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Notes Payable

3 Months Ended

Sep. 30, 2024

11. Notes Payable

On May 17, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with Mercuria Investments US, Inc. for pre-payment on the purchase of the Company’s recycled battery metal products. As such, inventory serves as collateral for outstanding balances. The Credit Agreement provides for an aggregate loan amount of up to $20 million, comprised of (i) an initial term loan in the aggregate principal amount of $6 million and (ii) delayed draw term loan commitments in an aggregate amount equal to $14 million. Borrowings under the Credit Agreement carry interest calculated as the secured overnight financing rate published on the Federal Reserve Bank of New York’s website, plus the applicable credit spread adjustment, based on the elected interest period, plus an applicable margin rate of 6%. The agreement contains provisions that allow the Company to remit principal and interest payments via future delivery of its initial recycling byproduct, black mass.

On August 30, 2023, the Company caused the repayment in full of all indebtedness, liabilities and other obligations under, and terminated the Credit Agreement The Company did not incur any material early termination penalties because of such termination of the credit agreement.

On August 29, 2023, the Company and High Trail (the “Buyers”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company sold to the Buyers up to $51.0 million of a new series of senior secured convertible notes (the “Notes”). To date, $25.0 million has been received and $22.2 million has been repaid. The remaining $26 million under the facility includes $13.5 million with the condition that the Company started trading on the Nasdaq Capital Market, had $250,000 in sales, and establish an ATM or ELOC, and another $12.5 million at the discretion of the Buyers. Buyers may request partial redemptions of up to an aggregate of $1.8 million on the 15^th of each month or may convert the Notes into shares of common stock of the Company (“Conversion Shares”) at a conversion rate of 110% of the last reported sales price on the date of the agreement to acquire such Notes. The Notes bear zero coupon, mature on September 1, 2025, require a minimum of $5.0 million maintained in cash and cash equivalents, and are secured by certain real property and cash and investment accounts of the Company.

The Company analyzed the conversion features of the Notes for derivative accounting considerations under ASC 815-15, “Derivatives and Hedging,” and determined a freestanding call option should be bifurcated and separately accounted for as a derivative liability. Accordingly, the derivative liability is carried at fair value at each reporting date with the corresponding gain or loss reflected in earnings in the condensed consolidated statements of operations. See Correction of Previously Issued Consolidated Financial Statements in Note 3. The Company determined the derivative liability to have a fair value of $0.4 million at issuance of the Notes. For the three months ended September 30, 2024, the Company recorded a gain of $0.7 million within the change in fair value of the derivative liability in the condensed consolidated statements of operations. As of September 30, 2024, the fair value of the derivative liability was determined to be nil given the expiration of the freestanding call option on October 1, 2024.

Note discount and issuance costs totaled $5.1 million and reduced the carrying value of the Notes as a debt discount. The carrying value, net of debt discount and issuance costs, is being accreted over the term of the Notes from date of issuance to date of full repayment, expected to be in October 2024 based on partial redemption payments, using the effective interest rate method. For the three months ended September 30, 2024, amortization of debt discount and issuance costs totaled $0.8 million.

On September 13, 2024, the Notes were amended to allow payment of principal totaling $0.6 million in common shares of the Company in lieu of cash, with the remaining principal due in September 2024 deferred to October 2024. Subsequent to September 30, 2024, further payment on the Notes has been deferred by the Buyers while negotiations on a potential amendment to the Notes are on-going. Total common shares of 726,216 were issued with a fair market value of $0.7 million. The Notes were also amended to increase the conversion option rate. The Company concluded that the amendment to the Notes was an extinguishment for accounting purposes due to the increase in the conversion option fair value. The Company recognized a $0.7 million loss on extinguishment in the condensed consolidated statement of operations, comprised of the write-off of the remaining debt discount and debt issuance costs of $0.6 million and the excess of fair value of the common shares paid in lieu of cash over the principal owed of $0.1 million.

The table below presents the net carrying amounts of the Notes as of:

	September 30, 2024
Principal outstanding	$	2,883,333
Debt discount associated with bifurcated conversion option		(689,132	)
Amortization of debt discount from derivative liability		366,101
Net carrying value	$	2,560,302

The table below presents the maturities of notes payable as of September 30, 2024:

Schedule of Maturities of Notes Payable


October 15, 2024	$	2,883,333
Less: unamortized debt discount and issuance costs		(323,031	)
Total notes payable	$	2,560,302

Notes payable, current	$	2,560,302
Notes payable, non-current	$	-

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

(unaudited)