What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-03-16 · 366 added, 336 removed, 730 unchanged (49% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 185 )

Report of Independent Registered Public Accounting Firm (Grant Thornton LLP, PCAOB ID Number 248 )

Report of Independent Registered Public Accounting Firm (KPMG LLP, PCAOB ID Number 185 )

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity for the Years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for the Years ended December 31, 2023, 2022 and 2021

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Board of Directors and Shareholders

SES AI Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of SES AI Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2023 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2022 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), as amended.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of SES AI Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 27, 2024 expressed an adverse opinion.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of sponsor earn-out liability

As discussed in Notes 2, 3 and 11 to the consolidated financial statements, on February 3, 2022, the Company completed a business combination that was accounted for as a reverse recapitalization, and the Company was determined to be the accounting acquirer.

In connection with the business combination, 6,900,000 shares of Class B ordinary shares held by Ivanhoe Capital Sponsor LLC (the “Sponsor”) were converted into an equal number of Class B common stock of the Company that were converted on closing of the business

combination into an equal number of Class A common stock of the Company (the “Sponsor Earn-Out Shares”).

Certain Sponsor Earn-Out Shares are accounted for as a derivative liability (the “Sponsor Earn-Out Liability”) measured at fair value, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss at each reporting period.

The fair value of the Sponsor Earn-Out Liability is estimated using a Monte Carlo simulation model.

The fair value of the Sponsor Earn-Out Liability was determined to be $36,393,000 at February 3, 2022, and $10,961,000 at December 31, 2022.

The gain on change of fair value of Sponsor Earn-Out Liability was $25,432,000 for the year ended December 31, 2022.

We identified the assessment of the fair value of the Sponsor Earn-Out Liability as a critical audit matter.

Specifically, a high degree of subjective auditor judgment was required due to the complex valuation model and volatility assumptions used in the determination of fair value.

It also required specialized skills and knowledge to evaluate the Company’s determination of the fair value of the Sponsor Earn-Out Liability.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the peer group public companies used in the determination of volatility assumptions by reviewing the business descriptions of the peer group public companies to determine if the peer group public companies are reasonably comparable in terms of the Company’s industry.

We involved valuation professionals with specialized skills and knowledge who assisted in (1) evaluating the appropriateness of the Monte Carlo simulation model (2) performing independent calculations of volatility using peer group public companies’ data and comparing to volatility assumptions utilized in management’s estimate and (3) performing an independent calculation of the fair value using management’s assumptions and comparing to the fair value of the Sponsor Earn-Out Liability determined by the Company.

Valuation of certain stock-based compensation awards

As discussed in Note 17 to the consolidated financial statements, during the year ended December 31, 2022, the Company issued various share-based awards, including restricted stock units, restricted stock awards, performance stock units, as well as earn-out restricted shares granted in connection with the business combination completed on February 3, 2022.

The performance stock units and earn-out restricted shares have both service and market vesting conditions.

The fair value of the performance stock units and earn-out restricted shares was estimated using a Monte Carlo simulation model.

The Company reported stock-based compensation expense of $22,775,000 for the year ended December 31, 2022.

We identified the assessment of fair value of the performance stock units and earn-out restricted shares granted in connection with the business combination as a critical audit matter.

Specifically, a high degree of subjective auditor judgment was required due to the complex valuation model and volatility assumptions used in the determination of fair value.

It also required specialized skills and knowledge to evaluate the Company’s determination of the fair value of the performance stock units and earn-out restricted shares.

The following are the primary procedures we performed to address this critical audit matter.

We involved valuation professionals with specialized skills and knowledge who assisted in (1) evaluating the appropriateness of the Monte Carlo simulation model (2) performing independent calculations of volatility using peer group public companies’ data and comparing to volatility assumptions utilized in management’s estimate and (3) performing an independent calculation of the fair value using management’s assumptions and comparing to the fair value of the performance stock units and earn-out restricted shares determined by the Company.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Sponsor Earn-Out Liabilities

As described further in Notes 2 and 11 to the consolidated financial statements, the Company has issued Sponsor Earn-Out Shares that are accounted for as a derivative liability (the “Sponsor Earn-Out Liabilities”) measured at fair value, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss each reporting period.

The fair value of the Sponsor Earn-Out Liabilities is estimated using a Monte Carlo simulation model.

The fair value of the Sponsor Earn-Out Liabilities was determined to be $4,166,000 at December 31, 2023.

The gain on change in fair value of Sponsor Earn-Out Liabilities was $6,795,000 for the year ended December 31, 2023.

We identified the assessment of the fair value of the Sponsor Earn-Out Liabilities as a critical audit matter.

The principal considerations for our determination that the valuation of the Sponsor Earn-Out Liabilities is a critical audit matter were (1) the high degree of subjective auditor judgment required due to the complex valuation model and volatility and expected term assumptions used in the determination of fair value;

and (2) the specialized skills and knowledge required to evaluate the Company’s determination of the fair value of the Sponsor Earn-Out Liabilities.

Our audit procedures related to the valuation of the Sponsor Earn-Out Liabilities included the following, among others.

● We evaluated the peer group public companies used in the determination of volatility and the judgments and assumptions made by management in the determination of the expected term.

● With the assistance of our valuation specialists, we:

o Evaluated the appropriateness of the Monte Carlo simulation model.

o Performed independent calculations of volatility using peer group public companies’ data and comparing to volatility assumptions utilized in management’s estimate.

o Performed an independent calculation of the fair value using management’s assumptions and comparing to the fair value of the Sponsor Earn-Out Liabilities determined by the Company.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2023.

Boston, Massachusetts

March 16, 2023

February 27, 2024

Report of Independent Registered Public Accounting Firm

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Opinion on internal control over financial reporting

We have audited SES AI Corporation and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, (collectively, the consolidated financial statements), and our report dated March 16, 2023 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses have been identified and included in management’s assessment related to certain components of the Company’s control environment that were ineffective as the Company did not have a sufficient complement of resources with assigned responsibility and accountability for the design, operation and documentation of internal control over financial reporting.

This created deficiencies in the Company’s risk assessment process that led to ineffective information and communication activities as the controls necessary to ensure the reliability of information used in financial reporting and communicate relevant information about roles and responsibilities for internal control over financial reporting were ineffective.

As a result, process-level control activities were not designed, implemented or operated effectively in the substantial majority of processes.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the December 31, 2022 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

We have audited the internal control over financial reporting of SES AI Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, because of the effect of the material weaknesses described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment.

The Company did not design and maintain sufficient user access and monitoring controls to ensure appropriate segregation of duties and adequately restrict access to a financial application.

In addition, a management review control associated with the valuation of the sponsor earn-out liability did not operate effectively as it did not evaluate a key assumption used in the valuation at an appropriate level of precision.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023.

The material weaknesses identified above were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated February 27, 2024 which expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Other information

We do not express an opinion or any other form of assurance on the remediation plans or related actions described in Management’s Annual Report on Internal Controls Over Financial Reporting.

/s/ GRANT THORNTON LLP

Boston, Massachusetts

February 27, 2024

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

SES AI Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of SES AI Corporation and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We served as the Company’s auditor from 2021 to 2023.

Boston, Massachusetts

March 16, 2023

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Consolidated Balance Sheet s

As of December 31,

(in thousands, except share and per share amounts)

December 31, 2023

December 31, 2022

Current Assets

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Receivable from related party

Prepaid expenses and other current assets

Prepaid expenses and other assets

Total current assets

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Right-of-use assets, net

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity

Deferred tax assets

Other assets, non-current

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable

Operating lease liabilities, current

Accrued expenses and other current liabilities

Operating lease liabilities

Accrued expenses and other liabilities

Total current liabilities

Sponsor Earn-Out liability

Sponsor Earn-Out liabilities

Operating lease liabilities, non-current

Unearned government grant

Other liabilities

Other liabilities, non-current

Total liabilities

Commitments and contingencies (Note 14)

Redeemable convertible preferred stock, $ 0.000001 par value;

none authorized, issued and outstanding as of December 31, 2022;

213,960,286 shares authorized, issued and outstanding as of December 31, 2021 (aggregate liquidation preference of $ 271,148 as of December 31, 2021)

Stockholders’ Equity

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Common stock:

Class A shares, $ 0.0001 par value;

2,100,000,000 shares authorized;

305,833,589 and 22,261,480 shares issued and outstanding as of December 31, 2022 and 2021, respectively;

Class B shares, $ 0.0001 par value;

200,000,000 shares authorized;

43,881,251 and 39,881,455 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Class A shares, $ 0.0001 par value, 2,100,000,000 shares authorized;

310,266,922 and 305,833,589 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively;

Class B shares, $ 0.0001 par value, 200,000,000 shares authorized;

43,881,251 shares issued and outstanding as of December 31, 2023 and December 31, 2022

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders' equity

Total liabilities, redeemable convertible preferred stock, and stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

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Other income (expense):

