Oklo Inc

The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table sets forth our historical results for the periods indicated, and the changes between periods:

Percentage changes that are considered not meaningful are denoted with “NM.”

The following table sets forth R&D expenses by category:

R&D expenses increased by $3,341,613, or 195.7%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to an increase of $1,725,590 in payroll and employee benefits of research and development personnel attributable to an increase in the weighted-average headcount of approximately 86.5% and an increase in salary over the prior period, an increase of $364,097 in stock-based compensation expenses, an increase of $664,333 in professional services, an increase of $160,869 in travel, entertainment and other expenses, and an increase of $426,724 in other expenses.

The following table sets forth G&A expenses by category:

G&A expenses increased by $4,275,680, or 144.6% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to an increase of $680,454 in payroll and employee benefits of general corporate functions and finance personnel attributable to an increase in the weighted-average headcount of approximately 64.4% and average salary over the prior period, an increase of $1,214,864 in stock-based compensation expenses, an increase of $1,913,523 in professional services primarily due to an increase in legal and accounting fees, and an increase of $552,404 related to travel, entertainment and other expenses, partially offset by a decrease of $85,565 in regulatory fees.

The following table sets forth other income (loss):

The change in fair value of SAFEs increased by $4,083,000 for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due to the removal of SAFE notes at the time of the Business Combination, resulting in no fair value impact of SAFEs for the three months ended September 30, 2024.

Interest and dividend income increased by $2,468,047 for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to an increase in interest and dividend income related to an increase in our cash, cash equivalents and marketable debt securities balances from the prior year period.

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

The following table sets forth our historical results for the periods indicated, and the changes between periods:

Percentage changes that are considered not meaningful are denoted with “NM.”

The following table sets forth R&D expenses by category:

R&D expenses increased by $13,971,678, or 256.0%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was primarily due to an increase of $4,226,531 in payroll and employee benefits of research and development personnel attributable to an increase in the weighted-average headcount of approximately 74.6% and an increase in salary over the prior period, an increase of $7,192,486 in stock-based compensation expenses (primarily from $6,129,200 incremental costs of the modification of Legacy Oklo’s awards for the vested options holders’ contingent right to receive a pro rata share of the Earnout Shares recorded at the Closing), and an increase of $1,157,428 in professional services, an increase of $411,522 in travel, entertainment and other expenses, and an increase of $983,711 in other expenses.

The following table sets forth General and Administrative expenses by category:

G&A expenses increased by $12,097,716, or 205.2% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was primarily due to an increase of $2,148,102 in payroll and employee benefits of general corporate functions and finance personnel attributable to an increase in the weighted-average headcount of approximately 54.8% and average salary over the prior period, an increase of $3,414,098 in stock-based compensation expenses (primarily from $1,655,000 incremental costs of the modification of Legacy Oklo’s awards for the vested options holders’ contingent right to receive a pro rata share of the Earnout Shares recorded at the Closing), an increase of $5,192,522 in professional services primarily due to an increase in legal and accounting fees, and an increase of $1,468,346 related to travel, entertainment and other expenses, partially offset by a decrease of $125,352 in regulatory fees.

The following table sets forth other income (loss):

The change in fair value of SAFEs of $29,919,959 for the nine months ended September 30, 2024, represents the remeasurement loss in the fair value related to the SAFEs as compared to the fair value as of December 31, 2023.

Interest and dividend income increased by $4,324,462 for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was primarily due to an increase in interest and dividend income related to an increase in our cash, cash equivalents and marketable debt securities balances from the prior year period.

Critical Accounting Estimates

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In the preparation of these condensed consolidated financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the condensed consolidated financial statements. See Note 2 in our accompanying condensed consolidated financial statements for a description of our significant accounting policies.

