What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-23 · 450 added, 256 removed, 535 unchanged (57% of the section changed)

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Solid Power, Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “ consolidated financial statements ” ).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders ’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “ consolidated financial statements ” ).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company ’ s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, and our report dated March 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Solid Power, Inc.

| 2022 Form 10-K | 54

Valuation of Private Placement Warrant Liability

Description of the Matter

The fair value of the Private Placement Warrant Liability at December 31, 2022, was $4.2 million.

During the year ended December 31, 2022, the fair value of the Private Placement Warrant Liability decreased by $19.3 million.

As discussed in Note 8 to the consolidated financial statements, the fair value of the Private Placement Warrant Liability was estimated using a Black-Scholes model that utilized various assumptions, including term, stock price, volatility, risk free rate and dividend yield.

Changes to the fair value of the Private Placement Warrant Liability are included within the Consolidated Statement of Operations.

The volatility assumption significantly affects the fair value of the Private Placement Warrant Liability.

The volatility is estimated based on implied volatility from the Company ’ s Public Warrants and from historical volatility of select peer companies ’ common stock that matches the expected remaining life of the warrants.

Auditing the fair value of the Private Placement Warrant Liability was challenging due to the judgmental nature of selecting an appropriate valuation model and the model ’ s assumptions, especially the guideline public companies used to determine the volatility assumption.

How We Addressed the Matter in Our Audit

To test the fair value of the Private Placement Warrant Liability, our audit procedures included, among others, assessing the appropriateness of the use of the Black-Scholes model and accuracy of the underlying calculation, including testing the assumptions used to calculate the fair value of the Private Placement Warrant Liability.

We compared the term, stock price, risk free rate and dividend yield to readily available information as of the valuation date at December 31, 2022.

For the volatility assumption, we assessed the suitability of the peer companies used based on the similarity of their operations to that of the Company and developed an independent range of volatility based on the implied volatility of the Company ’ s Public Warrants and historical volatilities of the similarly sized peer companies.

We involved our specialists to assist us with evaluating the Black-Scholes model, as well as to perform comparative range calculations using the assumptions previously discussed.

/s/ Ernst & Young LLP

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| 2022 Form 10-K | 55

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Solid Power, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Solid Power, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework (the COSO criteria).

In our opinion, Solid Power, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Denver, Colorado

March 1, 2023

Solid Power, Inc.

| 2022 Form 10-K | 56

Solid Power, Inc.

Financial Statements

(in thousands, except par value, share amounts, and per share amounts)

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

Consolidated Balance Sheets

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Total current assets

Property and Equipment – Net

Property, Plant and Equipment, net

Right-Of-Use Operating Lease Asset, net

Right-Of-Use Financing Lease Asset, net

Long-term Investments

Intangible Assets, net

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Accrued compensation

Accrued interest

Other accrued liabilities

Operating lease liabilities, short-term

Financing lease liability, short-term

Total current liabilities

Long-term Debt - Net of current portion

Long-term Debt

Warrant Liabilities

Convertible Notes Payable

Embedded Derivative Liability

Operating Lease Liabilities, Long-Term

Financing Lease Liabilities, Long-Term

Other Long-term Liabilities

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Common Stock, $ 0.0001 par value;

2,000,000,000 and 122,507,000 shares authorized;

2,000,000,000 shares authorized;

176,007,184 and 167,557,988 shares issued and outstanding as of December 31, 2022 and 2021, respectively

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Accumulated deficit

Accumulated other comprehensive loss

Total stockholders’ equity

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Financial Statements

(in thousands, except par value, share amounts, and per share amounts)

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

Consolidated Statements of Operations

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Interest expense

Other expense

Other income (expense)

Loss from change in fair value of debt

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Gain on loan extinguishment

Total nonoperating income (Loss)

Total nonoperating income (expense)

Pretax Income (Loss)

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Net Income (Loss) Attributable to Common Stockholders

Other Comprehensive Loss

Unrealized loss on marketable securities

Comprehensive Income (Loss) Attributable to Common Stockholders

Basic earnings (loss) per share

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Financial Statements

(in thousands, except par value, share amounts, and per share amounts)

(in thousands, except number of shares)

Consolidated Statements of Stockholders’ Equity

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Adjusted Balance Beginning of Period

Net income (loss)

Bank warrant issuance

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Balance - December 31, 2020

Net income (loss)

Business Combination, net of redemptions and transaction costs of $ 47,888

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Balance - December 31, 2021

* Legacy Solid Power preferred stock transactions converted to common with recast at Business Combination.

Withholding of Employee taxes related to stock-based compensation

Shares issued for the vesting of restricted stock units

Stock options exercised

Transaction costs

Unrealized loss on marketable securities

Stock-based compensation expense

Balance - December 31, 2022

All outstanding shares of Legacy Solid Power’s preferred stock were exchanged for shares of Solid Power common stock at the closing of the business combination

See accompanying Notes to Consolidated Financial Statements.

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Depreciation and amortization

Loss on sale of property and equipment

Amortization of right-of-use assets

Loss on sale of property, plant and equipment

(Gain) on extinguishment of debt

Stock compensation expense

Stock warrant issue

Stock warrant issuance

Deferred taxes

Warrant liabilities

Change in fair value of warrant liabilities

Amortization of premiums and accretion of discounts on marketable securities

Accrued interest on convertible notes payable to be paid in kind

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Loss from change in fair value of embedded derivative liability

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

Contract receivables

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

Contract receivable

Due from related party

Prepaid expenses and other current assets

Prepaid expenses and other assets

Accounts payable

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Accrued and other liabilities

