Solid Power(US:SLDP)2023-03-01 11:04PART I Item 1. Business Solid Power develops solid-state battery technologies for EVs, selling electrolyte and licensing cell designs, with 2022 production and partnership progress - Solid Power is developing solid-state battery technologies, focusing on proprietary sulfide-based solid electrolyte material and cell designs for EVs and other markets303132 - The business model is to sell electrolyte material and license cell designs and manufacturing processes, aiming to be a leading producer and distributor of sulfide-based solid electrolyte material, not a commercial battery manufacturer3538 - Key 2022 achievements include starting construction of a pilot electrolyte production line (expected online Q1 2023, 30 metric tons/year capacity), installing an EV cell production line (designed for 300 EV cells/week), delivering hundreds of 20 Ah cells to partners, and entering an R&D-only license agreement with BMW for cell manufacturing replication42434445 - The company's technology aims to provide extended driving range, longer battery life (improved high-temperature stability), improved safety (higher ignition point than liquid electrolytes), and lower production costs (compatible with existing manufacturing processes, potential 90% cathode cost reduction with nickel/cobalt-free cells)36374041 - Current R&D focuses on expanding sulfide-based solid electrolyte production (from 2 to 30 metric tons/year), developing second-generation electrolytes with improved ionic conductivity, increasing Li2S production (sourcing and in-house methods), and driving cell performance improvements to meet OEM specifications (energy density, pressure, cycle life, low-temperature performance, safety)47484950 - The company is pursuing next-gen battery cell innovations, including a $5.6 million grant for nickel- and cobalt-free battery cells and research on lithium metal and anode-free cells52 Automotive Qualification Stages | Category | Stage | Standard | Solid Power Cell Format | | :------- | :---- | :------- | :---------------------- | | Pre-A | Proof of concept | Produce cells to demonstrate functionality towards basic product requirements. | 0.2 Ah, 2 Ah, 20 Ah, and EV | | A-sample | Cell concept validation | 1. Evaluate multiple designs against customer requirements. 2. Suppliers tested and selected ahead of B-sample. | EV | | B-sample | Cell design validation | 1. Cell design is frozen. 2. Samples are produced on pilot equipment. 3. Ensure sample performance meets customer specifications. 4. Module and pack testing and validation begins. | EV | | C-sample | Cell process validation | 1. Frozen design manufactured on production equipment. 2. Ensure production samples continue to meet customer specifications. 3. Continued pack testing and prototype vehicle integration. | EV | | D-sample | Cell production validation | 1. Full cell production rates, quality and process certifications. 2. Vehicle level testing. | EV | | Product | Sales product | 1. Supply customer at requested volumes. | EV | - Solid Power is currently producing Pre-A sample 20 Ah and EV cells and aims to formally enter A-sample testing with EV cells in 202354 - Partnerships with OEMs (BMW, Ford) and cell manufacturers (SK On) are non-exclusive, allowing for additional relationships. The company intends to partner for C-sample and D-sample production due to the requirement for production equipment5657 - The company's intellectual property is protected by patents, patent applications, and trade secrets, including exclusive licenses from the University of Colorado Boulder and Oak Ridge National Laboratory. As of February 1, 2023, it owned or exclusively licensed 13 issued U.S. patents and 38 pending U.S. patent applications71 - The company operates in a highly competitive and evolving battery cell market, competing with established and emerging EV battery cell producers and material suppliers. Success depends on electrolyte performance, cost, safety, energy density, battery life, and non-technical factors like brand and customer relationships727376 - As of February 1, 2023, Solid Power employed 236 full-time employees, representing a growth of over 100 employees in the past year, with a focus on competitive compensation, benefits, and equity compensation to attract and retain talent8283 Item 1A. Risk Factors Solid Power faces risks from R&D stage operations, including commercialization, market adoption, partnership dependencies, financial losses, and intellectual property protection - Developing solid-state battery cells for high-volume production with acceptable performance, yields, and costs is challenging and unpredictable, potentially delaying revenue generation from licensing or electrolyte sales9899 - There is no established commercial market for sulfide-based electrolytes, and the company's ability to attract customers and compete depends on successfully developing battery cells