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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-30 · 200 added, 214 removed, 133 unchanged (76% of the section changed)

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

Amprius Technologies, Inc.

has developed and, since 2018, been in commercial production of ultra-high energy density lithium-ion batteries for mobility applications leveraging a disruptive silicon anode.

We have developed and, since 2018, been in commercial production of ultra-high energy density lithium-ion batteries for mobility applications leveraging a disruptive silicon anode.

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

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

Our batteries and their performance specifications have been tested and validated for application by over 40 customers, including Airbus, AeroVironment, BAE Systems, the U.S.

Army and Teledyne FLIR, and from inception, we have shipped over 10,000 batteries as of December 31, 2022, which have enabled

Our batteries and their performance specifications have been tested and validated for application by over 100 customers, including AALTO Airbus, AeroVironment, BAE Systems, the U.S.

Index to Consolidated Financial Statements

mission critical applications.

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

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

We are working to meet the expected demand in several rapidly growing addressable markets, including by expanding our production capacity in Fremont and by designing and building a large-scale manufacturing facility, which we expect will be in Brighton Colorado and manufacture at a GWh+ scale through an automated, high-volume manufacturing line for our silicon anode.

and Teledyne FLIR, and from inception through December 31, 2023, we have shipped approximately 50,000 batteries, which have enabled mission critical applications.

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

We currently offer high performance silicon anode batteries under the following product platforms:

SiMaxx and SiCore.

Our SiMaxx batteries are currently manufactured at our headquarters in Fremont, California, where we believe demand for our SiMaxx batteries exceeds our manufacturing capacity.

By the end of 2023, we had made significant progress in expanding our current kWh-scale manufacturing line into a MWh-scale manufacturing facility.

Once our expansion is in full operation, which we expect to achieve exiting 2024, we anticipate that we will manufacture SiMaxx batteries up to 2 MWh capacity, which is about 10 times our production capacity in 2023.

Our SiCore batteries are developed in collaboration with Berzelius.

We are also working to meet the expected demand in several rapidly growing addressable markets by designing and building out our newly leased large-scale facility in Brighton, Colorado that can manufacture at a GWh+ scale through an automated, high-volume manufacturing line.

Business Combination

As further described in "Business" in Part I, Item 1 above, we completed the Business Combination on September 14, 2022, which we accounted for as a reverse recapitalization, with Legacy Amprius deemed to be the acquirer and Kensington deemed to be the acquiree for financial statement reporting purposes.

On September 14, 2022, we completed the Business Combination pursuant to the Business Combination Agreement, dated May 11, 2022, by and among the Company, Legacy Amprius, Kensington and Kensington Capital Merger Sub Corp.

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

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

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

Immediately prior to the closing of the Business Combination, a number of investors (the “PIPE Investors”) purchased from us an aggregate of 2,052,000 units at a price of $10.00 per share (such transaction, the “PIPE”), pursuant to separate subscription agreements.

Each PIPE unit consisted of (i) one share of common stock and (ii) one warrant (each, a “PIPE warrant”) to purchase one share of common stock at an exercise price of $12.50 per share.

Immediately prior to the closing of the Business Combination, a number of PIPE Investors purchased from us an aggregate of 2,052,000 units at a price of $10.00 per share, pursuant to separate subscription agreements.

Each PIPE unit consisted of (i) one share of common stock and (ii) one PIPE warrant to purchase one share of common stock at an exercise price of $12.50 per share.

Our net proceeds from the Business Combination and the PIPE were $70.9 million, after deducting transaction and issuance costs.

At Market Issuance Sales Agreement

On October 2, 2023, we entered into the Sales Agreement with the Sales Agents, pursuant to which we may offer and sell, from time to time, through or to any Sales Agent, shares of our common stock with an aggregate offering price of not more than $100.0 million, as described in the prospectus supplement dated October 10, 2023 filed with the Securities and Exchange Commission.

During the year ended December 31, 2023, we sold a total of 89,383 shares of our common stock for an aggregate net proceeds of $0.4 million under the Sales Agreement.

