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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 001-40284

Graphic

SOLID POWER, INC.

(Exact name of registrant as specified in its charter)

Delaware

   

86-1888095

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

486 S. Pierce Ave., Suite E

Louisville, Colorado

80027

(Address of principal executive offices)

(Zip Code)

(303) 219-0720

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading symbol(s)

   

Name of each exchange on which registered

Common stock, par value $0.0001 per share

SLDP

The Nasdaq Stock Market LLC

Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50

SLDPW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

177,829,714 shares of common stock were issued and outstanding as of May 8, 2023.

GLOSSARY OF DEFINED TERMS

Term

Definition

Ah

Ampere hour

BMW

BMW of North America LLC

Board

The Board of Directors of Solid Power, Inc.

DCRC

Decarbonization Plus Acquisition Corporation III

EV

Battery electric vehicle

EV cells

Prototype cell formats between 60 and 100 Ah

EV line

Our pilot cell production line that is capable of producing cells between 60 and 100 Ah.

Exchange Act

Securities Exchange Act of 1934, as amended

JDA

Joint Development Agreement

OEM

Automotive original equipment manufacturers

Report

This Quarterly Report on Form 10-Q

SEC

Securities and Exchange Commission

Solid Power / the Company / we / us / our

Solid Power, Inc., a Delaware corporation (f/k/a Decarbonization Plus Acquisition Corporation III)

2

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) of Solid Power, Inc. (f/k/a Decarbonization Plus Acquisition Corporation III, “Solid Power,” the “Company,” “we,” “us,” or “our”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Report, regarding our future financial performance and our strategy, expansion plans, market opportunity, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “will,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “project” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Report. We caution you that the forward-looking statements contained herein are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

In addition, we caution you that the forward-looking statements regarding the Company contained in this Report are subject to the following factors:

risks relating to the uncertainty of the success of our research and development efforts, including our ability to achieve the technological objectives or results that our partners require, and to commercialize our technology in advance of competing technologies;
risks relating to the non-exclusive nature of our original equipment manufacturers and joint development agreement relationships;
our ability to negotiate and execute supply agreements with our partners on commercially reasonable terms;
our ability to protect our intellectual property, including in jurisdictions outside of the United States;
broad market adoption of EVs and other technologies where we are able to deploy our cell technology and electrolyte material, if developed successfully;
our success in retaining or recruiting, or changes required in, our officers, key employees, including technicians and engineers, or directors;
risks and potential disruptions related to management transitions;
changes in applicable laws or regulations;
risks related to technology systems and security breaches;
the possibility that we may be adversely affected by other economic, business or competitive factors, including supply chain interruptions, and may not be able to manage other risks and uncertainties;
risks relating to our status as a research and development stage company with a history of financial losses, and an expectation to incur significant expenses and continuing losses for the foreseeable future;
rollout of our business plan and the timing of expected business milestones;
the termination or reduction of government clean energy and electric vehicle incentives;
delays in the construction and operation of production facilities;

3

changes in domestic and foreign business, market, financial, political and legal conditions; and
those factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

We caution you that the foregoing list does not contain all of the risks or uncertainties that could affect the Company.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Report to reflect events or circumstances after the date of this Report or to reflect new information or the occurrence of unanticipated events, except as required by law. You should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

TRADEMARKS

Our logo and trademark appearing in this Report and the documents incorporated by reference herein are our property. This document and the documents incorporated by reference herein contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of it by, any other companies.

MARKET AND INDUSTRY DATA

We obtained the industry and market data used throughout this Report or any documents incorporated herein by reference from our own internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies, publicly available information and research, surveys and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In some cases, we do not expressly refer to the sources from which this data is derived. In addition, while we believe the industry and market data included in this Report or any documents incorporated herein by reference is reliable and based on reasonable assumptions, such data involve material risks and other uncertainties and is subject to change based on various factors, including those discussed in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties or by us.

4

INFORMATION ABOUT SOLID POWER

We use our website (www.solidpowerbattery.com) and various social media channels as a means of disclosing information about Solid Power and our products to our customers, investors and the public (e.g., @SolidPowerInc on Twitter, Solid Power Inc. on LinkedIn, and Solid Power on YouTube). The information posted on our website and social media channels is not incorporated by reference in this Report or in any other report or document we file with the SEC. Further, references to our website URLs are intended to be inactive textual references only. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about Solid Power when you enroll your e-mail address by visiting the “Investor Email Alerts” section of our website at https://ir.solidpowerbattery.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC. These reports and other information we file with the SEC are available free of charge at https://ir.solidpowerbattery.com/financial-information/sec-filings when such reports are available on the SEC’s website.

