UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Mark One)☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934June 30, 2023
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission file number:001-40284
SOLID POWER, INC.
(Exact name of registrant as specified in its charter)
Delaware | 86-1888095 | ||
(State or other jurisdiction of | (I.R.S. Employer | ||
incorporation or organization) | Identification No.) | ||
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Louisville, Colorado | 80027 | ||
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(Address of principal executive offices) | (Zip Code) | ||
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(303) 219-0720
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading | Name of each exchange on | |||
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| SLDP |
| The Nasdaq | ||
Warrants, each whole warrant exercisable for one share of | SLDPW |
| The Nasdaq |
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ No ☒
Explanatory Note: The registrant did not become subject to the filing requirements of the Securities Exchange Act of 1934 until March 23, 2021; however, the registrant has filed all reports that would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months had the registrant been subject to such filing requirements.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒ |
| Accelerated filer☐ | | Non-accelerated filer ☐ | | Smaller reporting company ☒ | ||
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ No ☐
As of June 4, 2021, 35,500,000178,390,443 shares of Class A common stock par value $0.0001 per share, and 8,750,000 shares of Class B common stock, par value $0.0001 per share, were issued and outstanding.outstanding as of August 7, 2023.
DECARBONIZATION PLUS ACQUISITION CORPORATION III
Quarterly Report on Form 10-Q
SOLID POWER, INC.
FORM 10-Q
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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1
GLOSSARY OF DEFINED TERMS
Term | | Definition |
Ah | | Ampere hour |
BMW | | BMW of North America LLC |
ESPP | | Solid Power, Inc. 2021 Employee Stock Purchase Plan |
EV | | Battery electric vehicle |
EV cells | | Prototype cell formats between 60 and 100 Ah |
EV line | | Our pilot cell production line that is capable of producing cells between 60 and 100 Ah. |
Exchange Act | | Securities Exchange Act of 1934, as amended |
Ford | | Ford Motor Company |
GAAP | | Generally accepted accounting principles in the United States |
JDA | | Joint development agreement |
OEM | | Automotive original equipment manufacturers |
Q1 Form 10-Q | | Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 |
Report | | This Quarterly Report on Form 10-Q |
SEC | | Securities and Exchange Commission |
Solid Power / the Company / we / us / our | | Solid Power, Inc., a Delaware corporation (f/k/a Decarbonization Plus Acquisition Corporation III) |
SP2 | | Our Thornton, CO facility that houses electrolyte development |
2022 Form 10-K | | Our Annual Report on Form 10-K for the year ended December 31, 2022 |
2
Cautionary Note Regarding Forward-Looking Statements
This Report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Report, regarding our future financial performance and our strategy, expansion plans, market opportunity, future operations, future operating results, estimated revenues or losses, projected costs, prospects, plans, and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “will,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “project,” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Report. We caution you that the forward-looking statements contained herein are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.
In addition, we caution you that the forward-looking statements regarding the Company contained in this Report are subject to the following factors:
● | risks relating to the uncertainty of the success of our research and development efforts, including our ability to achieve the technological objectives or results that our partners require, and to commercialize our technology in advance of competing technologies; |
● | risks relating to the non-exclusive nature of our original equipment manufacturers and JDA relationships; |
● | our ability to negotiate and execute supply agreements with our partners on commercially reasonable terms; |
● | rollout of our business plan and the timing of expected business milestones; |
● | delays in the construction and operation of production facilities; |
● | our ability to protect our intellectual property, including in jurisdictions outside of the United States; |
● | broad market adoption of EVs and other technologies where we are able to deploy our cell technology and electrolyte material, if developed successfully; |
● | our success in retaining or recruiting, or changes required in, our officers, key employees, including technicians and engineers, or directors; |
● | risks and potential disruptions related to management and board of directors transitions; |
● | changes in applicable laws or regulations; |
● | risks related to technology systems and security breaches; |
● | the possibility that we may be adversely affected by other economic, business or competitive factors, including supply chain interruptions, and may not be able to manage other risks and uncertainties; |
● | risks relating to our status as a research and development stage company with a history of financial losses, and an expectation to incur significant expenses and continuing losses for the foreseeable future; |
● | the termination or reduction of government clean energy and electric vehicle incentives; |
● | changes in domestic and foreign business, market, financial, political and legal conditions; and |
3
● | those factors discussed in “Part I, Item 1A. Risk Factors” in our 2022 Form 10-K and in “Part II, Item 1A. Risk Factors” in our Q1 Form 10-Q, as such descriptions may be updated or amended in future filings we make with the SEC. |
We caution you that the foregoing list does not contain all of the risks or uncertainties that could affect the Company.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in “Part I, Item 1A. Risk Factors” in our 2022 Form 10-K and “Part II, Item 1A. Risk Factors” in our Q1 Form 10-Q, as such descriptions may be updated or amended in future filings we make with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Report to reflect events or circumstances after the date of this Report or to reflect new information or the occurrence of unanticipated events, except as required by law. You should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
iTRADEMARKS
Our logo and trademark appearing in this Report and the documents incorporated by reference herein are our property. This document and the documents incorporated by reference herein contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of it by, any other companies.
MARKET AND INDUSTRY DATA
We obtained the industry and market data used throughout this Report or any documents incorporated herein by reference from our own internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies, publicly available information, and research, surveys, and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research, and our industry experience and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In some cases, we do not expressly refer to the sources from which this data is derived. In addition, while we believe the industry and market data included in this Report or any documents incorporated herein by reference is reliable and based on reasonable assumptions, such data involve material risks and other uncertainties and is subject to change based on various factors, including those discussed in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties or by us.
4
INFORMATION ABOUT SOLID POWER
We use our website (www.solidpowerbattery.com) and various social media channels as a means of disclosing information about Solid Power and our products to our customers, investors, and the public (e.g., @SolidPowerInc on Twitter, Solid Power Inc. on LinkedIn, and Solid Power on YouTube). The information posted on our website and social media channels is not incorporated by reference in this Report or in any other report or document we file with the SEC. Further, references to our website URLs are intended to be inactive textual references only. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about Solid Power when you enroll your e-mail address by visiting the “Investor Email Alerts” section of our website at https://ir.solidpowerbattery.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are filed with the SEC. These reports and other information we file with the SEC are available free of charge at https://ir.solidpowerbattery.com/financial-information/sec-filings when such reports are available on the SEC’s website.
5
PART I -– FINANCIAL INFORMATION
DECARBONIZATION PLUS ACQUISITION CORPORATION IIIItem 1. Financial Statements
UNAUDITED BALANCE SHEETSolid Power, Inc.
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| March 31, 2021 |
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ASSETS: |
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Current Assets: |
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Cash |
| $ | 2,986,880 |
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Short term prepaid insurance |
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| 551,380 |
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Total Current Assets |
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| 3,538,261 |
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Cash equivalent held in Trust Account |
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| 350,000,172 |
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Long term prepaid insurance |
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| 560,596 |
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Total assets |
| $ | 354,099,028 |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable - offering costs (affiliate) |
| $ | 160,538 |
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Accounts payable - affiliate |
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| 1,317,442 |
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Accrued offering costs |
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| 480,200 |
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Total current liabilities |
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| 1,958,180 |
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Warrant liabilities |
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| 26,883,334 |
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Deferred underwriting fee payable |
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| 12,250,000 |
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Total liabilities |
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| 41,091,514 |
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Commitments and Contingencies |
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Class A common stock subject to possible redemption, 30,800,751 shares at $10.00 per share |
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| 308,007,510 |
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Stockholders' Equity |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding |
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| - |
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Class A common stock, $0.0001 par value; 250,000,000 shares authorized; 4,199,249 shares issued and outstanding (excluding 30,800,751 shares subject to possible redemption) |
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| 420 |
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Class B common stock, $0.0001 par value, 20,000,000 shares authorized, 10,062,500 shares issued and outstanding (1) |
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| 1,006 |
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Additional paid-in capital |
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| 6,043,810 |
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Accumulated deficit |
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| (1,045,232 | ) |
Total stockholders' equity |
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| 5,000,004 |
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Total liabilities and stockholders' equity |
| $ | 354,099,028 |
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Condensed Consolidated Balance Sheets
The accompanying notes are an integral part(in thousands, except par value and number of these financial statements.shares)
| | | | | | | |
| | June 30, 2023 | | | | | |
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| (Unaudited) |
| December 31, 2022 | | ||
Assets | | | | | | | |
Current Assets |
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Cash and cash equivalents | | $ | 28,439 | | $ | 50,123 | |
Marketable securities | | | 192,694 | | | 272,957 | |
Contract receivables | |
| 5,224 | |
| 1,840 | |
Prepaid expenses and other current assets | |
| 3,494 | |
| 2,888 | |
Total current assets | |
| 229,851 | |
| 327,808 | |
Property, Plant and Equipment, net | |
| 95,076 | |
| 82,761 | |
Right-Of-Use Operating Lease Asset, net | | | 7,444 | | | 7,725 | |
Right-Of-Use Financing Lease Asset, net | | | 938 | | | 922 | |
Other Assets | | | 1,087 | | | 1,148 | |
Long-term Investments | | | 222,255 | | | 172,974 | |
Intangible Assets, net | |
| 1,360 | |
| 1,108 | |
Total assets | | $ | 558,011 | | $ | 594,446 | |
Liabilities and Stockholders’ Equity | |
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Current Liabilities | |
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Accounts payable and other accrued liabilities | | | 8,065 | | | 11,326 | |
Current portion of long-term debt | |
| — | |
| 7 | |
Deferred revenue | |
| 18 | |
| 4,050 | |
Accrued compensation | |
| 4,080 | |
| 4,528 | |
Operating lease liabilities, short-term | | | 586 | | | 549 | |
Financing lease liability, short-term | | | 308 | | | 273 | |
Total current liabilities | |
| 13,057 | |
| 20,733 | |
Warrant Liabilities | | | 6,791 | | | 9,117 | |
Operating Lease Liabilities, Long-Term | | | 8,317 | | | 8,622 | |
Financing Lease Liabilities, Long-Term | |
| 535 | |
| 602 | |
Total liabilities | | | 28,700 | | | 39,074 | |
Stockholders’ Equity | |
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Common Stock, $0.0001 par value; 2,000,000,000 shares authorized; 178,326,890 and 176,007,184 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | |
| 18 | |
| 18 | |
Additional paid-in capital | |
| 583,034 | | | 577,603 | |
Accumulated deficit | |
| (50,369) | |
| (19,090) | |
Accumulated other comprehensive loss | | | (3,372) | | | (3,159) | |
Total stockholders’ equity | |
| 529,311 | |
| 555,372 | |
Total liabilities and stockholders’ equity | | $ | 558,011 | | $ | 594,446 | |
(1)
2See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Includes 1,312,5006
Solid Power, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
(in thousands, except number of shares of Class B Common Stock subject to forfeiture if the over-allotment option is not exercised in full (See Note 5).and per share amounts)
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| Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | | ||||
Revenue | | $ | 4,906 | | $ | 2,582 | | $ | 8,698 | | $ | 4,778 | |
Operating Expenses | | | | |
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Direct costs | | | 6,897 | | | 2,987 | | | 13,171 | | | 5,017 | |
Research and development | | | 14,508 | |
| 8,440 | | | 26,156 | |
| 15,101 | |
Selling, general and administrative | | | 5,673 | |
| 5,851 | | | 12,862 | |
| 10,670 | |
Total operating expenses | | | 27,078 | |
| 17,278 | | | 52,189 | |
| 30,788 | |
Operating Loss | | | (22,172) | |
| (14,696) | | | (43,491) | |
| (26,010) | |
Nonoperating Income and Expense | | | | |
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Interest income | | | 4,993 | | | 931 | | | 9,827 | | | 1,171 | |
Change in fair value of warrant liabilities | | | 4,987 | | | 27,473 | | | 2,325 | | | 28,183 | |
Interest expense | | | (13) | |
| (5) | | | (26) | |
| (10) | |
Total nonoperating income and expense | | | 9,967 | |
| 28,399 | | | 12,126 | |
| 29,344 | |
Pretax Income (Loss) | | | (12,205) | |
| 13,703 | | | (31,365) | |
| 3,334 | |
Income tax benefit | | | — | |
| 36 | | | — | |
| 13 | |
Net Income (Loss) Attributable to Common Stockholders | | $ | (12,205) | | $ | 13,667 | | $ | (31,365) | | $ | 3,321 | |
Other Comprehensive Income (Loss) | | | 1,098 | | | (961) | | | (213) | | | (1,291) | |
Comprehensive Income (Loss) Attributable to Common Stockholders | | $ | (11,107) | | $ | 12,706 | | $ | (31,578) | | $ | 2,030 | |
Basic and diluted earnings (loss) per share | | $ | (0.07) | | $ | 0.08 | | $ | (0.18) | | $ | 0.02 | |
Weighted average shares outstanding – basic | | | 178,063,573 | |
| 174,128,230 | | | 177,502,037 | |
| 173,266,760 | |
Weighted average shares outstanding – diluted | | | 178,063,573 | |
| 174,703,533 | | | 177,502,037 | |
| 173,566,001 | |
DECARBONIZATION PLUS ACQUISITION CORPORATION IIISee accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
UNAUDITED STATEMENT OF OPERATIONS
7
Solid Power, Inc.
