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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-12 · 318 added, 141 removed, 3 unchanged (99% of the section changed)

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

References to the “Company,” “Kensington Capital Acquisition Corp.

IV,” “our,” “us” or “we” refer to Kensington Capital Acquisition Corp.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q

includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

We have based these forward-looking statements on our current expectations and projections about future events.

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.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions.

Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S.

Securities and Exchange Commission (“SEC”) filings.

We are a blank check company incorporated as a Cayman Islands exempted company and incorporated on March 19, 2021.

The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.

As of June 30, 2022, we had not commenced any operations.

All activity for the period from March 19, 2021 (inception) through June 30, 2022 relates to our formation and the initial public offering (the “Initial Public Offering”) described below, and since the Initial Public Offering, its search for a Business Combination.

We will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.

We generate non-operating

income from the proceeds derived from the Initial Public Offering and placed in a Trust Account (as defined below).

We have selected December 31 as its fiscal year end.

Our sponsor is Kensington Capital Sponsor IV LLC, a Delaware limited liability company (the “Sponsor”).

The registration statement for our Initial Public Offering was declared effective on March 1, 2022.

On March 4, 2022, we consummated our Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), including 3,000,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $13.3 million, of which approximately $8.1 million was for deferred underwriting fees (see Note 5).

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (the “Private Placement”) of 16,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $0.50 per Private Placement Warrant to the Sponsor, generating proceeds of $8.0 million (see Note 4).

Upon the closing of the Initial Public Offering and Private Placement, $230.0 million ($10.00 per Unit) of net proceeds, including the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement, was placed in a trust account (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 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7

under the Investment Company Act, which invest only in direct U.S.

government treasury obligations, as determined by the Company, until the earlier of:

(i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 4, 2024 (as such period may be extended pursuant to the Memorandum and Articles, the “Combination Period”), 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 taxes, net of taxes payable (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish the rights of holders of Public Shares as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial Business Combination within the Combination Period.

Liquidity and Capital Resources

As of June 30, 2022, we had approximately $2.0 million in cash and working capital of approximately $1.0 million.

Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to cover certain expenses on behalf of us in exchange for issuance of Founder Shares (as defined in Note 4) and loan proceeds under the Note (as defined in Note 4), which was converted into a Working Capital Loan (as defined in Note 4) on March 4, 2022.

Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans (see Note 4).

As of June 30, 2022, there was $200,000 outstanding principal under the Working Capital Loan.

Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.

Over this time period, we will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

Management 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 this condensed financial statements.

The condensed financial statements does not include any adjustments that might result from the outcome of this uncertainty.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including those factors set forth in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “Amprius,” “we,” “us,” “our” and other similar terms refer (i) prior to the Closing Date, to Legacy Amprius and (ii) after the Closing Date, to Amprius Technologies, Inc.

Amprius Technologies, Inc.

(f/k/a Kensington Capital Acquisition Corp.

IV, a Cayman Islands exempted company incorporated with limited liability) has developed and, since 2018, been in commercial production of ultra-high energy density lithium-ion batteries for mobility applications leveraging a disruptive silicon nanowire anode.

Our silicon nanowire anode technology enables batteries with higher energy density, higher power density, and extreme fast charging capabilities over a wide range of operating temperatures, which results in our batteries providing superior performance compared to conventional graphite lithium-ion batteries.

Our silicon nanowire anode is a direct drop-in replacement of the graphite anode in traditional lithium-ion batteries, and our manufacturing process leverages the manufacturing process for conventional lithium-ion batteries and the related supply chain.

Currently, our batteries are primarily used for existing and emerging aviation applications, including unmanned aerial systems, such as drones and high-altitude pseudo satellites.

We believe our proprietary technology has the potential for broad application in electric transportation.

Our batteries and their performance specifications have been tested and validated for application by over 30 customers, including Airbus, AeroVironment, BAE Systems, the U.S.

Army and Teledyne FLIR, and we have shipped over 10,000 batteries as of September 30, 2022, which have enabled mission critical applications.

Our proprietary silicon nanowire anode structures, battery designs and manufacturing processes are defended by our portfolio of patents, trade secrets and know-how developed over 10 years of research and development.

We currently manufacture batteries on a kWh-scale manufacturing line at our headquarters in Fremont, California, where we believe demand for our batteries exceeds our manufacturing capacity.

We are working to meet the expected demand in several rapidly growing addressable markets, including by designing and building a large-scale manufacturing facility that can manufacture at GWh+ scale, including an automated, high-volume manufacturing line for our silicon nanowire anode.

Business Combination

On September 14, 2022 (the “Closing Date”), the Company completed a business combination pursuant to the Business Combination Agreement, dated May 11, 2022 (the “Business Combination Agreement”), by and among the Company, Kensington Capital Merger Sub Corp., a wholly owned subsidiary of the Company (“Merger Sub”), and Amprius Technologies Operating, Inc.

(f/k/a Amprius Technologies, Inc., a Delaware corporation) (“Legacy Amprius”).

Pursuant to the terms of the Business Combination Agreement, the Company changed its jurisdiction of incorporation by domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”), upon which the Company changed its name to “Amprius Technologies, Inc.,” and a business combination between the Company and Legacy Amprius was effected through the merger of Merger Sub with and into Legacy Amprius, with Legacy Amprius surviving as a wholly owned subsidiary of Amprius (together with the Domestication and the other transactions contemplated by the Business Combination Agreement, the “Business Combination”).

Kensington Capital Acquisition Corp.

IV prior to the Business Combination is referred to herein as “Kensington.”

