Amprius Technologies, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Number Report of Independent Registered Public Accounting Firm (BDO USA, LLP, Houston, TX) (PCAOB ID: 243 ) 56 Report of Independent Registered Public Accounting Firm (SingerLewak LLP, San Jose, CA) (PCAOB ID: 367) 57 Consolidated Balance Sheets 58 Consolidated Statements of Operations 59 Consolidated Statements of Stockholders' Equity 60 Consolidated Statements of Cash Flows 61 Notes to Consolidated Financial Statements 62 Note 1. Nature of Operations and Organization 62 Note 2. Summary of Significant Accounting Policies 63 Note 3. Business Combination 73 Note 4. Revenue 73 Note 5. Inventory 75 Note 6. Property, Plant and Equipment, Net 75 Note 7. Accrued and Other Current Liabilities 75 Note 8. Notes Payable 76 Note 9. Stockholders' Equity 76 Note 10. Income Taxes 80 Note 11. Leases 82 Note 12. Commitments and Contingencies 83 Note 13. Related Party Transactions 83 Note 14. Net Loss Per Share 84 Note 15. Subsequent Event 84 55 Table of Contents Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Amprius Technologies, Inc. Fremont, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Amprius Technologies, Inc. (the “Company”) as of December 31, 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year then ended , in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 audit 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 audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ BDO USA, LLP We have served as the Company's auditor since 2022. Houston, Texas March 30, 2023 56 Table of Contents Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Amprius Technologies, Inc. (a carve-out of Amprius, Inc.) Opinion on the Financial Statements We have audited the accompanying balance sheet of Amprius Technologies, Inc. (a carve-out of Amprius, Inc.) (the Company) as of December 31, 2021, the related statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and the results of its operations and its cash flows for the year then ended, 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 audit. 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit 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. 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion. /s/ SingerLewak LLP We have served as the Company’s auditor from 2021 to 2022. San Jose, CA June 21, 2022, except for the reverse recapitalization described in Note 1 as to which the date is November 16, 2022. 57 Table of Contents Index to Consolidated Financial Statements A MPRIUS T ECHNOLOGIES, I NC. C ONSOLIDATED B ALANCE S HEETS December 31, (In thousands, except share and par value data) 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 69,696 $ 11,489 Accounts receivable 686 262 Inventories 500 500 Deferred costs 1,897 1,769 Prepaid expenses and other current assets 2,394 156 Total current assets 75,173 14,176 Non-current assets: Property, plant and equipment, net 4,236 4,210 Operating lease right-of-use assets, net 2,751 — Deferred costs 367 141 Other assets 644 — Total assets $ 83,171 $ 18,527 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,028 $ 359 Accrued and other current liabilities 2,708 1,446 Deferred revenue 2,660 2,363 Operating lease liabilities 521 — Total current liabilities 6,917 4,168 Non-current liabilities: Deferred revenue 720 501 Operating lease liabilities 2,501 — Total liabilities 10,138 4,669 Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock; $ 0.0001 par value; 50,000,000 shares authorized; no shares issued and outstanding — — Common stock; $ 0.0001 par value; 950,000,000 shares authorized; 84,610,114 and 65,772,001 shares issued and outstanding at December 31, 2022 and 2021, respectively 8 7 Additional paid-in capital 165,912 89,252 Accumulated deficit ( 92,887 ) ( 75,401 ) Total stockholders’ equity 73,033 13,858 Total liabilities and stockholders’ equity $ 83,171 $ 18,527 The accompanying notes are an integral part of these consolidated financial statements. 58 Table of Contents Index to Consolidated Financial Statements A MPRIUS T ECHNOLOGIES, I NC. C ONSOLIDATED S TATEMENTS O F O PERATIONS Year ended December 31, (In thousands, except share and per share data) 2022 2021 Revenue $ 4,409 $ 2,772 Cost of revenue 9,848 7,101 Gross loss ( 5,439 ) ( 4,329 ) Operating expenses: Research and development 2,030 1,450 Selling, general and administrative 10,572 4,844 Total operating expenses 12,602 6,294 Loss from operations ( 18,041 ) ( 10,623 ) Other income (expense), net: Interest income and other 709 ( 16 ) Gain on forgiveness of PPP loan — 743 Total other income, net 709 727 Net loss $ ( 17,332 ) $ ( 9,896 ) Weighted-average common shares outstanding: Basic and diluted 71,342,720 65,764,450 Net loss per share of common stock: Basic and diluted $ ( 0.24 ) $ ( 0.15 ) The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents Index to Consolidated Financial Statements A MPRIUS T ECHNOLOGIES, I NC. C ONSOLIDATED S TATEMENTS O F S TOCKHOLDERS’ E QUITY For the years ended December 31, 2022 and 2021 Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (In thousands, except share data) Shares Amount Balance as of January 1, 2021 45,156,145 $ 1 $ 66,673 $ ( 65,505 ) $ 1,169 Retroactive conversion of common stock due to Business Combination 20,586,738 6 ( 6 ) — — Balance as of January 1, 2021, as adjusted 65,742,883 7 66,667 ( 65,505 ) 1,169 Capital contribution from Amprius Holdings — — 20,111 — 20,111 Exercise of stock options 29,118 — 1 — 1 Stock-based compensation — — 1,000 — 1,000 Contribution from Amprius Holdings related to stock-based compensation — — 1,473 — 1,473 Net loss — — — ( 9,896 ) ( 9,896 ) Balance as of December 31, 2021 65,772,001 7 89,252 ( 75,401 ) 13,858 Cumulative effect adjustment from the adoption of ASC 842 — — — ( 154 ) ( 154 ) Issuance of common stock in connection with Business Combination and PIPE investment, net of issuance costs 18,392,366 1 70,937 — 70,938 Issuance of common stock in connection with a stock purchase agreement 84,793 — — — — Capital contribution from Amprius Holdings — — 505 — 505 Exercise of stock options, net of repurchased shares 146,566 — 44 — 44 Exercise of stock warrants 214,388 — 2,465 — 2,465 Stock-based compensation — — 2,329 — 2,329 Contribution from Amprius Holdings related to stock-based compensation — — 380 — 380 Net loss — — — ( 17,332 ) ( 17,332 ) Balance as of December 31, 2022 84,610,114 $ 8 $ 165,912 $ ( 92,887 ) $ 73,033 The accompanying notes are an integral part of these consolidated financial statements. 60 Table of Contents Index to Consolidated Financial Statements A MPRIUS T ECHNOLOGIES, I NC. C ONSOLIDATED S TATEMENTS O F C ASH F LOWS Year ended December 31, (In thousands) 2022 2021 Cash flows from operating activities: Net loss $ ( 17,332 ) $ ( 9,896 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 2,709 2,473 Depreciation and amortization 1,539 1,441 Amortization of deferred costs 1,585 548 Non-cash operating lease expense 556 — Loss from disposal of property, plant and equipment — 158 Gain on forgiveness of PPP loan — ( 743 ) Changes in operating assets and liabilities: Accounts receivable ( 424 ) 86 Inventories — 17 Deferred costs ( 1,939 ) ( 2,003 ) Prepaid expenses and other current assets ( 2,282 ) ( 70 ) Accounts payable 517 ( 1,804 ) Accrued and other current liabilities 1,155 574 Deferred revenue 516 1,203 Operating lease liabilities ( 482 ) — Net cash used in operating activities ( 13,882 ) ( 8,016 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 1,481 ) ( 609 ) Net cash used in investing activities ( 1,481 ) ( 609 ) Cash flows from financing activities: Proceeds from issuance of common stock in connection with Business Combination and PIPE investment 77,884 — Payment of transaction and issuance costs in connection with Business Combination and PIPE investment ( 6,946 ) — Payment of financing costs in connection with a stock purchase agreement ( 326 ) — Proceeds from exercise of stock options 44 1 Proceeds from exercise of warrants 2,465 — Capital contributions from Amprius Holdings 505 20,111 Net cash provided by financing activities 73,626 20,112 Net increase in cash, cash equivalents and restricted cash 58,263 11,487 Cash, cash equivalents and restricted cash, beginning of year 11,489 2 Cash, cash equivalents and restricted cash, end of year $ 69,752 $ 11,489 Components of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 69,696 $ 11,489 Restricted cash included in other assets 56 — Total cash, cash equivalents and restricted cash $ 69,752 $ 11,489 Supplemental disclosure of non-cash investing and financing information: Operating lease liabilities and right-of-use assets upon adoption of ASC 842 $ 3,256 $ — Unpaid purchases of property, plant and equipment $ 83 $ 51 Unpaid financing costs in connection with a stock purchase agreement $ 263 $ — The accompanying notes are an integral part of these consolidated financial statements. 61 Table of Contents Index to Consolidated Financial Statements A MPRIUS T ECHNOLOGIES, I NC. N OTES T O C ONSOLIDATED F INANCIAL S TATEMENTS Note 1. Nature of Operations and Organization Nature of Operations Amprius Technologies, Inc. (the "Company") has developed, and since 2018, been in commercial production of lithium-ion batteries for mobility applications leveraging a disruptive silicon anode. The Company’s silicon anode technology is intended to enable batteries with higher energy density, higher power density and fast charging capabilities over a wide range of operating temperatures. The Company's headquarters is located in Fremont, California. The Company pre viously had an intercompany agreement with a majority shareholder, Amprius, Inc. ( “Amprius Holdings”), to license intellectual property rights to continue to develop silicon nanowire technology. Under this agreement, Amprius Holdings provided resources and rights to use its assets to the Company, such as rights to the use of intellectual property, cash, equipment, manufacturing and office facilities, personnel, and management oversight. Beginning in 2020, Amprius Holdings assigned or contributed those assets to the Company and the Company treated them as contributions from Amprius Holdings. The intercompany agreement was terminated in May 2022. 