What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-03-01 · 227 added, 456 removed, 529 unchanged (56% of the section changed)

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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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Denver, Colorado

March 1, 2023

Solid Power, Inc.

| 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

February 28, 2024

Solid Power, Inc.

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Contract receivables

Contract receivables from related parties

Prepaid expenses and other current assets

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Property, Plant and Equipment, net

Right-Of-Use Operating Lease Asset, net

Right-Of-Use Financing Lease Asset, net

Right-Of-Use Operating Lease Assets, net

Right-Of-Use Finance Lease Assets, net

Long-term Investments

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Current Liabilities

Accounts payable

Accounts payable and other accrued liabilities

Current portion of long-term debt

Deferred revenue

Accrued and other current liabilities:

Deferred revenue from related parties

Accrued compensation

Other accrued liabilities

Operating lease liabilities, short-term

Financing lease liability, short-term

Finance lease liabilities, short-term

Total current liabilities

Long-term Debt

Warrant Liabilities

Operating Lease Liabilities, Long-Term

Financing Lease Liabilities, Long-Term

Finance Lease Liabilities, Long-Term

Other Long-Term Liabilities

Deferred Taxes

Total liabilities

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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

179,010,884 and 176,007,184 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

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Research and development

Marketing and sales

General and administrative

Selling, general and administrative

Total operating expenses

Operating Loss

Nonoperating Income (Expense)

Nonoperating Income and Expense

Interest income

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Interest expense

Other income (expense)

Loss from change in fair value of debt

Loss from change in fair value of embedded derivative liability

Gain on loan extinguishment

Total nonoperating income (expense)

Pretax Income (Loss)

Income tax (benefit) expense

Net Income (Loss)

Premium paid on repurchase of redeemable convertible preferred stock

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

Diluted earnings (loss) per share

Weighted average shares outstanding – basic

Weighted average shares outstanding – diluted

Total nonoperating income and expense

Income tax benefit

Net Loss Attributable to Common Stockholders

Other Comprehensive Income (Loss)

Comprehensive Loss Attributable to Common Stockholders

Basic and diluted loss per share

Weighted average shares outstanding – basic and diluted

See accompanying Notes to Consolidated Financial Statements.

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Balance - December 31, 2021

Retroactive application of recapitalization

Adjusted Balance Beginning of Period

Bank warrant issuance

Beneficial Conversion feature on convertible debt

Stock options exercised

Stock-based compensation expense

Balance - December 31, 2020

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

Beneficial Conversion feature on convertible debt

Redemption of Series A-1 redeemable preferred stock*

( 1,065,432 )

Issuance of Series B redeemable preferred stock net of issuance costs of $ 4,511 and settlement of associated convertible preferred stock liability*

Warrants exercised

Withholding of employee taxes related to stock-based compensation

Shares of common stock issued for vested RSUs

Stock options exercised

Transaction fees

Unrealized loss on marketable securities

Stock-based compensation expense

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Withholding of employee taxes related to stock-based compensation

Shares issued for the vesting of restricted stock units

Shares of common stock issued under ESPP

Shares of common stock issued for vested RSUs

Stock options exercised

Transaction costs

Unrealized loss on marketable securities

Transaction fees

Unrealized gain on marketable securities

Stock-based compensation expense

Balance - December 31, 2023

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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Cash Flows from Operating Activities

Net income (loss)

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

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

Depreciation and amortization

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Loss on sale of property, plant, and equipment

(Gain) on extinguishment of debt

Stock compensation expense

Stock warrant issuance

Stock-based compensation expense

Deferred taxes

Change in fair value of warrant liabilities

Accretion of discounts on other long-term liabilities

Amortization of premiums and accretion of discounts on marketable securities

Accrued interest on convertible notes payable to be paid in kind

Non-cash interest expense on convertible notes payable

Loss from change in fair value of embedded derivative liability

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

Contract receivable

Due from related party

Contract receivables

Contract receivables from related parties

Prepaid expenses and other assets

Accounts payable

Accounts payable and other accrued liabilities

Deferred revenue

Accrued and other liabilities

Operating lease liability

Deferred rent

Deferred revenue from related parties

Accrued compensation

Operating and finance lease liabilities, short-term

Net cash and cash equivalents used in operating activities

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Purchases of intangible assets

Net cash and cash equivalents used in investing activities

Net cash and cash equivalents provided by (used in) investing activities

Cash Flows from Financing Activities

Proceeds from debt

Payments of debt

Proceeds from issuance of convertible note payable

Proceeds from exercise of common stock options

Proceeds from exercise of common stock warrants

Proceeds from issuance of Series B preferred stock

Preferred stock issuance costs

Redemption of preferred stock

Proceeds from exercise of stock options

Proceeds from issuance of shares of common stock under ESPP

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

Payments on finance lease liability

Business Combination, net of transaction costs

Payments on finance lease liabilities

Transaction costs

Net cash and cash equivalents provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease 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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Note 1 – Nature of Business

Solid Power, Inc.

