HolderOfTheHorns

$envx TJ/3: Now, what happened if Honor gave me a 15 million unit order at cell phone pricing? We’re not ready for that right now, point 1 Point 2, Honor has raised the bar. They want 1,000 watt-hours per liter, not 900. We’ve got that. We call it AI-2, and we expect to start qualifying that. It’s just the urgency of the markets we can serve for revenue now that is pushing the direction. It’s got nothing to do with our good customer that’s helped us a lot [Q on the mix of the 24 AI-2 customers] AI-2, we have thousands of samples that are good enough that we say, "Shake, rattle, and roll. You can’t break them. Go ahead and qualify them." That’s what we’re doing, and we don’t have enough samples yet You take a company like Honor, they want 20,000 units to sample. Right now, our high-end battery can sample thousands of units and promise production in 2027 of tens of thousands of units. That’s where we’re at, and we’re matching up our capability with the market that needs us. Eyewear need us we’ve got a sweet spot where what we can do and what they want match up. The prices are right, and the gross margin is right in that market End

$envx From 10Q: We are currently concentrating our silicon-anode development efforts on smaller cells for smart eyewear and similar devices In October 2026, we received an initial purchase order for 100,000 batteries from a multinational provider of dual-use drone systems In November 2026, we received our first production purchase order for the MX1-B01, our high-energy aerial drone cell, from a U.S. drone manufacturer, with initial deliveries scheduled to begin in the first quarter of 2027 During the third fiscal quarter of 2026, we shipped approximately 8,600 silicon-anode AI-1 batteries, and recognized smart eyewear product revenue under a customer order for 50,000 packs. Shipments in the third quarter of 2026 were below our expectations as a result of a manufacturing process excursion, for which we have taken corrective action. As a result, we now expect to complete shipments under this order in the first half of 2027 We continue to sample our AI-2 battery with smart eyewear customers During 2026, our smartphone development efforts have primarily focused on qualifying our AI-1 silicon-anode cells with our lead smartphone customer. This work has included an accelerated cycle-life testing program developed in collaboration with the customer to evaluate our cells under a range of charge and discharge conditions. The final accelerated cycle-life test has passed our internal testing, and we expect the customer to verify that result in the fourth quarter of 2026. We believe these results demonstrate the cycle life and safety of our 100% active silicon-anode architecture in a smartphone-sized cell. However, our current qualification efforts were based on an earlier version of our silicon-anode technology, which now does not meet current customer energy density requirements. Accordingly, we have decided not to proceed with system-level field testing We have reduced AI-1 smartphone development spending and shifted our silicon-anode development focus to smaller cells for smart eyewear and similar devices, where development costs are substantially lower and will be directly supported by the smart eyewear production orders we are already shipping against. We expect our next energy density gains, including those from the AI-2 cells we are sampling, to reach smart eyewear customers first The application of our AI-2 technology for smartphones requires further development to meet customer requirements and be competitive in the marketplace. At this time, we cannot be certain whether our AI-2 technology, when applied to a smartphone-sized cell, will be able to satisfy customer energy density requirements. Smartphones remain a long-term opportunity, and we expect to re-engage when our next-generation cells restore a clear energy density advantage and the economics justify applying those improvements to larger smartphone cells In Malaysia, Fab2 remains in production at existing volumes, with near-term activities focused on completing our current smart eyewear order, sampling AI-2 and developing our next-generation small cells. Any broader increase in production will depend on product performance, manufacturing readiness and customer demand. We are concentrating our research and development and manufacturing engineering resources on a narrower set of priorities that we believe offer the greatest nearer-term return. Certain process improvement initiatives, including mechanical dicing, are behind their original schedules Achieving the yield, throughput and cost levels necessary to support manufacturing at scale remains an important execution priority. Our technology roadmap for products manufactured in South Korea continues to include MX-2, the next generation of our MX-1 drone cell, which remains targeted for 2027.

$envx TJ/2: Doubling up on 2026.. the reason we’re confident of it is half the bookings required for 2027 are already booked after the departure of our prior CEO, I found some pretty solid people. I’ve found that to be true again and we’ve now got an executive staff that’s ready to rock and roll. I don’t feel obliged to micromanage anything here I do show up frequently and I do show up for long meetings, particularly R&D meetings where the message, "You’ve got to move quickly, no matter how smart you are," is starting to come through Our biggest design win is underwater, not conventional, what you think of as drones. This is a technology revolution in the military, and we are connected many places with a lot of different companies The second generation of smart glasses doesn’t have the dorky look. It is pretty stylish. You notice that is not a rectangular solid in the temple. So, our super high energy batteries are smaller, and you can mount them at an angle in there, but sometimes you want to wrap the battery even beginning over the ear. So our 2 technologies, one allows for odd shapes, and one gives much higher energy density in a rectangular solid shape Smartphones, we have given them AI-1 samples. We have heard our qual worked. We have heard that today their qual will work, so we are going to agree on the hard part, that we have reliable devices. Meanwhile, I got a 50,000 unit order We put a modest amount of money in our Korean subsidiary and the fact that their technology is the standard technology means you can make a significant capacity addition without a lot of money, which is not true in the very high-energy density batteries. We’ve got a good projection for next year. We’re feeling good about next year, and it’s got some backing to it [Q on decision around smartphones, why the decision to pause] The problem is the qual at the cellphone customers is arduous, and it takes near 6 months to get it. We did get qualled, and we have met those reliability standards.. we’ve only qualified the 900 Wh/l AI-1 battery for reliability. The AI-2 will be equally reliable, has the same construction, has a little bit of different materials in it The deal is, do I want to make a bunch of cellphones that have a very limited lifetime in a large number of samples.. Do I want to ship them for money or do I want to ship them for a qual that has a very limited lifetime? We are going to resubmit the AI-2, which does meet the energy targets, and continue on. But right now, I got a choice, revenue or no revenue the eyewear batteries are a much better candidate for getting us going.. these doable, small, executable orders with good ASPs, that is what I am focusing on. Then if you talk about cellphones, you are talking about making money when your fourth machine is up and running. We have got one. So right now, we are doing what is required to fill orders we have got and start to make some gross profit [Q on competitive moats in defense arena] on the competition jumping in, you don’t get to jump in on a submarine. It’s what’s called a sticky order for a reason. It takes several years to qualify, and if you’re not in the right country, one of six, there’s one law that says you can’t qualify. In our case, we’ve got the defense companies coming to us. No, you don’t make one of these and jump into the market. It just doesn’t work that way [Q on smartphones] The cellphone company we’ve been working with is Honor. They’re as good as any customer gets in the world. They’re what I call a teaching customer, and they’ve helped us a lot. The qualification that was killer for a brand-new technology was the lifecycle test..That was the tough test and we have passed it internally. They did a parallel test with us, and we expect as of one week before the end of the test, we see data and we see they’re going to pass We’re extrapolating they’re going to pass today Cont’d..

$envx TJ/1: Our investors did not sign up for $40 million companies. They signed up for a bigger company and gave us that valuation and funded us to do that. We intend to do it having a team that at any size decides to make the quarter six quarters in a row, that’s a culture thing that’s very positive. I am bragging about that, and I am telling you we are going to do better Our gross margin was 34.5%, which is a great number. It is higher due to a rich mix of smart eyewear, where they are paying for energy density that fits in glasses and still can run a substantial computer, and then drone and defense, which always have a premium relative to the commercial market consider when we have a $100 million year, and that is not infinitely far away, and that number has climbed because of accretion to 40%. That is $40 million gross profit we are not that far away from the day when, internally and externally, we made $40 million gross profit last quarter, and I expect you guys to keep your OPEX under $40 million and therefore break even. I am just giving a vision that the step toward a demand for break-even is not that far away. It is not in 2027, but it is shortly after that Our drone orders that we have been bragging about are converting There’s only 6 countries in the world that can ship this kind of order, and they (Routejade) are one of them MX1 is the souped-up, hypercharged technology. It uses their machines, which are widely available, quick to get, and then it puts in our technology, and our technology is silicon anode. To my knowledge, there’s nobody in the world shipping 60% silicon. The highest number I’ve ever heard is 20. But we do 100. This is not a stretch for us, and we’re going to turbocharge We’re going to make that company more valuable than the one we bought by transferring, have already transferred, our technology there. Their first product is B01. We’ve already sampled it. It’s real. We’ve already passed the qual. We’ve already gotten an order and that’s going to start delivering in early 2027. So, we’ve got a pipeline. It’s military. It’s heavily weighted toward drones. We’re shipping something we can make today into it, and we’ve already got the next generation ready to go We’re already working on AI-2, which is over 1,000 Wh/L. For AI-1, which is in production, we have refocused on smart eyewear. Why? Because we got a 50,000-unit order from them, and although we’re qualified, and we’ll talk later about cell phones, we don’t have our first big order from cell phones. We got this order, it’s a real customer whose name you would recognize in a second if I could tell you we’ve already got qual samples for AI-2.. and that’s the one we’re going to build the most of in the future, and we’ve already sampled that to 24 customers. We’ve learned about depending on too few customers and getting bad surprises. This one is broad, and it’s a world-class technology The company is too big for its revenue. One of the reasons I was never impressed with $10 million a quarter is that it wasn’t paying the rent.. we decided to lean out the company a little bit 20% layoff in most companies is traumatic. This company was porky That included cutting some R&D people. So one of our problems with R&D in this company is smart but slow we’re doubling the Korean capacity.. because we’re getting run wild with drone orders We made cuts in all the other divisions. The Korean group had a slight increase, and then it got paid for by everybody else We’re moving from Fremont to downtown Silicon Valley, Sunnyvale.. and that’ll save another $1.5 million We will have our last middling quarter, the quarter we’re in now, because the orders I’m talking about they’re hitting early 2027 We had a long discussion last night and the number they gave me was bigger, and I gave the lecture about it’s great to give a good number and feel good for a few days and then reality comes in. They dropped the number, this number they gave me Cont’d..

$envx Still working through the call. Meanwhile the earnings deck is helpful and is now on the website. Highlights from it: Revenue: up 38% yoy Record gross margin of 34.5%: richer mix of smart eyewear, drone and defense Vision: $100M rev x 40% GM = $40M GP Drone orders converting: 100,000 MX (current tech) battery order (ships January 2027). First MX1-B01 (60% Si) sampled, production order, deliveries early 2027 AI-1 (900 Wh/l), AI-2 (1000 Wh/l): Refocused on smart eyewear 50,000- unit order (AI-1), next-gen qual samples to 24 customers (A1-2) Korean drone capacity doubles in Q2’27 Balance sheet: retired $128M of 2030 Notes for $81M, a 36% discount; warrant dividend launched to retire the 2028 Notes FY’27 guidance $65–85M ($37M of which already = backlog) Smart eyewear in production with major customer: AI-1 shipping against a 50,000-pack order. 19,000 units shipped AI-2 sampling with eyewear customers; next energy-density gains land here first Smartphones: AI-2 sampling deferred until smart eyewear orders are fulfilled silicon-anode development focused on smart eyewear Drone pipeline grew 48% in Q3 to ~$150M More sample requests across aerial, maritime and soldier-worn programs at premium pricing High-energy MX-1 cell targeting multiple UAV market segments; carries industry-leading silicon fraction using AI-1 know-how. Next-level performance in gravimetric energy density, power density and cycle life MX-2 targeted for 2027 with a goal of 400 Wh/kg at a high cycle life Sampled to 30+ industry-leading aerial drone accounts with positive feedback Korea plant is one of a very short list in this market that meets U.S. sourcing rules • List of qualified, compliant high-performance suppliers is very short; new programs pay premium pricing • 100% TAA compliant today; on track for NDAA compliance in 2027 • More than 1,000 cycles confirmed by lead smartphone customer on the 0.2C test • AI-1 passed the final hybrid-protocol cycle-life test internally; customer verification expected next week Development continues with small cells where customer prototyping costs less Silicon-anode development goes where we have backlog today: Smart eyewear comes first; AI-2 smartphone development and sampling deferred until after smart eyewear orders Shifted silicon-anode work to small cells and cut AI-1 smartphone spending. Small-cell development is more cost effective and funded by orders already shipping; the next energy-density gains reach eyewear customers first Cut ~220 positions, mostly at Fab2 with smaller reductions in the U.S., India and China Korea, where near-term revenue is concentrated, is staffed for growth Focused R&D on 8 projects, down from 19

$envx Someone, TJ?, said yesterday that the 2027 guidance is “conservative”. With the “vision” of $100 million and the leaked article quoting the same number, I think it’s entirely possible that next year will hit 100 million. They already have backlog of $37 million and pipeline of $216 million. In any event, doubling revenue next year in line with the conservative estimate ain’t too shabby!