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As filed with the Securities and Exchange Commission on September 20, 2021
Registration Statement
No. 333-258681
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No . 1
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Decarbonization Plus Acquisition Corporation III
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
|
6770
|
86-1888095
|
||
|
(State or other jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer
Identification Number)
|
2744 Sand Hill Road, Suite 100
Menlo Park, CA 94025
(212) 993-0076
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Decarbonization Plus Acquisition Corporation III
2744 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Attention: Peter Haskopoulos
Chief Financial Officer, Chief Accounting Officer and Secretary
(212) 993-0076
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
|
E. Ramey Layne
Vinson & Elkins L.L.P.
1001 Fannin Street
Suite 2500
Houston, TX 77002
(713) 758-2222
|
|
Douglas Campbell
Solid Power, Inc.
486 S. Pierce Avenue
Suite E
Louisville, CO 80027
(303) 219-0720
|
|
Robert O’Connor
Mark B. Baudler
Wilson Sonsini Goodrich & Rosati P.C.
One Market Plaza, Spear Tower, Suite 3300
San Francisco, CA 94105
(415) 947-2000
|
Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this Registration Statement becomes effective and on completion of the business combination described in the enclosed proxy statement/prospectus.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer) ☐
Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer) ☐
CALCULATION OF REGISTRATION FEE
|
|
||||||||
|
Title of Each Class of Securities
to be Registered
|
Amount
to be
Registered(1)(2)
|
Proposed
Maximum
Offering Price
per Share
|
Proposed
Maximum
Aggregate
Offering Price(3)
|
Amount of
Registration Fee(4)(5)
|
||||
|
Class A Common Stock, par value $0.0001 per share
|
128,645,073 | N/A | $1,269,726,870.51 | $138,527.21 | ||||
|
|
||||||||
|
|
||||||||
| (1) |
Based on the maximum number of shares of Class A common stock, par value $0.0001 per share (“Class A Common Stock”), of the registrant estimated to be issued or issuable upon exchange and exercise of all Solid Power Options and Solid Power Warrants (each defined below) in connection with the merger described herein (the “Merger”), assuming an exchange ratio of 3.2036 shares of Class A Common Stock for each share of the common stock of Solid Power, Inc. (“Solid Power”) expected to be outstanding at the closing of the Merger. The estimated exchange ratio calculated herein is based upon Solid Power’s capitalization as of June 15, 2021, the date the Business Combination Agreement (as defined below) was executed by the parties thereto. The number of shares of Class A Common Stock issued or issuable in the Merger will be adjusted to account for changes in Solid Power’s capitalization prior to the closing of the Merger.
|
| (2) |
Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), there are also being registered such additional shares of Class A Common Stock that may be issued because of events such as recapitalizations, stock dividends, stock splits, and reverse stock splits, and similar transactions.
|
| (3) |
Pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is an amount equal to $1,269,726,870.51, calculated as the product of (i) 128,645,073 shares of Class A Common Stock, the estimated maximum number of shares of Class A Common Stock that may be issued or be issuable in the Merger, and (ii) $9.87, the average of the high and low trading prices of the Class A Common Stock on August 4, 2021.
|
| (4) |
Calculated pursuant to Rule 457 under the Securities Act by calculating the product of (i) the proposed maximum aggregate offering price and (ii) 0.0001091.
|
| (5) |
Previously paid.
|
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary proxy statement/prospectus is not complete and may be changed. The securities described herein may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROXY STATEMENT/PROSPECTUS—SUBJECT TO COMPLETION, DATED SEPTEMBER 20, 2021
DECARBONIZATION PLUS ACQUISITION CORPORATION III
Dear Stockholders of Decarbonization Plus Acquisition Corporation III:
You are cordially invited to attend the special meeting (the “special meeting”) of stockholders of Decarbonization Plus Acquisition Corporation III (“DCRC,” “we,” “our,” “us” or the “Company”), which will be held at , Eastern time, on , 2021, via live webcast at the following address: https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021. At the special meeting, DCRC stockholders will be asked to consider and vote upon the following proposals:
| • |
The Business Combination Proposal
Annex A
|
| • |
The Charter Proposals
|
| • |
The Authorized Share Charter Proposal
|
| • |
The Additional Charter Proposal
|
The full text of the Proposed Second A&R Charter reflecting each of the proposed amendments pursuant to the Charter Proposals is attached to this proxy statement/prospectus as
.
Annex B
| • |
The Nasdaq Proposal
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (b) the issuance and sale of 16,500,000 shares of Class A Common Stock in the private offering of securities to certain investors (the “Nasdaq Proposal”) (Proposal No. 4).
|
| • |
The 2021 Plan Proposal
Annex C
|
| • |
The ESPP Proposal
Annex D
|
| • |
respective successors are duly elected and qualified, subject to such directors’ earlier death, resignation, retirement, disqualification or removal (the “Director Election Proposal”) (Proposal No. 7).
| • |
The Adjournment Proposal
|
The special meeting will be completely virtual. There will be no physical meeting location and the special meeting will only be conducted via live webcast at the following address: https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021.
The board of directors of DCRC (the “DCRC Board”) recommends that DCRC stockholders vote “FOR” each Proposal (or in the case of the Director Election Proposal, “FOR ALL NOMINEES”) being submitted to a vote of the stockholders at the special meeting. When you consider the recommendation of the DCRC Board in favor of each of the Proposals, you should keep in mind that certain of DCRC’s directors and officers have interests in the business combination that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”
Each of the Proposals is more fully described in this proxy statement/prospectus, which each DCRC stockholder is encouraged to review carefully.
DCRC’s Class A Common Stock and public warrants, which are exercisable for shares of Class A Common Stock under certain circumstances, are currently listed on Nasdaq under the symbols “DCRC” and “DCRCW,” respectively. In addition, certain of our shares of Class A Common Stock and warrants currently trade as units consisting of one share of Class A Common Stock and
one-third
of one warrant, and are listed on Nasdaq under the symbol “DCRCU.” The units will automatically separate into the component securities upon consummation of the business combination and, as a result, will no longer trade as a separate security. In connection with the Closing, we intend to change our name from “Decarbonization Plus Acquisition Corporation III” to “Solid Power, Inc.,” and we intend to apply to continue the listing of our Class A Common Stock and warrants on Nasdaq under the symbols “SLDP” and “SLDPW,” respectively.
Pursuant to our Charter, we are providing the holders of shares of Class A Common Stock originally sold as part of the units issued in our initial public offering (the “IPO” and such holders, the “public stockholders”) with the opportunity to redeem, upon the Closing, shares of Class A Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the trust account (the “Trust Account”) that holds the proceeds (including interest not previously released to DCRC to pay its franchise and income taxes) from the IPO and a concurrent private placement of warrants to Decarbonization Plus Acquisition Sponsor III LLC, a Delaware limited liability company (our “Sponsor”), and certain of our independent directors. For illustrative purposes, based on the fair value of cash and marketable
securities held in the Trust Account as of June 30, 2021 of approximately $350.0 million, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares whether or not they are holders as of the record date and whether or not they vote for the Business Combination Proposal. Notwithstanding the foregoing redemption rights, a public stockholder, together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the outstanding shares of Class A Common Stock sold in the IPO. Holders of DCRC’s outstanding warrants sold in the IPO, which are exercisable for shares of Class A Common Stock under certain circumstances, do not have redemption rights in connection with the business combination. Our Sponsor, officers and directors have agreed to waive their redemption rights in connection with the consummation of the business combination with respect to any shares of Class A Common Stock they may hold, and our shares of Class B Common Stock will be excluded from the pro rata calculation used to determine the per share redemption price. Currently, our Sponsor and directors own approximately 20% of our outstanding Class A Common Stock and Class B Common Stock, including all of the shares of Class B Common Stock. Our Sponsor, officers and directors have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination.
DCRC is providing this proxy statement/prospectus and accompanying proxy card to its stockholders in connection with the solicitation of proxies to be voted at the special meeting and any adjournments or postponements of the special meeting.
Your vote is very important. Whether or not you plan to attend the special meeting virtually, please submit your proxy card without delay.
We encourage you to read this proxy statement/prospectus carefully. In particular, you should review the matters discussed under the section entitled “Risk Factors” beginning on page 39 of this proxy statement/prospectus.
Approval of each of the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal and the Adjournment Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting, voting as a single class. Approval of the Authorized Share Charter Proposal requires the affirmative vote (online or by proxy) of (i) the holders of a majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class, and (ii) the holders of a majority of the shares of Class A Common Stock entitled to vote thereon at the special meeting, voting as a single class. Approval of the Additional Charter Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class. Approval of the Director Election Proposal requires the affirmative vote (online or by proxy) of a plurality of the votes cast by holders of our Class A Common Stock and Class B Common Stock at the special meeting and entitled to vote thereon, voting as a single class.
If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of Proposal Nos. 1, 2, 3, 4, 5, 6 and 8 and “FOR ALL NOMINEES” for Proposal No. 7. If you fail to return your proxy card or fail to submit your proxy by telephone or over the Internet, or fail to instruct your bank, broker or other nominee how to vote, and do not virtually attend the special meeting, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have no effect on the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal, the Director Election Proposal or the Adjournment Proposal, but will have the same effect as a vote “AGAINST” the Charter Proposals. If you are a stockholder of record and you virtually attend the special meeting and wish to vote, you may withdraw your proxy and vote online.
TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST ELECT TO HAVE DCRC REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND
TENDER YOUR SHARES TO DCRC’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT THE SPECIAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.
Thank you for your consideration of these matters.
Sincerely,
Erik Anderson
Chief Executive Officer and Director
Decarbonization Plus Acquisition Corporation III
Whether or not you plan to attend the special meeting of DCRC stockholders online, please submit your proxy by completing, signing, dating and mailing the enclosed proxy card in the
pre-addressed
postage paid envelope or by using the telephone or Internet procedures provided to you by your broker or bank.
Neither the Securities and Exchange Commission nor any state securities commission has passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated , 2021 and is first being mailed to DCRC stockholders on or about , 2021.
DECARBONIZATION PLUS ACQUISITION CORPORATION III
2744 Sand Hill Road, Suite 100
Menlo Park, California 94025
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF DECARBONIZATION PLUS ACQUISITION CORPORATION III
To Be Held On , 2021
To the Stockholders of Decarbonization Plus Acquisition Corporation III:
NOTICE IS HEREBY GIVEN that the special meeting (the “special meeting”) of stockholders of Decarbonization Plus Acquisition Corporation III (“DCRC,” “we,” “our,” “us” or the “Company”) will be held at , Eastern time, on , 2021, via live webcast at the following address: https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021. At the special meeting, DCRC stockholders will be asked to consider and vote upon the following proposals:
| • |
The Business Combination Proposal
Annex A
|
| • |
The Charter Proposals
|
| • |
The Authorized Share Charter Proposal
|
| • |
The Additional Charter Proposal
|
The full text of our proposed second amended and restated certificate of incorporation (the “Proposed Second A&R Charter”) reflecting each of the proposed amendments pursuant to the Charter Proposals is attached to the accompanying proxy statement/prospectus as
.
Annex B
| • |
The Nasdaq Proposal
pre-merger
Solid Power Options, Solid Power restricted stock, and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (b) the issuance and sale of 16,500,000 shares of Class A Common Stock in the private offering of securities to certain investors (the “Nasdaq Proposal”) (Proposal No. 4).
|
| • |
The 2021 Plan Proposal
|
(Proposal No. 5). A copy of the 2021 Plan is attached to the accompanying proxy statement/prospectus as
.
Annex C
| • |
The ESPP Proposal—
Annex D
|
| • |
The Adjournment Proposal
|
The special meeting will be completely virtual. There will be no physical meeting location and the special meeting will only be conducted via live webcast at the following address: https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021.
Only holders of record of DCRC’s Class A Common Stock and Class B Common Stock at the close of business on , 2021 are entitled to notice of the special meeting and to vote at the special meeting and any adjournments or postponements thereof. A complete list of DCRC’s stockholders of record entitled to vote at the special meeting will be available at the special meeting and for ten days before the special meeting at DCRC’s principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting.
Pursuant to our Charter, we are providing the holders of shares of Class A Common Stock originally sold as part of the units issued in our initial public offering (the “IPO” and such holders, the “public stockholders”) with the opportunity to redeem, upon the Closing, shares of Class A Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the trust account (the “Trust Account”) that holds the proceeds (including interest not previously released to DCRC to pay its franchise and income taxes) from the IPO and a concurrent private placement of warrants to Decarbonization Plus Acquisition Sponsor III LLC, a Delaware limited liability company (our “Sponsor”), and certain of our independent directors. For illustrative purposes, based on the fair value of cash and marketable securities held in the Trust Account as of June 30, 2021 of approximately $350.0 million, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares
whether or not they are holders as of the record date and whether or not they vote for the Business Combination Proposal. Notwithstanding the foregoing redemption rights, a public stockholder, together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the outstanding shares of Class A Common Stock sold in the IPO. Holders of DCRC’s outstanding warrants sold in the IPO, which are exercisable for shares of Class A Common Stock under certain circumstances, do not have redemption rights in connection with the business combination. Our Sponsor, officers and directors have agreed to waive their redemption rights in connection with the consummation of the business combination with respect to any shares of Class A Common Stock they may hold, and our shares of Class B Common Stock will be excluded from the pro rata calculation used to determine the per share redemption price. Currently, our Sponsor and directors own approximately 20% of our outstanding Class A Common Stock and Class B Common Stock, including all of the shares of Class B Common Stock. Our Sponsor, officers and directors have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination.
We may not consummate the business combination unless the Business Combination Proposal, the Charter Proposals and the Nasdaq Proposal are approved at the special meeting. The Charter Proposals, the 2021 Plan Proposal, the ESPP Proposal and the Director Election Proposal are conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal. The Adjournment Proposal is not conditioned on the approval of any other Proposal set forth in the accompanying proxy statement/prospectus.
Your attention is directed to the proxy statement/prospectus accompanying this notice (including the annexes thereto) for a more complete description of the proposed business combination and related transactions and each of our Proposals. We encourage you to read the accompanying proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Morrow Sodali LLC, at (800)
662-5200
(banks and brokers call collect at (203)
658-9400).
, 2021
By Order of the Board of Directors
Erik Anderson
Chief Executive Officer and Director
ABOUT THIS PROXY STATEMENT/PROSPECTUS
This document, which forms part of a registration statement on Form
S-4
filed with the U.S. Securities and Exchange Commission (“SEC”) by DCRC (File
No. 333-258681)
(the “Registration Statement”), constitutes a prospectus of DCRC under Section 5 of the Securities Act with respect to the shares of Class A Common Stock to be issued if the business combination described below is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Exchange Act with respect to the special meeting of DCRC stockholders at which DCRC stockholders will be asked to consider and vote upon a proposal to approve the business combination by the approval and adoption of the Business Combination Agreement, among other matters.
This proxy statement/prospectus incorporates important business and financial information about DCRC that is not included in or delivered with the document.
This information is available without charge to you upon written or oral request. To make this request, you should contact our proxy solicitor at:
Morrow Sodali LLC
470 West Avenue
Stamford, Connecticut 06902
Telephone: (800)
662-5200
(banks and brokers call collect at (203)
658-9400)
Email: DCRC.info@investor.morrowsodali.com
To obtain timely delivery of requested materials, you must request the information no later than five business days prior to the date of the special meeting.
You may also obtain additional information about us from documents filed with the SEC by following the instruction in the section entitled “Where You Can Find Additional Information.”
ii
CERTAIN DEFINED TERMS
Unless the context otherwise requires, references in this proxy statement/prospectus to:
| • |
“ASC 815” are to Accounting Standards Codification
815-40,
“Derivatives and Hedging — Contracts in Entity’s Own Equity;”
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| • |
“business combination” are to the transactions contemplated by the Business Combination Agreement;
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| • |
“Business Combination Agreement” are to that certain Business Combination Agreement and Plan of Reorganization, dated as of June 15, 2021, by and among DCRC, Merger Sub and Solid Power;
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| • |
“Charter” are to DCRC’s Amended and Restated Certificate of Incorporation;
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| • |
“Class A Common Stock” are to (a) prior to giving effect to the business combination, DCRC’s Class A Common Stock, par value $0.0001 per share, and (b) after giving effect to the business combination, the Class A Common Stock
re-designated
as “common stock, par value $0.0001 per share”;
|
| • |
“Class B Common Stock” are to DCRC’s Class B Common Stock, par value $0.0001 per share;
|
| • |
“Closing” are to the closing of the business combination;
|
| • |
“Closing Date” are to the date on which the Closing occurs;
|
| • |
“Code” are to Internal Revenue Code of 1986, as amended;
|
| • |
“Conversion Reaction Cell” are to Solid Power’s conversion reaction cathode cells.
|
| • |
“DCRC,” “we,” “our,” “us” or the “Company” are to Decarbonization Plus Acquisition Corporation III, a Delaware corporation;
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| • |
“DCRC Board” are to the board of directors of DCRC;
|
| • |
“Effective Time” are to the effective time of the Merger;
|
| • |
“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
|
| • |
“Exchange Ratio” are to the quotient obtained by dividing (i) the Solid Power Merger Shares by (ii) the Solid Power Outstanding Shares;
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| • |
“EV” are to electric vehicle;
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| • |
“eVTOL” are to electric vertical takeoff and landing aircraft;
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| • |
“FCPA” are to the Foreign Corrupt Practices Act;
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| • |
“Founder Shares” are to the outstanding shares of our Class B Common Stock;
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| • |
“GAAP” are to U.S. generally accepted accounting principles;
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| • |
“Historical Rollover Stockholders” are to the holders of shares of Class A Common Stock that will be issued in exchange for all outstanding shares of Solid Power Common Stock in the business combination (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination);
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| • |
“JDAs” are to joint development agreements;
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| • |
“Initial Business Combination” are to our initial merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;
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| • |
“initial stockholders” are to the holders of our Founder Shares, which includes our Sponsor and our independent directors;
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| • |
“Initial Public Offering” or “IPO” are to DCRC’s initial public offering of units, which closed on March 26, 2021;
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iii
| • |
“IRS” are to the Internal Revenue Service;
|
| • |
“Li
2
S” are to lithium-containing precursor material;
|
| • |
“Lithium Metal EV Cell” are to Solid Power’s lithium metal anode battery cells;
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| • |
“management” or our “management team” are to our officers and directors;
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| • |
“Merger” are to the merger of Merger Sub with and into Solid Power, with Solid Power surviving the merger as a wholly owned subsidiary of DCRC;
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| • |
“Merger Sub” are to DCRC Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of DCRC;
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| • |
“Merger Sub Common Stock” are to Merger Sub’s common stock, par value $0.0001 per share;
|
| • |
“Nasdaq” are to the Nasdaq Capital Market;
|
| • |
“New Solid Power” are to (a) prior to giving effect to the business combination, DCRC, and (b) after giving effect to the business combination, Solid Power, Inc., the new name of DCRC after giving effect to the business combination;
|
| • |
“New Solid Power Board” are to the board of directors of New Solid Power.
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| • |
“New PIPE Investors” are to investors in the PIPE Financing;
|
| • |
“NMC” are to lithium nickel manganese cobalt oxide;
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| • |
“NOLs” are to net operating loss carryforwards;
|
| • |
“OEM” are to original equipment manufacturers;
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| • |
“PIPE Financing” are to the private offering of securities of New Solid Power to certain investors in connection with the business combination;
|
| • |
“PIPE Funds” are to the proceeds from the PIPE Financing;
|
| • |
“PIPE Shares” are to the shares of Class A Common Stock that are issued in the PIPE Financing;
|
| • |
“PPP” are to the 2020 Payroll Protection Plan.
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| • |
“Preferred Stock” are to (a) prior to giving effect to the business combination, DCRC’s Preferred Stock, par value $0.0001 per share, and (b) after giving effect to the business combination, New Solid Power’s Preferred Stock, par value $0.0001 per share;
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| • |
“private placement warrants” are to the warrants issued to our Sponsor and certain of our independent directors in a private placement simultaneously with the closing of our IPO;
|
| • |
“Proposed Bylaws” are to the proposed amended and restated bylaws of New Solid Power, which will be effective immediately prior to the completion of the business combination;
|
| • |
“Proposed Second A&R Charter” are to the proposed second amended and restated certificate of incorporation of New Solid Power, which will be effective immediately prior to the completion of the business combination;
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| • |
“public shares” are to shares of DCRC’s Class A Common Stock sold as part of the units in the IPO (whether they were purchased in the IPO or thereafter in the open market);
|
| • |
“public stockholders” are to the holders of DCRC’s public shares;
|
| • |
“public warrants” are to the warrants sold as part of the units in the IPO (whether they were purchased in the IPO or thereafter in the open market);
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| • |
“Riverstone” are to Riverstone Investment Group LLC, a Delaware limited liability company, and its affiliates;
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| • |
“Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2020;
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| • |
“SEC” are to the U.S. Securities and Exchange Commission;
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iv
| • |
“Series B Financing” are to Solid Power’s issuance and sale of an aggregate (i) 8,722,812 shares of Solid Power Series B Preferred Stock and (ii) 1,755,557 warrants to purchase Solid Power Common Stock, in exchange for all of Solid Power’s $13.4 million aggregate principal amount of convertible promissory notes and $135.6 million in cash, which issuance and sale concluded May 12, 2021.
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| • |
“Securities Act” are to the Securities Act of 1933, as amended;
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| • |
“Silicon EV Cell” are to Solid Power’s high-content silicon anode battery cells;
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| • |
“Solid Power” are to Solid Power, Inc., a Colorado corporation;
|
| • |
“Solid Power Charter” are to Solid Power’s Fourth Amended and Restated Articles of Incorporation dated April 30, 2021, as the same may have been amended, supplemented or modified from time to time;
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| • |
“Solid Power Common Stock” are to Solid Power’s common stock, par value $0.0001 per share;
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| • |
“Solid Power Merger Shares” are 123,900,000;
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| • |
“Solid Power Options” are to all options to purchase shares of Solid Power Common Stock, whether or not exercisable and whether or not vested, outstanding immediately prior to the Effective Time under the Solid Power Stock Plan or otherwise;
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| • |
“Solid Power Outstanding Shares” are to the sum of (without duplication) (i) total number of shares of Solid Power Common Stock issued and outstanding immediately prior to the Effective Time, expressed on a fully-diluted and
as-converted
to Solid Power Common Stock basis and including, for the avoidance of doubt, the number of shares of Solid Power Common Stock issuable upon conversion of the Solid Power Preferred Stock pursuant to the Business Combination Agreement,
plus
plus
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| • |
“Solid Power Preferred Stock” are to the Solid Power Series
A-1
Preferred Stock and the Solid Power Series B Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately prior to the consummation of the business combination;
|
| • |
“Solid Power Restricted Stock” are to unvested restricted shares of Solid Power Common Stock outstanding immediately prior to the Effective Time under the Solid Power Stock Plan or otherwise;
|
| • |
“Solid Power Series
A-1
Preferred Stock” are to Solid Power’s preferred stock, par value $0.0001 per share, designated as Series
A-1
Preferred Stock in the Solid Power Charter;
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| • |
“Solid Power Series B Preferred Stock” are to Solid Power’s preferred stock, par value $0.0001 per share, designated as Series B Preferred Stock in the Solid Power Charter, which were issued in the Series B Financing;
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| • |
“Solid Power Stock Plan” are to the Solid Power, Inc. 2014 Equity Incentive Plan, as amended on April 7, 2015, February 1, 2017, and February 20, 2019 as such may have been further amended, supplemented or modified from time to time;
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| • |
“Solid Power Warrants” are to warrants to purchase shares of Solid Power Common Stock and/or Solid Power Preferred Stock;
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v
| • |
“special meeting” are to the special meeting of stockholders of DCRC that is the subject of this proxy statement/prospectus and any adjournments or postponements thereof;
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| • |
“Sponsor” are to Decarbonization Plus Acquisition Sponsor III LLC, a Delaware limited liability company, and an affiliate of Riverstone;
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| • |
“Surviving Corporation” are to (a) prior to giving effect to the business combination, Solid Power, and (b) after giving effect to the business combination, Solid Power Operating, Inc., the new name of Solid Power after giving effect to the business combination;
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| • |
“Trust Account” are to the trust account that holds the proceeds (including interest not previously released to DCRC to pay its franchise and income taxes) from the IPO and the concurrent private placement of private placement warrants;
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| • |
“units” are to the units sold in the IPO, each of which consists of one share of Class A Common Stock and
one-third
of one public warrant; and
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| • |
“voting common stock” are to DCRC’s Class A Common Stock and Class B Common Stock.
|
Unless otherwise specified, the voting and economic interests of DCRC stockholders set forth in this proxy statement/prospectus assume the following:
| • |
no public stockholders elect to have their public shares redeemed;
|
| • |
16,500,000 shares of Class A Common Stock are issued in the PIPE Financing;
|
| • |
at Closing, 102,922,125 shares of Class A Common Stock are issued to Historical Rollover Stockholders in the business combination, and the Solid Power Options, Solid Power Restricted Stock, and Solid Power Warrants convert into options, restricted stock and warrants in respect of 25,722,948 shares of Class A Common Stock;
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| • |
none of DCRC’s initial stockholders, the Historical Rollover Stockholders, or the New PIPE Investors purchase shares of Class A Common Stock in the open market;
|
| • |
our Sponsor has not made any working capital loans to DCRC;
|
| • |
that there are no other issuances of equity interests of DCRC or Solid Power prior to or in connection with the Closing; and
|
| • |
that there are no exercises of Solid Power Options or Solid Power Warrants prior to or in connection with the Closing.
|
Based on the assumptions set forth above, the Exchange Ratio would be calculated as the quotient obtained by dividing (i) 123,900,000, by (ii) approximately 38,675,762 shares of Solid Power Common Stock outstanding immediately prior to the Effective Time, expressed on a fully-diluted and as converted to Solid Power Common Stock basis, and would accordingly be 3.2036.
Further, unless otherwise specified, the voting and economic interests of DCRC stockholders set forth in this proxy statement/prospectus do not take into account the private placement warrants and public warrants, which will remain outstanding following the business combination and may be exercised at a later date.
In accordance with our Charter, shares of Class B Common Stock will automatically convert into shares of Class A Common Stock on a
basis upon consummation of the business combination, resulting in the issuance of 8,750,000 shares of Class A Common Stock in the aggregate.
one-for-one
Certain sections in this proxy statement/prospectus refer to a maximum redemption scenario. Unless otherwise specified, that scenario assumes for illustrative purposes that 21,500,000 shares of Class A Common Stock are redeemed in connection with the Closing, resulting in an aggregate payment of approximately $215.0 million from the Trust Account. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
vi
SUMMARY TERM SHEET
This Summary Term Sheet, together with the sections entitled “Questions and Answers About the Proposals for DCRC Stockholders” and “Summary of the Proxy Statement/Prospectus,” summarizes certain information contained in this proxy statement/prospectus, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus, including the attached annexes, for a more complete understanding of the matters to be considered at the special meeting.
| • |
DCRC is a blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. For more information about DCRC, see the section entitled “Information About DCRC.”
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| • |
There are currently 35,000,000 shares of DCRC’s Class A Common Stock and 8,750,000 shares of DCRC’s Class B Common Stock issued and outstanding. In addition, there are currently 18,333,334 warrants of DCRC outstanding, consisting of 11,666,667 public warrants and 6,666,667 private placement warrants. Each whole warrant entitles the holder to purchase one whole share of Class A Common Stock for $11.50 per share. The warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of our Initial Public Offering and will expire five years after the completion of an Initial Business Combination or earlier upon redemption or liquidation. Once the warrants become exercisable, DCRC may redeem warrants in certain circumstances. See the section entitled “Description of Securities—Warrants.”
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| • |
Solid Power, a Colorado corporation, is developing
all-solid-state
battery cell technology that replaces the liquid or gel polymer electrolyte used in conventional
lithium-ion
battery cells with a sulfide-based solid electrolyte, and is focused solely on the development and commercialization of
all-solid-state
battery cells and solid electrolyte materials, primarily for the fast-growing battery-powered electric vehicle market. For more information about Solid Power, see the sections entitled “Information About Solid Power” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Solid Power.”
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| • |
On June 15, 2021, we and our wholly owned subsidiary, Merger Sub, entered into the Business Combination Agreement with Solid Power. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as
Annex A
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| • |
Pursuant to the Business Combination Agreement, and subject to the terms and conditions contained therein, Merger Sub will merge with and into Solid Power, with Solid Power surviving the merger as a wholly owned subsidiary of New Solid Power. For more information about the Business Combination Agreement and the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal.”
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| • |
At the Closing, 102,922,125 shares of Class A Common Stock will be issued to the Historical Rollover Stockholders in the business combination in exchange for all outstanding shares of Solid Power Common Stock. It is also anticipated that we will reserve for issuance up to 25,722,948 shares of Class A Common Stock in respect of New Solid Power options. restricted stock and warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants, and each share of Class A Common Stock will be
re-designated
as “common stock, par value $0.0001.” For more information about the Business Combination Agreement and the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal.”
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| • |
The Closing is subject to the satisfaction (or waiver) of a number of conditions set forth in the Business Combination Agreement, including, among others, receipt of the requisite stockholder approval of the Business Combination Agreement and the business combination as contemplated by this proxy statement/prospectus. For more information about the closing conditions to the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination Agreement.”
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vii
| • |
The Business Combination Agreement may be terminated at any time prior to the consummation of the business combination upon mutual written consent of DCRC and Solid Power, or for other reasons in specified circumstances. For more information about the termination rights under the Business Combination Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Termination.”
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| • |
The proposed business combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”
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| • |
Pursuant to the PIPE Financing, we have agreed to issue and sell to certain investors, and those investors have agreed to buy from us, in connection with the Closing, an aggregate of 16,500,000 shares of Class A Common Stock at a purchase price of $10.00 per share for an aggregate commitment of $165,000,000. Such Class A Common Stock would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021.
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| • |
Under our Charter, in connection with the business combination, our public stockholders may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with our Charter. As of June 30, 2021, this would have amounted to approximately $10.00 per share. If a holder exercises its redemption rights, then such holder will be exchanging its public shares for cash and will no longer own shares of DCRC following the completion of the business combination and will not participate in the future growth of New Solid Power, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our transfer agent at least two business days prior to the special meeting. For more information regarding these procedures, see the section entitled “Special Meeting of DCRC Stockholders—Redemption Rights.”
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| • |
We anticipate that, upon the Closing, the ownership of New Solid Power will be as follows:
|
| • |
the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 63.1% of our outstanding Class A Common Stock;
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| • |
the public stockholders will own 35,000,000 shares of our Class A Common Stock, which will constitute 21.4% of our outstanding Class A Common Stock;
|
| • |
the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 10.1% of our outstanding Class A Common Stock; and
|
| • |
the initial stockholders will own 8,750,000 shares of our Class A Common Stock, which will constitute 5.4% of our outstanding Class A Common Stock.
|
The number of shares and the interests set forth above (a) assume (i) that no public stockholders elect to have their public shares redeemed, (ii) that there are no other issuances of equity interests of DCRC or Solid Power and (iii) that there are no exercises of Solid Power Options or Solid Power Warrants and (b) do not take into account DCRC warrants that will remain outstanding following the business combination and may be exercised at a later date. As a result of the business combination, the economic and voting interests of our public stockholders will decrease.
If we assume the maximum redemptions scenario described under the section entitled “Unaudited Pro Forma Condensed Combined Financial Information—Basis of Pro Forma Presentation,” i.e., 21,500,000 shares of Class A Common Stock are redeemed, and the assumptions set forth in the foregoing clauses (a)(ii)–(iii) and (b) remain true, the ownership of New Solid Power upon the Closing will be as follows:
| • |
the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 72.7% of our outstanding Class A Common Stock;
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viii
| • |
the public stockholders will own 13,500,000 shares of our Class A Common Stock, which will constitute 9.5% of our outstanding Class A Common Stock;
|
| • |
the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 11.6% of our outstanding Class A Common Stock; and
|
| • |
the initial stockholders will own 8,750,000 shares of our Class A Common Stock, which will constitute 6.2% of our outstanding Class A Common Stock.
|
The ownership percentages with respect to New Solid Power set forth above do not take into account warrants to purchase Class A Common Stock that will remain outstanding immediately following the business combination, but do include the Founder Shares, which will convert into Class A Common Stock upon an Initial Business Combination. If the facts are different than these assumptions, the percentage ownership retained by DCRC’s existing stockholders in New Solid Power following the business combination will be different. For example, if we assume that all outstanding 11,666,667 public warrants and 6,666,667 private placement warrants were exercisable and exercised following completion of the business combination and further assume that no public stockholders elect to have their public shares redeemed, then the ownership of New Solid Power would be as follows:
| • |
the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 56.7% of our outstanding Class A Common Stock;
|
| • |
the public stockholders will own 46,666,667 shares of our Class A Common Stock, which will constitute 25.7% of our outstanding Class A Common Stock;
|
| • |
the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 9.1% of our outstanding Class A Common Stock; and
|
| • |
the initial stockholders will own 15,416,667 shares of our Class A Common Stock, which will constitute 8.5% of our outstanding Class A Common Stock.
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The public warrants and private placement warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of our Initial Public Offering and will expire five years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation.
Please see the sections entitled “Summary of the Proxy Statement/Prospectus—Ownership of New Solid Power After the Closing” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.
| • |
The DCRC Board considered various factors in determining whether to approve the Business Combination Agreement and the business combination. For more information about the DCRC Board’s decision-making process, see the section entitled “Proposal No. 1—The Business Combination Proposal—DCRC Board’s Reasons for the Approval of the Business Combination.”
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| • |
In addition to voting on the proposal to approve and adopt the Business Combination Agreement and the business combination (the “Business Combination Proposal”) at the special meeting, DCRC’s stockholders will also be asked to vote on the approval of:
|
| • |
an amendment to DCRC’s Charter to increase the number of authorized shares of DCRC’s capital stock, par value $0.0001 per share, from 271,000,000 shares, consisting of (a) 270,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock, and (b) 1,000,000 shares of Preferred Stock, to 2,200,000,000 shares, consisting of (i) 2,000,000,000 shares of common stock, par value $0.0001 per share, and (ii) 200,000,000 shares of Preferred Stock (the “Authorized Share Charter Proposal”);
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| • |
amendments to DCRC’s Charter to (i) eliminate provisions in the Charter relating to DCRC’s Initial Business Combination that will no longer be applicable to DCRC following the Closing;
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ix
|
(ii) change the post-combination company’s name to “Solid Power, Inc.”; (iii) change the minimum stockholder vote required to amend, repeal or modify certain specified provisions of the Proposed Second A&R Charter or any provision inconsistent with any provision of New Solid Power’s amended and restated bylaws; (iv) provide for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon; (v) remove the right of holders of Class B Common Stock to act by written consent; and (vi) remove the designation of certain courts as the exclusive forum for certain types of stockholder claims (the “Additional Charter Proposal” and, together with the Authorized Share Charter Proposal, the “Charter Proposals”);
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| • |
for purposes of complying with applicable listing rules of Nasdaq, (a) the issuance (or reservation for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (b) the issuance and sale of 16,500,000 shares of Class A Common Stock in the PIPE Financing (the “Nasdaq Proposal”);
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| • |
the Solid Power, Inc. 2021 Equity Incentive Plan (the “2021 Plan”) and material terms thereunder (the “2021 Plan Proposal”);
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| • |
the Solid Power, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”) and material terms thereunder (the “ESPP”);
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| • |
the election of directors to serve until the 2022 annual meeting of stockholders, directors to serve until the 2023 annual meeting of stockholders and directors to serve until the 2024 annual meeting of stockholders, and until their respective successors are duly elected and qualified, subject to such directors’ earlier death, resignation, retirement, disqualification or removal (the “Director Election Proposal”); and
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| • |
the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal or the Director Election Proposal (the “Adjournment Proposal” and, together with the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal and the Director Election Proposal, the “Proposals”).
|
For more information, see the sections entitled “Proposal No. 2—The Authorized Share Charter Proposal,” “Proposal No. 3—The Additional Charter Proposal,” “Proposal No. 4—The Nasdaq Proposal,” “Proposal No. 5—The 2021 Plan Proposal,” “Proposal No. 6—The ESPP Proposal,” “Proposal No. 7—The Director Election Proposal” and “Proposal No. 8—The Adjournment Proposal.”
x
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR DCRC STOCKHOLDERS
The following questions and answers briefly address some commonly asked questions about the Proposals to be presented at the special meeting of stockholders of DCRC, including the proposed business combination. The following questions and answers do not include all the information that is important to DCRC stockholders. We urge DCRC stockholders to carefully read this entire proxy statement/prospectus, including the annexes and other documents referred to herein.
|
Q:
|
Why am I receiving this proxy statement/prospectus?
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| A: |
DCRC stockholders are being asked to consider and vote upon, among other things, a proposal to (a) approve and adopt the Business Combination Agreement, pursuant to which Merger Sub will merge with and into Solid Power, with Solid Power surviving the merger as a wholly owned subsidiary of DCRC, (b) approve such merger and the other transactions contemplated by the Business Combination Agreement and (c) approve, for purposes of complying with applicable listing rules of Nasdaq, (i) the issuance to the Historical Rollover Stockholders (or reservation for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (ii) the issuance and sale of 16,500,000 shares of Class A Common Stock in the PIPE Financing.
|
A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as
. This proxy statement/prospectus and its annexes contain important information about the proposed business combination and the other matters to be acted upon at the special meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.
Annex A
Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes.
|
Q:
|
What is being voted on at the special meeting?
|
| A: |
DCRC stockholders will vote on the following proposals at the special meeting.
|
| • |
The Business Combination Proposal
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The Charter Proposals
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The Authorized Share Charter Proposal
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The Additional Charter Proposal
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The full text of our proposed second amended and restated certificate of incorporation (the “Proposed Second A&R Charter”) reflecting each of the proposed amendments pursuant to the Charter Proposals is attached to this proxy statement/prospectus as
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Annex B
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The Nasdaq Proposal
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (b) the issuance and sale of 16,500,000 shares of Class A Common Stock in the PIPE Financing (Proposal No. 4).
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The 2021 Plan Proposal
Annex C
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The ESPP Proposal
Annex D
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The Adjournment Proposal
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Q:
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Are the Proposals conditioned on one another?
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| A: |
We may not consummate the business combination unless the Business Combination Proposal, the Charter Proposals and the Nasdaq Proposal are approved at the special meeting. The Charter Proposals, the 2021 Plan Proposal, the ESPP Proposal and the Director Election Proposal are conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal. The Adjournment Proposal is not conditioned on the approval of any other Proposal set forth in this proxy statement/prospectus.
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Q:
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What will happen in the business combination?
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Pursuant to the Business Combination Agreement, and subject to the terms and conditions contained therein, Merger Sub will merge with and into Solid Power, with Solid Power surviving the merger. After giving effect to the merger, Solid Power will become a wholly owned subsidiary of New Solid Power. At the Closing, 102,922,125 shares of Class A Common Stock will be issued to the Historical Rollover Stockholders in the business combination in exchange for all outstanding shares of Solid Power Common Stock (and 25,722,948 shares of Class A Common Stock will be reserved for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants), and each share of Class A Common Stock will be
re-designated
as “common stock, par value $0.0001.” For more information about the Business Combination Agreement and the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal.”
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Q:
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How were the transaction structure and consideration for the business combination determined?
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Following the closing of the IPO, DCRC representatives commenced a robust search for businesses or assets to acquire for the purpose of consummating DCRC’s Initial Business Combination. On March 29, 2021, Robert Tichio, a member of the DCRC Board, and John Staudinger, a Managing Director of Riverstone Holdings, LLC, an affiliate of our Sponsor, participated in a video conference with representatives of Stifel, Nicolaus & Company, Incorporated (“Stifel”) and Solid Power regarding a possible transaction between DCRC and Solid Power. Solid Power had engaged Stifel on February 20, 2020 to serve as its financial advisor in connection with Solid Power’s Series B Financing. This engagement was revised on March 19, 2021 to include Stifel’s engagement as strategic advisor in connection with consideration and pursuit of a potential SPAC business combination. DCRC management was first made aware of the Solid Power process by Stifel, and by representatives of Riverstone, who were familiar with Solid Power through their network. Riverstone had previously engaged in discussions with Solid Power and conducted a due diligence review of Solid Power’s business and certain technical topics. Riverstone was subject to a nondisclosure agreement, dated as of December 14, 2020 (the “NDA”), with respect to Solid Power. The NDA applied to affiliates of Riverstone and did not contain a standstill provision. After further discussions, negotiations and the performance of extensive due diligence, on April 13, 2021, DCRC and Solid Power executed a
non-binding
letter of intent. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination” for additional information.
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Q:
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What conditions must be satisfied to complete the business combination?
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| A: |
There are several closing conditions in the Business Combination Agreement, including the approval by our stockholders of the Business Combination Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination.”
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Q:
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How will we be managed and governed following the business combination?
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Immediately after the Closing, the DCRC Board will be divided into three separate classes, designated as follows:
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Class I comprised of Douglas Campbell, Erik Anderson and Robert M. Tichio;
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Class II comprised of Steven H. Goldberg, and
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Class III comprised of David Jansen, Rainer Feurer and .
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It is anticipated that will be designated Chair of the Board upon the Closing.
Please see the section entitled “Management After the Business Combination.”
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Q:
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Will DCRC obtain new financing in connection with the business combination?
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| A: |
The New PIPE Investors have committed to purchase from DCRC 16,500,000 shares of Class A Common Stock, for an aggregate purchase price of approximately $165,000,000 in the PIPE Financing.
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Q:
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What equity stake will our current stockholders and the holders of our Founder Shares hold in New Solid Power following the consummation of the business combination?
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| A: |
We anticipate that, upon the Closing, the ownership of New Solid Power will be as follows:
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the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 63.1% of our outstanding Class A Common Stock;
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the public stockholders will own 35,000,000 shares of our Class A Common Stock, which will constitute 21.4% of our outstanding Class A Common Stock;
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the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 10.1% of our outstanding Class A Common Stock; and
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the initial stockholders will own 8,750,000 shares of our Class A Common Stock, which would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date of the special meeting and will constitute 5.4% of our outstanding Class A Common Stock.
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The number of shares and the interests set forth above (a) assume (i) that no public stockholders elect to have their public shares redeemed, (ii) that there are no other issuances of equity interests of DCRC or Solid Power and (iii) that there are no exercises of Solid Power Options or Solid Power Warrants and (b) do not take into account DCRC warrants that will remain outstanding following the business combination and may be exercised at a later date. As a result of the business combination, the economic and voting interests of our public stockholders will decrease.
The ownership percentages with respect to New Solid Power set forth above do not take into account warrants to purchase Class A Common Stock that will remain outstanding immediately following the business combination, but do include the Founder Shares, which will convert into Class A Common Stock upon an Initial Business Combination. If the facts are different than these assumptions, the percentage ownership retained by DCRC’s existing stockholders in New Solid Power following the business combination will be different. For example, if we assume that all outstanding 11,666,667 public warrants and 6,666,667 private placement warrants were exercisable and exercised following completion of the business combination and further assume that no public stockholders elect to have their public shares redeemed, then the ownership of New Solid Power would be as follows:
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the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 56.7% of our outstanding Class A Common Stock;
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the public stockholders will own 46,666,667 shares of our Class A Common Stock, which will constitute 25.7% of our outstanding Class A Common Stock;
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the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 9.1% of our outstanding Class A Common Stock; and
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the initial stockholders will own 15,416,667 shares of our Class A Common Stock, which would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date of the special meeting and will constitute 8.5% of our outstanding Class A Common Stock.
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The public warrants and private placement warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of our Initial Public Offering and will expire five years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation.
Please see the sections entitled “Summary of the Proxy Statement/Prospectus—Ownership of New Solid Power After the Closing” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.
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Q:
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Why is DCRC proposing the amendments to the Charter set forth in the Charter Proposals?
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| A: |
DCRC is proposing amendments to the Charter to approve certain items required to effectuate the business combination and other matters the DCRC Board believes are appropriate for the operation of New Solid
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Power, including providing for, among other things, (a) an increase in the number of authorized shares of DCRC’s capital stock, par value $0.0001 per share, from 271,000,000 shares, consisting of (i) 270,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of Preferred Stock, to 2,200,000,000 shares, consisting of (A) 2,000,000,000 shares of common stock, par value $0.0001 per share, and (B) 200,000,000 shares of Preferred Stock, and (b) to (i) eliminate of certain provisions relating to an Initial Business Combination that will no longer be applicable to DCRC following the Closing, (ii) change the post-combination company’s name to “Solid Power, Inc.”; (iii) change the minimum stockholder vote required to amend, repeal or modify certain specified provisions of the Proposed Second A&R Charter or any provision inconsistent with any provision of New Solid Power’s amended and restated bylaws; (iv) provide for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon; (v) remove the right of holders of Class B Common Stock to act by written consent; and (vi) remove the designation of certain courts as the exclusive forum for certain types of stockholder claims. Under the Charter and Delaware law, stockholder approval is required in order to effect the Charter Proposals. See the sections entitled “
Proposal No. 2—The Authorized Share Charter Proposal
Proposal No. 3—The Additional Charter Proposal
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Q:
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Why is DCRC proposing the Nasdaq Proposal?
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DCRC is proposing the Nasdaq Proposal in order to comply with Nasdaq listing standards, which require stockholder approval of certain transactions that result in the issuance of 20% or more of a company’s outstanding voting power or shares of common stock outstanding before the issuance of stock or securities. In connection with the business combination and PIPE Financing, we may issue to the Historical Rollover Stockholders and the New PIPE Investors, and reserve for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants, up to 128,645,073 shares of Class A Common Stock. Because we may issue 20% or more of our outstanding voting power and outstanding common stock in connection with the business combination, we are required to obtain stockholder approval of such issuances pursuant to Nasdaq listing standards. See the section entitled “
Proposal No. 4—The Nasdaq Proposal
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Q:
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Did the DCRC Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the business combination?
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No. The DCRC Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the business combination. DCRC’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of DCRC’s advisors, enabled them to make the necessary analyses and determinations regarding the business combination. In addition, DCRC’s officers, directors and advisors have substantial experience with mergers and acquisitions. Accordingly, investors will be relying solely on the judgment of the DCRC Board in valuing Solid Power and assuming the risk that the DCRC Board may not have properly valued the business.
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Q:
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What are some of the positive and negative factors that the DCRC Board considered when determining to enter into the Business Combination Agreement and its rationale for approving the transaction?
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The factors considered by the DCRC Board include, but were not limited to, the following:
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Competitive and Innovative Design. The DCRC Board considered Solid Power’s innovative and competitive all-solid-state battery design and the potential applications of the batteries across multiple industries.
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Value to Equity Investors. The DCRC Board considered Solid Power’s value to investors, determining that Solid Power is the industry leader for all-solid-state battery development and manufacturing.
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Revenue Potential. The DCRC Board considered that Solid Power entered into non-exclusive JDAs with certain of its early investors, including Ford Motor Company and BMW of North America LLC, to collaborate on the research and development of its all-solid-state battery cell. The terms of the JDAs generally require Solid Power to continue its research and development of all-solid-state battery cells and component materials such that Solid Power’s products are capable of being deployed in electric vehicles within the next few years as well as other research and development milestones.
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Manufacturing Capabilities. The DCRC Board considered Solid Power’s demonstrated ability to manufacture electric vehicle-relevant battery cells in dimensions suitable for automotive applications using scalable manufacturing processes and Solid Power’s intention to license such manufacturing know-how to third party commercialization partners.
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Due Diligence. The DCRC Board considered the results of DCRC’s due diligence investigation of Solid Power conducted by DCRC’s management team and its financial and legal advisors.
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Terms of the Business Combination Agreement. The DCRC Board reviewed the financial and other terms of the Business Combination Agreement and determined that they were the product of arm’s-length negotiations among the parties.
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Independent Director Role. DCRC’s independent directors took an active role in guiding DCRC management as DCRC evaluated and negotiated the proposed terms of the business combination. Following an active and detailed evaluation, the DCRC Board’s independent directors unanimously approved, as members of the DCRC Board, the Business Combination Agreement and the business combination.
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Stockholder Approval. The DCRC Board considered the fact that, in connection with the business combination, DCRC stockholders have the option to (i) remain stockholders of the combined company, (ii) sell their shares on the open market or (iii) redeem their shares for the per share amount held in the Trust Account pursuant to the terms of our Charter.
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Other Alternatives. The DCRC Board believed, after a thorough review of other business combination opportunities reasonably available to DCRC, that the business combination represented the best potential business combination for DCRC and the most attractive opportunity for DCRC based upon the process utilized to evaluate and assess other potential business combination targets. The DCRC Board believes that such process has not presented a better alternative.
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In addition, the DCRC Board determined that the business combination satisfies the investment criteria that the DCRC Board identified in connection with the IPO. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination.”
In the course of its deliberations, the DCRC Board also considered a variety of uncertainties, risks and other potentially negative factors relevant to the business combination, including the following:
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Developmental Stage Company Risk. The risk that Solid Power is an early-stage company, with a history of financial losses and that expects to incur significant expenses and continuing losses for the foreseeable future. As Solid Power scales from limited production of batteries to, ultimately, significant licensing of all-solid-state battery cells or sales of the sulfide-based solid electrolytes, it is difficult, if not impossible, to forecast Solid Power’s future results, and Solid Power has limited insight into trends that may emerge and affect Solid Power’s business.
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Business Plan Risk. The risk that Solid Power may be unable to execute on its business model, which would have a material adverse effect on Solid Power’s operating results and business, would harm Solid Power’s reputation and could result in substantial liabilities that exceed its resources.
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Customer Risk. The risk that Solid Power may not be able to obtain binding licensing agreements or sales orders for its products.
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Financing Risk. The risk that Solid Power may be unable to achieve sufficient sales or otherwise raise the necessary capital to implement its business plan and strategy. If Solid Power needs to raise additional funds, the risk that these funds may not be available on terms favorable to Solid Power or Solid Power’s stockholders, or at all when needed.
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Competitive Risk. The risk that Solid Power faces significant competition and that its competitors may develop competing technologies more efficient or effective than Solid Power’s.
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Supplier Risk. The risk that Solid Power may not be able to attain the supplies, such as lithium sulfide, NMC and manufacturing tools for its all-solid-state battery cells. If Solid Power is unable to enter into commercial agreements with its current suppliers or its replacement suppliers on favorable terms, or if these suppliers experience difficulties meeting Solid Power’s requirements, the development and commercial progression of its all-solid-state battery cells and related technologies may be delayed.
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Intellectual Property Risk. The risk that Solid Power may not have adequate intellectual property rights to carry out its business, may need to defend itself against patent, copyright, trademark, trade secret or other intellectual property infringement or misappropriation claims, and may need to enforce its intellectual property rights from unauthorized use by third parties.
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Regulatory Risk. The risks that are associated with Solid Power operating in the highly-regulated battery cell industry. Failure to comply with regulations or laws could subject Solid Power to significant regulatory risk, including the risk of litigation, regulatory actions and compliance issues that could subject Solid Power to significant fines, penalties, judgments, remediation costs, negative publicity and requirements resulting in increased expenses.
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Public Company Risk. The risks that are associated with being a publicly traded company that is in its early, developmental stage.
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Benefits May Not Be Achieved Risk. The risk that the potential benefits of the business combination may not be fully achieved or may not be achieved within the expected timeframe.
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Redemption Risk. The risk that a significant number of DCRC stockholders elect to redeem their shares prior to the consummation of the business combination and pursuant to DCRC’s existing Charter, which would potentially make the business combination more difficult to complete or reduce the amount of cash available to the combined company to execute its business plan following the Closing.
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Stockholder Vote Risk. The risk that DCRC’s stockholders may fail to provide the votes necessary to effect the business combination.
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Litigation Risk. The risk of the possibility of litigation challenging the business combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the business combination.
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Closing Risk. The risk that the Closing might not occur in a timely manner or that the Closing might not occur at all, despite DCRC’s efforts.
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Closing Conditions Risk. The risk that completion of the business combination is conditioned on the satisfaction of certain closing conditions that are not within DCRC’s control.
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Minority Position. The risk that DCRC’s stockholders will hold a minority position in the combined company.
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No Third-Party Valuation Risk. The risk that DCRC did not obtain a third-party valuation or fairness opinion in connection with the business combination.
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Fees, Expenses and Time Risk. The risk of incurring significant fees and expenses associated with completing the business combination and the substantial time and effort of management required to complete the business combination.
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Other Risks. Various other risk factors associated with Solid Power’s business, as described in the section entitled “Risk Factors.”
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In addition to considering the factors described above, the DCRC Board also considered that the officers and directors of DCRC may have interests in the business combination as individuals that are in addition to, and that may be different from, the interests of DCRC’s stockholders. DCRC’s independent directors reviewed and considered these interests during the negotiation of the business combination and in evaluating and unanimously approving, as members of the DCRC Board, the Business Combination Agreement and the business combination. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”
The DCRC Board concluded that the potential benefits that it expects DCRC and its stockholders to achieve as a result of the business combination outweigh the potentially negative factors associated with the business combination. Accordingly, the DCRC Board, based on its consideration of the specific factors listed above, unanimously (a) determined that the business combination and the other transactions contemplated by the Business Combination Agreement are fair to, and in the best interests of, DCRC’s stockholders, (b) approved, adopted and declared advisable the Business Combination Agreement and the transactions contemplated thereby and (c) recommended that the stockholders of DCRC approve each of the Proposals.
The above discussion of the material factors considered by the DCRC Board is not intended to be exhaustive but does set forth the principal factors considered by the DCRC Board.
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Q:
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What happens if I sell my shares of Class A Common Stock before the special meeting?
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| A: |
The record date for the special meeting is earlier than the date that the business combination is expected to be completed. If you transfer your shares of Class A Common Stock after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting. However, you will not be able to seek redemption of your shares of Class A Common Stock because you will no longer be able to deliver them for cancellation upon consummation of the business combination in accordance with the provisions described in this proxy statement/prospectus. If you transfer your shares of Class A Common Stock prior to the record date, you will have no right to vote those shares at the special meeting or seek redemption of those shares.
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Q:
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How has the announcement of the business combination affected the trading price of DCRC’s units, Class A Common Stock and warrants?
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On June 14, 2021, the last trading date before the public announcement of the business combination, DCRC’s public units, Class A Common Stock and public warrants closed at $13.47, $12.09 and $3.65, respectively. On , 2021 the trading date immediately prior to the date of this proxy statement/prospectus, DCRC’s public units, Class A Common Stock and warrants closed at $ , $ and $ , respectively.
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Q:
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Following the business combination, will DCRC’s securities continue to trade on a stock exchange?
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Yes. We anticipate that, following the business combination, our common stock and public warrants will continue trading on Nasdaq under the new symbols “SLDP” and “SLDPW,” respectively. Our units will automatically separate into the component securities upon consummation of the business combination and, as a result, will no longer trade as separate securities following the business combination.
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Q:
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What vote is required to approve the Proposals presented at the special meeting?
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Approval of each of the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal and the Adjournment Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon, voting as a single class. Approval of the Authorized Share Charter Proposal requires the affirmative vote (online or by proxy) of (i) the holders of a majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class, and (ii) the holders of a majority of the shares of Class A Common Stock entitled to vote thereon at the special meeting, voting as a single class. Approval of the Additional Charter Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class.
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Approval of the Director Election Proposal requires the affirmative vote (online or by proxy) of a plurality of the votes cast by holders of our Class A Common Stock and Class B Common Stock at the special meeting and entitled to vote thereon, voting as a single class. This means that the director nominees will be elected if they receive more affirmative votes than any other nominee for the same position.
Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions will have no effect on the Director Election Proposal.
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Q:
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May DCRC’s Sponsor, directors, officers, advisors or any of their respective affiliates purchase public shares in connection with the business combination?
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In connection with the stockholder vote to approve the proposed business combination, our Sponsor, directors, officers, advisors and any of their respective affiliates may privately negotiate to purchase public shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per share pro rata portion of the Trust Account. Our Sponsor, directors, officers, advisors and any of their respective affiliates will not make any such purchases when they are in possession of any material
non-public
information not disclosed to the seller of such public shares or during a restricted period under Regulation M under the Exchange Act. Such a purchase could include a contractual acknowledgement that such stockholder, although still the record holder of such public shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such stockholder to vote such shares in a manner directed by the purchaser. In the event that our Sponsor, directors, officers, advisors or any of their respective affiliates purchase public shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are in excess of the per share pro rata portion of the Trust Account.
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Q:
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How many votes do I have at the special meeting?
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Our stockholders are entitled to one vote at the special meeting for each share of Class A Common Stock or Class B Common Stock held of record as of , 2021, the record date for the special meeting. As of the close of business on the record date, there were 35,000,000 outstanding shares of Class A Common Stock, which are held by our public stockholders, and 8,750,000 outstanding shares of Class B Common Stock, which are held by our initial stockholders.
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Q:
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What constitutes a quorum at the special meeting?
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Holders of a majority in voting power of Class A Common Stock and Class B Common Stock issued and outstanding and entitled to vote at the special meeting, virtually present or represented by proxy, constitute a
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| quorum. In the absence of a quorum, the chairman of the meeting has the power to adjourn the special meeting. As of the record date for the special meeting, 21,875,001 shares of Class A Common Stock and Class B Common Stock, in the aggregate, would be required to achieve a quorum. Abstentions will count as present for the purposes of establishing a quorum with respect to each Proposal. |
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Q:
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How will DCRC’s Sponsor, directors and officers vote?
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Our Sponsor, directors and officers have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination. Currently, our initial stockholders own approximately 20% of our issued and outstanding shares of Class A Common Stock and Class B Common Stock, in the aggregate.
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Q:
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What interests do the current officers and directors have in the business combination?
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In considering the recommendation of the DCRC Board to vote in favor of the business combination, stockholders should be aware that, aside from their interests as stockholders, our Sponsor and certain of our directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders generally. Our directors were aware of and considered these interests, among other matters, in evaluating the business combination, and in recommending to stockholders that they approve the business combination. Stockholders should take these interests into account in deciding whether to approve the business combination. These interests include, among other things:
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the fact that our Sponsor and independent directors hold an aggregate of 6,666,667 private placement warrants that would expire worthless if a business combination is not consummated, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our public warrants of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
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the fact that our Sponsor may convert any working capital loans that it may make to us into up to an additional 1,000,000 private placement warrants, at the price of $1.50 per warrant;
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the fact that our Sponsor, officers and directors have agreed not to redeem any of the shares of our common stock held by them in connection with a stockholder vote to approve the business combination;
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the fact that our initial stockholders paid an aggregate of $25,000 for the Founder Shares and that such securities will have a significantly higher value at the time of the business combination, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
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the fact that certain of DCRC’s officers and directors collectively own, directly or indirectly, a material interest in our Sponsor;
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the fact that affiliates of our Sponsor own an aggregate of 1,660,417 shares of Solid Power Series A-1 Preferred Stock, which at the Exchange Ratio, would be exchanged for 5,319,311 shares of our Class A Common Stock at the Closing;
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the anticipated appointment of each of Erik Anderson, a member of the DCRC Board and DCRC’s Chief Executive Officer, and Robert Tichio, a member of the DCRC Board, as a director on the New Solid Power Board in connection with the closing of the business combination;
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if the Trust Account is liquidated, including in the event we are unable to complete an Initial Business Combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of (a) any third party
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(other than our independent public accountants) for services rendered or products sold to us or (b) a prospective target business with which we have entered into an acquisition agreement, but only if such a third party or target business has not executed a waiver of all rights to seek access to the Trust Account;
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the fact that our independent directors own an aggregate of 360,000 Founder Shares, which if unrestricted and freely tradeable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date of the special meeting;
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the fact that our Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to stockholders rather than liquidate;
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the fact that our Sponsor and its affiliates can earn a positive rate of return on their investment, even if other DCRC stockholders experience a negative rate of return in the post-business combination company;
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the fact that our Sponsor, officers and directors will be reimbursed for out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations; and
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the fact that our Sponsor, officers and directors will lose their entire investment in us if an Initial Business Combination is not completed.
|
At the Closing, we anticipate that our Sponsor will own 6,367,353 private placement warrants and 8,390,000 shares of New Solid Power common stock (which will be issued upon conversion of the Founder Shares upon the Closing). In addition, our Sponsor may make available to us working capital loans for up to $1,500,000 to enable us to finance transaction costs in connection with our Initial Business Combination. As of the date of this proxy statement/prospectus, there were no amounts outstanding under any working capital loans. Further, as of the date of this proxy statement/prospectus, there has been no reimbursement to our Sponsor, officers or directors for any out-of-pocket expenses incurred in connection with activities on our behalf, and no such amounts have been incurred as of the date of this proxy statement/prospectus. However, as of the date of this proxy statement/prospectus, an affiliate of our Sponsor has incurred approximately $4.0 million of expenses on DCRC’s behalf, of which approximately $3.0 million has been repaid by DCRC to the affiliate of our Sponsor. The balance will be repaid by DCRC at the Closing.
Investors in our Sponsor, each of which contributed capital to our Sponsor in exchange for Founder Shares and private placement warrants, include entities affiliated with certain of our non-independent directors and officers. Specifically, Pierre Lapeyre, Jr., David Leuschen, Robert Tichio and Peter Haskopoulos are each affiliated with Decarbonization Plus Acquisition Sponsor Manager III, LLC (“Sponsor Manager”), and Erik Anderson is affiliated with WRG DCRC Investors, LLC (“WRG”), through which such DCRC directors and officers have an indirect economic interest in the private placement warrants and shares of New Solid Power common stock anticipated to be held by our Sponsor as of the completion of the business combination.
Our independent directors paid $1,028 in aggregate consideration for the 360,000 Founder Shares transferred to our independent directors by our Sponsor at the closing of our IPO. In addition, our independent directors purchased 299,314 private placement warrants at a price of $1.50 per warrant at the closing of our IPO.
11
The table set forth below summarizes the interests of Sponsor Manager, WRG and our independent directors in the private placement warrants and Founder Shares along with (i) the total investment made in our Sponsor (or purchase price paid for the private placement warrants, in the case of our independent directors) by Sponsor Manager, WRG and our independent directors in exchange for their interests in the private placement warrants and Founder Shares and (ii) the value of such interests based on the closing price of the public warrants and Class A Common Stock as of , 2021, all of which would be lost if an Initial Business Combination is not completed by us within the required time period:
|
Name of Holder
|
DCRC
Position |
Total Purchase
Price / Capital Contributions |
Number of
Private Placement Warrants |
Value of
Private Placement Warrants as of , 2021 |
Number of
Founder Shares |
Value of
Founder Shares as of , 2021 |
||||||||||||||||
|
Decarbonization Plus Acquisition Sponsor Manager III, LLC
1
|
N/A | $ | 7,923,040 | 5,268,801 | $ | 6,943,741 | $ | |||||||||||||||
|
WRG DCRC Investors, LLC
2
|
N/A | $ | 1,150,710 | 765,219 | $ | 1,008,759 | $ | |||||||||||||||
|
James AC McDermott
|
Director | $ | 300,000 | 199,543 | $ | 240,000 | $ | |||||||||||||||
|
Jennifer Aaker
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
Jane Kearns
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
Jeffrey Tepper
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
1
|
DCRC directors Pierre Lapeyre, Jr., David Leuschen and Robert Tichio and Chief Financial Officer, Chief Accounting Officer and Secretary Peter Haskopoulos each have an indirect economic interest in our Sponsor through Sponsor Manager.
|
|
2
|
DCRC Chief Executive Officer Erik Anderson has an indirect economic interest in our Sponsor through WRG.
|
In addition, our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that this waiver of the corporate opportunities doctrine has materially affected our search for an acquisition target or will materially affect our ability to complete our business combination.
|
Q:
|
What happens if I vote against the Business Combination Proposal?
|
| A: |
Under our Charter, if the Business Combination Proposal is not approved and we do not otherwise consummate an alternative business combination by March 26, 2023, we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.
|
|
Q:
|
Do I have redemption rights?
|
| A: |
If you are a holder of public shares, you may elect to have your public shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the business combination, including interest not previously released to us to pay our franchise and income taxes, by (b) the total number of then outstanding shares of Class A Common Stock included as part of the units sold in the IPO; provided that we will not redeem any public shares to the extent that such redemption would result in DCRC having net tangible assets (as determined in accordance with Rule
3a51-1(g)(1)
under the Exchange Act) of less than $5,000,001 unless our Class A Common Stock otherwise does not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act. Because we anticipate that the Class A Common Stock will be listed on Nasdaq at the Closing, and such listing would mean that the Class A Common Stock would not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act, we do not anticipate the $5,000,001 net tangible asset threshold
|
12
|
being applicable. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the public shares (the “20% threshold”). Unlike some other blank check companies, other than the net tangible asset requirement and the 20% threshold described above, we have no specified maximum redemption threshold and there is no other limit on the number of public shares that you can redeem. Holders of our outstanding public warrants do not have redemption rights in connection with the business combination. Our Sponsor, officers and directors have agreed to waive their redemption rights with respect to any shares of our common stock they may hold in connection with the consummation of the business combination. For illustrative purposes, based on the fair value of cash and marketable securities held in the Trust Account as of June 30, 2021 of approximately $350.0 million, the estimated per share redemption price would have been approximately $10.00. Additionally, shares properly tendered for redemption will only be redeemed if the business combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including interest but net of franchise and income taxes payable) (a) in connection with a stockholder vote to approve an amendment to our Charter that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an Initial Business Combination by March 26, 2023, or with respect to any other provision relating to the rights of holders of Class A Common Stock or
pre-Initial
Business Combination activity, (b) in connection with the liquidation of the Trust Account or (c) if we subsequently complete a different business combination on or before March 26, 2023.
|
|
Q:
|
Will how I vote affect my ability to exercise redemption rights?
|
| A: |
No. You may exercise your redemption rights whether you vote your shares of Class A Common Stock for or against or abstain from voting on the Business Combination Proposal or any other proposal described in this proxy statement/prospectus. As a result, the business combination can be approved by stockholders who will redeem their shares and no longer remain stockholders.
|
|
Q:
|
How do I exercise my redemption rights?
|
| A: |
In order to exercise your redemption rights, you must (a) if you hold your shares of Class A Common Stock through units, elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares, and (b) prior to 5:00 p.m., Eastern time, on , 2021 (two business days before the special meeting), tender your shares physically or electronically and submit a request in writing that we redeem your public shares for cash to Continental Stock Transfer & Trust Company, our transfer agent, at the following address:
|
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004-1561
Attention: Mark Zimkind
Email: mzimkind@continentalstock.com
A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to his, her or its shares or, if part of such a group, the group’s shares, in excess of the 20% threshold. Accordingly, all public shares in excess of the 20% threshold beneficially owned by a public stockholder or group will not be redeemed for cash. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent.
13
However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.
Holders of our outstanding units must separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold units registered in your own name, you must deliver the certificate for such units or deliver such units electronically to Continental Stock Transfer & Trust Company with written instructions to separate such units into public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates or electronic delivery of the public shares back to you so that you may then exercise your redemption rights with respect to the public shares following the separation of such public shares from the units.
If a broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using The Depository Trust Company’s (“DTC”) DWAC (deposit withdrawal at custodian) system, a withdrawal of the relevant units and a deposit of the corresponding number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights with respect to the public shares following the separation of such public shares from the units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.
Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the vote is taken with respect to the business combination. If you delivered your shares for redemption to the transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that the transfer agent return the shares (physically or electronically). You may make such request by contacting our transfer agent at the email address or address listed under the question “Who can help answer my questions?” below.
|
Q:
|
What are the material U.S. federal income tax consequences to the DCRC shareholders as a result of the Merger?
|
| A: |
DCRC stockholders will retain their shares of Class A Common Stock, which will be
re-designated
as “common stock, par value $0.0001,” will not receive any merger consideration and will not receive any additional shares of Class A Common Stock in the Merger. As a result, there will be no material U.S. federal income tax consequences to the current DCRC stockholders as a result of the Merger, regardless of whether the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code. Furthermore, although the Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and DCRC and Solid Power intend to report the Merger consistent with such qualification, such treatment is not a condition to DCRC or Solid Power’s obligation to complete the Merger.
|
|
Q:
|
What are the U.S. federal income tax consequences of exercising my redemption rights?
|
| A: |
The receipt of cash by a holder of Class A Common Stock in redemption of such stock will be a taxable event for U.S. federal income tax purposes in the case of a U.S. Holder (as defined below) and could be a taxable event for U.S. federal income tax purposes in the case of a
Non-U.S.
Holder (as defined below). Please see the discussion below under the caption “Proposal No. 1—The Business Combination Proposal—Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders” or “Proposal No. 1—The Business Combination Proposal—Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of
Non-U.S.
Holders,” as applicable, for additional information. All holders considering the exercise of their redemption rights should consult with, and rely solely upon, their own tax advisors with respect to the U.S. federal income tax consequences of exercising such redemption rights.
|
14
|
Q:
|
If I am a warrantholder, can I exercise redemption rights with respect to my warrants?
|
| A: |
No. The holders of our warrants have no redemption rights with respect to our warrants.
|
|
Q:
|
How do the public warrants differ from the private placement warrants, and what are the related risks for any public warrant holders post business combination?
|
| A: |
The private placement warrants (including the shares of Class A Common Stock issuable upon exercise of the private placement warrants) are not transferable, assignable or salable until 30 days after the completion of our Initial Business Combination (except, among other limited exceptions, to our officers and directors and other persons or entities affiliated with our Sponsor), and they will not be redeemable by us (except as described under “Description of Securities—Warrants—Redemption of Warrants for Cash When the Price Per share of Class A Common Stock Equals or Exceeds $10.00”) so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. The initial purchasers, or their permitted transferees, have the option to exercise the private placement warrants on a cashless basis. Otherwise, the private placement warrants have terms and provisions that are identical to those of the public warrants, including as to exercise price, exercisability and exercise period. If the private placement warrants are held by holders other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by us in all redemption scenarios and exercisable by the holders on the same basis as the public warrants.
|
Following the business combination, we may redeem public warrants prior to their exercise at a time that is disadvantageous to the public warrant holders, thereby making such warrants worthless. More specifically:
| • |
We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last sales price of the Class A Common Stock has been at least $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within the 30 trading-day period ending on the third business day prior to the date on which we give notice of such redemption and provided certain other conditions are met.
|
| • |
We also have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the last sale price of the Class A Common Stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which notice of the redemption is given. Historical trading prices for the Class A Common Stock have exceeded the $10.00 per share threshold at which the public warrants would become redeemable. In such a case, the holders will be able to exercise their warrants prior to redemption for a number of shares of Class A Common Stock determined by reference to a make-whole table. Please see “Description of Securities—Warrants—Redemption of Warrants for Cash When the Price Per share of Class A Common Stock Equals or Exceeds $10.00.” The value received upon exercise of the public warrants (1) may be less than the value the holders would have received if they had exercised their public warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the public warrants, including because the number of shares received is capped at 0.361 shares of Class A Common Stock per whole warrant (subject to adjustment) irrespective of the remaining life of the public warrants.
|
In each case, we may only call the public warrants for redemption upon a minimum of 30 days’ prior written notice of redemption to each public warrant holder.
Redemption of the outstanding public warrants could force holders of the public warrants (i) to exercise public warrants and pay the exercise price therefor at a time when it may be disadvantageous for such holders to do so, (ii) to sell public warrants at the then-current market price when they might otherwise wish to hold their public warrants or (iii) to accept the nominal redemption price which, at the time the outstanding public warrants are called for redemption, is likely to be substantially less than the market value of the public warrants.
15
|
Q:
|
Do I have appraisal rights if I object to the proposed business combination?
|
| A: |
No. There are no appraisal rights available to holders of Class A Common Stock or Class B Common Stock in connection with the business combination.
|
|
Q:
|
What happens to the funds deposited in the Trust Account after consummation of the business combination?
|
| A: |
If the Business Combination Proposal is approved, we intend to use a portion of the funds held in the Trust Account to pay (a) a portion of our aggregate costs, fees and expenses in connection with the consummation of the business combination, (b) tax obligations and deferred underwriting discounts and commissions from the IPO and (c) for any redemptions of public shares. The remaining balance in the Trust Account, together with PIPE Proceeds, will be used for general corporate purposes of New Solid Power. See the section entitled “
Proposal No. 1—The Business Combination Proposal
|
|
Q:
|
What happens if the business combination is not consummated or is terminated?
|
| A: |
There are certain circumstances under which the Business Combination Agreement may be terminated. See the section entitled “
Proposal No. 1—The Business Combination Proposal—The Business Combination
Agreement—Termination
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of such net interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (c) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and the DCRC Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
|
We expect that the amount of any distribution our public stockholders will be entitled to receive upon our dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the business combination, subject in each case to our obligations under the General Corporation Law of the State of Delaware (“DGCL”) to provide for claims of creditors and other requirements of applicable law. Holders of our Founder Shares are not entitled to liquidating distributions with respect to those shares.
In the event of liquidation, there will be no distribution with respect to our outstanding warrants. Accordingly, in such an event, the warrants will expire worthless.
|
Q:
|
When is the business combination expected to be consummated?
|
| A: |
It is currently anticipated that the business combination will be consummated promptly following the special meeting of our stockholders to be held on , 2021, provided that all the requisite stockholder approvals are obtained and other conditions to the consummation of the business combination have been satisfied or waived. For a description of the conditions for the completion of the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Business Combination Agreement—Conditions to Closing of the Business Combination.”
|
16
|
Q:
|
What do I need to do now?
|
| A: |
You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the section entitled “Risk Factors” and the annexes attached to this proxy statement/prospectus, and to consider how the business combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.
|
|
Q:
|
How do I vote?
|
| A: |
If you were a holder of record of Class A Common Stock or Class B Common Stock on , 2021, the record date for the special meeting of our stockholders, you may vote with respect to the proposals online at the special meeting or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to virtually attend the special meeting and vote online, obtain a proxy from your broker, bank or nominee.
|
|
Q:
|
What will happen if I abstain from voting or fail to vote at the special meeting?
|
| A: |
At the special meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, failure to vote or an abstention will have no effect on the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal, the Director Election Proposal or the Adjournment Proposal, but will have the same effect as a vote AGAINST the Charter Proposals.
|
|
Q:
|
What will happen if I sign and submit my proxy card without indicating how I wish to vote?
|
| A: |
Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each Proposal (or in the case of the Director Election Proposal, “FOR ALL NOMINEES”) being submitted to a vote of the stockholders at the special meeting.
|
|
Q:
|
If I am not going to attend the special meeting online, should I submit my proxy card instead?
|
| A: |
Yes. Whether you plan to attend the special meeting or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.
|
|
Q:
|
If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?
|
| A: |
No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to
non-discretionary
matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. We believe the Proposals presented to our stockholders will be considered
non-discretionary
and therefore your broker, bank or nominee cannot vote your shares without your instruction. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.
|
17
|
Q:
|
May I change my vote after I have submitted my executed proxy card?
|
| A: |
Yes. You may change your vote by sending a later-dated, signed proxy card to us at the address listed below so that it is received by us prior to the special meeting or by attending the special meeting online and voting there. You also may revoke your proxy by sending a notice of revocation to us, which must be received prior to the special meeting.
|
|
Q:
|
What should I do if I receive more than one set of voting materials?
|
| A: |
You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.
|
|
Q:
|
Who can help answer my questions?
|
| A: |
If you have questions about the proposals or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact:
|
Peter Haskopoulos, Chief Financial Officer, Chief Accounting Officer and Secretary
c/o Decarbonization Plus Acquisition Corporation III
2744 Sand Hill Road, Suite 100
Menlo Park, California 94025
Email: info@dcrbplus.com
Tel: (212)
993-0076
You may also contact our proxy solicitor at:
Morrow Sodali LLC
470 West Avenue
Stamford, Connecticut 06902
Telephone: (800)
662-5200
(banks and brokers call collect at (203)
658-9400)
Email: DCRC.info@investor.morrowsodali.com
To obtain timely delivery, our stockholders must request the materials no later than five business days prior to the special meeting.
You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find Additional Information.”
If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your shares (either physically or electronically) to our transfer agent at least two business days prior to the special meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your shares, please contact:
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004-1561
Attention: Mark Zimkind
Email: mzimkind@continentalstock.com
18
|
Q:
|
Who will solicit and pay the cost of soliciting proxies?
|
| A: |
The DCRC Board is soliciting your proxy to vote your shares of Class A Common Stock and Class B Common Stock on all matters scheduled to come before the special meeting. We will pay the cost of soliciting proxies for the special meeting. We have engaged Morrow Sodali LLC to assist in the solicitation of proxies for the special meeting. We have agreed to pay Morrow Sodali LLC a fee of $32,500, plus disbursements. We will reimburse Morrow Sodali LLC for reasonable
out-of-pocket
|
19
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the business combination and the proposals to be considered at the special meeting, you should read this entire proxy statement/prospectus carefully, including the annexes. See also the section entitled “Where You Can Find Additional Information.”
Parties to the Business Combination
Decarbonization Plus Acquisition Corporation III
DCRC is a Delaware corporation formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving DCRC and one or more businesses. Upon the Closing, we intend to change our name from “Decarbonization Plus Acquisition Corporation III” to “Solid Power, Inc.”
Our Class A Common Stock, public warrants, and units, consisting of one share of Class A Common Stock and
one-third
of one warrant, are traded on Nasdaq under the ticker symbols “DCRC,” “DCRCW” and “DCRCU,” respectively. We intend to apply to continue the listing of our Class A Common Stock and warrants on Nasdaq under the symbols “SLDP” and “SLDPW,” respectively, upon the Closing. Upon the Closing, each share of Class A Common Stock will be
re-designated
as “common stock, par value $0.0001.” The units will automatically separate into the component securities upon consummation of the business combination and, as a result, will no longer trade as a separate security.
The mailing address of our principal executive office is 2744 Sand Hill Road, Suite 100, Menlo Park, California 94025, and our telephone number is (212)
993-0076.
Solid Power, Inc.
Solid Power is developing
all-solid-state
battery cell technology that replaces the liquid or gel polymer electrolyte used in conventional
lithium-ion
battery cells with a sulfide-based solid electrolyte, and is focused solely on the development and commercialization of
all-solid-state
battery cells and solid electrolyte materials, primarily for the fast-growing battery-powered electric vehicle market. The world has started its transition to battery-powered electric vehicles. Current liquid electrolyte-based
lithium-ion
battery technology allowed electric vehicles to secure roughly 2% of new vehicle sales in 2020. BloombergNEF predicts by the
mid-2030s
nearly 50% of all new auto sales will be fully electric. This corresponds to a $220 billion total addressable market based on projected new auto sales in 2035.
In recent years, liquid electrolyte-based
to address these needs.
lithium-ion
technology made considerable strides to increase stored energy while lowering costs; however, current technology is approaching its practical limits. To reach mass adoption where a majority of new passenger vehicles are electrified, battery cell technology must take a big step forward. We are developing our
All-Solid-State
Platform
We believe our
will be able to meet the performance and cost demands from both consumers and automotive OEMs and outperform the best performing liquid electrolyte-based
All-Solid-State
Platform
lithium-ion
technologies of today and tomorrow. We are developing our
all-solid-state
battery cell technology with the goal to improve, among other things:
| • |
safety of electric vehicle batteries through the removal of flammable and volatile liquids and gels from the battery cells;
|
20
| • |
energy density, a measure of the energy stored by the battery cell relative to its volume, by enabling higher capacity electrodes that are otherwise not considered viable in a traditional
lithium-ion
battery cell;
|
| • |
calendar life – how long a battery cell can last before seeing significant degradation, especially at elevated temperature – as compared to current-generation
lithium-ion;
and
|
| • |
cost, through simplifying the manufacturing process and removal or reduction of battery pack cooling systems and pack-level safety features typically seen in traditional
lithium-ion
battery packs.
|
We have demonstrated that our
all-solid-state
battery cell technology can be manufactured in a high-throughput manner using existing
lithium-ion
battery cell manufacturing techniques and equipment. We believe that our technology could power longer range, lower cost, and safer electric vehicles, resulting in broader electric vehicle market adoption.
The mailing address of Solid Power’s principal executive office is 486 S. Pierce Avenue, Suite E, Louisville, Colorado 80027, and its telephone number is (303)
219-0720.
For more information about Solid Power, see the sections entitled “
” and “
.”
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Solid Power
Information About Solid Power
The Business Combination
On June 15, 2021, we entered into the Business Combination Agreement with Merger Sub and Solid Power. Pursuant to the Business Combination Agreement, and subject to the terms and conditions contained therein, Merger Sub will merge with and into Solid Power, with Solid Power surviving the merger. After giving effect to the merger, Solid Power will become a wholly owned subsidiary of New Solid Power.
Solid Power will cause each share of Solid Power Preferred Stock that is issued and outstanding immediately prior to the Effective Time to be automatically converted, effective immediately prior to the Effective Time, into a number of shares of Solid Power Common Stock, at the then effective conversion rate as calculated pursuant to the Solid Power Charter (the “Conversion”). After the Conversion, such converted shares of Solid Power Preferred Stock will no longer be outstanding and will cease to exist.
At the Effective Time, by virtue of the Merger and without any action on the part of DCRC, Merger Sub, Solid Power or the holders of any of Solid Power’s securities:
| • |
each share of Solid Power Common Stock issued and outstanding immediately prior to the Effective Time (including shares of Solid Power Common Stock resulting from the Conversion, but excluding Solid Power Restricted Stock and excluding any Dissenting Shares (as defined in the Business Combination Agreement)) will be canceled and converted into the right to receive the number of shares of Class A Common Stock equal to the Exchange Ratio;
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| • |
all shares of Solid Power Common Stock held in treasury of Solid Power will be canceled without any conversion thereof and no payment or distribution will be made with respect to such Solid Power Common Stock;
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| • |
each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation;
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| • |
each Solid Power Warrant (a) to the extent terminated, expired or exercised immediately prior to the Effective Time, either voluntarily prior to the Effective Time or in accordance with its terms in
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21
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connection with the Transactions, will no longer be deemed outstanding and any shares of Company Common Stock issuable in connection therewith shall be treated as described above and (b) to the extent outstanding and unexercised immediately prior to the Effective Time will automatically be converted into a warrant (each such resulting warrant, an “Assumed Warrant”) to acquire a number of shares of Class A Common Stock equal to (i) the number of shares of Solid Power Common Stock subject to the applicable Solid Power Warrant multiplied by (ii) the Exchange Ratio, rounding the resulting number down to the nearest whole number of shares of Class A Common Stock, at an adjusted price equal to (x) the per share exercise price for the shares of Solid Power Common Stock subject to the applicable Solid Power Warrant, as in effect immediately prior to the Effective Time, divided by (y) the Exchange Ratio, rounding the resulting exercise price up to the nearest whole cent;
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| • |
each Solid Power Option, whether or not exercisable and whether or not vested, outstanding immediately prior to the Effective Time will be converted into an option to purchase a number of shares of Class A Common Stock (such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Solid Power Common Stock subject to such Solid Power Option immediately prior to the Effective Time and (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Solid Power Option immediately prior to the Effective Time divided by (B) the Exchange Ratio; provided, however, that the exercise price and number of shares of Class A Common Stock shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that in the case of any Exchanged Option to which Section 422 of the Code applies, the exercise price and the number of shares of Class A Common Stock purchasable pursuant to such option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code; and
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| • |
each award of Solid Power Restricted Stock that is outstanding immediately prior to the Effective Time will be released and extinguished in exchange for an award covering a number of restricted shares of Class A Common Stock (such award of restricted stock, “Exchanged Restricted Stock”) equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Solid Power Common Stock subject to such award of Solid Power Restricted Stock immediately prior to the Effective Time and (y) the Exchange Ratio.
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Pursuant to the terms of the Charter, each share of Class B Common Stock outstanding prior to the Effective Time will convert into one share of Class A Common Stock at the Closing. All of the shares of Class B Common Stock converted into shares of Class A Common Stock will no longer be outstanding and will cease to exist, and each holder of such Class B Common Stock will thereafter cease to have any rights with respect to such securities.
For more information about the Business Combination Agreement and the business combination and other transactions contemplated thereby, see the section entitled “Proposal No. 1—The Business Combination Proposal.”
Conditions to the Closing
The obligations of Solid Power, DCRC and Merger Sub to consummate the business combination, including the Merger, are subject to the satisfaction or waiver of certain conditions, including, but not limited to (a) the written consent of the requisite stockholders of Solid Power in favor of the approval and adoption of the Business Combination Agreement and the Merger and all other transactions contemplated by the Business Combination Agreement (the “Written Consent”) having been delivered to DCRC, (b) approval and adoption of certain of the
22
Proposals by DCRC’s stockholders, (c) the absence of any law or order that makes the business combination illegal or otherwise prohibits consummation of the business combination, (d) expiration or termination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (the waiting period under the HSR Act expired on August 9, 2021), (e) listing of the Class A Common Stock on Nasdaq or another exchange mutually agreed to by the parties, as of the Closing Date, (f) the Registration Statement having been declared effective under the Securities Act and no stop orders or suspension proceedings having been initiated or threatened by the SEC, (g) DCRC having at least $5,000,001 of net tangible assets following the exercise of redemption rights in accordance with the Charter and after giving effect to the PIPE Financing or the Class A Common Stock not constituting “penny stock” as such term is defined in the Exchange Act, and (h) DCRC shall have provided an opportunity to DCRC’s stockholders to have their Class A Common Stock redeemed according to the Charter, the Investment Management Trust Agreement, dated as of March 23, 2021, between DCRC and Continental Stock Transfer & Trust Company (the “Trust Agreement”) and this proxy statement/prospectus.
The obligations of Solid Power to consummate the business combination, including the Merger, are also subject to the satisfaction or waiver of certain additional conditions, including, but not limited to, (a) the representations and warranties of DCRC and Merger Sub being true and correct to the standards applicable to such representations and warranties, (b) each of the covenants of DCRC and Merger Sub having been performed or complied in all material respects, (c) the absence of a DCRC Material Adverse Effect (as defined in the Business Combination Agreement), (d) DCRC having made all necessary and appropriate arrangements to have all of the funds held in the Trust Account disbursed to DCRC immediately prior to the Effective Time, and all such funds released from the Trust Account being available for immediate use to DCRC in respect of all or a portion of the payment obligations set forth in the Business Combination Agreement and the payment of DCRC’s fees and expenses incurred in connection with the Business Combination Agreement and the business combination and (e) as of the Closing, after consummation of the PIPE Financing and after distribution of the funds in the Trust Account pursuant to the Business Combination Agreement, DCRC having unrestricted cash on hand equal to or in excess of $300,000,000 (without, for the avoidance of doubt, taking into account any transaction fees, costs and expenses paid or required to be paid in connection with the business combination and the PIPE Financing).
Regulatory Matters
Neither DCRC nor Solid Power is aware of any material regulatory approvals or actions that are required for completion of the business combination other than as required under the HSR Act. The parties have filed a premerger notification under the HSR Act. It is presently contemplated that if any additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any such additional approvals or actions will be obtained.
Other Agreements
Stockholder Support Agreement
In connection with the execution of the Business Combination Agreement, on June 15, 2021, DCRC, Solid Power, and certain stockholders of Solid Power entered into a Stockholder Support Agreement (the “Stockholder Support Agreement”) pursuant to which, among other things, such stockholders agreed to vote all of their shares of Solid Power Common Stock and Solid Power Preferred Stock in favor of the approval and adoption of the business combination, including agreeing to execute the Written Consent within five business days of the Registration Statement becoming effective. Additionally, such stockholders have agreed, among other things, not to, prior to the Effective Time, (a) transfer any of their shares of Solid Power Common Stock and Solid Power Preferred Stock (or enter into any arrangement with respect thereto), subject to certain customary exceptions, or (b) enter into any voting arrangement that is inconsistent with the Stockholder Support Agreement.
23
Such stockholders also agreed not to transfer any of their shares of Class A Common Stock received in the Merger, or upon exercise of Assumed Warrants, Exchanged Options or Exchanged Restricted Stock received in the Merger, for a period of the shorter of (i) six months following the Closing and (ii) the termination, expiration or waiver of the
lock-up
period covering the Sponsor’s Class A Common Stock, subject to certain customary exceptions. Such restrictions on transfer will be set forth in the bylaws DCRC will adopt immediately prior to the Closing, which will apply to all investors of Solid Power that receive securities of DCRC in connection with the Merger; provided, however, that Solid Power agreed in the Stockholder Support Agreement that any waiver or termination of such
lock-up
period with respect to the Class A Common Stock held by BMW Holding B.V. (“BMW Holding”), Ford Motor Company, Volta Energy Storage Fund I, LP, Volta SPV SPW, LLC, Volta SPW
Co-Investment,
LP or any of their respective affiliates (the “Covered Group”) shall be deemed to be a proportional waiver or termination of the
lock-up
period with respect to the Class A Common Stock owned by the other members of the Covered Group.
For more information about the Stockholder Support Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Documents—Stockholder Support Agreement.”
Sponsor Letter
In connection with the execution of the Business Combination Agreement, on June 15, 2021, the Sponsor and certain directors of DCRC entered into a letter agreement with Solid Power and DCRC (the “Sponsor Letter”), pursuant to which, among other things, the Sponsor and such directors agreed to (i) waive the anti-dilution rights set forth in the Charter with respect to the Founder Shares held by them, (ii) comply with the
lock-up
provisions in the Letter Agreement, dated March 23, 2021, by and among DCRC, the Sponsor and DCRC’s directors and officers, (iii) vote all the shares of Class A Common Stock and Founder Shares held by them in favor of the adoption and approval of the Business Combination Agreement and the business combination and (iv) not redeem any shares of DCRC Class A Common Stock owned by them in connection with such stockholder approval.
For more information about the Sponsor Letter, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Documents—Sponsor Letter.”
A&R Registration Rights Agreement
In connection with the Closing, that certain Registration Rights Agreement dated March 23, 2021 (the “IPO Registration Rights Agreement”) will be amended and restated and DCRC, certain persons and entities holding securities of DCRC prior to the Closing (the “Initial Holders”) and certain persons and entities receiving Class A Common Stock pursuant to the Merger (the “New Holders” and together with the Initial Holders, the “Reg Rights Holders”) will enter into that amended and restated IPO Registration Rights Agreement attached as an exhibit to the Business Combination Agreement (the “A&R Registration Rights Agreement”). Pursuant to the A&R Registration Rights Agreement, DCRC will agree that, within 30 days after the Closing, DCRC will file with the SEC (at DCRC’s sole cost and expense) a registration statement registering the resale of certain securities held by or issuable to the Reg Rights Holders (the “Resale Registration Statement”), and DCRC will use its reasonable best efforts to have the Resale Registration Statement declared effective as promptly as reasonably practicable after the filing thereof. In certain circumstances, the Reg Rights Holders can demand DCRC’s assistance with underwritten offerings and block trades, and the Reg Rights Holders will be entitled to certain piggyback registration rights. The A&R Registration Rights Agreement does not provide for the payment of any cash penalties by DCRC if it fails to satisfy any of its obligations under the A&R Registration Rights Agreement.
