F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

or

or

For the transition period from July 1, 2022 to December 31, 2022

or

For the transition period from       to     .

Commission file number: 001-41208

NOVONIX LIMITED

(Exact name of Registrant as specified in its charter

NOVONIX LIMITED

(Translation of Registrant’s name into English)

Australia

(Jurisdiction of incorporation or organization)

NOVONIX LIMITED

Level 38

71 Eagle Street

Brisbane QLD 4000

Australia

(Address of principal executive offices)

NOVONIX Limited

Level 38

71 Eagle Street

Brisbane QLD 4000

Australia

(P) +61 439 310 818

Attn: Suzanne Yeates, Company Secretary

suzie@novonixgroup.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 486,774,622 Ordinary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or (15)(d) of the Securities Exchange Act of 1934. Yes  ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ☐ Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No  ☐

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  ☐ No  ☐

TABLE OF CONTENTS

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INTRODUCTION AND USE OF CERTAIN TERMS

We have prepared this transition report on Form 20-F using a number of conventions, which you should consider when reading the information contained herein. In this transition report, “NOVONIX,” the “Company,” the “Group”, “our company,” “we,” “us” and “our” refer to NOVONIX Limited and its consolidated subsidiaries, taken as a whole. Additionally, this transition report uses the following conventions:

EXPLANATORY NOTE

On December 20, 2022, the Board of Directors of NOVONIX Limited approved a change of fiscal year end from June 30 to December 31 to better align the reporting of the Company’s results with its industry peers. As a result, we are required to file this transition report on Form 20-F for the six-month transition period of July 1, 2022 to December 31, 2022. After filing the transition report, our next fiscal year will be the fiscal year ending December 31, 2023. Unless otherwise noted, all references to “fiscal year” in this transition report on Form 20-F refer to the fiscal year which, prior to the transition period, ended on June 30. Our consolidated financial statements for the transition period from July 1, 2022 to December 31, 2022 have been prepared in accordance with International Financial Reporting Standards (”IFRS”) as issued by the International Accounting Standards Board. A comparison of our operating results for the six-month periods ended December 31, 2022 and 2021 has been included within Item 5. Operating and Financial Review and Prospects and Note 31 to the financial statements. Financial information presented in this Form 20-F for the six-month period ended December 31, 2021 has not been audited and is presented for comparative purposes only. We note that this transition report on Form 20-F is filed pursuant to Rule 13a-10(g)(4) of the Securities Exchange Act of 1934, as amended, which permits us to respond only to Items 5, 8.A.7., 13, 14, and 17 or 18 of Form 20-F.

The Company also elected to change its presentation (reporting) currency from Australian to U.S. dollars commencing with the six-month period ended December 31, 2022. The Company believes that these changes in reporting period and currency will enhance the relevance of its financial information and comparability with its industry peer group, the majority of which report in U.S. dollars. Comparative financial information has been translated into U.S. dollars using the procedures outlined in Note 1 to the financial statements filed as part of this transition report. See Item 18. Financial Statements.​

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This transition report contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this transition report, including statements regarding our future results of operations, financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, other factors and assumptions, including the risks described in Item 3. Key Information—D. Risk Factors of our annual report on Form 20-F for the year ended June 30, 2022, as filed with the SEC, and as updated by Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Passive Foreign Investment Company Status of this transition report on Form 20-F.

These risks are not exhaustive. Other sections of this transition report may include additional factors that could harm our business and financial performance. New risk factors may emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this transition report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. We undertake no obligation to update any forward-looking statements made in this transition report to reflect events or circumstances after the date of this transition report or to reflect new information or the occurrence of unanticipated events, except as required by law. 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. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this transition report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

You should read this transition report and the documents that we reference in this transition report and have filed as exhibits to the transition report of which this transition report is a part with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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Item 5. Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this transition report on Form 20-F.

Certain information included in this discussion and analysis includes forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied by such forward-looking statements. For further information on important factors that could cause our actual results to differ materially from the results described in the forward-looking statements contained in this discussion and analysis, see “Special Note Regarding Forward-Looking Statements,” above, and the risks described in Item 3. Key Information—D. Risk Factors of our annual report on Form 20-F for the year ended June 30, 2022, as filed with the SEC (the "2022 Annual Report").

