What changed in this filing

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Item 9A. Controls and Procedures

2025-02-28 compared with 2024-02-27 · 48 added, 49 removed, 179 unchanged (35% of the section changed)

2 unchanged sentences

Under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under Securities Exchange Act of 1934, as amended (the “Exchange Act”).

D isclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Based on this evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2023, our disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting, as discussed in more detail below.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Based on this evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2024, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting, as discussed below.

Management’s Report on Internal Controls Over Financial Reporting

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

Based on the evaluation described above, management determined that our internal control over financial reporting was not effective as of December 31, 2023, because of material weaknesses.

Specifically, 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.

As a result, automated and manual business process controls that are dependent on the affected IT general controls were also deemed ineffective, as they could have been adversely affected due to their reliance on information and configurations from the affected IT system.

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

If not remediated, or if we identify further material weaknesses in our internal control, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our consolidated financial statements or a failure to meet our reporting and financial obligations.

The material weaknesses did not result in any material misstatements to our consolidated financial statements or disclosures in any of the years ended December 31, 2023, 2022 or 2021.

Our independent registered public accounting firm, Grant Thornton LLP, who audited the consolidated financial statements included in this annual report, has expressed an adverse opinion on the effectiveness of our internal control over financial reporting as of December 31, 2023, which appears in Item 8 Financial Statements and Supplementary Data of this 2023 Form 10-K.

Remediation Plan

We are taking the following actions to remediate the material weaknesses described in this Item 9A and to enhance our overall control environment.

We are committed to ensuring that our internal control over financial reporting is effective.

● We are developing a detailed remediation plan, with appropriate executive sponsorship, to specifically address the material weaknesses.

● We have hired, and will continue to hire, additional professionally qualified accountants who have the appropriate level of expertise in the areas of accounting, financial reporting, and IT general controls.

● We are taking steps to enhance the design of existing control activities related to IT environment and implement additional process-level control activities and ensure they are operating effectively.

● We have and will continue to restrict access to the financial application to ensure appropriate segregation of duties.

● We will design updated processes and controls around change management monitoring to ensure that all changes have sufficient documentation and are reviewed by an authorized person.

● We will maintain sufficient and appropriate review documentation for the assessment of all key assumptions related to the valuation of sponsor earn out liabilities.

We intend to complete the remediation process as promptly as possible.

We may discover additional material weaknesses that require additional time and resources to remediate, and we may decide to take additional measures to address the material weaknesses or modify the remediation steps described above.

Until these weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with GAAP.

Based on the evaluation described above, management determined that our internal control over financial reporting was not effective as of December 31, 2024, because of a material weakness.

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

The material weaknesses did not result in any material misstatements to our consolidated financial statements or disclosures in the years ended December 31, 2024 and 2023.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal controls over financial reporting because we are exempt from this requirement as a smaller reporting company and non-accelerated filer.

Remediation Plan for Current Material Weakness

We are taking the following actions to remediate the material weakness described in this Item 9A and to enhance our overall control environment.

We will design updated processes and controls and maintain sufficient and appropriate review documentation for the assessment of all key assumptions related to the valuation of sponsor earn out liabilities.

Remediation of Previously Reported Material Weaknesses

As previously reported in Part II, Item 9A, ‘Controls and Procedures’ of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on March 16, 2023, in connection with our assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, we identified material weaknesses related to insufficient complement of resources, ineffective risk assessment process and ineffective information and communication activities which resulted in ineffective process-level controls in a majority of financial reporting processes.

In response to the material weaknesses, the Company developed and implemented a remediation plan.

We hired additional qualified resources, trained those resources and engaged a nationally recognized accounting firm to review the design of high-risk processes.

We enhanced our risk assessment process and designed controls to mitigate the risk of material misstatements at an increased level of precision.

We implemented new tools and applications to ensure timely compliance with the internal control requirements.

Based on those

remediation actions, management has concluded that the material weaknesses previously reported have been remediated as of December 31, 2023.