5

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Solid Power, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and number of shares)

March 31, 2023

    

(Unaudited)

    

December 31, 2022

Assets

Current Assets

 

  

 

  

Cash and cash equivalents

$

9,888

$

50,123

Marketable securities

245,563

272,957

Contract receivables

 

1,700

 

1,840

Prepaid expenses and other current assets

 

4,219

 

2,888

Total current assets

 

261,370

 

327,808

Property, Plant and Equipment, net

 

87,891

 

82,761

Right-Of-Use Operating Lease Asset, net

7,586

7,725

Right-Of-Use Financing Lease Asset, net

896

922

Other Assets

1,099

1,148

Long-term Investments

212,785

172,974

Intangible Assets, net

 

1,229

 

1,108

Total assets

$

572,856

$

594,446

Liabilities and Stockholders’ Equity

 

 

Current Liabilities

 

 

Accounts payable

$

3,577

$

10,070

Current portion of long-term debt

 

 

7

Deferred revenue

 

1,036

 

4,050

Accrued and other current liabilities:

 

 

Accrued compensation

 

2,023

 

4,528

Other accrued liabilities

 

5,104

 

1,256

Operating lease liabilities, short-term

567

549

Financing lease liability, short-term

276

273

Total current liabilities

 

12,583

 

20,733

Warrant Liabilities

11,779

9,117

Operating Lease Liabilities, Long-Term

8,471

8,622

Financing Lease Liabilities, Long-Term

 

552

 

602

Total liabilities

33,385

39,074

Stockholders’ Equity

 

  

 

  

Common Stock, $0.0001 par value; 2,000,000,000 shares authorized; 177,687,138 and 176,007,184 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

18

 

18

Additional paid-in capital

 

579,975

577,603

Accumulated deficit

 

(38,248)

 

(19,090)

Accumulated other comprehensive loss

(2,274)

(3,159)

Total stockholders’ equity

 

539,471

 

555,372

Total liabilities and stockholders’ equity

$

572,856

$

594,446

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

6

Solid Power, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except number of shares and per share amounts)

Three Months Ended March 31, 

2023

    

2022

Revenue

$

3,792

$

2,196

Operating Expenses

 

Direct costs

6,274

2,030

Research and development

11,648

 

6,661

Marketing and sales

432

 

795

General and administrative

6,756

 

4,022

Total operating expenses

25,110

 

13,508

Operating Loss

(21,318)

 

(11,312)

Nonoperating Income

 

Interest income

4,835

240

Change in fair value of warrant liabilities

(2,662)

710

Interest expense

(13)

 

(5)

Total nonoperating income

2,160

 

945

Pretax Loss

(19,158)

 

(10,367)

Income tax benefit

 

(23)

Net Loss Attributable to Common Stockholders

$

(19,158)

$

(10,344)

Other Comprehensive Income (Loss)

885

(330)

Comprehensive Loss Attributable to Common Stockholders

$

(18,273)

$

(10,674)

Basic and diluted loss per share

(0.11)

(0.06)

Weighted average shares outstanding – basic and diluted

176,934,261

 

172,395,717

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

7

Solid Power, Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)

(in thousands, except number of shares)

Common Stock

Additional

Accumulated

Accumulated Other

Total Stockholders’

    

Shares

    

Amount

    

paid-in capital

    

deficit

    

Comprehensive Loss

    

Equity

Balance as of December 31, 2022

176,007,184

18

$

577,603

$

(19,090)

$

(3,159)

$

555,372

Net loss

 

 

 

(19,158)

 

(19,158)

Stock options exercised

 

1,679,954

 

150

 

 

150

Stock-based compensation expense

 

 

2,222

 

 

2,222

Unrealized gain on marketable securities

885

885

Balance as of March 31, 2023

177,687,138

$

18

$

579,975

$

(38,248)

$

(2,274)

$

539,471

Common Stock

Additional

Accumulated

Accumulated Other

Total Stockholders’

    

Shares

    

Amount

    

paid-in capital

    

deficit

    

Comprehensive Loss

    

Equity

Balance as of December 31, 2021

167,557,988

17

$

568,183

$

(9,535)

$

$

558,665

Net loss

 

 

 

(10,344)

 

(10,344)

Transaction costs

(12)