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, Amprius Technologies Operating, Inc. (formerly known as Amprius Technologies, Inc. or "Legacy Amprius"), Kensington Capital Acquisition Corp. IV, and Kensington Capital Merger Sub Corp. (“Merger Sub”). Pursuant to the terms of the Business Combination Agreement, Kensington Capital Acquisition Corp. IV changed its jurisdiction of incorporation by domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”), upon which it changed its name to “Amprius Technologies, Inc.,” and a business combination between Kensington Capital Acquisition Corp. IV 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 the Company (together with the Domestication and the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). Unless the context otherwise provides, the “Company” refers (i) prior to the Closing Date, to Legacy Amprius and (ii) on and after the Closing Date, to Amprius Technologies, Inc. and its subsidiaries, including Legacy Amprius. Prior to the Business Combination, Kensington Capital Acquisition Corp. IV is referred to herein as “Kensington.” The Business Combination was treated as a reverse recapitalization. Legacy Amprius was determined as the accounting acquirer and Kensington as the accounting acquiree for financial reporting purposes based on evaluation of the following facts and circumstances: • the stockholders of Legacy Amprius owned a majority of the shares of the Company following the Business Combination; • the board of directors of the Company following the Business Combination was comprised of all of the board members of Legacy Amprius; • the senior management of the Company following the Business Combination was the senior management of Legacy Amprius; and • Legacy Amprius is larger than Kensington in terms of existing operations and number of employees. Liquidity and Capital Resources Since its inception, the Company has incurred recurring losses and negative cash flows from operations. During the year ended December 31, 2022, the Company's net loss was $ 17.3 million and at December 31, 2022, the accumulated deficit was $ 92.9 million. The Company expects to incur additional losses in the future as it scales its business and increases its operating expenditures, such as increasing its research and development spend and headcount. Additionally, the Company expects to increase its capital expenditures as it plans to build a GWh-scale manufacturing facility in the future. The Company may need to raise funds in order to meet its future operating and capital expenditure requirements. If 62 Table of Contents Index to Consolidated Financial Statements sufficient funding is not raised, the Company may need to reduce its spending activities, which may negatively affect its ability to achieve its operating goals. At December 31, 2022, the Company had cash and cash equivalents of $ 69.7 million. The Company believes that its cash and cash equivalents will be sufficient to fund its working capital requirements over twelve months from the date these financial statements are issued. On September 27, 2022, the Company entered into a Common Stock Purchase Agreement (“Purchase Agreement”) with B. Riley Principal Capital II, LLC (“BRPC II”), pursuant to which BRPC II committed to purchase up to $ 200.0 million of its common stock until January 1, 2025, subject to certain contractual terms (the “Committed Equity Financing”). There can be no assurance that the Company will be able to raise $ 200.0 million over such period as the Committed Equity Financing contains certain limitations and conditions. On October 19, 2022, the U.S. Department of Energy (“DOE”) under the Bipartisan Infrastructure Law awarded the Company a cost-sharing grant of $ 50.0 million. The grant is dependent upon the successful negotiation of a final contract. There can be no assurance that such negotiation will be successful. Other Risk and Uncertainties The Company faces risks related to the COVID-19 pandemic, which has created significant volatility in the global economy, led to business disruptions, reduced economic activities, and imposition of travel restrictions. Although the COVID-19 pandemic did not have an adverse impact on the Company to-date, its future development is highly uncertain and cannot be predicted. Even after the COVID-19 pandemic has subsided, the Company and its customers may continue to experience its negative effect, which may adversely affect the Company's future financial condition, results of operations and cash flows. The Company also faces risks related to the war between Russia and Ukraine, which has also led to significant volatility in the global economy resulting in higher inflation, volatility in the credit and capital markets, and interruption in the supply chain. Although this war did not have an adverse impact to the Company to-date, its future outcome is highly unpredictable and uncertain, which may also adversely affect the Company's future financial condition, results of operations and cash flows. Note 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated. In connection with the closing of the Business Combination, whereby Legacy Amprius was determined as the accounting acquirer for accounting and reporting purposes, the historical financial statements of Legacy Amprius became the historical financial statements of the combined company and no goodwill or other intangible assets were recorded. As a result, the accompanying consolidated financial statements reflect (i) the assets and liabilities of Legacy Amprius at their historical cost; (ii) the historical operating results of Legacy Amprius prior to the Business Combination; and (iii) Legacy Amprius’ equity structure, which has been retroactively restated in the comparative period up to the Closing Date to reflect the number of shares of the Company’s common stock issued to Legacy Amprius stockholders. As such, the shares, corresponding capital amounts, and net loss per share related to Legacy Amprius common stock have been retroactively restated to reflect the effect of the exchange ratio of 1.45590 (the “Exchange Ratio”) established in the Business Combination. Prior to the Business Combination, the financial statements of the Company were presented on a carve-out basis using its historical results of operations and historical basis of assets and liabilities derived from the accounting records of Amprius Holdings, adjusted as necessary to conform with U.S. GAAP. The underlying assumptions in the Company's presentation of its financial statements prior to the Business Combination include: • Balance sheets include all of the Company’s owned assets, assets assigned or contributed by Amprius Holdings, and liabilities incurred by Amprius Holdings on behalf of the Company. • Statements of operations reflect all activities directly attributable to the Company, which include an allocation of certain general and administrative expenses of Amprius Holdings. 63 Table of Contents Index to Consolidated Financial Statements • Certain general and administrative expenses of Amprius Holdings, such as the payroll-related expenses for two executive employees, legal, tax, insurance and accounting fees, were shared between the Company, Amprius Holdings and its other subsidiaries. Since those two executive employees provided the Company and Amprius Holdings' other subsidiaries with governance and management oversight, those shared expenses were allocated between the Company and Amprius Holdings' other subsidiaries. The level of effort spent by Amprius Holdings' executives was not correlated with the level of activity, revenue or other financial operating metrics of the Company and Amprius Holdings' other subsidiaries. As a result, those shared expenses were allocated equally between the Company and Amprius Holdings' other subsidiaries. • Prior to the distribution of Amprius Holdings' other subsidiaries in January 2022 and February 2022, the shared expenses of Amprius Holdings were allocated equally between the Company and Amprius Holdings' other subsidiaries. After February 2022, those expenses were fully allocated to the Company. Management believes that the assumptions described above, including the allocation of certain shared expenses, are reasonable and consistently applied for all periods presented prior to the Business Combination. However, the financial statements of the Company that were presented prior to the Business Combination may not be indicative of the Company’s future performance and do not necessarily reflect what the financial position, results of operations and cash flows would have been had the Company operated as a separate and standalone entity. The significant accounting policies described below, together with other notes that follow, are an integral part of the consolidate financial statements. Reclassification Certain accounts in the prior year financial statements were reclassified to conform with the current year presentation. Emerging Growth Company The Company is an emerging growth company as defined in Section 2(a) of the Securities Act of 1933 (as amended), 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. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised accounting standards until private companies are required to comply with such standards. The JOBS Act provides that an emerging growth 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. The Company has elected to not opt out of such extended transition period. This 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 such new or revised standard unless the Company is no longer deemed an emerging growth company. As a result, the accompanying consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances; the results of which form the basis for making judgements that are not readily apparent from other sources. Actual results could materially differ from management estimates using different assumptions or under different conditions. Significant accounting estimates made by the Company include useful lives of property, plant and equipment, valuation of deferred taxes, lower of cost or net realizable adjustment of inventory, carve-out of financial statements including the allocation of assets, liabilities and expenses prior to the Business Combination, incremental borrowing rate used in calculating lease obligations and right-of-use assets, and fair value of common stock prior to the Business Combination and other inputs used to value stock-based compensation awards. 64 Table of Contents Index to Consolidated Financial Statements Fair Value Measurement Assets and liabilities recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to the valuation of these assets or liabilities are as follows: Level 1 – Inputs that are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 – Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The Company had a money market fund amounting to $ 69.4 million as of December 31, 2022, which was measured at Level 1 fair value based on the active market price of such instrument. The Company did not have assets or liabilities measured at fair value on a recurring basis using Level 2 or Level 3 inputs as of December 31, 2022 and 2021. There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the years ended December 31, 2022 and 2021. Cash, Cash Equivalents and Restricted Cash Cash consists of bank deposits and cash equivalent consists of a money market fund with original maturity of less than 90 days from the date of purchase. Restricted cash pertains to cash collateral required by the Company’s lessor to satisfy a letter of credit requirement under its lease agreement. As of December 31, 2022, restricted cash was $ 56 thousand and is included in other assets in the accompanying consolidated balance sheet. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, restricted cash and accounts receivable. The Company maintains its cash, cash equivalents and restricted cash with major financial institutions that may at times exceed federally insured limits. The Company has not experienced losses on its financial assets held in these financial institutions. Management believes that these financial institutions are financially sound with minimal credit risk. Accounts receivable consist mainly of amounts due from U.S. government agencies or sponsored entities and large public entities which limits the Company’s credit risk. Through December 31, 2022, the Company has not experienced any credit losses. During the year ended December 31, 2022, four customers individually represented 24 %, 20 %, 18 % and 11 % of the Company’s revenue. During the year ended December 31, 2021, two customers individually represented 56 % and 24 % of the Company’s revenue. As of December 31, 2022 and 2021, three and five customers represented 88 % and 96 %, respectively, of the Company’s total accounts receivable. 65 Table of Contents Index to Consolidated Financial Statements Segment Reporting The Company has determined that the Chief Executive Officer is its Chief Operating Decision Maker (CODM). The CODM reviews financial information presented on an aggregate basis for the purposes of assessing the Company’s performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single operating and reportable segment. All of the Company’s revenues are geographically earned in the United States and all property, plant and equipment is located in the United States. Revenue Recognition The Company recognizes revenue under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers , when a customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company generates revenue from both its arrangements for customization design services for the development of silicon-anode lithium-ion battery technology and delivery of prototypes and providing finished battery products to its customers. The customization design services generally provide design and development efforts to configure the Company’s existing battery technology towards a customer’s required specifications, including the delivery of the prototypes. The development and delivery of these battery prototypes is a single performance obligation as the individual customization activities performed through delivery of the prototype batteries are not distinct. Revenue is recognized at the point in time when control transfers to the customer upon final delivery of prototype batteries or completion of the defined service. The Company recognizes revenue from follow-on orders and standalone sales of battery products to customers at the point in time that control of the product has been transferred to the customer which is generally upon shipment. To achieve the core principle of revenue recognition, the Company applies the following steps: 1. Identify the contract with the customer . A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations. The Company generally enters into fixed-price agreements with its customers which outline the terms of the business relationship between the customer and the Company. Additionally, the Company may receive purchase orders from customers or enter into statements of work that indicate pricing, performance and delivery obligations, progress payments (if any) and the timing for each transaction. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable. At contract inception, the Company also evaluates prior incomplete contracts to determine whether the contract with the customer should be combined and accounted for as a single contract with any prior contract. 2. Identify the performance obligations in the contract . The promises within each contract for customization design services may vary depending on the customer requirements; however, those contracts contain promises which generally include (i) custom battery design to conform with customer’s requirements, (ii) design progress reporting, (iii) development of preliminary batteries, (iv) testing of battery design and performance, and (v) delivery of final battery prototypes that meet pre-defined customer specifications along with test results of the delivered batteries. Those promises are generally inputs to a combined output to deliver a single final prototype battery and are accounted for as a single performance obligation. Contracts for standard batteries for commercial sales are generally ready-made with no customization. Within these contracts, each battery is a distinct performance obligation. 3. Determine the transaction price . Payment terms for the Company’s development contracts are generally based on the achievement of defined milestones. Since revenue is generally recognized at the point in time when control transfers to the customer upon final delivery of prototype battery or completion of the service at the end of the contract as discussed below in Step 5, Recognize revenue when, or as, a performance obligation is satisfied, the variable consideration is not considered to be constrained at the inception of the contract and the transaction price equals the cumulative payments to which the Company is entitled to at the end of the contract. The Company elected to use the practical expedient to disregard the effect of the time value of money in a significant financing component when its payment terms are less than one year. In cases when there is a period 66 Table of Contents Index to Consolidated Financial Statements of more than one year, the Company only adjusts the transaction price when the financing component is significant and beyond the mitigating effect of the progress payments. 4. Allocate the transaction price to the performance obligations in the contract . The transaction price is allocated to the performance obligations. The Company’s revenue contracts contain a single performance obligation; therefore, allocation is not necessary. 5. Recognize revenue when, or as, a performance obligation is satisfied . Under the Company’s customized design services arrangements, control generally transfers upon the completion of the battery design and delivery of the final prototype batteries. For follow-on orders and standalone sales of battery products to customers, control generally transfers upon shipment of the product. In some instances, customers may request that the Company bill them for a product but the Company retains physical possession of the product until later delivery, commonly known as “bill-and-hold” arrangements. The Company has a customer that has requested an arrangement whereby the Company may store finished product until the customer’s employees arrive at a specific site for a customer flight test. The finished products for such customer are stored in a storage area that are identified separately as belonging to such customer and are ready for immediate shipment upon the customer’s request. Additionally, title and risk of loss has passed to the customer. As such, the Company does not have the ability to use the finished products or direct them to other customers. In these “bill-and-hold” arrangements, the Company recognizes revenue when the product is identified separately as belonging to the customer and the product is ready for delivery to the customer. Grant Revenue The Company receives payments from the U.S. federal government under a nonrefundable expense reimbursement grant in support of its product development programs. Expense reimbursement grants entitle the Company to claim from a government entity reimbursement of certain qualified expenses incurred to date. The nature and amount of such expenses are determined by each respective grant. The Company has concluded that government grants received are outside the scope of ASC Topic 606 because such grants do not involve a reciprocal transfer in which each party receives and sacrifices approximately commensurate value. Therefore, the grants meet the definition of a contribution and are non-exchange transactions. In absence of explicit US GAAP guidance on contributions received by business entities, the Company made a policy decision to apply by analogy recognition and measurement guidance in International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance . Under this approach the Company recognizes grants at fair value only when there is reasonable assurance that the Company will comply with the conditions attaching to them, and that the grants will be received. The Company recognizes as revenue the amounts received or receivable from expense reimbursement grants to the extent, and in the period in which, the qualifying costs have been incurred. Accounts Receivable Accounts receivable are recorded at the invoiced amount less any estimated allowance for doubtful accounts. An allowance for doubtful accounts is based on the Company’s assessment of the collectability of accounts by considering the age of outstanding invoices and the collection history of the customer, as well as an evaluation of potential risk of loss. A receivable deemed to be uncollectible is written off against a previously established allowance and recoveries are recognized when the cash is received. The Company does not accrue interest on past due balances and requires no collateral. The Company has not experienced any significant losses from accounts receivable. The Company had no allowance for doubtful accounts as of December 31, 2022 and 2021. Inventories Inventories, which consist of raw materials, work-in-process and finished goods, are stated at the lower of cost or net realizable value. Cost is determined using the first-in-first-out method. Net realizable value is determined based upon the estimated selling price of the inventory in the ordinary course of business less reasonably predictable costs of completion or disposal and transportation. The cost of raw materials, work-in-process and finished goods generally exceeds their respective realizable value. When an inventory is adjusted to its net realizable value, a new cost basis is established and such cost is not adjusted for any potential recovery or increase in cost. Obsolete inventories are written off to cost of goods sold. 67 Table of Contents Index to Consolidated Financial Statements Property, Plant and Equipment, Net Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets as shown below. Pilot production equipment 4 to 7 years Lab equipment 4 years Furniture, fixtures and other equipment 3 to 5 years Leasehold improvements Lesser of their useful lives or the term of the lease Custom assets that are being constructed are recorded