Operating lease liability

Deferred rent

Net cash and cash equivalents used by operating activities

Net cash and cash equivalents used in operating activities

Cash Flows from Investing Activities

Purchases of property and equipment

Purchase of marketable securities

Purchases of property, plant and equipment

Purchases of marketable securities and long-term investments

Proceeds from sales of marketable securities

Purchases of intangible assets

Net cash and cash equivalents used by investing activities

Net cash and cash equivalents used in investing activities

Cash Flows from Financing Activities

Proceeds from debt

Proceeds from issuance of Series B preferred stock

Preferred Stock Issuance Costs

Payments of debt

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Proceeds from exercise of common stock warrants

Business Combination, net of transaction costs

Proceeds from issuance of Series B preferred stock

Preferred stock issuance costs

Redemption of preferred stock

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

Payments on finance lease liability

Business Combination, net of transaction costs

Transaction costs

Net cash and cash equivalents provided by financing activities

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents - Beginning of year

Cash and Cash Equivalents - End of year

Supplemental Cash Flow Information - Cash paid for interest

Supplemental Cash Flow Information – (Gain) on extinguishment of PPP loan

Supplemental Cash Flow Information – Net Assets acquired in Business Combination

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental information

Cash paid for interest

Accrued capital expenditures

Net assets acquired in Business Combination

Gain on extinguishment of PPP loan

See accompanying Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

Years Ended December 31, 2021 and 2020

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 December 31, 2021, and 2020, the Company has not derived material revenue from its principal business activities.

(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 processes.

For the years ended December 31, 2022, 2021, and 2020, 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 previously announced 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”).

See Notes 2 and 3.

Note 2 – Significant Accounting Policies

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All amounts presented in the footnotes are in thousands, except share and per share amounts.

Pursuant to the Business Combination Agreement, the merger between Merger Sub and Legacy Solid Power was accounted for as a reverse recapitalization in accordance with U.S.

GAAP (the “Reverse Recapitalization”).

Pursuant to the Business Combination Agreement, the merger between Merger Sub and Legacy Solid Power was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”).

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.

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Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements as well as reported amounts of expenses during the reporting periods.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and contingencies at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting periods.

Estimates made by the Company include, but are not limited to, those related to the valuation of common stock prior to the Business Combination, valuation of stock warrants, and useful lives of long-term assets, among others.

The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

The Company bases these estimates on historical experience and other assumptions that it believes are reasonable under the circumstances.

Cash and Cash Equivalents

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The Company’s policy is focused on the preservation of capital, liquidity, and return.

From time to time, the Company may sell certain securities, but the objectives are generally not to generate profits on short-term differences in price.

From time to time, the Company may sell certain securities, but the objectives are not to generate profits on short-term differences in price.

These securities are carried at estimated fair value with unrealized holding gains and losses included in other comprehensive loss in stockholders’ deficit until realized.

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Contract receivables consist of amounts due from government entities and commercial contractors.

Included within contract receivables are amounts for work performed but not billed of $ 310 and $ 224 as of December 31, 2021 and 2020, respectively.

Management considers all contract receivables collectible, and therefore, an allowance for doubtful accounts has not been recorded at December 31, 2021 and 2020.

Management considers all contract receivables collectible, and therefore, an allowance for doubtful accounts has not been recorded as of December 31, 2022 and 2021.

Included within contract receivables are amounts for work performed but not billed as of December 31, 2022 and 2021, shown below.

December 31, 2022

December 31, 2021

Contract receivables not billed

Credit Risk and Major Customers

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.

The Company grants credit in the normal course of business to government entities and commercial contractors in the United States.

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The Company performs ongoing credit evaluations of its customers, but generally does not require collateral to support contract receivables.

During the year ended December 31, 2021, four customers accounted for 87 % percent of total revenue.

Two customers accounted for 58 % of total contract receivables at December 31, 2021.

During the year ended December 31, 2020, three customers accounted for 81 % percent of total revenue.

One customer accounted for 18 % percent of total contract receivables at December 31, 2020.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of security deposits, prepaid Directors and Officers insurance and other minor miscellaneous expenses paid in advance.

For the Years Ended December 31,

Revenue Concentration

Number of Customers

Related Total Revenue Percentage

Contract Receivable Concentration

Number of Customers

Related Contract Receivables Percentage

Solid Power, Inc.

| 2022 Form 10-K | 62

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of security deposits, prepaid Directors and Officers insurance and other minor miscellaneous expenses paid in advance.

Property and Equipment

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Laboratory equipment

Furniture and fixtures

Computer equipment

Furniture and Computer Equipment

Leasehold improvements

Lesser of asset life or lease term

Long-Term Investments

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

Intangible Assets

Intangible assets consist of licenses and costs incurred for pending patents and pending trademarks.

Licenses consist of rights to use patents and are amortized over their estimated useful life of 3 to 20 years .

Licenses consist of rights to use patents and are amortized over their estimated useful life of three to 20 years .

Patent and trademark costs are amortized over an estimated useful life upon award by the United States Patent and Trademark Office or expensed if the Company is unsuccessful in securing an issued patent.

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Deferred Rent

The Company has entered into operating lease agreements for its corporate office and production facility, which contain provisions for future rent increases or periods in which rent payments are reduced.

Prior to the adoption of ASU No.

2016-02, Leases (Topic 842) on January 1, 2022, the Company had entered into operating lease agreements for each of its two facilities, each of which contain provisions for future rent increases or periods in which rent payments are reduced.

The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term.

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Deferred rent also includes the unamortized portion of landlord-financed tenant improvement allowances, which are amortized on a straight-line basis over the lease term as a reduction in rent expense.

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.

Solid Power, Inc.

| 2022 Form 10-K | 63

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.

Stock-based Compensation

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Generally, the classification of transactions under the joint development agreements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.

The Company recognizes collaborative revenue from cost contracts on the basis of costs incurred during the period and cost plus

Solid Power, Inc.

| 2021 Form 10-K | 64

fixed-fee contracts on the basis of costs incurred during the period plus the fee earned.

The Company recognizes collaborative revenue from cost contracts on the basis of costs incurred during the period and cost plus fixed-fee contracts on the basis of costs incurred during the period plus the fee earned.