(12)

Stock options exercised

 

6,212,964

 

270

 

 

270

Stock-based compensation expense

 

 

1,596

 

 

1,596

Unrealized loss on marketable securities

(330)

(330)

Balance as of March 31, 2022

173,770,952

$

17

$

570,037

$

(19,879)

$

(330)

$

549,845

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

8

Solid Power, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Three Months Ended March 31, 

    

2023

    

2022

Cash Flows from Operating Activities

 

Net loss

$

(19,158)

$

(10,344)

Adjustments to reconcile net loss to net cash and cash equivalents from operating activities:

 

Depreciation and amortization

2,264

 

753

Amortization of right-of-use assets

183

9

Stock compensation expense

2,222

 

1,596

Deferred taxes

 

(23)

Warrant liabilities

2,662

(710)

Amortization of premiums and accretion of discounts on marketable securities

(2,716)

Change in operating assets and liabilities that provided (used) cash and cash equivalents:

 

Contract receivable

140

 

(810)

Prepaid expenses and other assets

(1,129)

 

659

Accounts payable

(2,131)

 

(3,310)

Deferred revenue

(3,014)

 

(69)

Accrued and other liabilities

1,178

 

(2,300)

Lease liabilities

(132)

180

Net cash and cash equivalents used in operating activities

(19,631)

 

(14,369)

Cash Flows from Investing Activities

 

Purchases of property, plant and equipment

(11,581)

 

(10,527)

Purchases of marketable securities and long-term investments

(110,636)

 

(61,669)

Proceeds from sales of marketable securities

101,665

23,420

Purchases of intangible assets

(125)

 

(105)

Net cash and cash equivalents used in investing activities

(20,677)

 

(48,881)

Cash Flows from Financing Activities

 

Payments of debt

(7)

 

(38)

Proceeds from exercise of common stock options

150

 

270

Payments on finance lease liability

(70)

(12)

Transaction costs

(12)

Net cash and cash equivalents provided by financing activities

73

208

Net (decrease) increase in cash and cash equivalents

(40,235)

(63,042)

Cash and cash equivalents at beginning of period

50,123

513,447

Cash and cash equivalents at end of period

9,888

450,405

Supplemental information

Cash paid for interest

$

13

$

3

Accrued capital expenditures

$

3,370

$

3,119

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

9

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Nature of Business

Solid Power, Inc. (the “Company”) is developing solid state battery technology to enable the next generation of batteries for the fast-growing EV and other markets. The Company’s planned business model is to sell its sulfide-based solid electrolyte and to license its solid-state cell designs and manufacturing process.

Note 2 – Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 2 – Significant Accounting Policies to the Company’s financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) and are supplemented by the Notes to the Condensed Consolidated Financial Statements (Unaudited) (the “Notes”) included in this Quarterly Report on Form 10-Q for the period ended March 31, 2023 (this “Report”). The financial statements included in this Report (including the Notes) should be read in conjunction with the 2022 Form 10-K.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the basis of generally accepted accounting principles in the United States (“GAAP”). The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ from those estimates. All dollar amounts presented herein are in U.S. dollars and are in thousands, except par value, share and per share amounts.

The accompanying unaudited condensed consolidated financial statements include accounts of the Company and its wholly owned subsidiary, Solid Power Operating, Inc. All intercompany balances and transactions have been eliminated in consolidation. Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying unaudited Condensed Consolidated financial statements.

Recent Accounting Pronouncements

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options. On January 1, 2022, the Company adopted the standards under Topic 842 using the modified retrospective method and elected a number of the practical expedients in its implementation of Topic 842. The key change that affected the Company relates to accounting for operating leases for which it is the lessee that were historically off-balance sheet.

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements. The Company adopted this guidance as of January 1, 2022.

The Company regularly reviews its available-for-sale marketable securities and evaluates the current expected credit losses by considering factors such as any changes in credit ratings, historical experience, market data, issuer-specific factors, and current economic conditions. Based on this analysis, any allowance for credit losses is immaterial and would be recorded as a reduction to the carrying value of the asset.

The Company reviews its receivable aging on an individual customer level, considering collectability of cash flows based on the risk of past events, current conditions, and forward-looking information. The Company establishes allowances for bad debts equal to the estimable portions of accounts receivable for which failure to collect is expected to occur. Allowances for doubtful accounts are recorded as reductions to the carrying values of the related receivables. To date, the Company has not recorded an allowance for doubtful accounts.