(the “Company”) is developing solid state battery technology to enable the next generation of batteries for the fast-growing EV and other markets.

The Company’s planned business model is to sell its sulfide-based solid electrolyte and to license its solid-state cell designs and manufacturing processes.

Solid Power is developing solid-state battery technology for the EV and other markets.

The Company’s planned business model is to sell its electrolyte and to license its cell designs and manufacturing processes.

For the years ended December 31, 2023 and 2022, the Company has not derived material revenue from its principal business activities.

On December 8, 2021 (the “Closing Date”), the Company (f/k/a Decarbonization Plus Acquisition Corporation III (“DCRC”)) consummated its 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”).

Note 2 – Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Consolidated Financial Statements of the Company have been prepared on the basis of generally accepted accounting principles in the United States (“GAAP”).

The Consolidated Financial Statements of the Company have been prepared on the basis of GAAP.

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements.

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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 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.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Legacy Solid Power issuing stock for the net assets of DCRC, accompanied by a recapitalization.

The net assets of DCRC are stated at historical cost, with no goodwill or other intangible assets recorded.

The consolidated assets, liabilities, and results of operations prior to the Reverse Recapitalization are those of Legacy Solid Power.

The shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on the Exchange Ratio (defined below).

The Consolidated Financial Statements include accounts of the Company and its wholly owned subsidiary, Solid Power Operating, Inc.

The Consolidated Financial Statements include accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

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Segment Reporting

The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer.

The Company’s CODM is its Chief Executive Officer.

The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented as a single entity for purposes of making operating decisions, allocating resources, and evaluating financial performance.

Solid Power, Inc.

| 2022 Form 10-K | 61

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, 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.

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

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

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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.

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

Gains and losses on marketable security transactions are reported on the specific-identification method.

Dividend and interest income are recognized when earned.

Solid Power, Inc.

| 2023 Form 10-K | 51

Contract Receivables

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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 seeks to mitigate its credit risk with respect to cash and cash equivalents, marketable securities, and long-term investments by making deposits with 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.

The Company periodically performs credit analyses and monitors the financial condition of its customers to reduce credit risk.

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

The Company periodically monitors the financial condition of its customers to reduce credit risk, but generally does not require collateral to support contract receivables.

For the Years Ended December 31,

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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.

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

Property and Equipment

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Assets are depreciated over their estimated useful lives.

The straight-line method is used for computing depreciation and amortization.

Depreciation and amortization expenses are recorded within the Direct costs and Research and development line items in the Consolidated Statements of Operations.

The straight-line method is used for computing depreciation.

Depreciation expenses are recorded within Direct costs and Research and development line items in the Consolidated Statements of Operations.

Cost of maintenance and repairs are charged to expense when incurred.

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

Solid Power, Inc.

| 2023 Form 10-K | 52

Intangible Assets

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

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

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

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Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

Assets not subject to amortization are tested for impairment if events or circumstances indicate an impairment may have occurred at least annually.

Assets not subject to amortization are tested at least annually for impairment if events or circumstances indicate an impairment may have occurred.

Deferred Rent

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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.

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The Company recognizes expenses for employee services received in exchange for stock-based compensation based on the grant date fair value of the awards.

The determination of the estimated fair value of stock-based payment awards on the date of grant using the Black-Scholes option-pricing model is affected by the Company’s stock price, as well as assumptions regarding risk-free rate, dividend yield, and the historical volatility of comparable entities.

The determination of the estimated fair value of stock-based payment awards on the date of grant is calculated using the Black-Scholes option-pricing model and is affected by the Company’s stock price, as well as assumptions regarding risk-free rate, dividend yield, and the historical volatility of comparable entities.

Stock-based compensation is recorded as an expense only for those awards that are expected to vest.

Compensation cost is recognized on a straight-line basis over the requisite vesting service period and is allocated ratably within Operating Expenses in the Consolidated Statements of Operations.

The Company records the elements of its joint development agreements that represent joint operating activities in accordance with Accounting Standards Codification (ASC) Topic 808, Collaborative Arrangements.

Accordingly, the elements of the joint development agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements.

