Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements as of and for the years ended December 31, 2025 and 2024 and the accompanying notes included in this Annual Report on Form 10-K. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs, which are subject to risks, uncertainties and assumptions. These forward-looking statements within the meaning of the federal securities law are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. There can be no assurance that future developments affecting us will be those that we have anticipated. Our actual results and the timing of events may differ materially from those expressed or implied as a result of various factors, including those set forth in the sections titled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." References in this section to our future plans that indicate the timing of when we expect such plans to be completed by a certain year mean at any point during that year.

Overview

We are a leading developer and manufacturer of high-performance, AI-enhanced Lithium-Metal ("Li-Metal") and Lithium-ion ("Li-ion") rechargeable battery technologies for electric vehicles ("EVs"), Urban Air Mobility ("UAM"), drones, robotics, Energy Storage Systems ("ESS") and other applications. The Company's mission is to accelerate the world's energy transition through material discovery and battery management. SES accelerates its pace of innovation by utilizing superintelligent AI across the spectrum of our business, from research and development, materials sourcing, cell design, engineering and manufacturing, to battery health and safety monitoring.

Key Trends, Opportunities and Uncertainties

Historical Performance

We are an early-stage growth company. We incurred net losses of $74.9 million and $100.2 million for the years ended December 31, 2025 and 2024, respectively, and had an accumulated deficit of $373.7 million and $298.9 million from our inception through December 31, 2025 and 2024, respectively. We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate and our ability to generate revenue in the future that is sufficient enough to achieve profitability will depend largely on the successful development of our products and services. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose significant risks and challenges, including those discussed below and in "Part I, Item 1A. Risk Factors."

Acquisition of UZ Energy

On July 25, 2025, our wholly owned subsidiary, SES AI International I Pte Ltd, entered into an agreement with UZ Energy and its shareholders to acquire 100% of the share capital of UZ Energy, a China-based battery energy storage system manufacturer. The aggregate consideration for the acquisition of UZ Energy is approximately RMB 183.5 million ($25.8 million), consisting of the purchase consideration of approximately RMB 93.5 million ($13.1 million) and a capital contribution of RMB 90.0 million ($12.6 million) made by the Company. The transaction closed on September 15, 2025. We believe that the acquisition of UZ Energy strengthens our capabilities in the ESS market and will provide opportunities for revenue generation.

Commercializationof Molecular Universe

We believe that the commercialization of the Molecular Universe platform represents a significant opportunity to drive future revenue growth and margin expansion, as it should enable us to offer differentiated AI-driven solutions to customers. We expect that successful adoption of Molecular Universe, both as a software product and as an integrated component of our hardware and software offerings, could increase revenues and improve gross margins over time. However, we also recognize that the market for AI-based scientific discovery tools is nascent and rapidly evolving, and that the pace of adoption and competitive dynamics are uncertain. If adoption is slower than anticipated or if competing platforms gain traction, our ability to achieve revenue growth and profitability could be adversely affected.

Shift to Joint Venture Manufacturing with Hisun

Our strategic shift away from in-house manufacturing of certain battery materials, and the announcement of a joint venture with Hisun to produce novel materials at commercial scale, is expected to reduce capital intensity and accelerate time-to-market for new products. We anticipate that this approach will allow us to scale more efficiently and address a broader customer base, which could positively impact future revenues. However, the transition introduces new uncertainties, including the risk of production delays, quality control challenges, and dependence on third-party manufacturing partners. These factors could result in variability in cost of goods sold, potential supply chain disruptions, and fluctuations in cash flows.

NDAA-Compliant Drone Cell Manufacturing

Our plan to develop NDAA-compliant manufacturing capacity for drone cells is intended to position us to capture new business from [U.S. government and defense-related customers], which we believe could be a driver of future revenue growth. Achieving NDAA compliance may also enhance our competitive positioning and open additional market opportunities. However, this initiative will require substantial capital investment and ongoing compliance costs, and there is uncertainty regarding the timing and magnitude of customer demand. If we are unable to achieve commercial-scale production or if demand for NDAA-compliant drone cells does not materialize as expected, we could experience underutilization of assets and negative impacts on cash flows.

Results of Operations

The following table sets forth a comparison of our operating results for the periods indicated:

Revenue from customers

For the years ended December 31, 2025 and 2024, we generated revenue from two primary sources:

See "Note 2 - Summary of Significant Accounting Policies" to the consolidated financial statements for further discussion on our revenue streams and revenue recognition policies.

Revenue from customers for the year ended December 31, 2025 increased $19.0 million to $21.0 million compared to $2.0 million for the year ended December 31, 2024.

Service revenues increased $11.6 million to $13.6 million for the year ended December 31, 2025 compared to $2.0 million for the year ended December 31, 2024. This increase was primarily attributable to a full year of revenue from service-related contracts with OEMs and other manufacturers compared with only one quarter of activities in the prior year. Product revenue increased $7.3 million to $7.4 million for the year ended December 31, 2025 compared to $0.1 million in the year ended December 31, 2024. This increase was primarily attributable to ESS systems sales from UZ Energy, which was acquired during the third quarter of 2025.

Cost of Revenue

Cost of revenue includes materials, labor, depreciation and amortization expense, inventory, freight costs, warranty, and other direct costs related to manufacturing our products and service contracts. Labor consists of personnel-related expenses such as salaries, benefits, and stock-based compensation.

Costs of revenue for the years ended December 31, 2025 increased $8.9 million to $9.7 million compared to $0.8 million for the year ended December 31, 2024.Costs related to service revenues increased $2.4 million to $3.1 million for the year ended December 31, 2025 compared to $0.8 million for the year ended December 31, 2024. This increase was primarily attributable to full year of activities for service-related contracts in 2025 compared to one quarter of activities in the prior year. Costs related to product revenue increased $6.6 million primarily attributable to ESS systems sales from UZ Energy, which was acquired during the third quarter of 2025.

Gross Profit

Gross profit has been and will continue to fluctuate over time affected by a variety of factors, including the average sales price of our product and service offerings and changes in our mix of revenue between ESS systems, drone batteries, battery materials and service offerings to automotive OEMs and other manufacturers.

Gross margin for the years ended December 31, 2025 and December 31, 2024 were 53.8% and 63.1%, respectively. The fluctuation was primarily due to the effect of changing revenue mix between product and service offerings as explained above.

Research and Development

We are an early-stage growth company conducting business activities through one operating segment. Research and development expenses include personnel-related expenses, such as salaries, benefits, and stock-based compensation, for scientists, experienced engineers and technicians. These expenses also cover materials and supplies used in product research and development, process engineering efforts and testing, payments made to consultants, and patent related legal costs. Furthermore, they encompass depreciation, allocated facilities expenses, and information technology costs, including costs incurred for renting graphic processing units ("GPUs") to train AI models.

Research and development expenses for the year ended December 31, 2025 decreased $5.1 million, or 7.1%, to $67.0 million, compared to $72.1 million for the year ended December 31, 2024. The decrease was driven by $13.0 million decrease in personnel costs mainly attributable to salaries, benefits and stock-based compensation attributable to reduced headcount resulting from the company's strategic shift to an AI-based focus, a $4.9 million decrease in lab expenses due to lower research and development activities, a $4.0 million decrease in automotive OEM JDA related lab equipment expenses, and a $0.6 million decrease in professional service fees. These decreases were

offset by a $9.1 million increase in AI infrastructure costs incurred from renting Graphic Processing Unit ("GPU") computing resources and from the development of the Company's Molecular Universe platform, a $8.3 million decrease in reimbursements compared to the prior period from billings from our automotive OEM JDA partners due to the culmination of certain JDA activities in 2024, and a $1.0 million increase in rent, depreciation, and utilities costs.

General and Administrative

General and administrative expenses include personnel-related expenses, such as salaries, benefits, and stock-based compensation for our finance, legal and human resource functions. These expenses also cover director and officer insurance, outside contractor fees, and professional services, including audit, compliance, legal, accounting, investor relations, and other advisory services. Additionally, the expenses encompass allocated facilities and information technology costs, such as depreciation and amortization.

General and administrative expense for the year ended December 31, 2025 decreased $11.5 million, or 30.0%, to $26.9 million, compared to $38.4 million for the year ended December 31, 2024. This decrease was driven by a $8.1 million decrease in personnel costs primarily attributable to salaries, benefits and stock-based compensation due to reduced headcount, a $3.1 million decrease in professional services including marketing and public relations, a $0.6 decrease in insurance costs, and a $0.3 million decrease in audit and legal fees partially offset by a $0.6 million increase in other operating costs including franchise tax fees and regulatory costs.

Non-Operating Items

Interest Income

Interest income primarily consists of interest earned on our cash and cash equivalents, short-term investments in marketable securities, and accretion income from the marketable securities.

Interest income for the year ended December 31, 2025 decreased $5.7 million, or 37.9%, to $9.3 million compared to $15.0 million for the year ended December 31, 2024. This $5.7 million decrease was primarily attributable to lower average short-term investment balances and a decline in market interest rates during the current year.

Change of Fair Value of Sponsor Earn-Out Liabilities

During the year ended December 31, 2025, we incurred a $1.7 million gain compared with a $5.3 million loss for the year ended December 31, 2024 associated with the change in fair value of the Sponsor Earn-Out liabilities. This $7.0 million increase in gain on the change in fair value of the Sponsor Earn-Out liabilities is tied to SES's stock price, continued volatility in the stock price or changes in the expected term. See "Note 12 - Sponsor Earn-Out Liabilities" to the consolidated financial statements for additional information.

Miscellaneous Income (Expense), Net

During the year ended December 31, 2025, we had miscellaneous expense of $1.2 million, compared with miscellaneous expense of $0.5 million for the year ended December 31, 2024. This $0.7 million increase in miscellaneous expense was primarily due to a $1.3 million loss on the disposal of property and equipment, partly offset by foreign currency gains recognized in the current year period.

(Provision) Benefit from Income Taxes

Income tax expense was $0.2 million on pre-tax loss of $74.6 million for the year ended December 31, 2025 compared with an income tax expense of $0.2 million on pre-tax loss of $100.0 million for the year ended December 31, 2024. Our effective tax rate was (0.3)% and (0.2)% for the years ended December 31, 2025 and 2024, respectively. The difference between our effective tax rate and the U.S. federal statutory rate of 21% was primarily driven by deferred tax benefits and release of valuation allowances from foreign jurisdictions. See "Note 17 - Income Taxes" to the consolidated financial statements for additional information on our income tax expense.

Liquidity and Capital Resources

As of December 31, 2025, we had total cash and cash equivalents of $29.5 million and short-term investments in marketable securities of $170.1 million. As an early-stage growth company, the net operating losses we have incurred since inception are consistent with our strategy and budget.

We expect to sustain substantial operating expenses, without generating sufficient revenues to cover expenditures, for a few more years. Our ability to successfully develop our products and services, scale up our commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity and/or debt financing and, over time, our ability to generate positive cash flows from operations. We believe that our cash on hand and marketable securities will be sufficient to meet our principal working capital and capital expenditure requirements and ongoing research and development costs, operational and commercial activities, including expenditures for deferred cash payments of an estimated approximately RMB 59.9 million ($8.4 million) related to the acquisition of UZ Energy as well as activities related to the recently acquired ESS business, our plans for NDAA-compliant manufacturing capacity to develop drone cells and development and commercialization of Molecular Universe material discoveries, for a period of at least 12 months from the date of this Annual Report. However, additional funding may be required during or after this period to finance certain needs beyond our principal working capital and capital expenditure requirements and ongoing costs, including additional opportunities to purchase data and equipment, develop and train our AI models, and/or develop commercial operations in the United States and abroad, acquisitions or other strategic transactions, and unexpected delays in the development of our battery cells. See "Note 3 - Acquisition" of our accompanying consolidated financial statements for further discussion of the estimated deferred cash payments related to the acquisition of UZ Energy.

If we need additional funding beyond these existing short- to medium-term sources of liquidity, or if we are not able to fund our operations from cash flows generated from anticipated product sales and service offerings, we expect that we will need to raise additional funds. This may be through a variety of possible methods, including, but not limited to, entry into joint ventures or other strategic arrangements, issuance of equity, equity-related or debt securities, and obtaining credit from financial institutions. We currently maintain an at-the-market equity offering program with certain investment banks (the "Agents"), pursuant to which we may offer and sell into the open market from time to time, at our option, shares of our Class A common stock with an aggregate offering price of up to $150.0 million. Subject to the terms and conditions of our agreement with them, the Agents will use their commercially reasonable efforts to sell shares of our Class A common stock from time to time, based on instructions from us (including any price, time or size limits or other parameters or conditions we may impose), in exchange for a commission of up to 3.0% of the aggregate gross sale proceeds. We have also provided the banks with customary indemnification and contribution rights. We are not obligated to sell any Class A common stock and may at any time suspend solicitation and offers thereunder. We sold no shares under the at-the-market equity offering program during the year ended December 31, 2025, and to date have sold no shares under the program.

Summary of Cash Flows

The following table provides a summary of our cash flow data for the periods indicated:

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Operating Activities

Our cash flows used in operating activities to date have been attributable to payroll, revenue from customers, consumables and supplies related to research and development, expenditures and reimbursements related to our JDAs, and facilities expense and professional services for general and administrative activities. As we continue to grow, we expect cash outflows from operating activities before we start to generate any material cash inflows from our operations.

Net cash used in operating activities of $58.4 million for the year ended December 31, 2025 was primarily attributable to net loss of $73.0 million, as adjusted for non-cash operating items such as stock-based compensation expense of $11.0 million, depreciation and amortization expense of $10.3 million, accretion income from available-for-sale short-term investments of $3.1 million, a gain on change in fair value of Sponsor Earn-Out liabilities of $1.7 million, a loss on disposal of fixed assets of $1.3 million, other adjustments, and a $3.5 million working capital outflow. The working capital outflow was primarily attributable to a $10.4 million decrease in accrued expenses and other liabilities, a $2.6 million increase in accounts receivable, and a $1.0 million increase in inventories, partially offset by a $10.0 million decrease in prepaids and other assets and a $1.0 million increase in accounts payable. The increase in accounts payable was primarily due to timing of vendor payments. The decrease in accrued expenses and other liabilities was primarily due to reductions in accruals for lab equipment

related to JDA, professional fees, and payroll related accruals. The increase in accounts receivable was primarily driven by increases in product shipments. The increase in inventories is primarily due to purchases for product sales. The decrease in prepaids and other assets was primarily due to AI infrastructure license and GPU rental advance payments, license fees for software, and advance payments for research agreements.

Net cash used in operating activities of $66.1 million for the year ended December 31, 2024 was primarily attributable to net loss of $100.2 million, as adjusted for non-cash operating items such as stock-based compensation expense of $19.9 million, depreciation and amortization expense of $8.3 million, accretion income from available-for-sale short-term investments of $7.2 million, a loss on change in fair value of Sponsor Earn-Out liabilities of $5.3 million, and a loss on sale of fixed asset of $0.7 million. These non-cash operating items were combined with a $8.4 million working capital inflow. The working capital inflow was driven primarily by a $7.6 million increase in accrued expenses and other liabilities and a $3.9 million decrease in receivable from related party. These working capital inflows were partially offset by working capital outflows of a $2.2 million increase in prepaids and other assets and a $1.0 increase in accounts receivable. The increase in accrued expenses and other liabilities was primarily due to accruals for purchases of equipment for a JDA, accrued income taxes payable, and payroll related accruals. The decrease in receivable from related party was driven by cessation of activity from a JDA. The increase in prepaids and other assets was primarily due to AI infrastructure license and rental advance payments, license fees for software, and advance payments for research agreements. The increase in accounts receivable is due to outstanding balances for earned but unbilled revenue.

Investing Activities

Net cash used in investing activities was $39.2 million for the year ended December 31, 2025, compared with net cash provided by investing activities of $108.2 million for the year ended December 31, 2024. This increase in cash used was primarily attributable to a $158.7 million reduction in cash provided by the maturities of short-term investments, net of purchases, and $3.0 million in the payment of deferred consideration related to the acquisition of UZ Energy, partially offset by $9.3 million of lower capital expenditures and $5.0 million from the sale of short-term investments in the current year period.

The decrease in capital expenditures was primarily attributable to reductions in purchases of manufacturing equipment, lab machinery and equipment, and leasehold improvements to manufacture battery cells due to the current year strategic shift to AI focused spending which consisted of purchases of software and computer equipment, lab tools and instruments and AI related infrastructure. We expect capital expenditures to remain consistent in 2026 compared with 2025 as we continue to spend on AI related infrastructure rather than invest in manufacturing equipment.

Financing Activities

Net cash used in financing activities of $2.0 million for the year ended December 31, 2025 was primarily attributable to $1.6 million in cash payments for Class A common share repurchases and $0.4 million in cash withheld for tax payments on restricted stock units ("RSU") vesting.

Net cash provided by financing activities of $1.0 million for the year ended December 31, 2024 was primarily attributable to proceeds from the exercise of stock options.

Contractual Obligations and Commitments

The following table summarizes our material contractual obligations for cash expenditures as of December 31, 2025, and the periods in which these obligations are due:

⁽¹⁾ Purchase obligations include commitments for the purchase of lab supplies and equipment as well as committed spend related to a JDA. These commitments are derived from purchase orders, supplier contracts and open orders based on projected demand information.

⁽²⁾ Operating lease obligations represent the fixed lease payments for the noncancelable lease term, fixed lease payments for optional renewal periods where the Company is reasonably certain the renewal option will be exercised, variable lease payments that depend on an underlying index or rate in effect at lease commencement, and future minimal lease payments for executed but not yet commenced lease agreements.

For additional information regarding our operating lease obligations, see "Note 13 - Leases" of our accompanying consolidated financial statements.

Recent Accounting Pronouncements

See "Note 2 - Summary of Significant Accounting Policies" of our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more information about recent accounting pronouncements, the timing of their adoption, and their potential impact on our financial condition, results of operations and cash flows.

Critical Accounting Estimates and Judgments

Our consolidated financial statements have been prepared in accordance with U.S. GAAP which requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

We consider an accounting estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the financial statements. Our significant accounting policies are described in "Note 2 - Summary of Significant Accounting Policies" of our accompanying consolidated financial statements included in this Annual Report on Form 10-K. We consider the following to be our critical accounting estimates.

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