Gain on change of fair value of Sponsor Earn-Out liability, net

Interest income, net

Other expense, net

Interest income

Gain on change in fair value of Sponsor Earn-Out liabilities

Miscellaneous income (expense), net

Gain on forgiveness of PPP note

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Loss before income taxes

Provision for income taxes

Other comprehensive (loss) income:

Benefit (provision) from income taxes

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment

Unrealized loss on short-term investments

Unrealized gain (loss) on short-term investments

Total other comprehensive (loss) income, net of tax

Total comprehensive loss

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Balance – December 31, 2020

Retroactive application of reverse recapitalization upon Business Combination (1)

Balance — December 31, 2019, as converted

Stock-based compensation

Foreign currency translation adjustments

Balance – December 31, 2020

Issuance of Series D and Series D plus redeemable convertible preferred stock, net of issuance costs of $ 608

Stock-based compensation

Issuance of common stock upon exercise of stock options

Stock-based compensation

Foreign currency translation adjustments

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Restricted stock units vested

Forfeitures of Earn-Out restricted shares

Forfeitures of Restricted Stock Awards

Forfeitures of Earn-Out restricted shares

Stock-based compensation

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Balance — December 31, 2022

(1) Included in the share number is 39,881,455 shares of Class B common stock as of December 31, 2020 and 2021 issued upon recapitalization to the SES Founder Group (defined in Note 2 - Summary of Significant Accounting Policies) based on the number of shares held by such executive prior to the recapitalization multiplied by 5.9328 (the “Exchange Ratio”).

Issuance of common stock upon exercise of stock options

Restricted stock units vested

Forfeitures of Restricted Stock Awards

Forfeitures of Earn-Out restricted shares

Stock-based compensation

Foreign currency translation adjustments

Unrealized gain on short-term investments

Balance — December 31, 2023

(1) Includes issuance of 33,793,878 restricted shares of Class A common stock and 3,999,796 restricted shares of Class B common stock, subject to vesting.

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Adjustments to reconcile net loss to net cash used in operating activities:

Gain on change of fair value of Sponsor Earn-Out liability

Gain on change of fair value of Sponsor Earn-Out liabilities

Stock-based compensation

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Prepaid expenses and other assets

Deferred tax assets

Accounts payable

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Purchases of intangible assets

Net cash (used in) provide by investing activities

Net cash provided by (used in) investing activities

Cash Flows From Financing Activities

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Proceeds from stock option exercises

Proceeds from issuance of Series D and D plus redeemable convertible preferred stock, net of issuance costs

Proceeds from issuance of Series D and Series D plus redeemable convertible preferred stock, net of issuance costs

Payment of deferred offering costs

Proceeds from PPP note

Net cash provided by financing activities

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Cash, cash equivalents and restricted cash at end of period (Note 5)

Supplemental Non-Cash Information:

Supplemental Cash and Non-Cash Information:

Incomes taxes paid

Conversion of Redeemable Convertible Preferred Stock to shares of Class A common stock

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SES AI Corporation, and consolidated subsidiaries (together the “Company”) consists of SES AI Corporation (“SES”) and its wholly-owned subsidiary SES Holdings Pte.

(“SES Holdings” or “Old SES”), along with its wholly owned subsidiaries SolidEnergy Systems, LLC (“SES LLC”), SolidEnergy (Shanghai) Co., Ltd.

(“SES Holdings” or “Old SES”), along with its wholly owned subsidiaries SolidEnergy Systems, LLC (“SES LLC”), SES (Shanghai) Co., Ltd.

(“SES Shanghai”), SolidEnergy Systems Securities Corporation (“SES Securities”), Viking Power Systems Pte.

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SES Energy is a Singapore private company and was incorporated in September 2022.

SES is engaged in the development of high-performance, Lithium-Metal (“Li-Metal”) rechargeable battery technologies for electric vehicles (“EVs”), electric vehicle take-off and landing (“eVTOL”) and other applications.

We were founded in 2012, and our mission is to facilitate the widespread adoption of sustainable electric transportation, both on land and in air, by creating best-in-class, high energy density Li-Metal batteries centered around long-range performance and safety.

Our third-party tested, differentiated battery technology has been designed to combine the high energy density of Li-Metal with the cost-effective, large-scale manufacturability of conventional Lithium-ion (“Li-ion”) batteries and will help to promote the transition from the global dependence on fossil fuel-based automotive vehicles to clean and efficient EVs.

The Company’s headquarters are located in Woburn, Massachusetts with research and development facilities located there, in Shanghai, China, and in Chungju, South Korea.

The Company is engaged in the development of high-performance, Lithium-Metal (“Li-Metal”) rechargeable battery technologies for electric vehicles (“EVs”), Urban Air Mobility (“UAM”) and other applications.

The Company’s mission is to facilitate the widespread adoption of sustainable electric transportation, both on land and in air, by creating best-in-class, high energy density Li-Metal batteries centered around long-range performance and safety.

The Company’s differentiated battery technology has been designed to combine the high energy density of Li-Metal with the cost-effective, large-scale manufacturability of conventional Lithium-ion (“Li-ion”) batteries which will help to promote the transition from the global dependence on fossil fuel-based automotive vehicles to clean and efficient EVs.

The Company’s headquarter is located in Woburn, Massachusetts with research and development facilities located there, in Shanghai, China, and in Chungju, South Korea.

Principal operations have not yet commenced as of December 31, 2023, and the Company has not derived revenue from its principal business activities.

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The Company’s fiscal year ends on December 31 .

As a result of the Business Combination completed on February 3, 2022, prior period share and per share amounts presented in the accompanying consolidated financial statements and these related notes have been retroactively converted.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

The consolidated financial statements include the accounts of SES and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated upon consolidation.

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The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of commitments and contingencies, and the reported

amounts of revenues, if any, and expenses.

The Company bases its estimates on available historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources.

GAAP requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of commitments and contingencies, and the reported amounts of revenues, if any, and expenses.

carrying values of assets and liabilities that are not apparent from other sources.

Changes in estimates are reflected in reported results for the period in which they become known.

Actual results may differ from those estimates.

Significant estimates and assumptions include those related to the valuation of (i) certain equity awards, including common stock awards prior to the Business Combination, the Sponsor Earn-Out Shares, the Earn-Out Restrcited Shares, and performance stock units, (ii) deferred tax assets and uncertain income tax positions, and (iii) and the measurement of operating lease liabilities.

Significant estimates and assumptions include those related to the valuation of (i) certain equity awards, including common stock awards prior to the Business Combination, the Sponsor Earn-Out Shares, the Earn-Out Restricted Shares, and performance stock units, (ii) deferred tax assets and uncertain income tax positions, and (iii) the measurement of operating lease liabilities.

On an ongoing basis, the Company evaluates these judgments and estimates for reasonableness.

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The net effect of these translation adjustments is reported in accumulated other comprehensive (loss) income within total stockholders’ equity on the consolidated balance sheets.

Net realized and unrealized gains (losses) from foreign currency transactions are included in other expense, net in the consolidated statement of operations and comprehensive loss and were $ 0.1 million, $( 0.2 ) million, and $( 0.1 ) million for the years ended years ended December 31, 2022, 2021 and 2020, respectively.

Reclassification of Prior Period Amounts

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.

Restricted cash and deferred offering costs have been combined with other assets and accrued compensation has been combined with accrued expenses and other current liabilities on the prior year consolidated balance sheet.

The impact of these changes was an increase of $ 6.2 million to other assets and an increase of $ 2.1 million to accrued expenses and other current liabilities as of December 31, 2021.

In addition, the Company reclassified the change in other assets to the change in prepaid expenses and other assets and the change in accrued compensation to the change in accrued expenses and other liabilities in the prior years statements of cash flows in the amount of $ 0.5 million and $ 0.9 million for the year ended December 31, 2021, respectively, and $ 0.1 million and $ 0.6 million for the year ended December 31, 2020, respectively.

There was no change to previously reported total assets, total liabilities, or net cash used in operating activities.

Net realized and unrealized gains (losses) from foreign currency transactions are included in miscellaneous income (expense), net in the consolidated statement of operations and comprehensive loss and were $ 0.3 million, $ 0.1 million, and $( 0.2 ) million for the years ended years ended December 31, 2023, 2022 and 2021, respectively.

Cash and Cash Equivalents

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As of December 31, 2023, no amount has been drawn under the letter of credit.

Investments in Short-term Investments

Investments in short-term investments consist of U.S.

treasury securities.

Investments with a stated maturity date of less than one year are classified as short-term investments, while investments with a stated maturity date of more than one year, and that are not expected to be used in current operations, are classified as long-term investments on the consolidated balance sheet, respectively.

As of December 31, 2023 and 2022, the Company had restricted cash balances of $ 1.3 million, respectively.

The Company has investments in short-term marketable debt and marketable equity securities.

Investments in marketable debt securities consist of U.S.

treasury securities, are classified as available-for-sale at the time of purchase and reevaluate such classification at each balance sheet date.

