SES AI Corp

Previous wording

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 and the related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2023 and the related notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024 (the “2023 Annual Report”). This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements within the meaning of the federal securities law are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2023 Annual Report. Unless the context otherwise requires, references in this section to “the Company,” “we,” “us” and “our” refer to the business and operations of SES Holdings Pte. Ltd. (“Old SES”) and its consolidated subsidiaries prior to the Business Combination and to SES AI Corporation and its consolidated subsidiaries following the Closing. References in this section to our future plans that indicate the timing of when we expect such plans to be completed by a certain year mean at any point during that year.

Current wording

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024 and the related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2023 and the related notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024 (the “2023 Annual Report”). This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements within the meaning of the federal securities law are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2023 Annual Report. Unless the context otherwise requires, references in this section to “the Company,” “we,” “us” and “our” refer to the business and operations of SES Holdings Pte. Ltd. (“Old SES”) and its consolidated subsidiaries prior to the Business Combination and to SES AI Corporation and its consolidated subsidiaries following the Closing. References in this section to our future plans that indicate the timing of when we expect such plans to be completed by a certain year mean at any point during that year.

Previous wording

We are apre-commercialization stage company engaged in the development and production of high-performance, Lithium-Metal (“Li-Metal”) rechargeable battery technologies for electric vehicles (“EVs”), Urban Air Mobility (“UAM”), which encompasses electric vehicle take-off and landing (“eVTOL”) technology, and other applications. Our differentiated battery technology has been designed to combine the high energy density of Li-Metal with the large-scale manufacturability of conventional Lithium-ion (“Li-ion”) batteries to help promote the transition from the global dependence on fossil fuel-based automotive vehicles to clean and efficient EVs in order to enable a new era of electric transportation on land and in the air.

Current wording

We are a leading developer and producer of high-performance, Lithium-Metal (“Li-Metal”) rechargeable battery technologies for electric vehicles (“EVs”), Urban Air Mobility (“UAM”), drones and other applications. Our differentiated battery technology has been designed to combine the high energy density of Li-Metal with the large-scale manufacturability of conventional Lithium-ion (“Li-ion”) batteries to help promote the transition from the global dependence on fossil fuel-based automotive vehicles to clean and efficient EVs in order to enable a new era of electric transportation on land and in the air. We are seeking to accelerate our pace of innovation by utilizing artificial intelligence (“AI”) across the spectrum of our business, from engineering and manufacturing to battery health and safety monitoring.

Previous wording

SES AI’s mission is to power a new era of electric transportation on land and in the air with Li-Metal batteries. We believe Li-Metal is the “end game” for electric transportation energy storage with its potential for step-change in energy density compared to state-of-the-art Li-ion. Our team has dedicated the past decade to developing a comprehensive and proprietary Li-Metal battery technology platform, including high concentration solvent-in-salt electrolyte, ultra-thin wide format lithium anode, protective anode coating, and novel cell engineering processes that are based on scalable Li-ion manufacturing but address unique Li-Metal challenges. As we build more automotive large capacity Li-Metal cells and generate more data, artificial intelligence (“AI”) becomes an increasingly integral part in material development, battery health monitoring and incident prediction.

Current wording

SES’s mission is to power a new era of electric transportation on land and in the air with Li-Metal batteries. We believe Li-Metal is the “end game” for electric transportation energy storage with its potential for step-change in energy density compared to state-of-the-art Li-ion. Our team has dedicated the past decade to developing a comprehensive and proprietary Li-Metal battery technology platform, including high concentration solvent-in-salt electrolyte, ultra-thin wide format lithium anode, protective anode coating, and novel cell engineering processes that are based on scalable Li-ion manufacturing but address unique Li-Metal challenges. As we build more automotive large capacity Li-Metal cells and generate more data, AI becomes an increasingly integral part in material development, battery health monitoring and incident prediction. We believe that our AI for Science has the potential to accelerate our pipeline material discovery by mapping the vast universe of small molecules, with the goal to improve battery performance and safety. Our AI for Safety is designed to monitor battery state-of-health and predict incidents more accurately than conventional battery management system. Our AI for Manufacturing uses machine learning to help define and fine-tune quality specifications based on manufacturing process data.

