Today, everyone, and thank you for joining us for this International Battery Metals' Second Quarter Fiscal Year 2026 Earnings Call and Webcast. As a reminder, all phone participants are in a muted or listen-only mode to prevent any background noise. For opening remarks and introductions, I'm pleased to turn the floor over to Brett Moss with Hayden IR. Welcome, sir.
Thank you, Operator. Good morning, everyone. With me today is our CEO, Joe Mills, who will provide a business update, and CFO, Michael Rutledge, will review our financial performance. Before we begin, I want to remind everyone that, except for historical information, the matters discussed in this presentation are forward-looking statements that involve risks and uncertainties. Words like believe, expect, and anticipate refer to our best estimates as of this call, and there are going to be no assurances that these will actually take place, so our actual future results could differ significantly from these statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports filed on SEDAR. Additionally, please note that we will not be taking live questions during today's call. With our S-1 registration statement pending, Securities Counsel has advised us against conducting live Q&A sessions or having a replay.
Now I turn the call over to Joe. Joe, the floor is yours.
Great. Thank you. Thank you, Brian. Okay, Brett. Good morning, everyone. We appreciate you joining us this morning to listen to our second quarter 2026 results. As I reach my sixth month as CEO of this company, I want to use today's call as a kind of state of the union for IBAT and a chance to step back and share what I've learned, where we stand, and how we're positioning the company for the future. When I started six months ago, I said my focus would be on three things: understanding the technology, understanding this market, and aligning our strategy with reality so we could be successful. Six months in, that's exactly what we've been doing. I continue to be a big believer in our technology. The low-cost and efficient fundamentals of our DLE process, the resin performance, the kinetics, and the environmental footprint are all very impressive.
I've also gained a good understanding of the opportunities in front of IBAT and the challenges that large-scale DLE projects will need to overcome, as well as the competitive landscape and any limitations of our existing MDLE plant. First, let's discuss our plant. It was designed back in 2022 for a specific deployment in the Lithium Triangle in South America. This opportunity was unique as it had very, very high lithium content, Brian, which required lower flow rates to efficiently recover the lithium, so the plant didn't need to be designed to run 24/7. Today, the opportunities we're seeing have lithium concentrations that are significantly lower, and therefore the plant will need to meet a different set of specifications. As such, we've identified opportunities to modify and upgrade the front-end filtration system to increase flow rates and improve recoveries in this lower-content lithium brine.
Additionally, through talks with potential customers, we've learned that most of them ultimately want the plant to be capable of running 24/7 while remaining efficient and low-cost in maximizing the lithium recovery. Therefore, before any future deployment, and based on customer-specific site and brine specifications, there's a pretty high likelihood that we'll need to upgrade the front end of our plant to make it a more efficient and reliable platform for the broader range of brine concentrations at the sites we're evaluating. Next, as currently configured, based on the brine concentrations of between 200 and 400 parts per million, that's what we see in the Smackover play in Texas and Arkansas, as well as other U.S. locations, and even in the Middle East. This plant can produce roughly 700 metric tons of lithium chloride per year on a lithium carbonate equivalent basis.
This means that effectively our plant can produce enough lithium chloride to make 700 metric tons of lithium carbonate per year. Additionally, as a result of these ongoing discussions with potential customers, we've analyzed two scenarios to understand what it would take to make the required upgrades for the front end of the plant, as well as expand the plant's capacity from the current 700 metric tons to 1,000 metric tons, and then up to 2,000 metric tons. Based on the lithium content levels in the brine we're currently evaluating, which again is between 200 and 400 parts per million, what we've determined is that we would need to potentially spend between $1 million and up to $10 million in order to upgrade the plant.
Specifically, to achieve 2,000 tons, we would be upgrading the plant to fully utilize the available column capacity, as well as expand operations to 24/7 commercial runtimes, maximize the water handling and storage capabilities, and add full redundancies for reliability and uptime. That is key in order to deploy in the oil field. Understand that both the initial investment to improve the flow rates and the larger CapEx for the plant's expansion will be driven by customer requirements once a customer decides to deploy the plant and the specific production target that they require. In addition, once a customer executes an agreement, we will still need to deploy and commission the plant to a customer's site, which, if located here in the U.S.A., could easily cost in the $500,000-$700,000 range, and if internationally, that number will more than double.