The Company considers the guidance in ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions, in determining the appropriate treatment for the transactions between the Company and its partners and the transactions between the Company and third parties.

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

The Company records the elements of its JDAs in accordance with ASC Topic 808, Collaborative Arrangements.

Accordingly, the elements of the JDAs that represent activities in which both parties are active participants and are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements.

Generally, the classification of transactions under the JDAs 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 for 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.

Unbilled receivables are included in contract receivables and represent revenue recognized for which billings have not yet been presented to customers.

Solid Power, Inc.

| 2023 Form 10-K | 53

Deferred revenue represents billings in advance of revenue recognized.

Deferred revenue as of December 31, 2022 and 2021 was $ 4,050 and $ 500 , respectively.

Beneficial Conversion Feature and Embedded Derivatives

The beneficial conversion feature (the “BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued.

For convertible debt where the rate of conversion is below market value, the Company records a BCF and related debt discount.

When Legacy Solid Power recorded a BCF, the intrinsic value of the BCF was recorded in equity to Additional paid-in capital and the difference between the debt proceeds and the BCF was a debt discount against the face amount of the respective debt instrument and amortized to interest expense over the life of the debt.

A separate embedded derivative was recognized as a derivative liability that was subsequently adjusted to fair value at each Consolidated Balance Sheet date.

Embedded derivatives that are required to be bifurcated from the underlying debt instrument (i.e., host) are accounted for and valued as separate financial instruments.

Legacy Solid Power evaluated the terms and features of its 2020 convertible promissory notes (as defined below) and identified embedded derivatives requiring bifurcation and accounting at fair value, using the valuation techniques mentioned in the Fair Value Measurements section of this Note, because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting due to the instruments containing mandatory redemption features that were not clearly and closely related to the debt host instrument.

December 31, 2023

December 31, 2022

Deferred revenue

Deferred revenue from related parties

Warrant Liabilities

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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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Research and Development

Research and development expenditures of approximately $ 38,592 , $ 17,102 and $ 9,594 in 2022, 2021 and 2020, respectively, were charged to expense as incurred.

Our research and development activities focus on making improvements to our electrolyte and cell technology with the ultimate goal of commercializing technology that outperforms conventional lithium-ion.

December 31, 2023

December 31, 2022

Research and development expenditures

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the Consolidated Financial Statements or tax returns.

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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.

Solid Power, Inc.

| 2023 Form 10-K | 54

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.

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No interest or penalties have been assessed during the years ended December 31, 2023 and 2022.

Net Earnings (Loss) per Share of Common Stock

Basic net earnings (loss) per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period.

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

Net Loss per Share of Common Stock

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period.

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

The Company reported a net loss in 2023 and 2022.

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

In accordance with ASC 480, Legacy Solid Power’s Series A-1 Preferred Stock and Series B Preferred Stock (collectively, “Preferred Stock”) prior to the Business Combination were classified as mezzanine equity as the Preferred Stock included redemption features that were not solely within control of Legacy Solid Power.

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), 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.

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.

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 2023, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which aims to reduce complexity in accounting standards by improving certain areas of GAAP without compromising information provided to users of financial statements.

ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

For all other entities, the standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

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

Solid Power, Inc.

| 2022 Form 10-K | 66

Note 3 – Business Combination

Legacy Solid Power was deemed the accounting acquirer in the Business Combination based on the analysis of the criteria outlined in ASC 805.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Solid Power issuing stock for the net assets of DCRC, accompanied by a recapitalization.

The net assets of DCRC are stated at historical cost, with no goodwill or other intangible assets recorded.

Because Legacy Solid Power was deemed the accounting acquirer, the historical Consolidated Financial Statements of Legacy Solid Power became the historical Consolidated Financial Statements of the combined company.

As a result, the Consolidated Financial Statements included in this report reflect (i) the historical operating results of Legacy Solid Power prior to the Business Combination;

(ii) the combined results of the Company and Legacy Solid Power following the closing of the Business Combination (“Closing”);

(iii) the assets and liabilities of Legacy Solid Power at their historical cost;

and (iv) the Company’s equity structure for all periods presented as discussed below.

In accordance with guidance applicable to the Business Combination, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s Common Stock, $ 0.0001 par value per share issued to Legacy Solid Power’s stockholders in connection with the Business Combination.

As such, the shares and corresponding capital amounts and earnings per share related to Legacy Solid Power redeemable convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the Exchange Ratio.

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 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.

Furthermore, in connection with the Business Combination, (i) all shares of DCRC’s Class A common stock prior to the Business Combination were re-designated as “Common Stock, par value $ 0.0001 per share” of the Company (“Common Stock”) and (ii) all 40,000 shares of DCRC’s Class B common stock were converted, on a one -for-one basis, into an equivalent number of shares of the Company’s Common Stock.

