Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Graphjet Technology. References to our "management" or our "management team" refer to our officers and directors. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP, and the related notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act") that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report, words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions, as they relate to us or the Company's management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to the Company's management. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on July 15, 2025. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

Graphjet Technology (the "Company", "Graphjet", "we," "us" or "our"), is a former blank check company incorporated under the laws of the Cayman Islands on August 6, 2021 under the name Energem Corp., ("Energem"), and formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses.

Business Combination

On November 18, 2021, we consummated an initial public offering ("IPO"). On March 14, 2024 (the "Closing Date"), we consummated a series of transactions that resulted in the combination (the "Merger") with Graphjet Technology Sdn. Bhd., a Malaysian private limited company ("Graphjet"), pursuant to a share purchase agreement, dated as of August 1, 2022 (the "SPA") by and among Energem, Graphjet, Swee Guan Hoo, solely in his capacity as the representative for the shareholders of Energem after the closing of the sale and purchase of the Graphjet Pre-Transaction Shares (the "Closing") for Energem's shareholders (the "Purchaser Representative"), the individuals listed on the signature page of the SPA under the heading "Selling Shareholders" (each, a "Selling Shareholder" and together, the "Selling Shareholders"), and Lee Ping Wei in his additional capacity as representative for the Selling Shareholders (the "Shareholder Representative").

The Merger and other transactions contemplated thereby (collectively, the "Business Combination") closed on March 14, 2024 when pursuant to the SPA, Energem acquired all of the issued and outstanding shares Graphjet Pre-Transaction Shares from the Selling Shareholders and Graphjet became a wholly owned subsidiary of Energem. Pursuant to the SPA, Energem changed its name to "Graphjet Technology" and the business of the Company became the business of Graphjet.

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Energem was treated as the acquired company and Graphjet was treated as the acquirer for financial statement reporting purposes.

Organization and Nature of Business

The Company is the owner of the state-of-the-art patented technology for the manufacture of high-quality graphene and graphite, critical raw materials utilized across various industries including energy storage, electronics, aerospace and advanced manufacturing. For graphene, is an extraordinary material that has sparked a global rush in industry. Graphjet Technology produces graphite, graphene and graphene-based anode battery material with over 98% similarity and greater consistent compared to other synthetic graphite and graphene which are produced from petroleum coke and coal. The breakthrough technology transforms a sustainable, abundant and renewable agricultural waste product, palm kernel shells into highly valuable artificial graphene and graphite, significantly reducing carbon emissions in the process. For research and development in graphite and graphene applications, Graphjet Technology collaborates closely with prestigious institutions such as the National University of Malaysia (UKM) and University Teknikal Malaysia Melaka (UTEM), which serve as the Company's Technology Advisor Panel, providing expect insights and guidance in technology advisory for the applications. Additionally, Graphjet's strategic membership in the Industrial Liaison Program (ILP) at Massachusetts Institute of Technology (MIT) underscores its commitment to continuous innovation and cutting-edge research partnership.

Positioning itself as a leader in cost efficiency, Graphjet aims to be the foremost low-cost producer of premium artificial graphite and graphene. The Company holds a patent for its proprietary bio-mass conversion process and graphite production method, and its graphene manufacturing technique. This unique capability positions Graphjet as the sole producer capable of mass-scale production of graphite and graphene using sustainable biomass sources, setting it apart from competitor worldwide.

Since Graphjet Technology uses a widely available waste product as their source, they are able to produce a higher quality product at a significantly lower cost than other graphite and graphene production methods currently in use worldwide.

Leveraging this innovation approach, Graphjet Technology aims to produce superior products at a significantly reduced cost compared to conventional graphite and graphene production methods that rely on non-renewable sources. This competitive advantage ensures the company's products not only meet but exceed industry standards for quality and sustainability.

As for now, Graphjet Technology has not commenced commercial sales, but plans to strategically sample its products to leading multinational companies to gain market acceptance and facilitate procurement. The Company's ultimate goal is to displace high-cost suppliers with its competitively priced, eco-friendly alternatives. To date, the Company has funded its operations primarily with proceeds through equity investments provided by its current shareholders.