FOR THE PERIOD FROM JANUARY 29, 2021 (INCEPTION) TO MARCH 31, 2021Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)
Operating expenses: |
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General and administrative expenses |
| $ | 205,486 |
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Loss from operations |
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| (205,486 | ) |
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Other income: |
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Interest earned on marketable securities held in Trust Account |
| $ | 172 |
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Offering costs allocated to warrant liabilities |
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| (956,584 | ) |
Change in fair value of warrant liabilities |
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| 116,666 |
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Net loss |
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| (1,045,232 | ) |
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Weighted average number of Class A redeemable common stock, basic and diluted |
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| 2,868,852 |
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Basic and diluted net income per common share, Class A redeemable common stock |
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| 0.00 |
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Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted |
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| 9,072,746 |
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Basic and diluted net loss per common share, Class B non-redeemable common stock |
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| (0.12 | ) |
(in thousands, except number of shares)
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| | Common Stock | | | | | | | | | | | | |||||
| | | | | | | | Additional | | Accumulated | | Accumulated Other | | Total Stockholders’ | ||||
|
| Shares |
| Amount |
| paid-in capital |
| deficit |
| Comprehensive Loss |
| Equity | ||||||
Balance as of December 31, 2022 | | | 176,007,184 | | $ | 18 | | $ | 577,603 | | $ | (19,090) | | $ | (3,159) | | $ | 555,372 |
Net loss | |
| — | |
| — | | | — | |
| (19,158) | | | — | |
| (19,158) |
Stock options exercised | |
| 1,679,954 | |
| — | | | 150 | |
| — | | | — | |
| 150 |
Stock-based compensation expense | |
| — | |
| — | | | 2,222 | |
| — | | | — | |
| 2,222 |
Unrealized gain on marketable securities | | | — | | | — | | | — | | | — | | | 885 | | | 885 |
Balance as of March 31, 2023 | | | 177,687,138 | | $ | 18 | | $ | 579,975 | | $ | (38,248) | | $ | (2,274) | | $ | 539,471 |
Net loss | |
| — | |
| — | | | — | |
| (12,205) | | | — | |
| (12,205) |
Shares issued under ESPP | | | 129,928 | | | — | | | 214 | | | — | | | — | | | 214 |
Withholding of employee taxes related to stock-based compensation | | | — | | | — | | | (111) | | | 84 | | | — | | | (27) |
Shares issued for vested RSUs | | | 163,148 | | | | | | — | | | — | | | — | | | — |
Stock options exercised | |
| 346,676 | |
| — | | | 33 | |
| — | | | — | |
| 33 |
Stock-based compensation expense | |
| — | |
| — | | | 2,923 | |
| — | | | — | |
| 2,923 |
Unrealized loss on marketable securities | | | — | | | — | | | — | | | — | | | (1,098) | | | (1,098) |
Balance as of June 30, 2023 | | | 178,326,890 | | $ | 18 | | $ | 583,034 | | $ | (50,369) | | $ | (3,372) | | $ | 529,311 |
| | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | | | | | | | |||||
| | | | | | | | Additional | | Accumulated | | Accumulated Other | | Total Stockholders’ | ||||
|
| Shares |
| Amount |
| paid-in capital |
| deficit |
| Comprehensive Loss |
| Equity | ||||||
Balance as of December 31, 2021 | | | 167,557,988 | | $ | 17 | | $ | 568,183 | | $ | (9,535) | | $ | — | | $ | 558,665 |
Net loss | |
| — | |
| — | | | — | |
| (10,344) | | | — | |
| (10,344) |
Transaction fees | | | — | | | — | | | (12) | | | — | | | — | | | (12) |
Stock options exercised | |
| 6,212,964 | |
| — | | | 270 | |
| — | | | — | |
| 270 |
Stock-based compensation expense | |
| — | |
| — | | | 1,596 | |
| — | | | — | |
| 1,596 |
Unrealized loss on marketable securities | | | — | | | — | | | — | | | — | | | (330) | | | (330) |
Balance as of March 31, 2022 | | | 173,770,952 | | $ | 17 | | $ | 570,037 | | $ | (19,879) | | $ | (330) | | $ | 549,845 |
Net income (loss) | |
| — | | | — | | | — | | | 13,667 | | | — | | | 13,667 |
Withholding of employee taxes related to stock-based compensation | | | — | | | — | | | (58) | | | — | | | — | | | (58) |
Shares issued for the vesting of RSUs | | | 20,672 | | | — | | | — | | | — | | | — | | | — |
Stock options exercised | |
| 656,180 | | | — | | | 163 | | | — | | | — | | | 163 |
Stock-based compensation expense | |
| — | | | — | | | 2,314 | | | — | | | — | | | 2,314 |
Unrealized loss on marketable securities | |
| — | | | — | | | — | | | — | | | (961) | | | (961) |
Balance as of June 30, 2022 | | | 174,447,804 | | $ | 17 | | $ | 572,456 | | $ | (6,212) | | $ | (1,291) | | $ | 564,970 |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
8
Solid Power, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| | | | | | | |
| | Six Months Ended June 30, | | ||||
|
| 2023 |
| 2022 | | ||
Cash Flows from Operating Activities |
| | | | | | |
Net income (loss) | | $ | (31,365) | | $ | 3,321 | |
Adjustments to reconcile net income (loss) to net cash and cash equivalents from operating activities: | | | | |
| | |
Depreciation and amortization | | | 4,906 | |
| 1,782 | |
Amortization of right-of-use assets | | | 372 | | | 16 | |
Stock compensation expense | | | 5,145 | |
| 3,910 | |
Deferred taxes | | | — | |
| 13 | |
Change in fair value of warrant liabilities | | | (2,325) | | | (28,183) | |
Amortization of premiums and accretion of discounts on marketable securities | | | (5,518) | | | — | |
Change in operating assets and liabilities that provided (used) cash and cash equivalents: | | | | |
| | |
Contract receivable | | | (3,383) | |
| (1,202) | |
Prepaid expenses and other assets | | | (188) | |
| 744 | |
Accounts payable and other accrued liabilities | | | (297) | |
| (4,261) | |
Deferred revenue | | | (4,032) | |
| (286) | |
Accrued expenses | | | 649 | |
| 1,000 | |
Lease liabilities | | | (268) | | | 188 | |
Net cash and cash equivalents used in operating activities | | | (36,304) | |
| (22,958) | |
Cash Flows from Investing Activities | | | | |
| | |
Purchases of property, plant and equipment | | | (21,184) | |
| (30,957) | |
Purchases of marketable securities and long-term investments | | | (174,400) | |
| (212,792) | |
Proceeds from sales of marketable securities | | | 210,329 | | | 54,819 | |
Purchases of intangible assets | | | (259) | |
| (228) | |
Net cash and cash equivalents provided by (used in) investing activities | | | 14,486 | |
| (189,158) | |
Cash Flows from Financing Activities | | | | |
| | |
Payments of debt | | | (7) | |
| (71) | |
Proceeds from exercise of stock options | | | 184 | |
| 354 | |
Proceeds from issuance of common stock under ESPP | | | 214 | | | — | |
Receivable for exercise of stock options | | | — | | | 79 | |
Cash paid for withholding of employee taxes related to stock-based compensation | | | (111) | | | (58) | |
Payments on finance lease liability | | | (146) | | | (20) | |
Transaction costs | | | — | | | (12) | |
Net cash and cash equivalents provided by financing activities | | | 134 | | | 272 | |
| | | | | | | |
Net (decrease) in cash and cash equivalents | | | (21,684) | | | (211,844) | |
Cash and cash equivalents at beginning of period | | | 50,123 | | | 513,447 | |
Cash and cash equivalents at end of period | | | 28,439 | | | 301,603 | |
| | | | | | | |
Cash paid for interest | | $ | 26 | | $ | 5 | |
Accrued capital expenditures | | $ | 3,591 | | $ | 8,146 | |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
9
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 accompanying notes are an integral part of these financial statements.Company’s planned business model is to sell its sulfide-based solid electrolyte and to license its solid-state cell designs and manufacturing process.