On the Closing Date, a number of purchasers, purchased from DCRC an aggregate of 19,500,000 shares of the Company’s Common Stock, for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 195,000 (the “PIPE Financing”), pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into on June 15, 2021 or October 27, 2021.

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:

Solid Power, Inc.

| 2022 Form 10-K | 67

Recapitalization

Cash – DCRC trust and cash, net of redemptions

Cash – PIPE Financing

Cash – Sponsor Funds

Non-cash net assets acquired from DCRC

transaction costs and advisory fees for Legacy Solid Power allocated to equity

transaction costs and advisory fees for DCRC

Net Business Combination

non-cash net assets acquired from DCRC

accrued transaction costs and advisory fees

Net cash contributions from Business Combination

Non-cash net assets acquired from DCRC include the fair value of acquired Common Stock warrants of ($ 101,253 ).

The following table sets forth the number of shares of Common Stock outstanding immediately following the consummation of the Business Combination:

Number of Shares

DCRC Class A common stock outstanding prior to Business Combination

DCRC Class B common stock outstanding prior to Business Combination

redemption of DCRC Class A common stock

Shares of Common Stock issued in PIPE Financing

Shares of Common Stock issued to Legacy Solid Power stockholders

Total shares of Common Stock outstanding immediately after Business Combination

2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures.

ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid.

ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively.

We are evaluating the disclosure impact of ASU 2023-09.

Segment Reporting

In November 2023, the FASB issued ASU No.

2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

Among other new disclosure requirements, ASC 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the CODM.

ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025.

ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements.

We are evaluating the disclosure impact of ASU 2023-07.

Note 3 – Property, Plant and Equipment

7 unchanged sentences

Net property and equipment

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;

1 unchanged sentence

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.

| 2023 Form 10-K | 55

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.

In 2023, the Company expanded its electrolyte production to produce larger quantities of electrolyte material required to feed cell-production lines and continue research and development efforts.

The Company began producing electrolyte from this facility in 2023.

December 31, 2023

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Construction in progress

Louisville, Colorado – 2 nd cell pilot line

Louisville, Colorado – Other capital projects

Thornton, Colorado – Increased scale electrolyte production

SP1 – 2 nd cell pilot line

SP1 – Other capital projects

SP2 – Increased scale electrolyte production

Note 4 – Intangible Assets

4 unchanged sentences

Patents pending

Trademarks and trademarks pending

Trademarks pending

Total amortized intangible assets

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

Amortization expense for intangible assets at December 31 are summarized as follows:

Amortization expense

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 April 2023.

The notes are collateralized by the financed equipment.

Less current portion

Long-term portion

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.

The 2020 Notes were converted into 1,007,965 shares of Legacy Solid Power Series B Preferred Stock on May 5, 2021, in conjunction with the closing of the Legacy Solid Power Series B Preferred Stock (“Series B Financing”).

The outstanding balance on the 2020 Notes, including accrued interest, was $ 10,228 when the 2020 Notes were converted to Legacy Solid Power Series B Preferred Stock.

Interest expense for 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.

The fair value of the embedded derivative was $ 5,497 .

This balance was transferred, along with the accrued interest, to mezzanine equity upon conversion of the 2020 Notes to Series B Preferred Stock in conjunction with the Series B Financing.

2020 Convertible Promissory Notes Embedded Derivative

The 2020 Notes contained the following embedded derivatives:

(i) a share settled redemption upon Qualified Financing;

(ii) share settled redemption upon De-SPAC and;

(iii) share settled redemption at maturity.

Embedded derivatives are separated from the host contract and carried at fair value when:

(a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract;

and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument.

The Company has concluded that certain embedded derivatives within the 2020 Notes meet these criteria and, as such, must be valued separate and apart from the 2020 convertible promissory notes as one embedded derivative and recorded at fair value each reporting period.

2019 Convertible Promissory Notes

On December 4, 2019, the Company issued an unsecured convertible promissory note to an investor in the principal amount of $ 3,000 (the “2019 Note,” and together with the 2020 Notes, the “Convertible Promissory Notes”).

The 2019 Note accrued interest at 5 percent per annum.

The 2019 Note converted into 254,899 shares of Legacy Solid Power Series B Preferred Stock, in conjunction with the Series B Financing.

Upon this conversion, the 2019 Note converted to Series B Preferred Stock at a 30 percent discount.

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.

