Solid Power Inc

Condensed Consolidated Balance Sheets

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

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

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

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)

(in thousands, except number of shares)

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Notes to Condensed Consolidated Financial Statements (Unaudited) (in thousands, except number of shares and per share amounts)

Note 1 – Nature of Business

Solid Power is developing solid-state battery technology for the EV and other markets. The Company’s planned business model is to manufacture and sell its proprietary electrolyte and to license its cell designs and manufacturing processes.

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 2023 Form 10-K and are supplemented by the Notes. The financial statements included in this Report (including the Notes) should be read in conjunction with the 2023 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 and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and results of operations at, and for, the periods presented. 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 and share and per share amounts.

The accompanying unaudited condensed consolidated financial statements include accounts of the Company and its wholly owned subsidiaries. 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

Income Taxes

In December 2023, the FASB issued ASU 2023-09Income Taxes (Topic 740) Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is evaluating the disclosure impact of ASU 2023-09.

Segment Reporting

In November 2023, the FASB issued ASU 2023-07Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker, or CODM. ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company does not expect any financial statement impact with the adoption of ASU 2023-07.

Note 3 – Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

Depreciation expenses for dedicated laboratory equipment and production equipment are charged to research and development. The other depreciation expenses are included in the Company’s overhead and are allocated across Operating Expenses based on Company personnel costs incurred.

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

The Company expanded its electrolyte production to produce larger quantities of electrolyte material required to feed cell-production lines and continue research and development efforts at SP2. The Company began producing electrolyte at SP2 in 2023. The Company is developing a design verification plan and report lab at SP2 to improve and test process developments, which is anticipated to be placed in service by the end of 2024.

Note 4 – Intangible Assets

Intangible assets of the Company are summarized as follows:

Amortization expense for intangible assets is summarized as follows:

Useful lives of intangible assets range from three to 20 years. Amortization expenses are allocated ratably across Operating Expenses based on Company personnel costs incurred.

Note 5 – Collaborative Arrangement

On January 10, 2024, the Company entered into the SK On Agreements. The Company determined the SK On Agreements should be combined and evaluated as a single contract. The SK On Agreements were determined to be a collaborative arrangement in accordance with ASC Topic 808,Collaborative Arrangements, and revenue recognition is recorded by analogy to ASC Topic 606,Revenue from Contracts with Customers. The Company determined the SK On Agreements represent a single, combined performance obligation. Collaborative revenue is recognized over time using the input measurement method utilizing incurred labor hours in relation to total labor hours anticipated to satisfy the combined performance obligation. The Company will expense contract fulfillment costs as incurred.

Note 6 – Fair Value Measurements

The Company considers all highly liquid instruments with original maturities of less than 90 days to be cash equivalents. 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.

Level 1inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that a reporting entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for assets or liabilities.

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

As of June 30, 2024 and December 31, 2023, 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:

The change in fair value of the Company’s marketable securities and investments are included in other comprehensive income (loss). There wereno transfers in and out of Level 3 fair value hierarchy during the three or six months ended June 30, 2024 or year ended December 31, 2023. During the six months ended June 30, 2024, the Company purchased$99,548 of marketable securities and investments.

Fair Value of Warrants

The fair value of the Private Placement Warrants has been estimated using a Black-Scholes model as of June 30, 2024 and December 31, 2023 Consolidated Balance Sheet dates. The estimated fair value of the Private Placement Warrants is determined using Level 2 directly or indirectly observable 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 the Company’s common stock. 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 dividend yield is based on the historical rate, which the Company anticipates remaining at zero. The fair value of the Public Warrants has been measured based on the quoted price of such warrants on the Nasdaq Stock Market, a Level 1 input.

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:

The following table provides a rollforward of the Public Warrants measured at fair value per Public Warrant using Level 1 inputs and Private Placement Warrants measured at fair value per Private Placement Warrant using Level 2 inputs:

The following tables provides a reconciliation of the change in fair value for the Public Warrants and Private Placement Warrants for the three months ended June 30, 2024:

The following tables provides a reconciliation of the change in fair value for the Public Warrants and Private Placement Warrants for the six months ended June 30, 2024:

Note 7 – Warrant Liabilities

The table below provides a summary of the outstanding Public and Private Placement Warrants at:

Each whole Warrant entitles the holder thereof to purchaseone 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 table below provides the fair value of warrant liabilities at:

The table below provides the Company’s loss recognized in connection with changes in fair value of warrant liabilities:

There have been no changes to our Public or Private Placement Warrants, including redemption terms disclosed in our 2023 Form 10-K.

