Annual Report for Fiscal Year Ending June 30, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.

Forward-Looking Statements

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Form 10-K. The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements except as required by applicable securities laws.

Overview

American Battery Technology Company (the "Company") is a growth-stage company in the lithium-ion battery industry that is working to increase the domestic U.S. production of battery materials, such as lithium, nickel, cobalt, and manganese through its exploration of new domestic-United States primary resources of battery metals, development and commercialization of new technologies for the extraction of these battery metals from primary resources, and commercialization of an internally developed integrated process for the recycling of lithium-ion batteries. Through this three-pronged approach the Company is working to both increase the domestic production of these battery materials, and to ensure spent batteries have their elemental battery metals returned to the domestic manufacturing supply chain in an economical, environmentally-conscious, closed-loop fashion.

To implement this business strategy, the Company has constructed its first integrated lithium-ion battery recycling facility, which takes in waste and end-of-life battery materials from the electric vehicle, stationary storage, and consumer electronics industries. The Company's revenue increased from $0.3 million in fiscal 2024 to $4.3 million in fiscal 2025. The ramp-up and operation of this facility remain a top priority, and the Company has significantly expanded resources to support its execution. These efforts included hiring additional technical staff, expanding laboratory facilities, and purchasing equipment. As a result, the Company generated its first revenue in the fourth quarter of fiscal 2024 and achieved continued growth in production volumes and revenues throughout fiscal 2025. The Company has been awarded a competitively bid grant from the U.S. Advanced Battery Consortium to support a $2 million project to accelerate the development and demonstration of the technologies within this integrated lithium-ion battery recycling facility. The Company has also been awarded an additional grant from the U.S. Department of Energy ("DOE") to support a $20 million project under the Bipartisan Infrastructure Law to validate, test, and deploy three next-generation disruptive advanced separation and processing recycling technologies.

Additionally, the Company is accelerating the demonstration and commercialization of its internally developed low-cost and low-environmental impact processing train for the manufacturing of battery grade lithium hydroxide from Nevada-based sedimentary claystone resources. The Company has been awarded a grant cooperative agreement from the DOE's Advanced Manufacturing and Materials Technologies Office through the Critical Materials Innovation program to support a $4.5 million project for the construction and operation of a multi-ton per day integrated continuous demonstration system to support the scale-up and commercialization of these technologies. The Company has also been awarded an additional grant award under the Bipartisan Infrastructure Law to support a $115 million project to design, construct, and commission a first-of-kind commercial-scale refinery to produce 30,000 MT of battery-grade lithium hydroxide per year from this resource.

The Company has completed the construction and commissioning of its lithium hydroxide (LiOH) pilot plant, marking a significant milestone in the commercialization of its internally-developed processes to access an unrealized domestic primary lithium resource. The construction and commissioning of this pilot plant enables the Company to demonstrate its technologies for accessing the lithium housed in its unconventional resource, Tonopah Flats Lithium Project ("TFLP"), in an integrated and continuous system, and to generate large amounts of battery grade lithium hydroxide for delivery to customers for qualifications and evaluation.

The TFLP is one of the largest identified lithium resources in the United States, and while initial pit designs and economic analyses in previous assessments evaluated the full resource, an updated Initial Assessment utilizes a commercialization pathway with a more rigorous mine plan that contemplates utilization of only Measured and Indicated Mineral Resources, and excludes Inferred Mineral Resources, to supply the planned commercial-scale lithium hydroxide monohydrate ("LHM") refinery. This commercialization pathway allows for an engineered phased development, with improved access to the higher quality portions of the resource, and improved project economics.

On March 28, 2024, the Company was selected for an approximately $19.5 million tax credit through the Qualifying Advanced Energy Project Credits program (the "48C program"). This tax credit was granted by the U.S. Department of Treasury Internal Revenue Service following a highly competitive technical and economic review process performed by the DOE, which evaluated the feasibility of applicant facilities to advance America's buildout of globally competitive critical material recycling, processing, and refining infrastructure. This $19.5 million tax credit can be utilized both for the reimbursement of capital expenditures spent to date, and also for equipment and infrastructure for additional value-add operations at the Company's battery recycling facility in the Tahoe-Reno Industrial Center (TRIC) near Reno, Nevada. As of June 30, 2025, the Company has incurred qualifying expenditures for this tax credit but will not recognize any amounts until it has reasonable assurance of compliance with the relevant standards.