DECARBONIZATION PLUS ACQUISITION CORPORATION IIINote 2 – Significant Accounting Policies
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 29, 2021 (INCEPTION) TO MARCH 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
|
| |
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders' |
|
| |||||||||||
|
| Shares |
| Amount |
|
| Shares |
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| |||||||
Balance as of January 29, 2021 (inception) |
|
| 0 |
| $ | 0 |
|
|
| 0 |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
Class B Common Stock issued to Sponsor (1) |
|
| - |
|
| - |
|
|
| 10,062,500 |
|
| 1,006 |
|
|
| 23,994 |
|
|
| - |
|
|
| 25,000 |
|
|
Sale of Class A Common Stock to Public, net of underwriting discounts and initial classification of warrant liabilities |
|
| 35,000,000 |
|
| 3,500 |
|
|
| - |
|
| - |
|
|
| 313,746,500 |
|
|
| - |
|
|
| 313,750,000 |
|
|
Offering Costs |
|
| - |
|
| - |
|
|
| - |
|
| - |
|
|
| (678,838 | ) |
|
| - |
|
|
| (678,838 | ) |
|
Cash paid in excess of fair value for Private Placement Warrants |
| - |
| - |
|
| - |
| - |
|
|
| 956,584 |
|
| - |
|
|
| 956,584 |
|
| |||||
Class A common stock subject to possible redemption |
|
| (30,800,751 | ) |
| (3,080 | ) |
|
| - |
|
| - |
|
|
| (308,004,430 | ) |
|
| - |
|
|
| (308,007,510 | ) |
|
Net loss |
|
| - |
|
| - |
|
|
| - |
|
| - |
|
|
| - |
|
|
| (1,045,232 | ) |
|
| (1,045,232 | ) |
|
Balance as of March 31, 2021 |
|
| 4,199,249 |
|
| 420 |
|
|
| 10,062,500 |
|
| 1,006 |
|
|
| 6,043,810 |
|
|
| (1,045,232 | ) |
|
| 5,000,004 |
|
|
The accompanying notes are an integral part of these financial statements.
(1)Includes up to 1,312,500 shares of subject to forfeiture if the over-allotment option is not exercised in full or in partsignificant accounting policies followed by the underwriters (SeeCompany are set forth in Note 5)
DECARBONIZATION PLUS ACQUISITION CORPORATION III
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 29, 2021 (INCEPTION) TO MARCH 31, 2021
Cash flow from operating activities: |
|
|
|
|
Net loss |
| $ | (1,045,232 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Change in fair value of warrant liabilities |
|
| (116,666 | ) |
Offering costs allocated to warrant liabilities |
|
| 956,584 |
|
Interest earned on marketable securities held in Trust Account |
|
| (172 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
Accounts payable - affiliate |
|
| 1,317,442 |
|
Prepaid insurance |
|
| (1,111,977 | ) |
Net cash used in operating activities |
|
| (20 | ) |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Investment of cash in Trust Account |
|
| (350,000,000 | ) |
Net cash used in investing activities |
|
| (350,000,000 | ) |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid |
|
| 343,000,000 |
|
Proceeds from sale of Private Placement Warrants |
|
| 10,000,000 |
|
Proceeds from sale of Class B Common Stock to Sponsor |
|
| 25,000 |
|
Payment of offering costs |
|
| (38,100 | ) |
Net cash provided by financing activities |
|
| 352,986,900 |
|
|
|
|
|
|
Net increase in cash |
|
| 2,986,880 |
|
Cash at beginning of period |
|
| - |
|
Cash at end of period |
| $ | 2,986,880 |
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities: |
|
|
|
|
Initial classification of Class A common stock subject to possible redemption |
| $ | 307,889,890 |
|
Change in initial value of Class A common stock subject to possible redemption |
|
| 117,620 |
|
Accrued offering costs |
| $ | 640,738 |
|
The accompanying notes are an integral part of these2 – Significant Accounting Policies to the Company’s financial statements.
Note 1 — Description of Organization and Business Operations
Organization and General
Decarbonization Plus Acquisition Corporation III (the “Company”) was incorporatedstatements included in Delawarethe Company’s Annual Report on January 29, 2021. The Company was formedForm 10-K for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businessesyear ended December 31, 2022 (the “Initial Business Combination”“2022 Form 10-K”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified and are supplemented by the Jumpstart Our Business Startups Act of 2012Notes to the Condensed Consolidated Financial Statements (Unaudited) (the “JOBS Act”“Notes”).
At March 31, 2021, the Company had not commenced any operations. All activity included in this Quarterly Report on Form 10-Q for the period from January 29, 2021 (inception) to March 31, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”ended June 30, 2023 (this “Report”) described below, as well as the identification and evaluationof prospective acquisition targets for an Initial Business Combination and ongoing administrative and compliance matters.. The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering. The Company has selected December 31st as its fiscal year end.
The registration statement for the Initial Public Offering was declared effective on March 23, 2021. On March 26, 2021, the Company consummated the Initial Public Offering of 35,000,000 units (the “Units” and, with respect to the Class A common stockfinancial statements included in this Report (including the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $350,000,000, which is describedNotes) should be read in Note 4.
Simultaneouslyconjunction with the closing2022 Form 10-K.
Basis of the Initial Public Offering, the Company consummated the private salePresentation and Principles of 6,666,667 warrants (the “Private Placement WarrantsConsolidation”) at a price of $1.50 per Private Placement Warrant in a private placement to Decarbonization Plus Acquisition Sponsor III LLC (the “Sponsor”) and certain of the Company’s independent directors, generating gross proceeds of $10,000,000, which is described in Note 5.
Transaction costs amounted to $19,928,838 consisting of $7,000,000 of underwriting fees, $12,250,000 of deferred underwriting fees and $678,838 of other offering costs. In addition, at March 31, 2021, cash of $2,986,880 was held outside of the Trust Account (as defined below) and is available for working capital purposes.
Following the closing of the Initial Public Offering on March 26, 2021, an amount of $350,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) located in the United States. The proceeds held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred eighty (185) days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Initial Business Combination; (ii) the redemption of any shares of Class A common stock included in the Units (the “Public Shares”) being sold in the Initial Public Offering that have been properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of its obligation to redeem 100% of the Public Shares if it does not complete the Initial Business Combination within 24 months from the closing of the Initial Public Offering; and (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an Initial Business Combination within 24 months from the closing of the Initial Public Offering (subject to the requirements of law). The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
6
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the Initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an Initial Business Combination.
The Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under NASDAQ rules. If the Company seeks stockholder approval, it will complete its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A common stock will be recorded at redemption amount and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination within 24 months from the closing of the Initial Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned and not previously released to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Sponsor and the Company’s independent director nominees will not be entitled to rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company fails to complete the Initial Business Combination within 24 months of the closing of the Initial Public Offering. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
7
In the event of a liquidation, dissolution or winding upaccompanying unaudited condensed consolidated financial statements of the Company after an Initial Business Combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, upon the completion of the Initial Business Combination, subject to the limitations described herein.
Note 2 — Correction of Previously Issued Financial Statements
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing the Company’s warrants. As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 11,666,667 redeemable warrants (the “Public Warrants”) that were included in the units issued by the Company in its initial public offering (the “Initial Public Offering”) and (ii) the 6,666,667 redeemable warrants that were issued to the Company’s sponsor in a private placement that closed concurrently with the closing of the Initial Public Offering (together with the Public Warrants, the “Warrants”). The Company previously accounted for the Warrants as components of equity.
In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC 815”), the Company concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statement of Operations in the period of change.
In accordance with ASC Subtopic 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASC 825-10”), as a result of the classification of the Warrants as derivative liabilities, the Company expensed a portion of the offering costs originally recorded as a reduction in equity. The portion of offering costs that was expensed was determined based on the relative fair value of the Public Warrants and shares of Class A common stock included in the Units to the proceeds raised.
The Company’s accounting for the warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported cash.
The following tables summarize the effect of the revision on each financial statement line item as of the dates, and for the period, indicated:
|
| As Previously Reported |
|
| Adjustment |
|
| As Revised |
| |||
Balance Sheet as of March 26, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities |
| $ | — |
|
| $ | 27,000,000 |
|
| $ | 27,000,000 |
|
Total liabilities |
|
| 13,086,989 |
|
|
| 27,000,000 |
|
|
| 40,086,989 |
|
Class A common stock subject to possible redemption |
|
| 334,899,890 |
|
|
| (27,000,000 | ) |
|
| 307,899,890 |
|
Class A common stock |
|
| 151 |
|
|
| 270 |
|
|
| 421 |
|
Additional paid-in capital |
|
| 5,000,115 |
|
|
| 1,165,674 |
|
|
| 6,165,789 |
|
Retained earnings (accumulated deficit) |
|
| (1,271 | ) |
|
| (1,165,944 | ) |
|
| (1,167,215 | ) |
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance withon the basis of generally accepted accounting principles generally accepted in the United States of America (“GAAP”GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the period from January 29, 2021 (inception) to March 31, 2021 are not necessarily indicative of the results that may be expected for the period from January 29, 2021 (inception) to December 31, 2021 or any future period.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period, excluding shares of common stock subject to forfeiture, plus, to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At March 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted income (loss) per common share is the same as basic income (loss) per common share for the period.
The Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable common stock outstanding for the period or since original issuance. Net loss per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares (as defined below) as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
| For the Period from January 29, 2021 (Inception) to March 31, 2021 |
| |
Class A Redeemable Common Stock |
|
|
|
|
Numerator: Earnings allocable to Class A Redeemable Common Stock |
|
|
|
|
Interest Income |
| $ | 172 |
|
Net Income |
| $ | 172 |
|
Denominator: Weighted Average Class A Redeemable Common Stock |
|
|
|
|
Class A Redeemable Common Stock, Basic and Diluted |
|
| 2,868,852 |
|
Income/Basic and Diluted Class A Redeemable Common Stock |
| $ | 0.00 |
|
|
|
|
|
|
Class B Non-Redeemable Common Stock |
|
|
|
|
Numerator: Net Loss minus Redeemable Net Income |
|
|
|
|
Net Loss |
| $ | (1,045,232 | ) |
Redeemable Net Income |
|
| (172 | ) |
Non-Redeemable Net Loss |
| $ | (1,045,404 | ) |
Denominator: Weighted Average Class B Non-Redeemable Common Stock |
|
|
|
|
Class B Non-Redeemable Common Stock, Basic and Diluted |
|
| 9,072,746 |
|
Loss/Basic and Diluted Class B Non-Redeemable Common Stock |
| $ | (0.12 | ) |
Note: As of March 31, 2021, basic and diluted shares are the same as there are no securities that are dilutive to the Company’s common stockholders.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limits of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company utilized a Monte Carlo simulation model to value the Public Warrant liabilities at the date of the Initial Public Offering and at March 31, 2021, and utilizes a Black-Scholes model to value the Private Warrant liabilities that are categorized within Level 3 at each reporting period, with changes in fair value recognized in the Statement of Operations (see Note 8).
Fair Value of Financial Instruments
The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
Level 1 – Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 – Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
See Note 8 for additional information on assets and liabilities measured at fair value.
Use of Estimates
The preparation of theunaudited condensed consolidated financial statementstatements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect amounts reported in the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thisunaudited condensed consolidated financial statement.statements. Actual results could differ from those estimates. All dollar amounts presented herein are in U.S. dollars and are in thousands, except par value, share and per share amounts.