Committed Equity Financing

As further described in "Risk Factors—Risks Related to Our Business and Industry" in Part I, Item 1A above, we entered into a Committed Equity Financing with BRPC II on September 27, 2022, whereby we have the right, but not the obligation, to sell to BRPC II up to $200.0 million of newly issued shares of common stock, subject to certain conditions and limitations, from time to time until January 1, 2025 .

Under the Purchase Agreement, we may direct BRPC II to purchase a specified maximum number of shares of common stock, not to exceed certain limitations.

As consideration for BRPC II’s commitment to purchase shares of common stock, we issued 84,793 shares of common stock to BRPC II upon execution of the Purchase Agreement and we will issue 84,793 additional shares of common stock to BRPC II upon receipt of total aggregate gross cash proceeds equal to $100.0 million.

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

Although the Purchase Agreement provides that we may sell up to an aggregate of $200.0 million of our common stock to BRPC II, only 16,825,366 shares of our common stock were registered for resale under a registration statement on Form S-1 filed with the SEC.

If it becomes necessary for us to issue and sell more than 16,825,366 shares to BRPC II in order to receive aggregate gross proceeds equal to $200.0 million, we must first file with the SEC one or more additional registration statements to register the resale by BRPC II of any such additional shares of our common stock.

Department of Energy Cost Sharing Grant

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

DOE under the Bipartisan Infrastructure Law.

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

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

Riley Principal Capital II, LLC (“ BRPC II”), pursuant to which BRPC II was committed to purchase up to $200.0 million of shares of common stock until January 1, 2025 (the “Committed Equity Financing”) .

Under the Purchase Agreement, we had the right to direct BRPC II to purchase a specified maximum number of shares of common stock, not to exceed certain limitations.

As consideration for BRPC II’s commitment to purchase shares of common stock, we issued 84,793 shares of common stock to BRPC II upon execution of the Purchase Agreement.

Shares of common stock issued under the Committed Equity Financing to BRPC II other than the Commitment Shares were purchased by BRPC II at current market prices less a 3.0% fixed discount.

During the year ended December 31, 2023, we sold an aggregate of 2,952,763 shares of our common stock for aggregate net proceeds of $19.1 million under the Purchase Agreement.

On October 2, 2023, we and BRPC II mutually agreed to terminate the Purchase Agreement concurrent with our execution of the Sales Agreement.

The termination of the Purchase Agreement became effective on October 10, 2023, upon the effectiveness of our registration statement on Form S-3 filed with the SEC in connection with our entrance into the Sales Agreement.

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

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Establishing Manufacturing Capacity

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

In January 2023, we entered into an amendment to the lease agreement of our Fremont headquarters, pursuant to which we will lease approximately 25,000 square feet of additional space located in the same building as our current headquarters.

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

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

We expect this machine to increase our capacity for silicon

Index to Consolidated Financial Statements

anode production to approximately 2 MWh by the end of 2023.

This is expected to accelerate our development of technological processes for building batteries at a GWh-scale as we prepare, in parallel, for the design and build of our high volume manufacturing facility.

On January 20, 2023, we entered into a nonbinding letter of intent to lease premises consisting of approximately 774,000 square feet of space located in Brighton, Colorado.

Execution of the lease agreement remains subject to ongoing negotiations.

In order to meet increased demand for our products, we plan to build and design our GWh-scale manufacturing facility on these premises.

We plan to procure manufacturing equipment that allows for anode and cathode fabrication, battery assembly, and battery testing from equipment suppliers.

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

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

Our potential suppliers and other equipment vendors may also encounter delays, including to our expected initial production capacity of 500 MWh, which is expected to be operational in 2025, additional costs, and other obstacles in building our manufacturing line, which are currently unknown.

In January 2023, we entered into an amendment to the lease agreement of our facility in Fremont, California, pursuant to which we leased approximately 25,000 square feet of additional space located in the same building as our current headquarters.

The additional space enables us to increase our manufacturing line in Fremont, California to MWh-scale capacity.

This expansion is expected to accelerate our development of technological processes for building batteries at a GWh-scale as we prepare for the design and build out of our high-volume manufacturing facility.

In addition , in order to support our customers’ roadmaps and supply forecasts, w e entered into an Exclusive Supply Agreement with Berzelius, which gives us exclusive rights to purchase its proprietary silicon anode materials in the United States, Canada and Mexico, and allows us to leverage its existing large-scale production line and manufacturing partners to produce SiCore batteries.

