SES AI (SES) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements for September 30, 2021, reflect the company's post-IPO status as a blank check company, showing increased assets from the Trust Account, a significant shareholders' deficit, and income/loss primarily from non-operating items, alongside a reclassification of redeemable shares Condensed Consolidated Balance Sheets As of September 30, 2021, the balance sheet shows total assets of $277.1 million, primarily from Trust Account investments, with $36.2 million in liabilities and a $35.2 million shareholders' deficit due to redeemable shares | Financial Metric | September 30, 2021 (Unaudited, USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $254,887 | $161,271 | | Investments held in Trust Account | $276,052,152 | $— | | Total Assets | $277,068,443 | $574,310 | | Liabilities & Equity | | | | Derivative warrant liabilities | $20,759,730 | $— | | Total Liabilities | $36,219,052 | $582,131 | | Class A ordinary shares subject to possible redemption | $276,000,000 | $— | | Total shareholders' deficit | $(35,150,609) | $(7,821) | Unaudited Condensed Consolidated Statements of Operations For the three months ended September 30, 2021, the company reported a net income of $3.4 million, primarily from changes in derivative warrant liabilities, while the nine-month period showed a $5.5 million net loss with no operating revenue | Period | General and administrative expenses (USD) | Change in fair value of derivative warrant liabilities (USD) | Net income (loss) (USD) | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30, 2021 | $2,498,694 | $5,856,830 | $3,374,118 | | Nine Months Ended Sep 30, 2021 | $6,009,125 | $1,388,270 | $(5,543,192) | Unaudited Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, cash flows were dominated by IPO-related financing activities generating $278.3 million, investing $276.0 million into the Trust Account, and using $2.2 million in operating activities | Cash Flow Activity (Nine months ended Sep 30, 2021) | Amount (USD) | | :--- | :--- | | Net cash used in operating activities | $(2,160,344) | | Net cash used in investing activities | $(276,000,000) | | Net cash provided by financing activities | $278,253,960 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's operations as a blank check company, the proposed business combination with SES, a significant accounting revision for redeemable shares, related party transactions, and warrant classification as derivative liabilities - The company is a blank check company that consummated its Initial Public Offering of 27,600,000 units on January 11, 2021, raising gross proceeds of $276.0 million[13][16] - On July 12, 2021, the company entered into a Business Combination Agreement with SES Holdings Pte. Ltd. (SES), a Singapore-based company[26] - The company revised its financial statements to classify all Class A ordinary shares subject to possible redemption as temporary equity, in accordance with ASC 480. This change affects balance sheet presentation but does not impact total assets, liabilities, or net income[45] - The company has a convertible promissory note with its CEO, allowing for borrowing up to $1.5 million. As of September 30, 2021, $945,000 was drawn on this note[82] - Deferred underwriting commissions of approximately $9.7 million are payable from the Trust Account only upon the completion of a Business Combination[87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's status as a blank check company, its January 2021 IPO, the definitive business combination agreement with SES, liquidity management, and operating results showing no revenue, with net income/loss influenced by non-cash changes in derivative warrant liabilities - The company is a blank check company formed to effect a business combination and consummated its IPO of $276.0 million in gross proceeds on January 11, 2021[116][117] - A definitive Business Combination Agreement was entered into with SES Holdings Pte. Ltd. on July 12, 2021[123] - As of September 30, 2021, the company had approximately $255,000 in its operating bank account and working capital of approximately $765,000. Liquidity needs are satisfied by funds outside the Trust Account and a convertible note from the CEO[124][125] | Period | Net Income / (Loss) (USD) | Key Drivers | | :--- | :--- | :--- | | Q3 2021 | $3.4 million | Net gain from change in fair value of derivative liabilities ($5.9 million) offset by G&A expenses ($2.5 million) | | Nine Months 2021 | ($5.5 million) | G&A expenses ($5.9 million), offering costs ($0.9 million), partially offset by gain from change in fair value of derivative liabilities (~$1.4 million) | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide disclosures about market risk - As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, the company is not required to provide the information otherwise required under this item[147] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with a previously identified material weakness in internal control over financial reporting successfully remediated - Management evaluated disclosure controls and procedures and concluded they were effective as of September 30, 2021[148] - A material weakness previously identified in Q2 2021 was remediated as of September 30, 2021, by enhancing processes related to the application of complex accounting standards[150][151] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings - None[152] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Form 10-K filed on March 31, 2021 - There have been no material changes to the risk factors disclosed in the company's Form 10-K filed on March 31, 2021[153] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details the private placement of warrants generating $7.5 million, the placement of $276 million from IPO and private placement into the Trust Account, and underwriting commissions paid and deferred - The company sold 5,013,333 Private Placement Warrants to its Sponsor at $1.50 per warrant, raising gross proceeds of approximately $7.5 million[154] - Of the gross proceeds from the IPO and private placement, $276,000,000 was placed in the Trust Account[156] - The company paid approximately $5.7 million in underwriting discounts and commissions and deferred an additional $9.7 million[157] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[158] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[159] Item 5. Other Information The company reports no other information - None[160] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Business Combination Agreement with SES and various officer certifications - A list of exhibits filed with the report is provided, including the Business Combination Agreement and related documents[162]