Cash and cash equivalents
Cash includes amounts held at banks with an original maturityThe accompanying unaudited condensed consolidated financial statements include accounts of less than three months. As of March 31, 2021, the Company held $2,986,880and its wholly owned subsidiary, Solid Power Operating, Inc. All intercompany balances and transactions have been eliminated in cash.consolidation. Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements
Leases
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.
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 March 31, 2021, the Company held cash equivalents of $350,000,172 in the Trust Account.January 1, 2022.
Common stock subject to possible redemption
The Company accountsregularly 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, any allowance for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption are classified as a liability instrumentcredit losses is immaterial and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered towould be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2021, 30,800,751 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
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Offering Costs
Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that are directly related to the Initial Public Offering. The Company incurred offering costs amounting to $19,928,838 upon the completion of the Initial Public Offering.
The Company complies with the requirements of ASC 825-10.Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction to the carrying value of the asset.
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.
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Note 3 – Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
| | | | | | | |
|
| June 30, 2023 |
| December 31, 2022 | | ||
Commercial production equipment | | $ | 25,454 | | $ | 21,595 | |
Laboratory equipment | | | 7,554 | | | 3,278 | |
Leasehold improvements | |
| 45,581 | |
| 27,996 | |
Furniture and computer equipment | |
| 1,634 | |
| 1,482 | |
Construction in progress | |
| 31,317 | |
| 40,036 | |
Total cost | |
| 111,540 | |
| 94,387 | |
Accumulated depreciation | |
| (16,464) | |
| (11,626) | |
Net property and equipment | | $ | 95,076 | | $ | 82,761 | |
Depreciation expenses for dedicated laboratory equipment and commercial production equipment are charged to research and development. The other depreciation expenses are included in equity. Offeringthe Company’s overhead and are allocated across operating expenses on the accompanying Condensed Consolidated Statements of Operations based on Company personnel costs incurred.
Depreciation expense related to property, plant, and equipment are summarized as follows:
| | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
|
| 2023 |
| 2022 | | 2023 |
| 2022 | | ||||
Depreciation expense | | $ | 2,639 | | $ | 1,026 | | $ | 4,898 | | $ | 1,777 | |
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 equity contracts thatthe automotive qualification process.
The Company expanded its electrolyte production at its facility 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 began producing electrolyte at this facility in 2023 and has placed portions of the facility into service.
| | | | | | | |
| | June 30, 2023 | | December 31, 2022 | | ||
Construction in progress | | | | | | | |
EV cell line (SP1) | | $ | 1,083 | | $ | 2,010 | |
Other cell development equipment (SP1) | | | 2,703 | | | 2,206 | |
Electrolyte production and development equipment (SP2) | | | 27,531 | | | 35,820 | |
Note 4 – Intangible Assets
Intangible assets of the Company are classifiedsummarized as follows:
| | | | | | | | | | | | | |
|
| June 30, 2023 |
| December 31, 2022 | | ||||||||
| | Gross Carrying | | Accumulated | | Gross Carrying | | Accumulated | | ||||
|
| Amount |
| Amortization |
| Amount |
| Amortization | | ||||
Intangible assets: | | | | | | | | | | | | | |
Licenses | | $ | 149 | | $ | (56) | | $ | 149 | | $ | (51) | |
Patents | | | 72 | | | (3) | | | — | | | — | |
Patents pending |
| | 1,168 |
| | — |
| | 984 |
| | — | |
Trademarks | | | 13 | | | — | | | 9 | | | — | |
Trademarks pending |
| | 17 |
| | — |
| | 17 |
| | — | |
Total amortized intangible assets | | $ | 1,419 | | $ | (59) | | $ | 1,159 | | $ | (51) | |
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Amortization expense for intangible assets is summarized as follows:
| | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| ||||||||
|
| 2023 |
| 2022 | | 2023 |
| 2022 |
| ||||
Amortization expense | | $ | 3 | | $ | 2 | | $ | 8 | | $ | 5 | |
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 5 – Fair Value Measurements
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.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
As of June 30, 2023 and December 31, 2022, the Company’s financial assets and liabilities are expensed immediately. The Companymeasured and recorded $18,972,254 of offering costs asat fair value on a reduction of equity in connection with the Public Shares included in the Units. The Company immediately expensed $956,584 of offering costs in connection with the Public Warrants included in the Units thatrecurring basis were classified within the fair value hierarchy as liabilities.follows:
As of March 31, 2021, the Company had 0 deferred offering costs on the accompanying balance sheet.
| | | | | | | | | | | | |
| | June 30, 2023 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets | | | | | | | | | | | | |
Commercial Paper | | $ | 137,072 | | $ | — | | $ | — | | $ | 137,072 |
Corporate Bonds | | $ | 216,390 | | $ | — | | $ | — | | $ | 216,390 |
Government Bonds | | $ | 61,487 | | $ | — | | $ | — | | $ | 61,487 |
U.S. Treasuries |
| | — | | | — | | | — |
| | — |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | |
Public Warrants | | $ | 3,932 | | $ | — | | $ | — | | $ | 3,932 |
Private Placement Warrants | | $ | — | | $ | 2,859 | | $ | — | | $ | 2,859 |
| | | | | | | | | | | | |
| | December 31, 2022 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets | | | | | | | | | | | | |
Commercial Paper | | $ | 165,179 | | $ | — | | $ | — | | $ | 165,179 |
Corporate Bonds | | $ | 227,957 | | $ | — | | $ | — | | $ | 227,957 |
Government Bonds | | $ | 42,865 | | $ | — | | $ | — | | $ | 42,865 |
U.S. Treasuries |
| | 9,930 | | | — | | | — |
| | 9,930 |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | |
Public Warrants | | $ | 4,900 | | $ | — | | $ | — | | $ | 4,900 |
Private Placement Warrants | | $ | — | | $ | 4,217 | | $ | — | | $ | 4,217 |
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The deferred tax assets are de minimis after accounting for the net effect of the valuation allowance.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were 0 unrecognized tax benefits as of March 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. NaN amounts were accrued for the payment of interest and penalties at March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company’s deferred tax assets and provision for income taxes were deemed to be de minimis as of March 31, 2021 and for the period from January 29, 2021 (inception) to March 31, 2021.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statement.
Note 4 — Public Offering
Pursuant to the Initial Public Offering, the Company sold 35,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
Note 5 — Related Party Transactions
Founder Shares
On February 4, 2021, the Company issued an aggregate of 10,062,500 shares of Class B common stock (the “Founder Shares”) in exchange for a $25,000 payment from the Sponsor to cover certain expenses on behalf of the
12
Company (approximately $0.002 per share). As used herein, unless the context otherwise requires, “Founder Shares” shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the Units being sold in the Initial Public Offering except that the Founder Shares automatically convert into shares of Class A common stock at the timefair value of the Company’s Initial Business Combinationmarketable securities and long-term investments are subject to certain transfer restrictions, as describedincluded in more detail below. The Sponsor has agreed to forfeit up to an aggregateother comprehensive loss. There were no transfers in and out of 1,312,500 Founder Shares toLevel 3 fair value hierarchy during the extent thatthree or six months ended June 30, 2023 or year ended December 31, 2022. For the over-allotment option is not exercised in full by the underwriters so that the Founder Shares will represent 20% of the Company’s issuedthree and outstanding shares after the Initial Public Offering. As of March 31, 2021, the underwriters’ over-allotment option had not been exercised. On March 23, 2021,six months ended June 30, 2023, the Company the Sponsor and the Company’s independent directors entered into several Securities Agreements, pursuant to which the Company issued an aggregatepurchased $174,400 of 400,000 Founder Shares and the Sponsor agreed to forfeit 400,000 Founder Shares at no cost, which were cancelled by the Company. The Sponsor will not be entitled to redemption rights with respect to any Founder Shares and any Public Shares held by them in connection with the completion of the Initial Business Combination. If the Initial Business Combination is not completed within 24 months from the closing of the Initial Public Offering, the Sponsor will not be entitled to rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them.marketable securities.
Fair Value of Warrants
The Company’s initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor and the Company’s independent directors and an affiliate of the Company’s chief executive officer purchased 6,666,667 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $10,000,000 (see Note 3 for further information regarding the accounting treatment of the Private Placement Warrants). The Sponsor has agreed to purchase up to an additional 700,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or an aggregate additional $1,050,000, to the extent the underwriter’s over-allotment option is exercised in full. As of March 31, 2021, the underwriters’ over-allotment option had not been exercised.
Each Private Placement Warrant is exercisable to purchase 1 share of Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within 24 months from the closing of the Initial Public Offering, the proceeds of the salefair value of the Private Placement Warrants held in the Trust Account will be used to partially fund the redemption(defined below) has been estimated using a Black-Scholes model as of June 30, 2023 and December 31, 2022 Consolidated Balance Sheet dates. The fair value of the Public Shares (subject toWarrants (defined below) has been measured based on the requirementsquoted price of applicable law), andsuch warrants on the Private Placement Warrants and all underlying securities will expire worthless.Nasdaq Stock Market, a Level 1 input. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the initial purchasersestimated fair value of the Private Placement Warrants or their permitted transferees.
The Sponsoris determined using Level 2 inputs. Inherent in a Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and certain of the Company’s independent directors have agreed, subject to limited exceptions, not to transfer, assign or selldividend yield. Material increases (or decreases) in any of theirthose inputs may result in a significantly higher (or lower) fair value measurement. The Company estimates the volatility of its Private Placement Warrants until 30 days afterbased on implied volatility from the completionCompany’s Public Warrants and from historical volatility of select peer
12
companies’ common stock that matches the expected remaining life of the Initial Business Combination.
Registration Rights
Warrants (defined below). The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, will be entitledrisk-free interest rate is based on the U.S. Treasury zero-coupon yield curve for a maturity similar to registration rights (in the caseexpected remaining life of the Founder Shares, only after conversionWarrants. The expected life of such shares to shares of Class A common stock) pursuant to a registration rights agreementthe Warrants is assumed to be signedequivalent to their remaining contractual term. The dividend yield is based on or before the date of the prospectus for the Initial Public Offering. These holders will be entitled to certain
13
demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Related Party Loans
On February 4, 2021,historical rate, which the Company and the Sponsor entered into a loan agreement, whereby the Sponsor agreed to loan the Company an aggregate of $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of August 3, 2021 or the completion of the Initial Public Offering (the “Maturity Date”). As of March 31, 2021, 0 amount has been drawn down or is outstanding under the Note.
As of March 31, 2021, the Company owed the Sponsor $1.5 million for additional expenses paid on its behalf which has since been paid in full.
Administrative Support Agreement
anticipates remaining at zero. The Company has agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the period from January 29, 2021 (Inception) to March 31, 2021, the Company had accrued $1,935 of monthly fees to the affiliate of the Sponsor,which were outstanding at March 31, 2021.