It's for that reason that we won't move the plant until a paying customer is signed up. Our near-term focus is working with several potential customers to deploy our existing plant. That could be to a location in the Smackover play in Arkansas or East Texas, or to a large solar opportunity in the Middle East, or potentially elsewhere, including South America. Depending on the requirements set by the specific customer, that will dictate how much, if any, additional capital we must spend to commission the plant to meet the resource brine specifications. A secondary but important objective is to build new, larger facilities for resource development. For example, we have had potential customers ask us to develop plans for a larger 5,000 metric ton plant that incorporates all of our learnings from the construction of the existing plant and can process lower PPM brines.
As part of this strategy, we may commit to building a smaller pilot program to prove the resources and techniques ahead of a larger deployment. Finally, and importantly, any future plants commissioned by customers will be more efficiently engineered from the start, incorporating everything we've learned over the past few years. Next, I'll discuss how the competitive landscape is evolving. The biggest shift I've seen in six months is in what customers actually want. Customers want turnkey execution, not a single piece of equipment. They're no longer looking for just an isolated DLE solution. They're asking for a complete flow sheet or a turnkey solution, which is from the brine treatment all the way through creating lithium carbonate.
IBAT believes it has the best-in-class DLE solution, but the strategy up until this point did not include the carbonation process, which is how you take lithium chloride, which comes from the tailgate of our plant, and convert it into a battery-grade lithium carbonate. To deliver that, IBAT will need to either partner with or acquire access to those complementary assets. The good news is we have those commercial and technical capabilities in-house to either develop or acquire these technologies, so we are dedicating some amount of time to determining the best path forward. That competitive shift also changes how we think about our business model.
There's a lot of capital that's tied up in the DLE and the carbonation processes, which makes it more challenging for us to build these plants with our balance sheet and then attempt to just lease them back to our customers at prevailing lithium prices because there just isn't enough margin for the resource owner and we, the DLE carbonation provider, to meet each party's required returns. Should lithium prices increase, which we hope will happen, this could change, but for now, we're focusing on two of our three revenue models that make economic sense in this current low-lithium pricing environment. We believe our technology is excellent. Specifically, our media, our resin, is exceptional, and our columns and processes are proven to be a low-cost and efficient solution, which is critical to be competitive in this low-lithium pricing environment.
We're actively working on our asset light model, where we will license our technology and then build and deploy our media and columns to a customer. Our second revenue model, which we call the mystery model, is more focused on building and selling a plant outright at a cost-plus model paired with a licensing fee for our proprietary media and extraction columns. This is a refinement of our previous mystery model of where we thought we would just build and rent our plants to customers. The third revenue model is our strategic partnership model, where we are working with several potential partners to evaluate owning or sharing in a portion of the resource, deploying our technology into that development, and directly participating in the economics of the lithium produced.
Given our team's strong oil and gas backgrounds, we know how to drill and develop resources, and we can actively help these partners technically develop the resource in the most cost-effective manner. All three paths allow us to create value, but the third one, our strategic partnership, ownership, or joint participation model aligns us more directly with the long-term success of the resource itself. Digging into the competitive environment, the level of competition is fierce in the DLE space. There are a lot of competing DLE providers, and we're seeing a number of them bid on projects at break-even economics or even losses. That is not sustainable. We continue to put our best foot forward on proposals that make economic sense, but we are acutely aware of the thin margins available.
We're also seeing potential customers want DLE companies to pay for all of the upfront capital and operating expenses associated with getting a plant up and running, with these costs being recovered in the monthly rental or sales price of the plant. This gives larger, better-capitalized companies an advantage submitting proposals. I hope you appreciate that any and all the projects we're evaluating will ultimately require resource owners to spend hundreds of millions of dollars to fully develop. The resource owners are hyper-fixated on partnering with DLE providers that not only have strong, efficient, and low-cost DLE technology, but also have a balance sheet to be a survivor in this low-lithium price environment. Therefore, they are focused on making the DLE investment decision not only based on the best technology, but also with a technology partner that will be there with them for years down the road.