The Business Combination was accounted for as a reverse recapitalization for financial statement reporting purposes with Legacy Amprius deemed to be the acquirer and Kensington deemed to be the acquiree.

As a result, the assets, liabilities and results of operations of Legacy Amprius became the historical financial statements after the Business Combination.

Our assets and liabilities continued to be stated at historical cost and there were no goodwill or other intangible assets recorded.

We received net proceeds from the Business Combination and the PIPE totaling $70.9 million, after deducting transaction and issuance costs.

Committed Equity Financing

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On September 27, 2022, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Committed Equity Registration Rights Agreement”) with B.

Riley Principal Capital II, LLC (“BRPC II”).

Pursuant to the Purchase Agreement, subject to the satisfaction of the conditions set forth therein, we have the right, but not the obligation, to sell to BRPC II up to $200,000,000 of newly issued shares of common stock (subject to certain conditions and limitations), from time to time during the term of the Purchase Agreement (the “Committed Equity Financing”).

Sales of common stock pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell any securities to BRPC II under the Purchase Agreement.

As consideration for BRPC II’s commitment to purchase shares of common stock at our direction upon the terms and subject to the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, we issued 84,793 shares of common stock (the “Initial Commitment Shares”) to BRPC II.

Upon our receipt of total aggregate gross cash proceeds equal to $100,000,000 from BRPC II under the Purchase Agreement, we will issue 84,793 additional shares of common stock (collectively with the Initial Commitment Shares, the “Commitment Shares”) to BRPC II.

Also, any shares of common stock issued in the Committed Equity Financing to BRPC II other than the Commitment Shares will be purchased by BRPC II at current market prices less a 3.0% fixed discount.

Upon the initial satisfaction of the conditions to BRPC II’s purchase obligation set forth in the Purchase Agreement (the “Commencement”), including that a registration statement registering under the Securities Act of 1933, as amended (the “Securities Act”), the resale by BRPC II of shares of common stock issued to it by the Company under the Purchase Agreement, which we agreed to file with the Securities and Exchange Commission (the “SEC”) pursuant to the Committed Equity Registration Rights Agreement, is declared effective by the SEC and a final prospectus relating thereto is filed with the SEC, we will have the right, but not the obligation, from time to time at our sole discretion over the 24-month period from and after the Commencement, to direct BRPC II to purchase a specified maximum amount of shares of common stock, not to exceed certain limitations as set forth in the Purchase Agreement (each, a “VWAP Purchase”), by delivering written notice to BRPC II prior to the commencement of trading of the common stock on the New York Stock Exchange (the “NYSE”) on any trading day (the “Purchase Date”), so long as (i) the closing sale price of the common stock on the trading day immediately prior to such Purchase Date is not less than the specified threshold price as set forth in the Purchase Agreement and (ii) all shares of common stock subject to all prior VWAP Purchases and all prior Intraday VWAP Purchases (as defined below) by BRPC II under the Purchase Agreement have been received by BRPC II prior to the Company’s delivery of such applicable purchase notice to BRPC II.

In addition to the regular VWAP Purchases described above, after the Commencement, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct BRPC II to purchase, on any trading day, including the same Purchase Date on which a regular VWAP Purchase is effected (as applicable), a specified amount of shares of common stock, not to exceed certain limitations set forth in the Purchase Agreement that are similar to those that apply to a regular VWAP Purchase (each, an “Intraday VWAP Purchase”), by the delivery to BRPC II of an irrevocable written purchase notice, after 10:00 a.m., New York City time, and prior to 3:30 p.m., New York City time, on such Purchase Date.

Under the applicable NYSE rules, in no event may we issue to BRPC II under the Purchase Agreement more than 16,825,366 shares of common stock, which number of shares is equal to 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with the applicable NYSE rules.

The Exchange Cap is not applicable to issuances and sales of common stock pursuant to VWAP Purchases and Intraday VWAP Purchases that we may effect pursuant to the Purchase Agreement, to the extent such shares of common stock are sold in such VWAP Purchases and Intraday VWAP Purchases (as applicable) at a price equal to or in excess of the applicable “minimum price” (as defined in the applicable listing rules of the NYSE) of the common stock, calculated at the time such VWAP Purchases and Intraday VWAP Purchases (as applicable) are effected by us under the Purchase Agreement, if any, as adjusted to take into account our issuance of the Commitment Shares to BRPC II and our reimbursement of a certain amount of BRPC II’s legal fees and expenses.

Moreover, we may not issue or sell any shares of common stock to BRPC II under the Purchase Agreement which, when aggregated with all other shares of common stock then beneficially owned by BRPC II and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 13d-3 thereunder), would result in BRPC II beneficially owning more than 4.99% of the outstanding shares of common stock.

From and after Commencement, we will control the timing and amount of any sales of common stock to BRPC II.

Actual sales of shares of common stock to BRPC II under the Purchase Agreement will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the common stock and determinations by us as to the appropriate sources of funding for us and our operations.

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Department of Energy Cost Sharing Grant

In October 2022, we were awarded a $50.0 million cost sharing grant from the U.S.

Department of Energy.

This cost sharing grant is dependent on the successful negotiation of a final contract, and among the terms to be finalized are the portion of relevant costs that will be covered by the grant.

Known Trends, Demands, Commitments, Events, or Uncertainties Impacting Our Business

We believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Risk Factors.”

Establishing Manufacturing Capacity

While we have manufactured on a kWh-scale capacity to date, we have started our phased build out of capacity with parallel paths.

We have received the first large-scale anode production machine from Centrotherm at our current facility in Fremont.

We are customizing the machine for our production processes and must then complete tuning and testing before the machine goes online for production purposes.