Working Capital Loans
In addition, in order to finance transaction costs in connection with its Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes its Initial Business Combination, the Company would repay the Working Capital Loans. In the event that the Initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds heldfollowing table provides quantitative information regarding Level 2 inputs used in the Trust Account would be used to repay the Working Capital Loans. If the Sponsor makes any Working Capital Loans, up to $1,500,000recurring valuation of such loans may be converted into warrants of the post business combination entity at the price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants including as to exercise price, exercisabilityof their measurement dates:
| | | | | | | |
|
| June 30, 2023 |
| December 31, 2022 |
| ||
Exercise Price | | $ | 11.50 | | $ | 11.50 | |
Stock Price | | $ | 2.54 | | $ | 2.54 | |
Volatility | |
| 70.0 | % |
| 71.3 | % |
Term | |
| 3.44 | |
| 3.94 | |
Risk-free rate | |
| 4.32 | % |
| 4.03 | % |
The following table provides a reconciliation of the Public Warrants measured at fair value using Level 1 directly observable inputs and exercise period. Private Placement Warrants measured at fair value using Level 2 directly or indirectly observable inputs:
| | | | | | |
| | Public Warrants | | Private Placement Warrants | ||
|
| Level 1 Fair Value |
| Level 2 Fair Value | ||
December 31, 2022 | | $ | 0.42 | | $ | 0.55 |
Change in fair value | | $ | 0.04 | | $ | 0.31 |
March 31, 2023 | | $ | 0.46 | | $ | 0.86 |
Change in fair value | | $ | (0.15) | | $ | (0.43) |
June 30, 2023 | | $ | 0.31 | | $ | 0.43 |
The following tables provides a reconciliation of the June 30, 2023 three and six month change in fair value for the Public Warrants and Private Placement Warrants:
| | | | | | | | | | | | | |
| | | | | | | | Three months change in | | | |||
Warrant Class |
| Level |
| Warrants |
| March 31, 2023 |
| fair value |
| June 30, 2023 | |||
Public Warrants |
| 1 |
| 12,684,423 | | $ | 5,576 | | $ | (1,644) | | $ | 3,932 |
Private Placement Warrants |
| 2 |
| 6,648,880 | | $ | 6,203 | | $ | (3,343) | | $ | 2,860 |
Total |
|
|
| 19,333,303 | | $ | 11,779 | | $ | (4,987) | | $ | 6,792 |
| | | | | | | | | | | | | |
| | | | | | | | Six months change in | | | |||
Warrant Class |
| Level |
| Warrants |
| December 31, 2022 |
| fair value |
| June 30, 2023 | |||
Public Warrants |
| 1 |
| 12,684,423 | | $ | 4,900 | | $ | (968) | | $ | 3,932 |
Private Placement Warrants |
| 2 |
| 6,648,880 | | $ | 4,217 | | $ | (1,357) | | $ | 2,860 |
Total |
|
|
| 19,333,303 | | $ | 9,117 | | $ | (2,325) | | $ | 6,792 |
Note 6 – Warrant Liabilities
As of MarchJune 30, 2023 and December 31, 2021, the Company had 0 borrowings under the Working Capital Loans.
Note 6 — Commitments2022, there were 12,684,423 and Contingencies
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the Initial 11,666,636 publicly traded warrants (“Public Offering to purchase up to 5,250,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less applicable underwriting discountsWarrants”) and commissions. As of March 31, 2021, the underwriters’ over-allotment option had not been exercised.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $12,250,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement.
Risks6,648,880 and Uncertainties
The Company continues to evaluate the impact of the COVID-19 pandemic on the industry7,666,667 private placement warrants (“Private Placement Warrants,” and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Note 7 — Stockholders’ Equity
Common Stock
The authorized common stock of the Company includes up to 250,000,000 shares of Class A common stock (4,199,249 shares issued and outstanding, excluding 30,800,751 shares subject to possible redemption) with a par value of $0.0001 per share and 20,000,000 shares of Class B common stock (10,062,500 shares issued and outstanding) with a par value of $0.0001 per share. If the Company enters into an Initial Business Combination, it may (depending on the terms of such an Initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on the Initial Business Combination to the extent the Company seeks stockholder approval in connectiontogether with the Initial Business Combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock. At March 31, 2021, there were 35,000,000 shares of Class A common stock issued andPublic Warrants, “Warrants”) outstanding, of which 30,800,751 shares were subject to possible redemption. At March 31, 2021, there were 10,062,500 shares of Class B common stock issued and outstanding.
The Sponsor has agreed to forfeit up to an aggregate of 1,312,500 Founder Shares depending on the extent to which the over-allotment option is not exercised by the underwriters so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As of March 31, 2021, the underwriters’ over-allotment option had not been exercised.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2021, there were 0 shares of preferred stock issued or outstanding.
Warrants
respectively. Each whole Warrant entitles the holder thereof to purchase one share of our Class A common stockCommon Stock at a price of $11.50 per share, subject to adjustment as described herein.customary adjustments. Only whole Warrants are exercisable. The Warrants will becomebecame exercisable on the later of 30 days after the completion of the Initial Business Combination or 12 months from the closing of the Initial Public Offering,January 7, 2022 and will expire five years after the completion of the Initial Business Combination or earlier upon redemption or liquidation. NaN fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade. The Company has also granted the underwriters a 45-day option to purchase up to an additional 5,250,000 Units to cover over-allotments, if any.
Each whole Warrant is exercisable to purchase one share of our Class A common stock and only whole Warrants are exercisable. No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade.
The exercise price of each Warrant is $11.50 per share, subject to adjustment as described herein. In addition, if we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the Newly Issued Price.
The Warrants will become exercisable on the later of:
|
|
|
|
provided in each case that we have an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the
15
state of residence of the holder (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement).December 8, 2026.
The Company is not registering the shares of Class A common stock issuable upon exercise of the Warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days, after the closing of the Initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Company’s Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Warrants will expire at 5:00 p.m., New York City time, five years after the completion of the Initial Business Combination or earlier upon redemption or liquidation. On the exercise of any Warrant, the Warrant exercise price will be paid directly to us and not placed in the Trust Account.
Once the Warrants become exercisable, the Company may redeem the outstanding Warrants for cash (except as described herein with respect to the Private Placement Warrants):
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The Company will not redeem the Warrants for cash unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. If and when the Warrants become redeemable by the Company, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Except as described below, noneNone of the Private Placement Warrants will beare redeemable by the Company so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.
Once theThe Warrants become exercisable, the Company may redeem the outstanding Warrants (except as described below with respect to the Private Placement Warrants):
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The “fair market value” of the Company’s Class A common stock shall mean the average reported last sale price of the Company’s Class A common stock for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of Warrants.
No fractional shares of Class A common stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company will round down to the nearest whole number of the number of shares of Class A common stock to be issued to the holder.
As of March 31, 2021, there were 16,800,000 Public Warrants and 10,200,000 Private Placement Warrants outstanding. The Company classifies the outstanding Public Warrants and Private Placement Warrants as warrant liabilities on the Balance Sheet in accordance with the guidance contained in ASC 815-40.
The Warrant liabilities are initially measured at fair value upon the closing of the Initial Public Offeringtransactions contemplated by the Business Combination Agreement and Plan of Reorganization, dated June 15, 2021 by and among the Company, DCRC Merger Sub, Inc., and Solid Power Operating, Inc., as amended, for $101,253 and subsequently re-measured at each reporting period. The Public Warrants were allocated a portion of the proceeds from the issuance of the Unitsunits of common stock and one-third warrants in Decarbonization Plus Acquisition Corporation III’s initial public offering equal to itstheir fair value. The Company recognized gains (losses)a gain in connection with
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changes in the fair value of warrant liabilities of $116,666 within change$4,987 and $2,325 for the three and six months ending June 30, 2023 and $27,473 and $28,183 for the three and six months ending June 30, 2022, respectively.
There have been no changes to our Public or Private Placement Warrants, including redemption terms disclosed in fair valueour 2022 Form 10-K.
Note 7 – Stockholders’ Equity
Common Stock
Stock options exercised for Common Stock, shares issued under the Solid Power, Inc. 2021 Employee Stock Purchase Plan (“ESPP”), and shares issued upon vesting of warrant liabilitiesRSUs for the three and six months ended June 30, 2023 and 2022 are summarized in the Statement of Operations duringtable below:
| | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | ||||
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| 2023 |
| 2022 | | 2023 |
| 2022 | |
Stock options exercised | | 346,676 | | 656,180 | | 2,026,630 | | 6,869,144 | |
Shares issued under ESPP | | 129,928 | | — | | 129,928 | | — | |
Shares issued upon vesting of RSUs | | 163,148 | | 20,672 | | 163,148 | | 20,672 | |
Cash received from stock options exercised under the periodSolid Power, Inc. 2014 Equity Incentive Plan (the “2014 Plan”) for the six months ended June 30, 2023 and 2022 was $184 and $354, respectively. Cash received from January 29, 2021 (inception) to March 31, 2021.stock options exercised under the 2014 Plan for the three months ended June 30, 2023 and 2022 was $34 and $84, respectively.
Cash received from shares issued under the ESPP for the six months ended June 30, 2023 and 2022 was $214 and $0, respectively. Cash received from shares issued under the ESPP for the three months ended June 30, 2023 and 2022 was $214 and $0, respectively.
Note 8 — Fair Value Measurements– Stock Based Compensation
There have been no changes to our equity incentive plans, Employee Stock Purchase Plan, or accounting methodology for stock based compensation, as disclosed in our 2022 Form 10-K.
At March 31, 2021, assets held in the Trust Account were comprised of $350,000,172 in money market funds which are invested in U.S. Treasury Securities. Through March 31, 2021, the Company has not withdrawn any interest earned on the Trust Account to pay its franchise and income tax obligations.
The fair value of stock options and Restricted Stock Units (“RSUs”) issued to employees and directors is recognized as compensation expense over the Company’s financial assets and liabilities reflects management’s estimateperiod of amountsservice that generally coincides with the vesting period of the award. The Company allocated compensation ratably across Operating Expenses. When calculating the amount of annual compensation expense, the Company would have received in connection withhas elected not to estimate forfeitures and instead accounts for forfeitures as they occur.