Previous wording

Since our founding, EV has always been our core focus. In 2012, we transitioned away from solid state Li-Metal, so our Li-Metal batteries could operate at room temperature and be manufactured at large scale. In 2015, we received the first strategic investment from General Motors. In 2021, we signed what we believe to be the world’s first automotive A-sample Li-Metal joint development agreements (JDAs) with GM, Hyundai and Honda, all of whom made strategic investments in our company. In 2023, we signed what we believe to be the world’s first automotive B-sample Li-Metal JDA with a major global automaker. In 2024, we extended our JDA agreement with Hyundai to conduct further research and development activities in order to achieve production of B-sample batteries. As of June 30, 2024, we operate three A-sample lines and we are in the process of building two B-sample lines.

Current wording

Since our founding, EV has always been our core focus. In 2012, we transitioned away from solid state Li-Metal, so our Li-Metal batteries could operate at room temperature and be manufactured at large scale. In 2015, we received the first strategic investment from General Motors. In 2021, we signed what we believe to be the world’s first automotive A-sample Li-Metal joint development agreements (JDAs) with GM, Hyundai and Honda, all of whom made strategic investments in our company. In 2023, we signed what we believe to be the world’s first automotive B-sample Li-Metal JDA with a major global automaker. In 2024, we extended our JDA agreement with Hyundai to conduct further development activities in order to achieve production of B-sample batteries. As of September 30, 2024, we are on track to build the B-sample line at our original equipment manufacturer (OEM) partner’s facility in South Korea.

Previous wording

We have made significant progress in large 50Ah and 100Ah automotive Li-Metal cell manufacturing. We have addressed key manufacturing challenges in ultra-thin wide format lithium anode, powder and metal bur issues in lithium anode punching, high concentration electrolyte scale-up, and other quality and safety related issues in automotive large Li-Metal cell manufacturing. We have performed inhouse testing on these 50Ah and 100Ah Li-Metal A-sample cells and shared testing data with our JDA original equipment manufacturer (OEM) partners, as well as shipped these A-sample cells to other third parties and OEMs for their further performance and safety testing.

Current wording

We have made significant progress in large 50Ah and 100Ah automotive Li-Metal cell manufacturing. We have addressed key manufacturing challenges in ultra-thin wide format lithium anode, powder and metal bur issues in lithium anode punching, high concentration electrolyte scale-up, and other quality and safety related issues in automotive large Li-Metal cell manufacturing. We have performed in-house testing on these 50Ah and 100Ah Li-Metal A-sample cells and shared testing data with our JDA OEM partners, as well as shipped these A-sample cells to other third parties and OEMs for their further performance and safety testing.

Previous wording

We believe that B-sample in EV is almost equivalent to commercial production for UAM. We believe that UAM is a perfect fit for Li-Metal and will require little additional development now that we have reached EV B-sample status. UAM frequently operates on a fleet business model where the key business metrics are cost per passenger per mile, with weight being a paramount factor to costs. We believe that the step-change gravimetric energy density that Li-Metal can potentially offer means that an aircraft has the potential to carry twice the number of passengers, or twice the payload for cargo applications, or fly twice the distance, which has the potential to significantly improve the profitability of UAM operators. We are converting one of our EV A-sample lines to be dedicated to UAM cell production by the end of 2024.

Current wording

We believe that B-sample in EV is almost equivalent to commercial production for UAM. We believe that UAM is a perfect fit for Li-Metal and will require little additional development now that we have reached EV B-sample status. UAM frequently operates on a fleet business model where the key business metrics are cost per passenger per mile, with weight being a paramount factor to costs. We believe that the step-change gravimetric energy density that Li-Metal can potentially offer means that an aircraft has the potential to carry twice the number of passengers, or twice the payload for cargo applications, or fly twice the distance, which has the potential to significantly improve the profitability of UAM operators. We have converted two of our EV A-sample lines to be dedicated to UAM cell production.