as construction in progress. Depreciation for those assets begins when the construction is completed and the assets are ready for their intended use. Expenditures for repairs and maintenance are expensed as incurred. Upon disposition, the cost and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss is reflected in the consolidated statements of operations. Impairment of Long-Lived Assets The Company reviews the valuation of long-lived assets, which consisted mainly of property, plant and equipment, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. An impairment loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset. Fair value is determined using the estimated cash flows discounted at a rate commensurate with the risk involved. Based on management's assessment, there were no impairment losses recorded during the years ended December 31, 2022 and 2021. Leases The Company determines if an arrangement is a lease, or contains a lease, by evaluating whether there is an identified asset and whether the Company controls the use of the identified asset throughout the period of use. The Company determines the classification of the lease, whether operating or finance lease, at the lease commencement date, which is the date the Company obtains control of the leased asset. The Company recognizes the right-of-use ("ROU") assets and lease liabilities on the lease commencement date based upon the present value of the fixed lease payments over the non-cancelable lease term, unless it is reasonably certain that any renewal or termination option will be exercised. Variable costs, such as common area maintenance fees, property insurance and property taxes, are not included in the measurement of the ROU assets and lease liabilities, but are expensed as incurred. As the implicit rate of the leases is not determinable, the Company uses an incremental borrowing rate in determining the present value of the lease payments. The Company does not recognize ROU assets on lease arrangements with a term of 12 months or less. Lease expense for such arrangements is recognized on a straight-line basis over the term of the lease. The Company accounts for lease components and non-lease components as a single lease component. Modifications are assessed to determine whether incremental differences result in new contract terms and accounted for as a new lease or whether the additional right of use should be included in the original lease and continue to be accounted with the remaining ROU asset. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Warranty Liability The Company warrants that battery cells sold to customers will meet the published or agreed upon specification. Battery cells that do not meet specification are replaced at no charge to the customer. The Company had no significant warranty claims based on its historical experience. In addition, the Company is not aware of pending warranty claims or returns of battery cells from customers as of December 31, 2022. Based on management's assessment, the Company had not recorded a warranty liability as of December 31, 2022 and 2021. 68 Table of Contents Index to Consolidated Financial Statements Loss Contingencies In the normal course of business, the Company may be involved in claims and legal proceedings. The Company records a liability for such matters when it is probable that a loss has been incurred and the amounts can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. Legal costs associated with these loss contingencies are expensed as incurred. Deferred Costs Certain costs, which consist primarily of payroll-related costs, are initially deferred when (i) the costs relate directly to a customer contract, (ii) generate or enhance resources of the Company that will be used in satisfying future performance obligations, and (iii) are expected to be recovered. If these three criteria are not met, the costs are expensed into cost of revenue in the period incurred. Deferred costs are recognized as cost of revenues in the period when the related revenue is recognized, except when such costs incurred are in excess of the amount expected to be recoverable, in which case they are expensed as incurred into cost of revenues. The recoverable amount equals the total of the amount of consideration that the Company expects to receive in the future and that the Company has received but has not recognized as revenue, in exchange for the goods or services to which the asset relates, less the costs that relate directly to providing those goods or services and that have not been recognized as expenses. Cost of Revenues Cost of revenue, which includes the cost of finished goods sold and the cost of customization development services, consist mainly of the costs of raw materials, labor costs, and the allocation of overhead costs incurred in producing batteries or performing the customization work. Labor costs consist of personnel-related expenses such as salaries, employee benefits and stock-based compensation expense. Overhead costs consist primarily of utilities, rent, depreciation expense and other facilities-related costs. Costs related to batteries and design services are recognized in the same period as the associated revenue. Research and Development Costs Research and development ("R&D") costs are expensed as incurred. These costs consist mainly of personnel-related costs such as salaries, employee benefits and stock-based compensation expense of R&D personnel, outside contractors, materials, R&D equipment, and allocation of overhead costs, which include utilities, rent, depreciation expense and other facilities-related costs. R&D 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. Advertising Costs Advertising costs, which were not material during the years ended December 31, 2022 and 2021, are expensed as incurred. Stock-Based Compensation Amprius Holdings, a major shareholder, granted certain of its employees, directors and contract workers stock-based awards under its Equity Incentive Plan ("Amprius Holdings Plan"). When the Company was formed, certain employees and contract workers of Amprius Holdings were transferred, or provided services, to the Company. The stock -based compensation costs associated with the outstanding stock-based awards granted to those employees and contract workers were recorded by the Company with a corresponding increase in additional paid-in capital. In 2016, the Company adopted the 2016 Equity Incentive Plan ("2016 Plan"), which was separate from the Amprius Holdings Plan. The Company granted stock-based awards under the 2016 Plan to certain employees, directors and contract workers of Amprius Holdings who provided services to the Company. T he stock -based compensation costs associated with those awards were recorded by the Company. In September 2022, the Company adopted the 2022 Equity Incentive Plan ("2022 Plan") and terminated the 2016 Plan. The Company measures stock-based compensation for stock options at fair value on the date of grant using the Black-Scholes option-pricing model. The Company measures stock-based compensation for restricted stock units ("RSUs") based on the closing price of the Company’s stock. The Company recognizes stock-based compensation expense on a 69 Table of Contents Index to Consolidated Financial Statements straight-line basis over the period from the date of the grant to the date the award is fully vested, which is generally four years . The Company has elected to account for forfeitures as they occur. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock option awards. These assumptions include: • Expected Term — The expected term of stock options represents the period that the Company’s stock-based awards are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term, the expected term has been derived based on the simplified method for awards that qualify as plain-vanilla options. • Expected Volatility — Since the Company did not have trading history for its common stock, the Company estimated volatility for option grants through December 31, 2022 by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the option’s expected term. • Risk-Free Interest Rate — The Company bases the risk-free interest rate on the implied yield available on the U.S. Treasury zero coupon issues with a remaining term equivalent to the expected term of the option. • Expected Dividend — The Company has not paid dividends and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero. The Black-Scholes option-pricing model also requires input on the fair value of the underlying common stock. There is no public market for Amprius Holdings' common stock and prior to the Business Combination, there was no public market for Legacy Amprius’ common stock. As such, the fair value of the shares of common stock underlying stock option grants had been determined by the Company’s board of directors at the time of grant by considering a number of objective and subjective factors including important developments in the Company’s operations, valuations performed by an independent third party, the rights, preferences, and privileges of Amprius Holdings’ preferred securities as compared to those of Legacy Amprius' and Amprius Holdings’ common stock, including liquidation preferences of Amprius Holdings’ preferred stock, the Company's stage of development and financial position, the market conditions affecting the industry, the stock price performance and volatility of comparable public companies, and the likelihood of achieving a liquidity event, among other factors. The third-party valuations were performed in accordance with the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”). The Practice Aid identifies various available methods for allocating the enterprise value across classes of capital stock in determining the fair value of the Company's common stock at each valuation date. The valuations for Amprius Holdings’ common stock were prepared using the Option Pricing Method ("OPM"), and the valuations for Legacy Amprius' common stock were prepared using the probability-weighed expected return method ("PWERM"), both of which used market approaches to estimate the Company's enterprise value. PWERM is a hybrid method where the equity value in one or more of the scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. After the Business Combination, the fair value of the shares of common stock underlying stock option grants is determined based on the closing price of the Company’s stock. Common Stock Warrants The Company has freestanding common stock warrants, which are classified as equity in accordance with the applicable guidance in ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity . Accordingly, a 70 Table of Contents Index to Consolidated Financial Statements freestanding instrument, such as a stock warrant, is classified as equity when (i) the instrument is considered indexed to an entity's own stock and (ii) when certain criteria for equity classification are met. When assessing whether the Company's stock warrants are indexed to its own stock, the Company evaluated the stock warrants' exercise contingencies and adjustment features. The stock warrants' exercise contingencies, which are not based on observable market or index, include restriction to exercise a portion of the stock warrants if the holder exceeds specified beneficial ownership limitations and the holder being required to exercise the stock warrants in the event of a reorganization or a warrant redemption. Since the exercise contingencies are not based on observable market or index, the stock warrants were not precluded from being considered indexed to the Company's own stock. In addition, the stock warrants' adjustment features, such as a change in exercise price in the event of a stock split or stock dividend and a downward adjustment on the exercise price at the Company's discretion, did not preclude the stock warrants from being considered indexed to the Company's own stock. The Company also evaluated other provisions in the warrant agreement, such as the share-settlement provision and the replacement of the instrument in the event of a reorganization, and determined that those provisions do not preclude the stock warrants from being classified as equity. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes . Deferred tax balances are recognized for the estimated future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for temporary differences that arise from net operating losses and credit carryforwards. 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 balances of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. Concurrent with the execution of the Business Combination Agreement, the Company and Amprius Holdings entered into a Tax Sharing Agreement which provides that with respect to any U.S. federal consolidated group of which Amprius Holdings and the Company are members, Amprius Holdings will be responsible for and will indemnify the Company for the tax liability of such group. In addition, Amprius Holdings will be responsible for and will indemnify the Company for state taxes of any consolidated, combined or unitary tax group for state tax purposes that includes Amprius Holdings and the Company. The Tax Sharing Agreement also provides that Amprius Holdings will generally control any tax returns and any tax audits or other proceedings for the taxes addressed by the Tax Sharing Agreement. The Tax Sharing Agreement did not have a material impact and is not expected to have a material impact on the Company's future results of operations. Prior to the Business Combination, any income taxes in the Company’s financial statements have been allocated in a manner that is systematic, rational and consistent. The Company’s results of operations had historically been included in Amprius Holdings' combined U.S. income tax returns. Since the Company and Amprius Holdings were members of a consolidated group for federal and state income tax purposes prior to the Business Combination, the net operating loss carryover of the consolidated group would be available to be utilized by either the Company or other members for periods prior to the Business Combination. Since the Company did not file separate income tax returns from Amprius Holdings, payments to certain tax authorities may have been made directly by Amprius Holdings, and not by the Company. For tax jurisdictions where the Company was included with Amprius Holdings' consolidated tax filings, the Company did not recognize a tax payable to or from Amprius Holdings, and the payments of taxes were deemed to be settled immediately with the legal entities paying for the taxes in the respective tax jurisdictions. Net Loss Per Share Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration of 71 Table of Contents Index to Consolidated Financial Statements potentially dilutive securities. Diluted net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the sum of the weighted-average number of shares of common stock outstanding and potentially dilutive securities during the period. Potentially dilutive securities include shares issuable upon the exercise of stock options, vesting of RSUs and exercise of common stock warrants; however, these have been excluded from the diluted net loss per share calculation because their effect were anti-dilutive given the net loss of the Company. Therefore, the basic and diluted net loss per share of common stock for all periods presented were the same. Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases, and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”). Under Topic 842, lessees are required to recognize leases on their balance sheet as an ROU asset and a lease liability. In addition, lessees are required to classify leases as either operating or finance leases, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company adopted Topic 842 using the modified retrospective method effective January 1, 2022. Under this approach, the Company is not required to restate or disclose the effects of applying Topic 842 for comparative periods. Upon adoption of Topic 842, the Company has elected to apply the package of practical expedients of not reassessing the following: (i) whether any expired or existing contracts are, or contain, leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any existing leases. In addition, the Company elected to apply the following policies: (i) lease arrangements with a term of 12 months or less will not be recognized as ROU assets and lease liabilities, and (ii) non-lease components shall not be separated from the lease components, but instead accounted for as a single lease component. The Company had a single lease of a real estate asset, which includes the Company's headquarters, research and development facilities, and manufacturing facilities on the date of adoption of Topic 842. Upon adoption of Topic 842, the lease continued to be classified as an operating lease and the Company recognized the following on January 1, 2022: • Operating lease liabilities of $ 3.3 million, which represented the present value of the lease payments over the remaining noncancellable lease term and the expected renewal period, discounted using the Company’s incremental borrowing rate of 7.9 %; • Operating lease ROU assets of $ 3.1 million, which represented the operating lease liabilities of $ 3.3 million, adjusted for deferred rent of $ 240 thousand and prepaid rent of $ 43 thousand; and • Adjustment to accumulated deficit of $ 154 thousand. The adoption of Topic 842 did not have any other impact on the Company’s balance sheet, results of operations and cash flows as of and during the year ended December 31, 2022. In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance , which requires business entities to provide disclosures on material government transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The Company adopted this ASU on January 1, 2022. Accounting Pronouncements Not Yet Adopted In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Effective Dates (“ASU 2019-10”), which amends the transition and effective date of accounting for credit losses under Topic 326 to years beginning after December 15, 2022, with early adoption permitted. Topic 326 requires that credit losses on financial assets, such as trade and other receivables and available-for-sale debt securities, be recognized as allowance for credit losses. Credit losses on trade and other receivables will reflect the current estimate of the expected credit losses that generally will result in the earlier recognition of allowances for losses. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. In addition, ASU 2019-10 added a provision to allow an entity to irrevocably elect the fair value option in accordance with Subtopic 825-10 for financial instruments within the scope of Subtopic 326-20, except for held to maturity 72 Table of Contents Index to Consolidated Financial Statements debt securities. The Company has trade and other receivables, but has no investment in debt securities. The Company is currently evaluating the impact of Topic 326 on its financial statements. Note 3. Business Combination On September 14, 2022, the Company completed the Business Combination, discussed further in Note 1, which was treated as a reverse recapitalization. The effects of the Business Combination include the following: • the Company’s certificate of incorporation was amended and restated to, among other things, authorize the issuance of 1,000,000,000 shares, of which 950,000,000 shares are designated as common stock, $ 0.0001 par value per share, and 50,000,000 shares are designated as preferred stock, $ 0.0001 par value per share; • all outstanding shares of Legacy Amprius’ common stock were exchanged for a number of the Company’s common stock equal to the number of Legacy Amprius’ shares multiplied by the Exchange Ratio of approximately 1.45590 , or for an aggregate of 65,776,550 shares of the Company’s common stock; and • Each option to purchase Legacy Amprius’ common stock (a “Legacy Amprius Option”), whether vested or unvested, was converted into an option to purchase a number of the Company’s common stock (an “Option”), subject to substantially the same terms and conditions as were applicable prior to the merger, equal to the product of the number of shares of Legacy Amprius’ common stock subject to such Legacy Amprius Option immediately prior to the closing and the Exchange Ratio, at an exercise price per share calculated by dividing the exercise price per share of such Legacy Amprius Option immediately prior to the Business Combination by the Exchange Ratio. At Closing Date, the Legacy Amprius Options were converted to Options to receive an aggregate of 14,223,410 shares of common stock, of which 6,664,919 shares remained subject to vesting obligations. Immediately prior to the closing of the Business Combination, a number of investors (the “PIPE Investors”) purchased from the Company an aggregate of 2,052,500 PIPE units at a price of $ 10.00 per share (such transaction, the “PIPE”), pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into with the PIPE Investors. Each PIPE unit consists of (i) one share of common stock and (ii) one warrant (each, a “PIPE Warrant”) to purchase one share of common stock. The exercise price of each PIPE Warrant is $ 12.50 per share. The Company may be able to redeem the PIPE Warrants if the price per share of the Company's common stock equals or exceeds $ 20.00 per share for at least 20 trading days during a period of 30 consecutive trading days prior to the redemption date. The Company’s outstanding shares of common stock immediately after giving effect to the Business Combination and the PIPE totaled 84,168,916 shares. The Company received net proceeds from the Business Combination and the PIPE totaling $ 70.9 million, after deducting transaction and issuance costs. Transaction costs paid by the Company, which consisted of direct and incremental costs, such as legal, consulting and advisory fees incurred in connection with the Business Combination, totaled $ 6.9 million during the year ended December 31, 2022. These costs were classified as a reduction of additional paid-in capital in the accompanying consolidated balance sheet. Note 4. Revenue Disaggregation of Revenue Revenue from customers consists mainly of customized design services arrangements and sale of battery products. Revenue from customized design services arrangements, which may include a requirement to achieve certain agreed upon milestones, is recognized when the battery design is completed and the final prototype batteries are delivered. Revenue from sale of battery products is recognized upon shipment. The Company disaggregates its revenue from customers by the type of arrangement, either as customization design services or as sale of battery products, as this depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The table below shows the composition of revenue from customers, as disaggregated by type of arrangement in accordance with Topic 606, and other revenue from government grants accounted for using the analogy from IAS 20 (in thousands). 