Note 5 – Fair Value Measurements

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

The fair value of debt instruments for which the Company has not elected fair value accounting is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company.

The book values of the Company’s long-term debt approximate fair value because interest rates charged are similar to other financial instruments with similar terms and maturities and the rates vary in accordance with a market index.

Most of the Company’s debt is carried on the Consolidated Balance Sheets on a historical cost basis net of unamortized discounts and premiums because the Company has not elected the fair value option of accounting.

Changes to the inputs used in these valuation models can have a significant impact on the estimated fair value of the Convertible Promissory Notes and the Company’s embedded derivatives.

Solid Power, Inc.

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

As discussed in Note 7, all Convertible Promissory Notes were converted to Legacy Solid Power Series B Preferred Stock in May 2021.

As of 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:

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

December 31, 2023

3 unchanged sentences

Public Warrants

Private Warrants

Private Placement Warrants

December 31, 2022

3 unchanged sentences

Public Warrants

Private Warrants

The change in fair value of the Company’s marketable securities is included in Other Comprehensive loss.

Private Placement Warrants

The change in fair value of the Company’s marketable securities is included in other comprehensive income (loss).

There were no transfers in and out of Level 3 fair value hierarchy during the years ended December 31, 2023 and 2022.

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

Fair Value Methodology

2020 Notes Embedded Derivative

The fair value of the 2020 Notes was estimated using the present value of probability weighted scenario analysis, considering the as-converted value and the downside protection.

The embedded derivative is valued using a “with-and-without method,” where the value of the 2020 Notes, including the embedded derivative, is defined as the “with”, and the value of the 2020 Notes, excluding the embedded derivative, is defined as the “without.” This method estimates the value of the embedded derivative by comparing the difference in the values between the 2020 Notes with the embedded derivative and the value of the 2020 Notes, without the embedded derivative.

The probability weighted scenario analysis requires the following inputs:

(i) probability of qualified financing, maturity, and other contingent scenarios;

(ii) equity value;

(iii) conversion price;

(iv) maturity date;

(v) risk-free interest rate;

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.” The embedded derivative liability was settled as of December 31, 2021.

Solid Power, Inc.

| 2022 Form 10-K | 71

Fair Value of Debt - 2019 Note

The 2019 Note was converted to Legacy Solid Power Series B Preferred Stock in May 2021.

At December 31, 2020, the contractual outstanding principal of the 2019 Note was $ 3,000 , and the fair value was $ 3,612 .

The fair value was estimated using the present value of probability weighted scenario analysis, considering the as-converted value and the downside protection.

The probability weighted scenario analysis requires the following inputs:

(i) probability of qualified financing, maturity and other contingent scenarios;

(ii) equity value;

(iii) conversion price;

(iv) maturity date;

(v) risk-free interest rate;

and (vi) estimated volatility.

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 (defined below) is determined using Level 2 inputs.

Year Ended December 31,

Marketable securities and long-term investments purchased

Fair Value of Warrants

The fair value of the Private Placement Warrants have been estimated using a Black-Scholes model as of December 31, 2023 and 2022 Consolidated Balance Sheet dates.

The estimated fair value of the Private Placement Warrants is determined using Level 2 directly or indirectly observable inputs.

Inherent in a Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate, and dividend yield.

Material increases (or decreases) in any of those inputs may result in a significantly higher (or lower) fair value measurement.

The Company estimates the volatility of its Private Placement Warrants based on implied volatility from the Company’s Public Warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants.

The Company estimates the volatility of its Private Placement Warrants based on implied volatility from the Company’s Public Warrants and from historical volatility of select peer companies’ common stock that matches the expected remaining life of the Warrants.

The risk-free interest rate is based on the U.S.

Treasury zero-coupon yield curve for a maturity similar to the expected remaining life of the Warrants.

The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

The dividend yield is based on the historical rate, which the Company anticipates remaining at zero.

The fair value of the Public Warrants has been measured based on the quoted price of such warrants on the Nasdaq Stock Market, a Level 1 input.

The following table provides quantitative information regarding Level 2 inputs used in the recurring valuation of the Private Placement Warrants as of their measurement dates:

Solid Power, Inc.

| 2023 Form 10-K | 57

December 31, 2023

2 unchanged sentences

Risk-free rate

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:

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

Public Warrants

Private Warrants

Private Placement Warrants

Level 1 Fair Value

3 unchanged sentences

December 31, 2023

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

The following table provides a reconciliation of the change in fair value for the Public and Private Placement Warrants at December 31.

Twelve Months Change in

Warrant Class

December 31, 2022

December 31, 2023

Public Warrants

Private Warrants

Solid Power, Inc.

| 2022 Form 10-K | 72

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.