Overview

NOVONIX provides battery materials and development technology for leading battery manufacturers, materials companies, automotive original equipment manufacturers (“OEMs”) and consumer electronics manufacturers at the forefront of the global electrification economy. Our core mission is to accelerate the continued advancement and scaling of electric vehicle batteries and energy storage solutions through our advanced, proprietary technologies that deliver longer cycle life batteries at lower costs. Through our in-house technology and capabilities, as well as our front-line access to industry trends, we intend to be an industry leader, delivering what we believe to be the most advanced, high-performance and cost-effective battery and energy storage technologies for our customers.

We currently operate two core businesses: NOVONIX Battery Technology Solutions (“BTS”) and NOVONIX Anode Materials (previously known as PUREgraphite). We also have a third reporting segment - Graphite Exploration - the business of which is currently under strategic review and is not presently considered by management as a core operating business.

BTS provides industry leading battery testing technology and research and development (“R&D”) services to create next generation batteries. BTS also serves as the pillar of innovation across the NOVONIX ecosystem by creating a positive feedback loop with our anode and cathode materials business through the development of applications and strategic partnerships. This collaboration drives our continuous technological innovation and enables us to deliver best-in-class products and services for customers.

NOVONIX Anode Materials was established with the objective of commercializing what we believe is the most advanced anode material in the market for electric vehicles and energy storage applications. These end-markets continue to demand high-performance batteries with longer life cycles, while at the same time pursuing cost efficiencies to continue to drive mass adoption. Anode materials are one of the most significant components that define the overall performance, reliability, and cycle life of the battery cell. To our knowledge, we are the only qualified U.S.-based producer of EV battery-grade synthetic graphite anode material and believe NOVONIX Anode Materials is well positioned to support the rapid growth in demand for these advanced anode materials in North America and globally.

Graphite Exploration, or the MDG Project, holds interests in a natural, high-grade graphite deposit in Queensland, Australia. NOVONIX had previously put any exploration and development of the MDG Project on hold while it conducts a strategic review of the graphite deposit asset in response to continued sector momentum to evaluate options for furthering exploration and development of the MDG Project.

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NOVONIX Battery Technology Solutions Overview

BTS was founded by researchers from the research group at Dalhousie University, formerly headed by Dr. Jeff Dahn, in 2013, and the Company acquired BTS in June 2017. BTS provides cutting edge R&D services along the supply chain to battery component, battery cell and original equipment manufacturers.

BTS, based in Halifax, Nova Scotia, Canada, provides battery R&D services and manufactures what we believe to be the most accurate lithium-ion battery cell test equipment in the world. This equipment is now used by leading battery makers, researchers, and equipment manufacturers including Panasonic, LG, Samsung SDI, and SK Innovation, and numerous consumer electronics and automotive Original Equipment Manufacturers (“OEMs”). The BTS division significantly expanded R&D capabilities through direct investment in and through a long-term partnership agreement with Dalhousie University.

Since we acquired the business, we have significantly expanded BTS’ R&D capabilities through direct investments and our long-term collaborative research agreement with Dalhousie University. BTS now has an established team of leading scientists with an internal battery cell pilot line to prototype and evaluate new materials and cell designs, and extensive battery testing capability, including our proprietary Ultra-High Precision Charger systems.

In the six months ended December 31, 2022, BTS continued strong revenue growth through increased sales of its hardware and battery testing and R&D service offerings, including through the addition and expansion of key strategic accounts. In the six months ended December 31, 2022, BTS’ revenues from contracts with customers decreased by 8%, compared to the six months ended December 31, 2021, due to an increase in sales in the cell building and testing division of the business. In the twelve months ended June 30, 2022, BTS’ revenues from contracts with customers grew by 57%, compared to the twelve months ended June 30, 2021, due to an increase in sales in the battery hardware division of the business.

In November 2022, BTS announced the opening of its new pilot production facility aimed to position NOVONIX as an industry leader in cathode technology. The program will be housed in a newly opened, 35,000-square-foot facility and leverage NOVONIX’s all-dry cathode synthesis technology to pilot its patent-pending technology for material production with the target of servicing the rapidly expanding electric vehicle and energy storage sectors. We believe if this pilot scale facility is successful, it will allow the Company to demonstrate the feasibility of large-scale production, with the production target of up to 10 tonnes per annum. 