73 Table of Contents Index to Consolidated Financial Statements Year ended December 31, 2022 2021 Revenue from contract with customers: Customized design services $ 1,836 $ 1,621 Sale of batteries 2,346 1,151 Total revenue from contract with customers 4,182 2,772 Other revenue – government grant 227 — Total revenue $ 4,409 $ 2,772 Revenue from sale of batteries includes bill-and-hold arrangements, which amounted to $ 768 thousand and $ 670 thousand during the years ended December 31, 2022 and 2021, respectively. Contract Balances The timing of revenue recognition, billings and cash collections can result in the recognition of accounts receivable, contract assets and contract liabilities. Accounts receivable is the Company’s right to consideration that is unconditional, and include amounts that are unbilled at the end of the period that are expected to be billed and collected within a 12-month period. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. The opening balance of accounts receivable as of January 1, 2021 was $ 348 thousand. As of December 31, 2022 and 2021, the accounts receivable balance was $ 686 thousand and $ 262 thousand, respectively. Unbilled accounts receivable, included in the accounts receivable, was $ 77 thousand as of December 31, 2022 and none as of December 31, 2021. Contract assets relate to rights to consideration that is conditional up on factors other than the passage of time. There were no contract assets in the accompanying consolidated balance sheets as of December 31, 2022 and 2021 and January 1, 2021. Contract liabilities consist primarily of deferred revenue, which is the amount of progress payments received or billed in advance of revenue recognition. Deferred revenue is subsequently recognized as revenue when the performance obligation is satisfied. The Company’s contracts with customers are generally billed based on pre-defined milestones stipulated in the contract. The opening balance of deferred revenue as of January 1, 2021 was $ 1.7 million. As of December 31, 2022 and 2021, the total deferred revenue was $ 3.4 million and $ 2.9 million, respectively. Deferred revenue is classified as either short-term or long term when the performance obligation is estimated to be satisfied within twelve months or more than twelve months, respectively, following the balance sheet date. During the years ended December 31, 2022 and 2021, revenue recognized from the prior year deferred revenue balance was $ 1.7 million and $ 0.6 million, respectively. Remaining Performance Obligations The Company has performance obligations associated with commitments in customer contracts for future services that have not yet been recognized as revenue. As of December 31, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied, including deferred revenue, was approximately $ 10.1 million. Given the applicable contract terms, approximately $ 6.2 million is expected to be recognized as revenue within one year and approximately $ 3.9 million is expected to be recognized between two to five years. This amount does not include contracts to which the customer is not committed. The estimated timing of the recognition of remaining unsatisfied performance obligations is subject to change and is affected by changes to scope, changes in timing of delivery of products and services, or contract modifications. Deferred Costs Deferred costs, which consist primarily of capitalized payroll-related costs to fulfill obligations under customer contracts, totaled $ 2.3 million and $ 1.9 million as of December 31, 2022 and 2021, respectively. The amortization of deferred costs, which is included in cost of revenue in the accompanying consolidated statements of operations, was $ 1.6 million and $ 0.5 million during the years ended December 31, 2022 and 2021, respectively. The Company evaluates deferred costs for impairment and recognizes any impairment loss in cost of revenues. During the years ended December 31, 2022 and 2021, cost of revenues includes costs incurred on certain customized design service contracts that were in excess of the amount expected to be recovered. 74 Table of Contents Index to Consolidated Financial Statements Grant Revenue In September 2022, the U.S. DOE's Advanced Manufacturing Office awarded the Company a grant totaling $ 1.0 million for the Company to use in further maturing its process for manufacturing nanowire-based silicon anodes. The grant will be paid over a period of two years , subject to the terms and conditions of the award. The Company recognized $ 227 thousand of grant revenue during the year ended December 31, 2022 and presented the amount as part of revenue on the accompanying consolidated statement of operations. Note 5. Inventory Inventory consisted of the following (in thousands): December 31, 2022 2021 Raw material $ 180 $ 231 Work in process 218 14 Finished goods 102 255 Inventory $ 500 $ 500 Note 6. Property, Plant and Equipment, Net Property, plant and equipment, net consisted of the following (in thousands): December 31, 2022 2021 Pilot production equipment $ 4,488 $ 4,041 Lab equipment 2,304 2,287 Leasehold improvements 3,525 3,439 Furniture, fixtures and other equipment 206 242 Construction in progress 957 — Property, plant and equipment, at cost 11,480 10,009 Less: accumulated depreciation and amortization ( 7,244 ) ( 5,799 ) Property, plant and equipment, net $ 4,236 $ 4,210 Construction in progress consisted primarily of pilot production and other equipment that have not been placed in service as of December 31, 2022. Depreciation and amortization expense was $ 1.5 million and $ 1.4 million during the years ended December 31, 2022 and 2021, respectively. Note 7. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following (in thousands): December 31, 2022 2021 Accrued compensation and benefits $ 1,840 $ 1,066 Accrued professional fees 481 18 Accrued financing costs 194 — Accrued tax payable 106 145 Deferred rent — 87 Other 87 130 Total accrued and other current liabilities $ 2,708 $ 1,446 75 Table of Contents Index to Consolidated Financial Statements Note 8. Note Payable In May 2020, the Company received a loan through the Paycheck Protection Program (“PPP”) of the U.S. Small Business Administration (“SBA”) under the CARES Act for an aggregate principal amount of $ 0.7 million (the “PPP loan”). In June 2021, SBA approved the Company’s loan forgiveness application for the entire balance of the PPP loan, including accrued interest. The Company recorded a gain on forgiveness of the PPP loan of $ 0.7 million during year ended December 31, 2021. Note 9. Stockholders' Equity Common and Preferred Stock As of December 31, 2022, t he Company was authorized to issue 1,000,000,000 shares of stock, of which 950,000,000 shares are designated as common stock, $ 0.0001 par value per share, and 50,000,000 shares are designated as preferred stock, $ 0.0001 par value per share. Holders of common stock are entitled to one vote for each share held and entitled to receive dividends when and if declared by the board of directors. The Company has not declared any dividends through and as of December 31, 2022. Equity Incentive Plans The Company adopted the 2022 Equity Incentive Plan ("2022 Plan") effective September 14, 2022. The 2022 Plan authorizes awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, or performance awards and may be granted to directors, employees or consultants. The Company initially reserved a total of 9,900,000 shares of the Company’s common stock for issuance under the 2022 Plan, subject to the adjustment provisions and the evergreen provisions contained in the 2022 Plan. In addition, the shares reserved for issuance under the 2022 Plan include any assumed awards that, on or after the closing of the Business Combination, were cancelled, expired or otherwise terminated without having been exercised in full, were tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or were forfeited to or repurchased by the Company due to failure to vest (provided that the maximum number of shares that may be added to the 2022 Plan is 15,000,000 shares). The number of shares available for issuance under the 2022 Plan will be increased annually beginning January 1, 2023 equal to the lesser o f (i) 30,000,000 shares, (ii) 5 % of the total number of shares of common stock outstanding as of the last day of the immediately preceding fiscal year, or (iii) as may be determined by the Plan administrator. As of December 31, 2022, a total of 9,722,507 shares of common stock were reserved for issuance under the 2022 Plan. Prior to the Business Combination, the Company maintained the 2016 Equity Incentive Plan (“2016 Plan”), which was adopted effective December 1, 2017. The 2016 Plan was terminated concurrently with the adoption of the 2022 Plan. As a result, no additional awards will be granted under the 2016 Plan. However, the 2016 Plan continues to govern the terms and conditions of the outstanding awards previously granted under the 2016 Plan. The 2022 Plan and 2016 Plan are collectively referred to as the “Equity Incentive Plans.” Stock Options Stock options granted under the Equity Incentive Plans provided for an exercise price not less than 100 % of the fair value at the grant date, unless the optionee is a 10 % stockholder, in which case the option price would not be less than 110 % of such fair market value. Options granted generally have a maximum term of 10 years from grant date or 90 days from the termination of the optionee, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant, and