For the salethree and six months ended June 30, 2023, the Company recognized compensation costs totaling:
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| | Three months ended June 30, | | Six months ended June 30, | ||||||||
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| 2023 |
| 2022 | | 2023 |
| 2022 | ||||
Equity-based compensation costs related to RSUs | | $ | 954 | | $ | 514 | | $ | 1,589 | | $ | 514 |
Equity-based compensation costs related to stock options | |
| 1,889 | |
| 1,800 | |
| 3,476 | |
| 3,396 |
Equity-based compensation costs related to ESPP | | | 80 | | | — | | | 80 | | | — |
Total equity-based compensation costs | | $ | 2,923 | | $ | 2,314 | | $ | 5,145 | | $ | 3,910 |
Unrecognized future compensation cost as of | | | — | | | — | | | 34,327 | | | 25,316 |
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The following table summarizes our award activity for RSUs and stock options for the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring thethree and six months ended June 30, 2023:
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| | RSUs | | Stock Options | |
Balance at December 31, 2022 | | 1,057,980 |
| | 25,998,172 |
Granted | | 1,797,034 | | | 3,272,873 |
Vested or Exercised | | — | | | (1,679,954) |
Forfeited | | (88,441) | | | (1,494,020) |
Balance at March 31, 2023 | | 2,766,573 | | | 26,097,071 |
Granted | | 1,753,207 | | | 1,904,016 |
Vested or Exercised | | (215,553) | | | (346,676) |
Forfeited | | (47,181) | | | (466,635) |
Outstanding at June 30, 2023 | | 4,257,046 | | | 27,187,776 |
Stock Options
The fair value of its assetseach stock option grant during the six months ended June 30, 2023 and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description |
| Amount at Fair Value |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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March 31, 2021 |
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Assets: |
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Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund |
| $ | 350,000,172 |
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| $ | 350,000,172 |
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| $ | — |
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| $ | — |
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Liabilities: |
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Warrant liability – Public Warrants |
| $ | 16,684,334 |
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| $ | — |
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| $ | — |
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| $ | 16,684,334 |
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Warrant liability – Private Placement Warrants |
| $ | 10,200,000 |
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| $ | — |
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| $ | — |
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| $ | 10,200,000 |
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The Company utilized a Monte Carlo simulation model to value the Public Warrant liabilities at the date of the Initial Public Offering and at March 31, 2021 and utilizes a Black-Scholes model to value the Private Warrant liabilities that are categorized within Level 3 at each reporting period, with changes in fair value recognized in the Statement of Operations. The2022 was estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility 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 on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions used:
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| Six months ended June 30, |
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| 2023 |
| 2022 |
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Approximate risk‑free rate |
| | 4.17 | % | | 2.84 | % | |
Volatility |
| | 46.91 | % | | 44.69 | % | |
Average expected life (years) |
| | 6 years | | | 6 years | | |
Dividend yield |
| | — | % | | — | % | |
Weighted‑average grant date fair value | | $ | 2.80 | | $ | 7.26 | | |
Estimated fair value of total stock options granted | | $ | 7,815 | | $ | 5,659 | | |
Note 9 – Earnings (Loss) Per Share
Basic earnings (loss) per share represents net income (loss) attributable to common stock divided by the basic weighted average number of common stock outstanding during the period.
Due to the net loss for the three and six months ended June 30, 2023, diluted loss per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive. Due to the net income for the three and six months ended June 30, 2022, diluted earnings per share was computed with consideration to potentially dilutive instruments. Warrants outstanding in 2023 and 2022 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 stock.
The table below sets forth the basic and diluted earnings (loss) per share calculation for the three and six months ended June 30, 2023 and 2022.
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| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
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| 2023 | | 2022 | | 2023 | | 2022 | | ||||
Net income (loss) attributable to common stockholders | | $ | (12,205) | | $ | 13,667 | | $ | (31,365) | | $ | 3,321 | |
Weighted average shares outstanding – basic | | | 178,063,573 | | | 174,128,230 | | | 177,502,037 | | | 173,266,760 | |
Weighted average shares outstanding – diluted | | | 178,063,573 | | | 174,703,533 | | | 177,502,037 | | | 173,566,001 | |
Basic and diluted earnings (loss) per share | | $ | (0.07) | | $ | 0.08 | | $ | (0.18) | | $ | 0.02 | |
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As of the three and six months ended June 30, 2023, potentially dilutive securities excluded from the diluted loss per share calculation are as illustrated in the table below. Additionally, for the three and six months ended June 30, 2022, potentially dilutive securities included from the diluted earnings per share calculation are as follows (in shares):
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| | Six Months Ended June 30, | | ||
| | 2023 |
| 2022 | |
Warrants | | 19,333,303 |
| 19,333,303 | |
2014 & 2021 Equity Incentive Plan - Stock Options | | 25,892,666 |
| 27,161,312 | |
2021 Equity Incentive Plan - RSUs | | 2,474,393 |
| 1,674,284 | |
2021 Employee Stock Purchase Plan - Common Stock | | 46,352 | | — | |
Contingently Issuable Common Stock | | 59,055 | | — | |
Total potentially dilutive securities | | 47,805,769 | | 48,168,899 | |
Note 10 – Leases
The Company leases its two facilities and certain equipment. Fixed rent generally escalates each year, and the Company is responsible for a maturity similar to the expected remaining lifeportion of the warrants. landlords’ operating expenses such as property tax, insurance, and common area maintenance.
The expected lifeCompany’s facility in Louisville, Colorado, is under a noncancelable operating lease with a maturity date in September 2029. In 2022, the Company amended the lease to incorporate a prior subleased space into the base lease and extend the term of the warrants is assumedlease. The Company has the right to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, whichrenew this lease for an additional five-year period.
On September 1, 2021, the Company anticipatesentered into an industrial operating lease agreement for its facility in Thornton, Colorado, with the initial term through March 31, 2029. Under this operating lease, the Company has one option to remain at zero.
The significant unobservable inputs usedrenew for five years, which has been included in the Monte Carlo simulation model to valuecalculation of lease liabilities and right-of-use assets at the Public Warrants at theadoption date of the Initial Public Offering andlease accounting standard on January 1, 2022, as the Black-Scholes model to measure the Private Warrant liabilities that are categorized within Level 3exercise of the option was reasonably certain. As the renewal rent has not been negotiated, the Company used an estimated rent rate which approximated the fair market rent at adoption of ASC 842 on January 1, 2022 for the extension period.
The Company has certain equipment leases classified as finance leases as of June 30, 2023.
The Company’s leases do not have any contingent rent payments and do not contain residual value hierarchyguarantees.
The components of lease expense are as follows:
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| As of March 26, 2021 (initial measurement) |
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| As of March 31, 2021 |
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Stock price |
| $ | 9.52 |
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| $ | 9.48 |
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Strike price |
| $ | 11.50 |
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| $ | 11.50 |
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Term (in years) |
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| 6.02 |
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| 6.00 |
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Volatility |
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| 23.6 | % |
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| 23.6 | % |
Risk-free rate |
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| 1.09 | % |
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| 1.16 | % |
Dividend yield |
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| 0.0 | % |
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| 0.0 | % |
Fair value of warrants |
| $ | 1.44 – 1.53 |
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| $ | 1.43 – 1.53 |
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| Three Months Ended |
| Six Months Ended | | ||
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| June 30, 2023 |
| June 30, 2023 | | ||
Finance lease costs: |
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Amortization of right-of-use assets | | $ | 47 | | $ | 91 | |
Interest on lease liabilities | |
| 13 | |
| 25 | |
Operating lease costs | |
| 290 | |
| 580 | |
Total lease expense | | $ | 350 | | $ | 696 | |
The following table provides a summarycomponents of the changes in fair valuecash flow information related to leases are as follows:
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| Three Months Ended |
| Six Months Ended | | ||
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| June 30, 2023 |
| June 30, 2023 | | ||
Operating outgoing cash flows – finance lease | | $ | 14 | | $ | 26 | |
Financing outgoing cash flows – finance lease | |
| 74 | |
| 141 | |
Operating outgoing cash flows – operating lease | |
| 283 | |
| 567 | |
Right-of-use assets obtained in exchange for new finance lease liabilities: | | | 79 | | | 89 | |
Right-of-use assets obtained in exchange for new operating lease liabilities: | | | — | | | — | |
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| | | |
| June 30, 2023 | ||
Finance lease | | ||
Weighted-average remaining lease term – finance lease (in years) | 2.98 | | |
Weighted-average discount rate – finance lease | 6.2 | % | |
Operating lease | | ||
Weighted-average remaining lease term – operating lease (in years) | 9.71 | | |
Weighted-average discount rate – operating lease | 6.9 | % |
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| Private Placement |
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| Public |
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| Level 3 Warrant Liabilities |
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Beginning balance as of January 29, 2021 (inception) |
| $ | - |
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| $ | - |
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| $ | - |
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Initial measurement at March 26, 2021 |
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| 10,200,000 |
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| 16,800,000 |
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| 27,000,000 |
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Change in valuation inputs or other assumptions |
| - |
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| (116,666 | ) |
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| (116,666 | ) | |
Fair value as of March 31, 2021 |
| $ | 10,200,000 |
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| $ | 16,683,334 |
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| $ | 26,883,334 |
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There were 0 transfers between Levels 1, 2 or 3As of June 30, 2023, future minimum payments during the periodnext five years and thereafter are as follows:
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Fiscal year |
| Finance Lease |
| Operating Lease | ||
2023 (remaining six months) | | $ | 174 | | $ | 571 |
2024 | | | 349 | | | 1,173 |
2025 | | | 234 | | | 1,210 |
2026 | | | 109 | | | 1,248 |
2027 | | | 37 | | | 1,288 |
2028 | | | 16 | | | 1,329 |
Thereafter | | | — | | | 5,244 |
Total | | | 919 | | | 12,063 |
Less present value discount | | | 77 | | | 3,158 |
Total lease liabilities | | $ | 842 | | $ | 8,905 |
Note 11 – Related Party Transactions
During the three and six months ended June 30, 2023, the Company recognized $3,470 and $6,470, respectively, of revenue related to the BMW joint development agreement. As of June 30, 2023 the Company recorded $2,477 of accounts receivable related to the BMW joint development agreement.
Note 12 – Income Taxes
The Company’s effective tax rate was 0.00% and 0.27% for the three months ended June 30, 2023 and 2022, respectively, and 0.00% and 0.49% for the six months ended June 30, 2023 and 2022, respectively. The change in the effective tax rate between periods was due to the Company was being in a full valuation allowance for the three and six months ended June 30, 2023.
Note 13 – Contingencies
In the normal course of business, the Company may be party to litigation from January 29, 2021 (inception)time to March 31, 2021.
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Note 9 — Subsequent Events
Management has evaluatedtime. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the impact of subsequent events through the date the financial statements were issued. All subsequent events required to be disclosed are included in these financial statements.Company.
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations |
References to the “Company,” “our,” “us” or “we” refer to Decarbonization Plus Acquisition Corporation III. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unauditedconsolidated financial statements and therelated notes thereto containedincluded elsewhere in Item 1. of this report. Certain information contained in theReport. The following discussion and analysis set forth below includescontains forward-looking statements that involvereflect 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. uncertainties that may be outside of our control. Our actual results maycould differ materially from those anticipateddiscussed in these forward-looking statements as a result of many factors.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that mightcould cause or contribute to such a discrepancydifferences include, but are not limited to, those describedidentified below and those discussed elsewhere in this Report, under Part I, Item 1A. “Risk Factors” of our 2022 Form 10-K, and under “Part II, Item 1A. Risk Factors” in our Q1 Form 10-Q, 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 our 2022 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.
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Overview
We are developing solid state battery technologies to enable the next generation of rechargeable batteries for the fast-growing EV and other Securitiesmarkets.
Our core technology is our proprietary sulfide-based solid electrolyte material, which replaces the liquid or gel electrolyte used in conventional lithium-ion batteries. We believe that our electrolyte material can enable extended driving range, longer battery life, improved safety, and Exchange Commission (“SEC”) filings.lower costs compared to conventional lithium-ion.