10

Note 3 – Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

    

March 31, 2023

    

December 31, 2022

Commercial production equipment

$

23,631

$

21,595

Laboratory equipment

4,916

3,278

Leasehold improvements

 

38,253

 

27,996

Furniture and computer equipment

 

1,483

 

1,482

Construction in progress

 

33,494

 

40,036

Total cost

 

101,777

 

94,387

Accumulated depreciation

 

(13,886)

 

(11,626)

Net property and equipment

$

87,891

$

82,761

Depreciation expenses are allocated ratably across operating expenses on the accompanying Condensed Consolidated Statements of Operations. Depreciation expenses for dedicated laboratory equipment and commercial production equipment are charged to research and development; other depreciation expenses are included in the Company’s overhead and are allocated across operating expenses on the accompanying Condensed Consolidated Statements of Operations based on Company personnel costs incurred.

Depreciation expense related to property, plant, and equipment are summarized as follows:

Three Months Ended March 31, 

2023

    

2022

Depreciation expense

$

2,259

$

751

In 2022, the Company expanded its cell production capabilities through the construction of a second dry room and installation of a second cell pilot production line at its Louisville, Colorado facility, which is designed to produce larger format solid-state battery cells for the automotive qualification process.

The Company is expanding its electrolyte production to a second location in Thornton, Colorado. Scaling this production will allow it to produce larger quantities of electrolyte material required to feed cell-production lines and continue research and development efforts. The Company will begin producing electrolyte from this facility in 2023 and have placed portions of the facility into service.

March 31, 2023

December 31, 2022

Construction in progress

Louisville, Colorado - 2nd cell pilot line

$

2,010

$

2,010

Louisville, Colorado - Other capital projects

2,431

2,206

Thornton, Colorado - Increased electrolyte production scale

29,053

35,820

Note 4 – Intangible Assets

Intangible assets of the Company are summarized as follows:

    

March 31, 2023

    

December 31, 2022

Gross Carrying

Accumulated

Gross Carrying

Accumulated

    

Amount

    

Amortization

    

Amount

    

Amortization

Intangible assets:

Licenses

$

149

$

(54)

$

149

$

(51)

Patents

72

(2)

Patents pending

 

1,038

 

 

984

 

Trademarks

9

9

Trademarks pending

 

17

 

 

17

 

Total amortized intangible assets

$

1,285

$

(56)

$

1,159

$

(51)

11

Amortization expense for intangible assets is summarized as follows:

Three Months Ended March 31, 

 

2023

    

2022

 

Amortization expense

$

5

$

2

Useful lives of intangible assets range from three to 20 years. Amortization expenses are allocated ratably across operating expenses on the accompanying condensed consolidated statements of operations.

Note 5 – Fair Value Measurements

The carrying amounts of certain financial instruments, such as cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their relatively short maturities.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

As of March 31, 2023 and December 31, 2022, the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:

March 31, 2023

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

Commercial Paper

$

166,411

$

$

$

166,411

Corporate Bonds

$

243,163

$

$

$

243,163

Government Bonds

$

48,774

$

$

$

48,774

U.S. Treasuries

 

 

Liabilities

Public Warrants

$

5,576

$

$

$

5,576

Private Warrants

$

$

6,203

$

$

6,203

December 31, 2022

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

Commercial Paper

$

165,179

$

$

$

165,179

Corporate Bonds

$

227,957

$

$

$

227,957

Government Bonds

$

42,865

$

$

$

42,865

U.S. Treasuries

 

9,930

 

9,930

Liabilities

Public Warrants

$

4,900

$

$

$

4,900

Private Warrants

$

$

4,217

$

$

4,217

The change in fair value of the Company’s marketable securities is included in other comprehensive loss. There were no transfers in and out of Level 3 fair value hierarchy during the three months ended March 31, 2023 and year ended December 31, 2022. For the three months ended March 31, 2023 the Company purchased $110,636 of marketable securities.

Fair Value of Common Stock Warrant Liabilities

The fair value of the Private Placement Warrant Liabilities (defined below) has been estimated using a Black-Scholes model as of March 31, 2023 and December 31, 2022 Consolidated Balance Sheet dates. The fair value of the Public Warrants (defined below) has been measured based on the quoted price of such warrants on the Nasdaq Stock Market, a Level 1 input. The estimated fair value of the Private Placement Warrants is determined using Level 2 inputs. Inherent in a Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. Material increases (or decreases) in any of those inputs may result in a significantly higher (or lower) fair value measurement. The Company estimates the volatility of its Private Placement Warrants based on implied volatility from the Company’s Public Warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S.