generally vest over a period of four years . A summary of option activity under the Equity Incentive Plans as of December 31, 2022, and changes during the year ended December 31, 2022, is as follows: 76 Table of Contents Index to Consolidated Financial Statements Number of Shares Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term (in Years) Average Intrinsic Value (in Thousands) Outstanding at January 1, 2022 10,372,865 $ 0.85 5.9 $ 16,208 Granted 3,875,412 $ 2.63 Exercised ( 146,794 ) $ 0.31 Expired/Forfeited ( 27,609 ) $ 2.03 Outstanding at December 31, 2022 14,073,874 $ 1.35 6.1 $ 92,629 Vested and exercisable at December 31, 2022 7,927,465 $ 0.64 3.9 $ 57,752 Vested and expected to vest at December 31, 2022 14,073,874 $ 1.35 6.1 $ 92,629 The weighted-average grant date fair value of options granted under the Equity Incentive Plans during the years ended December 31, 2022 and 2021 was $ 1.68 and $ 1.14 per share, respectively. The fair value of options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: Year ended December 31, 2022 2021 Dividend yield — % — % Expected volatility 59.2 % 51.8 % Expected term (in years) 6.2 5.9 Risk-free rate 2.7 % 1.1 % The total intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $ 1.2 million and $ 54 thousand, respectively. The fair value of options vested during the years ended December 31, 2022 and 2021 was $ 2.2 million and $ 0.9 million, respectively. As of December 31, 2022, there was approximately $ 8.6 million of total unrecognized compensation cost related to outstanding stock options. That cost is expected to be recognized over a weighted-average period of 3.1 years. Restricted Stock Units ("RSUs") The fair value of RSUs is determined based upon the market closing price of the Company’s common stock on the date of grant. RSUs generally vest over a period of approximately 4 years from the date of grant, subject to the continued employment or services of the grantee . A summary of RSU activity under the Equity Incentive Plans as of December 31, 2022, and changes during the year ended December 31, 2022, is as follow: Number of Shares Weighted-Average Grant Date Fair Value Outstanding at January 1, 2022 — — Granted 185,000 $ 10.40 Vested — — Expired/Forfeited — — Outstanding at December 31, 2022 185,000 $ 10.40 As of December 31, 2022, the total unrecognized stock-based compensation expense related to the unvested RSUs was approximately $ 1.9 million, which the Company expects to recognize over a weighted-average period of 4.0 years. Amprius Holdings Equity Incentive Plan 77 Table of Contents Index to Consolidated Financial Statements Under the Amprius Holdings Plan, Amprius Holdings granted certain of its employees, directors and contract workers stock-based awards under such plan. When the Company was formed, certain employees, directors and contract workers of Amprius Holdings were transferred, or provided services, to the Company. As a result, the stock-based compensation costs associated with the outstanding stock-based awards granted to those employees, directors and contract workers were recorded by the Company from the date of their transfer to the Company up to the remaining vesting period of their outstanding awards, with a corresponding increase in additional paid-in capital. The stock option grants under the Amprius Holdings Plan expire 10 years from the date of grant or 90 days from the termination of the optionee, vest over a period of two to four years , and are exercisable for shares of Amprius Holdings’ common stock. Amprius Holdings has not granted stock options under the Amprius Holdings Plan to its employees or contractors who continued to provide services to the Company during the year ended December 31, 2022. Additionally, there were no stock options attributable to those employees and contractors of Amprius Holdings that were transferred or continued to provide services to the Company that were exercised or forfeited during the year ended December 31, 2022. The fair value of options granted under the Amprius Holdings Plan during the year ended December 31, 2021 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: (i) divided yield of 0 %, (ii) expected volatility of 52.2 %, (iii) expected term of 5.0 years and (iv) risk free rate of 1.2 %. The weighted-average grant-date fair value of options granted under the Amprius Holdings Plan during the year ended December 31, 2021 was $ 2.50 per share. The total intrinsic value of stock options exercised under the Amprius Holdings Plan was $ 28 thousand during the year ended December 31, 2021. The fair value of options vested during the years ended December 31, 2022 and 2021 was $ 424 thousand and $ 273 thousand, respectively. As of December 31, 2022, there was approximately $ 16 thousand of total unrecognized compensation cost related to outstanding stock options. That cost is expected to be recognized over a weighted-average period of approximately 1.3 years. Employee Stock Purchase Plan ( "ESPP") The Company adopted the ESPP effective September 14, 2022. Under the ESPP, the Company's maximum number of shares available for issuance is 990,000 s hares of common stock, which number may be increased annually beginning January 1, 2023, subject to certain limitations under the ESPP. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986 (as amended) and will provide eligible employees an opportunity to purchase the Company’s common stock at a discount through payroll deductions. Under the ESPP, the Company may specify offering periods, provided that no offering period will have a duration exceeding 27 months. The purchase price per share is equal to 85 % of the fair market value of a share of the Company’s common stock on the (i) offering date or (ii) purchase date, whichever is lower. The Company has not established an offering under the ESPP as of December 31, 2022. Executive Incentive Compensation Plan On September 14, 2022, the Company’s board of directors approved the Company’s Executive Incentive Compensation Plan, which will allow the Company to grant incentive awards to certain executive employees, generally payable in cash, based upon achieving specified goals. The Company has the right to settle the award by granting an equity award, which may be subject to vesting conditions. All awards under the Executive Incentive Compensation Plan will be subject to reduction, cancellation, forfeiture, or recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to applicable laws. As of December 31, 2022, there were no grants under the Executive Incentive Compensation Plan. 78 Table of Contents Index to Consolidated Financial Statements Stock Warrants Outstanding stock warrants consisted of the following as of December 31, 2022: Number of Warrants Exercise Price Per Share Expiration Date Public warrants 29,268,336 $ 11.50 September 14, 2027 Private warrants 16,400,000 $ 11.50 September 14, 2027 PIPE warrants 2,052,500 $ 12.50 September 14, 2027 47,720,836 Holders of the Public Warrants and Private Warrants are entitled to purchase one share of the Company's common stock at a price of $ 11.50 per share subject to adjustment pursuant to the Warrant Agreement, dated as of March 1, 2022. The Public Warrants are listed on the NYSE and are redeemable by the Company when the price per share of the Company's common stock equals or exceeds $ 18.00 per share for at least 20 trading days during a period of 30 consecutive trading days prior to the redemption date. The Private Warrants are not listed on any securities exchange and not redeemable by the Company. The PIPE Warrants are substantially identical to the Public Warrants, except that the exercise price of each PIPE Warrant is $ 12.50 per share. In addition, the Company may only be able to redeem the PIPE Warrants if the price per share of the Company's common stock equals or exceeds $ 20.00 per share for at least 20 trading days during a period of 30 consecutive trading days prior to the redemption date. The PIPE Warrants are also not listed on any securities exchange. The warrants described above are classified as equity in accordance with the guidance under ASC 815-40, Derivatives and Hedging–Contracts in Entity’s Own Equity . Equity-classified contracts, such as stock warrants, are initially measured at fair value or allocated value. Any subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity. Common Stock Purchase Agreement On September 27, 2022, the Company entered into a Purchase Agreement with BRPC II, pursuant to which the Company, at its option, has the right to sell to BRPC II up to $ 200.0 million of its common stock from time to time until January 1, 2025. The purchase price will be determined by reference to the volume weighted average price of the Company’s common stock (as defined in the Purchase Agreement), less a discount of 3 %. The Company cannot issue to BRPC II more than 19.99 % of the aggregate number of shares of the common stock issued and outstanding immediately prior to the execution of the Purchase Agreement, except in limited circumstances. Proceeds from the sale of the Company’s common stock to BRPC II will depend upon the frequency and the market price of the Company’s common stock on the date of sale. The Company issu ed 84,793 s hares of common stock to BRPC II upon execution of the Purchase Agreement as consideration for BRPC II’s commitment to purchase shares of the Company’s common stock. The Company incurred a total of $ 0.6 million in costs related to the execution of the Purchase Agreement and the issuance of the initial commitment shares during the year ended December 31, 2022 and such amount is initially recorded as deferred stock issuance costs included in other assets in the accompanying consolidated balance sheet as of December 31, 2022 . Such deferred stock issuance cost will be charged proportionally against the gross proceeds of future shares issued to BRPC II based upon the total estimated funds the Company expect to raise under the Purchase Agreement. There were no other shares issued under the Purchase Agreement as of December 31, 2022. Stock-Based Compensation Stock-based compensation from stock options and RSUs under the Equity Incentive Plans and stock-based compensation from stock options under the Amprius Holdings Plan that were recorded by the Company were included in the following lines in the accompanying consolidated statements of operations during the periods presented (in thousands): 79 Table of Contents Index to Consolidated Financial Statements Years ended December 31, 2022 2021 Cost of revenue $ 516 $ 693 Research and development 27 233 Selling, general and administrative 2,166 1,547 Total stock-based compensation $ 2,709 $ 2,473 Note 10. Income Taxes Prior to the Business Combination, the Company did not file separate income tax returns as they were included in the consolidated income tax