Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

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The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Report. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs, and expected performance. For additional discussion, see "Cautionary Note Regarding Forward-Looking Statements" above. The forward-looking statements are dependent upon events, risks, and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Report, under "Part I, Item 1A. Risk Factors" of the 2025 Form 10-K, as such descriptions may be updated or amended in future filings we make with the SEC. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto of this Report and the 2025 Form 10-K. We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments, or otherwise, except to the extent that such disclosure is required by applicable law.

Overview

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

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2026 Development Objectives

We made progress on our 2026 development objectives as the solid-state battery landscape continues to evolve. Below is a summary of recent progress towards our goals.

Key Factors Affecting Operating Results

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

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

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

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

Basis of Presentation

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

Results of Operations

Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025

During the three months ended March 31, 2026, our capital and operational investments supported our key 2026 development objectives.

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Revenue and Grant Income

Revenue recognized consists of performance on our non-government contracts as well as certain government contracts. Grant income recognized consisted of performance on our assistance agreement, dated January 1, 2025 (as amended effective May 15, 2025 and amended and restated effective January 1, 2026, the "Assistance Agreement"), with the U.S. Department of Energy ("DOE").

We recognized $2.1 million of collaborative revenue for the three months ended March 31, 2026. The collaborative revenue mostly consisted of performance on our research and development technology license agreement (the "SK On R&D license"), line installation agreement, and electrolyte supply agreement with SK On (collectively, the "SK On Agreements"). During the three months ended March 31, 2026, we approached completion of site acceptance testing of the SK On line under the line installation agreement, which we completed in April 2026.

We recognized $1.0 million of government grant income for the three months ended March 31, 2026. Government grant income consists of grant income from the Assistance Agreement. The Assistance Agreement provides that the DOE will provide us with funding of up to $50 million for our installation of equipment necessary for the continuous production of sulfide-based solid electrolyte material. During the three months ended March 31, 2026, we began construction of the continuous electrolyte production pilot line.

Total revenue and grant income decreased $2.9 million for three months ended March 31, 2026 compared to the three months ended March 31, 2025 largely due to the timing and nature of milestone-based work under the SK On Agreements. For the remainder of 2026, we expect revenue recognition to continue to decrease relative to prior periods as we conduct validation activities under the SK On R&D license, construct the continuous electrolyte production pilot line, and provide electrolyte to our partners and customers.

Operating Expenses

Operating expenses decreased $0.6 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to the reduction in materials purchased related to research and development.

Direct Costs

Direct costs, which include labor, subcontractor, and material costs incurred in support of revenue-generating projects, increased $0.9 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase was mainly driven by the timing of milestone achievements under our collaborative agreements. In addition, the increase was due to increased costs associated with electrolyte product mix.

Research and Development

Research and development expenses consist of employee compensation and benefits for personnel engaged in research, engineering, manufacturing, chemistry, and technical operations. Research and development expenses also include costs related to our facilities and depreciation associated with plant and equipment used in our development activities.

Total research and development expenses decreased $1.3 million in the three months ended March 31, 2026 compared to the same period in 2025. The decrease was partially attributable to the timing of shipments and a reduction in depreciation expense during the current period. In addition, a higher proportion of material costs were allocated to revenue-generating projects rather than research activities.

Selling, General and Administrative

Selling, general and administrative expenses are largely comprised of employee compensation and personnel-related costs for our administrative functions as well as costs driven by insurance and regulatory requirements. Selling, general and administrative expenses did not change materially for the three ended March 31, 2026 compared to the same period in 2025.

Overall, we expect operating expenses for the remainder of the year to remain consistent as we focus on continuing to develop and drive improvements for our electrolyte products and pursue a potential partnership for commercial-scale electrolyte production in the Republic of Korea.

Nonoperating Income and Expense

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

For the three months ended March 31, 2026, nonoperating income and expense increased $4.5 million compared to the three months ended March 31, 2025 due to the change in fair value of warrant liabilities. The change in the fair value of warrant liabilities for the three months ended March 31, 2026 caused a $9.6 million gain compared to the three months ended March 31, 2025 where the change in the fair value caused a gain of $5.9 million. The impact of these changes caused a period-over-period loss in the fair value of warrant liabilities of $3.8 million.