For more information about the A&R Registration Rights Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Documents—A&R Registration Rights Agreement.”
24
Proposed Second Amended and Restated Charter
Pursuant to the terms of the Business Combination Agreement, at the Closing, we will amend and restate, effective as of the Effective Time, our Charter to, among other things, (a) increase the number of authorized shares of DCRC’s capital stock, par value $0.0001 per share, from 271,000,000 shares, consisting of (i) 270,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of Preferred Stock, to 2,200,000,000 shares, consisting of (A) 2,000,000,000 shares of common stock, par value $0.0001 per share, and (B) 200,000,000 shares of Preferred Stock; (b) eliminate certain provisions in the Charter relating to an Initial Business Combination that will no longer be applicable to us following the Closing; (c) change the post-combination company’s name to “Solid Power, Inc.”; (d) change the minimum stockholder vote required to amend, repeal or modify certain specified provisions of the Proposed Second A&R Charter or any provision inconsistent with any provision of New Solid Power’s amended and restated bylaws; (e) provide for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon; (f) remove the right of holders of Class B Common Stock to act by written consent; and (g) remove the designation of certain courts as the exclusive forum for certain types of stockholder claims.
For more information about the amendments to our Charter, see the sections entitled “Proposal No. 2—The Authorized Share Charter Proposal” and “Proposal No. 3—The Additional Charter Proposal.”
PIPE Financing
In connection with the execution of the Business Combination Agreement, on June 15, 2021, DCRC and Solid Power entered into separate subscription agreements (collectively, the “Subscription Agreements”) with the New PIPE Investors, pursuant to which the New PIPE Investors agreed to purchase, and DCRC agreed to sell to the New PIPE Investors, an aggregate of 16,500,000 PIPE Shares for a purchase price of $10.00 per share and an aggregate purchase price of $165,000,000, in the PIPE Financing.
The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the concurrent consummation of the business combination. The purpose of the PIPE Financing is to raise additional capital for use by the combined company following the Closing.
Pursuant to the Subscription Agreements, DCRC agreed that, within 30 calendar days after the Closing Date, DCRC will file with the SEC (at DCRC’s sole cost and expense) a registration statement registering the resale of the PIPE Shares (the “PIPE Resale Registration Statement”), and DCRC will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
For more information about the Subscription Agreements, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Documents—PIPE Financing.”
Interests of Certain Persons in the Business Combination
In considering the recommendation of the DCRC Board to vote in favor of the business combination, stockholders should be aware that, aside from their interests as stockholders, our Sponsor and certain of our directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders generally. Our directors were aware of and considered these interests, among other matters, in
25
evaluating the business combination, and in recommending to stockholders that they approve the business combination. Stockholders should take these interests into account in deciding whether to approve the business combination. These interests include, among other things:
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the fact that our Sponsor and independent directors hold an aggregate of 6,666,667 private placement warrants that would expire worthless if a business combination is not consummated, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our public warrants of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
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| • |
the fact that our Sponsor may convert any working capital loans that it may make to us into up to an additional 1,000,000 private placement warrants, at the price of $1.50 per warrant;
|
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the fact that our Sponsor, officers and directors have agreed not to redeem any of the shares of our common stock held by them in connection with a stockholder vote to approve the business combination;
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the fact that our initial stockholders paid an aggregate of $25,000 for the Founder Shares and that such securities will have a significantly higher value at the time of the business combination, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
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| • |
the fact that certain of DCRC’s officers and directors collectively own, directly or indirectly, a material interest in our Sponsor;
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| • |
the fact that affiliates of our Sponsor own an aggregate of 1,660,417 shares of Solid Power Series
A-1
Preferred Stock, which at the Exchange Ratio, would be exchanged for 5,319,311 shares of our Class A Common Stock at the Closing;
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| • |
the anticipated appointment of each of Erik Anderson, a member of the DCRC Board and DCRC’s Chief Executive Officer, and Robert Tichio, a member of the DCRC Board, as a director on the New Solid Power Board in connection with the closing of the business combination;
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if the Trust Account is liquidated, including in the event we are unable to complete an Initial Business Combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of (a) any third party (other than our independent public accountants) for services rendered or products sold to us or (b) a prospective target business with which we have entered into an acquisition agreement, but only if such a third party or target business has not executed a waiver of all rights to seek access to the Trust Account;
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the fact that our independent directors own an aggregate of 360,000 Founder Shares, which if unrestricted and freely tradeable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date of the special meeting;
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the fact that our Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to stockholders rather than liquidate;
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the fact that our Sponsor and its affiliates can earn a positive rate of return on their investment, even if other DCRC stockholders experience a negative rate of return in the post-business combination company;
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26
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the fact that our Sponsor, officers and directors will be reimbursed for
out-of-pocket
|
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the fact that our Sponsor, officers and directors will lose their entire investment in us if an Initial Business Combination is not completed.
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At the Closing, we anticipate that our Sponsor will own 6,367,353 private placement warrants and 8,390,000 shares of New Solid Power common stock (which will be issued upon conversion of the Founder Shares upon the Closing). In addition, our Sponsor may make available to us working capital loans for up to $1,500,000 to enable us to finance transaction costs in connection with our Initial Business Combination. As of the date of this proxy statement/prospectus, there were no amounts outstanding under any working capital loans. Further, as of the date of this proxy statement/prospectus, there has been no reimbursement to our Sponsor, officers or directors for any
expenses incurred in connection with activities on our behalf, and no such amounts have been incurred as of the date of this proxy statement/prospectus. However, as of the date of this proxy statement/prospectus, an affiliate of our Sponsor has incurred approximately $4.0 million of expenses on DCRC’s behalf, of which approximately $3.0 million has been repaid by DCRC to the affiliate of our Sponsor. The balance will be repaid by DCRC at the Closing.
out-of-pocket
Investors in our Sponsor, each of which contributed capital to our Sponsor in exchange for Founder Shares and private placement warrants, include entities affiliated with certain of our
non-independent
directors and officers. Specifically, Pierre Lapeyre, Jr., David Leuschen, Robert Tichio and Peter Haskopoulos are each affiliated with Sponsor Manager, and Erik Anderson is affiliated with WRG, through which such DCRC directors and officers have an indirect economic interest in the private placement warrants and shares of New Solid Power common stock anticipated to be held by our Sponsor as of the completion of the business combination.
Our independent directors paid $1,028 in aggregate consideration for the 360,000 Founder Shares transferred to our independent directors by our Sponsor at the closing of our IPO. In addition, our independent directors purchased 299,314 private placement warrants at a price of $1.50 per warrant at the closing of our IPO.
The table set forth below summarizes the interests of Sponsor Manager, WRG and our independent directors in the private placement warrants and Founder Shares along with (i) the total investment made in our Sponsor (or purchase price paid for the private placement warrants, in the case of our independent directors) by Sponsor Manager, WRG and our independent directors in exchange for their interests in the private placement warrants and Founder Shares and (ii) the value of such interests based on the closing price of the public warrants and Class A Common Stock as of , 2021, all of which would be lost if an Initial Business Combination is not completed by us within the required time period:
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Name of Holder
|
DCRC
Position |
Total
Purchase Price / Capital Contributions |
Number
of Private Placement Warrants |
Value of
Private Placement Warrants as of , 2021 |
Number
of Founder Shares |
Value of
Founder Shares as of , 2021 |
||||||||||||||||
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Decarbonization Plus Acquisition Sponsor Manager III, LLC
1
|
N/A | $ | 7,923,040 | 5,268,801 | $ | 6,943,741 | $ | |||||||||||||||
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WRG DCRC Investors, LLC
2
|
N/A | $ | 1,150,710 | 765,219 | $ | 1,008,759 | $ | |||||||||||||||
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James AC McDermott
|
Director | $ | 300,000 | 199,543 | $ | 240,000 | $ | |||||||||||||||
|
Jennifer Aaker
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
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|
1
|
DCRC directors Pierre Lapeyre, Jr., David Leuschen and Robert Tichio and Chief Financial Officer, Chief Accounting Officer and Secretary Peter Haskopoulos each have an indirect economic interest in our Sponsor through Sponsor Manager.
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2
|
DCRC Chief Executive Officer Erik Anderson has an indirect economic interest in our Sponsor through WRG.
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In addition, our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that this waiver of the corporate opportunities doctrine has materially affected our search for an acquisition target or will materially affect our ability to complete our business combination.
Reasons for the Approval of the Business Combination
After careful consideration, the DCRC Board recommends that our stockholders vote “FOR” the approval of the Business Combination Proposal.
For a more complete description of our reasons for the approval of the business combination and the recommendation of the DCRC Board, see the section entitled “Proposal No. 1—The Business Combination Proposal—DCRC Board’s Reasons for the Approval of the Business Combination.”
Redemption Rights
Under our Charter, holders of our Class A Common Stock may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the business combination, including interest not previously released to us to pay our franchise and income taxes, by (b) the total number of shares of Class A Common Stock issued in the IPO. As of June 30, 2021, this would have amounted to approximately $10.00 per share. Under our Charter, in connection with an Initial Business Combination, a public stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), is restricted from seeking redemption rights with respect to more than 20% of the public shares. Our Charter provides we will not redeem our Class A Common Stock in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our Initial Business Combination. However, our Charter will be amended and restated immediately prior to the business combination, such that such limitation will no longer apply, and we anticipate our Class A Common Stock will be listed on Nasdaq, which provides a separate exception from being subject to the “penny stock” rules.
If a holder exercises its redemption rights, then such holder will be exchanging its shares of Class A Common Stock for cash and will no longer own shares of Class A Common Stock and will not participate in our future growth, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our transfer agent in accordance with the procedures described herein. See the section entitled “S
” for the procedures to be followed if you wish to redeem your shares for cash.
pecial Meeting of DCRC Stockholders—Redemption Rights
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Ownership of New Solid Power After the Closing
Organizational Structure
The following diagram illustrates the
pre-business
combination organizational structure of DCRC:
The following diagram illustrates the
pre-business
combination organizational structure of Solid Power:
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1
|
Represents percentage ownership on a fully diluted basis.
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The following diagram illustrates the structure of New Solid Power immediately following the consummation of the business combination. The interests set forth below (a) assume (i) that no public stockholders elect to have their public shares redeemed, (ii) that there are no other issuances of equity interests of DCRC or Solid Power and (iii) that there are no exercises of Solid Power Options or Solid Power Warrants and (b) do not take into account DCRC warrants that will remain outstanding following the business combination and may be exercised at a later date. As a result of the business combination, the economic and voting interests of our public stockholders will decrease. If these assumptions are not correct, then the percent of ownership set forth in the diagram below would change.
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We anticipate that, upon the Closing, the ownership of New Solid Power will be as follows:
| • |
the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 63.1% of our outstanding Class A Common Stock;
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| • |
the public stockholders will own 35,000,000 shares of our Class A Common Stock, which will constitute 21.4% of our outstanding Class A Common Stock;
|
| • |
the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 10.1% of our outstanding Class A Common Stock; and
|
| • |
the initial stockholders will own 8,750,000 shares of our Class A Common Stock, which will constitute 5.4% of our outstanding Class A Common Stock.
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The number of shares and the interests set forth above (a) assume (i) that no public stockholders elect to have their public shares redeemed, (ii) that there are no other issuances of equity interests of DCRC or Solid Power and (iii) that there are no exercises of Solid Power Options or Solid Power Warrants and (b) do not take into account DCRC warrants that will remain outstanding following the business combination and may be exercised at a later date. As a result of the business combination, the economic and voting interests of our public stockholders will decrease.
The ownership percentages with respect to New Solid Power set forth above do not take into account warrants to purchase Class A Common Stock that will remain outstanding immediately following the business combination, but do include the Founder Shares, which will convert into Class A Common Stock upon an Initial Business Combination. If the facts are different than these assumptions, the percentage ownership retained by DCRC’s existing stockholders in New Solid Power following the business combination will be different. For example, if we assume that all outstanding 11,666,667 public warrants and 6,666,667 private placement warrants were exercisable and exercised following completion of the business combination and further assume that no public stockholders elect to have their public shares redeemed, then the ownership of New Solid Power would be as follows:
| • |
the Historical Rollover Stockholders (which, for the avoidance of doubt, includes holders of Solid Power Preferred Stock, each share of which will be converted to Solid Power Common Stock immediately before consummation of the business combination) will own 102,922,125 shares of our Class A Common Stock, which will constitute 56.7% of our outstanding Class A Common Stock;
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| • |
the public stockholders will own 46,666,667 shares of our Class A Common Stock, which will constitute 25.7% of our outstanding Class A Common Stock;
|
| • |
the New PIPE Investors will own 16,500,000 shares of our Class A Common Stock, which will constitute 9.1% of our outstanding Class A Common Stock; and
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30
| • |
the initial stockholders will own 15,416,667 shares of our Class A Common Stock, which will constitute 8.5% of our outstanding Class A Common Stock.
|
The public warrants and private placement warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of our Initial Public Offering and will expire five years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation.
Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for further information.
Board of Directors of New Solid Power Following the Business Combination
Assuming the Director Election Proposal is approved at the special meeting, we expect the New Solid Power board of directors (the “New Solid Power Board”) to be comprised of Erik Anderson, Steven Goldberg, Robert Tichio, Rainer Feurer, Douglas Campbell, David Jansen and .
Accounting Treatment
The business combination is intended to be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, DCRC will be treated as the “acquired” company for financial reporting purposes. Accordingly, the business combination will be treated as the equivalent of Solid Power issuing stock for the net assets of DCRC, accompanied by a reverse recapitalization. The net assets of DCRC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the business combination will be those of Solid Power.
Appraisal Rights
Appraisal rights are not available to holders of shares of Class A Common Stock and Class B Common Stock in connection with the business combination.
Other Proposals
In addition to the proposal to approve and adopt the Business Combination Agreement and the business combination, our stockholders will be asked to vote on proposals to amend and restate our Charter to, among other things, (a) increase the number of authorized shares of DCRC’s capital stock, par value $0.0001 per share, from 271,000,000 shares, consisting of (i) 270,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of Preferred Stock, to 2,200,000,000 shares, consisting of (A) 2,000,000,000 shares of common stock, par value $0.0001 per share, and (B) 200,000,000 shares of Preferred Stock; (b) eliminate certain provisions in the Charter relating to an Initial Business Combination that will no longer be applicable to us following the Closing; (c) change the post-combination company’s name to “Solid Power, Inc.”; (d) change the minimum stockholder vote required to amend, repeal or modify certain specified provisions of the Proposed Second A&R Charter or any provision inconsistent with any provision of New Solid Power’s amended and restated bylaws; (e) provide for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon; (f) remove the right of holders of Class B Common Stock to act by written consent; and (g) remove the designation of certain courts as the exclusive forum for certain types of stockholder claims. A copy of our Proposed Second A&R Charter reflecting the proposed amendments pursuant to the Authorized Share Charter Proposal and the Additional Charter Proposal is attached to this proxy statement/prospectus as
. For more information about the Authorized Share Charter Proposal and the Additional Charter Proposal, see the sections entitled “Proposal No. 2—The Authorized Share Charter Proposal” and “Proposal No. 3—The Additional Charter Proposal.”
Annex B
31
In addition, our stockholders will be asked to vote on (a) a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, (i) the issuance to the Historical Rollover Stockholders (or reservation for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (ii) the issuance and sale of 16,500,000 shares of Class A Common Stock in the PIPE Financing, (b) a proposal to approve and adopt the 2021 Plan, (c) a proposal to approve and adopt the ESPP, (d) a proposal to elect directors to serve until the 2022 annual meeting of stockholders, directors to serve until the 2023 annual meeting of stockholders and directors to serve until the 2024 annual meeting of stockholders, and until their respective successors are duly elected and qualified, subject to such directors’ earlier death, resignation, retirement, disqualification or removal and (e) a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal or the Director Election Proposal.
See the sections entitled “Proposal No. 4—The Nasdaq Proposal,” “Proposal No. 5—The 2021 Plan Proposal,” “Proposal No. 6—The ESPP Proposal,” “Proposal No. 7—The Director Election Proposal” and “Proposal No. 8—The Adjournment Proposal” for more information.
Date, Time and Place of Special Meeting
The special meeting will be held at , Eastern time, on , 2021, via live webcast at the following address: https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.
Voting Power; Record Date
You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of Class A Common Stock or Class B Common Stock at the close of business on , 2021, which is the record date for the special meeting. You are entitled to one vote for each share of Class A Common Stock or Class B Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 43,750,000 shares of Class A Common Stock and Class B Common Stock outstanding in the aggregate, of which 35,000,000 were public shares and 8,750,000 were Founder Shares held by the initial stockholders.
Proxy Solicitation
Proxies may be solicited by mail. We have engaged Morrow Sodali LLC to assist in the solicitation of proxies. If a stockholder grants a proxy, it may still vote its shares online if it revokes its proxy before the special meeting. A stockholder may also change its vote by submitting a later-dated proxy as described in the section entitled “Special Meeting of DCRC Stockholders—Revoking Your Proxy.”
Quorum and Required Vote for Proposals for the Special Meeting
A quorum of our stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting if holders of a majority of the outstanding shares of our Class A Common Stock and Class B Common
32
Stock entitled to vote thereat attend virtually or are represented by proxy at the special meeting. Abstentions will count as present for the purposes of establishing a quorum.
The approval of the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal and the Adjournment Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon online at the special meeting, voting as a single class. Approval of the Authorized Share Charter Proposal requires the affirmative vote (online or by proxy) of (i) the holders of a majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class, and (ii) the holders of a majority of the shares of Class A Common Stock entitled to vote thereon at the special meeting, voting as a single class. Approval of the Additional Charter Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class. Accordingly, a stockholder’s failure to vote by proxy or to vote online at the special meeting will not be counted towards the number of shares of Class A Common Stock and Class B Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, it will have no effect on the outcome of any vote on the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal or the Adjournment Proposal, but will have the same effect as a vote AGAINST the Charter Proposals.
Approval of the election of each director nominee pursuant to the Director Election Proposal requires the affirmative vote (online or by proxy) of a plurality of the votes cast by holders of our Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting. This means that the director nominees will be elected if they receive more affirmative votes than any other nominee for the same position. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions will have no effect on the Director Election Proposal.
The Closing is conditioned on the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the Director Election Proposal, the 2021 Plan Proposal and the ESPP Proposal at the special meeting. The Charter Proposals, the Director Election Proposal, the 2021 Plan Proposal and the ESPP Proposal are conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
Recommendation to DCRC Stockholders
The DCRC Board believes that each of the Business Combination Proposal, the Authorized Share Charter Proposal, the Additional Charter Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal, the Director Election Proposal and the Adjournment Proposal is in the best interests of DCRC and our stockholders and recommends that our stockholders vote “FOR” each Proposal (or in the case of the Director Election Proposal, “FOR ALL NOMINEES”) being submitted to a vote of the stockholders at the special meeting.
When you consider the recommendation of the DCRC Board in favor of approval of these Proposals, you should keep in mind that, aside from their interests as stockholders, our Sponsor and certain of our directors and officers have interests in the business combination that are different from, or in addition to, your interests as a stockholder. Please see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”
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Risk Factors
In evaluating the proposals set forth in this proxy statement/prospectus, you should carefully read this proxy statement/prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.” Some of the risks related to Solid Power’s business and industry and the business combination are summarized below.
Risks Related to Solid Power
Risks Related to Development and Commercialization
| • |
It will be challenging to develop
all-solid-state
battery cells capable of production at volume and with acceptable performance, yields and costs. The pace of development in materials science is often not predictable. Delays or failures in accomplishing particular development objectives may postpone or prevent Solid Power from generating revenues from the licensing of our battery cell technology or sales of its sulfide-based solid electrolytes.
|
| • |
If Solid Power’s
all-solid-state
battery cells fail to perform as expected, its ability to develop, market, and license its technology could be harmed.
|
| • |
Solid Power may not succeed in developing
all-solid-state
battery cells for commercialization under its JDAs within the time parameters specified therein. If Solid Power does not meet the milestones in the JDAs, its partners may terminate them without liability to Solid Power. Termination of a JDA by a partner, particularly a key partner like Ford or BMW of North America LLC, could impair Solid Power’s reputation and prospects materially.
|
| • |
Solid Power depends on its ability to manage its relationships with existing partners, and to develop new relationships over time. Solid Power may not succeed in managing these business relationships, which could slow its development progress and impair its business prospects.
|
| • |
Solid Power has not reached any agreement with its partners on economic terms for the supply of its
all-solid-state
battery cell technology or sale of sulfide-based solid electrolytes. As a result, Solid Power’s projections of revenue and other financial results are uncertain.
|
| • |
The
non-exclusive
nature of Solid Power’s JDAs exposes it to the risk that its partners may elect to pursue other electric vehicle technologies, which likely would impair its revenue generating ability.
|
| • |
The terms of each JDA permit Solid Power’s partners to share in the intellectual property developed through the research and development efforts required under its particular agreements with them. Solid Power’s ability to share developments gained through the course of performance of a particular JDA with its other partners may be limited in certain circumstances. In certain circumstances, Solid Power’s partners may be able to exploit certain of the intellectual property developed under their respective JDAs in ways that are detrimental to it.
|
| • |
Solid Power has only conducted preliminary safety testing on its prototype
all-solid-state
battery cells. Solid Power’s
all-solid-state
battery cells will require additional and extensive safety testing prior to being installed in electric vehicles.
|
| • |
Substantial increases in the prices for Solid Power’s raw materials and components, some of which are obtained from a limited number of sources where demand may exceed supply, could materially and adversely affect its business.
|
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Risks Related to Industry and Market Trends
| • |
If solid-state battery cell technology does not become widely accepted, Solid Power may not be successful in generating revenues from the manufacturing and sale of its sulfide-based solid electrolytes.
|
| • |
The battery cell market continues to evolve and is highly competitive, and Solid Power may not be successful in competing in this market or establishing and maintaining confidence in its long-term business prospects among current and future partners and customers.
|
| • |
Solid Power’s future growth and success are dependent upon consumers’ willingness to adopt electric vehicles.
|
| • |
Solid Power may not be able to accurately estimate the future supply and demand for its
all-solid-state
battery cells and/or its sulfide-based solid electrolytes, which could result in a variety of inefficiencies in Solid Power’s business and hinder its ability to generate revenue. If Solid Power fails to accurately predict our manufacturing requirements, it could incur additional costs or experience delays.
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Risks Related to Limited Operating History
| • |
Solid Power’s business model has yet to be tested and any failure to commercialize its strategic plans would have an adverse effect on its operating results and business, harm its reputation and could result in substantial liabilities that exceed its resources.
|
| • |
Solid Power is an early stage company with a history of financial losses and expects to incur significant expenses and continuing losses for the foreseeable future.
|
| • |
Solid Power may require additional capital to support business growth, and this capital might not be available on commercially reasonable terms or at all.
|
| • |
Solid Power’s management does not have experience in operating a public company.
|
| • |
Solid Power may not succeed in establishing, maintaining and strengthening its brand, which would materially and adversely affect customer acceptance of its technologies and its business, revenues and prospects.
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Risks Related to Intellectual Property
| • |
Solid Power relies heavily on owned and exclusively-licensed intellectual property, which includes patent rights, trade secrets, copyright, trademarks, and
know-how.
If Solid Power is unable to protect and maintain access to these intellectual property rights, its business and competitive position would be harmed.
|
| • |
Solid Power’s patent applications may not result in issued patents, which would result in the disclosures in those applications being available to the public. Also, Solid Power’s patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on its ability to prevent others from interfering with commercialization of its products.
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Risks Related to Finance and Accounting
| • |
Solid Power’s expectations and targets regarding the times when it will achieve various technical,
pre-production
and production-level performance objectives depend in large part upon assumptions, estimates, measurements, testing, analyses and data developed and performed by Solid Power, which if incorrect or flawed, could have a material adverse effect on its actual operating results and performance.
|
35
| • |
Incorrect estimates or assumptions by management in connection with the preparation of Solid Power’s financial statements could adversely affect its reported assets, liabilities, income, revenue or expenses.
|
| • |
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on Solid Power’s business, prospects, financial condition and operating results.
|
| • |
Our auditors identified a material weakness in our internal control over financial reporting as of December 31, 2020. If we are unable to develop and maintain an effective system of internal controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our stock price, business and operating results.
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Risks Related to Legal and Regulatory Compliance
| • |
Solid Power is subject to regulations regarding the storage and handling of various products. It may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.
|
| • |
Solid Power is subject to substantial regulation, and unfavorable changes to, or failure by it to comply with, these regulations could substantially harm its business and operating results.
|
| • |
Solid Power is subject to various existing and future environmental health and safety laws, which may result in increased compliance costs or additional operating costs and restrictions. Failure to comply with such laws and regulations may result in substantial fines or other limitations that could adversely impact Solid Power’s financial results or operations.
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Risks Related to DCRC and the Business Combination
| • |
DCRC’s Sponsor, certain members of the DCRC Board and DCRC’s officers have interests in the business combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal.
|
| • |
The DCRC Board did not obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the business combination.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this proxy statement/prospectus, regarding the proposed business combination, DCRC’s ability to consummate the business combination, the benefits of the transaction, the post-combination company’s future financial performance following the business combination and the post-combination company’s strategy, expansion plans, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “project” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, DCRC disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this proxy statement/prospectus. DCRC cautions you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of DCRC.
In addition, DCRC cautions you that the forward-looking statements regarding DCRC and the post-combination company, which are contained in this proxy statement/prospectus, are subject to the following factors:
| • |
the occurrence of any event, change or other circumstances that could delay the business combination or give rise to the termination of the Business Combination Agreement and the other agreements related to the business combination (including catastrophic events, acts of terrorism, the outbreak of war, the novel coronavirus pandemic
(“COVID-19”)
and/or any other pandemic and other public health events), as well as management’s response to any of the foregoing;
|
| • |
the outcome of any legal proceedings that may be instituted against DCRC, Solid Power, their affiliates or their respective directors and officers following announcement of the business combination;
|
| • |
the inability to complete the business combination due to the failure to obtain approval of the stockholders of DCRC, regulatory approvals, or satisfy the other conditions to closing in the Business Combination Agreement;
|
| • |
the risk that DCRC may not be able to obtain the financing necessary to consummate the business combination;
|
| • |
the risk that the proposed business combination disrupts current plans and operations of Solid Power or DCRC as a result of the announcement and consummation of the business combination;
|
| • |
DCRC’s ability to realize the anticipated benefits of the business combination, which may be affected by, among other things, consumers’ willingness to adopt electric vehicles, competition and the ability of Solid Power to grow and manage growth profitably following the business combination;
|
| • |
risks relating to the uncertainty of the projected financial information with respect to Solid Power;
|
| • |
risks relating to Solid Power’s status as an early stage company with a history of financial losses, and an expectation to incur significant expenses and continuing losses for the foreseeable future;
|
| • |
risks relating to the uncertainty of the success of Solid Power’s research and development efforts;
|
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| • |
risks relating to the
non-exclusive
nature of Solid Power’s OEM and JDA relationships;
|
| • |
costs related to the business combination;
|
| • |
New Solid Power’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following the business combination;
|
| • |
the possibility of third-party claims against DCRC’s Trust Account;
|
| • |
the amount of redemption requests by DCRC’s stockholders;
|
| • |
changes in applicable laws or regulations;
|
| • |
the ability of Solid Power to execute its business model, including market acceptance of
all-solid-state
battery cell technology;
|
| • |
the possibility that
COVID-19
may hinder DCRC’s ability to consummate the business combination;
|
| • |
the possibility that
COVID-19
may adversely affect the results of operations, financial position and cash flows of DCRC or the post-combination company; and
|
| • |
the possibility that DCRC or the post-combination company may be adversely affected by other economic, business or competitive factors.
|
Should one or more of the risks or uncertainties described in this proxy statement/prospectus, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in the section entitled “Risk Factors” in DCRC’s final prospectus for its Initial Public Offering, which was filed with the SEC on March 25, 2021, and in DCRC’s periodic filings with the SEC, including its Quarterly Report on Form
.
10-Q
for the quarter ended June 30, 2021. DCRC’s SEC filings are available publicly on the SEC’s website at
www.sec.gov
38
RISK FACTORS
Risks Related to Solid Power
The following risk factors will apply to our business and operations following the completion of the business combination. These risk factors are not exhaustive, and investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of Solid Power and our business, financial condition and prospects following the completion of the business combination. You should carefully consider the following risk factors in addition to the other information included in this proxy statement/prospectus, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements of Solid Power and notes to the financial statements included herein. Unless the context otherwise requires, all references in this section to “we,” “us” or “our” refer to Solid Power.
Risks Related to Development and Commercialization
It will be challenging to develop
all-solid-state
battery cells capable of production at volume and with acceptable performance, yields and costs. The pace of development in materials science is often not predictable. Delays or failures in accomplishing particular development objectives may postpone or prevent us from generating revenues from the licensing of our battery cell technology or sales of our sulfide-based solid electrolytes.
Our business depends on our ability to develop
all-solid-state
battery cells that outperform the
lithium-ion
batteries currently prevalent in electric vehicles. We expect to need at least four years of research and development and automotive qualification efforts before our cells will be advanced enough for us to realize material revenue generation from licensing agreements for our
all-solid-state
battery cells or reach commercial levels of manufacturing of our sulfide-based solid electrolytes. Developing the technology and
know-how
to produce
all-solid-state
battery cells at scale and cost, and which meet the performance requirements for wide adoption by automotive original equipment manufacturers (“OEMs”), is extremely challenging. We must overcome significant hurdles to complete development, validation and automotive qualification of our battery cells prior to being able to license or sell our technology to any customers. Some of the development hurdles that we need to overcome before licensing or selling our
all-solid-state
battery cell technology to customers include:
| • |
increasing the volume, yield, reliability and uniformity of our electrode layers, separators and cells;
|
| • |
increasing the size and layer count of our multi-layer cells;
|
| • |
developing manufacturing techniques to produce the volume of cells needed for customer applications;
|
| • |
understanding optimization requirements for high volume manufacturing equipment;
|
| • |
designing and engineering packaging to ensure adequate cycle life (
i.e.
|
| • |
reducing cost of production; and
|
| • |
meeting the rigorous and challenging specifications required by our customers, and ultimately OEMs, including but not limited to, calendar life, energy density, abuse testing, charge rate, cycle life, and operating temperature.
|
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We expect to encounter engineering challenges as we increase the dimensions and throughput of components and cells. To achieve target energy density, we need to increase the layer-count and dimensions of our current electrodes, which are enclosed within a single battery package. We have built and tested both
ten-layer
cells and
22-layer
cells. In order to be commercially viable, we expect our cells will need to have at least 40 layers, our cells will need to be capable of being produced at a high yield without compromising performance, and we will have to solve related packaging challenges in a way that is scalable and at an acceptable cost. If we are not able to overcome these engineering and mechanical hurdles, we may not succeed in licensing our
all-solid-state
battery cell technology or selling our sulfide-based solid electrolytes to customers as needed to continue our business.
Even if we complete development and succeed in entering into license agreements, we may not start to generate revenues from such agreements until our customers have retrofitted or constructed and deployed facilities to build our
all-solid-state
battery cells at scale. Any delay in the development, automotive qualification or third-party manufacturing
scale-up
of our
all-solid-state
battery cells would negatively impact our business as it will delay time to revenue. It may also negatively impact
end-user
relationships, including OEMs. Significant delays in providing licenses to our technology would materially damage our business, prospects, financial condition, operating results and brand.
If our
all-solid-state
battery cells fail to perform as expected, our ability to develop, market, and license our technology could be harmed.
Our battery cell architecture is inherently complex and incorporates technology and components that have not been used in commercial battery cell production. We anticipate that our research and development efforts will extend in an iterative process even beyond the time at which we initially deliver our
all-solid-state
battery cells to OEMs for validation. The continuous need to refine and optimize our products will require us to continue to perform extensive and costly research and development efforts even after the initial delivery of our cells to OEMs. For instance, we may learn from these validation efforts that our cells contain defects or errors that cause the cells not to perform as expected. Fixing any such problems may require design changes or other research and development efforts, take significant time, and be costly. There can be no assurance that we will be able to detect and fix any defects in our
all-solid-state
battery cell architecture. If our cell design fails to perform as expected, we could lose licensing contracts and customers of our sulfide-based solid electrolytes.
In addition, because we have a limited frame of reference from which to evaluate the long-term performance of our
all-solid-state
battery cell design, it is possible that issues or problems will arise once our technology has been deployed for a longer period. If our customers determine our technology does not perform as expected, they may delay deliveries, terminate further orders, or initiate product recalls, each of which could adversely affect our business, prospects, and results of operations.
We may not succeed in developing
all-solid-state
battery cells for commercialization under our JDAs within the time parameters specified therein. If we do not meet the milestones in the JDAs, our partners may terminate them without liability to us. Termination of a JDA by a partner, particularly a key partner like Ford or BMW of North America LLC, could impair our reputation and prospects materially.
We have entered into
non-exclusive
JDAs with certain of our early investors, including Ford Motor Company and BMW of North America LLC, to collaborate on the research and development of our
all-solid-state
battery cell. The terms of our JDAs generally require us to continue our research and development of
all-solid-state
battery cells and component materials such that our products are capable of being deployed in electric vehicles within the next few years. There is no assurance that we will be able to complete research and development in the time frame required by the JDAs and if are unable to, our partners may terminate their participation in the JDAs. Given the importance to us of these relationships, the termination of our JDA with either Ford or BMW of North America LLC could impair our reputation and prospects materially.
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Our business depends on our ability to manage our relationships with existing partners, and to develop new relationships over time. We may not succeed in managing these business relationships, which could slow our development progress and impair our business prospects.
Our OEM partners may have economic, business, or legal interests or goals that are inconsistent with ours. As a result, it may be challenging for us to resolve issues that arise in respect of the performance of our JDAs, and in particular as any issue might impact development work underway under the JDAs. Any significant disagreements with them, and especially if we become dependent on that OEM partner for our research and development efforts, may impede our ability to maximize the benefits of our partnerships and slow the commercial
roll-out
of our
all-solid-state
battery cell designs. In addition, if our partners are unable or unwilling to meet their economic or other obligations under the JDAs, we may be required to fulfill those obligations alone, which could delay research and development progress and otherwise negatively impact our business and financial results. Furthermore, the relationships we have with our existing partners and the rights our partners’ rights have under their respective JDAs, may deter other automotive OEMs from working with us. If we are not able to expand our other customer relationships, our business and prospects could be materially harmed.
We have not reached any agreement with our partners on economic terms for the supply of our
all-solid-state
battery cell technology or sale of sulfide-based solid electrolytes. As a result, our projections of revenue and other financial results are uncertain.
Our JDAs provide a framework for our cooperation and contemplate that we will enter into certain additional arrangements with our partners for the purchase and pricing of sulfide-based solid electrolyte materials for integration into our
all-solid-state
battery cell design, as well as terms for licensing our technology to cell producers. We have not reached agreement on key commercial terms with any of these partners and the structure for realizing the monetary value of our products is unknown. There can be no assurance that we will be able to agree with our partners on these key elements or that any terms will be financially beneficial for us.
The
non-exclusive
nature of our JDAs exposes us to the risk that our partners may elect to pursue other electric vehicle technologies, which likely would impair our revenue generating ability.
Our OEM partners are motivated to develop and commercialize improved electric vehicles. To that end, our partners have invested, and are likely to continue to invest in the future, in their own development efforts and, in certain cases, in JDAs with our current and future competitors. If other technology is developed more rapidly than our
all-solid-state
battery cells, or if such competing technologies are determined to be more efficient or effective than our
all-solid-state
battery cells, our partners may elect to adopt and install a competitor’s battery cell technology or products over ours, which could materially impact our business, financial results, and prospects
.
The terms of each JDA permit our partners to share in the intellectual property developed through the research and development efforts required under our particular agreements with them. Our ability to share developments gained through the course of performance of a particular JDA with our other partners may be limited in certain circumstances. In certain circumstances, our partners may be able to exploit certain of the intellectual property developed under their respective JDAs in ways that are detrimental to us.
Our JDAs, generally speaking, provide that, among other things, (i) any intellectual property jointly developed will be owned by both parties, with each party having the right to license that intellectual property to third parties in connection with the development of such party’s products, (ii) each party retains sole ownership of previously or independently developed intellectual property, and (iii) the partner receives a license to our solely developed intellectual property under the JDA for use in the partner’s products. Furthermore, to the extent a development we make jointly with one of our partners involves such partner’s previously developed intellectual property, we may not be able to use any information gleaned in the course of performance under the JDA with such partner in performance of our other partners’ JDAs, which could prevent us from scaling the development
41
or deploying it in work with all of our partners. There are no assurances we will maintain the access we need to any intellectual property of our partners or that any jointly developed intellectual property will be adequately protected, or that our partners will not seek to capitalize on jointly developed intellectual property for their sole benefit, such as through licensing agreements or other contractual arrangements they may enter with third parties that do not benefit us. In our JDAs to date, we have agreed that our partners would receive certain rights to our intellectual property in certain circumstances, including if we were to fail to perform under commercial agreements that we may enter into in the future or otherwise abandon our business following the execution of such commercial agreements. If those provisions are triggered, our partners may receive perpetual, irrevocable, royalty-free licenses to portions of our intellectual property, which may limit the profitability and competitive advantage offered by our intellectual property and adversely affect our revenue.
We have only conducted preliminary safety testing on our prototype
all-solid-state
battery cells. Our
all-solid-state
battery cells will require additional and extensive safety testing prior to being installed in electric vehicles.
To achieve acceptance by automotive OEMs, our anticipated
commercial-sized
all-solid-state
battery cells will have to undergo extensive safety testing. We cannot assure you such tests will be successful, and we may identify different or new safety issues in our development or the commercial cells that have not been present in our prototype cells. If we have to make design changes to address any safety issues, we may have to delay or suspend commercialization, which could materially damage our business, prospects, financial condition, operating results and brand.
We are subject to risks relating to the construction and development of facilities for our short-term research and development and long-term production requirements.
Our business model contemplates that we will construct additional facilities for research and development and eventually sulfide-based solid electrolyte manufacturing. In the near-term, we need to construct a facility for
higher-end
research and development and scaling of our sulfide-based solid electrolyte material production. In the longer-term, and in connection with potential supply agreements, we will need to construct facilities to produce commercial volumes of our sulfide-based solid electrolyte. We have not secured a location or obtained the necessary licenses or permits for commercial-level sulfide-based solid electrolyte manufacturing facilities. In connection with constructing these facilities, we will need to identify and acquire the land or obtain leases for suitable locations appropriately zoned for activities involving hazardous materials, which will limit where we are able to locate our facilities and may require us to pay a premium for any such real estate. If we fail to do so, or otherwise encounter delays or lose necessary consents, permits, licenses, or commercial agreements, we could face delays or terminations of construction or development activities. If our planned facilities do not become operable on schedule, or at all, or become inoperable, production of our battery cells and our business will be harmed.
We are subject to risks relating to production scale manufacturing of our
all-solid-state
battery cells through partners in the longer term.
Our business plan contemplates top tier battery cell suppliers and automotive OEMs will manufacture our
all-solid-state
battery cells pursuant to licensing agreements with us. A component of our plan is to develop our products in such a way as to enable our manufacturing partners to utilize existing
lithium-ion
battery cell manufacturing processes and equipment. While we believe our development of a manufacturing process compatible with existing
lithium-ion
battery cell manufacturing lines provides significant competitive advantages, modifying or constructing these lines for production of our products could be more complicated or present significant challenges to our manufacturing partners that we do not currently anticipate. As with any large-scale capital project, any modification or construction of this nature could be subject to delays, cost overruns or other complications. Any failure to commence commercial production on schedule likely would lead to additional costs and could delay our ability to generate meaningful revenues. In addition, any such delay could
42
diminish any “first mover” advantage we aim to attain, prevent us from gaining the confidence of OEMs and open the door to increased competition. All of the foregoing could hinder our ability to successfully launch and grow our business and achieve a competitive position in the market.
Collaboration with third parties to manufacture our
all-solid-state
battery cells reduces our level of control over the process. We could experience delays if our partners do not meet agreed upon timelines or experience capacity constraints. There is risk of potential disputes with partners, which could stop or slow battery cell production, and we could be affected by adverse publicity related to our partners, whether or not such publicity is related to such third parties’ collaboration with us. In addition, we cannot guarantee that our suppliers will not deviate from agreed-upon quality standards.
We may be unable to enter into agreements with manufacturers on terms and conditions acceptable to us and therefore we may need to contract with other third parties or create our own commercial production capacity. We may not be able to engage other third parties or establish or expand our own production capacity to meet our needs on acceptable terms, or at all. The expense and time required to adequately complete any transition may be greater than anticipated. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.
We rely on complex equipment for our operations, and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We rely heavily on complex equipment for our operations and the production of our
all-solid-state
battery cells. The work required to integrate this equipment into the production of our
all-solid-state
battery cells is time intensive and requires us to work closely with the equipment providers to ensure that it works properly with our proprietary technology. This integration involves a degree of uncertainty and risk and may result in the delay in the scaling up of production or result in additional cost to our
all-solid-state
battery cells.
Our current manufacturing facilities require, and we expect our future manufacturing facilities will require, large-scale machinery. Such machinery may unexpectedly malfunction and require repairs and spare parts to resume operations, which may not be available when needed. We do not expect to maintain any redundancies in our research and development facilities, so unexpected malfunctions of our production equipment may significantly affect our operational efficiency. In addition, because this equipment has historically not been used to build
all-solid-state
battery cells, the operational performance and costs associated with this equipment is difficult to predict and may be influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components of our products in a timely manner and at prices and volumes acceptable to us, environmental hazards and associated costs of remediation, difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity and other natural disasters.
Problems with our manufacturing equipment could result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production. In addition, in some cases operational problems may result in environmental damage, administrative fines, increased insurance costs and potential legal liabilities. Any of these operational problems, or a combination of them could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.
We may obtain licenses on technology that has not been commercialized or has been commercialized only to a limited extent, and the success of our business may be adversely affected if such technology does not perform as expected.
From time to time, we may license from third parties, including our partners under the JDAs, technologies that have not been commercialized or which have been commercialized only to a limited extent. These technologies may not perform as expected within our
all-solid-state
battery cells and related products. If
43
the cost, performance characteristics, manufacturing process or other specifications of these licensed technologies fall short of our targets, our projected sales, costs, time to market, competitive advantage, future product pricing and potential operating margins may be adversely affected.
Substantial increases in the prices for our raw materials and components, some of which are obtained from a limited number of sources where demand may exceed supply, could materially and adversely affect our business.
We rely on third-party suppliers for components and equipment necessary to develop our
all-solid-state
battery cells, including key supplies, such as Li
2
S, lithium nickel manganese cobalt oxide (“NMC”), silicon, lithium metal foil and manufacturing tools for our
all-solid-state
battery cells. We face risks relating to the availability of these materials and components, including that we will be subject to demand shortages and supply chain challenges and generally may not have sufficient purchasing power to eliminate the risk of price increases for the raw materials and tools we need. Further, certain components, including Li
2
S, are not currently produced at a scale we believe necessary to support our proposed commercial operations. To the extent that we are unable to enter into commercial agreements with our current suppliers or our replacement suppliers on favorable terms, or these suppliers experience difficulties meeting our requirements, the development and commercial progression of our
all-solid-state
battery cells and related technologies may be delayed.
Separately, we may be subject to various supply chain requirements regarding, among other things, conflict minerals and labor practices. We may be required to incur substantial costs to comply with these requirements, which may include locating new suppliers if certain issues are discovered. We may not be able to find any new suppliers for certain raw materials or components required for our operations, or such suppliers may be unwilling or unable to provide us with products.
Any disruption in the supply of components, equipment or materials could temporarily disrupt research and development activities or production of our
all-solid-state
battery cells or sulfide-based solid electrolytes until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components or equipment to us on a timely basis. Any of the foregoing could materially and adversely affect our results of operations, financial condition and prospects.
Currency fluctuations, trade barriers, tariffs or shortages and other general economic or political conditions may limit our ability to obtain key components or equipment for our
all-solid-state
battery cells or significantly increase freight charges, raw material costs and other expenses associated with our business, which could further materially and adversely affect our results of operations, financial condition and prospects.
We may be unable to adequately control the costs associated with our operations and the components necessary to build our
all-solid-state
battery cells, and, if we are unable to control these costs and achieve cost advantages in our production of our
all-solid-state
battery cells at scale, our business will be adversely affected.
We require significant capital to develop our
all-solid-state
battery cell technologies and expect to incur significant expenses, including those relating to research and development, raw material procurement, leases, sales and distribution as we build our brand and market our technologies, and general and administrative costs as we scale our operations. Our ability to become profitable in the future will not only depend on our ability to successfully develop and market our sulfide-based solid electrolytes and
all-solid-state
cells, but also to control our costs. If we are unable to efficiently design, appropriately price, sell and distribute our sulfide-based solid electrolytes and
all-solid-state
battery cell technologies, our anticipated margins, profitability and prospects would be materially and adversely affected.
44
If we are unable to attract and retain key employees and qualified personnel, our ability to compete could be harmed.
Our success depends on our ability to attract and retain our executive officers, key employees and other qualified personnel, and our operations may be severely disrupted if we lost their services. As we build our brand and become more well known, there is increased risk that competitors or other companies will seek to hire our personnel. Our success also depends on our continuing ability to identify, hire, attract, train and develop other highly qualified personnel. Competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and our failure to do so could seriously harm our business and prospects.
In addition, we are highly dependent on the services of Douglas Campbell, our Chief Executive Officer, and other senior technical and management personnel, including our executive officers, who would be difficult to replace. If Mr. Campbell or other key personnel were to depart, we may not be able to successfully attract and retain the personnel necessary to grow our business.
Our insurance coverage may not be adequate to protect us from all business risks.
We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God, and other claims against us, for which we may have no insurance coverage. As a general matter, the policies that we do have may include significant deductibles, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results. Furthermore, although we plan to obtain and maintain insurance for damage to our property and the disruption of our business, this insurance may be challenging to obtain and maintain on terms acceptable to us and may not be sufficient to cover all of our potential losses.
Our facilities or operations could be damaged or adversely affected as a result of natural disasters and other catastrophic events, including fire and explosions.
We currently conduct our operations in a single leased facility. Our current and future development and manufacturing facilities or operations could be adversely affected by events outside of our control, such as natural disasters, wars, health pandemics and epidemics such as the ongoing
We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, explosions, floods, cyber-attacks (including ransomware attacks), typhoons, earthquakes, power loss, telecommunications failures,
COVID-19
pandemic, and other calamities
.
break-ins,
war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to conduct our research and development activities as and on the timeline currently contemplated. These risks will remain particularly acute until we have completed the acquisition, permitting and
build-out
of our second facility, which we expect will not occur until 2022 and may be further delayed.
We have been, and may in the future be, adversely affected by the global
COVID-19
pandemic and/or any other pandemic.
We face various risks related to epidemics, pandemics, and other outbreaks, including the recent
COVID-19
pandemic and/or any other pandemic. The impact of
COVID-19,
including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of
COVID-19
has also impacted our potential customers and our suppliers by disrupting the manufacturing, delivery and overall supply chain of battery cell, electric vehicle and equipment manufacturers and suppliers and has led to a global decrease in battery cell and electric vehicle sales in markets around the world.
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The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines,
or
orders, and business shutdowns. These measures may adversely impact our employees, research and development activities and operations and the operations of our customers, suppliers, vendors and business partners. In addition, various aspects of our business cannot be conducted remotely, including many aspects of the research and development and manufacturing of our
stay-at-home
shelter-in-place
all-solid-state
material and our
all-solid-state
battery cells. These measures, to the extent imposed by government authorities, may remain in place for a significant period of time and they may adversely affect our future research and development, manufacturing and building plans, business and results of operations. We may take further actions as may be required by government authorities or that we determine are in the best interests of our customers, employees, suppliers, vendors and business partners.
The extent to which the
COVID-19
pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Even as the
COVID-19
pandemic subsides, we may continue to experience an adverse impact to our business as a result of the global economic impact, including any recession that has occurred or may occur in the future.
There are no comparable recent events that may provide guidance as to the effect of the spread of
COVID-19
and a pandemic, and, as a result, the ultimate impact of the
COVID-19
pandemic or a similar health epidemic is highly uncertain.
Risks Related to Industry and Market Trends
If solid-state battery cell technology does not become widely accepted, we may not be successful in generating revenues from the manufacturing and sale of our sulfide-based solid electrolytes.
Our business plan contemplates that we will develop the necessary production capabilities to manufacture our sulfide-based solid electrolytes for sale to top tier battery suppliers and automotive OEMs that have determined to manufacture solid-state battery cells, whether or not the ones we are working to develop. If a market for solid-state battery cells does not develop in the time or to the level we anticipate, we might not be able to generate revenues from this product line, which may prevent us from achieving our financial projections or recouping the costs we expect to incur in scaling our production of our sulfide-based solid electrolytes.
The battery cell market continues to evolve and is highly competitive, and we may not be successful in competing in this market or establishing and maintaining confidence in our long-term business prospects among current and future partners and customers.
The battery cell market in which we compete continues to evolve and is highly competitive. To date, we have focused our efforts on our
all-solid-state
battery cell technology, a promising alternative to conventional
lithium-ion
battery cell technology. However,
lithium-ion
battery cell technology has been widely adopted and our current competitors have, and future competitors may have, greater resources than we do and may also be able to devote greater resources to the development of their current and future technologies. These competitors also may have greater access to customers and may be able to establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and competitive positioning. In addition, traditional
lithium-ion
battery cell manufacturers may continue to reduce cost and expand supply of conventional batteries and, therefore, reduce the prospects for our business or negatively impact the ability for us to sell our products at a market-competitive price and yet at sufficient margins.
Many automotive OEMs are researching and investing in solid-state battery cell efforts and, in some cases, in battery cell development and production. We do not have exclusive relationships with any OEM to provide their future battery cell technologies, and it is possible that the investments made by these OEMs might result in technological advances earlier than, or superior in certain respect to, the
all-solid-state
battery cells we
46
are developing. There are a number of companies seeking to develop alternative approaches to solid-state battery cell technology. We expect competition in battery cell technology and electric vehicles to intensify due to increased demand for these vehicles and a regulatory push for electric vehicles, continuing globalization, and consolidation in the worldwide automotive industry. As new companies and larger, existing vehicle and battery cell manufacturers enter the solid-state battery cell space, we may lose any perceived or actual technological advantage we may have in the marketplace and suffer a decline in our position in the market.
Furthermore, the battery cell industry also competes with other emerging or evolving technologies, such as natural gas, advanced diesel and hydrogen-based fuel cell powered vehicles. Developments in alternative technologies or improvements in batteries technology made by competitors may materially adversely affect the sales, pricing and gross margins of our products. As technologies change, we will attempt to upgrade or adapt our products to continue to provide products with the latest technology. However, our products may become obsolete or our research and development efforts may not be sufficient to adapt to changes in or to create the necessary technology to effectively compete. If we are unable to keep up with competitive developments, including if such technologies achieve lower prices or enjoy greater policy support than the
lithium-ion
battery cell industry, our competitive position and growth prospects may be harmed. Similarly, if we fail to accurately predict and ensure that our
all-solid-state
battery cell technology can address customers’ changing needs or emerging technological trends, or if our customers fail to achieve the benefits expected from our
all-solid-state
battery cells, our business will be harmed.
We must continue to commit significant resources to develop our
all-solid-state
battery cell technology in order to establish a competitive position, and these commitments must be made without knowing whether our investments will result in products potential customers will accept. There is no assurance we will successfully identify new customer requirements, develop and bring our
all-solid-state
battery cells to market on a timely basis, or that products and technologies developed by others will not render our
all-solid-state
battery cells obsolete or noncompetitive, any of which would adversely affect our business and operating results.
We expect that OEMs and top tier battery cell suppliers will be less likely to license our
all-solid-state
battery cells and/or incorporate our sulfide-based solid electrolytes if they are not convinced that our business will succeed in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed in the long term. Accordingly, in order to build and maintain our business, we must instill and maintain confidence among current and future partners, customers, suppliers, analysts, ratings agencies and other parties in our long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as:
| • |
our limited operating history;
|
| • |
market unfamiliarity with our products;
|
| • |
delays in or impediments to completing or achieving our research and development goals;
|
| • |
unexpected costs that OEM partners may be required to incur to scale manufacturing, delivery and service operations to meet demand for electric vehicles containing our technologies or products;
|
| • |
competition and uncertainty regarding the future of electric vehicles;
|
| • |
the development and adoption of competing technologies that are less expensive and/or more effective than our products; and
|
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our eventual production and sales performance compared with market expectations.
|
Our future growth and success are dependent upon consumers’ willingness to adopt electric vehicles.
Our growth and future demand for our products is highly dependent upon the adoption by consumers of alternative fuel vehicles in general and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and factors, evolving government regulation and industry standards, and changing consumer demands and behaviors. If the market for
47
electric vehicles in general does not develop as expected, or develops more slowly than expected, our business, prospects, financial condition and operating results could be harmed.
We may not succeed in attracting customers during the development stage or for high volume commercial production, and our future growth and success depend on our ability to attract customers.
We may not succeed in attracting customers during our development stage or for high volume commercial production. Customers may be wary of unproven products or not be inclined to work with less established businesses. In addition, if we are unable to attract new customers in need of high-volume commercial production of our products, our business will be harmed.
OEMs are often large enterprises. Therefore, our future success will depend on our ability to effectively sell our products to such large customers. Sales to these
end-customers
involve risks that may not be present (or that are present to a lesser extent) with sales to smaller customers. These risks include, but are not limited to, (i) increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us and (ii) longer sales cycles and the associated risk that substantial time and resources may be spent on a potential
end-customer
that elects not to purchase our products.
OEMs that are large organizations often undertake a significant evaluation process that results in a lengthy sales cycle. In addition, product purchases by large organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. Finally, large organizations typically have longer implementation cycles, require greater product functionality and scalability, require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead to a delay in revenue recognition and expect greater payment flexibility. All of these factors can add further risk to business conducted with these potential customers.
We may not be able to accurately estimate the future supply and demand for our
all-solid-state
battery cells and/or our sulfide-based solid electrolytes, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.
It is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. We anticipate being required to provide forecasts of our demand to our current and future suppliers prior to the scheduled delivery of products to potential customers. Currently, there is no historical basis for making judgments on the demand for our
all-solid-state
battery cells and/or our sulfide-based solid electrolytes or our ability to develop, manufacture, and deliver such products, or our profitability in the future. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of our
all-solid-state
battery cells and/or our sulfide-based solid electrolytes to our potential customers could be delayed, which would harm our business, financial condition and operating results.
Risks Related to Limited Operating History
Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of establishing or entering new
48
markets, organizing operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business plan will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenue to cover expenditures. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.
It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results, prospects and financial position could be materially affected. The projected financial information appearing elsewhere in these materials was prepared by management and reflects current estimates of future performance. The projected results depend on the successful implementation of management’s growth strategies and are based on assumptions and events over which we have only partial or no control. In particular, our projected results are heavily reliant on our ability to license our
all-solid-state
battery cells and sell our sulfide-based solid electrolytes. The assumptions underlying such projected information require the exercise of judgment and may not occur, and the projections are subject to uncertainty due to the effects of economic, business, competitive, regulatory, legislative, and political or other changes.
We are an early stage company with a history of financial losses and expect to incur significant expenses and continuing losses for the foreseeable future.
We incurred a net loss of approximately $14.4 million for the year ended December 31, 2020 and an accumulated deficit of approximately $105.3 million from our inception in 2012 through December 31, 2020. We believe that we will continue to incur operating and net losses each quarter until the time significant production of our
all-solid-state
battery cells or sales of our sulfide-based solid electrolytes begins, which is not expected to occur until at least 2026, and may occur later.
We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things, continue to incur significant expenses in connection with the design, development and manufacturing of our materials and
all-solid-state
battery cells; expand our research and development activities; invest in additional research and development and manufacturing facilities and capabilities; build up inventories of raw materials and other components; commence sales and marketing activities; develop our distribution infrastructure; and increase our general and administrative functions to support our growing operations. We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
We may require additional capital to support business growth, and this capital might not be available on commercially reasonable terms or at all.
We may need additional capital before we commence generating revenues, and it may not be available on acceptable terms, if at all. For example, our capital budget assumes, among other things, that (i) DCRC will satisfy its condition precedent under the Business Combination Agreement to have unrestricted cash on hand at the closing of the business combination of at least $300 million (without giving effect to transaction expenses) after consummation of the PIPE Financing and after distribution of the funds in the Trust Account (the “Minimum Cash Condition”), which is a condition that we may choose to waive if not satisfied, and (ii) our development timeline progresses as planned and our corresponding expenditures are consistent with current expectations, both of which are subject to various risks and uncertainties, including those described herein.
49
More specifically, our business plan is expected to require continued capital investment to accelerate and continue research and development, to fund operations, and to improve infrastructure, and our budget continues to evolve as technology and economic conditions change in a dynamic industry.
As a result, we may need to access the debt and equity capital markets to obtain additional financing in the future. However, these sources of financing may not be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to a number of factors, including:
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market conditions;
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the level of success we have experienced with our research and development programs;
|
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our operating performance;
|
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investor sentiment; and
|
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our ability to incur additional debt in compliance with any agreements governing our then-outstanding debt.
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These factors may make the timing, amount, terms or conditions of additional financings unattractive to us. If we raise additional funds by issuing equity, equity-linked or debt securities, those securities may have rights, references or privileges senior to the rights of our currently issued and outstanding equity or debt, and our existing stockholders may experience dilution. If we are unable to generate sufficient funds from operations or raise additional capital, we may be forced to decrease our level of investment in product development or scale back our operations, which may adversely affect our business, operating results, financial condition and prospects.
If we fail to effectively manage our future growth, we may not be able to market and license the technology and
know-how
to manufacture our
all-solid-state
battery cells or sell our sulfide-based solid electrolyte successfully.
We intend to use the net proceeds from our recent Series B Financing, amounts in DCRC’s escrow account after giving effect to redemptions and the net proceeds from the PIPE Financing to expand our operations significantly, with a view toward accelerating our research and development activities and positioning our company for potential commercialization of our technologies. In connection with these efforts, we anticipate hiring, retaining and training personnel, establishing manufacturing plants and other facilities, and implementing administrative infrastructure, systems and processes. That said, our management team will have considerable discretion in the application of the funds available to us following completion of the business combination. We may use these funds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the cash held at closing of the business combination in a manner that does not produce income or that loses value. If we cannot manage our growth effectively, including by controlling our expenditures for these initiatives to the greatest extent possible, our business could be harmed.
Our management does not have experience in operating a public company.
Our executive officers do not have experience in the management of a publicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the policies, practices or internal controls over financial reporting required of public companies in the United States. As a result, we may be required to pay higher outside legal, accounting or consulting costs than our competitors, and our management team members may have to devote a higher proportion of their time to issues relating to compliance with the laws applicable to public companies, both of which might put us at a disadvantage relative to competitors.
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We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of our technologies and our business, revenues and prospects.
Our business and prospects depend on our ability to develop, maintain and strengthen our brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Our current and potential competitors, including many battery cell manufacturers and automotive OEMs around the world, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.
Risks Related to Intellectual Property
We rely heavily on owned and exclusively-licensed intellectual property, which includes patent rights, trade secrets, copyright, trademarks, and
know-how.
If we are unable to protect and maintain access to these intellectual property rights, our business and competitive position would be harmed.
We may not be able to prevent unauthorized use of our owned and exclusively-licensed intellectual property, which could harm our business and competitive position. We rely on a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights and competitive advantage in our proprietary technologies. In addition, we seek to protect our intellectual property rights through nondisclosure and invention assignment agreements with our employees and consultants, and through
non-disclosure
agreements with business partners and other third parties. Despite our efforts to protect our proprietary rights, third parties, including our business partners, may attempt to copy or otherwise obtain and use our intellectual property without our consent or may decline to license or defend necessary intellectual property rights to us on terms favorable to our business. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take to prevent misappropriation may not be sufficient. Any enforcement efforts we undertake, including litigation, could require involvement of the licensor, be time-consuming and expensive, and could divert management’s attention, all of which could harm our business, results of operations and financial condition. In addition, existing intellectual property laws and contractual remedies may afford less protection than needed to safeguard our proprietary technologies. A significant portion of our patent rights have been obtained through exclusive licenses. Because we do not own those patent rights, we have less control over their maintenance and enforcement, which could harm our ability to maintain any competitive advantage those patent rights provide.
Patent, copyright, trademark and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States and efforts to protect against the unauthorized use of our intellectual property rights, technology and other proprietary rights may be impossible outside of the United States. Failure to adequately protect our owned and exclusively-licensed intellectual property rights could result in our competitors using our intellectual property to offer products, potentially resulting in the loss of some of our competitive advantage, a decrease in our revenue and reputational harm caused by inferior products offered by third parties, which would adversely affect our business, prospects, financial condition and operating results.
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Our patent applications may not result in issued patents, which would result in the disclosures in those applications being available to the public. Also, our patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on our ability to prevent others from interfering with commercialization of our products.
Our patent portfolio includes some patent applications. Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to our products to our disadvantage. The status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us will afford protection against competitors with similar technology. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and are developing our technology, any number of which could be considered prior art and prevent us from obtaining a patent. In addition to those who may claim priority, any of our future or existing patents or pending patent applications (including those we have rights to under exclusive license) may also be challenged by others on the basis that they are otherwise invalid or unenforceable. Furthermore, patent applications filed in foreign countries may be subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued.
We have not performed exhaustive searches or analyses of the intellectual property landscape of the battery industry; therefore, we are unable to guarantee that our technology, or its ultimate integration into electric vehicle battery packs, does not infringe intellectual property rights of third parties. We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs.
Companies, organizations or individuals, including our current and future competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell, license, lease or market our products or technologies, which could make it more difficult for us to operate our business. From time to time, we may receive inquiries from third parties relating to whether we are infringing their intellectual property rights and/or seek court declarations that they do not infringe upon our intellectual property rights. Companies holding patents or other intellectual property rights relating to batteries may bring suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
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cease selling, leasing, incorporating or using products that incorporate the challenged intellectual property;
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pay substantial damages;
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materially alter our research and development activities and proposed production processes;
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obtain a license from the holder of the infringed intellectual property right, which may not be available on reasonable terms or at all; or
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redesign our battery cells at significant expense.
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In the event of a successful claim of infringement against us and our failure or inability to obtain a license to continue to use the technology on reasonable terms, our business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether or not well-founded, could result in substantial costs, negative publicity, reputational harm and diversion of resources and management’s attention.
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We also license patents and other intellectual property from third parties, and we may face claims that our use of this intellectual property infringes the rights of others. In such cases, we may seek indemnification from our licensors under our license contracts with them as permitted by our license agreements. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses, depending on our use of the technology, whether we choose to retain control over conduct of the litigation, and other factors.
Risks Related to Finance and Accounting
Our expectations and targets regarding the times when we will achieve various technical,
pre-production
and production-level performance objectives depend in large part upon assumptions, estimates, measurements, testing, analyses and data developed and performed by us, which if incorrect or flawed, could have a material adverse effect on our actual operating results and performance.
Our expectations and targets regarding the times when we will achieve various technical,
pre-production
and production objectives reflect our current expectations and estimates. Whether we will achieve these objectives when we expect depends on a number of factors, many of which are outside our control, including, but not limited to:
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success and timing of our development activity and ability to develop an
all-solid-state
battery cell that achieves our desired performance metrics and achieves the requisite automotive industry validations before our competitors;
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unanticipated technical or manufacturing challenges or delays;
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difficulties identifying or constructing the necessary research and development and manufacturing facilities;
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technological developments relating to
lithium-ion,
lithium-metal
all-solid-state
or other batteries that could adversely affect the commercial potential of our technologies;
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the extent of consumer acceptance of electric vehicles generally, and those deploying our products, in particular;
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competition, including from established and future competitors in the battery cell industry or from competing technologies such as hydrogen fuel cells that may be used to power electric vehicles;
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whether we can obtain sufficient capital when required to build our manufacturing facilities and sustain and grow our business;
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adverse developments in our partnership relationships like those with Ford and BMW Group (“BMW”), including termination of our partnerships or changes in our partners’ timetables and business plans, which could hinder our development efforts;
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our ability to manage our growth;
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whether we can manage relationships with key suppliers and the availability of the raw materials we need to procure from them;
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our ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel; and
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the overall strength and stability of domestic and international economies.
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Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our ability to achieve our objectives when planned and our business, results of operations and financial results.
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Incorrect estimates or assumptions by management in connection with the preparation of our financial statements could adversely affect our reported assets, liabilities, income, revenue or expenses.
The preparation of our consolidated financial statements requires management to make critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, income, revenue or expenses during the reporting periods. Incorrect estimates and assumptions by management could adversely affect our reported amounts of assets, liabilities, income, revenue and expenses during the reporting periods. If we make incorrect assumptions or estimates, our reported financial results may be over or understated, which could materially and adversely affect our business, financial condition and results of operations.
Our auditors identified a material weakness in our internal control over financial reporting as of December 31, 2020. If we are unable to develop and maintain an effective system of internal controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our stock price, business and operating results.
As part of the independent audit of our 2019 and 2020 financial statements, we undertook a technical evaluation of our accounting of several financial instruments, including the convertible notes and equity grants we issued in 2019 and 2020. Our evaluation did not consider the applicable accounting guidance. As a result, our auditor issued a finding of a material weakness in internal controls over financial reporting related to the review of complex transactions for proper accounting treatment as our control environment would have failed to detect the misstatement prior to the financial statement issuance. A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Management continues to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects. In the future, management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements.
In addition, we will be required to provide management’s attestation on internal controls. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) are significantly more stringent than those that were required of us as a privately held company. If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, if we are unable to maintain compliance with securities law requirements regarding timely filing of periodic reports or applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result and we could become subject to litigation or investigations by the SEC or other regulatory authorities, which could require additional financial and management resources. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.
We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we have created, or will create, new Board committees and adopted, or will adopt, new internal controls and disclosure controls and procedures. In addition, we will incur expenses associated with SEC reporting requirements. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it. It will also be more expensive to obtain director and officer liability insurance. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to spend money that could otherwise be used on our research and development programs and to achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
Our ability to utilize our net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its
pre-change
NOLs to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If we have experienced an ownership change at any time since our incorporation, we may be subject to limitations on our ability to utilize our existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, the business combination and future changes in our stock ownership, which may be outside of our control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, even if we earn net taxable income in the future, our ability to use our
pre-change
NOLs and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to us.
There is also a risk that changes in law or regulatory changes may result in suspensions on the use of NOLs or tax credits, possibly with retroactive effect, and our existing NOLs or tax credits expiring or otherwise being unavailable to offset future income tax liabilities.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.
We currently, and expect to continue to, benefit from certain government subsidies and economic incentives including tax credits, rebates and other incentives that support the development and adoption of clean energy technology. We cannot assure you that these subsidies and incentive programs will be available to us at
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the same or comparable levels in the future. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of clean and renewable energy products or other reasons, may require us to seek additional financing, which may not be obtainable on commercially attractive terms or at all, and may result in the diminished competitiveness of the battery cell industry generally or our
all-solid-state
battery cells in particular. Any change in the level of subsidies and incentives from which we benefit could materially and adversely affect our business, prospects, financial condition and operating results.
Risks Related to Legal and Regulatory Compliance
We are subject to regulations regarding the storage and handling of various products. We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We may become subject to product liability claims which could harm our business, prospects, operating results, and financial condition. We face inherent risk of exposure to claims in the event our
all-solid-state
battery cells do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given our
all-solid-state
battery cells and sulfide-based solid electrolytes are still in the development stage and have not yet been commercially tested or mass produced. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our technology and business and inhibit or prevent commercialization of our
all-solid-state
battery cells and sulfide-based solid electrolytes and future product candidates, which would have a material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under then-existing policies.
From time to time, we may be involved in litigation, regulatory actions or government investigations and inquiries, which could have an adverse impact on our profitability and consolidated financial position.
We may be involved in a variety of litigation, other claims, suits, regulatory actions or government investigations and inquiries and commercial or contractual disputes that, from time to time, are significant. In addition, from time to time, we may also be involved in legal proceedings and investigations arising in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with potential customers, former employees and suppliers, intellectual property matters, personal injury claims, environmental issues, tax matters, and employment matters. It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurance that any such exposure will not be material. Such claims may also negatively affect our reputation.
We are subject to substantial regulation, and unfavorable changes to, or failure by us to comply with, these regulations could substantially harm our business and operating results.
The sale of electric vehicles, and motor vehicles in general, is subject to substantial regulation under international, federal, state and local laws, including export control laws and other international trade regulations, which are continuously evolving as technology develops and becomes more widely adopted. We anticipate that our
all-solid-state
battery cells and sulfide-based solid electrolytes also would be subject to these regulations, and we expect to incur significant costs in complying with these regulations.
The U.S. government has made and continues to make significant changes in U.S. trade policy and has taken certain actions that could negatively impact U.S. trade, including imposing tariffs on certain goods
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imported into the United States, increasing scrutiny on foreign direct investment, and modifying export control laws applicable to certain technologies. In retaliation, other countries have implemented, and continue to evaluate, imposing additional trade controls on a wide range of American products and companies. The U.S. or foreign governments may take additional administrative, legislative, or regulatory action that could materially interfere with our ability to source and procure the raw materials we need for our research and development activities and, in the future, to sell products in certain countries. Sustained uncertainty about, or worsening of, current global economic conditions and further escalation of trade tensions between the United States and its trading partners could result in a global economic slowdown and long-term changes to global trade. Any alterations to our business strategy or operations made in order to adapt to or comply with any such changes could be time-consuming and expensive, and certain of our competitors may be better suited to withstand or react to these changes.
To the extent the laws change, our products may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.
Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. The laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles that may interfere with our ability to commercialize our products could have a negative and material impact on our business, prospects, financial condition and results of operations.
Our technology and our website, systems, and data we maintain may be subject to intentional disruption, other security incidents, or alleged violations of laws, regulations, or other obligations relating to data handling that could result in liability and adversely impact our reputation and future sales. We may be required to expend significant resources to continue to modify or enhance our protective measures to detect, investigate and remediate vulnerabilities to security incidents, including measures impacting our ability to develop and maintain a supply chain. In addition, we will be required to comply with rapidly evolving laws and regulations legislation in this area. Any future failure by us to comply with applicable cybersecurity or data privacy legislation or regulation could have a material adverse effect on our business, reputation, results of operations or financial condition.
We expect to face significant challenges with respect to information security and maintaining the security and integrity of our systems and other systems used in our business, as well as with respect to the data stored on or processed by these systems. We also anticipate receiving and storing confidential business information of our partners and customers. Advances in technology, an increased level of sophistication and expertise of hackers, and new discoveries in the field of cryptography can result in a compromise or breach of the systems used in our business or of security measures used in our business to protect confidential information, personal information, and other data. We may be a target for attacks designed to disrupt our operations or to attempt to gain access to our systems or to data that we possess, including proprietary information that we obtain from our partners pursuant to our JDAs with them. We also are at risk for interruptions, outages and breaches of our and our outsourced service providers’ operational systems and security systems, our integrated software and technology, and data that we or our third-party service providers process or possess. These may be caused by, among other causes, physical theft, viruses or other malicious code, denial or degradation of service attacks, ransomware, social engineering schemes, and insider theft or misuse.
The availability and effectiveness of our
all-solid-state
battery cell technology and our ability to conduct our business and operations depend on the continued operation of information technology and communications systems, some of which we have yet to develop or otherwise obtain the ability to use. Systems we currently use or may use in the future in conducting our business, including data centers and other information technology systems, will be vulnerable to damage or interruption. Such systems could also be
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subject to
break-ins,
sabotage and intentional acts of vandalism, as well as disruptions and security incidents as a result of
non-technical
issues, including intentional or inadvertent acts or omissions by employees, service providers, or others. We currently use, and may use in the future, outsourced service providers to help provide certain services, and any such outsourced service providers face similar security and system disruption risks as us. Our ability to monitor our outsourced service providers’ security measures is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of personal, confidential, or other data, including data relating to individuals. Some of the systems used in our business will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any data security incidents or other disruptions to any data centers or other systems used in our business could result in lengthy interruptions in our service and may adversely affect our business, prospects, financial condition, reputation and operating results.
Significant capital and other resources may be required in efforts to protect against information security breaches, security incidents, and system disruptions, or to alleviate problems caused by actual or suspected information security breaches and other data security incidents and system disruptions. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities and otherwise seeking to obtain unauthorized access to systems or data, and to disrupt systems, are increasingly sophisticated and constantly evolving. In particular, ransomware attacks have become more prevalent in the industrial sector, which could materially and adversely affect our ability to operate and may result in significant expense.
In addition, we may face increased compliance burdens regarding such requirements with regulators and customers regarding our products and services and also incur additional costs for oversight and monitoring of our supply chain. We also cannot be certain that these systems, networks, and other infrastructure or technology upon which we rely, including those of our third-party suppliers or service providers, will be effectively implemented, maintained or expanded as planned, or will be free from bugs, defects, errors, vulnerabilities, viruses, or malicious code. We may be required to expend significant resources to make corrections or to remediate issues that are identified or to find alternative sources.
Any failure or perceived failure by us or our service providers to prevent information security breaches or other security incidents or system disruptions, or any compromise of security that results in or is perceived or reported to result in unauthorized access to, or loss, theft, alteration, release or transfer of, our information, or any personal information, confidential information, or other data could result in loss or theft of proprietary or sensitive data and intellectual property, could harm our reputation and competitive position and could expose us to legal claims, regulatory investigations and proceedings, and fines, penalties, and other liability. Any such actual or perceived security breach, security incident or disruption could also divert the efforts of our technical and management personnel and could require us to incur significant costs and operational consequences in connection with investigating, remediating, eliminating and putting in place additional tools, devices, policies, and other measures designed to prevent actual or perceived security breaches and other incidents and system disruptions. Moreover, we could be required or otherwise find it appropriate to expend significant capital and other resources to respond to, notify third parties of, and otherwise address the incident or breach and its root cause, and most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data.
Further, we cannot assure that any limitations of liability provisions in our current or future contracts that may be applicable would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security-related matter. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover claims related to a security breach or incident, or that the insurer will not deny coverage as to any future claim. The successful assertion of claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or
co-insurance
requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
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Additionally, laws, regulations, and other actual and potential obligations relating to privacy, data hosting and transparency of data, data protection, and data security are evolving rapidly, and we expect to potentially be subject to new laws and regulations, or new interpretations of laws and regulations, in the future in various jurisdictions. These laws, regulations, and other obligations, and changes in their interpretation, could require us to modify our operations and practices, restrict our activities, and increase our costs. Further, these laws, regulations, and other obligations are complex and evolving rapidly, and we cannot provide assurance that we will not claims, allegations, or other proceedings related to actual or alleged obligations relating to privacy, data protection, or data security. It is possible that these laws, regulations, and other obligations may be inconsistent with one another or be interpreted or asserted to be inconsistent with our business or practices. We anticipate needing to dedicate substantial resources to comply with laws, regulations, and other obligations relating to privacy and cybersecurity in order to comply. Any failure or alleged or perceived failure to comply with any applicable laws, regulations, or other obligations relating to privacy, data protection, or data security could also result in regulatory investigations and proceedings, and misuse of or failure to secure data relating to individuals could also result in claims and proceedings against us by governmental entities or others, penalties and other liability, and damage to our reputation and credibility, and could have a negative impact on our business, prospects, financial condition and operating results.
We are subject to various existing and future environmental health and safety laws, which may result in increased compliance costs or additional operating costs and restrictions. Failure to comply with such laws and regulations may result in substantial fines or other limitations that could adversely impact our financial results or operations.
Our company and our operations, as well as our contractors, suppliers, and customers, are subject to numerous federal, state, local and foreign environmental laws and regulations governing, among other things, the generation, storage, transportation, and disposal of hazardous substances and wastes. We are also subject to a variety of product stewardship and manufacturer responsibility laws and regulations, primarily relating to the collection, reuse and recycling of electronic waste, as well as regulations regarding the hazardous material contents of electronic product components and product packaging, and
non-hazardous
wastes. We or others in our supply chain may be required to obtain permits and comply with procedures that impose various restrictions and operations that could have adverse effects on our operations. If key permits and approvals cannot be obtained on acceptable terms, or if other operations requirements cannot be met in a manner satisfactory for our operations or on a timeline that meets our commercial obligations, it may adversely impact our business. There are also significant capital, operating and other costs associated with compliance with these environmental laws and regulations.
Environmental and health and safety laws and regulations are subject to change and may become more stringent in the future, such as through new regulations enacted at the supranational, national,
sub-national,
and/or local level or new or modified regulations that may be implemented under existing law. The nature and extent of any changes in these laws, rules, regulations, and permits may be unpredictable and may have material effects on our business. Future legislation and regulations or changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, restrictions, and delays in connection with our operations as well as our other future projects, or may require us to manufacture with alternative technologies and materials.
Our manufacturing process creates regulated air emissions which are typically managed within established permit limits by available emissions control technology. Should permitted limits or other requirements change in the future, the company may be required to install additional, more costly control technology. If we were to violate any such permit or related permit conditions, we may incur significant fines and penalties.
We rely on third parties to ensure compliance with certain environmental laws, including those relating to the disposal of wastes. Any failure to properly handle or dispose of wastes, regardless of whether such failure is ours or our contractors, may result in liability under environmental laws, as well as liability for any impacts to
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human health or natural resources. The costs of liability with respect to contamination could have a material adverse effect on our business, financial condition, or results of operations. Additionally, we may not be able to secure contracts with third parties and contractors to continue their key supply chain and disposal services for our business, which may result in increased costs for compliance with environmental laws and regulations.
Our research and development activities expose our employees to potential occupational hazards such as, but not limited to, the presence of hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents. There may be safety incidents that damage machinery or product, slow or stop production, or harm employees. Employees may be exposed to toxic hydrogen sulfide as a result of the components we use being exposed to moisture. If released in an uncontrolled manner, this hydrogen sulfide can create hazardous working conditions. Consequences may include litigation, fines, increased insurance premiums, mandates to temporarily halt production, workers’ compensation claims, or other actions that impact our brand, finances, or ability to operate.
Some of our operations involve the manufacture and/or handling of a variety of explosive and flammable materials. We might experience incidents such as leaks and ruptures, explosions, fires, transportation accidents involving our chemical products, chemical spills and other discharges or releases of toxic or hazardous substances or gases and environmental hazards in the future or that these incidents will not result in production delays or otherwise have a material adverse effect on our business, financial condition or results of operations, for which we may not be adequately insured.
We rely on government contracts and grants for a significant portion of our revenue and to partially fund our research and development activities, which are subject to a number of uncertainties, challenges, and risks.
We currently rely on government contracts and grants for a significant portion of our revenue and to partially fund our research and development activities. Contracts and grants with government entities are subject to a number of risks. Obtaining grant funding and selling to government entities can be highly competitive, expensive, and time consuming, often requiring significant upfront time and expense without any assurance that we will be successful. In the event that we are successful in being awarded a government contract or grant, such award may be subject to appeals, disputes, or litigation, including, but not limited to, bid protests by unsuccessful bidders. Availability of government funding for our solutions may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our solutions. Where government funds are used, the government may require all work to be performed in and/or certain products to be manufactured in the United States, and we may not manufacture all products in locations that meet government requirements, and as a result, our business and results of operations may suffer. Contracts with governmental entities may also include preferential pricing terms, including, but not limited to, “most favored customer” pricing and obligations to disclose aspects of how our pricing is developed. Additionally, we may be required to obtain special certifications to sell some or all of our solutions to government or quasi-government entities. Such certification requirements for our solutions may change, thereby restricting our ability to sell into the federal government sector until we have obtained such certification. If our products are late in achieving or fail to achieve compliance with these certifications and standards, or our competitors achieve compliance with these certifications and standards, we may be disqualified from selling our products to such governmental entities, or be at a competitive disadvantage, which would harm our business, results of operations, and financial condition. There are no assurances that we will find the terms for obtaining such certifications to be acceptable or that we will be successful in obtaining or maintaining the certifications.
As a government contractor or subcontractor, we must comply with laws, regulations, and contractual provisions relating to the formation, administration, and performance of government contracts and grants and inclusion on government contract vehicles, which affect how we and our partners do business with government agencies. Government contracts often contain provisions and are subject to laws and regulations that provide government customers with additional rights and remedies not typically found in commercial contracts. These rights and remedies allow government customers, among other things, to terminate existing contracts for
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convenience and/or with short notice and without cause, and whether a government contract or grant might be terminated by the government under such a provision is outside of our control and could adversely affect our revenue. As a result of actual or perceived noncompliance with government contracting laws, regulations, or contractual provisions, we may be subject to
non-ordinary
course audits and internal investigations which may prove costly to our business financially, divert management time, or limit our ability to continue selling our products and services to our government customers. These laws and regulations may impose other added costs on our business, and failure to comply with these or other applicable regulations and requirements, including
non-compliance
in the past, could lead to claims for damages from our partners, downward contract price adjustments or refund obligations, civil or criminal penalties, and termination of contracts and suspension or debarment from obtaining government contracts and grants for a period of time with government agencies. Any such damages, penalties, disruption, or limitation in our ability to do business with a government could have a material adverse effect on our business, results of operations, financial condition, public perception and growth prospects.
We are subject to multiple environmental permitting processes at the national,
sub-national,
and/or local level. Failure to obtain key permits and approvals may adversely impact our business.
Our facilities are subject to local, state and federal siting and environmental permitting requirements. Permitting agencies with discretionary authority may refuse to issue required permits, forcing consideration of alternative sites, or may impose costly permit conditions. Such actions could increase the cost, or lengthen the timeline, of developing additional manufacturing facilities.
Even if we successfully navigate our way through the permitting phases, future conflicts may arise in the course of our development activities, including restrictions on our actions due to new or evolving environmental legislation, changes in permitted uses and conflicts with
non-governmental
organizations regarding the use of land for our manufacturing facilities. If such conflicts arise, we may be delayed or prevented from building our research and development and manufacturing facilities, which could have a negative impact on our financial condition, prospects, and results of operations.
We are subject to anti-corruption and anti-bribery laws and anti-money laundering laws, and
non-compliance
with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and possibly other anti-bribery and anti-corruption laws and anti-money laundering laws in various jurisdictions in which we conduct, or in the future may conduct, activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit us and our officers, directors, employees, business partners agents, representatives and third-party intermediaries from corruptly offering, promising, authorizing or providing, directly or indirectly anything of value to recipients in the public or private sector.
We may leverage third parties to sell our products and conduct our business abroad. We, our officers, directors, employees, business partners agents, representatives and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners or third-party intermediaries even if we do not explicitly authorize such activities. We cannot assure you that all of our officers, directors, employees, business partners agents, representatives and third-party intermediaries will not take actions in violation of applicable law, for which we may be ultimately held responsible. If we conduct international sales and business, our risks under these laws may increase.
These laws also require companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls
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and compliance procedures designed to prevent any such actions. While we have certain policies and procedures to address compliance with such laws, we cannot assure you that none of our officers, directors, employees, business partners agents, representatives and third-party intermediaries will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation. Our policies and procedures designed to ensure compliance with these regulations may not be sufficient and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.
Any allegations or violation of the FCPA or other applicable anti-bribery and anti-corruption laws and anti-money laundering laws could subject us to whistleblower complaints, adverse media coverage, investigations, settlements, prosecutions, enforcement actions, fines, damages, loss of export privileges, and severe administrative, civil and criminal sanctions, suspension or debarment from government contracts, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, prospects, financial condition and reputation. Responding to any investigation or action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.
Risks Related to DCRC
The risks discussed herein have been identified by DCRC’s management based on an evaluation of the historical risks faced by Solid Power and relate to DCRC management’s current expectations as to future risks that may result from DCRC’s anticipated ownership of Solid Power. Unless the context otherwise requires, all references in this section to “we,” “us” or “our” refer to DCRC.
Risks Related to Our Business, Operations and Industry
The loss of senior management or technical personnel could adversely affect our ability to successfully effect the business combination and successfully operate the business thereafter.
Our ability to successfully effect the business combination is dependent upon the efforts of our key personnel. Although some of our key personnel may remain with New Solid Power in senior management or advisory positions following our business combination, it is likely that some or all of the management of Solid Power will remain in place. While we intend to closely scrutinize any individuals we engage after the business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements. The loss of the services of our senior management or technical personnel could have a material adverse effect on our business, financial condition and results of operations. DCRC will also be dependent, in part, upon Solid Power’s technical personnel in connection with operating the business following the business combination. A loss by Solid Power of its technical personnel could seriously harm DCRC’s business and results of operations.
There are inherent limitations in all control systems, and misstatements due to error or fraud that could seriously harm DCRC’s business may occur and not be detected.
DCRC’s management does not expect that DCRC’s internal and disclosure controls will prevent all possible error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, an evaluation of controls can only provide reasonable assurance that all material control issues and instances of fraud, if any, in DCRC have been detected.
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These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by the individual acts of some persons or by collusion of two or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. DCRC will also be dependent, in part, upon Solid Power’s internal controls. A failure of DCRC’s or Solid Power’s controls and procedures to detect error or fraud could seriously harm DCRC’s business and results of operations.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early-stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss. DCRC will also be dependent, in part, upon Solid Power’s information. A failure in the security of Solid Power’s information systems could seriously harm DCRC’s business and results of operations.
We have not registered the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.
We have not registered the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws. However, under the terms of the warrant agreement governing the terms of our warrants, we have agreed that as soon as practicable, but in no event later than 15 business days, after the closing of an Initial Business Combination, we will use our best efforts to file a registration statement under the Securities Act covering such shares. We will use our best efforts to cause the same to become effective, but in no event later than 60 business days after the Closing, and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares
63
underlying the warrants under the Securities Act or applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A Common Stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A Common Stock for sale under all applicable state securities laws.
Risks Related to DCRC and the Business Combination
Following the consummation of the business combination, New Solid Power’s sole material asset will be its direct equity interest in the Surviving Corporation and, accordingly, New Solid Power will be dependent upon distributions from the Surviving Corporation to pay taxes and cover its corporate and other overhead expenses and pay dividends, if any, on New Solid Power common stock.
New Solid Power will be a holding company and, subsequent to the completion of the business combination, will have no material assets other than its direct equity interest in the Surviving Corporation. New Solid Power will have no independent means of generating revenue. To the extent the Surviving Corporation has available cash, New Solid Power will cause the Surviving Corporation to make distributions of cash to pay taxes, cover New Solid Power’s corporate and other overhead expenses and pay dividends, if any, on New Solid Power common stock. To the extent that New Solid Power needs funds and the Surviving Corporation fails to generate sufficient cash flow to distribute funds to New Solid Power or is restricted from making such distributions or payments under applicable law or regulation or under the terms of its financing arrangements, or is otherwise unable to provide such funds, New Solid Power’s liquidity and financial condition could be materially adversely affected.
Subsequent to the consummation of the business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
Although we have conducted due diligence on Solid Power, we cannot assure you that this diligence revealed all material issues that may be present in Solid Power, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of our control will not later arise. As a result, we may be forced to later write-down or
write-off
assets, restructure our operations or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be
non-cash
items and may not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us following the completion of the business combination or our securities. In addition, charges of this nature may cause us to be unable to obtain future financing on favorable terms or at all. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Our initial stockholders have agreed to vote in favor of the business combination, regardless of how our public stockholders vote.
Unlike many other blank check companies in which the founders agree to vote their founder shares in accordance with the majority of the votes cast by our public stockholders in connection with an Initial Business Combination, our initial stockholders have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination. As of the date hereof, our initial stockholders own shares equal to approximately 20% of our issued and outstanding shares of Class A Common Stock and Class B Common Stock in the aggregate. Accordingly, it is more likely that the necessary stockholder approval will be received for the business combination than would be the case if the initial stockholders agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in accordance with the majority of the votes cast by our public stockholders.
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Our Sponsor, certain members of the DCRC Board and our officers have interests in the business combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal.
When considering the DCRC Board’s recommendation that our stockholders vote in favor of the approval of the Business Combination Proposal, our stockholders should be aware that our directors and officers have interests in the business combination that may be different from, or in addition to, the interests of our stockholders. These interests include:
| • |
the fact that our Sponsor and independent directors hold an aggregate of 6,666,667 private placement warrants that would expire worthless if a business combination is not consummated, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our public warrants of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
|
| • |
the fact that our Sponsor may convert any working capital loans that it may make to us into up to an additional 1,000,000 private placement warrants, at the price of $1.50 per warrant;
|
| • |
the fact that our Sponsor, officers and directors have agreed not to redeem any of the shares of our common stock held by them in connection with a stockholder vote to approve the business combination;
|
| • |
the fact that our initial stockholders paid an aggregate of $25,000 for the Founder Shares and that such securities will have a significantly higher value at the time of the business combination, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
|
| • |
the fact that certain of DCRC’s officers and directors collectively own, directly or indirectly, a material interest in our Sponsor;
|
| • |
the fact that affiliates of our Sponsor own an aggregate of 1,660,417 shares of Solid Power Series A-1 Preferred Stock, which at the Exchange Ratio, would be exchanged for 5,319,311 shares of our Class A Common Stock at the Closing;
|
| • |
the anticipated appointment of each of Erik Anderson, a member of the DCRC Board and DCRC’s Chief Executive Officer, and Robert Tichio, a member of the DCRC Board, as a director on the New Solid Power Board in connection with the closing of the business combination;
|
| • |
if the Trust Account is liquidated, including in the event we are unable to complete an Initial Business Combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of (a) any third party (other than our independent public accountants) for services rendered or products sold to us or (b) a prospective target business with which we have entered into an acquisition agreement, but only if such a third party or target business has not executed a waiver of all rights to seek access to the Trust Account;
|
| • |
the fact that our independent directors own an aggregate of 360,000 Founder Shares, which if unrestricted and freely tradeable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date of the special meeting;
|
| • |
the fact that our Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to stockholders rather than liquidate;
|
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| • |
the fact that our Sponsor and its affiliates can earn a positive rate of return on their investment, even if other DCRC stockholders experience a negative rate of return in the post-business combination company;
|
| • |
the fact that our Sponsor, officers and directors will be reimbursed for out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations; and
|
| • |
the fact that our Sponsor, officers and directors will lose their entire investment in us if an Initial Business Combination is not completed.
|
At the Closing, we anticipate that our Sponsor will own 6,367,353 private placement warrants and 8,390,000 shares of New Solid Power common stock (which will be issued upon conversion of the Founder Shares upon the Closing). In addition, our Sponsor may make available to us working capital loans for up to $1,500,000 to enable us to finance transaction costs in connection with our Initial Business Combination. As of the date of this proxy statement/prospectus, there were no amounts outstanding under any working capital loans. Further, as of the date of this proxy statement/prospectus, there has been no reimbursement to our Sponsor, officers or directors for any out-of-pocket expenses incurred in connection with activities on our behalf, and no such amounts have been incurred as of the date of this proxy statement/prospectus. However, as of the date of this proxy statement/prospectus, an affiliate of our Sponsor has incurred approximately $4.0 million of expenses on DCRC’s behalf, of which approximately $3.0 million has been repaid by DCRC to the affiliate of our Sponsor. The balance will be repaid by DCRC at the Closing.