Contract costs include all direct labor, subcontract, material, and indirect costs related to the contract performance that are allowable under contract provisions.

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Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815.

Warrants recorded as equity are recorded at their relative fair value determined at the issuance date and remeasurement is not required.

The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815.

Warrants recorded as liabilities are recorded at their fair value, within Warrant Liabilities on the Consolidated Balance Sheets and are remeasured on each reporting date with changes recorded in Change in fair value of warrant liabilities on the Company’s Consolidated Statements of Operations.

Solid Power, Inc.

| 2022 Form 10-K | 64

Fair Value Measurements

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Level 3 – inputs are unobservable and corroborated by little or no market data.

See Note 8- Fair Value Measurement for information about the assumptions that the Company used to measure the fair value for the respective financial assets and liabilities.

Solid Power, Inc.

| 2021 Form 10-K | 65

Research and Development

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Deferred tax liabilities and assets are determined based on the differences between the Consolidated Financial Statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse.

The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence.

The measurement of deferred tax assets is reduced, if necessary, by the amount of any uncertain tax positions or tax benefits that are not expected to be realized based on available evidence.

The Company records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis.

Please refer to Note 17 – Income Taxes for additional disclosure.

The Company's temporary differences result primarily from accruals and reserves, depreciation of property and equipment, stock compensation, deferred rent, and net operating loss (NOL) carryovers.

The Company’s temporary differences result primarily from capitalization of certain qualifying research and development expenses, accruals and reserves, depreciation of property and equipment, stock compensation expense, capitalization of operating or financing leases, and net operating loss carryovers.

The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company measures the tax benefits recognized in the Consolidated Financial Statements from such a position based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

After evaluating the tax positions taken, none are considered to be uncertain as of December 31, 2021 and 2020.

Interest and penalties associated with tax positions are recorded in the period assessed as General and administrative on the Consolidated Statement of Operations.

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Diluted earnings per share adjusts basic earnings per share for the potentially dilutive impact of stock options and warrants.

As the Company has reported net income in 2021, diluted earnings per share reflects any dilutive effect of stock options and warrants but as the Company reported a net loss in 2020, all potentially dilutive securities including options and warrants, are antidilutive and accordingly, basic net loss per share equals diluted loss per share.

The Company reported a net loss in 2022 and 2020.

As such all potentially dilutive securities including options and warrants, are antidilutive and accordingly, basic net loss per share equals diluted loss per share.

As the Company reported net income in 2021, diluted earnings per share reflected any dilutive effect of stock options and warrants.

Solid Power, Inc.

| 2022 Form 10-K | 65

Mezzanine Equity

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Immediately prior to the consummation of the Business Combination, 14,069,187 shares of Legacy Solid Power Series A-1 Preferred Stock and 8,777,812 shares of Legacy Solid Power Series B Preferred Stock, which represented all of the then-outstanding shares of Preferred Stock, converted to Legacy Solid Power common stock on a one -to-one basis.

At the Closing (as defined below), such shares of Legacy Solid Power common stock were exchanged for shares of Solid Power Common Stock based on the Exchange Ratio.

Upcoming Accounting Pronouncements

At the Closing (as defined below), all shares of Legacy Solid Power common stock were exchanged for shares of Solid Power Common Stock based on the Exchange Ratio.

Recent Accounting Pronouncements

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 (collectively “ASU 2016-02”).

The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the Consolidated Balance Sheet for all leases.

Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the Consolidated Statements of Operations.

Solid Power, Inc.

| 2021 Form 10-K | 66

ASU 2016-02 was effective for fiscal years beginning after December 15, 2021.

The standard is effective for the Company on January 1, 2022.

The Company expects that this standard will have a material effect on its Consolidated Financial Statements.

While the Company continues to assess all of the effects of adoption, the Company currently believes the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on its Consolidated Balance Sheet for its office and equipment operating leases;

and (2) the requirement to provide significant new disclosures about its leasing activities.

On adoption, the Company currently expects to recognize additional operating liabilities, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

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 year ended December 31, 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 (“ASU 2016-13”).

This ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

As the Company completed the Business Combination in late 2021, ASU 2016-13 will be effective for the Company starting fiscal years beginning January 1, 2022.

The Company is currently assessing the impact of ASU 2016-13 on its Consolidated Financial Statements.

The impact to the Company is expected to be immaterial.

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.

To date, management has not recorded an allowance for credit losses.

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.

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 U.S.

Generally Accepted Accounting Principles (“U.S.

GAAP”) without compromising information provided to users of financial statements.

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.

As the Company completed the Business Combination in late 2021, ASU 2016-13 will be effective for the Company starting fiscal years beginning January 1, 2022.

Early adoption is permitted.

The Company is currently evaluating the impact, if any, that the updated standard will have on the consolidated financial statements.

The Company adopted this guidance beginning January 1, 2022 with no financial statement impact at adoption.

Solid Power, Inc.

| 2022 Form 10-K | 66

Note 3 – Business Combination

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Activity within the 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.

In connection with the Closing, and subject to the terms and conditions of the Business Combination Agreement, each outstanding share of Legacy Solid Power’s common stock (including shares of Legacy Solid Power common stock issued upon the conversion of each share of Legacy Solid Power’s Preferred Stock immediately prior to the Closing) was canceled and converted into the right to receive the number of shares of the Company’s Common Stock (as defined below) based on an Exchange Ratio equal to approximately 3.182 (the “Exchange Ratio”), and each outstanding Legacy Solid Power option issued under Legacy Solid Power’s

Solid Power, Inc.

| 2021 Form 10-K | 67

2014 Equity Incentive Plan (the “2014 Plan”) was converted into a Company option based on the Exchange Ratio applicable to shares of Legacy Solid Power common stock, each in accordance with the terms of the Business Combination Agreement.