These available-for-sale marketable securities are recorded at fair value, with any unrealized gains and losses included as a component of accumulated other comprehensive (loss) income in total stockholders’ equity on the consolidated balance sheets until realized or until a determination is made that an other-than-temporary decline in market value has occurred.

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treasury securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization and accretion are reported within interest income, net in the consolidated statement of operations and comprehensive loss.

Such amortization and accretion are reported within interest income in the consolidated statement of operations and comprehensive loss.

Investments in marketable debt securities with a stated maturity date of less than one year are classified as short-term investments, while these with a stated maturity date of more than one year, and that are not expected to be used in current operations, are classified as long-term investments on the consolidated balance sheet, respectively.

Investments in marketable equity securities are classified as short-term investments when the Company’s intention is to sell within a year of purchase, otherwise they will be classified as long-term investments.

Investments in marketable equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at fair value with changes to fair value reported within miscellaneous income (expense), net in the consolidated statements of operations and comprehensive loss.

Inventories consist of raw materials and are stated at the lower of average cost or net realizable value.

Concentrations of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk consist of cash, cash equivalents, restricted cash and short-term investments.

The Company seeks to mitigate its credit risk with respect to such concentrations by holding its deposits with large, reputable financial institutions and investing in high credit rated shorter-term instruments.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, restricted cash and short-term investments.

The Company seeks to mitigate its credit risk with respect to such concentrations by holding its deposits with

large, reputable, domestic financial institutions and investing in high credit rated shorter-term instruments.

The account balances at these institutions may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage, and as a result, there may be a concentration of risk related to amounts invested in excess of FDIC insurance coverage.

As of December 31, 2023 and 2022, the amount of cash, cash equivalents and restricted cash held by our subsidiaries in foreign bank accounts was $ 11.1 million and $ 21.0 million, respectively.

Fair Value Measurements

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December 31, 2023

Cash equivalents in money market funds

Restricted cash in money market funds

Current assets

Cash equivalents in money market funds (Note 5)

treasury securities

Equity securities (1)

Total current assets at fair value

Non-current assets

Restricted cash in money market funds

Total non-current assets at fair value

Total assets at fair value

Sponsor Earn-Out liability (2)

Total liabilities at fair value

Non-current liabilities

Sponsor Earn-Out liabilities

Total non-current liabilities at fair value

December 31, 2022

Cash equivalents in money market funds

Restricted cash in certificates of deposit

Current assets

Cash equivalents in money market funds (Note 5)

treasury securities

Total current assets at fair value

Non-current assets

Restricted cash in money market funds

Total non-current assets at fair value

Total assets at fair value

(1) Fair value was determined using market prices obtained from third-party sources.

See “Note 6 – Investments” for more details on investments.

(2) See “Note 11 – Sponsor Earn-Out Liability” for details about inputs used in the fair value measurements of the Sponsor Earn-Out liability.

There were no transfers in or out of Level 3 measurements during the year ended December 31, 2022.

Non-current liabilities

Sponsor Earn-Out liabilities

Total non-current liabilities at fair value

(1) Fair value was determined using publicly quoted market prices obtained from third-party sources in their respective markets.

There were no transfers in or out of Level 3 measurements during the years ended December 31, 2023 and 2022.

Property and Equipment

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Construction in progress is stated at cost, which includes the cost of construction and other direct costs attributable to placing the asset in service.

Additionally, reimbursements received by the Company under its A-Sample joint development agreement (“JDA”) related to property and equipment constructed and owned by the Company are recognized as a reduction of the cost of the related asset in the consolidated balance sheets as discussed in “Note 4 – Partnerships” below.

Additionally, reimbursements received by the Company under its A-Sample joint development agreement (“JDA”) related to property and

equipment constructed and owned by the Company are recognized as a reduction of the cost of the related asset in the consolidated balance sheets as discussed in “Note 4 – Partnerships” below.

Intangible Assets

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Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment annually or whenever events indicate that a potential impairment may have occurred.

If such events arise, the Company will compare the carrying amount of the asset group comprising the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the asset group.

The Company evaluates long-lived assets, including amortizable intangible assets and ROU assets, annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If such events or circumstances arise, the Company will compare the carrying amount of the asset group comprising the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the asset group.

If the estimated aggregate undiscounted cash flows are less than the carrying amount of the asset group, an impairment charge is recorded as the amount by which the carrying amount of the asset group exceeds the fair value of the assets, as based on the expected discounted future cash flows attributable to those assets.

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Deferred offering costs consist of legal, accounting, and other costs incurred through the balance sheet date that are directly related to the Company becoming a publicly traded company are capitalized.

Deferred offering costs are charged to stockholders’ equity upon the completion of the proposed transaction.

On the Closing Date, $ 5.7 million in deferred offering costs, included in other assets as of December 31, 2021, were charged to stockholders’ equity upon consummation of the Business Combination.

Deferred offering costs were charged to stockholders’ equity upon the completion of the transaction.

The Company determines if an arrangement includes a lease at inception.

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The operating lease liability is equal to the present value of (1) fixed lease payments for the noncancelable lease term, (2) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (3) variable lease payments that depend on an underlying index or rate in effect at lease commencement.

Variable lease payments that do not depend on an underlying index or rate in effect at lease commencement, such as common area maintenance, insurance, and property tax, are recognized in operating expenses when incurred.

Variable lease payments as the difference between underlying index and the actual index, or that do not depend on an underlying index or rate in effect at lease commencement, such as common area maintenance, insurance, and property tax, are recognized in operating expenses when incurred.

The operating ROU asset is initially measured at cost, which primarily comprises the initial amount of the lease liability and lease payments made prior to lease commencement, less any lease incentives received.

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See “Note 10 – Government Grant” for additional information about government grants awarded to the Company.

Sponsor Earn-Out Liability

Sponsor Earn-Out Liabilities

On February 2, 2022, in connection with the Domestication, 6,900,000 of Ivanhoe’s Class B ordinary shares held by Ivanhoe Capital Sponsor LLC (the “Sponsor”) converted into an equal number of shares of duly authorized, validly issued, fully paid and nonassessable Class B common stock, par value $ 0.0001 per share (the “Class B common stock”), of the Company.

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As of December 31, 2023, the earn-out triggering events were not achieved for any of Tranche 2 through Tranche 5.

See “Note 11 – Sponsor Earn-Out Liability” for further information on fair value.

See “Note 11 – Sponsor Earn-Out Liabilities” for further information on fair value.

Earn-Out Shares

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Any such forfeited Earn-Out Restricted Shares shall be available for grant pursuant to the Company’s incentive plan.

If, during the earn-out period of five years , there is a change in control transaction at a per share price of greater than or equal to $ 18.00 per share, then all 29,999,947 earn-out shares will vest immediately prior to the consummation of such change in control.

The Escrowed Earn-Out Shares to be released upon achievement of the vesting condition are classified as equity instruments and recorded at fair value in stockholders’ equity as vesting is indexed to the common stock of the Company.

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The Company records all shares of redeemable convertible preferred stock at their respective fair values less issuance costs on the dates of issuance.

The redeemable convertible preferred stock is recorded outside of stockholders’ equity because, in the event of certain liquidation events considered not solely within the Company’s control, such as a change in control event and sale of all or substantially all of the

Company’s assets, the redeemable convertible preferred stock will become redeemable at the option of the holders.

If it becomes probable that the shares will become redeemable, the Company will re-measure the carrying value of the shares to the redemption value through the redemption date.

Upon closing of the Business Combination, the redeemable convertible preferred shares were cancelled and converted into shares of Class A common stock, as discussed in “Note 3 – Business Combination.”

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Research and development costs are comprised of expenses incurred in performing research and development activities, including compensation and benefits for employees, materials and supplies, payments to consultants, patent related legal costs, facility costs, depreciation, and travel expenses.

Additionally, payments received by the Company under it’s A-Sample JDAs are recognized as a reduction to research and development expense in the consolidated statement of operations and comprehensive loss.

Additionally, payments received by the Company under its JDAs are recognized as a reduction to research and development expense in the consolidated statement of operations and comprehensive loss.

Stock-Based Compensation

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Other Comprehensive income (loss) includes changes in the balances of items that are reported directly as a separate component of stockholders’ equity on the consolidated balance sheets.

The components of comprehensive loss are net loss, foreign currency translation adjustments and unrealized gains and losses from available-for-sale marketable securities.

The components of comprehensive loss are net loss, foreign currency translation adjustments and unrealized gains and losses from available-for-sale marketable debt securities.

The Company does not provide for income taxes on foreign currency translation adjustments since it does not provide for taxes on the unremitted earnings of its foreign subsidiaries.

changes in accumulated other comprehensive income (loss) are included in the Company’s consolidated statement of operations and comprehensive loss.

The tax effects of unrealized gains and loss from available-for-sale marketable debt securities is recorded in deferred tax assets (liabilities) and fully offset by the valuation allowance.

The changes in accumulated other comprehensive income (loss) are included in the Company’s consolidated statement of operations and comprehensive loss.