Previous wording

We started two AI programs out of necessity, due to the need to provide a high level of safety in the field and the need to further accelerate our future roadmap for material development.

Current wording

We started our AI programs out of necessity, due to the need to provide a high level of safety in the field and the need to further accelerate our future roadmap for material development. Our AI programs fall under three major categories:

Previous wording

We seek to provide a high level of safety in the field and we are leveraging our automotive 50Ah and 100Ah cell production volume and quality data to train our Avatar AI. Our Avatar AI prediction accuracy increased from less than 60% in 2022, to 92% in 2023, and we expect it to reach 95% accuracy by the end of 2024. Our ultimate goal is to be able to reach near 100% safety in the field, which we believe will be paramount to both EV and UAM OEMs.

Current wording

AI for Safety - We seek to provide a high level of safety in the field and we are leveraging our automotive 50Ah and 100Ah cell production volume and quality data to train our AI for Safety. Our AI for Safety prediction accuracy increased from less than 60% in 2022 to 95% in 2024, meeting the target we set at the start of the year. Our ultimate goal is to be able to reach near 100% safety in the field, which we believe will be paramount to both EV and UAM OEMs.

Previous wording

We are also developing new AI models designed to screen a vast universe of small molecules for potential electrolyte solvent candidates. We have also built an electrolyte foundry designed to provide high throughput synthesis and testing of these materials.

Current wording

AI for Science - We are also developing new AI models designed to screen a vast universe of small molecules for potential electrolyte solvent candidates. We have also built an electrolyte foundry designed to provide high throughput synthesis and testing of these materials.

Previous wording

We are executing several initiatives to improve the environmental sustainability of our business, and to reduce cost and ensure traceability of our Li-Metal battery supply chain. The technological innovations include dry electrode that can significantly reduce our electricity consumption and CO2 and chemical solvent emissions, and recycling of Li-Metal that allows us to build a new supply chain with better traceability and robustness. Recently, we also announced SES Cares, where we power advanced drones with our Li-Metal A-samples and B-samples to collect field data to train Avatar AI, at the same time, partner with operations such as forest fire monitoring and marine animal protection.

Current wording

We are executing several initiatives designed to improve the environmental sustainability of our business, and to help reduce cost and provide enhanced traceability of our Li-Metal battery supply chain. The technological innovations include dry electrode that can significantly reduce our electricity consumption and CO2 and chemical solvent emissions. Recently, we also announced SES Cares, where we power advanced drones with our Li-Metal A-samples and B-samples to collect field data to train Avatar AI, at the same time, partner with operations such as forest fire monitoring and marine animal protection.

Previous wording

We believe that 2024 will be a key year in the commercialization of Li-Metal batteries for automotive applications. We continue to focus on EV B-sample JDAs including building and operating B-sample lines, improving cell practical safety and accelerating future roadmap electrolyte development; building and shipping cells to UAM OEM partners; and improving Avatar AI prediction accuracy by deploying Avatar infrastructure and training it across a wide range of data.

Current wording

We continue to focus on EV B-sample, including building and operating a B-sample line, improving Li-Metal cell practical safety and accelerating future roadmap electrolyte development; manufacturing and shipping Li-Metal cells to UAM OEM partners; improving Avatar AI prediction accuracy by deploying Avatar infrastructure and training it across a wide range of data, and applying AI for Science to solve various Li-Metal and Li-ion electrolyte challenges.

Previous wording

As of June 30, 2024, we have not generated any revenue from sales to customers to date through our one operating segment and have spent $15.6 million and $14.6 million on gross research and development activities during the three months ended June 30, 2024 and 2023, respectively, and $30.9 million and $26.3 million on gross research and development activities during the six months ended June 30, 2024 and 2023, respectively, which is prior to reimbursements received of $0.6 million and $8.3 million during the three months ended June 30, 2024 and 2023, respectively, and $4.1 million and $11.5 million during the six months ended June 30, 2024 and 2023, respectively, from our OEM partners under the JDAs. As a result, we have incurred net losses of $19.9 million and $12.9 million for the three months ended June 30, 2024 and 2023, respectively, and net losses of $35.5 million and $29.2 million for the six months ended June 30, 2024 and 2023, respectively. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate and our ability to generate revenue in the future that is sufficient enough to achieve profitability will depend largely on the successful development of our products. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.

