SES AI Corp - Annual Report: 2021 (Form 10-K)

This Annual Report on Form principally describes the business and operations of the Company following the Business Combination, other than the financial statements and related Management Discussion and Analysis which describe the business, financial condition, results of operations, liquidity and capital resources of Ivanhoe prior to the Business Combination. Substantially concurrently with the filing of this Annual Report on Form we will be filing Amendment No. 1 to our Current Report on Form initially filed on February 8, 2022, which will include the audited consolidated financial statements of the Company for the year ended December 31, 2021 and related Management’s Discussion and Analysis of Financial Condition and Results of Operations. Interested parties should refer to our Current Report on Form for more information.

This Annual Report on Form (this “Annual Report”) contains forward-looking statements. These forward-looking statements include, without limitation, statements relating to expectations for future financial performance, business strategies or expectations for our business. These statements are based on the beliefs and assumptions of the management of the Company. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, it cannot assure you that it will achieve or realize these plans, intentions or expectations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Annual Report, words such as “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “seek”, “should”, “strive”, “target”, “will”, “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

SES is a global leader in the development and production of high-performance, Lithium-Metal rechargeable batteries for electric vehicles and other applications.

Since our founding in 2012, we have been committed to developing the world’s most advanced EV batteries. Our batteries have been designed to combine the high energy density of with cost-effective, large-scale manufacturability of conventional rechargeable batteries. The results of tests undertaken by third party testing facilities, under instructions provided by Ivanhoe Capital Acquisition Corp. and SES, demonstrate industry-leading energy density, performance and safety.

We believe that our batteries demonstrate industry-leading density and performance and will:

We have developed what we believe to be the world’s most advanced battery technology, and we have the management team in place to become a leading provider of batteries. Our third-party tested, differentiated battery technology is designed for manufacturing at scale, and will help to promote the transition from the global dependence on fossil fuel-based automotive vehicles to clean and efficient EVs. SES is supported by strategic and financial investors, including energy and chemicals conglomerate SK Inc. (“SK”), mining and manufacturing company Tianqi Lithium HK Co. Ltd. (“Tianqi”), semiconductor equipment manufacturer Applied Materials, Inc., investment firms Vertex Ventures Holdings (“Vertex”) and Temasek Holdings Limited (“Temasek”), affiliates of automotive suppliers LG Corporation (“LG”) and Foxconn Technology Group, and global original equipment manufacturers (“OEMs”) General Motors Company (“GM”), Hyundai Motor Company (“Hyundai”), Honda Motor Co. Ltd. (“Honda”), Geely Auto Group and SAIC Motors. Among that group, each of GM, Hyundai and Honda are parties to existing JDAs with SES. Our headquarters are located in Boston, and most of our executive management is located in the United States. Our operating facilities are located in Boston and Shanghai, and we may build additional facilities in these or other locations.

Beyond government and corporate action, many investors around the world have increasingly focused on the energy transition as an investment opportunity and have poured record amounts into funds aimed at helping the environment. For example, from January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase over the whole of 2019, and certain investors have called on companies to disclose a plan for how their business model will be compatible with a economy. Moreover, EVs have become increasingly popular among consumers, who increased their spending on EVs to $120 billion in 2020, a 50% increase from 2019, according to the International Energy Agency’s “Global EV Outlook 2021.”

Our company was founded in 2012 by Dr. Qichao Hu through his work in the laboratory of Dr. Donald Sadoway, an accomplished professor of materials chemistry at the Massachusetts Institute of Technology (“MIT”). The following year, SES was newly formed based on the work begun at MIT. SES raised a Series A funding round, while Dr. Hu was named among the 2013 Forbes 30 Under 30 for his work on polymer ionic liquid rechargeable batteries. In 2013, we with A123 Venture Technologies, a technology incubator, to leverage its facility to incubate SES’s early-stage technology development. SES raised Series B funding in 2015, attracting strategic investors including GM, SAIC Motors and Applied Materials. SES’s first prototyping battery facility opened in Boston in 2016, while further Series C and C+ funding rounds engaged Temasek and Tianqi in 2017 and SK in 2018, respectively. We capitalized on this momentum, inaugurating our second battery prototyping facility in Shanghai in 2019.

Our company has made strategic advances across several fronts in 2021. SES entered into JDAs with three leading global OEMs—GM, Hyundai and Honda—while simultaneously raising Series D and D+ funding. We also announced our business combination with Ivanhoe Capital Acquisition Corp. With nine years of research and development, we have ambitious plans for the future. With the start of manufacturing by our 1 GWh pilot facility (our “Pilot Facility”) and 30 GWh Expansion I Facility approaching, we believe that SES is on the way to becoming a global leader in battery production through our combination of world-class technology and manufacturability at scale.

We believe that SES is the next generation battery technology for EVs. Our unique approach to is designed to deliver high energy density batteries and high manufacturability at the same time. The unique and differentiated design of our battery, enabled by advanced, proprietary and patented materials and software breakthrough, gives us the confidence that SES will be able to deliver batteries to its customers at scale while matching or exceeding their expectations on performance, safety and cost.

Conventional technology is currently being used in most commercially available EVs. typically uses a metal oxide-based or phosphate-based cathode, and graphite or graphite/silicon-based anodes. The anode and cathode are separated by a polymer-based separator. Finally, the whole cell is filled with a liquid electrolyte that conducts lithium ions from anode to cathode as the vehicle is being driven (or battery is being discharged), and from cathode to anode as the vehicle (or the battery) is being charged. Conventional cells have been instrumental in kick starting the current EV market, and are being manufactured at scale at capacities of hundreds of GWh today. However, the automotive industry and its customers are yearning for a battery with higher energy density to improve the electric driving range (the distance that a vehicle can be driven on a single charge) while reducing battery cost to enable mass-adoption.

is widely considered and accepted as the EV battery technology capable of achieving the highest energy density. In fact, switching the current graphite/silicon anode with will currently result in the highest possible energy density for any given cathode in lithium chemistry. Lithium metal is the lightest unengineered pure metal on earth. Also, since the lithium ions do not have to diffuse in and out of the anode host material (like in the case of graphite or silicon in conventional the battery cells made with lithium metal anode can be very compact and light. This combination of lightweight and compact anode results in the highest possible gravimetric (Watt-hour (“Wh”)/kg) and volumetric (Wh/liter) energy density, respectively, for any given cathode in lithium chemistry.

One approach to known as “solid-state primarily relies on solid-state materials. The solid-state material refers to the phase (solid) within which lithium ions transport from anode to cathode (during discharge) or cathode to anode (during charge). Conventional technology uses liquid electrolytes (not solid electrolytes), and such lithium ion transport is in the liquid phase. Approaches that use solid electrolytes generally suffer from either not having sufficient conductivity at room and lower than room temperatures, poor interface between electrolyte and electrode, inability to suppress lithium dendrites when the solid electrolyte film is thin, and lack of demonstrated manufacturability of thin, large format films and multi-layer cells at scale.

In stark contrast, SES’s approach to preserves the high energy density benefits of while utilizing a cell design that primarily uses a liquid electrolyte in the cathode and separator to transport the lithium ions. There is also a protective anode coating between the anode and the separator, which consists of solid-state electrolyte materials. Hence, we call our approach as it utilizes both liquid and solid electrolyte in the cell simultaneously. This approach results not only in improved energy density due to using lithium metal anode, but also superior performance at room and lower than room temperatures, and enables manufacturing at scale just like is manufactured at scale today. In fact, we have been successfully making multi-layer cells using our approach for many years. In addition to materials, SES’s safety software adds an additional layer of battery health monitoring and safety protection.

The key breakthrough in SES cells is its unique and patented liquid electrolyte. This electrolyte is developed internally at SES with many years of scientific research and development. We use a high-concentration, electrolyte. SES’s proprietary liquid electrolyte molecules and formula turns convention on its head. While liquid electrolyte used in conventional cells is volatile and flammable, SES liquid electrolyte has low volatility and is self-extinguishing. Conventional liquid electrolytes are primarily made up of organic solvent with low concentration of salt to aid lithium ion conduction. SES’s liquid electrolyte primarily consists of salt with a very minute amount of proprietary solvent molecule. This new type of high-concentration liquid electrolyte is fundamentally different from conventional liquid electrolyte. It maintains the manufacturability advantage of liquid electrolyte in conventional manufacturing, but can enable due to its stability on lithium metal.

SES’s proprietary and patented electrolyte helps resolve the issue that has plagued adoption and progress for decades. With repeated charge and discharge cycles, lithium metal anodes are known to develop needle-like mossy structures known as “dendrites,” which can penetrate the separator and short-circuit the battery cell. Our electrolyte not only significantly slows down the growth of dendrites, but it also changes its morphology from “mossy lithium,” or sharp dendrites, to “dense deposition,” or a smooth lithium metal surface. This significantly increases cell cycle life and safety.

In addition to the electrolyte, our battery cells use a proprietary anode coating that helps provide another layer of protection against dendrites and makes lithium plating denser during charging, as well as an advanced algorithm to accurately monitor the of the battery cells and detect any impending dendrite-related (or other) safety issues much earlier.

The rest of the cell is assembled using our proprietary ultra-thin wide-width lithium metal anode, a conventional separator and a cathode. With the exception of the lithium metal anode, all materials and components utilized in our battery cells are either already being manufactured at scale or have the capability to be easily manufactured at scale without the need for intensive research and development, or development of new equipment.

To our knowledge, SES battery cells are the only cells demonstrated to meet or exceed the preliminary OEM target requirements for energy density, low temperature discharge, room temperature fast charge and discharge, cycle life and safety.

This unique combination of high-energy density in a hybrid design enables a battery that is expected to be:

As described above, our batteries are expected to be lighter, more energy dense, safer, faster-charging, and lower cost solution than batteries, and to include smart technology. Our battery technology has projected energy density of 400 Wh/kg / 1,000 Wh/L (illustrative EV range of approximately 540 miles) in large 100 (“Ah”) cells, which we believe will help to enable the expansion of an electrified world. Our current 4 Ah multi-layer battery cells have demonstrated energy density of 370 Wh/kg / 700 Wh/L in third-party testing, along with fast charging up to 80% charge in less than 15 minutes, bolstering our confidence in our ability to achieve industry-leading performance. Our batteries are expected to be significantly cheaper in the long-term, while providing fast-charge capabilities, durability and a high degree of safety.

Over the last nine years of research and development, we have strived to develop a technology that is not only differentiated, but also scalable and manufacturable. As of December 31, 2021, we had produced more than 15,000 multi-layer battery cells using our production line demonstrating that our batteries are not only playing a leading role in the industry, but are also practical.