Accordingly, these are the policies and estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations:

Deemed Dividend

We recorded a deemed dividend attributable to the Class A common stockholders for the Earnout Shares and Founder Shares, based on the fair value at Closing of the Business Combination as determined by an independent third-party valuation of fair value using a Monte Carlo simulation with key inputs and assumptions, such as the per share stock price at Closing, term, dividend yield, risk-free rate, and volatility. The determination of the fair value involves certain judgments and estimates, primarily due to the volatility of our stock price and the uncertain timing of earnout conditions. The Monte Carlo simulation method requires assumptions that are inherently subjective, including stock price volatility that was estimated based on industry peer data due to our limited trading history, introducing an element of judgment in assessing comparability. The risk-free rate was based on U.S. Treasury rates, selected to match the expected term of the earnout provisions, and a zero-dividend yield was assumed. The expected term was estimated based on management’s assessment of when the Earnout Shares and Founder Shares would likely be issued, factoring in potential market conditions and shareholder behavior. Changes in the significant assumptions and estimates could materially impact the valuation and the amounts recorded in the financial statements, affecting our net loss per share attributable to common stockholders.

For additional information regarding the deemed dividend on the Earnout Shares and Founder Shares, see Note 3, Business Combination, in the accompanying condensed consolidated financial statements.

Stock-based Compensation

We account for stock-based compensation by measuring and recognizing expense for all stock-based payments made to employees and non-employees based on the estimated grant-date fair values over each recipient’s requisite service period, which is generally the vesting period. We estimate the fair value of stock options granted to employees and non-employees using the Black-Scholes option pricing model. The determination of fair value requires significant judgment and the use of estimates, particularly with regard to Black-Scholes assumptions, such as our Legacy Oklo common stock fair value, stock price volatility, and expected option lives to value stock-based compensation.

In connection with our Business Combination, we recorded an incremental cost related to the modification of Legacy Oklo’s awards that were outstanding at Closing, for the vested option holders’ contingent right to receive a pro rata share of the Earnout Shares in the future. The incremental costs were based on the fair value of the Earnout Shares, as determined by an independent third-party valuation of fair value using a Monte Carlo simulation with key inputs and assumptions, such as the per share stock price at Closing, term, dividend yield, risk-free rate, and volatility. The determination of the fair value involves certain judgments and estimates as outlined above (refer to Deemed Dividend). For additional information regarding the impact of incremental costs on the Earnout Shares and Founder Shares, see Note 3, Business Combination, in the accompanying condensed consolidated financial statements.

Simple Agreements for Future Equity

We record our Legacy Oklo SAFEs at fair value that require significant inputs not observable in the market, which cause the instrument to be classified as a Level 3 measurement with the fair value hierarchy. The valuation uses probabilities considering pay-offs under various scenarios as follows: (i) an equity financing where the SAFEs will convert into certain preferred stock; (ii) a liquidity event where the SAFE noteholders will have an option to receive either a cash payment equal to the invested amount under such SAFE Note, or a number of shares of common stock equal to the invested amount divided by the liquidity price; and (iii) a dissolution event where the SAFE noteholders will be entitled to receive a portion of the related proceeds equal to the purchase amount. We utilized an independent third-party to determine the fair value of the SAFEs under the Monte Carlo simulation method, which was used to estimate the future market value of our invested capital (“MVIC”) at a liquidity event and the expected payment to the SAFE holders at each simulated MVIC value. We believe these assumptions would be made by a market participant in estimating the valuation of the SAFEs. We assess these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained.

There is substantial judgment in selecting the assumptions which we use to determine the fair value of the SAFEs and other companies could use similar market inputs and experience and arrive at different conclusions with respect to those used to calculate fair value. Using alternative assumptions could cause there to be differences in the resulting fair value. If the fair value were to increase, the amount of loss that would result would also increase. Conversely, if the fair value were to decrease, the amount of expense would decrease.

Emerging Growth Company Status

The Company is classified as an emerging growth company (“EGC”), as defined under the Jumpstart Our Business Startups Act (the “JOBS Act”). Therefore, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. We could retain EGC status until December 31, 2026, although circumstances could cause us to lose that status earlier, including if the market value of common stock held by non-affiliates exceeds $700,000,000 as of any June 30 before that time, in which case we would no longer qualify for EGC status as of the following December 31.

Further, Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-EGCs, but any such election to opt out is irrevocable. We intend to take advantage of the benefits of this extended transition period.

Recent Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies, of the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for a discussion about Recently Issued and Not Adopted Accounting Standardsas of the date of this report. There has been no adoption of any new or recently issued accounting pronouncements.