that outperform traditional lithium-ion batteries104 - The company's cells require extensive safety testing before EV installation, and any identified safety issues could lead to design changes, delays, or suspension of commercialization107 - Reliance on non-exclusive JDAs with BMW, Ford, and SK On means partners may pursue other technologies or terminate agreements if milestones are not met, potentially impairing revenue and reputation109110 - The company has not yet reached commercial agreements on economic terms for cell technology supply or electrolyte sales with partners, making revenue projections uncertain112114 - Solid Power is a research and development stage company with a history of financial losses ($59.1 million operating loss in 2022, $19.0 million accumulated deficit) and expects to incur significant expenses and continuing losses for the foreseeable future159 - The company relies heavily on owned and exclusively-licensed intellectual property (patents, trade secrets) and faces risks of unauthorized use, infringement claims, and challenges in maintaining and enforcing these rights globally148149150154 - Future growth is highly dependent on consumer adoption of EVs, and the market is highly competitive with evolving technologies and regulatory landscapes142136137138 - As a public company, Solid Power incurs significant expenses and administrative burdens, including compliance costs, and faces risks related to managing growth and retaining key personnel177178165130 Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments236 Item 2. Properties Solid Power operates two leased facilities in Colorado for cell production, R&D, and electrolyte manufacturing, totaling approximately 104,000 square feet - Operates two leased facilities in Colorado: Louisville (29,000 sq ft, lease expires Sept 2029) for cell production, R&D, and small-scale electrolyte manufacturing; and Thornton (75,000 sq ft, lease expires March 2029) for pilot electrolyte production, R&D, and office space237238 Item 3. Legal Proceedings Solid Power is not currently involved in any litigation or legal proceedings expected to have a material adverse effect on its business - The company is not currently involved in any litigation or legal proceedings likely to have a material adverse effect on its business239 Item 4. Mine Safety Disclosures This item is not applicable to Solid Power, Inc - Mine Safety Disclosures are not applicable to the company240 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Solid Power's common stock and warrants trade on Nasdaq, with 34 common stock holders and four warrant holders as of February 27, 2023, and no recent unregistered sales or issuer purchases - Common stock and warrants are traded on Nasdaq under symbols "SLDP" and "SLDPW"243 - As of February 27, 2023, there were 34 holders of common stock and four holders of warrants244 - No recent sales of unregistered securities or issuer purchases of equity securities were reported245246 Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Solid Power, an R&D company, reported increased operating losses in 2022 due to higher R&D and G&A costs, offset by nonoperating income, maintaining strong liquidity for future capital expenditures - Solid Power is a research and development-stage company, with revenue primarily from government contracts and R&D licensing activities, not yet generating significant revenue from electrolyte sales or cell design licensing258260 Consolidated Summary of Operating Results (in thousands) | (in thousands) | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Change | % | | :--------------- | :--------------------------- | :--------------------------- | :----- | :-- | | Revenue | $ 11,789 | $ 2,712 | $ 9,077 | 335 % | | Direct costs | 9,592 | 3,073 | 6,519 | 212 % | | Research and development | 38,592 | 17,102 | 21,490 | 126 % | | Marketing and sales | 3,692 | 3,428 | 264 | 8 % | | General and administrative | 19,032 | 5,655 | 13,377 | 237 % | | Total operating expenses | 70,908 | 29,258 | 41,650 | 142 % | | Operating Loss | (59,119) | (26,546) | (32,573) | (123)% | | Total nonoperating income | $ 49,337 | $ 44,613 | $ 4,724 | NM | | Net Income (Loss) | $ (9,555) | $ 18,092 | $(27,647) | (153)% | | Comprehensive loss attributable to Common Stockholders | $(12,714) | $ 12,656 | $(25,370) | NM | - The increase in operating loss in 2022 was primarily due to increased research and development costs (up 126% to $38.6 million) and general and administrative expenses (up 237% to $19.0 million), driven by expanded development efforts and public company status265 - Nonoperating income increased in 2022 due to higher interest income from strategic cash investments and the absence of prior year's expense related to a manufacturing rights agreement termination, partially offset by a decrease in the gain on fair value adjustment of warrant liabilities266 Total Liquidity (in thousands) | (in