Investors in our Sponsor, each of which contributed capital to our Sponsor in exchange for Founder Shares and private placement warrants, include entities affiliated with certain of our non-independent directors and officers. Specifically, Pierre Lapeyre, Jr., David Leuschen, Robert Tichio and Peter Haskopoulos are each affiliated with Sponsor Manager, and Erik Anderson is affiliated with WRG, through which such DCRC directors and officers have an indirect economic interest in the private placement warrants and shares of New Solid Power common stock anticipated to be held by our Sponsor as of the completion of the business combination.
Our independent directors paid $1,028 in aggregate consideration for the 360,000 Founder Shares transferred to our independent directors by our Sponsor at the closing of our IPO. In addition, our independent directors purchased 299,314 private placement warrants at a price of $1.50 per warrant at the closing of our IPO.
The table set forth below summarizes the interests of Sponsor Manager, WRG and our independent directors in the private placement warrants and Founder Shares along with (i) the total investment made in our Sponsor (or purchase price paid for the private placement warrants, in the case of our independent directors) by Sponsor Manager, WRG and our independent directors in exchange for their interests in the private placement warrants and Founder Shares and (ii) the value of such interests based on the closing price of the public warrants and Class A Common Stock as of , 2021, all of which would be lost if an Initial Business Combination is not completed by us within the required time period:
|
Name of Holder
|
DCRC
Position |
Total Purchase
Price / Capital Contributions |
Number of
Private Placement Warrants |
Value of
Private Placement Warrants as of , 2021 |
Number of
Founder Shares |
Value of
Founder Shares as of , 2021 |
||||||||||||||||
|
Decarbonization Plus Acquisition Sponsor Manager III, LLC
1
|
N/A | $ | 7,923,040 | 5,268,801 | $ | 6,943,741 | $ | |||||||||||||||
|
WRG DCRC Investors, LLC
2
|
N/A | $ | 1,150,710 | 765,219 | $ | 1,008,759 | $ | |||||||||||||||
|
James AC McDermott
|
Director | $ | 300,000 | 199,543 | $ | 240,000 | $ | |||||||||||||||
|
Jennifer Aaker
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
Jane Kearns
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
Jeffrey Tepper
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
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| 1 |
DCRC directors Pierre Lapeyre, Jr., David Leuschen and Robert Tichio and Chief Financial Officer, Chief Accounting Officer and Secretary Peter Haskopoulos each have an indirect economic interest in our Sponsor through Sponsor Manager.
|
| 2 |
DCRC Chief Executive Officer Erik Anderson has an indirect economic interest in our Sponsor through WRG.
|
In addition, our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that this waiver of the corporate opportunities doctrine has materially affected our search for an acquisition target or will materially affect our ability to complete our business combination.
Our initial stockholders hold a significant number of shares of our common stock and our Sponsor holds a significant number of our warrants. They will lose their entire investment in us if we do not complete an Initial Business Combination.
Our Sponsor and our independent directors hold all of our 8,750,000 Founder Shares, representing 20% of the total outstanding shares upon completion of our IPO. The Founder Shares will be worthless if we do not complete an Initial Business Combination by March 26, 2023. In addition, our Sponsor and independent directors hold an aggregate of 6,666,667 private placement warrants that will also be worthless if we do not complete an Initial Business Combination by March 26, 2023.
The Founder Shares are identical to the shares of Class A Common Stock included in the units, except that (a) the Founder Shares and the shares of Class A Common Stock into which the Founder Shares convert upon an Initial Business Combination are subject to certain transfer restrictions, (b) our Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to their Founder Shares and public shares owned in connection with the completion of an Initial Business Combination, (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an Initial Business Combination by March 26, 2023 (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete an Initial Business Combination by March 26, 2023) and (c) the Founder Shares are automatically convertible into shares of our Class A Common Stock at the time of an Initial Business Combination, as described herein.
The personal and financial interests of our Sponsor, officers and directors may have influenced their motivation in identifying and selecting the business combination, completing the business combination and influencing our operation following the business combination.
We will incur significant transaction costs in connection with the business combination.
We have and expect to incur significant,
non-recurring
costs in connection with consummating the business combination. All expenses incurred in connection with the Business Combination Agreement and the business combination, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs. Our transaction expenses as a result of the business combination are currently estimated at approximately $40 million, including approximately $12.25 million in deferred underwriting discounts and commissions to the underwriters of our IPO.
We may be subject to business uncertainties while the business combination is pending.
Uncertainty about the effect of the business combination on employees and third parties may have an adverse effect on DCRC and Solid Power. These uncertainties may impair the ability to retain and motivate key personnel and could cause third parties that deal with Solid Power to defer entering into contracts or making other decisions or seek to change existing business relationships.
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The unaudited pro forma condensed combined financial information included in this document may not be indicative of what our actual financial position or results of operations would have been.
The unaudited pro forma condensed combined financial information for DCRC following the business combination in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the business combination been completed on the dates indicated. See the section entitled “
” for more information.
Unaudited Pro Forma Condensed Combined Financial Information
We may waive one or more of the conditions to the business combination.
We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the business combination, to the extent permitted by our Charter, bylaws and applicable laws. For example, it is a condition to our obligation to close the business combination that certain of Solid Power’s representations and warranties be true and correct to the standards applicable to such representations and warranties. However, if the DCRC Board determines that it is in the best interests of DCRC to proceed with the business combination, then the DCRC Board may elect to waive that condition and close the business combination.
If we are unable to complete an Initial Business Combination on or prior to March 26, 2023, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.
If we are unable to complete an Initial Business Combination on or prior to March 26, 2023, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify (as described below)), and our warrants will expire worthless.
If third parties bring claims against us, the proceeds held in our Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent public accountants), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. Although no third parties have refused to execute an agreement waiving such claims to the monies held in the Trust Account to date, if any third party refuses to execute such an agreement in the future, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Making such a request of potential target businesses may make our acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that we might pursue.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee
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that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our public shares, if we are unable to complete our business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the
per-share
redemption amount received by public stockholders could be less than the $10.00 per public share initially held in the Trust Account, due to claims of such creditors. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with which we have entered an acquisition agreement, reduce the amount of funds in the Trust Account to below the lesser of (a) $10.00 per public share and (b) the actual amount per public share held in the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets as of the date of the liquidation of the Trust Account, in each case including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes, less franchise and income taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our Sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for an Initial Business Combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete an Initial Business Combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (a) $10.00 per public share and (b) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, in each case including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes, less franchise and income taxes payable, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
We may not have sufficient funds to satisfy indemnification claims of our directors and officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed, and any persons who may become officers or directors prior to an Initial Business Combination will agree, to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account and to not seek recourse against the Trust Account for any reason whatsoever. Accordingly, any
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indemnification provided will be able to be satisfied by us only if (a) we have sufficient funds outside of the Trust Account or (b) we consummate an Initial Business Combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of the DCRC Board may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of the DCRC Board and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, the DCRC Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the
per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the
per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
Even if we consummate the business combination, there is no guarantee that the public warrants will be in the money at the time they become exercisable, and they may expire worthless.
The exercise price for our warrants is $11.50 per share of Class A Common Stock. There is no guarantee that the public warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then-outstanding public warrants (or, if applicable, 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes). As a result, the exercise price of the warrants could be increased, the exercise period could be shortened and the number of shares of our Class A Common Stock purchasable upon exercise of a warrant could be decreased, all without a holder’s approval.
Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding public warrants to
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make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants (or, if applicable, 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes) approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then-outstanding public warrants (or, if applicable, 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes) is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our Class A Common Stock purchasable upon exercise of a warrant.
We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrantholders, thereby making their warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last sales price of the Class A Common Stock has been at least $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within the 30
trading-day
period ending on the third business day prior to the date on which we give notice of such redemption and provided certain other conditions are met. Redemption of the outstanding warrants could force warrantholders (i) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. None of the private placement warrants will be redeemable by DCRC so long as they are held by our Sponsor or its permitted transferees.
In addition, we have the ability to redeem the outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the last sale price of the Class A Common Stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which notice of the redemption is given. In such a case, the holders will be able to exercise their warrants prior to redemption for a number of shares of Class A Common Stock determined by reference to a make-whole table. The value received upon such exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of shares of Class A Common Stock that may be received in connection with such an exercise is capped at 0.361 shares of Class A Common Stock per whole warrant (subject to adjustment) irrespective of the remaining life of the warrants.
Because certain of our shares of Class A Common Stock and warrants currently trade as units consisting of one share of Class A Common Stock and
one-third
of one warrant, the units may be worth less than units of other blank check companies.
Each unit contains
one-third
of one warrant. Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the units, and only whole warrants will trade. This is different from other blank check companies similar to ours whose units include one share of common stock and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of an Initial Business Combination since the warrants will be exercisable in the aggregate for
one-third
of the number of shares compared to units that each contain a whole warrant to purchase one share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if they included a warrant to purchase one whole share.
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Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”), which focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our 11,666,667 public warrants and 6,666,667 private placement warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our balance sheet as of June 30, 2021 contained elsewhere in this proxy statement/prospectus are derivative liabilities related to embedded features contained within our warrants. ASC 815 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting
non-cash
gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize
non-cash
gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in our internal control over financial reporting as of June 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following the issuance of the SEC Statement, we reevaluated the accounting treatment of our 11,666,667 public warrants and 6,666,667 private placement warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. See “Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” As part of such process, we identified a material weakness in our internal controls over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
We cannot assure you that our securities will continue to be listed on Nasdaq after the business combination. In connection with the business combination, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, our stock price would generally be required to be at least $4.00 per share and our stockholders’ equity would generally be required to be at least $5.0 million. We cannot assure you that we will be able to meet those initial listing requirements at that time. Our continued eligibility for listing may depend on, among other things, the number of our shares that are redeemed.
If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an
market. If this were to occur, we could face significant material adverse consequences, including:
over-the-counter
| • |
potential termination of the Business Combination Agreement if our securities are not listed on another national exchange mutually agreed to by Solid Power;
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| • |
a limited availability of market quotations for our securities;
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| • |
reduced liquidity for our securities;
|
| • |
a determination that our Class A Common Stock is a “penny stock” which will require brokers trading in our Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
|
| • |
a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our units, Class A Common Stock and public warrants are listed on Nasdaq, our units, Class A Common Stock and public warrants qualify as covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the state of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
The DCRC Board did not obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the business combination.
The DCRC Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the business combination. DCRC’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of DCRC’s advisors, enabled them to make the necessary analyses and determinations regarding the business combination. Accordingly, investors will be relying solely on the judgment of the DCRC Board in valuing Solid Power and assuming the risk that the DCRC Board may not have properly valued the business. The lack of a third-party valuation or fairness opinion may also lead an increased number of stockholders to vote against the proposed business combination or demand redemption of their shares for cash, which could potentially impact DCRC’s ability to consummate the business combination.
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We cannot assure you that our diligence review has identified all material risks associated with the business combination, and you may be less protected as an investor from any material issues with respect to Solid Power’s business, including any material omissions or misstatements contained in the Registration Statement or this proxy statement/prospectus relating to the business combination than an investor in an initial public offering.
Before entering into the Business Combination Agreement, we performed a due diligence review of Solid Power and its business and operations; however, we cannot assure you that our due diligence review identified all material issues, and certain unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Additionally, the scope of due diligence we have conducted in conjunction with the business combination may be different than would typically be conducted in the event Solid Power pursued an underwritten initial public offering. In a typical initial public offering, the underwriters of the offering conduct due diligence on the company to be taken public, and following the offering, the underwriters are subject to liability to private investors for any material misstatements or omissions in the registration statement. While potential investors in an initial public offering typically have a private right of action against the underwriters of the offering for any of these material misstatements or omissions, there are no underwriters of the Class A Common Stock that will be issued pursuant to the Registration Statement and thus no corresponding right of action is available to investors in the business combination for any material misstatements or omissions in the Registration Statement or this proxy statement/prospectus. Therefore, as an investor, you may be exposed to future losses, impairment charges, write-downs, write-offs or other charges that could have a significant negative effect on Solid Power’s financial condition, results of operations and the price of its securities, which could cause you to lose some or all of your investment without recourse against an underwriter that may have been available had Solid Power been taken public through an underwritten public offering.
A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A Common Stock. After the business combination (and assuming no redemptions by our public stockholders of public shares), our Sponsor, officers and directors and their affiliates will hold approximately 5.4% of our common stock, including the 8,750,000 shares of Class A Common Stock into which the Founder Shares convert. Assuming a maximum redemption by our public stockholders of 21,500,000 of the public shares, our Sponsor, officers and directors and their affiliates will hold approximately 6.2% of our common stock including the 8,750,000 shares of Class A Common Stock into which the Founder Shares convert. Pursuant to the terms of a letter agreement entered into at the time of the IPO, the Founder Shares (which will be converted into shares of Class A Common Stock at the Closing) may not be transferred until the earlier to occur of (a) one year after the Closing or (b) the date on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of our Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days after the Closing, the shares of Class A Common Stock into which the Founder Shares convert will be released from these transfer restrictions. In connection with the Closing, the IPO Registration Rights Agreement will be amended and restated and DCRC and the Reg Rights Holders will enter into the A&R Registration Rights Agreement. Pursuant to the A&R Registration Rights Agreement, DCRC will agree that, within 30 days after the Closing, DCRC will file the Resale Registration Statement with the SEC (at DCRC’s sole cost and expense), and DCRC will use its reasonable best efforts to have the Resale Registration Statement declared effective as promptly as reasonably practicable after the filing thereof. In certain circumstances, the Reg Rights Holders can demand DCRC’s assistance with underwritten
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offerings and block trades, and the Reg Rights Holders will be entitled to certain piggyback registration rights. Further, under the Subscription Agreements, DCRC agreed that, within 30 calendar days after the Closing Date, DCRC will file with the SEC (at DCRC’s sole cost and expense) the PIPE Resale Registration Statement, and DCRC will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
For more information about the A&R Registration Rights Agreement and Subscription Agreements, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Documents—A&R Registration Rights Agreement” and the section entitled “Proposal No. 1—The Business Combination Proposal—Related Documents—PIPE Financing.”
If the business combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
If the benefits of the business combination do not meet the expectations of investors or securities analysts, the market price of our securities prior to the Closing may decline. The market values of our securities at the time of the business combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement/prospectus or the date on which our stockholders vote on the business combination.
In addition, following the business combination, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Prior to the business combination, trading in the shares of our Class A Common Stock has not been active. Accordingly, the valuation ascribed to our Class A Common Stock in the business combination may not be indicative of the price that will prevail in the trading market following the business combination. If an active market for our securities develops and continues, the trading price of our securities following the business combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of our securities following the business combination may include:
| • |
actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
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changes in the market’s expectations about our operating results;
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success of competitors;
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our operating results failing to meet the expectation of securities analysts or investors in a particular period;
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changes in financial estimates and recommendations by securities analysts concerning New Solid Power or the market in general;
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operating and stock price performance of other companies that investors deem comparable to us;
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our ability to market new and enhanced products and technologies on a timely basis;
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changes in laws and regulations affecting our business;
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our ability to meet compliance requirements;
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commencement of, or involvement in, litigation involving New Solid Power;
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changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
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| • |
the volume of shares of our common stock available for public sale;
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any major change in the DCRC Board or management;
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sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur;
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sales of shares of our Class A Common Stock by the PIPE Investors;
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the volume of shares of our Class A Common Stock available for public sale, including as a result of the termination of the post-closing
lock-up
pursuant to the terms thereof; and
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general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
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Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to New Solid Power following the business combination could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
Following the business combination, if securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover New Solid Power following the business combination change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover New Solid Power following the business combination were to cease their coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
Our Sponsor, directors, officers, advisors or any of their respective affiliates may elect to purchase public shares from public stockholders, which may influence the vote on the Business Combination Proposal and reduce the public “float” of our Class A Common Stock.
Our Sponsor, directors, officers, advisors or any of their respective affiliates may purchase public shares in privately negotiated transactions or in the open market either prior to or following the completion of the business combination, although they are under no obligation to do so. There is no limit on the number of public shares our Sponsor, directors, officers, advisors or any of their respective affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. Any such privately negotiated purchases may be effected at purchase prices that are in excess of the per share pro rata portion of the Trust Account. However, our Sponsor, directors, officers, advisors and their respective affiliates have not consummated any such purchases or acquisitions, have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase public shares in such transactions. None of our Sponsor, directors, officers, advisors or any of their respective affiliates will make any such purchases when they are in possession of any material
non-public
information not disclosed to the seller of such public shares or during a restricted period under Regulation M under the Exchange Act. Such a purchase could include a contractual acknowledgement that such stockholder,
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although still the record holder of such public shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such stockholder to vote such shares in a manner directed by the purchaser.
In the event that our Sponsor, directors, officers, advisors or any of their respective affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares.
The purpose of any such purchases of public shares could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or to satisfy a closing condition in the Business Combination Agreement, where it appears that such requirement would otherwise not be met. Any such purchases of our public shares may result in the completion of the business combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent the purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of our Class A Common Stock may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange. See the section entitled “
” for a description of how our Sponsor, directors, officers, advisors or any of their respective affiliates will select which stockholders or warrantholders to purchase securities from in any private transaction.
Proposal No. 1—The Business Combination Proposal—Potential Purchases of Public Shares
We may be subject to legal proceedings in connection with the business combination, the outcomes of which would be uncertain, and may delay or prevent the completion of the business combination and adversely affect New Solid Power’s business, financial condition and results of operations.
DCRC has received demand letters, and may in the future receive additional demand letters or complaints, from purported stockholders of DCRC regarding certain actions taken in connection with the business combination and the adequacy of the Registration Statement, of which this proxy statement/prospectus forms a part. These demand letters or complaints may lead to litigation against DCRC or its directors and officers in connection with the business combination. Defending against any lawsuits could require DCRC to incur significant costs and draw the attention of DCRC’s management away from the business combination. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the Closing may adversely affect New Solid Power’s business, financial condition and results of operations. Such legal proceedings could also delay or prevent the Closing from occurring within the contemplated timeframe.
Changes in laws or regulations, or a failure to comply with any laws or regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete the business combination, and results of operations.
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As a result of plans to expand New Solid Power’s business operations, including to jurisdictions in which tax laws may not be favorable, its obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect New Solid Power’s
after-tax
profitability and financial results.
Our effective tax rates may fluctuate widely in the future, particularly if New Solid Power’s business expands domestically or internationally. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under GAAP, changes in deferred tax assets and liabilities, or changes in tax laws. Factors that could materially affect our future effective tax rates include, but are not limited to: (a) changes in tax laws or the regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and
(d) pre-tax
operating results of New Solid Power’s business.
Additionally, after the business combination, New Solid Power may be subject to significant income, withholding, and other tax obligations in the United States and may become subject to taxation in numerous additional U.S. state and local and
non-U.S.
jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. New Solid Power’s
after-tax
profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and (i) the ability to structure business operations in an efficient and competitive manner. Outcomes from audits or examinations by taxing authorities could have an adverse effect on New Solid Power’s
after-tax
profitability and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with New Solid Power’s intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If New Solid Power does not prevail in any such disagreements, New Solid Power’s profitability may be affected.
New Solid Power’s
after-tax
profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect.
Our warrants and Founder Shares may have an adverse effect on the market price of our Class A Common Stock and make it more difficult to effectuate our business combination.
We issued warrants to purchase 11,666,667 shares of Class A Common Stock as part of the units. We also issued 6,666,667 private placement warrants, each exercisable to purchase one share of Class A Common Stock at $11.50 per share.
Our initial stockholders currently own an aggregate of 8,750,000 Founder Shares. The Founder Shares are convertible into shares of Class A Common Stock on a
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to further adjustment as set forth herein. In addition, if our Sponsor makes any working capital loans, it may convert those loans into up to an additional 1,000,000 private placement warrants, at the price of $1.50 per warrant. Any issuance of a substantial number of additional shares of Class A Common Stock upon exercise of these warrants and conversion rights will increase the number of issued and outstanding shares of Class A Common Stock and reduce the value of the Class A Common Stock issued to complete the business combination. Therefore, our warrants and Founder Shares may make it more difficult to effectuate the business combination or increase the cost of acquiring Solid Power.
one-for-one
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We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete the business combination even if a substantial majority of our stockholders do not agree.
Our Charter does not provide a specified maximum redemption threshold. Our Charter provides we will not redeem our Class A Common Stock in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our Initial Business Combination. However, our Charter will be amended and restated immediately prior to the business combination, such that such limitation will no longer apply, and we anticipate our Class A Common Stock will be listed on Nasdaq, which provides a separate exception from being subject to the “penny stock” rules. As a result, we may be able to complete the business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to our Sponsor, officers, directors, advisors or any of their respective affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of Class A Common Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
Risks Related to the Redemption
DCRC cannot be certain as to the number of shares of public stock that will be redeemed and the potential impact to public stockholders who do not elect to redeem their public stock.
There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position. We can give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion of the business combination or any alternative business combination. Redemptions of public shares and certain events following the consummation of the business combination may cause an increase or decrease in our stock price, and may result in a lower value realized now than a stockholder of DCRC might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation of the business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. A stockholder should consult, and rely solely upon, the stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.
On , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus, the closing price per share of the Class A Common Stock was $ . Public stockholders should be aware that, while we are unable to predict the price per share of New Solid Power’s common stock following the consummation of the business combination—and accordingly we are unable to predict the potential impact of redemptions on the per share value of public shares owned by non-redeeming stockholders—increased levels of redemptions by public stockholders may be a result of the price per share of the Class A Common Stock falling below the redemption price. We expect that more public stockholders may elect to redeem their public shares if the share price of the Class A Common Stock is below the projected redemption price of $10.00 per share, and we expect that more public stockholders may elect not to redeem their public shares if the share price of the Class A Common Stock is above the projected redemption price of $10.00 per share. Each public share that is redeemed will represent both (i) a reduction, equal to the amount of the redemption price, of the cash that will be available to DCRC from the Trust Account and (ii) a corresponding increase in each public stockholder’s pro rata ownership interest in New Solid Power following the consummation of the business combination.
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If our stockholders fail to comply with the redemption requirements specified in this proxy statement/prospectus, they will not be entitled to redeem their shares of Class A Common Stock for a pro rata portion of the funds held in the Trust Account.
In order to exercise their redemption rights, holders of public shares are required to submit a request in writing and deliver their shares (either physically or electronically) to our transfer agent at least two business days prior to the special meeting. Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account, including interest not previously released to us to pay our franchise and income taxes, calculated as of two business days prior to the anticipated consummation of the business combination. See the section entitled “
” for additional information on how to exercise your redemption rights.
Special Meeting of DCRC Stockholders—Redemption Rights
Stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline.
Public stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must, among other things, as more fully described in the section entitled “Special Meeting of DCRC Stockholders—Redemption Rights,” tender their certificates to our transfer agent or deliver their shares to the transfer agent electronically through DTC prior to 5:00 p.m., Eastern time, on , 2021. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because we do not have any control over this process or over the brokers, it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.
In addition, holders of outstanding units of DCRC must separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold units registered in your own name, you must deliver the certificate for such units or deliver such units electronically to Continental Stock Transfer & Trust Company with written instructions to separate such units into public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates or electronic delivery of the public shares back to you so that you may then exercise your redemption rights with respect to the public shares following the separation of such public shares from the units.
If a broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of the corresponding number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights with respect to the public shares following the separation of such public shares from the units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.
If a public stockholder fails to receive notice of DCRC’s offer to redeem its public shares in connection with the business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
DCRC will comply with the proxy rules when conducting redemptions in connection with the business combination. Despite DCRC’s compliance with these rules, if a public stockholder fails to receive DCRC’s proxy
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materials, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy materials that DCRC will furnish to holders of its public shares in connection with the business combination will describe the various procedures that must be complied with in order to validly redeem public shares. In the event that a stockholder fails to comply with these or any other procedures, its shares may not be redeemed.
Whether a redemption of Class A Common Stock will be treated as a sale of such Class A Common Stock for U.S. federal income tax purposes will depend on a shareholder’s specific facts.
The U.S. federal income tax treatment of a redemption of Class A Common Stock will depend on whether the redemption qualifies as a sale of such Class A Common Stock under Section 302(a) of the Code, which will depend largely on the total number of shares of our stock treated as held by the stockholder electing to redeem Class A Common Stock (including any shares of stock constructively owned by the holder as a result of owning private placement warrants or public warrants or otherwise) relative to all shares of our stock outstanding both before and after the redemption. If such redemption is not treated as a sale of Class A Common Stock for U.S. federal income tax purposes, the redemption will instead be treated as a corporate distribution of cash from us. For more information about the U.S. federal income tax treatment of the redemption of Class A Common Stock, see the section below entitled “Proposal No. 1—The Business Combination Proposal—Material U. S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders” or “Proposal No. 1—The Business Combination Proposal—Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of
Non-U.S.
Holders,” as applicable.
If DCRC is unable to consummate the business combination or any other Initial Business Combination by March 26, 2023, the public stockholders may be forced to wait beyond such date before redemption from the Trust Account.
If DCRC is unable to consummate the business combination by March 26, 2023, DCRC will (a) cease all operations except for the purpose of winding up, (b) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of net interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (c) as promptly as reasonably possible following such redemption, subject to the approval of DCRC’s remaining stockholders and the DCRC Board, dissolve and liquidate, subject in each case to DCRC’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
General Risk Factors
The business combination or post-combination company may be materially adversely affected by the ongoing
COVID-19
pandemic.
In addition to the risks described above under “We have been, and may in the future be, adversely affected by the global
COVID-19
pandemic,” our ability to consummate the business combination may be materially adversely affected due to significant governmental measures being implemented to contain the outbreak of
COVID-19
or its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability of Solid Power’s personnel, vendors and service providers to negotiate and consummate the business combination in a timely manner. The extent to which
COVID-19
impacts the business combination or the post-combination company will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of
COVID-19
and the actions to contain
COVID-19
or treat its impact, among others. If the disruptions posed by
COVID-19
or other matters of global concern continue for an
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extensive period of time, our ability to consummate the business combination may be materially adversely affected. Additionally, if the financial markets or the overall economy are impacted for an extended period, the post-combination company’s results of operations, financial position and cash flows may be materially adversely affected.
Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect New Solid Power’s business and future profitability.
New Solid Power will be a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, New Solid Power’s operations and customers will be located in the United States, and, as a result, New Solid Power will be subject to various U.S. federal, state and local taxes. U.S. federal, state and local and
non-U.S.
tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to New Solid Power and may have an adverse effect on its business and future profitability.
For example, several tax proposals have been set forth that would, if enacted, make significant changes to U.S. tax laws. Such proposals include an increase in the U.S. income tax rate applicable to corporations (such as New Solid Power) from 21% to 28%. Congress may consider, and could include, some or all of these proposals in connection with tax reform that may be undertaken. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income tax laws could adversely affect New Solid Power’s business and future profitability.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the exemptions from
and
parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year (i) following March 26, 2026, the fifth anniversary of our IPO, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our Class A Common Stock that is held by
say-on-pay,
say-on-frequency
say-on-golden
non-affiliates
exceeds $700 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in
non-convertible
debt during the prior three year period.
In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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We cannot predict if investors will find our Class A Common Stock less attractive because we will rely on these exemptions. If some investors find our Class A Common Stock less attractive as a result, there may be a less active trading market for our Class A Common Stock and our stock price may be more volatile.
We may issue additional common stock or preferred stock to complete the business combination or under an employee incentive plan after completion of the business combination. Any such issuances would dilute the interest of our stockholders and likely present other risks.
We may issue a substantial number of additional shares of common or preferred stock to complete the business combination or under an employee incentive plan after completion of the business combination. The issuance of additional shares of common or preferred stock:
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potential termination of the Business Combination Agreement if our securities are not listed on another national exchange mutually agreed to by Solid Power;
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| • |
may significantly dilute the equity interests of our investors;
|
| • |
may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
|
| • |
could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
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may adversely affect prevailing market prices for our units, Class A Common Stock and/or warrants.
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Delaware law and provisions in the Proposed Second A&R Charter and New Solid Power bylaws might delay, discourage or prevent a change in control of New Solid Power or changes in New Solid Power’s management, thereby depressing the market price of New Solid Power’s common stock.
New Solid Power’s status as a Delaware corporation and the anti-takeover provisions of the DGCL may discourage, delay or prevent a change in control by prohibiting New Solid Power from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, even if a change of control would be beneficial to New Solid Power’s existing stockholders. In addition, the Proposed Second A&R Charter and New Solid Power bylaws will contain provisions that may make the acquisition of New Solid Power more difficult or delay or prevent changes in control of New Solid Power’s management. Among other things, these provisions will:
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provide advance notice procedures with regard to stockholder nominations of candidates for election as directors or other stockholder proposals to be brought before meetings of New Solid Power stockholders, which may preclude New Solid Power stockholders from bringing certain matters before the New Solid Power stockholders at an annual or special meeting;
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provide the New Solid Power Board the ability to authorize issuance of preferred stock in one or more series, which makes it possible for the New Solid Power Board to issue, without New Solid Power’s stockholder’s approval, preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of New Solid Power and which may have the effect of deterring hostile takeovers or delaying changes in control or management of New Solid Power;
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provide for the New Solid Power Board to be divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three-year terms;
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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
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provide that certain provisions of the Proposed Second A&R Charter can only be amended or repealed by the affirmative vote of the holders of at least 66
2
⁄
3
% in voting power of the outstanding shares of New Solid Power common stock entitled to vote thereon, voting together as a single class;
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provide that certain provisions of New Solid Power’s bylaws can be altered or repealed by (a) the New Solid Power Board or (b) the New Solid Power stockholders upon the affirmative vote of 66
2
⁄
3
% of the voting power of the New Solid Power common stock outstanding and entitled to vote thereon, voting together as a single class;
|
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only the Board of Directors (pursuant to a majority vote), the Chairperson of the Board of Directors, the President or the Chief Executive Officer may call a special meeting; and
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the designation of Delaware and federal courts as the exclusive forum for certain disputes.
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New Solid Power’s amended and restated bylaws will designate state courts within the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
New Solid Power’s amended and restated bylaws will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of New Solid Power, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, stockholder, officer or other employee of New Solid Power to New Solid Power or New Solid Power’s stockholders, (c) any action arising pursuant to any provision of the DGCL or New Solid Power’s certificate of incorporation or the bylaws (as either may be amended from time to time) or (d) any action asserting a claim governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction.
In addition, New Solid Power’s amended and restated bylaws will provide that, unless New Solid Power consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act against any person in connection with any offering of New Solid Power’s securities, including, without limitation and for the avoidance of doubt, any auditor, underwriter, expert, control person, or other defendant.
New Solid Power’s amended and restated bylaws will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any rule or regulation promulgated thereunder (in each case, as amended), or any other claim over which the federal courts have exclusive jurisdiction.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in New Solid Power’s amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
The following unaudited pro forma condensed combined financial information of New Solid Power has been prepared in accordance with Article 11 of Regulation
S-X
(as amended by the final rule, Release
No. 33-10786
“Amendments to Financial Disclosures about Acquired and Disposed Businesses”) and presents the combination of historical financial information of Solid Power and DCRC, adjusted to give effect to the business combination. The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines the historical balance sheet of DCRC as of June 30, 2021 with the historical balance sheet of Solid Power as of June 30, 2021 on a pro forma basis as if the business combination and other events, summarized below, had been consummated on June 30, 2021.
The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 combine the historical statements of operations of DCRC and the historical statements of operations of Solid Power for such periods on a pro forma basis as if the business combination and other events, summarized below, had been consummated on January 1, 2020, the beginning of the earliest period presented. Since DCRC was incorporated on January 29, 2021, there is no statement of operations for the year ended December 31, 2020 to include in the unaudited pro forma condensed combined statement of operations for the year ended December 31 2020.
The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following items included elsewhere in this proxy statement/prospectus:
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the accompanying notes to the unaudited pro forma condensed combined financial statements;
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the historical audited financial statements and accompanying notes of DCRC as of June 30, 2021 and for the period from January 29, 2021 (inception) to June 30, 2021;
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the historical audited financial statements and accompanying notes of Solid Power as of and for the year ended December 31, 2020;
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the historical unaudited financial statements and accompanying notes of Solid Power as of June 30, 2021 and for the six months ended June 30, 2021; and
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other information relating to DCRC and Solid Power included in this proxy statement/prospectus, including the Business Combination Agreement and the description of certain terms thereof set forth under the section entitled “
Proposal No.
1 – The Business Combination Proposal
|
The unaudited pro forma condensed combined financial information should also be read together with the sections titled “
,” “
,” and other financial information included elsewhere in this proxy statement/prospectus.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of DCRC
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Solid Power
Pursuant to the Charter, public stockholders are being offered the opportunity to redeem, upon the closing of the business combination, shares of Class A Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account. For illustrative purposes, based on the fair value of cash and marketable securities held in the Trust Account as of June 30, 2021 of approximately $350.0 million, the estimated per share redemption price would have been approximately $10.00.
The unaudited pro forma condensed combined financial information has been prepared using the assumptions below:
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Assuming No Redemptions:
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| • |
Assuming Maximum Redemptions:
3a51-1(g)(1)
under the Exchange Act) of at least $5,000,001 unless the Class A Common Stock otherwise does not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act. Because we anticipate that the Class A Common Stock will be listed on Nasdaq at the Closing, and such listing would mean that the Class A Common Stock would not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act, we do not anticipate the $5,000,001 net tangible asset threshold being applicable.
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Notwithstanding the legal form of the business combination pursuant to the Business Combination Agreement, under both the no redemption and maximum redemption scenarios, the business combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, DCRC is expected to be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of New Solid Power will represent a continuation of the financial statements of Solid Power with the business combination treated as the equivalent of Solid Power issuing shares for the net assets of DCRC, accompanied by a recapitalization. Operations prior to the reverse recapitalization will be those of Solid Power. Solid Power has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| • |
the Historical Rollover Stockholders will hold a majority of the outstanding equity interests in New Solid Power in both assuming no redemptions and assuming maximum redemptions scenarios;
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Solid Power’s existing management will comprise the management of New Solid Power;
|
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Solid Power’s existing Board of Directors will constitute a majority of the New Solid Power Board following the business combination;
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the operations of New Solid Power will represent the current operations of Solid Power; and
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New Solid Power will assume Solid Power’s name and headquarters.
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Description of the Business Combination
Pursuant to the terms of the Business Combination Agreement, and subject to the terms and conditions contained therein, Merger Sub will merge with and into Solid Power, with Solid Power surviving the merger as a wholly owned subsidiary of DCRC. At the Effective Time, by virtue of the Merger and without any action on the part of DCRC, Merger Sub, Solid Power or the holders of any of Solid Power’s securities:
| • |
each share of Solid Power Common Stock issued and outstanding immediately prior to the Effective Time (including shares of Solid Power Common Stock resulting from the Conversion, but excluding any Dissenting Shares) will be canceled and converted into the right to receive the number of shares of Class A Common Stock equal to the Exchange Ratio;
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86
| • |
all shares of Solid Power Common Stock held in treasury of Solid Power will be canceled without any conversion thereof and no payment or distribution will be made with respect to such Solid Power Common Stock;
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each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation;
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| • |
each Solid Power Warrant (a) to the extent terminated, expired or exercised immediately prior to the Effective Time, either voluntarily prior to the Effective Time or in accordance with its terms in connection with the business combination, will no longer be deemed outstanding and any shares of Company Common Stock issuable in connection therewith shall be treated as described above and (b) to the extent outstanding and unexercised immediately prior to the Effective Time will automatically be converted into an Assumed Warrant to acquire a number of shares of Class A Common Stock equal to (i) the number of shares of Solid Power Common Stock subject to the applicable Solid Power Warrant multiplied by (ii) the Exchange Ratio, rounding the resulting number down to the nearest whole number of shares of Class A Common Stock, at an adjusted price equal to (x) the per share exercise price for the shares of Solid Power Common Stock subject to the applicable Solid Power Warrant, as in effect immediately prior to the Effective Time, divided by (y) the Exchange Ratio, rounding the resulting exercise price up to the nearest whole cent;
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each Solid Power Option, whether or not exercisable and whether or not vested, outstanding immediately prior to the Effective Time will be converted into an option to purchase a number of shares of Class A Common Stock (such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Solid Power Common Stock subject to such Solid Power Option immediately prior to the Effective Time and (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Solid Power Option immediately prior to the Effective Time divided by (B) the Exchange Ratio; provided, however, that the exercise price and number of shares of Class A Common Stock shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that in the case of any Exchanged Option to which Section 422 of the Code applies, the exercise price and the number of shares of Class A Common Stock purchasable pursuant to such option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code; and
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each award of Solid Power Restricted Stock that is outstanding immediately prior to the Effective Time will be released and extinguished in exchange for an award covering a number of Exchanged Restricted Stock equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Solid Power Common Stock subject to such award of Solid Power Restricted Stock immediately prior to the Effective Time and (y) the Exchange Ratio.
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In connection with the execution of the Business Combination Agreement, on June 15, 2021, DCRC entered into separate Subscription Agreements with the New PIPE Investors, pursuant to which the New PIPE Investors agreed to purchase, and DCRC agreed to sell to the New PIPE Investors, an aggregate of 16,500,000 PIPE Shares for a purchase price of $10.00 per share and an aggregate purchase price of $165 million, in a private placement. The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the concurrent consummation of the business combination.
Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not
87
necessarily indicative of the operating results and financial position that would have been achieved had the business combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of New Solid Power following the completion of the business combination. The unaudited pro forma adjustments represent DCRC’s management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2021
(Dollar amounts in thousands)
89
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(in thousands, except share and per share data)
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For the Six Months Ended
June 30, 2021 |
For the
Six Months Ended June 30, 2021 |
For the
Six Months Ended June 30, 2021 |
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Collaboration and support
revenue |
DCRC
(Historical) |
Solid
Power (Historical) |
Pro Forma
Adjustments (Assuming No Redemptions) |
Pro Forma
Combined (Assuming No Redemptions) |
Additional
Pro Forma Adjustments (Assuming Maximum Redemptions) |
Pro Forma
Combined (Assuming Maximum Redemptions) |
||||||||||||||||||
|
Commercial
|
$ | — | 36 | $ | — | $ | 36 | — | $ | 36 | ||||||||||||||
|
Governmental
|
— | 1,005 | — | 1,005 | — | 1,005 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total collaboration and support revenue
|
— | 1,041 | — | 1,041 | — | 1,041 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating Expenses
|
||||||||||||||||||||||||
|
Research and development
|
— | 6,309 | — | 6,309 | — | 6,309 | ||||||||||||||||||
|
Direct Costs
|
— | 1,055 | — | 1,055 | — | 1,055 | ||||||||||||||||||
|
Marketing and sales
|
— | 1,090 | — | 1,090 | — | 1,090 | ||||||||||||||||||
|
Finance and administrative
|
2,082 | 2,929 | (2,082 | )(AA) | 1,523 | — | 1,523 | |||||||||||||||||
| (1,406 | )(BB) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total operating expenses
|
2,082 | 11,383 | (3,488 | ) | 9,977 | — | 9,977 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating Loss
|
(2,082 | ) | (10,342 | ) | 3,488 | (8,936 | ) | — | (8,936 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Interest expense
|
— | 342 | (263 | )(CC) | 79 | — | 79 | |||||||||||||||||
|
Offering costs allocated to warrant liabilities
|
957 | — | — | 957 | — | 957 | ||||||||||||||||||
|
Decrease in fair value of warrants
|
21,166 | — | — | 21,166 | — | 21,166 | ||||||||||||||||||
|
Loss from change in value of embedded derivative liability
|
— | 2,680 | (2,680 | )(DD) | — | — | — | |||||||||||||||||
|
Contract termination loss
|
— | 3,100 | (3,100 | )(EE) | — | — | — | |||||||||||||||||
|
Interest Income
|
(5 | ) | (9 | ) | 5 | (FF) | (9 | ) | — | (9 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Pretax Loss
|
(24,200 | ) | (16,455 | ) | 9,526 | (31,129 | ) | — | (31,129 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Income tax expense
|
— | (41 | ) | — | (41 | ) | — | (41 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Net loss
|
$ | (24,200 | ) | $ | (16,414 | ) | $ | 9,526 | $ | (31,088 | ) | — | (31,088 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Deemed dividend related to Solid Power Series A-1 and Series B preferred stock
|
— | 219,782 | (219,782 | )(GG) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Net Loss Attributable to Common Stockholders
|
$ | (24,200 | ) | $ | (236,196 | ) | $ | (229,308 | ) | $ | (31,088 | ) | — | (31,088 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Basic and diluted net loss per common share
|
$ | (2.77 | ) | $ | (29.74 | ) | $ | (0.19 | ) | — | $ | (0.22 | ) | |||||||||||
|
Weighted average shares outstanding, basic and diluted
|
8,750 | 7,943 | 163,205 | — | 141,705 | |||||||||||||||||||
90
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
(in thousands, except share and per share data)
|
For the Year
Ended December 31, 2020 |
For the Year
Ended December 31, 2020 |
For the Year
Ended December 31, 2020 |
||||||||||||||||||||||
|
Collaboration and
support revenue |
DCRC
(Historical) |
Solid Power
(Historical) |
Pro Forma
Adjustments (Assuming No Redemptions |
Pro Forma
Combined (Assuming No Redemptions) |
Additional Pro
Forma Adjustments (Assuming Maximum Redemptions) |
Pro Forma
Combined (Assuming Maximum Redemptions) |
||||||||||||||||||
|
Commercial
|
— | $ | 906 | $ | — | $ | 906 | — | $ | 906 | ||||||||||||||
|
Governmental
|
— | 1,197 | — | 1,197 | — | 1,197 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total collaboration and support revenue
|
— | 2,103 | — | 2,103 | — | 2,103 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating Expenses
|
||||||||||||||||||||||||
|
Research and development
|
— | 9,594 | — | 9,594 | — | 9,594 | ||||||||||||||||||
|
Direct Costs
|
— | 1,670 | — | 1,670 | — | 1,670 | ||||||||||||||||||
|
Marketing and sales
|
— | 1,205 | — | 1,205 | — | 1,205 | ||||||||||||||||||
|
Finance and administrative
|
— | 1,227 | — | 1,227 | — | 1,227 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total operating expenses
|
— | 13,696 | — | 13,696 | — | 13,696 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating Loss
|
— | (11,593 | ) | — | (11,593 | ) | — | (11,593 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Interest expense
|
— | 361 | (164 | )(HH) | 197 | — | 197 | |||||||||||||||||
|
Gain on loan extinguishment
|
— | (923 | ) | — | (923 | ) | — | (923 | ) | |||||||||||||||
|
Transaction costs related to warrant liabilities
|
— | — | 1,004 | (II) | 1,004 | — | 1,004 | |||||||||||||||||
|
Loss from change in fair value of debt
|
— | 437 | (437 | )(JJ) | — | — | — | |||||||||||||||||
|
Loss from change in value of embedded derivative liability
|
— | 2,817 | (2,817 | )(KK) | — | — | — | |||||||||||||||||
|
Contract termination loss
|
— | — | 3,100 | (LL) | 3,100 | — | 3,100 | |||||||||||||||||
|
Interest Income
|
— | (28 | ) | (28 | ) | — | (28 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Pretax Loss
|
— | (14,257 | ) | (686 | ) | (14,943 | ) | — | (14,943 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Income tax expense
|
— | 118 | — | 118 | — | 118 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Net loss
|
— | (14,375 | ) | $ | (686 | ) | $ | (15,061 | ) | — | (15,061 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Deemed dividend related to Series
A-1
redeemable preferred stock
|
— | 80,086 | (80,086 | )(MM) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Net Loss Attributable to Common Stockholders
|
— | (94,461 | ) | $ | 79,400 | $ | (15,061 | ) | — | (15,061 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Basic and diluted net loss per common share
|
— | $ | (12.85 | ) | $ | (0.09 | ) | — | $ | (0.11 | ) | |||||||||||||
|
Weighted average shares outstanding, basic and diluted
|
— | 7,352 | 163,205 | — | 141,705 | |||||||||||||||||||
91
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
|
1.
|
Basis of Presentation
|
The business combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, DCRC will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the business combination will be treated as the equivalent of Solid Power issuing stock for the net assets of DCRC, accompanied by a recapitalization. The net assets of DCRC will be stated at historical cost, with no goodwill or other intangible assets recorded.
The unaudited pro forma condensed combined balance sheet as of June 30, 2021 gives pro forma effect to the business combination as if it had been consummated on June 30, 2021. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and year ended December 31, 2020 give pro forma effect to the business combination as if it had been consummated on January 1, 2020.
The unaudited pro forma condensed combined balance sheet as of June 30, 2021 has been prepared using, and should be read in conjunction with, the following:
| • |
DCRC’s audited balance sheet as of June 30, 2021 and the related notes included elsewhere in this proxy statement/prospectus; and
|
| • |
Solid Power’s unaudited balance sheet as of June 30, 2021 and the related notes included elsewhere in this proxy statement/prospectus.
|
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 has been prepared using, and should be read in conjunction with, the following:
| • |
DCRC’s audited statement of operations from January 29, 2021 (inception) through June 30, 2021 and the related notes included elsewhere in this proxy statement/prospectus; and
|
| • |
Solid Power’s unaudited statement of operations for the six months ended June 30, 2021 and the related notes included elsewhere in this proxy statement/prospectus.
|
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 has been prepared using, and should be read in conjunction with, the following:
| • |
Solid Power’s audited statement of operations for the year ended December 31, 2020 and the related notes included elsewhere in this proxy statement/prospectus.
|
DCRC has made significant estimates and assumptions in its determination of the unaudited pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the business combination.
The unaudited pro forma adjustments reflecting the consummation of the business combination are based on certain currently available information and certain assumptions and methodologies that DCRC believes are reasonable under the circumstances. The unaudited pro forma adjustments, which are described below, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the unaudited pro forma adjustments and it is possible the difference may be material. DCRC believes that these assumptions and methodologies provide a reasonable basis for presenting all
92
of the significant effects of the business combination based on information available to management at this time and that the unaudited pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the business combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of New Solid Power.
|
2.
|
Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
|
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation
S-X
as amended by the final rule, Release
No. 33-10786
“Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release
No. 33-10786
replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). DCRC has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. DCRC and Solid Power have not had any historical relationship unrelated to the business combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The unaudited pro forma condensed combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented.
The unaudited pro forma basic and diluted net loss per common share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of the post-combination company’s common shares outstanding, assuming the business combination occurred on January 1, 2020.
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:
| (A) |
Reflects the proceeds from the private placement of 16,500,000 shares of Class A Common Stock at $10.00 per share pursuant to the PIPE Financing.
|
| (B) |
Reflects the reclassification of approximately $350 million of cash and cash equivalents held in the Trust Account at the balance sheet date that becomes available in connection with the business combination.
|
| (C) |
Reflects settlement of DCRC accounts payable and accruals in accordance with the business combination.
|
| (D) |
Reflects estimated transaction fees and expenses to be incurred in connection with the business combination.
|
| (E) |
Reflects transaction expenses to be capitalized upon Closing.
|
| (F) |
Reflects conversion of Solid Power Preferred Stock and Solid Power Common Stock to New Solid Power’s Class A Common Stock and the change of DCRC’s current Class A Common Stock to New Solid Power’s Class A Common Stock following Closing, including the clearing of the balance in DCRC Accumulated Deficit.
|
93
| (G) |
Reflects a reduction in the amount of cash transferred to New Solid Power from the Trust Account upon maximum allowable redemption of 21,500,000 shares of Class A Common Stock at $10.00 per share.
|
Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the Six Months ended June 30, 2021
The unaudited pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 are as follows:
| (AA) |
Elimination of Sponsor fees incurred by DCRC under an administrative support agreement with an affiliate of the Sponsor that will cease to be paid upon completion of the business combination. For the period from January 29, 2021 (Inception) to June 30, 2021, DCRC had accrued approximately $2.1 million of general and administrative expenses including due diligence costs incurred in the pursuit of acquisition plans, which were outstanding at June 30, 2021.
|
| (BB) |
Reflects transaction expenses to be capitalized upon Closing.
|
| (CC) |
Elimination of interest expenses related to Solid Power convertible notes payable that were converted to Solid Power Series B Preferred Stock in conjunction with the Series B Financing.
|
| (DD) |
Elimination of loss on Solid Power convertible notes that were converted to Solid Power Series B Preferred Stock in connection with the Series B Financing.
|
| (EE) |
Elimination of $3.1 million in May 2021 to cancel product manufacturing rights previously held by a Solid Power Series A-1 Preferred Stock stockholder.
|
| (FF) |
Elimination of interest income related to Cash Held in Trust by DCRC that becomes available in connection with the business combination.
|
| (GG) |
Elimination of deemed dividend related to Solid Power Preferred Stock that will convert to Solid Power Common Stock upon Closing.
|
Note: The unaudited pro forma condensed combined financial information does not reflect the income tax effects of the pro forma adjustments as based on the statutory rate in effect for the historical periods presented. Management believes statutory tax adjustments in this unaudited pro forma condensed combined financial information would not be meaningful given the combined entity is an early stage company with a history of financial losses.
Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2020
The unaudited pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 are as follows:
| (HH) |
Elimination of interest expenses related to convertible notes of Solid Power that were converted to Solid Power Series B Preferred Stock in conjunction with the Series B Financing.
|
| (II) |
Reflects estimated transaction fees and expenses to be incurred in connection with the business combination.
|
| (JJ) |
Elimination of debt-related fair value adjustment convertible notes of Solid Power that ceased upon closing of the Series B Financing.
|
| (KK) |
Elimination of loss on Solid Power convertible note embedded derivatives that were converted to Solid Power Series B Preferred Stock in connection with the Series B Financing.
|
| (LL) |
Elimination of $3.1 million in May 2021 to cancel product manufacturing rights previously held by a Solid Power Series A-1 Preferred Stock stockholder.
|
94
| (MM) |
Elimination of deemed dividend related to Solid Power Preferred Stock that will convert to Solid Power Common Stock upon Closing.
|
Note: The unaudited pro forma condensed combined financial information does not reflect the income tax effects of the pro forma adjustments as based on the statutory rate in effect for the historical periods presented. Management believes statutory tax adjustments in this unaudited pro forma condensed combined financial information would not be meaningful given the combined entity is an early stage company with a history of financial losses.
|
3.
|
Loss per Share
|
As the business combination has been reflected as if it occurred on January 1, 2020 for purposes of the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020, the calculation of weighted average shares outstanding for pro forma basic and diluted net loss per share assumes the shares issuable in connection with the business combination had been outstanding as of such date. If shares of Class A Common Stock are redeemed, this calculation would need to be adjusted to reflect the impact of such redemptions. Pro forma basic and diluted net loss per share for the period from January 1, 2021 through June 30, 2021 are calculated as follows:
|
(in thousands, except per share data)
|
No
Redemptions |
Maximum
Redemptions |
||||||
|
Pro forma net loss for the six months ended June 30, 2021
|
$ | (31,088 | ) | $ | (31,088 | ) | ||
|
Pro forma weighted average shares outstanding-basic and diluted (1) (2)
|
163,205 | 141,705 | ||||||
|
Pro forma net loss per share, basic and diluted
|
$ | (0.19 | ) | $ | (0.22 | ) | ||
|
Pro forma weighted average shares outstanding—basic and diluted
|
||||||||
|
DCRC Public Stockholders (Class A Common Stock)
|
35,000 | 13,500 | ||||||
|
DCRC Founders (Class B Common Stock)
|
8,750 | 8,750 | ||||||
|
|
|
|
|
|||||
|
Total DCRC
|
43,750 | 22,250 | ||||||
|
Solid Power (2)
|
102,955 | 102,955 | ||||||
|
PIPE Shares
|
16,500 | 16,500 | ||||||
|
|
|
|
|
|||||
|
Pro forma weighted average shares outstanding—basic and diluted
|
163,205 | 141,705 | ||||||
| (1) |
For the purposes of applying the
if-converted
method for calculating diluted earnings per share, it was assumed that all public warrants, private placement warrants, Solid Power Warrants and Solid Power Options are exchanged for 44.0 million shares of Class A Common Stock. However, since this results in anti-dilution, the effect of such exchange was not included in the calculation of diluted loss per share.
|
| (2) |
The equivalent pro forma basic and diluted per share data for Solid Power is calculated by multiplying the estimated number of shares of Solid Power Common Stock to be issued and outstanding immediately prior to the Effective Time (i.e., 9,290,326 shares of Solid Power Common Stock, 14,069,187 shares of Solid Power Series A-1 Preferred Stock, which are expected to be converted into 14,069,187 shares of Solid Power Common Stock immediately prior to the Effective Time, and 8,777,817 shares of Solid Power Series B Preferred Stock, which are expected to be converted into 8,777,817 shares of Solid Power Common Stock immediately prior to the Effective Time) by the Exchange Ratio. The Exchange Ratio, which is based on the assumptions set forth under “Certain Defined Terms,” has been calculated in the manner contemplated by the Business Combination Agreement as the quotient obtained by dividing (i) 123,900,000, by (ii) approximately 38,675,762 shares of Solid Power Common Stock outstanding immediately prior to the Effective Time, expressed on a fully-diluted and as converted to Solid Power Common Stock basis. The pro
|
95
| forma basic and diluted per share data for Solid Power does not include the estimated 25,722,948 shares of Class A Common Stock that may be issued upon the exercise of the options, restricted stock and warrants that will be issued in exchange for the Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants, respectively. |
Similarly, pro forma basic and diluted net loss per share for the period from January 1, 2020 through December 31, 2020 are calculated as follows:
|
(in thousands, except per share data)
|
No
Redemptions |
Maximum
Redemptions |
||||||
|
Pro forma net loss for the year ended December 31, 2020
|
$ | (15,061 | ) | $ | (15,061 | ) | ||
|
Pro forma weighted average shares outstanding-basic and diluted (1) (2)
|
163,205 | 141,705 | ||||||
|
Pro forma net loss per share, basic and diluted
|
$ | (0.09 | ) | $ | (0.11 | ) | ||
|
Pro forma weighted average shares outstanding—basic and diluted
|
||||||||
|
DCRC Public Stockholders (Class A Common Stock)
|
35,000 | 13,500 | ||||||
|
DCRC Founders (Class B Common Stock)
|
8,750 | 8,750 | ||||||
|
|
|
|
|
|||||
|
Total DCRC
|
43,750 | 22,250 | ||||||
|
Solid Power (2)
|
102,955 | 102,955 | ||||||
|
PIPE Shares
|
16,500 | 16,500 | ||||||
|
|
|
|
|
|||||
|
Pro forma weighted average shares outstanding—basic and diluted
|
163,205 | 141,705 | ||||||
|
|
|
|
|
|||||
| (1) |
For the purposes of applying the
if-converted
method for calculating diluted earnings per share, it was assumed that all public warrants, private placement warrants, Solid Power Warrants and Solid Power Options are exchanged for 44.0 million shares of Class A Common Stock. However, since this results in anti-dilution, the effect of such exchange was not included in the calculation of diluted loss per share.
|
| (2) |
The equivalent pro forma basic and diluted per share data for Solid Power is calculated by multiplying the estimated number of shares of Solid Power Common Stock to be issued and outstanding immediately prior to the Effective Time (i.e., 9,290,326 shares of Solid Power Common Stock, 14,069,187 shares of Solid Power Series A-1 Preferred Stock, which are expected to be converted into 14,069,187 shares of Solid Power Common Stock immediately prior to the Effective Time, and 8,777,817 shares of Solid Power Series B Preferred Stock, which are expected to be converted into 8,777,817 shares of Solid Power Common Stock immediately prior to the Effective Time) by the Exchange Ratio. The Exchange Ratio, which is based on the assumptions set forth under “Certain Defined Terms,” has been calculated in the manner contemplated by the Business Combination Agreement as the quotient obtained by dividing (i) 123,900,000, by (ii) approximately 38,675,762 shares of Solid Power Common Stock outstanding immediately prior to the Effective Time, expressed on a fully-diluted and as converted to Solid Power Common Stock basis. The pro forma basic and diluted per share data for Solid Power does not include the estimated 25,722,948 shares of Class A Common Stock that may be issued upon the exercise of the options, restricted stock and warrants that will be issued in exchange for the Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants, respectively.
|
96
COMPARATIVE SHARE INFORMATION
The following table sets forth summary historical comparative share information for DCRC and Solid Power and unaudited pro forma condensed combined per share information after giving effect to the business combination, assuming two redemption scenarios as follows:
| • |
Assuming No Redemptions: This presentation assumes that no public stockholders exercise redemption rights with respect to their Class A Common Stock.
|
| • |
Assuming Maximum Redemptions: This presentation assumes public stockholders holding approximately 21.5 million shares of Class A Common Stock will exercise their redemption rights for their pro rata share (approximately $10.00 per share) of funds in the Trust Account. This scenario gives effect to public share redemptions for aggregate redemption payments of approximately $215 million. The Business Combination Agreement provides that the obligations of Solid Power to consummate the business combination are subject to the satisfaction or waiver at or prior to the Closing of, among other conditions, a condition that as of the Closing, after consummation of the PIPE Financing and distribution of the Trust Account pursuant to the Business Combination Agreement, deducting all amounts to be paid pursuant to the exercise of redemption rights provided for in the Charter, DCRC shall have unrestricted cash on hand equal to or in excess of $300 million (without, for the avoidance of doubt, taking into account any transaction fees, costs and expenses paid or required to be paid in connection with the business combination or the PIPE Financing or any cash on hand of Solid Power). Furthermore, DCRC will only proceed with the business combination if it will have net tangible assets (as determined in accordance with Rule
3a51-1(g)(1)
under the Exchange Act) of at least $5,000,001 unless the Class A Common Stock otherwise does not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act. Because we anticipate that the Class A Common Stock will be listed on Nasdaq at the Closing, and such listing would mean that the Class A Common Stock would not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act, we do not anticipate the $5,000,001 net tangible asset threshold being applicable.
|
The pro forma book value information reflects the business combination as if it had occurred on June 30, 2021. The net loss per share information for the six months ended June 30, 2021 and for the year ended December 31, 2020 presents pro forma effect to the business combination as if it had been completed on January 1, 2020.
This information is only a summary and should be read together with DCRC’s and Solid Power’s audited financial statements and related notes, the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of DCRC,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Solid Power,” and other financial information included elsewhere in this proxy statement/prospectus. The unaudited pro forma condensed combined per share information of DCRC and Solid Power is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined net loss per share information below does not purport to represent the net loss per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma condensed combined book value per share information below does not purport to represent what the value of DCRC and Solid Power would have been had the companies been combined during the periods presented.
97
|
Historical
|
Pro Forma Combined
(3)
|
|||||||||||||||
|
DCRC
(1)
|
Solid Power
|
Assuming No
Redemptions |
Assuming Max
Redemptions |
|||||||||||||
|
As of and for the Six Months Ended June 30, 2021
(2)(4)
|
||||||||||||||||
|
Basic and diluted book value per common share
(5)
|
$ | (6.87 | ) | $ | (36.20 | ) | $ | 3.40 | $ | 2.39 | ||||||
|
Basic and diluted net loss per common share
|
$ | (2.77 | ) | $ | (29.74 | ) | $ | (0.19 | ) | $ | (0.22 | ) | ||||
|
Weighted average shares outstanding, basic and diluted
|
8,750 | 7,943 | 163,205 | 141,705 | ||||||||||||
|
For the Year Ended December 31, 2020
(2)(4)
|
||||||||||||||||
|
Basic and diluted net loss per common share
|
— | $ | (12.85 | ) | $ | (0.09 | ) | $ | (0.11 | ) | ||||||
|
Weighted average shares outstanding, basic and diluted
|
— | 7,352 | 163,205 | 141,705 | ||||||||||||
| (1) |
DCRC’s historical net loss per common share represents the net loss per share for Class B Common Stock. There was no net income or loss per share for Class A Common Stock during the period presented.
|
| (2) |
Information for DCRC is included from January 29, 2021 onward.
|
| (3) |
For purposes of determining the number of shares at Closing, we have assumed that the number of shares of Solid Power Common Stock to be issued and outstanding immediately prior to the Effective Time (i.e., 9,290,326 shares of Solid Power Common Stock, 14,069,187 shares of Solid Power Series A-1 Preferred Stock, which are expected to be converted into 14,069,187 shares of Solid Power Common Stock immediately prior to the Effective Time, and 8,777,817 shares of Solid Power Series B Preferred Stock, which are expected to be converted into 8,777,817 shares of Solid Power Common Stock immediately prior to the Effective Time) by the Exchange Ratio. The Exchange Ratio, which is based on the assumptions set forth under “Certain Defined Terms,” has been calculated in the manner contemplated by the Business Combination Agreement as the quotient obtained by dividing (i) 123,900,000, by (ii) approximately 38,675,762 shares of Solid Power Common Stock outstanding immediately prior to the Effective Time, expressed on a fully-diluted and as converted to Solid Power Common Stock basis. The pro forma basic and diluted per share data for Solid Power does not include the estimated 25,722,948 shares of Class A Common Stock that may be issued upon the exercise of the options, restricted stock and warrants that will be issued in exchange for the Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants, respectively.
|
| (4) |
There were no cash dividends declared in the period presented.
|
| (5) |
Book value per share is calculated using the formula: Total stockholders’ equity from the Balance Sheet as of June 30, 2021 divided by shares outstanding as of June 30, 2021.
|
98
SPECIAL MEETING OF DCRC STOCKHOLDERS
General
We are furnishing this proxy statement/prospectus to our stockholders as part of the solicitation of proxies by the DCRC Board for use at the special meeting of stockholders to be held on , 2021, and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to our stockholders on or about , 2021. This proxy statement/prospectus provides you with information you need to know to be able to vote or instruct your vote to be cast at the special meeting.
We are utilizing a virtual stockholder meeting format for the special meeting. Our virtual stockholder meeting format uses technology designed to increase stockholder access, save DCRC and our stockholders time and money and provide our stockholders rights and opportunities to participate in the special meeting similar to those they would have at an
in-person
special meeting, at no cost. In addition to online attendance, we provide stockholders with an opportunity to hear all portions of the official special meeting as conducted by the DCRC Board, submit written questions and comments during the special meeting and vote online during the open poll portion of the special meeting. We welcome your suggestions on how we can make our special meeting more effective and efficient.
All stockholders as of the record date, or their duly appointed proxies, may attend the special meeting, which will be a completely virtual meeting. There will be no physical meeting location and the special meeting will only be conducted via live webcast. If you were a stockholder as of the close of business on , 2021, you may attend the special meeting. As a registered stockholder, you received a proxy card with this proxy statement/prospectus. The proxy card contains instructions on how to attend the virtual meeting, including the website along with your control number. You will need your control number to attend the virtual meeting, submit questions and vote online.
If you do not have your control number, contact our transfer agent, Continental Stock Transfer & Trust Company, by telephone at (917)
262-2373
or by email at proxy@continentalstock.com. If your shares of common stock are held by a bank, broker or other nominee, you will need to contact your bank, broker or other nominee and obtain a legal proxy. Once you have received your legal proxy, you will need to contact Continental Stock Transfer & Trust Company to have a control number generated. Please allow up to 72 hours for processing your request for a control number.
Stockholders can
pre-register
to attend the virtual meeting. To
pre-register,
visit https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021 and enter your control number, name and email address. After
pre-registering,
you will be able to vote or submit questions for the special meeting.
Stockholders have multiple opportunities to submit questions to DCRC for the special meeting. Stockholders who wish to submit a question in advance may do so by
pre-registering
and then selecting the chat box link. Stockholders also may submit questions live during the meeting. Questions pertinent to special meeting matters may be recognized and answered during the special meeting in our discretion, subject to time constraints. We reserve the right to edit or reject questions that are inappropriate for special meeting matters. In addition, we will offer live technical support for all stockholders attending the special meeting.
To attend online and participate in the special meeting, stockholders of record will need to visit https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021 and enter the
12-digit
control number provided on your proxy card, regardless of whether you
pre-registered.
Date, Time and Place
The special meeting will be held at , Eastern time, on , 2021, via live webcast at https://www.cstproxy.com/decarbonizationplusacquisitioniii/2021, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.
99
Voting Power; Record Date
You will be entitled to vote or direct votes to be cast at the virtual special meeting if you owned shares of our common stock, i.e., Class A Common Stock or Class B Common Stock, at the close of business on , 2021, which is the record date for the special meeting. You are entitled to one vote for each share of our common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 43,750,000 shares of Class A Common Stock and Class B Common Stock outstanding in the aggregate, of which 35,000,000 were shares of Class A Common Stock and 8,750,000 were Founder Shares held by the initial stockholders.
Vote of the Sponsor, Directors and Officers of DCRC
Our Sponsor, directors and officers have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination.
Our Sponsor, directors and officers have waived any redemption rights, including with respect to shares of Class A Common Stock purchased in our IPO or in the aftermarket, in connection with the business combination. The Founder Shares held by the Sponsor and our independent directors have no redemption rights upon our liquidation and will be worthless if no business combination is effected by us by March 26, 2023. However, our Sponsor, directors and officers are entitled to redemption rights upon our liquidation with respect to any shares of Class A Common Stock they may own.
Quorum and Required Vote for Proposals for the Special Meeting
A quorum of our stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting if holders of a majority of the outstanding shares of our Class A Common Stock and Class B Common Stock entitled to vote thereat are present online or represented by proxy at the special meeting. Abstentions will count as present for the purposes of establishing a quorum.
The approval of the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal and the Adjournment Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting, voting as a single class. Approval of the Authorized Share Charter Proposal requires the affirmative vote (online or by proxy) of (i) the holders of a majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class, and (ii) the holders of a majority of the shares of Class A Common Stock entitled to vote thereon at the special meeting, voting as a single class. Approval of the Additional Charter Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class. Accordingly, a stockholder’s failure to vote by proxy or to vote online at the special meeting will not be counted towards the number of shares of Class A Common Stock and Class B Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, it will have no effect on the outcome of any vote on the Business Combination Proposal, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal or the Adjournment Proposal, but will have the same effect as a vote AGAINST the Charter Proposals.
Approval of the election of each director nominee pursuant to the Director Election Proposal requires the affirmative vote (online or by proxy) of a plurality of the votes cast by holders of our Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting. This means that the director nominees will be elected if they receive more affirmative votes than any other nominee for the same position. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions will have no effect on the Director Election Proposal.
100
The Closing is conditioned on the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the Director Election Proposal, the 2021 Plan Proposal and the ESPP Proposal at the special meeting. The Charter Proposals, the Director Election Proposal, the 2021 Plan Proposal and the ESPP Proposal are conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
Recommendation to DCRC Stockholders
After careful consideration, the DCRC Board recommends that our stockholders vote “FOR” each Proposal (or in the case of the Director Election Proposal, “FOR ALL NOMINEES”) being submitted to a vote of the stockholders at the special meeting.
For a more complete description of our reasons for the approval of the business combination and the recommendation of the DCRC Board, see the section entitled “Proposal No. 1—The Business Combination Proposal—DCRC Board’s Reasons for the Approval of the Business Combination.”
Voting Your Shares
Each share of Class A Common Stock and each share of Class B Common Stock that you own in your name entitles you to one vote on each of the Proposals for the special meeting. Your one or more proxy cards show the number of shares of Class A Common Stock and Class B Common Stock that you own. There are several ways to vote your shares of Class A Common Stock and Class B Common Stock:
| • |
You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the special meeting. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of Class A Common Stock or Class B Common Stock will be voted as recommended by the DCRC Board. The DCRC Board recommends voting “FOR” the Business Combination Proposal, “FOR” the Charter Proposals, “FOR” the Nasdaq Proposal, “FOR” the 2021 Plan Proposal, “FOR” the ESPP Proposal, “FOR ALL NOMINEES” in the Director Election Proposal and “FOR” the Adjournment Proposal.
|
| • |
You can attend the special meeting virtually and vote online even if you have previously voted by submitting a proxy pursuant to any of the methods noted above. However, if your shares of Class A Common Stock or Class B Common Stock are held in the name of your broker, bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your shares of Class A Common Stock or Class B Common Stock.
|
Revoking Your Proxy
If you give a proxy, you may revoke it at any time before the special meeting or at such meeting by doing any one of the following:
| • |
you may send another proxy card with a later date;
|
| • |
you may notify our secretary, in writing, before the special meeting that you have revoked your proxy; or
|
| • |
you may attend the special meeting virtually, revoke your proxy and vote online, as indicated above.
|
No Additional Matters May Be Presented at the Special Meeting
The special meeting has been called to consider only the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal, the Director Election
101
Proposal and the Adjournment Proposal. Under our bylaws, other than procedural matters incident to the conduct of the special meeting, no other matters may be considered at the special meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the special meeting.
Who Can Answer Your Questions About Voting Your Shares or Warrants
If you have any questions about how to vote or direct a vote in respect of your shares of Class A Common Stock or Class B Common Stock, you may call Morrow Sodali LLC, our proxy solicitor, at (800)
662-5200
(banks and brokerage firms, please call collect at (203)
658-9400).
Redemption Rights
Under our Charter, any holders of our Class A Common Stock may elect that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account, including interest not previously released to us to pay our franchise and income taxes, calculated as of two business days prior to the consummation of the business combination. If demand is properly made and the business combination is consummated, these shares, immediately prior to the business combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account, which holds the proceeds of our IPO (calculated as of two business days prior to the consummation of the business combination, including interest not previously released to us to pay our franchise and income taxes). For illustrative purposes, based on the fair value of cash and marketable securities held in the Trust Account as of June 30, 2021 of approximately $350.0 million, the estimated per share redemption price would have been approximately $10.00.
In order to exercise your redemption rights, you must:
| • |
if you hold your shares of Class A Common Stock through units, elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares;
|
| • |
certify to DCRC whether you are acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) with any other stockholder with respect to shares of Class A Common Stock;
|
| • |
prior to 5:00 p.m., Eastern time, on , 2021 (two business days before the special meeting), tender your shares physically or electronically and submit a request in writing that we redeem your public shares for cash to Continental Stock Transfer & Trust Company, our transfer agent, to the attention of Mark Zimkind at 1 State Street, 30th Floor, New York, New York 10004, by email at mzimkind@continentalstock.com or by telephone at (212)
509-4000;
and
|
| • |
deliver your shares of Class A Common Stock either physically or electronically through DTC to the transfer agent at least two business days before the special meeting. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically. If you do not submit a written request and deliver your shares of Class A Common Stock as described above, your shares will not be redeemed.
|
Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests (and submitting shares to the transfer agent) and thereafter, with our consent, until the vote is taken with respect to the business combination. If you delivered your shares for redemption to the transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that the transfer agent return the shares (physically or electronically). You may make such request by contacting the transfer agent at the phone number or address listed above.
102
Holders of outstanding units of DCRC must separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold units registered in your own name, you must deliver the certificate for such units or deliver such units electronically to Continental Stock Transfer & Trust Company with written instructions to separate such units into public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates or electronic delivery of the public shares back to you so that you may then exercise your redemption rights with respect to the public shares following the separation of such public shares from the units.
If a broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of the corresponding number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights with respect to the public shares following the separation of such public shares from the units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.
Prior to exercising redemption rights, stockholders should verify the market price of our Class A Common Stock as they may receive higher proceeds from the sale of their Class A Common Stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. We cannot assure you that you will be able to sell your shares of Class A Common Stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in the Class A Common Stock when you wish to sell your shares.
If you exercise your redemption rights, your shares of Class A Common Stock will cease to be outstanding immediately prior to the business combination and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, our future growth following the business combination, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.
If the business combination is not approved and we do not consummate a “business combination” (as defined in the Charter) by March 26, 2023, we will be required to dissolve and liquidate our Trust Account by returning the then-remaining funds in such account to the public stockholders and our warrants will expire worthless.
Appraisal Rights
Appraisal rights are not available to holders of shares of Class A Common Stock and Class B Common Stock in connection with the business combination.
Proxy Solicitation Costs
We are soliciting proxies on behalf of the DCRC Board. This solicitation is being made by mail but also may be made by telephone or in person. DCRC and its directors, officers and employees may also solicit proxies in person. We will file with the SEC all scripts and other electronic communications as proxy soliciting materials. DCRC will bear the cost of the solicitation.
We have engaged Morrow Sodali LLC to assist in the proxy solicitation process. We will pay that firm a fee of $32,500, plus disbursements. We will reimburse Morrow Sodali LLC for reasonable
expenses and will indemnify Morrow Sodali LLC and its affiliates against certain claims, liabilities, losses, damages and expenses. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. We will reimburse them for their reasonable expenses.
out-of-pocket
103
PROPOSAL NO. 1—THE BUSINESS COMBINATION PROPOSAL
We are asking our stockholders to approve and adopt the Business Combination Agreement and the business combination. Our stockholders should carefully read this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination Agreement, a copy of which is attached as
to this proxy statement/prospectus. Please see the subsection below entitled “The Business Combination Agreement” for additional information and a summary of certain terms of the Business Combination Agreement. You are urged to read carefully the Business Combination Agreement in its entirety before voting on this proposal.
Annex A
Because we are holding a special meeting of stockholders to vote on the business combination, we may consummate the business combination only if it is approved by the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting, voting as a single class.
The Business Combination Agreement
This subsection of the proxy statement/prospectus describes the material provisions of the Business Combination Agreement, but does not purport to describe all of the terms of the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, a copy of which is attached as Annex A hereto. You are urged to read the Business Combination Agreement in its entirety because it is the primary legal document that governs the business combination.
The Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made and will be made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Combination Agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in important part by the underlying disclosure schedules, which we refer to as the “Schedules,” which are not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders and were used for the purpose of allocating risk among the parties rather than establishing matters as facts.
General: Structure of the Business Combination
On June 15, 2021, DCRC, Merger Sub and Solid Power entered into the Business Combination Agreement. The terms of the Business Combination Agreement, which contains customary representations and warranties, covenants, closing conditions, termination provisions and other terms relating to the Merger and the other transactions contemplated thereby, are summarized below.
The Merger is to become effective by the filing of a statement of merger with the Secretary of State of the State of Colorado and a certificate of merger with the Secretary of State of the State of Delaware and will be effective immediately upon such filing or upon such later time as may be agreed by the parties and specified in such statement of merger and certificate of merger. The parties will hold the Closing contemporaneously with the Effective Time on the Closing Date which date will occur as promptly as practicable following the satisfaction or waiver (to the extent such waiver is permitted by applicable law) of the conditions set forth in the Business Combination Agreement (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time), but in no event later than three business days after the satisfaction or waiver, if permissible, of each of the conditions to the completion of the business combination (or on such other date, time or place as DCRC and Solid Power may mutually agree).
104
Conversion of Securities
Solid Power will cause each share of Solid Power Preferred Stock that is issued and outstanding immediately prior to the Effective Time to be automatically converted, effective immediately prior to the Effective Time, into a number of shares of Solid Power Common Stock, at the then effective conversion rate as calculated pursuant to the Solid Power Charter. After the Conversion, such converted shares of Solid Power Preferred Stock will no longer be outstanding and will cease to exist.
At the Effective Time, by virtue of the Merger and without any action on the part of DCRC, Merger Sub, Solid Power or the holders of any of Solid Power’s securities:
| • |
each share of Solid Power Common Stock issued and outstanding immediately prior to the Effective Time (including shares of Solid Power Common Stock resulting from the Conversion, but excluding Solid Power Restricted Stock and excluding any Dissenting Shares (as defined in the Business Combination Agreement)) will be canceled and converted into the right to receive the number of shares of Class A Common Stock equal to the Exchange Ratio;
|
| • |
all shares of Solid Power Common Stock held in treasury of Solid Power will be canceled without any conversion thereof and no payment or distribution will be made with respect to such Solid Power Common Stock;
|
| • |
each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation;
|
| • |
each Solid Power Warrant (a) to the extent terminated, expired or exercised immediately prior to the Effective Time, either voluntarily prior to the Effective Time or in accordance with its terms in connection with the Transactions, will no longer be deemed outstanding and any shares of Company Common Stock issuable in connection therewith shall be treated as described above and (b) to the extent outstanding and unexercised immediately prior to the Effective Time will automatically be converted into a warrant (each such resulting warrant, an “Assumed Warrant”) to acquire a number of shares of Class A Common Stock equal to (i) the number of shares of Solid Power Common Stock subject to the applicable Solid Power Warrant multiplied by (ii) the Exchange Ratio, rounding the resulting number down to the nearest whole number of shares of Class A Common Stock, at an adjusted price equal to (x) the per share exercise price for the shares of Solid Power Common Stock subject to the applicable Solid Power Warrant, as in effect immediately prior to the Effective Time, divided by (y) the Exchange Ratio, rounding the resulting exercise price up to the nearest whole cent;
|
| • |
each Solid Power Option, whether or not exercisable and whether or not vested, outstanding immediately prior to the Effective Time will be converted into an Exchanged Option to purchase a number of shares of Class A Common Stock equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Solid Power Common Stock subject to such Solid Power Option immediately prior to the Effective Time and (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Solid Power Option immediately prior to the Effective Time divided by (B) the Exchange Ratio; provided, however, that the exercise price and number of shares of Class A Common Stock shall be determined in a manner consistent with the requirements of Section 409A of the Code; provided, further, that in the case of any Exchanged Option to which Section 422 of the Code applies, the exercise price and the number of shares of Class A Common Stock purchasable pursuant to such option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code; and
|
| • |
each award of Solid Power Restricted Stock that is outstanding immediately prior to the Effective Time will be released and extinguished in exchange for an award covering a number of shares of Exchanged Restricted Stock equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Solid Power Common Stock subject to such award of Solid Power Restricted Stock immediately prior to the Effective Time and (y) the Exchange Ratio.
|
105
Stock Exchange Listing
DCRC will use its reasonable best efforts to cause the shares of Class A Common Stock to be issued in connection with the business combination to be approved for listing on Nasdaq at the Closing. Until the Closing, DCRC will use its reasonable best efforts to keep the units, Class A Common Stock and warrants listed for trading on Nasdaq.
Closing
The Closing will occur as promptly as practicable, but in no event later than three business days following the satisfaction or waiver of all of the closing conditions.
No Solicitation
From the date of the Business Combination Agreement and ending on the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement, Solid Power agreed not to, and to direct its representatives not to, (i) enter into, solicit, initiate, knowingly facilitate, knowingly encourage or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any way with, any person or other entity or “group” within the meaning of Section 13(d) of the Exchange Act, concerning any sale of any material assets of Solid Power or any of the outstanding capital stock of Solid Power or any conversion (other than the Conversion), consolidation, merger, business combination, liquidation, dissolution or similar transaction involving Solid Power other than with DCRC and its representatives (an “Alternative Transaction”), (ii) amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of Solid Power, (iii) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Alternative Transaction, (iv) approve, endorse, recommend, execute or enter into any agreement in principle, confidentiality agreement, letter of intent, memorandum of understanding, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other written arrangement relating to any Alternative Transaction or any proposal or offer that could reasonably be expected to lead to an Alternative Transaction, (v) commence, continue or renew any due diligence investigation regarding any Alternative Transaction, or (vi) resolve or agree to do any of the foregoing or otherwise authorize or permit any of its representatives acting on its behalf to take any such action. Solid Power agreed to, and to direct its affiliates and representatives to, immediately cease any and all existing discussions or negotiations with any person conducted heretofore with respect to any Alternative Transaction.
From the date of the Business Combination Agreement and ending on the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement, Solid Power will notify DCRC promptly (but in no event later than 24 hours) after receipt by Solid Power, or any of its representatives of any (i) inquiry or proposal with respect to an Alternative Transaction, (ii) inquiry that would reasonably be expected to lead to an Alternative Transaction or (iii) request for
non-public
information relating to Solid Power, or for access to the business, properties, assets, personnel, books or records of Solid Power by any third party, in each case that is related to an inquiry or proposal with respect to an Alternative Transaction. In such notice, Solid Power will, to the extent not prohibited by the terms of any confidentiality obligations existing as of the date of the Business Combination Agreement, identify the third party making any such inquiry, proposal, indication or request with respect to an Alternative Transaction and will provide the details of the material terms and conditions of any such inquiry, proposal, indication or request. Solid Power will keep DCRC informed, on a reasonably current and prompt basis, of the status and material terms of any such inquiry, proposal, indication or request with respect to an Alternative Transaction.
If Solid Power or any of its representatives receives any inquiry or proposal with respect to an Alternative Transaction at any time from the date of the Business Combination Agreement and ending on the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement, then Solid Power will
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promptly (and in no event later than 24 hours after Solid Power becomes aware of such inquiry or proposal) notify such person in writing that Solid Power is subject to an exclusivity agreement with respect to the Alternative Transaction that prohibits them from considering such inquiry or proposal.
From the date of the Business Combination Agreement and ending on the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement, each of DCRC and Merger Sub agreed not to, and to direct their respective representatives acting on their behalf not to, directly or indirectly, (i) enter into, solicit, initiate, knowingly facilitate, knowingly encourage or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any way with, any person or other entity or “group” within the meaning of Section 13(d) of the Exchange Act, concerning any merger, consolidation, or acquisition of stock or assets or any other business combination involving DCRC and any other corporation, partnership or other business organization other than Solid Power (a “DCRC Alternative Transaction”), (ii) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any DCRC Alternative Transaction, (iii) approve, endorse, recommend, execute or enter into any agreement in principle, confidentiality agreement, letter of intent, memorandum of understanding, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other written arrangement relating to any DCRC Alternative Transaction or any proposal or offer that could reasonably be expected to lead to a DCRC Alternative Transaction, (iv) commence, continue or renew any due diligence investigation regarding any DCRC Alternative Transaction, or (v) resolve or agree to do any of the foregoing or otherwise authorize or permit any of its representatives acting on its behalf to take any such action. Each of DCRC and Merger Sub agreed to, and agreed to direct their respective affiliates and representatives acting on their behalf to, immediately cease any and all existing discussions or negotiations with any person conducted heretofore with respect to any DCRC Alternative Transaction.
From the date of the Business Combination Agreement and ending on the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement, DCRC will notify Solid Power promptly (but in no event later than 24 hours) after receipt by DCRC or any of its representatives of any (i) inquiry or proposal with respect to a DCRC Alternative Transaction, (ii) inquiry that would reasonably be expected to lead to a DCRC Alternative Transaction or (iii) request for
non-public
information relating to DCRC, or for access to the business, properties, assets, personnel, books or records of DCRC by any third party, in each case that is related to an inquiry or proposal with respect to Alternative Transaction. In such notice, DCRC will, to the extent not prohibited by the terms of any confidentiality obligations existing as of the date of the Business Combination Agreement, identify the third party making any such inquiry, proposal, indication or request with respect to a DCRC Alternative Transaction and will provide the details of the material terms and conditions of any such inquiry, proposal, indication or request. DCRC will keep Solid Power informed, on a reasonably current and prompt basis, of the status and material terms of any such inquiry, proposal, indication or request with respect to a DCRC Alternative Transaction.
If DCRC or any of its representatives receives any inquiry or proposal with respect to a DCRC Alternative Transaction at any time from the date of the Business Combination Agreement and ending on the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement, then DCRC will promptly (and in no event later than 24 hours after DCRC becomes aware of such inquiry or proposal) notify such person in writing that DCRC is subject to an exclusivity agreement with respect to the DCRC Alternative Transaction that prohibits them from considering such inquiry or proposal.
Representations, Warranties and Covenants
The Business Combination Agreement contains customary representations and warranties of the parties thereto relating to, among other things, their (a) organization and structure, (b) ability to enter into the Business Combination Agreement, (c) outstanding capitalization and (d) compliance with laws.
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Additional Agreements
Registration Statement
As promptly as practicable after the date of execution of the Business Combination Agreement, DCRC agreed to prepare and file with the SEC the Registration Statement in connection with providing the stockholders of DCRC with the opportunity to exercise the redemption rights provided for in the Charter and the registration under the Securities Act of all the shares of Class A Common Stock to be issued pursuant to the Business Combination Agreement.
DCRC Stockholders’ Meeting; Solid Power Stockholders’ Written Consent
DCRC agreed to use its reasonable best efforts to call and hold the special meeting as promptly as practicable after the date on which the Registration Statement becomes effective (after taking into account a reasonable period of time as DCRC deems necessary to solicit proxies); provided, that DCRC may postpone or adjourn the special meeting on one or more occasions for up to 30 days in the aggregate upon good faith determination by the DCRC Board that such postponement or adjournment is necessary to solicit additional proxies or otherwise take actions consistent with DCRC’s obligations as set forth in the Business Combination Agreement. DCRC agreed, through the DCRC Board, to recommend to its stockholders that they approve the Proposals and to include the recommendation of the DCRC Board in this proxy statement/prospectus.
Solid Power agreed that, as promptly as practicable following the date upon which the Registration Statement becomes effective, Solid Power will solicit the affirmative vote or consent of (i) the holders of a majority of the outstanding shares of Solid Power Common Stock and Solid Power Preferred Stock (on an
as-converted
basis), voting as a single class, (ii) the holders of a majority of the outstanding shares of Solid Power Common Stock, voting together as a separate class, (iii) the holders of a majority of the outstanding shares of Solid Power Series
A-1
Preferred Stock, voting as a separate class on an as converted to Solid Power Common Stock basis, (iv) the holders of 85% of the outstanding shares of Solid Power Series B Preferred Stock, voting as a separate class on an as converted to Solid Power Common Stock basis, and/or (v) the holders of a majority of the outstanding shares of Solid Power Preferred Stock, voting as a separate class on an as converted to Solid Power Common Stock basis, via the Written Consent. If certain stockholders of Solid Power fail to deliver the Written Consent to Solid Power within five business days of the Registration Statement becoming effective, DCRC will have the right to terminate the Business Combination Agreement.
Conditions to Closing
Mutual
The obligations of DCRC, Merger Sub and Solid Power to consummate the business combination are subject to the satisfaction or waiver (where permissible) at or prior to the Effective Time of each of the following mutual conditions:
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the Written Consent shall have been delivered to DCRC;
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the Proposals shall have been approved and adopted by the requisite affirmative vote of DCRC’s stockholders in accordance with this proxy statement/prospectus, the DGCL, DCRC’s organizational documents and the rules and regulations of Nasdaq;
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no governmental authority shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the business combination illegal or otherwise prohibiting consummation of the business combination;
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all required filings under the HSR Act shall have been completed and any applicable waiting period (and any extension thereof) applicable to the consummation of the business combination under the HSR Act shall have expired or been terminated (the waiting period under the HSR Act expired on August 9, 2021);
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the shares of Class A Common Stock have been listed on Nasdaq, or another national securities exchange mutually agreed to by the parties, as of the Closing Date;
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the Registration Statement shall have been declared effective under the Securities Act, no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for purposes of suspending the effectiveness of the Registration Statement shall have been initiated or be threatened by the SEC;
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either DCRC shall have at least $5,000,001 of net tangible assets following the exercise of redemption rights in accordance with DCRC’s organizational documents and after giving effect to the PIPE Financing or the Class A Common Stock shall not constitute “penny stock” as such term is defined in Rule
3a51-1
of the Exchange Act; and
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DCRC shall have provided an opportunity to its stockholders to have their Class A Common Stock redeemed for the consideration, and on the terms and subject to the conditions and limitations, set forth in DCRC’s organizational documents, the Trust Agreement, and this proxy statement/prospectus in conjunction with obtaining approval from the stockholders of DCRC for the business combination. Other than as a result of the valid exercise of redemption rights prior to the Closing, no stockholder of DCRC will have any continuing right to redeem after the Closing.
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DCRC and Merger Sub
The obligations of DCRC and Merger Sub to consummate the business combination, including the Merger, are subject to the satisfaction or waiver (where permissible) at or prior to the Effective Time of the following additional conditions:
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(i) the representations and warranties of Solid Power contained in the sections titled (a) “Organization and Qualification; Subsidiaries,” (b) “Capitalization,” (c) “Authority Relative to this Agreement” and (d) “Brokers” in the Business Combination Agreement shall have each been true and correct in all material respects as of the date of the Business Combination Agreement and the Effective Time, except to the extent that any such representation or warranty expressly was made as of an earlier date, in which case such representation and warranty shall have been true and correct as of such earlier specified date, (ii) certain of the representations and warranties of Solid Power contained in the section titled “Absence of Certain Changes or Events” in the Business Combination Agreement shall have been true and correct in all respects as of the date of the Business Combination Agreement and the Effective Time and (iii) the other representations and warranties of Solid Power contained in the Business Combination Agreement shall have been true and correct in all respects (without giving effect to any “materiality,” “Solid Power Material Adverse Effect” (as defined below) or similar qualifiers contained in any such representations and warranties) as of the date of the Business Combination Agreement and as of the Effective Time as though made on and as of such date (except to the extent that any such representation or warranty expressly was made as of an earlier date, in which case such representation and warranty shall have been true and correct as of such earlier date), except where the failures of any such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a Solid Power Material Adverse Effect;
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Solid Power shall have performed or complied in all material respects with all agreements and covenants required by the Business Combination Agreement to be performed or complied with by it on or prior to the Effective Time;
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Solid Power shall have delivered to DCRC an officer’s certificate, dated the date of the Closing, certifying as to the satisfaction of certain conditions; and
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no Solid Power Material Adverse Effect shall have occurred between the date of the Business Combination Agreement and the Effective Time that is continuing.
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For purposes of the Business Combination Agreement, a “Solid Power Material Adverse Effect” means any event, circumstance, change or effect (collectively, “Effect”) that, individually or in the aggregate with all other Effects, (i) is or would reasonably be expected to be materially adverse to the business results of operations or financial condition, assets, liabilities or results of operations of Solid Power or (ii) would prevent, materially delay or materially impede the performance by Solid Power of its obligations under the Business Combination Agreement or the consummation of the Merger or business combination, in each case by the Outside Date (as defined below); provided, however, that none of the following shall be deemed to constitute, alone or in combination, or be taken into account in the determination of whether there has been or will be a Solid Power Material Adverse Effect: (a) any change or proposed change in or change in the interpretation of any law or GAAP; (b) events or conditions generally affecting the industries or geographic areas in which Solid Power operates; (c) any downturn in general economic conditions, including changes in the credit, debt, securities, financial or capital markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets); (d) any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, cyberterrorism, terrorism, military actions, earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions, epidemics, pandemics,
COVID-19
measure or other force majeure events (including any escalation or general worsening thereof); (e) any actions taken or not taken by Solid Power as required by the Business Combination Agreement or any ancillary agreement, (f) any Effect attributable to the announcement or execution, pendency, negotiation or consummation of the business combination (including the impact thereof on relationships with customers, suppliers, employees or governmental authorities) (provided that this clause (f) shall not apply to any representation or warranty to the extent the purpose of such representation or warranty is to address the consequences resulting from the Business Combination Agreement or the consummation of the business combination), (g) any failure to meet any projections, forecasts, guidance, estimates, milestones, budgets or financial or operating predictions of revenue, earnings, cash flow or cash position, provided that this clause (g) shall not prevent a determination that any Effect underlying such failure has resulted in a Solid Power Material Adverse Effect to the extent permitted by this definition, or (h) any actions taken, or failure to take action, or such other changes or events, in each case, which DCRC has requested or to which it has consented or which actions are contemplated by the Business Combination Agreement, except in the cases of clauses (a) through (c), to the extent that Solid Power is materially disproportionately affected thereby as compared with other participants in the industries and geographical regions in which Solid Power operates.
