Quarterly Report for Quarter Ending June 30, 2025 (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 and under "Part I, Item 1A. Risk Factors" of the 2024 Form 10-K, as such descriptions may be updated or amended in future filings we make with the SEC. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto of this Report and the 2024 Form 10-K. We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments, or otherwise, except to the extent that such disclosure is required by applicable law.

Overview

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

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2025 Development Objectives

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

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

Key Factors Affecting Operating Results

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

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

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

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

Basis of Presentation

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

Results of Operations

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

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

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Revenue and Grant Income

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

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

We recognized $5.9 million and $10.5 million of collaborative revenue for the three and six months ended June 30, 2025, respectively. The collaborative revenue primarily consists of performance on our research and development technology license agreement, line installation agreement, and electrolyte supply agreement with SK On (collectively, the "SK On Agreements"). During the three and six months ended June 30, 2025, we completed factory acceptance testing under the line installation agreement and began working towards site acceptance testing. We intend to continue executing on the SK On Agreements and anticipate recognizing additional revenue from the SK On Agreements through the remainder of the year.

We recognized $1.6 million and $3.1 million of government revenue and government grant income for the three and six months ended June 30, 2025, respectively. Government revenue and government grant income consisted primarily of grant income from the Assistance Agreement. The Assistance Agreement provides that the DOE will provide us with funding of up to $50 million for our installation of equipment necessary for the continuous production of sulfide-based solid electrolyte material. During the three and six months ended June 30, 2025, we initiated detailed design of the continuous electrolyte production pilot line and finished ordering long-lead time equipment. Grant income is recognized on the non-capital costs of the project. As we continue to execute on the project milestones, we expect to recognize additional grant income.

Operating Expenses

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

Direct Costs

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

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

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

Research and Development

Research and development-related operating expenses largely consisted of employee compensation and employee benefit costs incurred to maintain our skilled workforce, including engineers, scientists, operators, chemists, and technicians. Total research and development costs did not change materially forthe three and six months ended June 30, 2025 compared to the same period in 2024.

Selling, General and Administrative

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

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

Nonoperating Income and Expense

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

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

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

Liquidity and Capital Resources

Sources of Liquidity

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

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

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

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Short-Term Liquidity Requirements

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

Long-Term Liquidity Requirements

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

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

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

Cash Flows

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

Cash provided by investing activities:

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

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

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

Cash used in financing activities:

Cash used in financing activities decreased $5.0 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This decrease was primarily due to the repurchase of $3.6 million of our stock under the stock repurchase program in the six months ended June 30, 2025 compared to the repurchase of $8.3 million of our common stock in the six months ended June 30, 2024. The remaining cash used in financing activities for the six months ended June 30, 2025 was cash paid for withholding of employee taxes related to stock-based compensation and payments on finance lease liabilities, partially offset by proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

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

Critical Accounting Estimates

Except as set forth below, there have been no significant and material changes in our critical accounting policies and use of estimates during the six months ended June 30, 2025 as compared to those disclosed in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in the 2024 Form 10-K.

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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 2024 Form 10-K for more information.