Also on March 28, 2024, the Company has been selected for an additional $40.5 million tax credit through the 48C program to support the design and construction of a new, next-generation, commercial battery recycling facility to be located in the United States. As with the Company's initial $19.5 million tax credit under the 48C program supporting the construction and buildout of its battery recycling facility in Nevada, this additional award was granted by the U.S. Department of Treasury Internal Revenue Service following a highly competitive technical and economic review process performed by the DOE, which evaluated the feasibility of applicant facilities to advance America's buildout of globally competitive critical material recycling, processing, and refining infrastructure. As of June 30, 2025, the Company has not incurred any qualifying expenditures towards this tax credit.

Fiscal Fourth Quarter 2025 Financial Highlights :

	●	Revenue increased to $2.8 million in fourth quarter fiscal year 2025, compared to $1.0 million in third quarter fiscal year 2025, nearly tripling and reflecting a significant ramp-up of battery recycling facility operations.
	●	Total cost of goods sold was $5.3 million for fiscal fourth quarter fiscal year 2025, compared to $3.7 million in third quarter fiscal year 2025. The fiscal fourth quarter fiscal year 2025 cost of goods sold included non-cash items of depreciation of $1.0 million and stock-based compensation of $0.2 million. Excluding these non-cash items, fiscal fourth quarter fiscal year 2025 cash cost of goods sold (a non-GAAP measure) was $3.9 million.

A reconciliation of fiscal fourth quarter 2025 GAAP to non-GAAP cost of goods sold

Description		Amount ($M)
GAAP Cost of Goods Sold			5.1
Less: Depreciation Expense			(1.0	)
Less: Stock-Based Compensation			(0.2	)
Non-GAAP Cash Cost of Goods Sold			3.9

	●	Government grant reimbursement was $1.4 million for fourth quarter fiscal year 2025, compared to $2.3 million in third quarter fiscal year 2025. Out of the $1.4 million in grant funding for fourth quarter fiscal year 2025, nil was recorded as an offset to fixed assets, as reimbursements related to equipment purchases, and $1.4 million was recorded as an offset to research and development costs within the consolidated statement of operations.
	●	ABTC conducted additional drill programs at its Tonopah Flats Lithium Project in order to further expand and define the deposit, collect data for detailed design of the mining pit shell, and continue to advance the development of the lithium mining and refining project.
	●	ABTC continued to scale and operate its multi-tonne per day integrated pilot facility to demonstrate the performance of its internally-developed technologies for the manufacturing of battery grade lithium hydroxide from its Tonopah Flats claystone material.
	●	On April 23, 2025, ABTC received a Letter of Interest from the US Export-Import Bank for up to $900 million in low-interest debt financing to support the construction of the Tonopah Flats Lithium Project.

Fiscal Year 2025 Financial Highlights:

	●	Revenue increased to $4.3 million in fiscal year 2025, up from $0.3 million in fiscal year 2024, reflecting the ramp-up of facility operations and higher production volumes.
	●	Total cost of goods sold was $14.9 million for the fiscal year ended June 30, 2025, compared to $3.3 million in fiscal year ended 2024. The fiscal year ended 2025 cost of goods sold included non-cash items of depreciation of $3.6 million and stock-based compensation of $0.8 million. Excluding these non-cash items, fiscal year ended 2025 cash cost of goods sold (a non-GAAP measure) was $10.5 million.