This new facility and pilot program will utilize technology derived from NOVONIX’s proprietary Dry Particle Microgranulation process, which has the potential to minimize waste and reduce cathode manufacturing costs while improving yield. As previously announced, the development of the cathode facility was supported by funding of $0.7 million (C$1 million) from the Government of Canada through the Atlantic Canada Opportunities Agency ("ACOA") and $1.2 million (C$1.675 million) from Next Generation Manufacturing Canada. As part of the facility opening, NOVONIX will expand its internal cathode development team and on-site analytical capabilities.

The Company continues to invest in the internal cathode development team and capabilities, while driving process development internally and collaboratively with Dalhousie University pursuing new intellectual property. The Company also works with multiple established lithium and metal suppliers in material evaluation programs, which build on the Company’s initiatives in cathode precursor as well as final cathode synthesis technology. We believe NOVONIX is positioned to become a market leader in cathode synthesis technology as it pursues these development opportunities.

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With carbon-neutral policies taking hold across major countries, NOVONIX continues to opportunistically invest in the energy storage system ("ESS") market, which has experienced an increase in demand driven primarily by a significant increase in renewable energy adoption. NOVONIX first announced its partnership with Emera Technologies to develop the innovative battery storage technology in early 2021. More recently, NOVONIX developed a first-of-its-kind microgrid battery prototype to support Emera Technologies’ residential microgrid system, which is operating in a residential pilot project in Florida. This partnership highlights the strategic value BTS provides through working with various companies and industries to identify growth opportunities across the battery value chain.

NOVONIX Anode Materials Overview

NOVONIX Anode Materials (formerly PUREgraphite LLC) was established in March 2017 as a joint venture to develop and commercialize ultra-high purity high-performance graphite anode material for the lithium-ion battery market focused on electric vehicles, energy storage and specialty applications. In fiscal year 2019, we exercised our call option, pursuant to which we acquired all of our joint venture partner’s interest in NOVONIX Anode Materials and increased our ownership to 100%.

NOVONIX Anode Materials exclusively owns all graphite-related intellectual property of its former joint venture partner and has the ongoing exclusivity of its CEO for the development of graphite products and battery anode materials using that technology.

This intellectual property includes innovative, high-performance graphite anode materials (demonstrated in internal testing to outperform leading materials currently in the market) and production methods that we expect to deliver production costs significantly lower than existing producers.

Through operational growth and by executing on strategic partnerships, NOVONIX has developed proprietary technology that delivers increased energy efficiency, negligible facility emissions, and anode materials that outperform industry standards. In June 2022, NOVONIX released the results of a Life Cycle Assessment (“LCA”), which showed an approximate 60% decrease in global warming potential compared to commercially manufactured anode grade synthetic graphite produced in China, and an approximate 30% decrease in global warming potential compared to anode grade natural graphite also produced in China. NOVONIX Anode Materials strives for the highest performance while powering the battery materials industry with lower carbon emissions.

Since the United States passed the Inflation Reduction Act of 2022, battery development capacity has accelerated with increased domestic production and robust electric vehicle demand. These recent trends underpin the significance of NOVONIX’s agreement with Phillips 66 in January 2022 for the joint development of new feedstocks and synthetic graphite with reduced carbon-intensive processing. We believe this partnership positions NOVONIX at the forefront of revolutionary solutions that advance the adoption of clean energy.

In October 2022, we were selected to enter negotiations to receive $150 million in grant funding from the U.S. Department of Energy ("DOE") to expand our domestic production of high-performance, synthetic graphite anode materials. This award, announced by President Biden, is intended to strengthen the North American battery supply chain amidst surging demand and growing calls to onshore these critical industries. Negotiations will cover final project details including total project costs, operational milestones, and timing of access to grant funds. Under the terms of the grant, government funds must be at least matched by the recipient. Upon successful completion of negotiations with the DOE, NOVONIX will further update the market.

In the last quarter of FY 2022, NAM was selected to submit a formal application to the DOE's Loan Programs Office ("LPO"). The LPO provides low-interest loans to support the manufacture of eligible vehicles and qualifying components under the Advanced Technology Vehicles Manufacturing Loan Program ("ATVM"), authorized by the Energy Independence and Security Act of 2007. Through the ATVM, LPO can provide access to debt capital that is priced at U.S. Treasury Rates for

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auto manufacturing projects in the United States, and provide financing that meets the specific needs of individual borrowers. The LPO has experience with corporate, structured corporate, and limited recourse project finance loans. Additionally, the LPO has capacity to finance large projects as a sole lender or to fill gaps in financing as part of a group of lenders. The loan, if received, would contribute toward funding the Company’s current expansion of battery materials capacity for the production of synthetic graphite to support the United States EV and ESS supply chains.