Our SiCore batteries will complement our existing SiMaxx batteries and serve as a capacity bridge until our GWh-scale manufacturing facility becomes operational.

On April 15, 2023, we entered into a lease agreement for premises consisting of approximately 774,000 square feet of space located in Brighton, Colorado.

In order to meet increased demand for our products, we plan to design and build our GWh-scale manufacturing facility on these premises.

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

We plan to procure manufacturing equipment that allows for anode and cathode fabrication, battery assembly, and battery testing.

The capacity and timing of our future manufacturing requirements, and related capital expenditures, remain uncertain and will depend on a variety of factors, including:

our ability to design and construct new manufacturing sites and develop an automated, high-volume manufacturing line for our silicon anode, to mitigate supply chain constraints and manage a new labor force, to utilize planned capacity in our existing facilities, to obtain the required regulatory and zoning permits and approvals, to realize the benefits of any government incentives, and to operate in new geographic areas apart from our current headquarters.

Our potential suppliers and other equipment vendors may also encounter delays, including to our expected initial production capacity of up to 500 MWh, along with additional costs, and other obstacles in building our manufacturing line, which are currently unknown.

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

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

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

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

Based on our current expectations, we estimate that our capital equipment expenditures will range between $120.0 million and $150.0 million to achieve 1.0 GWh per year of manufacturing capacity.

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

Additionally, although we already received and are currently testing the large-scale anode production equipment from centrotherm for our manufacturing line expansion in Fremont, California, the equipment required certain modifications for our needs and there is uncertainty as to whether our planned manufacturing line will be successful.

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

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

Based on our current expectations, we estimate that our capital equipment expenditures will range between $75.0 million and $100.0 million to achieve up to 500 MWh per year of manufacturing capacity, which estimate does not include costs related to the construction and build-out of the new manufacturing facility.

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

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

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

Reducing Costs of Manufacturing

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

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

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

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

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

As the production of our SiMaxx silicon anode requires different equipment than traditional graphite anode manufacturing, our capital equipment costs are likely to be initially higher than equipment used for the production of

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graphite anodes.

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

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

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

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

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

In addition, high inflation may affect our manufacturing costs.

If our costs become subjected to significant inflationary pressures, we may not be able to fully offset such higher costs through the increase in prices of the products we sell.

Highly Competitive Market

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

We are not currently producing batteries for electric vehicles (“EVs”).

We are not currently producing batteries for EVs.

The EV battery industry has a limited number of commercially available batteries that meet the minimum performance specifications.

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

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

To compete in the EV industry, we expect that we will need

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to significantly reduce our manufacturing costs, improve cycle life, increase form factors and increase production quantity.

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

To compete in the EV industry, we expect that we will need to significantly reduce our manufacturing costs, increase form factors and increase production quantity.

One or more of our competitors and potential future entrants may be better capitalized to expand production capacities, have greater resources to commercialize and have greater access to customers in either or both the aviation and EV markets.

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Product Development

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

We expect to continue investing in the development of battery technology with the goal of enabling commercial production.

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

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• Larger cell form factors.

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

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

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

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

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

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

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

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

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

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or other liabilities.

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

The COVID-19 pandemic (or epidemics) has been unpredictable and unprecedented and may continue to result in significant national and global economic disruption, which may adversely affect our business.

The magnitude of its impact on our supply chain, productivity, results of operations and financial position, and its disruption to our business and battery development and timeline, will depend in part, on the length and severity of COVID-related restrictions and delays, on our ability to conduct business in the ordinary course and on the phasing out of government support measures.

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

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

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

Abrupt political change, terrorist activity, and armed conflict has had an adverse impact on the global economy and financial markets.

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

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

The COVID-19 pandemic has been unpredictable and unprecedented and resulted in significant national and global economic disruption.

The extent to which public health emergencies such as the COVID-19 pandemic may impact our business, financial condition, prospects and results of operations is highly uncertain and cannot be predicted.

Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any economic recession that has occurred or may occur in the future.