As such, we've opportunistically improved our balance sheet over the past six months. Overall, we expect to see a shakeout and eventual consolidation across the DLE technology industry, and our goal is to not only be a survivor, but to become a leader in this very competitive space. Next, I'm going to discuss the commercial activity and early revenue. On the commercial front, we're starting to see tangible traction. In the second quarter, we generated $64,000 in revenue compared to $7,500 in our first quarter, driven entirely by brine testing fees. These fees represent paying customers who are considering doing business with us on a larger scale. We're currently testing brines from the U.S., Argentina, and the Middle East.
In total, between testing brines, conducting resource evaluations, cost modeling, and preparing customer proposals, we are actively evaluating and working on more than half a dozen potential opportunities, and we expect that number only to grow. Our potential customers range from large oil and gas companies to national oil companies with extensive resources and land holdings. We're also working with smaller resource owners that control thousands of acres of brine rights across various geological plays in America and elsewhere. We announced back in September that we signed an 18-month exclusive collaboration agreement with a major Middle East energy services provider, and that company is National Energy Services Reunited Corporation, also known as NESR. They are a leading national provider of oil field services in the Middle East and the Asia-Pacific regions and are traded on the NASDAQ.
We're excited to be working with the NESR team as we evaluate and explore mutual opportunities to deploy our technology internationally. I hope this gives our investors some comfort in the level of activity that is ongoing within IBAT these days. That doesn't mean any or all of these will become customers, but it shows the level of commercial activity that's underway. To be clear, we have had to significantly ramp up our business development activities and discussions to engage potential customers and educate them on IBAT's technology and capabilities. This process does not take weeks, it takes months. We also remain active in attending selective lithium and DLE conferences, but candidly, our time is better spent engaging directly with key potential customers and showing them our technology, not just talking about it.
To help you better understand this process, I think investors need to understand that from the time we initially engage with a potential customer to the time we can get a sample of their brine, and by the way, not all of them even have brine yet as they've not even drilled a brine well, to the time we do detailed costing, modeling, and evaluating their technical requirements to submission of a proposal, that all takes months. Our new management team is only six months into this journey, and we've made tremendous progress. Our sole focus is to sign one or more customers, deploy our current plant, and also build new plants for a paying customer. I hope that gives you, our investors, a better view of what's happening behind the scenes. Now, let me touch on a few items you've seen in our recently issued proxy statement.
First, I want to address the reverse stock split proposal in our proxy because I know that topic can be perceived as a negative with retail investors. We are not conducting a reverse stock split at this time. What we're asking our shareholders to do is approve a proposal that would give the board authority to implement a reverse stock split in the future if and when the board believes it is in the best interest of the company and its shareholders. One example of when this authority could be used is in connection with our objective to uplist to the NASDAQ or the NYSE over the next 12- 15 months once we have a clear path to revenue generation.
Uplisting is an important long-term goal because it can help us attract institutional investors and improve the liquidity in our stock and better position the company alongside its peers in the energy transition sector. The exchanges require a minimum share price that is significantly higher than our current stock price. Many U.S. institutional investors cannot invest in stocks with prices below $5 per share, so we would likely want to target a much higher stock price than these minimums when it comes time to uplist. Generally, reverse stock splits that come with good news like an uplist are not viewed negatively by experienced investors. Also, if and when a stock split is authorized, it does not have to be one for 50. It could be one for any number between 1 and 50. It would all depend on the stock price and the circumstances at that time.
Also note that a reverse stock split does not change the value of the company or your percentage ownership. If you own $50,000 of IBAT stock before a reverse stock split, you still own $50,000 after a reverse stock split. You simply own fewer shares at a higher price per share. The board will only consider using this authority if it believes doing so would support the company's long-term strategy, including initiatives such as potential uplisting and improve our access to deeper and more stable pools of capital. If market conditions or other factors suggest that a reverse split would not be in the shareholders' best interest, the board is not required to use this authority. Second, in the proxy, we're proposing to replace and consolidate our two existing equity plans, one for stock options and one for RSUs, into a single modern plan that is more aligned with U.S. companies, more of our peers in the U.S.