At the Closing, the Company issued an aggregate of 104,518,159 shares of Common Stock to the equity-holders of Legacy Solid Power and the Legacy Solid Power option-holders’ held options in the Company to receive an aggregate 34,407,949 shares of Common Stock, subject to payment of the applicable exercise price and, in certain circumstances, vesting obligations.

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Prior to the Closing, DCRC had $ 1,500 outstanding under working capital loans from Decarbonization Plus Acquisition Sponsor III LLC (the “Sponsor”), which, in connection with the Closing, the Sponsor elected to convert into warrants to purchase 1,000,000 shares of Common Stock at a price of $ 1.50 per share, which are included in the 7,666,667 Private Placement Warrants (as defined below).

Pursuant to the Business Combination Agreement, the Merger was accounted for as a Reverse Recapitalization in accordance with 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.

The following table reconciles the elements of the Business Combination to the Consolidated Statements of Cash Flows and the Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2021:

Business Combination

Solid Power, Inc.

| 2022 Form 10-K | 67

Recapitalization

Cash – DCRC trust and cash, net of redemptions

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Shares of Common Stock issued in PIPE Financing

Shares of Common Stock issued to Legacy Solid Power shareholders

Shares of Common Stock issued to Legacy Solid Power stockholders

Total shares of Common Stock outstanding immediately after Business Combination

Solid Power, Inc.

| 2021 Form 10-K | 68

Note 4 – Property and Equipment

Property and equipment are summarized as follows:

Note 4 – Property, Plant and Equipment

Property, plant and equipment at December 31 are summarized as follows:

Commercial production equipment

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Leasehold improvements

Computer equipment

Furniture and fixtures

Furniture and computer equipment

Construction in progress

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Net property and equipment

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2021 and 2020 was $ 2,351 and $ 2,066 , respectively.

Depreciation and amortization expenses are allocated ratably across operating expenses on the accompanying Consolidated Statements of Operations.

Depreciation expenses are allocated ratably across operating expenses on the accompanying Consolidated Statements of Operations.

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 Consolidated Statements of Operations based on Company personnel costs incurred.

The Company is expanding its cell production capabilities through the construction of a second dry room and installation of a second cell-production line, which is expected to be able to produce larger format all-solid-state battery cells as part of the automotive qualification process.

The Company expects to complete this construction in 2022.

Construction in progress related to these efforts was $ 6,875 and $ 111 as of December 31, 2021 and December 31, 2020, respectively.

The Company is expanding its sulfide-based solid electrolyte production at a second location.

Scaling this production will allow it to produce larger quantities of electrolyte material required to feed the cell-production line and continue research and development efforts.

The Company expects to complete construction in late 2022.

Construction in progress related to these efforts was $ 943 as of December 31, 2021.

As of December 31, 2021, Construction in progress also contains $ 4,866 related to progress payments made to vendors for customized equipment, in connection with the expansions described above, that will be recorded as Property and Equipment upon being received and placed in service.

other depreciation expenses are included in the Company’s overhead and are allocated across operating expenses on the accompanying Consolidated Statements of Operations based on Company personnel costs incurred.

Depreciation expense

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.

Solid Power, Inc.

| 2022 Form 10-K | 68

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 expects to begin producing electrolyte from this facility in 2023.

December 31, 2022

December 31, 2021

Construction in progress

Louisville, Colorado – 2 nd cell pilot line

Louisville, Colorado – Other capital projects

Thornton, Colorado – Increased scale electrolyte production

Note 5 – Intangible Assets

Intangible assets of the Company on December 31, 2021 and 2020 are summarized as follows:

Intangible assets of the Company at December 31 are summarized as follows:

Gross Carrying

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Patents pending

Trademarks pending

Trademarks and trademarks pending

Total amortized intangible assets

Amortization expense for intangible assets totaled $ 9 for the years ended December 31, 2022, 2021 and 2020.

Useful lives of intangible assets range from 3 to 20 years .

Solid Power, Inc.

| 2021 Form 10-K | 69

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 6 – Long-term Debt

Long-term debt at December 31 is as follows:

Various equipment notes payable to banks in monthly installments ranging from $ 1 to $ 2 , including interest at 6.255 percent to 12.18 percent maturing from April 2022 through December 2022.

The notes are collateralized by the financed equipment and guaranteed by a stockholder of the Company.

Note payable to a bank in monthly installments beginning on January 1, 2020 of $ 91 , plus interest at the greater of 6.00 percent per annum or the prime rate plus 1.00 percent through December 7, 2021, the date the note was settled.

Various equipment notes payable to banks in monthly installments ranging from $ 1 to $ 2 , including interest at 6.255 percent to 12.18 percent maturing from April 2022 through April 2023.

The notes are collateralized by the financed equipment.

Less current portion

Long-term portion

The balance of the above debt matures as follows:

On December 7, 2021, prior to the Business Combination, 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 subject to certain restrictive covenants as of the years ended December 31, 2020 and remaining reporting periods in 2021 under the terms of the note payable.

The note payable contained customary representations, warrants and covenants.

As of December 31, 2020, the note payable required the Company to maintain an adjusted quick ratio at the last day of each month of not less than 1.25 .

The adjusted quick ratio was defined as cash plus net accounts receivable divided by current liabilities net of deferred revenue.

The note payable financial covenants required the Company to maintain $ 1,750 in unrestricted and unencumbered cash in accounts with the bank beginning December 31, 2020 through the remaining term of the note payable.

The Company was in compliance with all financial covenants as of December 31, 2020, and each subsequent reporting date through the loan payoff on December 7, 2021.

Interest expense on long-term debt for 2021 and 2020 was $ 131 and $ 196 , respectively.

The remaining balance of debt is all short-term.

The Company anticipates paying off the remaining balance in the subsequent year.

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 for the years ended December 31, 2022, 2021 and 2020 was $ 6 , $ 131 and $ 196 , respectively.

Solid Power, Inc.

| 2022 Form 10-K | 69

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.