Current wording

As of September 30, 2024, we have not generated any revenue from sales to customers to date through our one operating segment and have spent $28.9 million and $11.4 million on gross research and development activities during the three months ended September 30, 2024 and 2023, respectively, and $59.9 million and $37.7 million on gross research and development activities during the nine months ended September 30, 2024 and 2023, respectively, which is prior to reimbursements of $4.5 million and $2.9 million during the three months ended September 30, 2024 and 2023, respectively, and $8.6 million and $14.4 million during the nine months ended September 30, 2024 and 2023, respectively, from our OEM partners under the JDAs. As a result, we have incurred net losses of $30.2 million and $13.5 million for the three months ended September 30, 2024 and 2023, respectively, and net losses of $65.6 million and $42.6 million for the nine months ended September 30, 2024 and 2023, respectively. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate and our ability to generate revenue in the future that is sufficient enough to achieve profitability will depend largely on the successful development of our products. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.

Previous wording

Research and development expenses for the six months ended June 30, 2024 increased $12.0 million, or 81%, to $26.8 million compared with $14.8 million for the six months ended June 30, 2023. This increase was primarily driven by a $7.3 million decrease in credits to research and development expenses from billings for reimbursement from our JDA partners due to the timing for finalizing our JDA amendment terms, a $4.7 million increase in personnel costs mainly attributable to our growth in headcount to support our operations, a $1.8 million increase in facility related costs such as increased rent, utilities and depreciation expenses mainly attributable to the new electrolyte foundry, and a $0.5 million increase in professional services. These increases were partially offset by a $1.3 million decrease in

Current wording

Research and development expenses for the three months ended September 30, 2024 increased $16.0 million, or 188%, to $24.4 million, compared with $8.5 million for the three months ended September 30, 2023. This increase was primarily driven by a $10.7 million increase due to the purchase of equipment as part of our commitment under one of our JDA agreements, a $4.9 million increase in stock-based compensation mainly attributable to an out-of-period adjustment that was recorded in the three months ended September 30, 2024 to correct an error in the Earn-Out Restricted Share expense for the three months ended September 30, 2023, and a $1.5 million increase in personnel costs mainly attributable to our growth in headcount to support our operations. These increased expenses were partially offset by a $1.6 million increase in reimbursements from our JDA partners.

Previous wording

Research and development expenses for the three months ended June 30, 2024 increased $8.7 million, or 137%, to $15.1 million, compared with $6.3 million for the three months ended June 30, 2023. This increase was primarily driven by a $7.7 million decrease in credits to research and development expenses from decreased billings to our JDA partners for reimbursements due to the timing for finalizing our JDA amendment terms, a $1.6 million increase in personnel costs mainly attributable to our growth in headcount to support our operations, a $0.9 million increase in facility related costs such as rent, utilities and depreciation expenses mainly attributable to the new electrolyte foundry, and a $0.5 million increase in software development expenses due to university research agreements. The resulting higher expenses were partially offset by a $1.6 million decrease in lab equipment and material supplies due to the termination of one of our pre-production facility leases, and a $0.6 million decrease in stock-based compensation attributable to employee departure and the conclusion of the amortization period for the earn-out restricted shares by the third quarter of 2023.

Current wording

Research and development expenses for the nine months ended September 30, 2024 increased $28.0 million, or 120%, to $51.3 million compared with $23.3 million for the nine months ended September 30, 2023. This increase was primarily driven by a $10.7 million increase due to the purchase of equipment as part of our commitment under one of our JDA agreements, a $6.0 million increase in personnel costs mainly attributable to our growth in headcount to support our operations, a $5.8 million decrease in reimbursements from billings from our JDA partners, a $3.9 million increase in stock-based compensation mainly attributable to an out-of-period adjustment was recorded in the nine months ended September 30, 2024 to correct an error in the Earn-Out Restricted Share expense for the nine months ended September 30, 2023, a $2.7 million increase in facility related costs including increased rent and utilities, and depreciation expenses mainly attributable to the new electrolyte foundry that was put into use in the first quarter of 2024, a $0.6 million increase in software development costs due to our increased focus on AI, and a $0.5 million increase in other operating expenses. These increases were partially offset by a $2.4 million decrease in purchases of battery materials and lab supplies as JDA activities began winding down during this period.