We believe that our products will experience swift market adoption due to our current strategic partnerships with leading global OEMs GM, Hyundai and Honda. To our knowledge, we are the only company working on technology that has entered into JDAs for technology with major OEMs. We plan to collaborate with other OEMs to expedite such adoption and increase market acceptance of our battery over time.

We have spent approximately $100 million of capital over the last nine years to establish high barriers to protect our technological advantage. As of December 31, 2021, we have been granted 56 patents, with 61 patent applications pending, 53 trademark applications pending and 25 trade secrets. For more information, see “- Our Intellectual Property” below.

Our team includes both scientists and engineers with training from the world’s foremost academic institutions and exceptional industry experience. Leading our business operations are our founder and Chief Executive Officer Dr. Qichao Hu (our “Founder”), who earned his PhD in Applied Physics from Harvard University and his BS in Physics from MIT, and our President and Chief Operating Officer Rohit Makharia, who previously spent 19 years with GM, 12 of which he spent focusing on fuel cell and battery EVs. Our research, development, engineering and manufacturing efforts are spearheaded by Chief Technology Officer Yongkyu Son, who has 19 years of experience in cell development including with Apple, SK Innovation (“SKI”) and Samsung SDI, and Chief Science Officer Dr. Hong Gan, who has 25 years of battery research and development experience in both national labs and industry, during which he made key contributions to silicon based and technologies. For more information, see “Combined Company Management and Governance After the Business Combination.”

Our mission is to facilitate the widespread adoption of sustainable electric transportation both on land and in air by creating the high energy density batteries centered around long-range performance and safety.

. The results of tests undertaken by third-party testing facilities under instructions provided by Ivanhoe Capital Acquisition Corp. and SES demonstrate industry-leading energy density, performance and safety. We are currently working to develop and produce batteries with specifications required by OEMs for their EVs, with the goal of enabling commercial production in 2025. For more information on collaborations with these OEMs, see “- Our Partnerships” below. batteries are prototypes developed for OEMs based on OEMs’ technical specifications, and they would fully meet those technical specifications. These are in contrast with batteries, which would be functional prototypes allowing full drivability and tested in actual vehicles, and batteries, which would be fully functional, mature samples for mass production. As we remain focused on battery development, we do not yet have any arrangements with OEMs to manufacture consumer-ready batteries for their EVs.

. We will also continue to enhance our production processes to enable volume manufacturing in a cost-effective manner. We expect to complete our Pilot Facility by 2023, which we expect to be 100% and operated. We plan to concurrently develop a 10 GWh joint venture plant that we expect to be operational in 2025 and that will ramp up to 30 GWh by 2027 (our Expansion I Facility), which we expect to be located in the United States. Additionally, we expect to complete a 30 GWh facility in 2026 that will ramp to 70 GWh by 2028 (our Expansion II Facility), which would represent an additional expansion of our existing facilities. In total, we expect to have more than 100 GWh of capacity by 2028.

. As discussed below under “Our Partnerships,” while we will continue to strengthen our partnerships with GM, Hyundai and Honda in the use of our battery technology, we intend to work closely with other OEMs to make our battery widely available over time.

. Cost reduction remains an important underpinning of EV market growth and our future growth. Currently, we have no long-term supply arrangements, and expect to negotiate long-term supply contracts as volume grows. For more information, see “Our Suppliers” below. However, in addition to arrangements with suppliers, we plan to explore opportunities for partial vertical integration both upstream and downstream. Vertical integration is used by battery cell makers to reduce their costs, increase their competitiveness and streamline product development and commercialization for OEMs, by acquiring upstream and downstream participants in their supply chains. Upstream, we intend to explore integrating vendors of key materials of our cells and providers of key equipment and engineering capabilities, such as cell assembly, anode processing, chemical processing and safety testing. Downstream, we plan to explore integrating providers of key engineering capabilities, such as battery monitoring software, charging optimization software, battery module development and recycling.

. We intend to continue leveraging our world-class science, engineering and manufacturing expertise to innovate future products that will continue to provide leading technology coupled with manufacturability. We continue to invest in research and development in areas such as cell chemistry and structure, battery materials, AI software and advanced manufacturing, to build on our intellectual property portfolio.

We intend to work closely with OEMs and other strategic partners to develop and produce our battery cells, with the aim of making them widely available in EVs over time.

We have maintained a strong partnership with GM since 2015, when GM led our Series B financing, and since then, GM has invested approximately $70 million in our company, including a $50 million investment in our Series D funding round and a $10 million investment in the private placement transaction in connection with the Business Combination (the “PIPE Financing”), via GM’s affiliates and subsidiaries. GM is one of the world’s largest car companies, and has voiced its desire to be a leader in EVs. GM has announced plans to launch more than 30 new EV models by 2025 and only sell vehicles by 2035. Our collaboration initially involved close technical and research and development collaboration on SES’s battery technology. In February 2021, we entered into a JDA with GM, valued at over $50 million, under which we will work with GM to jointly develop an battery cell. For more information on the GM entities party to the transaction, see “Certain Relationships and Related Transactions—SES Related Person Transactions—GM Joint Development Agreement.”

We have also fostered a partnership with Hyundai, another global automobile leader. In December 2020, we entered into a JDA with Hyundai. In May 2021, Hyundai made an investment of $50 million in our Series D plus funding round and signed an JDA, under which we and Hyundai are collaborating to jointly develop an battery cell. Hyundai also purchased $50 million of our Class A common stock in the PIPE Financing.

In December 2021, Honda became the third global automobile leader to enter into an JDA with us. Honda purchased $75 million of our Class A common stock in the PIPE Financing as the single largest PIPE Financing investor.

The JDAs with GM, Hyundai and Honda do not represent commitments by these OEMs to purchase our battery cells, and are focused only on development. Although the JDAs set timeframes for the attainment of certain development milestones, these timeframes are objectives only and may be subject to ongoing elaboration and change by the parties. The JDAs also do not prohibit GM, Hyundai, Honda or SES from entering into additional agreements with other third parties. To our knowledge, neither GM, Hyundai nor Honda has entered into additional agreements with other third parties for the development of batteries.

As discussed above under “Our Growth Strategy—Commercialization roadmap - Battery manufacturing at scale,” we expect to form strategic joint ventures with one or more battery makers or OEMs to support the of our Expansion I Facility. We plan for our Expansion I Facility to be a joint venture with an OEM strategic partner and that we will supply our own coated anode and electrolyte to the facility, and for our Expansion II Facility to be 100% and operated. We expect to use the proceeds from the Business Combination for our Expansion I Facility. We anticipate a combination of debt and equity financing to fund the remaining facilities. Like our current partners and stockholders, we believe that any and all future partners will provide us with important support and resources in developing and scaling our battery technology.

We rely on a combination of the intellectual property protections afforded by patent, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies. As of December 31, 2021, we have been granted 56 patents, with 61 patent applications pending, and have 44 registered or allowed trademarks, with 53 trademark applications pending. We also rely substantially on unpatented proprietary technology, including or trade secrets, with 25 trade secrets as of December 31, 2021.

We possess patents, licenses and/or covering the following proprietary technologies:

Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for our designs and technology. Our policy is to protect our proprietary and intellectual property position by, in addition to filing patent applications in various jurisdictions related to our proprietary technology, relying on trade secrets, and continuing technological innovation. We may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position. For a more comprehensive discussion of the risks related to our intellectual property, please see “Risk Factors—Risks Relating to SES’s Business and Industry—Risks Relating to Intellectual Property.”

Currently, we are in product development and our product design has yet to be finalized, so our volume demand is limited and we do not have long-term supply arrangements. As volume demand grows, we expect to negotiate long-term supply contracts. For our current product development needs, we source from third-party suppliers for raw materials, components and equipment necessary to develop and manufacture our battery cells. See “—Our Growth Strategy—Commercialization roadmap—Cost reduction” above.

We believe that our employees are among the best in the EV battery industry. Currently, we employ approximately 126 employees globally. By headcount, approximately of our employees are located in the United States, approximately are located in China and a remaining handful of employees are located in each of South Korea and Singapore. All of our executive management is located in the United States, other than our Chief Legal & Corporate Officer, who is located in Singapore. Although we do not currently have definitive plans, as our joint development of batteries with certain U.S. and South Korean OEMs continues to progress, we would expect to launch future research facilities and, eventually, commercial production manufacturing facilities, in the United States and South Korea, while also significantly increasing our employee headcount in those locations. Currently, approximately 75% of our employees worldwide are engaged in research and development and related functions, with expertise in all aspects of the development process, including materials science, chemistry, engineering and software. More than half of these employees hold advanced engineering and scientific degrees, including many from the world’s top universities, and have extensive experience from large companies.

While SES has grown in size significantly, at its core it retains its early-stage culture. It attracts and honors employees that want to make a dent in the universe. In addition to competitive compensation and benefits, we set challenging yet meaningful goals for our employees and help them push their limits, as we believe the best and brightest are fundamentally driven by the desire to solve tough, meaningful problems, be part of an exciting movement and make a real impact in the industry.

Our headquarters are located in Boston, and most of our executive management is located in the United States. Our operating facilities are located in Boston and Shanghai. Both properties are leased, with the Boston lease and the Shanghai lease each expiring in 2026. Our Boston facility focuses on chemistry, materials and algorithm research and development, as well as engaging with OEMs worldwide, including GM, Hyundai and Honda. Our Shanghai facility focuses on supply chain development, manufacturing process development, cell product development, software, BMS and module development. We are building our 1 GWh Pilot Facility in China for the development of battery cells, which we expect to be completed in 2023. We have also set up an office in Seoul focused on supply chain, customer relations and our collaboration with partners in the region. As our joint development of batteries with certain U.S. and South Korean OEMs continues to progress, we also expect to launch future research facilities and, eventually, commercial production manufacturing facilities, in the United States and South Korea, while also significantly increasing our headcount in those locations. Specifically, we expect to enter into a joint venture with one or both of our OEM partners to build our Expansion I Facility in the United States. We expect to build the first 10 GWh portion of our Expansion I Facility in the United States in 2023 and 2024, with plans for such facility to be operational by 2025. SES expects that this Expansion I Facility will be located in the United States, as the Expansion I Facility would target the U.S. automotive market (the largest EV market for its OEM partners).

In addition to our 1 GWh Pilot Facility (which we are building in Shanghai) and our planned 30 GWh and 70 GWh facilities, we are planning to build a facility in South Korea. We continue to assess our ongoing facilities needs and may build new facilities or lease additional facilities in our current or other locations according to our manufacturing needs and the needs of any OEMs with whom we enter into collaborations.