Net Income (Loss) Per Share

Upon recapitalization, net loss per share calculations for all periods prior to the Business Combination have been retrospectively restated to the equivalent number of shares reflecting the Exchange Ratio established in the Business Combination, including the issuance of Class A common stock and Class B common stock to Old SES common stockholders.

Upon recapitalization, net loss per share calculations for all periods prior to the Business Combination have been retrospectively restated to the equivalent number of shares by multiplying by 5.9328 (the “Exchange Ratio) established in the Business Combination, including the issuance of Class A common stock and Class B common stock to Old SES common stockholders.

Under the two-class method, the net loss attributable to common stockholders was not allocated to the redeemable convertible preferred stock as the holders of its redeemable convertible preferred stock do not have a contractual obligation to share in the Company’s losses.

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Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standard Board (the “FASB”) issued ASU No.

2016-02, Leases (Topic 842) , and has since issued several updates, amendments, and technical improvements to ASU 2016-02.

Topic 842 generally requires that lessees recognize operating and financing liabilities for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term.

Topic 842 also requires additional disclosures about leasing arrangements related to discount rates, lease terms, and the amount, timing, and uncertainty of cash flows arising from leases.

Topic 842 is effective for financial statements issued for fiscal years beginning after December 15, 2021.

The Company adopted this guidance on January 1, 2022 utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of 2022.

The Company has elected the package of practical expedients, that allows the Company not to reassess prior conclusions of (i) whether any expired or existing contracts as of the adoption date are or contain a lease, (ii) lease classification for any expired or existing leases as of the adoption date and (iii) initial direct costs for any existing leases as of the adoption date.

The Company has also elected to account for lease and non-lease components as a single lease component and not to recognize ROU assets and liabilities for short-term leases with terms of twelve months or less.

The adoption of Topic 842 on January 1, 2022 resulted in the recognition of ROU assets of approximately $ 11.9 million and lease liabilities for operating leases of approximately $ 12.6 million on the Company’s consolidated balance sheets.

Approximately $ 0.7 million of deferred rent balances and lease incentives were reclassified against the costs of the ROU assets.

There was no material impact to the consolidated statement of operations and comprehensive loss and statement of cash flows.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance , which requires entities to provide disclosures on material government transactions for annual reporting periods.

The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies.

The Company’s adoption of this guidance on January 1, 2022 impacted the disclosures related to government grant that the Company received during the year ended December 31, 2022, as further described in “Note 10 – Government Grant.”

In November 2023, the FASB issued ASU 2023-7, Improvements to Reportable Segment Disclosures , which requires disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is also permitted.

We are currently evaluating the provisions and impact this ASU will have when adopted for the year ended December 31, 2024 and anticipate it will likely result in inclusion of additional required disclosures in our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-9, Improvements to Income Tax Disclosures , which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024.

Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.

We are currently evaluating the impact this ASU will have when adopted and anticipate this ASU will likely result in the required additional disclosures being included in our consolidated financial statements.

The Company has reviewed all other accounting pronouncements issued during the year ended December 31, 2023 and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.

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Under this method of accounting, SES, formerly known as Ivanhoe, was treated as the “acquired” company for financial reporting purposes.

Accordingly, the financial statements of the Company represent a continuation of the financial statements of

Old SES with the Business Combination treated as the equivalent of Old SES issuing stock for the net assets of Ivanhoe, accompanied by a recapitalization.

Accordingly, the financial statements of the Company represent a continuation of the financial statements of Old SES with the Business Combination treated as the equivalent of Old SES issuing stock for the net assets of Ivanhoe, accompanied by a recapitalization.

The net assets of Ivanhoe are stated at historical cost, with no goodwill or other intangible assets recorded.

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Business Combination and PIPE Financing Shares

In December 2020, the Company established a partnership with Hyundai Motor Company (“Hyundai”) when it entered into a joint development agreement (“JDA”) to jointly research and develop (“R&D”) Li-Metal battery technology.

Further, in May 2021, the Company executed another JDA with Hyundai to jointly develop an A-Sample Li-Metal battery effective August 31, 2021.

The JDAs have an initial term of three years .

Further, in May 2021, the Company executed another JDA with Hyundai to jointly develop an A-Sample Li-Metal battery effective August 31, 2021, which has an initial term of three years .

In February 2021, the Company established a partnership with GM Global Technology Operations LLC (“GM Technology”), an affiliate of GM Ventures LLC (“GM Ventures”), and General Motors Holdings LLC (“GM Holdings”) (collectively, “General Motors” or “GM”) when it entered into a JDA to jointly R&D an A-Sample Li-Metal battery cell and build-out a prototype manufacturing line for GM Technology.

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In December 2021, the Company established a partnership with Honda Motor Company, Ltd.

(“Honda”) when it entered into a JDA to jointly R&D an A-Sample Li-Metal battery cell.

The JDA has an initial term of two years .

Under the terms of the respective JDAs, the Company will fund research and development activities and capital expenditures related the buildout of pilot manufacturing lines and the JDA partner will be required to refund such expenses to the Company, regardless of the results

of the R&D activities.

The following table summarizes the expenses incurred by the Company that were recorded as a credit to research and development expense in the consolidated statement of operations and comprehensive loss:

Years Ended December 31,

(“Honda”) when it entered into a JDA to jointly R&D an A-Sample Li-Metal battery cell, which has an initial term of one and half years.

In November 2023, the Company entered into a B-Sample JDA with one of our OEM partners which includes technical milestones and timeline for delivery of B-Sample cells.

The JDA has an initial term of two and half years.

Under the terms of certain JDAs, the Company will fund research and development activities and capital expenditures related to the buildout of pilot manufacturing lines and the JDA partner will be required to refund such expenses to the Company, regardless of the results of the R&D activities.

The following table summarizes credits to research and development recorded in accordance to the terms of the JDA agreements:

Year Ended December 31,

(in thousands)

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Total credits to research and development

Additionally, the Company recorded $ 9.9 million as a credit to property and equipment in the consolidated balance sheets, which represents reimbursements received from related party for property and equipment constructed and owned by the Company.

Of the amounts invoiced to non-related party JDAs, $ 4.2 million was recorded as deferred income as of December 31, 2022, and $ 0.4 million and $ 0.8 million were recorded as a recivable and as deferred income as of December 31, 2021, respectively.

Receivables are recorded within prepaid expenses and other current assets and the deferred income is recorded within accrued expenses and other current liabilities in the consolidated balance sheets.

Additionally, the Company recorded $ 9.9 million as a credit to property and equipment in the consolidated balance sheets for the year ended December 31, 2022, which represents reimbursements received from related party for property and equipment constructed and purchased by the Company.

No credits to fixed assets were recorded in the year ended December 31, 2023 or the year ended December 31, 2021.

As of December 31, 2023 and 2022, there were $ 3.9 million and $ 2.4 million, respectively, outstanding as a receivable from related party as disclosed in the consolidated balance sheets.

As of December 31, 2023, there was a non-related party receivable of $ 5.1 million outstanding compared to no amount outstanding as of December 31, 2022.

As of December 31, 2023, there was no deferred income for non-related party JDAs compared to the $ 4.2 million recorded as deferred income as of December 31, 2022.

Amounts for non-related party receivables and deferred income are recorded within prepaid expenses and other current assets and accrued expenses and other current liabilities, respectively, in the consolidated balance sheets .

Cash and Cash Equivalents

The following table presents information about the Company’s cash, cash equivalents, and restricted cash:

As of December 31,

(in thousands)

December 31, 2023

December 31, 2022

Money market funds

Total cash and cash equivalents

Restricted cash included in prepaid expenses and other current assets and other assets

Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows

The following table provides amortized costs, gross unrealized gains and losses, and fair values for the Company’s investments as of December 31, 2022, which had maturity dates that range from 1 month to 11 months .

Restricted cash included in other assets

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

Short-Term Investments

The following table provides amortized costs, gross unrealized gains and losses, and fair values for the Company’s investments in available-for-sale U.S treasury securities as of December 31, 2023 and December 31, 2022, which had maturity dates that range from 1 month to 10 months and 1 month to 11 months , respectively.

Fair value was determined using market prices obtained from third-party sources.

The Company had no investments as of December 31, 2021.

Realized gains or losses were insignificant for the years ended December 31, 2023, 2022 and 2021.

December 31, 2023

(in thousands)

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Unrealized Losses

Short-term U.S.

treasury securities

Total short-term investments

December 31, 2022

(in thousands)

Amortized Cost

Unrealized Gains

Unrealized Losses

Short-term U.S.

treasury securities

The Company has $ 0.6 million marketable equity securities as of December 31, 2023, with an initial cost of $ 0.5 million.

Total unrealized gain/loss of $ 0.1 million is recorded under miscellaneous income (expense), net in the consolidated statement of operations and comprehensive loss.

The Company did not have any marketable equity securities as of December 31, 2022.

Property and Equipment, Net

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Depreciation expense was $ 5.4 million, $ 2.5 million, and $ 1.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Construction in progress primarily consists of leashold improvement projects associated with the Company’s Shanghai pilot facility.