Comparability of Financial Information

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

Since the Business Combination close, we have incurred, and expect to continue to incur, higher

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

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

Basis of Presentation

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Components of Our Results of Operations

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

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

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

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

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

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

Our contracts typically contain a single performance obligation.

Revenue is recognized at the point in time when a final milestone is met, generally when a final working prototype is delivered that meets required specifications, or when the customer obtains control of the product, which is generally upon shipment.

We also generate revenue from U.S.

federal government expense reimbursement grants that is recognized in the period in which the qualifying costs have been incurred.

We generate revenue from the (i) sale of finished battery products and (ii) arrangements for customization design services.

The customization design services generally include designing and developing custom batteries by applying our existing technology into a customer’s required specifications and delivery of prototype batteries.

We recognize revenue at the point in time when control is transferred to the customers, which is generally (i) upon shipment, in the case of sale of finished battery products, and (ii) upon completion and/or delivery of prototype batteries, in the case of customization design services.

We also generate revenue from a U.S.

federal government expense reimbursement grant that is recognized in the period when we have the right to bill and collect the payment, which is the period in which the qualifying costs have been incurred.

Cost of Revenue

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.

Cost of revenue, which includes the cost of finished goods sold and the cost of customization design services, are comprised primarily of costs of raw materials, labor costs, and the allocation of overhead costs incurred in producing batteries or performing the customization development work and the costs of SiCore batteries purchased from Berzelius.

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.

In addition, we expect that our cost of revenue will increase as we ramp up manufacturing in our existing facility and by building a GWh-scale manufacturing facility.

Research and Development (“R&D”) Expense

R&D expenses consist mainly of personnel-related expenses such as salaries, employee benefits and stock-based compensation expense of our 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.

Our R&D expenses 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.

Overhead and other costs consist primarily of outside services, 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 is recognized.

In addition, we include under cost of revenue certain non-capitalizable expenses incurred during the

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preliminary stage of our plan to construct a GWh-scale manufacturing facility in Brighton, Colorado, such as re-zoning costs and engineering studies.

We expect that our cost of revenue will increase as we ramp up manufacturing in our existing facility and when we start building a GWh-scale manufacturing facility.

Research and Development (“R&D”) Expenses

R&D expenses consist mainly of personnel-related expenses such as salaries, employee benefits and stock-based compensation expense of our R&D personnel, outside contractors, materials, R&D equipment for which there is no alternative future use, and allocation of overhead costs, which include utilities, rent, depreciation expense and other facilities-related costs.

R&D activities relate to the conceptual formulation and design of preproduction experimental prototypes and models.

R&D expenses are expensed as incurred.

We expect that our R&D expenses will increase for the foreseeable future as we continue to invest in activities to develop and enhance product capabilities, as well as build and test battery prototypes to meet the expected market demand.

Selling, General and Administrative Expense

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist mainly of personnel-related expenses such as salaries, employee benefits and stock-based compensation expense of our executive and administrative employees, as well as fees for professional and advisory services such as legal, accounting and audit.

Selling, general and administrative expenses also include corporate insurance expense including directors and officers insurance costs, and allocation of overhead costs,

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which include utilities, rent, depreciation expense and other facilities-related costs.

We expect that our selling, general and administrative expenses will increase due to the additional costs for compliance-related requirements resulting from being a public company and investment in additional general and administrative personnel to support the growth of our business.

Selling, general and administrative expenses also include corporate insurance expense, including directors and officers insurance costs, and allocation of overhead costs, which include utilities, rent, depreciation expense and other facilities-related costs.

We expect that our selling, general and administrative expenses will increase due to the additional costs for compliance-related requirements resulting from being a public company and investment in additional sales, general and administrative personnel to support the growth of our business.

Other Income, Net

Other income, net consists mainly of interest income and the one-time gain on the forgiveness of a PPP loan.

Other income consists mainly of interest income.

Other expense during the year ended December 31, 2023 pertains to the loss on write-off of deferred stock issuance costs.

