Standard Lithium(SLI) - 2023 Q2 - Quarterly Report

Condensed Consolidated Interim Financial Statements Condensed Consolidated Interim Statements of Financial Position The company's financial position weakened as total assets and equity declined, driven by a significant decrease in cash Statement of Financial Position Highlights (in thousands of CAD) | Account | Dec 31, 2023 | June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $160,337 | $173,497 | -$13,160 | | Cash | $15,831 | $59,612 | -$43,781 | | Exploration and evaluation assets | $134,168 | $99,952 | +$34,216 | | Total Liabilities | $11,948 | $14,121 | -$2,173 | | Total Equity | $148,389 | $159,376 | -$10,987 | Condensed Consolidated Interim Statements of Comprehensive Income (Loss) The company's net loss more than doubled year-over-year, primarily due to a substantial increase in share-based payments Comprehensive Income (Loss) Summary (in thousands of CAD, except per share amounts) | Metric | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Share-based payments | $6,357 | $1,092 | | Demonstration plant operations | $5,202 | $5,975 | | Loss from operations | ($20,779) | ($9,941) | | Net loss for the period | ($19,931) | ($8,439) | | Basic and diluted loss per share | ($0.12) | ($0.05) | Condensed Consolidated Interim Statements of Changes in Equity Total equity declined by $11 million, as the period's net loss outpaced capital raised from share issuances Equity Reconciliation for Six Months Ended Dec 31, 2023 (in thousands of CAD) | Description | Amount | | :--- | :--- | | Balance, June 30, 2023 | $159,376 | | Net loss for the period | ($19,931) | | Share-based payment | $6,357 | | Shares issues under ATM offering | $4,177 | | Share issuance costs | ($902) | | Stock options exercised | $140 | | Currency translation differences | ($828) | | Balance, December 31, 2023 | $148,389 | Condensed Consolidated Interim Statements of Cash Flows The company experienced a net cash decrease of $43.8 million, driven by operating and investing activities Cash Flow Summary (in thousands of CAD) | Activity | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,151) | ($11,873) | | Net cash used in investing activities | ($33,458) | ($13,356) | | Net cash from financing activities | $3,104 | $16 | | Net change in cash | ($43,781) | ($21,696) | | Cash, end of period | $15,831 | $107,369 | Notes to the Condensed Consolidated Interim Financial Statements Note 1. Nature of Operations The company focuses on developing lithium brine properties in the USA and is publicly listed on multiple exchanges - The company's primary business is the exploration and development of lithium brine properties in Arkansas and Texas, USA[7] - The company's shares are publicly traded on the TSX Venture Exchange and NYSE American under the symbol "SLI", and on the Frankfurt Exchange as "S5L"[8] Note 2. Basis of Presentation These unaudited interim financial statements were prepared in accordance with IFRS Accounting Standards under IAS 34 - The financial statements adhere to IFRS Accounting Standards applicable to interim financial statements under IAS 34[9] - These statements are condensed and should be read alongside the Company's annual consolidated financial statements for the year ended June 30, 2023[10] Note 4. Property, Plant and Equipment The net book value of property, plant, and equipment increased due to additions for a carbon capture plant and land purchase Net Book Value of Property, Plant and Equipment (in thousands of CAD) | Asset Category | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | Demonstration plant | $795 | $795 | | Aqualung Carbon Capture pilot plant | $1,445 | $1,778 | | Land for future South West Arkansas Project plant | $939 | $0 | | Other | $187 | $192 | | Total | $3,366 | $2,765 | Note 5. Exploration and Evaluation Assets Exploration and evaluation assets grew by $34.2 million, driven by significant investments in Texas and Arkansas projects Exploration and Evaluation Asset Growth (in thousands of CAD) | Project | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | South West Arkansas Project | $36,675 | $29,731 | | Commercial Plant Evaluation (Lanxess 1A) | $35,363 | $25,356 | | Texas Properties | $36,205 | $19,060 | | California Property | $25,925 | $25,805 | | Total | $134,168 | $99,952 | - On October 31, 2023, the Company exercised its option with TETRA Technologies, Inc to acquire brine productions rights for the South West Arkansas Project at no additional cost[14] Note 7. Demonstration Plant Operations Operating costs for the demonstration plant decreased year-over-year due to lower supply and personnel expenses Demonstration Plant Operating Costs (in thousands of CAD) | Cost Category | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Personnel | $2,626 | $3,042 | | Testwork | $1,049 | $561 | | Reagents | $566 | $584 | | Supplies | $488 | $1,682 | | Total | $5,202 | $5,975 | Note 8. Share Capital The company engaged in significant share capital activities, including ATM offerings, option exercises, and incentive plan grants Share Issuances Capital was raised through an At-The-Market offering and the exercise of stock options - Issued 1,426,359 common shares under the ATM offering for net proceeds of $4,177 thousand during the six months ended Dec 31, 2023[19] - Issued 100,000 common shares from the exercise of stock options for proceeds of $140 thousand[18] Options The company granted 1.75 million new stock options, increasing the total outstanding options to 9.82 million Stock Option Transactions | Transaction | Number of options | Weighted average exercise price | | :--- | :--- | :--- | | Balance at June 30, 2023 | 8,170,000 | $4.43 | | Options exercised | (100,000) | $1.40 | | Options granted | 1,750,000 | $4.00 | | Balance at December 31, 2023 | 9,820,000 | $4.38 | Long-term Incentive Plan A grant of nearly 2 million DSUs to the Board and Management resulted in a $4.9 million share-based payment expense - Granted 1,991,004 Deferred Share Units (DSUs) to the Board of Directors and Management[23] - Recorded $4,929 thousand in share-based payment expense related to the DSU grant during the six-month period[23] Note 9. Related Party Transactions Key management compensation increased sharply due to share-based payments, and services were procured from a related entity Key Management Compensation (in thousands of CAD) | Component | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Management and director fees | $1,314 | $1,024 | | Share-based payments | $4,929 | $0 | | Total | $6,255 | $1,024 | - The company incurred $760 thousand in R&D costs from Telescope Innovations Corp, a related party, under a Master Services Agreement[26] Note 10. Financial Instruments and Financial Risk Management The company faces significant liquidity risk due to a sharp decline in working capital and manages foreign exchange risk Risk Management The company faces significant liquidity risk with a sharp drop in working capital and is exposed to foreign currency fluctuations - The company faces liquidity risk as working capital has decreased significantly to $5,668 thousand at Dec 31, 2023, from $48,800 thousand at June 30, 2023[34] - The company is exposed to foreign currency risk through its US dollar-denominated cash and accounts payable; a 10% change in the USD/CAD rate would change comprehensive loss by approximately $316 thousand[35] Note 11. Contingencies The company is defending against a securities class action lawsuit alleging misrepresentation of its DLE technology - A securities class action lawsuit was filed against the company and certain officers, alleging misrepresentations about its LiSTR DLE technology and recovery percentages between May 2020 and February 2022[36] - The company is vigorously defending against the action and has not recorded any provision as the outcome is undeterminable[36] Note 12. Subsequent Event The company continued its ATM offering after the period end, raising an additional $7.2 million in net proceeds - After December 31, 2023, the company issued 3,218,200 common shares under its ATM offering, raising proceeds of $7,157 thousand net of transaction costs[37]