As noted above, we have reported material weaknesses in 2023.

We previously identified a material weakness, as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, 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.

Further, as disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, in the first quarter of 2024 we identified an additional material weakness in a review control because we failed to detect an error in the accounting for forfeitures of Earn-Out Restricted Shares upon a holder’s termination of employment.

In response to the above material weaknesses, the Company executed a remediation plan in 2024.

The remediation actions taken were as follows:

● We have hired professionally qualified personnel who have the appropriate level of expertise in the areas of accounting, financial reporting, and IT general controls.

● We have taken steps to enhance the design of existing control activities related to IT environment and implemented additional process-level control activities.

● We have restricted, and will continue to restrict, access to the financial application to ensure appropriate segregation of duties.

● We have designed updated processes and controls around change management monitoring to ensure that all changes have sufficient documentation and are reviewed by an authorized person.

● We have added, and will continue to maintain, an additional layer of internal review over the accounting of the Earn-Out Restricted Shares’ expense in relation to employees’ terminations and forfeitures.

As a result, we have concluded that, as of December 31, 2024, we have remediated the above-mentioned material weaknesses related to IT application, user access and monitoring controls, and to accounting for forfeitures of Earn-Out Restricted Shares upon a holder’s termination of employment.

Changes in Internal Control over Financial Reporting

As described above, we have taken and continue to take steps to remediate material weaknesses in our internal control over financial reporting described in “Remediation Plan” and “Remediation of Previously Reported Material Weaknesses.” Other than in connection with the remediation process described above, no change in our internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As described above, we have taken and continue to take steps to remediate material weaknesses in our internal control over financial reporting described in “Remediation Plan for Current Material Weakness” and “Remediation of Previously Reported Material Weaknesses.” Other than in connection with the remediation process described above, no change in our internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Rule 10b5-1 Trading Arrangements

(a) Item 1.01 Entry into a Material Definitive Agreement.

ATM Equity Offering Program

On February 28, 2025, we entered into a Controlled Equity Offering Sales SM Agreement (the “ATM Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Oppenheimer & Co.

(each an “Agent” and together, the “Agents”), pursuant to which we may offer and sell from time to time, at our option, shares of our Class A common stock through the Agents.

The issuance and sale, if any, of the Class A common stock under the ATM Agreement will be made pursuant to our registration statement on Form S-3 (File No.

333-271423), which became effective on April 28, 2023, and the related prospectus supplement, including an accompanying base prospectus, dated February 28, 2025 (the “Prospectus Supplement”), in each case filed with the SEC.

In accordance with the terms of the ATM Agreement, under the Prospectus Supplement, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $150.0 million from time to time through the Agents.

Sales of shares of Class A common stock through the Agents, if any, will be made in sales deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including, without limitation, sales made directly on the NYSE or any other existing trading market for the shares of Class A common stock.

Subject to the terms and conditions of the ATM Agreement, the Agents will use their commercially reasonable efforts to sell shares of our Class A common stock from time to time, based on instructions from us (including any price, time or size limits or other parameters or conditions we may impose).

We have agreed to pay the Agents a commission equal to up to 3.0% of the aggregate gross proceeds from the sales of shares of Class A common stock sold through the Agents under the ATM Agreement and will also reimburse the Agents for certain specified expenses in connection with entering into the ATM Agreement as well as in connection with each Representation Date (as defined in the ATM Agreement).

Pursuant to the ATM Agreement, we have also provided the Agents with customary indemnification and contribution rights.

The ATM Agreement contains customary representations and warranties and conditions to the sale of the shares of Class A common stock pursuant thereto.

We are not obligated to sell any Class A common stock under the ATM Agreement and may at any time suspend solicitation and offers thereunder.

The foregoing description of the material terms of the ATM Agreement is not complete and is qualified in its entirety by reference to the full text of the ATM Agreement, a copy of which is filed as Exhibit 10.32 to this Annual Report and is incorporated herein by reference.