Previous wording

General and administrative expenses consist primarily of costs incurred for salaries and personnel-related expenses, including bonus and stock-based compensation expense, for our finance, legal and human resource functions, expenses for director and officer insurance, outside contractor and professional service fees, audit and compliance expenses, legal, patent-related costs, accounting and other advisory services, as well as allocated facilities and information technology costs, including depreciation. Upon commencement of commercial operations, we also expect to incur customer and sales support and advertising costs.

Current wording

General and administrative expenses consist primarily of costs incurred for salaries and personnel-related expenses, including bonus and stock-based compensation expense, for our finance, legal and human resource functions, expenses for director and officer insurance, outside contractor and professional service fees, audit and compliance expenses, legal, patent-related costs, accounting and other advisory services, as well as allocated facilities and information technology costs, including depreciation.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 decreased $3.4 million, or 26%, to $9.6 million, compared with $12.9 million for the three months ended June 30, 2023. This decrease was primarily driven by a decrease of $1.9 million of stock-based compensation expense that related to the conclusion of the amortization period for the earn-out restricted shares by the third quarter of 2023, and a $0.4 million decrease in insurance expense due to lower premiums incurred to cover potential liabilities under our indemnification obligations to our directors and certain officers of the Company.

Current wording

General and administrative expenses for the three months ended September 30, 2024 decreased $1.1 million, or 10%, to $9.8 million, compared with $10.9 million for the three months ended September 30, 2023. This decrease was primarily driven by a decrease of $0.8 million of stock-based compensation expense that related to the conclusion of the amortization period for the Earn-Out Restricted Shares by the third quarter of 2023 and decreased headcount, and a $0.3 million decrease in insurance expense due to lower premiums incurred to cover potential liabilities under our indemnification obligations to our directors and certain officers of the Company.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 decreased $7.0 million, or 27%, to $19.1 million, compared with $26.0 million for the six months ended June 30, 2023. This decrease was primarily driven by a decrease of $3.2 million of stock-based compensation expense that related to the conclusion of the amortization period for the earn-out restricted shares by the third quarter of 2023, a $1.4 million decrease in accounting related expense due to the reduction in audit fees from the prior period resulting from a more efficient reporting process, a $1.0 million decrease in insurance expense due to lower premiums incurred to cover potential liabilities under our indemnification obligations to our directors and certain officers of the Company compared to the prior year period, and a $1.0 million decrease in legal expenses primarily due to the higher cost incurred to support compliance as a large accelerated filer in 2023.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 decreased $8.1 million, or 22%, to $28.9 million, compared with $36.9 million for the nine months ended September 30, 2023. This decrease was primarily driven by a decrease of $4.0 million of stock-based compensation expense that related to the conclusion of the amortization period for the Earn-Out Restricted Shares by the third quarter of 2023 and lower stock-based compensation expense following an executive officer’s departure in January 2024, a $1.9 million decrease in accounting related expense due to the reduction in audit fees from the prior period resulting from a more efficient reporting process, a $1.4 million decrease in insurance expense due to lower premiums incurred to cover potential liabilities under our indemnification obligations to our directors and certain officers of the Company compared to the prior year period, and a $0.5 million decrease in legal expenses which were higher in 2023 primarily to support our annual compliance as a large accelerated filer.

Previous wording

During the three and six months ended June 30, 2024, we had interest income of $4.0 million and $8.2 million, respectively, compared with $4.1 million and $8.3 million for the three and six months ended June 30, 2023, respectively. The $0.1 million decreases from each of the three and six months ended June 30, 2023 to each of the three and six months ended June 30, 2024 were due to lower investment balances primarily arising from cash used in operations.