12

Treasury zero-coupon yield curve for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend yield is based on the historical rate, which the Company anticipates remaining at zero. The following table provides quantitative information regarding Level 2 inputs used in the recurring valuation of the Private Placement Warrants as of their measurement dates:

    

March 31, 2023

    

December 31, 2022

 

Exercise Price

$

11.50

$

11.50

Stock Price

$

3.01

$

2.54

Volatility

 

79.0

%  

 

71.3

%

Term

 

3.69

 

3.94

Risk-free rate

 

3.67

%  

 

4.03

%

The following table provides a reconciliation of the Public Warrants measured at fair value using Level 1 directly observable inputs and Private Placement Warrants measured at fair value using Level 2 directly or indirectly observable inputs:

Public Warrants

Private Warrants

    

Level 1 Fair Value

    

Level 2 Fair Value

December 31, 2022

$

0.42

$

0.55

Change in fair value

$

0.04

$

0.31

March 31, 2023

$

0.46

$

0.86

The following tables provides a reconciliation of the March 31, 2023 three month change in fair value for the Public Warrants and Private Placement Warrants:

Three months change in

Warrant Class

    

Level

    

Warrants

    

December 31, 2022

    

fair value

    

March 31, 2023

Public Warrants

 

1

 

12,120,985

$

4,900

$

676

$

5,576

Private Warrants

 

2

 

7,212,318

$

4,217

$

1,986

$

6,203

Total

 

  

 

19,333,303

$

9,117

$

2,662

$

11,779

Note 6 – Common Stock Warrant Liabilities

As of March 31, 2023 and December 31, 2022, there were 12,120,985 and 11,666,636 publicly traded warrants (“Public Warrants”) and 7,212,318 and 7,666,667 private placement warrants (“Private Placement Warrants,” and together with the Public Warrants, “Warrants”) outstanding, respectively. Each whole Warrant entitles the holder thereof to purchase one share of Common Stock at a price of $11.50 per share, subject to customary adjustments. Only whole Warrants are exercisable. The Warrants became exercisable on January 7, 2022 and will expire on December 8, 2026.

None of the Private Placement Warrants are redeemable by the Company so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.

The Warrant Liabilities were initially measured at fair value upon closing of the transactions contemplated by the Business Combination Agreement and Plan of Reorganization, dated June 15, 2021 by and among the Company, DCRC Merger Sub, Inc., and Solid Power Operating, Inc., as amended (“Business Combination”), for $101,253 and subsequently re-measured at each reporting period. The Public Warrants were allocated a portion of the proceeds from the issuance of the units of common stock and one-third warrants in DCRC’s initial public offering equal to their fair value. The Company recognized a loss and gain in connection with changes in the fair value of warrant liabilities of $2,662 and $710 for the three months ending March 31, 2023 and 2022, respectively.

There have been no significant changes to our Public or Private Placement Warrants, including redemption terms disclosed in our 2022 Form 10-K.

Note 7 – Stockholders’ Equity

Common Stock

Stock options exercised for Common Stock are summarized in the table below:

13

Three months ended March 31, 

2023

    

2022

Stock options exercised

1,679,954

6,212,964

Cash received from options exercised under the Solid Power, Inc. 2014 Equity Incentive Plan (the “2014 Plan”) for the three months ended March 31, 2023 and 2022 was $150 and $270, respectively.

Note 8 – Stock Based Compensation

There have been no significant changes to our equity incentive plans, Employee Stock Purchase Plan, or accounting methodology for stock based compensation, as disclosed in our 2022 Form 10-K.

The fair value of stock options and Restricted Stock Units (“RSUs”) issued to employees and directors is recognized as compensation expense over the period of service that generally coincides with the vesting period of the award. The Company allocated compensation ratably across Operating Expenses within the following financial statement lines. When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.