The representations, warranties and covenants contained in the ATM Agreement were made solely for the benefit of the parties to the ATM Agreement, and may be subject to limitations agreed upon by the contracting parties.

Accordingly, the ATM Agreement is filed with this Annual Report only to provide investors with information regarding the terms of the ATM Agreement and not to provide investors with any other factual information regarding us or our business, and should be read in conjunction with the disclosures in our periodic reports and other filings with the SEC.

(b) Rule 10b5-1 Trading Arrangements

During the quarter ended December 31, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements as defined in Item 408 of Regulation S-K.

33 unchanged sentences

001-39845), filed with the Securities and Exchange Commission on March 31, 2022).

Opinion of White & Case LLP.

Amended and Restated Registration Rights Agreement, dated February 3, 2022, by and among SES AI Corporation, the Sponsor and certain other holders of SES AI Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

2 unchanged sentences

001-39845), filed with the Securities and Exchange Commission on February 8, 2022).

SES AI Corporation 2021 Incentive Award Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No.

001-39845), filed with the Securities and Exchange Commission on February 8, 2022).

SES AI Corporation 2021 Incentive Award Plan.

SES Holdings Pte.

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001-39845), filed with the Securities and Exchange Commission on May 9, 2023).

Employment Agreement, dated as of March 2, 2022, by and between Kyle Pilkington and SolidEnergy Systems, LLC

Advisory Agreement, dated as of June 26, 2022, by and between Joanne Ban and SES AI Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No.

001-39845), filed with the Securities and Exchange Commission on May 9, 2023).

Separation Letter, dated as of January 24, 2024, by and between Rohit Makharia and SES Holdings Pte Ltd .

Director Nomination Agreement dated as of July 12, 2021, by and among Ivanhoe Capital Acquisition Corp., SES Holdings Pte.

and General Motors Ventures LLC (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K (File No.

Employment Agreement, dated as of March 2, 2022, by and between Kyle Pilkington and SolidEnergy Systems, LLC (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K (File No.

001-39845), filed with the Securities and Exchange Commission on February 27, 2024.

Employment Agreement, dated as of June 15, 2023, by and between Kang Xu and SolidEnergy Systems, LLC.

Board Observation Agreement, dated as of July 12, 2021, by and among Ivanhoe Capital Acquisition Corp., SES Holdings Pte.

43 unchanged sentences

001-39845), filed with the Securities and Exchange Commission on May 13, 2022).

Form of Restricted Share Award Grant pursuant to the SES Holdings Pte.

2021 Share Incentive Plan (incorporated by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K (File No.

001-39845), filed with the Securities and Exchange Commission on February 8, 2022).

Form of Share Option Award Grant pursuant to the SES Holdings Pte.

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333-258691), filed with the Securities and Exchange Commission on January 5, 2022).

Controlled Equity Offering Agreement, dated February 28, 2025, by and among SES AI Corporation, Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Oppenheimer & Co.

Letter from Withum Smith+Brown, PC (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K (File No.

2 unchanged sentences

001-39845), filed with the Securities and Exchange Commission on June 16, 2023).

SES AI Corporation - Compliance with United States Federal Securities Laws Regarding Insider Trading:

Security Trading Policy

List of Subsidiaries .

Consent of Independent Registered Public Accounting Firm (Grant Thornton LLP) .

Consent of Independent Registered Public Accounting Firm (KPMG LLP).

Consent of White & Case LLP (included in Exhibit 5.1).

Power of Attorney (included on the signature page to this Annual Report).

6 unchanged sentences

Policy for the Recovery of Erroneously Awarded Compensation.

(incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K (File No.

001-39845) filed with the Securities and Exchange Commission on February 27, 2024).

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

33 unchanged sentences

Jang Wook Choi

/s/ Anirvan Coomer

February 28, 2025

Anirvan Coomer

/s/ Brian Krzanich

February 28, 2025

Brian Krzanich

February 27, 2024

/s/ Michael Noonen

2 unchanged sentences

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 9A. Controls and Procedures