Solid Power, Inc. quarterly report, Q3 FY2021

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Business context and reporting period

This is Decarbonization Plus Acquisition Corporation III’s (DCRC) Form 10-Q for the quarter ended September 30, 2021—not an operating-company 10-Q filed by Solid Power. DCRC was a blank-check company pursuing a merger with Solid Power under an agreement signed June 15, 2021. The proposed transaction was expected to close in the fourth quarter of 2021, subject to stockholder approval and other conditions.

Financial results and position

  • Revenue: None. DCRC had not commenced operations and expected no operating revenue before a business combination.
  • Quarterly result: Net income of $5.8 million, comprising $2.9 million of general and administrative expense and $50,411 of franchise tax expense, offset principally by an $8.7 million non-cash gain from the change in fair value of warrant liabilities.
  • Inception through September 30: Net loss of $18.4 million, including $4.9 million of general and administrative expense, $133,699 of franchise tax expense, $956,584 of warrant-related offering costs, and a $12.4 million warrant-liability fair-value loss.
  • Cash flow: From inception, operating cash use was $2.35 million; investing cash use was $350.0 million, largely funds placed in the trust; financing cash provided was $352.35 million. Cash outside the trust was zero at quarter-end.
  • Liquidity and balance sheet: Trust assets were $350.01 million, invested in U.S. Treasury money-market funds. Current assets were $560,596 versus current liabilities of $3.52 million. Total liabilities were $55.20 million, including $39.43 million of warrant liabilities and $12.25 million of deferred underwriting fees. There were no working-capital-loan borrowings at quarter-end. The $350.0 million of redeemable Class A shares was classified as temporary equity; stockholders’ deficit was $54.36 million.
  • Margins and debt: Operating margins are not meaningful because DCRC had no operating revenue. The filing reports no conventional borrowings at September 30; the deferred underwriting fee is payable only if a business combination is completed.

Changes, outlook, and risks

  • The filing does not provide a prior-year comparable operating period; DCRC was incorporated in January 2021. Quarterly results are therefore not directly comparable with a prior-year quarter.
  • Quarterly income was driven by warrant fair-value movements, not operating performance. Results for the inception-to-date period include a larger warrant fair-value loss.
  • Management stated DCRC lacked sufficient liquidity to meet current obligations and anticipated needs from its own cash, but expected Sponsor funding to support working capital through the earlier of a business combination or one year after issuance. An undrawn $1.5 million Sponsor promissory note was issued October 14, 2021.
  • DCRC had signed subscription agreements for $165 million of PIPE financing; an additional $30 million subscription from SK Innovation was agreed October 27, bringing announced PIPE subscriptions to $195 million. Funding depended on closing the proposed transaction.
  • The company revised previously issued financial statements to correct the classification and carrying amount of redeemable Class A shares and its earnings-per-share presentation. It reported no change to total assets, liabilities, or operating results.
  • A previously identified material weakness in internal control was reported as remediated by June 30, 2021. Management concluded disclosure controls were effective as of September 30.
  • Key contingencies and risks include failure to complete the transaction by March 26, 2023 (which would require liquidation and redemption of public shares), potential creditor claims against trust funds, transaction conditions and approvals, and possible adverse COVID-19 effects whose impact was not quantifiable. Approximately $2.4 million of third-party success fees were expected if the transaction closed.

Important facts for investors to verify

  1. Confirm the status and final terms of the Solid Power business combination, including stockholder approval and closing conditions.
  2. Verify whether the $195 million PIPE subscriptions closed and how redemptions affected available transaction proceeds.
  3. Review the Sponsor’s actual funding and DCRC’s cash needs, given zero cash outside the trust and management’s stated liquidity shortfall.
  4. Assess warrant-liability valuation volatility and the accounting revision for redeemable shares.
  5. Consult the merger agreement, amendments, and related SEC filings for dilution, lock-up, redemption, and transaction-cost details.