Solid Power, Inc.: Form 10-Q for the period ended Jun 30, 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 during the second quarter of 2025.

• 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. Detailed design work for the planned installation is in process, and we finished ordering long-lead time equipment. We expect detailed design to be substantially completed by the end of 2025 and remain on track for commissioning of the line in 2026.
• Ramp electrolyte sampling and identify long-term customers – We saw continued demand for multiple generations of electrolyte from both existing and new customers, with active sampling to key strategic customers. We intend to continue focusing on customer growth for the remainder of the year.
• Execute on the SK On Agreements – We completed the factory acceptance testing milestone in our line installation agreement with SK On Co., Ltd. (“SK On”). We began site acceptance testing this quarter and remain on track for completion of site acceptance testing at SK On’s facility later this year.
• Remain fiscally disciplined – We remained fiscally disciplined, balancing financial discipline with appropriate investments in technology developments and process improvements. See “—Results of Operations” for more information.

Additionally, BMW Group’s introduction of an i7 test vehicle powered by our cells and solid-state battery technology was a significant achievement in our partnership with BMW of North America LLC.

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 and Six Months Ended June 30, 2025 to the Three and Six Months Ended June 30, 2024

During the three and six months ended June 30, 2025, our capital and operational investments supported our key 2025 development objectives.

Revenue and Grant Income

Revenue recognized consists of performance on our non-governement contracts as well as certain government contracts. Grant income recognized consists of performance on our assistance agreement, dated January 1, 2025 (as amended effective May 15, 2025, the “Assistance Agreement”), with the U.S. Department of Energy (“DOE”).

Revenue and grant income increased $2.5 million for the three months ended June 30, 2025 compared to June 30, 2024 primarily driven by the performance on our collaboration agreements which included the achievement of different milestones in the three months ended June 30, 2025 compared to the June 30, 2024. Revenue and grant income increased $2.5 million for the six months ended June 30, 2025 compared to June 30, 2024 primarily driven by the performance on our Assistance Agreement in the three and six months ended June 30, 2025.

We recognized $5.9 million and $10.5 million of collaborative revenue for the three and six months ended June 30, 2025, respectively. The collaborative revenue primarily consists of 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 and six months ended June 30, 2025, we completed factory acceptance testing under the line installation agreement and began working towards site acceptance testing. 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 $1.6 million and $3.1 million of government revenue and government grant income for the three and six months ended June 30, 2025, respectively. Government revenue and government grant income consisted primarily of grant income from the Assistance Agreement. 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 and six months ended June 30, 2025, we initiated detailed design of the continuous electrolyte production pilot line and finished ordering long-lead time equipment. Grant income is recognized on the non-capital costs of the project. As we continue to execute on the project milestones, we expect to recognize additional grant income.

Operating Expenses

Operating expenses increased $1.4 million in three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily due to direct costs related to the achievement of the factory acceptance testing milestone in our line installation agreement with SK On in the period ended June 30, 2025. Operating expenses for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 did not change materially in aggregate.

Direct Costs

Direct costs increased $3.0 million for the three months ended June 30, 2025 compared to the same period in 2024 due to timing of achievements of milestones under our collaboration agreements. Executing on the milestones under our collaboration agreements required greater investments in 2025 than in the same period ended in 2024. In the three months ended June 30, 2025, we incurred $6.7 million in services and equipment provided by Dahae Energy Co., Ltd. (“Dahae”), a strategic partner serving as installer of the SK On line. Costs included validation purchases and material and labor to support completion of the factory acceptance testing milestone of the line installation agreement. The increase was also due to labor and travel for training of SK On personnel under our research and development technology license agreement.

Direct costs increased $1.4 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to an increase in internal costs focused on achieving the detailed design work and finishing ordering long-lead equipment for the continuous electrolyte production pilot line.

We expect an increase in direct costs corresponding to our revenue growth as we begin site acceptance testing of the line at SK On’s facility later this year and continue to execute on the construction of the project milestones supporting our continuous electrolyte production pilot line.