We expect this machine to increase our capacity for silicon anode production to approximately 2 MWh by the end of 2023.

This is expected to accelerate our development of technological processes for building batteries at a GWh-scale as we prepare, in parallel, for the design and build of our high volume manufacturing facility using the proceeds obtained from the Business Combination and, if any, the Committed Equity Financing.

Achieving capacity at commercial scale of high energy density lithium-ion batteries will require us to make significant capital expenditures to scale our production capacity and improve our supply chain processes.

Based on our current expectations, we estimate that our capital equipment expenditures will range between $120.0 million and $150.0 million to achieve 1.0 GWh per year of manufacturing capacity, and that it will take approximately two years following the Closing to start volume manufacturing.

Because our silicon nanowire anode process requires different equipment than traditional anode manufacturing, our capital equipment costs are likely to be higher than equipment used for production of graphite anodes.

We have begun selection of sites for a GWh-scale manufacturing facility, and we plan to procure manufacturing equipment that allows for cathode fabrication, battery assembly, and battery testing from equipment suppliers.

To achieve capacity at commercial scale, we need to establish supply relationships for necessary materials, components and equipment to mass produce the silicon nanowire technology for our prospective markets, which will allow us to develop an automated, high-volume manufacturing line to increase production volume.

The capacity and timing of our future manufacturing requirements, and related capital expenditures, remain uncertain and will depend on a variety of factors, including our ability to design and construct new manufacturing sites and develop an automated, high-volume manufacturing line for our silicon nanowire anode, to mitigate supply chain constraints and manage a new labor force, to utilize planned capacity in our existing facilities, and to operate in new geographic areas apart from our current headquarters.

Our potential suppliers and other equipment vendors may also encounter delays, additional costs, and other obstacles in building our manufacturing line, which are currently unknown.

To the extent we are unable to develop an automated, high-volume manufacturing line for our silicon nanowire anode, our ability to grow will be adversely affected.

Additionally, although we have tested and validated the performance of our products on one supplier’s platform, there is uncertainty as to whether our planned manufacturing line will be successful.

We expect our capital expenditures to increase each as we ramp up our manufacturing capacity and expand operations.

Reducing Costs of Manufacturing

We believe the focus on reducing the manufacturing costs of our batteries on a $/kWh basis is an important factor to accelerate the demand for our batteries and the expansion of our customer base.

As a result, we will continue to work to develop further and validate our manufacturing processes to enable high volume manufacturing and reduce manufacturing costs.

The production of our silicon nanowire anode requires different equipment than traditional graphite anode manufacturing.

Therefore, our capital equipment costs are likely to be initially higher than equipment used for the production of graphite anodes.

As we scale, we believe we will benefit from reduced per-unit fixed costs, such as overhead, labor and capital expenditures, tool utilization improvements and volume pricing for equipment and materials.

We will also seek to reduce costs by optimizing material utilization, throughput and yield.

This is complemented by further intentions to continue to invest in research and development to improve both battery performance and manufacturing processes.

However, until we are able to successfully design and implement an automated, high-volume manufacturing line for our silicon nanowire anode and manufacture our batteries at scale, we cannot accurately forecast our manufacturing costs, which may adversely affect our ability to achieve reduced costs in our manufacturing processes.

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Highly Competitive Market

Our competition includes both established manufacturers and new entrants that are developing new battery technologies and chemistries to address the growing market for electrified transportation solutions.

We believe the manufacturers of these batteries will continue to invest funds, time and effort to improve the capabilities of their batteries with the recent developments of silicon batteries as a potential alternative to conventional graphite batteries.

Currently, we are the only known manufacturer using a 100% silicon anode that is free of any inactive additives.

We believe we are the leading company in the market that has a high-performance battery that can meet the requirements of aviation applications.

The electric vehicle (“EV”) battery industry has a limited number of commercially available batteries that meet the minimum performance specifications.

This creates a fast-growing and highly competitive industry for many battery manufacturers to claim market share for commercially acceptable batteries.

We believe that there is significant room for improvement in the EV industry in driving range and fast charging capabilities that our silicon nanowire technology can address.

To compete in the EV industry, the reduction of manufacturing costs is a significant objective in addition to improving cycle life, increasing form factors and improving production quantity.

A primary concern is that many of our competitors and potential future entrants may be better capitalized to expand production capacities, have greater resources to commercialize and have greater access to customers.

As such, we may be at a competitive disadvantage and be unable to retain or grow our market share.

Product Development

We expect to continue investing in the development of battery technology with the goal of enabling commercial production after the completion of our new GWh-scale manufacturing facility.

We continue to develop customized battery solutions and deliver standardized samples (i.e., prototypes) of batteries to industry leading manufacturers as well as the federal government.

We plan to focus our research and development on the following key areas:

• Improving battery life:

To continue to meet the specific needs of our customers and drive adoption of our batteries in new areas of electrified transportation, including the EV space.

We are working with chemical compounds as potential additives to the silane gas we use to produce our silicon nanowire anodes, which have demonstrated the potential to improve cycle life without negatively impacting other performance characteristics such as energy density.

• Further improvements to energy density:

We are engaged in ongoing development activities to explore different cathode materials, including a conversion cathode, to further improve the energy density of our batteries.

• Larger cell form factors:

The batteries we have developed and are developing for our customers are typically approximately 2-15Ah for small-sized aircraft.

As we expand our customer base, we expect to develop larger form factor batteries for broader electrified transportation applications.

As a result of these efforts, our goal is to fully realize the benefits of our silicon nanowire anode technology and develop the highest performing products in the market.