OverviewWe also are designing and developing solid state cells that utilize our electrolyte in the cathode, anode, and separator layers. We currently produce 0.2 Ah, 2 Ah, 20 Ah, and EV cells on two pilot lines using established manufacturing processes.
We have partnered with industry leaders, including Ford, BMW, and SK On Co., Ltd. We are working closely with each of these partners to refine and validate our cell designs and electrolyte material with the ultimate goal to commercialize our technologies. Our business model – selling our electrolyte to cell manufacturers and licensing our cell designs and manufacturing processes – distinguishes us from many of our competitors who plan to be commercial battery manufacturers. Ultimately, we endeavor to be a leading producer and distributor of sulfide-based solid electrolyte material for powering both EVs and other applications. Since we do not intend to commercially produce battery cells, we expect to invest less than other development-stage battery companies that plan to commercially manufacture their own cell designs and construct battery production facilities.
The products we currently make are in the development stage and require continued development and validation before we can commercialize either our electrolyte or cell technology.
Recent Business Highlights
● | SP2 commenced electrolyte powder production in April, began scaling production, and is meeting internal performance and quality targets. |
● | Continued execution on JDAs and extended JDA with Ford. |
● | Received positive feedback from industry leaders on initial electrolyte powder sampling activities. |
● | EV cell production increased and improved 20 Ah cell yields, keeping the company on track for 2023 delivery of A-sample EV cells to partners and delivery of EV cells to BMW for demo car program. |
● | Second half of 2023 is focused on continuing electrolyte scaling and sampling, optimizing cell production processes, improving cell performance, and delivering cells to partners. |
● | Appointed John Van Scoter as President and Chief Executive Officer. |
Key Factors Affecting Operating Results
We are a blank check company incorporated as a Delaware corporationresearch and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “initial business combination”). Our Sponsor is Decarbonization Plus Acquisition Sponsor III LLC, a Delaware limited liability company (“Sponsor”) and an affiliate of Riverstone Investment Group LLC, a Delaware limited liabilitydevelopment-stage company and its affiliates (“Riverstone”). Although we may pursue an acquisition opportunity in any business or industry, we intend to capitalize on the Riverstone platform to identify, acquire and operate a business in industries that may provide opportunities for attractive risk-adjusted returns in one of the multiple sectors that may advance the objectives of global decarbonization. This includes the energy and agriculture, industrials, transportation and commercial and residential sectors.
The Registration Statement for our initial public offering was declared effective on March 23, 2021 (the “Public Offering”). On March 23, 2021, (the “Closing Date”) we consummated the Public Offering of 35,000,000 units (the “Units”) at $10.00 per Unit, generating gross proceeds of $350.0 million, and incurring transaction costs of approximately $20.0 million, consisting of $7.0 million of underwriting fees, $12.3 million of deferred underwriting fees and approximately $679,000 of other offering costs. The underwriters were granted a 45-day option from the date of the final prospectus relating to the Public Offering to purchase up to 5,250,000 additional units to cover over-allotments, if any, at $10.00 per unit, less underwriting discounts and commissions. As of March 31, 2021, the underwriters’ over-allotment option hashave not been exercised.
Simultaneously with the consummation of the Public Offering, we consummatedgenerated significant revenue through the sale of 6,666,667 Private Placement Warrants atour electrolyte or licensing of our cell designs. Our ability to commercialize our products depends on several factors that present significant opportunities for us but also pose material risks and challenges, including those discussed in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” appearing in this Report, which are incorporated by reference.
Prior to reaching commercialization, we must test and validate our products to ensure they meet the performance and safety requirements of our customers. We also will have to negotiate licensing and supply contracts with our customers on terms and conditions that are mutually acceptable. We will need to scale production of our electrolyte material to satisfy anticipated demand. All of these factors will take time and affect our operating results. Since many factors are difficult to quantify, our actual operating results may be different than we currently anticipate.
Our revenue generated to date has primarily come from research and development performance on government contracts and research and development licensing activities. We have deployed and are deploying substantial capital to expand our production
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capabilities and engage in research and development programs. We also continue to incur significantly more administrative expenses as a pricepublicly traded company.
In addition to meeting our development goals and reaching commercialization, future growth and demand for our products will be highly dependent upon market adoption of $1.50 per Private Placement Warrant inEVs. 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. As a private placementresearch and development company with no commercial operations, our activities to our Sponsordate have been limited and independent directors, generating gross proceeds of $10.0 million (the “Private Placement”).
Approximately $350.0 million ($10.00 per Unit) of the net proceeds of the Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”) locatedwere conducted primarily in the United States with the Continental Stock Transfer & Trust Company,States. Our historical results are reported under GAAP and invested only in U.S. “government securities,” withindollars.
Results of Operations
Comparison of the meaningThree and Six Months Ended June 30, 2023 to the Three and Six Months Ended June 30, 2022
During the three and six months ended June 30, 2023, we expanded and accelerated our development efforts through increased capital and operational investments. We continued to invest in talent while expanding our facilities, production equipment, and capabilities. We expect to continue to increase our spending in all operational areas through the remainder of 2023 in order to execute our development strategy.
The following table is a consolidated summary of our operating results for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | | | |
| | Six Months Ended June 30, | | | | | |
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(in thousands) |
| 2023 |
| 2022 |
| Change |
| % |
| | 2023 |
| 2022 |
| Change |
| % |
| | ||||||
Revenue | | $ | 4,906 | | $ | 2,582 | | $ | 2,324 | | 90 | % | | $ | 8,698 | | $ | 4,778 | | $ | 3,920 | | 82 | % | |
Operating Expenses | | | | | | | | | |
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Direct costs | | | 6,897 | | | 2,987 | |
| 3,910 |
| 131 | % | |
| 13,171 | | | 5,017 | |
| 8,154 |
| 163 | % | |
Research and development | | | 14,508 | |
| 8,440 | |
| 6,068 |
| 72 | % | |
| 26,156 | | | 15,101 | |
| 11,055 |
| 73 | % | |
Selling, general and administrative | | | 5,673 | |
| 5,851 | |
| (178) |
| (3) | % | |
| 12,862 | | | 10,670 | |
| 2,192 |
| 21 | % | |
Total operating expenses | | | 27,078 | |
| 17,278 | |
| 9,800 |
| 57 | % | |
| 52,189 | | | 30,788 | |
| 21,401 |
| 70 | % | |
Operating Loss | | | (22,172) | |
| (14,696) | |
| (7,476) |
| (51) | % | |
| (43,491) | | | (26,010) | |
| (17,481) |
| (67) | % | |
Nonoperating Income and Expense | | | | | | | |
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Interest income | | | 4,993 | | | 931 | |
| 4,062 |
| 436 | % | |
| 9,827 | | | 1,171 | |
| 8,656 |
| 739 | % | |
Change in fair value of warrant liabilities | | | 4,987 | | | 27,473 | | | (22,486) | | (82) | % | | | 2,325 | | | 28,183 | | | (25,858) | | (123) | % | |
Interest expense | | | (13) | | | (5) | |
| (8) |
| 160 | % | |
| (26) | | | (10) | |
| (16) |
| 160 | % | |
Total nonoperating income and expense | | | 9,967 | |
| 28,399 | | $ | (18,432) |
| (65) | % | | $ | 12,126 | | | 29,344 | | $ | (17,218) |
| (59) | % | |
Pretax Income (Loss) | | | (12,205) | |
| 13,703 | | | (25,908) | | NM | | | | (31,365) | | | 3,334 | | | (34,699) | | NM | | |
Income tax benefit | | | — | |
| 36 | |
| (36) |
| NM | | |
| — | | | 13 | |
| (13) |
| NM | | |
Net Income (Loss) | | $ | (12,205) | | $ | 13,667 | |
| (25,872) |
| NM | | |
| (31,365) | | $ | 3,321 | |
| (34,686) |
| NM | | |
Net Income (Loss) Attributable to Common Stockholders | | $ | (12,205) | | $ | 13,667 | | $ | (25,872) |
| NM | | | $ | (31,365) | | $ | 3,321 | | $ | (34,686) |
| NM | | |
Other Comprehensive Income (Loss) | | | 1,098 | | | (961) | | | 2,059 |
| NM | | |
| (213) | | | (1,291) | | | 1,078 |
| NM | | |
Comprehensive Income (Loss) Attributable to Common Stockholders | | $ | (11,107) | | $ | 12,706 | | $ | (23,813) |
| NM | | | $ | (31,578) | | $ | 2,030 | | $ | (33,608) |
| NM | | |
NM = Not meaningful
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The key factors driving our results of operations for the three and six months ended June 30, 2023, including our increased operating loss as compared to the corresponding periods in 2022, were as follows:
● | Revenue and direct costs – revenue and related direct costs from the execution of our JDAs drove the overall increase for the periods, while revenue and direct costs from performance on government contracts decreased slightly. We expect revenue and related direct costs to increase in the second half of 2023 as we execute on JDA deliverables and continue to provide samples to third parties and potential customers. |
● | Research and development – our research and development costs increased for the periods primarily as a result of increased labor and material costs as we expanded the development efforts of our battery cells and electrolyte material. We expect our development costs to continue to increase as we continue to accelerate both the pace and scope of our development efforts. |
● | Selling, general and administrative – our selling, general and administrative costs decreased in the three months ended June 30, 2023 primarily due to reduced use of outside professional services and increased in the six months ended June 30, 2023 primarily due to additional planned hiring, and workforce development and training, as we have increased our headcount to over 250 people, as well as enterprise resource planning system costs and implementation efforts. |
● | Operating expenses – non-cash stock compensation costs for the periods increased across direct costs, research and development costs, and selling, general and administrative expenses related to our increased headcount. |
● | Nonoperating income – our nonoperating income decreased for the periods primarily due to loss on fair value adjustment of warrant liabilities, partially offset by strategic cash investments in A-rated investments, which increased both our interest income and other income. |
Liquidity and Capital Resources
Sources of Liquidity
Our sources of cash have historically been primarily derived from the sale of equity, with a small portion coming from performance on government contracts and commercial revenues.
As of June 30, 2023 and December 31, 2022, we had total liquidity, as set forth in Section 2(a)(16)below:
| | | | | | | |
(in thousands) |
| June 30, 2023 | | December 31, 2022 | | ||
Cash and cash equivalents | | $ | 28,439 | | $ | 50,123 | |
Marketable securities | |
| 192,694 | |
| 272,957 | |
Long-term investments | |
| 222,255 | |
| 172,974 | |
Total liquidity | | $ | 443,388 | | $ | 496,054 | |
Short-Term Liquidity Requirements
We anticipate that our most significant capital expenditures for the remainder of the Investment Company Act, with a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by
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the Company, until the earlier of: (i) the completion2023 will relate to finishing construction of our initial business combinationelectrolyte production and (ii) the distribution of the Trust Account as otherwise permitted underdevelopment facility. In addition, our amendedshort-term liquidity requirements include operating and restated certificate of incorporation.capital expenses needed to further our technology development programs. We expect to fund our short-term liquidity requirements through our cash on hand and other liquid assets.