Research and Development

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 did not change materially for the three and six months ended June 30, 2025 compared to the same period in 2024.

Selling, General and Administrative

Selling, general and administrative expenses are largely comprised 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 by $1.4 million and $1.7 million in the three and six months ended June 30, 2025, respectively, compared to the same periods ended June 30, 2024 primarily due to a decrease in stock-based compensation expense as a result of forfeitures of unvested stock options and restricted stock units. The decrease of selling, general and administrative expenses was also driven by the strategic decision to reduce contractor and consultant support.

Overall, we expect operating expenses for the remainder of the year to remain consistent with the expenses incurred in the first two quarters of 2025 as we continue to execute on our objectives and focus on cost reduction efforts to offset overall rising costs.

Nonoperating Income and Expense

Nonoperating income and expense includes interest income, the non-cash impact from the change in the fair value of our warrant liabilities and other immaterial income and expense items.

For the three months ended June 30, 2025, nonoperating income and expense decreased $5.3 million compared to the three months ended June 30, 2024 due to both the change in fair value of the warrant liabilities as well as the change in interest income earned. Interest income earned decreased $1.3 million for the three months ended June 30, 2025 due to a reduction in the total available-for-sale securities available to earn interest compared to prior year. The change in the fair value of the warrant liabilities for the three months ended June 30, 2025 caused a $3.2 million loss compared to the three months ended June 30, 2024 where the change in the fair value caused a gain of $0.7 million. The impact of these changes caused a period-over-period loss in the fair value of warrant liabilities of $3.9 million.

For the six months ended June 30, 2025, nonoperating income and expense decreased $0.9 million compared to the six months ended June 30, 2024 due to both the change in fair value of the warrant liabilities as well as the change in interest income earned. Interest income earned decreased $2.8 million for the six months ended June 30, 2025 compared to the same period in 2024 due to a reduction in the total available-for-sale securities available to earn interest. The change in the fair value of the warrant liabilities for the six months ended June 30, 2025 caused a $2.7 million gain compared to the six months ended June 30, 2024 where the change in the fair value caused gain of $0.2 million. The impact of these changes caused a period-over-period gain in the fair value of warrant liabilities of $2.5 million.

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 and government contracts. We also receive cash from the interest earned on our available-for-sale securities.

As of June 30, 2025 and December 31, 2024, we had total liquidity, as set forth below:

(in thousands)

As of June 30, 2025 total liquidity, which includes all cash and cash equivalents as well as our available-for-sale securities, was $279.8 million, a decrease of $47.7 million compared to December 31, 2024. Additionally, we had contract receivables of $4.6 million and total current liabilities of $12.4 million as of June 30, 2025.

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.

Stock Repurchase Program

On January 23, 2024, we announced that our Board approved a stock repurchase program authorizing us to purchase up to $50 million of our outstanding common stock. Under the stock repurchase program, we may purchase shares of our common stock from time to time until the repurchase program expires on December 31, 2025. The shares of common stock may be purchased on the open market, in unsolicited negotiated transactions, or in any manner that complies with the provisions of Rule 10b-18 of the Exchange Act. Management’s decision to repurchase shares of common stock will depend on a number of factors, such as the price of the common stock, economic and market conditions, and corporate and regulatory requirements. During the six months ended June 30, 2025, we repurchased 3,361,396 shares of common stock at an average price of $1.05 per share for an aggregate cost of approximately $3.59 million. During the six months ended June 30, 2024, we repurchased 5,000,000 shares of common stock at an average price of $1.63 per share for an aggregate cost of approximately $8.27 million.

