Solid Power, Inc.: Form 10-Q for the period ended Mar 31, 2025

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Report. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs, and expected performance. For additional discussion, see “Cautionary Note Regarding Forward-Looking Statements” above. The forward-looking statements are dependent upon events, risks, and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Report and under “Part I, Item 1A. Risk Factors” of the 2024 Form 10-K, as such descriptions may be updated or amended in future filings we make with the SEC. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto of this Report and the 2024 Form 10-K. We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments, or otherwise, except to the extent that such disclosure is required by applicable law.

Overview

Solid Power is a U.S.-based leader in solid-state battery technology and manufacturing processes. Our core technology is a sulfide-based solid electrolyte material, which replaces the liquid or gel electrolyte used in traditional lithium-ion battery cells. We believe our electrolyte technology has the potential to enable a step-change improvement in battery cell performance beyond what is currently achievable in conventional lithium-ion battery cells, including improved energy density, battery life, and safety performance. We are currently targeting the battery electric vehicle market due to the size and perceived demand for next generation battery technology but believe our technologies can have a broader application as they mature.

2025 Development Objectives

We made progress on our 2025 development objectives as the solid-state battery landscape continues to evolve. Below is a summary of our progress towards our goals.

• Drive electrolyte innovation and performance through feedback from cell development and customers – We continued to receive productive customer feedback on electrolyte sampling, which we are using to drive process engineering that we expect will lead to improved performance. We also continued to use our Electrolyte Innovation Center (the “EIC”) to design, improve, and test electrolyte manufacturing processes.
• Continue executing on our electrolyte development roadmap – We made progress toward installation of a pilot line designed to manufacture electrolyte on a continuous process. We conducted detailed design of equipment for the planned installation and finished ordering long-lead time equipment. We expect to begin facility engineering in the second quarter and remain on track for commissioning of the line in 2026.
• Ramp electrolyte sampling and identify long-term customers – We saw additional demand for multiple generations of electrolyte from both existing and potential new customers. We intend to continue focusing on customer growth in the upcoming months.
• Execute on the SK On Agreements – We have neared completion on the factory acceptance testing milestone in our line installation agreement with SK On Co., Ltd. (“SK On”) and remain on track for completion of site acceptance testing at SK On’s facility later this year.
• Remain fiscally disciplined – We have remained fiscally disciplined, balancing financial discipline with appropriate investments in technology developments and process improvements. See “—Results of Operations” for more information.

Key Factors Affecting Operating Results

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

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

Revenue generated to date has primarily come from performance on research and development licensing agreements, line installation agreement, and government contracts. We will need to continue to deploy substantial capital to expand our production capabilities and engage in research and development programs. We also expect to continue to incur administrative expenses as a publicly traded company.

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

Basis of Presentation

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

Results of Operations

Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

During the three months ended March 31, 2025, our capital and operational investments supported our key 2025 development objectives.

Revenue

We recognized revenue of $6.0 million during the three months ended March 31, 2025, compared to $5.9 million during the three months ended March 31, 2024. Revenue recognized in the current year was driven by both our collaborative revenue and government contracts revenue.

We recognized $4.5 million of collaborative revenue for the three months ended March 31, 2025. The majority of our collaborative revenue consisted of revenue driven by our performance on our research and development technology license agreement, line installation agreement, and electrolyte supply agreement with SK On (collectively, the “SK On Agreements”). During the three months ended March 31, 2025, we neared completion of factory acceptance testing under the line installation agreement, which we completed in April 2025. We intend to continue executing on the SK On Agreements and anticipate recognizing additional revenue from the SK On Agreements through the remainder of the year.

We recognized $1.5 million of government revenue for the three months ended March 31, 2025. The majority of our government revenue consisted of revenue from our assistance agreement (the “Assistance Agreement”) with the U.S. Department of Energy (“DOE”). The Assistance Agreement provides that the DOE will provide us with funding of up to $50 million for our installation of equipment necessary for the continuous production of sulfide-based solid electrolyte material. During the three months ended March 31, 2025, we conducted detailed design of equipment and finished ordering long-lead time equipment for the installation of a continuous electrolyte production pilot line. Revenue is recognized on the non-capital costs of the project. As we continue to execute on the construction of the project milestones, we expect to recognize additional grant revenue.