In July 2023, the Company secured a production facility in Kampung Baru Subang, Selangor State, Central Malaysia. Machinery commissioning was completed, and production was started. The Company has generated revenue from selling side products since June 2025.

Key Factors Affecting Operating Results

The Company believes the key factors affecting the financial condition and results of operations include the following:

Intellectual Properties

Graphjet Technology acquired a palm-based synthetic graphite and the preparation method thereof with the application no. PI2021002802, a palm-based synthetic graphite and the preparation method thereof with the application no. CN111892048A and a preparation system of palm-based synthetic graphite with the application no. CN111675214A and all the intellectual property rights attached thereto. The Company also purchased the process for producing palm-based graphene. The Company currently owns all of the intellectual property rights to its technology and manufacturing process and the Company's technology is not subject to any ownership, intellectual property, or other rights of any parties other than Graphjet Technology.

The Company's innovative technology offers a strong alternative option in the artificial graphite market. Traditionally, artificial graphite is preferred by the technology industry due to its superior quality over mineral graphite. Conventional artificial graphite usually sourced from coal or petroleum coke, which is a byproduct in its respective industry. Therefore, conventional artificial graphite may be limited by shortages or supply chain issues related to coal and petroleum coke. At this time, there are no similar supply chain issues that would affect Graphjet Technology's access to palm kernel shells used to produce its version of artificial graphite.

The Company's success hinges on sourcing, maintaining, and enforcing strong intellectual property protections for its technology and methodologies. Should we fail to achieve comprehensive protection, others could potentially duplicate and commercialize similar technologies, undermining our competitive advantages and hindering our ability to successfully market our innovations or strategic.

Graphite Pricing

Graphite prices have receded with the ban of China graphite since December 1, 2023. Our business, financial condition and operating results could be materially and adversely affected to the extent prices for graphite continue to decline in future.

Supply of Palm Kernel Shells

Palm kernel shells are the critical raw material for our graphite production. Since initiating the merger exercise in August 2022, we have witnessed a surge in palm kernel shell prices driven by heightened demand, adversely impacting our operational performance due to increased raw material cost.

Customer and Border Control Issues between Malaysia and China

The recent border control measures implemented by Malaysia and China have disrupted critical raw material supply chains. These restrictions have impacted our ability to transport and trade graphite efficiently, resulting in delays to qualification timelines, production schedule and timelines and overall costs escalations.

US-China Trade War and China Banning Export of Graphite and Graphene and its related machineries

The ongoing trade tensions between the US and China continue to reshape global economic landscapes, with critical implications for strategic materials. Graphite, being a critical raw material, sourcing for its machineries amidst trade war is not immune to these effects. In response, we are proactively diversifying our sourcing strategy to mitigate risks associated with this trade war. China's restriction on graphite exports, coupled with the EU's regulations limiting the use of graphite and graphene due to environmental concerns, underscore the need for strategic adaptation. While the potential of these materials remains significant, we are committed to balancing their advantages with sustainable and responsible practices.

Conflicts and Geopolitical Positions

The complex geopolitical landscape, particularly the ongoing conflicts, further escalation of the war, as well as further escalation of tensions between various countries could result in a global economic slowdown and long-term changes to global trade, which continues affects global supply chains and trade dynamics. As a result, the Company's ability to procure raw materials at the desired price may be affected. Furthermore, the Company's ability to raise equity and debt financing may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of these events on the world economy and the specific impact on the Company's financial position, results of operations and its cash flows are not yet determinable. We remain acutely aware of these developments and prepared to pivot out strategic to mitigate their impact on our operation.

Impact of China's Export Ban on Graphite

China's ban on graphite exports has significant impact on the global supply chain. Graphite, a critical raw material in anode materials and battery production, has seen supply constraints that have led to production slowdowns across the electric vehicle (EV) industry. While we are actively exploring alternative sourcing channels to maintain our supply, we acknowledge the widespread challenges posed by the reduced global graphite demand. Our resolve to navigate these disruptions remains steadfast, as we continuously adapt to evolving market conditions to support sustainable growth and resilience.

