Solid Power, Inc. current report, 08 December 2021

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Business Context and Reporting Period

Solid Power, Inc. filed this Form 8-K regarding the closing of its business combination with Decarbonization Plus Acquisition Corporation III on December 8, 2021. The transaction converted Solid Power Operating, Inc. (formerly Legacy Solid Power) into a wholly owned subsidiary, changed the registrant’s name to Solid Power, Inc., and ended its status as a shell company.

Common stock and warrants began trading on Nasdaq on December 9, 2021 under the symbols SLDP and SLDPW. The filing incorporates historical audited financial statements for 2019 and 2020 and unaudited financial statements for the nine months ended September 30, 2021 and 2020, but the supplied filing text does not provide the underlying revenue, earnings, cash flow, or balance-sheet amounts.

Key Financial and Capitalization Information

  • The company completed a PIPE financing of 19.5 million shares at $10.00 per share, generating aggregate gross proceeds of $195 million.
  • Immediately after the transaction and PIPE issuance, the company had 167,557,988 shares of common stock outstanding.
  • The company had 19,333,334 warrants outstanding, generally exercisable at $11.50 per share, and 34,407,949 options issued through the conversion of Legacy Solid Power options.
  • Warrants were scheduled to become exercisable on March 26, 2022 and expire on December 8, 2026, subject to earlier redemption or liquidation.
  • Legacy Solid Power’s $1.5 million of working capital loans from the Sponsor were converted into 1 million warrants with an exercise price of $1.50 per warrant.
  • The filing text does not provide clear values for revenue, net income or loss, operating expenses, cash flow, cash and equivalents, total debt, liquidity ratios, or margins.
  • The company stated that it does not anticipate declaring cash dividends in the foreseeable future.

Material Changes Versus the Prior Comparable Period

  • The principal change was the completion of the business combination and related recapitalization, rather than a reported operating-period comparison.
  • Legacy Solid Power’s preferred stock and outstanding warrants were converted into common stock or equivalent rights based on an exchange ratio of approximately 3.182.
  • The former Class A and Class B common stock were re-designated or converted into common stock, and the former Units ceased trading separately.
  • The company replaced the prior IPO registration rights agreement with an amended and restated registration rights agreement. It agreed to file a resale registration statement within 30 days after closing and use reasonable best efforts to obtain effectiveness.
  • WithumSmith+Brown, PC was dismissed as the company’s independent registered public accounting firm, and Ernst & Young LLP was engaged for the year ending December 31, 2021. The filing reports no disagreements or reportable events with Withum.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

No quantitative financial guidance is provided in the supplied text. Management describes Solid Power as an early-stage company with a history of financial losses and an expectation of significant expenses and continuing losses for the foreseeable future.

  • Key execution risks include achieving research and development objectives, commercializing all-solid-state battery technology, negotiating supply agreements, and obtaining market acceptance.
  • Relationships with automotive manufacturers and other partners are non-exclusive, and the company may not retain or successfully expand those relationships.
  • Additional risks include intellectual-property protection, electric-vehicle adoption, competition, regulatory changes, COVID-19 effects, personnel retention, and broader economic conditions.
  • The company entered into indemnification agreements with directors and executive officers, adopted a new code of business conduct, and implemented 2021 equity incentive and employee stock purchase plans.
  • Non-employee directors became eligible for a $35,000 annual cash retainer, additional committee or chair fees, and annual restricted stock unit awards with a stated grant-date fair value of $125,000, subject to the policy terms.
  • The filing states that the company was not currently involved in litigation likely to have a material adverse effect, although litigation could still create defense costs and management distraction.

Important Facts for Investors to Verify

  1. Review Exhibit 99.1 and the incorporated historical financial statements for actual revenue, losses, cash balances, operating cash burn, and debt.
  2. Review Exhibit 99.2 for the pro forma capitalization and the accounting treatment of the business combination and PIPE financing.
  3. Confirm the net cash proceeds from the PIPE after transaction expenses, redemptions, and other closing adjustments.
  4. Assess dilution from the 19.3 million warrants, 34.4 million converted options, Sponsor warrants, equity plans, and registration rights.
  5. Review Exhibit 99.3 and the Proxy Statement/Prospectus for liquidity requirements, expected operating losses, commercialization milestones, and partner obligations.
  6. Examine the amended registration rights agreement and the potential timing and market impact of resale registrations by existing holders and PIPE investors.