Aligned with its strategic partnership and investment in KORE Power, NOVONIX will be KORE Power's exclusive supplier of graphite anode material in North America. In November 2022, KORE Power received strategic financing from investors for the construction of its KOREPlex facility in Phoenix, Arizona, which will begin commercial production in the fourth quarter of 2024. To support KORE Power’s capacity requirement and other customers, NOVONIX is expanding production at the Company’s Riverside facility in Chattanooga, Tennessee to a target of 10,000 tpa of production capacity. The production ramp will be aligned with current contracted volumes of approximately 3,000 tpa in 2024 and ramp up to approximately 12,000 tpa in 2028.

Graphite Exploration (MDG Project) Overview

The Mount Dromedary Graphite Project is a high-grade (18%+) natural graphite deposit located in Northern Queensland, Australia. Despite the favorable characteristics of this natural graphite deposit, exploration was put on hold given the substantially more favorable investment opportunities for the Company through the manufacturing of advanced battery anode materials and the development of new battery technologies. During the twelve months ended June 30, 2022, management initiated a strategic review of the graphite deposit asset. No findings have been released and there can be no assurances that the strategic review will result in further development of the asset. The Company continues to hold the project in good standing while monitoring the market.

Overview of Financials

The Group has incurred operating losses since 2013. Our ability to generate product revenue sufficient to achieve profitability will be dependent on our ability to begin significant production and commercialization of NOVONIX Anode Materials business’ synthetic graphite product. Accordingly, we expect to continue to incur significant expenses as we continue to scale production of our synthetic graphite product, the majority of which will be associated with planned production equipment spend. We expect to incur significant additional costs associated with operating as a public company in the United States, including additional legal, accounting, investor relations, compliance and other expenses.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time, if ever, as we can generate sufficient revenue from synthetic graphite sales, we expect to finance our operations through the issue of equity, debt financings, or other capital sources, which may include collaborations with other companies or other strategic transactions as well as U.S. government financing support and tax incentives. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our synthetic graphite product. See Item 3. Key Information—D. Risk Factors of our 2022 Annual Report ("We may need to obtain funding from time to time to finance our growth and operations, which may not be available on acceptable terms, or at all. If we are unable to raise capital when needed, we may be forced to delay, reduce or eliminate certain operations, and we may be unable to adequately control their costs.”).

Because of the numerous risks and uncertainties associated with the commercialization of battery-grade materials, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may never become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to scale back or discontinue our operations. See Item 3. Key Information—D. Risk Factors of our 2022

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Annual Report ("We have a history of financial losses and expect to incur significant expenses and continuing losses in the near future.”).

As of December 31, 2022, we had cash and cash equivalents of $99,039,172. The Company plans to ramp synthetic graphite production capacities aligned with current and potential customer take-away agreements towards 10,000 tpa in 2024, with further targets of 40,000 tpa by 2025 and 150,000 tpa by 2030. We believe that our existing cash and cash equivalents will help support capacity expansion towards 10,000 tpa, which is expected to be completed in 2024. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources,” below.

Components of Our Results of Operations

Segment Information

Our segments consist of Battery Technology (BTS), Battery Materials (NOVONIX Anode Materials) and Graphite Exploration. In order to comply with the requirement to discuss significant components of revenue and expenses, and to enable investors to understand the consolidated amounts, where applicable we have provided a discussion along segmental lines. As a result, the discussion and analysis of segments is integrated with the discussion of the consolidated amounts to avoid confusion and duplication of disclosure.

Revenue from Contracts with Customers

NOVONIX Battery Technology Solutions

Revenue from contracts with customers is contributed through two primary BTS business lines: 1) hardware sales and 2) consulting services. Our customers include leading battery makers and researchers and equipment manufacturers, including Panasonic, LG , Samsung SDI, and SK Innovation, and numerous specialty materials, consumer electronics OEMs and automotive OEMs.