Regulatory Landscape

We operate in an industry that is subject to many established environmental regulations, which have generally become more stringent over time.

As we process, store, dispose of, transport, and use large amounts of hazardous materials, we are subject to laws and regulations surrounding battery safety and transportation, as well as health and production safety laws and regulations governing hazardous materials.

We expect that environmental regulations under the Biden administration could, if adopted, facilitate market demand and revenue growth, while other potential regulations, if adopted, could result in additional operating costs.

If we fail to comply with existing and future laws and regulations, our business and results of operations could be adversely affected, such as the imposition of fines, litigation, criminal charges, sanctions by regulators, or other liabilities.

As future regulatory changes are uncertain, we are unable to measure the impact of such changes on our business and our results of operations.

The rapid global spread of the COVID-19 coronavirus since December 2019 has caused business disruption affecting production and sales across a range of industries.

While the disruption is currently expected to be temporary, the 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, and the impact on our customers, employees and vendors.

Our customers may experience significant adverse effects on their cash flow and operations, leading to potential difficulty with purchasing and paying for

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our products, and therefore, a reduction in our revenues.

We also experienced a 10% reduction in workforce as a result of the COVID-19 pandemic and the related temporary closure during the year ended December 31, 2020.

However, during the year ended December 31, 2021 and continuing into 2022, our workforce numbers were restored, showing signs of recovery and growth of production activities and the continued flow of supply chains.

From December 31, 2021 to September 30, 2022, we grew our workforce by 41%.

The ultimate outcome of the pandemic is uncertain and, accordingly, the impact on our financial condition or results of operations is also uncertain.

To date, and as a result of us not commencing full-scale commercial production activities, COVID-19 has not had a material impact on our interim unaudited condensed financial statements or our liquidity.

We have not materially altered any terms with contractors, suppliers, customers, other business partners or our financing sources as a result of COVID-19.

Additionally, the military conflict between Russia and Ukraine, which began in February 2022, has had an adverse impact on the global economy and financial markets.

Although our business has not been directly impacted by this ongoing military conflict, as we have no assets or operations, and we have not purchased materials from, Russia, Belarus or Ukraine, it is impossible to predict the extent to which our operations, or those of our customers, suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business.

The extent and duration of the military action, sanctions and resulting market disruptions and inflationary pressures, and the impact of such changes on our business and our results of operations are impossible to predict, but could be material.

Comparability of Financial Information

Our future results of operations and financial position may not be comparable to historical results as a result of the Business Combination.

Since the Business Combination close, we have incurred, and expect to continue to incur, higher capital expenditures related to both the design and build out of our new GWh-scale manufacturing facility and the development of an automated, high-volume manufacturing line for our silicon nanowire anode, as well as higher costs for continued research and development efforts, compliance with regulatory matters and other general and administrative expenses, including those related to being a public company.

Basis of Presentation

Our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

We carry on our business through one operating segment.

Given that Amprius Holdings, which held approximately 99.6% of the Legacy Amprius common stock prior to the Business Combination, has not historically prepared financial statements for Legacy Amprius, the historical results for Legacy Amprius have been prepared from the financial records of Amprius Holdings on a carve-out basis derived from the accounting records of Amprius Holdings using the historical results of operations and the historical basis of assets and liabilities of our business, adjusted as necessary to conform to U.S.

Components of Our Results of Operations

We currently operate a kWh-scale manufacturing line at our headquarters in Fremont, California.

To meet the demand for our batteries, we are in the process of designing and then building a GWh-scale manufacturing facility, designing our automated, high-volume manufacturing line, and scaling up production.

As a result, we expect our capital expenditures and working capital requirements to increase materially in the near future.

Our ability in the future to generate revenue sufficient to achieve profitability will depend largely on our ability to scale production to meet the expected market demand for our products.

Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.

We have historically generated revenues from providing both design services for the development of customized silicon-anode lithium-ion battery technology and selling our batteries to our customers.

Our contracts typically contain a single performance obligation.

Revenue is recognized at the point in time when final milestones are met (i.e., a final working prototype is delivered and meets all required specifications) or when the customer obtains control of the product, which is generally upon shipment.

Cost of Revenues

Cost of revenues includes materials, direct labor, allocated depreciation expense, and other direct and indirect costs related to revenue contracts.

Labor consists of personnel-related expenses such as salaries and benefits, and stock-based compensation.

Stock-based compensation expense included within cost of revenues is allocated based on the proportion of

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time spent by personnel in relation to manufacturing batteries and fulfilling customer contracts.

Cost of revenues are expected to continue to increase as we incur expenses related to the design and build-out of our GWh-scale manufacturing facility.

We expense costs in the period incurred unless the costs meet three criteria to be capitalized as an asset:

when the costs relate directly to a customer contract;

we expect to generate or enhance resources of the business from performing the contract that will be used in satisfying future performance obligations;

and we expect to recover such benefits.

We recognize deferred costs as cost of revenues in the period when the related revenue is recognized.

Cost of revenues also includes costs incurred that was in excess of the recoverable amount.

Research and Development (“R&D”) Expense

R&D expenses mainly consist of salaries and benefits, including stock-based compensation expense and other related personnel costs, depreciation, contract services, materials and supplies, other expenses from outside contractors and suppliers plus an allocation of indirect costs.

These costs relate to the conceptual formulation and design of preproduction experimental prototypes and models, including the cost of equipment and material for which there is no alternative future use.

R&D expenses are expensed as incurred.

Stock-based compensation expense included within R&D expense is allocated based on the proportion of time spent by personnel in relation to innovating and introducing new batteries to our product line.