thousands) | December 31, 2022 | December 31, 2021 | | :---------------- | :---------------- | :---------------- | | Cash and cash equivalents | $ 50,123 | $ 513,447 | | Marketable securities | 272,957 | 75,885 | | Long-term investments | 172,974 | — | | Total liquidity | $ 496,054 | $ 589,332 | - Anticipated 2023 capital and operational expenditures are between $50 million and $60 million, primarily for finishing the electrolyte facility and enhancing production capabilities274 - The company believes its cash on hand is sufficient to meet operating cash needs, working capital, and capital expenditure requirements for at least the next 12 months and longer term until adequate cash flows from licensing/electrolyte sales are generated275 Cash Flows Summary (in thousands) | (in thousands) | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $ (33,824) | $ (25,440) | $(9,995) | | Net cash used in investing activities | $(429,985) | $ (88,883) | $(1,060) | | Net cash provided by financing activities | $ 485 | $ 622,796 | $ 5,395 | - Cash used in operating activities increased from 2021 to 2022 due to higher operating losses, driven by increased R&D and G&A expenses281 - Cash used in investing activities significantly increased from 2021 to 2022, primarily due to capital expenditures for custom manufacturing equipment, expansion of electrolyte production capabilities, and the installation of the EV line, as well as net purchases of marketable securities283 - Net cash provided by financing activities in 2022 was primarily from stock option exercises, a significant decrease from 2021 which included proceeds from the business combination and Series B Financing285 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Solid Power faces credit risks from cash, receivables, and marketable securities, mitigated by reputable financial institutions, with significant revenue concentration but no credit losses - The company is exposed to credit risk primarily from cash, accounts receivable, and marketable securities301302 - Credit risk is mitigated by depositing cash with large, reputable financial institutions and investing in high-credit-rated instruments302356 - A significant portion of revenue (82% in 2022, 87% in 2021) is concentrated among four customers, but no customer credit losses have been experienced303358 Item 8. Financial Statements and Supplementary Data This section presents Solid Power's audited consolidated financial statements for 2022, 2021, and 2020, prepared under GAAP, with an unqualified opinion from Ernst & Young LLP, noting a critical audit matter regarding warrant liability valuation - The consolidated financial statements for the years ended December 31, 2022, 2021, and 2020 are presented in accordance with U.S. GAAP308344 - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022308309320321 - A critical audit matter involved the valuation of the Private Placement Warrant Liability, specifically the judgmental nature of selecting the Black-Scholes model and its assumptions, particularly the volatility derived from guideline public companies314315 Consolidated Balance Sheets (in thousands) | (in thousands) | December 31, 2022 | December 31, 2021 | | :------------------------------ | :---------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $ 50,123 | $ 513,447 | | Marketable securities | 272,957 | 75,885 | | Total current assets | 327,808 | 594,377 | | Property, Plant and Equipment, net | 82,761 | 22,082 | | Long-term Investments | 172,974 | — | | Total assets | $ 594,446 | $ 617,680 | | Liabilities and Stockholders' Equity | | | | Accounts payable | $ 10,070 | $ 4,326 | | Deferred revenue | 4,050 | 500 | | Total current liabilities | 20,733 | 8,366 | | Warrant Liabilities | 9,117 | 50,020 | | Total liabilities | 39,074 | 59,015 | | Total stockholders' equity | 555,372 | 558,665 | | Total liabilities and stockholders' equity | $ 594,446 | $ 617,680 | Consolidated Statements of Operations (in thousands) | (in thousands) | For the Years Ended December 31, 2022 | For the Years Ended December 31, 2021 | For the Years Ended December 31, 2020 | | :------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Revenue | $ 11,789 | $ 2,712 | $ 2,103 | | Total operating expenses | 70,908 | 29,258 | 13,696 | | Operating Loss | (59,119) | (26,546) | (11,593) | | Total nonoperating income (expense) | 49,337 | 44,613 | (2,664) | | Net Income (Loss) | $ (9,555) | $ 18,092 | $ (14,375) | | Basic earnings (loss) per share | (0.05) | 0.13 | (0.21) | | Diluted earnings (loss) per share | (0.05) | 0.11 | (0.21) | Consolidated Statements of Cash Flows (in thousands) | (in thousands) | For the Years Ended December 31, 2022 | For the Years Ended December 31, 2021 | For the Years Ended December 31, 2020 | | :------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Net cash used in operating activities | $ (33,824) | $ (25,440) | $(9,995) | | Net cash used in investing