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 for the six months ended June 30, 2025 increased $0.5 million compared to the six months ended June 30, 2024. This cash flow stabilization was driven by offsetting cash uses. Cash used for payments to Dahae were $3.9 million in the six months ended June 30, 2025 compared to $7.7 million in the six months ended June 30, 2024. This change is due to the timing of milestone payments under our agreement with Dahae in connection with the SK On arrangement. Cash used for employee compensation and other employee benefit related costs, including the payout of annual performance-based incentive compensation, totaled $19.4 million in the six months ended June 30, 2025 compared to $16.9 million for the same period in prior year. The remaining cash used in operating activities for the six months ended June 30, 2025 were costs to operate our facilities, purchases of materials and supplies, and hazardous waste removal. Additionally, we received $9.9 million of cash from our partners in the six months ended June 30, 2025, compared to $10.1 million of cash received from our partners in the six months ended June 30, 2024. The cash received from partners for the period ended June 30, 2025 included the payment of the factory acceptance testing milestone under our line installation agreement with SK On. We anticipate cash used in operations for the remainder of the year to remain consistent with the first half of 2025, but expect additional cash receipts from partners which will partially offset the cash used for expenses.

Cash provided by investing activities:

Cash provided by investing activities increased $0.3 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 due to the change in the activity on our proceeds and purchases of our available-for-sale securities, change in capital expenditures, and cash used for loan receivables.

Proceeds from our available-for-sale security activity provided $5.8 million less in cash in the six months ending June 30, 2025 compared to the same period in prior year. This change was due to the timing of the individual security maturity date and the sale of fewer securities in the six months ended June 30, 2025 compared to the same period in 2024.

Cash used for capital expenditures was $3.4 million less in the six months ended June 30, 2025, compared to the six months ended June 30, 2024. Capital expenditures in 2025 were primarily for the construction of our continuous electrolyte production pilot line. Cash used for capital expenditures for the same period in 2024 were for construction of the EIC. Capital expenditures for the six months ended June 30, 2025 totaled $7.0 million partially offset by cash received of $2.0 million from the DOE under the Assistance Agreement. We anticipate cash used in investing for capital expenditures for the remainder of the year to increase as we continue to make progress toward installation of the continuous electrolyte production pilot line. Cash paid for a loan receivable from our equity method investee, Dahae, was $0 in the six months ended June 30, 2025 and $3.0 million in the six months ended June 30, 2024.

Cash used in financing activities:

Cash used in financing activities decreased $5.0 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This decrease was primarily due to the repurchase of $3.6 million of our stock under the stock repurchase program in the six months ended June 30, 2025 compared to the repurchase of $8.3 million of our common stock in the six months ended June 30, 2024. The remaining cash used in financing activities for the six months ended June 30, 2025 was 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 six months ended June 30, 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 June 30, 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 June 30, 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. Except as set forth below, there have been no material changes to our risk factors since the 2024 Form 10-K.

We rely on government contracts and grants for a portion of our revenue and to partially fund our research and development activities, and such contracts and grants are subject to a number of uncertainties, challenges, and risks.

We currently rely on government contracts and grants for a portion of our revenue and to partially fund our research and development activities. For example, the Assistance Agreement provides that 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. Changes in government priorities or government funding reductions or delays could result in discontinuation of funding under, or termination of, our government contracts and grants. Further, the change in administration could increase this risk. On January 20, 2025, an executive order, titled Unleashing American Energy (the “Executive Order”), paused disbursement of funds appropriated through the Bipartisan Infrastructure Law pending further review. Because the Assistance Agreement is funded under the Bipartisan Infrastructure Law, our continued receipt of funding under the Assistance agreement could be delayed or cancelled. In addition, the Executive Order declared a policy of eliminating the “electric vehicle (EV) mandate.” The government has discretion under the terms of the Assistance Agreement to discontinue future funding as the result of insufficient progress, change in strategic direction, or lack of available funding. The government could determine that the Assistance Agreement no longer effectuates DOE priorities, interpret the terms of the Assistance Agreement to permit termination for this reason, and terminate the agreement. There can be no assurance that we will continue to receive funding under our government contracts and grants in the amounts that we expect or at all.