The battery market, like the EV market it services, is fast-growing, extremely competitive and driven by the innovation of both large incumbents and emerging entrants like SES. Contemporary Amperex Technology Co. (“CATL”), SKI, LG Energy Solutions, Panasonic and Samsung SDI are among the existing suppliers of batteries to the EV industry. Although their offerings tend to be conventional they could develop batteries that would directly compete with our offerings. Additionally, the efforts of OEMs, including Tesla, Nio, Rivian and Toyota, to develop their own EV battery production capabilities could reduce demand for SES’s technology if they are successful. Newer entrants, including Northvolt, Sila Nanotechnologies, Solid Power, QuantumScape, Ganfeng Lithium and WeLion, are supplying next-generation batteries that could compete with ours, and others could feasibly emerge.

We acknowledge that incumbents and emerging entrants may have greater resources to invest in advancing their technologies, access to more potential customers, or strategic relationships with OEMs (or other third parties) that may give them a competitive edge. We further acknowledge that these disparities, where they exist, have the potential to harm our business, results of operations or financial condition. However, SES combines the technology innovation of emerging entrants with the practical execution capability of incumbents, and we believe that SES, with its determination and focus, will be able to be successful in the competitive space.

We incurred net losses of approximately $13.9 million for the year ended December 31, 2020 and $31.3 million for the year ended December 31, 2021, and had an accumulated deficit of approximately $63.0 million from our inception through December 31, 2020 and $94.3 million from our inception through December 31, 2021. As discussed in “,” to date, we have only validated capabilities of battery cell technology and have not for sale. As a result, we have yet to generate any revenue from our business operations, and since inception, we have not achieved profitable operations or positive cash flows from our operations.

Our plan is to effect the production at scale and commercialization of our battery technology in three phases, each involving manufacturing capacity with higher output (under current plans, more than 100 GWh), over multiple years (under current plans, through 2028). Under this growth plan, we believe that we will continue to incur operating and net losses each quarter until at least 2026, the year following the one in which we expect to begin generating revenue as part of our Expansion I Facility becomes operational at 10 GWh of capability. For more information, see “.” This plan and the related revenue and other financial projections reflect current estimates of future performance, based on certain financial and operational assumptions. Given our limited operating history, there can be no assurance that the actual results will be in line with our expectations. As discussed in other risk factors in this section, factors that could impact the timing and levels of our profitability include, but are not limited to: the level of demand for our products; the performance of our products; the projected supply materials for our products; a reduction in the cost selling prices of EVs and our products; projected production capacities of our facilities; our collaboration with OEMs; the projected gross margin achievable upon sale of our products; and the extent to which growth of EV markets and continued shift in consumer preference will conform with projections.

Over time, we expect that we will need to raise additional funds through a variety of possible methods, including, but not limited to, entry into joint ventures or other strategic arrangements, the issuance of equity, equity-related or debt securities or receipt of credit from financial institutions. These funds are expected to finance our principal sources of liquidity, ongoing costs such as research and development relating to our batteries and the construction of manufacturing facilities, including the creation of the remainder of our Expansion I Facility and all of our Expansion II Facility. For more information, see “” We cannot be certain that additional capital will be available on attractive terms, if at all, when needed, which could be dilutive to stockholders. We may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects. Furthermore, the cost of debt could be higher than anticipated, which could negatively affect our earnings.

To our knowledge, battery cells are the cells with published performance and safety test results from tests conducted by third-party testing facilities. The results of these tests show that our multi-layer cells meet or exceed the preliminary OEM target requirements for energy density, low temperature discharge, room temperature fast charge and discharge, cycle life and safety. is widely considered and accepted as the EV battery technology capable of achieving the highest energy density. However, we have not batteries for use by an actual EV, and no one has successfully demonstrated use of high energy in EVs. cell technology may prove unworkable when used in actual EVs, which would substantially undercut our business, operating results, financial condition and prospects, and could effectively eliminate the value of your investment.

Once commercial production of technology commences, our batteries may contain defects in design and manufacture that may cause them to not perform as expected or that may require repairs, recalls, and design changes. Our battery cells are inherently complex and incorporate technology and components that have not been used for other applications and that may contain defects and errors, particularly when first introduced. For more information, see “” Due to our limited operating history, we have a restricted frame of reference from which to evaluate the long-term performance of There can be no assurance that we will be able to detect and fix any defects in our batteries prior to the sale to potential consumers. If our batteries fail to perform as expected, we could lose design wins and customers may delay deliveries, terminate further orders or initiate product recalls, each of which could adversely affect our sales and brand and could adversely affect our business, financial condition, operating results and prospects.

While technology has been tested in many applications for several completely new. Even if we work with OEMs to thoroughly there is no guarantee that users in the field will not drive outside of recommended driving conditions and unintentionally abuse the batteries. In such events, performance and safety may be compromised, thus having a materially negative impact on our business, financial condition, operating results and prospects.

We have entered into JDAs with GM, Hyundai and Honda to jointly with the expectation that such development will culminate in the widespread use of our technology in future EVs with these major OEMs, and eventually with other large OEMs. For more information, see “.” However, as we are still in the developmental stages with each of GM, Hyundai and Honda, we do not currently have existing arrangements to produce for their vehicles, and production-ready models of our batteries will not be available until sufficiently tested and approved for inclusion in future OEMs’ EVs. Each time we produce a battery with a higher output, the product must undergo and testing. Anything that delays the consistent development and testing cells samples at increasingly higher outputs, such as technology or engineering issues, could alter our prospects and adversely affect our business.

Our research and development efforts strive to create products that are on the cutting edge of technology and meeting the evolving requirements of our customers, but competition in our industry is high. To secure acceptance of our products, we must also constantly develop and introduce cost-effective, increasingly more with enhanced functionality and performance to meet evolving industry standards. If we are unable to retain target customers, or convert early trial deployments into meaningful orders, our business, financial condition, operating results and prospects could be materially adversely affected. In addition, we may not receive adequate assistance from OEMs to commercialize our products successfully, which could impair our results of operations.

Currently, we are in product development and our product design has yet to be finalized, so our volume demand is limited and we do not have long-term supply arrangements. As volume demand grows, we expect to negotiate long-term supply contracts. For our current product development needs, we source from third-party suppliers for raw materials, components and equipment necessary to develop and manufacture cells. For more information, see “.”

To the extent that, when our volume demand so requires, we are unable to enter into long-term agreements with our current or future suppliers on beneficial terms, or such suppliers experience difficulties ramping up their supply to meet our long-term requirements, we may need to seek alternative sources for necessary raw materials, components or equipment necessary to develop and manufacture cells, produce the raw materials or additional redesign our proposed products to accommodate available substitutes or at reasonable cost. To the extent that our suppliers experience any delays in providing or developing their products, we could also experience delays in delivering on our timelines.

Changes in business conditions, unforeseen circumstances and governmental changes, as well as other factors beyond our control or which we do not presently anticipate, could affect our suppliers’ ability to deliver raw materials, components or equipment to us on a timely basis. For instance, we may be impacted by currency fluctuations, trade barriers, tariffs or shortages and other general economic or political conditions, such as the ongoing military conflict between Russia and Ukraine, which may limit our ability to obtain key raw materials or components for batteries or significantly increase freight charges and other costs and expenses associated with our business. Any of the foregoing could materially and adversely affect our business, financial condition, operating results and prospects.

We expect to start building our Pilot Facility in 2022 in Shanghai and to build additional facilities in other countries to meet the expected demand for our products. For more information, see “” and “.” Because we expect to rely heavily on complex machinery, well-trained personnel and well-managed supply chain for our operations in these facilities, our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs.

The production of our facilities will also require us to hire and train highly-skilled personnel to operate such facilities, including engineers, workers, and indirect laborers. Recruiting and training such skilled staff will take significant cost and time, and an inability to do so timely or at all will inhibit the successful operation of these facilities, thus negatively affecting our business. In addition, the manufacturing of at our Pilot Facility and other facilities will require us to obtain various production licenses and permits, receive the necessary internal approvals from our customers regarding specifications and enter into agreements for the supply of raw materials, components and manufacturing tools and supplies. If we do not complete such steps timely, our manufacturing timeline or output could be significantly delayed or inhibited.

Finally, the production of at scale with our forecasted cost advantage, compared to will require us to achieve rates of throughput, use of electricity and consumables, yield, and rate of automation demonstrated for mature batteries and battery material. As we have not at scale, our ability to achieve such rates is untested and subject to significant constraints and uncertainties. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, environmental hazards and remediation, costs associated with commissioning of machines, damages or defects in electronic systems, industrial accidents, fire and seismic activity and natural disasters, and problems with equipment vendors. Should operational risks materialize, they may result in lower yield, which would negatively affect our revenue growth and profitability as projected. Additionally, they could cause personal injury to or death of workers, the loss of manufacturing equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all of which could have a material adverse effect on our business, financial condition, operating results and prospects.

We have entered into strategic alliances, and may in the future enter into additional strategic alliances. For example, as further discussed in “,” we have JDAs with GM, Hyundai and Honda. We expect to form strategic joint ventures with one or more battery makers or OEMs to support our Expansion I Facility.

While offering potential benefits, these current and future strategic alliances with battery manufacturers, OEMs and others could subject us to a number of risks, including risks associated with sharing proprietary our partners and costs of establishing and maintaining new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of our partners and, to the extent any of them suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with them. For example, if we rely on our partners’ manufacturing facilities, those operations would be outside of our control. We could experience delays if our partners do not meet agreed-upon timelines or experience capacity constraints, and in turn, we could lose customers and face reputational harm.

The EV battery market, like the EV market it services, is fast-growing, extremely competitive and driven by the innovation of both large incumbents and emerging entrants like SES. For more information, see “.” battery technology has been widely adopted and our current competitors have, and future competitors may have, greater resources than we do and may also be able to devote greater resources to the development of their current and future technologies. These competitors also may have greater access to customers and may be able to establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and competitive positioning. In manufacturers may continue to reduce cost and expand supply of conventional batteries and therefore reduce the prospects for our business or negatively impact our ability to sell our products at a market-competitive price and yet with sufficient margins.

