SES AI Corp annual report, FY2021

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SES AI Corp. — FY2021 Form 10-K Summary

Important scope note: Although the filing describes SES AI’s battery business, its audited financial statements and MD&A are for Ivanhoe Capital Acquisition Corp., the pre-combination SPAC—not the SES battery business. The business combination closed February 3, 2022. The filing says audited SES operating-company statements and related MD&A were to be filed separately on Form 8-K.

Business context and reporting period

The report covers the fiscal year ended December 31, 2021. SES develops lithium-metal rechargeable batteries for electric vehicles and other applications. At year-end, it was still developing its technology and had not begun commercial battery sales. It reported more than 15,000 multi-layer cells produced and third-party testing of 4 Ah cells at 370 Wh/kg and 700 Wh/L; these are development results, not commercial-scale results.

Financial performance, cash flow and liquidity

  • SPAC audited results: FY2021 net loss was $11.54 million, versus $32,821 from inception on July 8, 2020 through December 31, 2020. FY2021 operating expenses were $7.36 million; the loss also included a $3.18 million warrant-liability fair-value loss, a $208,000 convertible-note fair-value loss and $855,000 of warrant-related offering costs, partly offset by $58,000 of trust-account investment income.
  • Cash flow: Net cash used in operating activities was $2.30 million in FY2021. Cash at year-end was $117,282, excluding $276.06 million held in the trust account. The trust balance was subject to transaction and redemption terms and was not equivalent to unrestricted operating cash.
  • Balance sheet and debt: Total assets were $276.78 million, including the trust account. Total liabilities were $41.93 million, including $25.32 million of warrant liabilities, $9.66 million of deferred underwriting commissions and a $1.15 million related-party convertible note measured at fair value. The note’s principal drawn was $945,000 and it was repaid at the February 2022 combination closing. Working capital deficit was approximately $200,000.
  • SES operating-company losses disclosed in risk factors: The filing states SES had net losses of approximately $31.3 million in 2021 and $13.9 million in 2020, with no operating revenue. Detailed SES financial statements and cash-flow, margin, debt and liquidity values are not clearly provided in this 10-K; consult the referenced Form 8-K for the company-level figures.
  • Margins and dividends: No commercial battery revenue or gross-margin history was reported. The company said it did not expect to pay cash dividends for the foreseeable future.

Material changes and business milestones

  • SES entered development agreements with GM, Hyundai and Honda during 2021. These are development arrangements, not commitments by the automakers to purchase batteries.
  • The GM agreement had a budget of more than $50 million; SES invoiced approximately $14 million under it in 2021. The filing says eligible research and development and prototype costs are reimbursed.
  • The SPAC raised $276 million gross in its January 2021 IPO and $7.52 million from private-placement warrants. A separate $275.4 million gross PIPE was completed in connection with the February 2022 business combination.
  • For context only, the SPAC’s 2021 loss is not comparable with SES’s disclosed operating-company loss: the entities and accounting periods differ, and the 2020 SPAC period covers only its formation period.

Outlook, risks and unusual items

  • Management’s stated targets included completing a 1 GWh pilot facility in 2023, beginning commercial production at a planned 10 GWh portion of Expansion I in 2025, and reaching more than 100 GWh of capacity by 2028. These are plans, not assured outcomes; the filing says SES expected losses to continue at least through 2026.
  • SES targeted commercial production in 2025, but had not yet produced batteries for sale or demonstrated its technology in actual EVs. The OEM agreements remain developmental, and timing and milestones may change.
  • SES anticipated substantial further capital needs to develop products and build facilities. It expected business-combination proceeds to fund the pilot facility and most of Expansion I, with additional facilities requiring further financing, including anticipated debt and equity.
  • Key risks include scale-up and manufacturing execution, battery safety and performance, customer adoption, competition, supply-chain availability and material costs, dependence on strategic partners, international and China-related regulatory and geopolitical exposure, export controls, and access to capital.
  • COVID-19 measures reduced SES activity and personnel and travel costs during 2021, while safety protocols contributed to project delays. The filing also cited the Russia-Ukraine conflict as a potential source of market and supply-chain disruption.
  • Controls: The filing reports a material weakness in Ivanhoe’s accounting controls for complex financial instruments, with restatements of prior interim statements. Separately, it describes SES stock-based compensation errors that led to restatements of 2021 interim periods. Management said remediation efforts were ongoing. The auditor expressed an unqualified opinion on the SPAC financial statements but did not audit internal-control effectiveness.
  • No legal proceedings were reported that management considered likely to have a material adverse effect. The filing disclosed no off-balance-sheet arrangements for Ivanhoe at December 31, 2021.

Most important facts for investors to verify

  • Review the separate Form 8-K financial statements and MD&A for SES Holdings to confirm operating-company revenue, losses, cash, cash burn, debt and liquidity.
  • Check the actual use and remaining availability of business-combination and PIPE proceeds against facility and R&D spending plans.
  • Track progress toward OEM sample milestones, validation in vehicles, and any binding supply or purchase agreements; the disclosed JDAs do not guarantee sales.
  • Verify pilot-facility timing, construction and funding plans, production yields, cell performance at larger formats, and safety results.
  • Assess remediation of both disclosed internal-control weaknesses and the reliability of subsequent financial reporting.