Liquidity and Capital Resources

Sources of Liquidity

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

As of March 31, 2026 and December 31, 2025, we had total liquidity, as set forth below:

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As of March 31, 2026, total liquidity, which includes all cash and cash equivalents as well as our available-for-sale securities, was $435.3 million, an increase of $98.8 million compared to December 31, 2025. As of March 31, 2026, contract assets and contract receivables were $12.7 million and total current liabilities were $17.1 million. 

Short-Term Liquidity Requirements

Our short-term liquidity requirements include operating and capital expenses needed to further our research and development programs and to install our continuous electrolyte production pilot line. We anticipate that our most significant capital expenditures for the remainder of the year will relate to construction of our continuous electrolyte production pilot line as well as improvements to our cell development capabilities. We believe that our cash on hand is sufficient to meet our operating cash needs and working capital and capital expenditure requirements for a period of at least the next 12 months.

Long-Term Liquidity Requirements

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

At-the-Market Offering

On September 5, 2025, we entered into an Equity Distribution Agreement (the "Distribution Agreement") with Oppenheimer & Co. Inc., serving as agent ("Oppenheimer"), with respect to the ATM under which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million through Oppenheimer.

During the three months ended March 31, 2026, we did not sell any shares of common stock under the Distribution Agreement. As of March 31, 2026, approximately $58.8 million remained available for future sales under the Distribution Agreement.

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Stock Repurchase Program

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On January 23, 2024, we announced that our Board approved a stock repurchase program authorizing us to purchase up to $50 million of our outstanding common stock. During the three months ended March 31, 2025, we did not repurchase any shares of common stock under the program. The stock repurchase program expired on December 31, 2025.

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Registered Direct Offering

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On January 28, 2026, we entered into a securities purchase agreement with a single sector-focused institutional investor for a registered direct offering of 17,000,000 shares of our common stock, pre-funded warrants to purchase an aggregate of 5,807,018 shares of common stock, and warrants to purchase up to an aggregate of 45,614,036 shares of common stock (the "registered direct offering"). Our proceeds, net of fees and expenses, totaled $121.3 million.

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Cash Flows

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

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Cash used in operating activities:

Cash used in operating activities for the three months ended March 31, 2026 decreased by $7.5 million compared to the three months ended March 31, 2025. This decrease was driven by the timing of annual contract payments, which shifted from a beginning-of-year payment schedule to an end-of-year payment schedule.

The decrease was also attributable to cash used for employee compensation and related benefit costs, including the payment of annual performance-based incentive compensation. Cash used for employee compensation decreased by $1.6 million during the three months ended March 31, 2026 compared to the same period in the prior year.

Other cash used in operating activities during the three months ended March 31, 2026 related to facility operating costs, purchases of materials from suppliers, and hazardous waste removal. We expect cash used in operating activities for the remainder of the year to remain consistent on a quarterly basis as we continue to explore a production partnership in the Republic of Korea and focus on driving electrolyte product competitiveness.

Cash provided by (used in) investing activities:

Cash used in investing activities increased by $122.8 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due changes in our proceeds from and purchases of available-for-sale securities and changes in capital expenditures.

Purchases of available-for-sale security activity increased $143.4 million in the three months ending March 31, 2026 compared to the same period in prior year. This change was driven by deployment of $121.3 million of proceeds, net of fees and expenses, from the registered direct offering into our investment portfolio.

Cash used for capital expenditures and intangibles decreased $1.2 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to timing of milestone payments on our capital projects. We anticipate cash used in investing for capital expenditures for the remainder of the year to increase as we continue to construct the continuous electrolyte production pilot line.

Cash provided by (used in) financing activities:

Cash provided by financing activities increased $121.1 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was due the proceeds of $121.3 million, net of fees and expenses, from the registered direct offering.

Off-Balance Sheet Arrangements

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

Critical Accounting Estimates

Except as set forth below, there have been no significant and material changes in our critical accounting policies and use of estimates during the three months ended March 31, 2026 as compared to those disclosed in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in the 2025 Form 10-K.

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Recent Accounting Pronouncements

See Note 2 of our unaudited financial statements included in this Report as well as Note 2 of our audited financial statements included in the 2025 Form 10-K for more information.