Note 8 – Stockholders’ Equity

Common Stock

Stock options exercised for common stock, shares of common stock repurchased under the stock repurchase program, shares of common stock issued under the ESPP, and shares of common stock issued upon vesting of RSUs for the three and six months ended June 30, 2024 and 2023 are summarized in the table below:

The table below presents the cash received or paid associated with common stock related activities for the three and six months ended June 30, 2024 and 2023:

Stock Repurchase Program

On January 23, 2024, the Company announced that its Board approved a stock repurchase program authorizing the Company to purchase up to$50,000 of the Company’s outstanding common stock. Under the repurchase program, the Company may purchase shares of its common stock from time to time until the repurchase program expires on December 31, 2025.

The table below presents the number of shares repurchased and retired, the aggregate cost, and the average purchase price per share for the three months ended June 30, 2024:

The table below presents the number of shares repurchased and retired, the aggregate cost, and the average purchase price per share for the six months ended June 30, 2024:

Note 9 – Stock-Based Compensation

There have been no changes to our equity incentive plans, the ESPP, or our accounting methodology for stock-based compensation, as disclosed in our 2023 Form 10-K.

The fair value of stock options and 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 based on Company personnel costs incurred. 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 and six months ended June 30, 2024 and 2023, the Company recognized compensation costs totaling:

The unrecognized future compensation costs as of June 30, 2024 and 2023, were$25,868 and$34,327, respectively.

The following table summarizes our award activity for RSUs and stock options for the three and six months ended June 30, 2024:

Stock Options

The fair value of each stock option grant during the six months ended June 30, 2024 and 2023 was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions used:

Note 10 – Basic and Diluted Loss Per Share

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

Diluted loss per share also includes the dilutive effect of additional potential shares of common stock issuable from stock-based awards determined using the treasury stock method. Diluted loss per share represents net earnings divided by diluted weighted average number of shares of common stock, which includes the average dilutive effect of all potentially dilutive securities that are outstanding during the period.

The table below sets forth the basic and diluted loss per share calculation for the three and six months ended June 30, 2024 and 2023.

Due to the net loss for the three and six months ended June 30, 2024 and 2023 presented above, diluted loss per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive. The table below sets forth (in shares) potentially dilutive securities excluded from the diluted loss per share calculation for the three and six months ended June 30, 2024 and 2023.

Note 11 – Leases

The Company leases its facilities and certain equipment. Fixed rent 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 this operating 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 operating 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 forfive 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 June 30, 2024.

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:

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

As of June 30, 2024, future minimum payments during the next five years and thereafter are as follows:

Note 12 – Related Party Transactions

During the three and six months ended June 30, 2024, the Company recognized$430 and$5,410 of revenue related to the BMW JDA, respectively. As of June 30, 2024, the Company recorded$4,581 of accounts receivable related to the BMW JDA. During the three and six months ended June 30, 2023, the Company recognized$3,470 and$6,470 of revenue related to the BMW JDA, respectively. For the year ended December 31, 2023, the Company recorded$828 of deferred revenue related to cash paid from BMW in advance of services provided.

On June 21, 2024, Solid Power Operating, Inc., a wholly owned subsidiary of the Company, amended its JDA with BMW to extend the term of the JDA and revise the payment schedule.

Note 13 – Income Taxes

The Company’s effective tax rate was (2.4%) and (1.2%) for the three and six months ended June 30, 2024, respectively, as a result of withholding tax expense on revenue earned in a foreign jurisdiction. The Company’s effective tax rate was 0% for the three and six months ended June 30, 2023, and the Company was in a full valuation allowance for the three and six months ended June 30, 2024 and 2023.

The Company's quarterly provision for income taxes is calculated by applying a projected annual effective tax rate, calculated separately for the United States and Republic of Korea, to ordinary pre-tax book income.

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.