Solid Power
The obligations of Solid Power to consummate the business combination, including the Merger, are subject to the satisfaction or waiver (where permissible) at or prior to the Closing of the following additional conditions:
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(i) the representations and warranties of DCRC and Merger Sub contained in the sections titled (a) “Corporate Organization,” (b) “Capitalization,” (c) “Authority Relative to This Agreement” and (d) “Brokers” in the Business Combination Agreement shall have each been true and correct in all material respects as of the date of the Business Combination Agreement and the Effective Time, except to the extent that any such representation or warranty expressly was made as of an earlier date, in which case such representation and warranty shall have been true and correct as of such earlier specified date, (ii) certain of the representations and warranties of DCRC and Merger Sub contained in the section titled “Absence of Certain Changes or Events” in the Business Combination Agreement shall have been true and correct in all respects as of the date of the Business Combination Agreement and the Effective Time and (iii) the other representations and warranties of DCRC and Merger Sub contained in the Business Combination Agreement shall have been true and correct in all respects (without giving effect to any “materiality,” “DCRC Material Adverse Effect” (as defined below) or similar qualifiers contained in any such representations and warranties) as of the date of the Business Combination Agreement and as of the Effective Time as though made on and as of such date (except to the extent that any such representation or warranty expressly was made as of an earlier date, in which case such representation and warranty shall have been true and correct as of such earlier date), except where the
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failure of any such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a DCRC Material Adverse Effect;
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DCRC and Merger Sub shall have performed or complied in all material respects with all other agreements and covenants required by the Business Combination Agreement to be performed or complied with by it on or prior to the Effective Time;
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DCRC shall have delivered to Solid Power an officer’s certificate, dated the date of the Closing, certifying as to the satisfaction of certain conditions;
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no DCRC Material Adverse Effect shall have occurred between the date of the Business Combination Agreement and the Effective Time that is continuing;
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DCRC shall have delivered a copy of the A&R Registration Rights Agreement duly executed by DCRC and the DCRC stockholders party thereto;
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DCRC shall have made all necessary and appropriate arrangements with Continental Stock Transfer & Trust Company, acting as trustee, to have all of the funds in the Trust Account disbursed to DCRC immediately prior to the Effective Time, and all such funds released from the Trust Account shall be available for immediate use to DCRC in respect of all or a portion of certain payment obligations set forth in the Business Combination Agreement and the payment of DCRC’s fees and expenses incurred in connection with the Business Combination Agreement and the business combination; and
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as of the Closing, after consummation of the PIPE Financing and distribution of the Trust Account pursuant to the Business Combination Agreement, deducting all amounts to be paid pursuant to the exercise of redemption rights provided for in the Charter, DCRC shall have unrestricted cash on hand equal to or in excess of $300,000,000 (without, for the avoidance of doubt, taking into account any transaction fees, costs and expenses paid or required to be paid in connection with the business combination or the PIPE Financing or any cash on hand of Solid Power).
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For purposes of the Business Combination Agreement, a “DCRC Material Adverse Effect” means any Effect that, individually or in the aggregate with all other Effects, (i) is or would reasonably be expected to be materially adverse to the business, results of operations or financial condition, assets, liabilities or results of operations of DCRC, or (ii) would prevent, materially delay or materially impede the performance by DCRC or Merger Sub of their respective obligations under the Business Combination Agreement or the consummation of the Merger or business combination, in each case by the Outside Date; provided, however, that none of the following shall be deemed to constitute, alone or in combination, or be taken into account in the determination of whether, there has been or will be a DCRC Material Adverse Effect: (a) any change or proposed change in or change in the interpretation of any law or GAAP; (b) events or conditions generally affecting the industries or geographic areas in which DCRC operates; (c) any downturn in general economic conditions, including changes in the credit, debt, securities, financial or capital markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets); (d) any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, cyberterrorism, terrorism, military actions, earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions, epidemics, pandemics,
COVID-19
measure or other force majeure events (including any escalation or general worsening thereof); (e) any actions taken or not taken by DCRC as required by the Business Combination Agreement or any ancillary agreement, (f) any Effect attributable to the announcement or execution, pendency, negotiation or consummation of the business combination (provided that this clause (f) shall not apply to any representation or warranty to the extent the purpose of such representation or warranty is to address the consequences resulting from the Business Combination Agreement or the consummation of the business combination), or (g) any actions taken, or failure to take action, or such other changes or events, in each case, which Solid Power has requested or to which it has consented or which actions are contemplated by the Business Combination Agreement, except in the cases of clauses (a) through (d), to the extent that DCRC is materially disproportionately affected thereby as compared with other participants in the industry and geographical regions in which DCRC operates.
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Termination
The Business Combination Agreement may be terminated and the business combination may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Business Combination Agreement and the business combination by the stockholders of Solid Power or DCRC, as follows:
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by mutual written consent of DCRC and Solid Power;
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by either DCRC or Solid Power, if (i) the Effective Time shall not have occurred prior to December 12, 2021 (the “Outside Date”); provided, however, that the Business Combination Agreement may not be terminated by or on behalf of any party that either directly or indirectly through its affiliates is in breach or violation of any representation, warranty, covenant, agreement or obligation contained therein and such breach or violation is the principal cause of the failure of a condition on or prior to the Outside Date, and, provided further, that if on the Outside Date at least one of certain closing conditions set forth in the Business Combination Agreement shall not have been satisfied, but all the other conditions to Closing have been satisfied (other than those conditions that by their nature cannot be satisfied until the Closing Date), then the Outside Date will be deemed automatically extended without any further action until March 12, 2022; (ii) any governmental authority in the United States has enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling (whether temporary, preliminary or permanent) which has become final and nonappealable and has the effect of making consummation of the business combination and related transactions illegal or otherwise preventing or prohibiting consummation of the business combination and related transactions, including the Merger; or (iii) any of the Proposals fail to receive the requisite vote for approval at the special meeting;
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by Solid Power upon a breach of any representation, warranty, covenant or agreement on the part of DCRC and Merger Sub set forth in the Business Combination Agreement, or if any representation or warranty of DCRC and Merger Sub shall have become untrue, in either case such that certain closing conditions specified in the Business Combination Agreement would not be satisfied (“Terminating DCRC Breach”); provided that Solid Power has not waived such Terminating DCRC Breach and Solid Power is not then in material breach of their representations, warranties, covenants or agreements in the Business Combination Agreement; provided, however, that, if such Terminating DCRC Breach is curable by DCRC and Merger Sub, Solid Power may not terminate the Business Combination Agreement under this provision for so long as DCRC and Merger Sub continue to exercise their reasonable efforts to cure such breach, unless such breach is not cured within 15 days after notice of such breach is provided by Solid Power to DCRC; or
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by DCRC if (i) certain stockholders of Solid Power have failed to deliver the Written Consent to Solid Power within five business days of the Registration Statement becoming effective, provided that DCRC’s right to terminate the Business Combination Agreement under this provision will automatically terminate and expire once Solid Power has delivered evidence that the requisite stockholder approval has been obtained; or (ii) upon a breach of any representation, warranty, covenant or agreement on the part of Solid Power set forth in the Business Combination Agreement, or if any representation or warranty of Solid Power has become untrue, in either case such that certain closing conditions specified in the Business Combination Agreement would not be satisfied (“Terminating Solid Power Breach”); provided that DCRC has not waived such Terminating Solid Power Breach and DCRC and Merger Sub are not then in material breach of their representations, warranties, covenants or agreements in the Business Combination Agreement; provided further that, if such Terminating Solid Power Breach is curable by Solid Power, DCRC may not terminate the Business Combination Agreement under this provision for so long as Solid Power continues to exercise its reasonable efforts to cure such breach, unless such breach is not cured within 15 days after notice of such breach is provided by DCRC to Solid Power.
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Effect of Termination
If the Business Combination Agreement is terminated, the agreement will forthwith become void, and there will be no liability under the Business Combination Agreement on the part of any party thereto, except as set
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forth in the Business Combination Agreement or in the case of termination subsequent to a willful and material breach of the Business Combination Agreement for the party thereto that committed such breach.
Related Documents
This section describes the material provisions of certain additional agreements entered into or to be entered into pursuant to the Business Combination Agreement, which we refer to as the “Related Documents,” but does not purport to describe all of the terms thereof. The Related Documents have been or will be filed with the SEC at a future date. Stockholders and other interested parties are urged to read such Related Documents in their entirety.
Stockholder Support Agreement
In connection with the execution of the Business Combination Agreement, on June 15, 2021, DCRC and certain stockholders of Solid Power entered into the Stockholder Support Agreement pursuant to which, among other things, such stockholders agreed to vote all of their shares of Solid Power Common Stock and Solid Power Preferred Stock in favor of the approval and adoption of the business combination, including agreeing to execute the Written Consent within five business days of the Registration Statement becoming effective. Additionally, such stockholders have agreed, among other things, not to, prior to the Effective Time, (a) transfer any of their shares of Solid Power Common Stock and Solid Power Preferred Stock (or enter into any arrangement with respect thereto), subject to certain customary exceptions, or (b) enter into any voting arrangement that is inconsistent with the Stockholder Support Agreement.
Such stockholders and certain other stockholders also agreed not transfer any of their shares of Class A Common Stock received in the Merger, or upon exercise of Assumed Warrants, Exchanged Options or Exchanged Restricted Stock received in the Merger, for a period of the shorter of (i) six months following the Closing and (ii) the termination, expiration or waiver of the
lock-up
period covering the Sponsor’s Class A Common Stock, subject to certain customary exceptions. Such restrictions on transfer will be set forth in the bylaws DCRC will adopt in connection with Closing, which will apply to all investors of Solid Power that receive securities of DCRC in connection with Merger; provided, however, that Solid Power agreed in the Stockholder Support Agreement that any waiver or termination of such
lock-up
period with respect to the Class A Common Stock held by any member of the Covered Group shall be deemed to be a proportional waiver or termination of the
lock-up
period with respect to the Class A Common Stock owned by the other members of the Covered Group.
Sponsor Letter
In connection with the execution of the Business Combination Agreement, on June 15, 2021, the Sponsor and certain directors of DCRC entered into the Sponsor Letter, pursuant to which, among other things, the Sponsor and such directors agreed to (i) waive the anti-dilution rights set forth in the Charter with respect to the Founder Shares held by them, (ii) comply with the
lock-up
provisions in the Letter Agreement, dated March 23, 2021, by and among DCRC, the Sponsor and DCRC’s directors and officers and (iii) vote all the shares of Class A Common Stock and Founder Shares held by them in favor of the adoption and approval of the Business Combination Agreement and the business combination.
A&R Registration Rights Agreement
In connection with the Closing, the IPO Registration Rights Agreement will be amended and restated and DCRC, the Initial Holders and certain persons and entities receiving Class A Common Stock pursuant to the Merger will enter into the A&R Registration Rights Agreement. Pursuant to the A&R Registration Rights Agreement, DCRC will agree that, within 30 days after the Closing, DCRC will file with the SEC (at DCRC’s
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sole cost and expense) the Resale Registration Statement, and DCRC will use its reasonable best efforts to have the Resale Registration Statement declared effective as promptly as reasonably practicable after the filing thereof. In certain circumstances, the Reg Rights Holders can demand DCRC’s assistance with underwritten offerings and block trades, and the Reg Rights Holders will be entitled to certain piggyback registration rights. The A&R Registration Rights Agreement does not provide for the payment of any cash penalties by DCRC if it fails to satisfy any of its obligations under the A&R Registration Rights Agreement.
Proposed Second Amended and Restated Charter
Pursuant to the terms of the Business Combination Agreement, at the Closing, we will amend and restate, effective as of the Effective Time, our Charter to, among other things, (a) increase the number of authorized shares of DCRC’s capital stock, par value $0.0001 per share, from 271,000,000 shares, consisting of (i) 270,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of Preferred Stock, to 2,200,000,000 shares, consisting of (A) 2,000,000,000 shares of common stock and (B) 200,000,000 shares of Preferred Stock; (b) eliminate certain provisions in the Charter relating to an Initial Business Combination that will no longer be applicable to us following the Closing: (c) change the post-combination company’s name to “Solid Power, Inc.”; (d) change the minimum stockholder vote required to amend, repeal or modify certain specified provisions of the Proposed Second A&R Charter or any provision inconsistent with any provision of New Solid Power’s amended and restated bylaws; (e) provide for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon; (f) remove the right of holders of Class B Common Stock to act by written consent; and (g) remove the designation of certain courts as the exclusive forum for certain types of stockholder claims. See the sections entitled “
,” and “
” for additional information.
Proposal No. 2—The Authorized Share Charter Proposal
Proposal No. 3—The Additional Charter Proposal
PIPE Financing
In connection with the execution of the Business Combination Agreement, on June 15, 2021, DCRC and Solid Power entered into the Subscription Agreements with the New PIPE Investors, pursuant to which the New PIPE Investors agreed to purchase, and DCRC agreed to sell to the New PIPE Investors, an aggregate of 16,500,000 PIPE Shares for a purchase price of $10.00 per share and an aggregate purchase price of $165,000,000, in the PIPE Financing.
The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the concurrent consummation of the business combination. The purpose of the PIPE Financing is to raise additional capital for use by the combined company following the Closing.
Pursuant to the Subscription Agreements, DCRC agreed that, within 30 calendar days after the Closing Date, DCRC will file with the SEC (at DCRC’s sole cost and expense) the PIPE Resale Registration Statement, and DCRC will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Background of the Business Combination
DCRC is a Delaware corporation formed on January 29, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Our business strategy is to identify, acquire and, after the Initial Business Combination, build a company whose principal effort is developing and advancing a platform that decarbonizes the most carbon-intensive sectors, including the energy and agriculture, industrials, transportation and commercial and residential
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sectors. DCRC’s goal is to build a focused business with multiple competitive advantages that have the potential to improve the target business’s overall value proposition. The ultimate goal of this business strategy is to maximize stockholder value. The proposed business combination was the result of an extensive search for a potential transaction utilizing the vast network and industry experience of DCRC’s management team, our Sponsor and its affiliates. The terms of the business combination were the result of extensive negotiations between representatives of DCRC and Solid Power management. The following is a brief description of the background of these negotiations, the business combination and related transactions.
On March 26, 2021, DCRC completed its IPO of 35,000,000 public units, with each unit consisting of one share of Class A Common Stock and
one-third
of one public warrant, raising gross proceeds of approximately $350.0 million. Simultaneously with the closing of the IPO, DCRC completed the private sale of 6,666,667 private placement warrants to our Sponsor and our independent directors, generating gross proceeds of approximately $10.0 million.
In connection with the IPO, the underwriters were granted an option to purchase up to an additional 5,250,000 units. On May 7, 2021, the underwriters’ option expired unexercised.
Following the closing of the IPO, DCRC representatives commenced a robust search for businesses or assets to acquire for the purpose of consummating DCRC’s Initial Business Combination. In evaluating potential businesses and assets to acquire, DCRC surveyed the landscape of potential acquisition opportunities based on their representatives’ familiarity with relevant industry sectors. Between March 26, 2021 and April 13, 2021, we reviewed potential acquisition alternatives, explored options with the underwriters from the IPO, and contacted or were contacted by eight individuals and entities with respect to eight business combination opportunities. As part of this process, DCRC representatives considered over ten potential acquisition targets in a wide variety of industry sectors, including targets that were engaged in businesses involving energy sustainability or utilizing technologies that would make a positive impact on the environment. As part of its acquisition strategy, DCRC did not focus its efforts on pursuing potential transactions in competitive or auction situations, but instead focused on bilateral discussions with the key decision makers of the potential targets regarding a potential transaction.
We conducted due diligence and discussions (including by participating in investor presentations) with the senior executives, stockholders or sponsors of, or investment advisors to, all of such business combination candidates. Many of these discussions advanced to the point where we executed a confidentiality agreement with the business combination candidate. Each such confidentiality agreement was entered into on customary terms and conditions and, among other things, restricted the disclosure of confidential information and limited the rights of a party to use the confidential information except for the purpose of evaluating a possible transaction. None of the confidentiality agreements included a standstill agreement provision that would prevent DCRC from making an offer for the counterparty, or would prevent any party from making an offer for DCRC. Other than Solid Power, DCRC did not proceed with the business combination candidates following initial due diligence, and did not submit formal indications of interest and/or draft letters of intent to any such business combination candidates.
Between November 2020 and April 2021, Solid Power executed
non-disclosure
agreements with 15 other special purpose acquisition companies (“SPACs”) interested in exploring a potential business combination with Solid Power, which strategic alternative Solid Power management and the Solid Power board of directors had first discussed the possibility of pursuing in October 2020. Solid Power engaged Stifel to serve as its financial advisor in connection with Solid Power’s Series B Financing on February 20, 2020. This engagement was revised on March 19, 2021 to include Stifel’s engagement as strategic advisor in connection with consideration and pursuit of such strategic alternative. Following execution of such
non-disclosure
agreements, those SPACs were provided with Solid Power’s management presentation. Twelve SPACs were also given access to the electronic data room containing information about Solid Power’s business.
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On March 29, 2021, Robert Tichio and John Staudinger, a Managing Director of Riverstone Holdings, LLC, an affiliate of our Sponsor (“Riverstone”), participated in a video conference with representatives of Stifel and Solid Power regarding a possible transaction between DCRC and Solid Power. DCRC management was first made aware of the Solid Power process by Stifel, and by representatives of Riverstone, who were familiar with Solid Power through their network. Riverstone had previously engaged in discussions with Solid Power and conducted a due diligence review of Solid Power’s business and certain technical topics. Riverstone was subject to a nondisclosure agreement, dated as of December 14, 2020 (the “NDA”), with respect to Solid Power. The NDA applied to affiliates of Riverstone and did not contain a standstill provision.
On March 30, 2021, DCRC reviewed Solid Power’s management presentation, including an overview of Solid Power’s business and financial model, comparison against peer companies and information regarding Solid Power’s potential customers, existing and planned facility developments, products and technologies. That same day, Mr. Tichio and Mr. Staudinger had a call with Douglas Campbell of Solid Power and Stifel representatives, expressing their interest in advancing diligence to assess Solid Power and its prospects, and DCRC was granted access to an electronic data room containing information relating to Solid Power. Over the next few days, Stifel and members of Solid Power management provided DCRC with responses to certain diligence questions raised by Mr. Tichio and Mr. Staudinger, including with respect to technology, business development, organizational structure and capital spending plans, and provided an overview of Solid Power’s business and current operations. DCRC’s diligence also included a virtual tour of Solid Power’s manufacturing facilities.
During this time, DCRC also engaged leading management consulting firms to assist DCRC in its due diligence investigation of Solid Power as well as the solid state battery industry. These firms assessed battery demand trends and the projected adoption of solid state batteries, supply trends for battery suppliers, key battery chemistries, the competitive landscape for solid state battery suppliers and Solid Power’s business plan and proposed path to commercialization.
On March 31, 2021, DCRC contacted and retained Vinson & Elkins L.L.P. (“Vinson & Elkins”) to advise DCRC on a possible business combination with Solid Power. Vinson & Elkins assisted DCRC in drafting a
non-binding
letter of intent.
On April 4, 2021, DCRC shared a draft of the
non-binding
letter of intent with Solid Power. The draft
non-binding
letter of intent provided for a total enterprise value of Solid Power of $1.1 billion (assuming a $60 million Series B Financing by Solid Power prior to signing of definitive documents, which was then in progress), with equity consideration in the form of Class A Common Stock and a $200 million (or such other amount to be agreed by the parties) PIPE Financing. The
non-binding
letter of intent also provided (on a binding basis) for the termination of any existing discussions by Solid Power and DCRC with respect to any potential transactions similar to the proposed business combination and to exclusive negotiations with each other until April 30, 2021.
On April 5, 2021, Stifel delivered questions on the draft
non-binding
letter of intent to DCRC on behalf of Solid Power. The questions related to the treatment of unvested options, board structure, the proposed equity incentive plans of the post-closing company and DCRC’s expected anchor investors for the PIPE Financing.
On April 6, 2021, DCRC delivered responses to Solid Power’s questions and a revised draft of the
non-binding
letter of intent to Stifel. The revised draft of the
non-binding
letter of intent specified that unvested options would be included for purposes of calculating the total equity consideration to Solid Power’s investors and the post-closing company would create a new equity incentive plan and employee stock option purchase program with pools to be agreed by the parties. The revised
non-binding
letter of intent also included the consent of Solid Power to the assignment of the NDA by Riverstone to DCRC.
On April 9, 2021, Mr. Tichio and Mr. Staudinger made a presentation to the board of directors of Solid Power that included an overview of DCRC, a summary of DCRC’s key diligence findings regarding Solid Power and a marketing strategy and timeline for a possible business combination between DCRC and Solid Power.
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On April 12, 2021, Stifel delivered a revised draft of the
non-binding
letter of intent to DCRC on behalf of Solid Power. The revised draft of the
non-binding
letter of intent bracketed the proposed enterprise value for Solid Power with the intent to further discuss the enterprise value, and provided that (i) unvested options would not be included for purposes of calculating the total equity consideration to Solid Power’s investors, (ii) the Sponsor or one of its affiliates would fund a minimum of $15 million in the PIPE Financing, (iii) the post-closing company would create (a) a new equity incentive plan with an award pool in the range of 10% of the post-closing company’s fully diluted outstanding stock immediately after the closing and a 5% evergreen provision and (b) an employee stock purchase program with a reserved pool in the range of 2% of the post-closing company’s fully diluted outstanding stock immediately after the closing and a 1% evergreen provision, (iv) the definitive documents would include a minimum cash condition and (v) the Sponsor would agree to forfeit or transfer a portion of its equity as may be necessary to obtain commitments in the PIPE Financing and/or satisfy the minimum cash condition. The revised draft of the
non-binding
letter of intent also provided that the exclusivity period would extend for 30 days and automatically extend for
15-day
periods thereafter absent notice from one of the parties of an intent to terminate.
Over the next day, DCRC and Stifel exchanged revised drafts of the
non-binding
letter of intent. The final draft provided (i) for a total enterprise value for Solid Power of $1.15 billion (assuming a $60 million Series B capital raise by Solid Power prior to signing of definitive documents), (ii) that DCRC would assist in obtaining $15 million of commitments for the PIPE Financing, (iii) that the evergreen provisions for the post-closing incentive plans would be discussed and determined by the parties at a later date, and (iv) that the minimum cash condition would be $400 million.
On April 12, 2021, the board of directors of Decarbonization Plus Acquisition Corporation II (“DCRN”), a SPAC sponsored by an affiliate of Riverstone and that had previously engaged in discussions with Solid Power, waived any interest or expectancy of DCRN in, or in being offered an opportunity to participate in, any transaction with Solid Power. DCRC agreed to assume all costs and expenses incurred by DCRN in connection with its consideration of a proposed transaction with Solid Power, and the assumption of such costs was not conditioned on the consummation of the business combination. Such costs and expenses amounted to approximately $2,957,723.
On April 13, 2021, DCRC and Solid Power executed the
non-binding
letter of intent. Also on April 13, 2021, Riverstone assigned all of its rights and obligations under the NDA to DCRC. Mr. Tichio kept the DCRC Board apprised of this and other developments relating to a potential business combination with Solid Power.
From April 13, 2021 to June 15, 2021, DCRC’s representatives and advisors, including its legal, accounting, tax and technical advisors, performed an extensive due diligence investigation of the materials included in the electronic data room, including a review of Solid Power’s material contracts and facilities, and intellectual property, financial, tax, legal insurance and accounting due diligence. DCRC’s representatives and advisors also participated in several calls with representatives of Solid Power in connection with their due diligence review, including with respect to intellectual property and regulatory matters.
On April 19, 2021, DCRC, Solid Power, Citigroup Global Markets Inc. (“Citi”), J.P. Morgan Securities LLC (“J.P. Morgan”) and Stifel, the proposed placement agents for the PIPE financing, participated in a conference call to discuss the proposed transaction timeline and organizational matters.
On April 21, 2021, representatives of Vinson & Elkins and Wilson Sonsini Goodrich & Rosati, P.C. (“Wilson Sonsini”), legal counsel to Solid Power, participated in a conference call to discuss initial drafts of transaction documents, certain deal points and diligence matters.
On May 5, 2021, Vinson & Elkins delivered an initial draft of the Business Combination Agreement to Wilson Sonsini.
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On May 11, 2021, DCRC engaged Citi, J.P. Morgan and Stifel to serve as placement agents for the PIPE Financing.
Representatives of DCRC and Solid Power and their advisors prepared an investor presentation, relating to Solid Power and its business, which included certain management projections for Solid Power, as well as a pro forma capitalization table of the post-combination company as of the Closing. The investor presentation was made available on May 11, 2021 to investors interested in participating in the PIPE Financing.
Beginning on May 12, 2021 and over the next five weeks, Citi, J.P. Morgan and Stifel facilitated telephonic and video conferences with a number of prospective investors in the PIPE Financing. A number of the prospective investors participated in discussions with DCRC and Solid Power representatives and were provided the investor presentation as well as access to an electronic data room containing supporting information. A draft of a subscription agreement prepared by Vinson & Elkins was shared with prospective investors and representatives of Vinson & Elkins and Wilson Sonsini addressed and negotiated comments to the subscription agreement from the various interested investors.
On May 12, 2021, Solid Power closed the Series B Financing, resulting in approximately $136 million in cash proceeds ($149 million gross proceeds), which was greater than the assumed value of proceeds from the Series B Financing in the
non-binding
letter of intent with Solid Power. As such, the parties agreed to increase the enterprise value of Solid Power by the increase in total proceeds from the Series B Financing.
On May 17 and May 28, 2021, DCRC engaged Citi and J.P. Morgan as financial advisors in connection with the business combination to assist the DCRC Board with advice on the transaction structure, negotiation strategy, valuation analyses, financial terms and other financial matters. In determining to engage Citi and J.P. Morgan, DCRC considered Citi and J.P. Morgan’s knowledge and experience with respect to similar transactions, special purpose acquisition companies in general and the fact that Citi had previously acted as an underwriter of DCRC’s IPO.
On May 26, 2021, Wilson Sonsini delivered a revised draft of the Business Combination Agreement to Vinson & Elkins. Throughout the following three weeks, Vinson & Elkins and Wilson Sonsini exchanged several drafts of the Business Combination Agreement to resolve issues raised by DCRC and Solid Power, which focused principally on certain representations, warranties and covenants by Solid Power related to Solid Power’s critical technologies and relationships with certain significant stockholders, the ability of Solid Power to engage in certain actions, particularly related to employment compensation and other arrangements, prior to Closing without the consent of DCRC, the ability of DCRC to receive loans from the Sponsor prior to Closing that are repayable in additional Private Placement Warrants without the consent of Solid Power, certain indemnification rights of the Sponsor, the size of the minimum cash condition, and Solid Power’s ability to consider and terminate the Business Combination Agreement in connection with a superior proposal, including a revised draft that was delivered by Vinson & Elkins to Wilson Sonsini on June 2, 2021 and several revised drafts delivered between Wilson Sonsini and Vinson & Elkins between June 9, 2021 and June 11, 2021.
On June 3, 2021, Vinson & Elkins delivered initial drafts of the A&R Registration Rights Agreement and the Stockholder Support Agreement to Wilson Sonsini.
On June 8, 2021, the DCRC Board held a special meeting by video conference. Also in attendance were members of DCRC management and representatives of the Sponsor. During the meeting, Mr. Tichio and Mr. Staudinger provided the DCRC Board an overview of the potential transaction with Solid Power, a summary of DCRC’s due diligence efforts thus far, a high level assessment of the proposed transaction and feedback received from potential investors in the PIPE Financing.
On June 9, 2021, Wilson Sonsini delivered an initial draft of the Sponsor Letter. On the same day, Wilson Sonsini delivered revised drafts of the A&R Registration Rights Agreement, the Stockholder Support Agreement
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to Vinson & Elkins, and over the next several days, Vinson & Elkins and Wilson Sonsini exchanged drafts of these documents and the other exhibits and ancillary documents to the Business Combination Agreement.
On June 10, 2021, DCRC and Solid Power executed an amendment to the NDA whereby certain specified legal representatives from Vinson & Elkins would be permitted to review certain sensitive provisions of certain key agreements between Solid Power and Ford and Solid Power and BMW of North America LLC. On June 13, 2021, these representatives participated in a call with representatives of Solid Power in connection with their due diligence review of the agreements.
On June 14, 2021, the DCRC Board held a special meeting by video conference. Also in attendance were members of DCRC management, and representatives of the Sponsor, Vinson & Elkins, J.P. Morgan and Citi. During this meeting, representatives of J.P. Morgan and Citi provided to the DCRC Board a financial overview of the proposed transaction, including pro forma assumptions, Solid Power’s business as an industry leader in solid state battery manufacturing, the current status of the PIPE market and the proposed transaction timeline. Vinson & Elkins provided to the DCRC Board a review of fiduciary duties under Delaware law in the context of consideration of the proposed business combination transaction. Vinson & Elkins also reviewed with the DCRC Board the scope of the due diligence review and the terms of the business combination, including the Business Combination Agreement, the form of subscription agreements and the other definitive agreements, copies of all of which were provided to the DCRC Board in advance of the meeting. After considerable review of the information presented to the DCRC Board, the DCRC Board unanimously approved the Business Combination Agreement and the other transaction documents related thereto and the PIPE Financing by written consent, with their signatures held in escrow pending any final changes to the transaction documents. The written consent of the DCRC Board also authorized payment of all fees and expenses incurred by DCRC in connection with the transaction, including the assumption of costs incurred by DCRN in connection with its consideration of a proposed transaction with Solid Power.
The DCRC Board’s decision to ultimately pursue the business combination with Solid Power over other potential targets was generally the result of, but not limited to, one or more of the following factors:
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the other potential acquisitions did not fully meet the investment criteria of DCRC, which included, among other things, candidates that are at an inflection point, exhibit a need for capital to achieve the company’s growth strategy and would benefit from DCRC management’s transactional, financial, managerial and investment experience;
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the determination of DCRC’s management and our Sponsor that Solid Power was of superior quality to the other potential acquisitions after taking into consideration the following:
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Solid Power’s value to investors as the industry leader for solid state battery development and manufacturing;
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Solid Power’s
non-exclusive
JDAs with certain of its early investors, including Ford and BMW of North America LLC, to collaborate on the research and development of its
all-solid-state
battery cell; and
|
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Solid Power’s demonstrated ability to manufacture electric vehicle-relevant battery cells in dimensions suitable for automotive applications using scalable manufacturing processes, and Solid Power’s intention to license such manufacturing
know-how
to third party commercialization partners; and
|
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a difference in valuation expectations between DCRC and the senior executives or stockholders of the other potential targets.
|
Early morning on June 15, 2021, the Solid Power board of directors unanimously approved the Business Combination Agreement and the transactions contemplated thereby, the parties executed the Business Combination Agreement, and the investors subscribing to purchase PIPE Shares in connection with the PIPE Financing executed the subscription agreements.
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Before the market opened on June 15, 2021, DCRC and Solid Power announced the business combination together with the execution of the Business Combination Agreement along with the subscription agreements.
DCRC Board’s Consideration of and Reasons for Approving the Business Combination
The DCRC Board considered a wide variety of factors in connection with its evaluation of the business combination. In light of the complexity of those factors, the DCRC Board, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. The DCRC Board viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual members of the DCRC Board may have given different weight to different factors. This explanation of the reasons for the DCRC Board’s approval of the business combination, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Before reaching its decision, the DCRC Board reviewed the results of the due diligence conducted by DCRC’s management and DCRC’s advisors, which included:
| • |
meetings and calls with Solid Power management and advisors regarding business model, operations and forecasts;
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research on 10 comparable public companies, including QuantumScape;
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research on comparable transactions;
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study of analyst reports and market trends in the solid state battery industry;
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review of material contracts;
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review of intellectual property matters;
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review of commercial, financial, tax, legal and accounting due diligence;
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consultation with Solid Power’s management and DCRC’s legal and financial advisors and industry experts, including its advisor that assisted in evaluating the overall electrified vehicle market and of the addressable market for Solid Power’s batteries;
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financial and valuation analysis of Solid Power and the business combination;
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financial projections prepared by Solid Power’s management team; and
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the financial statements of Solid Power.
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In approving the business combination, the DCRC Board determined not to obtain a fairness opinion. The officers and directors of DCRC have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and background enabled them to make the necessary analyses and determinations regarding the business combination.
The factors considered by the DCRC Board include, but were not limited to, the following:
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Competitive and Innovative Design. The DCRC Board considered Solid Power’s innovative and competitive solid state battery design and the potential applications of the batteries across multiple industries.
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Value to Equity Investors. The DCRC Board considered Solid Power’s value to investors, determining that Solid Power is the industry leader for solid state battery development and manufacturing.
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Revenue Potential. The DCRC Board considered that Solid Power entered into
non-exclusive
JDAs with certain of its early investors, including Ford Motor Company and BMW of North America LLC, to
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collaborate on the research and development of its
all-solid-state
battery cell. The terms of the JDAs generally require Solid Power to continue its research and development of
all-solid-state
battery cells and component materials such that Solid Power’s products are capable of being deployed in electric vehicles within the next few years as well as other research and development milestones.
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Manufacturing Capabilities. The DCRC Board considered Solid Power’s demonstrated ability to manufacture electric vehicle-relevant battery cells in dimensions suitable for automotive applications using scalable manufacturing processes and Solid Power’s intention to license such manufacturing
know-how
to third party commercialization partners.
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Due Diligence. The results of DCRC’s due diligence investigation of Solid Power conducted by DCRC’s management team and its financial and legal advisors.
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Terms of the Business Combination Agreement. The DCRC Board reviewed the financial and other terms of the Business Combination Agreement and determined that they were the product of
arm’s-length
negotiations among the parties.
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Independent Director Role. DCRC’s independent directors took an active role in guiding DCRC management as DCRC evaluated and negotiated the proposed terms of the business combination. Following an active and detailed evaluation, the DCRC Board’s independent directors unanimously approved, as members of the DCRC Board, the Business Combination Agreement and the business combination.
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Stockholder Approval. The DCRC Board considered the fact that, in connection with the business combination, DCRC stockholders have the option to (i) remain stockholders of the combined company, (ii) sell their shares on the open market or (iii) redeem their shares for the per share amount held in the Trust Account pursuant to the terms of our Charter.
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Other Alternatives. The DCRC Board believes, after a thorough review of other business combination opportunities reasonably available to DCRC, that the business combination represents the best potential business combination for DCRC and the most attractive opportunity for DCRC based upon the process utilized to evaluate and assess other potential business combination targets. The DCRC Board believes that such process has not presented a better alternative.
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In addition, the DCRC Board determined that the business combination satisfies the investment criteria that the DCRC Board identified in connection with the IPO. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Background of the Business Combination.”
In the course of its deliberations, the DCRC Board also considered a variety of uncertainties, risks and other potentially negative factors relevant to the business combination, including the following:
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Developmental Stage Company Risk. The risk that Solid Power is an early-stage company, with a history of financial losses and expects to incur significant expenses and continuing losses for the foreseeable future. As Solid Power scales from limited production of batteries to, ultimately, significant production of
all-solid-state
battery cells or sales of the sulfide based solid electrolytes, it is difficult, if not impossible, to forecast Solid Power’s future results, and Solid Power has limited insight into trends that may emerge and affect Solid Power’s business.
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Business Plan Risk. The risk that Solid Power may be unable to execute on its business model, which would have a material adverse effect on Solid Power’s operating results and business, would harm Solid Power’s reputation and could result in substantial liabilities that exceed its resources.
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Customer Risk. The risk that Solid Power may not be able to obtain binding sales orders for its products.
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Financing Risk. The risk that Solid Power may be unable to achieve sufficient sales or otherwise raise the necessary capital to implement its business plan and strategy. If Solid Power needs to raise additional funds, the risk that these funds may not be available on terms favorable to Solid Power or Solid Power’s stockholders, or at all when needed.
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Competitive Risk. The risk that Solid Power faces significant competition and that its competitors may develop competing technologies more efficient or effective than Solid Power’s.
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Supplier Risk. The risk that Solid Power may not be able to attain the supplies, such as lithium sulfide, NMC and manufacturing tools for its
all-solid-state
battery cells. If Solid Power is unable to enter into commercial agreements with its current suppliers or its replacement suppliers on favorable terms, or if these suppliers experience difficulties meeting Solid Power’s requirements, the development and commercial progression of its
all-solid-state
battery cells and related technologies may be delayed.
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Intellectual Property Risk. The risk that Solid Power may not have adequate intellectual property rights to carry out its business, may need to defend itself against patent, copyright, trademark, trade secret or other intellectual property infringement or misappropriation claims, and may need to enforce its intellectual property rights from unauthorized use by third parties.
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Regulatory Risk. The risks that are associated with Solid Power operating in the highly-regulated battery cell industry. Failure to comply with regulations or laws could subject Solid Power to significant regulatory risk, including the risk of litigation, regulatory actions and compliance issues that could subject Solid Power to significant fines, penalties, judgments, remediation costs, negative publicity and requirements resulting in increased expenses.
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Public Company Risk. The risks that are associated with being a publicly traded company that is in its early, developmental stage.
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Benefits May Not Be Achieved Risk. The risk that the potential benefits of the business combination may not be fully achieved or may not be achieved within the expected timeframe.
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Redemption Risk. The risk that a significant number of DCRC stockholders elect to redeem their shares prior to the consummation of the business combination and pursuant to DCRC’s existing Charter, which would potentially make the business combination more difficult to complete or reduce the amount of cash available to the combined company to execute its business plan following the Closing.
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Stockholder Vote Risk. The risk that DCRC’s stockholders may fail to provide the votes necessary to effect the business combination.
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Litigation Risk. The risk of the possibility of litigation challenging the business combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the business combination.
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Closing Risk. The risk that the closing might not occur in a timely manner or that the closing might not occur at all, despite DCRC’s efforts.
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Closing Conditions Risk. The risk that completion of the business combination is conditioned on the satisfaction of certain closing conditions that are not within DCRC’s control.
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Minority Position. The risk that DCRC’s stockholders will hold a minority position in the combined company.
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No Third-Party Valuation Risk. The risk that DCRC did not obtain a third-party valuation or fairness opinion in connection with the business combination.
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Fees, Expenses and Time Risk. The risk of incurring significant fees and expenses associated with completing the business combination and the substantial time and effort of management required to complete the business combination.
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Other Risks. Various other risk factors associated with Solid Power’s business, as described in the section entitled “Risk Factors.”
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In addition to considering the factors described above, the DCRC Board also considered that the officers and directors of DCRC may have interests in the business combination as individuals that are in addition to, and that
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may be different from, the interests of DCRC’s stockholders. DCRC’s independent directors reviewed and considered these interests during the negotiation of the business combination and in evaluating and unanimously approving, as members of the DCRC Board, the Business Combination Agreement and the business combination. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”
The DCRC Board concluded that the potential benefits that it expects DCRC and its stockholders to achieve as a result of the business combination outweigh the potentially negative factors associated with the business combination. Accordingly, the DCRC Board, based on its consideration of the specific factors listed above, unanimously (a) determined that the business combination and the other transactions contemplated by the Business Combination Agreement are fair to, and in the best interests of, DCRC’s stockholders, (b) approved, adopted and declared advisable the Business Combination Agreement and the transactions contemplated thereby and (c) recommended that the stockholders of DCRC approve each of the Proposals.
The above discussion of the material factors considered by the DCRC Board is not intended to be exhaustive but does set forth the principal factors considered by the DCRC Board.
Unaudited Prospective Financial Information
Solid Power provided DCRC with its internally prepared forecasts for each of the years in the eight-year period ending December 31, 2028. The projections were prepared to provide DCRC’s management team and the DCRC Board with an outlook for Solid Power’s revenue path over such eight-year period and to identify critical resources necessary to facilitate product development. Solid Power and DCRC do not, as a matter of general practice, publicly disclose long-term forecasts or internal projections of future performance, revenue, financial condition or other results. However, in connection with the proposed business combination, management of DCRC and the DCRC Board used the financial forecasts set forth below as part of their analysis. The forecasts were prepared solely for internal use and not with a view toward public disclosure, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. However, in the view of Solid Power’s management, the forecasts were prepared on a reasonable basis, reflected the best currently available estimates and judgments, and presented, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of Solid Power.
The forecasts include EBITDA and EBITDA Margin, which are
non-GAAP
financial measures. Due to the forward-looking nature of these projections, specific quantifications of the amounts that would be required to reconcile such projections to GAAP measures are not available, and Solid Power’s management believes that it is not feasible to provide accurate forecasted
non-GAAP
reconciliations.
Non-GAAP
financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and
non-GAAP
financial measures as used by Solid Power’s management may not be comparable to similarly titled measures used by other companies.
The inclusion of financial projections in this proxy statement/prospectus should not be regarded as an indication that DCRC, Solid Power, their respective directors, officers, advisors or other representatives considered, or now considers, such financial projections necessarily to be predictive of actual future results or to support or fail to support your decision whether to vote for or against the Business Combination Proposal. The financial projections are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus, including investors or stockholders, are cautioned not to place undue reliance on this information. You are cautioned not to rely on the projections in making a decision regarding the business combination, as the projections may be materially different than actual results. We do not expect that we will refer back to the financial projections in our future periodic reports filed under the Exchange Act.
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Furthermore, the financial projections do not take into account any circumstances or events occurring after the date they were prepared. Nonetheless, a summary of the financial projections is provided in this proxy statement/prospectus because they were made available to DCRC and the DCRC Board in connection with their review of the proposed business combination.
While the projections were prepared by Solid Power in order to aid DCRC in its determination of whether to approve the business combination, the DCRC team performed diligence with respect to the forecasts received from the Solid Power team and understands that information included in this proxy statement/prospectus is the responsibility of DCRC. Ernst & Young LLP, Solid Power’s independent registered public accounting firm, and WithumSmith+Brown, PC, DCRC’s independent registered public accounting firm, have not examined, compiled or otherwise applied procedures with respect to the accompanying prospective financial information presented herein and, accordingly, express no opinion or any other form of assurance on it or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The Ernst & Young LLP report included in this proxy statement/prospectus relates to historical financial information of Solid Power. It does not extend to the projections and should not be read as if it does.
The projections are based in part on Solid Power’s estimates of addressable market and potential demand, estimated future capital expenditures, and anticipated commercialization timing. Solid Power estimated its addressable market and potential demand based on, among other things, conversations with its OEM partners, some of which are jointly developing Solid Power’s
all-solid-state
battery cells for inclusion in their electric vehicles, and other third party sources regarding the potential demand for electric vehicles. In determining its revenue and gross margin projections, Solid Power first estimated OEM pricing expectations for all-solid-state battery cells on a projected per kilowatt hour basis and the expected size of an average battery pack to be included in an electric vehicle in 2028, based on a number of factors, including third-party forecasts and discussions with its automotive partners. Solid Power then estimated its expected bill of material and general and administrative costs and expenses, based on a number of factors, including its historical costs, internal projections and anticipated economies of scale. Solid Power then applied those estimates to its assumptions of market penetration, which assumptions were formed in part through discussions with its automotive partners and top tier cell producers. Solid Power’s estimates of future capital expenditures included, among other things, projected costs of equipment and facilities necessary to scale production of its cells, specifically 100 Ah cells, sulfide-based solid electrolyte and production of Li
2
S as well as future research and development activities and all of the support functions required to execute on these activities, each of which was based on management’s estimates and third party sources. Solid Power developed its target commercialization date based on the then-current status of its
all-solid-state
battery cell development, the time it expects to scale production of its sulfide-based solid electrolyte, requirements from its OEM partners, and by using an automotive industry-standard Advanced Product Quality Planning (“APQP”) stage gate product development approach.
The key elements of the forecasts provided by management of DCRC to the DCRC Board are summarized in the tables below:
Key Financial Metrics:
|
Year Ending December 31,
|
||||||||||||||||||||||||||||||||
|
2021E
|
2022E
|
2023E
|
2024E
|
2025E
|
2026E
|
2027E
|
2028E
|
|||||||||||||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||||||
|
Total Revenue(1)
|
$ | 2 | $ | 3 | $ | 4 | $ | 10 | $ | 33 | $ | 132 | $ | 1,047 | $ | 1,674 | ||||||||||||||||
|
Total Gross Profit
|
$ | (0 | ) | $ | (1 | ) | $ | (0 | ) | $ | 7 | $ | 27 | $ | 48 | $ | 373 | $ | 596 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Gross Margin %(2)
|
NM | NM | NM | 76 | % | 81 | % | 36 | % | 36 | % | 36 | % | |||||||||||||||||||
|
EBITDA(3)
|
$ | (21 | ) | $ | (39 | ) | $ | (40 | ) | $ | (32 | ) | $ | (6 | ) | $ | 14 | $ | 302 | $ | 480 | |||||||||||
|
EBITDA Margin %(4)
|
NM | NM | NM | NM | NM | 10 | % | 29 | % | 29 | % | |||||||||||||||||||||
|
Capital Expenditures
|
$ | (19 | ) | $ | (36 | ) | $ | (35 | ) | $ | (40 | ) | $ | (100 | ) | $ | (70 | ) | $ | (70 | ) | $ | (50 | ) | ||||||||
|
Free Cash Flow(5)
|
$ | (37 | ) | $ | (73 | ) | $ | (72 | ) | $ | (69 | ) | $ | (102 | ) | $ | (56 | ) | $ | 209 | $ | 317 | ||||||||||
| NM = not meaningful | ||||||||||||||||||||||||||||||||
124
| (1) |
Includes revenue related to Solid Power’s all-solid-state battery cells, electrolyte materials and other sources.
|
| (2) |
Solid Power defines gross margin as total revenue less total direct costs, divided by total revenue, expressed as a percentage of total revenue.
|
| (3) |
Solid Power defines EBITDA as operating income (loss) plus depreciation expense. EBITDA is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for net income (loss) reported in accordance with GAAP.
|
| (4) |
Solid Power defines EBITDA Margin % as EBITDA divided by total revenue, expressed as a percentage of total revenue. EBITDA Margin % is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for net income (loss) reported in accordance with GAAP.
|
| (5) |
Solid Power defines Free Cash Flow as EBITDA less increase in net working capital, capital expenditures, and income taxes. Free Cash Flow is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for cash flow from operations reported in accordance with GAAP.
|
Key
Non-Financial
Metrics:
|
Year Ending December 31,
|
||||||||||||||||||||||||||||||||
|
2021E
|
2022E
|
2023E
|
2024E
|
2025E
|
2026E
|
2027E
|
2028E
|
|||||||||||||||||||||||||
|
Third Party Manufacturing (gigawatt-hours)
|
— | — | — | 0.1 | 0.4 | 6 | 50 | 80 | ||||||||||||||||||||||||
|
Electrolyte Material (Tonnes)
|
— | — | — | 50 | 200 | 3,000 | 25,000 | 40,000 | ||||||||||||||||||||||||
The financial projections reflect numerous estimates and assumptions, including those described below, with respect to general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Solid Power’s business, all of which are difficult to predict and many of which are beyond the control of Solid Power and DCRC. The financial projections are forward-looking statements that are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of Solid Power and DCRC. These risks and uncertainties include, but are not limited to, Solid Power’s ability to develop
all-solid-state
battery cells capable of production at volume with acceptable performance, yields, and costs, Solid Power’s
all-solid-state
battery cells performing as expected, Solid Power’s ability to commercialize its products, Solid Power’s ability to scale manufacturing of its
all-solid-state
battery cells and sulfide-based sulfide electrolytes; the continued growth of the battery-powered electric vehicle market, and OEMs adopting
all-solid-state
technology in their battery-powered electric vehicles on the schedule that is currently predicted based on the APQP qualification process. In addition, you should carefully review the various risks and uncertainties set forth in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Solid Power” and “Cautionary Note Regarding Forward-Looking Statements.” As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. Since the financial projections cover multiple years, such information by its nature becomes less reliable with each successive year. These financial projections are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments.
Solid Power’s forecasted financial information was prepared using a number of assumptions that are estimates based on feedback from its OEM partners, industry data and competitive analyses, including the following assumptions that Solid Power’s management believed to be material:
| • |
successful construction of a 20 Ah Silicon EV Cell by the end of 2021;
|
| • |
successful construction of a 100 Ah electric vehicle battery cell production line in 2022 and formally entering automotive qualification in 2022;
|
| • |
efficient scaling of sulfide-based solid electrolyte manufacturing to up to 3,000 metric tons by 2026, 25,000 metric tons by 2027, and 40,000 metric tons by 2028, to support the production of 800,000 electric vehicles by 2028 using all-solid-state battery cells and the anticipated cost to meet expected demand for its
all-solid-state
battery cells;
|
125
| • |
entry into commercial supply agreements with its cell manufacturing partners to supply its sulfide-based solid electrolyte;
|
| • |
entry into licensing agreements with its OEM partners and/or other
top-tier
battery manufacturers to commercially produce its
all-solid-state
battery cell designs;
|
| • |
increased investment in research and development and sales expenses to drive revenue growth, while realizing improved economies of scale in general and administrative;
|
| • |
adequate manufacturing capacity and a willingness for battery manufacturers to adapt their processes to produce Solid Power’s
all-solid-state
battery cell designs;
|
| • |
continued growth in consumer demand for battery-powered electric vehicles; and
|
| • |
production of battery-powered electric vehicles at the volume and within the timeframe set forth in OEM public projections.
|
Solid Power’s forecasted
non-financial
information was prepared using a number of assumptions, including achieving a 10% market share of BMW’s and Ford’s approximate combined estimated 7.8 million annual vehicle sales by 2028. Such assumptions were subject to significant risk and uncertainties, which risks are exacerbated by the fact that Solid Power assumed four years of research and development and automotive qualification efforts, as Solid Power does not currently have a product that satisfies OEM specifications. Solid Power has not historically generated, and did not assume it would generate during such four-year period, material revenues. The projections assumed that, once Solid Power developed and could commercialize its products, Solid Power would be able to achieve a significant market share from its existing partners. For a description of the risks related to Solid Power’s business, any of which may adversely impact the assumptions utilized in generating the projections, please see “Risk Factors—Risks Related to Solid Power.”
In making the foregoing assumptions, Solid Power’s management relied on a number of factors, including:
| • |
its experience in the battery cell development industry, including the cost and timing related to Solid Power’s ongoing efforts to develop its 20 Ah Silicon EV Cell;
|
| • |
its estimates of the timing for the development and commercialization of its
All-Solid-State
Platform
|
| • |
its best estimates of current and future customers purchasing its sulfide-based solid electrolyte and licensing its
all-solid-state
battery cell designs; and
|
| • |
third-party forecasts for industry growth.
|
EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS, BY INCLUDING IN THIS PROXY STATEMENT/PROSPECTUS A SUMMARY OF THE PROJECTIONS FOR SOLID POWER, DCRC UNDERTAKES NO OBLIGATIONS AND EXPRESSLY DISCLAIMS ANY RESPONSIBILITY TO UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, THESE PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS CHANGE OR ARE SHOWN TO BE IN ERROR.
Satisfaction of 80% Test
It is a requirement under our Charter and Nasdaq listing requirements that the business or assets acquired in an Initial Business Combination have a fair market value equal to at least 80% of the balance of the funds in the Trust Account (excluding the deferred underwriting discounts and commissions and taxes payable on the income
126
earned on the Trust Account) at the time of the execution of a definitive agreement for an Initial Business Combination. In connection with its evaluation and approval of the business combination, the DCRC Board determined that the fair market value of Solid Power exceeded $1.0 billion, based on, among other things, comparable company EBITDA multiples and revenue multiples.
Interests of Certain Persons in the Business Combination
In considering the recommendation of the DCRC Board to vote in favor of the business combination, stockholders should be aware that, aside from their interests as stockholders, our Sponsor and certain of our directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders generally. Our directors were aware of and considered these interests, among other matters, in evaluating the business combination, and in recommending to stockholders that they approve the business combination. Stockholders should take these interests into account in deciding whether to approve the business combination. These interests include, among other things:
| • |
the fact that our Sponsor and independent directors hold an aggregate of 6,666,667 private placement warrants that would expire worthless if a business combination is not consummated, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our public warrants of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
|
| • |
the fact that our Sponsor may convert any working capital loans that it may make to us into up to an additional 1,000,000 private placement warrants, at the price of $1.50 per warrant;
|
| • |
the fact that our Sponsor, officers and directors have agreed not to redeem any of the shares of our common stock held by them in connection with a stockholder vote to approve the business combination;
|
| • |
the fact that our initial stockholders paid an aggregate of $25,000 for the Founder Shares and that such securities will have a significantly higher value at the time of the business combination, which if unrestricted and freely tradable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date for the special meeting, resulting in a theoretical gain of $ ;
|
| • |
the fact that certain of DCRC’s officers and directors collectively own, directly or indirectly, a material interest in our Sponsor;
|
| • |
the fact that affiliates of our Sponsor own an aggregate of 1,660,417 shares of Solid Power Series A-1 Preferred Stock, which at the assumed Exchange Ratio, would be exchanged for 5,319,311 shares of our Class A Common Stock at the Closing;
|
| • |
the anticipated appointment of each of Erik Anderson, a member of the DCRC Board and DCRC’s Chief Executive Officer, and Robert Tichio, a member of the DCRC Board, as a director on the New Solid Power Board in connection with the closing of the business combination;
|
| • |
if the Trust Account is liquidated, including in the event we are unable to complete an Initial Business Combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of (a) any third party (other than our independent public accountants) for services rendered or products sold to us or (b) a prospective target business with which we have entered into an acquisition agreement, but only if such a third party or target business has not executed a waiver of all rights to seek access to the Trust Account;
|
| • |
the fact that our independent directors own an aggregate of 360,000 Founder Shares, which if unrestricted and freely tradeable would be valued at approximately $ , based on the closing price of our Class A Common Stock of $ per share on , 2021, the record date of the special meeting;
|
127
| • |
the fact that our Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to stockholders rather than liquidate;
|
| • |
the fact that our Sponsor and its affiliates can earn a positive rate of return on their investment, even if other DCRC stockholders experience a negative rate of return in the post-business combination company;
|
| • |
the fact that our Sponsor, officers and directors will be reimbursed for out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations; and
|
| • |
the fact that our Sponsor, officers and directors will lose their entire investment in us if an Initial Business Combination is not completed.
|
At the Closing, we anticipate that our Sponsor will own 6,367,353 private placement warrants and 8,390,000 shares of New Solid Power common stock (which will be issued upon conversion of the Founder Shares upon the Closing). In addition, our Sponsor may make available to us working capital loans for up to $1,500,000 to enable us to finance transaction costs in connection with our Initial Business Combination. As of the date of this proxy statement/prospectus, there were no amounts outstanding under any working capital loans. Further, as of the date of this proxy statement/prospectus, there has been no reimbursement to our Sponsor, officers or directors for any out-of-pocket expenses incurred in connection with activities on our behalf, and no such amounts have been incurred as of the date of this proxy statement/prospectus. However, as of the date of this proxy statement/prospectus, an affiliate of our Sponsor has incurred approximately $4.0 million of expenses on DCRC’s behalf, of which approximately $3.0 million has been repaid by DCRC to the affiliate of our Sponsor. The balance will be repaid by DCRC at the Closing.
Investors in our Sponsor, each of which contributed capital to our Sponsor in exchange for Founder Shares and private placement warrants, include entities affiliated with certain of our non-independent directors and officers. Specifically, Pierre Lapeyre, Jr., David Leuschen, Robert Tichio and Peter Haskopoulos are each affiliated with Sponsor Manager, and Erik Anderson is affiliated with WRG, through which such DCRC directors and officers have an indirect economic interest in the private placement warrants and shares of New Solid Power common stock anticipated to be held by our Sponsor as of the completion of the business combination.
Our independent directors paid $1,028 in aggregate consideration for the 360,000 Founder Shares transferred to our independent directors by our Sponsor at the closing of our IPO. In addition, our independent directors purchased 299,314 private placement warrants at a price of $1.50 per warrant at the closing of our IPO.
128
The table set forth below summarizes the interests of Sponsor Manager, WRG and our independent directors in the private placement warrants and Founder Shares along with (i) the total investment made in our Sponsor (or purchase price paid for the private placement warrants, in the case of our independent directors) by Sponsor Manager, WRG and our independent directors in exchange for their interests in the private placement warrants and Founder Shares and (ii) the value of such interests based on the closing price of the public warrants and Class A Common Stock as of , 2021, all of which would be lost if an Initial Business Combination is not completed by us within the required time period:
|
Name of Holder
|
DCRC
Position |
Total Purchase
Price / Capital Contributions |
Number of
Private Placement Warrants |
Value of
Private Placement Warrants as of , 2021 |
Number of
Founder Shares |
Value of
Founder Shares as of , 2021 |
||||||||||||||||
|
Decarbonization Plus Acquisition Sponsor Manager III, LLC
1
|
N/A | $ | 7,923,040 | 5,268,801 | $ | 6,943,741 | $ | |||||||||||||||
|
WRG DCRC Investors, LLC
2
|
N/A | $ | 1,150,710 | 765,219 | $ | 1,008,759 | $ | |||||||||||||||
|
James AC McDermott
|
Director | $ | 300,000 | 199,543 | $ | 240,000 | $ | |||||||||||||||
|
Jennifer Aaker
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
Jane Kearns
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
Jeffrey Tepper
|
Director | $ | 50,000 | 33,257 | $ | 40,000 | $ | |||||||||||||||
|
1
|
DCRC directors Pierre Lapeyre, Jr., David Leuschen and Robert Tichio and Chief Financial Officer, Chief Accounting Officer and Secretary Peter Haskopoulos each have an indirect economic interest in our Sponsor through Sponsor Manager.
|
|
2
|
DCRC Chief Executive Officer Erik Anderson has an indirect economic interest in our Sponsor through WRG.
|
In addition, our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that this waiver of the corporate opportunities doctrine has materially affected our search for an acquisition target or will materially affect our ability to complete our business combination.
Potential Purchases of Public Shares
In connection with the stockholder vote to approve the business combination, our Sponsor, directors, officers, advisors or any of their respective affiliates may privately negotiate transactions to purchase public shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with the business combination for a per share pro rata portion of the Trust Account. There is no limit on the number of public shares our Sponsor, directors, officers, advisors or any of their respective affiliates may purchase in such transactions, subject to compliance with applicable law and the rules of Nasdaq. Any such privately negotiated purchases may be effected at purchase prices that are in excess of the per share pro rata portion of the Trust Account. However, our Sponsor, directors, officers, advisors and their respective affiliates have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase public shares in such transactions. None of our Sponsor, directors, officers, advisors or any of their respective affiliates will make any such purchases when they are in possession of any material
non-public
information not disclosed to the seller of such public shares or during a restricted period under Regulation M under the Exchange Act. Such a purchase could include a contractual acknowledgement that such stockholder, although still the record holder of such public shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such stockholder to vote such shares in a manner directed by the purchaser.
129
In the event that our Sponsor, directors, officers, advisors or any of their respective affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares.
The purpose of any such purchases of public shares could be to (a) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or (b) to satisfy a closing condition in the Business Combination Agreement, where it appears that such requirement would otherwise not be met. Any such purchases of our public shares may result in the completion of the business combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent the purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of our Class A Common Stock may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our Sponsor, officers, directors, advisors or any of their respective affiliates anticipate that they may identify the stockholders with whom our Sponsor, officers, directors, advisors or any of their respective affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with the business combination. To the extent that our Sponsor, officers, directors, advisors or any of their respective affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against the business combination. Our Sponsor, officers, directors, advisors or any of their respective affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our Sponsor, officers, directors, advisors or any of their respective affiliates who are affiliated purchasers under Rule
10b-18
under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule
10b-18,
which is a safe harbor from liability for manipulation under Section 9(a)(2) of and Rule
10b-5
under the Exchange Act. Rule
10b-18
has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our Sponsor, officers, directors, advisors and any of their respective affiliates will not make purchases of Class A Common Stock if the purchases would violate Section 9(a)(2) of or Rule
10b-5
under the Exchange Act.
Total Company Shares to Be Issued in the Business Combination
The following table presents the anticipated ownership of New Solid Power upon the Closing, which does not give effect to the potential exercise of any warrants and otherwise assumes the following redemption scenarios:
No Redemptions:
Illustrative Redemptions:
Maximum Redemptions:
130
21,500,000 shares of Class A Common Stock are redeemed (approximately 61.4% of the outstanding shares of Class A Common Stock as of the date of this proxy statement/prospectus).
|
Holders
|
No
Redemptions
|
% of
Total
|
Illustrative
Redemptions
|
% of
Total
|
Maximum
Redemptions
|
% of
Total
|
||||||||||||||||||
|
Historical Rollover Stockholders
|
102,922,125 | 63.1 | 102,922,125 | 67.5 | 102,922,125 | 72.6 | ||||||||||||||||||
|
Public Stockholders
|
35,000,000 | 21.4 | 24,250,000 | 15.9 | 13,500,000 | 9.5 | ||||||||||||||||||
|
New PIPE Investors
|
16,500,000 | 10.1 | 16,500,000 | 10.8 | 16,500,000 | 11.6 | ||||||||||||||||||
|
Initial Stockholders
|
8,750,000 | 5.4 | 8,750,000 | 5.7 | 8,750,000 | 6.2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total
|
163,172,125 | 100.00 | 152,422,125 | 100.00 | 141,672,125 | 100.00 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The table set forth above does not take into account warrants to purchase Class A Common Stock that will remain outstanding immediately following the business combination, but does include the Founder Shares, which will convert into Class A Common Stock upon an Initial Business Combination. The public warrants and private placement warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of our IPO and will expire five years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation. If we assume that all outstanding 11,666,667 public warrants and 6,666,667 private placement warrants were exercisable and exercised following completion of the business combination (and each other assumption applicable to the table set forth above remains the same), then the ownership of New Solid Power would be as follows:
|
Holders
|
No
Redemptions
|
% of
Total
|
Illustrative
Redemptions
|
% of
Total
|
Maximum
Redemptions
|
% of
Total
|
||||||||||||||||||
|
Historical Rollover Stockholders
|
102,922,125 | 56.7 | 102,922,125 | 60.3 | 102,922,125 | 64.3 | ||||||||||||||||||
|
Public Stockholders
|
46,666,667 | 25.7 | 35,916,667 | 21.0 | 25,166,667 | 15.7 | ||||||||||||||||||
|
New PIPE Investors
|
16,500,000 | 9.1 | 16,500,000 | 9.7 | 16,500,000 | 10.3 | ||||||||||||||||||
|
Initial Stockholders
|
15,416,667 | 8.5 | 15,416,667 | 9.0 | 15,416,667 | 9.6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total
|
181,505,459 | 100.00 | 170,755,459 | 100.00 | 160,005,459 | 100.00 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
In addition to the changes in percentage ownerships depicted above, variation in the levels of redemption will impact the dilutive effect of certain equity issuances related to the business combination, which would not otherwise be present in an underwritten public offering. Increasing levels of redemption will increase the dilutive effects of these issuances on non-redeeming stockholders. See the section entitled “Risk Factors—DCRC cannot be certain as to the number of public shares that will be redeemed and the potential impact to public stockholders who do not elect to redeem their public shares.”
|
No
Redemptions
|
Illustrative
Redemptions
|
Maximum
Redemptions
|
||||||||||||||||||||||
|
Shares
|
Value per
Share
(1)
|
Shares
|
Value per
Share
(2)
|
Shares
|
Value per
Share
(3)
|
|||||||||||||||||||
|
Base Scenario
(4)
|
163,172,125 | $ | 10.00 | 152,422,125 | $ | 10.00 | 141,672,125 | $ | 10.00 | |||||||||||||||
|
Excluding Initial Stockholders
(5)
|
154,422,125 | 10.57 | 143,672,125 | 10.61 | 132,922,125 | 10.66 | ||||||||||||||||||
|
Exercising Public Warrants
(6)(7)
|
174,838,792 | 9.33 | 164,088,792 | 9.29 | 153,338,792 | 9.24 | ||||||||||||||||||
|
Exercising Private Placement Warrants
(7)(8)
|
169,838,792 | 9.61 | 159,088,792 | 9.58 | 148,338,792 | 9.55 | ||||||||||||||||||
|
Exercising Public and Private Placement Warrants
(7)(9)
|
181,505,459 | 8.99 | 170,755,459 | 8.93 | 160,005,459 | 8.85 | ||||||||||||||||||
| (1) |
Based on a post-transaction equity value of New Solid Power of $1.632 billion.
|
| (2) |
Based on a post-transaction equity value of New Solid Power of $1.524 billion, or $1.632 billion less the approximately $107.5 million that would be paid from the Trust Account to redeem 10,750,000 shares of Class A Common Stock in connection with the business combination.
|
131
| (3) |
Based on a post-transaction equity value of New Solid Power of $1.417 billion, or $1.632 billion less the approximately $215.0 million that would be paid from the Trust Account to redeem 21,500,000 shares of Class A Common Stock in connection with the business combination.
|
| (4) |
Represents (a) the 102,922,125 shares of Class A Common Stock that would be issued to the Historical Rollover Stockholders in the business combination, (b) the 16,500,000 shares of Class A Common Stock to be issued to the New PIPE Investors, (c) the conversion of 8,750,000 shares of Class B Common Stock held by the initial stockholders and (d) the public shares, less any redemptions described above.
|
| (5) |
Represents the Base Scenario excluding the 8,750,000 shares of converted Class B Common Stock held by the initial stockholders.
|
| (6) |
Represents the Base Scenario plus the full exercise of the public warrants.
|
| (7) |
Analysis does not account for exercise prices to be paid in connection with the exercise of warrants.
|
| (8) |
Represents the Base Scenario plus the full exercise of the private placement warrants.
|
| (9) |
Represents the Base Scenario plus the full exercise of the public warrants and the private placement warrants.
|
Deferred Underwriting Fees
Approximately $12.3 million of deferred underwriting fees related to our IPO are conditioned upon completion of an Initial Business Combination, which fees are not impacted by the size of such transaction or the level of redemptions associated therewith. The following table illustrates the effective deferred underwriting fee on a percentage basis for public shares at each redemption level identified below.
|
No
Redemptions
|
Illustrative
Redemptions
|
Maximum
Redemptions
|
||||||||||
|
($ in millions)
|
||||||||||||
|
Unredeemed Public Shares
|
35,000,000 | 24,250,000 | 13,500,000 | |||||||||
|
Trust Proceeds to New Solid Power
|
$ | 350.0 | $ | 242.3 | $ | 135.0 | ||||||
|
Deferred Underwriting Fees
|
$ | 12.3 | $ | 12.3 | $ | 12.3 | ||||||
|
Effective Deferred Underwriting Fee (%)
|
3.5 | % | 5.1 | % | 9.1 | % | ||||||
Board of Directors of New Solid Power Following the Business Combination
Assuming the Director Election Proposal is approved by our stockholders at the special meeting, we expect the New Solid Power Board to be comprised of the individuals set forth below following the completion of the business combination.
|
Name
|
Age
|
Position
|
||
| Erik Anderson | 63 | Class I Director | ||
| Douglas Campbell | 48 | Class I Director and Chief Executive Officer | ||
| Rainer Feurer | 54 | Class III Director | ||
| Steven Goldberg | 68 | Class II Director | ||
| David Jansen | 59 | Class III Director and President | ||
| Robert Tichio | 43 | Class I Director | ||
| Class Director | ||||
| Class Director | ||||
| Class Director |
Redemption Rights
Under our Charter, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with our Charter. As of June 30, 2021, this would
132
have amounted to approximately $10.00 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Class A Common Stock for cash and will no longer own shares of DCRC. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our transfer agent in accordance with the procedures described herein. Notwithstanding the foregoing, a holder of the public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights in excess of the 20% threshold. Accordingly, all public shares in excess of the 20% threshold beneficially owned by a public stockholder or group will not be redeemed for cash. Each redemption of shares of Class A Common Stock by our public stockholders will decrease the amount in our Trust Account, which holds approximately $350.0 million as of June 30, 2021. In no event will we redeem public shares in an amount that would cause our net tangible assets (as determined in accordance with Rule
” for the procedures to be followed if you wish to redeem your shares for cash.
3a51-1(g)(1)
under the Exchange Act) to be less than $5,000,001 unless our Class A Common Stock otherwise does not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act. Because we anticipate that the Class A Common Stock will be listed on Nasdaq at the Closing, and such listing would mean that the Class A Common Stock would not constitute “penny stock” as such term is defined in Rule
3a51-1
under the Exchange Act, we do not anticipate the $5,000,001 net tangible asset threshold being applicable. See the section entitled “
Special Meeting of DCRC Stockholders—Redemption Rights
Appraisal Rights
There are no appraisal rights available to holders of shares of Class A Common Stock and Class B Common Stock in connection with the business combination.
Accounting Treatment
The business combination is intended to be accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (“GAAP”). Under this method of accounting, DCRC will be treated as the “acquired” company for financial reporting purposes. Accordingly, the business combination will be treated as the equivalent of Solid Power issuing stock for the net assets of DCRC, accompanied by a recapitalization. The net assets of DCRC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the business combination will be those of Solid Power.
Material U.S. Federal Income Tax Considerations
The following is a discussion of the material U.S. federal income tax considerations for U.S. Holders (as defined below) of Class A Common Stock and
Non-U.S.
Holders (as defined below) of Class A Common Stock that, in either case, elect to have their Class A Common Stock redeemed for cash if the business combination is completed. This discussion applies only to shares of our Class A Common Stock that are held as “capital assets” within the meaning of Section 1221 of the Code for U.S. federal income tax purposes (generally, property held for investment).
This discussion is based on the provisions of the Code, U.S. Treasury regulations, administrative rules, and judicial decisions, all as in effect on the date hereof, and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change or differing interpretation could significantly alter the tax considerations described herein. We have not sought any rulings from the IRS or formal written opinion from our tax advisors with respect to the statements made and the positions or conclusions described in this summary. Such statements, positions and conclusions are not free from doubt, and there can be no assurance that your tax advisor, the IRS or a court will agree with such statements, positions and conclusions.
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The following discussion does not purport to be a complete analysis of all potential tax effects resulting from the completion of the business combination and does not address the tax treatment of any other transactions occurring in connection with the business combination, including, but not limited to, the issuance of PIPE Shares and transactions undertaken by shareholders of Solid Power in connection with the business combination. In addition, this summary does not address the Medicare tax on certain investment income, U.S. federal estate or gift tax laws, any U.S. state or local or
non-U.S.
tax laws, any tax treaties or other tax law other than U.S. federal income tax law. Furthermore, this discussion does not address all U.S. federal income tax considerations that may be relevant to particular holders in light of their personal circumstances or that may be relevant to certain categories of investors that may be subject to special rules, such as:
| • |
banks, insurance companies, or other financial institutions;
|
| • |
tax-exempt
or governmental organizations;
|
| • |
“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code (or any entities all of the interests of which are held by a qualified foreign pension fund);
|
| • |
dealers in securities or foreign currencies;
|
| • |
persons whose functional currency is not the U.S. dollar;
|
| • |
traders in securities that use the
mark-to-market
|
| • |
“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
|
| • |
entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes or holders of interests therein;
|
| • |
persons deemed to sell Class A Common Stock under the constructive sale provisions of the Code;
|
| • |
persons that acquired Class A Common Stock through the exercise of employee stock options or otherwise as compensation or through a
tax-qualified
retirement plan;
|
| • |
persons that actually or constructively hold 5% or more (by vote or value) of any class of our stock;
|
| • |
persons that hold Class A Common Stock as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction, or other integrated investment or risk reduction transaction;
|
| • |
certain former citizens or long-term residents of the United States;
|
| • |
holders of Founder Shares and private placement warrants;
|
| • |
Solid Power and its shareholders, officers or directors; and
|
| • |
Sponsor, Riverstone and our officers or directors.
|
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our Class A Common Stock, the tax treatment of a partner in such partnership generally will depend upon the status of the partner, upon the activities of the partnership and upon certain determinations made at the partner level. Accordingly, partners in partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes) holding our Class A Common Stock are urged to consult with, and rely solely upon, their tax advisors regarding the U.S. federal income tax consequences to them relating to the matters discussed below.
INVESTORS ARE ENCOURAGED TO CONSULT WITH, AND RELY SOLELY UPON, THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS (INCLUDING ANY POTENTIAL FUTURE CHANGES THERETO) TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY OTHER TAX
134
LAWS, INCLUDING BUT NOT LIMITED TO, THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY U.S. STATE OR LOCAL,
NON-U.S.
OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
U.S. Holder and
Non-U.S.
Holder Defined
For purposes of this discussion, a “U.S. Holder” is a holder that, for U.S. federal income tax purposes, is:
| • |
an individual who is a citizen or resident of the United States;
|
| • |
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
|
| • |
an estate the income of which is subject to U.S. federal income tax regardless of its source; or
|
| • |
a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (ii) that has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person.
|
A
“Non-U.S.
Holder” is a Holder that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust and that is not a U.S. Holder.
U.S. Federal Income Taxation of U.S. Holders
This section applies to you if you are a “U.S. Holder
”
.
Redemption of Class A Common Stock – In General
In the event that a U.S. Holder’s Class A Common Stock is redeemed pursuant to the redemption provisions described in the subsection of this proxy statement/prospectus entitled “Special Meeting of DCRC Stockholders—Redemption Rights,” the treatment of the redemption for U.S. federal income tax purposes will depend on whether it qualifies as a sale of the Class A Common Stock under Section 302 of the Code. If the redemption qualifies as a sale of Class A Common Stock, the U.S. Holder will be treated as described under “—U.S. Federal Income Taxation of U.S. Holders—Gain or Loss on Redemption Treated as a Sale of Class A Common Stock” below. If the redemption does not qualify as a sale of Class A Common Stock, the U.S. Holder will be treated as receiving a distribution from us with the tax consequences described below under “—U.S. Federal Income Taxation of U.S. Holders—Taxation of Redemption Treated as a Distribution.” Whether a redemption qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the U.S. Holder (including any stock constructively owned by the U.S. Holder as a result of owning public warrants or otherwise) relative to all of our shares outstanding both before and after the redemption. The redemption of Class A Common Stock generally will be treated as a sale of Class A Common Stock (rather than as a distribution from us) if the redemption satisfies one of the following tests (which we refer to as the “redemption sale tests”): (i) it is “substantially disproportionate” with respect to the U.S. Holder, (ii) it results in a “complete termination” of the U.S. Holder’s interest in us, or (iii) it is “not essentially equivalent to a dividend” with respect to the U.S. Holder. In determining whether any of the redemption sale tests is satisfied, a U.S. Holder takes into account not only stock actually owned by the U.S. Holder, but also shares of stock that are “constructively” owned by it. A U.S. Holder may constructively own (i) stock owned by certain related individuals or entities in which the U.S. Holder has an interest or that have an interest in such U.S. Holder and (ii) any stock the U.S. Holder has a right to acquire by exercise of an option, which would generally include Class A Common Stock that could be acquired pursuant to the exercise of the public warrants.
In order to meet the “substantially disproportionate” test, the percentage of our outstanding voting stock actually and constructively owned by the U.S. Holder immediately following the redemption of our Class A
135
Common Stock must, among other requirements, be less than 80% of the percentage of our outstanding voting stock actually and constructively owned by the U.S. Holder immediately before the redemption. Prior to the business combination, the Class A Common Stock may not be treated as voting stock for this purpose and, consequently, this substantially disproportionate test may not be applicable. There will be a “complete termination” of a U.S. Holder’s interest if either (i) all of the shares of our stock both actually and constructively owned by the U.S. Holder are redeemed or (ii) all of the shares of our stock actually owned by the U.S. Holder are redeemed, the U.S. Holder is eligible to waive and effectively waives in accordance with specific rules the constructive attribution of stock owned by certain family members, and the U.S. Holder does not constructively own any other shares of our stock (including as a result of owning public warrants). The redemption of shares of our Class A Common Stock will not be “essentially equivalent to a dividend” if a U.S. Holder’s redemption results in a “meaningful reduction” of the U.S. Holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a U.S. Holder’s proportionate interest in us will depend on the particular facts and circumstances, but the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.”
If none of the redemption sale tests is satisfied, the redemption will be treated as a distribution from us and the tax considerations will be as described under “—U.S. Federal Income Taxation of U.S. Holders—Taxation of Redemption Treated as a Distribution” below. After the application of those rules, any remaining tax basis of the U.S. Holder in the redeemed Class A Common Stock will be added to the U.S. Holder’s adjusted tax basis in its remaining stock or, if it has none, to the U.S. Holder’s adjusted tax basis in its public warrants or possibly in other shares of our stock constructively owned by it.
U.S. Holders who actually or constructively own five percent (or, if our Class A Common Stock is not then publicly traded, one percent) or more of our stock (by vote or value) may be subject to special reporting requirements with respect to a redemption of our Class A Common Stock, and such holders should consult with, and rely solely upon, their own tax advisors with respect to their reporting requirements.
The rules governing the U.S. federal income tax treatment of redemptions are complex and the determination of whether a redemption will be treated as a sale of Class A Common Stock or as a distribution with respect to such stock is made on a
basis. U.S. Holders of Class A Common Stock who are considering exercising their redemption rights are encouraged to consult with, and rely solely upon, their tax advisors with respect to the potential tax consequences to them of the exercise of their redemption rights.
holder-by-holder
Gain or Loss on Redemption Treated as a Sale of Class A Common Stock
If the redemption qualifies as a sale of Class A Common Stock, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis with respect to its Class A Common Stock. Generally, the amount of gain or loss recognized by a U.S. Holder will be an amount equal to the difference between (i) the amount of cash received in such redemption and (ii) the U.S. Holder’s adjusted tax basis in its Class A Common Stock redeemed. A U.S. Holder’s adjusted tax basis in its Class A Common Stock generally will equal the U.S. Holder’s acquisition cost less any prior distributions paid to such U.S. Holder that were treated as a return of capital for U.S. federal income tax purposes.
Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period for the Class A Common Stock so disposed of exceeds one year. It is unclear, however, whether the redemption rights with respect to the Class A Common Stock described in this proxy statement/prospectus may be deemed to be a limitation of a stockholder’s risk of loss and suspend the running of the applicable holding period of such stock for this purpose. If the running of the holding period for the Class A Common Stock is suspended, U.S. Holders may not be able to satisfy the
one-year
holding period requirement for long-term capital
136
gain treatment. If the
one-year
holding period requirement is not satisfied, any gain would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. Long-term capital gains recognized by
non-corporate
U.S. Holders are currently eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Taxation of Redemption Treated as a Distribution
If the redemption does not qualify as a sale of Class A Common Stock, the U.S. Holder generally will be treated as receiving a distribution of cash from us. Such distribution generally will constitute a dividend for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. A distribution in excess of our current and accumulated earnings and profits will constitute a
non-taxable
return of capital to the extent of the U.S. Holder’s adjusted tax basis in its Class A Common Stock, that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in its Class A Common Stock. Any remaining portion of the distribution will be treated as capital gain from the sale or exchange of Class A Common Stock and will be treated as described under “—U.S. Federal Income Taxation of U.S. Holders—Gain or Loss on Redemption Treated as a Sale of Class A Common Stock” above.
Any portion of such a distribution deemed to be paid to a U.S. Holder that is treated as a corporation for U.S. federal income tax purposes that is treated as a dividend generally will qualify for the dividends received deduction if the requisite holding period is satisfied, but may be subject to the “extraordinary dividend” provisions of the Code (which could cause a reduction in the tax basis of such corporate U.S. Holder’s basis in its shares of Class A Common Stock and increase the amount of gain or decrease the amount of loss recognized by such U.S. Holder in connection with a disposition of its shares). With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, any portion of such a distribution deemed to be paid to a
non-corporate
U.S. Holder that is treated as a dividend generally will constitute a “qualified dividend” that is currently subject to U.S. federal income tax at the lower applicable long-term capital gains rate. It is unclear whether the redemption rights with respect to the Class A Common Stock described in this proxy statement/prospectus may be deemed to be a limitation of a stockholder’s risk of loss and suspend the running of the applicable holding period requirements for this purpose. If the applicable holding period requirements are not satisfied, a corporate U.S. Holder may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and a
non-corporate
U.S. Holder may be subject to tax on the dividend at regular ordinary income tax rates instead of the preferential income tax rate that applies to qualified dividend income. U.S. Holders should consult with, and rely solely upon, their tax advisors regarding the availability of the dividends received deduction (and the possible application of the “extraordinary dividend” provisions of the Code in their particular circumstances) or the lower preferential income tax rate for qualified dividend income, as the case may be.
Information Reporting and Backup Withholding
Payments received by a U.S. Holder as a result of the exercise of its redemption rights may be subject, under certain circumstances, to information reporting and backup withholding. Backup withholding will not apply, however, to a U.S. Holder that (i) is a corporation or entity that is otherwise exempt from backup withholding (that, when required, certifies as to its status) or (ii) furnishes a correct taxpayer identification number and makes any other required certification on IRS Form
W-9.
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of the U.S. Holder subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund generally may be obtained, provided that the required information is timely furnished to the IRS.
137
U.S. Federal Income Taxation of
Non-U.S.
Holders
This section applies to you if you are a
“Non-U.S.
Holder.”
Redemption of Class A Common Stock—In General
The characterization for U.S. federal income tax purposes of the redemption of a
” as applicable.
Non-U.S.
Holder’s Class A Common Stock pursuant to the redemption provisions described in the section of this proxy statement/prospectus entitled “Special Meeting of DCRC Stockholders—Redemption Rights,” generally will correspond to the U.S. federal income tax characterization of such a redemption of a U.S. Holder’s Class A Common Stock, as described under “—U.S. Federal Income Taxation of U.S. Holders—Redemption of Class A Common Stock—In General” above, and the consequences of the redemption to the
Non-U.S.
Holder are described below in “—U.S. Federal Income Taxation of
Non-U.S.
Holders—Gain on Redemption Treated as a Sale of Class A Common Stock” and “—U.S. Federal Income Taxation of
Non-U.S.
Holders—Taxation of Redemption Treated as a Distribution
,
The rules governing the U.S. federal income tax treatment of redemptions are complex and the determination of whether a redemption will be treated as a sale of Class A Common Stock or as a distribution with respect to such stock is made on a
basis. It is possible that because the applicable withholding agent may not be able to determine the proper characterization of a redemption of a
holder-by-holder
Non-U.S.
Holder’s Class A Common Stock at the time such
Non-U.S.
Holder is redeemed, the withholding agent might treat the entire redemption as a distribution subject to withholding tax.
Non-U.S.
Holders of Class A Common Stock considering exercising their redemption rights are encouraged to consult with, and rely solely upon, their tax advisors with respect to the potential tax consequences to them of the exercise of their redemption rights.
Gain on Redemption Treated as a Sale of Class A Common Stock
If the redemption qualifies as a sale of Class A Common Stock with respect to a
Non-U.S.
Holder, subject to the discussion below under “—U.S. Federal Income Taxation of
Non-U.S.
Holders—Information Reporting and Backup Withholding,” such
Non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax on any gain realized upon the redemption of its Class A Common Stock unless:
| • |
the
Non-U.S.
Holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the redemption occurs and certain other conditions are met;
|
| • |
such gain is effectively connected with a trade or business conducted by the
Non-U.S.
Holder in the United States (and, if required by an applicable income tax treaty, is treated as attributable to a permanent establishment maintained by the
Non-U.S.
Holder in the United States); or
|
| • |
our Class A Common Stock constitutes a United States real property interest by reason of our status as a “United States real property holding corporation” (a “USRPHC”) for U.S. federal income tax purposes and, as a result, such gain is treated as effectively connected with a trade or business conducted by the
Non-U.S.
Holder in the United States.
|
A
Non-U.S.
Holder described in the first bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses.
A
Non-U.S.
Holder whose gain is described in the second bullet point above or, subject to the exceptions described in the next paragraph, the third bullet point above, generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons unless an applicable income tax treaty provides otherwise. If the
Non-U.S.
Holder is a corporation for U.S. federal income tax purposes whose gain is
138
described in the second bullet point above, such gain would also be included in its effectively connected earnings and profits (as adjusted for certain items), which may be subject to a branch profits tax (at a 30% rate or such lower rate as provided under an applicable income tax treaty).
Generally, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. We believe that we currently are not (and have not been during the applicable testing period) a USRPHC for U.S. federal income tax purposes, and we do not expect to be a USRPHC on the redemption date. However, in the event that we were to become a USRPHC, as long as the Class A Common Stock continues to be “regularly traded on an established securities market” (within the meaning of the U.S. Treasury regulations, referred to herein as “regularly traded”), a
Non-U.S.
Holder that actually or constructively owns, or owned at any time during the shorter of the five-year period ending on the date of the redemption or the
Non-U.S.
Holder’s holding period for the Class A Common Stock, more than 5% of the Class A Common Stock will be treated as disposing of a United States real property interest as a result of the redemption and will be subject to U.S. tax on gain realized on such redemption as a result of our status as a USRPHC. It is unclear how a
Non-U.S.
Holder’s ownership of public warrants will affect the determination of whether such
Non-U.S.
Holder owns more than 5% of the Class A Common Stock. We can provide no assurance as to our status as a USRPHC or as to whether the Class A Common Stock will be treated as regularly traded. If we were a USRPHC and our Class A Common Stock were not considered to be regularly traded, a
Non-U.S.
Holder (regardless of the percentage of Class A Common Stock or public warrants owned) would be treated as disposing of a United States real property interest as a result of the redemption and would be subject to U.S. federal income tax on such redemption of Class A Common Stock, and a 15% withholding tax would apply to the gross proceeds from such redemption.
Non-U.S.
Holders are encouraged to consult with, and rely solely upon, their tax advisors regarding the tax consequences related to ownership in a USRPHC.
Taxation of Redemption Treated as a Distribution
If the redemption does not qualify as a sale of Class A Common Stock, the
Non-U.S.
Holder generally will be treated as receiving a distribution of cash from us. Such distribution generally will constitute a dividend for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. A distribution in excess of our current and accumulated earnings and profits will constitute a
non-taxable
return of capital to the extent of the
Non-U.S.
Holder’s adjusted tax basis in its Class A Common Stock. Any remaining portion of the distribution will be treated as capital gain from the sale or exchange of Class A Common Stock and will be treated as described under “—U.S. Federal Income Taxation of
Non-U.S.
Holders—Gain on Redemption Treated as a Sale of Class A Common Stock” above.
Subject to the withholding requirements under FATCA (as defined below) and other than with respect to effectively connected dividends, each of which is discussed below, any distribution treated as a dividend paid to a
(or other applicable or successor form) certifying qualification for the reduced rate.
Non-U.S.
Holder on its Class A Common Stock generally will be subject to U.S. withholding tax at a rate of 30% (unless an applicable income tax treaty provides for a lower rate). It is possible that because the applicable withholding agent may not know our current or accumulated earnings and profits at the time of the redemption, the withholding agent may withhold 30% of the gross amount of the entire distribution, as permitted by applicable U.S. Treasury regulations. To receive the benefit of a reduced treaty rate, a
Non-U.S.
Holder must provide the applicable withholding agent with an IRS Form
W-8BEN
or IRS Form
W-8BEN-E
Any portion of a distribution that is treated as a dividend paid to a
Non-U.S.
Holder that is effectively connected with a trade or business conducted by the
Non-U.S.
Holder in the United States (and, if required by an applicable income tax treaty, that is treated as attributable to a permanent establishment maintained by the
139
Non-U.S.
Holder in the United States) generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons. Such effectively connected dividends will not be subject to U.S. withholding tax if the
Non-U.S.
Holder satisfies certain certification requirements by providing the applicable withholding agent with a properly executed IRS Form
W-8ECI
certifying eligibility for exemption. If the
Non-U.S.
Holder is a corporation for U.S. federal income tax purposes, it may also be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include effectively connected dividends.
Information Reporting and Backup Withholding
Payments received by a
Non-U.S.
Holder as a result of the exercise of its redemption rights may be subject, under certain circumstances, to information reporting and backup withholding. A
Non-U.S.
Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its
non-U.S.
status, under penalties of perjury, on a duly executed applicable IRS Form
W-8
or by otherwise establishing an exemption, provided the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person. However, information returns are required to be filed with the IRS in connection with any payments of dividends on our Class A Common Stock paid to the
Non-U.S.
Holder, regardless of whether any tax was actually withheld.
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of the
Non-U.S.
Holder subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund generally may be obtained, provided that the required information is timely furnished to the IRS.
Additional Withholding Requirements under FATCA
Sections 1471 through 1474 of the Code, and the U.S. Treasury regulations and administrative guidance issued thereunder (“FATCA”), impose a 30% withholding tax on any dividends paid on Class A Common Stock and, subject to the proposed U.S. Treasury regulations discussed below, on proceeds from sales or other dispositions of Class A Common Stock, if paid to a “foreign financial institution” or a
or (iii) the foreign financial institution or
Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes. While gross proceeds from a sale or other disposition of Class A Common Stock paid after January 1, 2019 would have originally been subject to withholding under FATCA, proposed U.S. Treasury regulations provide that such payments of gross proceeds do not constitute withholdable payments. Taxpayers may generally rely on these proposed U.S. Treasury regulations until they are revoked or final U.S. Treasury regulations are issued. Holders are encouraged to consult with, and rely solely upon, their own tax advisors regarding the effects of FATCA with respect to them.
“non-financial
foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or
non-financial
foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are
non-U.S.
entities with U.S. owners), (ii) in the case of a
non-financial
foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on an IRS Form
W-8BEN-E),
non-financial
foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form
W-8BEN-E).
THE FOREGOING DISCUSSION IS NOT A COMPREHENSIVE DISCUSSION OF ALL OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CLASS A COMMON STOCK.