Construction in progress primarily consists of leasehold improvement projects associated with the Company’s Shanghai pilot facility and a new lab facility in Woburn, MA.

Intangible Assets, Net

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Intellectual property

Internal-use software

Total intangible assets

accumulated amortization

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The components of accrued expenses and other current liabilities consisted of the following:

As of December 31,

(in thousands)

Advance payments received under joint development agreements

December 31, 2023

December 31, 2022

Employee compensation and related costs

Construction in process

Income taxes payable

Professional and consulting services

Deferred income received under joint development agreements

Accrued expenses and other current liabilities

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The incentives received under the Grant, which is in the form of cash, can be used for facilities related expenses and the purchase of property and equipment.

The Company is required to adhere to the following conditions attached to the incentives, which include required minimum investments into specified spending categories and the creation of a minimum amount of permanent full-time jobs in a certain geographical location over the next five years .

As of December 31, 2022, the Company had received but not yet earned $ 6.7 million, which is shown as a noncurrent liability in the consolidated balance sheet.

Sponsor Earn-Out Liability

The Company is required to adhere to the following conditions attached to the incentives, which include purchase of a government grant guarantee insurance policy, required minimum investments into specified spending categories and the creation of a minimum amount of permanent full-time jobs in a certain geographical location over the next five years , with the option to extend to 10 years by remaining in a certain geographical location.

If determined that we were ineligible to receive the Grant, we could be required to pay the Grant in its entirety with interest.

The Company has yet to fulfill the required minimum investment, and the compliance with this condition will continue to be monitored over the remaining grant period.

During the year ended December 31, 2023, the Company received cash grants of 3.6 billion Korean won, or $ 2.8 million after translation, which is the remaining balance of the awarded grant.

The Company has received, but not yet earned 12 billion Korean won and 8.4 billion Korean won, as of December 31, 2023 and December 31, 2022, respectively.

These balances are equivalent to $ 9.3 million and $ 6.7 million, after translation, as of December 31, 2023 and December 31, 2022, respectively, which is disclosed as a noncurrent liability in the consolidated balance sheet.

Sponsor Earn-Out Liabilities

The Sponsor Earn-Out shares in Tranche 2 through Tranche 5 have been measured at their estimated fair value using a Monte Carlo simulation valuation model.

Inherent in the valuation model are assumptions related to expected stock price volatility, risk-free interest rate, expected life, and dividend yield.

The key inputs used in the Monte Carlo simulation model for the Sponsor Earn-Out liability at their measurement dates were as follows:

The key inputs used in the Monte Carlo simulation model for the Sponsor Earn-Out liabilities at their measurement dates were as follows:

December 31, 2023

February 3, 2022

(Closing Date)

Contractual term (in years)

December 31, 2022

Expected term (in years)

Risk free rate

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The stock price is based on the closing price of the Company’s Class A common stock as of the valuation date and simulated through the end of the earn-out period following Geometric Brownian Motion.

The Company estimates the volatility of its common stock by using an average of historical volatilities of select peer companies’ common stock that matches the expected remaining term of the awards.

The Company estimates the volatility of its common stock by using a weighted average of historical volatilities of SES’s shares and warrants and select peer companies’ common stock that matches the expected term of the awards (range of the weighted average of volatility is 83.8 % - 96.2 % and 85.0 % - 101.4 % for the years ended December 31, 2023 and 2022, respectively).

The expected term is derived from the probability weighted model, considering the number of inputs, including the probability of a change in control.

The risk-free interest rate is based on the yield curve for zero-coupon U.S.

Treasury notes with maturities corresponding to the expected remaining life of the awards, which is assumed to be equivalent to their remaining contractual term.

Treasury notes with maturities corresponding to the expected term of the awards.

The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The following table provides a reconciliation of the beginning and ending balances for the Sponsor Earn-Out liability:

The following table provides a reconciliation of the beginning and ending balances for the Sponsor Earn-Out liabilities:

(in thousands)

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Balance as of December 31, 2022

Change in fair value

Balance as of December 31, 2023

The Company’s operating leases consist primarily of leases for office and plant spaces.

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For the years ended December 31, 2022 and 2021 total rental expense was $ 2.5 million and $ 1.8 million, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 2.4 million for the year ended December 31, 2022.

The following table summarizes the future minimum undiscounted lease payments under operating leases as of December 31, 2022:

Cash paid for amounts included in the measurement of lease liabilities was $ 2.9 million and $ 2.4 million for the years ended December 31, 2023 and 2022.

The following table summarizes the future minimum undiscounted lease payments under existing operating leases as of December 31, 2023:

Years Ending December 31,

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Total future minimum lease payments

As of December 31, 2022, the weighted average remaining lease term for operating leases was 6.3 years and the weighted average discount rate used to determine the operating lease liability was 6.2 % .

As of December 31, 2023 and 2022, the weighted average remaining lease term for operating leases was 5.6 years and 6.3 years, respectively, and the weighted average discount rate used to determine the operating lease liability was 7.4 % and 6.2 % , respectively.

In August 2016, the Company entered into an operating lease agreement to lease an office space in Woburn, Massachusetts with the original lease term expiring in August 2021.

The lease agreement has one five-year renewal option and provides for annual cost of living increases of up to 6 % .

The lease agreement has one five-year renewal option and has variable lease payment that depends on the CPI index and is measured annually.

In May 2020, the Company extended the term of the lease by 5 years through August 2026.

and March 2021, the Company amended the lease agreement increasing the leased space.

In February and March 2021, the Company amended the lease agreement increasing the leased space.

In December 2021, the Company further amended the lease agreement reducing the leased space.

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As of December 31, 2023, the Company assessed the probability of any liability to be incurred for relinquishment charges as remote.

Total future minimum lease payments under this lease is $ 7.6 million.

In October 2022, the Company entered into an amendment to the operating lease agreement for its Woburn facility to add additional space.

Pursuant to the amendment, the landlord has agreed to construct an addition to the existing facility for such additional space, which the Company anticipates will be completed in the third quarter of 2023, triggering the commencement of the amended lease.

The additional space will consist of approximately 5,000 square feet and the total undiscounted future minimum lease payments for the addition through the expected 8 year term will be approximately $ 1.5 million.

Total future minimum lease payments under this lease are $ 6.8 million.

In October 2022, the Company entered into an amendment to the operating lease agreement for its Woburn facility to add additional space and is accounted for as a separate lease (Addition Lease).

Pursuant to the amendment, the landlord has agreed to construct an addition to the existing facility for such additional space, which commenced in June 2023 and expires at the same time as the original lease.

The Addition Lease also contains a variable lease payment that depends on the CPI Index and is measured annually.

The additional space consists of approximately 5,000 square feet and the total undiscounted future minimum lease payments for the addition through the expected 8 -year term will be approximately $ 1.5 million.

Electrolyte Foundry Lease

In June 2023, the Company entered into an operating lease agreement to lease a lab space in Woburn, Massachusetts with the original lease term expiring five years after the delivery date upon completion of the build-out.

The lease agreement has renewal terms that can extend the lease term by providing application for renewal at least six months before the expiry and has variable lease payment that depends on the CPI index and is measured annually.

In January 2024, the Company started using the lab space.

Total future minimum lease payments under this lease are $ 2.8 million.

Shanghai Lease

In September 2018, the Company entered into an operating lease agreement to lease a manufacturing space in Shanghai, China with the original lease term expiring in August 2023.

The lease agreement has renewal terms that can extend the lease term by providing application for renewal at least 90 days before the expiry and provides for annual cost of living increases of up to 3 %.

In September 2021, the Company amended the lease agreement.

The amendment increased the amount of leased space and extended the term of the lease by three years through August 2026.

Total future minimum lease payments under this lease is $ 5.3 million.

In April 2020, the Company applied for and received a loan in the amount of $ 0.8 million under the Paycheck Protection Program (the "PPP"), established and pursuant to the Coronavirus Aid, Relief, and Economic Security Act and administered by the Small Business Administration (the "PPP Note").

Under the terms of the PPP Note, interest accrues on the outstanding principal at the rate of 1 % per annum.

Total future minimum lease payments under this lease are $ 3.9 million.

South Korea Leases

In November 2022, the Company entered into an operating lease agreement with a lease commencement date of July 2022 to lease a manufacturing building in the Chungju, South Korea industrial complex with the original lease term expiring in September 2024.

The lease agreement has renewal terms that can extend the lease term by our providing application for renewal at least 30 days before the expiry and provides for annual cost of living increases in rent.

Total future minimum lease payments under this lease are $ 1.5 million.

In February 2023, the Company entered into an operating lease agreement with a commencement date of February 1, 2023 to lease a second manufacturing space in the Chungju, South Korea industrial complex with the original lease term expiring in December 2024.

Total future minimum lease payments under this lease are $ 0.7 million.