Price Reduction and Market Slow Down of Critical Minerals

The reduction in the price of critical minerals has implications market slowdown, posing significant challenges for industry growth and revenue stability. As responsible stewards of market expansions and resilience, we are closely monitoring these pricing and market dynamics. We are committed to recalibrating our financial forecasts and operational strategies to ensure sustainable business practices and competitiveness. We value the trust of our stakeholders as we navigate these adjustments to align with market realities.

Competition

The competitive landscape in the graphene and graphite industry is driven by several factors, including market acceptance, material differentiation and quality, delivery reliability and customer service. The competition is expected to remain fierce, based primarily on price, performance and cost effectiveness, customer service and product innovation. Competition could prevent implementation of price increases, require price reductions or require increased spending on research and development, marketing and sales that could adversely affect us. Market shifts, such as changing customer preferences and advancements technology, could directly affected our ability to remain competitive and sustain profitability. Failure to achieve anticipated sales volumes and customers adoption rates could have a detrimental impact on Graphjet Technology's business, financial health, operating results and future prospects.

Regulatory Environment

The graphene and graphite industry are governed by laws, which continue to evolve and change over time. The costs and resources necessary to comply with these laws are significant. Our profitability depends in part upon our ability, and that of our affiliated providers and independent contractors, to operate in compliance with applicable laws and to maintain all applicable licenses. To the extent any of our employees or third-party contractors engages in any misconduct or activity in violation of an applicable law, we may be subject to increased liability under the law or increased government scrutiny. If any such action is instituted against us, and we are not successful in defending ourselves or asserting our rights, such action could have a significant impact on our business, including the imposition of significant fines or other sanctions. Complying with any new legislation and regulations could be time-intensive and expensive, resulting in a material adverse effect on our business, prospects, financial condition and/or results of operations.

Business Development and Marketing

Our commitment to excellence extends well beyond production. We recognize that robust business development and effective marketing strategies are fundamental for sustained success. To ensure our position in the competitive market, we are dedicating ample resources to enhance our business developing various strategies to better reach our customers with new marketing tools. The focus of our business development is the development of quality products that is able to meet the demand of our customers, building trust with customers and foster long term business relationship with our customers.

Qualification Process Duration

The qualification process for our products by prospective customers is a rigorous and necessary step, in line with industry standards. Industry standards dictate that this process generally spans 12 to 18 months, involves comprehensive testing, stringent quality assurance protocols, and detailed compliance checks. Our commitment during this period is to uphold the highest standards of performance and reliability in our product to our customers. While the timeline may seem extended, it represents a strategic investment in ensuring that our offerings consistently meet or exceed industry expectations.

Political and Regulatory Risks for Green Energy Policies

Graphjet may face significant uncertainty stemming from changing political landscapes and shifting green energy policies. Lawmakers' shifting position on supporting green energy initiative make it difficult for company to project revenues and make investment decision confidently. This inconsistent support affects innovation and the adoption of sustainable materials like graphite and graphene. In addition, the lack of a consistent approach to subsidies and incentives poses a considerable challenge. Company may face reduced funding and stalled research and development efforts, limiting their ability to stay competitive and innovate. Election cycles and new government leadership can result in abrupt changes in policy, impacting strategic plans and long-term investments. Companies must continuously adapt to these policy shifts, which can be resource-intensive and disrupt operation.

Environmental Compliance and Regulation

Strict and evolving environment regulations are necessary for sustainability but add complexity to operations. Company must invest significantly in eco-friendly technologies and production methods to comply, which can increase operating costs and lengthen production cycles. Failure to comply can lead to penalties, legal challenges and reputational damage. The financial burden of compliance diverts funds from other growth-oriented activities, putting smaller companies at risk of failing behind larger competitors with more resources.