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SUCH HOLDERS SHOULD CONSULT WITH, AND RELY SOLELY UPON, THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES TO THEM OF ANY EXERCISE OF THEIR REDEMPTION RIGHTS, INCLUDING THE APPLICABILITY AND EFFECT OF ANY OTHER TAX LAWS, INCLUDING BUT NOT LIMITED TO, U.S. FEDERAL ESTATE AND GIFT TAX LAWS, ANY U.S. STATE OR LOCAL OR
NON-U.S.
TAX LAWS AND TAX TREATIES (AND ANY POTENTIAL FUTURE CHANGES THERETO).
Regulatory Matters
Neither DCRC nor Solid Power is aware of any material regulatory approvals or actions that are required for completion of the business combination other than as required under the HSR Act. The parties have filed a premerger notification under the HSR Act. It is presently contemplated that if any additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any such additional approvals or actions will be obtained.
Vote Required for Approval
The Closing is conditioned on the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the Director Election Proposal, the 2021 Plan Proposal and the ESPP Proposal at the special meeting.
The Business Combination Proposal (and consequently, the Business Combination Agreement and the business combination) will be approved and adopted only if we obtain the affirmative vote (online or by proxy) of holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have no effect on the outcome of the vote on the Business Combination Proposal.
Our Sponsor, directors and officers have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT DCRC STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.
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PROPOSAL NO. 2—THE AUTHORIZED SHARE CHARTER PROPOSAL
Overview
Assuming the Business Combination Proposal and the Nasdaq Proposal are approved, our stockholders are also being asked to approve and adopt an amendment to the Charter to increase the number of authorized shares of DCRC’s capital stock, par value $0.0001 per share, from 271,000,000 shares, consisting of (a) 270,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock, and (b) 1,000,000 shares of Preferred Stock, to 2,200,000,000 shares, consisting of (i) 2,000,000,000 shares of common stock, par value $0.0001 per share, and (ii) 200,000,000 shares of Preferred Stock. The full text of the Proposed Second A&R Charter reflecting the proposed amendment pursuant to the Authorized Share Charter Proposal is attached to this proxy statement/prospectus as
.
Annex B
Reasons for the Amendment
The Authorized Share Charter Proposal is intended to provide adequate authorized share capital to (a) accommodate the issuance of shares of Class A Common Stock as part of the exchange for outstanding securities of Solid Power at Closing (or reservation for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) pursuant to the Business Combination Agreement, PIPE Financing, 2021 Plan, the ESPP and the future conversion of outstanding warrants into shares of Class A Common Stock and (b) provide flexibility for future issuances of Class A Common Stock and Preferred Stock if determined by the New Solid Power Board to be in the best interests of the post-combination company without incurring the risk, delay and potential expense incident to obtaining stockholder approval for a particular issuance.
Vote Required for Approval
The Authorized Share Charter Proposal is conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal at the special meeting. If the Business Combination Proposal or the Nasdaq Proposal are not approved, this Proposal No. 2 will have no effect, even if approved by our stockholders.
The approval of the Authorized Share Charter Proposal requires the affirmative vote (online or by proxy) of (i) holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class, and (ii) holders of a majority of the shares of Class A Common Stock entitled to vote thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have the same effect as a vote “AGAINST” this proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT DCRC STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AUTHORIZED SHARE CHARTER PROPOSAL.
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PROPOSAL NO. 3—THE ADDITIONAL CHARTER PROPOSAL
Overview
Assuming the Business Combination Proposal and the Nasdaq Proposal are approved, DCRC’s stockholders are also being asked, for the reasons described below, to approve amendments to the Charter to (a) eliminate certain provisions relating to an Initial Business Combination that will no longer be applicable to DCRC following the closing of the business combination; (b) change the post-combination company’s name to “Solid Power, Inc.”; (c) change the minimum stockholder vote required to amend, repeal or modify certain specified provisions of the Proposed Second A&R Charter or any provision inconsistent with any provision of the Amended and Restated Bylaws; (d) provide for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon; (e) remove the right of holders of Class B Common Stock to act by written consent; and (f) remove the designation of certain courts as the exclusive forum for certain types of stockholder claims. The full text of the Proposed Second A&R Charter reflecting the proposed amendments pursuant to the Additional Charter Proposal is attached to this proxy statement/prospectus as
. For a comparison of the existing Charter and the Proposed Second A&R Charter, please see the section entitled “Description of Securities.”
Annex B
Reasons for the Amendments
The DCRC Board’s reasons for proposing each of these amendments to the Charter are as set forth below:
Currently, the Charter contains provisions related to DCRC’s status as a blank check company. The DCRC Board believes that making corporate existence perpetual is desirable to reflect the business combination. The elimination of certain provisions related to the DCRC’s status as a blank check company is desirable because these provisions will serve no purpose following the business combination. For example, the Proposed Second A&R Charter does not include the requirement to dissolve the post-combination company and instead allow the post-combination company to continue as a corporate entity with perpetual existence following consummation of the business combination. Perpetual existence is the usual period of existence for public corporations, and the DCRC Board believes it is the most appropriate period for the post-combination company following the business combination. In addition, certain other provisions in the Company’s current organizational documents require that proceeds from the Initial Public Offering be held in the Trust Account until a business combination or liquidation of the Company has occurred. These provisions cease to apply once the business combination is consummated and are therefore not included in the Proposed Second A&R Charter of the post-combination company. Furthermore, the Charter contemplates that DCRC’s common stock is subdivided into two series: Class A Common Stock and Class B Common Stock. All shares of the Class B Common Stock will convert into shares of Class A Common Stock automatically on the closing of the business combination. As such, the Proposed Second A&R Charter contemplates that, upon the effectiveness of the Proposed Second A&R Charter, each share of DCRC’s Class A Common Stock and Class B Common Stock issued and outstanding or held as treasury stock immediately prior thereto shall, automatically and without further action by any stockholder, be reclassified as, and shall become, one share of “common stock” of New Solid Power.
Currently the Company’s name is Decarbonization Plus Acquisition Corporation III. The Board believes the name of the post-combination company should more closely align with the name of the post-combination business and therefore has proposed the name change.
The Charter generally may not be amended without an affirmative vote of a majority of all the then-outstanding shares of capital stock, voting as a single class, subject to certain heightened voting standards with respect to amendments to certain Initial Business Combination provisions and increases to authorized capital. The Proposed Second A&R Charter would require at least 66 2/3% of the voting power of all the then-outstanding
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shares of capital stock, voting as a single class, for the amendment, repeal or modification of (i) certain specified provisions of the Proposed Second A&R Charter, or (ii) any provision inconsistent with any provision of the Amended and Restated Bylaws of the post-combination company. The amendments are intended to protect the Amended and Restated Bylaws and certain key provisions of the Proposed Second A&R Charter of the post-combination company from arbitrary amendment and to prevent a simple majority of stockholders from taking actions that may be harmful to other stockholders or making changes to provisions that are intended to protect all stockholders.
The current Charter provides that before a business combination, only holders of Founder Shares may remove a director, with or without cause, and that holders of public shares have no right to vote on the election or removal of any director. Under the DGCL, unless a company’s certificate of incorporation provides otherwise, removal of a director only for cause is automatic with a classified board. The Proposed Second A&R Charter provides for the removal of a director only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the stock outstanding and entitled to vote thereon. The DCRC Board believes that such a standard will (i) increase board continuity and the likelihood that experienced board members with familiarity of the post-combination company’s business operations would serve on the board at any given time and (ii) make it more difficult for a potential acquiror or other person, group or entity to gain control of the post-combination company’s board of directors.
The current Charter provides that before a business combination, holders of Class B Common Stock may act by written consent in accordance with the DGCL. The Proposed Second A&R Charter would remove this right. Eliminating the right of stockholders to act by written consent limits the circumstances under which stockholders can act on their own initiative to remove directors, or alter or amend the post-combination company’s organizational documents outside of a duly called special or annual meeting of the stockholders of the post-combination company. Further, the DCRC Board believes continuing to limit stockholders’ ability to act by written consent will (i) reduce the time and effort our board of directors and management would need to devote to stockholder proposals, which time and effort could distract our directors and management from other important company business; and (ii) facilitate transparency and fairness by allowing all stockholders to consider, discuss, and vote on pending stockholder actions. In addition, the elimination of the stockholders’ ability to act by written consent may have certain anti-takeover effects by forcing a potential acquirer to take control of the board of directors only at a duly called special or annual meeting. However, this proposal is not in response to any effort of which the Company is aware to obtain control of the post-combination company. Further, the DCRC Board does not believe that the effects of the elimination of stockholder action by written consent will create a significant impediment to a tender offer or other effort to take control of the post-combination company. Inclusion of these provisions in the Proposed Second A&R Charter might also increase the likelihood that a potential acquirer would negotiate the terms of any proposed transaction with the board of directors and thereby help protect stockholders from the use of abusive and coercive takeover tactics.
Currently, the Charter contains provisions establishing exclusive forums for certain types of stockholder claims. The Proposed Second A&R Charter does not contain similar provisions. However, similar provisions are included in the Proposed Bylaws. For a comparison of such provisions, please see “Description of Securities.”
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Vote Required for Approval
The Additional Charter Proposal is conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal at the special meeting. If the Business Combination Proposal or the Nasdaq Proposal are not approved, this Proposal No. 3 will have no effect, even if approved by our stockholders.
The approval of the Additional Charter Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have the same effect as a vote “AGAINST” this proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT DCRC STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADDITIONAL CHARTER PROPOSAL.
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PROPOSAL NO. 4—THE NASDAQ PROPOSAL
Overview
Assuming the Business Combination Proposal is approved, DCRC’s stockholders are also being asked to approve (a) the issuance (or reservation for issuance in respect of New Solid Power options, New Solid Power restricted stock and New Solid Power warrants issued in exchange for outstanding
pre-merger
Solid Power Options, Solid Power Restricted Stock and Solid Power Warrants) of 128,645,073 shares of Class A Common Stock and (b) the issuance and sale of (i) 16,500,000 shares of Class A Common Stock in the PIPE Financing.
Why DCRC Needs Stockholder Approval
We are seeking stockholder approval in order to comply with Section 5635(a) of the Nasdaq Stock Market Rulebook.
Under Section 5635(a) of the Nasdaq Stock Market Rulebook, stockholder approval is required prior to the issuance of securities in connection with the acquisition of the stock or assets of another company if such securities are not issued in a public offering for cash and due to the present or potential issuance of common stock or securities convertible into or exercisable for common stock (a) have or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock; or (b) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities. DCRC will issue shares representing 20% or more of the number of outstanding shares of Class A Common Stock and Class B Common Stock of DCRC prior to the issuance, or 20% or more of its voting power prior to the issuance, pursuant to the Business Combination Agreement and the PIPE Financing.
Effect of Proposal on Current Stockholders
If the Nasdaq Proposal is adopted, up to an aggregate of 145,145,073 shares of Class A Common Stock may be issued in connection with the business combination and the PIPE Financing. The issuance of such shares would result in significant dilution to our stockholders, and result in our stockholders having a smaller percentage interest in the voting power, liquidation value and aggregate book value of DCRC.
Vote Required for Approval
The Closing is conditioned on the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the Director Election Proposal, the 2021 Plan Proposal and the ESPP Proposal at the special meeting.
Approval of the Nasdaq Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have no effect on the outcome of the vote on the Nasdaq Proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT DCRC STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE NASDAQ PROPOSAL.
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PROPOSAL NO. 5 —THE 2021 PLAN PROPOSAL
Assuming the Business Combination Proposal is approved, DCRC’s stockholders are also being asked to approve the Solid Power, Inc. 2021 Equity Incentive Plan (the “2021 Plan”) a copy of which is attached as Annex E. The DCRC Board approved the 2021 Plan on , subject to stockholder approval at the special meeting. The 2021 Plan is being adopted in connection with the Business Combination Agreement and, subject to stockholder approval at the special meeting, will become effective upon the closing of the business combination. A total of shares of Class A Common Stock are being requested to be reserved for issuance under the 2021 Plan, plus up to additional shares of Class A Common Stock that may become available for issuance as a result of shares subject to assumed awards under the Solid Power, Inc. 2014 Equity Incentive Plan (the “2014 Plan”) due to their expiration or termination, being tendered or withheld for the payment of an exercise price or for tax withholding obligations, or forfeiture or repurchase due to failure to vest. The 2021 Plan is intended to replace the 2014 Plan, which will expire as to future grants as of the effective date of the Business Combination. Approval of the 2021 Plan will allow New Solid Power to provide equity awards as part of New Solid Power’s compensation program, an important tool for motivating, attracting and retaining talented employees and for creating stockholder value.
Non-approval
of the 2021 Plan will result in the 2021 Plan not becoming effective, no awards being granted thereunder and compel New Solid Power to consider significantly increasing the cash component of employee compensation following the closing of the business combination to attract and retain key employees because New Solid Power may need to replace components of compensation New Solid Power previously delivered in equity awards in order to provide market competitive pay, which would (if implemented) reduce New Solid Power’s operating cash flow.
We believe that long-term incentive compensation programs align the interests of management, employees and stockholders to create long-term stockholder value. Equity plans such as the 2021 Plan increase New Solid Power ability to achieve this objective, and, by allowing for several different forms of long-term incentive awards, helps New Solid Power to recruit, reward, motive, and retain talented personnel. We believe that the approval of the 2021 Plan is an essential component to New Solid Power’s continued success following the Business Combination, and in particular, New Solid Power’s ability to attract and retain outstanding and highly skilled individuals in the competitive labor markets in which New Solid Power will compete. Such awards are also crucial to New Solid Power’s ability to motivate employees to achieve its goals.
Key Plan Provisions
| • |
The 2021 Plan will continue for up to ten (10) years following stockholder approval of the 2021 Plan, unless earlier terminated by the New Solid Power Board or compensation committee, but no incentive stock options may be granted after ten (10) years from the earlier of the New Solid Power Board or stockholder approval of the 2021 Plan.
|
| • |
The 2021 Plan provides for the grant of stock options, both incentive stock options and nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards.
|
| • |
shares of Class A Common Stock will be authorized for issuance pursuant to awards under the 2021 Plan, plus up to additional shares of Class A Common Stock that may become available for issuance as a result of shares subject to assumed awards under the 2014 Plan due to their expiration or termination, being tendered or withheld for the payment of an exercise price or for tax withholding obligations, or forfeiture or repurchase due to failure to vest, as described below.
|
| • |
The 2021 Plan will be administered by the New Solid Power Board or, if delegated by the New Solid Power Board, the compensation committee of the New Solid Power Board.
|
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Summary of the 2021 Plan
The following paragraphs provide a summary of the principal features of the 2021 Plan and its operation. However, this summary is not a complete description of all of the provisions of the 2021 Plan and is qualified in its entirety by the specific language of the 2021 Plan.
Purposes of the 2021 Plan
The purposes of the 2021 Plan are to attract and retain personnel for positions with New Solid Power, any parent or subsidiary, and any entity that is in control of, is controlled by or is under common control with New Solid Power following the Business Combination (such entities are referred to herein as the company group); to provide additional incentive to employees, directors, and consultants; and to promote the success of New Solid Power’s business following the Business Combination. These incentives will be provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards as the administrator of the 2021 Plan may determine.
Authorized Shares
Subject to the adjustment provisions contained in the 2021 Plan, the maximum number of shares of Class A Common Stock that may be issued pursuant to awards under the 2021 Plan is (i) shares of Class A Common Stock, plus (ii) any shares of Class A Common Stock subject to stock options or other awards that were assumed in the Business Combination and expire or otherwise terminate without having been exercised in full, are tendered to or withheld by New Solid Power for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by New Solid Power due to failure to vest, with the maximum number of shares to be added to the 2021 Plan pursuant to clause (ii) equal to shares of Class A Common Stock. The 2021 Plan also includes an evergreen provision that provides for an automatic annual increase to the number of shares of Class A Common Stock available for issuance under the 2021 Plan on the first day of each fiscal year beginning with the 2022 fiscal year, equal to the least of:
| • |
shares of Class A Common Stock;
|
| • |
5% of the total number of shares of all classes of Class A Common Stock outstanding as of the last day of our immediately preceding fiscal year; or
|
| • |
Such lesser amount determined by the administrator.
|
The 2021 Plan provides that the evergreen provision will terminate following the increase on the first day of the 2031 fiscal year. Generally, if an award expires or becomes unexercisable without having been exercised in full, is surrendered in full pursuant to an exchange program, or, with respect to restricted stock, restricted stock units or performance awards, is forfeited to or reacquired by us due to the failure to vest, the unpurchased shares (or for awards other than options or stock appreciation rights, the forfeited or repurchased shares) that were subject to such awards will become available for future grant or sale under the 2021 Plan (unless it has terminated). With respect to stock appreciation rights, only shares actually issued will cease to be available. Shares that actually have been issued under the 2021 Plan under any award will not be returned to the 2021 Plan and will not become available for future distribution under the 2021 Plan. Shares used to pay the exercise price of an award or to satisfy the tax withholding and remittance obligations related to an award will become available for future grant or sale under the 2021 Plan. To the extent an award is paid out in cash rather than shares, such cash payment will not reduce the number of shares available for issuance.
If any extraordinary dividend or other extraordinary distribution (whether in cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up,
spin-off,
combination, reclassification, repurchase, or exchange of shares or other securities of New Solid Power, other change in the corporate structure of New Solid Power affecting the shares, or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting
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Standards Codification Topic 718 (or any of its successors) affecting the shares occurs (including a change in control of New Solid Power), the administrator, to the extent the administrator in its sole discretion deems necessary to prevent diminution or enlargement of the benefits or potential benefits intended to be provided under the 2021 Plan, will adjust the number and class of shares that may be delivered under the 2021 Plan and/or the number, class, and price of shares covered by each outstanding award, and the numerical share limits contained in the 2021 Plan.
Plan Administration
The Board or a committee appointed by the Board will administer the 2021 Plan and is referred to as the administrator. Different administrators may administer the 2021 Plan with respect to different groups of service providers. The Board may retain the authority to concurrently administer the 2021 Plan and revoke the delegation of some or all authority previously delegated.
Subject to the terms of the 2021 Plan and applicable laws, the administrator generally will have the power, in its sole discretion, to make any determinations and perform any actions deemed necessary or advisable for administering the 2021 Plan. The administrator will have the power to administer the 2021 Plan, including but not limited to the power to construe and interpret the 2021 Plan and awards granted under the 2021 Plan, and determine the terms of awards, including but not limited to the exercise price (if any), the number of shares of Class A Common Stock subject to each award, the time when awards may vest or be exercised (including the ability to accelerate the vesting and exercisability of awards), and the form of consideration payable upon exercise, if applicable. The administrator may select the service providers to whom awards may be granted and approve forms of awards agreements under the 2021 Plan. The administrator will not be required to treat all awards, portions of awards or participants similarly. The administrator will also have the authority to amend awards (including but not limited to the discretionary authority to extend the post-termination exercisability period of awards and to extend the maximum term of an option) and to temporarily suspend the exercisability of an award if the administrator deems such suspension to be necessary or appropriate for administrative purposes, subject to the provisions of the 2021 Plan. The administrator may institute and determine the terms and conditions of an exchange program under which participants have the opportunity to transfer any outstanding awards to a financial institution or other person or entity selected by the administrator and to institute an exchange program by which outstanding awards may be surrendered or cancelled in exchange for awards of the same type which may have a higher or lower exercise price and/or different terms, awards of a different type, and/or cash, or by which the exercise price of an outstanding award is increased or reduced. Unless a participant is on an approved leave of absence, the administrator will have sole discretion to determine the date on which a participant stops actively providing services to New Solid Power or the company group. The administrator’s decisions, determinations, and interpretations are final and binding on all participants and any other holders of awards.
Eligibility
Persons eligible to receive awards under the 2021 Plan include our officers and other employees,
non-employee
directors and consultants of New Solid Power. Following the closing of the business combination, approximately 71 of our employees, each of our seven
non-employee
directors and approximately other individuals who provide services to us as consultants, are considered eligible under the 2021 Plan.
Stock Options
Options may be granted under the 2021 Plan. Subject to the provisions of the 2021 Plan, the administrator will determine the terms and conditions of options, including when such options vest and become exercisable (and the administrator will have the discretion to accelerate the time at which such options will vest or become exercisable) and whether such options are designated as incentive stock options intended to qualify under
149
Section 422 of the Code or options not intended to so qualify. The per share exercise price of any option generally must be at least 100% of the fair market value of a share on the date of grant, and the term of an incentive stock option may not be more than 10 years. However, with respect to any incentive stock option granted to an individual who owns 10% of the voting power of all classes of stock of New Solid Power or any of its parent or subsidiary corporations, the term of such option must not exceed 5 years, and the per share exercise price of such incentive stock option must be at least 110% of the fair market value of a share on the grant date. After a participant’s service terminates, he or she generally may exercise the vested portion of his or her option for the period of time stated in his or her option agreement. In the event of a termination for cause or resignation following the occurrence of an event that otherwise would be cause, the option immediately will be forfeited. In no event may an option be exercised later than the expiration of its term, except in certain circumstances where the expiration occurs during a period where exercise is not permitted under applicable law, as described more fully in the 2021 Plan. Subject to the provisions of the 2021 Plan, the administrator will determine the other terms of options, including but not limited to the acceptable forms of consideration for exercising an option.
Stock Appreciation Rights
Stock appreciation rights may be granted under the 2021 Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of Class A Common Stock between the exercise date and the date of grant. Subject to the provisions of the 2021 Plan, the administrator will determine the terms and conditions of stock appreciation rights, including when such rights vest and become exercisable (and the administrator will have the discretion to accelerate the time at which such rights will vest or become exercisable) and whether to pay any increased appreciation in cash, shares, or a combination of both. The per share exercise price of a stock appreciation right must be at least 100% of the fair market value a share on the date of grant with respect to United States taxpayers, and the term of a stock appreciation right will be 10 years. After a participant’s service terminates, he or she generally may exercise the vested portion of his or her stock appreciation right for the period of time stated in his or her option agreement. In the event of a termination for cause or resignation following the occurrence of an event that otherwise would be cause, the stock appreciation right immediately will be forfeited. However, in no event may a stock appreciation right be exercised later than the expiration of its terms, except in certain circumstances where the expiration occurs during a period where exercise is not permitted under applicable law, as described more fully in the 2021 Plan.
Restricted Stock
Restricted stock may be granted under the 2021 Plan. Restricted stock awards are grants of shares that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of shares of restricted stock granted to any employee, director or consultant. The administrator may impose whatever conditions to vesting it determines to be appropriate (for example, the administrator may set restrictions based on the achievement of specific performance goals or continued service to us or members of the company group), and the administrator will have the discretion to accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have voting but will not have dividend rights with respect to such shares unless and until such shares vest in accordance with their terms. Shares of restricted stock as to which the restrictions have not lapsed are subject to our right of repurchase or forfeiture by the participant.
Restricted Stock Units
Restricted stock units may be granted under the 2021 Plan. Restricted stock units are bookkeeping entries representing an amount equal to the fair market value of one share of Class A Common Stock. The administrator will determine the terms and conditions of restricted stock units including the vesting criteria (which may include accomplishing specified performance criteria or continued service to us) and the form and timing of payment. The administrator will have the discretion to accelerate the time at which any restrictions will lapse or be removed and to settle earned restricted stock units in cash, shares, or a combination of both.
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Performance Awards
Performance awards may be granted under the 2021 Plan. Performance awards are awards that will result in a payment to a participant only if objectives established by the administrator are achieved or the awards otherwise vest. The administrator will establish organizational or individual performance objectives in its discretion, which, depending on the extent to which they are met, will determine the value of the payout for the performance awards to be paid out to participants. The administrator will have the discretion to reduce or waive any performance objectives or other vesting provisions for performance awards. Performance awards will have a threshold, target, and maximum payout value established by the administrator on or before to the grant date. The administrator will have the discretion to pay earned performance awards in the form of cash, shares, or in some combination of both.
Non-Employee
Directors
The 2021 Plan provides that any
non-employee
director, in any fiscal year, may not be granted compensation (including, but not limited to, cash retainer or fees) (including awards under the 2021 Plan) with an aggregate value of more than $500,000, increased to $750,000 in connection with the
non-employee
director’s initial fiscal year of service, with the value of each equity award based on such award’s grant date fair value. For purposes of this limitation, the grant date fair value is determined in accordance with GAAP. Any compensation paid to a
non-employee
director for his or her prior services as an employee, or for his or her services as a consultant (other than as a
non-employee
director), will not count for purposes of the limitation. The maximum limit does not reflect the intended size of any potential equity awards to our
non-employee
directors.
Non-Transferability
of Awards
Unless the administrator provides otherwise, the 2021 Plan generally does not allow for the transfer or disposal of awards and only the recipient of an award may exercise an award during his or her lifetime. Any unauthorized transfer will be void.
Dissolution or Liquidation
If there is a proposed liquidation or dissolution of New Solid Power, the administrator will notify participants at such time before the effective date of such event as the administrator determines and all awards, to the extent that they have not been previously exercised, will terminate immediately before the consummation of such event.
Merger or Change in Control
The 2021 Plan provides that if there is a merger or a “change in control” (as defined under the 2021 Plan) of New Solid Power, each outstanding award will be treated as the administrator determines (subject to the following paragraphs) without a participant’s consent, including that an award be continued by the successor corporation or that vesting of awards may accelerate automatically upon consummation of the transaction. The administrator will not be required to treat all awards, portions of awards or participants similarly and may modify awards, subject to the provisions of the 2021 Plan.
If the successor corporation does not continue an award (or some portion of such award), the participant will fully vest in (and have the right to exercise) 100% of the then-unvested shares subject to his or her outstanding options and stock appreciation rights, all restrictions on 100% of the participant’s outstanding restricted stock and restricted stock units will lapse, and, regarding 100% of participant’s outstanding awards with performance-based vesting, all performance goals or other vesting criteria will be treated as achieved at 100% of target levels and all other terms and conditions met. In no event will vesting of an award accelerate as to more than 100% of the award. If options or stock appreciation rights are not continued when a change in control or a merger of New
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Solid Power with or into another corporation or other entity occurs, the administrator will notify the participant in writing or electronically that the participant’s vested options or stock appreciation rights (after considering the foregoing vesting acceleration, if any) will be exercisable for a period of time determined by the administrator in its sole discretion and all of the participant’s options or stock appreciation rights will terminate upon the expiration of such period (whether vested or unvested).
For awards granted to a
non-employee
director, in the event of a change in control, the
non-employee
director will fully vest in and have the right to exercise all of their outstanding options and stock appreciation rights, all restrictions on restricted stock and RSUs will lapse and, for awards with performance-based vesting, unless specifically provided for in the award agreement, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met.
Forfeiture and Clawback
All awards granted under the 2021 Plan will be subject to recoupment under any clawback policy that we are required to adopt under applicable law or listing standards. In addition, the administrator may impose such other clawback, recovery or recoupment provisions in an award agreement as the administrator determines necessary or appropriate, including without limitation to any reacquisition right regarding previously acquired shares or other cash or property. In addition, the administrator may provide in an award agreement that the recipient’s rights, payments, and benefits with respect to such award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an award.
Amendment or Termination
The 2021 Plan will become effective upon the Closing and will continue in effect for up to ten (10) years following stockholder approval of the 2021 Plan, unless earlier terminated by the administrator, but no incentive stock options may be granted after ten (10) years from the earlier of the Board or stockholder approval of the 2021 Plan. In addition, the Board will have the authority to amend, suspend, or terminate the 2021 Plan, but such action generally may not materially impair the rights of any participant without his or her written consent.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the 2021 Plan. The summary is based on existing U.S. laws and regulations as of the date of this filing, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.
Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an option that qualifies as incentive stock option under Section 422 of the Code. If a participant exercises the option and then later sells or otherwise disposes of the shares acquired through the exercise the option after both the
two-year
anniversary of the date the option was granted and the
one-year
anniversary of the exercise, the participant will recognize a capital gain or loss equal to the difference between the sale price of the shares and the exercise price, and we will not be entitled to any deduction for U.S. federal income tax purposes.
However, if the participant disposes of such shares either on or before the
two-year
anniversary of the date of grant or on or before the
one-year
anniversary of the date of exercise (a “disqualifying disposition”), any gain up to the excess of the fair market value of the shares on the date of exercise over the exercise price generally
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will be taxed as ordinary income, unless the shares are disposed of in a transaction in which the participant would not recognize a gain (such as a gift). Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for U.S. federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.
For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on the exercise date is treated as an adjustment item in computing the participant’s alternative minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the shares or provide certain basis adjustments or tax credits for purposes.
Nonstatutory Stock Options
A participant generally recognizes no taxable income as the result of the grant of a nonstatutory option. However, upon exercising the option, the participant normally recognizes ordinary income equal to the amount that the fair market value of the shares on such date exceeds the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes and we will be entitled to a tax deduction related to the ordinary income recognized by the participant. Upon the sale of the shares acquired by the exercise of a nonstatutory stock option, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as capital gain or loss. No tax deduction is available to us with respect to the grant of a nonstatutory stock option or the sale of the shares acquired through the exercise of the nonstatutory stock option.
Stock Appreciation Rights
In general, no taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant generally will recognize ordinary income in an amount equal to the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
Restricted Stock Awards
A participant acquiring shares of restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The participant may elect, pursuant to Section 83(b) of the Code to accelerate the ordinary income tax event to the date of acquisition by filing an election with the IRS no later than thirty days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.
Restricted Stock Unit Awards
There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded restricted stock units generally will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss.
Performance Awards
A participant generally will recognize no income upon the grant of a performance award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an
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amount equal to the cash received and the fair market value of any unrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.
Section 409A
Section 409A of the Code provides certain requirements for
non-qualified
deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 2021 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% U.S. federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation.
Tax Effect for New Solid Power
The Company generally will be entitled to a tax deduction in connection with an award under the 2021 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility of compensation paid to our chief executive officer and certain “covered employees” as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified individuals will be deductible only to the extent that it does not exceed $1,000,000.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY WITH RESPECT TO AWARDS UNDER THE 2021 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
Number of Awards Granted to Employees, Consultants and Directors
The number of awards that an employee, director, or consultant may receive under the 2021 Plan is in the discretion of the administrator and therefore cannot be determined in advance. We have not previously sponsored an equity incentive plan, and, therefore, the aggregate number of shares of Class A Common Stock which would have been received by or allocated to our named executive officers; executive officers, as a group; directors who are not executive officers, as a group; and all other current employees who are not executive officers, as a group is not determinable. Therefore, a New Plan Benefit Table is not provided.
Equity Compensation Plan Information
No shares of Class A Common Stock were covered by awards outstanding under any equity compensation plan as of August 31, 2021. The following table provides information about the options to purchase shares of Solid Power Common Stock outstanding under the Solid Power Stock Plan as of August 31, 2021.
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|
Plan Category
|
Number of securities to be
issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise
price of outstanding options, warrants and rights |
Number of securities
remaining available for future issuance under equity compensation plans |
|||||||||
|
Equity compensation plans approved by security holders
|
8,578,613 | $ | 2.68 | 3,638,894 | ||||||||
|
Equity compensation plans not approved by security holders
|
— | — | — | |||||||||
| (1) |
The numbers of shares and the weighted average exercise price set forth in the table are on a
pre-conversion
basis. Pursuant to the Business Combination Agreement, New Solid Power will assume the Solid Power Stock Plan as of the Effective Time, and each stock option granted under the Solid Power Stock Plan that is outstanding as of immediately prior to the Effective Time for which the holder elected to have assumed by New Solid Power will be assumed by New Solid Power and converted into an option, issued under the Solid Power Stock Plan, to purchase shares of Class A Common Stock. No new awards will be granted under the Solid Power Stock Plan once the business combination is consummated.
|
Vote Required for Approval
The 2021 Plan Proposal will be adopted and approved only if the holders of at least a majority of our outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have the same effect as a vote “AGAINST” this proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE 2021 PLAN PROPOSAL.
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PROPOSAL NO. 6 —THE ESPP PROPOSAL
We are seeking stockholder approval for the Solid Power, Inc. 2021 Employee Stock Purchase Plan, or the “ESPP.” The ESPP is being adopted in connection with the business combination and will become effective upon the Closing, but the first offering period will commence at a later date determined by the administrator of the ESPP. The ESPP will provide eligible employees an opportunity to purchase Class A Common Stock at a discount through accumulated contributions of their earned compensation. The DCRC Board and its compensation committee have determined that offering an employee stock purchase plan is important to our ability to compete for talent. The ESPP will become a part of our overall equity compensation strategy (especially with respect to our nonexecutive employees) if it is approved by DCRC’s stockholders. If DCRC’s stockholders do not approve the ESPP, we may not be able to offer competitive compensation to existing employees and qualified candidates, which could prevent us from successfully attracting and retaining highly skilled employees.
The ESPP’s initial share reserve which we are asking the stockholders to approve is shares of Class A Common Stock. Following the ESPP’s effectiveness, offering periods will not commence under the ESPP until determined by the New Solid Power Board or its compensation committee.
The DCRC Board and its compensation committee believe that an employee stock purchase plan will be an important factor in attracting, motivating, and retaining qualified personnel who are essential to our success. The ESPP provides a significant incentive by allowing employees to purchase shares of Class A Common Stock at a discount. The DCRC Board has approved the ESPP, subject to the approval of DCRC’s stockholders.
Summary of the 2021 Employee Stock Purchase Plan
The following is a summary of the principal features of the ESPP and its operation. This summary does not contain all of the terms and conditions of the ESPP and is qualified in its entirety by reference to the ESPP as set forth in Annex E attached to this proxy statement/prospectus/information statement.
Purpose
The purpose of the ESPP is to provide eligible employees with an opportunity to purchase shares of Class A Common Stock through accumulated contributions, which generally will be made through payroll deductions. The ESPP permits the administrator (as discussed below) to grant purchase rights that qualify for preferential tax treatment under Section 423 of the Code. In addition, the ESPP authorizes the grant of purchase rights that do not qualify under Code Section 423 pursuant to rules, procedures or
sub-plans
adopted by the administrator that are designed to achieve desired tax or other objectives.
Shares Available for Issuance
If DCRC’s stockholders approve the ESPP, and subject to adjustment upon certain changes in our capitalization as described in the ESPP, the maximum number of shares of Class A Common Stock that will be available for issuance under the ESPP will be shares. The shares may be authorized, but unissued, or reacquired Class A Common Stock. The number of shares of Class A Common Stock available for issuance under the ESPP will be increased on the first day of each fiscal year beginning with the 2021 fiscal year equal to the least of (i) shares of Class A Common Stock, (ii) one percent (1%) of the outstanding shares of all series of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the administrator. We currently are unable to determine how long this share reserve may last because the number of shares that will be issued in any year or offering period depends on a variety of factors that cannot be predicted with certainty, including, for example, the number of employees who elect to participate in the ESPP, the level of contributions made by participants and the future price of shares of Class A Common Stock.
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If DCRC’s stockholders do not approve the ESPP, then the ESPP will not become effective and no shares of Class A Common Stock will be available for issuance thereunder.
Administration
The ESPP will be administered by the New Solid Power Board or a committee appointed by the New Solid Power Board that is constituted to comply with applicable laws (including the compensation committee). We expect the compensation committee to be the administrator of the ESPP. Subject to the terms of the ESPP, the administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the ESPP, to delegate ministerial duties to any of our employees, to designate separate offerings under the ESPP, to designate subsidiaries and affiliates as participating in the Section 423 Component and the
Non-Section
423 Component, to determine eligibility, to adjudicate all disputed claims filed under the ESPP and to establish such procedures that it deems necessary or advisable for the administration of the ESPP. The administrator is authorized to adopt rules and procedures in order to: determine eligibility to participate, determine the definition of compensation for the purposes of contributions to the ESPP, handle contributions to the ESPP, coordinate the making of contributions to the ESPP, establish bank or trust accounts to hold contributions to the ESPP, effect the payment of interest, effect the conversion of local currency, satisfy obligations to pay payroll tax, determine beneficiary designation requirements, implement and determine withholding procedures and determine procedures for the handling of stock certificates that vary with applicable local requirements. The administrator will also be authorized to determine that, to the extent permitted by applicable law, the terms of a purchase right granted under the ESPP or an offering to citizens or residents of a
non-U.S.
jurisdiction will be less favorable than the terms of options granted under the ESPP or the same offering to employees resident solely in the United States. Every finding, decision and determination made by the administrator will, to the full extent permitted by law, be final and binding upon all parties.
Eligibility
Generally, all of our employees will be eligible to participate if they are customarily employed by us, or any participating subsidiary or affiliate, for at least 20 hours per week and more than five months in any calendar year. Following the closing of the business combination, approximately of our employees will be generally eligible under the ESPP. The administrator, in its discretion, may, prior to an enrollment date, for all options to be granted on such enrollment date in an offering, determine that an employee who (i) has not completed at least two years of service (or a lesser period of time determined by the administrator) since his or her last hire date, (ii) customarily works not more than 20 hours per week (or a lesser period of time determined by the administrator), (iii) customarily works not more than five months per calendar year (or a lesser period of time determined by the administrator), (iv) is a highly compensated employee within the meaning of Section 414(q) of the Code, or (v) is a highly compensated employee within the meaning of Section 414(q) of the Code with compensation above a certain level or is an officer or subject to disclosure requirements under Section 16(a) of the Exchange Act, is or is not eligible to participate in such offering period.
However, an employee may not be granted rights to purchase shares of Class A Common Stock under the ESPP if such employee:
| • |
immediately after the grant would own capital stock and/or hold outstanding options to purchase such stock possessing 5% or more of the total combined voting power or value of all series of capital stock of ours or of any parent or subsidiary of ours; or
|
| • |
holds rights to purchase shares of Class A Common Stock under all employee stock purchase plans of ours or any parent or subsidiary of ours that accrue at a rate that exceeds $25,000 worth of shares of Class A Common Stock for each calendar year in which such rights are outstanding at any time.
|
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Offering Periods
The ESPP will include a component that allows us to make offerings intended to qualify under Section 423 of the Code and a component that allows us to make offerings not intended to qualify under Section 423 of the Code to designated companies, as described in the ESPP. Offering periods will begin and end on such dates as may be determined by the administrator in its discretion, in each case on a uniform and nondiscriminatory basis, and may contain one or more purchase periods. The administrator may change the duration of offering periods (including commencement dates) with respect to future offerings so long as such change is announced prior to the scheduled beginning of the first offering period affected. No offering period may last more than 27 months.
Contributions
The ESPP will permit participants to purchase shares of Class A Common Stock through contributions (in the form of payroll deductions or otherwise to the extent permitted by the administrator) of up to 15% of their eligible compensation, or such other limit established by the administrator from time to time in its discretion and on a uniform and nondiscretionary basis for all options to be granted on an enrollment date in an offering, which includes a participant’s base straight time gross earnings but excludes payments for commissions, incentive compensation, bonuses, payments for overtime and shift premium, equity compensation income and other similar compensation. Unless otherwise determined by the administrator, during any offering period, a participant may not increase the rate of his or her contributions and may only decrease the rate of his or her contributions (including to 0%) one time.
Exercise of Purchase Right
Amounts contributed and accumulated by the participant will be used to purchase shares of Class A Common Stock at the end of each purchase period. A participant may purchase a maximum number of shares of Class A Common Stock during a purchase period as determined by the administrator in its discretion and on a uniform and nondiscriminatory basis. The purchase price of the shares will be determined by the administrator from time to time, in its discretion and on a uniform and nondiscriminatory basis for all options to be granted on an enrollment date, provided that in no event may the purchase price be less than 85% of the lower of the fair market value of Class A Common Stock on the first trading day of the offering period or on the exercise date, which is generally the last trading day of a purchase period. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of Class A Common Stock. Participation in the ESPP ends automatically upon termination of employment with us.
Termination of Participation
Participation in the ESPP generally will terminate when a participating employee’s employment with us or a designated company ceases for any reason, the employee withdraws from the ESPP or we terminate or amend the ESPP such that the employee no longer is eligible to participate. An employee may withdraw his or her participation in the ESPP at any time in accordance with procedures specified by the administrator prior to any applicable deadline. Upon withdrawal from the ESPP, in general, the employee will receive all amounts credited to his or her account without interest (unless otherwise required under applicable law) and his or her payroll withholdings or contributions under the ESPP will cease.
Non-Transferability
Neither contributions credited to a participant’s account nor rights to purchase shares of Class A Common Stock and any other rights and interests under the ESPP may be assigned, transferred, pledged or otherwise disposed of (other than by will, the laws of descent and distribution or beneficiary designation in the event of death). Any attempt at such prohibited disposition will be without effect, except that we may treat such act as an election to withdraw participation.
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Certain Transactions
In the event that any dividend or other distribution (whether in the form of cash, Class A Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up,
spin-off,
combination, reclassification, repurchase, or exchange of shares of Class A Common Stock or our other securities, or other change in our corporate structure affecting the Class A Common Stock occurs (other than any ordinary dividends or other ordinary distributions), the administrator, to the extent the administrator in its sole discretion deems necessary in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the ESPP in such manner it may deem equitable, will adjust the number and class of Class A Common Stock that may be delivered under the ESPP, the purchase price per share, the number of shares of Class A Common Stock covered by each purchase right under the ESPP that has not yet been exercised, and the numerical limits of the ESPP.
In the event of our proposed dissolution or liquidation, any ongoing offering periods will be shortened and will terminate immediately before consummation of the proposed dissolution or liquidation following the purchase of shares of Class A Common Stock under the shortened offering periods, unless provided otherwise by the administrator. Prior to the new exercise date, the administrator will notify participants regarding the new exercise date and the exercise to occur on such date.
In the event of a merger or “change in control” (as defined in the ESPP), except as otherwise determined by the administrator, each outstanding option under the ESPP will be assumed or substituted for by the successor corporation or its parent or subsidiary. In the event that options are not assumed or substituted for, the offering period will be shortened by setting a new exercise date on which the offering period will end, which will occur prior to the closing of the merger or change in control. Prior to the new exercise date, the administrator will notify participants regarding the new exercise date and the exercise to occur on such date.
Amendment; Termination
The administrator will have the authority to amend, suspend or terminate the ESPP. The ESPP automatically will terminate in 2040, unless we terminate it sooner. If the administrator determines that the ongoing operation of the ESPP may result in unfavorable financial accounting consequences, the administrator may modify, amend or terminate the ESPP to reduce or eliminate such accounting consequence. If the ESPP is terminated, the administrator in its discretion may terminate all outstanding offering periods either immediately or after consummation of the purchase of shares of Class A Common Stock under the ESPP (which may be adjusted to occur sooner than originally scheduled), or in accordance with their terms. If options are terminated prior to their expiration, then all amounts credited to participants that have not been used to purchase shares of Class A Common Stock will be returned, without interest (unless otherwise required under applicable law), as soon as administratively practicable.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the ESPP. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or
non-U.S.
jurisdiction to which the participant may be subject. As a result, tax consequences for any particular participant may vary based on individual circumstances.
The ESPP is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Code. Under an employee stock purchase plan that so qualifies, no taxable income will be recognized by a participant, and no deductions will be allowable to New Solid Power, upon either the grant or the exercise of the purchase rights. Taxable income will not be recognized until there is a sale or other disposition of the shares of Class A Common Stock acquired under the ESPP or in the event of the participant’s death while still owning the purchased shares of Class A Common Stock.
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If the participant sells or otherwise disposes of the purchased shares of Class A Common Stock within two years after the start date of the offering period in which the shares of Class A Common Stock were acquired or within one year after the actual purchase date of those shares of Class A Common Stock, then the participant generally will recognize ordinary income in the year of sale or disposition equal to the amount by which the fair market value of the shares of Class A Common Stock on the purchase date exceeded the purchase price paid for those shares of Class A Common Stock, and we will be entitled to an income tax deduction equal in amount to such excess, for the taxable year in which such disposition occurs. The amount of this ordinary income will be added to the participant’s basis in the shares of Class A Common Stock, and any resulting gain or loss recognized upon the sale or disposition will be a capital gain or loss. If the shares of Class A Common Stock have been held for more than one year since the date of purchase, the gain or loss will be long-term.
If the participant sells or disposes of the purchased shares of Class A Common Stock more than two years after the start date of the offering period in which the shares of Class A Common Stock were acquired and more than one year after the actual purchase date of those shares of Class A Common Stock, then the participant generally will recognize ordinary income in the year of sale or disposition equal to the lesser of (a) the amount by which the fair market value of the shares of Class A Common Stock on the sale or disposition date exceeded the purchase price paid for those shares of Class A Common Stock, or (b) 15% of the fair market value of the shares of Class A Common Stock on the start date of that offering period. Any additional gain upon the disposition will be taxed as a long-term capital gain. Alternatively, if the fair market value of the shares of Class A Common Stock on the date of the sale or disposition is less than the purchase price, there will be no ordinary income and any loss recognized will be a long-term capital loss. We will not be entitled to an income tax deduction with respect to such disposition.
In addition, a participant’s annual “net investment income,” as defined in Section 1411 of the Code, may be subject to a 3.8% U.S. federal surtax. Net investment income may include capital gain and/or loss arising from the disposition of shares of Class A Common Stock purchased under the ESPP. Whether a participant’s net investment income will be subject to this surtax will depend on the participant’s level of annual income and other factors.
If the participant still owns the purchased shares of Class A Common Stock at the time of death, the lesser of (i) the amount by which the fair market value of the shares of Class A Common Stock on the date of death exceeds the purchase price or (ii) 15% of the fair market value of the shares of Class A Common Stock on the start date of the offering period in which those shares of Class A Common Stock were acquired will constitute ordinary income in the year of death.
Plan Benefits
Participation in the ESPP is voluntary and dependent on each eligible employee’s election to participate, the amount of his or her eligible compensation, and his or her determination as to the portion of his or her eligible compensation to contribute to the ESPP. Further, the number of shares of Class A Common Stock that may be purchased under the ESPP is determined, in part, by the price of our shares of Class A Common Stock on the first day of each offering period and applicable exercise date of each purchase period. Accordingly, the actual number of shares of Class A Common Stock that would be purchased by any individual under the ESPP in the future is not determinable. We have not previously sponsored an employee stock purchase plan, and, therefore, the number of shares of Class A Common Stock which would have been received by or allocated to our named executive officers, all current executive officers as a group, and all other current employees who may participate in the ESPP as a group are not determinable.
Non-employee
directors are not eligible to participate in the ESPP. Therefore, a New Plan Benefit Table is not provided.
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Vote Required for Approval
The ESPP Proposal will be adopted and approved only if the holders of at least a majority of our outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have the same effect as a vote “AGAINST” this proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ESPP PROPOSAL.
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PROPOSAL NO. 7—THE DIRECTOR ELECTION PROPOSAL
Overview
The DCRC Board currently consists of eight members. Pursuant to our Charter, the members of the DCRC Board are divided into three classes, with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. The term of office of the first class of directors, consisting of Dr. Jennifer Aaker, Erik Anderson and Jane Kearns, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Jim McDermott and Jeffrey H. Tepper, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Pierre Lapeyre, Jr., David Leuschen and Robert Tichio, will expire at the third annual meeting of stockholders.
In addition, the amended and restated bylaws of New Solid Power will provide that each director shall serve until his or her successor is elected and qualified or until his or her earlier death, resignation or removal.
Pursuant to the Business Combination Agreement and the Proposed Second A&R Charter, if the Director Election Proposal is approved, it is expected that the New Solid Power Board will be comprised of Erik Anderson, Steven Goldberg, Robert Tichio, Rainer Feurer, Douglas Campbell, David Jansen and . It is currently contemplated that Douglas Campbell, Erik Anderson and Robert M. Tichio will be nominated to serve as Class I directors, Steven H. Goldberg, and will be nominated to serve as Class II directors and David Jansen, Rainer Feurer and will be nominated to serve as Class III directors.
Information regarding each nominee is set forth in the section entitled “Management After the Business Combination.”
Vote Required for Approval
The Director Election Proposal is conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal at the special meeting. If the Business Combination Proposal or the Nasdaq Proposal is not approved, this Proposal No. 7 will have no effect, even if approved by our stockholders.
The approval of the Director Election Proposal requires the affirmative vote (online or by proxy) of a plurality of the votes cast by holders of our Class A Common Stock and Class B Common Stock at the special meeting and entitled to vote thereon, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have no effect on the outcome of the vote on the Director Election Proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT DCRC STOCKHOLDERS VOTE “FOR ALL NOMINEES” FOR ELECTION TO THE DCRC BOARD.
162
PROPOSAL NO. 8—THE ADJOURNMENT PROPOSAL
Overview
The Adjournment Proposal, if adopted, will allow the DCRC Board to adjourn the special meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies. The Adjournment Proposal will only be presented to our stockholders in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal or the Director Election Proposal. If our stockholders approve the Adjournment Proposal, we may adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from our stockholders who have voted previously.
Consequences if the Adjournment Proposal is Not Approved
If the Adjournment Proposal is not approved by DCRC stockholders, the DCRC Board may not be able to adjourn the special meeting to a later date in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposals, the Nasdaq Proposal, the 2021 Plan Proposal, the ESPP Proposal or the Director Election Proposal.
Vote Required for Approval
The Adjournment Proposal is not conditioned on the approval of any other Proposal at the special meeting.
The approval of the Adjournment Proposal requires the affirmative vote (online or by proxy) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the special meeting, voting as a single class. Failure to vote by proxy or to vote online at the special meeting or an abstention from voting will have no effect on the outcome of the vote on the Adjournment Proposal.
Recommendation of the DCRC Board
THE DCRC BOARD RECOMMENDS THAT DCRC STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
163
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SOLID POWER
You should read the following discussion and analysis of Solid Power’s financial condition and results of operations together with Solid Power’s financial statements and the related notes included elsewhere in this proxy statement/prospectus. Some of the information contained in this discussion and analysis is set forth elsewhere in this proxy statement/prospectus, including information with respect to Solid Power’s plans and strategy for its business and related financing, and includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” Solid Power’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Throughout this section, unless otherwise noted “we,” “us,” “our” and the “Company” refer to Solid Power.
Overview
Solid Power is developing
all-solid-state
battery cell technology that replaces the liquid or gel polymer electrolyte used in conventional
lithium-ion
battery cells with a sulfide-based solid electrolyte. We focus solely on the development and commercialization of
all-solid-state
battery cells and solid electrolyte materials, primarily for the fast-growing battery-powered electric vehicle market.
As a development-stage company, we have historically generated revenue through performance on government contracts and grants as well as a small volume of sales of our cells and materials into non-commercial markets. These activities have partially funded our research and development activities to date. In addition, we have been able to secure additional liquidity through various financing rounds. Most recently, in May 2021, we announced a $135.6 million Series B investment round, led by BMW and Ford. In conjunction with this capital infusion, we also announced an expansion of our Joint Development Agreements with BMW and Ford to develop all solid-state battery cells for future electric vehicles.
We believe our
will be able to meet the performance and cost demands from both consumers and automotive OEMs and outperform the best performing liquid electrolyte-based
All-Solid-State
Platform
lithium-ion
technologies of today and tomorrow. We are developing our
all-solid-state
battery cell technology with the goal to improve, among other things:
| • |
safety of electric vehicle batteries through the removal of flammable and volatile liquids and gels from the battery cells;
|
| • |
energy density, a measure of the energy stored by the battery cell relative to its volume, by enabling higher capacity electrodes that are otherwise not considered viable in a traditional
lithium-ion
battery cell;
|
| • |
calendar life – how long a battery cell can last before seeing significant degradation, especially at elevated temperature – as compared to current-generation
lithium-ion;
and
|
| • |
cost, through simplifying the manufacturing process and removal or reduction of battery pack cooling systems and pack-level safety features typically seen in traditional
lithium-ion
battery packs.
|
Critically, the cell manufacturing processes we have developed are already used globally for high volume traditional
lithium-ion
battery cell production, which we anticipate will enable manufacturers of our
all-solid-state
battery cells to meet volume and cost requirements of OEMs.
We intend to license our
all-solid-state
battery cell architectures and manufacturing
know-how
to our commercialization partners. In addition, we plan to sell our proprietary sulfide-based solid electrolyte material to enable cell production by our partners and to other solid-state cell producers who may not be using our unique
164
all-solid-state
cell designs. Longer-term, we endeavor to be the leading producer and distributor of sulfide-based solid electrolyte material, which may be employed both in powering
all-solid-state
battery cells in electric vehicles and in other commercial applications.
The Business Combination
Solid Power entered into the Business Combination Agreement with DCRC and Merger Sub on June 15, 2021. Pursuant to the Business Combination Agreement, and assuming a favorable vote of DCRC’s stockholders, Merger Sub will be merged with and into Solid Power. Upon the Closing, the separate corporate existence of Merger Sub shall cease, and Solid Power will survive and become a wholly owned subsidiary of DCRC. The business combination is anticipated to be accounted for as a reverse recapitalization. Solid Power will be deemed the accounting predecessor and the combined entity will be the successor SEC registrant, meaning that Solid Power’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. Under this method of accounting, DCRC will be treated as the acquired company for financial statement reporting purposes. The most significant change in New Solid Power’s future reported financial position and results, assuming no stockholder redemptions, are expected to be an estimated $474.3 million net increase in cash and cash equivalents (as compared to Solid Power’s balance sheet at June 30, 2021) and an estimated $950.6 million net increase in total stockholders’ equity (as compared to Solid Power’s balance sheet at June 30, 2021), both of which include $165 million in gross proceeds from the PIPE that will close concurrent with the Closing. Total transaction costs are estimated at approximately $40 million. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
As a result of the business combination, New Solid Power will become the successor to an
SEC-registered
and Nasdaq-listed company, which will require New Solid Power to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. In addition, following the business combination, we expect that our research and development and other expenses will continue to increase as we expand our development efforts to obtain qualification for electric vehicle testing, expand existing relationships with our development partners, and eventually commercialize our products. See “—Liquidity and Capital Resources.”
Key Trends, Opportunities and Uncertainties
We are a research and development company; we believe that our performance and future success depend on several factors that present significant opportunities for us but also pose significant risks and challenges, including those discussed in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” appearing elsewhere in this proxy statement/prospectus. Specifically, the success of our business is dependent upon our ability to successfully develop and commercialize our products, which will require significant capital and subject us to regulatory oversight. For more information, please read “Information About Solid Power” appearing elsewhere in this proxy statement/prospectus.
Additionally, the
COVID-19
pandemic has disrupted supply chains and affected production and sales across a range of industries. The long-term extent of the impact of
COVID-19
on our operational and financial performance will depend on certain developments, including the duration and spread of the virus, vaccine distribution and uptake and the impact on our customers, employees and vendors. The ultimate outcome of these matters is uncertain and, accordingly, the impact on our financial condition or results of operations is also uncertain.
To date, the primary impact of the
COVID-19
pandemic on our liquidity was an overall unfavorable fundraising environment during
mid-2020,
which delayed our Series B Financing to May 2021. In response to such delay, our planned growth during 2020 was largely deferred to 2021. To date, we have not materially altered any terms with our contractors, suppliers, customers, other business partners or financing sources as a result of the
COVID-19
pandemic.
165
Basis of Presentation
We currently conduct our business through one operating 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. Our historical results are reported under U.S. GAAP and in U.S. dollars.
Components of Our Results of Operations
We are a research and development stage company and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.
Collaboration and Support Revenue
We earn revenue primarily from collaborative research and development agreements with both commercial partners and governmental agencies. Our revenues include a modest amount of product sales. Collaboration and support revenues are recognized as the underlying costs of fulfilling required research objectives are incurred.
Cost of Revenue
Cost of revenue consists primarily of employee compensation and related overhead costs, as well as direct material and consulting expenses incurred to fulfill contractually required research deliverables. Costs of collaboration and support revenue are expensed as incurred.
Gross Margin
Our gross margin can fluctuate significantly from quarter to quarter, reflecting contractual delivery timeframes, conclusion of existing contracts, additions of new contracts and the timing effects of the variable availability of employees, materials and access to technical equipment. Gross margin, calculated as collaboration and support revenue less costs of revenue, has been, and will continue to be, affected by various factors, including fluctuations in the number and mix of collaboration and support revenue contracts and the cost of enhancing our internal technical equipment resources.
Operating Expenses
Research and development
Research and development expenses primarily consist of personnel-related expenses for scientific, engineering and operation technician personnel, as well as materials, equipment costs and consulting expenses incurred to further our commercialization development efforts. We anticipate significant research and development cost increases related to the expansion of our research and development team and building the infrastructure needed to enable the achievement of entering automotive product qualification testing processes.
Sales and marketing
Sales and marketing expenses consist primarily of expenses for business development personnel as well as expenses associated with trade shows, lobbying and consulting. We anticipate significant expansion in our sales and marketing efforts as the
COVID-19
pandemic abates, resulting in resumption of technical conferences, trade shows and significant efforts to expand our business development into both the electric vehicle markets and other battery-oriented commercial consumer markets.
166
Finance and administrative
Finance and administrative expenses consist primarily of personnel-related expenses for our executive and administrative functions as well as outside professional services, including legal, accounting and other advisory services. We expect our finance and administrative expenses to increase significantly in the near term as we expand our infrastructure to prepare for being a public company following the Closing.
Other income (expense)
Interest expense
Interest expense consists primarily of interest incurred on equipment financing notes, a bank term loan and unsecured convertible investor notes issued at various times from December 2019 to June 2021.
Other income (expense)
Other income (expense) consists primarily of income realized from cash investments and a forgiven 2020 Payroll Protection Plan (“PPP”) loan, more than offset by costs associated with fair value recording of convertible notes and contract cancellation costs. The notes contained multiple conversion features that constituted embedded derivatives; we evaluated each note and recorded expenses either reflecting the cost of marking the notes to fair value or the expense associated with the assessed value of the embedded derivatives in the notes. During 2021, our other income (expense) includes amounts paid to terminate a manufacturing rights letter agreement with one of our stockholders that we entered into in connection with the initial sale of Solid Power Series A-1 Preferred Stock.
Results of Operations
Comparison of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020
The following table sets forth our historical operating results for the periods indicated:
|
Three Months Ended June 30,
|
$ Change
|
% Change
|
||||||||||||||
|
($ in thousands)
|
2021
|
2020
|
||||||||||||||
|
Collaboration and support revenue
|
561 | 433 | 128 | 30 | % | |||||||||||
|
Cost of revenue
|
540 | 346 | 194 | 56 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Gross margin
|
21 | 87 | (66 | ) | (76 | %) | ||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
3,203 | 2,579 | 624 | 24 | % | |||||||||||
|
Sales and marketing
|
535 | 284 | 251 | 88 | % | |||||||||||
|
Finance and administrative
|
2,332 | 309 | 2,023 | 655 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total operating expenses
|
6,070 | 3,172 | 2,898 | 91 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Loss from operations
|
(6,049 | ) | (3,085 | ) | (2,964 | ) | (96 | %) | ||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest expense
|
(121 | ) | (87 | ) | (34 | ) | (39 | %) | ||||||||
|
Other income (expense)
|
(3,091 | ) | 1 | (3,092 | ) | NM | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other income (expense)
|
(3,212 | ) | (86 | ) | (3,126 | ) | NM | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Loss before income taxes
|
(9,261 | ) | (3,171 | ) | (6,090 | ) | (192 | %) | ||||||||
|
Provision for income taxes
|
12 | 26 | (14 | ) | (54 | %) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net loss
|
(9,273 | ) | (3,197 | ) | (6,076 | ) | (190 | %) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
NM = Not meaningful
167
Collaboration and Support Revenue
Collaboration and support revenue increased by $0.1 million, or 30%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. This increase was primarily attributable to a multi-year government contract we entered into during 2020, and which had significant related revenues in the second quarter of 2021.
Cost of Revenue
Cost of revenue increased by $0.2 million, or 56%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. This increase was primarily driven by increased personnel-related expenses charged to collaboration and services agreements in the second quarter of 2021.
Operating Expenses
Research and development
Research and development expenses increased by $0.6 million, or 24%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. This increase was primarily driven by increased costs associated with a higher allocation of personnel, and related personnel costs, to commercialization efforts.
Sales and marketing
Sales and marketing expense increased by $0.3 million, or 88%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily the result of increased costs associated with a higher allocation of personnel and engagement with marketplace advisory services to aid our commercialization efforts.
Finance and administrative
Finance and administrative expense increased by $2.0 million, or 655%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. This increase was primarily due to increased costs associated with a higher allocation of personnel-related expenses and increased professional fees expenses associated with legal, compliance and accounting matters, primarily in connection with the Series B Financing and the proposed business combination.
Other income (expense)
Interest expense
Interest expense increased by $0.03 million, or 39%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase primarily reflects the increased interest expense associated with the $10.0 million of aggregate principal amount of unsecured convertible notes we issued to investors in December 2020 and during the first half of 2021.
Other income (expense)
Other income (expense) increased to $3.1 million for the three months ended June 30, 2021, primarily due to the amounts paid to terminate a manufacturing rights letter agreement that was issued in connection with the initial purchase of Series A-1 Preferred Stock.
168
Results of Operations
Comparison of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020
The following table sets forth our historical operating results for the periods indicated:
|
Six Months Ended June 30,
|
$ Change
|
% Change
|
||||||||||||||
|
($ in thousands)
|
2021
|
2020
|
||||||||||||||
|
Collaboration and support revenue
|
$ | 1,041 | $ | 945 | $ | 96 | 10 | % | ||||||||
|
Cost of revenue
|
1,055 | 767 | 288 | 38 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Gross margin
|
(14 | ) | 178 | (192 | ) | (108 | %) | |||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
6,309 | 5,122 | 1,187 | 23 | % | |||||||||||
|
Sales and marketing
|
1,090 | 617 | 473 | 77 | % | |||||||||||
|
Finance and administrative
|
2,927 | 633 | 2,294 | 362 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total operating expenses
|
10,326 | 6,372 | 3,954 | 62 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Loss from operations
|
(10,340 | ) | (6,194 | ) | (4,146 | ) | (67 | %) | ||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest expense
|
(342 | ) | (177 | ) | (165 | ) | (93 | %) | ||||||||
|
Other income (expense)
|
(5,773 | ) | 26 | (5,799 | ) | NM | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other income (expense)
|
(6,115 | ) | (151 | ) | (5,964 | ) | NM | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Loss before income taxes
|
(16,455 | ) | (6,345 | ) | (10,110 | ) | (159 | %) | ||||||||
|
Provision for income taxes
|
(41 | ) | 52 | (93 | ) | (179 | %) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net loss
|
$(16,414) | $(6,397) | $(10,017) | (157%) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
NM = Not meaningful
Collaboration and Support Revenue
Collaboration and support revenue increased by $0.1 million, or 10%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily attributable to a multi-year government contract we entered into in late 2020, and which had significant related revenues in the first six months of 2021.
Cost of Revenue
Cost of revenue increased by $0.3 million, or 38%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily driven by increased personnel-related expenses charged to collaboration and services agreements in the first six months of 2021.
Operating Expenses
Research and development
Research and development expenses increased by $1.2 million, or 23%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily driven by increased costs associated with a higher allocation of personnel, and related personnel costs, to commercialization efforts.
Sales and marketing
Sales and marketing expense increased by $0.5 million, or 77%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase was primarily the result of increased costs associated with a higher allocation of personnel and engagement with marketplace advisory services to aid our commercialization efforts.
169
Finance and administrative
Finance and administrative expense increased by $2.3 million, or 362%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily due to increased costs associated with a higher allocation of personnel-related expenses and increased professional fees expenses associated with legal, compliance and accounting matters, primarily in connection with the Series B Financing and the proposed business combination.
Other income (expense)
Interest expense
Interest expense increased by $0.2 million, or 93%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase primarily reflects the increased interest expense associated with the $10.0 million of aggregate principal amount of unsecured convertible notes we issued to investors in December 2020 and during the first half of 2021.
Other income (expense)
Other income (expense) increased to $5.8 million for the six months ended June 30, 2021, primarily due to amounts paid to terminate a manufacturing rights letter agreement that was issued in connection with the initial purchase of Series
A-1
Preferred Stock and expense adjustments associated with our convertible notes and their embedded derivatives issued in the first half of 2021.
Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019
The following table sets forth our historical operating results for the periods indicated:
|
Year Ended December 31,
|
$ Change
|
% Change
|
||||||||||||||
|
($ in thousands)
|
2020
|
2019
|
||||||||||||||
|
Collaboration and support revenue
|
$ | 2,103 | $ | 2,276 | $ | (173 | ) | (8 | %) | |||||||
|
Cost of revenue
|
1,670 | 1,821 | (151 | ) | (8 | %) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Gross margin
|
433 | 455 | (22 | ) | (5 | %) | ||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
9,593 | 7,241 | 2,352 | 32 | % | |||||||||||
|
Sales and marketing
|
1,205 | 1,544 | (339 | ) | (22 | %) | ||||||||||
|
Finance and administrative
|
1,227 | 917 | 311 | 34 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total operating expenses
|
12,026 | 9,701 | 2,325 | 24 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Loss from operations
|
(11,593) | (9,247) | (2,346) | (25%) | ||||||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest expense
|
(361 | ) | (59 | ) | (302 | ) | (512 | %) | ||||||||
|
Other income (expense)
|
(2,303 | ) | 232 | (2,535 | ) | NM | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other income (expense)
|
(2,664 | ) | 173 | (2,837 | ) | NM | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Loss before income taxes
|
(14,257 | ) | (9,074 | ) | (5,184 | ) | (57 | %) | ||||||||
|
Provision for income taxes
|
118 | 135 | (17 | ) | (13 | %) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net loss
|
$(14,375) | $(9,208) | $(5,166) | (56%) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
NM = Not meaningful
170
Collaboration and Support Revenue
Collaboration and support revenue decreased by $0.2 million, or 8%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. This decrease was primarily attributable to the termination of a services agreement for administrative services to a related party company. The services agreement was discontinued in
mid-2019
and generated approximately $0.2 million of support revenue in the year ended December 31, 2019.
Cost of Revenue
Cost of revenue decreased by $0.2 million, or 8%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. This decrease was primarily driven by reduced personnel-related expenses charged to collaboration and services agreements compared to the year ended December 31, 2019.
Operating Expenses
Research and development
Research and development expenses increased by $2.4 million, or 32%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. This increase was primarily driven by increased costs associated with a higher allocation of personnel to commercialization efforts and increased purchases of materials to support manufacturing functionality testing and the production of samples on our pilot production line.
Sales and marketing
Sales and marketing expense decreased by $0.3 million, or 22%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. This decrease was primarily driven by reduced business meetings, technical conferences and associated travel-related costs, as these activities were effectively ceased for a large portion of the year ended December 31, 2020 at the onset of the
COVID-19
pandemic in March 2020.
Finance and administrative
Finance and administrative expense increased by $0.3 million, or 34%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. This increase was primarily driven by the elimination of personnel-related expenses allocated to the related-party support services arrangement that was discontinued in
mid-2019
and increased professional fees associated with legal, compliance and accounting matters.
Other income (expense)
Interest expense
Interest expense increased by $0.3 million, or 512%, from $0.1 million for the year ended December 31, 2019 to $0.4 million for the year ended December 31, 2020. The increase primarily reflects the initiation of a $3.0 million bank term loan and a $3.0 million unsecured convertible note issued to an investor in December 2019.
Other income (expense)
Other income (expense) decreased from net other income of $0.2 million for the year ended December 31, 2019 to net other expense totaling $2.3 million for the year ended December 31, 2020, primarily due to expense adjustments associated with convertible notes and their embedded derivatives issued in 2020 and reduced interest income earnings due to lower cash holdings in 2020 compared to 2019.
171
Liquidity and Capital Resources
Sources of Liquidity
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. As of the date of this proxy statement/prospectus, we have yet to generate meaningful revenue from our business operations and have funded capital expenditure and working capital requirements through equity and debt financing and, to a lesser extent, government grants. For example, in May 2021, we consummated the Series B Financing whereby we issued an aggregate of 8.8 million shares of Solid Power Series B Preferred Stock and 1.8 million warrants to purchase Solid Power Common Stock for an aggregate purchase price of $149 million, approximately $135 million of which was paid in cash, from certain existing and new investors. Our ability to successfully develop our products, commence commercial operations and expand our business will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.
We expect our capital expenditures and working capital requirements to increase materially in the near future, as we accelerate our research and development efforts and scale up production operations with our joint venture partners. We believe that our cash on hand following the Closing will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this proxy statement/prospectus. We may, however, need additional cash if the Minimum Cash Condition is not satisfied and/or if there are material changes to our business conditions or other developments, including unanticipated delays in negotiations with OEMs and
tier-one
automotive suppliers or other suppliers, supply chain challenges, disruptions due to the
COVID-19
pandemic, competitive pressures, and regulatory developments. To the extent that our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which may adversely affect our business, operating results, financial condition and prospects.
Cash Flows
The following tables summarize our cash flows from operating, investing and financing activities for the periods presented.
|
Six Months Ended June 30,
|
||||||||
|
($ in thousands)
|
2021
|
2020
|
||||||
|
Net cash (used in) operating activities
|
(10,156 | ) | (4,878 | ) | ||||
|
Net cash (used in) investing activities
|
(3,855 | ) | (778 | ) | ||||
|
Net cash provided by financing activities
|
129,371 | 498 | ||||||
|
Year Ended December 31,
|
||||||||
|
($ in thousands)
|
2020
|
2019
|
||||||
|
Net cash (used in) operating activities
|
$ | (9,995 | ) | $ | (8,590 | ) | ||
|
Net cash (used in) investing activities
|
(1,060 | ) | (3,112 | ) | ||||
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Net cash provided by financing activities
|
5,395 | 5,890 | ||||||
Cash flows from operating activities:
Our cash flows used in operating activities to date have been primarily comprised of costs related to research and development, commercial production development, sales and marketing, and other finance and administrative activities. We expect our expenses related to personnel, research and development, sales and marketing, and finance and administrative activities to increase as we prepare for being a public company following the Closing.
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During the six months ended June 30, 2021, net cash used in operations was $10.2 million, primarily resulting from a net loss of $16.4 million, after consideration of non-cash charges of $4.2 million. Net cash generated by changes in operating assets and liabilities for six months ended June 30, 2021 consisted primarily of a $1.5 million increase in accrued expenses and other accrued liabilities and $0.8 million increase in accounts payable, partially offset by a $0.1 million increase in contract receivables. The increase in accrued expenses resulted from an increase in accruals for $0.5 million and $0.9 million related to 2021 accrued bonus and professional services, respectively. The increase in accounts payable is related to $0.6 million for legal expenses and $0.1 million for tax consulting services. Non-cash charges relate primarily to loss from change in fair value of embedded derivative liability of $2.7 million and depreciation and amortization of $1.1 million during the six months ended June 30, 2021.
During the six months ended June 30, 2020, net cash used in operations was $4.9 million, primarily resulting from a net loss of $6.4 million, after consideration of non-cash charges of $1.2 million. Net cash generated by changes in operating assets and liabilities for six months ended June 30, 2020 consisted primarily of a $0.4 million increase in accrued expenses and other accrued liabilities and a $0.2 million decrease in due from related party, partially offset by a $0.1 million increase in contract receivables. The increase in accrued expenses resulted from an increase in accruals for $0.3 million related to 2020 accrued bonus. The decrease in due from related party is related to settlement of receivables for accounting and administrative services provided to a related party. Non-cash charges relate primarily to a non-cash charge for depreciation and amortization of $1.0 million during the six months ended June 30, 2020.
During the year ended December 31, 2020, net cash used in operations was $10.0 million, primarily resulting from a net loss of $14.4 million, after consideration of non-cash charges of $4.9 million. Net cash generated by changes in operating assets and liabilities for year ended December 31, 2020 consisted primarily of a $0.4 million decrease in deferred revenue and $0.2 million increase in contract receivables, partially offset by a $0.2 million decrease in due from related party. The decrease in deferred revenue resulted from billed revenue for BMW. The decrease in due from related party is related to settlement of receivables for accounting and administrative services provided to a related party. Non-cash charges relate primarily to non-cash charges from change in fair value of embedded derivative of $2.8 million and depreciation and amortization of $2.1 million during the year ended December 31, 2020.
During the year ended December 31, 2019, net cash used in operations was $8.6 million, primarily resulting from a net loss of $9.2 million, after consideration of non-cash charges of $1.7 million. Net cash generated by changes in operating assets and liabilities for the year ended December 31, 2019 consisted primarily of a $0.9 million decrease in deferred revenue, partially offset by a $0.1 million decrease in contract receivables. The decrease in deferred revenue is related to billed revenue for BMW and AFRL PH II. Non-cash charges relate primarily to charges for depreciation and amortization of $1.4 million during the year ended December 31, 2019.
Cash flows from investing activities:
Our cash flows from investing activities have been comprised primarily of purchases of equipment and installation of improvements to our leased headquarters.
Net cash used in investing activities was $3.9 million for the six months ended June 30, 2021 and included $3.8 million of purchases of machinery and equipment, compared to net cash used in investing activities of $0.8 million in the six months ended June 30, 2020. The increase principally reflects additional purchases of equipment.
Net cash used in investing activities was $1.1 million for the year ended December 31, 2020 and included $1.0 million of purchases of machinery and equipment, compared to net cash used in investing activities of $3.1 million in the year ended December 31, 2019. Our purchases of machinery and equipment were significantly lower in 2020 than in 2019 due to the expenditures in 2019 related to completion of our pilot production line during 2019.
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Cash flows from financing activities:
We have financed our operations primarily through the sale of preferred stock, a bank term loan and the issuance of convertible notes.
Net cash provided by financing activities was $129.4 million for the six months ended June 30, 2021 and included $135.6 million of proceeds from the Series B Financing, offset by related transaction costs.
Net cash provided by financing activities was $0.5 million in the six months ended June 30, 2020 reflecting $0.9 million of proceeds from borrowing transactions offset by $0.4 million of debt repayments.
Net cash provided by financing activities was $5.4 million for the year ended December 31, 2020 and included $6.0 million proceeds from borrowing transactions partially offset by $0.7 million of debt repayments. Net financing receipts in 2020 were $0.5 million less than net financing receipts in 2019 due to debt service payments of $0.6 million in 2020 on our bank term loan.
Net cash provided by financing activities was $5.9 million in the year ended December 31, 2019 and included $6.0 million from borrowing transactions partially offset by $0.1 million of debt repayments.
Off-Balance
Sheet Arrangements
We are not a party to any
off-balance
sheet arrangements, as defined under SEC rules.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our financial statements included elsewhere in this proxy statement/prospectus. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on past experience, technical analysis and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates.
Our critical accounting policies are those that materially affect our financial statements and involve difficult, subjective or complex judgments by management. A thorough understanding of these critical accounting policies is essential when reviewing our financial statements. We believe that the critical accounting policies listed below involve the most difficult management decisions because they require the use of significant estimates and assumptions as described above.
Stock-Based Compensation and Common Stock Valuation
We record stock-based compensation expense according to the provisions of ASC Topic 718 – Stock Compensation. ASC Topic 718 requires all share-based awards to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Under the provisions of ASC Topic 718, we determine the appropriate fair value model to be used for valuing share-based issuances and the amortization method for recording compensation cost, which can be impacted by the following assumptions:
| • |
Expected Term –
|
| • |
Expected Volatility –
|
| • |
Expected Dividend Yield –
|
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| • |
Risk-Free Interest Rate –
|
The grant date fair value of our common stock has been and will be determined by our board of directors with the assistance of management and based in part on an independent valuation. Once our common stock is publicly traded, we intend to determine the fair value of our publicly traded common stock based on the closing market price on the date grants are made.
The estimated fair value of our common stock per share was $15.96, $0.84 and $0.84, as of June 30, 2021,
December 31, 2020 and December 31, 2019, respectively. The change in fair value between such dates is
influenced by myriad factors, including, but not limited to, the progress of our research and development
efforts, valuations used in completed and potential equity financing rounds and the amount of cash on hand
relative to our short- and long-term capital needs, which is influenced by the probability of the completion of
the business combination.
Collaborative and Support Revenue
We recognize revenue from our research and development collaboration agreements representing joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements. The elements of the collaboration agreements in which both parties to the contract are active participants and to which both parties are exposed to significant risks and rewards that are dependent on the commercial success of the efforts under the contract are recorded as collaborative arrangements. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature of the transactions and the contractual terms of the arrangement. Collaborative revenues from cost-based contracts are recognized based on costs incurred during each period plus any earned fee. Contract costs include all direct labor, subcontract costs, costs for materials and indirect costs related to the contract performance that are allowable under the provisions of the contract. Collaborative revenues from
fee-based
contracts are recognized based on costs incurred to meet contractually defined milestones and deliverables along with our assessment of achievement of those measurable deliverables under the contract.
Lease Obligations
We lease our headquarters space in Louisville, Colorado under leases classified as operating leases. The FASB has issued ASU
No. 2016-02,
Leases (Topic 842) along with other related guidance (collectively, “ASU 842”), under which lessees are required to recognize a right of use (“ROU”) asset and related lease liability on the lessee’s balance sheet for all substantive leases. The new lease guidance is effective for the Company on January 1, 2022.
We expect the new lease guidance will have a material effect on our financial statements. We continue to assess the impact of the effect of adoption; we currently believe the most significant effects will be the recognition of new ROU assets along with additional offsetting operating liabilities of approximately the same amount based on the present value of the remaining minimum rental payments under the existing operating leases.
Mezzanine Equity
Solid Power Preferred Stock is classified as mezzanine equity as both classes of Solid Power Preferred Stock include redemption features that are not solely within our control. Solid Power Preferred Stock is carried at the greater of its original issue price or fair value (the “Redemption Value”). Solid Power Series B Preferred Stock has a Redemption Value equal to the greater of its original issue price of $18.041 per share or fair value. The estimated fair value of Solid Power Series B Preferred Stock was $24.29 as of June 30, 2021. The Solid Power Series A-1 Preferred Stock has a Redemption Value equal to the greater of its original issue price of $1.806775 per share or fair value. The estimated fair value of Solid Power Series A-1 Preferred Stock was $17.78, $7.58, and $2.02, as of June 30, 2021, December 31, 2020 and December 31, 2019, respectively. We assess the fair value of the Solid Power Preferred Stock at each reporting date. The Solid Power Preferred Stock
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generates deemed dividends to be charged against retained earnings, or in the absence of retained earnings, against
paid-in
capital when its fair value exceeds its issuance price. Once paid-in-capital has been fully depleted, any remaining deemed dividend amount results in an increase to accumulated deficit. The change in fair value between each reporting date is influenced by myriad factors, including, but not limited to, the progress of our research and development efforts, valuations used in completed and potential equity financing rounds and the amount of cash on hand relative to our short-and long-term capital needs, which is influenced by the probability of the completion of the business combination. The fair values implied for Solid Power Series A-1 Preferred Stock and Solid Power Series B Preferred Stock consider the liquidation and redemption features, which causes a material difference in the valuation of the Solid Power Series A-1 Preferred Stock and Solid Power Series B Preferred Stock when compared to valuation of Solid Power Common Stock. Each share of Solid Power Preferred Stock will be converted to Solid Power Common Stock immediately prior to the business combination.
Emerging Growth Company Status
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to remain an emerging growth company at least through the end of the 2021 fiscal year and expect to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Recent Accounting Pronouncements
See Note 3 to our audited financial statements included elsewhere in this proxy statement/prospectus for more information.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to a variety of market and other risks including credit risks, and foreign currency translation and transaction risks as well as risks relating to the availability of funding sources, hazard events and specific asset risks.
Credit Risk
Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash, restricted cash, accounts receivable, and net investment in direct financing receivable. Domestic cash deposits exceeded the Federal Deposit Insurance Corporation insurable limit at June 30, 2021, December 31, 2020 and 2019. We have not experienced any losses on our cash deposits to date.
Furthermore, for the year ended December 31, 2020, 41% of our revenues came from a contract with a single customer, and for the year ended December 31, 2019, 88% of our revenues came from two contracts with a single customer. We are subject to
non-payment
or
non-performance
of these counterparties, and we generally do not require collateral from our customers. We evaluate the collectability of our accounts receivable and provide an allowance for potential credit losses as necessary. To date, we have not experienced any customer credit losses.
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Foreign Currency Risk
Our functional currency is the U.S. dollar reflecting our principal operating market. As we expand, we expect to be exposed to both currency transaction and translation risk as we collaborate with international investors, partners and vendors. To date, we have not had exposure to foreign currency fluctuations and have not hedged such exposure, although we may do so in the future.
Change in Certifying Accountant
On June 2, 2021, our Board of Directors ratified the company’s officers’ engagement of Ernst & Young LLP, effective February 25, 2021, to serve as our independent registered public accounting firm and dismissal of Plante & Moran, PLLC (“Plante & Moran”) as our independent auditors. Plante & Moran previously audited our financial statements through the year ended December 31, 2019 in accordance with auditing standards generally accepted in the United States of America. Following its engagement, Ernst & Young LLP reaudited in accordance with the standards of PCAOB and we reissued our financial statements as of and for the year ended December 31, 2019, which are included in this proxy statement/prospectus.
Plante & Moran did not audit Solid Power’s financial statements for any period subsequent to the year ended December 31, 2019. The Plante & Moran report on our financial statements the year ended December 31, 2019 did not contain an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except for the substantial doubt about our ability to continue as a going concern as of December 31, 2019.
From January 1, 2019 through June 2, 2021, there were (i) no disagreements with Plante & Moran on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Plante & Moran, would have caused them to make reference to the subject matter of the disagreements in their audit reports, and (ii) no “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation
S-K.
We have provided Plante & Moran with a copy of these disclosures and Plante & Moran has furnished a letter addressed to the SEC stating that it agrees with the statements made herein, a copy of which is included as Exhibit 16.1 to the registration statement of which this proxy statement/prospectus forms a part.
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INFORMATION ABOUT SOLID POWER
Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refer to Solid Power prior to the Closing.
Overview
Solid Power is developing
all-solid-state
battery cell technology that replaces the liquid or gel polymer electrolyte used in conventional
lithium-ion
battery cells with a sulfide-based solid electrolyte. We focus solely on the development and commercialization of
all-solid-state
battery cells and solid electrolyte materials, primarily for the fast-growing battery-powered electric vehicle market.
As a development-stage company, we have historically generated revenue through performance on government contracts and grants as well as a small volume of sales of our cells and materials into non-commercial markets. These activities have partially funded our research and development activities to date. In addition, we have been able to secure additional liquidity through various financing rounds. Most recently, in May 2021, we announced a $135.6 million Series B investment round, led by BMW and Ford. In conjunction with this capital infusion, we also announced an expansion of our Joint Development Agreements with BMW and Ford to develop all solid-state battery cells for future electric vehicles.
The world has started its transition to battery-powered electric vehicles. Current liquid electrolyte-based
lithium-ion
battery technology helped introduce the possibility of more broad adoption of electric vehicles, which secured roughly 2% of new vehicle sales in 2020. BloombergNEF predicts by the
mid-2030s
nearly 50% of all new auto sales will be fully electric. This corresponds to a $220 billion total addressable market based on projected new auto sales in 2035.
In recent years, liquid electrolyte-based
to address these needs.
lithium-ion
technology made considerable strides to increase stored energy while lowering costs; however, current technology is approaching its practical limits. In the future, we intend to license our all-solid-state battery cell architectures and manufacturing know-how to our commercialization partners, in addition to selling our proprietary sulfide-based solid electrolyte material. Longer-term, we endeavor to be the leading producer and distributor of sulfide-based solid electrolyte material, which may be employed both in powering all-solid-state battery cells in electric vehicles and in other commercial applications. To reach mass adoption where a majority of new passenger vehicles are electrified, we believe battery cell technology must take a big step forward. We are developing our
All-Solid-State
Platform
We believe our
will be able to meet the performance and cost demands from both consumers and automotive original equipment manufacturers (“OEMs”) and outperform the best performing liquid electrolyte-based
All-Solid-State
Platform
lithium-ion
technologies of today and tomorrow. We are developing our
all-solid-state
battery cell technology with the goal to improve, among other things:
| • |
safety of electric vehicle batteries through the removal of flammable and volatile liquids and gels from the battery cells;
|
| • |
energy density, a measure of the energy stored by the battery cell relative to its volume, by enabling higher capacity electrodes that are otherwise not considered viable in a traditional
lithium-ion
battery cell;
|
| • |
calendar life – how long a battery cell can last before seeing significant degradation, especially at elevated temperature – as compared to current-generation
lithium-ion;
and
|
| • |
cost, through simplifying the manufacturing process and removal or reduction of battery pack cooling systems and pack-level safety features typically seen in traditional
lithium-ion
battery packs.
|
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Critically, the cell manufacturing processes we have developed are already used globally for high volume traditional
lithium-ion
battery cell production, which we anticipate will enable manufacturers of our
all-solid-state
battery cells to meet volume and cost requirements of OEMs.
Our first two
all-solid-state
cell designs, high-content silicon anode EV cells (“Silicon EV Cell”) and lithium metal anode EV cells (“Lithium Metal EV Cell”), use many of the materials that are standard in today’s
lithium-ion
battery cells, specifically in the cathode. We expect our third cell design, conversion reaction cathode cells (“Conversion Reaction Cell”), which is earlier in the research and development cycle than our Silicon EV Cell and Lithium Metal EV Cell designs (see “—Current Research and Development” below), to include a cathode free of nickel and cobalt, which could cut cathode active material costs by up to 90%.
As the production of
could power electric vehicles with increased range, lower costs, and improved safety, resulting in broader electric vehicle market adoption.
lithium-ion
battery cells has increased with the growth of electric vehicles, the materials costs for
lithium-ion
battery cells have declined, which is a trend from which we expect to also benefit. We believe that our
All-Solid-State
Platform
Our core sulfide-based solid electrolyte technology uses earth-abundant materials. We expect to be producing at scale to support the production of approximately 800,000 electrified vehicles using our
all-solid-state
battery cells annually by 2028. We currently produce up to 1.2 metric tons per year of our proprietary sulfide-based solid electrolyte and are working toward meeting our goal of 30 metric tons per year capacity by 2022. We have plans to produce 40,000 metric tons of sulfide-based solid electrolyte by 2028 to support commercial production of electric vehicles using our
all-solid-state
battery cell design.
We intend to license our
all-solid-state
battery cell architectures and manufacturing
know-how
to our commercialization partners. In addition, we plan to sell our proprietary sulfide-based solid electrolyte material to feed cell production by our partners and to other solid-state cell producers who may not be using our unique
all-solid-state
cell designs. Longer-term, we endeavor to be the leading producer and distributor of sulfide-based solid electrolyte material, which may be employed both in powering
all-solid-state
battery cells in electric vehicles and in other commercial applications.
Our long-standing partnerships with BMW and Ford have allowed us to rapidly achieve research and development milestones on our path to commercialization. In connection with our Series B Financing in May 2021, we expanded our partnerships with Ford and BMW. Our goal is to provide these partners with the technology to secure
pilot production line-produced battery cells that were tested by automotive OEMs and top tier battery manufacturers as consistent with our
all-solid-state
battery cells for their future battery powered electric vehicles. Ford recently announced an increase in its investment into electrification of its fleet from $22 billion to $30 billion and expressed its belief that 40% of its vehicle sales in 2030 will be electrified. BMW similarly announced that it expects to produce 25 electrified models by 2023 and deliver two million electric vehicles to its customers by the end of 2025. With the delivery of hundreds of
roll-to-roll
in-house
testing results, we believe we are a leader in the development of
all-solid-state
battery cells.
While we expect Ford and BMW to be the first to produce passenger vehicles using our
all-solid
state battery cell technology, we intend to work closely with other automotive OEMs and top tier battery cell producers to make our
all-solid-state
battery cells widely available over time. Our business model is based on these parties producing our battery cells at scale using existing
lithium-ion
battery cell manufacturing processes and equipment. By modifying current manufacturing facilities or constructing new facilities using existing processes and equipment, we expect our technology will allow battery cell manufacturers to avoid incurring significant capital expenditures as they produce battery cells using our
all-solid-state
battery cell designs.
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Industry Background
The Electric Vehicle Transition is Underway
The Global Carbon Project, a leading
non-governmental
agency studying the effects of emissions on climate, estimated in 2019 that humans emit over 36.4 billion tons of CO
2
equivalent greenhouse gases per year. The United States Environmental Protection Agency estimated that transportation emissions accounted for about 29% of domestic emissions in 2019, producing close to two billion tons of CO
2
equivalent greenhouse gases, while transportation accounted for approximately 14% of global emissions. According to research from International Energy Association, about 75% of transport emissions are from road transport, with passenger cars being responsible for over 45% of all transport-related emissions. We believe the widespread use of fully electric vehicles would significantly cut passenger vehicle emissions and help to reduce human-caused CO
2
.
In response to consumer demand, as well as government mandates and incentives, many major traditional automakers have made commitments to electrify significant portions of their fleets. Specifically, traditional OEMs, including Ford, BMW, GM, Toyota, Daimler, Honda, Hyundai, Jaguar Land Rover, Renault-Nissan Alliance, and Volkswagen, as well as new entrants such as Rivian, Nio, and Vinfast, have publicly stated their commitment to developing solid-state battery technology. Automotive OEMs are incentivized by the technology’s potential to achieve higher energy density, longer calendar life, lower costs and increased safety.
The United States is making significant investments to prepare for the electrification of vehicles. In June 2021, the United States Department of Energy announced additional initiatives to bolster the domestic supply chain of advanced batteries, including strengthening the United States’ manufacturing requirements in federally-funded grants, cooperative agreements, and research and development contracts, releasing a national blueprint to develop a domestic advanced battery supply chain, providing financing to the advanced battery supply chain for electric vehicles, and procuring stationary battery storage. In August 2021, President Biden signed an executive order setting a goal that 50% of all new passenger cars and light trucks sold in 2030 be
zero-emission
vehicles, including battery electric,
plug-in
hybrid electric, or fuel cell electric vehicles. In addition, there are federal and state tax credits available to consumers who purchase electric vehicles.
State governments also are being proactive to prepare for the electrification of vehicles. For example, in his proposed
2021-22
budget, the governor of California included $500 million to substantially increase the number of electric vehicle charging stations in the state, while the State of Michigan provides economic grants to install direct current fast chargers. Similar efforts are being undertaken in other countries as well. For example, Germany announced that it will invest €5.5 billion to incentivize installation of electric vehicle charging stations and provide a €6,000 subsidy to consumers towards the cost of an electric vehicle. Also, in India, buyers of electric vehicles qualify for certain economic incentives and subsidies.