For the three months ended March 31, 2023, the Company recognized compensation costs totaling:

Three months ended March 31, 

2023

    

2022

Equity-based compensation costs related to RSUs

$

635

$

Equity-based compensation costs related to stock options

 

1,587

 

1,596

Total equity-based compensation costs

$

2,222

$

1,596

Unrecognized future compensation cost

59,945

21,455

The following table summarizes our award activity for stock options and RSUs for the three months ended March 31, 2023:

    

    

RSUs

Stock Options

Balance at December 31, 2022

 

1,057,980

 

25,998,172

Granted

 

1,797,034

3,272,873

Vested or Exercised

 

(1,679,954)

Forfeited

 

(88,441)

(1,494,020)

Outstanding at March 31, 2023

 

2,766,573

26,097,071

Stock Options

The fair value of each option grant during the three months ended March 31, 2023 and 2022 was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions used:

    

Three months ended March 31, 

 

    

2023

 

2022

 

Approximate riskfree rate

 

4.28

%

1.02

%

Volatility

 

46.86

%

59.97

%

Average expected life (years)

 

6 years

6 years

Dividend yield

 

%

%

Weightedaverage grant date fair value

$

3.11

$

0.95

Estimated fair value of total options granted

$

5,165

$

31

Note 9 –Loss Per Share

Basic loss per share represents net loss attributable to common stock divided by the basic weighted average number of common stock outstanding during the period.

14

Due to the net loss for the three months ended March 31, 2023 and 2022, diluted loss per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive. Warrants outstanding in 2023 and 2022 were not included in the computation of diluted earnings per share because the Warrant’s exercise price for the period was greater than the average market price of the common stock.

The table below sets forth the basic and diluted loss per share calculation for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31, 

2023

2022

Net loss attributable to common stockholders

$

(19,158)

$

(10,344)

Weighted average shares outstanding – basic and diluted

176,934,261

172,395,717

Basic and diluted loss per share

$

(0.11)

$

(0.06)

As of the three months ended March 31, 2023 and 2022, potentially dilutive securities excluded from the diluted loss per share calculation are as follows (in shares):

Three Months Ended March 31, 

2023

    

2022

Common Stock Warrants

19,333,303

 

19,333,303

2014 & 2021 Equity Incentive Plan - Stock Options

25,352,980

 

27,837,492

2021 Equity Incentive Plan - Restricted Stock Units

1,764,062

 

2021 Employee Stock Purchase Plan

90,314

Contingently Issuable Common Stock

49,834

Total potentially dilutive securities

46,590,493

47,170,795

Note 10 – Leases

The Company leases its two facilities and certain equipment. Fixed rent generally escalates each year, and the Company is responsible for a portion of the landlords’ operating expenses such as property tax, insurance and common area maintenance.

The Company’s facility in Louisville, Colorado, is under a noncancelable operating lease with a maturity date in September 2029. In 2022, the Company amended the lease to incorporate a prior subleased space into the base lease and extend the term of the lease. The Company has the right to renew this lease for an additional five-year period.

On September 1, 2021, the Company entered into an industrial operating lease agreement for its facility in Thornton, Colorado, with the initial term through March 31, 2029. Under this operating lease, the Company has one option to renew for five years, which has been included in the calculation of lease liabilities and right-of-use assets at the adoption date of the lease accounting standard on January 1, 2022, as the exercise of the option was reasonably certain. As the renewal rent has not been negotiated, the Company used an estimated rent rate which approximated the fair market rent at adoption of ASC 842 on January 1, 2022 for the extension period.

The Company has certain equipment leases classified as finance leases as of March 31, 2023.

The Company’s leases do not have any contingent rent payments and do not contain residual value guarantees.

The components of lease expense are as follows:

    

Three Months Ended

    

March 31, 2023

Finance lease costs:

 

  

Amortization of right-of-use assets

$

44

Interest on lease liabilities

 

12

Operating lease costs

 

308

Total lease expense

$

364

15

The components of cash flow information related to leases are as follows:

    

Three Months Ended

    

March 31, 2023

Operating outgoing cash flows – finance lease

$

12

Financing outgoing cash flows – finance lease

 

66

Operating outgoing cash flows – operating lease

 

283

    

March 31, 2023

 

Finance lease

 

  

Weighted-average remaining lease term – finance lease (in years)

 

3.22

Weighted-average discount rate – finance lease

 

5.9

%

Operating lease

 

  

Weighted-average remaining lease term – operating lease (in years)

 

9.95

Weighted-average discount rate – operating lease

 

6.9

%

As of March 31, 2023, future minimum payments during the next five years and thereafter are as follows:

Fiscal year

    

Finance Lease

    

Operating Lease

2023 (remaining nine months)

$

236

$

854

2024

315

1,173

2025

200

1,210

2026

101

1,248

2027

37

1,288

2028

16

1,329

Thereafter

5,244

Total

905

12,346

Less present value discount

77

3,307

Total lease liabilities

$

828

$

9,039

Note 11 – Related Party Transactions

During the three months ended March 31, 2023, the Company recognized $3,000 of revenue and $1,000 of deferred revenue related to the BMW joint development agreement.