Current wording

During the three and nine months ended September 30, 2024, we had interest income of $3.7 million and $11.8 million, respectively, compared with $4.2 million and $12.5 million for the three and nine months ended September 30, 2023, respectively. The $0.5 million and $0.7 million decreases from each of the three and nine months ended September 30, 2023 to each of the three and nine months ended September 30, 2024 were due to lower investment balances primarily arising from cash used in operations.

Previous wording

During the three and six months ended June 30, 2024, we incurred a gain of $1.4 million and $2.3 million, respectively, associated with the change in fair value of the Sponsor Earn-Out liabilities compared with a gain of $2.9 million and $3.5 million, respectively, for the three and six months ended June 30, 2023. With the fair value of the Sponsor Earn-Out liabilities tied to the Company’s stock price, continued volatility in the stock price or changes in the expected term could result in further gains or losses resulting from the change in fair value. Refer to “Note 8 – Sponsor Earn-Out Liabilities” to the unaudited interim condensed consolidated financial statements for additional information.

Current wording

During the three and nine months ended September 30, 2024, we incurred a gain of $1.0 million and $3.3 million, respectively, associated with the change in fair value of the Sponsor Earn-Out liabilities compared with a gain of $1.9 million and $5.4 million, respectively, for the three and nine months ended September 30, 2023. With the fair value of the Sponsor Earn-Out liabilities tied to the Company’s stock price, continued volatility in the stock price or changes in the expected term could result in further gains or losses resulting from the change in fair value. Refer to “Note 8 – Sponsor Earn-Out Liabilities” to the unaudited interim condensed consolidated financial statements for additional information.

Previous wording

During the three months ended June 30, 2024, we had miscellaneous expense of $0.6 million, compared with miscellaneous expense of $0.4 million for the three months ended June 30, 2023. This $0.2 million increase in miscellaneous expense was an increase in the loss on foreign currency translation offset by an increase in fair value of equity investments.

Current wording

During the three months ended September 30, 2024, we had miscellaneous expense of $0.5 million, compared with less than $0.1 million miscellaneous expense for the three months ended September 30, 2023. This $0.5 million increase in miscellaneous expense was due to a decline in the fair value of our investment in publicly traded companies.

Previous wording

During the six months ended June 30, 2024, we had miscellaneous income of $0.3 million, compared with miscellaneous income of $0.4 million for the six months ended June 30, 2023. This $0.1 million decrease in miscellaneous income was the result of an increase in the loss on foreign currency translation offset by an increase in fair value of equity investments.

Current wording

During the nine months ended September 30, 2024, we had miscellaneous expense of $0.2 million, compared with miscellaneous income of $0.4 million for the nine months ended September 30, 2023. This $0.6 million decrease was the result of an increase in the loss on foreign currency translation offset by an increase in the fair value of our investment in publicly traded companies.

Previous wording

The provision for income taxes for the three and six months ended June 30, 2024 increased to $0.1 million and $0.3 million, compared to $0.3 million and $0.5 million for the three and six months ended June 30, 2023, respectively, primarily due to local taxes in the foreign jurisdictions in which the Company operates.

Current wording

The provision for income taxes for the three and nine months ended September 30, 2024 decreased to $0.1 million and $0.4 million, compared to $0.2 million and $0.7 million for the three and nine months ended September 30, 2023, respectively, primarily due to local taxes in the foreign jurisdictions in which the Company operates.

Previous wording

As of June 30, 2024, we had total cash and cash equivalents of $54.8 million and investments in marketable debt and equity securities of $239.9 million. As a pre-commercialization stage research and development company, the net operating losses we have incurred since inception are consistent with our strategy and budget.

Current wording

As of September 30, 2024, we had total cash and cash equivalents of $66.7 million and investments in marketable debt and equity securities of $207.0 million. As a pre-commercialization stage research and development company, the net operating losses we have incurred since inception are consistent with our strategy and budget.

Previous wording

As a result of the capital-intensive nature of our business, we expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a number of years. To date, we have funded our operations through a combination of proceeds from the Business Combination private investments in public entity and funding received through the sales of our redeemable convertible preferred stock. These funds are expected to finance our principal sources of liquidity and ongoing costs, such as research and development relating to our Li-Metal batteries and the construction of additional manufacturing facilities. In the future, if we are not able to fund our operations from cash flows generated from anticipated product sales, we expect that we will need to raise additional funds through a variety of possible methods, including, but not limited to, entry into joint ventures or other strategic arrangements, issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions, as well as anticipated future revenue from product sales.

Current wording

We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a number of years. To date, we have funded our operations through a combination of proceeds from the Business Combination private investments in public entity and prior funding received through the sales of our redeemable convertible preferred stock. These funds are expected to finance our principal sources of liquidity and ongoing costs, such as research and development relating to our Li-Metal batteries and costs associated with AI initiatives. In the future, if we are not able to fund our operations from cash flows generated from anticipated product sales or service revenues, we expect that we will need to raise additional funds through a variety of possible methods, including, but not limited to, entry into joint ventures or other strategic arrangements, issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions, as well as anticipated future revenue from product sales.

Previous wording

We believe that our cash on hand and marketable securities will be sufficient to meet our working capital and capital expenditure requirements for a period of at least 12 months from the date of filing this Quarterly Report on Form 10-Q, and also sufficient to fund us to commercialization. However, additional funding may be required for a variety of reasons, including opportunities to build an integrated supply chain in the United States and delays in expected development of our Li-Metal battery cells. Our ability to successfully develop our products, commence commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity and/or debt financing and, over time, our ability to generate positive cash flows from operations.

Current wording

We believe that our cash on hand and marketable securities will be sufficient to meet our working capital and capital expenditure requirements for a period of at least 12 months from the date of filing this Quarterly Report on Form 10-Q, and also sufficient to fund us to commercialization. However, additional funding may be required for a variety of reasons, including delays in expected development of our Li-Metal battery cells. Our ability to successfully develop our products, commence commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity and/or debt financing and, over time, our ability to generate positive cash flows from operations.

Previous wording

Our cash flows used in operating activities to date have primarily comprised research and development and general and administrative activities as discussed above. As we continue to ramp up hiring for research and development headcount to accelerate our engineering efforts, we expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from our operations.

Current wording

Our cash flows used in operating activities to date have primarily comprised research and development and general and administrative activities as discussed above.

Previous wording

Net cash used in operating activities of $31.1 million for the six months ended June 30, 2024 was primarily attributable to net loss of $35.5 million, as adjusted for stock-based compensation expense of $9.6 million, accretion income from marketable securities of $3.9 million, depreciation and amortization of $3.7 million, a gain on change in fair value of Sponsor Earn-Out liabilities of $2.3 million, other adjustments to net loss of $1.5 million, and a $1.2 million working capital outflow. The working capital outflow was primarily driven by a $2.5 million increase in prepaids and other assets. The increase in prepaids and other assets was primarily due to advance payments made for equipment purchases pursuant to our JDA agreements and prepaid costs related to software development. Additionally, a $1.8 million decrease in accrued expenses and other liabilities was due to the timing of legal fees and equipment purchases also contributed to the working capital outflow. The outflow was partially offset by a $3.3 million receipt from the related party.

Current wording

Net cash used in operating activities of $53.8 million for the nine months ended September 30, 2024 was primarily attributable to net loss of $65.6 million, as adjusted for stock-based compensation expense of $16.1 million, accretion income from marketable securities of $6.0 million, depreciation and amortization of $5.9 million, a gain on change in fair value of Sponsor Earn-Out liabilities of $3.3 million, other adjustments to net loss of $1.0 million, and a $0.1 million working capital inflow. The working capital inflow was primarily driven by a $2.8 million increase in accrued expenses and other liabilities, including due to the timing of payments for legal fees and equipment purchases, and a $1.3 million receipt for reimbursements of our expenses from a JDA partner. The working capital inflow was partially offset by a $3.7 million increase in prepaids and other assets. The increase in prepaids and other assets was primarily due to advance payments made for equipment purchases pursuant to our JDA agreements and prepaid costs related to software development. Additionally, the $0.4 million decrease in accounts payable was due to the timing of vendor payments, which also offset the working capital inflow.