Geopolitical Tensions and Policy Shifts

Geopolitical tensions, such as presidential elections and policy shifts, affect trade relations, market access, and the availability of key raw materials. The uncertainty surrounding these events can cause delays in corporate decision-making, hinder expansion plans, and affect operational efficiency. Graphjet Technology may experience disrupted supply chains, unpredictable regulatory changes, and an inability to plan for long term growth, impacting profitability and stability.

Export and Import Regulations

Stringent import and export regulations in key markets such as Malaysia and US pose significant operational challenges. Company needs to navigate complex customs procedures and adapt to frequent policy changes that can delay shipments and increase costs. Political tensions further complicate this, leading to uncertainty in international trade. Regulatory barriers can lead to delays in product delivery, increased logistical expenses, and missed business opportunities.

Semiconductor Industry Challenge

The slowdown in the semiconductor industry, highlighted by Intel's financial struggles, has a domino effect on industries reliant on high-tech components. Graphjet, which supplies critical materials for chip production, may face reduced demand and disrupted partnership. The heavy reliance of Nvidia and AMD on TSMC, alongside China's influence over Taiwan, creates additional risks. Graphjet Technology may find it harder to secure contracts and partnerships within the semiconductor sector, leading to decreased revenue streams and limited market reach.

Impact of Raw Material Shortages on Industry Leaders

Major players such as Posco and Samsung SDI have scaled back operation due to raw material shortages and political uncertainties. This reflects broader market challenges that we faced, including securing a steady supply chain and maintaining production levels. Reduced availability of raw materials drives up cost and forces production cuts, which could weaken company's market position and profitability.

Market Pricing and Global Control

China's dominance over raw materials supply chains continues to influence global market pricing. This control not only adds prices volatility but also creates uncertainty around supply continuity. Graphjet may find it difficult to compete on cost and scale, impacting their bottom line. High dependency on a single, dominant supplier exposes companies to price fluctuations and potential shortages, threatening their ability to meet contractual obligation and remain competitive.

Access to Market and Strategic Partnership

Developing direct relationships with EV battery manufacturers is essential for growth, yet remain challenging due to competitive pressures, regional economic uncertainties and frequent management changes driven by financial pressures. Graphjet aims to bridge this gap by ensuring a reliable supply of essential materials to these manufacturers. Despite this, barriers without strategic support and government cooperation make it difficult to access these key contacts and establish long-term partnership. This inability to secure partnerships limits market penetration, slow revenue growth, and hinders Graphjet's ability to showcase its capacity to supply high quality materials, thus impacting overall market growth and resilience.

Government Disruptions and Ceased Operations

Raw materials shortages and supply chain disruptions have led some industry leaders to reduce or cease operations. The lack of cohesive government support exacerbates these issues, making it challenging for company to sustain the operation and meet market demand. Company may risk reduced output, lost revenues, and potential closure, underscoring the need for a diversified supply chain and strategic support from both industry and government.

Operational Disruptions and Ceased Operations

The industry has witness significant operational halts, with major players such as LG and GM ceasing certain operations due to persistent raw materials shortages. This highlights the fragility of current supply chains and the pressing need for robust, diversified sourcing strategies. Graphjet is well-positioned to support these industries by providing alternative sources that can bridge these supply chain gaps. However, without sufficient government backing, it becomes challenging to form strategic alliances with major manufacturers like GM and LG to secure consistent materials flow and ensure stability in the markets.

Supply Chain Disruptions and Strategic Support Challenges

Global supply chain vulnerabilities can significantly disrupt the availability of raw materials essential for graphite and graphene production. Factor such as natural disasters, geopolitical tensions, and pandemic can create instability in supply chains. Additionally, the challenge of developing effective supply chain strategies and partnership adds complexity. Without strategic support from suppliers and stakeholders, Graphjet may struggle to secure reliable sources for critical materials. Disruptions in the supply chain can lead to production delays, increased operational costs, and potential revenue loss. If key materials become unavailable, Graphjet may be unable to meet customer demand, leading to damaged relationship and reduced market share. Additionally, the inability to establish robust supply chain partnerships could hinder Graphjet's operational efficiency and long-term growth, ultimately impacting stakeholder confidence and overall financial performance.