Provision for Income Taxes

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

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Results of Operations

Comparison of the Year Ended December 31, 2022 and 2021

The following table summarizes our results of operations during the years ended December 31, 2022 and 2021 (in thousands):

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

The following table summarizes our results of operations during the years ended December 31, 2023 and 2022 (amounts in thousands):

Year ended December 31, Change

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Gross loss (14,676) (5,654) (9,022) 160 %

Gross margin (162) % (128) %

Operating expenses:

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Loss from operations (38,709) (18,041) (20,668) 115 %

Other income, net 709 727 (18) (2) %

Other income (expense):

Interest and other income 2,514 709 1,805 255 %

Loss on write-off of deferred stock issuance costs (581) — (581) — %

Total other income, net 1,933 709 1,224 173 %

Net loss $ (36,776) $ (17,332) $ (19,444) 112 %

Cost of revenue and operating expenses reported above include stock-based compensation as follows (in thousands):

Cost of revenue and operating expenses reported above include stock-based compensation as follows (amounts in thousands):

Year ended December 31, Change

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Research and development expense 186 27 159 589 %

Selling, general and administrative 2,166 1,547 619 40 %

Selling, general and administrative expense 2,829 2,166 663 31 %

Total stock-based compensation $ 3,880 $ 2,709 $ 1,171 43 %

Revenue increased by $4.6 million, or 105%, to $9.1 million during the year ended December 31, 2023 from $4.4 million in the prior year.

The increase was primarily due to a $1.2 million increase in sales of batteries resulting from an increase in volume of orders from existing and new customers;

a $0.2 million increase due to the completion of customization design services for certain customers;

and a $0.2 million increase from a government grant.

The increase was primarily due to a $2.6 million increase in sales of batteries resulting from an increase in volume of orders from existing and new customers and a $2.0 million increase in non-recurring development service revenue due to the completion of customization design services for certain customers.

The increase in product revenue during the year ended December 31, 2023 included a $1.9 million increase in sales of SiCore batteries.

Cost of Revenues

Cost of revenues increased by $13.7 million, or 136%, to $23.7 million during the year ended December 31, 2023 from $10.1 million in the prior year.

The increase was primarily due the increase in production of battery cells and service costs, driven by the increase in sales volume and completion of customization design services.

Our direct labor costs, which

The increase was primarily due to a $10.3 million increase in our production costs, which included a $4.8 million increase in outside services and consulting fees, a $1.6 million increase in direct costs, a $1.6 million increase in personnel-related costs and a $2.3 million increase in other indirect and overhead costs, primarily shared-facility costs, equipment and utility costs.

The increase in outside services and consulting fees included nonrecurring fees incurred in connection with our plan to construct a GWh-scale manufacturing facility in Brighton, Colorado.

The increase in cost of revenues was also due to a $1.4 million increase in purchases of SiCore batteries from Berzelius and a $2.0 million increase in service costs due to the completion of non-recurring customization design services for certain customers.

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contributed a significant portion of our cost of revenue, increased by $1.8 million due to the hiring of additional personnel, while our cost of materials and other overhead costs increased by $1.0 million.

Research and Development Expense

Research and development expense increased by $1.7 million, or 81%, to $3.7 million during the year ended December 31, 2023 from $2.0 million in the prior year.

The increase was primarily due to a $0.6 million increase in personnel-related costs due to the hiring of additional personnel involved in research and development activities, offset by a $0.2 million decrease in stock-based compensation expense due to the grant of fully vested stock-based awards in the prior year that did not recur during the current year.

Overhead and other costs also increased by $0.2 million due to the overall increase in our research and development activities.

The increase was primarily due to a $0.7 million increase in personnel-related costs, including stock-based compensation expense, due to the hiring of additional personnel involved in research and development activities, and a $1.0 million increase in outside service fees and allocation of overhead costs, primarily shared-facility costs, equipment and utility costs.

Selling, General and Administrative Expense

Selling, general and administrative expense increased by $5.7 million, or 118%, to $10.6 million during the year ended December 31, 2022 from $4.8 million in the prior year, primarily due to the transition to being a public company.

Drivers of this increase were a $2.3 million increase in personnel-related costs, including stock-based compensation expense, due to the hiring of additional executive and administrative personnel, a $2.2 million increase in professional and consulting fees as we obtained additional assistance before and after we became a public company, a $0.7 million increase in corporate insurance costs, including director and officer insurance costs, and a $0.5 million increase in other general and administrative spend resulting from operating as a public company.