A number of development-stage companies are also seeking to develop new technologies Potential new entrants are seeking to develop new technologies for cathodes, anodes, electrolytes and additives. Some of these companies have established relationships with OEMs and are in varying stages of development. Additionally, many OEMs are researching and investing in batteries efforts and, in some cases, in battery development and production. Furthermore, other companies are developing alternative technologies such as advanced diesel, ethanol, fuel cells or compressed natural gas, as well as potential improvements in the fuel economy of the internal combustion engine. We expect competition in battery technology and EVs to intensify due to increased demand for these vehicles and a regulatory push for EVs, continuing globalization, and consolidation in the worldwide automotive industry. Developments in alternative technologies or improvements in battery technology made by competitors may materially adversely affect the sales, pricing and gross margins of our batteries. If a competing technology is developed that has superior operational or price performance, our business will be harmed. Similarly, if we fail to accurately predict and ensure that our battery technology can address customers’ changing needs or emerging technological trends, or if our customers fail to achieve the benefits expected from our business will be harmed.

Once we begin commercializing our products, our customers’ final purchase orders may not be consistent with our estimates. If these final purchase orders substantially differ from our estimates at that point in time, we may have excess product inventory or product shortages. Excess product inventory could result in unprofitable sales or write-offs, as our products, which are customized, are susceptible to obsolescence due to their limited shelf life. Because we have no operating history with respect to manufacturing for sale for any OEM, we may also be unable to forecast accurately the pace of manufacturing or our products by them. Additionally, EV batteries are susceptible to price declines. Producing additional products to make up for any product shortages within a short time frame may be difficult, making us unable to fulfill the purchase orders, especially due to the customized nature of our products. In either case, our business, financial condition, operating results and prospects may be adversely affected.

We have made and continue to make investments in research and development with the goal of further innovation and cost reduction. For information on our current technology, see “” and “.” Our ability to create newer products and line extensions and to sustain currently contemplated products is affected by whether we can, amongst other things:

Due to the high energy density inherent in lithium-based batteries, our batteries can pose certain safety risks, including the risk of fire. is designed to accurately monitor and predict most safety incidents. Nevertheless, accidents causing death or personal injury or property damage can occur, and no high energy density battery will ever be 100% safe. For example, with repeated charge and discharge are known to develop needle-like mossy structures known as “dendrites,” which can penetrate the separator and short-circuit the battery cell. Although we incorporate safety procedures in the research, development, manufacture and transportation of batteries that are designed to minimize safety risks - for example, technology is designed to slow down the growth of dendrites and change their morphology - the manufacture or use of our products may still cause accidents. Any accident, whether occurring at the manufacturing facilities or from the use of our products, may result in significant production interruption, delays or claims for substantial damages caused by personal injuries or property damage.

Our future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected expenses and be unable to meet our eventual customers’ requirements, all of which could materially adversely affect our business, financial condition, operating results and prospects. To manage our current and anticipated future growth effectively, we must continue to maintain and enhance our infrastructure, financial and accounting systems and controls. We must also attract, train and retain a significant number of scientists, engineers, sales and marketing personnel, customer support personnel, professional services personnel, technical personnel and management personnel, and the availability of such personnel may be constrained. For more information, see “.”

Our success depends on our ability to attract and retain our executive officers, key employees and other qualified personnel, and our operations may be severely disrupted if we lost their services. As we build our brand and become better known, there is increased risk that competitors or other companies will seek to hire our personnel. All of our executives and engineering staff are subject but we may face the challenge that many companies face of enforcing The failure to attract, integrate, train, motivate and retain these personnel could seriously harm our business and prospects.

To execute our business plan, we must attract and retain highly qualified personnel in research and development, sales and marketing, production and other leadership roles. Competition for these employees is intense, and we may not be successful in attracting and retaining qualified personnel. We have from time to time in the past experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications in relevant industries. Many of the companies with which we compete for experienced personnel have greater resources than we have. In addition, in making employment decisions, particularly in high-technology industries, job candidates often consider the value of the equity they are to receive in connection with their employment. Employees may be more likely to leave us if the shares they own or the shares underlying their equity incentive awards have significantly appreciated or significantly reduced in value. A significant talent pool consists of nationals from countries that may require a license from the United States Bureau of Industry and Security to work with our technology, which raises the cost of hiring due to the uncertainty that a license may not be granted and the candidate would be unemployable in the role envisioned. For more information, see “ .” If we fail to attract new personnel, or fail to retain and motivate our current personnel, our business and growth prospects could be harmed.

Any of these factors could impair the development of the EV market, lowering demand. In anticipation of an expected increase in the demand for EVs in the next few years, we plan to develop, test, manufacture and commercialize technology. However, the markets we expect to target, primarily those in North America, Europe and Asia may not achieve the level of growth we expect. If any market fails to achieve our expected level of growth, we may have excess manufacturing capacity and may not be able to generate enough revenue to achieve or sustain our profitability.

Over time, vehicles using our batteries will see performance decline as the battery ages. Furthermore, excessive fast charging (for example, repeatedly using super chargers) can adversely affect the performance of technology by degrading the battery over time. If these sources of performance decline dissuade potential customers from buying EVs built using our batteries, it could negatively impact our capacity for future sales.

Our key technological innovations, including innovations that are currently commercialized in our products and innovations that we plan to deploy in the future, are described in our issued patents and pending patent applications, as well as patent applications that we plan to file in the future. For more information, see “.” The process of applying for and obtaining a patent is expensive, time consuming and does not always result in patent claims as expected or needed. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions where protection may be commercially advantageous, or we financially may not be able to protect our proprietary rights at all. There is also no assurance that the pending applications will result in issued patents.

In addition, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from marketing our products and practicing our technology. Alternatively, third parties may seek to market their products similar to or otherwise competitive with our products. In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or agency with jurisdiction may find our patents invalid and/or unenforceable. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. We do not patents, but under the terms of our of patents and patent applications with third parties is possible in the future. If the other owners are unwilling to join us in an enforcement action, we may be unable to enforce our jointly owned patent rights against infringers. may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

We may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position. We rely upon a combination of the intellectual property protections afforded by patent, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies. For more information, see “.”

We also rely substantially on unpatented proprietary technology, trade secrets. We seek to protect our intellectual property rights in various ways, including through nondisclosure and invention assignment agreements with our employees and consultants and with business partners and other third parties. We cannot ensure that these agreements will provide meaningful protection for our trade other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade other proprietary information. There can be no assurance that employees, consultants, vendors and customers have executed such agreements or have not breached or will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors. The theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products and harm our business, the value of our investment in development or business acquisitions could be reduced and third parties might make claims against us related to losses of their confidential or proprietary information. Any of the foregoing could materially and adversely affect our business.

Patent, trademark and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States, and efforts to protect against the unauthorized use of our intellectual property rights, technology, and other proprietary rights may be more expensive and difficult outside of the United States. Some courts inside and outside the United States may be less willing or unwilling to protect trade secrets and agreement terms that difficult to enforce in many jurisdictions and might not be enforceable in certain cases. Failure to adequately protect our intellectual property rights could result in our competitors using our intellectual property to offer products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, financial condition, operating results and prospects.

As a result of the certain domestic and foreign intellectual property authorities have amended their filing requirements and other procedures, including, but not limited to, extending deadlines and waiving fees. These accommodations have not been applied uniformly across all intellectual property authorities globally, and the effectiveness and duration of existing action is unclear. Further, the has created uncertainty with respect to the uninterrupted operation of domestic and foreign intellectual property authorities, which, among other things, may cause delayed processing of renewal and application filings. Our inability to establish and maintain current and future intellectual property rights may have an adverse effect on the growth and reputation of our business. Further, the constantly evolving nature of may change its effect on our intellectual property rights over time in ways that cannot be reasonably anticipated or mitigated. This could have an adverse effect on our business, results of operations, and financial condition.

Additionally, we believe that, currently, the availability of government incentives and subsidies available OEMs is an important factor considered by customers when purchasing EVs, and that growth in the battery market will depend in part on the availability and amounts of these subsidies and incentives for EVs. Any further reduction or elimination of government and economic incentives or subsidies may result in the diminished competitiveness of the alternative fuel vehicle industry generally or EVs that use our batteries in particular.

Our operations in the United States and China may be subject environmental laws and regulations, including laws and regulations relating to water, discharges, emissions, chemicals, hazardous materials, natural resources, remediation and contamination. Compliance with these laws can be difficult and costly. For example, battery life cycle management regulations and regulations governing the transport of batteries may impose substantial requirements on our operations in the United States. Our operations may be required to obtain and comply with environmental permits, many of which may be difficult and expensive to obtain and must be renewed on a periodic basis. A failure to comply with these laws, regulations or permits could result in substantial liabilities, including fines, penalties, the suspension or loss of permits, and possibly orders to cease

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, and other anti-corruption laws and regulations in countries in which we conduct activities. Anti-corruption laws prohibit us and our officers, directors, employees, contractors and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing, directly or indirectly, anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. These laws also require companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. These laws also bribery and soliciting or accepting bribes. A violation of any of these laws or regulations could result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences and adversely affect our business, financial condition, operating results and reputation. Our policies and procedures designed to ensure compliance with these laws and regulations may not be sufficient and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.

Detecting, investigating and resolving actual or alleged violations of anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws can require a significant diversion of time, resources and attention from these laws could subject us to whistleblower complaints, adverse media coverage, investigations, subpoenas received, enforcement actions, prosecution and severe fines, damages and administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, financial condition, operating results and reputation. In addition, changes in these laws in the future could adversely impact our business and investments in the SES securities.

We face various risks relating to public health issues, including epidemics, pandemics, and other outbreaks, including the ongoing pandemic. The effects and potential effects but are not limited to, its impact on general economic conditions, trade and financing markets and changes in customer behavior, and significant uncertainty in the overall continuity in business operations. The spread also disrupted the manufacturing, delivery and overall supply chain of EV manufacturers and suppliers and EV batteries, and has led to a global decrease in vehicle sales in markets around the world. In particular, may cause a decrease in demand for EV batteries if fleet operators delay purchases of vehicles or if fuel prices for internal combustion engine vehicles remain at levels that do not create an incentive to accelerate the migration from internal combustion engine vehicles to EVs, an increase in costs resulting from the efforts of manufacturers of EVs or EV batteries to mitigate the effects in EV manufacturers’ schedules to full commercial production of EVs and disruptions to these supply chains, among other negative effects.

The pandemic has resulted in government authorities implementing many measures to contain the spread travel bans and restrictions, business closures and other public health safety measures. These measures may be in place for a significant period of time and may be reinstituted if conditions deteriorate, which could adversely affect manufacturing plans. As a precaution, we took certain preventive measures in light of this pandemic and reduced our operational activities during the year ended December 31, 2021. In particular, we temporarily reduced employee compensation, recommended that work from home, and in research and development activities. As a result, our personnel costs and travel related costs were lower in 2021. We also were required to implement additional safety protocols for essential workers, which resulted in delays in the timing of project execution.

