Oklo Inc

The following discussion and analysis of our financial condition and results of operations for the nine months ended September 30, 2024 and 2023, should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s Registration Statement on Form S-1, as amended (File No. 333-280344) (the “Form S-1”), which was declared effective on September 18, 2024. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Special Note Regarding Forward-Looking Statements.”

Overview

We were founded in 2013 with the goal of revolutionizing the energy landscape by developing clean, reliable, affordable energy solutions at scale. According to Fortune, global demand for reliable, clean energy is growing rapidly, with 63% of Fortune Global companies publicly committing to emissions reductions by 2050, and the International Energy Agency expects global spending on clean energy technologies and infrastructure to reach $2 trillion in 2024. We are pursuing two complementary tracks to address this demand: providing reliable, commercial-scale energy to customers and selling used nuclear fuel recycling services to the U.S. market.

We are developing next-generation fast fission power plants called “powerhouses.” In our differentiated build, own, and operate business model, we plan to sell power in the forms of electricity and heat directly to customers, which we believe can allow for fast-tracked customer adoption. In addition, we are a leader in the nuclear industry in the development of fuel recycling, which can unlock the energy content of used fuel; we also believe this business unit can complement our market position by vertically integrating and securing our fuel supply chain.

The fast fission technology we are working to commercialize was demonstrated by the Experimental Breeder Reactor-II (“EBR-II”), a fast fission plant that was operated by the U.S. government for 30 years. Our powerhouse product line, called the “Aurora,” builds on this legacy of proven and demonstrated technology. Our Aurora powerhouse product line is designed to be inherently safe, to be able to run on fresh or recycled fuel, and to produce 15-50 megawatts electric (“MWe”) and with the potential to expand powerhouse size to produce 100 MWe of electricity. Because the Aurora powerhouses are designed to operate by harnessing the power of high-energy, or “fast,” neutrons, they are expected to be able to tap into the vast energy reserves remaining in existing used nuclear fuel from conventional nuclear power plants, which is currently considered nuclear waste. We estimate there is enough energy in the form of nuclear waste globally to meet the projected U.S. demand for electricity for 100 years with fast fission power plants.

We have achieved several significant deployment and regulatory milestones for deploying our Aurora powerhouses. Notably, we secured a site use permit from the U.S. Department of Energy (“DOE”) for the Idaho National Laboratory (“INL”) site and received a fuel award from INL for a commercial Aurora powerhouse in Idaho. Additionally, we have successfully completed the second phase of the thermal hydraulic testing campaign in collaboration with Argonne National Laboratory (“Argonne”). The DOE and INL have completed the environmental compliance process addressing the DOE requirements for site characterization at our first commercial advanced fission power plant site at the INL. This process, resulting in an Environmental Compliance Permit, marks a milestone as we advance our plans to deliver the first commercial advanced fission power plant in the United States. On September 25, 2024, we announced the finalization of a Memorandum of Agreement (“MOA”) with the DOE Idaho Operations Office. This MOA grants Oklo access to conduct site investigations at its preferred site in Idaho, marking a key step toward the next phase of site preparation and construction.

We announced plans and entered into a land rights agreement for two additional Aurora powerhouses in southern Ohio. Furthermore, we have been tentatively selected to provide power and heat to Eielson Air Force Base. Our robust pipeline of potential customer engagements span a number of industries. We have signed additional non-binding letters of intent with Equinix, Diamondback Energy, and Prometheus Hyperscale (formerly Wyoming Hyperscale), and has received two other letters of intent to provide an additional 750 MWe of energy for data center customers, which could bring our current total deployment of Aurora powerhouses to over 2,100 MWe in capacity - nearly a 200% increase since our business combination announcement in July 2023. The early market interest in our solutions exemplifies the potential demand for the size range of the Aurora powerhouse product line and our differentiated business model. Our first Aurora powerhouse is targeted for deployment in 2027.

In addition to deployment milestones, we have made significant progress in our recycling efforts and in securing fuel. The DOE has reviewed and approved Oklo's Safety Design Strategy (SDS) and the Conceptual Safety Design Report for Oklo's Aurora Fuel Fabrication Facility at INL, key milestones as Oklo advances toward its goal of utilizing recovered nuclear material to fuel its first commercial Aurora powerhouse. We successfully completed the first end-to-end demonstration of the key stages of our advanced fuel recycling process, in collaboration with Argonne and INL. This marks a significant step forward in scaling up fuel recycling capabilities and deploying a commercial-scale recycling facility.