We anticipate that R&D expenses will increase for the foreseeable future as we continue to invest in activities to enhance product capabilities, build battery prototypes that meet our customers’ specifications, and test batteries.

Selling, General and Administrative Expense

Selling, general and administrative expenses consist primarily of costs incurred for salaries and personnel-related expenses, including stock-based compensation expense, outside contractor and professional service fees, audit and compliance expenses, legal, accounting and other advisory services, as well as allocated facilities and information technology costs including depreciation.

Stock-based compensation expense included within selling, general and administrative expense is allocated based on the proportion of time spent by personnel in relation to marketing, administrative and corporate services.

We expect that our selling, general and administrative expenses will increase due to our operations as a public company, including expenses related to compliance with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as increased expenses for insurance (including director and officer insurance), investor relations activities and other administrative and professional services such as accounting, legal, regulatory and tax.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income and the gain on the forgiveness of a PPP loan.

Provision for Income Taxes

Our provision for income tax consists of an estimate for U.S.

federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law.

We maintain a valuation allowance against the full value of our U.S.

and state net deferred tax assets because it is not more likely that our deferred tax assets will be recoverable.

Results of Operations

Our entire activity from March 19, 2021 (inception) through June 30, 2022, was in preparation for an Initial Public Offering.

We will not generate any operating revenues until the closing and completion of our initial Business Combination, at the earliest.

For the three months ended June 30, 2022, we had a net income of approximately $2.9 million, which consisted of a non-cash

gain of approximately $4.3 million for the change in fair value of derivative warrant liabilities, and approximately $262,000 of income from investments held in the Trust Account, partly offset by approximately $1.6 million in general and administrative expenses, and $60,000 in administrative expenses-related party.

For the three months ended June 30, 2021, we had a net loss of approximately $10,000, which consisted solely of general and administrative expenses.

For the six months ended June 30, 2022, we had a net income of approximately $2.6 million, which consisted of a non-cash

gain of approximately $4.7 million for the change in fair value of derivative warrant liabilities, and approximately $295,000 of income from investments held in the Trust Account, partly offset by approximately $1.7 million in general and administrative expenses, approximately $564,000 in offering costs associated with derivative warrant liabilities and $80,000 in administrative expenses-related party.

For the period from March 19, 2021 (inception) through June 30, 2021, we had a net loss of approximately $36,000, which consisted solely of general and administrative expenses.

Contractual Obligations

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any Class A ordinary shares 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 are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering.

These holders are 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.

Underwriting Agreement

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.6 million in the aggregate, paid upon the closing of the Initial Public Offering.

In addition, $0.35 per unit, or approximately $8.1 million in the aggregate will be payable to the 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 the Company completes a Business Combination, subject to the terms of the underwriting agreement.

In addition, the underwriters’ right to receive up to one-half

of such amount is subject to forfeiture by the underwriters on a dollar-for-dollar

basis in the event of any redemptions in the initial Business Combination.

Service Agreement

On March 1, 2022, the Company entered into an agreement (the “Service Agreement”) with DEHC LLC, an affiliate of the Company’s Chief Financial Officer, pursuant to which the Company agreed to pay service and administrative fees of $20,000 per month to DEHC LLC for 18 months commencing on the date of consummation of the Initial Public Offering.

Upon completion of the initial Business Combination, any portion of the amounts due that have not yet been paid will accelerate.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with GAAP.

The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our condensed financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses.

We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We have identified the following as our critical accounting policies:

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

The Company evaluates all of its financial instruments, including units and issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, will be re-assessed

at the end of each reporting period.

Derivative warrant liabilities were classified as non-current

liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

The Class 1 Warrants and Private Placement Warrants were recognized as derivative warrant liabilities in accordance with ASC 815.

Accordingly, the Company recognized the warrant instruments as liabilities at fair value and will adjust the instruments to fair value at each reporting period, with changes in fair value recognized in earnings, until exercised or expiration.

The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed statements of operations.

The fair value of the Class 1 Warrants issued in connection with the Initial Public Offering were initially estimated using a Monte Carlo simulation model.

For periods where no observable traded price is available, the fair value continues to be estimated using a Monte Carlo simulation.

The fair value of the Private Placement Warrants is determined using Black-Scholes option pricing model.

The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly.

Derivative warrant liabilities are classified as non-current

liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Working Capital Loan-Related Party

The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings and losses.

When an embedded derivative is bifurcated, the initial fair value of the embedded derivative generally creates a discount to the loan host instrument, which is subsequently amortized to interest expense over the life of the debt.

Any bifurcated embedded derivative is presented combined with the loan host instrument in the accompanying condensed balance sheets.

Working Capital Loans (as defined in Note 4) may be converted into warrants of the post Business Combination entity at a price of $0.50 per warrant, at the option of the holder.

The warrants obtained from conversion will be identical to the Private Placement Warrants.

The embedded conversion option is not clearly and closely related to the debt host instrument and was bifurcated from the loan host instrument, with a de minimis value, and classified on a combined basis with the loan host instrument in Working Capital Loan—related party in the accompanying condensed balance sheets.

Offering Costs Associated with the Initial Public Offering

Offering costs consisted of legal, accounting, underwriting and other costs incurred that were directly related to the Initial Public Offering.

Upon completion of the Initial Public Offering, offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received.

Offering costs associated with derivative warrant liabilities were expensed as incurred and presented as non-operating

expenses in the condensed statements of operations.

Offering costs associated with the Public Shares were charged to the carrying value of temporary equity upon the completion of the Initial Public Offering.