Note 12 – Retirement Plans

The Company sponsors a 401(k) plan for all eligible employees. The plan provides for the Company to make a discretionary matching contribution. Contributions to the plan totaled $180 and $144 for the three months ended March 31, 2023 and 2022, respectively.

Note 13 – Income Taxes

The Company’s effective tax rate was 0.0% and 0.21% for the three months ended March 31, 2023 and 2022, respectively. The change in the effective tax rate between periods was due to the Company was being in a full valuation allowance for the three months ended March 31, 2023.

Note 14 – Contingencies

In the normal course of business, the Company may be party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.

DCRC, the predecessor to the Company, received a demand letter dated August 31, 2021 from counsel purporting to represent a shareholder of DCRC alleging that the proposed vote on the Authorized Share Charter Proposal (the “Proposal”) for the proposed Business Combination with Solid Power Operating, Inc. violated Section 242(b)(2) of the Delaware General Corporation

16

law and demanded that DCRC provide DCRC’s Class A stockholders with a separate class vote on the Proposal. DCRC subsequently provided for the Class A stockholders to have a separate class vote on the Proposal share increase. The Proposal was approved and the Business Combination closed. The counsel who issued this demand letter made a fee demand (the “Fee Demand”) for prompting the change in the Proposal. The Company accrued a liability of $500 on its Consolidated Balance Sheets as of December 31, 2021 in anticipation of settling the Fee Demand. On March 10, 2022, the Company settled the Fee Demand for an amount that is materially consistent with the Company’s accrual.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Report. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs, and expected performance. For additional discussion, see “Cautionary Note Regarding Forward-Looking Statements” above. The forward-looking statements are dependent upon events, risks, and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Report and under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, dated March 1, 2023. We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments or otherwise, except to the extent that such disclosure is required by applicable law.

Overview

We are developing solid state battery technologies to enable the next generation of rechargeable batteries for the fast-growing EV and other markets.

Our core technology is our proprietary sulfide-based solid electrolyte material, which replaces the liquid or gel electrolyte used in conventional lithium-ion batteries. We believe that our electrolyte material can enable extended driving range, longer battery life, improved safety, and lower costs compared to conventional lithium-ion.

We also are designing and developing solid state cells that utilize our electrolyte in the cathode, anode, and separator layers. We currently produce 0.2 Ah, 2 Ah, 20 Ah, and EV cells on two pilot lines using established manufacturing processes. In 2022, we installed our EV line, which allows us to produce EV cells between 60 Ah and 100 Ah. The EV line is designed to produce cells as part of the automotive qualification process and for vehicle integration demonstration purposes.

We have partnered with industry leaders, including Ford Motor Company, BMW, and SK On Co., Ltd. We are working closely with each of these partners to refine and validate our cell designs and electrolyte material with the ultimate goal to commercialize our technologies. Our business model – selling our electrolyte to cell manufacturers and licensing our cell designs and manufacturing processes – distinguishes us from many of our competitors who plan to be commercial battery manufacturers. Ultimately, we endeavor to be a leading producer and distributor of sulfide-based solid electrolyte material for powering both EVs and other applications. Since we do not intend to commercially produce battery cells, we expect to invest less than other development-stage battery companies that plan to commercially manufacture their own cell designs and construct battery production facilities.

The products we currently make are in the development stage and require continued development and validation before we can commercialize either our electrolyte or cell technology.

Key Factors Affecting Operating Results

We are a research and development-stage company and have not generated significant revenue through the sale of our electrolyte or licensing of our cell designs. Our ability to commercialize our products depends on several factors that present significant opportunities for us but also pose material risks and challenges, including those discussed in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” appearing in this Report, which are incorporated by reference.

17

Prior to reaching commercialization, we must test and validate our products to ensure they meet the performance and safety requirements of our customers. We also will have to negotiate licensing and supply contracts with our customers on terms and conditions that are mutually acceptable. We will need to scale production of our electrolyte material to satisfy anticipated demand. All of these factors will take time and affect our operating results. Since many factors are difficult to quantify, our actual operating results may be different than we currently anticipate.

Our revenue generated to date has primarily come from research and development performance on government contracts and research and development licensing activities. We have and are deploying substantial capital to expand our production capabilities and engage in research and development programs. We also continue to incur significantly more administrative expenses as a publicly traded company.