Following and the easing of restrictions since the beginning of the year ended December 31, 2021, we have ramped up research and development hiring and increased our investment However, measures that have been relaxed may be to spread. If, as a result of these measures, we have to limit the number of employees and contractors at any research and development or manufacturing facility at a given time, it could cause a delay in our development, testing and manufacturing efforts and a delay in our product schedule. If our workforce is unable to work effectively, including due to illness, quarantines, government actions or other restrictions in connection operations will be adversely affected.

The extent to which may continue to affect our business will depend on continued developments, which are uncertain and cannot be predicted. Even after pandemic has subsided, we may continue to suffer an adverse effect to our business due to its global economic effect, including any economic recession. If the immediate or prolonged effects of have a significant adverse impact on government finances, it would create uncertainty as to the continuing availability of incentives related to EV purchases and other governmental support programs. In addition, a recurrence or an emergence of additional variants or strains could cause other widespread or more severe impacts depending on where infection rates are highest.

Our Charter and Bylaws contain provisions to limit the ability of others to acquire control of us or cause us to engage in transactions, including, among other things:

Dr. Hu, directly or indirectly through entities affiliated with him, has the ability to control the outcome of all matters submitted to our stockholders for approval, including the election, removal, and replacement of directors and any merger, consolidation, or sale of all or substantially all of our assets. As our Chief Executive Officer, Dr. Hu has control over and the implementation of major strategic investments, subject to authorization and oversight by our board of directors. As a board member and officer, Dr. Hu also owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. However, Dr. Hu is still entitled to vote his shares, and his concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support. Conversely, this concentrated control could allow the SES Founder Group, members of the SES Founder Group or their permitted transferees to consummate such a transaction or otherwise vote in a way that our other stockholders do not support. This was designed to shepherd our long-term growth amidst significant near term fluctuations and uncertainty in the market.

We have incurred and will continue to incur significant legal, accounting and other expenses that Old SES did not incur as a private company. We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE. Our management and other personnel have devoted and will need to continue to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make certain activities more time-consuming and costly, which will increase our operating expenses. For example, these rules and regulations applicable to public companies may make it more difficult and more expensive for us to obtain director and officer liability insurance and we will likely incur additional costs to maintain sufficient insurance coverage as a public company.

Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and errors in our financial statements and operate successfully as a public company. In connection with the preparation of our fiscal year 2021 financial statements, we identified a material weakness in our internal control over financial reporting, which we are currently working to remediate, related to certain errors in our historical financial calculation of stock-based compensation expense and stock-based compensation disclosures during the three and nine months ended September 30, 2021. These errors led us to conclude that the financial statements during the three and nine months ended September 30, 2021 should be restated. In light of the foregoing, and in order to comply with the requirements of being a public company, we are undertaking and will continue to undertake various actions, such as implementing additional internal controls and procedures and hiring additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge. The measures we take to remediate the deficiency in our internal control over financial reporting and to implement and maintain effective internal controls may not be sufficient to satisfy our obligations as a public company and produce reliable financial reports, and we may not be able to implement the required controls in a timely fashion. If we experience any additional material weaknesses or significant deficiencies or otherwise fail to develop or maintain an effective system of internal controls in the future, we may need to disclose such matters investors may lose, which may adversely confidence in us and our financial statements, which could adversely affect the value of our securities. In addition, if we cannot provide reliable financial reports or prevent fraud and errors in our financial statements, our reputation and operating results could be materially adversely affected.

In addition, as a public company, we are required to comply with SEC rules that implement Sections 308 and 404 of the Sarbanes-Oxley Act. Under these rules, management is required to certify financial and other information in our quarterly and annual reports and is required to make a formal assessment of the effectiveness of our internal control over financial reporting in connection with the filing of our annual reports. Additionally, once we cease to be an emerging growth company, we are required to include a report on internal control over financial reporting issued by our independent registered public accounting firm.

For as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following January 11, 2026, the fifth anniversary of the completion of Ivanhoe’s IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion securities during the prior three-year period. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, or if we no longer can be classified as an “emerging growth company,” we expect that we will incur additional compliance costs, which will reduce our ability to operate profitably.

 

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Currently, our Class A common stock and public warrants are listed on the NYSE under the symbols “SES” and “SES WS.” In order to continue the list of these securities on the NYSE, we are required to maintain certain financial, distribution and stock price levels. Generally, we are required to maintain a minimum market capitalization (generally $50,000,000) and a minimum number of holders of our securities (generally 300 public holders). If NYSE delists our securities from trading on its exchange and we are not able to list its securities on another national securities exchange, we expect our securities could be quoted on If this were to occur, we could face significant material adverse consequences, including:

The exercise price for our warrants is to adjustment, which exceeds the market price of our Class A common stock, which was on the closing price of our Class A common stock on the NYSE on March 28, 2022. There can be no assurance that the public warrants will ever be in the money prior to their expiration and, as such, the warrants may expire worthless.

We may redeem outstanding warrants (excluding any private placement warrants held by the Ivanhoe Capital Sponsor LLC (the “Sponsor”) or its permitted transferees) at any time after they become exercisable and prior to their expiration, at $0.01 per warrant, provided that the last reported sales price (or the closing bid price of our Class A common stock in the event our Class A common stock is not traded on any specific trading day) of our Class A common stock equals or exceeds any 20 trading days within a ending on the third business day prior to the date we send proper notice of such redemption, provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants, there is an effective registration statement under the Securities Act covering the shares of our Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force a warrant holder: (i) to exercise its warrants and pay the exercise price therefore at a time when it may be disadvantageous for it to do so, (ii) to sell its warrants at the then-current market price when it might otherwise wish to hold its warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, will be substantially less than the market value of its warrants.

As of the closing of the Business Combination, there were 14,213,280 warrants outstanding. Each warrant entitles its holder to purchase one share of Class A common stock at an exercise price of will expire at 5:00 p.m., New York time, five years after the closing of the Business Combination or earlier upon redemption of our Class A common stock or our liquidation. To the extent warrants are exercised, additional shares of Class A common stock will be issued, which will result in dilution to our then existing stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could depress the market price of our Class A common stock.

Although the SES Founder Group, the Sponsor and each other stockholder party to the registration rights agreement is prohibited from transferring any securities of SES until the earlier of the date that is 180 days following the Closing Date, these shares may be sold under a registration statement after the expiration or early termination or release of the respective the registration rights agreement. As restrictions on resale end and the registration statements are available for use, the market price of Class A common stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

As of March 28, 2022, the SES Founder Group owned approximately 12.8% of our outstanding common stock and 56.5% of the total voting power. Accordingly, we are a “controlled company” for purposes of the NYSE listing requirements. As such, we are exempt from the obligation to comply with certain corporate governance requirements, including the requirements that a majority of our board of directors must consist of independent directors, and that we have nominating and compensation committees that are each composed entirely of independent directors. These exemptions do not modify the requirement for a fully independent audit committee. If we cease to be a “controlled company,” we must comply with the independent board committee requirements as they relate to the nominating and compensation committees, subject to

Our principal business location is in Boston, MA, which is subject to a written lease agreement with an unrelated third party. We have no other offices. Our operating facilities are located in Boston, MA and Shanghai, People’s Republic of China. Both properties are leased, with the Boston lease and the Shanghai lease each expiring in 2026. Our Boston facility focuses on chemistry, materials and algorithm research and development, as well as engaging with OEMs worldwide, including GM, Hyundai and Honda. Our Shanghai facility focuses on supply chain development, manufacturing process development, cell product development, software, BMS and module development. We are building our 1 GWh Pilot Facility in China for the development of battery cells, which we expect to be completed in 2023. We have also set up an office in Seoul, South Korea focused on supply chain, customer relations and our collaboration with partners in the region. As our joint development of batteries with certain U.S. and South Korean OEMs continues to progress, we also expect to launch future research facilities and, eventually, commercial production manufacturing facilities, in the United States and South Korea.

We did not issue any equity securities during the year ended December 31, 2021 that were not registered under the Securities Act and that have not otherwise been described in a Quarterly Report on Form or a Periodic Report on Form

See our Current Report on Form filed with the SEC on February 1, 2022.

Management continues to evaluate the impact of the pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our entire activity since inception up to December 31, 2021 was in preparation for our formation and the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a business combination target, including activities in connection with the proposed acquisition of SES. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial business combination. We will generate income in the form of interest income on the investments held in the trust account from the proceeds of the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a business combination.

We granted the underwriters a option from the date of the Initial Public Offering prospectus to purchase up to 3,600,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. On January 11, 2021, the underwriter fully exercised its over-allotment option. The underwriters were entitled to an underwriting discount of $0.20 per unit, or approximately $5.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $9.7 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Subtopic “Derivatives and Hedging — Embedded Derivatives” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is at the end of each reporting period.

The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants (as defined in Note 4) (collectively, the “Warrant”) are recognized as derivative liabilities in accordance with ASC Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the Public Warrants issued in connection with the Initial Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Subtopic “Derivatives and Hedging — Embedded Derivatives” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is at the end of each reporting period.

The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants (as defined in Note 4) (collectively, the “Warrant”) are recognized as derivative liabilities in accordance with ASC Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the Public Warrants issued in connection with the Initial Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities

In August 2020, the FASB issued ASU , which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. We early adopted the ASU on January 21, 2021 (inception). Adoption of the ASU did not impact our financial position, results of operations or cash flows.

As of December 31, 2021, we did not have any sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for growth companies. As a result, the consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.

We are a smaller reporting company as defined by Rule of the Exchange Act and are not required to provide the information otherwise required under this item.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of Ivanhoe’s disclosure controls and procedures as of the end of the fiscal quarter ended December 31, 2021, as such term is defined in Rules and under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this Annual Report, Ivanhoe’s disclosure controls and procedures were not effective as of December 31, 2021, because of a material weakness in its internal control over financial reporting. 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 consolidated financial statements will not be prevented or detected on a timely basis. Specifically, our management has concluded that Ivanhoe’s internal controls around the interpretation and accounting for certain complex financial instruments issued by it was not effectively designed or maintained. This material weakness resulted in the restatement of Ivanhoe’s audited balance sheet as of January 11, 2021, as previously revised in its Quarterly Report on Form for the quarterly period ended March 31, 2021, filed with the SEC on June 14, 2021 and its interim consolidated financial statements for the quarters ended March 31, 2021, June 30, 2021, and September 30, 2021. Additionally, this material weakness could result in a misstatement of the carrying value of equity, equity-linked instruments and related accounts and disclosures, and presentation of earnings per share that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected on a timely basis.