The Company classifies deferred underwriting commissions as non-current

liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Class A Ordinary Shares Subject to Possible Redemption

As discussed in Note 1, all of the 23,000,000 Class A ordinary shares sold as parts of the Units in the Initial Public Offering (or Public Shares) contain a redemption feature.

In accordance with the ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity.

Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480.

The Company classified all of the Public Shares as temporary equity.

480, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the Public Shares to equal the redemption value at the end of each reporting period.

This method views the end of the reporting period as if it were also the redemption date for the security.

Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement from initial book value to redemption amount value.

The change in the carrying value of the redeemable Public Shares resulted in charges against additional paid-in

capital (to the extent available) and accumulated deficit.

Net Income (Loss) per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares.

Income and losses are shared pro rata between the two classes of shares.

Net loss per ordinary share is calculated by dividing the net income by the weighted average shares of ordinary shares outstanding for the respective period.

The calculation of diluted net income (loss) does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the private placement warrants to purchase an aggregate of 62,000,000 Class A ordinary shares in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method.

The Company has considered the effect of Class B ordinary shares that were excluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of over-allotment option by the underwriters.

Though the contingency was satisfied, the Company had net income (loss) for the three and six months ended June 30, 2022, the three months ended June 30, 2021 and for the period from March 19, 2021 (inception) through June 30, 2021.

Remeasurement of the redeemable Class A ordinary shares is excluded from net loss per share as the redemption value approximates fair value.

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations during the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

2022 2021 $ % 2022 2021 $ %

Revenue $ 816 $ 330 $ 486 147 % $ 3,617 $ 1,556 $ 2,061 132 %

Cost of revenue 2,284 1,986 298 15 % 7,448 4,990 2,458 49 %

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Gross loss (1,468) (1,656) 188 (11) % (3,831) (3,434) (397) 12 %

Operating expenses:

Research and development 488 327 161 49 % 1,340 978 362 37 %

Selling, general and administrative 2,367 1,154 1,213 105 % 6,223 2,508 3,715 148 %

Total operating expenses 2,855 1,481 1,374 93 % 7,563 3,486 4,077 117 %

Loss from operations (4,323) (3,137) (1,186) 38 % (11,394) (6,920) (4,474) 65 %

Other income (expense), net 79 (4) 83 (2075) % 118 726 (608) (84) %

Net Loss $ (4,244) $ (3,141) $ (1,103) 35 % $ (11,276) $ (6,194) $ (5,082) 82 %

Cost and operating expenses reported above include stock-based compensation as follows:

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

2022 2021 $ % 2022 2021 $ %

Cost of revenue $ 125 $ 86 $ 39 45 % $ 357 $ 250 $ 107 43 %

Research and development expense 6 7 (1) (14) % 20 11 9 82 %

Selling, general and administrative

expense 646 230 416 181 % 1,746 441 1,305 296 %

Total stock-based compensation $ 777 $ 323 $ 454 141 % $ 2,123 $ 702 $ 1,421 202 %

Revenue increased by $0.5 million, or 147%, and $2.1 million, or 132%, to $0.8 and $3.6 million during the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

The increase was primarily due to the completion of customization design services of $0.3 million and $1.3 million during the three and nine months ended September 30, 2022, respectively.

In addition, sales of standard battery cells increased by $0.2 million and $0.8 million during the three and nine months ended September 30, 2022, respectively.

Cost of Revenues

Cost of revenues increased by $0.3 million, or 15%, and $2.5 million, or 49%, during the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

The increase during the three months ended September 30, 2022 was primarily due to a $0.3 million increase in costs to fulfill design service contracts.

The increase during the nine months ended September 30, 2022 was primarily due to a $1.6 million increase in costs to fulfill design service contracts and a $0.9 million net increase in production costs, which was mostly attributed to the expansion of our production capacity and increase in personnel involved in production.

Research and Development Expense

Research and development expenses increased by $0.2 million, or 49%, and $0.4 million, or 37%, during the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

The increase was primarily due to the increase in headcount and related increases in payroll and employee benefit costs, including stock-based compensation.

Selling, General and Administrative Expense

Selling, general and administrative expense increased by $1.2 million, or 105%, and $3.7 million, or 148%, during the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

The increase was primarily due to an increase in headcount as we prepared to become a public entity including increases of $0.3 million and $1.0 million during the three and nine months ended September 30, 2022, respectively, in personnel-related costs and increases of $0.4 million and $1.3 million, during the same periods respectively, in stock-based compensation expense.

Additionally, our professional fees, which primarily include legal and accounting support, increased by $0.4 million and $1.2 million during the three and nine months ended September 30, 2022, respectively, as we prepared to operate as a public company.

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Liquidity and Capital Resources

Sources and Uses 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.

We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities.

To meet our contractual obligations, we must continually have sufficient highly liquid assets.

Prior to the Business Combination, we have financed our operations primarily through capital contributions from Amprius Holdings and revenue generated from operations.

We do not expect to receive additional capital contributions from Amprius Holdings as we expect to rely on the cash on hand from the Business Combination, the private placement of 2,052,500 units (the “PIPE units”), each consisting of one share of common stock and one warrant (the “PIPE warrant”), at a price of $10.00 per unit, immediately prior to the closing of the Business Combination (such transaction, the “PIPE”) and proceeds from the Committed Equity Financing, if any.

Our ability to become profitable is dependent upon future events, including obtaining adequate financing to fund our business plan, completing the design and build out of our GWh-scale manufacturing facility, obtaining adequate supplier relationships, building our customer base, successfully executing our business and marketing strategy and hiring appropriate personnel.

We expect our capital expenditures and working capital requirements to increase materially in the near future.