In addition to meeting our development goals and reaching commercialization, future growth and demand for our products will be highly dependent upon consumers adopting EVs. The market for new energy vehicles is still rapidly evolving due to emerging technologies, competitive pricing, government regulation and industry standards, and changing consumer demands and behaviors.

Basis of Presentation

We currently conduct our business through one operating segment. As a research and development company with no commercial operations, our activities to date have been limited and were conducted primarily in the United States. Our historical results are reported under GAAP and in U.S. dollars.

Results of Operations

Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

During the three months ended March 31, 2023, we expanded and accelerated our development efforts through increased capital and operational expenditures. We continued to invest in talent while expanding our facilities, production equipment, and capabilities. We expect to continue to increase our spending in all operational areas through the remainder of 2023 in order to execute our development strategy.

The following table is a consolidated summary of our operating results for the periods indicated:

Three Months Ended March 31, 

 

(in thousands)

2023

    

2022

    

Change

    

%

 

Revenue

$

3,792

$

2,196

$

1,596

73

%

Operating Expenses

 

  

 

  

 

  

 

  

Direct costs

 

6,274

 

2,030

 

4,244

 

209

%

Research and development

 

11,648

 

6,661

 

4,987

 

75

%

Marketing and sales

 

432

 

795

 

(363)

 

(46)

%

General and administrative

 

6,756

 

4,022

 

2,734

 

68

%

Total operating expenses

 

25,110

 

13,508

 

11,602

 

86

%

Operating Loss

 

(21,318)

 

(11,312)

 

(10,006)

 

(88)

%

Nonoperating Income

 

  

 

  

 

  

 

  

Interest income

 

4,835

 

240

 

4,595

 

NM

Change in fair value of warrant liabilities

 

(2,662)

 

710

 

(3,372)

 

NM

Interest expense

 

(13)

 

(5)

 

(8)

 

160

%

Total nonoperating income

$

2,160

$

945

$

1,215

 

NM

Pretax Loss

 

(19,158)

 

(10,367)

 

(8,791)

 

85

%

Income tax benefit

 

 

(23)

 

23

 

NM

Net Loss attributable to Common Stockholders

$

(19,158)

$

(10,344)

$

(8,814)

 

85

%

Other Comprehensive Income (Loss)

885

(330)

1,215

 

NM

Comprehensive loss attributable to Common Stockholders

$

(18,273)

$

(10,674)

$

(7,599)

 

NM

NM = Not meaningful

18

The key factors driving our results of operations for the three months ended March 31, 2023, including our increased operating loss as compared to the corresponding period in 2022, were as follows:

Revenue and direct costs – our JDA revenue and related direct cost drove the overall increase for the period, while revenues and direct costs from performance on government contracts decreased slightly.
Research and development – our research and development costs increased primarily as a result of increased labor and material costs as we expanded the development efforts of our battery cells and electrolyte material. We expect our development costs to continue to increase as we continue to accelerate both the pace and scope of our development efforts.
General and administrative – our general and administrative costs increased primarily due to additional planned hiring, workforce development and training, and enterprise resource planning system costs and implementation efforts.
Non-cash stock compensation costs increased across Direct costs, Research and development, and General and administrative expenses related to increased labor costs.
Nonoperating income – our nonoperating income increased primarily due to strategic cash investments in A-rated investments which increased both our interest income and other income, partially offset by loss on fair value adjustment of warrant liabilities.

Liquidity and Capital Resources

Sources of Liquidity

Our sources of cash have historically been primarily derived from the sale of equity, with a small portion coming from performance on government contracts and commercial revenues.

As of March 31, 2023 and December 31, 2022, we had total liquidity, as set forth below:

(in thousands)

    

March 31, 2023

December 31, 2022

Cash and cash equivalents

$

9,888

$

50,123

Marketable securities

 

245,563

 

272,957

Long-term investments

 

212,785

 

172,974

Total liquidity

$

468,236

$

496,054

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On March 13, 2023, the FDIC announced that it had transferred all insured and uninsured deposits and substantially all assets of SVB to a newly created, full-service FDIC-operated “bridge bank” called Silicon Valley Bridge Bank, N.A., where depositors would have full access to their money immediately. The Company did not incur any loss related to its operating accounts and did not hold any investments with SVB. We continue to invest in A-rated investments with two top-tier banks, and have no exposure related to SVB going forward.