When we sell battery testing equipment, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things. Our contractual delivery periods vary, but are typically about three months. Contracts for battery testing equipment can range in value based on the amount of equipment provided and the duration of the contract. Revenue from the sales of BTS hardware is recognized at the point in time when the hardware is delivered, the legal title has passed and the customer has accepted the hardware.

The consulting services division provides battery cell design, testing, implementation and support services under fixed and variable price contracts. Contracts for services can range in value based on the duration and scope of the engagement. Revenue from providing services is recognized over-time in the reporting period in which the services are rendered. For fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period based on the resources allocated, costs incurred and actual labor hours spent within the billing period.

Where the contracts include multiple performance obligations, we allocate revenue based on the transaction price to each performance obligation based on the stand-alone selling price for that obligation. Where these performance obligations are not directly observable, they are estimated based on expected cost-plus margin.

Our BTS revenue is affected by changes in the price, volume and mix of products and services purchased by BTS’ customers. The price and volume of our products is driven by the demand for our products, changes in product mix between equipment and services, geographic mix of our customers, and strength of competitors’ product offerings.

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NOVONIX Anode Materials

As of the date of this transition report on Form 20-F, we have not generated any revenue from sale of synthetic graphite. If our commercialization efforts for our synthetic graphite product are successful, we may generate revenue from the sale of our synthetic graphite materials. In addition, if we enter into additional collaboration, partnership or license agreements with third parties, we may generate revenue in the future from payments from such collaboration or license agreements or a combination of product sales and those payments.

Graphite Exploration

As of the date of this transition report on Form 20-F, we have not generated any revenue from sale of natural graphite. We do not expect any revenue from our interests in the MDG Project in the near future. However, in the June 2021 quarter, management initiated a strategic review of the Mt. Dromedary high-grade graphite deposit asset in response to continued sector momentum to evaluate options for furthering exploration and development of the MDG Project. This strategic review remains ongoing as of the date of this report.

Other Income

Other income is primarily comprised of interest income and grant revenue. Interest income is recognized as interest accrues using the effective interest method. This is a method of calculating the amortized cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Grants from government bodies are recognized at their fair value where there is a reasonable assurance that the grant will be received and that we are able to comply with all conditions for receipt of the grant. Other income also includes gains on revaluation of previously held equity method investments, which can be recognized when we obtain control over the equity method investee.

Product manufacturing and operating costs

Product manufacturing and operating costs consists of product costs, including purchased materials and components, as well as costs related to shipping, which, as at the date of this transition report on Form 20-F, have been in connection with our BTS business only. Our product costs are affected by the underlying cost of raw materials and component costs.

Administrative and Other Expenses

Administrative and other expenses consist primarily of travel expenses, facilities costs, audit, legal, tax, insurance, information technology and other costs.

We expect to incur additional audit, tax, accounting, legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor relations and other costs associated with being a public company in the United States. In addition, if we cease to qualify as a foreign private issuer in the future, we would expect that we would incur additional expenses as a domestic reporting company in the United States. The costs associated with the Nasdaq listing totaled $4,226,062, of which $1,633,154 were capitalized as deferred issuance costs on the consolidated balance sheet as at June 30, 2021 and were expensed during the twelve months ended June 30, 2022, following a change in the Company’s plans with respect to our contemplated activities in the U.S. capital markets . See Item 3. Key Information—D. Risk Factor of our 2022 Annual Report (We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.).

Borrowing Costs

Borrowing costs are recognized in the profit or loss statement in the reporting period in which they are incurred.

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Borrowing costs consist primarily of interest accrued on loan notes and borrowings, loss on redemption of loan notes and unwinding of fair value gains.

Impairment Losses

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment includes the consideration of external and internal sources of information, including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use, to the asset’s carrying amount. Any excess of the assets carrying amount over its recoverable amount is recognized immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another accounting standard. Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other accounting standard.

Depreciation and Amortization Expenses

Depreciation expense consists of costs associated with property, plant and equipment (“PP&E”) which are depreciated over their expected useful lives. We expect that as we increase both our revenues and the number of our general and administrative personnel, we will invest in additional PP&E to support our growth resulting in additional depreciation expense.

Amortization expense consists of costs associated with technology intangible assets other than goodwill, which are amortized over their expected useful lives.

Research and Development Costs

Research and development costs primarily represent the Group’s investment in research and development activities for the Single Crystal Cathode (SCC) project. At present, our research and development activities are conducted through our two core businesses: BTS and NOVONIX Anode Materials; SCC falls under BTS R&D.