There were no changes in our internal control over financial reporting (as such term is defined in Rules and of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting except as noted below.

PART III

 

The following sets forth certain information, as of the date of this report, concerning the directors and officers of SES AI Corporation (formerly known as Ivanhoe Capital Acquisition Corp.). Ages are shown as of December 31, 2021.

 

 

. Dr. Hu serves as the Company’s Chief Executive Officer and Chairman of the Board. Dr. Hu has served as Founder, Chief Executive Officer and Director of SES since 2012. Dr. Hu is also a board member on the MIT Enterprise Forum Cambridge. Dr. Hu is recipient of’s “Innovators Under 35” and was named among the 2013 “30 Under 30.” Dr. Hu earned his PhD in Applied Physics from Harvard University, and his BS in Physics from MIT. We believe that Dr. Hu is qualified to serve both as a member of our management team and the Board because of his visionary leadership of SES from inception to date, his scientific and managerial expertise in the EV battery development industry, his innovative plans for SES’s future and his ability to execute on those plans.

. Mr. Makharia serves as the Company’s President and Chief Operating Officer. He currently serves as the President and Chief Operating Officer of SES, a position he has held since March 2021. Mr. Makharia served as Senior Investment Manager and Partner at GM Ventures, which is a shareholder of SES, from 2014 to 2021. During his tenure at GM Ventures, he served on the board of multiple early-stage and high-growth companies, including SES, as a Director or an Observer. He previously led the battery cell development at GM Global Battery Systems from 2012 to 2014, served as Manager & Senior Staff Engineer, Electrochemical Energy Lab from 2007 to 2012, and Project/Senior Engineer, Fuel Cell Activities, from 2002 to 2006. Mr. Makharia earned a MS from University of Rochester in Chemical Engineering and a BS from Mumbai University in 1999.

 

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. Ms. Nealis serves as the Company’s Chief Financial Officer. She currently serves as SES’s Chief Financial Officer, a position she has held since March 2021. Ms. Nealis served as Senior Director, Corporate Finance at View Inc., from 2019 until March 2021. Previously, she served as Chief Financial Officer of SunPower Systems International Ltd. from 2017 until 2019, after having served in the same role in the International Division of Shunfeng International Clean Energy Ltd from 2014 until 2017. From 2012 to 2014, Ms. Nealis was Finance Director/Global Tax Director of Suntech Power, prior to which she was a manager at Deloitte from 2006 to 2012 and worked at Deloitte offices in Chicago, Shanghai, and Hong Kong. Ms. Nealis earned her MS in Accounting from the University of Hawaii and her Bachelor’s in International Business from China University of Petroleum in Beijing.

. Ms. Ban serves as the Company’s Chief Legal and Corporate Officer. She currently serves as Chief Legal and Corporate Officer of SES, a position she has held since 2020. Ms. Ban previously served as SES’s Vice President Legal & Corporate Development from 2019 to 2020, and prior to that, was a consultant to SES in her role as a Partner at garage3 ventures in 2018 and 2019. From 2013 to 2017, Ms. Ban was General Counsel at Heptagon Advanced Micro-Optics Pte. Ltd. Prior to that, Ms. Ban was in legal practice in Beijing, China and Singapore with White & Case LLP. Ms. Ban holds dual EMBAs from Tsinghua University School of Economics and Management and INSEAD and her LLB from National University of Singapore.

. Mr. Son serves as the Company’s Chief Technology Officer. He currently serves as SES’s Chief Technology Officer, a position he has held since 2020. Prior to that, he was SES’s Director of Cell Engineering from 2018 to 2020 and SES’s Principal Engineer from 2016 to 2018. Mr. Son led LV battery at Apple Inc. from 2015 to 2016. He previously served as a Senior Research Scientist at Johnson Controls Inc. from 2010 to 2015 leading an awarded DOE project—Low cost manufacturing as a principle investigator. He had worked as a cell development engineer at Samsung SDI from 2002 to 2006 and as a material development team manager at A123 Korea from 2008 to 2009 and as a senior cell engineer at SK Innovation from 2009 to 2010 leading PHEV battery development project. Mr. Son earned an MS in Chemistry from Sungkyunkwan University.

. Dr. Gan serves as the Company’s Chief Science Officer. He currently serves as SES’s Chief Science Officer, a position he has held since 2020. Dr. Gan was previously SES’s Director of Research & Development from 2018 to 2020. From 2013 to 2018, he was Group Leader of the Energy Storage Group at the Sustainable Energy Department at the Brookhaven National Laboratory, and from 2011 to 2013, he was Senior Director of Research & Development at Enevate Corporation. From 1993 to 2011, Dr. Gan held various positions at Greatbatch Medical, culminating in his roles as Director, Battery Research and Director, Research & Development Power Sources, Primary Battery. Dr. Gan earned his PhD in Chemistry from the University of Chicago in 1990, and his BS in Chemistry from Peking University in 1982.

. Dr. Choi serves as a director of the Company, a position he has held since February 2022. Since September 2020, Dr. Choi has served as Professor at Seoul National University, where he was previously Associate Professor from 2017 to 2020. Prior to joining Seoul National University, he was Associate Professor from 2012 until 2017 and Assistant Professor from 2010 until 2012 at Korea Advanced Institute of Science and Technology. Dr. Choi received his PhD in Chemical Engineering from California Institute of Technology and BS in Chemical Engineering from Seoul National University. We believe that Dr. Choi is qualified to serve as a director of our Board because of his extensive academic experience and expertise in chemistry, engineering and battery technologies.

. Mr. Friedland serves as a director of the Company, a position he has held since February 2022. Mr. Friedland has over 25 years of experience and has been recognized by leaders of the international financial sector and mineral resource industries as an entrepreneurial explorer, technology innovator and company builder. Mr. Friedland’s experience is extensive. Mr. Friedland is the Director, President and CEO of Ivanhoe Capital Corporation (“Ivanhoe Capital”) (since July 1988), the executive (since September 2018) (previously the Executive Chairman from May 2012 until September 2018) of Ivanhoe Mines Ltd. and the Director of SK Global Entertainment, Inc. (since February 2017). Under Mr. Friedland’s tenure, Ivanhoe Capital has invested in a diverse portfolio of businesses. Additionally, Mr. Friedland has been the Chief Executive Officer of High Power Exploration Inc. (“HPX”) since December 2015. HPX is applying proprietary, geophysical technologies to rapidly evaluate underground geological targets and accelerate exploration programs targeting mineral and water resources. Mr. Friedland is also the Director, Chairman and President of Ivanhoe Pictures, Inc. (since May 2013), and a Director (since December 2016) and Chairman (since June 2018) of VRB Energy Inc. As one of the most recognized mining personalities and achievers in the world, Mr. Friedland is dedicated to serving on numerous boards in the natural resources sector. These positions include as a and Director of Clean TeQ Holdings Limited (since September 2016), a Director of Inc. (since April 2008) and a Director of Kietta SAS (since November 2009), as well as the Chairman of Gold X Mining Corp. (since June 2020). Mr. Friedland graduated with a degree in political science from Reed College. We believe that Mr. Friedland is qualified to serve as on our board of directors because of his depth of experience in both executive positions and serving on numerous boards.

Mr. Helfrich serves as a director of the Company, a position he has held since February 2022. Mr. Helfrich was appointed Chief Technology Officer and Vice President, Global Research and Development of GM and President of GM Ventures in 2021. In these roles, Mr. Helfrich is responsible for innovation and technology solutions in the development of GM vehicles. From 2019 until 2021, Mr. Helfrich served as GM’s Executive Director of Global Electrification and Battery Systems, where he was responsible for GM electrified vehicle hardware development and the overall electric vehicle propulsion calibration and driving performance. Mr. Helfrich previously served as Executive Director, Connected Ecosystem Integration at GM from 2016 until 2019, where he oversaw the GM mobile and applications and the information technology back office. Prior to rejoining GM in 2016, Mr. Helfrich was Vice President and Chief Technology Officer at Flex Ltd. (“Flex”) from 2014 until 2016. Before joining Flex, Mr. Helfrich served in various roles at GM, where he was globally responsible for all unstyled electrical systems in the vehicle, as well as defining electrical architecture and software architecture strategies. Mr. Helfrich earned his BS in Electrical Engineering from Ohio State University and MBA from the Fuqua School of Business at Duke University. We believe that Mr. Helfrich is qualified to serve as a director of our Board because of his experience in executive leadership positions and expertise in information technology, innovation and software solutions.

Mr. Luo serves as a director of the Company, a position he has held since February 2022. From 2017 until 2021, Mr. Luo served as Chairman and Chief Executive Officer of GCL System Integration Limited, GCL New Energy USA (“GCL”), an international energy conglomerate specializing in clean and sustainable energy. Prior to his position at GCL, Mr. Luo served as the Chief Executive Officer and Board Member of Shunfeng International Clean Energy Limited (SFCE), a Hong Kong-based supplier of and energy saving integrated solutions from 2015 to 2017. Mr. Luo received his MBA from Michigan State University and BS in Operational Management from Zhejiang Gongshang University. We believe that Mr. Luo is qualified to serve as a director of our Board because of his experience in executive leadership positions and expertise in clean and sustainable energy.

Dr. Ma serves as a director of the Company, a position she has held since February 2022. Since 2021, Dr. Ma has served as a Founder and Chief Executive Officer of Chavant Capital Acquisition Corp. (NASDAQ: CLAY) (“Chavant”), a special purpose acquisition company seeking to invest in a high growth technology companies. From 2008 to 2020, Dr. Ma served as a Partner at Braemar Energy Ventures (“Braemar”), a venture capital firm investing in early to technology companies operating in the mobility, power, resources and infrastructure sectors. At Braemar, Dr. Ma focused on investments in digitization of industry, resource efficiency, mobility, renewable energy infrastructure, and deeptech. Prior to joining Braemar, Dr. Ma served in the Venture Capital Group at 3i Group plc (“3i”), a global private equity firm, from 2004 to 2008, where she was responsible for investment in the information technology and cleantech sectors. Prior to 3i, Dr. Ma served as Senior Manager of the Optical Networking Group, Technology and Business Leadership at Lucent Technologies and Bell Labs, where she was responsible for product portfolio strategy, new product launches for Optical and Data Networking, and research and product development. Dr. Ma was also a founding team member of Onetta, a fiber networks company. Dr. Ma has served on the boards of Chavant and Anavex Life Sciences (NASDAQ: AVXL) since 2021. Dr. Ma received her PhD in electrical engineering from the University of Colorado at Boulder, MS in electrical engineering from the Worcester Polytechnic Institute in Massachusetts and BS in Physics from Lanzhou University. We believe that Dr. Ma is qualified to serve as a director of our Board because of her extensive experience in research, operations and venture capital, particularly in the technology industry.

Mr. Noonen serves as a director of the Company, a position he has held since February 2022. Since June 2019, Mr. Noonen has served as Chief Executive Officer of MixComm Inc., a leader in RFSOI mmWave solutions based in New Jersey, which was acquired by Sivers Semiconductors in February 2022. Mr. Noonen brings 25 years of experience in leading technology businesses. Mr. Noonen has held various leadership positions, including as chairman and of Silicon Catalyst from 2013 to 2015, the world’s first semiconductor incubator and the EE Times 2015 of the Year, and as chairman of the board of Socle in Taiwan in 2013 (which was acquired by Foxconn), and was also previously Executive Vice President of Global Products, Design, Sales & Marketing at GlobalFoundries from 2011 to 2013. From 2008 and 2011, Mr. Noonen served as Executive Vice President of Worldwide Sales and Marketing at NXP Semiconductors (NASDAQ: NXPI). He also currently serves on the board of Graph Audio and previously served on the board of Energous (NASDAQ: WATT) from 2019 to 2021. Mr. Noonen received his B.S. from Colorado State University in Electrical Engineering and was named the College of Engineering Distinguished Alumni in 2012, was elected to the Global Semiconductor Alliance Board of Directors and holds multiple patents in the areas of Internet telephony and video communications. We believe Mr. Noonen is qualified to serve as a director of our Board because of his experience in executive leadership positions and expertise in information technology, innovation and the electronics industry.

Based on information provided by each director concerning his or her background, employment, and affiliations, our board of directors has determined that the board of directors meets independence standards under the applicable rules and regulations of the SEC and the listing standards of NYSE. In making these determinations, our board of directors considered the current and prior relationships that each director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each and the transactions involving them described in the section titled “”

The members of our audit committee are Mr. Luo, Dr. Ma and Mr. Noonen. Mr. Luo is the chair of our audit committee. The audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting and legal compliance functions by approving the services performed by our independent registered public accounting firm and reviewing their reports regarding our accounting practices and systems of internal accounting controls. The audit committee also oversees the audit efforts of our independent registered public accounting firm and takes those actions as it deems necessary to satisfy itself that the independent registered public accounting firm is independent of management. Subject to rules and a limited exception, the rules of NYSE and Rule of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. All of the members of our audit committee are independent under the applicable NYSE and SEC rules. All of the members of our audit committee also meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NYSE. In addition, Mr. Luo qualifies as our “audit committee financial expert,” as such term is defined in Item 407 of Regulation

Our board of directors has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), applicable to all of our employees, executive officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The Code of Conduct is available on our website under the heading “Investors” at . Any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website to the extent required by applicable rules and exchange requirements.

We have adopted a set of corporate governance guidelines to provide the framework for the governance of our Board and to assist our Board in the exercise of its responsibilities. These guidelines reflect our Board’s commitment to monitoring the effectiveness of policy and decision-making both at the board and management levels, with a view to enhancing stockholder value over the long term. The corporate governance guidelines are available on our website under the heading “Investors” at .

Narrative Disclosure to Summary Compensation Table

Our compensation for our executive officers has the following components: base salary, annual cash bonus opportunities, equity compensation, employee benefits, executive perquisites and severance benefits. Base salaries, employee benefits, executive perquisites and severance benefits are designed to attract and retain senior management talent. We also use annual cash bonuses and equity awards to promote performance-based pay that aligns the interests of our named executive officers with the long-term interests of its equity-owners and to enhance executive retention.

SES entered into employment agreements with Dr. Hu, Mr. Makharia and Ms. Nealis on May 4, 2021, February 15, 2021 and February 16, 2021, respectively, providing for the terms of their employment with SES and including (i) annual base salary, (ii) eligibility for an annual performance bonus, (iii) participation in SES’s benefit plans and vacation in accordance with SES’s policies and (iv) severance benefits in the event of certain terminations of employment. Each of Mr. Makharia’s and Ms. Nealis’s agreements also included a bonus of $150,000, as well as an entitlement to reimbursement of relocation and/or other related expenses. Although Dr. Hu received a base salary, bonus and similar benefits in the fiscal year ended December 31, 2020, he was not party to an employment agreement with SES in that year.

SES’s named executive officers received in Fiscal 2021 and currently receive a base salary to compensate them for services rendered to SES. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. In March 2021, the Company increased Dr. Hu’s annual base salary and hired Mr. Makharia and Ms. Nealis. As such, the annual base salary for Dr. Hu for 2021 was $250,000 (through February 28, 2021) and $350,000 (beginning March 1, 2021), the annual base salaries for Mr. Makharia and Ms. Nealis for 2021 were $325,000 and $350,000, respectively, and Dr. Hu, Mr. Makharia and Ms. Nealis earned in 2021 aggregate salary payments of $328,333, $275,000 and $289,423, respectively.

SES provided in Fiscal 2021 and currently provides incentive compensation to its named executive officers in the form of annual performance bonuses, determined by SES’s board of directors or compensation committee, based on both individual performance of the named executive officer and the overall performance of SES, generally in accordance with performance milestones established by SES’s board or compensation committee. The performance goals differ from executive to executive, and each executive’s target annual bonus opportunity is equal to a predetermined percentage of his or her base salary. Near the beginning of each year, the board or compensation committee selects the performance targets, target amounts, target award opportunities and other terms and conditions of annual bonuses for the named executive officers, subject to the terms of their employment agreements. Following the end of each year, the board or compensation committee determines the extent to which the performance targets were achieved and the amount of the award that is payable to the named executive officers. The bonuses may be paid in cash or equity at the discretion of the board or compensation committee.

Historically, the annual bonuses have covered performance from April 1 of one fiscal year until March 31 of the following fiscal year. For the period from April 1, 2021 to March 31, 2022, the target annual bonus opportunities for Dr. Hu, Mr. Makharia and Ms. Nealis were 50%, 30% and 30%, respectively, of annual base salary for Fiscal 2021. For Fiscal 2021, the annual cash bonus earned by each named executive officer was as follows: for Dr. Hu, $131,250 (based on a payout of $175,000 for the performance period from April 1, 2021 to March 31, 2022, prorated for Fiscal 2021); for Mr. Makharia, $73,125 (based on a payout of $97,500 for the performance period from April 1, 2021 to March 31, 2022, prorated for Fiscal 2021); and for Ms. Nealis, $78,750 (based on a payout of $105,000 for the performance period from April 1, 2021 to March 31, 2022, prorated for Fiscal 2021). Dr. Hu also received $35,417 for performance from January 1, 2021 to March 31, 2021, based on a target bonus opportunity of 50% of his base salary of $250,000 from January 1, 2021 to February 28, 2021 and 50% of his base salary of $350,000 from March 1, 2021 to March 31, 2021. For the actual payouts of the annual performance bonuses for April 1, 2022 to March 31, 2022, see footnote 2 to the Summary Compensation Table.

 

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SES previously maintained the 2018 Share Incentive Plan (the “2018 Plan”), which provided for the discretionary grant of incentive stock options, stock options, and restricted share awards to eligible employees, officers, directors, consultants or advisors of SES, including the named executive officers. In March 2021, the Company amended the 2018 Plan with the 2021 Share Incentive Plan (the “2021 Plan”). Upon approval of the 2021 Plan, any shares that, as of the date of stockholder approval, were reserved but not issued pursuant to any awards granted under the Company’s 2018 Plan were rolled into the 2021 Plan. In addition, any shares subject to stock options or similar awards granted under the 2018 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 2018 Plan that are forfeited or repurchased by the Company shall roll into the 2021 Plan. The 2021 Plan provides for the discretionary grant of incentive stock options, stock options, and restricted share awards.

In Fiscal 2021, SES granted stock options under the 2018 Plan to Mr. Makharia and Ms. Nealis in connection with their joining SES, and a restricted share award under the 2021 Plan to Ms. Nealis in order to align her equity ownership with that of her executive team peers and further align her interests with those of the Company’s stockholders. For information on the grant dates, vesting terms and expiration terms, as applicable, of these equity awards, as well as other outstanding stock options under the 2018 Plan, see the Outstanding Equity Awards at Fiscal Table.

SES’s named executive officers did not in Fiscal 2021 and currently do not participate in, or earn any benefits under, a deferred compensation plan sponsored by SES.

Under each named executive officer’s employment, in the event that SES terminates a named executive officer without cause or in the event that any named executive officer resigns for good reason (each of “cause” and “good reason” as defined the named executive officer’s offer letters), such named executive officer would receive, in addition to accrued but unpaid base salary, earned but unpaid annual bonus, and reimbursement for all reasonable and necessary expenses incurred in connection with the named executive officer’s performance, the following: (i) continuation of annual base salary for a period of 12 months following the termination date for Dr. Hu, 12 months following the termination date for Mr. Makharia and 9 months following the termination date for Ms. Nealis; and (ii) reimbursement of SES’s portion for continued health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 for a period of 12 months for Dr. Hu, 12 months for Mr. Makharia and 12 months for Ms. Nealis, or an earlier date if such named executive officer has secured alternate health insurance coverage. Severance is subject to the execution and of a release of claims in favor of SES.

With respect to the restricted share award granted to Ms. Nealis in Fiscal 2021, in the event of a termination without cause by SES or a resignation by her for good reason, the award will vest 50% upon such a termination. In the event of a merger, acquisition or Initial Public Offering (but not the Business Combination), her restricted share award will become fully vested and exercisable.

Director Compensation for Fiscal 2021

SES did not pay compensation to any of its directors in Fiscal 2021, other than Dr. Hu, who was paid for his role as Chief Executive Officer. For information on Dr. Hu’s compensation, see the Summary Compensation Table. SES has historically reimbursed all of its directors for any reasonable expenses incurred by them in connection with services provided in such capacity.

Compensation Arrangements for Fiscal 2022

Beginning in Fiscal 2022, decisions with respect to the compensation of SES’s executive officers, including our named executive officers, are made by the compensation committee of our board of directors. The actual compensation of our named executive officers depends on the judgment of the members of the compensation committee and such compensation is also generally governed by our executive officers’ employment agreements, as in effect from time to time, including as described above.