activities | $(429,985) | $ (88,883) | $(1,060) | | Net cash provided by financing activities | $ 485 | $ 622,796 | $ 5,395 | | Net (decrease) increase in cash and cash equivalents | (463,324) | 508,473 | (5,660) | | Cash and cash equivalents at end of period | 50,123 | 513,447 | 4,974 | - The business combination on December 8, 2021, was accounted for as a reverse recapitalization, with Legacy Solid Power treated as the accounting acquirer. The equity structure was restated to reflect the Company's common stock shares343345347388389390 - Property, plant, and equipment, net, increased significantly from $22.1 million in 2021 to $82.8 million in 2022, primarily due to investments in commercial production equipment, laboratory equipment, leasehold improvements, and construction in progress for the second dry room, EV pilot line, and Thornton electrolyte production facility330397398399400 - Warrant Liabilities decreased from $50.0 million in 2021 to $9.1 million in 2022, with a gain recognized from changes in fair value of $40.9 million in 2022330423 - Total equity-based compensation costs increased from $2.7 million in 2021 to $8.7 million in 2022, with future unrecognized compensation costs related to unvested options at $19.3 million as of December 31, 2022440 - The company reported a net loss of $9.6 million in 2022, resulting in basic and diluted EPS of $(0.05)333453 - The company adopted new accounting standards for Leases (Topic 842) and Financial Instruments – Credit Losses (Topic 326) as of January 1, 2022, which resulted in the recognition of right-of-use assets and lease liabilities but did not materially affect the statement of operations or cash flows383384385 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Solid Power reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported480 Item 9A. Controls and Procedures Solid Power's disclosure controls were effective as of December 31, 2022, with the 2021 material weakness in complex transaction accounting remediated through personnel, technical accounting, and control framework enhancements - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2022481 - The material weakness in internal control over financial reporting identified in 2021, related to the review of complex transactions, was remediated as of December 31, 2022486487 - Remediation actions included hiring additional personnel, improving technical accounting capabilities, designing and implementing a formalized internal control framework, and strengthening control processes487 Item 9B. Other Information This item reports that there is no other information to disclose - No other information is reported under this item488 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Solid Power, Inc - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable489 PART III Item 10. Directors, Executive Officers and Corporate Governance Information on executive officers is provided, while other details on directors and corporate governance are incorporated by reference from the 2023 Proxy Statement - Information on executive officers is included in the report, while other details on directors and corporate governance are incorporated by reference from the 2023 Proxy Statement491 Item 11. Executive Compensation Executive compensation information is incorporated by reference from the company's 2023 Proxy Statement - Executive compensation information is incorporated by reference from the 2023 Proxy Statement492 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management, and related stockholder matters, is incorporated by reference from the 2023 Proxy Statement - Security ownership information for beneficial owners and management, and related stockholder matters, is incorporated by reference from the 2023 Proxy Statement493 Item 13. Certain Relationships and Related Transactions, and Director Independence Details regarding certain relationships, related transactions, and director independence are incorporated by reference from the 2023 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement494 Item 14. Principal Accounting Fees and Services Information concerning principal accounting fees and services is incorporated by reference from the company's 2023 Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the 2023 Proxy Statement495 PART IV Item 15. Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the 10-K report, including consolidated financial statements and various agreements, with many incorporated by reference - This section lists all exhibits and financial statement schedules, including consolidated financial statements, business combination agreements, equity incentive plans, and other legal documents498499500 - Many exhibits are incorporated by reference from prior SEC filings, such as Form 424B3, 8-K, S-4, and S-8498500 Item 16. Form 10-K Summary This item indicates that no Form 10-K summary is provided - No Form 10-K summary is provided507