returns of Amprius Holdings. As a result, the Company's provision for income taxes prior to the Business Combination was determined using a method consistent with a separate return basis, as if the Company was a separate taxpayer. The components of loss before provision for income taxes were as follows (in thousands): Year ended December 31, 2022 2021 Domestic $ ( 17,332 ) $ ( 9,896 ) Foreign — — Total $ ( 17,332 ) $ ( 9,896 ) The provision for income taxes during the years ended December 31, 2022 and 2021 were not material. The provision for income taxes differed from the amount computed by applying the federal statutory rate, which was 21.0% during the years ended December 31, 2022 and 2021, to the loss before provision for income taxes as follows (in thousands): Year ended December 31, 2022 2021 Expected benefit at U.S. federal statutory tax rate $ ( 3,640 ) $ ( 2,078 ) State tax ( 764 ) ( 707 ) Change in valuation allowance ( 8,858 ) 2,720 Deconsolidation adjustment 13,318 — Other ( 56 ) 65 Provision for income taxes $ — $ — 80 Table of Contents Index to Consolidated Financial Statements The components of deferred tax assets and deferred tax liabilities were as follows (in thousands) : December 31, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 10,326 $ 17,646 Tax credits 819 1,900 Operating lease liabilities 783 — Stock-based compensation 725 — Accruals, reserves and other 624 757 Capitalized research and development 336 479 Valuation allowance ( 12,900 ) ( 20,697 ) Total deferred tax assets 713 85 Deferred tax liabilities: Property, plant and equipment — ( 85 ) Operating lease right-of-use assets ( 713 ) — Total deferred tax liabilities ( 713 ) ( 85 ) Net deferred taxes $ — $ — In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. The Company assesses available positive and negative evidences to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets. A significant piece of objective negative evidence is the cumulative losses incurred since inception, supported by negative subjective evidence of no expectations of future taxable income. Based on this evaluation, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance decreased by $ 7.8 million and increased by $ 2.7 million during the years ended December 31, 2022 and 2021, respectively. Net operating losses ("NOL") and tax credit carryforwards were as follows as of December 31, 2022: Amount (In thousands) Expiration Years NOL, federal (after December 31, 2017) $ 33,756 Do not expire NOL, federal (before January 1, 2018) $ 3,799 2028—2037 NOL, state $ 30,072 2029—2042 Tax credits, federal $ 727 2034—2042 Tax credits, state $ 462 Do not expire The utilization of NOL and tax credit carryforwards are subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, in the event of a change in the Company’s ownership, as defined in the current income tax Regulations. Ownership changes prior to the Business Combination did not result in a limitation that will materially reduce the total amount of NOL carryforwards and credits that can be utilized. Subsequent ownership changes may affect the limitation in future years. As a result of the Business Combination, the Company was deconsolidated from Amprius Holdings for federal and state income tax purposes. The Internal Revenue Code and related Regulations provide for a methodology for the allocation of the cumulative NOL carryovers between the Company and Amprius Holdings upon deconsolidation. Based on the methodology used, the federal and state NOL carryovers have been reduced by approximately $ 43.1 million and $ 40.3 million, respectively, and the federal and state R&D tax credit carryovers have been reduced by approximately $ 0.7 million and $ 1.0 million, respectively, during the year ended December 31, 2022. 81 Table of Contents Index to Consolidated Financial Statements A reconciliation of the unrecognized tax benefits is as follows (in thousands): December 31, 2022 2021 Balance at beginning of year $ 709 $ 674 Addition based on tax positions during the current year 2 35 Reduction of tax positions from prior years ( 414 ) — Balance at end of year $ 297 $ 709 The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized and there would be no cash tax impact. The Company has elected to include interest and penalties as a component of income tax expense. During the years ended December 31, 2022 and 2021, the Company did no t recognize interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months. Prior to the Business Combination, the Company had been included in Amprius Holdings' consolidated income tax returns in the U.S. federal and California tax jurisdictions. For periods after the Business Combination, the Company will file income tax returns separate from Amprius Holdings. The federal and state income tax returns from inception to December 31, 2022 remain subject to examination. Note 11. Leases The Company had a space and facility sharing arrangement with Amprius Holdings to use the equipment owned by Amprius Holdings and the spaces leased by Amprius Holdings as its administrative and sales office, research and development lab, and production and engineering facilities. Effective May 1, 2022, Amprius Holdings assigned to the Company the office lease that covers all facilities that the Company uses in its operations. During the period from January 1, 2022 through May 1, 2022 and the year ended December 31, 2021, the Company paid Amprius Holdings an average monthly fee to share the facilities of $ 43 thousand and $ 42 thousand, respectively. The current lease has an expiration date of June 30, 2024, with a single option to extend the lease for 60 months that the Company determined it is reasonably certain to exercise. The Company had no leases that were classified as finance leases as of December 31, 2022. Operating lease expense under ASC 842 during the year ended December 31, 2022 amounted to $ 0.6 million. The total amount paid for amounts included in the measurement of operating lease liabilities was $ 0.5 million during the year ended December 31, 2022. Future operating lease payments as of December 31, 2022 are as follows (in thousands): Year ending December 31, Amount 2023 $ 540 2024 565 2025 586 2026 604 2027 622 Thereafter 966 Gross lease payments 3,883 Less - Present value adjustments ( 861 ) Total operating lease liabilities $ 3,022 Operating lease disclosures for the Company’s single operating lease as of December 31, 2022 were as follows: Remaining lease term 6.5 years Discount rate for operating lease liabilities 7.9 % 82 Table of Contents Index to Consolidated Financial Statements Note 12. Commitments and Contingencies From time to time, the Company may be involved in lawsuits, claims or legal proceedings that arise in the ordinary course of business. The Company accrues a contingent liability when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Management believes that there are no claims against the Company for which the outcome is expected to have a material effect on the financial position, results of operations or cash flows of the Company. Note 13. Related Party Transactions Transactions with Amprius Holdings The Company had a service agreement with Amprius Holdings, which was terminated upon the closing of the Business Combination on September 14, 2022. Prior to its termination, the service agreement required Amprius Holdings to provide certain services to the Company such as administration, management service, information technology and engineering services to support the Company's operations. The administrative costs, including stock-based compensation, incurred by Amprius Holdings up to the termination of the service agreement were allocated to the Company. The Company also previously received cash advances and capital contributions from Amprius Holdings to support the Company's working capital requirements. Intercompany advances were forgiven and treated as capital contributions by Amprius Holdings. The composition of the administrative costs allocated to the Company, including stock-based compensation, cash advances and contribution by Amprius Holdings, which are all treated as contributions and shown as increase in additional paid-in capital in the accompanying consolidated statements of stockholders' equity, were as follows during the periods presented (in thousands) : Year ended December 31, 2022 2021 Contributions attributed to stock-based compensation $ 380 $ 1,473 Capital contributions consisting of: Allocation of administrative costs 295 396 Cash 210 19,715 Total capital contributions 505 20,111 Total contributions from Amprius Holdings $ 885 $ 21,584 The Company also had a licensing agreement with Amprius Holdings to use patents and licenses owned by Amprius Holdings. By February 2023, Amprius Holdings assigned to the Company all patents and patent applications, as well as registered trademarks and trademark applications, used by the Company in its operations under Intellectual Property Rights agreements. The transfer of intellectual property did not have any financial impact on the Company’s consolidated financial statements. Transactions with Previous Related Parties The Company purchased raw materials and development materials from two companies that were previously owned and controlled by Amprius Holdings. In February 2022, Amprius Holdings no longer owned and controlled these two companies. Purchases from these previous related parties, which were recorded as cost of revenue in the accompanying consolidated statements of operations, were $ 86 thousand and $ 264 thousand during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2021, the outstanding payable balance to these previous related parties was $ 18 thousand. 83 Table of Contents Index to Consolidated Financial Statements Note 14. Net Loss Per Share The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts): Year ended December 31, 2022 2021 Numerator: Net loss $ ( 17,332 ) $ ( 9,896 ) Denominator: Weighted-average number of common shares outstanding 71,342,720 65,764,450 Basic and diluted net loss per common share $ ( 0.24 ) $ ( 0.15 ) The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive: Year ended December 31, 2022 2021 Stock warrants 47,720,836 — Stock options 14,073,874 10,372,865 RSUs 185,000 — Total 61,979,710 10,372,865 Note 15. Subsequent Event On January 4, 2023, the Company entered into an amendment to its lease agreement of its corporate headquarters located in Fremont, California. The amendment includes the lease of additional facility space in the same building and extending the lease term to end on June 30, 2027, with an option to extend for an additional five -year term. The total future lease payments, after amendment, are approximately $ 11.7 million, of which $ 1.0 million is payable in 2023. 84 Table of Contents Index to Consolidated Financial Statements Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None.