In February 2021, the principal and interest were forgiven for the PPP Note, for which the Company recorded a gain on forgiveness of PPP Note of $ 0.8 million in its consolidated statement of operations and comprehensive loss.

Commitments and Contingencies

The Company has entered into multiple JDAs with strategic automotive OEM Partners to develop A-Sample battery cells over the next two to three years .

Under the terms of one of the JDAs, the Company is committed to undertake certain research and development activities to the benefit of both itself and its OEM Partners which involves expenditures related to engineering efforts and purchases of related equipment.

This JDA has an agreed-upon value of up to $ 50 million, of which the Company has spent $ 1.7 million as of December 31, 2022.

Under the terms of one of the JDAs entered into in 2021, the Company is committed to undertake certain research and development activities to the benefit of both itself and its OEM Partners which involves expenditures related to engineering efforts and purchases of related equipment.

The JDA has an agreed-upon value of up to $ 50 million, of which the Company has spent $ 5.9 million as of December 31, 2023.

Legal Contingencies

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In addition, the Company indemnifies its officers, directors, and certain key employees against claims made with respect to matters that arise while they are serving in their respective capacities as such, subject to certain limitations set forth under applicable law, and applicable indemnification agreements.

The Company maintains insurance, including commercial general liability insurance, product liability

insurance, and directors and officers insurance to offset certain potential liabilities under these indemnification provisions.

The Company maintains insurance, including commercial general liability insurance, product liability insurance, and directors and officers insurance to offset certain potential liabilities under these indemnification provisions.

To date, there have been no claims under these indemnification provisions.

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The Company had the following redeemable convertible preferred stock issued and outstanding as of December 31, 2021.

Upon closing of the Business Combination, all outstanding redeemable convertible preferred stock were converted into shares of the Company’s common stock in an amount determined by application of the Exchange Ratio, as discussed further in “Note 3 – Business Combination,” and as a result, the following share and per share amounts have been retroactively converted.

Upon closing of the Business Combination, all outstanding redeemable convertible preferred stock were converted into shares of the Company’s common

stock in an amount determined by application of the Exchange Ratio, as discussed further in “Note 3 – Business Combination,” and as a result, the following share and per share amounts have been retroactively converted.

(in thousands, except share and per share amounts)

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Upon closing of the financing transaction in May 2021, the investor purchased 10,074,380 shares of Series D plus redeemable convertible preferred stock.

The holders of Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock are entitled to vote on all matters on which the common stockholders are entitled to vote.

On such matters, holders of Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred and common stock vote together with the holders of common stock as a single class.

Each holder of the Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which the shares of redeemable convertible preferred stock held by such holder could then be converted.

Shares of redeemable convertible preferred stock are convertible into common stock at the holders’ option at any time after the date of issuance of such share or automatically (i) immediately prior to the closing of a firm commitment underwritten public offering of the Company’s common stock at a price per share at least 2 times the Series D and Series D plus issuance price and with gross proceeds to the Company of at least $ 100 million, net of underwriting commission and discounts or (ii) upon the vote or receipt by the Company of a written request for such conversion from the holders of the 66 % of the redeemable convertible preferred stock then outstanding, voting as a single class and on an as-converted basis.

Each share of the Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock is convertible into the number of shares of common stock at the then effective conversion ratio.

The initial conversion price per share for the Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock is subject to anti-dilution adjustments, if any.

In the event of any liquidation of the Company, sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company, dissolution, or winding up of the Company, the holders of Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock will be entitled to receive, in preference to any distribution to the holders of common stock, an amount per share equal to the applicable issuance price together with any other dividends declared but unpaid thereon on each share of redeemable convertible preferred stock.

If the assets of the Company legally available for distribution to the holders of given Series of redeemable convertible preferred stock are insufficient to permit the payment to such holders of the full amounts of a given Series, then the assets of the Company will be distributed on a pro rata basis among the holders of such Series of redeemable convertible preferred stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to their liquidation preference.

After the payment to the holders of redeemable convertible preferred stock of the full amounts above, the remaining assets of the Company will be distributed with equal priority and pro rata among the holders of the redeemable convertible preferred stock on an as-converted basis and common stock.

The holders of the Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock are entitled to receive dividends, when and if declared by the Board of Directors subject to adjustment for stock splits, stock dividends, combination of shares, reorganization, recapitalization, reclassification, or other similar event.

The dividends are payable in preference and priority to any payment of any dividend on the common stock of the Company and are noncumulative.

No dividends were declared by the Board of Directors during the years ended December 31, 2022, 2021 and 2020.

The redeemable convertible preferred stock is recorded in mezzanine equity because while it is not mandatorily redeemable, it will become redeemable at the option of the preferred stockholders upon the occurrence of certain deemed liquidation events that are considered not solely within the Company’s control.

Shares of redeemable convertible preferred stock were converted into common stock at the holders’ option at any time after the date of issuance of such share or automatically (i) immediately prior to the closing of a firm commitment underwritten public offering of the Company’s common stock at a price per share at least 2 times the Series D and Series D plus issuance price and with gross proceeds to the Company of at least $ 100 million, net of underwriting commission and discounts or (ii) upon the vote or receipt by the Company of a written request for such conversion from the holders of the 66 % of the redeemable convertible preferred stock then outstanding, voting as a single class and on an as-converted basis.

Each share of the Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock was converted into the number of shares of common stock at the then effective conversion ratio.

The initial conversion price per share for the Series A, Series B, Series C, Series C plus, Series D and Series D plus redeemable convertible preferred stock was subject to anti-dilution adjustments, if any.

Stockholders’ Equity

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Each outstanding share of Class B c ommon stock is entitled to ten votes per share and each outstanding share of Class A common stock is entitled to one vote per share.

As of December 31, 2022, the Company had 305,833,589 and 43,881,251 shares of Class A common stock and Class B common stock issued and outstanding, respectively.

As of December 31, 2023, the Company had 310,266,922 and 43,881,251 shares of Class A common stock and Class B common stock issued and outstanding, respectively and as of December 31, 2022 had 305,833,589 and 43,881,251 shares of Class A common stock and Class B common stock issued and outstanding, respectively.

For accounting purposes, only shares that are fully vested or that are not subject to repurchase are considered issued and outstanding.

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December 31, 2023

December 31, 2022

Total shares of common stock legally issued and outstanding

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( 27,690,978 )

Sponsor Earn-Out Shares

( 5,520,000 )

Earn-Out Restricted Shares

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( 1,931,044 )

( 1,270,726 )

Total shares issued and outstanding

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The Company’s board of directors has the authority to issue preferred stock and to determine the rights, preferences, privileges, and restrictions, including voting rights of such preferred stock.

As of December 31, 2022, no shares of the Company’s preferred stock were issued and outstanding.

As of December 31, 2023 and 2022, no shares of the Company’s preferred stock were issued and outstanding.

Common stock is entitled to dividends when and if declared by the Company’s board of directors, subject to the rights of all classes of stock outstanding having priority rights to dividends.

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If any such Warrants are not exercised within that 30 -day period, they will be redeemed pursuant to this provision.

As of December 31, 2022, the Company had outstanding Public Warrants to purchase 9,199,947 shares of Class A common stock.

As of December 31, 2023 and 2022, the Company had outstanding Public Warrants to purchase 9,199,947 shares of Class A common stock.

Private Warrants

The Private Warrants have similar terms to the Public Warrants, except that the Private Warrants are not redeemable.

As of December 31, 2022, the Company had outstanding Private Warrants to purchase 5,013,333 shares of Class A common stock.

As of December 31, 2023 and 2022, the Company had outstanding Private Warrants to purchase 5,013,333 shares of Class A common stock.

The Company has the following shares of common stock available for future issuance on an as-if converted basis:

December 31, 2023

December 31, 2022

Shares reserved for issuance under the SES AI Corporation 2021 Plan

Shares reserved for issuance under the SES Holdings Pte.

Common stock options outstanding

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Private Warrants

Redeemable convertible preferred stock

Total common stock available for future issuance

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In addition, and subject to certain limitations, any shares issued pursuant to or subject to awards granted under the 2021 Plan that expired or otherwise terminated without having been exercised in full or that were forfeited or repurchased by the Company, rolled into the SES 2021 Plan.

The SES 2021 Plan allows for the maximum number of shares issuable to automatically increase on January 1st of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to two percent of the total number of shares of Class A common stock outstanding on December 31 st of the preceding year.

The SES 2021 Plan allows for the maximum number of shares issuable to automatically increase on January 1st of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to two percent of the total number of shares of stock outstanding on December 31 st of the preceding year.

As of December 31, 2023, 34,965,909 shares remain available for future issuance under the SES 2021 Plan.

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Outstanding at December 31, 2022

The total fair value of RSUs vested was $ 0.8 million for the year ended December 31, 2022.

( 1,063,863 )

Forfeited and canceled

Outstanding at December 31, 2023

The total fair value of RSUs vested was $ 8.9 million and $ 0.8 million for the years ended December 31, 2023 and 2022, respectively.

No RSUs were granted or vested in the year ended December 31, 2021.