For Fiscal 2022, the annual base salaries for Dr. Hu, Mr. Makharia and Ms. Nealis are $530,000, $505,000 and $470,000, respectively, the target annual bonus opportunities for Dr. Hu, Mr. Makharia and Ms. Nealis are 100%, 60% and 60%, respectively, of annual base salary. The performance period for the annual bonuses is January 1, 2022 to December 31, 2022. These base salaries reflect, for Fiscal 2022, the elimination of the standalone monthly general allowance and the addition of its annualized amount to base salary.

The compensation committee of the board also plans to make an initial equity grants to our executive officers, which are expected to be formally approved in the second quarter of Fiscal 2022 under SES AI Corporation 2021 Incentive Award Plan. The grants are expected to be composed 50% of time-based restricted stock units (“RSUs”) and 50% of performance-based restricted stock units (“PSUs”), with the following aggregate grant date fair values: for Dr. Hu, $10 million; for Ms. Nealis, $4 million; for Ms. Ban, $4 million; for Mr. Son, $5 million; and for Dr. Gan, $5 million. These grant date fair values assume a payout of 100% of PSUs granted, which is the maximum amount that may be earned. The RSUs will vest in three equal annual installments starting one year from the date of grant, subject to the executive officer’s continued service on each such vesting date. The PSUs will vest in one installment following a three-year performance period from the date of grant, subject to the achievement of share price performance targets and the executive officer’s continued service on such vesting date. A specified percentage of the target number of PSUs will vest based on the average closing price of our shares of Class A Common Stock (the “Average Closing Price”) during any consecutive 100-calendar-day period within the three-year performance period (with the percentage vesting based on certain threshold Average Closing Prices (the “Share Price Thresholds”)), assuming that the Average Closing Price during the last 30-calendar-day period in the three-year performance period also exceeds the highest Share Price Threshold achieved during any 100-calendar-day period. Otherwise, the number of PSUs that vest at the end of the three-year performance period will be based upon the Average Closing Price during the last 30 calendar days, using the same list of Share Price Thresholds. Any incremental shares of Class A Common Stock that do not vest based on the Average Closing Price in the last 30 calendar days, but would have vested based on the 100-calendar-day Average Closing Price, will subsequently be eligible to vest (subject to the executive officer’s continued service through the vesting date) if, at any point before the fifth anniversary of the grant date, the Average Closing Price during a 30-calendar-day period ends up exceeding the highest Share Price Threshold previously achieved during the 100-calendar-day period. The Share Price Thresholds are as follows: under $12.5, 0%; $12.5 or greater, 10%; $15 or greater, 20%; $17.5 or greater, 30%; $20 or greater, 40%; $22.5 or greater, 50%; $25 or greater, 60%; $27.5 or greater, 70%; $30 or greater, 80%; $32.5 or greater, 90%; and $35 or greater, 100%. Beginning in Fiscal 2022, we have also adopted stock ownership guidelines applicable to our executive officers, non-employee directors and certain members of senior management, to align further the incentives of our management and board with those of our public stockholders.

 

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Beginning in 2022, our non-employee directors will receive a combination of cash compensation and equity for their service on our board in accordance with industry practice and standards. All non-employee directors will receive a base annual cash retainer of $45,000, and if our chairman is a non-employee director, he/she will receive an additional $50,000 annually. Each member of the audit committee will receive an annual cash retainer of $10,000 (with the chair of the audit committee receiving an additional $12,500 annually), each non-employee member of the compensation committee will receive an annual cash retainer of $7,500 (with the chair of the compensation committee receiving an additional $7,500 annually), and each non-employee member of the nominating and corporate governance committee will receive an annual cash retainer of $5,000 (with the chair of the nominating and corporate governance committee receiving an additional $5,000). Cash fees will be paid quarterly, with a pro rata fee applicable to service for less than a whole quarter. Additionally, all non-employee directors will receive an initial equity grant in the form of RSUs with a value of $300,000 in connection with joining the board of directors and an annual equity award in the form of RSUs with a value of $150,000 startig tin the second year of board service. All such RSUs will vest, vesting fully in one installment one year after the grant date subject to the director’s continued service on such vesting date. We also reimburse all directors for reasonable transportation and lodging expenses actually incurred to attend meetings of our board or committees.

 

The following table sets forth information known to us regarding the beneficial ownership of our Class A common stock and Class B common stock, as of March 28, 2022, by:

 

 

 

 

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security. Under those rules, beneficial ownership includes securities that the individual or entity has the right to acquire, such as through the exercise of warrants or stock options, within 60 days of the record date. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days of the record date that vest within 60 days of the record date are considered outstanding and beneficially owned by the person holding such warrants or options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Except as noted by footnote, and subject to community property laws where applicable, based on the information provided to us, the persons and entities named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

The beneficial ownership of shares of our Class A common stock is based on 303,989,794 shares of our Class A common stock, including 23,691,182 Shares in the form of Class A common stock (including restricted Class A common stock), and 43,881,251 shares of Class B common stock, including 3,999,796 Founder Shares, in each case, issued and outstanding as of the date of this Annual Report; the Earn-Out Shares and Founder Earn-Out Shares are issued and held in escrow subject to the satisfaction of certain conditions described above and have voting rights while in escrow.

Percentage of voting power is calculated based on one vote per share for each share of Class A common stock and ten votes per share for each share of Class B common stock. The table is based upon information supplied by officers, directors and beneficial owners, Section 13(d) filings made with the SEC and other SEC filings under Section 16 of the Exchange Act.

 

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Simultaneously with the closing of the Initial Public Offering or IPO, pursuant to the Private Placement Warrants Purchase Agreement, dated as of January 6, 2021, by and between the Company and Sponsor (the “Private Placement Warrant Purchase Agreement”), the Company completed the private sale of 5,013,333 private placement warrants to the Sponsor at a purchase price of $1.50 per private placement warrant, generating gross proceeds to the Company of $7,520,000. Please see the section entitled “” for the terms of the private placement warrants. The issuance of the private placement warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

On July 22, 2020, the Sponsor agreed to loan the Company up to $600,000 pursuant to a promissory note (the “Note”), which was later amended on December 1, 2020. The Company borrowed $500,000 under the Note. The Note was bearing, unsecured and repaid in full on January 15, 2021.

On April 9, 2021, the Company issued an unsecured convertible promissory note (the “Convertible Note”) to the Company’s former Chief Executive Officer, Robert Friedland, pursuant to which the Company could borrow up to $1,500,000 from Mr. Friedland for ongoing expenses reasonably related to the business of the Company and the consummation of the Business Combination. The Convertible Note did not bear any interest and was unsecured. All unpaid principal under the Convertible Note was due and payable in full on the earlier of (i) January 11, 2023 and (ii) the effective date of the Business Combination (such earlier date, the “Maturity Date”). Mr. Friedland had the option, at any time on or prior to the Maturity Date, to convert any amounts outstanding under the Convertible Note into warrants to purchase the Company’s shares, at a conversion price of $1.50 per warrant, with each warrant entitling the holder to purchase one share at a price of $11.50 subject to the same adjustments applicable to the private placement warrants sold concurrently with the Company’s initial public offering. The Company borrowed approximately $1,045,000 under the Note. Mr. Friedland did not convert any amounts owed under the Convertible Note into warrants, instead, the Note was repaid in cash in full at the Closing.

In February 2021, SES executed a JDA with GM Global Technology Operations LLC (“GM Technology”) and General Motors Holdings LLC (“GM Holdings”), with a budget over $50.0 million, to jointly develop an battery cell with a capacity of almost 100 Ah and build out a prototype manufacturing line for GM Technology. GM Technology is an affiliate of GM Ventures and a subsidiary of GM Holdings (GM Ventures and GM Holdings collectively, the “GM Funds”), both of which are stockholders of SES. GM Holdings is also a subsidiary of GM. The JDA has an initial term of three years. Under the terms of the JDA, SES will receive reimbursement of research and development and prototype buildout costs. SES will not be required to refund such fees once due to SES regardless of the results of the research and development activities, however, ownership of the prototype line would remain with GM, unless purchased by SES. During the fiscal year ended December 31, 2021, SES invoiced approximately $14.0 million pursuant to the terms of the JDA.

In connection with the Business Combination, Ivanhoe entered into the PIPE Financing, which includes subscription agreements with certain institutional and accredited investors who agreed to purchase, immediately prior to the consummation of the Business Combination, an aggregate of 27,450,000 shares of Class A common stock at a purchase price of $10.00 for aggregate gross proceeds of $275.4 million. This included purchases by the following investors in the following amounts: $10.0 million by the GM Funds, $1.0 million by Long Siang Pte. Ltd. (“Long Siang”), $5.0 million by Vertex Legacy and $75.0 million by Honda.

We have adopted a formal written policy that sets forth the policies and procedures for the review and approval or ratification of related party transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related party. The policy provides for the review and approval of any such transactions with related persons, and requires, among other things, that:

. Audit fees consist of fees billed for professional services rendered for the audit of our consolidated financial statements, reviews of our quarterly consolidated financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings. The aggregate fees billed by WithumSmith+Brown, PC for audit fees, inclusive of required filings with the SEC for the year ended December 31, 2021 and for such filings in addition to services rendered in connection with Ivanhoe’s initial public offering for the period from July 8, 2020 (inception) to December 31, 2020, totaled approximately $91,000 and $78,280, respectively.

. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. For the year ended December 31, 2021, audit related fees were approximately $47,000 related to consents in connection with the registration statement on Form filings. We did not pay WithumSmith+Brown, PC any audit-related fees during the period from July 8, 2020 (inception) to December 31, 2020.

. Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice. We did not pay WithumSmith+Brown, PC any tax fees during the year ended December 31, 2021 and during the period from July 8, 2020 (inception) to December 31, 2020.

. All other fees consist of fees billed for all other services. We did not pay WithumSmith+Brown, PC any other fees during the year ended December 31, 2021 and during the period from July 8, 2020 (inception) to December 31, 2020.

In accordance with the Sarbanes-Oxley Act of 2002, our audit committee charter requires the audit committee to all audit and permitted services provided by our independent registered public accounting firm, including the review and approval in advance of our independent registered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authority to services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the audit committee must report to the full audit committee at the next audit committee meeting all items pre-approved by such delegated members. Since becoming a publicly listed company (following Ivanhoe’s initial public offering) all of the services performed by our independent registered public accounting firm were by the audit committee.

 

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PART IV

 

 

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report.

 

The exhibits listed below are filed as part of this Annual Report or incorporated herein by reference to the location indicated.

 

 

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