Further, as a government contractor or subcontractor, we must comply with laws, regulations, and contractual provisions relating to the formation, administration, and performance of government contracts and grants, which may impose added costs on our business. Although our management team and other personnel devote a substantial amount of time to compliance initiatives, we cannot guarantee that our efforts will be successful. Any failure to comply with such laws, regulations, and provisions or satisfy our obligations under such contracts and grants could lead to termination of contract; civil or criminal penalties; withholding, delay, or disallowance of payments to us; reimbursement of the government for amounts previously received; claims for damages from our partners; contract price adjustments or refunds; suspension or debarment from obtaining government contracts and grants; or non-ordinary course audits and internal investigations, any one of which could have a material adverse effect on our business, prospects, results of operations, and financial condition.

Obtaining grant funding and selling to government entities can be highly competitive, expensive, and time consuming, often requiring significant upfront time and expense without any assurance of success. Awards of contracts and grants may be subject to appeals, disputes, or litigation. Government contracts also often contain provisions and are subject to laws and regulations that provide government customers with additional rights and remedies not typically found in commercial contracts. For example, government customers may terminate existing contracts for convenience, with short notice, and without cause. Government contracts may also require work to be performed or products to be manufactured in a particular jurisdiction, include preferential pricing terms, or require us to obtain special certifications. If such certification requirements change or we fail to timely achieve or maintain compliance with applicable requirements, we may be at a competitive disadvantage and disqualified from selling our technology to government or quasi-government entities.

In addition to government contracts and grants, we benefit from certain government subsidies and economic incentives, including tax credits, rebates, and other incentives, that support the development and adoption of clean energy technology. We cannot guarantee that government grants, subsidies, and incentives will be available to us at the same or comparable levels in the future. The Executive Order indicated that the government will consider eliminating subsidies that favor EVs. Further, the reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was signed into law on January 4, 2025 and eliminates certain EV incentives effective September 30, 2025. Any reduction, elimination, or discriminatory application of these grants, subsidies, or incentives, including as a result of the OBBBA, may require us to seek additional financing, which may not be obtainable on commercially attractive terms or at all; adversely impact public sector demand for our technology; and diminish the competitiveness of the battery industry generally or our technology in particular. Any change in our ability to secure these grants, subsidies, and incentives, including as a result of the OBBBA, could have a material adverse effect on our business, prospects, results of operations, and financial condition.

Our future growth and success are dependent upon consumers’ willingness to adopt EVs.

Our growth and future demand for our products are highly dependent upon the adoption by consumers of alternative fuel vehicles in general and EVs in particular. The market for new energy vehicles is still rapidly evolving, characterized by changing technologies, competitive pricing and factors, evolving government regulation and industry standards, and changing consumer demands and behaviors. For example, the federal government has eliminated certain subsidies that favor EVs, which could adversely impact demand for our technology. If the market for EVs in general does not develop as expected, or develops more slowly than expected, our business, prospects, results of operation, and financial condition could be materially and adversely affected.

Our ability to utilize any net operating losses or tax credit carryforwards to offset taxable income may be subject to certain limitations.

Section 382 of the Internal Revenue Code limits the ability of a corporation that undergoes an “ownership change” to use its pre-change net operating losses to offset future taxable income. An “ownership change” generally means a greater than 50 percentage point change (by value) in a corporation’s equity ownership by certain stockholders over a three-year period. If we have experienced an ownership change at any time since our incorporation, we may be subject to these limitations on our ability to utilize our net operating losses and other tax attributes to offset taxable income or tax liability. In addition, future changes in our stock ownership, which may be outside of our control, may trigger an ownership change.

Changes in tax law, regulations, or interpretations, including those resulting from the OBBBA, could suspend the use of net operating losses or tax credits, possibly with retroactive effect, and adversely impact our effective tax rate or cash flows. As a result, if we earn net taxable income, we could be unable or limited in our ability to use net operating losses and other tax attributes to offset such taxable income, which could result in increased future income tax liabilities. Similar provisions of state tax law may also limit our use of accumulated state tax attributes.