We currently operate a kWh-scale manufacturing line at our headquarters in Fremont, California, which we are working to expand to achieve production on a MWh-scale.

To meet the demand for our batteries, we are in the process of designing and then building a GWh-scale manufacturing facility.

We plan to build in a modular form where we can incrementally increase our manufacturing capacity and operate a MWh-scale manufacturing line at our Fremont headquarters until we achieve approximately 0.5 to 1.0 GWh per year of manufacturing capacity at our new GWh-scale manufacturing facility and then to further expand as needed through a Copy Exact methodology.

As of September 30, 2022, we had $73.8 million of cash and cash equivalents, which included the $70.9 million net proceeds from the consummation of the Business Combination on September 14, 2022.

We believe that our cash on hand from the Business Combination, the PIPE, proceeds from the Committed Equity Financing, if any, and funding from the government, will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months.

We may, however, need additional cash as a result of being able to access all or a portion of the capacity of the Committed Equity Financing and/or if there are material changes to our business conditions or other developments, including unanticipated delays in the development of our high-volume manufacturing line, supply chain challenges, delays or unavailability of government funding, disruptions due to the COVID-19 pandemic, competitive pressures, and regulatory developments.

Actual sales, if any, of shares of common stock to BRPC II under the Committed Equity Financing will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock and determinations by us as to appropriate sources of funding for our business and operations.

We cannot guarantee the extent to which we may utilize the Committed Equity Financing.

See “— Committed Equity Financing ” for more information.

We may receive up to approximately $289.4 million from the exercise in full of all of our warrants for cash.

However, the exercise price of our public warrants and private warrants is $11.50 per share, and the exercise price of the PIPE warrants is $12.50 per share.

The likelihood that warrant holders will exercise the warrants and any cash proceeds that we would receive is dependent upon the market price of our common stock.

If the market price for our common stock is less than $11.50 per share, in the case of the private warrants or public warrants, or $12.50 per share, in the case of the PIPE warrants, we believe warrant holders will be unlikely to exercise their warrants.

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 take actions to reduce our capital or operating expenditures, including by reducing or delaying our production facility expansion, which may adversely affect our business, operating results, financial condition and prospects.

For example, because we expect to expand through a Copy Exact methodology, to the extent we have less cash than expected and additional financing is unavailable on acceptable terms, we expect that we would reduce the initial

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production capacity of our large-scale facility and thereafter add capacity as appropriate.

Any such reduction or delay may have an adverse impact on our business plan and our results of operations.

We have incurred net losses to date.

For the three and nine months ended September 30, 2022, we incurred a net loss of $4.2 million and $11.3 million, respectively.

We expect to incur additional losses and increased expenses in future periods, including those associated with the design and build out of our GWh-scale manufacturing facility, continued research and development efforts and increased employee headcount.

We believe that building and operating a high-volume manufacturing facility will facilitate profitability.

Management believes that its cash and cash equivalents on hand as of September 30, 2022 will be sufficient to fund our operating activities for at least the next twelve months.

Contractual and Other Obligations

We had operated under a space and facility sharing arrangement, categorized as an operating lease, with Amprius, Inc.

(“Amprius Holdings”) in Fremont, California.

Pursuant to the agreement, we used equipment owned by and space leased by Amprius Holdings in our operations.

The current lease has an expiration date of June 30, 2024, with a single option to extend the lease for 60 months, which we are reasonably certain to exercise on behalf of Amprius Holdings.

Effective May 1, 2022, we assumed this lease, which was initially entered into by Los Altos Fields, LLC and Amprius Holdings, and, as a result of the assignment, the space and facility sharing arrangement was terminated.

Our expected minimum lease payments through June 30, 2024 are $0.9 million.

If we elect to extend the lease, the additional expected minimum lease payments would be $3.1 million through June 30, 2029.

See Note 11 to the condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.

We also enter into other contracts in the normal course of business with various vendors that generally provide for contract termination following a certain notice period.

These contracts generally do not contain any minimum purchase commitments.

Payments due upon cancellation under these contracts generally consist only of payments for services provided, expenses incurred up to the date of cancellation and de minimis termination penalties.

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

Nine Months Ended

September 30, Change

Net cash used in operating activities $ (8,184) $ (6,307) $ (1,877)

Net cash used in investing activities (747) (276) (471)

Net cash provided by financing activities 71,578 19,693 51,885

Net increase in cash and cash equivalents $ 62,647 $ 13,110 $ 49,537

Cash Flows Used in Operating Activities

Our cash flows used in operating activities to date have been primarily comprised of various personnel expenses related to expanding our business, as well as costs to support our increased production capacity related to our second manufacturing line that was placed into service in July 2021.

We expect our expenses related to personnel, research and development, and selling, general and administrative activities to increase to support our transition into a public company, as well as to support our plans to increase manufacturing capacity.

Net cash used in operating activities during the nine months ended September 30, 2022 was $8.2 million, consisting primarily of our net loss of $11.3 million, adjusted for positive non-cash adjustments of $3.7 million and cash used by changes in our operating assets and liabilities of $0.6 million.

The non-cash adjustments were primarily driven by $2.1 million in stock-based compensation expense and $1.1 million in depreciation and amortization expense.

Net cash used by changes in our operating assets and liabilities of $0.6 million was primarily driven by an increase of $2.2 million in prepaid expenses attributed to prepaid insurance as insurance premiums, including director and officer insurance, increased for a public company, an increase of $0.5 million in accounts receivable primarily due to timing of invoices issued based on milestones achieved of our customization design services and additional standard cell shipments completed within the periods, and a decrease of $0.4 million in rental payments for our operating lease.