A reconciliation of fiscal year ended 2025 GAAP to non-GAAP cost of goods sold

Description		Amount ($M)
GAAP Cost of Goods Sold			14.9
Less: Depreciation Expense			(3.6	)
Less: Stock-Based Compensation			(0.8	)
Non-GAAP Cash Cost of Goods Sold			10.5

	●	The Company was selected for, and successfully contracted, a grant from the US DOE for $150 million to support the construction of an additional battery recycling facility.
	●	The Company successfully completed all contractual requirements of its $2.3 million grant from the US DOE, including the construction and operation of its multi-tonne per day integrated pilot facility for the demonstration of its internally-developed technologies for the manufacturing of battery grade lithium from its Nevada-based claystone resource.
	●	The Company and its partners successfully completed all contractual requirements of its $0.5 million grant award from the US Advanced Battery Consortium, which is comprised of the US DOE, General Motors, Ford Motor Company, and Stellantis NV, including the recycling of commercial quantities of batteries, the purification and manufacturing of battery grade precursors, the manufacturing of high energy density cathode active material, and the manufacturing and testing of approximately 100 automotive scale multi-layer pouch cell batteries.
	●	Government grant reimbursement was $5.7 million for the fiscal year ended June 30, 2025, compared to $3.3 million during the same period of the prior year. Out of the $5.7 million in grant funding for the fiscal year ended June 30, 2025, $0.6 million was recorded as an offset to fixed assets, as reimbursements related to equipment purchases, and $5.1 million was recorded as an offset to research and development costs within the consolidated statement of operations.
	●	As of June 30, 2025, the Company had total cash on hand of $12.5 million of which $7.5 million was available and $5.0 million was restricted. Subsequent to year-end, on July 29, 2025, the restrictions were lifted, and the funds became available for general use. As the restriction was still in place as of the balance sheet date, the cash remains classified as restricted.
	●	The Company was able to leverage its June 27, 2025 inclusion in the Russell 2000 index to raise capital, along with receiving proceeds from warrant exercises, and benefiting from convertible note conversions and the release of restricted cash subsequent to June 30, 2025. As a result, following the fiscal year ended, the Company's net cash position has improved to $25.4 million as of September 15, 2025.

Components of Statements of Operations

The following table sets forth the Company's operating results for the periods indicated:

		Fiscal Year Ended June 30, 2025				Fiscal Year Ended June 30, 2024				$ Change				% Change
Revenue		$	4,290,224			$	343,500			$	3,946,724				1,149	%
Cost of goods sold			14,864,633				3,304,707				11,559,926				350
Gross loss			(10,574,409	)			(2,961,207	)			(7,613,202	)			257
Operating expense
General and administrative			21,151,445				16,106,807				5,044,638				31
Research and development			8,470,161				14,325,681				(5,855,520	)			(41	)
Exploration			1,827,314				4,121,941				(2,294,627	)			(56	)
Impairment charge on held-for sale assets			-				10,254,037				(10,254,037	)			(100	)
Total operating expenses			31,448,920				44,808,466				(13,359,546	)			(30	)
Other income (expense)			(4.739.296	)			(4,732,151	)			(7,145	)			(0	)
Net loss			(46,762,625	)			(52,501,824	)			5,739,199				(11	)

Revenue

During the fiscal years ended June 30, 2025 and 2024, our net sales were $4.3 million and $0.3 million, respectively. These sales are related to our black mass and metal byproducts resulting from recycling operations.

Cost of Goods Sold

Cost of goods sold during the fiscal years ended June 30, 2025 and 2024 were $14.9 million and $3.3 million, respectively, well above the value of the related revenue. The increase in cost of sales was primarily driven by higher headcount as the plant was commissioned and employees were hired to support expanded production capacity. In addition, cost of goods sold reflects depreciation expense associated with the recycling facility fixed assets, which commenced upon the facility's in-service date. Costs also increased as the production process was finalized and stabilized during the period. We expect these costs to be reduced as a percentage of revenue as we scale our production and gain efficiencies in the process.

Management uses certain non-GAAP metrics to evaluate our operating and financial results. We believe the presentation of non-GAAP results is useful to investors for analyzing business trends as well as to view the results from management's perspective. Non-GAAP cost of goods sold excludes certain non-cash charges including depreciation expense and stock-based compensation. Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP.

