OnNovember 25, 2020 , Kensington acquired us. The Business Combination was accounted for as a reverse recapitalization in accordance withU.S. GAAP. Under this method of accounting, Kensington was treated as the "acquired" company for financial reporting purposes. Except as otherwise provided herein, our financial statement presentation includes (1) the results of Legacy QuantumScape and its consolidated subsidiaries as our accounting predecessor for periods prior to the completion of the Business Combination, and (2) the results of the Company (including the consolidation of Legacy QuantumScape and its subsidiaries) for periods after the completion of the Business Combination. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" as set forth in this Report. Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "LegacyQuantumScape ", "the Company", "we", "us" and "our" refer to the business and operations of Legacy QuantumScape and its consolidated subsidiaries prior to the Business Combination and toQuantumScape Corporation and its consolidated subsidiaries, following the closing of the Business Combination.
Overview
We are developing next generation battery technology for EVs and other applications. We believe that our technology will enable a new category of battery that meets the requirements for broader market adoption. The lithium-metal solid-state battery technology that we are developing is being designed to offer greater energy density, longer life, faster charging, and greater safety when compared to today's conventional lithium-ion batteries.
We are a development stage company with no revenue to date, have incurred a net loss from operations of approximately$90.7 million for the three months endedMarch 31, 2022 and an accumulated deficit of approximately$2.1 billion from our inception throughMarch 31, 2022 . We expect to incur significant expenses and continuing losses for the foreseeable future.
Key Trends, Opportunities and Uncertainties
We are a pre-revenue company. We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose significant risks and challenges, including those discussed below and in the section titled "Risk Factors" appearing elsewhere in this Report.
Product Development
We are developing our battery technology with the goal of beginning commercialization between 2024 and 2025 via the production of C-sample battery cells made available for sale to a third party. We have demonstrated capabilities of our solid-state separator and battery technology in single-layer, four-layer, 10-layer, and 16-layer solid-state cells. We are now working to develop A-sample battery cells, to validate the performance of these cells and to continue to improve yield and performance of our battery cells. 23 --------------------------------------------------------------------------------
Our research and development currently includes programs for the following areas:
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Multi-layering. We are working to continue increasing the number of layers in our cells. We have demonstrated capabilities of our solid-state separator and battery technology in single-layer, four-layer, and 10-layer solid-state cells in commercially relevant areas (ranging from approximately 60x75mm to 70x85mm). InFebruary 2022 , we announced early cycling test results for 16-layer cells also in commercially relevant areas. InApril 2022 , we announced 16-layer cell cycling results in our proprietary new cell form factor. In order to advance the maturity of our prototype cells and produce commercially-viable solid-state battery cells, we must produce battery cells with dozens of layers, the exact number of which depends on our customers' requirements. We are targeting two to four dozen layers for our A-sample battery cells and additional layers for our B-sample battery cells - depending upon customer preference, cell design considerations, and other factors. We will need to overcome the developmental challenges to increase the layer count and implement the appropriate cell design for our solid-state battery cell.
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Continued improvement in the quantity, quality and consistency of our solid-state separator. We are working to improve the quantity, quality and consistency of our solid-state separators, to further improve, among other things, the cycling behavior, power, operating conditions of our cells and to continue to reduce separator thickness.
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Improvement of our separator manufacturing process. We have selected a method of continuous processing found at scale in both the battery and ceramic industries and are working on continuous improvement of this process, including better consistency and higher throughput. In addition, we are exploring other approaches to improve the output and performance of our separator manufacturing. Regarding consistency, tightening the variability of separator quality results in better yield. Regarding throughput, increasing the volume of separator production results in the increased quantities required for higher layer counts and delivery of more test cells to prospective customers. We are automating our manufacturing process and purchasing larger-scale manufacturing equipment. We will need to substantially improve our manufacturing processes to increase throughput required for higher layer counts and to achieve the cost, performance and volume levels required for commercial shipments. 24 --------------------------------------------------------------------------------
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Continued improvement of the cathode. Our cathodes use a conventional cathode active material such as NMC mixed with a catholyte. We plan to benefit from industry cathode chemistry improvements and/or cost reduction, which in the future may include use of other cathode active materials, including cobalt-free compositions, including LFP, as well as cathode processing advances such as dry electrode processing. Over the years, we have developed catholytes made of differing mixtures of organic polymer and organic liquid electrolyte to optimize performance across multiple metrics such as voltage, temperature, power, and safety, among others. We continue to test solid, gel and liquid catholytes in our cells. The solid catholyte is part of our ongoing research and development investigation into inorganic catholytes. Our solid-state catholyte platform is being designed to enable high rates of charge and discharge for even thicker cathode electrodes, which when combined with a lithium-metal anode, may further increase cell energy densities. Our team of over 600 scientists, engineers, technicians, and other staff is highly motivated and committed to solving these challenges ahead. However, any delays in the completion of these tasks will require additional cash use and delay market entry. As we grow our team, expand the size of our engineering line capacity, and build-out and bring up our QS-0 andQS-1 , our rate of cash utilization will also increase significantly.
Our architecture depends on our proprietary solid-state ceramic separator which we will manufacture ourselves. Though our separator's design is unique, its manufacturing relies on well-established, high-volume production processes currently deployed globally in other industries at large scale.
The solid-state separator is being designed to enable our 'anode-free' architecture. As manufactured, our solid-state battery cell has no anode; the lithium-metal anode is formed during the first charge of the cell; 100% of the lithium that forms the anode comes from the cathode material we purchase. Eliminating the anode bill of materials and associated manufacturing costs found in conventional lithium-ion cells could result in a meaningful cost of goods sold advantage for us. In addition, our solid-state battery cell is being designed to reduce the time and capital-intensity of the formation process step as compared to conventional lithium-ion manufacturing. We are focused on the continued expansion of the throughput and capability of ourSan Jose, California engineering line as well as the planning and setup of our QS-0 and planning for ourQS-1 . As part of the continued expansion of our throughput we are automating our manufacturing process and purchasing larger-scale battery-cell manufacturing equipment. We will need to substantially improve our battery cell manufacturing processes to increase throughput required for higher numbers of battery cells and to achieve the cost, performance and volume levels required for commercial shipments. Continued expansion of the throughput and capability of ourSan Jose engineering line and QS-0 serves two purposes. First, the engineering line and QS-0 are intended to provide a sufficient quantity of solid-state separators and cells for internal development, customer sampling (including pre A-sample, A-sample, and B-sample cells), and marking the start of commercialization via production of C-sample cells made available for sale to a third party. And second, ourSan Jose engineering line and QS-0 are intended to provide the basis for continued manufacturing process development and help inform tool selection and specifications for equipment forQS-1 . Delays in the successful buildout of ourSan Jose engineering line and QS-0 may impact both our development and theQS-1 timelines. We will need to achieve significant cost savings in battery design and manufacturing, in addition to the cost savings associated with the elimination of an anode from our solid-state battery cells, while controlling costs associated with the manufacture of our solid-state separator, including achieving substantial improvements in throughput and yield required to hit commercial targets. Further, we will need to capture industry cost savings in the materials, components, equipment, and processes that we share, notably in the cathode, cell design, and factory.
Commercialization and Market Focus
As noted above, we will continue developing our battery technology with the goal of enabling customer prototype sampling in 2022, samples for use in test cars in 2023, and commercialization through the production of C-sample battery cells made available for sale to a third party, between 2024 and 2025. We are currently targeting the initial production of C-sample battery cells at QS-0. We have demonstrated the performance capabilities of our solid-state separator and battery technology in single-layer, four-layer, and 10-layer solid-state cells and more recently announced early cycling test results of 16-layer solid-state cells, in each case in commercially relevant areas (ranging approximately from 60x75mm to 70x85mm). We will work to continue improving quality, consistency, and throughput and optimize all components of the cell. We will continue to work to further develop and validate the volume manufacturing processes to enable high volume manufacturing and minimize manufacturing costs. The funds available to us will enable us to expand and accelerate research and development activities and undertake additional initiatives. Finally, we will continue to use and expand on our engineering line inSan Jose to prepare for high volume manufacturing, to continue to order QS-0 equipment and prepare our QS-0, and to plan ourQS-1 through our joint venture partnership withVolkswagen . 25 --------------------------------------------------------------------------------QS-1 to be built and run by QSV and the subsequent QS-1 Expansion, would represent a small fraction ofVolkswagen's demand for batteries and implies vehicle volumes under 2.5% ofVolkswagen's total production in 2021, assuming a 100kWh battery pack size. Our goal is to significantly expand the production capacity of the joint venture, in partnership withVolkswagen , to meet more of their projected demand. WhileVolkswagen is the first automotive original equipment manufacturer ("OEM") that we signed an agreement with the goal of commercializing vehicles using our battery technology, we intend to work closely with other OEMs to make our solid-state battery cells widely available over time. We recently signed an agreement with a fourth OEM, a top ten automaker by global revenues in which the OEM agreed to collaborate with us on the validation and testing of our solid-state battery cells with the goal of us providing such cells to the OEM for inclusion into pre-production prototype vehicles and ultimately into serial production vehicles. The agreement follows testing of the Company's early-stage cells by the OEM in its labs. We are currently focused on automotive EV applications, which have among the most stringent sets of requirements for batteries. However, we recognize that our solid-state battery technology has applicability in other large and growing markets including stationary storage and consumer electronics such as smartphones and wearables and will explore opportunities in those areas as appropriate. We believe that our technology enables a variety of business models. In addition to joint ventures, such as the one withVolkswagen , we may operate solely-owned manufacturing facilities or license our technology to other manufacturers. We intend to continue to invest in research and development to improve battery cell performance, improve manufacturing processes, and reduce cost.
Access to Capital
Following the Business Combination, theMarch 2021 Public Offering, and assuming we experience no significant delays in the research and development of our solid-state battery cells, we believe that our cash resources are sufficient to fund QS-0 expenses and the initial setup of theQS-1 production facilities. However, any delays could materially impact us.
Regulatory Landscape
We operate in an industry that is subject to many established environmental regulations, which have generally become more stringent over time, particularly in hazardous waste generation and disposal and pollution control. Regulations in our target markets include economic incentives to purchasers of EVs, tax credits for EV manufacturers, and economic penalties that may apply to a car manufacturer based on its fleet-wide emissions which may indirectly benefit us in that the regulations will expand the market size of EVs. While we expect environmental regulations to provide a tailwind to our growth, it is possible for certain regulations to result in margin pressures. Trade restrictions and tariffs, while historically minimal between theEuropean Union andthe United States where most of our production and sales are expected, are subject to unknown and unpredictable change that could impact our ability to meet projected sales or margins. COVID-19 Beginning inMarch 2020 , the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and may continue to impact the Company's business. InCalifornia , many of the COVID-19 restrictions have been removed, but there is concern that some or all of these restrictions may be reimposed if there are new variants (which may be more contagious or severe and may be less responsive to vaccines or treatments) and resurgences of COVID-19 cases. The magnitude of the impact of the COVID-19 pandemic on the Company's productivity, results of operations and financial position, and its disruption to the Company's business and battery development and timeline, will depend in part, on the length and severity of these restrictions and on the Company's ability to conduct business in the ordinary course.
Basis of Presentation
We currently conduct our business through one operating segment. As a pre-revenue company with no commercial operations, our activities to date have been limited and were conducted primarily inthe United States . Our historical results are reported underU.S. GAAP and inU.S. dollars. Upon commencement of commercial operations, we expect to expand our global operations substantially, including inthe United States and theEuropean Union , and as a result we expect our future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in our historical financial statements. As a result, we expect that the financial results we report for periods after we begin commercial operations will not be comparable to the financial results included in this Report.
Components of Results of Operations
We are a research and development stage company and we have not generated any revenues to date. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations. Operating Expenses 26
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Research and Development Expense
To date, our research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering and QS-0 facilities inSan Jose , including the material and supplies to support the product development and process engineering efforts. As we ramp up our engineering operations to complete the development of our solid-state, lithium-metal batteries and required process engineering to meet automotive cost targets, we anticipate that research and development expenses will increase significantly for the foreseeable future as we expand our hiring of scientists, engineers, and technicians and continue to invest in additional plant and equipment for product development (e.g. multi-layer cell stacking, packaging engineering), building prototypes, and testing of battery cells as our team works to meet the full set of automotive product requirements. We also recognized significant non-cash stock-based compensation to employees directly involved in research and development activities. For stock-based compensation awards with performance and market conditions, such as the awards granted under our Extraordinary Performance Award Program (the "EPA Program") inDecember 2021 , the non-cash expense recognized is based on a probability assessment of the performance conditions, and as such, we expect research and development expenses to fluctuate in the future as the performance conditions are re-assessed at each reporting period. Further, should the stated market conditions of the EPA Program grants be achieved prior to the expected achievement period, we would accelerate the stock-based compensation expense recognized, which could result in significant fluctuations in research and development expense recognized in the future. For more information on the EPA Program and grants thereunder, see Note 9 to our audited consolidated financial statements elsewhere in this Report.
As we ramp up towards commercial manufacturing operations, we will begin to incur expenses that are directly associated with manufacturing, including allocation of indirect costs from research and development.
General and Administrative Expense
General and administrative expenses consist mainly of personnel-related expenses for our executive, sales and marketing and other administrative functions and expenses for director and officer insurance and outside professional services, including legal, accounting and other advisory services. We are rapidly expanding our personnel headcount and supporting systems, in anticipation of planning for and supporting the ramping up of commercial manufacturing operations and being a public company. Accordingly, we expect our general and administrative expenses to increase significantly in the near term and for the foreseeable future. Upon commencement of commercial operations, we also expect general and administrative expenses to include customer and sales support and advertising costs. We also recognize significant non-cash stock-based compensation to executives and certain employees. The non-cash expense recognized for EPA Program grants is based on a probability assessment of the performance conditions, and as such, we expect general and administrative expenses to fluctuate in the future as the performance conditions are re-assessed at each reporting period. Further, should the stated market conditions of the EPA Program awards be achieved prior to the expected achievement period, we would accelerate the stock-based compensation expense recognized, which could result in significant fluctuations in general and administrative expense recognized in the future.
As we ramp up towards commercial manufacturing operations, we will begin to incur expenses that are directly associated with manufacturing, including allocation of indirect costs from general and administrative activities.
Other Income (Expense)
Interest Expense
Interest expense consists primarily of interest expense associated with our QS-0 facility lease.
Interest Income
Interest income consists primarily of interest income from marketable securities.
Other Income (Expense)
Our other income (expense) consists of miscellaneous income and expenses such as the gain on the disposal of fixed assets.
Income Tax Expense / Benefit
Our income tax provision consists of an estimate for
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Results of Operations
Comparison of the Three Months Ended
The following table sets forth our historical operating results for the periods indicated (amounts in thousands):
Three Months Ended March 31, $ % 2022 2021 Change Change Operating expenses: Research and development$ 61,345 $ 29,465 $ 31,880 108 % General and administrative 29,312 15,210 14,102 93 % Total operating expenses 90,657 44,675 45,982 103 % Loss from operations (90,657 ) (44,675 ) (45,982 ) 103 % Other income (loss): Interest expense (600 ) - (600 ) 100 % Interest income 816 247 569 230 % Change in fair value of assumed common stock warrant liabilities - (30,764 ) 30,764 (100 )% Other income 88 103 (15 ) (15 )% Total other income (loss): 304 (30,414 ) 30,718 (101 )% Net loss (90,353 ) (75,089 ) (15,264 ) 20 % Less: Net loss attributable to non-controlling interest (1 ) (10 ) 9 (90 )% Net loss attributable to common stockholders$ (90,352 ) $ (75,079 ) $ (15,273 ) 20 % Research and Development The increase in research and development expense in the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily resulted from the$12.0 million increase in personnel cost due to the growth in research and development headcount to support technology development, an increase of$2.7 million in material supplies and equipment maintenance to support the increase of research and development cell builds in our commercial form factor, an increase of$3.6 million related to depreciation and amortization, an increase of$4.1 million in facility expenses primarily related to the QS-0 facility and a$2.5 million increase in professional fees, administrative expenses and outside services to support the growth in product development and process engineering efforts. Additionally, non-cash stock-based compensation expense increased by$6.9 million from$6.4 million for the three months endedMarch 31, 2021 to$13.2 million for the three months endedMarch 31, 2022 primarily due to the effect of restricted stock unit ("RSU") granted subsequent toMarch 31, 2021 and the EPA Program grants inDecember 2021 .
General and Administrative
The increase in general and administrative expenses in the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 primarily resulted from the$2.8 million increase in professional fees and other corporate expenses due to costs associated with business growth and an increase of$1.4 million in personnel costs due to the headcount increase to support business growth. Additionally, non-cash stock-based compensation expense increased by$9.9 million , from$5.3 million for the three months endedMarch 31, 2021 to$15.2 million for the three months endedMarch 31, 2022 primarily due to the effect of RSUs granted subsequent toMarch 31, 2021 and the EPA Program grants inDecember 2021 . Interest Expense The increase in interest expense during the three months endedMarch 31, 2022 was due to the interest expense associated with a finance lease, which commenced inMay 2021 . Interest Income
The increase in interest income during the three months ended
Change in Fair Value of Assumed Common Stock Warrant Liability
The change in fair value of Assumed Common Stock Warrant liabilities was due to the change in the estimated non-cash fair value of the Public and Private Placement Warrants at the end of each reporting period or through the exercise of the warrants. All Assumed Common Stock Warrants were exercised or redeemed as ofDecember 31, 2021 , and there was no remaining liability for Assumed Common Stock Warrants as ofDecember 31, 2021 . 28 --------------------------------------------------------------------------------
Liquidity and Capital Resources
As ofMarch 31, 2022 andDecember 31, 2021 , our principal sources of liquidity were our cash and cash equivalents and marketable securities in the amount of approximately$1.3 billion and$1.4 billion , respectively. Our cash equivalents are invested inU.S. money market funds,U.S. Treasury bonds and commercial paper. Our marketable securities are invested inU.S. Treasury notes and bonds, commercial paper, and corporate notes and bonds. We have yet to generate any revenue from our business operations. To date, we have funded our capital expenditure and working capital requirements through equity as further discussed below. 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 or debt financing and, over time, our ability to generate cash flows from operations. Prior to the Business Combination, we financed our operations primarily from the sales of redeemable convertible preferred stock. In connection with the Business Combination, we received net cash proceeds of approximately$676.9 million . Additionally, after the Business Combination, during the year endedDecember 31, 2020 , we received proceeds of approximately$99.8 million from the Series F Preferred Stock Purchase Agreements. During the year endedDecember 31, 2021 , we completed theMarch 2021 Public Offering for aggregate net cash proceeds of$462.9 million . InApril 2021 , we received$100 million from VGA pursuant to our achievement of the technical milestone specified in the Series F Preferred Stock Purchase Agreements. Also, during the year endedDecember 31, 2021 , all Assumed Common Stock Warrants were exercised or redeemed and we received net proceeds of$151.4 million . We believe that our cash on hand will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this Report. We believe it is also sufficient to fund QS-0 expenses, and our initial start ofQS-1 production. We may, however, need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with automotive OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, disruptions due to the COVID-19 pandemic, competitive pressures, and regulatory developments, among others. To the extent that our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If such financing is not available, or if the financing terms are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects.
Cash Flows
The following table provides a summary of our cash flow data for the periods indicated (amounts in thousands):
Three Months EndedMarch 31, 2022 2021
Net cash used in operating activities
8,427
97,839
Net cash provided by financing activities 1,287
572,822
Cash Flows from Operating Activities
Our cash flows used in operating activities to date have been primarily driven by the growth in our underlying business to support the research and development of our next generation of battery technology. As we continue to ramp up hiring for technical headcount to accelerate our engineering efforts ahead of starting the pre-pilot and pilot line operations, we expect our cash used in operating activities to increase significantly before we start to generate any material cash flows from our business. To support our research and development activities and our plan to expand our pre-pilot manufacturing capability, we are expecting cash payments of$5.0 million during the next twelve months and$79.5 million thereafter for the operating lease commitments as ofMarch 31, 2022 . The lease commenced inApril 2022 results in cash payments of$0.4 million in the next twelve months and$7.5 million thereafter. From time to time we also enter into non-cancellable service and purchase commitments. We are expecting cash used in operating activities to include payments of$0.8 million in the next twelve months and$1.2 million thereafter through 2024 for our non-cancellable service commitments as ofMarch 31, 2022 and payments of$0.5 million in the next twelve months and$8.7 million thereafter for the non-cancellable purchase commitment we entered into inApril 2022 . As we complete the development of our solid-state, lithium-metal batteries and required process engineering to meet automotive cost targets, we anticipate that research and development operating expenses will increase significantly for the foreseeable future. Cash used in operating activities for the three months endedMarch 31, 2022 was primarily driven by a net loss of$90.4 million offset by non-cash of$28.5 million related to stock-based compensation, non-cash expense of$2.2 million related to amortization of premiums and accretion of discounts on marketable securities, and non-cash expense of$4.7 million related to depreciation and amortization. This was partially offset by a net increase of$2.7 million in accounts payable and total accrued liabilities. The increase in accounts payable and accrued liabilities was driven by higher period-over-period spending in payroll, materials and supplies, professional services and general and administrative to support the growth of the business, specifically in the research and development of our battery technology. Cash used in operating activities for the three months endedMarch 31, 2021 was primarily driven by a net loss of$75.1 million offset by the non-cash expenses including$30.8 million for the change in fair value of Assumed Common Stock Warrant liabilities,$11.7 29 -------------------------------------------------------------------------------- million related to stock-based compensation expense,$2.4 million related to amortization of premiums and accretion of discounts on marketable securities, and$2.2 million related to depreciation and amortization expense.
Cash Flows from Investing Activities
Our cash flows from investing activities to date have been comprised of purchases of property and equipment and purchases, maturities and sales of our marketable securities. We expect the level of capital investment to increase substantially in the near future as we fully build out our engineering lines as well as acquire the property and equipment for QS-0. Cash provided by investing activities for the three months endedMarch 31, 2022 primarily consists of the maturity and sale of marketable securities of$218.5 million and$13.1 million , respectively, offset by$183.9 million used for the purchase of marketable securities. Cash provided by investing activities also reflects$39.3 million of cash used for various leasehold improvements, fixtures and structures, lab equipment, office and software to primarily support our R&D activities. Cash provided by investing activities for the three months endedMarch 31, 2021 primarily consists of proceeds from the maturities of marketable securities of$111.0 million . These proceeds were offset by$13.3 million of cash used for various property and equipment expenditures.
Cash Flows from Financing Activities
Our cash flows from financing activities primarily consist of proceeds from the exercise of stock options. Finance lease commitment for QS-0 will result in net cash payments of$2.4 million in the next twelve months and payments of$53.2 million thereafter.
Cash provided by financing activities during the three months ended
Cash provided by financing activities during the three months endedMarch 31, 2021 is primarily related to$463.8 million in net proceeds received from theMarch 2021 Public Offering,$109.1 million received from the exercise of Public Warrants, and approximately$0.9 million received from the exercise of stock options.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, as defined under
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance withU.S. GAAP. In the preparation of these condensed consolidated financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements. Our significant accounting policies are described in Note 2 to our condensed consolidated financial statements in this Report. Our critical accounting policies and estimates were described in Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report. There have been no material changes to our critical accounting policies and estimates since our Annual Report.
Recent Accounting Pronouncements
See Note 3 to the condensed consolidated financial statements in this Report for more information about recent accounting pronouncements, the timing of their adoption, and, to the extent it has made one, of their potential impact on our financial condition and its results of operations and cash flows. 30
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