Private Placement Warrants

Note 6 –Warrant Liabilities

The table below provides a summary of the outstanding Public and Private Placement Warrants at December 31:

Public Warrants

Private Placement Warrants

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.

6 unchanged sentences

● at a price of $ 0.01 per Public Warrant; and

Solid Power, Inc.

| 2023 Form 10-K | 58

● 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.

3 unchanged sentences

● 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

● 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 the Company’s 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.

2 unchanged sentences

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 balance sheets.

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.

Fair value of warrant liabilities

The table below provides the Company’s recognized gain(loss) recognized in connection with the changes in fair value of warrant liabilities at December 31:

Gain recognized associated with warrant liabilities

Note 7 – Stockholders’ Equity

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

Stock options exercised for common stock, stock issued under the ESPP, and shares of common stock issued upon vesting of RSUs for the years ended December 31, 2023 and 2022 are summarized in the table below:

Year Ended December 31,

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 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 statement of stockholders’ equity.

During 2020, Legacy Solid Power issued additional warrants to purchase 45,730 shares of common stock at an exercise price of $ 0.53 per share.

Legacy Solid Power recognized expense totaling $ 16 on the date of the grant.

In May 2021, Legacy Solid Power issued warrants to purchase 1,755,557 shares of Legacy Solid Power common stock at an exercise price of $ 0.01 per share, in connection with the Series B Financing.

These warrants were detachable from the Legacy Solid Power Series B Preferred Stock and in all cases would physically settle or net share settle.

Therefore, Legacy Solid Power determined that these warrants represented equity in Legacy Solid Power.

Prior to the Closing, all Legacy Solid Power warrants were either exercised for cash or net exercised and the holders thereof received shares of Legacy Solid Power common stock.

Shares of common stock issued under ESPP

Shares of common stock issued for vested RSUs

Solid Power, Inc.

| 2023 Form 10-K | 59

The table below presents the cash received associated with common stock related activities at December 31.

Year Ended December 31,

Cash received from stock options exercised

Cash received from shares of common stock issued under ESPP

Note 8 – Stock-Based Compensation

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.

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.

2014 Plan and 2021 Plan

Options granted under the 2014 Plan 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.

Option awards under the 2014 Plan were granted with an exercise price equal to the fair market value of Solid Power Operating, Inc.’s common stock at the date of grant.

Certain option awards issued under the 2014 Plan provide for accelerated vesting if there is a change in control (as defined in the plan agreements).

On December 8, 2021 and in connection with the Closing, the Company adopted the Solid Power, Inc.

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

The 2021 Plan originated with 18,900,000 shares of Common Stock available for issuance.

Beginning on January 1, 2022, the number of shares of common stock available for issuance under the 2021 Plan shall increase each year by an amount equal to the lesser of (i) 18,900,000 shares of Common Stock (ii) five percent of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year;

or (iii) a number of shares of common stock determined by the administrator no later than the last day of the immediately preceding fiscal year.

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.

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.

Options granted under the 2021 Plan during 2022 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.

Options granted under the 2021 Plan during 2023 have a ten-year term and vest as to 1/4 th of the shares one year after the initial date of service of a service provider then 6.25 % per quarter thereafter.

Option awards under the 2021 Plan were 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).

1 unchanged sentence

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 for employees granted during 2022 generally vest 25 % per year commencing on the first anniversary of the grant date.

RSU awards for employees granted during 2023 generally vest 25 % on the first anniversary of the grant date then 6.25 % per quarter thereafter.

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

4 unchanged sentences

At December 31, 2023 and 2022, the Company had 24,264,016 and 24,766,176 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.

No additional grants under the 2014 Plan are permitted.

Beginning on January 1, 2022, the number of shares of common stock available for issuance under the 2021 Plan shall increase by an amount equal to the lesser of (i) 18,900,000 shares of common stock, (ii) five percent ( 5 %) 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.

On January 1, 2022, the number of shares of common stock available for issuance under the 2021 Plan increased by 8,377,899 shares of common stock.

As of December 31, 2023, the 2021 Plan permitted the Company to grant up to 21,711,885 shares of common stock to its employees, directors, and consultants, as designated by the board of directors.

December 31, 2022

December 31, 2021

As of December 31, 2023, the Company had 22,048,584 shares of common stock underlying options awards and RSU awards outstanding under the 2021Plan, respectively.