Operating Expenses

During the fiscal year ended June 30, 2025, the Company incurred $31.4 million of operating expenses compared to $44.8 million of operating expenses during the fiscal year ended June 30, 2024. The decrease is primarily due to the items described below:

General and administrative expenses consist of personnel, legal, finance, recruiting, business development, public relations, and general facility expenses. For the fiscal year ended June 30, 2025 and 2024, general and administrative expenses were $21.2 million and $16.1 million, respectively. The increase of $5.0 million is related to the following: an increase of $3.0 million in payroll, driven by the changes in employee activity, resulting in additional cost into general and administrative during fiscal year 2025 with a corresponding decrease to research and development cost; a $2.4 million increase in stock-based compensation based on the achievement of executive performance milestones; and property tax expense increased by $0.4 million due to the plant commissioning in fourth quarter of fiscal year 2024.

Research and development expenses consist primarily of personnel, laboratory leases, and supplies. Research and development expenses for the fiscal years ended June 30, 2025 and 2024 were $8.5 million and $14.3 million, respectively. The decrease is due to allocation of such costs to inventory and cost of goods sold as part of phase 1 recycling operations being commissioned in the fourth quarter of fiscal year 2024 and fiscal year 2025 seeing an increase in throughput of the plant. In addition, there was a decrease, for fiscal year ended 2025 as compared to the fiscal year ended 2024, due to higher grant reimbursements which are recorded as an offset to research and development expenses of $1.6 million.

Exploration costs consist primarily of personnel, drilling, assay, claim fees, office and warehouse costs, travel, and other costs related to exploration of claims in central Nevada. Exploration expenses totaled $1.8 million for the fiscal year ended June 30, 2025, compared to $4.1 million during the prior year. The decrease reflects $1.5 million in lower payroll costs resulting from the transfer of employees from exploration to technical programs (research and development) and to general and administrative. In addition, exploration costs decreased by $0.9 million as the Company completed its drilling program and shifted focus to producing and publishing the PFS.

An impairment loss of $10.2 million on assets held-for-sale was recorded in the fiscal year ended June 30, 2024, related to two parcels of land and a building at the Fernley, Nevada location, comprising 12.44 acres and 11.55 acres, that the Company decided to sell. As of June 30, 2024, these assets had a carrying value of $8.4 million. As of June 30, 2025, the 11.55 acres of land was no longer actively marketed for sale and was therefore reclassified back to property, plant, and equipment. As of June 30, 2025, the remaining land and building has a carrying value of $6.0 million, is included within assets held for sale on the consolidated balance sheet, and is subject to further impairment, if required, until the asset is sold. Additionally, as of March 31, 2025, the Company reclassified certain water rights with a carrying value of $3.8 million to assets held for sale in the consolidated balance sheet.

Other (Expense) Income

Other expense was $4.7 million in the fiscal year ended June 30, 2025 versus other expense of $4.7 million in the prior year. The noted changes for the current fiscal year as compared to the prior year are as follows: a change in fair value of the derivative liability of $1.0 million (see Note 13 of the consolidated financial statements for further detail), an increase due to recording a credit loss expense of $1.4 million related to a subscription receivable that was deemed uncollectible, consistent with the Company's policy for expected credit losses, and a decrease in the amortization and accretion of financing costs during the fiscal year ended June 30, 2025 of $0.4 million.

Liquidity and Capital Resources

At June 30, 2025, the Company had cash of $12.5 million (of which $7.5 million was available and $5.0 million was restricted) and total assets of $84.5 million compared to available cash of $7.0 million and total assets of $77.7 million at June 30, 2024.

The Company had total current liabilities of $13.7 million at June 30, 2025, compared to $15.8 million at June 30, 2024. The decrease is related to the paydown of outstanding payables with the proceeds from the registered direct offerings and the issuance of the 2024 Notes.

As of June 30, 2025 and 2024 the Company had positive working capital of $10.9 million and $2.6 million, respectively. The positive working capital is related to the current classification of held-for-sale assets at June 30, 2025 and 2024 of $9.8 million and $8.4 million, respectively. Absent this classification, we would still maintain a positive working capital of $1.1 million at June 30, 2025 and have a $5.8 million working capital deficiency at June 30, 2024. The working capital deficiency in the prior year is largely attributed to the current classification of the 2024 Notes, as well as acquisitions of property and equipment and cash used in operating activities.

Going Concern

The continuation of the Company as a going concern is dependent upon generating profit from its operations and its ability to obtain debt or equity financing. There is no assurance that the Company will be able to generate sufficient profits, obtain such financings, or obtain them on favorable terms, which could limit its operations. Any such financing activities are subject to market conditions. These uncertainties cause substantial doubt about the Company's ability to continue as a going concern for 12 months from issuance of these financial statements. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.

On April 3, 2024, the Company entered into an ATM sales agreement with Virtu Americas LLC, pursuant to which the Company may offer and sell, from time to time through the sales agent, shares of the Company's common stock having an aggregate offering price of up to $50,000,000, subject to the terms and conditions of the Sales Agreement (the "ATM Program"). During the fiscal year ended 2025, the Company sold 14,097,636 common shares for total proceeds of $18.6 million.

The going concern assessment excludes the ATM Program, which could provide a source of liquidity.

Based on our current operating plan, unless we generate income from the operations of our facilities and receipt of cash from United States government grant awards, or raise additional capital (debt or equity), it is possible that we will be unable to maintain our financial covenants the agreement governing the 2024 Notes (the "Note Agreement"), which, if such violation is not waived, could result in an event of default, causing an acceleration of the outstanding balance. If we raise additional capital through public or private equity offerings, as opposed to debt issuances, the ownership interests of our existing stockholders may be diluted.

Cash Flows

For the fiscal years ended June 30:

		2025				2024
Cash Flows used in Operating Activities		$	(28,921,158	)		$	(16,736,231	)
Cash Flows used in Investing Activities		$	(2,548,476	)		$	(12,969,219	)
Cash Flows provided by Financing Activities		$	36,942,152			$	34,387,087
Net Increase in Cash During the Period		$	5,472,518			$	4,681,637

Cash from Operating Activities

During the fiscal year ended June 30, 2025, the Company used $28.9 million of cash for operating activities, compared to $16.7 million used during the fiscal year ended June 30, 2024. In both periods, the cash used has supported an increased scale of operations including increased employee headcount and personnel costs, increased production, and increased administrative costs.

Cash from Investing Activities

During the fiscal year ended June 30, 2025, the Company used cash in investing activities of $2.5 million for acquisition of property and equipment for its recycling facilities. This is in comparison to cash used in investing activities of $13.0 million for the fiscal year ended June 30, 2024. The decrease is due to the Company's purchasing more equipment in the beginning stages of the recycling plant build-out in the prior year.

Cash from Financing Activities

During the fiscal year ended June 30, 2025, the Company had cash provided by financing activities of $36.9 million, compared to $34.4 million provided during the fiscal year ended June 30, 2024. The Company has relied on equity and debt financing to support its increased operating activities, the ramp up of the recycling plant, development of the lithium claystone pilot plant, and upgrades to the geological classification of its Tonopah Flats claims through additional studies and assessments.

The Company had proceeds from equity and debt financings of $45.7 million in the fiscal year ended June 30, 2025, compared to $58.3 million in the prior year. The proceeds are offset by principal paid on the notes payable of $7.5 million and payment of issuance costs on registered direct offerings of $1.1 million in fiscal year ended June 30, 2025. In 2024, principal paid on notes payable was $24.0 million.

Off-Balance Sheet Arrangements

As of June 30, 2025 and 2024, we had no off-balance sheet arrangements.

Working Capital

		June 30, 2025				June 30, 2024
Current Assets		$	29,532,110			$	18,406,048
Restricted Cash		$	(5,000,000	)		$	-
Current Liabilities		$	(13,668,605	)		$	(15,798,298	)
Working Capital		$	10,863,505			$	2,607,750

Future Financings

The Company will continue to rely on sales of our common shares, debt, or other financing to fund our business operations as needed beyond any revenue generated from internal operations and the government tax credits and grants we have been awarded. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the securities or arrange for debt or other financing to fund planned operating activities, acquisitions and exploration activities.