As of December 31, 2023, there was $ 16.5 million of unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 1.2 years.

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Outstanding at December 31, 2022

The weighted-average grant date fair value per share of RSAs granted was $ 5.12 for the year ended December 31, 2021.

No RSAs were granted in the year ended December 31, 2020.

The total fair value of RSAs vested was $ 4.9 million for the year ended December 31, 2022.

Forfeited and canceled

Outstanding at December 31, 2023

The total fair value of RSAs vested was $ 3.1 million and $ 4.9 million for the years ended December 31, 2023 and 2022.

No RSAs vested during the year ended December 31, 2021.

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PSUs are measured at their estimated fair value using a Monte Carlo simulation valuation model with the effect of the market condition reflected in the grant date fair value of the award.

The fair value of PSU awards is amortized to expense on a straight-line basis over the requisite

service period, irrespective of whether the market vesting condition is satisfied, which is generally two to three years .

The key inputs used in the Monte Carlo simulation model for PSUs granted during the current year at their measurement date were as follows:

April 18, 2022

Contractual term (in years)

The fair value of PSU awards is amortized to expense on a straight-line basis over the requisite service period, irrespective of whether the market vesting condition is satisfied, which is generally two to three years .

The key inputs used in the Monte Carlo simulation model for PSUs granted during the years ended December 31, 2023 and 2022 at their measurement date were as follows:

Expected term (in years)

Risk free rate

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Expected dividends

The Company estimates the volatility of its common stock by using a weighted average of historical volatilities of SES’s shares and select peer companies’ common stock that matches the expected term of the awards.

The expected term is derived from the vesting period.

The risk-free interest rate is based on the yield curve for zero-coupon U.S.

Treasury notes with maturities corresponding to the expected term of the awards.

The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

PSU activity is as follows:

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Outstanding at December 31, 2022

Forfeited and canceled

Outstanding at December 31, 2023

There were no PSUs granted or vested in the year ended December 31, 2021.

As of December 31, 2023, there was $ 3.6 million of unrecognized compensation cost related to PSUs, which is expected to be recognized over a weighted-average period of 1.5 years.

Earn-Out Restricted Shares

The Earn-Out Restricted Shares granted in connection with the Business Combination vest over a five-year period and have both service and market vesting conditions.

The Earn-Out Restricted Shares granted in connection with the Business Combination have a contractual term of five years and have both service and market vesting conditions.

The Earn-Out Restricted Shares have been measured at their estimated fair value using a Monte Carlo simulation valuation model with t he effect of the market condition reflected in the grant date fair value of the award.

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Expected dividends

Expected stock price

The Company estimates the volatility of its common stock by using select peer companies’ common stock that matches the contractual term of the awards.

The risk-free interest rate is based on the yield curve for zero-coupon U.S.

Treasury notes with maturities corresponding to the contractual term of the restricted shares.

The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

Earn-Out Restricted Shares activity is as follows:

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Outstanding at December 31, 2022

As of December 31, 2022, there was $ 4.7 million of unrecognized compensation cost related to Earn-Out Restricted Shares, which is expected to be recognized over a weighted-average period of 0.5 years.

Granted/vested

Forfeited and canceled

Outstanding at December 31, 2023

During the year ended December 31, 2023, the Earn-Out Restricted Shares met the requisite service period and the related expense was fully amortized.

Stock Options

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Outstanding at December 31, 2022

( 3,691,340 )

Forfeited and canceled

Outstanding at December 31, 2023

Vested, December 31, 2023

Vested or expected to vest, December 31, 2023

The weighted-average grant date fair value per share of stock options granted was $ 0.12 and $ 0.08 for the years ended December 31, 2021 and 2020, respectively.

The aggregate intrinsic value of options exercised was $ 6.7 million for the year ended December 31, 2021.

No options were exercised for the year ended December 31, 2020.

No income tax benefit was recognized for stock options exercised as the Company does not anticipate realizing any such benefit in the near future.

The fair value of stock options vested was not material during the years ended years ended December 31, 2021 and 2020.

The fair value of stock options vested for the years ended December 31, 2023 and 2022 were $ 16.4 million and $ 29.3 million, respectively.

The Company uses the Black-Scholes pricing model to determine the fair value of options granted.

The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield.

The assumptions used in the Black-Scholes pricing model for options granted during each year, along with the weighted-average grant-date fair values, were as follows:

Years Ended December 31,

As there were no options granted in 2023 and 2022, the

assumptions used in the Black-Scholes pricing model for options granted during 2021, along with the weighted-average grant-date fair value, were as follows:

Year Ended December 31,

Expected term of options (in years)

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0.6 % to 1.1 %

0.4 % to 0.9 %

Expected volatility

68.0 % to 69.9 %

61.8 % to 67.5 %

Expected dividends

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Total deferred expense

Income tax expense

Income tax (benefit) expense

Reconciliations of the federal statutory income tax rate to the Company’s effective income tax rate are as follows:

Years Ended December 31,

Federal statutory income tax rate

Tax provision (benefit) at U.S.

statutory rate

State income taxes, net of federal benefit

Foreign income taxed at non US rates

Other permanent items

Section 162(m)

Stock-based compensation

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Unrecognized tax benefits

Increase in valuation allowance

Change in Sponsor Earn-out liability

Change in valuation allowance

Change in Sponsor Earn-Out liabilities

Transaction costs

Section 162(m)

Effective tax rate

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Lease liabilities

Stock-based compensation

Research and development tax credits

Stock-based compensation

Accruals and reserves

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Net deferred tax asset

The Company maintained a valuation allowance of $ 38.8 million and $ 21.5 million as of December 31, 2022 and 2021, respectively, against U.S.

federal, state and foreign deferred tax assets, as management has determined that it is more likely than not that these net deferred tax assets will not be realized.

The Company’s net operating loss carryforwards consist of the following:

As of December 31,

(in thousands)

As of December 31, 2022, $ 95.1 million of the U.S.

federal net operating loss carryforwards were generated post-2017, which have an indefinite carryforward period that can only offset 80% of annual taxable income.

The remaining U.S.

federal carryforwards, if not utilized, expire through 2037, and the state net operating loss carryforwards expire through 2042.

The utilization of such net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon the Company’s ability to generate taxable income in the U.S.

Research and development tax credits were $ 3.6 million and $ 2.8 million at December 31, 2022 and 2021, respectively, and if not utilized, will begin to expire in 2030.

The utilization of the Company’s net operating losses and research and development tax credit carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions under Section 382 of the Internal Revenue Code, and similar state provisions.

The difference between the provision for income taxes and the income tax determined by applying the statutory federal income tax rate of 21 % was due primarily to the research and development credit and change in valuation allowance.

The Company maintains full valuation allowance against its U.S.

and Viking Power System Pte.

Ltd., net deferred tax assets as it believes these deferred tax assets were not realizable on a more likely than not basis as of December 31, 2023.

The Company's valuation allowance balance increased by $ 11.9 million and $ 17.3 million for the years ended December 31, 2023 and 2022, respectively.

A full valuation allowance was established for SES AI Korea Co., Ltd since the fiscal year 2021.

However, SES Korea operates under a cost-plus model in adherence to transfer pricing (TP) regulations, ensuring its profitability in accordance with U.S.

Upon reevaluation of the subsidiary's consistent profitability and other favorable indicators, it is determined that a valuation allowance was no longer warranted.

In the fiscal year 2023, the Company released the Korean valuation allowance.

As of December 31, 2023, the Company has Federal net operating loss (“NOLs”) carryforward of approximately $ 124.7 million, of which $ 9.3 million is for pre-2018 and $ 115.4 million is post 2017.

The pre-2018 Federal NOLs carryforwards will begin to expire in 2033.

The post-2017 Federal NOLs will carryforward indefinitely but can only offset 80% of annual taxable income.

The Company also has Massachusetts NOLs carryforwards of approximately $ 74.9 million, which begins to expire in 2033.

As of December 31, 2022, the Company had Federal NOLs carryforward of approximately $ 104.4 million, of which $ 9.3 million was for pre-2018 and $ 95.1 million was post 2017.

The pre-2018 Federal NOLs carryforwards will begin to expire in 2033.

The post-2017 Federal NOLs will carryforward indefinitely but can only offset 80% of annual taxable income.

The Company also had Massachusetts NOLs carryforwards of approximately $ 61.2 million, which begins to expire in 2033.

As of December 31, 2023 and 2022, the Company had federal research credit carryforwards of approximately $ 3.8 million and $ 2.4 million, respectively, which begins to expire in 2033, and Massachusetts research credit carryforwards of approximately $ 1.9 million and $ 1.2 million, respectively, which begins to expire in 2030.

The utilization of the Company’s NOLs and R&D credits and carryforwards may be subject to a limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code.

An “ownership change” is generally defined as a greater than 50 percent change (by value) in its equity ownership over a three-year period.

The annual limitation may result in the expiration of the net operating loss carryforwards before their utilization.