Operating Expenses

Operating expenses were $30.0 million for the three months ended March 31, 2025, a decrease of $1.7 million, or 5%, compared to operating expenses of $31.7 million for the same period in 2024. This decrease was primarily attributable to a decrease in direct expenses, which were $2.7 million in the period ending March 31, 2025 compared to $4.3 million in the period ending March 31, 2024, a decrease of $1.6 million. This decrease in direct expenses was due to the use of internal labor and facility costs to execute on milestones under our collaborative arrangements in the three months ended March 31, 2024 compared to outsourcing to our strategic partner in Korea, Dahae Energy Co., Ltd. (“Dahae”), for the three months ended March 31, 2025. We expect our direct costs to increase in relation to our revenue as we begin site acceptance testing of the line at SK On’s facility later this year.

Research and development-related operating expenses largely consisted of employee compensation and employee benefit costs incurred to maintain our skilled workforce, including engineers, scientists, operators, chemists, and technicians. Total research and development costs remained consistent with a $0.1 million increase in the three months ended March 31, 2025 compared to the same period in 2024. Factors contributing to the change in research and development costs included both an increase from depreciation expense and a decrease due to stock-based compensation. The increase in depreciation expense was a result of EIC being place into service in 2024. This accounted for an increase in depreciation expense of $0.5 million for the period ending March 31, 2025 compared to the same period in 2024. We expect depreciation expense to continue to increase as we place the remainder of the EIC and other construction in progress into service within the year. This increase in depreciation expense was partially offset by a decrease in stock-based compensation expense as a result of forfeiture of unvested stock options.

Selling, general and administrative expenses largely consisted of employee compensation and personnel related costs for our administrative functions as well as costs driven by insurance and regulatory requirements. Selling, general and administrative expenses decreased $0.2 million in the three months ended March 31, 2025 compared to the same period in 2024. This was primarily due to the strategic decision to reduce outside contractor and external consultant support in an effort to reduce costs.

Overall, we expect operating expenses for the remainder of the year to slightly increase on a quarterly basis compared to the expenses incurred in the current quarter as we continue to execute on our objectives.

Nonoperating Income and Expense

Nonoperating income and expense was $8.9 million for the three months ended March 31, 2025, an increase of $4.3 million compared to nonoperating income and expense of $4.6 million for same period in 2024. This increase was primarily driven by the change in the fair value of our warrant liabilities. The change in fair value drove a gain recognition of $5.9 million in the three months ended March 31, 2025, partially offset by a decrease in interest earned from our available-for-sale securities. For the three months ended March 31, 2025, we earned $3.6 million of interest income compared to $5.1 million of interest income for the same period in 2024 due to the lower amounts invested.

Liquidity and Capital Resources

Sources of Liquidity

The sale of equity has historically been our primary source of cash, with a smaller portion of cash coming from achievement of performance milestones under agreements with our partners, government contracts, and interest earned on available-for-sale securities.

As of March 31, 2025 and December 31, 2024, we had total liquidity, as set forth below:

(in thousands)

As of March 31, 2025 total liquidity, which includes all cash and cash equivalents as well as our available-for-sale securities,

was $299.6 million, a decrease of $27.9 million compared to December 31, 2024. Additionally, we had contract receivables of $2.2 million and total current liabilities of $10.4 million.

Short-Term Liquidity Requirements

Our short-term liquidity requirements include operating and capital expenses needed to further our research and development programs and to install our continuous electrolyte production pilot line. We anticipate that our most significant capital expenditures for the remainder of the year will relate to facility engineering and construction of our continuous electrolyte production pilot line as well as improvements to our cell development capabilities.