Moreover, we have previously formed a non-binding strategic partnership with Atomic Alchemy. This partnership aims to combine Oklo’s expertise in building and operating fast reactors and fuel recycling with Atomic Alchemy’s expertise in isotope production. Together, we aim to meet the increasing demands for isotopes in medical, energy, industry, and science applications.

Our Business Model

Our primary product will be the energy produced from our Aurora powerhouses once operational. Our planned business model is to sell the energy to customers via power purchase agreements (“PPAs”), as opposed to selling our powerhouse designs. This business model allows for recurring revenue, the opportunity to capture profitability upon improved operational efficiency, and enables novel project financing structures. This business model sets us apart from the traditional nuclear power industry, other companies in the advanced fission industry, and other larger scale energy types such as natural gas. Selling power via PPAs is a common practice within the renewable energy and utilities sectors and indicates that this business model could be feasible for power plants within the size range targeted by our Aurora product line (i.e., starting with 15 MWe and 50 MWe, and ranging upward to anticipated sizes of 100 MWe).

The traditional nuclear power industry comprises developers of large (ranging from approximately 600 MWe to over 1,000 MWe) light water reactors that sell or license their reactor designs to large utilities that then construct and operate the nuclear power plant. The developer’s focus on regulatory approval of the design may lock in certain lifecycle regulatory costs that are realized by the owner-operator during construction and operations. As a result, lifecycle cost implications are generally not addressed cohesively between the developer and the owner-operator, and the regulatory strategy does not holistically implement the lifecycle benefits of the technology’s inherent safety characteristics. To date, the advanced fission industry is largely following the historical blueprint of developers seeking design certifications or approvals, and utilities bearing the future burden of licensing for construction and operations. While there are a number of advanced reactor designers developing smaller sized reactors than those traditionally used in the nuclear power industry, most of these developers are generally pursuing regulatory approval of groupings of these smaller reactors as part of singular larger plants, sizes of 200 MWe and up to 1,000 MWe.

In contrast, we plan to be the designer, builder, owner, and operator of our powerhouses and plan to focus on small-scale powerhouses (15 MWe, 50 MWe and up to 100 MWe). As a result, we have an incentive to relentlessly focus on the full lifecycle of a safe, well-maintained, cost-effective powerhouse and holistically implement the benefits of an inherently safe, simple design. We expect this approach to enable us to reduce and manage lifecycle regulatory and operating costs in an integrated fashion, as opposed to the historical model used in the nuclear power industry that divides the incentives and responsibilities between the developer and the utility.

Selling electricity under PPAs follows an established revenue model in global power markets. While this model is more typically used for renewable energy solutions, we believe it is a compelling model for us because of the relatively small size and the lower expected capital costs of our powerhouses, when compared with other nuclear power plants. In addition, our model is designed to generate recurring revenue in a way that the traditional licensing model does not. For example, in the traditional technology licensing model, after the sale of the design, recurring revenue is dependent upon the sale of service contracts, including fuel services, which may result in prices being undercut by intermediaries. We expect our powerhouses to be profitable from the first year of operation due to our anticipated favorable unit economics. We also believe this approach will drive unit growth and allow us to ultimately launch higher output versions of our powerhouses.

We believe that our potential customers want to buy power, rather than own or operate power plants, and will provide affordable solutions that meet their environmental and operational goals. We plan to further accelerate customer adoption by offering minimal to potentially zero upfront costs and quick delivery times. With non-binding letters of intent from potential customers for over 2,100 MWe, we believe our powerhouses are an ideal fit for target markets in decentralized use cases, such as data centers, national defense, factories, industrial customers, off-grid and rural customers and utilities.

In addition to selling power under PPAs, we believe we have an embedded opportunity to enhance our mission with our advanced nuclear fuel recycling technology. We are actively developing nuclear fuel recycling capabilities with the goal of deploying a commercial-scale fuel recycling facility in the United States by the 2030s. Used nuclear fuel waste still contains more than 90% of its energy content, and we believe there is enough energy in the form of used nuclear fuel globally to power the expected electrical needs in the United States for 100 years with fast fission power plants. According to the DOE, more than 90,000 metric tons of used nuclear fuel waste have been generated since 1950, and an additional 2,000 metric tons are generated every year. Currently, other countries recycle used nuclear fuel waste, but the United States does not, and there is an enormous opportunity to do so. Our reactors are specifically designed to run on either fresh or recycled nuclear fuel, and nuclear fuel recycling could provide future margin uplift for our power sales business, as well as the potential for new revenue streams.