Research expenditures are recognized as an expense when incurred. Costs incurred on development projects (relating to the design and testing of enhancements or extensions of products from the SSC project) are recognized as intangible assets when:

The expenditure capitalized comprises all directly attributable costs, including costs of materials, services, direct labor and an appropriate proportion of overhead. Other development expenditures that do not meet these criteria are recognized as an expense when incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use on a straight-line basis over its useful life.

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Share Based Compensation

Equity-settled share-based compensation benefits are provided to directors and employees. Equity-settled transactions are awards of shares, options or performance rights over shares, that are provided to directors and employees in exchange for the rendering of services.

The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either a binomial or Monte Carlo option pricing model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions, including share price volatility, interest rates and vesting periods would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact the profit or loss and equity.

The cost of equity-settled transactions are recognized as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognized in profit or loss for the reporting period is the cumulative amount calculated at each reporting date less amounts already recognized in previous reporting periods.

Share-based payment expenses are recognized over the period during which the employee provides the relevant services. This period may commence prior to the formal grant date, such as where the granting of options or performance rights are subject to shareholder approval. In this situation, the entity estimates the grant date fair value of the equity instruments for the purposes of recognizing an expense for the services received during the period between service commencement date and grant date. Once the grant date has been established, the fair value of the equity instrument is calculated, and the earlier estimate is revised so that the amount recognized for services received is ultimately based on the grant date fair value of the equity instruments. Where there is a difference between the estimated grant date fair value and the actual grant date fair value, adjusting entries are recognized in share-based payment expense and the share-based payment reserve.

Employee Benefits Expense

Employee benefits expenses consists of fixed annual remuneration, short term incentives and long-term incentives. Employees receive their fixed annual remuneration as cash. Short term incentives are payable on achievement of mutually agreed KPIs each fiscal year with short term incentives being payable in either cash or by way of the issue of fully paid ordinary shares. The Company has historically paid short term incentives as cash.

At the Board’s discretion, employees are invited to participate in the Long-Term Incentive Program which comprises one-off grants of options and/or performance rights, with varying vesting conditions.

Foreign Currency Gain (Loss)

Foreign currency gain (loss) results from a change in exchange rates between our functional currency and the currency in which a foreign currency transaction is denominated.

Income Tax Benefit

The income tax expense or benefit for the reporting period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognized for prior reporting periods, where applicable.

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Deferred tax assets and liabilities are recognized for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

Deferred tax assets are recognized for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.

The carrying amount of recognized and unrecognized deferred tax assets are reviewed at each reporting date. Deferred tax assets recognized are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognized deferred tax assets are recognized to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

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Results of Operations for the Six Months Ended December 31, 2022, and 2021

The following table sets forth a summary of our consolidated statements of profit or loss and other comprehensive income for the periods presented:

Revenue from Contracts with Customers

Revenue from contracts with customers decreased $219,954 to $2,702,276 for the six months ended December 31, 2022, compared to $2,922,230 for the six months ended December 31, 2021. The decrease was primarily due to a customer return in hardware sales in our BTS segment.

Product manufacturing and operating costs

Product manufacturing and operating costs increased $719,918 to $1,319,682 for the six months ended December 31, 2022, compared to $599,764 for the six months ended December 31, 2021. The increase was due to the inclusion of labor costs from our hardware and consulting sales in our BTS segment.

Administrative and Other Expenses

Administrative and other expenses increased $7,405,683 to $11,481,647 for the six months ended December 31, 2022, compared to $4,075,964 for the six months ended December 31, 2021. The increase was primarily due to an increase in insurance costs of $3,607,029 due to D&O insurance for the U.S. listing and newly acquired NOVONIX Anode Materials (NAM) property in Chattanooga, Tennessee on July 28, 2021; an increase of $1,865,295 in professional fees; and an increase of $1,482,687 in IT software and services required to support the overall business as we continue to grow and further invest in product development and capacity expansion activities.

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Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $780,852 to $2,572,019 for the six months ended December 31, 2022, compared to $1,791,167 for the six months ended December 31, 2021. The increase was primarily due to an increase in PP&E to $125,318,748 at December 31, 2022, from $104,207,182 at December 31, 2021, which primarily related to the expansion of our production facilities in Chattanooga, Tennessee.