Several Roadblocks Impede the Mass Adoption of Electric Vehicles
Today’s liquid electrolyte-based
lithium-ion
battery cell technology helped introduce the possibility of broad adoption of electric vehicles. However, this first-generation technology is reaching a practical limit where further investments into development provide diminishing returns due to concerns about safety, energy density, and stability. Without further improvements to electric vehicle battery pack performance, consumer demand for electric vehicles may plateau over time. Specifically, we believe that today’s liquid electrolyte-based
lithium-ion
battery cells suffer from four key problems that discourage the widespread acceptance of electric vehicles:
| • |
Limited drive range
.
lithium-ion
battery cell technology does not provide enough energy density to support extended drives before requiring recharging.
|
| • |
Short calendar life
.
i.e.
|
180
| • |
Abuse tolerance
.
lithium-ion
battery cell used in current electric vehicle battery packs contains highly flammable and volatile components that create safety risks when exposed to abuse conditions.
|
| • |
Expensive materials and pack systems
.
|
Solid Power’s
All-Solid-State
Battery Cell Technology Addresses These Roadblocks
As discussed in further detail below, we believe that our
all-solid-state
battery cell technology will help address the current roadblocks to mass adoption of electric vehicles. Based on testing results from our internal research and development, we expect our
all-solid-state
battery cell technology to provide key improvements over today’s conventional liquid-based
lithium-ion
technology, including:
| • |
Energy density
.
all-solid-state
battery cell designs improve energy density by allowing the use of higher capacity electrodes than those used in today’s traditional
lithium-ion
battery cells, which in turn could increase vehicle driving ranges at the same battery pack volume.
|
| • |
Longer calendar life
all-solid-state
battery cell designs to achieve significant improvements to calendar life compared to today’s liquid-based
lithium-ion
battery cells.
|
| • |
Safety
.
all-solid-state
battery cell technology will bring significant safety improvements.
|
| • |
Cost savings
.
all-solid-state
battery cell designs to allow for simpler manufacturing and more flexible battery pack designs, including reducing or eliminating the need for complex cooling systems, which can enable cost savings and reduced pack complexity. In addition, we expect our designs to allow for manufacturing of
all-solid-state
battery cells on existing
lithium-ion
infrastructure,
|
We believe these collective improvements are
. While competing approaches may, for example, deliver improved energy by enabling similar higher capacity electrodes (
, lithium metal anodes), we expect any cell technology utilizing a gel or liquid electrolyte will suffer from the same safety and calendar life issues associated with today’s traditional
enabled only in a
100-percent
all-solid-state
cell format
e.g.
lithium-ion
battery cells. We believe this would require compromising on many of the pack-level benefits that we believe will be enabled by our truly
all-solid-state
battery cell.
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Our Technology
We anticipate our
technology will:
All-Solid-State
Platform
| • |
Enable several unique
all-solid-state
battery cell designs. Our first two
all-solid-state
cell designs, Silicon EV Cell and Lithium Metal EV Cell, use many of the materials that are standard in today’s
lithium-ion
battery cells, specifically in the cathode. We expect our third cell design, Conversion Reaction Cell, which is earlier in the research and development cycle than our other two designs, to include a cathode that is not suitable in liquid electrolyte-based cell architectures.
|
| • |
Leverage existing
lithium-ion
battery cell manufacturing processes and infrastructure. Our manufacturing processes were specifically optimized around industry-standard
lithium-ion
battery cell manufacturing processes, which we believe
de-risks
industrialization.
|
| • |
Sustain a product roadmap with continuous performance improvements across three unique battery cell chemistries that can be tailored to specific customer specifications. We believe our product roadmap will empower us to enter the market quickly and remain at the forefront of multiple electric vehicle product lifecycles, with improvements on performance and cost at every step.
|
| • |
Be powered by our proprietary sulfide-based solid electrolytes. Sulfide-based solid electrolytes have the best-known balance of conductivity (
i.e.
i.e.
roll-to-roll
lithium-ion
processing.
|
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All three of our
all-solid-state
battery cell designs utilize high-capacity anode materials, including lithium metal and silicon. We utilize industry-standard and commercially mature cathodes, like lithium nickel manganese cobalt oxide (“NMC”). We are developing our Conversion Reaction Cell to remove nickel and cobalt from the cathode entirely, which, if successful, could significantly reduce the cost of the cell and potentially be deployed in both electric vehicle and
non-electric
vehicle battery markets. We believe that our
all-solid-state
cell designs can unlock the potential performance of lithium metal, high-content silicon and conversion type cathodes that are not suitable for use in liquid electrolyte-based cell designs.
Our three unique and truly
all-solid-state
cell designs have no liquids or gels within the cell architecture, which allows us to utilize high-capacity materials like lithium metal and high-content silicon – as well as improve the safety profile for cells containing high-nickel NMC cathode materials – without the need for highly engineered electrode materials. The removal of all flammable liquids and gels is also key to other performance metrics where we expect to outperform traditional liquid electrolyte-based
lithium-ion
battery cells.
Benefits of Our Technology
We expect our
all-solid-state
battery cells to provide an increase in energy density compared to today’s best performing
lithium-ion
battery cells. Together with anticipated reductions in mass at the pack level due to improved safety and removal or reduction of cooling pack systems, we expect this improvement in energy density to allow automotive OEMs the flexibility to balance cost and range when designing their electric vehicles. As an example, based on internal modeling and projections and with similar overall mass as today’s liquid electrolyte-based
lithium-ion
battery packs, our Lithium Metal EV Cell design could increase vehicle range by up to 80%. Conversely, and based on internal modeling and projections, our Lithium Metal EV Cell design could deliver similar vehicle range while reducing mass by 46%, compared to today’s liquid electrolyte-based
lithium-ion
battery packs.
We expect our
all-solid-state
battery cells to have significantly improved high temperature stability compared to current liquid electrolyte-based
lithium-ion
technology, which could allow for the removal of expensive and extensively engineered battery pack cooling systems and provide significant cost savings at the pack level. Based on internal modeling, an added benefit of the high temperature stability of our
all-solid-state
battery cells could be a longer calendar life of the battery cell.
183
In internal testing, our
all-solid-state
battery cell designs have demonstrated superior safety characteristics in comparison to traditional
lithium-ion
or any other organic or flammable liquid or gel containing battery cell. The safety of our prototype
all-solid-state
battery cells has been confirmed by third-party testing through nail penetration, crushing, and overcharging to show that our cells
to-date
have not negatively reacted to harsh abuse conditions, including those expected to occur in vehicle crashes; however, as we move into automotive qualification testing, we will need to conduct additional and rigorous safety testing. We believe our
all-solid-state
battery cell design will reduce the risk for electric vehicle fires, which according to a 2020 National Transportation Safety Board study, require the use of different firefighting techniques that few fire departments have implemented.
We expect all of the previously noted benefits – energy density, high temperature stability and safety – to result in a lower-priced battery both at the cell level and at the pack level on a $/kWh basis. At scale, we anticipate a highly competitive cell-level cost in comparison to traditional liquid electrolyte
lithium-ion
design, enabled in part by leveraging existing industry-standard manufacturing processes and infrastructure. We also expect that we will be able to leverage future
lithium-ion
cost reductions in both materials and production in manufacturing our cells. We believe our
all-solid-state
battery cell costs become more compelling at the pack level due to reduced engineering requirements to meet the same level of safety and the ability to significantly reduce or remove pack cooling components.
Our Competitive Strengths
Only known inorganic
all-solid-state
battery cell architecture expected to enter automotive qualification in 2022
.
all-solid-state
battery cell company that has showcased the ability to manufacture electric vehicle-relevant battery cells in dimensions suitable for automotive applications using scalable manufacturing processes. Through our partnerships with Ford and BMW of North America LLC, we have designed a 100 ampere-hour (Ah) cell format intended for future electric vehicle integration and use. We are currently in the process of constructing a 100 Ah electric vehicle battery cell production line at our headquarters in Louisville, Colorado that will support the production of the cells needed to formally enter automotive qualification in 2022. We expect Solid Power will be the first inorganic
all-solid-state
battery cell company to enter such qualification.
Specific energy design that surpasses today’s
lithium-ion
.
all-solid-state
battery cell company that has showcased multi-layer,
multi-Ah
pilot line-produced cells that outperform traditional
lithium-ion
battery cells on specific energy. In December 2020, we showcased 330 watt-hour per kilogram (Wh/kg),
22-layer
cells that have higher specific energy (on a Wh/kg basis) than any commercially available
lithium-ion
battery cell manufactured today. Importantly, these battery cells’ specific energy is on an
actual
as-measured
basis rather than relying on forward-looking projections
Industry leading
in-house
production using
lithium-ion
manufacturing processes and equipment
.
all-solid-state
battery cell company that has showcased the ability to manufacture its cell products using industry-standard, scalable
roll-to-roll
lithium-ion
gigafactories. Our pilot production line became fully operational in early 2020. Since that time, we have delivered and had externally tested and validated hundreds of production line-produced battery cells.
Multi-pronged revenue streams from cell products and electrolyte sales
.
know-how
to third party commercialization partners, which could include top tier battery cell suppliers and automotive OEMs. The cells produced via our potential third-party commercialization partners could serve multiple automotive OEMs. Further, we plan to sell our sulfide-based solid electrolyte to our commercialization partners and other solid-state cell producers who may or may not be using our unique
all-solid-state
cell designs. Long-term, we endeavor to be the leading producer and distributor of sulfide-based solid electrolyte material, which has higher margins than the battery cell manufacturing business and the mass production of which requires substantially less capital equipment investment than battery cell production.
184
All-solid-state
manufacturing removes costly and time-consuming steps required in
lithium-ion
production and can be done using existing production infrastructure
.
lithium-ion
battery cell manufacturing facilities to produce our
all-solid-state
battery cells, which can allow manufacturing facilities to save on significant capital expenditures when transitioning over to manufacturing our
all-solid-state
battery cells. Furthermore, our
all-solid-state
battery cell designs do not require liquids or gels, thus allowing us to remove the electrolyte filling step from the cell assembly process, which accounts for approximately 5% of capital expenditures in a typical
GWh-scale
lithium-ion
facility. We also expect cell manufacturers will be able to remove nearly all of the cell conditioning steps required in traditional liquid electrolyte-based
lithium-ion
manufacturing, including
pre-formation,
elevated temperature aging, degassing, formation and final storage, and replace these with a shorter cell quality check. These conditioning steps account for approximately 30% of capital expenditures in a typical
GWh-scale
lithium-ion
facility and can take anywhere from one and
one-half
to three weeks. In total, we expect our unique cell designs allow for the reduction of costly and time-consuming steps that currently account for approximately 35% of capital expenditure costs in a typical
GWh-scale
lithium-ion
cell production facility.
Partnership with two of the world’s leading automotive OEMs
.
all-solid-state
battery cells, with the ultimate goal of deploying our
all-solid-state
battery cells in certain of their forthcoming battery powered electric vehicles. We also have received investment capital from both companies and representatives from each organization currently serve on our Board of Directors. We have been working closely with BMW since 2016 and Ford since 2018. Ford recently announced its increased investment into electrification of its fleet from $22 billion to $30 billion, while expecting 40% of all vehicle sales in 2030 to be electrified. BMW also announced that it expects to produce 25 electrified models by 2023 with two million electric vehicles delivered to customers by the end of 2025. Both BMW and Ford have made public their belief that the successful development of
all-solid-state
battery cells and technologies could put these automakers in an advantageous position over their peers in terms of driving range and cost.
High barriers to entry with extensive patents, trade secrets, manufacturing
know-how,
and industry relationships
.
all-solid-state
battery cell technology and the past three years demonstrating that the technology can be manufactured in a high-throughput manner using existing
lithium-ion
battery cell manufacturing techniques and equipment. Throughout our existence, we have compiled a robust portfolio of patents and patent applications (including those we have rights to under exclusive licenses) alongside internally kept trade secrets and manufacturing
know-how.
Across this portfolio, we have intellectual property in areas including:
| • |
composition of sulfide-based solid electrolyte materials and methods of production;
|
| • |
electrode and cell designs;
|
| • |
cell processing methods; and
|
| • |
electrolyte precursor production.
|
As of August 31, 2021, we own or exclusively license eight issued United States patents and 15 pending United States patent applications, 16
non-United
States and PCT patents and applications, and two registered United States trademarks. Processes for manufacturing sulfide solid electrolyte materials and
all-solid-state
cells make up the majority of our trade secrets.
Our Growth Strategy
As we continue our development activities with the goal of commercializing our
in electric vehicle applications, we are pursuing an aggressive growth strategy. While we believe our goals are achievable, and our roadmap to hitting those goals is reasonable, as with any company that is developing novel technology, our strategy, forecasts, and timetables are subject to change.
All-Solid-State
Platform
185
100 Ah cell development for official entrance into automotive qualification
.
all-solid-state
battery cell technology with the goal of validating our 100 Ah cell production line in 2022. We intend to build 20 Ah Silicon EV Cell designs using our current pilot production line before the end of 2021. Once our Silicon EV Cells have been transferred to the 100 Ah EV cell line, we expect to utilize our current pilot production line to refine our 20 Ah Lithium Metal EV Cells.
Expanded sulfide-based solid electrolyte production
.
all-solid-state
battery cells annually by 2028.
Expanded electrolyte precursor production
.
2
S”), needed in the synthesis of our proprietary sulfide-based solid electrolyte. We currently source Li
2
S from leading lithium and chemical companies globally. While we expect Li
2
S production scale to significantly increase with commercialization of sulfide-based
all-solid-state
battery cells, we are also working to develop a novel
low-cost
Li
2
S production method at our facility to address potential supply chain risks. We intend to increase
in-house
production of Li
2
S and continue development of
low-cost
production methods.
Meet battery demand
and increase battery production throughput
.
all-solid-state
battery cells per week via our
roll-to-roll
lithium-ion
manufacturing facilities to meet the battery cell throughput required by our automotive partners.
Establish and expand partnerships with other automotive OEMs
.
non-exclusive,
allowing us the ability to pursue relationships with other automotive OEMs. We intend to focus on establishing and expanding our partnership relationships with additional automotive OEMs through both our
all-solid-state
battery cell designs and sulfide-based solid electrolyte material.
Expand target markets
.
low-cost
all-solid-state
battery cells. However, we intend to explore the opportunity of supplying
all-solid-state
battery cell designs and sulfide-based solid electrolyte materials to other established and emerging markets, including electric vertical takeoff and landing aircraft (“eVTOL”), aerospace, defense, stationary storage and consumer electronics.
Continued investment in
next-gen
battery cell innovations
.
all-solid-state
battery cell performance, improve manufacturing processes and reduce costs.
Manufacturing and Supply
We have designed our battery cell manufacturing process to be nearly identical to that currently used in production of conventional liquid electrolyte-based
lithium-ion
battery cells. Since inception, compatibility with
lithium-ion
manufacturing processes has been fundamental to our strategy, driving the selection of a sulfide-based solid electrolyte solution and subsequent research and development. We believe that using industry standard
lithium-ion
production processes and equipment substantially
de-risks
commercial success and allows for rapid deployment of technology among early adopter platforms.
186
The manufacturing processes we have adopted significantly reduce cell conditioning steps and completely remove electrolyte filling, which account for approximately 30% and 5% of capital expenditures in a typical
GWh-scale
lithium-ion
facility, respectively. This removes the one and
one-half
to three-week cell conditioning process.
The following diagram shows the steps eliminated through adoption of an
all-solid-state
battery cell.
We expect our operational
pilot production line to successfully produce Silicon EV Cells and Lithium Metal EV Cells in 0.2 Ah, 2 Ah and 20 Ah form factors by late 2021. The production line can be transitioned between Silicon EV Cells and Lithium Metal EV Cells. Thus, we expect there are limited future capital expenditure requirements for us to demonstrate the viability of commercial volume production of our
MWh-scale
roll-to-roll
all-solid-state
battery cells.
Our
all-solid-state
battery cell design is a multi-layered stacked pouch cell. Our cell architecture relies on our proprietary sulfide-based solid electrolyte as a separator layer, which isolates the anode and cathode and conducts lithium-ions and which we manufacture ourselves. We also manufacture our cathode and high-content silicon anode using materials sourced from external suppliers. We combine those materials with our proprietary sulfide-based solid electrolyte in each layer. We source our lithium metal anode and other input materials from industry leading suppliers and emerging disruptive suppliers. Our sulfide-based solid electrolyte is made from abundant materials produced at industrial scale in multiple geographical locations, excluding the Li
2
S precursor material. Since we anticipate our need for Li
2
S to significantly increase with commercialization of sulfide-based
all-solid-state
battery cells, we are taking a
two-pronged
approach to secure the necessary supply of Li
2
S precursor material: sourcing from multiple global entities and working to develop processes to produce material
in-house
using novel production methods.
187
Partnerships
We have cultivated long-term relationships with BMW and Ford. These partnerships have played a significant role in our ability to rapidly achieve research and development milestones on our path to commercialization. To memorialize these partnerships, we have entered into separate non-exclusive JDAs with BMW of North America LLC and Ford. These JDAs generally require us to continue our research and development efforts such that our products are capable of being deployed in the partner’s electric vehicles within the next few years. However, our JDAs do not contain provisions with respect to licensing or other key commercial terms. We anticipate that we will enter into certain additional agreements with our partners for purchase and pricing of sulfide-based solid electrolyte materials for integration into our all-solid-state battery cell design, as well as terms for licensing our technology to cell producers. The terms of each JDA permit Solid Power’s partners to share in the intellectual property developed through the research and development efforts required under its particular agreements with them. Solid Power’s ability to share developments gained through the course of performance of a particular JDA with its other partners may be limited in certain circumstances. See “Risk Factors—Risks Related to Solid Power—Risks Related to Development and Commercialization” for more information.
BMW Group
We have a long-standing relationship with BMW, which began in 2016. Our relationship initially focused on
all-solid-state
battery cell research and development, and in 2017, we announced a partnership to jointly develop
all-solid-state
battery cell technology. In 2021, BMW and Solid Power expanded the partnership with BMW Holding’s participation in the Series B Financing and with the execution of a joint development agreement for full-scale 100 Ah cells for testing and vehicle integration with BMW of North America LLC. As part of this expanded partnership, Rainer Feurer, Senior Vice President at BMW, joined the Solid Power Board of Directors and will join the New Solid Power Board in connection with the consummation of the business combination.
Ford Motor Company
We started our relationship with Ford in 2018, when it participated in our Series A equity financing by providing both business plan validation and capital. In 2019, we announced an investment by Ford and partnership to jointly develop
production line. In 2021, we expanded our partnership with Ford’s participation in the Series B Financing and the execution of a joint
all-solid-state
battery cells using our
roll-to-roll
188
development agreement for full-scale 100 Ah cells for testing and vehicle integration. As part of our expanded partnership, Ted Miller, Manager of Electrification Subsystems and Power Supply Research at Ford, joined the Solid Power Board of Directors.
Current Research and Development
We conduct research and development at our headquarters in Louisville, Colorado. Research and development activities focus on making further improvements to our
all-solid-state
battery cell technology, including improvements to component materials to optimize cell performance and cost. Our research and development programs are currently focused on the following initiatives:
| • |
Sulfide-Based Solid Electrolyte Development
.
|
| • |
Conversion Reaction Cell Development
.
|
| • |
Improvements in Cell Performance
.
all-solid-state
battery cells and minimizing resistance within the cells. We are also working to maximize the long-term cycling stability of lithium metal anodes across a broad temperature range and with high charging rates.
|
Intellectual Property
Our proprietary battery cell technology is protected through a combination of patents, patent applications, and trade secrets. Our patent portfolio includes technologies invented by us, in addition to exclusive licenses obtained from the University of Colorado Boulder and Oak Ridge National Laboratory. Solid electrolyte materials and methods of production make up the largest portion of our patent application filings. Additional subjects include electrode and cell designs, cell processing methods, and electrolyte precursor methods, among others. We have accelerated our patent application filings in 2020 and 2021 and we regularly file new applications in areas that are enforceable and/or reverse-engineerable. Processes for manufacturing sulfide-based solid electrolyte materials and
all-solid-state
cells make up the majority of our trade secrets. As of August 31, 2021, we owned or exclusively licensed eight issued United States patents and 15 pending United States patent applications, 16
non-United
States and PCT patents and applications, and two registered United States trademarks. We further protect our intellectual property with
non-disclosure
agreements for all employees and consultants and material-transfer and
non-disclosure
agreements with third parties.
Competition
The battery industry is currently receiving significant attention in part due to an evolutionary change in both technology and environmental, social and governance initiatives. Next-generation battery and electric vehicle technologies will underpin performance improvements contributing to global adoption of electric vehicles. The growing spark of global interest has heightened competition in the industry and increased the risk of potential new entrants, which could negatively impact the success of our business, results of operations or financial condition.
We compete directly with “status quo” and emerging electric vehicle battery cell producers. As we near
for the next generation of electric vehicles, new and emerging battery technologies could
start-of-production
189
create impediments to our commercial success. Nonetheless, we believe we are uniquely positioned across the battery cell technology value chain, including material and cell development and production techniques. Our prospective competitors include major automotive OEMs and top tier battery producers currently supplying, producing and developing solid-state solutions.
A number of mature and development-stage companies are seeking to improve conventional
lithium-ion
battery cells or to develop new technologies for solid-state battery cells, including lithium-metal battery cells. Potential new entrants are seeking to develop new technologies for cathodes, anodes, electrolytes and additives. Some of these companies have established relationships with automotive OEMs and are in varying stages of development.
There are various competing electrolyte material pathways to enable
all-solid-state
or semi-solid-state battery cell designs. Broadly speaking, we believe the next-generation battery cell community has converged on three competing approaches to solid-state battery cells. Below is a brief overview of these approaches along with our opinion why we believe a sulfide-based solid electrolyte is the superior approach for deployment in passenger electric vehicles.
| • |
Polymers
o
C). Polymers may also require pack-cooling as they can degrade at elevated temperature (>80
o
C). Consequently, we believe polymer market penetration is generally limited to mass transit applications (
e.g.
|
| • |
Oxides
lithium-ion
battery cell manufacturing. Because of these high-temperature manufacturing hurdles, we believe that most manufacturers utilizing an oxide design have been forced to utilize a liquid or gel electrolyte in their cell design, which reduces the calendar life, safety and electrode design benefits that accompany battery cells that are truly
all-solid-state.
To date we are not aware of any manufacturer demonstrating an oxide cell design with greater specific energy (Wh/kg) than traditional
lithium-ion.
|
| • |
Sulfides
i.e.
roll-to-roll
dry-room
environment to prevent the material from degrading; however,
state-of-the-art
dry-rooms.
We have developed our processes around an industry-standard
dry-room
condition of
-40
o
C dew point.
|
Sulfide electrolytes generate hydrogen sulfide (“H
, cell depackaging or layer delamination) generated negligible H
, solvents, cathode/anode active materials, and liquid electrolytes) in the manufacturing process.
2
S”) gas when exposed to moist ambient air. H
2
S is a gas that is toxic to humans above a specific threshold and is regulated by the Occupational Safety and Health Administration. Through preliminary testing, we believe H
2
S concerns with respect to our sulfide-based solid electrolyte are limited to when it is in powder form. Our preliminary abuse and destructive testing (
e.g.
2
S gas. If additional safety tests are consistent with our preliminary results, we expect H
2
S safety concerns at the battery pack level to be minimal. We have implemented robust safety protocols to mitigate H
2
S risk and other risks associated with handling large volumes of potentially hazardous materials (
e.g.
190
The following is a summary chart showing the three approaches discussed above:
We believe our ability to compete successfully with traditional
lithium-ion
battery cell technology and with other companies seeking to develop solid-state battery cells will depend on several factors, including cell price, safety, energy density, and calendar life, and on
non-technical
factors such as brand, established customer relationships and financial and manufacturing resources. Our positioning across the entire production chain has expedited our research and development process relative to our competitors by creating a constant feedback loop allowing for more rapid and intelligent iterations.
Many energy storage and battery technology players have, and future entrants may have, greater resources than we have and may also be able to devote greater resources to the development of their current and future technologies. They may also have access to larger potential customer bases and have and may continue to establish cooperative or strategic relationships amongst themselves or with third parties (including automotive OEMs) that may further enhance their resources and offerings.
Government Regulation and Compliance
Government regulations frequently control how battery cells are stored, transported, used and disposed of. We are subject to regulations governing the proper handling, storage, disposal and transportation of products containing hazardous materials, including federal regulations governing transport of battery cells and state laws relating to recycling and disposal of battery cells.
Separately, we are subject to federal and state environmental laws and regulations regarding the handling and disposal of hazardous substances and solid waste, to include electronic waste and battery cells. These laws regulate the generation, storage, treatment, transportation, and disposal of solid and hazardous waste and may impose strict, joint and several liability for the investigation and remediation of areas where hazardous substances may have been released or disposed. In the course of ordinary operations, we, through third parties and contractors, may handle hazardous substances within the meaning of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state statutes and, as a result, may be jointly and severally liable for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment. We are also subject to the strict requirements of the Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes for the generation or disposal of solid waste, which may include hazardous waste.
The Occupational Safety and Health Act (“OSHA”), and comparable laws in other jurisdictions, regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about any hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities, and the public.
191
In many cases, our products – including our
all-solid-state
battery cells and related technology – are or may in the future be subject to trade and export control laws and regulations in the United States and other jurisdictions where we do business. Such laws may include the export administration regulations and similar export control regimes, trade and economic sanctions maintained by the Office of Foreign Asset Control and other similar agencies, foreign direct investment rules and regulations, tariffs and quotas, and other related regulations in jurisdictions in which we operate. In particular, an export license may be required to export or
re-export
our products and technology to certain countries or
end-users
or for certain
end-uses
or may be prohibited. Obtaining the necessary export license for a particular sale or offering may not be possible or may be time-consuming and may result in the delay or loss of sales opportunities. Any failure to adequately address these legal obligations could result in civil fines or suspension or loss of our export privileges, any of which could materially adversely affect our business, financial condition, and results of operations. In addition, our business may be subject to the Foreign Corrupt Practices Act and other anti-corruption, anti-bribery, and anti-money laundering laws and regulations in the jurisdictions in which we have offices or do business, both domestic and abroad. Any failure to adequately comply with any of these collected trade or international business obligations, or future changes with respect to any of these legal regimes, could cause us to incur significant costs, including the potential for new overhead costs, fines, sanctions, and third-party claims.
Employees
As of August 31, 2021, we employed 79 full-time employees, based out of our headquarters in Louisville, Colorado. More than half of these employees have a technical background and hold advanced engineering and scientific degrees. We are committed to increasing diversity in the workforce and building and maintaining an inclusive and positive culture is critical for our success.
From the outside, Solid Power is an industry-leading developer of
all-solid-state
battery cells. From the inside, we are a collection of individuals with a shared passion and purpose in revolutionizing energy storage and enabling future
e-mobility.
Our work environment is highly collaborative and one that is based on trust and mutual respect. We take pride in our honest and transparent approach to communication, whether it be internally or with our external partners and customers. Our team is made up of incredibly talented and creative engineers and scientists who take considerable pride and ownership in their work. We believe very strongly that these traits combine to result in an exceptionally high-quality work product that meets or exceeds our customers’ and partners’ expectations.
We are committed to compensating our employees in an ethical manner. We have taken steps to comply with Colorado’s Equal Pay for Equal Work Act. We offer competitive salaries and benefits, as well as a robust equity compensation plan, all with the intention of attracting and retaining team members capable of making our company the world leader in
all-solid-state
battery cell development. Our compensation decisions are driven by individual contributions, the overall market, and how critical the role is to our success.
To date, we have not experienced any work stoppages and we consider our relationship with our employees to be good. None of our employees are either represented by a labor union or subject to a collective bargaining agreement.
Facilities
Our corporate headquarters is located in Louisville, Colorado. There, we lease approximately 30,000 square feet under a lease and a sublease that expire in September 2024 and December 2024, respectively. Most of the facility is used for our research and development, manufacturing and quality control.
In September 2021, we entered into a lease for approximately 75,000 square feet in Thornton, Colorado. The lease for this facility expires in March 2029. We intend to use this facility to significantly increase our production of sulfide-based solid electrolyte, expand research and development operations, and for general office purposes.
Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
192
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF DCRC
The following discussion and analysis should be read in conjunction with the financial statements and related notes of DCRC included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting an Initial Business Combination. On March 23, 2021 (the “IPO Closing Date”), we consummated our IPO of 35,000,000 units. The units were sold at a price of $10.00 per unit, generating gross proceeds of $350.0 million, and incurring transaction costs of approximately $20.0 million, consisting of $7.0 million of underwriting fees, $12.3 million of deferred underwriting fees and approximately $879,000 of other offering costs. The underwriters were granted a
45-day
option from the date of the final prospectus relating to the IPO to purchase up to 5,250,000 additional units to cover over-allotments, if any, at $10.00 per unit, less underwriting discounts and commissions. The over-allotment option expired unexercised.
Simultaneously with the closing of the IPO, we completed the private sale of 6,666,667 private placement warrants at a purchase price of $1.50 per warrant to our Sponsor and our independent directors, generating gross proceeds to us of approximately $10.0 million.
Approximately $350.0 million of the net proceeds from the IPO and certain of the proceeds of the private placement of the private placement warrants was placed in the Trust Account located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, with a maturity of 185 days or less, or in market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule
2a-7
under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of our Initial Business Combination and (ii) the distribution of the Trust Account as described below.
If we are unable to complete an Initial Business Combination within 24 months from the closing of the Initial Public Offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and the DCRC Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our only activities from inception through June 30, 2021 related to our formation and the IPO, as well as the pursuit of our acquisition plans. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as costs in the pursuit of our acquisition plans.
193
For the three months ended June 30, 2021, we had a net loss of approximately $23.2 million, which consisted of approximately $1.8 million in general and administrative expenses, including due diligence costs incurred in the pursuit of our acquisition plans, $83,000 in franchise taxes and $21.3 million due to the change in the fair value of warrant liabilities.
For the period from January 29, 2021 (inception) through June 30, 2021, we had a net loss of approximately $24.2 million, which consisted of approximately $2.0 million in general and administrative expenses, including due diligence costs incurred in the pursuit of our acquisition plans, $83,000 in franchise taxes, $1.0 million of offering costs allocated to warrant liabilities offset by $21.2 million due to the change in the fair value of warrant liabilities.
Liquidity and Capital Resources
Our liquidity needs up to the IPO were satisfied through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of Founder Shares to our Sponsor and a loan from our Sponsor for an aggregate amount of $300,000 to cover organizational expenses and expenses related to the IPO pursuant to a promissory note. As of June 30, 2021, no amount has been drawn down or is outstanding under the promissory note. Subsequent to the consummation of our IPO, our liquidity needs have been satisfied through the net proceeds of approximately $1.1 million from the private sale of 6,666,667 private placement warrants held outside of the Trust Account.
We do not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of the financial statements. In connection with our assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that we have access to funds from our Sponsor, which is described in Note 4, and our Sponsor has the financial ability to provide such funds, that are sufficient to fund our working capital needs until the earlier of the consummation of an Initial Business Combination and one year from the date of issuance of the financial statements.
In addition, in order to finance transaction costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. As of June 30, 2021, there were no amounts outstanding under any working capital loans.
Contractual Obligations
Registration Rights
The holders of the Founder Shares, private placement warrants and warrants that may be issued upon conversion of working capital loans, if any, and any shares of Class A Common Stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares will be entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $7.0 million in the aggregate, paid upon closing of our IPO. In addition, $0.35 per unit, or approximately $12.3 million in the aggregate, will be payable to underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination, subject to the terms of the underwriting agreement.
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Administrative Support Agreement
Commencing on the date that our securities were first listed on Nasdaq and continuing until the earlier of our consummation of an Initial Business Combination or our liquidation, we have agreed to pay an affiliate of our Sponsor a total of $10,000 per month for office space, utilities, secretarial support and administrative services. We recorded an aggregate of $31,935 for the period from January 29, 2021 (inception) to June 30, 2021, in general and administrative expenses in connection with the related agreement in the accompanying statement of operations.
We recorded an aggregate of approximately $31,935 in related party expenses, which were paid in full at June 30, 2021.
Critical Accounting Policies
Basis of Presentation
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and expenses during the periods reported. Actual results could materially differ from those estimates.
Warrant Liabilities
We account for the warrants issued in connection with our Initial Public Offering in accordance with ASC 815, under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants are measured at fair value at inception and at each reporting date in accordance with ASC 820,
, with changes in fair value recognized in the statements of operations in the period of change.
Fair Value Measurement
Common Stock Subject to Possible Redemption
We account for the Class A Common Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A Common Stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within DCRC’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. DCRC’s common stock features certain redemption rights that are considered to be outside of DCRC’s control and subject to occurrence of uncertain future events.
Impact of
COVID-19
Our Sponsor continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of June 30, 2021. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance
Sheet Arrangements
As of June 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.
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Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on our financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
non-emerging
growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
As an “emerging growth company,” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting, (ii) provide all of the compensation disclosure that may be required of
non-emerging
growth public companies, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we otherwise no longer qualify as an “emerging growth company.”
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INFORMATION ABOUT DCRC
Overview
DCRC is a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting an Initial Business Combination. DCRC has neither engaged in any operations nor generated any revenue to date. Based on its business activities, it is a “shell company” as defined in the Exchange Act because it has no operations and nominal assets consisting solely of cash and/or cash equivalents.
In February 2021, our Sponsor purchased an aggregate of 10,062,500 shares of Class B Common Stock in exchange for the payment of $25,000 of expenses on our behalf. In March 2021, our Sponsor forfeited 400,000 shares of Class B Common Stock, and an aggregate of 400,000 shares of Class B Common Stock were issued to our independent director nominees at their original purchase price. In April 2021, one of our independent directors forfeited 40,000 shares of Class B Common Stock in connection with such director’s resignation from the DCRC Board, and our Sponsor acquired an equivalent number of shares of Class B Common Stock from us. In May 2021, our Sponsor forfeited 1,312,500 shares of Class B Common Stock in connection with the expiration of the underwriters’ over-allotment option for our Initial Public Offering, resulting in our Sponsor and our independent directors holding an aggregate of 8,750,000 Founder Shares. The Founder Shares will automatically convert into shares of our Class A Common Stock at the time of the Initial Business Combination, or at any time prior thereto at the option of the holder, on a
basis, subject to adjustment pursuant to certain anti-dilution rights.
one-for-one
On the IPO Closing Date, we consummated the IPO of 35,000,000 units. The units were sold at a price of $10.00 per unit, generating gross proceeds of $350,000,000. Each unit consists of one share of Class A Common Stock and
one-third
of one warrant. Each public warrant entitles the holder thereof to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to adjustment, and only whole warrants are exercisable. The public warrants will become exercisable on the later of 30 days after the completion of our Initial Business Combination or 12 months from the closing of our Initial Public Offering and will expire five years after the completion of our Initial Business Combination or earlier upon redemption or liquidation.
Simultaneously with the consummation of the IPO, we completed the private sale of 6,666,667 private placement warrants at a purchase price of $1.50 per private placement warrant to our Sponsor and our independent directors, generating gross proceeds of approximately $10,000,000. Each private placement warrant entitles the holder to purchase one share of our Class A Common Stock at $11.50 per share, subject to adjustment. The private placement warrants (including the Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of our Initial Business Combination.
Approximately $350,000,000 of the net proceeds from the IPO and the private placement with our Sponsor and our independent directors has been deposited in the Trust Account. The net proceeds held in the Trust Account includes approximately $12,250,000 of deferred underwriting discounts and commissions that will be released to the underwriters of the IPO upon completion of our Initial Business Combination. Of the gross proceeds from the IPO and the sale of the private placement warrants that were not deposited in the Trust Account, approximately $7,000,000 was used to pay underwriting discounts and commissions in the IPO and the balance was reserved to pay accrued offering and formation costs, business, legal and accounting due diligence expenses on prospective acquisitions and continuing general and administrative expenses.
On May 14, 2021, we announced that, commencing May 14, 2021, holders of the units may elect to separately trade the shares of Class A Common Stock and public warrants included in the units. The shares of Class A Common Stock and public warrants that are separated trade on Nasdaq under the symbols “DCRC” and “DCRCW,” respectively. Those units not separated continue to trade on Nasdaq under the symbol “DCRCU.”
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Initial Business Combination
Our Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the Initial Business Combination.
Redemption Rights for Holders of Public Shares
We are providing our public stockholders with the opportunity to elect to redeem their public shares for cash equal to a pro rata share of the aggregate amount then on deposit in the Trust Account, including interest not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, upon the consummation of the business combination, subject to the limitations described herein. As of June 30, 2021, the amount in the Trust Account, including interest not previously released to us to pay our franchise and income taxes, is approximately $10.00 per public share. Our Sponsor, officers and directors have agreed to waive their redemption rights with respect to the Founder Shares and any public shares they may hold in connection with the consummation of the business combination. The Founder Shares will be excluded from the pro rata calculation used to determine the per share redemption price.
Submission of Initial Business Combination to a Stockholder Vote
The special meeting of DCRC stockholders to which this proxy statement/prospectus relates is being held to solicit your approval of, among other things, the business combination. DCRC public stockholders are not required to vote against the business combination in order to exercise their redemption rights. If the business combination is not completed, then public stockholders electing to exercise their redemption rights will not be entitled to receive such payments. Our Sponsor, directors and officers have agreed to vote any shares of Class A Common Stock and Class B Common Stock owned by them in favor of the business combination.
Limitation on Redemption Rights
Notwithstanding the foregoing, our Charter provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemptions with respect to more than an aggregate of 20% of the shares of Class A Common Stock included in the units sold in the IPO.
Employees
DCRC currently has two officers. These individuals are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our Initial Business Combination. The amount of time that they will devote in any time period will vary based on whether a target business has been selected for our Initial Business Combination and the stage of the business combination process we are in.
Management
Executive Officers and Directors
Our current executive officers and directors are set forth below:
|
Name
|
Age
|
Position
|
||
| Erik Anderson | 63 | Chief Executive Officer and Director | ||
| Peter Haskopoulos | 45 | Chief Financial Officer, Chief Accounting Officer and Secretary | ||
| Dr. Jennifer Aaker | 54 | Director | ||
| Jane Kearns | 50 | Director |
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|
Name
|
Age
|
Position
|
||
| Pierre Lapeyre, Jr. | 58 | Director | ||
| David Leuschen | 70 | Director | ||
| Robert Tichio | 43 | Director | ||
| Jim McDermott | 52 | Director | ||
| Jeffrey Tepper | 55 | Director |
Erik Anderson
Peter Haskopoulos
Dr.
Jennifer Aaker
hands-on
tool putting The Dragonfly Effect model to work. Her professional areas of focus include artificial intelligence, digitization and brand value. Dr. Aaker currently serves
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on the board of directors of Codexis Inc. and on the board of directors and audit committee of the Stephen and Ayesha Curry Eat. Learn. Play. Foundation. Ms. Aaker served on the boards of Corporate Visions, Inc. from 2011 to 2016, California Casualty Insurance from 2009 to 2015, and Accompany from 2014 to 2018. She is the recipient of the Distinguished Scientific Achievement Award, Stanford Distinguished Teaching Award, Citibank Best Teacher Award, George Robbins Best Teacher Award, Robert Jaedicke Silver Apple Award, and the MBA Professor of the Year Award. Dr. Aaker completed her PhD degrees at Stanford University, and holds a BA from UC Berkeley.
We believe that Dr. Aaker’s expertise in behavioral science, artificial intelligence, digitization and brand value and significant experience on numerous boards of directors bring important and valuable skills to our board of directors.
Jane Kearns
co-founded,
grew and profitably sold a renewable energy company, and leverages over 20 years of experience in venture capital, cleantech and sustainability to help build businesses that matter. Ms. Kearns is a
co-founder
of the CanadaCleantech Alliance, sits on the board of Clear Blue Technologies International (TSXV: CBLU), is an advisory board member for StandUp Ventures and Amplify Ventures, and is a member of the Expert Panel on Clean Growth for the Canadian Institute for Climate Choices. She holds an MBA from Columbia University.
We believe that Ms. Kearns’s leadership in sustainable innovation and extensive experience growing successful companies at the intersection of business and sustainability bring important and valuable skills to our board of directors.
Pierre Lapeyre, Jr.
co-founder
and senior managing director of Riverstone Holdings LLC. Mr. Lapeyre was a managing director of Goldman Sachs in its Global Energy & Power Group. Mr. Lapeyre joined Goldman Sachs in 1986 and spent his
14-year
investment banking career focused on energy and power, and leading client coverage and execution of a wide variety of M&A, IPO, strategic advisory and capital markets financings for clients across all sectors of the industry. Mr. Lapeyre received his B.S. in Finance/Economics from the University of Kentucky and his M.B.A. from the University of North Carolina at Chapel Hill. Mr. Lapeyre serves on the boards of directors or equivalent bodies of a number of public and private Riverstone portfolio companies and their affiliates. In addition to his duties at Riverstone, Mr. Lapeyre serves on the Executive Committee of the Board of Visitors of the MD Anderson Cancer Center and is a Trustee and Treasurer of The Convent of the Sacred Heart.
We believe that Mr. Lapeyre’s considerable energy and power private equity and investment banking experience bring important and valuable skills to our board of directors.
David Leuschen
co-founder
and senior managing director of Riverstone Holdings LLC. Prior to Riverstone, Mr. Leuschen was a partner and managing director at Goldman Sachs and founder and head of the Goldman Sachs Global Energy and Power Group. Mr. Leuschen was responsible for building the Goldman Sachs energy and power investment banking practice into one of the leading franchises in the global energy and power industry. Mr. Leuschen additionally served as chairman of the Goldman Sachs Energy Investment Committee, where he was responsible for screening potential direct investments by Goldman Sachs in the energy and power
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industry. In addition to his board roles at various Riverstone portfolio companies and investment vehicles, Mr. Leuschen has served as a director of Cambridge Energy Research Associates, Cross Timbers Oil Company (predecessor to XTO Energy) and J. Aron Resources. He is also president and sole owner of Switchback Ranch LLC and on the Advisory Board of Big Sky Investment Holdings LLC. David serves on a number of nonprofit boards of directors, including as a Trustee of United States Olympic Committee Foundation, a Director of Conservation International, a Director of the Peterson Institute for International Economics, a Founding Member of the Peterson Institute’s Economic Leadership Council, a Director of the Wyoming Stock Growers Association and a Director of the Montana Land Reliance. Mr. Leuschen received his A.B. from Dartmouth and his M.B.A. from Dartmouth’s Amos Tuck School of Business.
We believe that Mr. Leuschen’s considerable energy and power private equity and investment banking experience, as well as his experience on the boards of various Riverstone portfolio companies and investment vehicles, bring important and valuable skills to our board of directors.
Robert Tichio
We believe that Mr. Tichio’s considerable investment experience, as well as his experience on the DCRB and DCRN boards and boards of Riverstone portfolio companies, bring important and valuable skills to our board of directors.
Jim McDermott
low-carbon
energy and water sustainability sectors. As an investor and entrepreneur, Mr. McDermott has founded, run and invested in over 35 businesses over a
25-year
career and has built an extensive professional network in the
low-carbon
energy, water and sustainability sectors. From 1996 to 2003, Mr. McDermott founded and ran Stamps.com (STMP:NASDAQ), Archive.com (sold to Cyclone Commerce) and Spoke.com. From 2003 to 2017, Mr. McDermott
co-founded
and served as Managing Partner of US Renewables Group, a private investment firm, where he raised and invested approximately $1 billion into clean energy businesses. Mr. McDermott was founder and board member of NanoH2O, is the founder and executive chairman of Fulcrum BioEnergy, investor and board observer of Moleaer, a board member of Carbon Engineering and the chief executive officer of 1PointFive. For five years, Mr. McDermott has been a board member of the Los Angeles Cleantech Incubator. Mr. McDermott holds an MBA from UCLA, and a BA in Philosophy from Colorado College.
We believe Mr. McDermott’s extensive investment and leadership experience brings important and valuable skills to our board of directors.
Jeffrey Tepper
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Mr. Tepper is founder of JHT Advisors LLC, a mergers and acquisitions (“M&A”) advisory and investment firm. From 1990 to 2013, Mr. Tepper served in a variety of senior management and operating roles at the investment bank Gleacher & Company, Inc. and its predecessors and affiliates (“Gleacher”). Mr. Tepper was head of investment banking and a member of Gleacher’s Management Committee. Mr. Tepper is also Gleacher’s former chief operating officer overseeing operations, compliance, technology and financial reporting. In 2001, Mr. Tepper
co-founded
Gleacher’s asset management activities and served as president. Gleacher managed over $1 billion of institutional capital in the mezzanine capital and hedge fund areas. Mr. Tepper served on the investment committees of Gleacher Mezzanine and Gleacher Fund Advisors. Between 1987 and 1990, Mr. Tepper was employed by Morgan Stanley & Co. as a financial analyst in the M&A and merchant banking departments. Mr. Tepper served as a director of Silver Run I from its inception in November 2015 until the completion of its acquisition of Centennial in October 2016 and has served as a director of Centennial Resource Development, Inc. (NASDAQ: CDEV) since October 2016. Mr. Tepper is a former director of Alta Mesa Resources, Inc. (NASDAQ: AMR) and its predecessor, Silver Run II, between March 2017 and June 2020. Mr. Tepper received a Master of Business Administration from Columbia Business School and a Bachelor of Science in Economics from The Wharton School of the University of Pennsylvania with concentrations in finance and accounting.
We believe Mr. Tepper’s extensive M&A experience, including service on the boards of directors of two blank check companies, brings important and valuable skills to our board of directors.
Number and Terms of Office of Officers and Directors
DCRC has eight directors. The DCRC Board is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to DCRC’s first annual meeting of stockholders) serving a three-year term. The term of office of the first class of directors, consisting of Dr. Jennifer Aaker, Erik Anderson and Jane Kearns, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Jim McDermott and Jeffrey Tepper, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Pierre Lapeyre, Jr., David Leuschen and Robert Tichio, will expire at the third annual meeting of stockholders.
Holders of our Founder Shares will have the right to elect all of our directors prior to the consummation of our Initial Business Combination and holders of our public shares will not have the right to vote on the election of directors during such time.
Approval of our Initial Business Combination will require the affirmative vote of a majority of the DCRC Board, which must include a majority of our independent directors and a majority of the
non-independent
directors nominated by our Sponsor.
DCRC’s officers are appointed by the DCRC Board and serve at the discretion of the DCRC Board, rather than for specific terms of office. The DCRC Board is authorized to appoint persons to the offices set forth in DCRC’s bylaws as it deems appropriate. DCRC’s bylaws provide that DCRC’s officers may consist of a Chairman of the Board, Chief Executive Officer, Presidents, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries and such other officers as may be determined by the board of directors.
Board Leadership Structure and Role in Risk Oversight
Robert Tichio serves as the Chairman of the DCRC Board. The Chief Executive Officer, who is also a director, is responsible for leading our management and operations. The DCRC Board believes that the current leadership structure is efficient for a company of our size and promotes good corporate governance. However, the DCRC Board will continue to evaluate its leadership structure and may change it if, in the opinion of the DCRC Board, a change is required by the needs of our business and operations.
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The DCRC Board is actively involved in overseeing our risk assessment and monitoring processes. The DCRC Board focuses on our general risk management strategy and ensures that appropriate risk mitigation strategies are implemented by management. Further, operational and strategic presentations by management to the DCRC Board include consideration of the challenges and risks of our businesses, and the DCRC Board and management actively engage in discussion on these topics. In addition, each of the DCRC Board’s committees considers risk within its area of responsibility.
Director Independence
Pursuant to Nasdaq Listing Rule 5615, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement to have a board that includes a majority of “independent directors,” as defined under the Nasdaq rules.
Only holders of the Class B Common Stock have the right to vote on the election of directors, and our Sponsor holds more than 50% of the Class B Common Stock. As a result, we are a “controlled company” and utilize the exemption from the requirement to have a board that includes a majority of “independent directors,” as defined under the Nasdaq rules. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgement in carrying out the responsibilities of a director. The DCRC Board has determined that Dr. Jennifer Aaker, Jane Kearns, Jim McDermott and Jeffrey H. Tepper are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Committees of the DCRC Board
The DCRC Board has two standing committees: an audit committee and a compensation committee. Subject to
phase-in
rules and a limited exception, the rules of Nasdaq and Rule
10A-3
under the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of Nasdaq require that the compensation committee of a listed company be comprised solely of independent directors.
Audit Committee
The DCRC Board has established an audit committee of the board of directors. Jim McDermott, Jeffrey Tepper and Robert Tichio serve as members of our audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent, subject to the exception described below. Jim McDermott and Jeffrey Tepper are independent. Because we listed our securities on Nasdaq in connection with the IPO, we have one year from the effective date of our registration statement to have our audit committee be comprised solely of independent members. We intend to identify one additional independent director to serve on our audit committee within one year of the effective date of our registration statement, at which time Robert Tichio will resign from the committee. We expect such additional director to enter into a letter agreement substantially similar to the letter agreement signed by our Sponsor, officers and directors included as an exhibit to our registration statement.
Jeffrey Tepper serves as chair of the audit committee. All of the members of the audit committee are financially literate, and the DCRC Board has determined that Jeffrey Tepper qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
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The DCRC Board has adopted an audit committee charter, which details the principal functions of the audit committee, including:
| • |
the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
|
| • |
pre-approving
all audit and permitted
non-audit
services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing
pre-approval
policies and procedures;
|
| • |
reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
|
| • |
setting clear hiring policies for employees or former employees of the independent auditors;
|
| • |
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
|
| • |
obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
|
| • |
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation
S-K
promulgated by the SEC prior to us entering into such transaction; and
|
| • |
reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the FASB, the SEC or other regulatory authorities.
|
Compensation Committee
The DCRC Board has established a compensation committee of the board of directors. Dr. Jennifer Aaker and Jeffrey Tepper serve as members of our compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. Dr. Jennifer Aaker and Jeffrey Tepper are independent. Dr. Jennifer Aaker serves as chair of the compensation committee.
The DCRC Board has adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| • |
reviewing and approving on an annual basis the corporate goals and objectives relevant to our chief executive officer’s compensation, evaluating our chief executive officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our chief executive officer based on such evaluation;
|
| • |
reviewing and approving on an annual basis the compensation of all of our other officers;
|
| • |
reviewing on an annual basis our executive compensation policies and plans;
|
| • |
implementing and administering our incentive compensation equity-based remuneration plans;
|
| • |
assisting management in complying with our proxy statement and annual report disclosure requirements;
|
| • |
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
|
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| • |
if required, producing a report on executive compensation to be included in our annual proxy statement; and
|
| • |
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
|
Notwithstanding the foregoing, as indicated above, other than the $10,000 per month administrative fee payable to an affiliate of our sponsor and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the closing of a business combination. Accordingly, prior to the closing of an Initial Business Combination, the compensation committee is only responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such Initial Business Combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Committee Membership, Meetings and Attendance
During the fiscal year ended December 31, 2020, the DCRC Board did not meet, our audit committee did not meet, and our compensation committee did not meet. We encourage all of our directors to attend our annual meetings of stockholders.
Director Nominations
We do not have a standing nominating committee. In accordance with Rule 5605(e)(2) of the Nasdaq Rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The DCRC Board believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The DCRC Board also considers director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the DCRC Board considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders. Prior to our Initial Business Combination, holders of our public shares will not have the right to recommend director candidates for nomination to our board of directors.
Stockholder Communications
The DCRC Board welcomes communications from our stockholders. Our stockholders may send communications to the DCRC Board, any committee of the DCRC Board or any other director in particular to:
Decarbonization Plus Acquisition Corporation III
2744 Sand Hill Road, Suite 100
Menlo Park, CA 94025
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Our stockholders should mark the envelope containing each communication as “Stockholder Communication with Directors” and clearly identify the intended recipient(s) of the communication. DCRC’s Chief Executive Officer will review each communication received from our stockholders and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: (a) the communication complies with the requirements of any applicable policy adopted by the DCRC Board relating to the subject matter of the communication; and (b) the communication falls within the scope of matters generally considered by the DCRC Board. To the extent the subject matter of a communication relates to matters that have been delegated by the DCRC Board to a committee or to an executive officer of DCRC, then DCRC’s Chief Executive Officer may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the DCRC Board or an executive officer does not imply or create any fiduciary duty of any DCRC Board member or executive officer to the person submitting the communications.
Code of Ethics and Committee Charters
We have adopted a Code of Ethics applicable to our directors, officers and employees. Our Code of Ethics and our audit and compensation committee charters are available on our website, www.dcrbplus.com, under the “DCRC” tab. In addition, a copy of the Code of Ethics will be provided without charge upon request from us in writing at 2744 Sand Hill Road, Suite 100, Menlo Park, CA 94025 or by telephone at (212)
993-0076.
We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form
8-K.
Conflicts of Interest
Riverstone manages several investment vehicles. A family of private equity funds in the energy and power industry that are managed by Riverstone (“Riverstone Funds”) or its affiliates may compete with us for acquisition opportunities. If these funds decide to pursue any such opportunity, we may be precluded from procuring such opportunities. In addition, investment ideas generated within Riverstone may be suitable for both us and for a current or future Riverstone Fund and may be directed to such investment vehicle rather than to us. Neither Riverstone nor members of our management team who are also employed by Riverstone have any obligation to present us with any opportunity for a potential business combination of which they become aware. Riverstone and/or our management, in their capacities as officers or managing directors of Riverstone or in their other endeavors, may be required to present potential business combinations to the related entities, current or future investment vehicles, or third parties, before they present such opportunities to us.
Notwithstanding the foregoing, we may, at our option, pursue an acquisition opportunity jointly with our Sponsor, or one or more of its affiliates, which we refer to as an “Affiliated Joint Acquisition.” Such entity may
co-invest
with us in the target business at the time of our Initial Business Combination, or we could raise additional proceeds to complete the acquisition by making a specified future issuance to any such fund or vehicle.
Each of our officers and directors presently has, and any of them in the future may have additional fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such other entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination. In addition, we may pursue an Affiliated Joint Acquisition opportunity with an entity to which an officer or director has a fiduciary or contractual obligation. Any such entity may
co-invest
with us in the target business at the time of our Initial Business Combination, or we could raise additional proceeds to complete the acquisition by issuing to such entity a class of equity or equity-linked securities. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such
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opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
In addition, Riverstone or its affiliates, including our officers and directors who are affiliated with Riverstone, may sponsor or form other blank check companies similar to ours during the period in which we are seeking an Initial Business Combination, and members of our management team may participate in such blank check companies. Any such companies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among the management teams. However, we do not believe that any such potential conflicts would materially affect our ability to complete our Initial Business Combination.
Investors and potential investors should also be aware of the following other potential conflicts of interest:
| • |
None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities.
|
| • |
In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
|
| • |
Our initial stockholders will not be entitled to redemption rights with respect to any Founder Shares and any public shares held by them in connection with the consummation of our Initial Business Combination. Additionally, our initial stockholders will not be entitled to rights to liquidating distributions with respect to any Founder Shares held by them if we fail to consummate our Initial Business Combination by the deadline specified in our Charter. If we do not complete our Initial Business Combination within such time period, the proceeds of the sale of the private placement warrants held in the Trust Account will be used to fund the redemption of our public shares, and the private placement warrants will expire worthless. With certain limited exceptions, the Founder Shares are not transferrable, assignable or salable until the earlier of: (A) one year after the completion of our Initial Business Combination or (B) subsequent to our Initial Business Combination, (i) if the last sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after our Initial Business Combination, or (ii) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the private placement warrants and the Class A Common Stock underlying such warrants will not be transferable, assignable or salable until 30 days after the completion of our Initial Business Combination. Since our Sponsor and officers and directors directly or indirectly own common stock and warrants, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our Initial Business Combination.
|
| • |
Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our Initial Business Combination.
|
| • |
Our Sponsor, officers or directors may have a conflict of interest with respect to evaluating a business combination and financing arrangements as we may obtain loans from our Sponsor or an affiliate of our Sponsor or any of our officers or directors to finance transaction costs in connection with an intended Initial Business Combination. Up to $1,500,000 of such loans may be convertible into warrants of the post combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period.
|
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The conflicts described above may not be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| • |
the corporation could financially undertake the opportunity;
|
| • |
the opportunity is within the corporation’s line of business; and
|
| • |
it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
|
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our Charter provides that the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have.
We are not prohibited from pursuing an Initial Business Combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our Initial Business Combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that such Initial Business Combination is fair to our company from a financial point of view.
In the event that we submit our Initial Business Combination to our public stockholders for a vote, our initial stockholders have agreed to vote any Founder Shares held by them and any public shares held by them in favor of our Initial Business Combination, and our officers and directors have also agreed to vote any public shares held by them in favor of our Initial Business Combination.
Limitation on Liability and Indemnification of Officers and Directors
Our Charter provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our Charter provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our Charter. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against or obligations to indemnify our officers and directors.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
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EXECUTIVE COMPENSATION
DCRC
None of our officers or directors has received any cash compensation for services rendered to us. Commencing on the date our securities were first listed on Nasdaq, we have agreed to pay an affiliate of our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our Initial Business Combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including finder’s and consulting fees, will be paid to our Sponsor, officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of our Initial Business Combination. However, these individuals will be reimbursed for any
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers or directors, or our or their affiliates.
out-of-pocket
We do not intend to take and have not taken any action to ensure that members of our management team will be part of our management team after the business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after an Initial Business Combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
For more information about the interests of our Sponsor, directors and officers in the business combination, see the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”
Solid Power
To achieve our goals, we have designed, and intend to modify as necessary, our compensation and benefits program to attract, retain, incentivize and reward talented and qualified executives who share our philosophy and desire to work towards achieving our goals.
We believe our compensation program should promote the success of our company and align executive incentives with the long-term interests of our stockholders. Our current compensation programs reflect our startup origins in that they consist primarily of salary and stock option awards. We intend to continue to evaluate our philosophy and compensation programs as circumstances require. In May 2021, we engaged Compensia, Inc., an independent compensation consultant (“Compensia”), to assess the competitiveness of our executive and director compensation programs.
We are considered an emerging growth company for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, this section provides an overview of our executive compensation programs, including a narrative description of the material factors necessary to understand the information disclosed in the summary compensation table below. Further, our reporting obligations extend only to the individuals serving as our chief executive officer and our two other most highly compensated executive officers.
The Solid Power Board, with input from our Chief Executive Officer, has historically determined the compensation for our named executive officers. For the year ended December 31, 2020, our named executive officers were:
| • |
Douglas Campbell, Chief Executive Officer
|
| • |
Derek Johnson, Chief Operating Officer
|
| • |
Stephen C. Fuhrman, Chief Financial Officer
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Summary Compensation Table
The following table sets forth information concerning the compensation of the named executive officers for the year ended December 31, 2020.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Option
Awards ($)(1) |
All Other
Compensation ($)(2) |
Total
($)
|
|||||||||||||||
|
Douglas Campbell
Chief Executive Officer
|
2020 | 225,000 | — | 10,500 | $ | 235,500 | ||||||||||||||
|
Derek Johnson
Chief Operating Officer
|
2020 | 196,146 | 137,580 | 6,375 | $ | 340,101 | ||||||||||||||
|
Stephen C. Fuhrman
Chief Financial Officer
|
2020 | 203,522 | — | 8,125 | $ | 211,647 | ||||||||||||||
| (1) |
The amounts in this column represent the aggregate grant-date fair value of awards granted to each named executive officer, computed in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic 718. See Note 10 to our audited consolidated financial statements included elsewhere in this proxy statement/prospectus for a discussion of the assumptions we made in determining the grant-date fair value of our stock options.
|
| (2) |
The amounts in this column represent matching contributions under Solid Power’s 401(k) plan in the amount of $9,000 for Mr. Campbell, $5,687.50 for Dr. Johnson, and $8,125 for Mr. Fuhrman, and health savings account contributions made on behalf of Mr. Campbell in the amount of $1,500 and on behalf of Dr. Johnson in the amount of $687.50.
|
Narrative Disclosure to Summary Compensation Table
For 2020, the compensation program for our named executive officers consisted of base salary, annual bonus opportunity, and, in certain instances, incentive compensation delivered in the form of stock option awards, as well as 401(k) match and health savings account contributions. Solid Power entered into an employment agreement with Mr. Campbell dated as of December 20, 2018 (the “Employment Agreement”). The narrative below summarizes the payments and benefits that each named executive officer was entitled to receive during fiscal year 2020.
Base Salary
Base salary is set after taking into account the named executive officer’s duties and authorities, contributions, prior experience and individual and company performance. The Employment Agreement provides for an annual salary of $225,000 for Mr. Campbell. Dr. Johnson and Mr. Fuhrman currently receive annual salaries of $220,000 and $203,522, respectively.
Cash Bonus
Cash bonuses are determined by the Solid Power Board based on the performance of the named executive officer. Pursuant to their respective employment arrangements, Mr. Campbell, Dr. Johnson, and Mr. Fuhrman are each eligible to receive an annual cash bonus as determined by the Solid Power Board.
Stock Option Awards
Stock options have been granted to certain of our named executive officers under the 2014 Plan.
Solid Power, Inc. 2014 Equity Incentive Plan
Solid Power’s Board adopted, and its stockholders approved, the 2014 Plan in March 2014. The 2014 Plan has been periodically amended, most recently in August 2021. The 2014 Plan permits the grant of incentive stock
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options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted or unrestricted stock awards, restricted stock units, and other stock-based awards. ISOs may be granted only to our employees and to any of our parent’s or our subsidiary corporation’s employees. All other awards under the 2014 Plan may be granted to employees, directors, and consultants and to any of our parent’s or our subsidiary corporation’s director, employees or consultants. The 2014 Plan will be terminated as to future awards thereunder prior to the Closing, and thereafter no additional awards under the 2014 Plan will be granted. However, the 2014 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.
As of August 31, 2021, stock options to purchase 8,578,613 shares of Solid Power Common Stock with a weighted-average exercise price of $2.68 per share were outstanding, no shares of Solid Power Common Stock remained restricted stock subject to future vesting requirements, and 3,638,894 shares of the Solid Power Common Stock remained available for the future grant of awards under the 2014 Plan.
Administration
Options
Changes to Capital Structure
Corporate Transaction
| • |
arrange for the assumption, continuation, or substitution of the award by the surviving or acquiring corporation (or its parent company);
|
| • |
arrange for the assignment of any reacquisition or repurchase rights held by us to the surviving or acquiring corporation (or its parent company);
|
| • |
accelerate the vesting and, if applicable, exercisability of the award and provide for its termination prior to the effective time of the change in control;
|
| • |
arrange for the lapse of any reacquisition or repurchase rights held by the company;
|
| • |
cancel or arrange for the cancellation of the award in exchange for such cash consideration, if any, as Solid Power’s Board may deem appropriate; or
|
| • |
make a payment equal to the excess of (1) the value of the property the participant would have received upon exercise of the award over (2) the exercise price or strike price otherwise payable in connection with the award.
|
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Solid Power’s Board is not obligated to treat all awards in the same manner in the event of a corporate transaction.
Change in Control
In addition, and except as otherwise described in the “Recent Developments – 2021 Named Executive Officer Compensation” section below, each outstanding and fully- or partially-unvested stock option under the 2014 Plan is subject to the following vesting acceleration terms (the “2014 Plan Vesting Acceleration”):
| • |
if options are assumed or substituted for in a change in control, 100% vesting acceleration if there is a termination without “cause” or resignation for “good reason” (as such terms are defined in the award agreement), in either case, on or after a change in control; or
|
| • |
if options are not assumed or substituted for in a change in control, 100% vesting acceleration on the change in control (or 50% in the event the change in control occurs within two years from the vesting commencement date) (the “2014 Plan
Non-Assumption
Provision”).
|
Plan Amendment or Termination
Solid Power 2021 Equity Incentive Plan
In connection with the business combination, we intend to adopt, subject to stockholder approval, the 2021 Plan. For more information about the 2021 Plan, see the section entitled “Proposal No. 5
The 2021 Plan Proposal.”
—
Solid Power 2021 Employee Stock Purchase Plan
In connection with the business combination, we intend to adopt, subject to stockholder approval, the ESPP. For more information about the ESPP, see the section entitled “Proposal No. 6
The ESPP Proposal.”
—
Treatment of Solid Power Options in the Business Combination
For a discussion of the treatment of outstanding Solid Power Options granted under the 2014 Plan in the Business Combination (including those held by our named executive officers), please see the section entitled “
.”
The Business Combination Agreement—
Conversion of Securities
Outstanding Equity Awards at 2020 Year End
The following table presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2020.
|
Option Awards
|
||||||||||||||||||||
|
Name
|
Grant
Date
|
Number of
Securities Underlying Options Exercisable (#)(1) |
Number of
Securities Underlying Options Unexercisable (#) |
Option
Exercise Price ($)(2) |
Option
Expiration Date |
|||||||||||||||
|
Douglas Campbell (3)
|
02/01/2017 | 1,600,000 | — | 0.1012 | 02/01/2022 | |||||||||||||||
|
Derek Johnson (3)
|
01/30/2020 | — | 300,000 | 0.53 | 01/30/2030 | |||||||||||||||
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Stephen Fuhrman (3)
|
03/09/2017 | 66,604 | 2,896 | 0.092 | 03/09/2027 | |||||||||||||||
|
Stephen Fuhrman (3)
|
09/14/2018 | 78,750 | 61,250 | 0.474 | 09/14/2028 | |||||||||||||||
| (1) |
All stock options were granted pursuant to the 2014 Plan.
|
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| (2) |
This column represents the fair market value of a share of Common Stock on the date of the grant, as determined by our Board.
|
| (3) |
1/4
th
of these shares vest one year after the applicable vesting commencement date; the balance of the shares vest in a series of 36 successive equal monthly installments measured from the first anniversary of the vesting commencement date. The option is further subject to vesting acceleration under certain circumstances as described under “—Potential Payments upon Termination or Change in Control.”
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Benefits and Perquisites
We provide benefits to our named executive officers on the same basis as provided to all of our employees, including medical, dental and vision insurance; life insurance; accident insurance;
short-and
long-term disability insurance; a health savings account; an employee assistance program; a flexible spending account for medical, dental, and vision expenses; a dependent flexible spending account; and a 401(k) plan.
Executive Letter Agreements
As a part of the Business Combination, we expect to enter into new executive employee letter agreeements with each of our named executive officers, as outlined below.
Letter Agreement with Douglas Campbell
On August 5, 2021, we entered into an employment letter with Mr. Campbell, our Chief Executive Officer. The employment letter does not have a specific term and provides that Mr. Campbell is an
at-will
employee. The employment letter provides that Mr. Campbell’s annual base salary is $325,000 and his target annual cash bonus is 50% of his annual base salary. Effective August 3, 2021, Mr. Campbell was granted an option to purchase 150,000 shares of Solid Power Common Stock at an exercise price of $15.96 per share. The option vests as follows: 1/4th of the shares vest one year after the vesting commencement date; the balance of the shares vest in a series of 36 equal monthly installments measured from the first anniversary of the vesting commencement date, subject to acceleration as set forth in the Executive Severance Plan (as discussed below). The option expires on August 3, 2022.
Letter Agreement with Derek Johnson
On August 5, 2021, we entered into an employment letter with Dr. Johnson, our Chief Operating Officer. The employment letter does not have a specific term and provides that Dr. Johnson is an
at-will
employee. The employment letter provides that Dr. Johnson’s annual base salary is $275,000 and his target annual cash bonus is 35% of his annual base salary. Effective August 3, 2021, Dr. Johnson was granted an option to purchase 300,000 shares of Solid Power Common Stock at an exercise price of $15.96 per share. The option vests as follows: 1/4th of the shares vest one year after the vesting commencement date; the balance of the shares vest in a series of 36 equal monthly installments measured from the first anniversary of the vesting commencement date, subject to acceleration as set forth in the Executive Severance Plan (as discussed below). The option expires on August 3, 2022.
Letter Agreement with Stephen C. Fuhrman
On August 5, 2021, we entered into an employment letter with Mr. Fuhrman, our Chief Financial Officer. The employment letter does not have a specific term and provides that Mr. Fuhrman is an
at-will
employee. The employment letter provides that Mr. Fuhrman’s annual base salary is $275,000 and his target annual cash bonus is 30% of his annual base salary. Effective August 3, 2021, Mr. Fuhrman was granted an option to purchase 200,000 shares of Solid Power Common Stock at an exercise price of $15.96 per share. The option vests as follows: 1/4th of the shares vest one year after the vesting commencement date; the balance of the shares vest in a series of 36 equal monthly installments measured from the first anniversary of the vesting commencement date, subject to acceleration as set forth in the Executive Severance Plan (as discussed below). The option expires on August 3, 2022.
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Retirement Benefits
We provide a
tax-qualified
Section 401(k) plan for all employees, including the named executive officers. We provide a matching contribution for certain participants’ elective contributions to the 401(k) plan, including certain named executive officers. We do not provide to employees, including our named executive officers, any other retirement benefits, including but not limited to
tax-qualified
defined benefit plans, supplemental executive retirement plans and nonqualified defined contribution plans.
Potential Payments upon Termination or Change in Control
Each outstanding option to purchase shares of the Company’s common stock held by our named executive officers and granted prior to August 2021 is subject to vesting acceleration under the 2014 Plan Vesting Acceleration provisions above.
In August 2021, the Solid Power Board adopted an Executive Change in Control and Severance Plan, or the Executive Severance Plan, pursuant to which our named executive officers and certain other key employees are eligible to receive severance benefits, as specified in and subject to the employee signing a participation agreement under our Executive Severance Plan. This Executive Severance Plan was developed with input from Compensia, regarding severance practices at comparable companies. It is designed to attract, retain and reward senior level employees. The Executive Severance Plan will be in lieu of any other severance payments and benefits to which such key employee was entitled prior to signing the participation agreement, other than the 2014 Plan Vesting Acceleration provisions, which will continue to apply.
Each of our named executive officers has entered into a participation agreement under our Executive Severance Plan providing for the rights to the applicable payments and benefits described below.
In the event of an “involuntary termination” of the employment of a named executive officer (i) by us for a reason other than “cause,” or the named executive officer’s death or “disability”, or(ii) by him for “good reason” (as such terms are defined in our Executive Severance Plan), in either case, that occurs outside the change in control period (as described below), then the named executive officer will be entitled to the following payments and benefits:
| • |
a lump sum payment equal to six months of the named executive officer’s annual base salary as in effect immediately prior to their involuntary termination of employment, or, in the case of Mr. Campbell, 12 months; and
|
| • |
reimbursement for premium cost for continued health coverage under the Consolidated Omnibus Reconciliation Act of 1985 as amended, or COBRA, or a taxable lump sum payment equal to the premium cost of continued health coverage under COBRA, for a period of six months, or, in the case of Mr. Campbell, 12 months.
|
In the event of an “involuntary termination” of the employment of a named executive officer (i) by us for a reason other than “cause,” or the named executive officer’s death or “disability” or (ii) by him for “good reason”, in either case, within a period beginning three months prior to and ending 12 months following a “change in control” (as defined in our Executive Severance Plan) (such period, the “change in control period”), then the named executive officer will be entitled to the following payments and benefits:
| • |
a lump sum payment equal to 12 months of the named executive officer’s annual base salary as in effect immediately prior to their involuntary termination of employment, or, in the case of Mr. Campbell, 18 months;
|
| • |
a lump sum payment equal to such named executive officer’s annual target bonus in effect for the year of termination, or, in the case of Mr. Campbell, 150% of annual target bonus in effect for the year of termination;
|
214
| • |
reimbursement for premium cost for continued health coverage under COBRA or a taxable lump sum payments equal to the premium cost of continued health coverage under COBRA for a period of 12 months, or, in the case of Mr. Campbell, 18 months; and
|
| • |
100% accelerated vesting of all outstanding equity awards granted on or after August 4, 2021, and, with respect to such equity awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels for the relevant performance period(s).
|
The receipt of the payments and benefits provided for under the Executive Severance Plan described above is conditioned on the named executive officer signing and not revoking a separation and release of claims agreement and such release becoming effective and irrevocable no later than the 60th day following the named executive officer’s involuntary termination of employment, as well as compliance with certain
non-disparagement
provisions and continued compliance with the invention assignment and confidentiality agreement applicable to the named executive officer.
In addition, if any of the payments or benefits provided for under the Executive Severance Plan or otherwise payable to a named executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax, the named executive officer will receive either full payment of such payments and benefits or such lesser amount that would result in no portion of the payments and benefits being subject to the excise tax, whichever results in the greater amount of
after-tax
benefits to them. The Executive Severance Plan does not require us to provide any tax
gross-up
payments to the named executive officers.
Director Compensation
We compensated director Steven Goldberg $1,000 for one regular board meeting held in 2020 and provided reimbursement for reasonable travel expenses and other expenses incurred in connection with services on our behalf and requested by us, and granted him an option to purchase 304,408 shares under the 2014 Plan at an exercise price of $0.53, and vesting as follows: 1/4th of the shares vest one year after the vesting commencement date; the balance of the shares vest in a series of 36 successive equal monthly installments measured from the first anniversary of the vesting commencement date.
Our policy is to reimburse
expenses incurred in connection with attending board and committee meetings or performing other services in their capacities as
non-employee
directors for reasonable and necessary
out-of-pocket
non-employee
directors, and occasionally grant stock options to our
non-employee
directors.
The table below summarizes the compensation of each person serving as a
non-employee
director who received compensation from us for the year ended December 31, 2020.
|
Name
|
Fees Earned
or Paid in Cash ($) |
Option
Awards ($)(1) |
All Other
Compensation ($) |
Total
($)
|
||||||||||||
|
Steven H. Goldberg
|
1,000 | 157,135 | — | 158,135 | ||||||||||||
| (1) |
The amounts in this column represent the aggregate grant-date fair value of awards granted to each director, computed in accordance with the FASB’s ASC Topic 718. See Note 10 to our audited consolidated financial statements included elsewhere in this proxy statement/prospectus for a discussion of the we assumptions made in determining the grant-date fair value of our stock options.
|
We expect to review director compensation periodically to ensure that director compensation remains competitive such that we are able to recruit and retain qualified directors. New Solid Power intends to adopt a
non-employee
director compensation program to apply following the Closing that is designed to align compensation with New Solid Power’s business objectives and the creation of stockholder value, while enabling New Solid Power to attract, retain, incentivize and reward directors who contribute to the long-term success of New Solid Power.
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Recent Developments
2021 Named Executive Officer Compensation
In August 2021, the Solid Power Board, in consultation with Compensia and upon recommendation of the Solid Power compensation committee, approved market-based adjustments to the base salary and target annual bonus opportunities for our named executive officers and other key employees.
In August 2021, the Solid Power Board also approved option grants to Mr. Campbell covering 150,000 shares of Solid Power Common Stock, Dr. Johnson covering 300,000 shares of Solid Power Common Stock, and Mr. Fuhrman covering 200,000 shares of Solid Power Common Stock, in each case, at an exercise price per share of Solid Power Common Stock of 15.96. These grants were made to provide them additional incentives to remain with us and to promote further alignment between their interests and those of our stockholders. In determining the size of these grants, the Solid Power Board, in consultation with Compensia and upon recommendation of the Solid Power compensation committee, considered several factors, including the percentage ownership in Solid Power held by each named executive officer and the amount his ownership interests were unvested as of the date of grant, the estimated value of his company ownership interests, market data for similarly situated executives at comparable companies, the named executive officer’s past and expected future contributions. The grants are subject to the terms and conditions of the 2014 Plan and the applicable form of option agreement thereunder, and vest as to 1/4th of these shares after one year after the grant date with the balance of the shares vesting in a series of 36 successive equal monthly installments measured from the first anniversary of the grant date, subject to the named executive officer’s continued service with us, and further subject to vesting acceleration under the 2014 Plan
Non-Assumption
Provision and under certain circumstances as described under “ —Potential Payments upon Termination or Change in Control.”
Post-Business Combination Executive Compensation
Following the consummation of the Business Combination, New Solid Power intends to develop an executive compensation program that is designed to align compensation with New Solid Power’s business objectives and the creation of stockholder value, while enabling New Solid Power to attract, retain, incentivize and reward individuals who contribute to the long-term success of New Solid Power. Decisions on the executive compensation program will be made by New Solid Power’s compensation committee.
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MANAGEMENT AFTER THE BUSINESS COMBINATION
Executive Officers and Directors After the Business Combination
Upon the Closing, the business and affairs of New Solid Power will be managed by or under the direction of the New Solid Power Board. We are currently evaluating potential director nominees and executive officer appointments, but expect that the directors and executive officers of New Solid Power upon the Closing will include the following:
|
Name
|
Age
|
Position
|
||
| Douglas Campbell | 48 | Chief Executive Officer and Class I Director | ||
| David B. Jansen | 59 | President and Class III Director | ||
| Joshua R. Buettner-Garrett | 36 | Chief Technology Officer | ||
| Stephen C. Fuhrman | 64 | Chief Financial Officer | ||
| Derek C. Johnson | 44 | Chief Operating Officer | ||
| Erik Anderson | 63 | Class I Director | ||
| Rainer Feurer | 54 | Class III Director | ||
| Steven H. Goldberg | 68 | Class II Director | ||
| Robert M. Tichio | 43 | Class I Director | ||
| Class Director | ||||
| Class Director | ||||
| Class Director |
Douglas Campbell
co-founder
of Solid Power and has served as Solid Power’s Chief Executive Officer since our inception. He has been a member of our board of directors since March 2014, when we converted to a corporation. In parallel with establishing Solid Power, he founded i2C Solutions, LLC (“i2C”), a thermal management company, and
co-founded
Roccor, LLC (“Roccor”), a component supplier for the small satellite industry; i2C and Roccor merged in 2015, with Roccor being the surviving entity. Mr. Campbell served as the Chief Executive Officer of Roccor until the end of 2018 and remained on its board of directors until the company was acquired in late 2020. He began his career in advanced technology development at the Space Vehicles Directorate of the Air Force Research Laboratory, Kirtland AFB, NM. Mr. Campbell earned his B.S. and M.S. in Civil Engineering with a Structural Mechanics emphasis from the University of New Mexico. We believe Mr. Campbell is well-qualified to serve on New Solid Power’s Board of Directors due to his extensive experience in managing and leading Solid Power.
David Jansen
Joshua Buettner-Garrett
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Stephen Fuhrman
Derek Johnson
lithium-ion
batteries and energy storage systems for automotive applications. His responsibilities ranged from new technology development and IP generation, customer and strategic partner engagement, and production strategy and supply chain rationalization, prior to which he served as the Executive Director of R&D at A123, from April 2015 to September 2016. Dr. Johnson serves as a director of Symbios Technologies, LLC, an aqueous plasma technology platform, and previously served as its Director of Technology Development, Senior Scientist and Engineer from April 2009 to January 2014. He also serves as the President of Fields of Hope, a
non-profit
focusing on enriching the lives of
at-risk
youth. Dr. Johnson holds a B.S. in Environmental Engineering from the University of Florida, an M.S. in Chemical Engineering from Colorado State University, and a Ph.D. in Chemical and Biochemical Engineering from Colorado State University. Dr. Johnson has published 16 peer reviewed publications and holds 38 patents.
Rainer Feurer
Steven Goldberg
non-profit
organization focused on fostering innovation and entrepreneurship in Silicon Valley, from June 2014 to May 2018. Finally, he served on the board of directors of Quantenna, a WiFi semiconductor company, from May 2009 to August 2016. Dr. Goldberg holds B.S. and M.S. degrees in Electrical Engineering from Washington University, St. Louis, and a Ph.D. in Electrical Engineering from the University of California,
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Santa Barbara. We believe that Dr. Goldberg is well-qualified to serve as a member of New Solid Power’s Board of Directors due to his extensive experience in working with growing technology companies, his strong technical background, and his prior service on private and
pre-public
company boards.
For Messrs. Anderson and Tichio biographical information, see the section entitled “Information about DCRC—Management.”
Family Relationships
There are no family relationships among any of our directors or executive officers.
Board Composition
New Solid Power’s business and affairs will be organized under the direction of the New Solid Power Board. We anticipate that the New Solid Power Board will consist of members upon the Closing. will serve as Chairman of the New Solid Power Board. The primary responsibilities of the New Solid Power Board will be to provide oversight, strategic guidance, counseling and direction to New Solid Power’s management. The New Solid Power Board will meet on a regular basis and additionally as required.
In accordance with the terms of our Proposed Bylaws, which will be effective immediately prior to the Closing, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.
Any director may be removed from office by the stockholders of New Solid Power as provided in Section 141(k) of the DGCL.
Director Independence
Upon the Closing, the New Solid Power Board is expected to determine that each of the directors on the New Solid Power Board other than will qualify as independent directors, as defined under the rules of Nasdaq, and the New Solid Power Board will consist of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq relating to director independence requirements. In addition, New Solid Power will be subject to the rules of the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit committee, as discussed below. is expected to be the New Solid Power lead independent director under Nasdaq rules.
Role of the New Solid Power Board in Risk Oversight/Risk Committee
Upon the Closing, one of the key functions of the New Solid Power Board will be informed oversight of New Solid Power’s risk management process. The New Solid Power Board does not anticipate having a standing risk management committee, but rather anticipates administering this oversight function directly through the New Solid Power Board as a whole, as well as through various standing committees of the New Solid Power Board that address risks inherent in their respective areas of oversight. In particular, the New Solid Power Board will be responsible for monitoring and assessing strategic risk exposure and New Solid Power’s audit committee will have the responsibility to consider and discuss New Solid Power’s major financial risk exposures and the steps its management will take to monitor and control such exposures, including guidelines and policies to govern the processes by which risk assessment and management is undertaken.
The audit committee also will monitor compliance with legal and regulatory requirements. New Solid Power’s compensation committee will assess and monitor whether New Solid Power’s compensation plans, policies and programs comply with applicable legal and regulatory requirements.
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Board Committees
Effective upon the Closing, the New Solid Power Board will have three standing committees—an audit committee, a compensation committee, and a nominating and corporate governance committee. Following the Closing, copies of the charters for each committee will be available on New Solid Power’s website.
Audit Committee
New Solid Power Board’s audit committee is expected to consist of , , and . The New Solid Power Board will need to determine that each of the members of the audit committee will satisfy the independence requirements of Nasdaq and Rule
10A-3
under the Exchange Act and be able to read and understand fundamental financial statements in accordance with the Nasdaq audit committee requirements. In arriving at this determination, the New Solid Power Board will examine each audit committee member’s scope of experience and the nature of their prior and/or current employment.
will serve as the chair of the audit committee. The New Solid Power Board expects to determine that qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq rules. In making this determination, the New Solid Power Board will consider formal education and previous experience in financial roles. New Solid Power’s independent registered public accounting firm and management will periodically meet privately with New Solid Power’s audit committee.
The functions of this committee are expected to include, among other things:
| • |
evaluating the performance, independence and qualifications of New Solid Power’s independent auditors and determining whether to retain New Solid Power’s existing independent auditors or engage new independent auditors;
|
| • |
reviewing New Solid Power’s financial reporting processes and disclosure controls;
|
| • |
reviewing and approving the engagement of New Solid Power’s independent auditors to perform audit services and any permissible
non-audit
services;
|
| • |
reviewing the adequacy and effectiveness of New Solid Power’s internal control policies and procedures, including the responsibilities, budget, staffing and effectiveness of New Solid Power’s internal audit function;
|
| • |
reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and practices to be used by New Solid Power;
|
| • |
obtaining and reviewing at least annually a report by New Solid Power’s independent auditors describing the independent auditors’ internal quality control procedures and any material issues raised by the most recent internal quality-control review;
|
| • |
monitoring the rotation of partners of New Solid Power’s independent auditors on New Solid Power’s engagement team as required by law;
|
| • |
prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of New Solid Power’s independent auditor;
|
| • |
reviewing New Solid Power’s annual and quarterly financial statements and reports, including the disclosures contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with New Solid Power’s independent auditors and management;
|
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| • |
reviewing with New Solid Power’s independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of New Solid Power’s financial controls and critical accounting policies;
|
| • |
reviewing with management and New Solid Power’s auditors any earnings announcements and other public announcements regarding material developments;
|
| • |
establishing procedures for the receipt, retention and treatment of complaints received by New Solid Power regarding financial controls, accounting, auditing or other matters;
|
| • |
preparing the report that the SEC requires in New Solid Power’s annual proxy statement;
|
| • |
reviewing and providing oversight of any related party transactions in accordance with New Solid Power’s related party transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including New Solid Power’s code of ethics;
|
| • |
reviewing New Solid Power’s major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and
|
| • |
reviewing and evaluating on an annual basis the performance of the audit committee and the audit committee charter
|
Compensation Committee
New Solid Power’s compensation committee is expected to consist of , and . is expected to serve as the chair of the compensation committee. The New Solid Power Board will need to determine that each of the members of the compensation committee will be a
non-employee
director, as defined in Rule
16b-3
promulgated under the Exchange Act and will satisfy the independence requirements of the Nasdaq rules. The functions of the committee are expected to include, among other things.
| • |
reviewing and approving the corporate objectives that pertain to the determination of executive compensation;
|
| • |
reviewing and approving the compensation and other terms of employment of New Solid Power’s executive officers;
|
| • |
reviewing and approving performance goals and objectives relevant to the compensation of New Solid Power’s executive officers and assessing their performance against these goals and objectives;
|
| • |
making recommendations to the New Solid Power Board regarding the adoption or amendment of equity and cash incentive plans and approving amendments to such plans to the extent authorized by the New Solid Power Board;
|
| • |
reviewing and making recommendations to the New Solid Power Board regarding the type and amount of compensation to be paid or awarded to New Solid Power’s
non-employee
board members;
|
| • |
reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act;
|
| • |
administering New Solid Power’s equity incentive plans, to the extent such authority is delegated by the New Solid Power Board;
|
| • |
reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections, indemnification agreements and any other material arrangements for New Solid Power’s executive officers;
|
| • |
reviewing with management New Solid Power’s disclosures under the caption “Compensation Discussion and Analysis” in New Solid Power’s periodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy statement;
|
221
| • |
preparing an annual report on executive compensation that the SEC requires in New Solid Power’s annual proxy statement; and
|
| • |
reviewing and evaluating on an annual basis the performance of the compensation committee and recommending such changes as deemed necessary with the New Solid Power Board.
|
Nominating and Corporate Governance Committee
New Solid Power’s nominating and corporate governance committee is expected to consist of , and . The New Solid Power Board will determine that each of the members of New Solid Power’s nominating and corporate governance committee will satisfy the independence requirements of the Nasdaq rules.
will serve as the chair of New Solid Power’s nominating and corporate governance committee. The functions of this committee are expected to include, among other things:
| • |
identifying, reviewing and making recommendations of candidates to serve on the New Solid Power Board;
|
| • |
evaluating the performance of the New Solid Power Board, committees of the New Solid Power Board and individual directors and determining whether continued service on the New Solid Power Board is appropriate;
|
| • |
evaluating nominations by stockholders of candidates for election to the New Solid Power Board;
|
| • |
evaluating the current size, composition and organization of the New Solid Power Board and its committees and making recommendations to the New Solid Power Board for approvals;
|
| • |
developing a set of corporate governance policies and principles and recommending to the New Solid Power Board any changes to such policies and principles;
|
| • |
reviewing issues and developments related to corporate governance and identifying and bringing to the attention of the New Solid Power Board current and emerging corporate governance trends; and
|
| • |
reviewing periodically the nominating and corporate governance committee charter, structure and membership requirements and recommending any proposed changes to the New Solid Power Board, including undertaking an annual review of its own performance.
|
Compensation Committee Interlocks and Insider Participation
None of the intended members of New Solid Power’s compensation committee has ever been an executive officer or employee of New Solid Power. None of New Solid Power’s intended executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers that will serve as a member of the New Solid Power Board or compensation committee.
Limitation on Liability and Indemnification of Directors and Officers
The Proposed Second A&R Charter, which will be effective upon the Closing, limits New Solid Power’s directors’ liability to the fullest extent permitted under the DGCL. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability:
| • |
for any transaction from which the director derives an improper personal benefit;
|
| • |
for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
| • |
for any unlawful payment of dividends or redemption of shares; or
|
| • |
for any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
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If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of New Solid Power’s directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. The DGCL and our Proposed Bylaws provide that New Solid Power will, in certain situations, indemnify New Solid Power’s directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to advancement, direct payment, or reimbursement of reasonable expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding.
In addition, New Solid Power will enter into separate indemnification agreements with New Solid Power’s directors and officers. These agreements, among other things, require New Solid Power to indemnify its directors and officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of New Solid Power’s directors or officers or any other company or enterprise to which the person provides services at New Solid Power’s request, which rights will be in addition to the indemnification provided for in the Proposed Second A&R Charter and the Proposed Bylaws.
New Solid Power plans to maintain a directors’ and officers’ insurance policy pursuant to which New Solid Power’s directors and officers are insured against liability for actions taken in their capacities as directors and officers.
The limitation of liability and indemnification provisions in the Proposed Second A&R Charter and the Proposed Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit New Solid Power and its stockholders. A stockholder’s investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Code of Business Conduct and Ethics for Employees, Executive Officers, and Directors
The New Solid Power Board will adopt a code of business conduct and ethics (the “Code of Conduct”), applicable to all of New Solid Power’s employees, executive officers and directors. The Code of Conduct will be available on New Solid Power’s website. Information contained on or accessible through New Solid Power’s website is not a part of this proxy statement/prospectus, and the inclusion of New Solid Power’s website address in this proxy statement/prospectus is an inactive textual reference only. The nominating and corporate governance committee of the New Solid Power Board will be responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. New Solid Power expects that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on its website.
Non-Employee
Director Compensation
The New Solid Power Board expects to review director compensation periodically to ensure that director compensation remains competitive such that New Solid Power is able to recruit and retain qualified directors. Following the Closing, New Solid Power intends to develop a
non-employee
director compensation program that is designed to align compensation with New Solid Power’s business objectives and the creation of stockholder value, while enabling New Solid Power to attract, retain, incentivize and reward directors who contribute to the long-term success of New Solid Power.
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DESCRIPTION OF SECURITIES
If the business combination is consummated, New Solid Power will replace (1) its current Charter with the Proposed Second A&R Charter in the form attached to this proxy statement/prospectus as Annex B, and (2) its current bylaws with the Proposed Bylaws in the form attached as Exhibit H to the Business Combination Agreement each of which, in the judgment of the DCRC Board, is necessary to adequately address the needs of the post-combination company.
The following table sets forth a summary of the principal proposed changes and the differences between DCRC’s stockholders’ rights under the existing Charter and existing bylaws and such stockholders’ rights after the closing of the business combination under the Proposed Second A&R Charter and Proposed Bylaws. This summary is qualified by reference to the complete text of the Proposed Second A&R Charter, a copy of which is attached to this proxy statement/prospectus as Annex B, and the Proposed Bylaws, a copy of which is attached as Exhibit H to the Business Combination Agreement. We urge you to read each of the Proposed Second A&R Charter and the Proposed Bylaws in its entirety for a complete description of the rights and preferences of the post-combination company’s securities following the business combination. For more information on the Charter Proposals, see the sections entitled “Proposal No. 2—The Authorized Share Charter Proposal” and “Proposal No. 3—The Additional Charter Proposal.”
