SES AI Corp. / Ivanhoe Capital Acquisition Corp. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The registrant was Ivanhoe Capital Acquisition Corp., a blank-check company—not yet SES AI Corp. It reported no operating business or revenue during the period. Its proposed acquisition of SES Holdings Pte. Ltd. was announced after quarter-end, on July 12, 2021.
Financial results and position
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| General and administrative expense | $3.16 million | $3.45 million |
| Related-party administrative expense | $30,000 | $60,000 |
| Net loss | $10.45 million | $8.92 million |
| Investment income from Trust Account | $3,472 | $47,984 |
- The quarterly loss included a $7.13 million adverse change in fair value of warrant liabilities and a $131,000 adverse change in fair value of a related-party convertible note. The six-month loss also included $855,000 of offering costs allocated to warrant liabilities. These valuation and offering-cost items were not presented as operating expenses.
- Margins are not meaningful because the company had no operating revenue.
- At June 30, cash was $501,228; prepaid expenses were $918,587; and working capital was approximately $1.2 million. Trust Account investments were $276.05 million.
- Total liabilities were $39.99 million, including $26.62 million of derivative warrant liabilities, $9.66 million of deferred underwriting commissions, $2.85 million of accrued liabilities, and a $631,260 related-party convertible note. Shareholders’ equity was $5.00 million; $232.48 million of Class A shares were classified as temporary equity subject to possible redemption.
- Six-month cash used in operations was $1.47 million; cash used in investing was $276.00 million, primarily the Trust Account deposit; and financing provided $277.81 million. Ending cash was $501,228.
The filing does not provide a comparable prior-year-quarter income statement or cash-flow period. The balance sheet provides December 31, 2020 figures, when cash was $161,271 and total liabilities were $582,131; comparisons are limited because the IPO closed in January 2021.
Transaction, outlook, and risks
- The July 12, 2021 agreement proposed a business combination with SES Holdings, with stated equity consideration of $2.81 billion in shares valued at $10 each. A concurrent PIPE was expected to raise $200 million through 20 million shares at $10 each. The transaction remained subject to closing conditions; it was not a Q2 completed transaction.
- The agreement also provided for up to 30 million earn-out shares if the post-combination share price reached $18 during the specified period, and described a dual-class structure with 10 votes per Class B share versus one vote per Class A share.
- Management expected available working capital and potential sponsor or affiliate borrowing to cover needs through the earlier of a business combination or one year from the filing. This depends partly on financing that related parties were not obligated to provide. The filing reports $500,000 drawn under a Working Capital Loan, but does not separately show that amount as a balance-sheet liability; the disclosure should be reconciled with the related-party convertible note presentation.
- If no business combination was completed by January 11, 2023, the company was required to wind up and redeem public shares, subject to the stated terms. Warrants could expire worthless if no combination closed.
- Management said COVID-19 could negatively affect the company’s financial position, results, or target search, but the impact was not determinable. No formal financial guidance was provided.
- Disclosure controls were deemed ineffective due to a material weakness involving warrant accounting. Management reported remediation steps, but the weakness was not fully remediated as of June 30, 2021. Management stated it performed additional analysis and believed the financial statements were fairly presented.
- The company reported no legal proceedings, no off-balance-sheet arrangements, and no material changes to previously disclosed risk factors. It was an emerging growth company and used the extended transition period for new accounting standards.
Important facts for investors to verify
- Whether the proposed SES transaction and $200 million PIPE closed, and the final consideration, dilution, redemption levels, and earn-out terms.
- The Working Capital Loan disclosure and its reconciliation with the balance sheet and related-party convertible note.
- Warrant-liability valuation assumptions and the status of remediation of the material weakness in disclosure controls.
- Available cash outside the Trust Account, sponsor financing availability, and the company’s ability to meet transaction costs if the deal is delayed or fails.
- Redemption rights, deferred underwriting commissions, and the consequences for public shareholders and warrants if no business combination is completed.