Long-Term Liquidity Requirements
If we are unableWe believe that our cash on hand is sufficient to complete an initial business combination within 24 months from the closing of the Public Offering, or March 26, 2023, we will (i) cease all operations exceptmeet our operating cash needs (including expenditures for the purposeincreased pace and scope of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our only activities from January 29, 2021 (inception) to March 31, 2021 related to our formation and the Public Offering,development as well as due diligence costs incurred to identify a targetincreased public company costs) and working capital and capital expenditure requirements for a potential Business Combination. period of at least the next 12 months and longer term until we generate adequate cash flows from licensing activities and/or electrolyte sales.
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We may, however, need additional cash if there are material changes to our business conditions or other developments, including changes to our operating plan, development progress, delays in negotiations with OEMs, cell manufacturers, or other suppliers, market adoption of EVs, supply chain challenges, competitive pressures, inflation, and regulatory developments. To the extent that our resources are insufficient to satisfy our cash requirements, we may need to seek additional 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 the 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:
| | | | | | | |
| | Six Months Ended June 30, | | ||||
(in thousands) |
| 2023 |
| 2022 | | ||
Net cash used in operating activities | | $ | (36,304) | | $ | (22,958) | |
Net cash provided by (used in) investing activities | | $ | 14,486 | | $ | (189,158) | |
Net cash provided by financing activities | | $ | 134 | | $ | 272 | |
Cash used in operating activities:
Cash used in operating activities increased from June 30, 2022 to 2023. The increase was primarily attributable to our operating loss, which was driven by continued increase in research and development costs and selling, general and administrative expenses. We continue to expect cash used in operating activities to increase as we accelerate both the pace and scope of our development efforts and work to achieve commercialization of our products. We continue to anticipate increased expenditures for research and development and selling, general and administrative functions to support growth of our development efforts. In addition, we expect to incur increased operating expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as costs in the pursuitsecond half of our acquisition plans.2023 as we execute on BMW JDA deliverables.
Cash flows provided by (used in) investing activities:
For the periodCash provided by investing activities increased from January 29, 2021 (inception)June 30, 2022 to March 31, 2021, we had a net loss of approximately $1.1 million, which consisted of approximately $0.2 million in general and administrative expenses, including due diligence costs incurred in the pursuit of our acquisition plans, $1.0 million of offering costs allocated to warrant liabilities offset by $0.1 million2023 primarily due to the changenet effect of increased purchase and sales of marketable securities partially offset by increases in the fair value of warrant liabilities.
Liquiditycapital expenditures and patent investments. Capital Resources
Our liquidity needs up to the Public Offeringexpenditures were satisfied through receipt of a $25,000 capital contribution from our Sponsor in exchangeprimarily for the issuance of Class B common stock (the “Founder Shares”) to our Sponsor and a loan from our Sponsor for an aggregate amount of $300,000 to cover organizational expenses and expenses related to the Public Offering pursuant to a promissory note (the “Note”). As of March 31, 2021, no amount has been drawn down or is outstanding under the Note. Subsequent to the consummation of the Public Offering, our liquidity needs have been satisfied through the net proceeds of approximately $1.1 million from the Private Placement held outside of the Trust Account.
In addition, in the short term and long term, in connection with a business combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. As of March 31, 2021, there were no amounts outstanding under any working capital loans.
Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares will be entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $7.0 million in the aggregate, paid upon closing of the Public Offering.
In addition, $0.35 per unit, or approximately $12.3 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Administrative Services Agreement
Commencing on the date that our securities were first listed on the NASDAQ Capital Market and continuing until the earlier of our consummation of an initial business combination or our liquidation, we have agreed to pay an affiliate of our Sponsor a total of $10,000 per month for office space, utilities, secretarial support and administrative services. We recorded an aggregate of $1,935 for the period from January 29, 2021 (inception) to March 31, 2021, in general and administrative expenses in connection with the related agreement in the accompanying statement of operations.
As of March 31, 2021, we recorded an aggregate of approximately $1,935 in related party accrued expenses.
Critical Accounting Policies
Basis of Presentation
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and expenses during the periods reported. Actual results could materially differ from those estimates.
Warrant Liabilities
We account for the warrants issuedcustom manufacturing equipment in connection with our initial public offeringexpansion of electrolyte production capabilities. We expect cash used in accordance with Accounting Standards Codification (“ASC”) 815-40, Derivativesinvesting activities to increase as we finalize the build out of our electrolyte production facility and Hedging—Contractsincrease its production capabilities, and as we increase our electrolyte production scale. Each of our locations will continue to require investment in Entity’s Own Equity (“ASC 815”), under whichspecialized equipment to facilitate the warrants do not meet the criteria for equity classificationmanufacturing process of our electrolyte material and must be recorded as liabilities.battery cells. As the warrants meet the definition of a derivative as contemplated in ASC 815, the Warrantsour production processes are measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognizedscaled in the Statements of Operations in the period of change.future, especially with respect to our electrolyte material, we expect capital expenditures to increase.
Cash flows provided by financing activities:
Common stock subject to possible redemption
We accountNet cash provided by financing activities for the Class Asix months ended June 30, 2023 and 2022 was primarily from the cash exercise of stock options and proceeds from the sale of common stock subject to possible redemption in accordance withunder the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.
Impact of COVID-19ESPP.
Our Sponsor continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of the balance date.
Recent Accounting Pronouncements
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We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on our financial statements.
Off-Balance Sheet Arrangements
As of the date of this Quarterly Report, we didWe are not havea party to any off-balance sheet arrangements, as defined under SEC rules.
Critical Accounting Estimates
Except as discussed in Item 303(a)(4)(ii)Note 2 of Regulation S-K.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our unaudited financial statements may not be comparableincluded in this Report, there were no significant and material changes in our critical accounting policies and use of estimates during the three and six months ended June 30, 2023, as compared to companies that comply with new or revised accounting pronouncements asthose disclosed in “Part II, Item 7. Management’s Discussion and Analysis of public company effective dates.Financial Condition and Results of Operations—Critical Accounting Estimates” in our 2022 Form 10-K.
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Recent Accounting Pronouncements
As an “emerging growth company,” we are not requiredSee Note 2 to among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and theaudited financial statements (auditor discussion and analysis), and (iv) disclose comparisons of the CEO’s compensation to median employee compensation. These exemptions will applyincluded in our 2022 Form 10-K for a period of five years following the completion of our Public Offering or until we otherwise no longer qualify as an “emerging growth company.”more information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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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.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controlsIn designing and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded thatevaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, 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, 2021, due solely toJune 30, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the material weakness in our internal control over financial reporting related to issues to the accounting for the Company’s warrants, as described below. In lightend of this material weakness, management performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.covered by this Report, our disclosure controls and procedures were effective.
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Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there has beenThere was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2023 covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting as the circumstances leading to the revision of the financial statements were not yet identified.reporting.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC (the “SEC Staff”) issued a statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity, in accordance with ASC 815. Since issuance on March 26, 2021, the Company’s warrants, which includes (i) 11,416,667 redeemable warrants included as a part of the Units issued by the Company in the Public Offering (the “Public Warrants”) and (ii) 6,666,667 Private Placement Warrants (together with the Public Warrants, the “Warrants”), were accounted for as equity within the Company’s financial statements.
After consideration of the guidance in the SEC Staff Statement, the Company concluded that the Warrants should be accounted for as a liability and measured at fair value with changes in fair value for each period reported in the Company’s statement of operations. The Company has reflected this revision as a correction in the Company’s financial statements as of and for the period from January 29, 2021(inception) to March 31, 2021. Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
PART II – OTHER INFORMATION
None.Item 1. Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
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In addition toItem 1A. Risk Factors
Our business, prospects, reputation, results of operations and financial condition, as well as the other information set forthprice of our common stock and warrants, can be affected by a number of factors, whether currently known or unknown, including those described in this Quarterly Report on“Part I, Item 1A. Risk Factors” of our 2022 Form 10-K and “Part II, Item 1A. Risk Factors” of our Q1 Form 10-Q, you should carefully consider the risks discussedas such descriptions may be updated or amended in our final prospectus filedfuture filings we make with the SEC on March 25, 2021 (“Final Prospectus”). AdditionalSEC. When any one or more of these risks and uncertainties not currently knownmaterialize from time to us or that we currently deem to be immaterial also may materially adversely affecttime, our business, reputation, results of operations and financial condition, or future results.as well as the price of our common stock and warrants, can be materially and adversely affected. There have been no material changes in theto our risk factors discussedsince our Final Prospectus except as described below.Q1 Form 10-Q.
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Item 6. Exhibits
Our Warrants are accounted for as liabilities and
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| | | | Incorporated by Reference | ||||||
Exhibit Number | | Description | | Schedule Form | | File Number | | Exhibit/Annex | | Filing Date |
2.1 | | | 424B3 | | 333-258681 | | Annex A | | November 10, 2021 | |
2.2 | | | 424B3 | | 333-258681 | | Annex A-1 | | November 10, 2021 | |
3.1 | | | 8-K | | 001-40284 | | 3.1 | | December 13, 2021 | |
3.2 | | | 8-K | | 001-40284 | | 3.1 | | November 21, 2022 | |
10.1± | | | 8-K | | 001-40284 | | 10.1 | | July 5, 2023 | |
10.2# | | | 8-K | | 001-40284 | | 10.1 | | May 31, 2023 | |
31.1* | | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | | | | | | | | |
31.2* | | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | | | | | | | | |
32.1** | | | | | | | | | | |
32.2** | | | | | | | | | | |
101.INS* | | XBRL Instance Document – the instance document does not appear in the Interactive Data file because its Inline XBRL tags are embedded within the Inline XBRL document. | | | | | | | | |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase | | | | | | | | |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Document | | | | | | | | |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase | | | | | | | | |
104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | |
* Filed herewith.
** Furnished herewith.
± Certain portions of this exhibit have been omitted in accordance with Regulation S-K Item 601. The Company agrees to furnish an unredacted copy of the changes in value of our Warrants could have a material effect on our financial results.
On April 12, 2021,exhibit to the SEC Staff issued the SEC Statement, which focused on certain settlement terms and provisions related to certain tender offers followingupon request.
# Indicates a business combination, which terms are similar to those contained in the warrant agreement governing our Warrants. As a resultmanagement or compensatory plan.
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SIGNATURE
As a result, included on our balance sheet as of March 31, 2021 are derivative liabilities related to the embedded features contained within our Warrants. ASC 815 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors which are outside of our
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control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.
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All recent unregistered sales of securities have been previously reported.
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None.
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Not applicable.
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None.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: August 9, 2023 |
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| By: | /s/ John Van Scoter | |
| Name: | John Van Scoter | |
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| Kevin Paprzycki |
| Title: | Chief |
| (Principal Financial and Accounting Officer) |
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