Year Ended December 31,

Option awards granted under 2021 Plan

RSU awards granted under 2021 Plan

Solid Power, Inc.

| 2023 Form 10-K | 60

Compensation Expense for Stock-Based Compensation

1 unchanged sentence

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

For the years ended December 31, 2023 and 2022, the Company recognized compensation costs totaling:

Year Ended December 31,

Equity-based compensation costs related to RSUs

2 unchanged sentences

Total equity-based compensation costs

Future compensation costs related to unvested options

Unrecognized future compensation cost as of:

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

Year Ended December 31,

Research and Development

Sales and Marketing

General and Administrative

Selling, general and administrative

Total equity-based compensation cost

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Weighted‑average grant date fair value

Estimated fair value of total options granted

Estimated fair value of total stock options granted

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

9 unchanged sentences

Forfeited or expired

Outstanding at December 31, 2020

Outstanding at January 1, 2021

( 1,711,817 )

Forfeited or expired

Outstanding at December 31, 2022

6 unchanged sentences

Exercisable at December 31, 2023

Exercisable at December 31, 2022

Cash received from options exercised under the 2014 Plan for December 31, 2023 and 2022 was $ 220 and $ 818 , respectively.

5 unchanged sentences

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.

Balance at December 31, 2022

Vested or Exercised

Balance at December 31, 2023

The vested RSUs had no intrinsic value as of December 31, 2023.

Solid Power, Inc.

| 2022 Form 10-K | 77

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (“2021 ESPP”) originated with 3,778,000 shares of Common Stock available for issuance.

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

The ESPP originated with 3,778,000 shares of common stock available for issuance.

Beginning on January 1, 2022, the number of shares of common stock available for issuance under the 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.

On January 1, 2022, the number of shares of common stock available for issuance under the ESPP increased by 1,685,579 shares of common stock.

As of December 31, 2023, 5,748,573 shares remained available for issuance.

As of December 31, 2023, the ESPP permitted the Company to issue up to 5,748,573 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 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

Substantially all employees are eligible to participate and, through payroll deductions, can purchase shares on dates determined by the administrator.

However, with respect to the Section 423 Component, an employee may not be granted rights to purchase stock under the ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5 % or more of the total combined voting power or value of all classes of the Company’s Common Stock.

Solid Power, Inc.

| 2023 Form 10-K | 62

total combined voting power or value of all classes of the Company’s common stock.

The purchase price per share sold pursuant to the ESPP will be the lower of (i) 85 % of the fair market value of common stock on the enrollment or (ii) 85 % of the fair market value on the exercise date.

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

Note 13 – Earnings (Loss) Per Share

Note 9 – Basic and Diluted Loss Per Share

The table below reconciles basic weighted average common shares outstanding to diluted weighted average shares outstanding for December 31, 2023 and 2022.

Basic earnings per share is based on the weighted average number of common shares outstanding for the period.

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.

Basic loss per share is based on the weighted average number of common shares outstanding for the period.

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

Diluted loss 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 loss per share represents net loss divided by diluted weighted average number of common shares, which includes the average dilutive effect of all potentially dilutive securities that are outstanding during the period.

The unvested stock awards, warrants, and options are included in the number of shares outstanding for diluted earnings per share calculations, unless a net loss is reported, in which situation unvested stock awards, warrants, and options are excluded from the number of shares outstanding for diluted earnings per share calculations.

Years Ended December 31,

Net income (loss) attributable to common stockholders

Weighted average shares outstanding – basic

Weighted average shares outstanding – diluted

Basic earnings (loss) per share

Diluted earnings (loss) per share

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Net loss attributable to common stockholders

Weighted average shares outstanding – basic and diluted

Basic and diluted loss per share

Due to the net loss to common stockholders in 2023 and 2022 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, 2023 and 2022, 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

2014 Plan & 2021 Plan - Stock Options

2021 Plan - RSUs

ESPP - Common Stock

Contingently Issued Shares of Common Stock

Total potentially dilutive securities

Note 10 – Leases

The Company leases its two facilities and certain equipment.

The Company leases its 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.

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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.

As the renewal rent has not been negotiated, the

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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, 2023.

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Total lease expense

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

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December 31, 2022

Operating outgoing cash flows – finance lease

Financing outgoing cash flows – finance lease

Operating outgoing cash flows – operating lease

Operating outgoing cash flows – finance leases

Financing outgoing cash flows – finance leases

Operating outgoing cash flows – operating leases

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

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Finance lease

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

Weighted-average discount rate – finance lease

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

Weighted-average discount rate – finance leases

Operating lease

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

Weighted-average discount rate – operating lease

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

Weighted-average discount rate – operating leases

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

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Total lease liabilities

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Note 11 – Related Party Transactions

During 2020, the Company entered into a subcontractor agreement with Roccor, LLC, which was a related party until October 30, 2020.