Like one of our existing plans, this new plan's authorization is tied to a percentage of issued shares outstanding, so there'll be an increase in authorized shares from 50 million, which is what we have today, to 59 million as a result of the growth in our existing outstanding share count. That expansion is designed to ensure we can retain and attract top talent across engineering, operations, and commercial development, and those are the people who will turn IBAT from a development-stage company into a commercial leader. In short, both of these corporate actions are strategic steps aimed at long-term growth, better governance, and stronger alignment between the board, management, and shareholders. Again, I want to reiterate, we are not asking you to approve a new plan with 59 million new shares.
We're asking you to allow us to consolidate two existing plans that would result in an increase in a total of approximately 9 million shares. We encourage you to vote your shares with the board in this important proxy. Looking ahead, our mission remains the same: to commercialize a proven, low-cost, environmentally responsible DLE technology at scale. We've learned where the bottlenecks are, what customers actually need, and how to design the next plant to be faster, more cost-effective, and more scalable. The next six months will be all about executing smarter, partnering strategically, and working to sign one or more customers. I'm proud of what the team has accomplished in this short time, and I'm confident that IBAT's best days are ahead.
I do want to recognize and thank the 11 employees of IBAT who work tirelessly every single day to move this company forward to deploy our exciting technology. Now I'm going to turn the call over to Michael to discuss the financials.
Thank you, Joe. Let's note that all comparisons are for the second fiscal quarter of 2026 compared to the same quarter last year. As we've discussed in the past, IBAT is still effectively in the pre-revenue state of development. However, during our most recent fiscal quarter, we did recognize $64,000 of service revenue related to testing brines. Last year, we recognized $639,000 of revenue, which represented reimbursable costs from the US Magnesium contract that began in May of 2024. Operating expenses remained flat at approximately $500,000 in the current quarter compared to approximately $460,000 in the prior year.
Our sales, general, and administrative expenses, otherwise known as SG&A, used in the day-to-day operations consist primarily of compensation expense, both cash and stock-based, professional and legal fees, engineering cost, and office cost. SG&A expenses for the second quarter were approximately $2.2 million compared to approximately $2.9 million last year. Primary causes of the decrease were lower non-cash stock compensation and lower legal fees. This year, changes in our warrant liability, net of non-cash cost of modifying certain warrants, caused income of approximately $6.4 million, which is a non-cash item that is marked to market each quarter based on the change in stock price. This compares to $20.1 million of income recognized in last year's quarter. Fluctuations such as this will continue until all of the warrants that have been previously issued either expire or are exercised.
Net income for the fiscal quarter was $3 million compared to $16.7 million last year, with a major driver in the reduction quarter over quarter being the non-cash warrant liability fluctuation. Our operating loss for the quarter, excluding the warrant liability, improved by approximately $650,000 compared to last year. Net income per share was $0.01 versus $0.07 a share last year. Turning to the balance sheet, as of September 30, 2025, we had approximately $9.4 million of cash on hand compared to approximately $10.7 million on March 31, 2025. During the quarter, we successfully completed a private placement for the sale of approximately 25.8 million units, each unit consisting of one share of common stock and one warrant, for $5 million in gross proceeds. The agreement also allows the investor to purchase up to an additional $2 million of stock units on similar terms through December 31, 2025.
Subsequently, on October 31, 2025, we close an additional private placement for the sale of approximately 12.5 million units, each unit consisting of one share of common stock and one warrant, for $2 million in gross proceeds. This funding was in connection with the private placement agreement entered into in February of 2025. With the cash on hand at September 30 and the proceeds from the private placement issued subsequent, we believe the company has sufficient operating cash to continue through at least the next 12 months. At this point, I would like to turn the call back to Joe.
Thank you, Mike. With that update, I want to thank each of you for your time and attention this morning. As we push to move IBAT forward, we are intent on becoming the first true DLE player to operate at full commercial scale. I want to assure each of you the sense of urgency is and will remain very high with the Board of directors and the management team to aggressively move forward with bringing on new customers. I truly believe we have something very unique here at IBAT, and I'm excited about the potential and the journey ahead for us. We sincerely appreciate your support and your continued patience as we build out our business and our business plan. With that, thank you, and we look forward to talking to you again soon.
Ladies and gentlemen, this does conclude today's presentation, and we're thankful that you all joined. You may now disconnect your lines.