Selling, general and administrative expense increased by $10.0 million, or 96%, to $20.4 million during the year ended December 31, 2023 from $10.4 million in the prior year.

The increase was primarily due to our transition to operating as a public company.

Drivers of this increase include a $5.2 million increase in professional and consulting fees as we obtained additional outside service assistance related to management initiatives after we became a public company, a $3.0 million increase in personnel-related and compensation costs, including stock-based compensation expense, due to the hiring of additional administrative personnel, a $1.2 million increase in corporate insurance costs, including director and officer insurance costs, and a $0.6 million increase in other general and administrative spend.

Other Income, Net

The change in other income, net during the year ended December 31, 2022 consisted primarily of a $0.7 million increase in interest income attributed to the funds that we received from the Business Combination and the PIPE, offset by a $0.7 million decrease resulting from a one-time gain on forgiveness of PPP loan which was recognized during the year ended December 31, 2021.

Other income, net increased by $1.2 million, or 173%, to $1.9 million during the year ended December 31, 2023 from $0.7 million in the prior year.

The increase was primarily due to a $1.8 million increase in interest income attributed to a higher amount of funds held, offset by a $0.6 million loss on write-off of deferred stock issuance costs.

Liquidity and Capital Resources

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

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

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

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

We expect to rely on our cash on hand, which was $69.7 million as of December 31, 2022 , and cash flows from operations to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date our financial statements included in this Annual Report on Form 10-K are issued.

In addition, we may receive additional funds from the following sources:

(i) all or a portion of the $200.0 million Committed Equity Financing with BRPC II if we decide to issue shares of common stock to BRPC II under the Purchase Agreement, (ii) $50.0 million grant from the U.S.

DOE if we successfully finalize a contract and perform under such contract, and (iii) exercise of outstanding stock warrants.

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

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

The $50.0 million cost sharing grant from DOE is dependent on the successful negotiation of a final contract, and among the terms to be finalized are the portion of relevant costs that will be covered by the grant.

The contract was not yet finalized as of December 31, 2022.

There can be no assurance that such negotiation will be successful and, if successful, that we will be able to perform under such contract.

We may receive up to approximately $550.8 million from the exercise in full of all outstanding warrants.

Since the Business Combination, we have financed our operations primarily though revenue generated from operations, the proceeds from the Business Combination and sale of shares of our common stock under our Purchase Agreement with BRPC II.

We expect to rely on our cash and cash equivalents, which was $45.8 million as of December 31, 2023 , cash flows from operations and proceeds from the At Market Issuance Sales Agreement to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date our financial statements included in this Annual Report on Form 10-K are issued.

We may receive additional funds from the offering and sale of our shares of our common stock, from time to time, under the At Market Financing with an aggregate offering price of not more than $100.0 million.

The At Market Financing became available for use on October 10, 2023.

As of December 31, 2023, aggregate proceeds from the At Market Financing were $0.4 million through the sale of 0.1 million shares and subsequent to December 31, 2023, aggregate proceeds were approximately $6.5 million through the sale of approximately 2.0 million shares as of March 18, 2024.

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

We cannot guarantee the extent to which we may be able to raise funds through the At Market Financing.

Concurrent with the execution of the Sales Agreement, we mutually agreed with BRPC II to terminate the Purchase Agreement.

From January 1, 2023 through the termination of the Purchase Agreement on October 10, 2023, we received aggregate proceeds of $19.1 million from sale of shares of our common stock under the Purchase Agreement.

In addition, we may receive up to $550.8 million from the exercise in full of all outstanding warrants.

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

As of March 16, 2023, we had an aggregate of 45,668,336 public warrants and private warrants and

Index to Consolidated Financial Statements

2,052,500 PIPE warrants outstanding.

As of December 31, 2023, we had an aggregate of 45,668,236 public warrants and private warrants and 2,052,500 PIPE warrants outstanding.

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

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

If the market price for our common stock

Index to Consolidated Financial Statements

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

Furthermore, while we have been successful in obtaining certain external funding through government grants or incentives, future efforts to obtain such funds may be unsuccessful.

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

Department of Energy (“DOE”).