Research and Development Costs

Research and development costs remained consistent at $2,020,656 for the six months ended December 31, 2022, compared to $1,632,347 for the six months ended December 31, 2021, as we continue to investment in product and technology development for our cathode business in our BTS segment and our NOVONIX Anode Materials segment.

Nasdaq listing related expenses

There were no Nasdaq listing related expenses for the six months ended December 31, 2022, compared to $3,298,186 for the six months ended December 31, 2021. These expenses primarily consisted of direct and incremental legal and advisory fees related to the Company’s NASDAQ listing in expectation of an equity raise in the prior year.

Share Based Compensation

Share based compensation decreased $3,247,252 to $5,354,429 for the six months ended December 31, 2022, compared to $8,601,681 for the six months ended December 31, 2021. The decrease was primarily due to the issuance of immediately vesting performance rights to senior management in November 2021, which resulted in a share based compensation expense of $6,829,664 during the six months ended December 31, 2021, which did not occur during the six months ended 31 December 2022.

Employee Benefits Expense

Employee Benefits expense increased $4,569,701 to $8,549,850 for the six months ended December 31, 2022, compared to $3,980,149 for the six months ended December 31, 2021. The increase was primarily driven by an increase in headcount of 76 employees to support the alignment with the expansion of these business.

Borrowing Costs

Borrowing costs increased $312,441 to $943,421 for the six months ended December 31, 2022, compared to $630,980 for the six months ended December 31, 2021. The increase was primarily due to the increase in borrowings from the purchase of commercial land and buildings in Chattanooga, Tennessee, to expand our NAM business.

Foreign Currency Gain (Loss)

Foreign currency gain for the six months ended December 31, 2022, was $1,360,308 compared to a foreign currency loss for the six months ended December 31, 2021, of $190,997. Our foreign currency gain/loss fluctuates based on our exposure to transactions and balances denominated in currencies other than the functional currency of the related subsidiary.

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Other Income, net

Other income decreased $474,280 to $315,106 for the six months ended December 31, 2022, compared to $789,386 for the six months ended December 31, 2021. The decrease was primarily due to $184,686 in grant funding received from the Canada Industrial Research Assistance Program to assist in funding BTS research and development activities received in the prior period; and a day-1 gain of $14,436 related to an interest-free loan facility from ACOA to assist with purchasing equipment for the cathode pilot line expansion received in the prior period.

Results of Operations for the Twelve Months Ended June 30, 2022 and 2021

The following table sets forth a summary of our consolidated statements of profit or loss and other comprehensive income for the periods presented:

Revenue from Contracts with Customers

Revenue from contracts with customers increased $2,207,416 to $6,101,155 for the twelve months ended June 30, 2022, compared to $3,893,739 for the twelve months ended June 30, 2021. The increase was primarily due to an increase in demand from existing and new customers and an increase in pricing for both business lines in our BTS segment; hardware sales increased $1,502,689 to $2,549,308, and consulting services increased $704,727 to $3,551,847.

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The following tables present the disaggregated revenue streams for the twelve months ended June 30, 2022, and 2021 (in U.S. dollars).

Product manufacturing and operating costs

Product manufacturing and operating costs increased $913,961 to $1,724,625 for the twelve months ended June 30, 2022, compared to $810,664 for the twelve months ended June 30, 2021. The increase was due to the growth in revenue from our hardware and consulting sales in our BTS segment as described above.

Administrative and Other Expenses

Administrative and other expenses increased $9,740,844 to $12,591,709 for the twelve months ended June 30, 2022, compared to $2,850,865 for the twelve months ended June 30, 2021. The increase was primarily due to an increase in insurance costs of $2,959,010 due to D&O insurance for the US listing and newly acquired NOVONIX Anode Materials (NAM) property in Chattanooga, Tennessee on July 28, 2021; an increase in occupancy expenses of $2,756,885 related to our newly acquired NAM property in Chattanooga, Tennessee; and an increase of approximately $2,203,138 in professional fees required to support the overall business as we continue to grow and further invest in product development and capacity expansion activities

Impairment Losses

There was no impairment loss recognized in the twelve months ended June 30, 2022, compared to an impairment loss of $2,002,399 for the twelve months ended June 30, 2021.