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|
Existing Charter /Existing Bylaws
|
Proposed Second A&R Charter /Proposed Bylaws
|
|||
| preferences, and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions, applicable to the shares of each series. The DCRC Board is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of Class A Common Stock and Class B Common Stock and could have anti-takeover effects. The ability of the DCRC Board to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future. |
rights, and the qualifications, limitations or restrictions thereof, of any series of Preferred Stock, including, without limitation, authority to fix by resolution the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any such series and the designation thereof, or any of the foregoing. The New Solid Power Board is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of Common Stock and could have anti-takeover effects. The ability of the New Solid Power Board to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. No preferred stock is expected to be outstanding at the effectiveness of the Proposed Second A&R Charter. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
See Article IV of the Proposed Second A&R Charter.
|
|||
| Voting Power | Except as otherwise required by law, the Charter or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of Class A Common Stock and Class B Common Stock possess all voting power for the election of our directors (subject to the limitation on director elections prior to an Initial Business Combination) and all other matters requiring stockholder action. Holders of Class A Common Stock and Class B Common Stock are entitled to one vote per share on matters to be voted on by stockholders. |
Except as otherwise required by law, the Proposed Second A&R Charter or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of New Solid Power Board directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders.
See Article IV of the Proposed Second A&R Charter.
|
||
225
|
Existing Charter /Existing Bylaws
|
Proposed Second A&R Charter /Proposed Bylaws
|
|||
|
See Article IV of the existing Charter.
|
||||
| Director Elections |
Currently, the DCRC Board is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected at each annual meeting by a plurality of the votes cast. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Prior to the closing of an Initial Business Combination, the holders of Class B Common Stock have the exclusive right to elect, remove and replace any director, and the holders of Class A Common Stock have no such right to vote on the election, removal or replacement of any director.
See Article V and Article IX of the existing Charter.
|
Currently, the New Solid Power Board will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected at each annual meeting by a plurality of the votes cast. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.
See Article V of the Proposed Second A&R Charter.
|
||
| Dividends |
Subject to applicable law and the rights, if any, of holders of outstanding preferred stock, holders of Class A Common Stock and Class B Common Stock are entitled to receive such dividends and other distributions (payable in cash, property or capital stock) when, as and if declared thereon by the DCRC Board from time to time out of any assets or funds legally available therefor, and will share equally on a per share basis in such dividends and distributions. DCRC has not paid any cash dividends on its Class A Common Stock or Class B Common Stock to date and does not intend to pay cash dividends prior to the completion of the business combination.
The DCRC Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future.
|
The New Solid Power Board, subject to any restrictions contained in the Proposed Second A&R Charter or applicable law, may declare and pay dividends upon the shares of New Solid Power capital stock. Dividends may be paid in cash, in property, or in shares of New Solid Power’s capital stock, subject to the provisions of the certificate of incorporation. The New Solid Power Board may set apart out of any of the funds of New Solid Power available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
See Section 6.4 of the Proposed Bylaws.
|
||
226
|
Existing Charter /Existing Bylaws
|
Proposed Second A&R Charter /Proposed Bylaws
|
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| Exclusive Forum |
Unless DCRC consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of DCRC, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of DCRC to DCRC or DCRC’s stockholders, (iii) any action asserting a claim against DCRC, its directors, officers or employees arising pursuant to any provision of the DGCL or the Charter or DCRC’s Bylaws, or (iv) any action asserting a claim against DCRC, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim arising under the Securities Act or the Exchange Act, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction, in which case, any such claim shall be brought in any other court located in the State of Delaware possessing subject matter jurisdiction.
If any action the subject matter of which is within the scope described above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have
|
Unless New Solid Power consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of New Solid Power, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, stockholder, officer or other employee of New Solid Power to New Solid Power or New Solid Power’s stockholders, (c) any action arising pursuant to any provision of the DGCL or the Proposed Second A&R Charter or the Proposed Bylaws (as either may be amended from time to time) or (d) any action asserting a claim governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction.
Unless New Solid Power consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act against any person in connection with any offering of New Solid Power’s securities, including, without limitation and for the avoidance of doubt, any auditor, underwriter, expert, control person, or other defendant.
|
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227
|
Existing Charter /Existing Bylaws
|
Proposed Second A&R Charter /Proposed Bylaws
|
|||
| consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the provisions described above (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. |
See Section 9.5 of the Proposed Bylaws.
|
|||
| Liquidation, Dissolution and Winding Up |
Subject to applicable law and the rights, if any, of holders of outstanding Preferred Stock, in the event of DCRC’s voluntary or involuntary liquidation, dissolution or
winding-up,
after payment or provision for payment of the debts and other liabilities of DCRC, the holders of the Common Stock will be entitled to receive all the remaining assets of DCRC available for distribution to its stockholders, ratably in proportion to the number of shares of Class A Common Stock (on an as converted basis with respect to the Class B Common Stock) held by them.
|
Subject to applicable law and the rights, if any, of holders of outstanding Preferred Stock, in the event of New Solid Power’s voluntary or involuntary liquidation, dissolution or
winding-up,
after payment or provision for payment of the debts and other liabilities of New Solid Power, the holders of the common stock will be entitled to receive all the remaining assets of New Solid Power available for distribution to its stockholders, ratably in proportion to the number of shares of common stock held by them.
|
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Warrants
Public Stockholders’ Warrants
Each whole warrant entitles the registered holder to purchase one whole share of our Class A Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing of our Initial Public Offering or 30 days after the completion of our Initial Business Combination. Pursuant to the warrant agreement, a warrantholder may exercise its warrants only for a whole number of shares of Class A Common Stock. This means that only a whole warrant may be exercised at any given time by a warrantholder. The warrants will expire five years after the completion of our Initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We will not be obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Class A Common Stock upon exercise of a warrant unless the Class A Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the
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registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A Common Stock underlying such unit.
We have agreed that as soon as practicable, but in no event later than 15 business days, after the closing of our Initial Business Combination, we will use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the warrants. We will use our best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants for Cash When the Price Per Share of Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable, we may call the warrants for redemption for cash (except as described below with respect to the private placement warrants):
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon not less than 30 days’ prior written notice of redemption (the
“30-day
redemption period”) to each warrantholder; and
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if, and only if, the reported last sales price of the Class A Common Stock reported has been at least $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on each of 20 trading days within a
30-trading
day period ending on the third business day prior to the date on which notice of the redemption is given.
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We will not redeem the warrants for cash unless a registration statement under the Securities Act covering the shares of Class A Common Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A Common Stock is available throughout the
30-day
redemption period. Any such exercise would not be on a “cashless” basis and would require the exercising warrantholder to pay the exercise price for each warrant being exercised. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrantholder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A Common Stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 (for whole shares) warrant exercise price after the redemption notice is issued.
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Redemption of Warrants for Cash When the Price Per share of Class A Common Stock Equals or Exceeds $10.00
Once the warrants become exercisable, we may call the warrants for redemption for cash (except as described below with respect to the private placement warrants):
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in whole and not in part;
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at a price of $0.10 per warrant, provided that holders will be able to exercise their warrants prior to redemption and receive that number of shares of Class A Common Stock determined by reference to the table below, based on the redemption date and the “fair market value” of our Class A Common Stock (as defined below) except as otherwise described below);
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upon a minimum of 30 days’ prior written notice; and
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if, and only if, the last sale price of our Class A Common Stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading prior to the date on which notice of the redemption is given.
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Beginning on the date the notice of redemption is given until the warrants are redeemed or exercised, holders may elect to exercise their warrants on a cashless basis. The numbers in the table below represent the number of shares of Class A Common Stock that a warrantholder will receive upon a cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market value” of our Class A Common Stock on the corresponding redemption date (assuming holders elect to exercise their warrants and such warrants are not redeemed for $0.10 per warrant), and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below.
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Redemption Date
(period to expiration of warrants) |
Fair Market Value of Class A Common Stock
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£
10.00
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11.00
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12.00
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13.00
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14.00
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15.00
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16.00
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17.00
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³
18.00
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60 months
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0.261 | 0.281 | 0.297 | 0.311 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
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57 months
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0.257 | 0.277 | 0.294 | 0.310 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
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54 months
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0.252 | 0.272 | 0.291 | 0.307 | 0.322 | 0.335 | 0.347 | 0.357 | 0.361 | |||||||||||||||||||||||||||
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51 months
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0.246 | 0.268 | 0.287 | 0.304 | 0.320 | 0.333 | 0.346 | 0.357 | 0.361 | |||||||||||||||||||||||||||
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48 months
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0.241 | 0.263 | 0.283 | 0.301 | 0.317 | 0.332 | 0.344 | 0.356 | 0.361 | |||||||||||||||||||||||||||
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45 months
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0.235 | 0.258 | 0.279 | 0.298 | 0.315 | 0.330 | 0.343 | 0.356 | 0.361 | |||||||||||||||||||||||||||
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42 months
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0.228 | 0.252 | 0.274 | 0.294 | 0.312 | 0.328 | 0.342 | 0.355 | 0.361 | |||||||||||||||||||||||||||
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39 months
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0.221 | 0.246 | 0.269 | 0.290 | 0.309 | 0.325 | 0.340 | 0.354 | 0.361 | |||||||||||||||||||||||||||
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36 months
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0.213 | 0.239 | 0.263 | 0.285 | 0.305 | 0.323 | 0.339 | 0.353 | 0.361 | |||||||||||||||||||||||||||
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33 months
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0.205 | 0.232 | 0.257 | 0.280 | 0.301 | 0.320 | 0.337 | 0.352 | 0.361 | |||||||||||||||||||||||||||
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30 months
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0.196 | 0.224 | 0.250 | 0.274 | 0.297 | 0.316 | 0.335 | 0.351 | 0.361 | |||||||||||||||||||||||||||
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27 months
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0.185 | 0.214 | 0.242 | 0.268 | 0.291 | 0.313 | 0.332 | 0.350 | 0.361 | |||||||||||||||||||||||||||
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24 months
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0.173 | 0.204 | 0.233 | 0.260 | 0.285 | 0.308 | 0.329 | 0.348 | 0.361 | |||||||||||||||||||||||||||
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21 months
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0.161 | 0.193 | 0.223 | 0.252 | 0.279 | 0.304 | 0.326 | 0.347 | 0.361 | |||||||||||||||||||||||||||
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18 months
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0.146 | 0.179 | 0.211 | 0.242 | 0.271 | 0.298 | 0.322 | 0.345 | 0.361 | |||||||||||||||||||||||||||
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15 months
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0.130 | 0.164 | 0.197 | 0.230 | 0.262 | 0.291 | 0.317 | 0.342 | 0.361 | |||||||||||||||||||||||||||
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12 months
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0.111 | 0.146 | 0.181 | 0.216 | 0.250 | 0.282 | 0.312 | 0.339 | 0.361 | |||||||||||||||||||||||||||
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9 months
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0.090 | 0.125 | 0.162 | 0.199 | 0.237 | 0.272 | 0.305 | 0.336 | 0.361 | |||||||||||||||||||||||||||
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6 months
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0.065 | 0.099 | 0.137 | 0.178 | 0.219 | 0.259 | 0.296 | 0.331 | 0.361 | |||||||||||||||||||||||||||
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3 months
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0.034 | 0.065 | 0.104 | 0.150 | 0.197 | 0.243 | 0.286 | 0.326 | 0.361 | |||||||||||||||||||||||||||
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0 months
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— | — | 0.042 | 0.115 | 0.179 | 0.233 | 0.281 | 0.323 | 0.361 | |||||||||||||||||||||||||||
The “fair market value” of our Class A Common Stock shall mean the average reported last sale price of our Class A Common Stock for the ten trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. We will provide our warrantholders with the final fair market value no later than one business day after the
ten-trading
day period described above ends.
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The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of Class A Common Stock to be issued for each warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a
365-day
year. For example, if the average reported last sale price of our Class A Common Stock for the ten trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $11.00 per share, and at such time there are 57 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.277 shares of Class A Common Stock for each whole warrant. For an example where the exact fair market value and redemption date are not as set forth in the table above, if the average reported last sale price of our Class A Common Stock for the ten trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $13.50 per share, and at such time there are 38 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.298 shares of Class A Common Stock for each whole warrant. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A Common Stock per whole warrant (subject to adjustment). Finally, as reflected in the table above, if the warrants are “out of the money” (i.e. the trading price of our Class A Common Stock is below the exercise price of the warrants) and about to expire, they cannot be exercised on a cashless basis in connection with a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of Class A Common Stock.
This redemption feature differs from the typical warrant redemption features used in some other blank check offerings, which typically only provide for a redemption of warrants for cash (other than the private placement warrants) when the trading price for the Class A Common Stock exceeds $18.00 per share for a specified period of time. This redemption feature is structured to allow for all of the outstanding warrants to be redeemed when the Class A Common Stock is trading at or above $10.00 per share, which may be at a time when the trading price of our Class A Common Stock is below the exercise price of the warrants. We have established this redemption feature to provide the warrants with an additional liquidity feature, which provides us with the flexibility to redeem the warrants without the warrants having to reach the $18.00 per share threshold. Holders choosing to exercise their warrants in connection with a redemption pursuant to this feature will, in effect, receive a number of shares for their warrants, based on the “redemption price” as determined pursuant to the above table. We have calculated the “redemption prices” as set forth in the table above to reflect a Black-Scholes option pricing model with a fixed volatility input as of March 23, 2021. This redemption right provides us an additional mechanism by which to redeem all of the outstanding warrants and therefore have certainty as to our capital structure as the warrants would no longer be outstanding and would have been exercised or redeemed, and we will effectively be required to pay the redemption price to warrantholders if we choose to exercise this redemption right, it will allow us to quickly proceed with a redemption of the warrants if we determine it is in our best interest to do so. As such, we would redeem the warrants in this manner when we believe it is in our best interest to update our capital structure to remove the warrants and pay the redemption price to the warrantholders.
As stated above, we can redeem the warrants when the Class A Common Stock is trading at a price starting at $10.00, which is below the exercise price of $11.50, because it will provide certainty with respect to our capital structure and cash position while providing warrantholders with the opportunity to exercise their warrants on a cashless basis for the applicable number of shares of Class A Common Stock. If we choose to redeem the warrants when the Class A Common Stock is trading at a price below the exercise price of the warrants, this could result in the warrantholders receiving fewer shares of Class A Common Stock than they would have received if they had chosen to wait to exercise their warrants for shares of Class A Common Stock if and when such shares of Class A Common Stock were trading at a price higher than the exercise price of $11.50. No fractional shares of Class A Common Stock will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole number of the number of shares of Class A Common Stock to be issued to the holder.
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Redemption Procedures
A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Class A Common Stock outstanding immediately after giving effect to such exercise.
Anti-Dilution Adjustments
The stock prices set forth in the column headings of the table above shall be adjusted as of any date on which the number of shares issuable upon exercise of a warrant is adjusted pursuant to the following three paragraphs. The adjusted stock prices in the column headings shall equal the stock prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of shares deliverable upon exercise of a warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a warrant as so adjusted. The number of shares in the table above shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a warrant.
If the number of outstanding shares of Class A Common Stock is increased by a stock dividend payable in shares of Class A Common Stock, or by a
split-up
of shares of Class A Common Stock or other similar event, then, on the effective date of such stock dividend,
split-up
or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A Common Stock. A rights offering to holders of Class A Common Stock entitling holders to purchase shares of Class A Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A Common Stock equal to the product of (i) the number of shares of Class A Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A Common Stock) multiplied by (ii) one minus the quotient of (x) the price per share of Class A Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A Common Stock, in determining the price payable for Class A Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A Common Stock as reported during the 10 trading day period ending on the trading day prior to the first date on which the shares of Class A Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of Class A Common Stock on account of such shares of Class A Common Stock (or other shares of our capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of Class A Common Stock in connection with a proposed Initial Business Combination, (d) to satisfy the redemption rights of the holders of Class A Common Stock in connection with a stockholder vote to approve an amendment to our Charter (i) to modify the substance or timing of our obligation to redeem 100% of our Class A Common Stock if we do not complete an Initial Business Combination within the time period set forth in the Charter or (ii) with respect to any other provision relating to the rights of holders of our Class A Common Stock or
pre-Initial
Business Combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our Initial Business Combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Common Stock in respect of such event.
If the number of outstanding shares of our Class A Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A Common Stock or other similar event,
232
then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A Common Stock.
Whenever the number of shares of Class A Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Class A Common Stock (other than those described above or that solely affects the par value of such shares of Class A Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Class A Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our Class A Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A Common Stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established
market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the warrant.
over-the-counter
The warrants have been issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. If an amendment adversely affects the private placement warrants in a different manner than the public warrants or vice versa, then approval of holders of at least 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes, is required.
In addition, if we issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of our Initial Business Combination at a newly issued price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the DCRC Board and, in the case of any such issuance to our Sponsor or its affiliates, without taking into account any Founder Shares held by our Sponsor or such affiliates, as applicable, prior to such issuance), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the newly issued price, the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the newly issued price, and the $10.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to the newly issued price.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed
233
and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrantholders do not have the rights or privileges of holders of Class A Common Stock or any voting rights until they exercise their warrants and receive shares of Class A Common Stock. After the issuance of shares of Class A Common Stock upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Class A Common Stock to be issued to the warrantholder.
Private Placement Warrants
The private placement warrants (including the shares of Class A Common Stock issuable upon exercise of the private placement warrants) are not transferable, assignable or salable until 30 days after the completion of our Initial Business Combination (except, among other limited exceptions, to our officers and directors and other persons or entities affiliated with our Sponsor), and they will not be redeemable by us (except as described above under “—Redemption of Warrants When the Price Per Share of Class A Common Stock Equals or Exceeds $10.00”) so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. The initial purchasers, or their permitted transferees, have the option to exercise the private placement warrants on a cashless basis. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants sold as part of the units in our Initial Public Offering, including as to exercise price, exercisability and exercise period. If the private placement warrants are held by holders other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by us in all redemption scenarios and exercisable by the holders on the same basis as the warrants included in the units sold in our Initial Public Offering.
If holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A Common Stock for the ten trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
Our Transfer Agent and Warrant Agent
The transfer agent for our common stock and warrant agent for our warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity.
Certain Anti-Takeover Provisions of Delaware Law and our Proposed Second A&R Charter and Bylaws
Although we have opted out of Section 203 of the DGCL under the existing Charter, we will not opt out of Section 203 of the DGCL under the Proposed Second A&R Charter. Under Section 203 of the DGCL, New Solid Power will be prohibited from engaging in any business combination with any stockholder for a period of three years following the time that such stockholder (the “interested stockholder”) came to own at least 15% of the outstanding voting stock of New Solid (the “acquisition”), except if:
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the New Solid Power Board approved the acquisition prior to its consummation;
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the interested stockholder owned at least 85% of the outstanding voting stock upon consummation of the acquisition; or
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the business combination is approved by the New Solid Power Board, and by a 2/3 majority vote of the other stockholders in a meeting.
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Generally, a “business combination” includes any merger, consolidation, asset or stock sale or certain other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock.
Under certain circumstances, declining to opt out of Section 203 of the DGCL will make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with New Solid Power for a three-year period. This may encourage companies interested in acquiring New Solid Power to negotiate in advance with the New Solid Power Board because the stockholder approval requirement would be avoided if the New Solid Power Board approves the acquisition which results in the stockholder becoming an interested stockholder. This may also have the effect of preventing changes in the New Solid Power Board and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.
Written Consent by Stockholders
Under the Proposed Second A&R Charter, subject to the rights of holders of preferred stock of New Solid Power, any action required or permitted to be taken by the stockholders of New Solid Power will be required to be effected at a duly called annual or special meeting of stockholders of New Solid Power and may not be effected by any consent in writing by such stockholders.
Special Meeting of Stockholders
Under the Proposed Second A&R Charter, subject to the terms of any series of preferred stock, special meetings of stockholders of New Solid Power may be called only by the chairperson of the New Solid Power Board, the Chief Executive Officer, the President or the New Solid Power Board acting pursuant to a resolution adopted by a majority of the total number of authorized directorships whether or not there exist any vacancies or other unfilled seats in previously authorized directorships, but a special meeting may not be called by any other person or persons and any power of stockholders to call a special meeting of stockholders is specifically denied. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Under the Proposed Second A&R Charter, advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of New Solid Power shall be given in the manner and to the extent provided in the bylaws of New Solid Power.
Rule 144
Pursuant to Rule 144, a person who has beneficially owned restricted shares of our common stock or warrants for at least six months would be entitled to sell their securities provided that (a) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (b) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
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Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
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1% of the total number of shares of such securities then-outstanding; or
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the average weekly reported trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
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Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
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the issuer of the securities that was formerly a shell company has ceased to be a shell company;
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the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form
8-K;
and
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at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
|
As a result, our initial stockholders will not be able to sell their Founder Shares pursuant to Rule 144 without registration for at least one year after we have completed an Initial Business Combination.
Listing of Securities
We intend to apply to continue the listing of our common stock and public warrants on Nasdaq under the symbols “SLDP” and “SLDPW,” respectively, upon the Closing. Our units will automatically separate into the component securities upon consummation of the business combination and, as a result, will no longer trade as a separate security.
236
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information known to DCRC regarding (a) the actual beneficial ownership of our voting common stock as of the record date (prior to the business combination and PIPE Financing) and (b) the expected beneficial ownership of our voting common stock immediately following consummation of the business combination and PIPE Financing, assuming that no public shares of DCRC are redeemed, and alternatively assuming maximum redemption of public shares, resulting in an aggregate payment of approximately $215.0 million out of the Trust Account, in each case, by:
| • |
each person who is, or is expected to be, the beneficial owner of more than 5% of the outstanding shares of voting common stock;
|
| • |
each of our named executive officers and directors;
|
| • |
each person who will become a named executive officer or director of New Solid Power post-business combination; and
|
| • |
all current executive officers and directors of DCRC, as a group
pre-business
combination and all executive officers and directors on the New Solid Power Board post-business combination.
|
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership of our voting common stock prior to the business combination and PIPE Financing is based on 43,750,000 shares of Class A Common Stock and Class B Common Stock (including Founder Shares) issued and outstanding in the aggregate as of August 31, 2021.
The expected beneficial ownership of shares of our voting common stock immediately following consummation of the business combination and PIPE Financing, both when assuming no redemptions and when assuming maximum redemptions, has been determined based upon the assumptions set forth under “Certain Defined Terms.” For purposes of calculating the ownership percentages in the table below, the number of shares outstanding for each person assumes full exercise of only such person’s outstanding options and warrants that are exercisable by such person within 60 days of August 31, 2021.
Unless otherwise indicated and subject to applicable community property laws, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of voting common stock beneficially owned by them.
|
Name and Address of Beneficial Owners
|
Prior to the business
combination
(1)
|
After the business combination
|
||||||||||||||||||||||
|
Assuming No
Redemptions |
Assuming Maximum
Redemptions |
|||||||||||||||||||||||
|
Number of
shares |
%
|
Number of
shares |
%
|
Number of
shares |
%
|
|||||||||||||||||||
|
Five Percent Holders of DCRC
|
||||||||||||||||||||||||
|
Decarbonization Plus Acquisition Sponsor III LLC
(2)(3)
|
8,390,000 | 19.2 | 8,390,000 | 5.1 | % | 8,390,000 | 5.9 | % | ||||||||||||||||
|
Directors and Named Executive Officers of DCRC
|
||||||||||||||||||||||||
|
Erik Anderson
|
— | — | — | — | — | — | ||||||||||||||||||
|
Peter Haskopoulos
|
— | — | — | — | — | — | ||||||||||||||||||
|
Dr. Jennifer Aaker
(2)(4)
|
40,000 | * | 40,000 | * | 40,000 | * | ||||||||||||||||||
|
Jane Kearns
(2)(4)
|
40,000 | * | 40,000 | * | 40,000 | * | ||||||||||||||||||
|
Pierre Lapeyre, Jr.
(2)(3)
|
8,390,000 | 19.2 | 13,709,311 | 8.3 | % |
|
13,709,311
|
|
9.6 | % | ||||||||||||||
|
David Leuschen
(2)(3)
|
8,390,000 | 19.2 |
|
13,709,311
|
|
8.3 | % |
|
13,709,311
|
|
9.6 | % | ||||||||||||
|
Robert Tichio
|
— | — | — | — | — | — | ||||||||||||||||||
237
|
Name and Address of Beneficial Owners
|
Prior to the business
combination
(1)
|
After the business combination
|
||||||||||||||||||||||
|
Assuming No
Redemptions |
Assuming Maximum
Redemptions |
|||||||||||||||||||||||
|
Number of
shares |
%
|
Number of
shares |
%
|
Number of
shares |
%
|
|||||||||||||||||||
|
Jim McDermott
(2)(5)
|
240,000 | * | 240,000 | * | 240,000 | * | ||||||||||||||||||
|
Jeffrey Tepper
(2)(4)
|
40,000 | * | 40,000 | * | 40,000 | * | ||||||||||||||||||
|
All Directors and Executive Officers of DCRC as a Group (9 Individuals)
|
8,750,000 |
(6)
|
20.0 |
|
14,069,311
|
|
8.6 | % | 14,069,311 | 9.9 | % | |||||||||||||
|
Five Percent Holders of New Solid Power After Consummation of the Business Combination
|
||||||||||||||||||||||||
|
Entities affiliated with Volta
(7)
|
— | — | 18,021,421 | 10.9 | % | 18,021,855 | 12.5 | % | ||||||||||||||||
|
Ford Motor Company
(8)
|
— | — | 11,711,947 | 7.1 | % | 11,711,947 | 8.1 | % | ||||||||||||||||
|
BMW Holding B.V.
(9)
|
— | — | 10,559,779 | 6.4 | % | 10,559,779 | 7.3 | % | ||||||||||||||||
|
Dr. Conrad Stoldt
(10)
|
— | — | 7,528,460 | 4.5 | % | 7,528,640 | 5.2 | % | ||||||||||||||||
|
Directors and Named Executive Officers of New Solid Power After Consummation of the Business Combination
|
||||||||||||||||||||||||
|
Douglas Campbell
(11)
|
— | — | 11,853,320 | 7.0 | % | 11,853,320 | 8.0 | % | ||||||||||||||||
|
David B. Jansen
(12)
|
— | — | 2,402,700 | 1.4 | % | 2,402,700 | 1.7 | % | ||||||||||||||||
|
Erik Anderson
|
— | — | — | — | — | — | ||||||||||||||||||
|
Stephen C. Fuhrman
(13)
|
— | — | 568,369 | * | 568,369 | * | ||||||||||||||||||
|
Derek C. Johnson
(14)
|
— | — | 420,469 | * | 420,469 | * | ||||||||||||||||||
|
Rainer Feurer
|
— | — | — | — | — | — | ||||||||||||||||||
|
Steven H. Goldberg
(15)
|
— | — | 507,914 | * | 507,914 | * | ||||||||||||||||||
|
Robert M. Tichio
|
— | — | — | — | — | — | ||||||||||||||||||
|
All Directors and Executive Officers of New Solid Power as a Group (9 Individuals)
(16)
|
— | — | 20,830,478 | 11.7 | % | 20,830,478 | 13.3 | % | ||||||||||||||||
| * |
Less than one percent.
|
| (1) |
This table is based on 43,750,000 shares of voting common stock outstanding at , 2021, of which 35,000,000 were shares of Class A Common Stock and 8,750,000 were shares of Class B Common Stock. Unless otherwise noted, the business address of each of the following entities or individuals is 2744 Sand Hill Road, Suite 100, Menlo Park, CA 94025.
|
| (2) |
Interests shown prior to the business combination consist solely of Founder Shares, classified as shares of Class B Common Stock. Such shares will automatically convert into shares of Class A Common Stock at the time of our Initial Business Combination on a
one-for-one
|
| (3) |
Interests shown exclude 6,333,996 shares of Class A Common Stock underlying private placement warrants currently held and 1,000,000 shares of Class A Common Stock underlying private placement warrants issuable upon conversion of up to $1,500,000 of any working capital loans the Sponsor may make to DCRC. Except as described elsewhere in this proxy statement/prospectus, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. The Sponsor is the record holder of 8,390,000 of the shares reported herein. The remaining 5,319,311 shares reported herein consists of shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock to be held by certain affiliates of the Sponsor. David M. Leuschen and Pierre F. Lapeyre, Jr. are the managing directors of Riverstone Holdings LLC and have shared voting and investment discretion with respect to the common stock held of record by the Sponsor and its affiliates. As such, each of Riverstone Holdings LLC, David M. Leuschen and Pierre F. Lapeyre, Jr. may be deemed to have or share beneficial ownership of the shares held directly by the Sponsor and its affiliates. Each such entity or person disclaims any such beneficial ownership. The business address of each of these entities and individuals is c/o Riverstone Holdings LLC, 712 Fifth Avenue, 36
th
Floor, New York, NY 10019.
|
| (4) |
Interests shown exclude 33,267 shares of Class A Common Stock underlying private placement warrants that are not currently exercisable.
|
238
| (5) |
Interests shown exclude 199,603 shares of Class A Common Stock underlying private placement warrants that are not currently exercisable.
|
| (6) |
These shares represent 100% of the Founder Shares.
|
| (7) |
Consists of: (i) 2,468,450 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock to be held by Volta Energy Storage Fund I, LP (“Volta Energy”), (ii) 12,356,655 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock to be held by Volta SPV SPW, LLC (“Volta SPV”), and (iii) 3,196,314 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock to be held by Volta SPW
Co-Investment,
LP (“Volta SPW” and together with Volta Energy and Volta SPV, the “Volta Entities”). Volta Energy Storage Fund I GP, LLC is the general partner of Volta Energy and Volta SPW and has the power to direct investments and/or vote the shares beneficially held by them. Jeffrey Chamberlain, David Schroeder, Alexander Arkin, Jason Moede, and Michael Rochman are on the investment committee of Volta Energy Storage Fund I GP, LLC and, therefore, may be deemed to beneficially own the shares held by Volta Energy and Volta SPW. Volta Energy Technologies, LLC is the managing member of Volta SPV and has the power to direct investments and/or vote the shares beneficially held by it. Jeffrey Chamberlain is the Manager of Volta Energy Technologies, LLC and, therefore, may be deemed to beneficially own the shares held by Volta SPV. The business address for the Volta Entities is 28365 Davis Pkwy STE 202, Warrenville, IL 60555.
|
| (8) |
Consists of 11,711,947 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock to be held by Ford Motor Company. The business address of Ford Motor Company is 1 American Road, Dearborn, Michigan 48126.
|
| (9) |
Consists of 10,559,779 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock to be held by BMW Holding, which is a wholly owned subsidiary of BMW INTEC Beetling’s GmbH (“BMW INTEC”), which is a wholly owned subsidiary of BMW AG. BMW AG is a publicly traded entity controlled by a 19-person supervisory board. BMW AG has the power to direct investments and/or vote the shares held by BMW Holding. The business address of each of BMW AG and BMW INTEC is Petuelring 130, 80809 Munich, Federal Republic of Germany. The business address of BMW Holding is Einsteinlaan 5, 2289 CC Rijswijk, The Netherlands.
|
| (10) |
The business address for Dr. Stoldt is 427 UCB, University of Colorado at Boulder, Boulder, CO 80309.
|
| (11) |
Consists of (i) 6,727,560 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock held by Mr. Campbell and (ii) 5,125,760 shares of Class A Common Stock underlying options to be held by Mr. Campbell issued in exchange for Solid Power Options scheduled to vest within 60 days of August 31, 2021. The business address for Mr. Campbell is 486 S. Pierce Avenue, Suite E, Louisville, Colorado 80027.
|
| (12) |
Consists of: (i) 800,900 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock held by Mr. Jansen and (ii) 1,601,800 shares of Class A Common Stock underlying options to be held by Mr. Jansen issued in exchange for Solid Power Options scheduled to vest within 60 days of August 31, 2021. The business address for Mr. Jansen is 486 S. Pierce Avenue, Suite E, Louisville, Colorado 80027.
|
| (13) |
Consists of: (i) 510,974 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock held by Mr. Fuhrman and (ii) 57,395 shares of Class A Common Stock underlying options to be held by Mr. Fuhrman issued in exchange for Solid Power Options scheduled to vest within 60 days of August 31, 2021. The business address for Mr. Fuhrman is 486 S. Pierce Avenue, Suite E, Louisville, Colorado 80027.
|
| (14) |
Consists of 420,469 shares of Class A Common Stock underlying options to be held by Dr. Johnson issued in exchange for Solid Power Options scheduled to vest within 60 days of August 31, 2021. The business address for Dr. Johnson is 486 S. Pierce Avenue, Suite E, Louisville, Colorado 80027.
|
| (15) |
Consists of 507,914 shares of Class A Common Stock underlying options to be held by Mr. Goldberg issued in exchange for Solid Power Options scheduled to vest within 60 days of August 31, 2021. The business address for Mr. Goldberg is 486 S. Pierce Avenue, Suite E, Louisville, Colorado 80027.
|
| (16) |
Includes (i) an aggregate of 8,039,434 shares of Class A Common Stock to be issued in exchange for Solid Power Common Stock held by executive officers and directors and (ii) 12,791,044 shares of Class A Common Stock underlying options to be held by executive officers and directors issued in exchange for Solid Power Options scheduled to vest within 60 days of August 31, 2021.
|
239
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
DCRC Related Party Transactions
Founder Shares
In February 2021, our Sponsor purchased an aggregate of 10,062,500 shares of Class B Common Stock in exchange for the payment of $25,000 of expenses on our behalf. In March 2021, our Sponsor forfeited 400,000 shares of Class B Common Stock, and an aggregate of 400,000 shares of Class B Common Stock were issued to our independent director nominees at their original purchase price. In April 2021, one of our independent directors forfeited 40,000 shares of Class B Common Stock in connection with such director’s resignation from the DCRC Board, and our Sponsor acquired an equivalent number of shares of Class B Common Stock from us. In May 2021, our Sponsor forfeited 1,312,500 shares of Class B Common Stock in connection with the expiration of the underwriters’ over-allotment option for our Initial Public Offering, resulting in our Sponsor and our independent directors holding an aggregate of 8,750,000 Founder Shares. The Founder Shares will automatically convert into shares of our Class A Common Stock at the time of the business combination, or at any time prior thereto at the option of the holder, on a
basis, subject to adjustment pursuant to certain anti-dilution rights.
one-for-one
Private Placement Warrants
Our Sponsor and independent directors purchased an aggregate of 6,666,667 private placement warrants for a purchase price of $1.50 per warrant in a private placement that occurred simultaneously with the closing of our Initial Public Offering. As such, the interest of our Sponsor and independent directors in this transaction is valued at approximately $10.0 million.
Each private placement warrant entitles the holder to purchase one share of our Class A Common Stock at $11.50 per share. The private placement warrants (including the Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of our Initial Business Combination.
Administrative Support Agreement
On March 23, 2021, we entered into an administrative support agreement with an affiliate of our Sponsor, pursuant to which we pay an affiliate of our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our Initial Business Combination or our liquidation, we will cease paying these monthly fees.
Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of
expenses incurred by such persons in connection with activities on our behalf.
out-of-pocket
out-of-pocket
Related Party Loans and Advances
Our liquidity needs up to the IPO were satisfied through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of Founder Shares to our Sponsor. Subsequent to the consummation of our Initial Public Offering, our liquidity needs have been satisfied through the net proceeds of approximately $1.1 million from the private placement of private placement warrants held outside of the Trust Account.
In addition, in order to finance transaction costs in connection with an intended Initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not
240
obligated to, loan us funds as may be required. If we complete an Initial Business Combination, we would repay such loaned amounts. In the event that our Initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our business combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
Registration Rights
The holders of the Founder Shares, private placement warrants and warrants that may be issued upon conversion of working capital loans (and any shares of Class A Common Stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to the IPO Registration Rights Agreement requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A Common Stock). The holders of at least $25 million in value of these securities are entitled to demand that we file a registration statement covering such securities and to require us to effect up to an aggregate of three underwritten offerings of such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our Initial Business Combination.
In connection with the Closing, the IPO Registration Rights Agreement will be amended and restated and DCRC and the Reg Rights Holders will enter into the A&R Registration Rights Agreement. Pursuant to the A&R Registration Rights Agreement, DCRC will agree that, within 30 days after the Closing, DCRC will file the Resale Registration Statement with the SEC (at DCRC’s sole cost and expense), and DCRC will use its reasonable best efforts to have the Resale Registration Statement declared effective as promptly as reasonably practicable after the filing thereof. In certain circumstances, the Reg Rights Holders can demand DCRC’s assistance with underwritten offerings and block trades, and the Reg Rights Holders will be entitled to certain piggyback registration rights. The A&R Registration Rights Agreement does not provide for the payment of any cash penalties by DCRC if it fails to satisfy any of its obligations under the A&R Registration Rights Agreement.
Sponsor Letter
In connection with the execution of the Business Combination Agreement, on June 15, 2021, the Sponsor and certain directors of DCRC entered into the Sponsor Letter, pursuant to which, among other things, the Sponsor and such directors agreed to (i) waive the anti-dilution rights set forth in the Charter with respect to the Founder Shares held by them, (ii) comply with the
lock-up
provisions in the Letter Agreement, dated March 23, 2021, by and among DCRC, the Sponsor and DCRC’s directors and officers and (iii) vote all the shares of Class A Common Stock and Founder Shares held by them in favor of the adoption and approval of the Business Combination Agreement and the business combination.
241
Solid Power Related Party Transactions
In 2018, Solid Power completed the private placement of shares of Solid Power Series
A-1
Preferred Stock, at a purchase price of $1.806775 per share to, among others, the following related parties, each of whom, together with its affiliates, is expected to be a beneficial owner of more than 5% of the outstanding shares of Class A Common Stock upon the Closing:
|
Shareholder
|
Shares of Series A-1
Preferred Stock |
Total Purchase Price
($ in millions) |
||||||
|
Ford Motor Company
|
1,660,417 | $ | 3.0 | |||||
|
Volta SPV SPW, LLC(1)
|
2,767,361 | $ | 5.0 | |||||
| (1) |
David Schroeder became a member of the Solid Power Board in connection with such financing. Mr. Schroeder was appointed to the Solid Power Board by Volta SPV SPW, LLC.
|
Convertible Note Financing
In 2020 and 2021, Solid Power completed the private placement of approximately $7.4 million aggregate principal amount of its convertible notes to, among others, Volta SPV SPW, LLC, Volta SPV SPW, LLC and Volta Energy Storage Fund I. LP, each of whom, together with its affiliates, is expected to be a beneficial owner of more than 5% of the outstanding shares of Class A Common Stock upon the Closing.
Series B Preferred Stock Financing
In 2021, Solid Power completed the Series B Financing, which was a private placement of shares of Solid Power Series B Preferred Stock at a purchase price of $18.041 per share to, among others, the following related parties, each of whom, together with its affiliates, is expected to be a beneficial owner of more than 5% of the outstanding shares of Class A Common Stock upon the Closing:
|
Shareholder
|
Shares of Solid
Power Series B Preferred Stock |
Total Consideration
Paid ($ in millions) |
||||||
|
BMW Holding B.V.(1)
|
2,746,853 | $ | 49.6 | |||||
|
Ford Motor Company(2)
|
1,662,879 | $ | 30.0 | |||||
|
Volta(3)
|
2,381,673 | $ | 43.0 | |||||
| (1) |
Rainer Feurer became a member of the Solid Power Board in connection with the Series B Financing. Mr. Feurer was appointed to the Solid Power Board by entities affiliated with BMW Holding B.V.
|
| (2) |
Theodore Miller became a member of the Solid Power Board in connection with the Series B Financing. Mr. Miller was appointed to the Solid Power Board by Ford Motor Company.
|
| (3) |
Includes shares purchased by Volta Energy Storage Fund I, LP, Volta SPV SPW, LLC, and Volta SPW
Co-Investment,
LP.
|
In connection with the Series B Financing, Solid Power, the related parties set forth above, and certain other Solid Power shareholders entered into an Amended and Restated Voting Agreement, an Amended and Restated Right of First Refusal and
Co-Sale
Agreement, and Amended and Restated Investors’ Rights Agreement (collectively, the “Series B Financing Documents”). Solid Power’s ongoing obligations under the Series B Financing Documents will cease upon the Closing.
Transactions with Roccor
Until October 2020, Roccor was partially owned by Douglas Campbell, Solid Power’s Chief Executive Officer and a member of the Solid Power Board. During the year ended December 31, 2019, Solid Power provided accounting and administrative support to Roccor for which Roccor reimbursed Solid Power approximately $0.2 million.
242
In 2019 and 2020, Solid Power entered into subcontractor agreements with Roccor, pursuant to which Solid Power provided technical support to Roccor on a government research contract and research and development support. In 2020, Roccor paid an aggregate of approximately $0.2 million to Solid Power in connection with such subcontractor agreements.
Additional Transactions with BMW
Pursuant to certain commercial arrangements with BMW, BMW AG or its affiliates have paid an aggregate of approximately $3.3 million, $0.7 million, and $0.5 million to Solid Power in the years ended December 31, 2018, 2019 and 2020, respectively. BMW AG and its affiliates are expected to be beneficial owners of more than 5% of the outstanding shares of Class A Common Stock upon the Closing.
In connection with the Series B Financing, Solid Power and BMW Holding, an affiliate of BMW AG and one of Solid Power’s shareholders, entered into a Board Nomination Support Agreement, dated May 5, 2021 (the “BMW Nomination Agreement”), pursuant to which BMW Holding received certain director nomination rights.
Compensation Arrangements
Solid Power is party to offer letters, stock option agreements, change in control and severance agreements, and indemnification agreements with Solid Power’s executive officers that, among other things, provide for certain change of control benefits. Solid Power has also granted stock options to Steven H. Goldberg, a member of the Solid Power Board. See “Executive Compensation—Solid Power.”
Post-Business Combination Policies and Procedures
Policies and Procedures for Related Party Transactions
Upon the Closing, it is anticipated that the New Solid Power Board will adopt a written Related Party Transactions Policy that sets forth New Solid Power’s policies and procedures regarding the identification, review, consideration and oversight of “related party transactions.” For purposes of New Solid Power’s policy only, a “related party transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which New Solid Power or any of its subsidiaries are participants involving an amount that exceeds $120,000, in which any “related person” has a material interest.
Transactions involving compensation for services provided to New Solid Power as an employee, consultant or director will not be considered related person transactions under this policy. A related person is any executive officer, director, nominee to become a director or a holder of more than 5% of any class of New Solid Power’s voting securities (including New Solid Power Common Stock), including any of their immediate family members and affiliates, including entities owned or controlled by such persons.
Under the policy, the related person in question or, in the case of transactions with a holder of more than 5% of any class of New Solid Power’s voting securities, an officer with knowledge of a proposed transaction, must present information regarding the proposed related person transaction to New Solid Power’s audit committee (or, where review by New Solid Power’s audit committee would be inappropriate, to another independent body of the New Solid Power’s Board) for review. To identify related person transactions in advance, New Solid Power will rely on information supplied by New Solid Power’s executive officers, directors and certain significant shareholders. In considering related person transactions, New Solid Power’s audit committee will take into account the relevant available facts and circumstances, which may include, but are not limited to:
| • |
the risks, costs, and benefits to New Solid Power;
|
| • |
the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
|
243
| • |
the terms of the transaction;
|
| • |
the availability of other sources for comparable services or products; and
|
| • |
the terms available to or from, as the case may be, unrelated third parties.
|
New Solid Power’s audit committee will approve only those transactions that it determines are fair to it and in New Solid Power’s best interests. All of the transactions described above were entered into prior to the adoption of such policy.
244
PRICE RANGE AND DIVIDENDS OF SECURITIES
Price Range of DCRC’s Securities
DCRC’s units, Class A Common Stock, and warrants are currently listed on Nasdaq under the symbols “DCRCU,” “DCRC,” and “DCRCW,” respectively. The units commenced public trading on Nasdaq on March 24, 2021. Commencing May 14, 2021, holders of the units could elect to separately trade the shares of Class A Common Stock and warrants included in the units.
On June 14, 2021, the last trading date before the public announcement of the business combination, DCRC’s public units, Class A Common Stock and public warrants closed at $13.47, $12.09 and $3.65, respectively.
Holders of DCRC Capital Stock
As of the record date, there were holders of record of the Class A Common Stock, holders of record of the Class B Common Stock, holders of record of the public warrants, holders of record of the private placement warrants and holders of record of the units.
Dividend Policy of DCRC
DCRC has not paid any cash dividends on its common stock to date and does not intend to pay cash dividends prior to the completion of its Initial Business Combination (including the business combination).
Solid Power
Solid Power has not paid any cash dividends on the Solid Power Common Stock to date and does not intend to pay cash dividends on Solid Power Common Stock prior to the completion of the business combination.
As of the record date, there were holders of Solid Power Common Stock.
Dividend Policy of the Company Following the Business Combination
The payment of cash dividends on Class A Common Stock in the future will be dependent upon the revenues and earnings, if any, capital requirements and general financial condition of New Solid Power subsequent to completion of the business combination. The payment of any cash dividends on Class A Common Stock subsequent to the business combination will be within the discretion of the New Solid Power Board. The New Solid Power Board is not currently contemplating and does not anticipate declaring stock dividends on Class A Common Stock nor is it currently expected that the New Solid Power Board will declare any dividends in the foreseeable future.
245
INDEPENDENT REGISTERED ACCOUNTING FIRM
Representatives of our independent registered public accounting firm, WithumSmith+Brown, PC, will be present at the special meeting of the stockholders. The representatives will have the opportunity to make a statement if they so desire and they are expected to be available to respond to appropriate questions.
HOUSEHOLDING INFORMATION
Unless DCRC has received contrary instructions, DCRC may send a single copy of this proxy statement/prospectus to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of DCRC’s disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of DCRC’s disclosure documents, the stockholders should follow these instructions:
| • |
If the shares are registered in the name of the stockholder, the stockholder should contact DCRC at its offices at 2744 Sand Hill Road, Suite 100, Menlo Park, California 94025 or its telephone number at (212)
993-0076
to inform DCRC of his or her request; or
|
| • |
If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.
|
TRANSFER AGENT AND REGISTRAR
The transfer agent for our securities is Continental Stock Transfer & Trust Company.
SUBMISSION OF STOCKHOLDER PROPOSALS
The DCRC Board is aware of no other matter that may be brought before the special meeting. Under Delaware law, only business that is specified in the notice of special meeting to stockholders may be transacted at the special meeting.
FUTURE STOCKHOLDER PROPOSALS
For any proposal to be considered for inclusion in our proxy statement and form of proxy for submission to the stockholders at our 2022 annual meeting of stockholders, it must be submitted in writing and comply with the requirements of Rule
14a-8
of the Exchange Act and our bylaws. Such proposals must be received by New Solid Power at its offices at 486 S. Pierce Avenue, Suite E, Louisville, CO 80027, within a reasonable time before New Solid Power begins to print and send its proxy materials for the meeting.
In addition, New Solid Power’s amended and restated bylaws, which will be effective immediately prior to the consummation of the business combination, provide notice procedures for stockholders to propose business (other than director nominations) to be considered by stockholders at a meeting. To be timely, a stockholder’s notice must be received by the Secretary at the principal executive offices of New Solid Power not later than the close of business on the . The chair of the New Solid Power Board may refuse to acknowledge the introduction of any stockholder proposal not made in compliance with the foregoing procedures.
246
Further, New Solid Power’s amended and restated bylaws, which will be effective immediately prior to the consummation of the business combination, provide notice procedures for stockholders to nominate a person as a director to be considered by stockholders at a meeting. To be timely, a stockholder’s notice must be received by the Secretary at the principal executive offices of New Solid Power (a) in the case of an annual meeting, not later than . The chair of the New Solid Power Board may refuse to acknowledge the introduction of any stockholder nomination not made in compliance with the foregoing procedures.
247
EXPERTS
The financial statements of DCRC for the period from January 29, 2021 (inception) to June 30, 2021 appearing in this proxy statement/prospectus have been audited by WithumSmith+Brown, PC, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere in this proxy statement/prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial statements of Solid Power as of December 31, 2020 and 2019, and for each of the two years in the period ended December 31, 2020 included in this proxy statement/prospectus, have been audited by Ernst & Young LLP, independent registered accounting firm, as set forth in their report thereon appearing elsewhere herein. Such financial statements are included in reliance on their report given on their authority as experts in accounting and auditing.
LEGAL MATTERS
The legality of shares of New Solid Power offered by this proxy statement/prospectus will be passed upon for DCRC by Vinson & Elkins L.L.P., Houston, Texas.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
DCRC files reports, proxy statements and other information with the SEC as required by the Exchange Act. You can read DCRC’s SEC filings, including this proxy statement/prospectus, over the Internet at the SEC’s website at
.
http://www.sec.gov
If you would like additional copies of this proxy statement/prospectus or if you have questions about the business combination or the Proposals to be presented at the special meeting, you should contact DCRC’s proxy solicitation agent at the following address and telephone number:
Morrow Sodali LLC
470 West Avenue
Stamford, Connecticut 06902
Telephone: (800)
662-5200
(banks and brokers call collect at (203)
658-9400)
Email: DCRC.info@investor.morrowsodali.com
If you are a DCRC stockholder and would like to request documents, please do so by
, 2021, in order to receive them before the special meeting.
All information contained in this proxy statement/prospectus relating to DCRC has been supplied by DCRC, and all such information relating to Solid Power has been supplied by Solid Power. Information provided by either DCRC or Solid Power does not constitute any representation, estimate or projection of any other party.
DCRC has not authorized anyone to give any information or make any representation about the business combination, DCRC or Solid Power that is different from, or in addition to, that contained in this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this document speaks only as of the date of this document unless the information specifically indicates that another date applies.
248
|
Decarbonization Plus Acquisition Corporation III Audited Financial Statements
|
Page
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| F-6 | ||||
| F-7 | ||||
|
Solid Power, Inc. Audited Financial Statements
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||||
| F-22 | ||||
| F-23 | ||||
| F-24 | ||||
| F-25 | ||||
| F-26 | ||||
| F-27 | ||||
|
Solid Power, Inc. Unaudited Financial Statements
|
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| F-47 | ||||
| F-48 | ||||
| F-50 | ||||
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| F-53 | ||||
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Decarbonization Plus Acquisition Corporation III
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Decarbonization Plus Acquisition Corporation III (the “Company”) as of June 30, 2021, the related statements of operations, changes in stockholders’ equity and cash flows for the period from January 29, 2021 (inception) through June 30, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021, and the results of its operations and its cash flows for the period from January 29, 2021 (inception) through June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Company’s auditor since 2021.
New York, New York
September 20, 2021
F-2
DECARBONIZATION PLUS ACQUISITION CORPORATION III
BALANCE SHEET
|
June 30, 2021
|
||||
|
ASSETS:
|
||||
|
Current Assets:
|
||||
|
Cash
|
$ | — | ||
|
Short term prepaid insurance
|
560,596 | |||
|
|
|
|||
|
Total Current Assets
|
560,596 | |||
|
Cash equivalents held in Trust Account
|
350,005,400 | |||
|
Long term prepaid insurance
|
411,616 | |||
|
|
|
|||
|
Total assets
|
$ | 350,977,612 | ||
|
|
|
|||
|
Liabilities and Stockholders’ Equity (Deficit)
|
||||
|
Current liabilities:
|
||||
|
Accounts payable
|
$ | 625,004 | ||
|
Franchise tax payable
|
83,288 | |||
|
|
|
|||
|
Total current liabilities
|
708,292 | |||
|
Warrant liabilities
|
48,166,668 | |||
|
Deferred underwriting fee payable
|
12,250,000 | |||
|
|
|
|||
|
Total liabilities
|
61,124,960 | |||
|
|
|
|||
|
Commitments and Contingencies
|
||||
|
Class A common stock subject to possible redemption, 35,000,000 shares at $10.00 per share
|
350,000,000 | |||
|
Stockholders’ Equity
(Deficit)
|
||||
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding
|
— | |||
|
Class A common stock, $0.0001 par value; 250,000,000 shares authorized
; none issued and outstanding
|
—
|
|||
|
Class B common stock, $0.0001 par value, 20,000,000 shares authorized, 8,750,000 shares issued and outstanding
|
875 | |||
|
Additional
paid-in
capital
|
—
|
|||
|
Accumulated deficit
|
(60,148,223 | ) | ||
|
|
|
|||
|
Total stockholders’ equity (deficit)
|
(60,147,348 | ) | ||
|
|
|
|||
|
Total liabilities and stockholders’ equity (deficit)
|
$ | 350,977,612 | ||
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
F-3
DECARBONIZATION PLUS ACQUISITION CORPORATION III
STATEMENT OF OPERATIONS
|
For the period from
January 29, 2021 (inception) to June 30, 2021 |
||||
|
Operating expenses:
|
||||
|
General and administrative expenses
|
$ | 1,998,954 | ||
|
Franchise tax expense
|
83,288 | |||
|
|
|
|||
|
Loss from operations
|
(2,082,242 | ) | ||
|
|
|
|||
|
Other income (expense):
|
||||
|
Interest earned on cash equivalents held in Trust Account
|
5,400 | |||
|
Offering costs allocated to warrant liabilities
|
(956,584 | ) | ||
|
Change in fair value of warrant liabilities
|
(21,166,668 | ) | ||
|
|
|
|||
|
Net Loss
|
$
|
(24,200,094 | ) | |
|
|
|
|||
|
Weighted average shares outstanding of Class A common stock, basic and diluted
|
35,000,000 | |||
|
|
|
|||
|
Basic and diluted net income per common share, Class A redeemable common stock
|
$ | — | ||
|
|
|
|||
|
Weighted average shares outstanding of Class B
non-redeemable
common stock, basic and diluted
|
8,750,000 | |||
|
|
|
|||
|
Basic and diluted net loss per common share, Class B
non-redeemable
common stock
|
$ | (2.77 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these financial statements.
F-4
DECARBONIZATION PLUS ACQUISITION CORPORATION III
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM JANUARY 29, 2021 (INCEPTION) TO JUNE 30, 2021
|
Class A Common Stock
|
Class B Common Stock
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Stockholders’
Equity (Deficit)
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
|
Balance as of January 29, 2021 (inception)
|
— | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
|
Class B Common Stock issued to Sponsor
|
— | — | 10,062,500 | 1,006 | 23,994 | — | 25,000 | |||||||||||||||||||||
|
Forfeiture of Founder Shares
|
— | — | (1,312,500 | ) | (131 | ) | 131 | — | — | |||||||||||||||||||
|
Accretion for Class A
common stock to redemption amount
|
—
|
—
|
— | — | (24,125 |
)
|
(35,948,129 |
)
|
(35,972,254 | ) | ||||||||||||||||||
|
Net loss
|
— | — | — | — | — | (24,200,094 | ) | (24,200,094 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance as of June 30, 2021
|
—
|
—
|
8,750,000 |
$
|
875 |
—
|
$
|
(60,148,223 | ) |
$
|
(60,147,348 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
F-5
DECARBONIZATION PLUS ACQUISITION CORPORATION III
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 29, 2021 (INCEPTION) TO JUNE 30, 2021
|
Cash flow from operating activities:
|
||||
|
Net loss
|
$ | (24,200,094 | ) | |
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||
|
Change in fair value of warrant liabilities
|
21,166,668 | |||
|
Offering costs allocated to warrant liabilities
|
956,584 | |||
|
Interest earned on cash equivalents held in Trust Account
|
(5,400 | ) | ||
|
Changes in operating assets and liabilities:
|
||||
|
Accounts payable
|
625,004 | |||
|
Franchise tax payable
|
83,288 | |||
|
Prepaid insurance
|
(972,212 | ) | ||
|
|
|
|||
|
Net cash used in operating activities
|
(2,346,162 | ) | ||
|
|
|
|||
|
Cash flows from investing activities:
|
||||
|
Investment of cash in Trust Account
|
(350,000,000 | ) | ||
|
|
|
|||
|
Net cash used in investing activities
|
(350,000,000 | ) | ||
|
|
|
|||
|
Cash flows from financing activities:
|
||||
|
Proceeds from sale of Units, net of underwriting discounts paid
|
343,000,000 | |||
|
Proceeds from sale of Private Placement Warrants
|
10,000,000 | |||
|
Proceeds from sale of Class B Common Stock to Sponsor
|
25,000 | |||
|
Payment of offering costs
|
(678,838 | ) | ||
|
|
|
|||
|
Net cash provided by financing activities
|
352,346,162 | |||
|
|
|
|||
|
Net decrease in cash
|
— | |||
|
Cash at beginning of period
|
— | |||
|
|
|
|||
|
Cash at end of period
|
$ | — | ||
|
|
|
|||
|
Supplemental disclosure of
non-cash
financing activities:
|
||||
|
Deferred underwriting compensation
|
12,250,000 |
The accompanying notes are an integral part of these financial statements.
F-6
DECARBONIZATION PLUS ACQUISITION CORPORATION III
NOTES TO FINANCIAL STATEMENTS
Note 1 — Description of Organization and Business Operations
Organization and General
Decarbonization Plus Acquisition Corporation III (the “
”) was incorporated in Delaware on January 29, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “
”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “
,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “
”).
Company
Initial Business Combination
Securities Act
JOBS Act
At June 30, 2021, the Company had not commenced any operations. All activity for the period from January 29, 2021 (inception) to June 30, 2021 relates to the Company’s formation and the initial public offering (“
”) described below, as well as the identification and evaluation
of prospective acquisition targets for an Initial Business Combination and ongoing administrative and compliance matters. The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The Company will generate
from the proceeds derived from the Initial Public Offering. The Company has selected December 31st as its fiscal year end.
Initial Public Offering
non-operating
income in the form of interest income
The registration statement for the Initial Public Offering was declared effective on March 23, 2021. On March 26, 2021, the Company consummated the Initial Public Offering of 35,000,000 units (the “
” and, with respect to the Class A common stock included in the Units sold, the “
”), at $10.00 per Unit, generating gross proceeds of $350,000,000, which is described in Note 4.
Units
Public Shares
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale of 6,666,667 warrants (the “
”) at a price of $1.50 per Private Placement Warrant in a private placement to Decarbonization Plus Acquisition Sponsor III LLC (the “
”) and certain of the Company’s independent directors, generating gross proceeds of $10,000,000, which is described in Note 5.
Private Placement Warrants
Sponsor
Transaction costs amounted to $20,12 8,838 consisting of $7,000,000 of underwriting fees, $12,250,000 of deferred underwriting fees and $878,838 of other offering costs. In addition, at June 30, 2021, no cash was held outside of the Trust Account (as defined below) and is available for working capital purposes.
Following the closing of the Initial Public Offering on March 26, 2021, an amount of $350,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “
”) located in the United States. The proceeds held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred eighty (185) days or less or in money market funds that meet certain conditions under Rule
Trust Account
2a-7
under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Initial Business Combination; (ii) the redemption of any shares of Class A common stock included in the Units (the “
”) being sold in the Initial Public Offering that have been
Public Shares
F-7
properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of its obligation to redeem 100% of the Public Shares if it does not complete the Initial Business Combination within 24 months from the closing of the Initial Public Offering; and (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an Initial Business Combination within 24 months from the closing of the Initial Public Offering (subject to the requirements of law). The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the Initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an Initial Business Combination.
The Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under NASDAQ rules. If the Company seeks stockholder approval, it will complete its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A common stock will be recorded at redemption amount and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with the Financial Accounting Standards Board (“
”) Accounting Standards Codification (“
”) 480, “Distinguishing Liabilities from Equity.”
FASB
ASC
Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination within 24 months from the closing of the Initial Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust
F-8
Account including interest earned and not previously released to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Sponsor and the Company’s independent director nominees will not be entitled to rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company fails to complete the Initial Business Combination within 24 months of the closing of the Initial Public Offering. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
In the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then o
n
deposit in the Trust Account, upon the completion of the Initial Business Combination, subject to the limitations described herein.
Going Concern Considerations
As of June 30, 2021, the Company had a cash balance of $0. In connection with the Company’s assessment of going concern considerations in accordance with ASU2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern” as of June 30, 2021, the Company does not have sufficient liquidity to meet its current obligations. However, management has determined that the Company has access to funds from the Sponsor entity that are sufficient to fund the working capital needs of the Company.
If the Company’s estimates of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to an Initial Business Combination. Moreover, the Company may need to obtain additional financing either to complete an Initial Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of an Initial Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Initial Business Combination.
The Company does not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these financial statements. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company has access to funds from the Sponsor, which is described in Note 4, and the Sponsor has the financial ability to provide such funds, that are sufficient to fund the working capital needs of the Company until the earlier of the consummation of the Business Combination and one year from the date of issuance of these financial statements
.
These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
F-9
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“
”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the
period from
GAAP
January 29, 2021 (inception) to June 30, 2021 are not necessarily indicative of the results that may be expected for the period from January 29, 2021 (inception) to December 31, 2021 or any
future
period.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “
”), as modified by the Jumpstart our Business Startups Act of 2012 (the “
”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements, and exemptions from the requirements of holding a
Securities Act
JOBS Act
non-binding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period, excluding shares of common stock subject to forfeiture, plus, to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At June 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted loss per common share is the same as basic loss per common share for the period.
The Company’s statement of operations includes a presentation of loss per share for common shares subject to possible redemption in a manner similar to the
two-class
method of income per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable common stock outstanding for the period or since original issuance. Net loss per common share, basic and diluted for Class B
non-redeemable
common stock is calculated by dividing the net loss, less income attributable to Class A
F-10
redeemable common stock, by the weighted average number of Class B
non-redeemable
common stock outstanding for the period. Class B
non-redeemable
common stock includes the Founder Shares (as defined below) as these shares do not have any redemption features and do not participate in the income earned on the Trust Account. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
|
January 29, 2021
(inception)
to June 30, 2021
|
||||
|
Class A Redeemable Common Stock
|
|
|||
|
Numerator: Earnings allocable to Class A Redeemable Common Stock
|
|
|||
|
Interest Income
|
|
5,400 | ||
|
Franchise Taxes
|
|
(5,400 | ) | |
|
Net Income (Loss)
|
|
— | ||
|
Denominator: Weighted Average Class A Redeemable Common Stock
|
|
|||
|
Class A Redeemable Common Stock, Basic and Diluted
|
|
35,000,000 | ||
|
Earnings/Basic and Diluted Class A Redeemable Common Stock
|
|
— | ||
|
Class B
Non-Redeemable
Common Stock
|
|
|||
|
Numerator: Net Income minus Redeemable Net Earnings
|
|
|||
|
Net Income (Loss)
|
|
(24,200,094 | ) | |
|
Redeemable Net Income
|
|
— | ||
|
Non-Redeemable
Net Loss
|
|
(24,200,094 | ) | |
|
Denominator: Weighted Average Class B
Non-Redeemable
Common Stock
|
|
|||
|
Class B
Non-Redeemable
Common Stock, Basic and Diluted
|
|
8,750,000 | ||
|
Loss/Basic and Diluted Class B
Non-Redeemable
Common Stock
|
|
$
|
(2.77 | ) |
Note: As of June 30, 2021, basic and diluted shares are the same as there are no securities that are dilutive to the Company’s common stockholders.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limits of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in
capital at the time of issuance.
F-11
For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a
non-cash
gain or loss on the statements of operations. The Company utilized a Monte Carlo simulation model to value the Public Warrant liabilities at the date of the Initial Public Offering and then the unadjusted, quoted price listed on the NASDAQ Capital Market for each subsequent reporting period, and utilizes a Black-Scholes model to value the Private Warrant liabilities that are categorized within Level 3 at each reporting period, with changes in fair value recognized in the Statement of Operations (see Note 8).
Fair Value of Financial Instruments
The Company applies ASC 820,
(“ASC 820”), which establishes framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Fair Value Measurement
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
Level 1 – Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 – Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
See Note 8 for additional information on assets and liabilities measured at fair value.
Use of Estimates
The preparation of the financial statement in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of this financial statement. Actual results could differ from those estimates.
Cash and cash equivalents
Cash includes amounts held at banks with an original maturity of less than three months. As of June 30, 2021, the Company held no cash.
F-12
Common stock subject to possible redemption
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2021, 35,000,000
shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
The Company’s Class A common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
The Company revised the presentation in these financial statements for the classification of Class A redeemable stock from the historical presentation of classifying a portion of the Class A common stock in permanent equity to maintain minimum stockholders’ equity of $5,000,001 to classifying all of the Class A common stock subject to redemption in temporary equity.
Offering Costs
Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that are directly related to the Initial Public Offering. The Company incurred offering costs amounting to $20,128,838 upon the completion of the Initial Public Offering.
The Company complies with the requirements of ASC
Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company recorded $19,172,254
$956,584 of offering costs in connection with the Public Warrants included in the Units that were classified as liabilities.
825-10.
of offering costs as a reduction of temporary equity in connection with the Public Shares included in the Units. The Company immediately expensed
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The deferred tax assets are de minimis after accounting for the net effect of the valuation allowance.
F-13
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception
.
The Company had no
tax liability as of June 30, 2021.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standard Update (“ASU”)
No. 2020-06,
“Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU
2020-06
also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The Company early adopted the ASU on January 1, 2021. Adoption of the ASU
2020-06
did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying condensed consolidated financial statements.
Note 3 — Public Offering
Pursuant to the Initial Public Offering, the Company sold 35,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and
one-third
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment
(see Note 8).
Note 4 — Related Party Transactions
Founder Shares
On February 4, 2021, the Company issued an aggregate of 10,062,500 shares of Class B common stock (the “
”) in exchange for a $25,000 payment from the Sponsor to cover certain expenses on behalf of the Company (approximately $0.002 per share). As used herein, unless the context otherwise requires, “Founder Shares” shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the Units being sold in the Initial Public Offering except that the Founder Shares automatically convert into shares of Class A common stock at the time of the Company’s Initial Business Combination and are subject to certain transfer restrictions, as described in more detail below. The Sponsor has agreed to forfeit up to an aggregate of 1,312,500 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As of June 30, 2021, the underwriters’ over-allotment option had not been exercised. On March 23, 2021, the Company, the Sponsor and the Company’s independent directors entered into several Securities Agreements, pursuant to which the Company issued an aggregate of 400,000 Founder Shares and the Sponsor agreed to forfeit 400,000 Founder Shares at no cost, which were cancelled by the Company. The Sponsor will not be entitled to redemption rights with respect to any Founder Shares and any Public Shares held by them in connection with the completion of the Initial Business Combination. If the Initial Business Combination is not completed within 24 months from the closing of the Initial Public Offering, the Sponsor will not be entitled to rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by
Founder Shares
them.
F-14
The Company’s initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor and the Company’s independent directors and an affiliate of the Company’s chief executive officer purchased 6,666,667 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $10,000,000 (see Note 3 for further information regarding the accounting treatment of the Private Placement Warrants). The Sponsor has agreed to purchase up to an additional 700,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or an aggregate additional $1,050,000, to the extent the underwriter’s over-allotment option is exercised in full. As of June 30, 2021, the underwriters’ over-allotment option had not been exercised.
Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within 24 months from the closing of the Initial Public Offering, the proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to partially fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants and all underlying securities will expire worthless. The Private Placement Warrants will be
non-redeemable
and exercisable on a cashless basis so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.
The Sponsor and certain of the Company’s independent directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial Business Combination.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement to be signed on or before the date of the prospectus for the Initial Public Offering. These holders will be entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Related Party Loans
On February 4, 2021, the Company and the Sponsor entered into a loan agreement, whereby the Sponsor agreed to loan the Company an aggregate of $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “
”). This loan was
”). As of June 30, 2021, no amount has been drawn down or is outstanding under the Note.
Note
non-interest
bearing and payable on the earlier of August 3, 2021 or the completion of the Initial Public Offering (the “
Maturity Date
During the period ending June 30, 2021, the Company paid the Sponsor $1.5 million for additional expenses paid on its
behalf.
F-15
Administrative Support Agreement
On March 23, 2021 the Company agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the period from January 29, 2021 (Inception) to June 30, 2021, the Company had incurred and paid $31,935 of monthly fees to the affiliate of the Sponsor which were paid in full at June 30, 2021.
Working Capital Loans
In addition, in order to finance transaction costs in connection with its Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“
”). If the Company completes its Initial Business Combination, the Company would repay the Working Capital Loans. In the event that the Initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. If the Sponsor makes any Working Capital Loans, up to $1,500,000 of such loans may be converted into warrants of the post business combination entity at the price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. As of June 30, 2021, the Company had no borrowings under the Working Capital Loans.
Working Capital Loans
Note 5 — Commitments and Contingencies
Underwriting Agreement
The Company granted the underwriters a
45-day
option from the date of the Initial Public Offering to purchase up to 5,250,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less applicable underwriting discounts and commissions. As of June 30, 2021, the underwriters’ over-allotment option had not been exercised.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $12,250,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreem
e
nt.
Risks and Uncertainties
The Company continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In the normal course of business, the Company may be party to litigation from time to time. As of June 30, 2021, the Company was not party to any litigation.
Note 6 — Stockholders’ Equity
(Deficit)
Common Stock
The authorized common stock of the Company includes up to 250,000,000
shares of Class A common stock (no shares issued and outstanding) with a par value of
$0.0001 per share and 20,000,000 shares of Class B common stock (8,750,000 shares issued and outstanding) with a par value of $0.0001 per share. If the Company enters into an Initial Business Combination, it may (depending on the terms of such an Initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on the Initial Business Combination to the extent the Company seeks stockholder approval in connection with the Initial Business Combination. Holders of the
Company’s
F-16
common stock are entitled to
one vote for each share of common stock. At June 30, 2021, there were 35,000,000
shares of Class A common stock issued and outstanding, of which all shares were subject to possible redemption. At June 30, 2021, there were
8,750,000 shares of Class B common stock issued and outstanding.
The Sponsor agreed to forfeit up to an aggregate of 1,312,500 Founder Shares depending on the extent to which the over-allotment option is not exercised by the underwriters so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering.
As a result of the underwriters’ election to not exercise their over-allotment option, 1,312,500
Founder Shares were forfeited
.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2021, there were no shares of preferred stock issued or outstanding.
Warrants
Each whole Warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as described herein. Only whole Warrants are exercisable. The Warrants will become exercisable on the later of 30 days after the completion of the Initial Business Combination or 12 months from the closing of the Initial Public Offering, and will expire five years after the completion of the Initial Business Combination or earlier upon redemption or liquidation. No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade. The Company has also granted the underwriters a
45-day
option to purchase up to an additional 5,250,000 Units to cover over-allotments, if any.
Each whole Warrant is exercisable to purchase one share of our Class A common stock and only whole Warrants are exercisable. No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade.
The exercise price of each Warrant is $11.50 per share, subject to adjustment as described herein. In addition, if we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “
”), the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the Newly Issued Price.
Newly Issued Price
The Warrants will become exercisable on the later of:
| • |
30 days after the completion of the Initial Business Combination or,
|
| • |
12 months from the closing of the Initial Public Offering;
|
provided in each case that we have an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement).
The Company is not registering the shares of Class A common stock issuable upon exercise of the Warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days, after the closing of the Initial Business Combination, the Company will use its best efforts to
F-17
file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Company’s Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Warrants will expire at 5:00 p.m., New York City time, five years after the completion of the Initial Business Combination or earlier upon redemption or liquidation. On the exercise of any Warrant, the Warrant exercise price will be paid directly to us and not placed in the Trust Account.
Once the Warrants become exercisable, the Company may redeem the outstanding Warrants for cash (except as described herein with respect to the Private Placement Warrants):
| • |
In whole and not in part;
|
| • |
At a price of $0.01 per Warrant;
|
| • |
Upon a minimum of 30 days’ prior written notice of redemption, referred to as the
30-day
redemption period; and
|
| • |
if, and only if, the last sale price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrantholders.
|
The Company will not redeem the Warrants for cash unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the
30-day
redemption period. If and when the Warrants become redeemable by the Company, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Except as described below, none of the Private Placement Warrants will be redeemable by the Company so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.
Once the Warrants become exercisable, the Company may redeem the outstanding Warrants (except as described below with respect to the Private Placement Warrants):
| • |
in whole and not in part;
|
| • |
at a price of $0.10 per Warrant, provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined in part by the redemption date and the “fair market value” of the Class A common stock except as otherwise below;
|
| • |
upon a minimum of 30 days’ prior written notice of redemption;
|
| • |
if, and only if, the last sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which we send the notice of redemption to the warrantholders; and
|
F-18
| • |
if the last sale price of the Company’s Class A common stock on the trading day prior to the date on which the Company send the notice of redemption to the warrantholders is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Warrants, as described above.
|
The “fair market value” of the Company’s Class A common stock shall mean the average reported last sale price of the Company’s Class A common stock for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of Warrants.
No fractional shares
of Class A common stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company will round down to the nearest whole number of the number of shares of Class A common stock to be issued to the holder.
As of June 30, 2021, there were 11,666,667 Public Warrants and 6,666,667 Private Placement Warrants outstanding. The Company classifies the outstanding Public Warrants and Private Placement Warrants as warrant liabilities on the Balance Sheet in accordance with the guidance contained in ASC
815-40.
The Warrant liabilities are initially measured at fair value upon the closing of the Initial Public Offering and subsequently
re-measured
at each reporting period. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. The Company recognized gains (losses) in connection with changes in the fair value of warrant liabilities of $(21,283,334) and $(21,166,668) within change in fair value of warrant liabilities in the Statement of Operations during the three months ended June 30, 2021 and the period from January 29, 2021 (inception) to June 30, 2021, respectively
.
Note 7 — Income Tax
The Company’s net deferred tax assets are as follows:
|
|
|
June 30, 2021
|
|
|
|
Deferred tax asset
|
|
|||
|
Organizational costs/Startup expenses
|
|
$
|
385,893
|
|
|
Net operating loss carryforward
|
|
|
50,244
|
|
|
Total deferred tax asset
|
|
|
436,137
|
|
|
Valuation allowance
|
|
|
(436,137
|
)
|
|
Deferred tax asset, net of allowance
|
|
$
|
—
|
|
The income tax provision consists of the following:
|
|
|
June 30, 2021
|
|
|
|
Federal
|
|
|||
|
Current
|
|
$
|
—
|
|
|
Deferred
|
|
|
(436,137
|
)
|
|
State
|
|
|||
|
Current
|
|
$
|
—
|
|
|
Deferred
|
|
|
—
|
|
|
Change in valuation allowance
|
|
|
436,137
|
|
|
Income tax provision
|
|
$
|
—
|
|
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended June 30, 2021, the change in the valuation allowance was $436,137.
A reconciliation of the
federal income tax rate to the Company’s effective tax rate at June 30, 2021 is as follows:
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
State taxes, net of federal tax benefit
|
|
|
0.0
|
%
|
|
Change in fair value of warrant liabilities
|
|
|
(18.4
|
)%
|
|
Non-deductible transaction costs
|
|
|
(0.8
|
)%
|
|
Change in valuation allowance
|
|
|
(1.8
|
)%
|
|
Income tax provision
|
|
|
0.0
|
%
|
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities.
Note 8
— Fair Value Measurements
At June 30, 2021, assets held in the Trust Account were comprised of $350,005,400 in money market funds which are invested in U.S. Treasury Securities. Through June 30, 2021, the Company has not withdrawn any interest earned on the Trust Account to pay its franchise and income tax obligations.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
Description
|
Amount at
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
June 30, 2021
|
||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund
|
$ | 350,005,400 | $ | 350,005,400 | $ | — | $ | — | ||||||||
|
Liabilities:
|
||||||||||||||||
|
Warrant liability – Public Warrants
|
$ | 29,633,334 | $ |
29,633,334
|
$ | — | $ |
—
|
||||||||
|
Warrant liability – Private Placement Warrants
|
$ | 18,533,334 | $ | — | $ | — | $ | 18,533,334 | ||||||||
The Company utilized a Monte Carlo simulation model to value the Public Warrant liabilities at the date of the Initial Public Offering, and then the unadjusted, quoted price listed on the NASDAQ Capital Market for each subsequent reporting period. The Company utilizes a Black-Scholes model to value the Private Warrant liabilities that are categorized within Level 3 at each reporting period, with changes in fair value recognized in the Statement of Operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S.
F-
20
Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The significant unobservable inputs used in the Monte Carlo simulation model to value the Public Warrants at the date of the Initial Public Offering and the Black-Scholes model to measure the Private Warrant liabilities that are categorized within Level 3 of the fair value hierarchy are as follows:
|
As of
June 30, 2021
|
||||
|
Stock price
|
$ | 10.37 | ||
|
Strike price
|
$ | 11.50 | ||
|
Term (in years)
|
5.3 | |||
|
Volatility
|
32.0 | % | ||
|
Risk-free rate
|
0.92 | % | ||
|
Dividend yield
|
0.0 | % | ||
|
Fair value of warrants
|
2.54 - 2.78
|
|||
The following table provides a summary of the changes in fair value of the Level 3 warrant liabilities:
|
Level 3
Private
Placement
|
||||
|
Beginning balance as of January 29, 2021 (inception)
|
$
|
— |
|
|
|
Initial measurement at March 26, 2021
|
10,200,000 |
|
||
|
Change in value inputs or other assumptions
|
8,333,334 |
|
||
|
|
|
|||
|
Fair value as of June 30, 2021
|
$ | 18,533,334 |
|
|
|
|
|
|||
The Company transferred the public warrants from Level 3 to Level 1 in the amount of $16,800,000 at the Initial Public Offering Date during the period from January 29, 2021 (inception) to June 30, 2021.
Note 9 — Subsequent Events
Management has evaluated the impact of subsequent events thro
u
gh the date the financial statements were issued. All subsequent events required to be disclosed are included in these financial statements except for the following.
On June 15, 2021, DCRC filed Form 8-K announcing the definitive agreement for which DCRC, DCRC Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of DCRC (“Merger Sub”), and Solid Power, Inc., a Colorado corporation (“Solid Power”), entered into a business combination agreement and plan of reorganization, pursuant to which Merger Sub will be merged with and into Solid Power, with Solid Power surviving the Merger as a wholly owned subsidiary of DCRC.
F-21
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Solid Power, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Solid Power, Inc. (the Company) as of December 31, 2020 and 2019, the related statements of operations, mezzanine and stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Denver, Colorado
August 10, 2021
F-22
Solid Power, Inc. Audited Financial Statements
Balance Sheet
December 31,
F-23
Solid Power, Inc. Audited Financial Statements
Statement of Operations
Years Ended December 31,
| 2020 | 2019 | |||||||
|
Collaboration and Support Revenue
|
||||||||
|
Commercial
|
$ | 905,868 | $ | 1,784,680 | ||||
|
Governmental
|
1,197,208 | 244,873 | ||||||
|
Related party support services
|
— | 246,237 | ||||||
|
|
|
|
|
|||||
|
Total collaboration and support revenue
|
2,103,076 | 2,275,790 | ||||||
|
Operating Expenses
|
||||||||
|
Research and development
|
9,593,474 | 7,240,702 | ||||||
|
Direct costs
|
1,670,444 | 1,821,483 | ||||||
|
Marketing and sales
|
1,204,827 | 1,543,783 | ||||||
|
Finance and administrative
|
1,227,372 | 916,567 | ||||||
|
|
|
|
|
|||||
|
Total operating expenses
|
13,696,117 | 11,522,535 | ||||||
|
|
|
|
|
|||||
|
Operating Loss
|
(11,593,041 | ) | (9,246,745 | ) | ||||
|
Nonoperating Income (Expense)
|
||||||||
|
Interest income
|
28,076 | 232,316 | ||||||
|
Interest expense
|
(361,272 | ) | (59,366 | ) | ||||
|
Loss from change in fair value of debt
|
(436,926 | ) | — | |||||
|
Loss from change in fair value of embedded derivative liability
|
(2,817,000 | ) | — | |||||
|
Gain on loan extinguishment
|
922,815 | — | ||||||
|
|
|
|
|
|||||
|
Total nonoperating income
|
(2,664,307 | ) | 172,950 | |||||
|
|
|
|
|
|||||
|
Pretax Loss
|
|
(14,257,348
|
)
|
|
(9,073,795
|
)
|
||
|
Income tax expense
|
117,516 | 134,637 | ||||||
|
Net Loss
|
$
|
(14,374,864
|
)
|
$
|
(9,208,432
|
)
|
||
|
|
|
|
|
|||||
|
Deemed dividend related to Series
A-1
redeemable preferred stock
|
(80,086,341 | ) | (3,076,566 | ) | ||||
|
Net Loss Attributable to Common Stockholders
|
$
|
(94,461,205
|
)
|
$
|
(12,284,998
|
)
|
||
|
|
|
|
|
|||||
|
Basic loss per share – Year to date:
|
$ | (12.85 | ) | $ | (1.71 | ) | ||
|
Diluted loss per share – Year to date:
|
$ | (12.85 | ) | $ | (1.71 | ) | ||
|
Basic weighted average shares outstanding – Year to date
|
7,352,268 | 7,200,808 | ||||||
|
Diluted weighted average shares outstanding – Year to date
|
7,352,268 | 7,200,808 | ||||||
F-24
Solid Power, Inc. Audited Financial Statements
Statement of Mezzanine and Stockholders’ Equity
|
Series
A-1
Redeemable Preferred Stock |
Common Stock |
Additional
Paid-in
Capital
|
Accumulated
Deficit |
Total | ||||||||||||||||
|
Balance
-
January 1, 2019
|
$ | 26,024,820 | $ | 716 | $ | — | $ | (4,043,085 | ) | $ | (4,042,369 | ) | ||||||||
|
Net loss
|
— | — | — | (9,208,432 | ) | (9,208,432 | ) | |||||||||||||
|
Deemed dividend related to Series
A-1
redeemable preferred stock
|
3,076,566 | — | (131,607 | ) | (2,944,959 | ) | (3,076,566 | ) | ||||||||||||
|
Issuance Costs
|
(5,270 | ) | — | 5,270 | — | 5,270 | ||||||||||||||
|
Stock options exercised
|
— | 5 | 7,819 | — | 7,824 | |||||||||||||||
|
Stock-based
compensation expense
|
— | — | 118,518 | — | 118,518 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance
-
December 31, 2019
|
$
|
29,096,116
|
|
$
|
721
|
|
$
|
—
|
|
$
|
(16,196,476
|
)
|
$
|
(16,195,755
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net loss
|
— | — | — | (14,374,864 | ) | (14,374,864 | ) | |||||||||||||
|
Bank warrant issuance
|
— | — | 15,789 | — | 15,789 | |||||||||||||||
|
Beneficial Conversion feature on convertible debt
|
— | — | 5,125,000 | — | 5,125,000 | |||||||||||||||
|
Deemed dividend related to Series
A-1
redeemable preferred stock
|
80,086,341 | — | (5,346,314 | ) | (74,740,027 | ) | (80,086,341 | ) | ||||||||||||
|
Stock options exercised
|
— | 35 | 23,151 | — | 23,186 | |||||||||||||||
|
Stock-based
compensation expense
|
— | — | 182,374 | — | 182,374 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance
-
December 31, 2020
|
$
|
109,182,457
|
|
$
|
756
|
|
|
—
|
|
$
|
(105,311,367
|
)
|
$
|
(105,310,611
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
F-25
Solid Power, Inc. Audited Financial Statements
Statement of Cash Flows
Years Ended December 31,
| 2020 | 2019 | |||||||
|
Cash Flows from Operating Activities
|
||||||||
|
Net loss
|
$ | (14,374,864 | ) | $ | (9,208,432 | ) | ||
|
Adjustments to reconcile net loss to net cash and cash equivalents from operating activities:
|
||||||||
|
Depreciation and amortization
|
2,067,461 | 1,439,488 | ||||||
|
Loss (Gain) on sale of property and equipment
|
7,009 | (6,319 | ) | |||||
|
(Gain) on extinguishment of debt
|
(922,815 | ) | — | |||||
|
Stock compensation expense
|
182,374 | 118,518 | ||||||
|
Stock warrant issue
|
15,789 | — | ||||||
|
Deferred tax assets and liabilities
|
117,516 | 134,637 | ||||||
|
Accrued interest on convertible notes payable to be paid in kind
|
164,835 | 10,274 | ||||||
|
Non-cash
interest expense on convertible notes payable
|
436,926 | — | ||||||
|
Loss from change in fair value of embedded derivative liability
|
2,817,000 | — | ||||||
|
Changes in operating assets and liabilities that provided (used) cash and cash equivalents:
|
||||||||
|
Contract receivables
|
(248,025 | ) | 146,886 | |||||
|
Due from related party
|
243,676 | (135,231 | ) | |||||
|
Prepaid expenses and other current assets
|
23,330 | (56,309 | ) | |||||
|
Accounts payable
|
(119,494 | ) | (6,726 | ) | ||||
|
Deferred revenue
|
(420,975 | ) | (917,863 | ) | ||||
|
Accrued and other liabilities
|
76,869 | (50,540 | ) | |||||
|
Deferred rent
|
(61,136 | ) | (58,807 | ) | ||||
|
|
|
|
|
|||||
|
Net cash and cash equivalents used in operating activities
|
(9,994,524 | ) | (8,590,424 | ) | ||||
|
Cash Flows from Investing Activities
|
||||||||
|
Purchases of property and equipment
|
(1,019,730 | ) | (3,085,289 | ) | ||||
|
Proceeds from sale of property and equipment
|
— | 9,334 | ||||||
|
Purchases of intangible assets
|
(40,314 | ) | (35,624 | ) | ||||
|
|
|
|
|
|||||
|
Net cash and cash equivalents used in investing activities
|
(1,060,044 | ) | (3,111,579 | ) | ||||
|
Cash Flows from Financing Activities
|
||||||||
|
Proceeds from debt
|
922,815 | 3,000,000 | ||||||
|
Payments of debt
|
(676,108 | ) | (118,317 | ) | ||||
|
Proceeds from issuance of convertible note payable
|
5,125,000 | 3,000,000 | ||||||
|
Proceeds from exercise of common stock options
|
23,186 | 7,824 | ||||||
|
Net cash and cash equivalents provided by financing activities
|
5,394,893 | 5,889,507 | ||||||
|
|
|
|
|
|||||
|
Net (Decrease) Increase in Cash and Cash Equivalents
|
(5,659,675 | ) | (5,812,496 | ) | ||||
|
Cash and Cash Equivalents
-
Beginning of year
|
10,634,160 | 16,446,656 | ||||||
|
|
|
|
|
|||||
|
Cash and Cash Equivalents
-
End of year
|
$
|
4,974,485
|
|
$
|
10,634,160
|
|
||
|
|
|
|
|
|||||
|
Supplemental Cash Flow Information
-
Cash paid for interest
|
$ | 351,090 | $ | 56,866 | ||||
|
Supplemental Cash Flow Information
|
$ | (922,815 | ) | $ | — | |||
F-26
Notes to Financial Statements
December 31, 2020 and 2019
Note 1 – Nature of Business
Solid Power, Inc. (the “Company”) was organized on August 3, 2011 as a Colorado limited liability company. On November 11, 2011, the Company converted to a Colorado corporation. On December 3, 2012, the Company converted to a Colorado limited liability company. On March 7, 2014, the Company converted to a Colorado corporation. The Company is developing
all-solid-state
battery cell technology and sulfide-based solid electrolyte materials, primarily for the electric vehicle market. The Company’s intended business model is to license its
all-solid-state
battery cell technology to top tier battery manufacturers or automotive original equipment manufacturers, and to sell its sulfide-based solid electrolytes for incorporation into
all-solid-state
battery cells. As of December 31, 2020 and 2019, the Company has not derived material revenue from its principal business activities. The Company is headquartered in Louisville, Colorado.
Note 2 – Liquidity
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses and negative cash flows from operations for several years and had an accumulated deficit of $105,311,367 as of December 31, 2020. As the Company continues to pursue its business plan, it expects to continue to incur net losses and negative cash flows. However, as described in Note 18 - Subsequent Events, the Company realized proceeds from a Series B offering of preferred stock of $129,556,000 on May 5, 2021. As a result of these financing activities, management believes the Company has sufficient capital to execute its strategic plan and fund operations through at least the next twelve months from the date these financial statements are issued.
Note 3 – Significant Accounting Policies
Basis of Presentation
The financial statements of the Company have been prepared on the basis of generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
Segment Reporting
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented as a single entity for purposes of making operating decisions, allocating resources, and evaluating financial performance.
Cash and Cash Equivalents
The Company considers all investments with an original maturity of three months or less when purchased to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet date and periodically throughout the year, the Company’s cash accounts exceeded federally insured limits.
F-27
Notes to Financial Statements
December 31, 2020 and 2019
Note 3 – Significant Accounting Policies (Continued)
Contract Receivables
Contract receivables consist of amounts due from government entities and commercial contractors. Included within contract receivables are amounts for work performed but not billed of $224,516 and $3,475 as of December 31, 2020 and 2019, respectively. Management estimates an allowance for doubtful accounts equal to the estimated uncollectible amounts. Management’s estimate is based on historical collection experience and a review of the current status of contracts receivable. It is reasonably possible that management’s estimate of the allowance for doubtful accounts will change and that losses ultimately incurred could differ materially from the amounts estimated in determining the allowance. Management considers all contracts receivable collectible, and, therefore, an allowance for doubtful accounts has not been recorded at December 31, 2020 and 2019.
Credit Risk and Major Customers
The Company grants credit in the normal course of business to government entities and commercial contractors in the United States. The Company periodically performs credit analyses and monitors the financial condition of its customers to reduce credit risk. The Company performs ongoing credit evaluations of its customers, but generally does not require collateral to support contract receivables.
During the year ended December 31, 2020, one commercial customer accounted for 41 percent of total revenue. Two governmental entities accounted for 100 percent of total contract receivables at December 31, 2020.
During the year ended December 31, 2019, one commercial customer accounted for 88 percent of total revenue, excluding related party support services. Two governmental entities accounted for 100 percent of total contract receivables at December 31, 2019.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily of security deposits and other minor miscellaneous expenses paid in advance.
Property and Equipment
Property and equipment are recorded at cost. The Company capitalizes property and equipment with useful lives exceeding one year and costing over $1,000. Assets are depreciated over their estimated useful lives. The
straight-line
method is used for computing depreciation and amortization. Depreciation and amortization expenses are recorded within the direct costs and research and development line items in the statement of operations. The cost of leasehold improvements is amortized over the lesser of the length of the related leases or the estimated useful lives of the assets. Cost of maintenance and repairs are charged to expense when incurred.
|
Depreciable
Life
-
Years
|
||||
|
Laboratory equipment
|
5 years | |||
|
Furniture and fixtures
|
5-7 years
|
|||
|
Computer equipment
|
3-5 years
|
|||
|
Leasehold improvements
|
5-7
years
|
|||
F-28
Notes to Financial Statements
December 31, 2020 and 2019
Note 3 – Significant Accounting Policies (Continued)
Intangible Assets
Intangible assets consist of licenses and costs incurred for pending patents and pending trademarks. Licenses consist of rights to use patents and are amortized over their estimated useful life of 4 to 20 years. Patent and trademark costs will be amortized over an estimated useful life upon award by the United States Patent and Trademark Office, or expensed if the Company is unsuccessful in securing an issued patent. Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment if events or circumstances indicate an impairment may have occurred at least annually.