Previous wording

Net cash used in operating activities of $30.9 million for the six months ended June 30, 2023 was primarily attributable to net loss of $29.2 million, as adjusted for stock-based compensation expense of $13.8 million, accretion income from marketable securities of $5.9 million, a gain in change in fair value of Sponsor Earn-Out Liability of $3.5 million, depreciation and amortization of $2.3 million and a $8.1 million working capital outflow. The working capital outflow was primarily driven by a $6.6 million increase in prepaids and other assets, and a $3.8 million decrease in accrued expensed and other liabilities, partially offset by a $2.3 million increase in accounts payable. The increase in prepaids and other assets was primarily due to amounts due from JDA partners, the renewal of an insurance contractto cover potential liabilities under our indemnification obligations to our directors and certain officers, and prepaid costs related to software development. The decrease in accrued expenses and other liabilities was primarily due to the release of deferred liabilities related to JDAs. The increase in accounts payable was primarily due to the extended timing of our payments.

Current wording

Net cash used in operating activities of $43.9 million for the nine months ended September 30, 2023 was primarily attributable to net loss of $42.6 million, as adjusted for stock-based compensation expense of $16.2 million, accretion income from marketable securities of $8.6 million, a gain on change in fair value of Sponsor Earn-Out Liability of $5.4 million, depreciation and amortization of $3.9 million and a $6.8 million working capital outflow. The working capital outflow was primarily driven by a $3.8 million decrease in accrued expenses and other liabilities and a $3.3 million increase in prepaids and other assets, partially offset by a $0.6 million dollar increase in accounts payable. The increase in prepaids and other assets was primarily due to amounts due from JDA partners, the renewal of an insurance contract to cover potential liabilities under our indemnification obligations to our directors and certain officers and prepaid costs related to

Previous wording

Net cash provided by investing activities was $0.5 million for the six months ended June 30, 2024, compared to net cash used in investing activities of $23.8 million for the six months ended June 30, 2023.

Current wording

Net cash provided by investing activities was $34.2 million for the nine months ended September 30, 2024, compared to net cash used in investing activities of $12.3 million for the nine months ended September 30, 2023.

Previous wording

Purchases and Maturities of Investments – Net proceeds from investments in marketable debt and equity securities were $11.0 million for the six months ended June 30, 2024, compared to net purchases of investments in marketable debt and equity securities of $16.0 million during the six months ended June 30, 2023.

Current wording

Purchases and Maturities of Investments – Net proceeds from investments in marketable debt and equity securities were $46.1 million for the nine months ended September 30, 2024, compared to net purchases of investments in marketable debt and equity securities of $0.1 million during the nine months ended September 30, 2023.

Previous wording

Capital Spending – Capital expenditures were $10.5 million and $7.8 million for the six months ended June 30, 2024 and 2023, respectively, and primarily related to the timing of purchases of lab machinery and equipment, lab tools and instruments related to our build out of production lines and facilities. We expect capital expenditures for the rest of 2024 to increase compared with the corresponding periods in 2023 as we continue to invest in the build out of our fourth and fifth production lines and research and development facilities.

Current wording

Capital Spending – Capital expenditures were $12.0 million and $12.3 million for the nine months ended September 30, 2024 and 2023, respectively, and primarily related to the timing of purchases of lab machinery and equipment, lab tools and instruments related to our build out of production lines and facilities. We expect capital expenditures for the fourth quarter of 2024 to decrease compared with the corresponding periods in 2023 due to our having higher capital expenditure for the build out of new facilities in the prior year.

Previous wording

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2024 and 2023.

Current wording

Net cash provided by financing activities was $0.4 million and $0.2 million for the nine months ended September 30, 2024 and 2023, respectively, due to an increase in receipts for option exercises of $0.2 million.

Previous wording

See “Note 2 – Basis of Presentation” of our accompanying unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2024 included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and their potential impact on our financial condition, results of operations and cash flows.

Current wording

See “Note 2 – Basis of Presentation” of our accompanying unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024 included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and their potential impact on our financial condition, results of operations and cash flows.