Under the subcontractor agreement, the Company provided technical support to Roccor on a government research contract.

The total value of the subcontract is $ 331 to the Company.

The period of performance commenced during 2020 and extended to late 2021.

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.

During 2022, the Company amended our JDA with BMW to provide a research and development-only license to certain of the Company’s intellectual property relating to cell manufacturing.

The license allows, among other things, BMW to install a solid-

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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.

state prototype cell manufacturing line based upon the Company’s proprietary information.

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

We expect to negotiate a non-exclusive electrolyte supply agreement to supply BMW with our electrolyte material following commissioning of BMW’s prototype cell manufacturing line.

Before BMW’s installation of their cell manufacturing line, the Company and BMW have agreed to joint development and manufacturing activities at Solid Power’s facilities.

Any intellectual property developed jointly by the Company and BMW at the Company’s facilities will be solely owned by Solid Power.

To the extent intellectual property is jointly conceived elsewhere, the Company and BMW will jointly own such intellectual property.

The intellectual property developed by us or BMW individually will be owned by such party.

Both parties will have the right to utilize the other party’s technical improvements for research and development purposes only.

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

BMW will pay the Company $ 20,000 between December 2022 and June 2024, subject to the Company achieving certain milestones.

For the year ended December 31, 2023, the Company recognized $ 12,700 of revenue from BMW and recorded $ 828 of deferred revenue related to cash paid from BMW in advance of services provided.

For the year ended December 31, 2022, the Company recognized $ 2,000 of revenue from BMW and recorded $ 4,000 of deferred revenue related to cash paid from BMW in advance of services provided.

Note 12 – Retirement Plans

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The Company provides deferred U.S.

federal, state, or foreign income tax benefits for all of the periods presented.

The Company has also provided a valuation allowance on the net deferred tax asset because of uncertainty regarding its realizability.

federal, state, or foreign income tax benefits for periods presented.

The Company has also provided a valuation allowance on the net deferred tax asset because of uncertainty regarding realizability.

Realization of deferred tax assets is dependent on generating sufficient taxable income prior to the expiration of loss carryforwards.

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For the Years Ended December 31,

Current income tax (benefit) expense:

Deferred income tax (benefit) expense:

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Permanent Differences

Permanent Differences – Related to Convertible Debt

Permanent Differences – Fair Value Adjustments– Warrant Liability

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ROU Lease Liability

MTM Market Equities

Total income tax expense (benefit)

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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 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.

The Proposal was approved and the Business Combination closed.

The counsel who issued this demand letter made a fee demand (the “Fee Demand”) for prompting the change in the Proposal.

The Company accrued a liability of $ 500 on its Consolidated Balance Sheets as of December 31, 2021 in anticipation of settling the Fee Demand.

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

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.

Note 15 – Subsequent Events

Agreements with SK On

On January 10, 2024, the Company entered into several agreements with SK On to include the R&D License Agreement, the Electrolyte Supply Agreement, and the Line Installation Agreement.

The R&D License Agreement granted SK On a research and development license of the Company’s intellectual property related to cell designs and manufacturing processes allowing for the installation and operation of the SK On Line.

The license may not be used for commercial battery cell production under the current terms of this agreement.

In consideration of the license and the other obligations of the parties in this agreement, SK On will pay the Company $ 20,000 between June 2024 and July 2027, subject to the Company achieving certain milestones.

Under the Electrolyte Supply Agreement, SK On has agreed to purchase the Company’s electrolyte for use on the SK On Line.

SK On will initially purchase electrolyte to validate the new pilot line.

After validation, SK On is required to purchase at least

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eight metric tons of electrolyte from the Company by December 31, 2028.

The Company expects to receive at least $ 10,000 in revenue from these electrolyte sales.

The Line Installation Agreement provides that the Company will, or will cause a subcontractor to, design, procure, and install the SK On Line in exchange for approximately $ 22,300 to be paid in three installments.

The new line will be modeled after the Company’s pilot cell production line in Colorado, which is capable of producing cells between 60 and 100 Ah, and will produce EV cells utilizing the Company’s electrolyte technology.

Construction of the line will begin in 2024 and is expected to be complete in 2025.

Stock Repurchase Program

On January 23, 2024, the Company announced that its Board of Directors approved a stock repurchase program authorizing the Company to purchase up to $ 50,000 of the Company’s outstanding common stock.

Under the repurchase program, the Company may purchase shares of its common stock from time to time until the repurchase program expires on December 31, 2025.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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