Long-Term Liquidity Requirements

We believe that our cash on hand is sufficient to meet our operating cash needs and working capital and capital expenditure requirements for a period of at least the next 12 months. We also believe that we have adequate cash on hand for our stock repurchase program should we choose to execute additional share repurchases prior to the program’s expiration on December 31, 2025.

Longer term, we may require additional liquidity prior to being able to generate adequate cash flows from electrolyte sales and/or licensing activities. We also may require funding if there are material changes to our business conditions or other developments, including changes to our operating plan; development progress or delays; negotiations with OEMs, cell manufacturers, or other customers; market adoption of EVs; supply chain challenges; competitive pressures; government regulations, including tariffs; and inflation. To the extent that our resources are insufficient to satisfy our cash requirements, we may need to seek equity or debt financing. We also may opportunistically seek to enhance our liquidity through equity or debt financing, if such financing becomes available to us on terms that we consider favorable. If financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, which may adversely affect our development, business, operating results, financial condition and prospects.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the periods presented:

(in thousands)

Cash used in operating activities:

Cash used in operating activities decreased $2.8 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease was primarily driven by lower payments to Dahae, a strategic partner serving as installer of the SK On line, partially offset by an annualized increase in employee compensation costs. Payments to Dahae were $5.8 million in the three months ended March 31, 2024 compared to $1.1 million in the three months ended March 31, 2025. The largest use of operating cash in the three months ended March 31, 2025 was employee compensation, including the payout of annual performance-based incentive compensation, which together were $14.2 million. The remaining cash used in operating activities for the three months ended March 31, 2025 were costs to operate our facilities, purchases of materials and supplies, and hazardous waste removal. Additionally, we received $3.0 million of cash from our partners in the three months ended March 31, 2025, compared to $2.7 million of cash received from our partners in the three months ended March 31, 2024. We anticipate cash used in operations to slightly increase on a quarterly basis for the remainder of the year, but expect additional cash receipts from partners which will partially offset that increase.

Cash provided by investing activities:

Cash provided by investing activities increased $16.9 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to increased proceeds from purchases and sales of available-for-sale securities, which provided $33.3 million of proceeds in the three months ended March 31, 2025 compared to $17.9 million of proceeds in the three months ended in March 31, 2024. This increase was due to the timing of the individual security maturity date and the sale of more securities in the three months ended March 31, 2025 compared to the same period in 2024.

Cash spent on capital expenditures was $2.4 million in the three months ended March 31, 2025, compared to $4.0 million in the three months ended March 31, 2024. Capital expenditures were primarily for the construction of our continuous electrolyte production pilot line which was partially offset by cash received from the DOE under the Assistance Agreement. We anticipate cash used in investing for capital expenditures to increase as we continue to make progress toward installation of the continuous electrolyte production pilot line.

Cash used in financing activities:

Cash used in financing activities decreased $4.9 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease was primarily related to the repurchase of $4.9 million of our common stock under our stock repurchase program in the three months ended March 31, 2024 and no repurchases in the three months ended March 31, 2025. Cash used in financing activities for the three months ended March 31, 2025 was predominantly cash paid for withholding of employee taxes related to stock-based compensation and payments on finance lease liabilities, partially offset by proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements, as defined under SEC rules.

Critical Accounting Estimates

Except as set forth below, there have been no significant and material changes in our critical accounting policies and use of estimates during the three months ended March 31, 2025 as compared to those disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the 2024 Form 10-K.

Collaborative Revenue

Recent Accounting Pronouncements

See Note 2 of our unaudited financial statements included in this Report as well as Note 2 of our audited financial statements included in the 2024 Form 10-K for more information.

We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controls. As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025.

Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended March 31, 2025 covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our business, prospects, reputation, results of operations, and financial condition, as well as the price of our common stock and warrants, can be affected by a number of factors, whether currently known or unknown, including those described in “Part I, Item 1A. Risk Factors” of the 2024 Form 10-K. When any one or more of these risks materialize from time to time, our business, reputation, results of operations, and financial condition, as well as the price of our common stock and warrants, can be materially and adversely affected. There have been no material changes to our risk factors since the 2024 Form 10-K.