Deferred Rent
The Company has entered into operating lease agreements for its corporate office, which contains provisions for future rent increases or periods in which rent payments are reduced. The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent, which is reflected in Other Long-term Liabilities in the accompanying balance sheet. Deferred rent also includes the unamortized portion of
landlord-financed
tenant improvement allowances, which is amortized on a
straight-line
basis over the lease term as a reduction in rent expense.
Stock-based
Compensation
The Company recognizes expenses for employee services received in exchange for
stock-based
compensation on the grant date fair value of the awards. The determination of the estimated fair value of
stock-based
payment awards on the date of grant using the
Black-Scholes
option-pricing
model is affected by stock price, as well as assumptions regarding a number of complex and subjective variables. Expected volatilities are based on comparable public companies for the Company’s own share price, as there is no active market for its common shares. The
risk-free
interest rate used in the option valuation model is based on the U.S. Treasury
zero-coupon
issues, with remaining terms similar to the expected term on the options. In addition, the Company does not anticipate paying any cash dividends in the foreseeable future; therefore, an expected dividend yield of zero is used in the option valuation model.
Share-based
compensation is recorded as an expense only for those awards that are expected to vest. Compensation cost is recognized on a
straight-line
basis over the requisite service period, and is allocated ratably within operating expenses in the statement of operations.
Collaborative and Support Revenue
The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808). Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements. The Company considers the guidance in ASC
Revenue from Contracts with Customers – Scope and Scope Exceptions, in determining the appropriate treatment for the transactions between the Company and its collaborative partner and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. The Company recognizes collaborative revenue from cost contracts on the basis of costs incurred during the period and cost plus
606-10-15,
fixed-fee
contracts on the basis of costs incurred during the period plus the fee earned. Contract costs include all direct labor, subcontract, material, and indirect costs related to the contract performance that are allowable under contract provisions.
F-29
Notes to Financial Statements
December 31, 2020 and 2019
Note 3 – Significant Accounting Policies (Continued)
Unbilled receivables are included in contract receivables and represent revenue recognized for which billings have not yet been presented to customers. Deferred revenue represents billings in advance of revenue recognized. Deferred revenue as of December 31, 2020 and 2019 was $38,414 and $459,389, respectively.
The Company provides accounting and support services for a related party through a time and materials arrangement. Revenue related to related party accounting and support services is recognized at contract rates over time as work is performed and material costs are incurred. The Company has determined that ASC 606 does not apply to this contract, as the shared services are not deemed to be a contract with a customer.
Beneficial Conversion Feature
The Beneficial Conversion Feature (the “BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or
when issued. For convertible debt where the rate of conversion is below market value, the Company records a BCF and related debt discount.
in-the-money
When the Company records a BCF, the intrinsic value of the BCF is recorded in equity to additional
paid-in
capital and the difference between the debt proceeds and the BCF is a debt discount against the face amount of the respective debt instrument and amortized to interest expense over the life of the debt.
Fair Value Measurements
The Company applies fair value accounting for all financial assets and liabilities measured on a recurring and nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance established a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, used to determine the fair value of its financial instruments. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Level 1 – inputs include quoted market prices in an active market for identical assets or liabilities.
Level 2 – inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data.
Level 3 – inputs are unobservable and corroborated by little or no market data.
See Note
8-
Fair Value Measurement for information about the assumptions that the Company used to measure the fair value for the respective financial assets and liabilities.
Derivatives
Embedded derivatives that are required to be bifurcated from the underlying debt instrument (i.e., host) are accounted for and valued as separate financial instruments. The Company has evaluated the terms and features of its 2020 convertible promissory notes and identified embedded derivatives requiring bifurcation
F-30
Notes to Financial Statements
December 31, 2020 and 2019
Note 3 – Significant Accounting Policies (Continued)
and accounting at fair value, using the valuation techniques mentioned in the Fair Value Measurements section of this Note, because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting due to the instruments containing mandatory redemption features that are not clearly and closely related to the debt host instrument.
Research and Development
Research and development expenditures of approximately $9,593,474 and $7,240,702 in 2020 and 2019, respectively, were charged to expense as incurred.
Advertising Expense
Advertising expense is charged to income during the year in which it is incurred. Advertising expense for 2020 and 2019 was $15,020 and $156,393, respectively.
Income Taxes
Effective January 1, 2017, the Company revoked its S corporation status.
After January 1, 2017, the Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence. The Company records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. Please refer to Note 16 – Income Taxes for additional disclosure. The Company’s temporary differences result primarily from accruals and reserves, depreciation of property and equipment, deferred rent, and net operating loss (NOL) carryovers.
The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. After evaluating the tax positions taken, none are considered to be uncertain as of December 31, 2020 and 2019. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. No interest or penalties have been assessed during the years ended December 31, 2020 and 2019.
Mezzanine Equity
The Company has issued Solid Power Series
A-1
Preferred Stock, which the Company has determined is a financial instrument with both equity and debt characteristics and is classified as mezzanine equity in its financial statements. As such, the Solid Power Series
A-1
Preferred Stock is required under ASC 480 to be classified outside of permanent equity. The Solid Power Series
A-1
Preferred Stock includes redemption features that are not solely within control of the Company. The Company is carrying the Solid Power
Series A-1
Preferred Stock at the greater of its acquisition cost or its fair value. The Solid Power
Series A-1
F-31
Notes to Financial Statements
December 31, 2020 and 2019
Note 3 – Significant Accounting Policies (Continued)
Preferred Stock was initially recognized at acquisition cost net of issuance costs, which was determined to be equal to fair value. The Company assesses the fair value of the Solid Power Series
A-1
Preferred Stock for each reporting date; increases to the fair value of the Solid Power Series
A-1
Preferred Stock generate deemed dividends to be charged against retained earnings, or in the absence of retained earnings, against
paid-in
capital. Once
paid-in
capital has been fully depleted, any remaining amount results in an increase to accumulated deficit.
Upcoming Accounting Pronouncements
Leases
In February 2016, the FASB issued ASU
(“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
No. 2016-02,
Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASU
2016-02”
or “Topic 842”). The new standard establishes a
right-of-use
The new lease standard is effective for fiscal years beginning after December 15, 2021. The standard is effective for the Company on January 1, 2022. The Company expects that this standard will have a material effect on its financial statements. While the Company continues to assess all of the effects of adoption, the Company currently believes the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on its balance sheet for its office and equipment operating leases; and (2) the requirement to provide significant new disclosures about its leasing activities. On adoption, the Company currently expects to recognize additional operating liabilities, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.
Financial Instruments
In June 2016, The FASB issued ASU
2016-13,
Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”).
This ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU
2016-13
is effective for fiscal years beginning after December 15, 2022. The standard is effective for the Company on January 1, 2023. The Company is currently assessing the impact of ASU
2016-13
on its consolidated financial statements.
Collaborative Arrangements
The FASB issued ASU
, which amends ASC 808 to clarify when transactions between participants in a collaborative arrangement under ASC 808 are within the scope of the FASB’s new revenue standard, ASU
No. 2018-18,
Collaborative Arrangements (Topic 808)
No. 2014-09
(codified in ASC 606). Because ASC 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, the accounting for those arrangements is often based on an analogy to other accounting literature or on an entity’s accounting policy election. Some entities apply revenue guidance directly or by analogy to all or part of their arrangements, and others apply a different method as an accounting policy. This standard clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a
F-32
Notes to Financial Statements
December 31, 2020 and 2019
Note 3 – Significant Accounting Policies (Continued)
unit of account. ASU
guidance in Topic 808 to align with ASC 606 and also requires that, in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative participant is not a customer. The new collaborative arrangements guidance will be effective for the Company’s year ending December 31, 2021 and will be applied retrospectively upon adoption. The Company has elected not to early adopt ASU
No. 2018-18
also adds a
unit-of-account
No. 2018-18.
The impact to the Company is not yet determinable, as the Company will need to evaluate any collaborative agreements during the year of adoption, along with collaborative agreements prior to the year of adoption.
Note 4 – Property and Equipment
Property and equipment are summarized as follows:
| 2020 | 2019 | |||||||
|
Laboratory equipment
|
$ | 7,503,736 | $ | 5,495,603 | ||||
|
Leasehold improvements
|
4,661,643 | 4,503,133 | ||||||
|
Computer equipment
|
180,736 | 159,106 | ||||||
|
Furniture and fixtures
|
167,770 | 147,196 | ||||||
|
Construction in progress
|
111,341 | 1,235,854 | ||||||
|
|
|
|
|
|||||
|
Total cost
|
12,625,226 | 11,540,892 | ||||||
|
Accumulated depreciation
|
4,144,569 | 2,078,823 | ||||||
|
|
|
|
|
|||||
|
Net property and equipment
|
$ | 8,480,657 | $ | 9,462,069 | ||||
|
|
|
|
|
|||||
Depreciation and amortization expense related to property and equipment for 2020 and 2019 was $2,065,746 and $1,431,873, respectively. Depreciation expenses for dedicated laboratory equipment are charged to research and development; other depreciation and amortization expenses are included in Company overhead and are allocated across operating expenses on the accompanying Condensed Statements of Operations based on Company personnel costs incurred.
During 2018, the Company began a project to expand its current production facilities. The project is expected to be completed in 2021. Construction in progress related to this project was $111,341 and $1,235,854 as of December 31, 2020 and 2019, respectively. There are no material purchase commitments as of December 31, 2020 and 2019.
Note 5 – Intangible Assets
Intangible assets of the Company at December 31, 2020 and 2019 are summarized as follows:
| 2020 | 2019 | |||||||||||||||
|
Gross Carrying
Amount |
Accumulated
Amortization |
Gross Carrying
Amount |
Accumulated
Amortization |
|||||||||||||
|
Intangible assets:
|
||||||||||||||||
|
Licenses
|
$ | 147,242 | $ | (32,522 | ) | $ | 137,352 | $ | (23,798 | ) | ||||||
|
Patents pending
|
124,265 | — | 93,841 | — | ||||||||||||
|
Trademarks
|
9,187 | — | 9,187 | — | ||||||||||||
|
Trademarks pending
|
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total amortized intangible assets
|
$ | 280,694 | $ | (32,522 | ) | $ | 240,380 | $ | (23,798 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
F-33
Notes to Financial Statements
December 31, 2020 and 2019
Note 5 – Intangible Assets (Continued)
Amortization expense for intangible assets totaled $8,724 and $7,615 for the years ended December 31, 2020 and 2019, respectively.
Note 6 –
Long-term
Debt
Long-term
debt at December 31 is as follows:
The balance of the above debt matures as follows:
|
Years Ending
|
Amount | |||
|
2021
|
$ | 1,235,338 | ||
|
2022
|
1,216,327 | |||
|
2023
|
272,727 | |||
|
2024
|
— | |||
|
|
|
|||
|
Total
|
$ | 2,724,392 | ||
|
|
|
|||
Payment Protection Plan Loan
In May of 2020, the Company received funds from the Payment Protection Plan under the CARES Act in the amount of $922,815. The full balance was forgiven in October of 2020. The full balance is recorded in gain on loan extinguishment on the statement of operations.
Note Payable
The note payable to the bank contains customary representations, warrants and covenants. The note payable to the bank contains an adjusted quick ratio which is required to be maintained at the last day of each month and may not be less than 1.25 to 1.00 as of December 30, 2020 and December 31, 2019. The adjusted quick ratio is defined as cash plus net accounts receivable divided by current liabilities net of deferred revenue.
F-34
Notes to Financial Statements
December 31, 2020 and 2019
Note 6 –
Long-term
Debt (Continued)
The note payable to the bank financial covenants require the Company to receive $2.6 million in unrestricted and unencumbered net cash proceeds from the sale of equity securities or subordinated debt on or prior to December 31, 2020. The note payable to the bank financial covenants require the company to maintain $1.75 million in unrestricted and unencumbered cash in accounts with the bank beginning December 31, 2020 through the remaining term of the note payable. The Company was in compliance with the financial covenants as of each reporting date.
During 2020, the bank granted the Company a waiver to defer principal payments on the note payable for a
six-month
period in 2020. The due date on the note payable was extended to March 1, 2023.
Interest expense on
long-term
debt for 2020 and 2019 was $361,272 and $59,366, respectively.
Note 7 – Convertible Notes Payable
2020 Convertible Promissory Notes
On December 10, 2020, the Company authorized the issuance and sale of unsecured convertible promissory notes to investors in the principal amount of $5,125,000. The notes payable are convertible into shares of preferred equity securities per the terms of the agreements upon a qualified financing, a liquidating event or upon their maturity. A qualified financing will be deemed to have occurred if the Company closes a transaction or series of related transactions resulting in gross proceeds of at least $20,000,000. A Liquidating Event includes voluntary or involuntary liquidation, dissolution, or winding up of the Company or a deemed liquidation event, as defined in the Company’s second amended and restated articles of incorporation. If a qualified financing transaction occurs prior to June 30, 2021, the unsecured convertible promissory notes will convert to a new series of preferred stock at a 30 percent discount. If a qualified financing or liquidating event does not occur by June 30, 2021, the unsecured convertible promissory notes will convert to shares of preferred equity securities at 1.3 times the Series
A-1
price of $2.34881 per share. The unsecured convertible promissory notes bear interest of 8 percent per annum, with interest converted to shares of preferred equity securities at the time of conversion. The outstanding balance on the convertible notes payable was $5,139,836 as of December 31, 2020. During 2020, interest expense of $14,836 was incurred related to these borrowings. The Company recorded a debt discount of $5,125,000 for the fair value of the BCF as the intrinsic value of the BCF was greater than the proceeds allocated to the convertible promissory note.
2020 Convertible Promissory Notes Embedded Derivative
The 2020 Notes contained the following embedded derivatives: (i) a share settled redemption upon Qualified Financing (as defined in the 2020 convertible promissory notes Indenture); (ii) share settled redemption upon
De-SPAC
(as defined in the 2020 Convertible Promissory Notes Indenture); (iii) share settled redemption at maturity.
Embedded derivatives are separated from the host contract and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. The Company has concluded that certain embedded derivatives within the 2020 convertible promissory notes meet these criteria and, as such, must be valued separate and apart from the 2020 convertible promissory notes as one embedded derivative and recorded at fair value each reporting period.
See Note 8 -Fair Value Measurement for information about the assumptions that the Company used to measure the fair value of the embedded derivative.
F-35
Notes to Financial Statements
December 31, 2020 and 2019
Note 7 – Convertible Notes Payable (Continued)
2019 Convertible Promissory Notes
On December 4, 2019, the Company authorized the issuance and sale of an unsecured convertible promissory note to an investor in the principal amount of $3,000,000. The note payable is convertible into shares of preferred equity securities per the terms of the agreement upon a qualified financing or liquidating event. A qualified financing will be deemed to have occurred if the Company closes a transaction or series of related transactions resulting in gross proceeds of at least $10,000,000. A Liquidating Event includes voluntary or involuntary liquidation, dissolution, or winding up of the Company or a deemed liquidation event, as defined in the Company’s second amended and restated articles of incorporation. If a qualified financing transaction occurs prior to December 4, 2021, the unsecured convertible promissory note will convert to a new series of preferred stock at a 30 percent discount. If a qualified financing or liquidating event does not occur by December 4, 2021, the unsecured convertible promissory note will convert to shares of preferred equity securities at 1.3 times the Series
A-1
price of $2.34881 per share.
The unsecured convertible promissory note bears interest at 5 percent per annum, with interest converted to shares of preferred equity securities at the time of conversion.
The Company elected to account for the 2019 convertible promissory note at fair value, as of the December 4, 2019 issuance date. Management believes that the fair value option better reflects the underlying economics of the 2019 convertible promissory note, which contain multiple embedded derivatives. Under the fair value election, changes in fair value will be reported in the consolidated statements of operations as “Loss from change in fair value of debt “ in each reporting period subsequent to the issuance of the 2019 convertible promissory note.
For the years ended December 31, 2020 and 2019, the Company recorded a loss of $436,926 and $0, respectively. See Note
8-
Fair Value Measurement for information about the assumptions that the Company used to measure the fair value of the 2019 convertible promissory note. As of December 31, 2020 and 2019, the outstanding balance on the convertible note payable was $3,612,035 and $3,010,274, respectively. For the years ended December 31, 2020 and 2019, interest expense of $150,000 and $10,274 was incurred related to this borrowing, respectively.
For all debt instruments, including any for which the Company has elected fair value accounting, the Company classifies interest that has been accrued during each period as Interest expense on the consolidated statements of operations.
Note 8 – Fair Value Measurements
The carrying amounts of certain financial instruments, such as cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.
The fair value of debt instruments for which the Company has not elected fair value accounting is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company. Most of the Company’s debt is carried on the consolidated balance sheet on a historical cost basis net of unamortized discounts and premiums, because the Company has not elected the fair value option of accounting.
Changes to the inputs used in these valuation models can have a significant impact on the estimated fair value of the 2019 Convertible Promissory Notes and the Company’s embedded derivatives.
F-36
Notes to Financial Statements
December 31, 2020 and 2019
Note 8 – Fair Value Measurements (Continued)
Liabilities Measured and Recorded at Fair Value on a Recurring Basis
As of December 31, 2020 and 2019, the Company’s financial liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:
| 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Liabilities
|
||||||||||||||||
|
2020 Convertible Promissory Notes Embedded Derivative
|
$ | — | $ | — | $ | 2,817,000 | $ | 2,817,000 | ||||||||
|
2019 Convertible Promissory Notes
|
— | — | $ | 3,612,035 | $ | 3,612,035 | ||||||||||
| 2019 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Liabilities
|
||||||||||||||||
|
2020 Convertible Promissory Notes Embedded Derivative
|
$ | — | $ | — | $ | — | $ | — | ||||||||
|
2019 Convertible Promissory Notes
|
— | — | $ | 3,000,000 | $ | 3,000,000 | ||||||||||
There were no transfers in and out of Level 3 during the years ended December 31, 2020 and 2019.
Fair Value Methodology
2020 Convertible Promissory Notes Embedded Derivative
The estimated fair value of the embedded derivative was $2,817,000 at December 31, 2020. Changes in the fair value of the embedded derivative is recognized each reporting period as a “Loss from change in fair value of embedded derivative liability” in the consolidated Statements of Operations and Statements of Cash Flows. The fair value was estimated using the present value of probability weighted scenario analysis, considering the
method”, where the value of the convertible promissory notes including the embedded derivative is defined as the “with”, and the value of the convertible promissory notes excluding the embedded derivative is defined as the “without”. This method estimates the value of the embedded derivative by comparing the difference in the values between the convertible promissory notes with the embedded derivative and the value of the convertible promissory notes without the embedded derivative. The probability weighted scenario analysis requires the following inputs: (i) probability of qualified financing, maturity and other contingent scenarios; (ii) equity value; (iii) conversion price; (iv) maturity date; (v) risk-free interest rate; and (vi) estimated volatility. The changes during 2020 in the fair values of the bifurcated compound embedded derivatives are primarily related to the change in value of the conversion features and are reflected in the consolidated statements of operations as “Loss from change in fair value of embedded derivative liability”.
as-converted
value and the downside protection. The embedded derivative is valued using a
“with-and-without
Fair Value of Debt - 2019 Convertible Promissory Note
At December 31, 2020 and 2019, the contractual outstanding principal of the 2019 convertible promissory note was $3,000,000 and $3,000,000, respectively, and the fair value was $3,436,926 and $3,000,000, respectively. The Company recorded a loss of $436,926 and $0 related to change in fair value of the 2019 convertible note for the year ended December 31, 2020 and 2019, respectively. The fair value was estimated
F-37
Notes to Financial Statements
December 31, 2020 and 2019
Note 8 – Fair Value Measurements (Continued)
using the present value of probability weighted scenario analysis, considering the
as-converted
value and the downside protection. The probability weighted scenario analysis requires the following inputs: (i) probability of qualified financing, maturity and other contingent scenarios; (ii) equity value; (iii) conversion price; (iv) maturity date; (v) risk-free interest rate; and (vi) estimated volatility. Changes in fair value of the 2019 Convertible Promissory Notes are reflected in the consolidated statements of operations as “Loss from change in fair value of debt”.
Fair Value of Other Financial Instruments
The following table provides the fair value of financial instruments that are not recorded at fair value in the balance sheets:
| December 31, 2020 | ||||||||
| Principal Amount | Fair Value | |||||||
|
APIC:
|
||||||||
|
2020 Convertible Promissory Notes
|
$ | 5,125,000 | $ | 7,424,039 | ||||
The fair value of the 2020 convertible promissory notes at December 31,2020 was estimated using the present value of probability weighted scenario analysis, considering the
as-converted
value and the downside protection and is classified as Level 3 in the fair value hierarchy.
Fair Value of Redeemable Preferred Stock
Redeemable preferred stock is remeasured as of each reporting period and is classified as Level 3 in the fair value hierarchy. Differences between the carrying amount and the fair value is reported as a deemed dividend on the statement of operations. The fair value was estimated using the present value of probability weighted expected return analysis, considering the
as-converted
value and the downside protection. This method estimates the value of the redeemable preferred stock by analyzing the future values of a company using several likely scenarios. These scenarios include: (i) strategic sale or merger; (ii) an initial public offering; and (iii) the dissolution of the company in which the preferred shares receive all of the proceeds and the common stock has no value. During the years ended December 31, 2020 and 2019, the Company realized increases to the fair value of the preferred stock in the amounts of $80,086,341 and $3,076,566, respectively, and are recorded as “Deemed Dividends” on the statement of operations.
Note 9 – Mezzanine Equity
As of December 31, 2020 and 2019, the Company has 14,404,018 shares of Series
A-1
preferred shares outstanding.
After 10 years, Series
A-1
will be redeemable at the option of the holders of a majority of the outstanding Series
A-1
for a price that is the greater of the original issue price, plus all declared but unpaid dividends thereon, or fair market value, as defined in the Company’s amended and restated certificate of incorporation. Since the Series
A-1
preferred shares have a redemption provision that is not solely within control of the Company, the Series
A-1
preferred shares are determined to be a financial instrument with both debt and equity characteristics, and thus are classified as mezzanine equity on the balance sheet. The amount recognized is the greater of the acquisition proceeds or the current fair market value. The value of this mezzanine equity at December 31, 2020 and December 31, 2019 was $109,182,457 and $29,096,116, respectively.
F-38
Notes to Financial Statements
December 31, 2020 and 2019
Note 9 – Mezzanine Equity (Continued)
Series
A-1
preferred shares are subject to noncumulative dividends at an annual rate of 6 percent of the original issue price of $1.806775 per share, payable when and if declared by the board. After payment of the preferred dividend to Series
A-1
holders, any further dividends would be paid pro rata to the holders of the Series
A-1
and common stock on an
as-converted
basis.
The liquidation preference for Series
A-1
is equal to the greater of (a) the original issuance price for such shares plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of Series
A-1
been converted to common stock pursuant to Section 4 of the Company’s Third Amended and Restated Articles of Incorporation. After payment of the liquidation preference, if any, the holders of Series
A-1
and common stock will share ratably in the Company’s net assets.
The holders of the Series
basis. The conversion price may be later adjusted for the effects of subsequent sales of common shares at a price less than the existing conversion price. The Company evaluated the conversion feature, determining a beneficial conversion feature is not present.
A-1
have the option to convert their shares into shares of common stock at any time at a conversion rate determined by a fraction in which the numerator is the original issue price of such stock and the denominator is the conversion price, as defined in the Company’s amended and restated certificate of incorporation, which is initially set at the original issue price of such stock, subject to future adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series
A-1
Preferred Stock. The resulting conversion rate for such stock is on a
one-for-one
Series
A-1
shall automatically be converted into shares of common stock based on the effective conversion price (a) upon a majority vote of the Series
A-1
holders or (b) immediately upon the closing of a firmly underwritten public offering in which the price per share is at least $5.4204 and the cash proceeds to the Company, net of underwriting discount and commission, are at least $50,000,000.
Shares of Series
A-1
shall be entitled to the number of votes equal to the number of common shares that each Series
A-1
holder would receive upon conversion, based on the conversion price in effect on the record date of the meeting. Additionally, for so long as at least 1,000,000 shares of Series
A-1
are outstanding, at least 50 percent of the Series
A-1
must approve, by voting together as a single class, changes in authorized capital, changes in the option pool allocation, and certain other matters.
Note 10 – Stockholders’ Equity
Common Stock
During the years ended December 31, 2020 and 2019, stock options were exercised for 344,870 and 49,132 shares of common stock, respectively.
Warrants
During 2015, the Company issued warrants to a third party in conjunction with a licensing agreement to purchase 276,000 shares of common stock at an exercise price of $0.00001088 per share, which expire in October 2025. The warrants may be exercised at the earliest of the
10-year
anniversary of the grant date, a change in control of the Company, or an initial public offering. Management has determined that equity classification is appropriate for these warrants. The Company recognized expense totaling $17,661 on the date of the grant that has been included as a component of additional
paid-in
capital within the statement of stockholders’ equity. During 2020, an additional $15,789 in warrants were issued.
F-39
Notes to Financial Statements
December 31, 2020 and 2019
Note 11 – Stock Options
The fair value of stock options and other
equity-based
compensation issued to employees is recognized as compensation expense over the period of service that generally coincides with the vesting period of the award. The Company recognized compensation costs totaling $182,374 and $118,518 for the years ended December 31, 2020 and 2019, respectively, which are charged to operating expense categories based on personnel costs incurred within the accompanying Condensed Statement of Operations.
The Company’s equity incentive plan (the “Plan”) permits the grant of 8,586,191 shares of common stock to its employees, directors, and consultants, as designated by the board of directors. Awards may be issued in the form of stock options, stock appreciation rights, restricted stock, and restricted stock units. The Company believes that such awards better align the interests of its employees with those of its stockholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest based on four years of continuous service and have
10-year
contractual terms. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the plan agreements).
The fair value of each option award is estimated on the date of grant using a
Black-Scholes
option valuation model that uses the
weighted-average
assumptions noted in the following table. Expected volatilities are based on historical volatility of comparable companies. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The
risk-free
rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.
The fair value of each option grant during the years ended December 31, 2020 and 2019 was estimated on the grant date using the
Black-Scholes
option pricing model with the following
weighted-average
assumptions used:
| 2020 | 2019 | |||||||
|
Approximate
risk-free
rate
|
1.29 | % | 1.92 | % | ||||
|
Volatility
|
43.92 | % | 41.96 | % | ||||
|
Average expected life (years)
|
6 years | 6 years | ||||||
|
Dividend yield
|
0 | % | 0 | % | ||||
|
Weighted-average
grant date fair value
|
$ | 0.84 | $ | 0.76 | ||||
|
Estimated fair value of total options granted
|
$ | 245,553 | $ | 505,620 | ||||
A summary of option activity under the Plan for the years ended December 31, 2020 and 2019 is presented below:
|
Options
|
Number of
Shares |
Weighted-average
Exercise Price |
Weighted-average
Remaining Contractual Term (in years) |
|||||||||
|
Outstanding at January 1, 2019
|
6,183,596 | 0.14 | 7.63 | |||||||||
|
Granted
|
1,128,923 | 0.52 | ||||||||||
|
Exercised
|
(49,132 | ) | 0.16 | |||||||||
|
Forfeited or expired
|
(28,574 | ) | 0.09 | |||||||||
|
|
|
|||||||||||
|
Outstanding at December 31, 2019
|
7,234,813 | 0.20 | 7.06 | |||||||||
|
|
|
|||||||||||
F-40
Notes to Financial Statements
December 31, 2020 and 2019
Note 11 – Stock Options (Continued)
|
Options
|
Number of
Shares |
Weighted-average
Exercise Price |
Weighted-average
Remaining Contractual Term (in years) |
|||||||||
|
Outstanding at January 1, 2020
|
7,234,813 | 0.20 | 7.06 | |||||||||
|
Granted
|
540,468 | 0.53 | ||||||||||
|
Exercised
|
(344,871 | ) | 0.07 | |||||||||
|
Forfeited or expired
|
(52,603 | ) | 0.50 | |||||||||
|
Outstanding at December 31, 2020
|
7,377,807 | 0.22 | 6.53 | |||||||||
|
|
|
|||||||||||
|
Exercisable at December 31, 2019
|
4,491,038 | 0.10 | 6.23 | |||||||||
|
Exercisable at December 31, 2020
|
5,664,314 | 0.15 | 5.96 | |||||||||
Cash received from options exercised under all
share-based
payment arrangements for December 31, 2020 and 2019 was $23,186 and $7,824, respectively.
Future compensation costs related to the unvested portion of stock options at December 31, 2020 and 2019 was $592,802 and $638,173, respectively.
Note 12 – Earnings Per Share
The table below reconciles basic weighted average common shares outstanding to diluted weighted average shares outstanding for December 31, 2020 and 2019. Basic earnings per share is based on the weighted average number of common shares outstanding for the period. Diluted earnings per share also includes the dilutive effect of additional potential common shares issuable from stock-based awards and are determined using the treasury stock method. Basic earnings per share represents net earnings or loss attributable to common stockholders divided by the basic weighted average number of common shares outstanding during the period. Diluted earnings per share represents net earnings divided by diluted weighted average number of common shares, which includes the average dilutive effect of all potentially dilutive securities that are outstanding during the period. Our
A-1
preferred shares, unvested stock awards, warrants and options are included in the number of shares outstanding for diluted earnings per share calculations, unless a net loss is reported, in which situation
A-1
preferred shares, unvested stock awards, warrants and options are excluded from the number of shares outstanding for diluted earnings per share calculations.
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
|
Net loss (attributable to common stockholders)
|
$ | 94,461,205 | $ | 12,284,998 | ||||
|
Weighted average shares outstanding – basic
|
7,352,268 | 7,200,808 | ||||||
|
Effect of dilutive securities:
|
||||||||
|
Preferred stock
|
— | — | ||||||
|
Warrants
|
— | — | ||||||
|
|
|
|
|
|||||
|
Weighted average shares outstanding – diluted
|
7,352,268 | 7,200,808 | ||||||
|
|
|
|
|
|||||
|
Basic loss per share
|
$ | (12.85 | ) | $ | (1.71 | ) | ||
F-41
Notes to Financial Statements
December 31, 2020 and 2019
Note 13 – Operating Leases
The Company leases office space under a noncancelable operating lease with a maturity date in September 2024. The lease requires the Company to pay certain taxes, insurance, utilities, and maintenance costs. In 2019, the Company amended the lease, agreeing to sublease additional space in the building. Total rent expense under these leases was $414,816 and $305,270 for 2020 and 2019, respectively, and are charged to operating expense categories based on personnel costs incurred in the accompanying Condensed Statement of Operations.
In connection with this operating lease, the Company was granted an allowance for tenant improvements as a lease incentive. Deferred lease incentive reflected in the accompanying balance sheet are being amortized on a
straight-line
basis over the term of the lease ending in September 2024. Deferred lease incentive totaled $245,581 and $312,558 as of December 31, 2020 and 2019, respectively.
Future minimum annual commitments under these operating leases are as follows:
|
Years Ending
December 31
|
Amount | |||
|
2020
|
$ | 368,501 | ||
|
2021
|
379,416 | |||
|
2022
|
390,688 | |||
|
2023
|
306,243 | |||
|
Thereafter
|
— | |||
|
|
|
|||
|
Total
|
$ | 1,444,848 | ||
|
|
|
|||
Note 14 – Related Party Transactions
Albemarle U.S. Inc. (Albemarle) is a limited partner investor of Volta SPV SPW, LLC, a Series
A-1
investor in the Company. Albemarle is a significant supplier of the Company’s lithium sulfide and other lithium-based materials. The Company purchases raw material from Albemarle to be used in the Company’s research and development and salable goods production processes. During the years ended December 31, 2020 and 2019, $209,956 and $30,142, were included in research and development operating expenses, respectively,
Roccor, LLC (Roccor) was partially owned by a stockholder of the Company until October, 2020. During 2019, the Company provided accounting and administrative support to Roccor, which has been expensed within direct costs and operating expenses on the statement of operations. There were no ongoing services being provided to Roccor after December 31, 2019. During the years ended December 31, 2020 and 2019, $0 and $246,237, respectively, of those expenses were allocable to Roccor and were recorded as related party support services on the accompanying statement of operations. As of December 31, 2020 and 2019, related party services amounts due from Roccor totaled $0 and $243,669, respectively. Subsequent to December 31, 2019, the related party services amounts due from Roccor have been settled in full. During 2020, the Company entered into a subcontractor agreement with Roccor, where the Company is providing technical support to Roccor on a government research contract. The total value of the subcontract is $331,000 to the Company; the period of performance commenced during 2020 and extends to late 2021. The terms of the subcontract were negotiated between Roccor and the Company, and the services are not related to the agreement for administrative services referenced above. There were no amounts due to Roccor as of December 31, 2020 and 2019.
F-42
Notes to Financial Statements
December 31, 2020 and 2019
Note 15 – Retirement Plans
The Company sponsors a 401(k) plan for substantially all employees. The plan provides for the Company to make a discretionary matching contribution. Contributions to the plan totaled $225,481 and $192,620 for the years ended December 31, 2020 and 2019, respectively.
Note 16 – Income Taxes
The Company provides deferred U.S. federal, state, or foreign income tax benefits for all of the periods presented. The Company has also provided a valuation allowance on the net deferred tax asset because of uncertainty regarding its realizability. Realization of deferred tax assets is dependent on generating sufficient taxable income prior to the expiration of loss carryforwards.
Deferred tax assets and liabilities arise primarily from net operating loss carryforwards and temporary differences arising from the amortization of intangible assets, depreciation on property and equipment, and various accrued liabilities.
Income taxes included in the consolidated statements of income at December 31, 2020 and 2019 are detailed below:
| December 31, | ||||||||
| 2020 | 2019 | |||||||
|
Current income tax expense (benefit):
|
||||||||
|
Federal
|
$ | — | $ | — | ||||
|
State
|
— | — | ||||||
|
Deferred income tax expense (benefit):
|
||||||||
|
Federal
|
95,552 | 110,058 | ||||||
|
State
|
21,964 | 24,579 | ||||||
|
|
|
|
|
|||||
|
Total income tax expense (benefit)
|
117,516 | 134,637 | ||||||
|
|
|
|
|
|||||
The tables below represent a reconciliation of the statutory federal income tax expense to income tax:
| December 31, 2020 | ||||||||
| Tax Expense | Effective Tax Rate | |||||||
|
Income tax expense at the federal statutory rate
|
$ | (2,994,043 | ) | 21.00 | % | |||
|
State income taxes - net of federal income tax benefits
|
(422,425 | ) | 2.96 | % | ||||
|
Permanent Differences
|
(154,285 | ) | 1.08 | % | ||||
|
Permanent Differences – Related to Convertible Debt
|
717,940 | -5.04 | % | |||||
|
Prior year provision to return
|
4,046 | -0.03 | % | |||||
|
Net change in valuation allowance
|
2,966,283 | -20.81 | % | |||||
|
|
|
|
|
|||||
|
Total income tax expense (benefit)
|
117,516 | -0.84 | % | |||||
|
|
|
|
|
|||||
F-43
Notes to Financial Statements
December 31, 2020 and 2019
Note 16 – Income Taxes (Continued)
| December 31, 2019 | ||||||||
| Tax Expense | Effective Tax Rate | |||||||
|
Income tax expense at the federal statutory rate
|
$ | (1,905,497 | ) | 21.00 | % | |||
|
State income taxes - net of federal income tax benefits
|
(326,847 | ) | 3.60 | % | ||||
|
Permanent Differences
|
25,008 | -0.28 | % | |||||
|
Prior year provision to return
|
— | 0.00 | % | |||||
|
Net change in valuation allowance
|
2,341,973 | -25.81 | % | |||||
|
|
|
|
|
|||||
|
Total income tax expense (benefit)
|
134,637 | -1.49 | % | |||||
|
|
|
|
|
|||||
For the years ended December 31, 2020 and 2019, the effective tax rate was approximately 1 percent. Differences between the statutory rate and the Company’s effective tax rate resulted from changes in valuation allowance and permanent differences for tax purposes in the treatment of certain nondeductible expenses.
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities are presented below:
| December 31, | ||||||||
| 2020 | 2019 | |||||||
|
Deferred tax assets:
|
||||||||
|
Net operating loss
|
$ | 7,349,101 | $ | 3,912,753 | ||||
|
Other
|
19,796 | 18,110 | ||||||
|
|
|
|
|
|||||
|
Total income tax expense (benefit)
|
7,368,897 | 3,930,863 | ||||||
|
|
|
|
|
|||||
|
Valuation allowance
|
(6,189,651 | ) | (3,223,368 | ) | ||||
|
Net deferred tax assets:
|
1,179,246 | 707,495 | ||||||
|
|
|
|
|
|||||
|
Deferred tax liabilities:
|
||||||||
|
Intangibles
(non-goodwill)
|
$ | (2,123 | ) | $ | (1,661 | ) | ||
|
Property and equipment
|
(1,429,276 | ) | (840,471 | ) | ||||
|
|
|
|
|
|||||
|
Total deferred tax liabilities
|
(1,431,399 | ) | (842,132 | ) | ||||
|
|
|
|
|
|||||
|
Total net deferred tax liability
|
$ | (252,153 | ) | $ | (134,637 | ) | ||
The ultimate realization of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences and net operating loss carryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment. Based on available evidence, management does not believe it is more likely than not that all of the deferred tax assets will be realized. Accordingly, the Company has established a valuation allowance equal to the net realizable deferred tax assets. The valuation allowance increased by $2,966,283 in 2020.
At December 31, 2020 and 2019, the Company had total domestic Federal net operating loss carryovers of approximately $29,814,000 and $15,873,000, respectively. Federal net operating losses generated prior to 2018 expire in 2037. Federal net operating losses generated after 2017 have an indefinite carryforward and
F-44
Notes to Financial Statements
December 31, 2020 and 2019
Note 16 – Income Taxes (Continued)
are only available to offset 80% taxable income beginning in 2021. The determination of state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and that can thereby impact the amount of such carryforwards. If unutilized, the majority of the state NOLs will expire between 2037 and 2040.
Accounting for uncertainty in income taxes is based on a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes in its financial statements only those tax positions that are
more-likely-than-not
to be sustained as of the adoption date, based on the technical merits of the position. Each year the Company performs a comprehensive review of its material tax positions. The Company’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense.
As the Company had no uncertain tax benefits during 2020 and 2019, there was no accrued interest or penalties related to uncertain tax positions.
The 2017 through 2020 tax years remain open to examination by the Internal Revenue Service and, with few exceptions, various other state tax agencies. These taxing authorities have the authority to examine those tax years until the applicable statutes of limitations expire.
On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provided for an increased interest deduction for tax years 2019 and 2020, as well as the deferral of the employer portion of social security taxes.
Note 17 – Contingencies
In the normal course of business, the Company may be party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.
Note 18 – Subsequent Events
The financial statements and related disclosures include evaluation of events up through and including August 10, 2021, which is the date the financial statements were available to be issued.
In January 2021, the Company applied for and secured a second Paycheck Protection Plan loan from the Small Business Administration in the amount of $956,085, and is financed through its bank. The loan carries an interest rate of 1 percent per annum. The Company repaid the loan balance with accrued interest in May 2021.
In February 2021, the Company secured additional convertible note financing in the amount of $4,875,000. The terms of the notes remain unchanged from the December 2020 convertible notes discussed above.
On May 5, 2021 and May 12, 2021, the Company realized proceeds from offerings of Series B Preferred Stock totaling $135,577,000. In conjunction with the Series B transaction, the Company agreed to redeem 334,831 shares of Series
A-1
Preferred Stock and terminate a Manufacturing Rights Letter with an existing investor. The payment to the investor for the redemption and termination totaled $9,140,686.
These events triggered the conversion feature on the all convertible notes payable. The unsecured convertible promissory notes hold interest converted to shares of preferred equity securities at the time of conversion. Upon the closure of this event, the unsecured convertible promissory notes converted to a new series of preferred stock at a 30 percent discount.
F-45
Notes to Financial Statements
December 31, 2020 and 2019
Note 18 – Subsequent Events (Continued)
On June 15, 2021, the Company entered into a Business Combination Agreement (“BCA”) with Decarbonization Plus Acquisition Corporation III (“DCRC”) and DCRC Merger Sub Inc. (“Merger Sub”). Pursuant to the BCA, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of DCRC (the “Merger”). In connection with the Merger, Company shareholders will receive common stock of DCRC, pursuant to the terms of the BCA. The Merger is expected to close in the fourth quarter of 2021, subject to completion of required filings and other customary closing conditions.
F-46
Solid Power, Inc. Unaudited Financial Statements
(in thousands, except par value, share amounts and per share amounts)
Condensed Balance Sheets
See notes to financial statements
F-47
Solid Power, Inc. Unaudited Financial Statements
(in thousands, except par value, share amounts and per share amounts)
Condensed Statements of Operations
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
|
Collaboration and Support Revenue
|
||||||||||||||||
|
Commercial
|
$ | 25 | $ | 219 | $ | 36 | $ | 536 | ||||||||
|
Governmental
|
536 | 214 | 1,005 | 409 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total collaboration and support revenue
|
561 | 433 | 1,041 | 945 | ||||||||||||
|
Operating Expenses
|
||||||||||||||||
|
Research and development
|
3,203 | 2,579 | 6,309 | 5,122 | ||||||||||||
|
Direct costs
|
540 | 346 | 1,055 | 767 | ||||||||||||
|
Marketing and sales
|
535 | 284 | 1,090 | 617 | ||||||||||||
|
Finance and administrative
|
2,332 | 309 | 2,929 | 633 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total operating expenses
|
6,610 | 3,518 | 11,383 | 7,139 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Operating (Loss)
|
(6,049 | ) | (3,085 | ) | (10,342 | ) | (6,194 | ) | ||||||||
|
Non-operating
Income (Expense)
|
||||||||||||||||
|
Interest income
|
9 | 1 | 9 | 26 | ||||||||||||
|
Interest expense
|
(121 | ) | (87 | ) | (342 | ) | (177 | ) | ||||||||
|
Loss from change in fair value of embedded derivative liability
|
— | — | (2,680 | ) | — | |||||||||||
|
Other expense
|
(3,100 | ) | — | (3,100 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total
non-operating
expense
|
(3,212 | ) | (86 | ) | (6,113 | ) | (151 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Pretax (Loss)
|
|
(9,261
|
)
|
|
(3,171
|
)
|
|
(16,455
|
)
|
|
(6,345
|
)
|
||||
|
Income tax (benefit)/expense
|
12 | 26 | (41 | ) | 52 | |||||||||||
|
Net (Loss)
|
$
|
(9,273
|
)
|
$
|
(3,197
|
)
|
$
|
(16,414
|
)
|
$
|
(6,397
|
)
|
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Deemed dividend related to Series
A-1
preferred stock and Series B preferred stock
|
(192,847 | ) | — | (219,782 | ) | 3,071 | ||||||||||
|
Net (Loss) Attributable to Common Stockholders
|
$
|
(202,120
|
)
|
$
|
(3,197
|
)
|
$
|
(236,196
|
)
|
$
|
(3,326
|
)
|
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Basic (loss) per share:
|
$ | (24.47 | ) | $ | (0.44 | ) | $ | (29.74 | ) | $ | (0.46 | ) | ||||
|
Diluted (loss) per share:
|
$ | (24.47 | ) | $ | (0.44 | ) | $ | (29.74 | ) | $ | (0.46 | ) | ||||
|
Basic weighted average shares outstanding
|
8,259,934 | 7,237,109 | 7,942,847 | 7,236,852 | ||||||||||||
|
Diluted weighted average shares outstanding
|
8,259,934 | 7,237,109 | 7,942,847 | 7,236,852 | ||||||||||||
See notes to financial statements
F-48
Solid Power, Inc. Unaudited Financial Statements
(in thousands, except par value, share amounts and per share amounts)
Condensed Statements of Mezzanine and Stockholders’ Equity
|
Three Months Ended June 30, 2021 (unaudited)
|
Mezzanine
Equity |
Common Stock |
Additional
Paid-in Capital
|
Accumulated
Deficit |
Total
Stockholders’ Equity |
|||||||||||||||
|
Balance
|
$ | 136,118 | $ | 1 | $ | — | $ | (134,426 | ) | $ | (134,425 | ) | ||||||||
|
Net loss
|
— | — | — | (9,273 | ) | (9,273 | ) | |||||||||||||
|
Redemption of Series
A-1
preferred stock
|
(6,041 | ) | — | — | — | — | ||||||||||||||
|
Deemed dividend related to Series
A-1
preferred stock
|
120,073 | — | (215 | ) | (119,858 | ) | (120,073 | ) | ||||||||||||
|
Issuance of Series B preferred stock
|
140,439 | — | — | — | — | |||||||||||||||
|
Deemed dividend related to Series B preferred stock
|
72,774 | — | — | (72,774 | ) | (72,774 | ) | |||||||||||||
|
Warrants exercised
|
— | — | 15 | — | 15 | |||||||||||||||
|
Stock options exercised
|
— | — | 53 | — | 53 | |||||||||||||||
|
Stock-based
compensation expense
|
— | — | 147 | — | 147 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance
|
$
|
463,363
|
|
$
|
1
|
|
$
|
—
|
|
$
|
(336,331
|
)
|
$
|
(336,330
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
See notes to financial statements
F-49
Solid Power, Inc. Unaudited Financial Statements
(in thousands, except par value, share amounts and per share amounts)
Condensed Statements of Mezzanine and Stockholders’ Equity
|
Six Months Ended June 30, 2021 (unaudited)
|
Mezzanine
Equity |
Common Stock |
Additional
Paid-in Capital
|
Accumulated
Deficit |
Total
Stockholders’ Equity |
|||||||||||||||
|
Balance
|
$ | 109,183 | $ | 1 | $ | — | $ | (105,312 | ) | $ | (105,311 | ) | ||||||||
|
Net loss
|
— | — | — | (16,414 | ) | (16,414 | ) | |||||||||||||
|
Beneficial Conversion feature on convertible debt
|
— | — | 4,875 | — | 4,875 | |||||||||||||||
|
Redemption of Series
A-1
preferred stock
|
(6,041 | ) | — | — | — | — | ||||||||||||||
|
Deemed dividend related to Series
A-1
preferred stock
|
147,008 | — | (5,177 | ) | (141,831 | ) | (147,008 | ) | ||||||||||||
|
Issuance of Series B preferred stock
|
140,439 | — | — | — | — | |||||||||||||||
|
Deemed dividend related to Series B preferred stock
|
72,774 | — | — | (72,774 | ) | (72,774 | ) | |||||||||||||
|
Warrants exercised
|
— | — | 15 | — | 15 | |||||||||||||||
|
Stock options exercised
|
— | — | 70 | — | 70 | |||||||||||||||
|
Stock-based
compensation expense
|
— | — | 217 | — | 217 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance
|
$
|
463,363
|
|
$
|
1
|
|
$
|
—
|
|
$
|
(336,331
|
)
|
$
|
(336,330
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
See notes to financial statements
F-50
Solid Power, Inc. Unaudited Financial Statements
(in thousands, except par value, share amounts and per share amounts)
Condensed Statements of Mezzanine and Stockholders’ Equity
|
Three Months Ended June 30, 2020 (unaudited)
|
Mezzanine
Equity |
Common Stock |
Additional
Paid-in Capital
|
Accumulated
Deficit |
Total
Stockholders’ Equity |
|||||||||||||||
|
Balance
|
$ | 26,025 | $ | 1 | $ | 40 | $ | (16,325 | ) | $ | (16,284 | ) | ||||||||
|
Net loss
|
— | — | — | (3,197 | ) | (3,197 | ) | |||||||||||||
|
Deemed dividend related to Series
A-1
preferred stock
|
— | — | — | — | — | |||||||||||||||
|
Stock options exercised
|
— | — | — | — | — | |||||||||||||||
|
Stock-based
compensation expense
|
— | — | 44 | — | 44 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance
|
$
|
26,025
|
|
$
|
1
|
|
$
|
84
|
|
$
|
(19,522
|
)
|
$
|
(19,437
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Six Months Ended June 30, 2020 (unaudited)
|
Mezzanine
Equity |
Common Stock |
Additional
Paid-in Capital
|
Accumulated
Deficit |
Total
Stockholders’ Equity |
|||||||||||||||
|
Balance
|
$ | 29,096 | $ | 1 | $ | — | $ | (16,196 | ) | $ | (16,195 | ) | ||||||||
|
Net loss
|
— | — | — | (6,397 | ) | (6,397 | ) | |||||||||||||
|
Bank warrant issuance
|
— | — | — | — | — | |||||||||||||||
|
Deemed dividend related to Series
A-1
preferred stock
|
(3,071 | ) | — | — | 3,071 | 3,071 | ||||||||||||||
|
Stock options exercised
|
— | — | 2 | — | 2 | |||||||||||||||
|
Stock-based
compensation expense
|
— | — | 82 | — | 82 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance
|
$
|
26,025
|
|
$
|
1
|
|
$
|
84
|
|
$
|
(19,522
|
)
|
$
|
(19,437
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
See notes to financial statements
F-51
Solid Power, Inc. Unaudited Financial Statements
(in thousands, except par value, share amounts and per share amounts)
Condensed Statements of Cash Flows
|
Six Months Ended June 30,
|
||||||||
| 2021 (Unaudited) | 2020 (Unaudited) | |||||||
|
Cash Flows from Operating Activities
|
||||||||
|
Net (loss)
|
$ | (16,414 | ) | $ | (6,397 | ) | ||
|
Adjustments to reconcile net loss to net cash and cash equivalents from operating activities:
|
||||||||
|
Depreciation and amortization
|
1,102 | 959 | ||||||
|
Loss on sale of property and equipment
|
2 | 7 | ||||||
|
Stock compensation expense
|
217 | 82 | ||||||
|
Deferred tax assets and liabilities
|
(41 | ) | 55 | |||||
|
Non-cash
interest expense on convertible notes payable
|
263 | 75 | ||||||
|
Loss from change in fair value of embedded derivative liability
|
2,680 | — | ||||||
|
Changes in operating assets and liabilities that provided (used) cash and cash equivalents:
|
||||||||
|
Contract receivables
|
(110 | ) | (128 | ) | ||||
|
Due from related party
|
— | 244 | ||||||
|
Prepaid expenses and other current assets
|
(74 | ) | (108 | ) | ||||
|
Accounts payable
|
792 | (35 | ) | |||||
|
Deferred revenue
|
(38 | ) | 12 | |||||
|
Accrued and other liabilities
|
1,500 | 352 | ||||||
|
Deferred rent
|
(35 | ) | 4 | |||||
|
|
|
|
|
|||||
|
Net cash and cash equivalents used in operating activities
|
(10,156 | ) | (4,878 | ) | ||||
|
Cash Flows from Investing Activities
|
||||||||
|
Purchases of property and equipment
|
(3,770 | ) | (753 | ) | ||||
|
Purchases of intangible assets
|
(85 | ) | (25 | ) | ||||
|
|
|
|
|
|||||
|
Net cash and cash equivalents used in investing activities
|
(3,855 | ) | (778 | ) | ||||
|
Cash Flows from Financing Activities
|
||||||||
|
Proceeds from borrowing
|
958 | 923 | ||||||
|
Payments of debt
|
(1,574 | ) | (427 | ) | ||||
|
Proceeds from issuance of convertible note payable
|
4,875 | — | ||||||
|
Proceeds from exercise of common stock options
|
70 | 2 | ||||||
|
Proceeds from exercise of common stock warrants
|
15 | — | ||||||
|
Proceeds from issuance of Series B preferred stock
|
135,579 | — | ||||||
|
Preferred stock issuance costs
|
(4,511 | ) | — | |||||
|
Redemption of preferred stock
|
(6,041 | ) | — | |||||
|
|
|
|
|
|||||
|
Net cash and cash equivalents provided by financing activities
|
129,371 | 498 | ||||||
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
115,360 | (5,158 | ) | |||||
|
Cash and Cash Equivalents
|
4,974 | 10,634 | ||||||
|
|
|
|
|
|||||
|
Cash and Cash Equivalents
|
$
|
120,334
|
|
$
|
5,476
|
|
||
|
|
|
|
|
|||||
|
Supplemental Cash Flow Information
|
$ | 82 | $ | 89 | ||||
See notes to financial statements
F-52
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 1 – Nature of Business
Solid Power, Inc. (the “Company”) was organized on August 3, 2011, as a Colorado limited liability company. On November 11, 2011, the Company converted to a Colorado corporation. On December 3, 2012, the Company converted to a Colorado limited liability company. On March 7, 2014, the Company converted to a Colorado corporation. The Company is developing
all-solid-state
battery cell technology and sulfide-based solid electrolyte materials, primarily for the electric vehicle market. The Company’s intended business model is to license its
all-solid-state
battery cell technology to top tier battery manufacturers or automotive original equipment manufacturers, and to sell its sulfide-based solid electrolytes for incorporation into
all-solid-state
battery cells. As of June 30, 2021, and December 31, 2020, the Company has not derived material revenue from its principal business activities. The Company is headquartered in Louisville, Colorado.
Note 2 – Liquidity
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses and negative cash flows from operations for several years and had an accumulated deficit of $336.3 million as of June 30, 2021. As the Company pursues its business plan, it expects to continue to incur net losses and negative cash flows.
In May 2021, the Company received $135.6 million of cash in conjunction with its issuance of 8,777,812 shares of Series B Preferred Stock (the “Series B Financing”) (see Note 9 for a discussion of the Series B Financing).
On June 15, 2021, the Company entered into a Business Combination Agreement (“BCA”) with Decarbonization Plus Acquisition Corporation III (“DCRC”) and DCRC Merger Sub Inc. (“Merger Sub”). Pursuant to the BCA, Merger Sub will merge with and into the Company, and the Company will survive as a wholly owned subsidiary of DCRC (the “Merger”). In connection with the Merger, Company stockholders will receive common stock of DCRC, pursuant to the terms of the BCA. The Merger is expected to close in the fourth quarter of 2021, subject to completion of required filings and other customary closing conditions.
As a result of cash on hand at June 30, 2021, management believes the Company has sufficient capital to execute its strategic plan and fund operations through at least the next twelve months from the date these financial statements are issued.
Note 3 – Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements and notes to the condensed financial statements of the Company have been prepared on the basis of generally accepted accounting principles in the United States (GAAP) for interim financial information. Accordingly, certain notes and other information normally included in the condensed financial statements prepared in accordance with GAAP have been condensed or omitted. The accompanying interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the Company’s financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates.
These unaudited financial statements and condensed notes to the financial statements should be read in conjunction with the Company’s financial statements and the notes thereto as set forth in the Company’s audited
F-53
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 3 – Significant Accounting Policies (Continued)
annual report, which included all disclosures required by GAAP. The results of operations for the periods ended June 30, 2021, and 2020 are not necessarily indicative of expected operating results for the full year. The information presented throughout the financial statements and these accompanying notes is unaudited.
Stock-based
Compensation
The Company recognizes expense for employee services received in exchange for
stock-based
compensation on the grant date fair value of the awards. The determination of the estimated fair value of
stock-based
payment awards on the date of grant using the
Black-Scholes
option-pricing
model is affected by stock price, as well as assumptions regarding a number of complex and subjective variables. Expected volatilities are based on comparable public companies for the Company’s own share price, as there is no active market for its common shares. The
risk-free
interest rate used in the option valuation model is based on the U.S. Treasury
zero-coupon
issues, with remaining terms similar to the expected term on the options. In addition, the Company does not anticipate paying any cash dividends in the foreseeable future; therefore, an expected dividend yield of zero is used in the option valuation model.
Share-based
compensation is recorded as an expense only for those awards that are expected to vest. Compensation cost is recognized on a
straight-line
basis over the requisite service period and is allocated ratably within operating expenses in the statement of operations.
Beneficial Conversion Feature
The Beneficial Conversion Feature (the “BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or
when issued. For convertible debt where the rate of conversion is below market value, the Company records a BCF and related debt discount. When the Company records a BCF, the intrinsic value of the BCF is recorded in equity to additional
in-the-money
paid-in
capital and the difference between the debt proceeds and the BCF is a debt discount against the face amount of the respective debt instrument and amortized to interest expense over the life of the debt. A separate embedded derivative is recognized as a derivative liability that is adjusted to fair value at each balance sheet date.
Fair Value Measurements
The Company applies fair value accounting for selected financial assets and liabilities measured on a recurring and nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance established a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, used to determine the fair value of its financial instruments. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Level 1 – inputs include quoted market prices in an active market for identical assets or liabilities.
Level 2 – inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data.
Level 3 – inputs are unobservable and corroborated by little or no market data.
F-54
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 3 – Significant Accounting Policies (Continued)
See Note 8 – Fair Value Measurement for information about the assumptions that the Company used to measure the fair value for the respective financial assets and liabilities.
Derivatives
Embedded derivatives that are required to be bifurcated from the underlying debt instrument (i.e., host) are accounted for and valued as separate financial instruments. The Company has evaluated the terms and features of its 2020 Notes (as defined below) and identified embedded derivatives requiring bifurcation and accounting at fair value, using the valuation techniques mentioned in the Fair Value Measurements section of this Note, because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting due to the instruments containing mandatory redemption features that are not clearly and closely related to the debt host instrument.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence. The Company records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. Please refer to Note 16 – Income Taxes for additional disclosure. The Company’s temporary differences result primarily from accruals and reserves, depreciation of property and equipment, deferred rent, and net operating loss (NOL) carryovers.
The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. After evaluating the tax positions taken, none are considered to be uncertain as of June 30, 2021, and December 31, 2020. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. No interest or penalties have been assessed during the quarters ended June 30, 2021 and 2020.
Mezzanine Equity
The Company’s Series
A-1
Preferred Stock and Series B Preferred Stock (collectively, “Preferred Stock”) are classified as mezzanine equity as the Preferred Stock includes redemption features that are not solely within control of the Company. Preferred Stock is carried at the greater of its original issue price or fair value (the “Redemption Value”). Series B Preferred Stock has a Redemption Value equal to the greater of its original issue price of $18.041 per share or fair value, while the Series
A-1
Preferred Stock has a Redemption Value equal to the greater of its original issue price of $1.806775 per share or fair value. The Company assesses the fair value of the Preferred Stock for each reporting date; changes to the fair value of the Preferred Stock generate deemed dividends to be charged against retained earnings, or in the absence of retained earnings, against
paid-in
capital. Once
paid-in
capital has been fully depleted, any remaining amount results in an increase, or decrease, to accumulated deficit.
F-55
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 3 – Significant Accounting Policies (Continued)
The Company issued Series B Preferred Stock in May 2021 in exchange for $135.6 million in cash and the conversion of the 2019, 2020, and 2021 convertible debt. All proceeds, less direct issuance costs of $4.5 million, and the conversion of the convertible notes payable as discussed in Note 7 were recognized as Series B Preferred Stock within Mezzanine Equity. The Company also issued 1,755,557 warrants that are each convertible, at the option of the holder, to one share of common stock. No value was allocated to these warrants. See Note 10 for further discussion.
As part of the Series B Financing, the Company redeemed 334,831 shares of Series
A-1
Preferred Stock for $6.1 million ($18.041 per share) and paid $3.1 million to terminate a Manufacturing Rights Letter agreement that was issued in connection with the initial purchase of Series
A-1
Preferred Stock. Termination of the Manufacturing Rights Letter is a contract termination subject to ASC 420. As such, the $3.1 million paid to terminate the Manufacturing Rights Letter was recognized as an expense (Other Income/Expense) in May 2021 when the contract terminating the Manufacturing Rights Letter was executed.
Upcoming Accounting Pronouncements
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU
(“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
No. 2016-02,
Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASU
2016-02”
or “Topic 842”). The new standard establishes a
right-of-use
The new lease standard is effective for fiscal years beginning after December 15, 2021. The standard is effective for the Company on January 1, 2022. The Company expects that this standard will have a material effect on its financial statements. While the Company continues to assess all of the effects of adoption, the Company currently believes the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on its balance sheet for its office and equipment operating leases; and (2) the requirement to provide significant new disclosures about its leasing activities. On adoption, the Company currently expects to recognize additional operating liabilities, with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.
Financial Instruments
In June 2016, the FASB issued ASU
2016-13,
Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”).
This ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU
2016-13
is effective for fiscal years beginning after December 15, 2022. The standard is effective for the Company on January 1, 2023. The Company is currently assessing the impact of ASU
2016-13
on its financial statements.
F-56
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 4 – Property and Equipment
Property and equipment at June 30, 2021, and December 31, 2020, are summarized as follows:
| June 30, 2021 | December 31, 2020 | |||||||
|
Laboratory equipment
|
$ | 7,676 | $ | 7,504 | ||||
|
Leasehold improvements
|
4,662 | 4,662 | ||||||
|
Computer equipment
|
237 | 181 | ||||||
|
Furniture and fixtures
|
211 | 168 | ||||||
|
Construction in progress
|
3,631 | 111 | ||||||
|
|
|
|
|
|||||
|
Total cost
|
16,417 | 12,626 | ||||||
|
Accumulated depreciation
|
(5,244 | ) | (4,145 | ) | ||||
|
|
|
|
|
|||||
|
Net property and equipment
|
$ | 11,173 | $ | 8,481 | ||||
|
|
|
|
|
|||||
Depreciation expense related to property and equipment was $556 and $486 for the three months ended June 30, 2021 and 2020, respectively and $1,098 and $955 for the six months ended June 30, 2021 and 2020, respectively. Depreciation expenses for dedicated laboratory equipment are charged to research and development; other depreciation and amortization expenses are included in Company overhead and are allocated across operating expenses on the accompanying Condensed Statements of Operations based on Company personnel costs incurred.
During 2018, the Company undertook efforts to expand its current production facilities. The continuing project is expected to be completed in 2022. Construction in progress related to these efforts was $2,424 and $111 as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021, Construction in progress contains $1,207 related to progress payments made to vendors for customized equipment that will be recorded as Property and Equipment upon receipt. There are no material purchase commitments as of June 30, 2021 or December 31, 2020.
Note 5 – Intangible Assets
Intangible assets of the Company on June 30, 2021 and December 31, 2020 are summarized as follows:
| June 30, 2021 | December 31, 2020 | |||||||||||||||
|
Gross
Carrying Amount |
Accumulated
Amortization |
Gross
Carrying Amount |
Accumulated
Amortization |
|||||||||||||
|
Intangible assets:
|
||||||||||||||||
|
Licenses
|
$ | 148 | $ | (37 | ) | $ | 147 | $ | (33 | ) | ||||||
|
Patents pending
|
209 | — | 125 | — | ||||||||||||
|
Trademarks
|
9 | — | 9 | — | ||||||||||||
|
Total amortized intangible assets
|
$ | 366 | $ | (37 | ) | $ | 281 | $ | (33 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
Amortization expense for intangible assets totaled $2 and $2 for the three months ended June 30, 2021 and 2020, respectively, and $4 and $4 for the six months ended June 30, 2021 and 2020, respectively. Useful lives of intangible assets range from 3 to 20 years.
F-57
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 6 –
Long-term
Debt
Long-term
debt is as follows:
Note Payable
The note payable to the bank contains customary representations, warrants and covenants. The note payable to the bank contains an adjusted quick ratio which is required to be maintained at the last day of each month and may not be less than 1.50 to 1.00 and 1.25 to 1.00 as of June 30, 2021 and December 31, 2020, respectively. The adjusted quick ratio is defined as cash plus net accounts receivable divided by current liabilities net of deferred revenue. The note payable to the bank financial covenants require the Company to receive $2.6 million and $25 million in unrestricted and unencumbered net cash proceeds from the sale of equity securities or subordinated debt on or prior to December 31, 2020 and May 31, 2021, respectively, in addition the company is required to deliver a fully executed letter of intent on or prior to May 1, 2021 to the bank evidencing the $25 million in net cash proceeds to be received on or prior to May 31, 2021. The note payable to the bank financial covenants require the company to maintain $1.75 million in unrestricted and unencumbered cash in accounts with the bank beginning December 31, 2020 through the remaining term of the note payable. The Company was in compliance with the financial covenants as of each reporting date.
Interest expense on
long-term
debt was $38 and $50 for the three months ended June 30, 2021 and 2020, respectively, and $79 and $102 or the six months ended June 30, 2021 and 2020, respectively.
Note 7 – Convertible Notes Payable
2020 Convertible Promissory Notes
On December 10, 2020 and December 18, 2020, the Company issued unsecured convertible promissory notes to investors in the total principal amount of $5,125, and on February 4, 2021, and March 1, 2021, the Company issued additional unsecured convertible promissory notes to investors in the total principal amount of $4,875, as part of a single financing (collectively, the “2020 Notes”). The 2020 Notes accrued
F-58
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 7 – Convertible Notes Payable (Continued)
interest at eight percent per annum. The 2020 Notes were converted into 1,007,965 shares of Series B Preferred Stock, per the terms of the 2020 Notes, on May 5, 2021, in conjunction with the Series B Financing. The outstanding balance on the 2020 Notes, including accrued interest, was $10,228 when the 2020 Notes were converted to Series B Preferred Stock in May 2021. During the three and six months ended June 30, 2021, interest expense of $66 and $210, respectively, was incurred related to the 2020 Notes. The principal of the 2020 Notes was included in Additional
Paid-in
Capital and the fair value of the embedded derivative was recorded as a liability on the Company’s balance sheet. The fair value of the embedded derivative was $5,497. This balance was transferred, along with the accrued interest, to mezzanine equity upon conversion of the 2020 Notes to Series B Preferred Stock in conjunction with the Series B Financing.
2020 Notes Embedded Derivative
The 2020 Notes contained the following embedded derivatives: (i) a share settled redemption upon Qualified Financing (as defined in the indenture for the Notes); (ii) share settled redemption upon
De-SPAC
(as defined in the indenture for the 2020 Notes); and (iii) share settled redemption at maturity.
Embedded derivatives are separated from the host contract and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. The Company has concluded that certain embedded derivatives within the 2020 Notes meet these criteria and, as such, must be valued separate and apart from the 2020 Notes as one embedded derivative and recorded at fair value each reporting period.
Fair Value Measurement for information about the assumptions that the Company used to measure the fair value of the embedded derivative and the amounts thereof can be found at Note 8.
2019 Convertible Promissory Note
On December 4, 2019, the Company issued an unsecured convertible promissory note to an investor in the principal amount of $3,000 (the “2019 Note,” and together with the 2020 Notes, the “Convertible Promissory Notes”). The 2019 Note accrued interest at 5 percent per annum. The 2019 Note converted into 254,899 shares of Series B Preferred Stock, per the terms of the agreement, on May 5, 2021, in conjunction with the Series B Financing. Upon this conversion, the 2019 Note converted to Series B Preferred Stock at a 30 percent discount.
The Company elected to account for the 2019 Note at fair value. Management believes that the fair value option better reflects the underlying economics of the 2019 Note, which contain multiple embedded derivatives. Under the fair value election, changes in fair value are reported in the Condensed Statements of Operations as “Loss from change in fair value of debt.”
The principal, accrued interest, and fair value totaling $3,647 was transferred to mezzanine equity upon conversion of the 2019 Note to Series B Preferred Stock in conjunction with the Series B Financing.
See Note 8 – Fair Value Measurement for information about the assumptions that the Company used to measure the fair value of the 2019 Note. At December 31, 2020, the outstanding balance on the 2019 Note was $3,612. For the three months ended June 30, 2021 and 2020, interest expense of $16 and $37 was incurred related to the 2019 Note, respectively. For the six months ended June 30, 2021 and 2020, interest expense of $53 and $75 was incurred related to the 2019 Note, respectively.
For all debt instruments, including any for which the Company has elected fair value accounting, the Company classifies interest that has been accrued during each period as Interest expense on the statements of operations.
F-59
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 8 – Fair Value Measurements
The carrying amounts of certain financial instruments, such as cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.
The fair value of debt instruments for which the Company has not elected fair value accounting is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company. The book values of the Company’s long-term debt approximates fair value because interest rates charged are similar to other financial instruments with similar terms and maturities and the rates vary in accordance with a market index. Most of the Company’s debt is carried on the balance sheet on a historical cost basis net of unamortized discounts and premiums, because the Company has not elected the fair value option of accounting.
Changes to the inputs used in these valuation models can have a significant impact on the estimated fair value of the Convertible Promissory Notes and the Company’s embedded derivatives.
Liabilities Measured and Recorded at Fair Value on a Recurring Basis
As discussed in Note 7, all Convertible Promissory Notes were converted to Series B Preferred Stock in May 2021 in conjunction with the Series B Financing. As of December 31, 2020, the Company’s financial liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:
| December 31, 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Liabilities
|
||||||||||||||||
|
2020 Notes Embedded Derivative
|
$ | — | $ | — | $ | 2,817 | $ | 2,817 | ||||||||
|
2019 Note
|
— | — | 3,612 | 3,612 | ||||||||||||
There were no other transfers in and out of Level 3 during the three and six months ended June 30, 2021 and 2020.
Fair Value Methodology
2020 Notes Embedded Derivative
The fair value of the 2020 Notes was estimated using the present value of probability weighted scenario analysis, considering the
method,” where the value of the 2020 Notes, including the embedded derivative, is defined as the “with”, and the value of the 2020 Notes, excluding the embedded derivative, is defined as the “without.” This method estimates the value of the embedded derivative by comparing the difference in the values between the 2020 Notes with the embedded derivative and the value of the 2020 Notes, without the embedded derivative. The probability weighted scenario analysis requires the following inputs: (i) probability of qualified financing, maturity and other contingent scenarios; (ii) equity value; (iii) conversion price; (iv) maturity date; (v) risk-free interest rate; and (vi) estimated volatility. The changes during the six months ended June 30, 2021 in the fair values of the embedded derivatives are primarily related to the change in the value of the conversion features and are reflected in the Condensed Statement of Operations as “Loss from change in fair value of embedded derivative liability.”
as-converted
value and the downside protection. The embedded derivative is valued using a
“with-and-without
F-60
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 8 – Fair Value Measurements (Continued)
Fair Value of Debt – 2019 Note
The 2019 Note was converted to Series B Preferred Stock in May 2021 in conjunction with the Series B Financing. At December 31, 2020, the contractual outstanding principal of the 2019 Note was $3,000, and the fair value was $3,612. The fair value was estimated using the present value of probability weighted scenario analysis, considering the
as-converted
value and the downside protection. The probability weighted scenario analysis requires the following inputs: (i) probability of qualified financing, maturity and other contingent scenarios; (ii) equity value; (iii) conversion price; (iv) maturity date; (v) risk-free interest rate; and (vi) estimated volatility.
Fair Value of Redeemable Preferred Stock
Redeemable preferred stock is remeasured to the greater of its original issue price or fair value (“Preferred Redemption Value”) at each balance sheet date and is classified as Level 3 in the fair value hierarchy. Differences between the carrying amount and current period value is reported as an adjustment to net loss attributable to common stockholders. Fair value was estimated using the present value of probability weighted expected return analysis, considering the
as-converted
value and the downside protection. This method estimates the value of the redeemable preferred stock by analyzing the future values of a company using several likely scenarios. These scenarios include: (i) strategic sale or merger; (ii) an initial public offering; and (iii) the dissolution of the company in which the preferred shares receive all of the proceeds, and the common stock has no value. During the three months ended June 30, 2021, the Company realized an increase to the Preferred Redemption Value of the Preferred Stock totaling $192.8 million. There was no change in the Preferred Redemption Value of the Series
A-1
Preferred Stock for the three months ended June 30, 2020. These amounts are reported as “Deemed dividends related to Series
A-1
preferred stock and Series B preferred stock” on the Condensed Statement of Operations and increase Net loss attributable to common stockholders. During the six months ended June 30, 2021, the Company realized an increase to the Preferred Redemption Value of the Preferred Stock totaling $219.8 million and a decrease of $3.1 million for the six months ended June 30, 2020, and are recorded as “Deemed dividends related to Series
A-1
preferred stock and Series B preferred stock” on the Condensed Statement of Operations and increase Net loss attributable to common stockholders. Fair value of the Preferred Stock increased during the period primarily due to a change in the weighting of valuation scenarios that considered the BCA.
Note 9 – Mezzanine Equity
The Company had 14,069,187 and 14,404,018 shares of Series
A-1
Preferred Stock outstanding at June 30, 2021 and December 31, 2020, respectively, and 8,777,812 shares of Series B Preferred Stock outstanding at June 30, 2021. The Series B Preferred Stock was issued in May 2021 in exchange for $135.6 million of cash and the conversion of the 2019 Note and the 2020 Notes as discussed in Note 7.
The Preferred Stock is redeemable, at the option of the holders of a majority of the outstanding Preferred Stock, any time after April 30, 2031. The Preferred Stock is redeemable for the greater of its original issue price, plus all declared but unpaid dividends thereon, or fair value. Since the Preferred Stock has redemption provisions that are not solely within control of the Company, the Preferred Stock is classified as Mezzanine Equity on the Company’s balance sheet. The amount recognized is the greater of the redemption value or fair value. The value of the Preferred Stock as of June 30, 2021, was $463.4 million and the value of the Series
A-1
Preferred Stock as of December 31, 2020 was $109.2 million.
Shares of Series B Preferred Stock are entitled to noncumulative dividends at an annual rate of 6 percent of the original issue price of $18.041 per share, payable when and if declared by the Company’s board of
F-61
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 9 – Mezzanine Equity (Continued)
directors. Shares of Series
A-1
Preferred Stock are entitled to noncumulative dividends at an annual rate of 6 percent of the original issue price of $1.806775 per share, payable when and if declared by the Company’s board of directors. After payment of the preferred dividend to the holders of Preferred Stock, any further dividends would be paid pro rata to the holders of the Preferred Stock and common stock on an
as-converted
basis.
The liquidation value for each share of Series B Preferred Stock is $27.0615, which is equal to the greater of 1.5 times the original issuance price for each share plus any dividends declared but unpaid thereon, or such amount per share as would have been payable had all shares of Series B Preferred Stock been converted to common stock. After the holders of Series B Preferred Stock are paid their liquidation preference, the liquidation preference for each share of Series
A-1
Preferred Stock is equal to the greater of the original issuance price for such share ($1.806775) plus any dividends declared but unpaid thereon, or such amount per share as would have been payable had all shares of Series
A-1
Preferred Stock been converted to common stock. After payment of the liquidation preferences, if any, the holders of Preferred Stock and common stock will share ratably in the Company’s net assets.
The holders of the Preferred Stock have the option to convert their shares into shares of common stock at any time at a conversion rate determined by a fraction in which the numerator is the original issue price of such Preferred Stock and the denominator is the conversion price, which is initially set at the original issue price of such Preferred Stock, subject to future adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization. The resulting conversion rate for such Preferred Stock is on a
basis. The conversion price may be later adjusted for the effects of subsequent sales of common shares at a price less than the existing conversion price. The Company evaluated the conversion feature, determining a beneficial conversion feature is not present.
one-for-one
The Preferred Stock shall automatically be converted into shares of common stock based on the effective conversion price upon a majority vote of the Preferred Stockholders or immediately upon the closing of a firmly underwritten public offering in which the price per share is at least $36.082 and the cash proceeds, net of underwriting discount and commission, to the Company are at least $50.0 million.
Holders of Preferred Stock are entitled to the number of votes equal to the number of common shares that each holder of Preferred Stock would receive upon conversion, based on the conversion price in effect on the record date of the meeting. Additionally, at least 50 percent of the Preferred Stock outstanding must approve, voting together as a single class, changes in authorized capital, changes in the option pool allocation, and certain other matters.
Note 10 – Stockholders’ Equity
Common Stock
During the three months ended June 30, 2021 and 2020, stock options were exercised for 157,761 and 0 shares of common stock, respectively. During the six months ended June 30, 2021 and 2020, stock options were exercised for 244,754 shares of common stock and 23,379 shares of common stock, respectively.
Warrants
During 2015, the Company issued warrants to a third party in conjunction with a licensing agreement to purchase 276,000 shares of common stock at an exercise price of $0.00001088 per share, which expire in October 2025. The warrants may be exercised at the earliest of the
10-year
anniversary of the grant date, a
F-62
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 10 – Stockholders’ Equity (Continued)
change in control of the Company, or an initial public offering. Management has determined that equity classification is appropriate for these warrants. The Company recognized expense totaling $18 on the date of the grant that has been included as a component of additional
paid-in
capital within the Condensed Statement of Stockholders’ Equity. During 2020, the Company issued additional warrants for the right to purchase 45,730 shares of common stock at an exercise price of $0.53 per share, which expire in December 2030. The Company recognized expense totaling $16 on the date of the grant.
In May 2021, the Company issued 1,755,557 warrants in connection with the Series B Financing. Each warrant allows the holder to purchase one share of common stock for $0.01. No value was allocated to the warrants as all value was recognized with the Series B Financing. As of June 30, 2021, 1,486,971 warrants have been exercised and exchanged for common stock, and 268,586 warrants remained outstanding.
Note 11 – Stock Options
The fair value of stock options and other
equity-based
compensation issued to employees is recognized as compensation expense over the period of service that generally coincides with the vesting period of the award. The Company recognized compensation costs totaling $147 and $44 for the three months ended June 30, 2021 and 2020, respectively, and $217 and $82 for the six months ended June 30, 2021 and 2020, respectively, which are charged to operating expense categories based on personnel costs incurred within the accompanying Condensed Statement of Operations.
As of June 30, 2021, the Company’s 2014 equity incentive plan (the “Plan”) permitted the grant of 8,586,191 shares of common stock to its employees, directors, and consultants, as designated by the board of directors. Awards may be issued in the form of stock options, stock appreciation rights, restricted stock, and restricted stock units. The Company believes that such awards better align the interests of its employees with those of its stockholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest based on four years of continuous service and have
10-year
contractual terms. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the plan agreements).
The fair value of each option award is estimated on the date of grant using a
Black-Scholes
option valuation model that uses the
weighted-average
assumptions noted in the following table. Expected volatilities are based on historical volatility of comparable companies. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The
risk-free
rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.
| 2021 | 2020 | |||||||
|
Approximate
risk-free
rate
|
0.80 | % | 1.37 | % | ||||
|
Volatility
|
46.94 | % | 39.75 | % | ||||
|
Average expected life (years)
|
6 years | 6 years | ||||||
|
Dividend yield
|
0 | % | 0 | % | ||||
|
Weighted-average
grant date fair value
|
$ | 6.92 | $ | 0.84 | ||||
|
Estimated fair value of total options granted
|
$ | 1,004 | $ | 213 | ||||
F-63
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 11 – Stock Options (Continued)
A summary of option activity under the Plan for the six months ended June 30, 2021 and 2020, is presented below:
|
Options
|
Number of
Shares |
Weighted-average
Exercise Price |
Weighted-average
Remaining Contractual Term (in years) |
|||||||||
|
Outstanding on December 31, 2020
|
7,377,807 | 0.22 | 6.53 | |||||||||
|
Granted
|
333,643 | 6.86 | ||||||||||
|
Exercised
|
(244,754 | ) | 0.29 | |||||||||
|
Forfeited or expired
|
(37,385 | ) | 0.52 | |||||||||
|
|
|
|||||||||||
|
Outstanding on June 30, 2021
|
7,429,311 | 0.52 | 6.18 | |||||||||
|
|
|
|||||||||||
|
Outstanding on December 31, 2019
|
7,234,813 | 0.20 | 7.06 | |||||||||
|
Granted
|
464,765 | 0.53 | ||||||||||
|
Exercised
|
(23,379 | ) | 0.09 | |||||||||
|
Forfeited or expired
|
(20,132 | ) | 0.47 | |||||||||
|
|
|
|||||||||||
|
Outstanding on June 30, 2020
|
7,656,067 | 0.22 | 6.92 | |||||||||
|
|
|
|||||||||||
|
Exercisable on June 30, 2021
|
6,012,833 | 0.22 | 5.64 | |||||||||
|
Exercisable on June 30, 2020
|
5,176,090 | 0.12 | 6.17 | |||||||||
Cash received from options exercised under all
share-based
payment arrangements for the three months ended June 30, 2021 and 2020 was $53 and $0, respectively, and for the six months ended June 30, 2021 and 2020 was $70 and $2, respectively.
Future compensation costs related to the unvested portion of stock options at June 30, 2021 and 2020 was $1,469 and $679, respectively.
Note 12 – Earnings Per Share
The table below reconciles basic weighted average common shares outstanding to diluted weighted average shares outstanding for three and six months ended June 30, 2021 and 2020. Basic earnings per share is based on the weighted average number of common shares outstanding for the period. Diluted earnings per share also includes the dilutive effect of additional potential common shares issuable from stock-based awards and are determined using the treasury stock method. Basic earnings per share represents net earnings or loss attributable to common stock divided by the basic weighted average number of common shares outstanding during the period. Diluted earnings per share represents net earnings divided by diluted weighted average number of common shares, which includes the average dilutive effect of all potentially dilutive securities that are outstanding during the period. Our Preferred Stock, unvested stock awards, warrants and options are included in the number of shares outstanding for diluted earnings per share calculations, unless a net loss is
F-64
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 12 – Earnings Per Share (Continued)
reported, in which situation preferred shares, unvested stock awards, warrants and options are excluded from the number of shares outstanding for diluted earnings per share calculations.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
|
Net loss (attributable to common stockholders)
|
$ | (202,120 | ) | $ | (3,197 | ) | $ | (236,196 | ) | $ | (3,326 | ) | ||||
|
Weighted average shares outstanding – basic
|
8,259,934 | 7,237,109 | 7,942,847 | 7,236,852 | ||||||||||||
|
Effect of dilutive securities:
|
||||||||||||||||
|
Preferred shares
|
— | — | — | — | ||||||||||||
|
Options
|
— | — | — | — | ||||||||||||
|
Warrants
|
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Weighted average shares outstanding – diluted
|
8,259,934 | 7,237,109 | 7,942,847 | 7,236,852 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Basic and fully diluted loss per share
|
$ | (24.47 | ) | $ | (0.44 | ) | $ | (29.74 | ) | $ | (0.46 | ) | ||||
Due to the net loss to common stockholders in each of the periods presented above, diluted loss per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive. As of June 30, 2021 and 2020, potentially dilutive securities excluded from the diluted loss per share calculation are as follows:
| June 30, 2021 | June 30, 2020 | |||||||
|
Series
A-1
Preferred Stock
|
14,069,187 | 14,404,018 | ||||||
|
Series B Preferred Stock
|
8,777,812 | — | ||||||
|
Warrant Common Stock
|
590,316 | 276,000 | ||||||
|
2014 Equity Incentive Plan
|
7,429,311 | 7,656,067 | ||||||
|
|
|
|
|
|||||
|
Total potentially dilutive securities
|
30,866,626 | 22,336,085 | ||||||
Note 13 – Operating Leases
The Company leases office space under a noncancelable operating lease with a maturity date in September 2024. The lease requires the Company to pay certain taxes, insurance, utilities, and maintenance costs. In 2019, the Company amended the lease, agreeing to sublease additional space in the building. Total rent expense under these leases was $105 and $119 for the three months ended June 30, 2021 and 2020, respectively, and $202 and $244 for the six months ended June 30, 2021 and 2020, respectively, and are charged to operating expense categories based on personnel costs incurred in the accompanying Condensed Statement of Operations.
In connection with this operating lease, the Company was granted an allowance for tenant improvements as a lease incentive. Deferred lease incentive reflected in the accompanying balance sheets are being amortized on a straight-line basis over the term of the lease ending in September 2024. Deferred lease incentive totaled $211 and $246 as of June 30, 2021, and December 31, 2020, respectively.
F-65
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 14 – Related Party Transactions
Albemarle U.S. Inc. (Albemarle) is a limited partner investor of Volta SPV SPW, LLC, a Preferred Stock investor in the Company. Albemarle is a significant supplier of the Company’s lithium sulfide and other lithium-based materials. The Company purchases raw material from Albemarle to be used in the Company’s research and development and salable goods production processes. Related party expense with Albermarle totaled $0 and $70, for the three months ended June 30, 2021 and 2020 respectively, and $60 and $122 for the six months ended June 30, 2021 and 2020 respectively, and were included in Research and development on the Condensed Statements of Operations. There were no amounts due to or from Albemarle as of June 30, 2021 or December 31, 2020.
During 2020, the Company entered into a subcontractor agreement with Roccor, LLC, who was a related party until October 30, 2020, where the Company is providing technical support to Roccor on a government research contract. The total value of the subcontract is $331 to the Company; the period of performance commenced during 2020 and extends to late 2021. The terms of the subcontract were negotiated between Roccor and the Company, and the services are not related to the agreement for administrative services between companies. Related party revenue from Roccor was $100 and $100 for the three and six months ended June 30, 2020.
Umicore South Korea provides production materials to Solid Power and is considered a supplier of raw materials for Solid Power. Umicore Marketing Services Belgium and Umicore Holdings Belgium are Company stockholders due to their 2018 investment in Series
A-1
and their 2021 investments in Series B. Related party expense with Umicore companies totaled $32 and $19 for the three months ended June 30, 2021 and 2020, respectively, and $51 and $32 for the six months ended June 30, 2021 and 2020, respectively and were included in Research and development on the Condensed Statements of Operations. There were no amounts due to or from Umicore companies as of June 30, 2021 or December 31, 2020.
Note 15 – Retirement Plans
The Company sponsors a 401(k) plan for substantially all employees. The plan provides for the Company to make a discretionary matching contribution. Contributions to the plan totaled $67 and $58 for the three months ended June 30, 2021 and 2020, respectively, and $149 and $112 for the six months ended June 30, 2021 and 2020, respectively.
Note 16 – Income Taxes
The Company’s effective tax rate for the three and six months ended June 30, 2021 and 2020 differs from the federal statutory tax rate due to permanent differences, state taxes, and changes in the Company’s valuation allowance. The effective tax rate was (0.13%) and (0.82%) for the three months ended June 30, 2021 and 2020, respectively and 0.25% and (0.82%) for the six months ended June 30, 2021 and 2020, respectively.
Note 17 – Contingencies
In the normal course of business, the Company may be party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.
F-66
Notes to Financial Statements (Unaudited)
Three and Six Months Ended June 30, 2021 and 2020
Note 18 – Subsequent Events
The financial statements and related disclosures include evaluation of events up through and including September 20, 2021, which is the date the financial statements were available to be issued.
On August 10, 2021, in connection with the terms and conditions of the BCA as described in Note 2, DCRC filed a registration statement on Form
S-4
(registration no.
333-258681)
with the U.S. Securities and Exchange Commission, to, among other things, register the shares issuable to Company stockholders in connection with the Merger.
On September 1, 2021, the Company entered into an Industrial Lease Agreement with 25 North Investors SPE1, LLC (the “Site 2 Lease”), pursuant to which the Company leases approximately 75,000 square feet of commercial real estate in Thornton, Colorado (“Site 2”). The Company intends to use Site 2 to increase its sulfide-based electrolyte production, further its research and development activities, and provide general office space. The initial term of the Site 2 Lease is through March 31, 2029, and the Company has one five-year option to renew. The Site 2 Lease provides for annual rent payments of approximately $713, commencing on January 1, 2022, with a three percent annual increase. The Company is responsible for its proportionate share of common area maintenance, taxes, and insurance. In connection with the Site 2 Lease, the Company was granted a reimbursable allowance of up to $900 for tenant improvements as a lease incentive.
F-67
Annex A
Execution Version
BUSINESS COMBINATION AGREEMENT AND PLAN OF REORGANIZATION
by and among
DECARBONIZATION PLUS ACQUISITION CORPORATION III
DCRC
MERGER SUB INC.
and
SOLID POWER, INC.
Dated as of June
15
2021
Table of Contents
| Page | ||||||
| ARTICLE I |
|
|||||
| DEFINITIONS |
|
|||||
| Section 1.01 | A-3 | |||||
| Section 1.02 | A-12 | |||||
| Section 1.03 | A-14 | |||||
| ARTICLE II |
|
|||||
| AGREEMENT AND PLAN OF MERGER |
|
|||||
| Section 2.01 | A-15 | |||||
| Section 2.02 | A-15 | |||||
| Section 2.03 | A-15 | |||||
| Section 2.04 | A-15 | |||||
| Section 2.05 | A-16 | |||||
| ARTICLE III |
|
|||||
| CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES |
|
|||||
| Section 3.01 | A-17 | |||||
| Section 3.02 | A-19 | |||||
| Section 3.03 | A-20 | |||||
| Section 3.04 | A-21 | |||||
| Section 3.05 | A-21 | |||||
| ARTICLE IV |
|
|||||
| REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
|
|||||
| Section 4.01 | A-22 | |||||
| Section 4.02 | A-22 | |||||
| Section 4.03 | A-22 | |||||
| Section 4.04 | A-24 | |||||
| Section 4.05 | A-24 | |||||
| Section 4.06 | A-25 | |||||
| Section 4.07 | A-25 | |||||
| Section 4.08 | A-26 | |||||
| Section 4.09 | A-26 | |||||
| Section 4.10 | A-26 | |||||
| Section 4.11 | A-28 | |||||
| Section 4.12 | A-28 | |||||
| Section 4.13 | A-29 | |||||
| Section 4.14 | A-31 | |||||
| Section 4.15 | A-32 | |||||
| Section 4.16 | A-33 | |||||
| Section 4.17 | A-34 | |||||
| Section 4.18 | A-34 | |||||
| Section 4.19 | A-35 | |||||
| Section 4.20 | A-35 | |||||
| Section 4.21 | A-36 | |||||
| Section 4.22 | A-36 | |||||
| Section 4.23 | A-36 | |||||
A-i
| ARTICLE V |
|
|||||
| REPRESENTATIONS AND WARRANTIES OF DCRC AND MERGER SUB |
|
|||||
| Section 5.01 | A-37 | |||||
| Section 5.02 | A-37 | |||||
| Section 5.03 | A-37 | |||||
| Section 5.04 | A-38 | |||||
| Section 5.05 | A-38 | |||||
| Section 5.06 | A-39 | |||||
| Section 5.07 | A-39 | |||||
| Section 5.08 | A-41 | |||||
| Section 5.09 | A-41 | |||||
| Section 5.10 | A-41 | |||||
| Section 5.11 | A-41 | |||||
| Section 5.12 | A-42 | |||||
| Section 5.13 | A-42 | |||||
| Section 5.14 | A-42 | |||||
| Section 5.15 | A-43 | |||||
| Section 5.16 | A-44 | |||||
| Section 5.17 | A-44 | |||||
| Section 5.18 | A-44 | |||||
| Section 5.19 | A-45 | |||||
| Section 5.20 | A-45 | |||||
| ARTICLE VI |
|
|||||
| CONDUCT OF BUSINESS PENDING THE MERGER |
|
|||||
| Section 6.01 | A-46 | |||||
| Section 6.02 | A-48 | |||||
| Section 6.03 | A-49 | |||||
| ARTICLE VII |
|
|||||
| ADDITIONAL AGREEMENTS | ||||||