Critical Accounting Estimates and Judgments

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

Certain accounting estimates, including those concerning revenue recognition, share-based compensation, impairments of long-lived assets, and assets held-for-sale, are considered to be critical in evaluating and understanding our financial results because they involve inherently uncertain matters and their application requires the most difficult and complex judgments and estimates. These are described below. For further information on our accounting policies, see Note 3 to our consolidated financial statements.

Fair Value Measurements

Recurring Valuations. The Company's fair value measurements included the valuation of the derivative liabilities for the bifurcated notes payable freestanding call and conversion options and for the liability-classified equity-linked contracts, both of which are classified as Level 3 of the fair value hierarchy. In making these fair value determinations, we were required to make assumptions that affected the recorded amounts, including volatility, risk free rates, and duration of time. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain. As of December 31, 2024, the Company reclassified derivative liabilities and liability-classified equity-linked contracts from long-term liabilities to equity. No derivative instruments were issued during the six months ended June 30, 2025; accordingly, fair value measurement was not required. See Notes 6 and 11 for further discussion.

Revenue Recognition

The Company recognizes revenue upon satisfying its promises to transfer goods or services to customers under the terms of its contracts. Nearly all of these promises, referred to as performance obligations, consist of the transfer of physical goods, including recycled ferrous and nonferrous metals and black mass, to customers. These performance obligations are satisfied at the point in time the Company transfers control of the goods to the customer, which is when title to and risk of loss of the goods transfer to the customer. The timing of transfer of title and risk of loss is dictated by customary or explicitly stated contract terms. The majority of the Company's sales involve transfer of control to the customer, and thus revenue recognition, before delivery to the customer's destination; for example, upon release of the goods to the shipper.

The Company recognizes revenue based on contractually stated selling prices and quantities shipped, net of sales tax, and adjusted for estimated claims and discounts. Claims are customary in the recycled metal industry and arise from variances in the quantity or quality of delivered products. Revenue adjustments may be required if the settlement of claims exceeds original estimates. For the fiscal year ended June 30, 2025, revenue adjustments related to performance obligations that were satisfied in previous periods were not material.

Long-Lived Assets

The Company evaluates long-lived assets, such as plant and equipment, with finite useful lives and ROU assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset or asset group may not be recoverable. These events and circumstances may include significant decreases in the market price of an asset or asset group, significant changes in the extent or manner in which an asset or asset group is being used by the Company or in its physical condition, a significant change in legal factors or in the business climate, a history or forecast of future operating or cash flow losses, significant disposal activity, a significant decline in the Company's share price, or a significant decline in revenue or adverse changes in the economic environment. The existence of an individual indicator outlined above, or otherwise, is not automatically an indicator that a long-lived asset may not be recoverable. Instead, management exercises judgment and considers the combined effect of all potential indicators and developments present, potentially positive or negative, when determining whether a long-lived asset may not be recoverable. No impairment loss was recognized during the fiscal years ended June 30, 2025 and 2024.

Assets Held-for-Sale

The Company evaluates long-lived assets for classification as held for sale when management, having the authority to approve the action, commits to a plan to sell the asset. To qualify as held for sale, the asset must be available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets, and the sale must be probable within one year.

Management considers whether events and circumstances such as a change in strategic direction and changes in business climate would impact the fair value of long-lived assets. The Company used critical judgements in analyzing certain market data and estimates to calculate the value of the assets held-for-sale. Significant assumptions that form the basis of fair value include market comparison of similar properties, construction cost estimates and using certain dollar per square foot amounts to derive fair value. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain.

Stock-Based Compensation

The fair value of share-based payments are valued using the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the inputs of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the estimate.

New Accounting Pronouncements

New accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. For further discussion on recent accounting pronouncements, please see Note 3, "Accounting Pronouncements," to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.