The annual limitation may result in the expiration of the NOL carryforwards before their utilization.

Through December 31, 2018, the Company had completed several financings since its inception and performed the related analysis which concluded that changes in ownership had occurred, as defined by Sections 382 and 383 of the Internal Revenue Code.

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This could further limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

Based on analysis performed, the Copmany would not lose any material tax attribute due to Section 382 since 2018.

Based on analysis performed, the Company would not lose any material tax attribute due to Section 382 since 2018.

During 2023, management does not believe there were significant ownership changes that would trigger a Section 382 limitation.

The Company records unrecognized tax benefits in accordance with ASC 740-10, Income Taxes .

ASC 740-10 which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected

to be taken in the Company’s income tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

ASC 740-10 which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in the Company’s income tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

As of December 31, 2023 and 2022, the total amount of unrecognized tax benefits was $ 5.5 million and $ 4.6 million respectively, of which $ 5.2 million would affect 2023 income tax expense, if recognized, without considering any valuation allowance.

The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

The Company includes interest and penalties related to unrecognized tax benefits within the benefit from (provision for) income taxes.

As of the years ended December 31, 2023 and 2022 the total amount of gross interest accrued in each year was less than $ 0.1 million, respectively.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

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End of the year

Due to the Company’s full valuation allowance, the unrecognized tax benefits would not materially impact the Company’s effective tax rate when recognized.

The Company’s policy is to include interest and penalties, if any, related to unrecognized tax benefits as a component of its income tax provision.

For the years ended December 31, 2022 and 2021, the total amount of gross interest accrued in each year was not material.

The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

The Company is subject to income taxes in the U.S.

federal, state, and various foreign jurisdictions.

Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.

The Company’s tax years remain open for examination within the U.S.

and foreign authorities for all years, until such time as the NOLs are initially utilized.

The Company’s tax years remain open for examination by foreign authorities beginning with the tax year ended December 31, 2018.

Beginning in 2022, the 2017 Tax Cuts and Jobs Act amended Section 174 to eliminate current-year deductibility of research and experimentation (R&E) expenditures and software development costs (collectively, R&E expenditures) and instead require taxpayers to charge their R&E expenditures to a capital account amortized over five years (15 years for expenditures attributable R&E activity performed outside the United States).

The Company generated a deferred tax asset for capitalized R&E expenditures for the year ended December 31, 2022, which is fully offset with a valuation allowance.

The Company generated a deferred tax asset for capitalized R&E expenditures for the year ended December 31, 2023 which was fully offset with a valuation allowance.

Net Income (Loss) Per Share

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Intangible assets, net:

Total intangible assets, net

Total long-lived assets

Defined Contribution Plan

The Company offers a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code.

This plan covers employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.

There were no contributions by the Company during the years ended December 31, 2022 and 2021.

Beginning January 1, 2023, the Company offers a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code.

This plan covers employees who meet minimum age and service requirements and allows participants to defer a portion of their

annual compensation on a pre-tax basis.

The Company contributed $ 0.5 million to the defined contribution retirement savings plan for the year ended December 31, 2023.

Related-Party Transactions

The Company considered the following as related parties due to their role in the Company and/or status as a principal owner of at least 10% of the Company’s voting interest on a fully diluted basis for the year ended December 31, 2021:

Role In The Company

Fully Diluted Voting Interest

Chief Executive Officer, founder and board representation

SK Holdings (1)

Board representation

Affiliates of Temasek Holdings (Private) Limited (1)

Former board representation

General Motors Ventures LLC and General Motors Holdings LLC

Board representation

Vertex Legacy Continuation Fund Pte.

Board representation

Tianqi Lithium HK Co., Ltd.

Board representation

Long Siang Pte.

Board representation

(1) As of December 31, 2022 and in connection with the Closing of the Business Combination, the respective party no longer had representation on the Company’s Board of Directors and no longer had status as a principal owner.

Director Nomination Agreement

Concurrently with the execution of the Business Combination Agreement, the Company and Ivanhoe entered into the Director Nomination Agreement with GM Ventures, pursuant to which, among other things, GM Ventures has the right to nominate one person for election to the Board from and after the Effective Time for so long as GM Ventures together with its affiliates, collectively continue to beneficially own at least 5 % of the fully diluted outstanding equity securities of SES.

See “Note 4 – Partnerships” for related party transactions with General Motors.

Preferred Stock Purchase Agreements

In April 2021, SES entered into a stock purchase agreement, in which various holders purchased $ 138.5 million in Series D redeemable convertible preferred stock, $ 0.000001 par value per share.

This included investments by the following investors, who were considered related parties due to either their relationship with the Company or status as a principal owner, in the following amounts:

$ 27.0 million by Aranda Investments Pte.

Ltd., an entity associated with Temasek Holdings Limited (“Aranda”), $ 50.0 million by General Motors Ventures LLC and General Motors Holdings LLC (the “GM Funds”), $ 36.0 million by SK Holdings (“SK”), and $ 10.0 million by Vertex affiliates Vertex Legacy Continuation Fund Pte.

(“Vertex Legacy”) and Vertex Ventures China IV, L.P.

(“Vertex Ventures” and, with Vertex Legacy, the “Vertex Funds”) collectively.

PIPE Financing

In connection with the Closing of the Business Combination, Ivanhoe issued an aggregate of 27,450,000 shares of Class A common stock to the PIPE Investors at a purchase price of $ 10.00 per share, for aggregate gross proceeds of $ 274.5 million.

This included purchases by the following investors, who were considered related parties due to either their relationship with the Company or status as a principal owner, in the following amounts:

$ 10.0 million by the GM Funds, $ 1.0 million by Long Siang Pte.

(“Long Siang”), $ 5.0 million by Vertex Legacy and $ 75.0 million by Honda.

Old SES Shareholder Support Agreement

Concurrently with the execution of the Business Combination Agreement, certain shareholders of Old SES representing the requisite votes necessary to approve the Business Combination, including among others, GM, Dr.

Hu and his affiliated trusts, Long Siang, the Vertex Funds, SK, the Temasek Funds (Aranda and Anderson Investments Pte.

Ltd.) and Tianqi Lithium HK Co., Ltd.

(“Tianqi”), entered into a support agreement with the Company (formerly known as Ivanhoe Capital Acquisition Corp) and Old SES, pursuant to which each such holder agreed to (i) vote at any meeting of Old SES’s shareholders, and in any action by written consent of Old SES’s shareholders, all of its equity securities in favor of the adoption and approval of the Business Combination Agreement and the transactions contemplated thereby, including the Amalgamation, and not withdraw or rescind such vote or otherwise take action to make such vote ineffective, (ii) be bound by certain other covenants and agreements related to the Business Combination, (iii) waive and not to exercise or assert any rights, or make any demand or claims of oppression relating to the Amalgamation or any other transaction contemplated by the Business

Combination Agreement that such Shareholder may have (under the Singapore Companies Act or otherwise) by virtue of, or with respect to, any outstanding equity securities of Old SES legally or beneficially owned by such shareholder and (iv) be bound by certain transfer restrictions with respect to such securities, in each case, on the terms and subject to the conditions set forth in the Support Agreements.

Each Old SES shareholder party to the support agreement made certain representations and warranties to the Company.

The support agreement terminated upon the consummation of the Business Combination.

A&R Registration Rights Agreement

At the Closing of the Business Combination, SES, the Sponsor and certain other holders of SES, including, but not limited to, the GM Funds, Dr.

Hu and his affiliated trusts, Long Siang, SK, the Temasek Funds, Tianqi and the Vertex Funds, entered into the Amended and Restated Registration Rights Agreement, dated as of February 3, 2022 (the “Registration Rights Agreement), pursuant to which, among other things, the Sponsor and such other holders were granted certain customary registration rights, demand rights and piggyback rights with respect to their respective shares of Class A common stock and any other equity securities of SES.

The Registration Rights Agreement also prohibits the transfer (subject to limited exceptions) of the shares of our Class A common stock and Class B common stock held by the Sponsor and other holders party to the Registration Rights Agreement, in each case for a period of 180 days following the Closing.

Other Transactions

In connection with the closing of the PIPE Financing on February 3, 2022, the brother of one of the Company’s board of directors, purchased 150,000 shares of Class A common stock from the Company for an aggregate purchase price of $ 1,500,000 , in accordance with the terms of that certain subscription agreement with the Company, dated July 12, 2021.

Subsequent Events

In February 2023, the Company entered into an operating lease for a manufacturing space in Chungju, South Korea.

Total undiscounted future minimum lease payments under the lease through the expected 5 year term will be approximately $ 0.9 million.

As of December 31, 2023 and 2022, pursuant to the Director Nomination Agreement, General Motors Company and its affiliates (“GM”) were considered related parties due to their board representation and the board member’s employment position at GM, which remained in effect as long as GM continues to hold more than 5 % of the fully diluted outstanding equity securities of SES as per the agreement.

See “Note 4 – Partnerships” for more details about our partnership with GM.

Changes in and Disagreements With Accountants On Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data