SES AI Corp quarterly report, Q3 FY2021

完整文档

Business context and reporting period

This is Ivanhoe Capital Acquisition Corp.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021, filed November 15, 2021. The registrant was a SPAC, not yet SES AI Corp.; it had no operating business or revenue and was pursuing a business combination with SES Holdings Pte. Ltd. Under the proposed transaction, Ivanhoe would domesticate as a Delaware corporation and be renamed SES AI Corporation.

Financial results and liquidity

  • Revenue and margins: No operating revenue; the company stated it would not generate operating revenue until after a business combination. Operating margins are not meaningful.
  • Profit/loss: Q3 2021 net income was $3.37 million, versus a $5.54 million net loss for the nine months. Q3 income principally reflected a $5.86 million gain from the change in fair value of warrant liabilities; nine-month results included a $1.39 million such gain, offset by operating and offering expenses.
  • Expenses: General and administrative expense was $2.47 million for Q3 and $5.92 million for the nine months; related-party administrative expense was $30,000 and $90,000, respectively.
  • Cash flow: Operating activities used $2.16 million and investing activities used $276.0 million in the nine months; financing activities provided $278.25 million. Cash at September 30 was $254,887.
  • Liquidity and debt: Management reported working capital of approximately $765,000. The trust account held $276.05 million. A related-party convertible note had $945,000 drawn and a reported fair value of $1.06 million; it is non-interest-bearing and due at the earlier of the business-combination effective date or January 11, 2023. Total liabilities were $36.22 million, including $9.66 million of deferred underwriting commissions and $20.76 million of warrant liabilities. All 27.6 million public Class A shares, totaling $276.0 million at redemption value, were classified as temporary equity.

Material changes and transaction developments

  • On July 12, 2021, Ivanhoe agreed to combine with SES for stated consideration of $2.81 billion in shares valued at $10 per share. A September amendment addressed earn-out eligibility and provided that the founder group’s earn-out shares would carry 10 votes per share.
  • The transaction also included an initial $200 million PIPE commitment at $10 per share. An additional $75 million subscription agreement was signed October 22, 2021, bringing stated commitments to $275 million; these were commitments, not reported proceeds as of quarter-end.
  • Up to 30 million additional earn-out shares were contemplated if the post-combination share price reaches $18 during the specified period. The proposed transaction remained subject to closing conditions and shareholder redemptions.
  • The company revised its presentation of redeemable Class A shares to classify all such shares as temporary equity. The revision increased accumulated deficit by approximately $29.6 million and reclassified shares from permanent equity; it did not affect total assets, total liabilities, or net income (loss).

Outlook, risks, and unusual items

  • Management said available working capital and potential sponsor or insider borrowing should meet needs through the earlier of a business-combination closing or one year from the filing. Additional working-capital loans were possible but not committed.
  • If no business combination is completed by January 11, 2023, the company must cease operations, redeem public shares from the trust (subject to stated adjustments), and liquidate. The warrants could expire worthless.
  • Management said COVID-19 could negatively affect the company’s financial position, results, or target search, but the specific impact was not determinable.
  • Q3 profit was materially influenced by noncash fair-value movements in warrant liabilities. Private warrant and convertible-note valuations use significant unobservable inputs.
  • The company reported that a material weakness identified in Q2 accounting controls was remediated by September 30. Management concluded disclosure controls were effective; no legal proceedings were reported.

Key facts for investors to verify

  1. Whether and when the SES business combination closed, and final transaction terms, redemptions, and financing.
  2. Actual PIPE funding versus the $275 million of stated commitments, and the resulting cash available at closing.
  3. Underlying noncash fair-value effects and assumptions for warrant and convertible-note valuations.
  4. Liquidity needs, any further related-party or working-capital borrowing, and the status of the $945,000 convertible-note draw.
  5. The revised temporary-equity presentation and the status of the disclosed control-weakness remediation.