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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 2021 and 2020 was $ 210 and $ 15 , respectively, for the 2020 Notes.

Interest expense for 2021 was $ 210 for the 2020 Notes.

The principal of the 2020 Notes was included in Additional paid-in capital and the fair value of the embedded derivative was recorded as a liability on the Legacy Solid Power’s Consolidated Balance Sheet.

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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.

Solid Power, Inc.

| 2021 Form 10-K | 70

2020 Convertible Promissory Notes Embedded Derivative

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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").

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.

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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 years ended December 31, 2021 and 2020, interest expense of $ 53 and $ 150 was incurred related to the 2019 Note, respectively.

Interest expense incurred for the year ended December 31, 2020 was $ 150 .

Prior to conversion, interest expense incurred for the year ended December 31, 2020 was $ 53 .

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 Consolidated Statements of Operations.

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As of December 31, 2022 and 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:

December 31, 2022

Commercial Paper

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Private Warrants

2020 Convertible Promissory Notes Embedded Derivative

2019 Convertible Promissory Notes

The fair value of the Company's marketable securities as of December 31, 2021 approximated original purchase price, as a result the Company deemed the fair value adjustment immaterial for reporting purposes.

The Company had no marketable securities at December 31, 2020.

December 31, 2021

Commercial Paper

Corporate Bonds

Government Bonds

Public Warrants

Private Warrants

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 years ended December 31, 2022 and 2021.

For the year ended December 31, 2022 the Company purchased $ 561,565 of marketable securities.

Fair Value Methodology

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and (vi) estimated volatility.

The changes during the twelve months ended December 31, 2021 in the fair values of the embedded derivatives are primarily related to the change in the value of the conversion features and are reflected in the Consolidated Statements of Operations as “Loss from change in fair value of embedded derivative liability.”

Solid Power, Inc.

| 2022 Form 10-K | 71

Fair Value of Debt - 2019 Note

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and (vi) estimated volatility.

Solid Power, Inc.

| 2021 Form 10-K | 72

Fair Value of Other Financial Instruments

The following table provides the estimated fair value of ﬁnancial instruments that are not recorded at fair value in the Consolidated Balance Sheets:

December 31, 2020

Principal Amount

2020 Convertible Promissory Notes

The fair value of the 2020 Notes at December 31,2020 was estimated using the present value of probability weighted scenario analysis, considering the as-converted value and the downside protection and is classiﬁed as Level 3 in the fair value hierarchy.

Fair Value of Stock

The fair value of the Private Placement Warrants (defined below) have been estimated using a Black-Scholes model as of the Closing Date and subsequently as of the December 31, 2021 Consolidated Balance Sheet date.

Fair Value of Common Stock Warrant Liabilities

The fair value of the Private Placement Warrant Liabilities have been estimated using a Black-Scholes model as of the Closing Date and subsequently as of the December 31, 2022 and 2021 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.

The estimated fair value of the Private Placement Warrants (defined below) 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.

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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:

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Risk-free rate

The following table provides a reconciliation of the Private Placement Warrants measured at fair value using Level 2 significant unobservable inputs (in thousands):

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, 2021

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December 31, 2022

Note 9 – Common Stock Warrant Liabilities

At the Closing, the Company had outstanding 11,666,636 publicly traded warrants (“Public Warrants”) and 7,666,667 private placement warrants (the “Private Placement Warrants”).

Each whole warrant (the Public Warrants and Private Placement Warrants, collectively, the “Warrants”) entitles the holder thereof to purchase one share of Common Stock at a price of $ 11.50 per share, subject

The following tables provides a reconciliation of the change in fair value for the Public and Private Placement Warrants for the years ended December 31, 2022 and 2021.

Change in Fair

Warrant Class

Public Warrants

Private Warrants

Solid Power, Inc.

| 2022 Form 10-K | 72

to adjustment as described herein.

Note 9 – Common Stock Warrant Liabilities

As of December 31, 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 or earlier upon redemption or liquidation.

The Company may redeem the outstanding Warrants for cash (except as described herein with respect to the Private Placement Warrants) in whole and not in part, at a price of $ 0.01 per Warrant, upon a minimum of 30 days’ prior written notice of redemption, referred to as the 30 -day redemption period;

and if, and only if, the last sale price of the Company’s Common Stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30 -trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

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

The Company may redeem the outstanding Warrants (described as a Make-Whole Exercise) (except as described above with respect to the Private Placement Warrants):

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;

● at a price of $ 0.10 per Warrant, provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares of Common Stock determined in part by the redemption date and the “fair market value” of the Common Stock except as otherwise below;

● upon a minimum of 30 days’ prior written notice of redemption;

● if, and only if, the last sale price of the Company’s Common Stock equals or exceeds $ 10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) on the trading day prior to the date on which we send the notice of redemption to the warrant holders;

● if the last sale price of the Company’s Common Stock on the trading day prior to the date on which the Company send the notice of redemption to the warrant holders is less than $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Warrants, as described above.

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 10 trading days immediately following the date on which the notice of redemption is sent to the holders of Warrants.

The Company classifies the outstanding Public Warrants and Private Placement Warrants as Warrant Liabilities on the Consolidated Balance Sheet in accordance with the guidance contained in ASC 815-40.

The Warrant Liabilities were initially measured at fair value upon Closing of the Business Combination for $ 101,253 and subsequently re-measured at December 31, 2021 for $ 50,020 .

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 $ 51,233 during the period from December 8, 2021 (the Closing) to December 31, 2021.

Note 10 – Mezzanine Equity

Immediately prior to the Closing and as of December 31, 2020, Legacy Solid Power had 14,069,187 and 14,404,018 shares of Series A-1 Preferred Stock Shares outstanding.

Immediately prior to the Closing, Legacy Solid Power had 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 Convertible Promissory Notes as discussed in Note 7.

See Note 11 for a discussion of warrants issued with the Legacy Solid Power Series B Preferred Stock.

● 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;

● 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 for $ 101,253 and subsequently re-measured on December 31, 2021 and December 31, 2022 for $ 50,020 and $ 9,117 , respectively.

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 gain in connection with changes in the fair value of warrant liabilities of $ 40,903 and $ 51,233 as of December 31, 2022 and 2021, respectively.

Solid Power, Inc.

| 2022 Form 10-K | 73

Note 10 – Mezzanine Equity

In accordance with ASC 480, Legacy Solid Power’s Preferred Stock prior to the Business Combination was 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.

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 Consolidated Balance Sheets.

The amount recognized was the greater of the redemption value or fair value.

Immediately prior to the Business Combination, 14,069,187 shares of Legacy Solid Power Series A-1 Preferred Stock and 8,777,812 shares of Legacy Solid Power Series B Preferred Stock were converted into shares of Legacy Solid Power common stock on a one -to-one basis.

Immediately prior to the Business Combination, 14,069,187 shares of Series A-1 Preferred Stock and 8,777,812 shares of Series B Preferred Stock were converted to the equivalent number of shares of Legacy Solid Power common stock.

At the Closing, those shares of Legacy Solid Power common stock were exchanged for Common Stock in accordance with the Exchange Ratio.

Note 11 – Stockholders’ Equity

During the years ended December 31, 2021 and 2020, stock options were exercised for 1,160,930 and 1,097,370 shares of Common Stock, respectively.

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

Stock options exercised

Cash received from options exercised under the Legacy Solid Power, Inc.

2014 Equity Incentive Plan (the “2014 Plan”) for the years ended December 31, 2022, 2021 and 2020 was $ 818 , $ 106 and $ 24 , respectively.

During the years ended December 31, 2022, 2021 and 2020, restricted stock units (“RSUs”) vested for 29,108 , 0 , and 0 shares of Common Stock, respectively.

Legacy Solid Power Warrants

During 2015, Legacy Solid Power issued warrants to a third party in conjunction with a licensing agreement to purchase 276,000 shares of Legacy Solid Power common stock at an exercise price of $ 0.00001088 per share.

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 Consolidated Statements of Stockholders' Equity.

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 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.

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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.

Solid Power, Inc.

| 2022 Form 10-K | 74

Note 12 – Stock Based Compensation

The fair value of stock options and other equity-based compensation issued to employees is recognized as compensation expense over the period of service that generally coincides with the vesting period of the award.

The Company recognized compensation costs totaling $ 2,714 and $ 182 for the years ended December 31, 2021 and 2020, respectively, which are allocated ratably across Operating Expenses within the accompanying Consolidated Statements of Operations.

At December 31, 2021, the Company had 34,407,949 shares of Common Stock underlying stock options outstanding under the 2014 Plan.

2014 Equity Incentive Plan and 2021 Equity Incentive Plan

Options granted under the 2014 Plan generally had a ten-year term and vest as to 1/4 th 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.

The 2014 Plan was terminated upon the Closing, no additional grants will be made under the 2014 Plan.

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.

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2021 Equity Incentive Plan (the “2021 Plan”).

As of December 31, 2021, the 2021 Plan permitted the Company to grant up to 18,900,000 shares of Common Stock to its employees, directors, and consultants, as designated by the board of directors.

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.

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.

At December 31, 2021, no awards had been granted under the 2021 Plan.

Options granted under the 2021 Plan generally have a ten-year term and vest as to 1/4 th of these shares per year beginning one year after the initial date of service of a service provider.

Option awards under the 2021 Plan were generally granted with an exercise price equal to the fair market value of the Company’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).

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 25 % per year commencing on the first anniversary of the grant date.

RSU awards upon initial service as a director vest in 12 equal quarterly installments.

For initial service grants, vested RSUs are settled in common stock upon the earlier of the director no longer serving on the board of directors or the date the RSU has fully vested.

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.

At December 31, 2022 and 2021 the Company had 24,766,176 and 34,407,949 shares of common stock underlying stock options outstanding under the 2014 Plan respectively.

Upon the Closing, the 2014 Plan was terminated and no additional grants were made under the 2014 Plan.

As of December 31, 2022, the 2021 Plan permitted the Company to grant up to 24,466,527 shares of common stock to its employees, directors, and consultants, as designated by the board of directors.

December 31, 2022

December 31, 2021

Option awards granted under 2021 Plan

RSU awards granted under 2021 Plan

Compensation Expense for Stock Based Compensation

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.

When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.

Solid Power, Inc.

| 2022 Form 10-K | 75

The fair value 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.

For the years ended December 31, 2022, 2021 and 2020 the Company recognized compensation costs totaling:

Equity-based compensation costs related to RSUs

Equity-based compensation costs related to stock options

Equity-based compensation costs related to ESPP

Total equity-based compensation costs

Future compensation costs related to unvested options

The Company allocated compensation ratably across Operating Expenses within the following financial statement lines:

Research and Development

Sales and Marketing

General and Administrative

Total equity-based compensation cost

Stock Options

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.

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Treasury yield curve in effect at the time of grant.

When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.

The fair value of each option grant during the years ended December 31, 2022, 2021 and 2020 was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions used:

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Estimated fair value of total options granted

A summary of option activity under the 2014 Plan for the years ended December 31, 2021 and 2020 is presented below:

When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.

Solid Power, Inc.

| 2022 Form 10-K | 76

A summary of option activity under the 2014 Plan and 2021 Plan for the years ended December 31, 2022, 2021, and 2020 is presented below:

Weighted-average

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Outstanding at December 31, 2021

Outstanding at January 1, 2022

( 8,428,524 )

Forfeited or expired

( 1,711,817 )

Outstanding at December 31, 2022

Exercisable at December 31, 2020

Exercisable at December 31, 2021

Exercisable at December 31, 2022

Cash received from options exercised under the 2014 Plan for December 31, 2022, 2021 and 2020 was $ 818 , $ 106 and $ 23 , respectively.

Future compensation costs related to the unvested portion of stock options at December 31, 2021 and 2020 was $ 23,307 and $ 593 , respectively.

The aggregate intrinsic value of exercisable options at December 31, 2022 was $ 35,058 .

The aggregate intrinsic value of exercised options at December 31, 2022 was $ 63,287 .

Restricted Stock Units

The following table summarizes non-vested RSUs at December 31, 2022 and the changes for the period ended December 31, 2022:

Weighted-average

Grant Date Fair Value

Balance at January 1, 2022

Outstanding at December 31, 2022

As of December 31, 2022 unrecognized compensation costs related to restricted stock units was $ 6,144 and is expected to be recognized over a weighted average period of 2.97 years.

The vested RSUs had no intrinsic value as of December 31, 2022.

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2021 Employee Stock Purchase Plan

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As of December 31, 2021, 3,778,000 shares remained available for issuance.

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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

Beginning on January 1, 2022, the number of shares of Common Stock available for issuance under the 2021 ESPP shall increase by an amount equal to the lesser of (i) 3,778,000 shares of Common Stock (ii) one percent (1%) 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 December 31, 2022 5,463,579 shares remained available for issuance.

As of December 31, 2022 the 2021 ESPP permitted the Company to issue up to 5,463,579 shares of common stock.

The Company recorded $ 29 of expense related to the 2021 ESPP in the year ended December 31, 2022.

No shares have been purchased under the ESPP as of December 31, 2022.

As of December 31, 2022, there was $ 58 of unrecognized stock-based compensation expense related to the ESPP that is expected to be recognized by the end of second quarter of 2023.

The 2021 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

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Purchases may be up to 15 % of qualified compensation, with an annual limit of $ 25,000 .

Note 13 – Earnings Per Share

Note 13 – Earnings (Loss) Per Share

The table below reconciles basic weighted average common shares outstanding to diluted weighted average shares outstanding for December 31, 2022, 2021 and 2020.

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 also includes the dilutive effect of additional potential common shares issuable from stock-based awards and are determined using the treasury stock method.

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.

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Years Ended December 31,

Net Income (loss)

Premium paid on repurchase of redeemable convertible preferred stock

Net income (loss) attributable to common stockholders

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Diluted earnings (loss) per share

Due to the net loss to common stockholders in 2020 presented above, diluted loss per share was computed without consideration of potentially dilutive instruments as their inclusion would have been anti-dilutive.

Warrants outstanding in 2021 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 shares.

As of December 31, 2021 and 2020, potentially dilutive securities excluded from the diluted earnings (loss) per share calculation are as follows:

Warrant Common Stock

2014 Equity Incentive Plan

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Due to the net loss to common stockholders in 2022 and 2020 presented above, diluted loss per share was computed without consideration of potentially dilutive instruments as their inclusion would have been anti-dilutive.

Warrants outstanding in 2022 and 2021 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 shares.

As of December 31, 2022, 2021 and 2020, potentially dilutive securities excluded from the diluted earnings (loss) per share calculation are as follows (in shares):

Common Stock Warrants

2014 & 2021 Equity Incentive Plan - Stock Options

2021 Equity Incentive Plan - Restricted Stock Units

2021 Employee Stock Purchase Plan

Contingently Issuable Common Stock

Total potentially dilutive securities

Note 14 – Operating Leases

The Company leases office space under a noncancelable operating lease with a maturity date in September 2024.

The lease requires the Company to pay certain taxes, insurance, utilities, and maintenance costs.

In 2019, the Company amended the lease, agreeing to sublease additional space in the building, which sublease expires in December 2024.

In connection with this operating

Note 14 – 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 December 31, 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:

December 31, 2022

December 31, 2021

Finance lease costs:

Amortization of right-of-use assets

Interest on lease liabilities

Operating lease costs

Total lease expense

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lease, the Company was granted an allowance for tenant improvements as a lease incentive.

Deferred lease incentive is included in Other Long-term Liabilities on the Consolidated Balance Sheets and is being amortized on a straight-line basis over the term of the lease ending in September 2024.

Deferred lease incentive totaled $ 179 and $ 246 as of December 31, 2021, and December 31, 2020, respectively.

On September 1, 2021, the Company entered into an Industrial Lease Agreement with the initial term through March 31, 2029 and which contains one option to renew for five years.

The Company is responsible for its proportionate share of common area maintenance, taxes, and insurance.

Total rent expense under these leases was $ 661 and $ 415 for years ended December 31, 2021 and 2020, respectively, and are charged to Operating Expenses based on personnel costs incurred in the accompanying Consolidated Statements of Operations.

Future minimum annual commitments under these operating leases are as follows:

Years Ending December 31

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

December 31, 2022

December 31, 2021

Operating outgoing cash flows – finance lease

Financing outgoing cash flows – finance lease

Operating outgoing cash flows – operating lease

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

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

December 31, 2022

Finance lease

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

Weighted-average discount rate – finance lease

Operating lease

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

Weighted-average discount rate – operating lease

As of December 31, 2022, future minimum payments during the next five years and thereafter are as follows:

Finance Lease

Operating Lease

Less present value discount

Total lease liabilities

Note 15 – Related Party Transactions

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Related party revenue from Roccor was $ 163 for the year ended December 31, 2020.

During 2022, the Company entered into a collaborative arrangement with BMW of North America, LLC (“BMW”).

Pursuant to the terms of the agreement, the Company granted BMW a research and development-only license to certain of the Company’s intellectual property relating to solid-state battery cell manufacturing (the “R&D License”).

The R&D License allows, among other things, BMW to install a solid-state prototype cell manufacturing line based upon the Company’s proprietary information.

The R&D License is limited to BMW’s research and development activities and may not be used for commercial battery cell production.

The Company and BMW also agreed to negotiate a non-exclusive short-term electrolyte supply agreement for the Company to supply BMW with electrolyte material for use in BMW’s cell manufacturing, which is expected to commence in 2024 following commissioning of BMW’s solid-state protype cell manufacturing line.

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Pursuant to the agreement, prior to installation of BMW’s anticipated prototype cell manufacturing line, the Company and BMW have agreed to undertake development and manufacturing activities jointly at the Company’s facilities.

Any intellectual property developed jointly by the Company and BMW at the Company’s facilities will be solely owned by the Company (“Joint Onsite Foreground IP”).

To the extent intellectual property is jointly conceived but not considered Joint Onsite Foreground IP, the Company and BMW will jointly own such intellectual property.

Each party will solely own intellectual property developed solely by such party.

The Company and BMW will each have the right to utilize the other party’s technical improvements for research and development purposes only.

Subject to certain limitations, the Company has the right to cause BMW to license BMW’s technical improvements to the Company for commercial purposes.

In consideration of the R&D License and additional development activities contemplated by the agreement BMW will pay the Company $ 20 million between December 2022 and June 2024, subject to the Company achieving certain milestones.

For the year ended December 31, 2022, the Company has recognized $ 2 million of revenue from BMW and recorded $ 4 million of deferred revenue related to cash paid from BMW in advance of services provided.

Unrelated to the terms under the R&D License agreement the Company received $ 375 from BMW in exchange for initial prototype cells.

Note 16 – Retirement Plans

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Deferred tax assets and liabilities arise primarily from net operating loss carryforwards and temporary differences arising from the amortization of intangible assets, depreciation on property and equipment, and various accrued liabilities.

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Income taxes included in the Consolidated Statements of Operations at December 31, 2021 and 2020 are detailed below:

Current income tax (benefit)/expense:

Income taxes included in the Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 are detailed below:

For the Years Ended December 31,

Deferred income tax (benefit) expense:

Total income tax (benefit) expense

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The tables below represent a reconciliation of the statutory federal income tax expense to income tax:

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Permanent Differences – Related to Convertible Debt

Permanent Differences – Fair Value Adjustments

Permanent Differences – Fair Value Adjustments– Warrant Liability

Permanent Differences – Fair Value Adjustments– Marketable Securities

Prior year provision to return

Net change in valuation allowance

Research and Development

Total income tax (benefit)

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Stock compensation

Section 174 Capitalization

ROU Lease Liability

Total income tax expense (benefit)

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Management considers the scheduled reversal of deferred tax liabilities, taxes paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment.

Based on available evidence, management does not believe it is more likely than not that all of the

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| 2021 Form 10-K | 79

deferred tax assets will be realized.

Based on available evidence, management does not believe it is more likely than not that all of the deferred tax assets will be realized.

Accordingly, the Company has established a valuation allowance equal to the net realizable deferred tax assets.

The valuation allowance increased by $ 13,494 in 2022.

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At December 31, 2022, 2021 and 2020, the Company had total domestic Federal net operating loss carryovers of approximately $ 73,367 , $ 63,391 and $ 29,836 , respectively.

Federal net operating losses generated prior to 2018 expire in 2037.

Federal net operating losses generated after 2017 have an indefinite carryforward and are only available to offset 80 % taxable income beginning in 2021.

The determination of state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and that can thereby impact the amount of such carryforwards.

The majority of the state NOLs have an indefinite carryforward.

Federal net operating losses generated on or prior to December 31, 2017 expire in 2037.

Federal net operating losses generated on or after January 1, 2018 have an indefinite carryforward and are only available to offset 80 % taxable income beginning in 2021.

The determination of state net operating loss carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and that can thereby impact the amount of such carryforwards.

The majority of the state net operating losses have an indefinite carryforward.

Accounting for uncertainty in income taxes is based on a recognition threshold and measurement attribute for the Consolidated Financial Statements recognition and measurement of a tax position taken or expected to be taken in a tax return.

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Each year the Company performs a comprehensive review of its material tax positions.

Our policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense.

As the Company had no uncertain tax benefits during 2021 and 2020, there was no accrued interest or penalties related to uncertain tax positions.

The Company’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense.

As the Company had no uncertain tax benefits before the year ending December 31, 2022, there is no accrual of interest or penalties related to uncertain tax positions.

The following table summarizes the Company’s unrecognized tax benefits:

December 31, 2022

Balance, beginning of year

Gross increases related to prior period tax position

Gross increases related to current period tax position

Gross decreases related to prior period tax position

Balance, end of year

Included in the balance of unrecognized tax benefits at December 31, 2022, are potential benefits of $ 636 that if recognized would affect the effective tax rate.

The 2018 through 2021 tax years remain open to examination by the Internal Revenue Service and, with few exceptions, various other state tax agencies.

These taxing authorities have the authority to examine those tax years until the applicable statutes of limitations expire.

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act provided for an increased interest deduction for tax years 2019 and 2020, as well as the deferral of the employer portion of social security taxes.

Note 18 – Contingencies

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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 (“Proposal”) for the proposed business combination with Legacy Solid Power violated Section 242(b)(2) of the Delaware General Corporation law and demanded that DCRC provide DCRC’s Class A stockholders with a separate class vote on the Proposal.

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

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On March 10, 2022, the Company settled the Fee Demand for an amount that is materially consistent with our accrual.

Note 19 – Going Concern

The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern.

The Company has incurred negative cash flows from operations for several years and had an accumulated deficit of $ 9,535 as of December 31, 2021.

As the Company pursues its business plan, it expects to continue to incur negative cash flows until the mid-2020s when it expects its products are able to be commercialized and the Company begins generating significant revenues from operations.

Based on cash on hand at December 31, 2022, management believes the Company has sufficient capital to execute its strategic plan and fund operations through at least the next 12 months from the date these Consolidated Financial Statements are issued.

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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data