SES AI (SES) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements The company presents its unaudited condensed consolidated financial statements, reflecting its IPO, business combination search, and proposed merger with SES Holdings Pte. Ltd Condensed Consolidated Balance Sheets As of June 30, 2021, the balance sheet shows total assets of $277.5 million, primarily trust investments, and $40.0 million in liabilities Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | 501,228 | 161,271 | | Investments held in Trust Account | 276,047,984 | 0 | | Total Assets | 277,467,799 | 574,310 | | Liabilities | | | | Derivative warrant liabilities | 26,616,560 | 0 | | Deferred underwriting commissions | 9,660,000 | 0 | | Total Liabilities | 39,992,526 | 582,131 | | Class A ordinary shares subject to possible redemption | 232,475,270 | 0 | | Total shareholders' equity (deficit) | 5,000,003 | (7,821) | Unaudited Condensed Consolidated Statements of Operations The company reported net losses of $10.4 million and $8.9 million for the three and six months ended June 30, 2021, driven by expenses and derivative fair value changes Statement of Operations Summary (Unaudited) | Item | Three Months Ended June 30, 2021 ($) | Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Total operating expenses | (3,189,841) | (3,510,431) | | Income from investments held in Trust Account | 3,472 | 47,984 | | Change in fair value of derivative warrant liabilities | (7,127,760) | (4,468,560) | | Net loss | (10,445,389) | (8,917,310) | | Basic and diluted net loss per Class B share | (1.51) | (1.31) | Unaudited Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2021, net cash used in operations was $1.5 million, investing $276.0 million, and financing provided $277.8 million Cash Flow Summary for the Six Months Ended June 30, 2021 (Unaudited) | Activity | Net Cash Flow ($) | | :--- | :--- | | Net cash used in operating activities | (1,469,309) | | Net cash used in investing activities | (276,000,000) | | Net cash provided by financing activities | 277,809,266 | | Net change in cash | 339,957 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's blank check status, January 2021 IPO, concurrent private placement, and July 2021 business combination agreement with SES Holdings Pte. Ltd - The Company is a blank check company formed on July 8, 2020, with all activity through June 30, 2021, related to its formation, IPO, and target search[14][16] - On January 11, 2021, the Company completed its IPO of 27.6 million units at $10.00 per unit, raising $276.0 million, and a concurrent $7.5 million private placement of warrants[17][18] - On July 12, 2021, the Company entered into a Business Combination Agreement with SES Holdings Pte. Ltd., involving its domestication as SES AI Corporation and acquisition of SES[27][28] - The company classifies public and private warrants as derivative liabilities measured at fair value, and Class A ordinary shares subject to redemption as temporary equity[53][57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operations, highlighting its blank check status, $8.9 million net loss, liquidity, and the SES Holdings Pte. Ltd. business combination agreement - The company is a blank check company that completed its IPO on January 11, 2021, raising $276.0 million in gross proceeds for a business combination[107][108] - On July 12, 2021, the company entered into a Business Combination Agreement with SES Holdings Pte. Ltd.[114] Results of Operations Summary | Period | Net Loss ($) | Key Drivers | | :--- | :--- | :--- | | Three Months Ended June 30, 2021 | $10.4 million | G&A expenses ($3.2M), change in fair value of derivative liabilities ($7.1M) | | Six Months Ended June 30, 2021 | $8.9 million | G&A expenses ($3.5M), change in fair value of derivative liabilities ($4.5M), offering costs (~$0.9M) | - As of June 30, 2021, the company had approximately $501,000 in cash and $1.2 million in working capital, with liquidity met by non-trust IPO funds and Sponsor loans[115][116] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not subject to material market or interest rate risk, with IPO proceeds invested in short-term U.S. government securities - The company is a smaller reporting company and is not required to provide extensive market risk disclosures[136] - IPO net proceeds are invested in short-term U.S. government securities or money market funds, minimizing interest rate risk exposure[136] Controls and Procedures Management concluded disclosure controls were ineffective as of June 30, 2021, due to a material weakness in warrant accounting, despite ongoing remediation efforts - Management concluded that disclosure controls and procedures were not effective as of June 30, 2021, due to a material weakness in warrant accounting[138] - The material weakness originated from the misapplication of accounting for warrants as liabilities, as noted by an SEC staff statement[138] - Remediation steps, including an improved review process for complex securities, have been implemented but were not fully complete as of June 30, 2021[140] PART II. OTHER INFORMATION Legal Proceedings The company reports no legal proceedings to disclose for the period - None[141] Risk Factors The company reports no material changes to the risk factors previously disclosed in its Form 10-K filed on March 31, 2021 - There have been no material changes to the risk factors disclosed in the Form 10-K filed on March 31, 2021[142] Unregistered Sales of Equity Securities and Use of Proceeds This section details the $7.5 million private placement of warrants, the $276 million placed in the Trust Account, and underwriting fees - Simultaneously with the IPO, the company sold 5,013,333 Private Placement Warrants to the Sponsor at $1.50 each, generating approximately $7.5 million in gross proceeds[143] - Gross proceeds of $276.0 million from the IPO and Private Placement were deposited into the Trust Account[145] - The company paid approximately $5.7 million in underwriting fees and deferred an additional $9.7 million[146] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[147] Mine Safety Disclosures This item is not applicable to the company - Not applicable[148] Other Information The company reports no other information for the period - None[149] Exhibits This section lists exhibits filed with the Form 10-Q, including the Business Combination Agreement with SES and officer certifications - Key exhibits filed include the Business Combination Agreement with SES, related subscription and support agreements, and officer certifications[152]