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In the twelve months ended June 30, 2021, we recognized an impairment loss of $2,002,399 relating to redundant furnace technology which was replaced with new proprietary furnace technology under our strategic alliance with Harper International Corporation. The impairment loss represents the net book value of fixed assets written off related to the NOVONIX Anode Materials segment.

Our Directors have assessed that for the exploration and evaluation assets remaining in the Graphite Exploration segment recognized at June 30, 2022, the facts and circumstances do not suggest that the carrying amount may exceed its recoverable amount.

The following table presents impairment losses recognized in the twelve months ended June 30, 2021. (in U.S. dollars).

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $2,949,995 to $4,214,617 for the twelve months ended June 30, 2022, compared to $1,264,622 for the twelve months ended June 30, 2021. The increase was primarily due to an increase in PP&E to $104,207,182 for the year ended June 30, 2022, from $23,707,367 for the year ended June 30, 2021, which primarily related to the expansion of our production facilities in Chattanooga, Tennessee.

Loss on equity investment securities at fair value through profit or loss

During the twelve months ended June 30, 2022, we recognized a loss of $8,113,657 related to our equity investment in KORE Power held at fair value through profit or loss. The loss was a result of a review of the fair value of our equity investment in KORE. The key assumptions used in the fair valuation of KORE Power at June 30, 2022 include (but were not limited to) the share price at which Novonix subscribed for equity in KORE Power, indicators of value derived from actual and proposed share transactions that the Group is aware of, and market observable inputs based on an analysis of share price movements of listed peer companies in the battery technology sector between the date of the initial investment and reporting date.

Research and Development Costs

Research and development costs increased $3,009,726 to $5,102,824 for the twelve months ended June 30, 2022, compared to $2,093,098 for the twelve months ended June 30, 2021. The increase was primarily due to increased investment in product and technology development for our cathode business in our BTS segment and our NOVONIX Anode Materials segment.

Nasdaq listing related expenses

Nasdaq listing related expenses was $4,226,062 for the twelve months ended June 30, 2022, compared to zero for the twelve months ended June 30, 2021. These expenses primarily consisted of direct and incremental legal and advisory fees related to the Company’s NASDAQ listing and the fact that these expenses were capitalized last year on the balance sheet in expectation of an equity raise.

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Share Based Compensation

Share based compensation increased $10,062,763 to $14,530,749 for the twelve months ended June 30, 2022, compared to $4,467,986 for the twelve months ended June 30, 2021. The increase was primarily due to current year grants of performance rights to key management personnel and other employees in participation of the Group’s Long-Term Incentive Program (“LTIP”); and current year grants of share rights to non-executive directors.

The following table presents the composition of share-based payments expense for the twelve months ended June 30, 2022, and 2021 (In Australian dollars).

Employee Benefits Expense

Employee Benefits expense increased $8,388,043 to $12,736,590 for the twelve months ended June 30, 2022, compared to $4,348,547 for the twelve months ended June 30, 2021. The increase was primarily driven by an increase in headcount of 84 employees, salary and bonuses increases to KMP ($1.0 million).

Borrowing Costs

Borrowing costs increased $1,341,677 to $1,512,548 for the twelve months ended June 30, 2022, compared to $170,871 for the twelve months ended June 30, 2021. The increase was primarily related to the increase in borrowings from the purchase of commercial land and buildings in Chattanooga, Tennessee, to expand our NAM business.

Foreign Currency Gain (Loss)

Foreign currency gain for the twelve months ended June 30, 2022, was $5,195,798 compared to a foreign currency loss for the twelve months ended June 30, 2021 of $62,527. Our foreign currency gain/loss fluctuates based on our exposure to transactions and balances denominated in currencies other than our functional currency, predominantly USD transactions and their respective rates.

Other Income, net

Other income increased $862,673 to $1,596,120 for the twelve months ended June 30, 2022, compared to $733,447 for the twelve months ended June 30, 2021. The increase was primarily due to $982,767 in grant funding, $587,249 of which was received from the Canada Industrial Research Assistance Program to assist in funding BTS research and development activities; and a day-1 gain of $219,557 related to an interest-free loan facility from ACOA to assist with purchasing equipment for the cathode pilot line expansion.

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Results of Operations for the Twelve Months Ended June 30, 2021, and 2020

The following table sets forth a summary of our consolidated statements of profit or loss and other comprehensive income for the periods presented: