SES AI Corporation — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual report, not a separate fourth-quarter report. SES develops lithium-metal rechargeable batteries for electric vehicles, eVTOL aircraft and other uses. The February 2022 business combination was accounted for as a reverse recapitalization.
Financial results and liquidity
SES remained pre-commercialization and reported no revenue from its principal business. Profit margins are therefore not meaningful.
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $79.6 million | $32.0 million |
| Operating loss | $79.6 million | $32.0 million |
| Net loss | $51.0 million | $31.3 million |
| Net loss per share, basic and diluted | $0.18 | $0.51 |
| Cash used in operating activities | $46.5 million | $30.0 million |
| Capital expenditures | $14.7 million | $9.0 million |
- Research and development expense rose 80% to $28.0 million; general and administrative expense rose 213% to $51.6 million. The increases included higher staffing and public-company costs, as well as stock-based compensation.
- Stock-based compensation was $22.8 million. A $25.4 million non-cash gain from the change in fair value of the Sponsor earn-out liability and $6.2 million of net interest income partly offset operating losses; these items are not operating revenue.
- At year-end, cash and cash equivalents were $106.6 million and short-term U.S. Treasury investments were $283.5 million. Current assets were $396.6 million against current liabilities of $19.4 million. Total assets were $440.4 million and total liabilities were $48.9 million.
- Management said cash and marketable securities should fund working capital and capital expenditures for at least 12 months from the report date and, in its view, through commercialization. It also warned that additional capital could be needed, including for supply-chain integration or development delays.
- SES had no debt outstanding. Contractual obligations totaled $80.7 million, including $63.4 million of purchase obligations and $17.3 million of operating lease obligations.
Material changes and operating progress
- Net loss increased from $31.3 million to $51.0 million; operating expenses grew 149%. Operating cash use increased from $30.0 million to $46.5 million.
- SES received $282.9 million in net proceeds from the business combination and PIPE financing. Investing cash outflow was $296.0 million, primarily reflecting purchases of short-term investments, as well as capital expenditures.
- The Shanghai pilot facility became fully operational in Q3 2022; the Chungju, South Korea pilot facility became fully operational in Q4. SES reported about 200 employees at year-end, up 60% from the prior year.
- Management reported that third-party testing of 100 Ah cells demonstrated energy density of 380 Wh/kg and 850 Wh/L, with charging to 80% in under 15 minutes. Targets described by the company include at least 400 Wh/kg and 1,000 Wh/L; these are development objectives, not commercial results.
Outlook, commentary and risks
- Management’s stated development plan was to work toward B-Sample batteries in 2023, C-Sample batteries in 2024 and potential commercial production in 2025. SES expected R&D expense, capital expenditures, staffing and cash use to increase in 2023. The company expected losses to continue at least until 2026; actual timing and results are uncertain.
- SES has development agreements with GM, Hyundai and Honda. These agreements focus on joint development and do not commit the OEMs to purchase batteries. SES had no arrangements to manufacture consumer-ready batteries for these partners’ vehicles.
- Key risks include unresolved technical, safety, durability and manufacturing-scale challenges; delayed development or OEM integration; dependence on suppliers without long-term supply arrangements; competition; and the need for substantial capital before revenue generation.
- International operations expose SES to geopolitical, regulatory, export-control, currency and intellectual-property risks. A COVID-related Shanghai shutdown in April 2022 delayed development and testing by more than a month; the facility reopened June 1.
- The company recorded a $6.7 million South Korean government grant as unearned at year-end. Grant benefits depend on meeting investment and employment conditions and may be reduced, terminated or clawed back.
- Management and KPMG concluded that internal control over financial reporting was ineffective at December 31, 2022 because of material weaknesses involving control resources, risk assessment, information and communication, and process-level controls. KPMG issued an adverse opinion on internal controls but an unqualified opinion on the financial statements. Management said it was developing a remediation plan; completion timing was not clear.
- The CEO and affiliated entities held about 58.9% of voting power as of March 10, 2023, principally through the dual-class share structure. The filing identifies potential conflicts and limited influence for other stockholders.
Most important facts for investors to verify
- Whether cash, cash equivalents and Treasury investments remain sufficient to fund the development plan, and whether further financing will be required.
- Progress against B-Sample, C-Sample and commercialization milestones, including independent validation of cell performance, safety, yields and manufacturing costs.
- Whether GM, Hyundai or Honda move beyond development agreements to binding purchase or production commitments.
- Whether SES remediates the reported material weaknesses in financial reporting controls, and whether subsequent auditor assessments confirm effective controls.
- Whether government grant conditions, contractual commitments, supplier access and export-control requirements affect cash needs or production timelines.
- The effects of stock-based compensation, earn-out fair-value changes and potential share issuance—including warrants and equity awards—on reported results and dilution.