Investor Sentiment and Market Stability

Political uncertainty during election periods can lead to fluctuations in investor confidence and market stability. A deadline in investor sentiment may result in reduced capital ability to fund growth initiatives and research. Market volatility could also impact stock prices, making it challenging to raise funds through equity financing.

Regulatory Compliance Burdens

New political leadership can lead to the introduction of additional regulations that require compliance. Increased regulatory burdens could result in higher operational costs and divert resources from core business activities to compliance-related functions. This can strain financial resources and impact profitability.

International Investments and Compliance

The SEC' global cooperation stance under Gensler could be altered, affecting international agreement and compliance protocols, impacting how Graphjet interacts with global markets and U.S based investors.

Specific Policy Areas

The directions of policies around ESG (Environmental, Social, and Governance) disclosure requirements and oversight on innovative technologies may change, influencing how Graphjet and similar companies navigate these evolving regulatory expectations.

Shift in Enforcement Priorities

A new SEC chair may shift focus away from Gensler's emphasis on transparency and investor protection, potentially leading to lighter regulatory burdens or heightened scrutiny, depending on the new leadership's priorities.

Increased Global Supply and Price Volatility

A removal of export restrictions could flood the global market with cheaper Chinese graphite and graphene, leading to price volatility. Companie like Graphjet could face margin pressures due to increased competitions and potential price war, particularly in market where they rely on high value or premium materials.

Market Saturation

With China being one of the largest producers of graphite and graphene, lifting export restrictions could lead to market oversupply, driving down prices and potentially reducing the demand for alternative suppliers, affecting the sales and market positioning of companies.

Business Continuity Risk

Without cross-functional backups or a succession plan, the company could face significant challenges in maintaining operational continuity, potentially impacting customer satisfaction and company performance. The lack of a contingency plan may led to halted operations, revenue loss, or reduced market confidence during transitions.

Technology Transfer and Training Gaps

A lack of knowledge transfer leads to skill gaps, inefficiencies, and increased reliance on external consultants. The absence of structured training processes for employees on the company's technology creates a reliance on the China Technician and increases risks during transitions or expansions.

Management Opportunities

Sustainability Practices

Enhancing the company's ESG profile by adopting green manufacturing methods and contributing to sustainable innovations. Company' commitments to excellence in environmental, quality and health & safety management, driving operational, financial, and reputational gains that aligns with global best practices. In Malaysia, approximately 5 million tons of palm kernel shells (PKS) annually, but we only utilized a small fraction of that amount. Increasing the usage of palm kernel shells in producing graphene and graphite could significantly help reduce waste in Malaysia. Graphjet's award-winning proprietary manufacturing technology achieved up to an 83% reduction in carbon footprint and up to an 80% reduction in production costs, setting a new benchmark for sustainability and efficiency in the industry.

Leadership in Graphene and Graphite Production

The Company is uniquely positioned to become a global leader in the production of high-quality graphene and graphite materials. With its state-of -the-art manufacturing processes, the company is poised to meet the increasing demand for these materials, which are integral to advanced technology sectors.

Diverse Market Applications

The Company's products are essential for numerous high-growth industries, including biomedical advancements such as medical sensors and drug delivery system, automotive innovations like electric vehicle batteries and lightweight composites, semiconductor and sensor technologies critical for modern digital devices, and energy storage solutions, particularly in batteries for renewable energy systems. This wide range of applications ensures the company's relevance across multiple billion-dollar markets.

Cost and Quality Advantage

The Company's patented production technology and its use of low- cost raw materials, such as palm kernel shells, give it a significant edge over traditional suppliers. The Company can offer graphene and graphite at a lower production cost while maintaining higher quality standards, enhancing its higher quality standards, enhancing its competitiveness in the market.

Experienced Leadership Driving Sustainability

The Company's experienced management team brings a proven track record in clean and sustainable manufacturing. Their dedication to using renewable waste materials reflects a strong commitment to environmental stewardship, positioning the company as a responsible leader in the graphene and graphite sector. This expertise also ensures operational excellence and drives investor confidence.

Components of Results of Operations

Results of Operations

The following information includes, in Graphjet Technology's opinion, all adjustments necessary to state fairly its consolidated results of operations for these periods. This data should be read in conjunction with Graphjet Technology's unaudited condensed consolidated financial statements and notes thereto.

Comparison for the three months ended June 30, 2025 and 2024

		For the Three Months Ended June 30,								Changes
		2025				2024				Amount				%
		USD				USD				USD
Revenues			49,316				-				49,316				100	%
Cost of revenues			(76,005	)			-				76,005				100	%
Gross loss			(26,689	)			-				26,689				100	%
Operating expenses
General and administrative expenses			(1,672,011	)			(2,012,938	)			340,927				(16.9	)%
Share compensation expense			(19,200,000	)			-				(19,200,000	)			100	%
Loss from operations			(20,898,700	)			(2,012,938	)			(18,885,762	)			938.2	%
Other expenses, net			(603,257	)			(5,593	)			(597,664	)			10,685.9	%
Net loss			(21,501,957	)			(2,018,531	)			(19,483,426	)			965.2	%

Revenues

Our revenues increased by approximately $49,000, or 100% for the three months ended June 30, 2025. The increase had resulted from selling side products since June 2025.

Cost of revenues

Cost of revenues mainly consists of cost to manufacture products, primarily includes the cost to purchase raw materials, direct labor, and other related costs that are attributable to production. Our cost of revenues increased by approximately $76,000, or 100% for the three months ended June 30, 2025. The increase in cost of revenues was consistent with the increase in products revenue.

Gross loss

Our gross loss was approximately $27,000 for the three months ended June 30, 2025, mainly because we have not commenced commercial sales as our production line was operated at a low productivity level and the side products were also sold for a discount due to the deterioration in quality because of prolonged storage time. We expect to have a better gross margin when we begin our official graphite production.

Operating Expenses

Operating expenses included only general and administrative expenses in the three months ended June 30, 2025 and 2024 as we had no selling expenses.

General and administrative expenses consist of a range of critical business activities, including staff cost, marketing initiatives, audit fees, consulting and legal fees. Additionally, these expenses cover the depreciation of property and equipment. This diverse allocation reflects our commitment to maintaining robust operations, supporting strategic business functions, and ensuring compliance and transparency across all facets of our organization.

General and administrative expenses decreased by approximately $0.3 million, or 16.9%, from approximately $2.0 million for the three months ended June 30, 2024, to approximately $1.7 million for the three months ended June 30, 2025. The decrease was primarily driven by a decrease in professional fees of approximately $0.9 million and a decrease in travel expense, meals and entertainment expense of approximately $0.2 million, both of which were due to less fees associated with the business combination. The decrease was partially offset by an increase in staff costs of approximately $0.9 million due to headcount increased and the increased salaries and compensation expense for management personnels.

Share compensation expense increased by $19.2 million for the three months ended June 30, 2025 compared to the same period in 2024 due to issuance of warrants to a shareholder.

Other Expenses, net

Other expenses mainly include loan interest, the amortization of imputed interest of compensation payable to shareholders and loss on debt settlement of approximately $0.6 million and approximately $6,000 for the three months ended June 30, 2025 and 2024, respectively.

Net Loss

Net loss increased by approximately $19.5 million, or 965.2%, from approximately $2.0 million for the three months ended June 30, 2024, to approximately $21.5 million for the three months ended June 30, 2025. Such change was mainly due to the reasons discussed above.

Comparison for the nine months ended June 30, 2025 and 2024

		For the Nine Months Ended June 30,								Changes
		2025				2024				Amount				%
		USD				USD				USD
Revenues			49,316				-				49,316				100	%
Cost of revenues			(76,005	)			-				76,005				100	%
Gross loss			(26,689	)			-				26,689				100	%
Operating expenses
General and administrative expenses			(2,877,016	)			(16,328,960	)		`	13,451,944				(82.4	)%
Share compensation expense			(19,200,000	)			-				(19,200,000	)			100	%
Loss from operations			(22,103,705	)			(16,328,960	)			(5,774,745	)			35.4	%
Other expenses, net			(664,430	)			(363,847	)			(300,583	)			82.6	%
Net loss			(22,768,135	)			(16,692,807	)			(6,075,328	)			36.4	%

Revenues

Our revenues increased by approximately $49,000, or 100% for the nine months ended June 30, 2025. The increase had resulted from selling side products since June 2025.

Cost of revenues

Cost of revenues mainly consists of cost to manufacture products, primarily includes the cost to purchase raw materials, direct labor, and other related costs that are attributable to production. Our cost of revenues increased by approximately $76,000, or 100% for the nine months ended June 30, 2025. The increase in cost of revenues was consistent with the increase in products revenue.

Gross loss

Our gross loss was approximately $27,000 for the nine months ended June 30, 2025, mainly because we have not commenced commercial sales as our production line was operated at a low productivity level and the side products were also sold for a discount due to the deterioration in quality because of prolonged storage time. We expect to have a better gross margin when we begin our official graphite production.

Operating Expenses

Operating expenses included only general and administrative expenses in the nine months ended June 30, 2025 and 2024 as we had no sales or selling expenses.

General and administrative expenses consist of a range of critical business activities, including staff cost, marketing initiatives, audit fees, consulting and legal fees. Additionally, these expenses cover the depreciation of property and equipment. This diverse allocation reflects our commitment to maintaining robust operations, supporting strategic business functions, and ensuring compliance and transparency across all facets of our organization.

General and administrative expenses decreased by approximately $13.4 million, or 82.4%, from approximately $16.3 million for the nine months ended June 30, 2024, to approximately $2.9 million for the nine months ended June 30, 2025. The decrease was primarily driven by the decrease in provision for bonus of $13.8 million incurred during the nine months ended June 30, 2024. On February 29, 2024, the Board of Directors of Graphjet approved the proposed bonus plan to reward the senior management team of Graphjet for the successful business combination and corporate listing. The total provision made is $13,800,000 according to the plan. During the nine months ended June 30, 2024, the provision was recorded under the general and administrative expenses, and the full balance of $13.8 million is to be provided by December 2025. The decrease was also due to a decrease in professional fees of approximately $0.9 million due to less fees associated with the business combination. The decrease was partially offset by an increase in staff costs of approximately $1.3 million due to headcount increased and the increased salaries and compensation expense for management personnels.

Share compensation expense increased by $19.2 million for the nine months ended June 30, 2025 compared to the same period in 2024 due to issuance of warrants to a shareholder.

Other Expenses, net

Other expenses mainly include loan interest, the amortization of imputed interest of compensation payable to shareholders and loss on debt settlement of approximately $0.7 million and approximately $0.4 million for the nine months ended June 30, 2025 and 2024, respectively.

Net Loss

Net loss increased by approximately $6.1 million, or 36.4%, from approximately $16.7 million for the nine months ended June 30, 2024, to approximately $22.8 million for the nine months ended June 30, 2025. Such change was mainly due to the reasons discussed above.

Liquidity and Capital Resources

We currently finance our internal operations primarily with self-funding. Our fundamental principles are to build and maintain a financial base for the purpose of maintaining soundness and efficiency of operations and achieving sustainable growth. Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements. Our primary sources of liquidity are additional capital investment and debt.

The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the market acceptance of our products. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate expenses including some or all of our planned development, including the production of plant.

Through June 30, 2025, we have incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $48.6 million. We are a pre-revenue organization possess patented technologies and in production testing phase of operation at the factory located at Kampung Baru Subang district of Selangor State in Central Malaysia. While management expects that the proceeds from fundraising from new external shareholders and the net impact of the Business Combination along with our cash balances held prior to the Closing Date will be sufficient to fund our current operating plan for next 12 months from the date these consolidated financial statements were available to be issued, there is significant uncertainty around our ability to meet the going concern assumption beyond that period without raising additional capital.

Our short-term liquidity requirements are primarily linked to the business operations, including payments for operating costs, production costs, staffing expenses and marketing expenses. Our long-term liquidity requirements are primarily linked to the expenses incurred in connection with our contract manufacturing facility and the construction of our manufacturing facility. We successfully completed the Business Combination on March 14, 2024, and received the $2,500,000 PIPE Investment pursuant to the PIPE Investment Purchase Agreement. On November 1, 2024, we successfully completed a fundraising exercise amounting to approximately $1.0 million (MYR 4.4 million) net proceeds from new external shareholders. On April 30, 2025, we signed debt settlement agreements with our prior director and shareholder to settle the debts with them. We believe we will have sufficient working capital for the next 12 months. If additional funds are required to support our working capital requirements, construction plans, and other purposes, we may seek to raise additional funds through equity and debt financing or from other sources. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operating flexibility and would also require us to incur interest expense. If we raise additional funds through the issuance of equity, the percentage ownership of our equity holders could be diluted. We can provide no assurance that additional financing will be available at all or, if available, that we would be able to obtain additional financing on terms favorable to us.

The following tables set forth a summary of our key components of cash flows for the nine months ended June 30, 2025 and 2024.

		For the Nine Months Ended June 30,
		2025				2024
		USD				USD
Net cash used in operating activities		$	(1,813,635	)		$	(2,578,471	)
Net cash used in investing activities			(32,277	)			(1,271,734	)
Net cash provided by financing activities			1,568,062				4,059,793
Effect of exchange rate changes			(19,491	)			(122,809	)
Net change in cash			(297,341	)			86,779
Cash, beginning of period			348,655				1,430
Cash, end of period		$	51,314			$	88,209

Operating activities

Net cash used in operating activities for the nine months ended June 30, 2025 was approximately $1.8 million and was primarily attributable to a net loss of approximately $22.8 million with non-cash expenses of approximately $20.3 million. Cash outflow was also attributable to the increase in advance in purchase of machinery of approximately $0.1 million. Cash outflow was partially offset by the increase in payable to shareholders of approximately $0.6 million, and the increase in other payables and accrued expenses of approximately $0.1 million.

Net cash used in operating activities for the nine months ended June 30, 2024 was approximately $2.6 million and was primarily attributable to net loss of approximately $16.7 million. Cash outflow was partially offset by the provision for bonus of $13.8 million and the increase in other payables and accrued expenses of approximately $0.2 million.

Investing activities

Net cash used in investing activities for the nine months ended June 30, 2025 was approximately $32,000, which was due to purchases of fixed assets and intangible assets.

Net cash used in investing activities for the nine months ended June 30, 2024 was approximately $1.3 million, which was due to purchase of fixed assets.

Financing activities

Net cash provided by financing activities for the nine months ended June 30, 2025 was approximately $1.6 million which consisted of proceeds from issuance of ordinary shares of approximately $1.0 million, and proceeds from short-term related-party loans of approximately $0.6 million.

Net cash provided by financing activities for the nine months ended June 30, 2024 was approximately $4.1 million, which consisted of proceeds from long-term related-party loans of approximately $2.6 million, and proceeds from PIPE investment of $2.5 million. The cash provided by financing activities was partially offset by the payments of deferred merger costs of approximately $0.9 million, and repayments to long-term related-party loans of approximately $0.1 million.

Off-Balance Sheet Arrangements

As of June 30, 2025,we did not have any off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support, or other benefits.

Critical Accounting Estimates

This management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). The preparation of these unaudited condensed consolidated financial statements and accompanying notes requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgements, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimates that are critical to the preparation of financial statements. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe that the critical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements are described below.

Impairment for long-lived assets

Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, we would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.

These estimates and assumptions can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the estimated useful lives. Changes in these assumptions could affect the carrying value of these assets. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates.