10. Equity

The Company is authorized to issue up to 360,000,000 shares of common stock, par value $0.01 per share, and 20,000,000 shares of preferred stock, par value, $0.01 per share. The Company has no outstanding shares of preferred stock.

2024 Out-of-Court Restructuring

On January 18, 2024, as part of the 2024 Out-of-Court Restructuring, and pursuant to a subscription agreement with Ascend, dated December 5, 2023 and an amended and restated subscription agreement with 5ECAP LLC (“5ECAP”), dated January 18, 2024 (the “5ECAP Subscription Agreement”), the Company issued (i) 233,298 shares of Common Stock to Ascend at a price of $23.575 per share, which shares included the placement fee to Ascend in shares of Common Stock and (ii) 233,298 shares of Common Stock to 5ECAP at a price of $23.575 per share, which shares included the placement fee to 5ECAP in shares of Common Stock. Then, on January 29, 2024, also as part of the 2024 Out-of-Court Restructuring and pursuant to the 5ECAP Subscription Agreement, the Company issued an additional 361,611 shares of Common Stock to 5ECAP at a price of $23.575 per share. These transactions resulted in net proceeds to the Company of $15.8 million.

August 2024 Equity Offering

On August 27, 2024, the Company completed an offering (the “August 2024 Equity Offering”) of (i) 231,884 shares (the “Shares”) of Common Stock, (ii) Series A warrants to purchase up to an aggregate of up to 231,885 shares of Common Stock (the “Series A Warrants”) and (iii) Series B warrants to purchase an aggregate of 231,885 shares of Common Stock (the “Series B Warrants”, and collectively with the Series A Warrants, the “2024 Warrants”). The Shares and 2024 Warrants were offered and sold on a combined basis for consideration equating to $17.25 for one Share and two 2024 Warrants. This transaction resulted in net proceeds to the Company of approximately $3.0 million after deducting the placement agent’s fees and other offering expenses. The aggregate net proceeds and issuance costs associated with the August 2024 Equity Offering were allocated to the Shares and 2024 Warrants based upon the relative fair value of such items on the offering date, which resulted in approximately $1.5 million allocated to the Shares and $1.5 million allocated to the 2024 Warrants.

Convertible Notes Derivatives

On December 31, 2024, the provisions that resulted in separate accounting for the Convertible Notes Derivatives expired, and accordingly, the Convertible Note Derivatives were derecognized and the remaining aggregate fair value of approximately $3.6 million was transferred to additional paid-in capital. Refer to Note 8–Convertible Notes Derivatives, for additional details.

Debt Exchange Transaction

As further described in Note 1–Description of Company and Summary of Significant Accounting and Note 7–Debt, the Exchange Transaction resulted in (i) the issuance of 13,586,524 shares of Common Stock issued in the Exchange for the termination of the Amended and Restated Note Purchase Agreement and the extinguishment of all indebtedness owed by the Company under the Amended and Restated Note Purchase Agreement, (ii) the issuance of 1,408,173 shares of Common Stock for an aggregate purchase price of $5.0 million in the March 2025 Subscription, and (iii) the issuance of Restructuring Warrants with a one-year term to purchase an aggregate 5,632,692 shares of Common Stock. For accounting purposes, and as described in Note 7–Debt, the Exchange Transaction was determined to constitute a single transaction accounted for as a troubled debt restructuring. As such, the equity interests issued in the Exchange Transaction were recognized in shareholders’ equity at fair value on their respective issuance dates, less issuance costs incurred, which were allocated based upon the relative fair value of the underlying

equity interests. The table below summarizes the method by which fair value was determined, the fair value, the allocation of transaction costs incurred, and net amounts recognized in shareholders’ equity for each equity interest issued in the Exchange Transaction.


Equity Interest Issued / Transaction	Fair Value Method	Units		Fair Value per Unit		Fair Value (in thousands)		Transaction Costs Incurred			Amount Recognized in Equity
Common Stock / Exchange	Closing price		13,586,524	$	4.26	$	57,879	$	(781	)	$	57,098
Common Stock / Subscription	Closing price		1,408,173	$	3.15		4,436		(60	)	$	4,376
Warrants / Subscription	Black Sholes		5,632,692	$	1.37		7,744		(105	)	$	7,639
Total						$	70,059	$	(946	)	$	69,113

May 2025 Equity Offering

On May 12, 2025 and May 13, 2025, the Company entered into subscription agreements to issue and sell an aggregate of 1,984,709 shares of its Common Stock at a price of $3.55 per share (collectively, the “May 2025 Subscription”). In connection with the May 2025 Subscription, the Company also issued 37,042 shares of its Common Stock as an advisory fee. The May 2025 Subscription closed on May 15, 2025 and resulted in aggregate net proceeds to the Company of approximately $6.4 million after deducting fees and other offering expenses payable by us (inclusive of costs that remained payable by the Company as of June 30, 2025).

Vesting of Equity Awards

During the years ended June 30, 2025 and 2024, the Company issued approximately 16 thousand shares and 4 thousand shares of its Common Stock, respectively, upon the vesting of equity awards. The vesting events did not result in any cash proceeds to the Company.

Warrants

The Series A Warrants and the Series B Warrants became exercisable on February 27, 2025. The Series A Warrants will expire on February 27, 2030 and the Series B Warrants will expire on February 27, 2027. The exercise price for each of the 2024 Warrants is $18.3563 per share. The Restructuring Warrants were exercisable upon issuance and will expire on March 13, 2026. The exercise price for the Restructuring Warrants is $3.5507 per share.

The 2024 Warrants and Restructuring Warrants (collectively, the “Warrants”) contain standard adjustments to the exercise price including for stock splits, stock dividends, rights offerings and pro rata distributions. The Warrants also include certain rights upon the occurrence of a “fundamental transaction” (as described in the respective warrant agreement), including the right of the holder thereof to receive from the Company or a successor entity the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of Common Stock in such fundamental transaction in the amount of the Black Scholes value (as described in the respective warrant agreement) of the unexercised portion of the Warrants on the date of the consummation of such fundamental transaction. The Warrants include cashless exercise rights to the extent the resale of the shares of Common Stock underlying the Warrants is not registered under the Securities Act.

2024 Equity Distribution Agreement

On March 28, 2024, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC and D.A. Davidson & Co. (the “Agents”) pursuant to which the Company may offer and sell up to $15.0 million of shares of Common Stock from time to time through the Agents, acting as the Company’s sales agents, or directly to one or more of the Agents, acting as principal (the “ATM Program”).

As a result of the August 2024 Equity Offering, the Company was precluded from utilizing the ATM Program for one year following the closing of the offering, and as a result approximately $410,000 of costs previously capitalized for the ATM Program were written-off to general and administrative expense during the year ended June 30, 2025. On August 14, 2025, the Equity Distribution Agreement was terminated pursuant to the terms therein. The Company is not subject to any termination penalties related to the termination of the Equity Distribution Agreement. The Company did not sell any shares of its common stock under the Equity Distribution Agreement.

- Definition

The entire disclosure for equity.

+ References

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+ Details

5E Advanced Materials, Inc. 10-K