Recent Developments

Atomic Alchemy Acquisition

On November 7, 2024, the Company entered into a term sheet (the “Term Sheet”) with Atomic Alchemy, whereby Atomic Alchemy has agreed to negotiate exclusively through a certain date, pursuant to an exclusivity agreement dated September 30, 2024 in connection with the proposed acquisition of Atomic Alchemy. The Term Sheet provides for the Company being in a position to execute a definitive agreement for a proposed $25 million all-stock transaction, subject to customary due diligence.

Business Combination

On May 9, 2024, we consummated a business combination pursuant to an Agreement and Plan of Merger and Reorganization dated July 11, 2023 (as amended, modified, supplemented or waived, the “Merger Agreement”), by and among us, AltC Acquisition Corp., a Delaware corporation (“AltC”) and AltC Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of AltC (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Oklo Inc., with Oklo Inc. surviving the merger as a wholly owned subsidiary of AltC (following the merger Oklo Inc. changed its name to Oklo Technologies, Inc. and herein after referred to as “Legacy Oklo”) (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). Upon consummation of the Business Combination (the “Closing”), AltC changed its name to Oklo Inc.

Our Class A common stock commenced trading on the NYSE under the symbol “OKLO” on May 10, 2024.

In connection with the Business Combination, we received proceeds of $276,209,768, and after transaction costs and advisor fees, we received net proceeds of $260,859,623. Further details related to the Business Combination are provided in Note 3 in our accompanying condensed consolidated financial statements.

In connection with the Business Combination, the following shares of Class A common stock are outstanding: (i) 1,450,000 private placement shares held by the Sponsor subject to certain provisions under the Sponsor Agreement, (ii) 12,500,000 Founder Shares held by the Sponsor subject to certain vesting conditions under the Sponsor Agreement (between November 5, 2024 and November 13, 2024 the Founder Shares vesting conditions were met), and (iii) 15,000,000 shares were reserved for the potential future issuance of the Earnout Shares (between November 12, 2024 and November 13, 2024, the Earnout Shares vesting conditions were met), which includes certain shares held by Legacy Oklo vested options holders’ for the contingent right to receive a pro rata share of the Earnout Shares at Closing. Further details related to the Business Combination and Vesting of Earnout Shares are provided in Note 3 and Note 15, respectively, in our accompanying condensed consolidated financial statements.

Key Factors Affecting Our Performance

We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business, but also pose risks and challenges. As a result, we are subject to continuing risks and uncertainties. For additional information, see the sections titled “Risk Factors” included in the Form S-1 and in this Quarterly Report.

Product Development Plan

We plan to leverage the next-generation fast fission powerhouses that we are developing in order to sell power to a variety of potential customers, including data centers, national defense, factories, industrial customers, off-grid and rural customers and utilities.

Commercial deployment of any advanced fission power plant requires obtaining regulatory approvals for design, construction, and operation. Our regulatory strategy has been focused on a custom combined license application. We submitted an initial custom combined license application with the Nuclear Regulatory Commission (“NRC”) in March 2020, which was denied without prejudice in 2022, and we are working toward submitting an updated custom combined license application for review. In March 2020, we became the first advanced fission company to submit a custom combined license application, and we remain the only such company to do so. It is uncertain when, if at all, we will obtain regulatory approvals for the design, construction, and operation of any of our powerhouses. Our financial condition and results of operation are likely to be materially and adversely affected if we do not obtain such approvals and to the extent this process takes longer or costs more than we expect.

Additionally, we plan to be the designer, builder, owner, and operator of our powerhouses and plan to focus on small-scale powerhouses (15 MWe, 50 MWe, and exploring 100+ MWe designs). As a result, we have an incentive to relentlessly focus on the full lifecycle of a safe, well-maintained, cost-effective powerhouse and holistically implement the benefits of an inherently safe, simple design. We expect this approach to enable us to reduce and manage lifecycle regulatory and operating costs in an integrated fashion, as opposed to the historical model used in the nuclear power industry that divides the incentives and responsibilities between the developer and the utility. However, this model exposes us directly to the costs of building, owning, and operating our powerhouses. Our cost projections are heavily dependent upon fuel and raw materials (such as steel), equipment and technical and construction service providers (such as engineering, procurement, and construction firms). The global supply chain, on which we will rely, has been significantly impacted in recent years by inflation, instability in the banking sector, war and other hostilities, and other economic uncertainties, resulting in potential significant delays and cost fluctuations. Similar developments in the future may impact our performance from both a deployment and cost perspective.

Plan of Operations

To further our target of deploying our first powerhouse in 2027, during 2024, we have been engaged in the following key initiatives:

•Progressing regulatory approval with the NRC, including a Pre-Application Readiness Assessment for our next Combined Operating Licensing Agreement, expected to begin in the first half of 2025.

•Initiating regulatory pre-application related activities with the NRC for licensing of commercial fuel fabrication.

•Continuing work related to fuel recycling, such as pre-application regulatory alignment efforts with the NRC, research and development, both independently and in conjunction with the DOE, focused on facility and process design.

•Working with INL on fuel manufacturing, including preparation of documentation for regulatory review and finalization of the facility design.

•Advancing partnerships related to fuel enrichment, fuel fabrication, and other key supply chain elements, as well as other procurement activities to expand our fuel sourcing supply chain.

•Executing on key non-fuel elements of our supply chain including, steam turbine generator sourcing, steel, and other construction inputs.

•Progressing engineering procurement and construction negotiations for construction of Aurora powerhouses.

•Initiating site preparation for announced facilities at the INL, and Piketon, Ohio as well as other announced projects with Equinix, Diamondback Energy, Prometheus Hyperscale, and projects yet to be announced but where we have initiated commercial discussions.

•Negotiating and executing additional letters of intent to purchase power through power purchase agreements with multiple potential customers.

•Negotiating and trading term sheets and binding power purchases agreements with customers who have previously signed nonbinding agreements such as letters of intent to purchase power.

•Continuing to hire additional personnel and implement processes and systems necessary to deliver our business strategy.

For the nine months ended September 30, 2024 and the year ended December 31, 2023, our total operating expenses were$37,422,453 and $18,636,017, respectively. We expect our total operating expenses for 2024 to be in the range of $40,000,000 to $50,000,000.

Nuclear Energy Industry

The nuclear energy industry operates in a politically sensitive environment, and the successful execution of our business model is dependent upon public support for nuclear power, in general, in the U.S. and other countries. Recently, the U.S. government has indicated through bipartisan action that it recognizes the importance of nuclear power in meeting the United States’ growing energy needs. However, the current political environment in the U.S. could change at any time, including in response to events and circumstances over which we exercise no control and the perception of such events and circumstances. Additionally, opposition by third parties could delay the licensing that our business model requires. As a result, our performance will depend in part on factors generally affecting the views and policies regulating nuclear energy industry, which we cannot predict over the long term.

Key Components of Results of Operations

Operating Expenses

Our operating expenses consist of research and development and general and administrative expenses.

Research and development (“R&D”) expenses represent costs incurred to develop our technology. These costs consist of personnel costs, including salaries, employee benefit costs, bonuses and stock-based compensation expenses, software costs, computing costs, hardware and experimental supplies, and expenses for outside engineering contractors for analytical work and consulting costs. We expense all R&D costs in the periods in which they are incurred; however, occasionally, the reimbursement would be received in the following period.

We have several recycling technology projects awarded as R&D cost-share projects (the “cost-share projects”) through the Department of Energy’s Advanced Research Projects Agency – Energy (“ARPA-E”) and the DOE Technology Commercialization Fund (“TCF”). The ARPA-E and TCF projects do not involve any funds being reimbursed to us. A budget was initially approved for each of these cost-share projects, and as certain expenses and capital expenditures for equipment are incurred, such expenses or capital expenditures are reported to ARPA-E and then a pre-determined percentage of such expenses or capital expenditures are reimbursed by ARPA-E back to us. The expenses are categorized as R&D expenses, which are then partially reimbursed.

Our general and administrative (“G&A”) expenses primarily comprise various components not related to R&D, such as personnel costs, regulatory fees, promotion expenses, costs associated with maintaining and filing intellectual property, meals and entertainment expenses, travel expenses, and other expenditures related to external professional services including legal, engineering, marketing, human resources, audit, and accounting services. Personnel costs include salaries, benefits, and stock-based compensation expenses. As we continue to grow and expand our workforce and operations, and in light of the increased costs associated with operating as a public company, we anticipate that our G&A expenses will rise for the foreseeable future.

Other income (loss) consists of interest and dividend income and the remeasurement gains and losses related to simple agreements for future equity (“SAFEs”).

Income Taxes

Income taxes primarily consist of income taxes in certain jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development. Prior to the Business Combination, because we are pre-revenue, income taxes have been minimal. After the Business Combination, as a result of our interest and dividend income from our investments, federal and state income taxes may be incurred, after available tax deductions, including available carryovers.

Liquidity and Capital Resources

As of September 30, 2024, our cash, cash equivalents and marketable debt securities were $288,470,604, which includes the proceeds received from the Business Combination. We continue to incur significant operating losses. For the nine months ended September 30, 2024, we had a net loss of $63,327,233, loss from operations of $37,422,453, and net cash used in operating activities of $24,920,638. As of September 30, 2024, we had accumulated deficits of $124,820,677. Management expects that significant on-going operating expenditures will be necessary to successfully implement our business plan and develop our powerhouses.

We will utilize our existing cash, cash equivalents and marketable debt securities to fund our powerhouses, operations and growth plans. We believe that, as a result of the Business Combination, our existing cash, cash equivalents and marketable debt securities will be sufficient to fund our operations for the one-year period following the issuance date of the accompanying condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Commitments and Contractual Obligations

We do not have any material commitments or contractual obligations, other than with respect to the leases under which we lease real estate for office space. These leases are classified as operating leases and expire on December 1, 2026. See Note 5 in our accompanying condensed consolidated financial statements for more information regarding our commitments and contractual obligations.

Cash Flows Comparison

The following table sets forth our cash flows for the period indicated.

Comparison for the Nine Months Ended September 30, 2024 and 2023

Operating Activities

Net cash used in operating activities of $24,920,638 during the nine months ended September 30, 2024 was primarily attributable to our net loss of $63,327,233, consisting of a $2,183,419 increase in our working capital and partially offset by $40,590,014 in noncash adjustments. Noncash adjustments consisted of $180,420 in depreciation and amortization, $29,919,959 in loss upon change in fair value of SAFEs, $10,750,780 in share-based compensation, and $261,145 interest income reflected upon accretion of discount on marketable securities. The $2,183,419 increase in working capital was primarily due to a $833,202 use of cash for prepaid and other current assets, a $1,924,326 use of cash for accounts payable and a $89,639 use of cash in other assets, partially offset by a $33,409 increase for the operating lease liabilities and a $630,339 increase for accrued expenses and other. Our cash used in operating activities of $28,674,672, consisted primarily of $12,925,424 of cash paid for payroll and employee benefits of personnel and $15,749,248 of cash paid for professional services (related to consulting, legal and accounting fees), occupancy costs, travel, entertainment and other expenses.

Net cash used in operating activities of $10,373,637 during the nine months ended September 30, 2023 was primarily attributable to our net loss of $17,851,758, partially offset by $6,758,710 in noncash adjustments and a $719,411 decrease in our working capital. Noncash adjustments consisted of $36,514 in depreciation and amortization, $6,578,000 in loss upon change in fair value of SAFEs, and $144,196 in share-based compensation. The $719,411 decrease in working capital was primarily due to a $81,974 decrease for prepaid and other assets, a $25,909 decrease in other assets, a $203,972 increase for accounts payable and a $423,118 increase for accrued expenses and other, partially offset by a $15,562 use of cash for the operating lease liabilities. Our cash used in operating activities of $10,452,938 consisted primarily of $6,698,063 of cash paid for payroll and employee benefits of personnel and $3,754,875 of cash paid for professional services (related to legal and accounting fees), occupancy costs, travel, entertainment and other expenses.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2024 was due primarily to $282,619 use of cash on the purchase of discretionary property and equipment, $261,081,678 use of cash on the purchase of marketable securities, partially offset by $67,393,060 of proceeds from redemptions of marketable securities.

Net cash used in investing activities for the nine months ended September 30, 2023 was due to the purchase of property and equipment of $60,087.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2024 consisted of the proceeds from recapitalization of $276,209,768, proceeds from right of first refusal liability of $25,000,000, proceeds from the issuance of SAFEs of $10,232,000 and proceeds from the exercise of stock options of $439,922, partially offset by payment of deferred issuance costs of $11,057,649.

Net cash provided by financing activities for the nine months ended September 30, 2023 consisted of the proceeds from the issuance of SAFEs of $12,315,000, as well as proceeds from the exercise of stock options of $38,675, partially offset by payment of deferred issuance costs of $1,563,558.