These outflows were primarily offset by an increase of $2.3 million in accounts payable primarily attributable to payments of the transaction costs upon Closing of the Business Combination.

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Net cash used in operating activities during the nine months ended September 30, 2021 was $6.3 million, consisting primarily of our net loss of $6.2 million, adjusted for positive non-cash adjustments of $1.0 million and cash used by changes in our operating assets and liabilities of $1.1 million.

The non-cash adjustments were primarily driven by $1.1 million in depreciation and amortization expense, and $0.7 million in stock-based compensation expense.

This was offset by a $0.7 million gain on forgiveness of the PPP loan in June 2021.

Net cash used by changes in our operating assets and liabilities of $1.1 million was predominantly driven by a decrease of $1.8 million in accounts payable due to the payment of a significant portion of our legal obligations in the first quarter of 2021.

Additionally, we experienced a further increase of $1.0 million in deferred costs primarily attributable to capitalized costs for design services contracts with two major customers.

These outflows were primarily offset by a $1.5 million increase in deferred revenue from amounts invoiced as progress payments in advance of revenue recognition for the same two design services customers that resulted in the increased deferred costs.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2022 was $0.7 million, in comparison to $0.3 million in the nine months ended September 30, 2021.

The increase in purchases in property and equipment during the nine months ended September 30, 2022 was primarily due to two advanced payments made for construction in progress during the third quarter of 2022.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2022 was $71.6 million, as compared to net cash provided by financing activities of $19.7 million in the nine months ended September 30, 2021.

The increase in net cash provided by financing activities was primarily attributable to $71.1 million in proceeds from the reverse recapitalization and PIPE financing, net of transaction costs.

During the nine months ended September 30, 2021, cash provided by financing activities was primarily attributable to cash contributed from Amprius Holdings.

Related Party Transactions

We entered into related party transactions with Amprius Holdings in the ordinary course of business.

On February 27, 2017, we entered into the Intercompany Services Agreement with Amprius Holdings, pursuant to which Amprius Holdings agreed to provide certain services to us, including financial and external reporting services, tax and general accounting services, engineering services, legal and patent-related services, services related to business development, information technology and human resources and other administrative services.

Prior to the distribution of Amprius Holdings’ subsidiaries in late January and early February 2022, the general and administrative expenses of Amprius Holdings were allocated among each subsidiary, including Amprius.

After the distribution, such costs incurred by the Amprius Holdings were wholly allocated to Amprius as the only remaining subsidiary.

For the one month ended January 31, 2022 and the year ended December 31, 2021, the fee for Amprius Holdings’ services pursuant to the Intercompany Services Agreement was 25% of total costs incurred by Amprius Holdings in connection with the services provided under the agreement.

From February 2022, the fee for Amprius Holdings’ services pursuant to the Intercompany Services Agreement was 100% of total costs incurred by Amprius Holdings in connection with the services provided under the agreement.

Pursuant to the termination agreement entered into by Amprius Holdings and the Legacy Amprius on June 8, 2022, the Intercompany Service Agreement was terminated upon the closing of the Business Combination on September 14, 2022.

Allocated service costs were $0.1 million for the three months ended September 30, 2022 and 2021, and $0.7 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively, including costs related to stock-based compensation.

The service costs allocated to us were accounted for as capital contributions by Amprius Holdings to Amprius.

Prior to the Business Combination, Amprius Holdings contributed capital to support our operations.

Amprius Holdings provided $0.1 million and $14.7 million in capital contributions during the three months ended September 30, 2022 and 2021, and $0.9 million and $19.8 million during the nine months ended September 30, 2022 and 2021, respectively, in addition to the amounts allocated to us under the Intercompany Services Agreement.

Additionally, we purchased and may continue to purchase raw materials and development materials from two former subsidiaries of Amprius Holdings.

In early 2022, ownership of each of these entities was transferred to the Amprius Holdings stockholders so that each could pursue its business separately.

Following the spin-offs, Dr.

Sun, our Chief Executive Officer and a member of our Board, has continued to serve on the boards of each of these entities and their

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respective holding companies.

For periods prior to distribution of the subsidiaries of Amprius Holdings during the nine months ended September 30, 2022, such purchases recorded as cost of revenues totaled $0.1 million.

There is no commitment on either party to continue such sales.

For more information regarding our related party transactions, see Note 13 to the condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Emerging Growth Company and Smaller Reporting Company Status

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies.

Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards.

This means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, we have the option to adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

We have elected to use the extended transition period for complying with new or revised accounting standards unless we otherwise early adopt select standards.

We are also a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250.0 million as of the prior June 30 or (ii) our annual revenue exceeded $100.0 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700.0 million as of the prior June 30.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited financial statements and interim unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q or in the Form S-1 filed with the SEC on September 30, 2022, that have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported income (loss) generated, and expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

For a discussion of our critical accounting estimates, see notes to financial statements and management’s discussion and analysis of financial condition and results of operations in our Form S-1 filed with the SEC on September 30, 2022.

Recent Accounting Pronouncements

Our management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our unaudited condensed financial statements.

Sheet Arrangements

As of June 30, 2022, we did not have any off-balance

sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K

and did not have any commitments or contractual obligations.

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 will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

We are electing 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 such, our condensed financial statements may not be comparable to companies that comply with public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging

growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB 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 certain executive compensation related items such as the correlation between executive compensation and performance and 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 are no longer an “emerging growth company,” whichever is earlier.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2

of the Exchange Act and are not required to provide the information otherwise required under this item.

See Note 2 to the condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis