PROSPECTUS SUPPLEMENT NO. 8 Filed Pursuant to Rule 424(b)(3)
(To Prospectus dated April 5, 2022) Registration No. 333-261711

 

89,684,845 Shares of Common Stock

7,666,667 Warrants

 

 

This prospectus supplement supplements the prospectus dated April 5, 2022 (as supplemented to date, the “Prospectus”), which forms part of our Registration Statement on Form S-1 (No. 333-261711) for which Post-Effective Amendment No. 1 was filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2022 and declared effective by the SEC on April 5, 2022. This prospectus supplement is being filed to update the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q for the period ended September 30, 2022, filed with the SEC on November 9, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

 

The Prospectus relates to the offer by us and the resale by the Selling Securityholders (as defined in “Selling Securityholders” in the Prospectus) of up to: (i) 7,666,667 shares of common stock, par value $0.0001 per share, of Solid Power, Inc. (“Common Stock”) issuable upon the exercise of an aggregate of 7,666,667 warrants held by Decarbonization Plus Acquisition Sponsor III LLC, a Delaware limited liability company (the “Sponsor”), and certain former independent directors, each of which is exercisable at a price of $11.50 per share (collectively, the “Private Placement Warrants”) and (ii) 11,666,636 shares of Common Stock issuable upon the exercise of 11,666,636 warrants, each of which is exercisable at a price of $11.50 per share (the “Public Warrants”).

 

The Prospectus also relates to the resale from time to time by the Selling Securityholders of up to: (i) 45,760,373 shares of Common Stock consisting of (a) an aggregate of 8,750,000 shares of Common Stock held by the Sponsor and certain former independent directors and (b) an aggregate of 37,010,373 shares of Common Stock beneficially owned by certain former stockholders of Solid Power Operating, Inc., (ii) an aggregate of 19,500,000 shares of Common Stock purchased at Closing (as defined in the Prospectus) by a number of subscribers pursuant to separate subscription agreements, (iii) 5,091,169 shares of Common Stock issued to Douglas Campbell upon his exercise of options to purchase shares of Common Stock and (iv) the 7,666,667 Private Placement Warrants.

 

Our Common Stock and Public Warrants are listed on the Nasdaq Global Select Market under the symbols “SLDP” and “SLDPW,” respectively. On November 8, 2022, the closing price of our Common Stock was $5.27 and the closing price for our Public Warrants was $1.05.

 

This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement. This prospectus supplement updates and supplements the information included or incorporated by reference in the Prospectus. If there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

 

This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any supplements to it.

 

 

 

We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

 

Investing in our securities involves a high degree of risk. In reviewing the Prospectus, you should carefully consider the matters described under the heading “Risk Factors” beginning on page 7 of the Prospectus.

 

You should rely only on the information contained in the Prospectus, this prospectus supplement or any prospectus supplements to the Prospectus. We have not authorized anyone to provide you with different information.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus supplement is November 9, 2022.

 

 

 

Table of Contents

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 September 30, 2022

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

175,814,364 shares of common stock were issued and outstanding as of November 4, 2022.


Table of Contents

SOLID POWER, INC.

FORM 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 6.

Exhibits

28

Signatures

29


Table of Contents

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 manufacturer 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 electric vehicles and other technologies where we are able to deploy our all-solid-state batteries, if developed successfully;
our success in retaining or recruiting, or changes required in, our officers, key employees, including technicians and engineers, or directors;
changes in applicable laws or regulations;
risks related to technology systems and security breaches;
the possibility that COVID-19 or a future pandemic may adversely affect our results of operations, financial position and cash flows;
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 an early 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;

1


Table of Contents

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, 2021.

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, 2021. 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, and 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.

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 United States Securities and Exchange Commission (“SEC”). 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.

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Solid Power, Inc.

Condensed Consolidated Balance Sheets

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

September 30, 2022

    

(Unaudited)

    

December 31, 2021

Assets

Current Assets

 

  

 

  

Cash and cash equivalents

$

97,700

$

513,447

Marketable securities

270,839

75,885

Contract receivables

 

3,301

 

829

Prepaid expenses and other current assets

 

2,444

 

4,216

Total current assets

 

374,284

 

594,377

Property, Plant and Equipment, net

 

74,381

 

22,082

Right-Of-Use Operating Lease Asset, net

7,181

Right-Of-Use Financing Lease Asset, net

800

Other Assets

1,178

602

Long-term Investments

139,034

Intangible Assets, net

 

921

 

619

Total assets

$

597,779

$

617,680

Liabilities and Stockholders’ Equity

Current Liabilities

 

  

 

  

Accounts payable

$

9,946

$

4,326

Current portion of long-term debt

 

24

 

120

Deferred revenue

 

200

 

500

Accrued and other current liabilities:

 

 

  

Accrued compensation

 

2,905

 

1,151

Other accrued liabilities

 

1,157

 

2,269

Operating lease liabilities, short-term

691

Financing lease liabilities, short-term

231

Total current liabilities

 

15,154

 

8,366

Long-term Debt

 

2

 

10

Operating Lease Liabilities, Long-Term

 

7,134

 

Financing Lease Liabilities, Long-Term

 

545

 

Warrant Liabilities

21,837

50,020

Other Long-term Liabilities

 

 

393

Deferred Taxes

 

156

 

226

Total liabilities

44,828

59,015

Stockholders’ Equity

 

 

  

Common stock, $0.0001 par value; 2,000,000,000 shares authorized; 175,741,566 and 167,557,988 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

18

 

17

Additional paid in capital

575,381

568,183

Accumulated other comprehensive loss

(3,837)

Accumulated deficit

 

(18,611)

 

(9,535)

Total stockholders’ equity

 

552,951

 

558,665

Total liabilities and stockholders’ equity

$

597,779

$

617,680

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

3


Table of Contents

Solid Power, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

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

    

Three Months Ended September 30, 

    

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

Revenue

$

2,813

$

628

$

7,591

$

1,669

Operating expenses

 

 

Direct costs

3,544

709

8,561

1,764

Research and development

 

9,710

4,400

24,811

 

10,709

Marketing and sales

 

864

729

2,615

 

1,819

General and administrative

 

4,294

3,271

13,212

 

6,200

Total operating expenses

 

18,412

9,109

49,199

 

20,492

Operating loss

 

(15,599)

(8,481)

(41,608)

 

(18,823)

Non-operating income (expense)

 

 

Interest income

 

1,777

18

2,713

 

27

Interest expense

 

(12)

(32)

(22)

 

(374)

Other income (expense)

 

1,351

(2)

1,587

 

(3,102)

Change in fair value of warrant liabilities

28,183

Loss from change in fair value of embedded derivative liability

(2,680)

Total non-operating income (expense)

 

3,116

(16)

32,461

 

(6,129)

Pretax loss

 

(12,483)

(8,497)

(9,147)

 

(24,952)

Income tax expense (benefit)

 

(84)

(47)

(71)

 

(88)

Net loss

$

(12,399)

$

(8,450)

$

(9,076)

$

(24,864)

Other comprehensive loss

(2,546)

(3,837)

Comprehensive loss attributable to common stockholders

$

(14,945)

$

(8,450)

$

(12,913)

$

(24,864)

Net loss per share – Basic and Diluted

(0.07)

(0.08)

(0.05)

(0.28)

Weighted average shares outstanding – Basic and Diluted

175,025,984

102,389,770

173,859,649

87,258,952

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

4


Table of Contents

Solid Power, Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)

(in thousands, except number of shares)

Common Stock

    

Additional Paid in

Accumulated

    

Accumulated Other

Total Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Comprehensive Loss

    

Equity

Balance as of December 31, 2021

167,557,988

$

17

$

568,183

$

(9,535)

$

$

558,665

Net income

 

 

 

3,323

 

3,323

Transaction fees

(12)

(12)

Stock options exercised

6,869,144

 

 

433

 

 

433

Stock-based compensation expense

3,910

3,910

Unrealized loss on marketable securities

(1,291)

(1,291)

Withholding of Employee taxes related to stock-based compensation

(58)

(58)

Shares issued for the vesting of restricted stock units

20,672

Balance as of June 30, 2022

174,447,804

$

17

$

572,456

$

(6,212)

$

(1,291)

$

564,970

Net loss

(12,399)

(12,399)

Stock options exercised

1,293,762

1

337

338

Stock-based compensation expense

2,588

2,588

Unrealized loss on marketable securities

(2,546)

(2,546)

Balance as of September 30, 2022

175,741,566

$

18

$

575,381

$

(18,611)

$

(3,837)

$

552,951

    

Common Stock

    

Additional Paid in 

    

Accumulated

    

Accumulated Other 

    

Total Stockholders’

    

Shares

    

Amount

    

Capital

    

 Deficit

    

Comprehensive Loss

    

 Equity

Balance as of December 31, 2020

 

69,885,043

$

7

$

31,492

$

(27,627)

$

$

3,872

Net loss

 

 

 

 

(16,414)

 

 

(16,414)

Beneficial conversion feature on convertible debt

 

 

 

4,875

 

 

 

4,875

Redemption of Series A-1 redeemable preferred stock

 

(1,065,432)

 

 

(6,041)

 

 

 

(6,041)

Issuance of redeemable preferred stock

 

27,930,998

 

3

 

140,436

 

 

 

140,439

Stock options exercised

 

778,817

70

70

Warrants exercised

 

4,731,542

 

 

15

 

 

 

15

Stock-based compensation expense

 

 

 

217

 

 

 

217

Balance as of June 30, 2021

 

102,260,968

$

10

$

171,064

$

(44,041)

$

$

127,033

Net loss

 

 

 

 

(8,450)

 

 

(8,450)

Stock options exercised

226,558

32

32

Warrants exercised

Stock-based compensation expense

758

758

Balance as of September 30, 2021

 

102,487,526

$

10

$

171,853

$

(52,491)

$

$

119,373

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

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Solid Power, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Nine Months Ended September 30, 

    

2022

    

2021

Cash Flows from Operating Activities

 

  

 

  

Net loss

$

(9,076)

$

(24,864)

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

 

 

Depreciation and amortization

 

3,437

 

1,673

Amortization of right-of-use assets

51

Loss on sale of property, plant and equipment

 

4

 

4

Stock compensation expense

 

6,498

 

975

Deferred taxes

 

(71)

 

(88)

Change in fair value of warrant liabilities

(28,183)

Amortization of premiums and accretion of discounts on marketable securities

(1,170)

Accrued interest on convertible notes payable to be paid in kind

 

 

263

Loss from change in fair value of embedded derivative liability

 

 

2,680

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

 

 

Contract receivables

 

(2,473)

 

(365)

Prepaid expenses and other assets

 

2,101

 

(876)

Accounts payable

 

(2,215)

 

1,070

Deferred revenue

 

(300)

 

20

Accrued and other liabilities

 

719

 

1,530

Operating lease liability

192

(55)

Net cash and cash equivalents used in operating activities

 

(30,486)

 

(18,033)

Cash Flows from Investing Activities

 

 

Purchases of property, plant and equipment

 

(47,915)

 

(6,573)

Purchase of marketable securities and long-term investments

(448,757)

Proceeds from sales of marketable securities

111,198

Purchases of intangible assets

 

(308)

 

(189)

Net cash and cash equivalents used in investing activities

 

(385,782)

 

(6,762)

Cash Flows from Financing Activities

 

 

Proceeds from debt

 

 

957

Payments of debt

 

(104)

 

(1,883)

Proceeds from issuance of convertible note payable

 

 

4,875

Proceeds from exercise of common stock options

 

771

 

102

Proceeds from exercise of common stock warrants

15

Proceeds from issuance of Series B preferred stock

135,579

Preferred stock issuance costs

(4,511)

Redemption of preferred stock

(6,041)

Cash paid for withholding of employee taxes related to stock-based compensation

(58)

Payments on finance lease liability

(76)

Transaction costs

(12)

Net cash and cash equivalents provided by financing activities

521

129,093

Net (decrease) increase in cash and cash equivalents

(415,747)

104,298

Cash and cash equivalents at beginning of period

513,447

4,974

Cash and cash equivalents at end of period

97,700

109,272

Supplemental information

Cash paid for interest

$

5

$

112

Accrued capital expenditures

$

7,818

$

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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Nature of Business

Solid Power, Inc. (the “Company”), headquartered in Louisville, Colorado, is developing all-solid-state battery cell technology primarily for the electric vehicle market. The Company’s planned business model is to license its all-solid-state battery cell designs and manufacturing know-how to top tier battery manufacturers or automotive original equipment manufacturers and to sell its sulfide-based solid electrolyte for incorporation into all-solid-state battery cells. As of September 30, 2022, the Company has not derived material revenue from its principal business activities.

On December 8, 2021 (the “Closing Date”), the Company (f/k/a Decarbonization Plus Acquisition Corporation III (“DCRC”)) consummated its business combination pursuant to the Business Combination Agreement and Plan of Reorganization, dated June 15, 2021 (as amended, the “Business Combination Agreement”), among the Company, DCRC Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of DCRC (“Merger Sub”), and Solid Power Operating, Inc., a Colorado corporation (f/k/a Solid Power, Inc., “Legacy Solid Power”). Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with and into Legacy Solid Power, with Legacy Solid Power surviving the merger as a wholly owned subsidiary of the Company (the “Merger” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”).

Pursuant to the Business Combination Agreement, the Merger was accounted for as a reverse recapitalization (the “Reverse Recapitalization”) in accordance with generally accepted accounting principles in the United States (“GAAP”). Under this method of accounting, DCRC was treated as the “acquired” company and Legacy Solid Power is treated as the acquirer for financial reporting purposes. See Note 3.

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, 2021 (the “2021 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 September 30, 2022 (this “Report”). The financial statements included in this Report (including the Notes) should be read in conjunction with the 2021 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 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.

Long-Term Investments

The Company considers all investments with an original maturity of twelve months or more when purchased to be long-term investments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents, marketable securities, and long-term investments. The Company seeks to mitigate its credit risk with respect to cash and cash equivalents, marketable securities, and long-term investments by making deposits with several large, reputable financial institutions and investing in high credit rated instruments. See Note 8 for allocation of respective investment holdings.

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Leases

The Company accounts for its leases under ASU No. 2016-02, Leases (Topic 842). Under this guidance, the Company classifies contracts meeting the definition of a lease as operating or financing leases, and leases are recorded on the condensed consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses, including common maintenance fees, insurance and property tax, are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components for all classes of assets. The Company excludes short-term leases having initial terms of 12 months or less as an accounting policy election, and instead recognizes rent expense on a straight-line basis over the lease term.

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. The impact of adopting the standards resulted in the recognition of a right-of-use asset of $7,853 and lease liability of $8,246 on the Company’s condensed consolidated balance sheet on January 1, 2022, exclusive of previously recognized lease balances. The implementation of Topic 842 did not have a material effect on the Company’s condensed consolidated statement of operations or condensed consolidated statement of cash flows for the nine months ended September 30, 2022.

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, an allowance for credit losses is 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.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which aims to reduce complexity in accounting standards by improving certain areas of GAAP without compromising information provided to users of financial statements. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted this guidance beginning January 1, 2022 with no financial statement impact at adoption.

Note 3 – Business Combination

Legacy Solid Power was deemed the accounting acquirer in the Business Combination based on the analysis of the criteria outlined in FASB Topic 805, Business Combinations. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Solid Power issuing stock for the net assets of DCRC, accompanied by a recapitalization. The net assets of DCRC are stated at historical cost, with no goodwill or other intangible assets recorded.

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Because Legacy Solid Power was deemed the accounting acquirer, the historical consolidated financial statements of Legacy Solid Power became the historical consolidated financial statements of the combined company. As a result, the condensed consolidated financial statements included in this Report reflect (i) the historical operating results of Legacy Solid Power prior to the Business Combination; (ii) the combined results of the Company and Legacy Solid Power following the closing of the Business Combination (“Closing”); (iii) the assets and liabilities of Legacy Solid Power at their historical cost; and (iv) the Company’s equity structure for all periods presented as discussed below.

In accordance with guidance applicable to the Business Combination, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Legacy Solid Power’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Solid Power redeemable convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect an exchange ratio of approximately 3.182 (the “Exchange Ratio”). Activity within the condensed consolidated statements of stockholders’ equity for the issuances and repurchases of Legacy Solid Power’s redeemable convertible preferred stock were also retroactively converted to Legacy Solid Power common stock.

Note 4 – Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

    

September 30, 2022

    

December 31, 2021

Commercial production equipment

$

19,272

$

9,139

Laboratory equipment

2,379

1,316

Leasehold improvements

 

11,806

 

4,674

Furniture and computer equipment

 

860

 

737

Construction in progress

 

49,966

 

12,684

Total cost

 

84,283

 

28,550

Accumulated depreciation

 

(9,902)

 

(6,468)

Net property, plant and equipment

$

74,381

$

22,082

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

    

Three months ended September 30,

    

Nine months ended September 30,

    

2022

    

2021

    

2022

    

2021

Depreciation and amortization expense

$

1,653

$

569

$

3,430

$

1,666

Depreciation expenses for dedicated laboratory equipment and commercial production equipment are charged to research and development; other depreciation and amortization 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.

In 2022, the Company expanded its cell production capabilities through the construction of a second dry room and installation of a second EV cell pilot line at its Louisville, Colorado facility, which is designed to produce larger format all-solid-state battery cells for the automotive qualification process. Construction in progress related to these efforts was $2,010 and $6,875 as of September 30, 2022 and December 31, 2021, respectively. Construction in progress related to multiple other projects at the Louisville, Colorado facility was $1,521 as of September 30, 2022.

The Company is expanding its sulfide-based solid 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 the cell-production lines and continue research and development efforts. The Company expects to begin producing sulfide-based electrolyte from this facility in the first quarter of 2023. Construction in progress related to these efforts was $46,435 and $5,809 as of September 30, 2022 and December 31, 2021, respectively.

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Note 5 – Intangible Assets

Intangible assets of the Company are summarized as follows:

September 30, 2022

December 31, 2021

Gross Carrying

Accumulated

Gross Carrying

Accumulated

Amount

Amortization

Amount

Amortization

Intangible assets:

    

  

    

  

    

  

    

  

Licenses

$

149

$

(49)

$

149

$

(42)

Patents pending

 

796

 

 

503

 

Trademarks

 

9

 

 

9

 

Trademarks pending

16

Total amortized intangible assets

$

970

$

(49)

$

661

$

(42)

Amortization expense for intangible assets is summarized as follows:

    

Three months ended September 30,

    

Nine months ended September 30,

    

2022

    

2021

    

2022

    

2021

Amortization expense

$

2

$

2

$

7

$

7

Useful lives of intangible assets range from 3 to 20 years. Amortization expenses are allocated ratably across operating expenses on the accompanying condensed consolidated statements of operations.

Note 6 – Long-term Debt

Long-term debt is as follows:

September 30, 2022

December 31, 2021

Various equipment notes payable to banks in monthly installments ranging from $1 to $2, including interest at 6.26 percent to 12.18 percent maturing from July 2022 through April 2023. The notes are collateralized by the financed equipment and guaranteed by a stockholder of the Company.

$

26

$

130

Total

 

26

 

130

Less current portion

 

24

 

120

Longterm portion

$

2

$

10

Note Payable

On December 7, 2021, prior to the Closing, the Company used available cash to pay off the outstanding balance and remaining fees of a note payable to a commercial bank. The Company was in compliance with all financial covenants through the loan payoff on December 7, 2021.

Interest expense on long-term debt was $1 and $32 for the three months ended September 30, 2022 and 2021, respectively, and $6 and $111 for the nine months ended September 30, 2022 and 2021, respectively.

Note 7 – Convertible Notes Payable

2020 Convertible Promissory Notes

On December 10, 2020 and December 18, 2020, the Company issued unsecured convertible promissory notes to investors in the total principal amount of $5,125, and on February 4, 2021, and March 1, 2021, the Company issued additional unsecured convertible promissory notes to investors in the total principal amount of $4,875, as part of a single financing (collectively, the “2020 Notes”). The 2020 Notes accrued interest at eight percent per annum. The 2020 Notes were converted into 1,007,965 shares of Legacy Solid Power Series B Preferred Stock, on May 5, 2021, in conjunction with the closing of the Legacy Solid Power Series B Preferred Stock (“Series B Financing”). The outstanding balance on the 2020 Notes, including accrued interest, was $10,228 when the 2020 Notes were converted to Legacy Solid Power Series B Preferred Stock. Interest expense for the 2020 Notes for three and nine months ended September 30, 2021 was $0 and $210, respectively. The principal of the 2020 Notes was included in Additional Paid In Capital

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and the fair value of the embedded derivative was recorded as a liability on Legacy Solid Power’s balance sheet. The fair value of the embedded derivative was $5,497. This balance was transferred, along with the accrued interest, to mezzanine equity upon conversion of the 2020 Notes to Series B Preferred Stock in conjunction with the Series B Financing.

2020 Convertible Promissory Notes Embedded Derivative

The 2020 Notes contained the following embedded derivatives: (i) a share settled redemption upon Qualified Financing; (ii) share settled redemption upon the closing of the Business Combination; and (iii) share settled redemption at maturity.

Embedded derivatives are separated from the host contract and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. The Company has concluded that certain embedded derivatives within the 2020 Notes meet these criteria and, as such, must be valued separate and apart from the 2020 convertible promissory notes as one embedded derivative and recorded at fair value each reporting period.

See Note 8 – Fair Value Measurement for information about the assumptions that the Company used to measure the fair value of the embedded derivative.

2019 Convertible Promissory Notes

On December 4, 2019, the Company issued an unsecured convertible promissory note to an investor in the principal amount of $3,000 (the “2019 Note,” and together with the 2020 Notes, the “Convertible Promissory Notes”). The 2019 Note accrued interest at 5 percent per annum. The 2019 Note converted into 254,899 shares of Legacy Solid Power Series B Preferred Stock, in conjunction with the Series B Financing. Upon this conversion, the 2019 Note converted to Series B Preferred Stock at a 30 percent discount.

See Note 8 – Fair Value Measurement for information about the assumptions that the Company used to measure the fair value of the 2019 Note. At December 31, 2020, the outstanding balance on the 2019 Note was $3,612. For the three and nine months ended September 30, 2021, interest expense of $0 and $53, respectively, was incurred related to the 2019 Note.

For all debt instruments, including any for which the Company has elected fair value accounting, the Company classifies interest that has been accrued during each period as Interest expense on the Condensed Consolidated Statements of Operations.

Note 8 – Fair Value Measurements

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

The fair value of debt instruments for which the Company has not elected fair value accounting is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company. The book values of the Company’s long-term debt approximate fair value because interest rates charged are similar to other financial instruments with similar terms and maturities and the rates vary in accordance with a market index. Most of the Company’s debt is carried on the condensed consolidated balance sheets on a historical cost basis net of unamortized discounts and premiums because the Company has not elected the fair value option of accounting. Changes to the inputs used in these valuation models can have a significant impact on the estimated fair value of the Convertible Promissory Notes and the Company’s embedded derivatives.

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

As discussed in Note 7, all Convertible Promissory Notes were converted to Legacy Solid Power Series B Preferred Stock in May 2021. As of September 30, 2022 and December 31, 2021 the Company’s financial liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:

September 30, 2022

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

Commercial Paper

$

146,572

$

$

$

146,572

Corporate Bonds

$

208,824

$

$

$

208,824

Government Bonds

$

42,938

$

$

$

42,938

U.S. Treasuries

$

11,539

$

$

$

11,539

Liabilities

Public Warrants

$

12,483

$

$

$

12,483

Private Warrants

$

$

9,354

$

$

9,354

December 31, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

Commercial Paper

$

33,275

$

$

$

33,275

Corporate Bonds

$

39,593

$

$

$

39,593

Government Bonds

$

3,017

$

$

$

3,017

Liabilities

 

  

 

  

 

  

 

  

Public Warrants

$

26,483

$

$

$

26,483

Private Warrants

$

$

23,537

$

$

23,537

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 or nine months ended September 30, 2022 and 2021.

Fair Value of Stock Warrants

The fair value of the Private Placement Warrants (defined below) has been estimated using a Black-Scholes model as of September 30, 2022 and December 31, 2021. 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. 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. Refer to Note 9 for additional details on the Company’s warrant liabilities.

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:

    

September 30, 2022

    

December 31, 2021

 

Exercise Price

$

11.50

$

11.50

Stock Price

$

5.26

$

8.74

Volatility

 

51.5

%  

 

48.9

%

Term

 

4.19

 

4.94

Risk-free rate

 

4.05

%  

 

1.24

%

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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

Date

    

Level 1 Fair Value

Level 2 Fair Value

December 31, 2021

$

2.27

$

3.07

Change in fair value

(1.20)

(1.85)

June 30, 2022

1.07

1.22

Change in fair value

September 30, 2022

$

1.07

$

1.22

The following tables provides a reconciliation of the September 30,2022 three and nine month change in fair value for the Public Warrants and Private Placement Warrants:

    

    

    

    

Nine months change in

    

Warrant Class

    

Level

    

Shares

    

December 31, 2021

    

fair value

    

September 30, 2022

Public Warrants

 

1

 

11,666,636

$

26,483

$

(14,000)

$

12,483

Private Warrants

 

2

 

7,666,667

 

23,537

 

(14,183)

 

9,354

Total

 

19,333,303

$

50,020

$

(28,183)

$

21,837

    

    

    

    

Three months change in

    

Warrant Class

    

Level

    

Shares

    

June 30, 2022

    

fair value

    

September 30, 2022

Public Warrants

 

1

 

11,666,636

$

12,483

$

$

12,483

Private Warrants

 

2

 

7,666,667

 

9,354

 

 

9,354

Total

 

19,333,303

$

21,837

$

$

21,837

Note 9 – Common Stock Warrant Liabilities

As of September 30, 2022 and December 31, 2021, there were 11,666,636 publicly traded warrants (“Public Warrants”) and 7,666,667 private placement warrants (“Private Placement Warrants,” and together with the Public Warrants, “Warrants”) outstanding. 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.

Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $18.00.

The Company may redeem all of the outstanding Public Warrants:

in whole and not in part;
upon at least 30 days’ prior written notice;
at a price of $0.01 per Public Warrant; and
if the last sale price of the Company’s Common Stock equals or exceeds $18.00 per share, subject to customary adjustments, for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which notice of the redemption is given.

Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $10.00.

The Company may redeem all of the outstanding Public Warrants:

in whole and not in part;
upon at least 30 days’ prior written notice;

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at a price of $0.10 per Public Warrant, provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive a number of shares of Common Stock determined in part by the redemption date and the “fair market value” of the Common Stock; and
if the last sale price of the Company’s Common Stock equals or exceeds $10.00 per share, subject to customary adjustments, on the trading day prior to the date on which notice of redemption is given.

The “fair market value” of the Company’s Common Stock means the average reported last sale price of the Company’s Common Stock for the ten trading days immediately following the date on which the notice of redemption is sent to the holders of Warrants. The Company classifies the outstanding Warrants as Warrant Liabilities on the condensed consolidated balance sheets in accordance with the guidance contained in ASC 815.

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 Business Combination and subsequently re-measured at each reporting period. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. The Company recognized a gain in connection with changes in the fair value of warrant liabilities of $0 and $28,183 for the three- and nine-months ending September 30, 2022, respectively.

Note 10 – Mezzanine Equity

In accordance with ASC 480, Legacy Solid Power’s Series A-1 Preferred Stock and Series B Preferred Stock (collectively, “Preferred Stock”) prior to the Business Combination were classified as mezzanine equity. Immediately prior to the Closing Legacy Solid Power had 14,069,187 shares of Series A-1 Preferred Stock outstanding and 8,777,812 shares of Series B Preferred Stock outstanding. Legacy Solid Power issued the Series B Preferred Stock in May 2021 in exchange for $135,579 of cash and the conversion of the 2019 Note and the 2020 Notes as discussed in Note 7. See Note 11 for a discussion of warrants issued with the Legacy Solid Power Series B Preferred Stock.

Prior to the Business Combination, the Preferred Stock had a redemption feature, at the option of the holders of a majority of the outstanding Preferred Stock, any time after April 30, 2031. The Preferred Stock was redeemable for the greater of its original issue price, plus all declared but unpaid dividends thereon, or fair value. Since the Preferred Stock had redemption provisions that were not solely within control of Legacy Solid Power, the Preferred Stock was classified prior to the Business Combination as mezzanine equity on Legacy Solid Power’s balance sheets.

As a result of the Business Combination with DCRC on December 8, 2021, the Solid Power Series A-1 and Series B Preferred Stock converted to common stock. The 14,069,187 and 8,777,812 shares of Series A-1 Preferred Stock and Series B Preferred Stock were converted to the equivalent number of shares of Legacy Solid Power common stock prior to the impact of the common stock Exchange Ratio used to complete the Business Combination.

Note 11 – Stockholders’ Equity

Common Stock

Stock options exercised are summarized in the table below:

    

Three months ended September 30,

    

Nine months ended September 30,

    

2022

    

2021

    

2022

2021

Stock options exercised

 

1,293,762

 

226,558

 

8,162,906

 

1,005,375

Cash received from options exercised under the Legacy Solid Power, Inc. 2014 Equity Incentive Plan (the “2014 Plan”) for the nine months ended September 30, 2022 and 2021 was $771 and $102, respectively.

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Legacy Solid Power Warrants

During 2015, Legacy Solid Power issued warrants to a third party to purchase 276,000 shares of Legacy Solid Power common stock at an exercise price of $0.00001088 per share, in conjunction with a licensing agreement. Management determined that equity classification is appropriate for these warrants. Legacy Solid Power recognized expense totaling $18 on the date of the grant that has been included as a component of Additional Paid In Capital within the condensed consolidated statement of stockholders’ equity. During 2020, Legacy Solid Power issued additional warrants to purchase 45,730 shares of common stock at an exercise price of $0.53 per share. Legacy Solid Power recognized expense totaling $16 on the date of the grant.

In May 2021, Legacy Solid Power issued warrants to purchase 1,755,557 shares of Legacy Solid Power common stock at an exercise price of $0.01 per share, in connection with the Series B Financing. These warrants were detachable from the Legacy Solid Power Series B Preferred Stock and in all cases would physically settle or net share settle. Therefore, Legacy Solid Power determined that these warrants represented equity in Legacy Solid Power. Prior to the Closing, all Legacy Solid Power warrants were either exercised for cash or net exercised and the holders thereof received shares of Legacy Solid Power common stock.

Note 12 – Stock Based Compensation

2014 Equity Incentive Plan and 2021 Equity Incentive Plan

At September 30, 2022, the Company had 25,827,919 shares of common stock underlying stock options outstanding under the 2014 Plan. Upon the Closing, the 2014 Plan was terminated and no additional grants will be made under the 2014 Plan.

On December 8, 2021 and in connection with the Closing, the Company adopted the Solid Power, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan originated with 18,900,000 shares of Common Stock available for issuance. Beginning on January 1, 2022, the number of shares of common stock available for issuance under the 2021 Plan shall increase each year by an amount equal to the lesser of (i) 18,900,000 shares of Common Stock (ii) five percent of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year; or (iii) a number of shares of common stock determined by the administrator no later than the last day of the immediately preceding fiscal year.

As of September 30, 2022, the 2021 Plan permitted the Company to grant up to 24,821,940 shares of common stock to its employees, directors, and consultants, as designated by the board of directors. Awards may be issued in the form of stock options, stock appreciation rights, restricted stock, and restricted stock units. The Company believes that such awards better align the interests of its employees with those of its stockholders.

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. 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 and nine months ended September 30, 2022, the Company recognized compensation costs totaling:

    

Three months ended September 30,

    

Nine months ended September 30,

    

2022

    

2021

    

2022

    

2021

Equity-based compensation cost related to RSUs

$

618

$

$

1,133

$

Equity-based compensation cost related to stock options

 

1,970

 

758

 

5,365

 

975

Total equity-based compensation cost

$

2,588

$

758

$

6,498

$

975

Equity-based compensation costs are allocated ratably across operating expenses within the accompanying condensed consolidated statements of operations.

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Stock Options

Options granted under the 2014 Plan generally had a ten-year term and vest as to 1/4th of these shares after one year after the initial date of service of a service provider and with the balance of the shares vesting in a series of 36 successive equal monthly installments following the first vesting date. Option awards under the 2014 Plan were generally granted with an exercise price equal to the fair market value of Legacy Solid Power’s common stock at the date of grant. Certain option awards issued under the 2014 Plan provide for accelerated vesting if there is a change in control (as defined in the plan agreements).

Options granted under the 2021 Plan generally have a ten-year term and vest as to 1/4th of these shares each year, commencing after one year after the initial date of grant. Option awards under the 2021 Plan are generally granted with an exercise price equal to the fair market value of Solid Power’s common stock at the date of grant. Certain option awards issued under the 2021 Plan provide for accelerated vesting if there is a change in control (as defined in the plan agreements).

The fair value for purposes of determining the compensation cost of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses the weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of comparable companies. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of each option grant during the nine months ended September 30, 2022 and 2021 was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions used:

    

Nine months ended September 30,

 

2022

2021

Approximate riskfree rate

 

2.84

%

0.88

%

Volatility

 

44.69

%

42.47

%

Average expected life

 

6 years

6 years

Dividend yield

 

0

%

0

%

Weightedaverage grant date fair value

$

7.26

$

4.62

Estimated fair value of total options granted

$

5,659

$

14,484

Future compensation costs related to the unvested portion of stock options as of September 30, 2022 and 2021 was $23,324 and $14,189, respectively, over a period of four years.

The following table summarizes stock options granted under the 2021 Plan during the nine months ended September 30, 2022 and under the 2014 Plan during the year ended December 31, 2021, respectively:

    

September 30, 2022

    

December 31, 2021

2021 Plan stock option grants

 

1,674,284

 

2014 Plan stock option grants

 

 

12,285,359

Restricted Stock Units

Effective April 1, 2022, the Company began granting RSUs in accordance with the terms of the 2021 Plan. The grant date fair value of RSUs awarded are determined based on the Company’s closing common share price on the NASDAQ on the trading day preceding the grant date. RSU awards for employees generally vest 1/4th per year commencing on the first anniversary of the grant date. RSU awards upon initial service as a director vest 1/3rd per year commencing on the first anniversary of the grant date. Annual RSU awards to directors generally fully vest on the one-year anniversary of the grant date. Upon vesting, granted RSUs entitle the grantee to receive one share of common stock of the Company at no additional cost. Holders of unvested RSUs do not have voting or dividend rights.

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The following table summarizes non-vested RSUs at September 30, 2022 and the changes for the period ended September 30, 2022:

    

    

Weighted Average Grant 

RSU Shares

Date Fair Value

Non-vested, December 31, 2021

$

Granted

 

1,139,935

 

7.42

Vested

 

(29,108)

 

7.26

Forfeited

 

(1,689)

 

8.67

Non-vested, September 30, 2022

 

1,109,138

$

7.42

Future compensation costs related to the unvested portion of RSUs at September 30, 2022 was $6,803 over a period of four years.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) originated with 3,778,000 shares of common stock available for issuance. As of September 30, 2022, 5,453,579 shares remained available for issuance. Beginning on January 1, 2022, the number of shares of Common Stock available for issuance under the 2021 ESPP shall increase each year by an amount equal to the lesser of (i) 3,778,000 shares of Common Stock; (ii) one percent of the total number of shares of Common Stock outstanding on the last day of the immediately preceding fiscal year; or (iii) a number of shares of Common Stock determined by the administrator no later than the last day of the immediately preceding fiscal year. As of September 30, 2022, the 2021 ESPP permitted the Company to issue up to 5,463,579 shares of common stock. Substantially all employees will be eligible to participate in the ESPP and through payroll deductions will be able to purchase shares on dates determined by the administrator. The first offering period under the ESPP will run from November 16, 2022 through May 15, 2023. At September 30, 2022, no shares of common stock had been issued under the 2021 ESPP.

The 2021 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. However, with respect to the Section 423 Component, an employee may not be granted rights to purchase stock under the 2021 ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of the Company’s common stock. The purchase price per share sold pursuant to the 2021 ESPP will be the lower of (i) 85% of the fair market value of common stock on the enrollment date or (ii) 85% of the fair market value on the exercise date. Each offering period will span up to six months. Purchases may be up to 15% of qualified compensation, with an annual limit of $25,000.

Note 13 – Earnings (Loss) Per Share

The table below reconciles basic weighted average common shares outstanding to diluted weighted average shares outstanding for September 30, 2022 and 2021. Basic earnings per share is based on the weighted average number of common shares outstanding for the period. Diluted earnings per share also includes the dilutive effect of additional potential common shares issuable from stock-based awards and are determined using the treasury stock method. Basic earnings per share represents net earnings or loss attributable to Common Stock divided by the basic weighted average number of common shares outstanding during the period. Diluted earnings per share represents net earnings divided by diluted weighted average number of common shares, which includes the average dilutive effect of all potentially dilutive securities that are outstanding during the period. The unvested stock awards, warrants, and options are included in the number of shares outstanding for diluted earnings per share calculations, unless a net loss is reported, in which situation unvested stock awards, warrants, and options are excluded from the number of shares outstanding for diluted earnings per share calculations.

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

2022

    

2021

Net (loss)

$

(12,399)

$

(8,450)

$

(9,076)

$

(24,864)

Weighted average shares outstanding – Basic and diluted

175,025,984

102,389,770

173,859,649

87,258,952

Basic and diluted (loss) per share

(0.07)

(0.08)

(0.05)

(0.28)

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Due to the net loss to common stockholders in 2022 and 2021, diluted loss per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive. As of the three and nine months ended September 30, 2022 and 2021, potentially dilutive securities excluded from the diluted loss per share calculation are as follows:

Three Months ended September 30,

    

Nine Months ended September 30,

2022

    

2021

    

2022

    

2021

Warrant Common Stock

19,333,303

 

1,878,386

 

19,333,303

 

1,878,386

2021 Equity Incentive Plan – Restricted Stock Units

1,078,129

 

 

558,910

 

2014 & 2021 Equity Incentive Plan – Stock Options

25,217,862

22,812,400

26,109,658

23,872,378

Total potentially dilutive securities

45,629,294

 

24,690,785

 

46,001,871

 

25,750,764

Note 14 – Leases

The Company leases its headquarters, other warehouse space 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 headquarters, in Louisville, Colorado, are under a noncancelable operating lease with a maturity date in September 2024. In 2019, the Company amended the lease, agreeing to sublease additional space in the building, which sublease expires in December 2024.

On September 1, 2021, the Company entered into an Industrial Lease Agreement, 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 is responsible for its proportionate share of common area maintenance, taxes, and insurance.

The Company has certain equipment leases classified as financing leases as of September 30, 2022.

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

Nine Months Ended

    

September 30, 2022

    

September 30, 2022

Finance lease costs:

 

Amortization of right-of-use assets

$

36

$

51

Interest on lease liabilities

11

 

16

Operating lease costs

277

 

830

Total lease expense

$

324

$

897

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

Three Months Ended

Nine Months Ended

    

September 30, 2022

    

September 30, 2022

Operating outgoing cash flows – finance lease

$

8

$

12

Financing outgoing cash flows – finance lease

56

 

76

Operating outgoing cash flows – operating lease

273

 

638

Right-of-use assets obtained in exchange for new finance lease liabilities

637

 

857

Right-of-use assets obtained in exchange for new operating lease liabilities

 

7,671

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