The cost sharing grant was dependent on the successful negotiation of a final contract.

In June 2023, we and the DOE mutually agreed to discontinue the negotiation of the cost sharing contract.

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

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At our headquarters in Fremont, California, we currently operate a kWh-scale manufacturing line that we are expanding in order to achieve production on a MWh-scale.

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

Based on our current expectations, we estimate that our capital equipment expenditures will range between $120.0 million and $150.0 million to achieve 1.0 GWh per year of manufacturing capacity, with the build-out to be completed over phases.

The initial phase of 500 MWh is expected to be operational in 2025.

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

We are continuing the design and pre-construction work of the initial phase of up to 500 MWh that will allow us to be operational in 2025, and we expect to build out additional manufacturing in phases thereafter.

We have incurred net losses to date.

During the year ended December 31, 2023, we incurred a net loss of $36.8 million.

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

As of December 31, 2022, our contractual obligations consisted primarily of our noncancellable operating lease agreement for our corporate headquarters in Fremont, California.

The total future lease payments under this operating lease was $3.9 million as of December 31, 2022, of which a total of $0.5 million is due in 2023.

In January 2023, we amended this lease to include the lease of additional space within the same building and extend the lease term to expire in June 2027, with an option to extend for an additional five-year term.

The total future lease payments after amending this lease was approximately $11.7 million, of which a total of $1.0 million is payable in 2023.

Additionally, in January 2023, we entered into a nonbiding letter of intent to lease a space for our GWh-scale manufacturing facility in Brighton, Colorado.

The execution of the lease agreement remains subject to ongoing negotiations.

Under the letter of intent, the expected lease payments over the estimated lease term of 15 years total to approximately $63.0 million.

For additional discussion about our leases, refer to Note 11 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

As of December 31, 2023, our contractual obligations consisted primarily of our noncancellable operating lease agreements for our corporate headquarters and manufacturing facilities in Fremont, California and in Brighton, Colorado.

As of December 31, 2023, the total future minimum lease payments under these operating lease agreements were approximately $71.3 million over a weighted-average lease term of 14.4 years, of which a total of $1.1 million is payable over the next twelve months.

For additional information about our leases, please refer to Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

To the extent that our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing.

If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including by reducing or delaying our production facility expansion, which may adversely affect our business, operating results, financial condition and prospects.

If financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including by reducing or delaying our production facility expansion, which may adversely affect our business, operating results, financial condition and prospects.

For example, because we expect to expand through a Copy Exact methodology, to the extent we have less cash than expected and additional financing is unavailable on acceptable terms, we expect that we would reduce the initial production capacity of our large-scale facility and thereafter add capacity as appropriate.

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

Year ended December 31,

Year ended December 31, Change

Net cash used in operating activities $ (25,553) $ (13,882) $ (11,671)

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Net cash provided by financing activities $ 19,168 $ 73,626 $ (54,458)

Net increase in cash and cash equivalents $ 58,263 $ 11,487

Index to Consolidated Financial Statements

Net Cash Used in Operating Activities

Our primary source of cash provided by operations is revenue from customized design services and sale of batteries.

Our uses of cash in our operating activities primarily include payments for personnel-related costs, procurement of materials used to produce batteries and to conduct research, professional fees and other general corporate expenses.

Net cash used in operating activities increased to $13.9 million during the year ended December 31, 2022 from $8.0 million in the prior year due primarily to an increase in personnel-related costs as we hired additional employees, an increase in professional and consulting fees as we obtained additional assistance before and after we became a public company, and an increase in corporate insurance costs, including directors' and officers' insurance costs.

Our primary source of cash provided by operations is revenue from the sale of batteries and customization design services.

Our uses of cash in our operating activities primarily include payments for personnel-related costs, procurement

Index to Consolidated Financial Statements

of finished batteries or materials used to produce our batteries, professional and outside service fees, and other general corporate expenses.

Net cash used in operating activities increased to $25.6 million during the year ended December 31, 2023 from $13.9 million during the year ended December 31, 2022 primarily due to increases in personnel-related costs as we hired additional employees, professional and consulting fees as we utilized additional outside services after we became a public company, and corporate insurance costs, including directors’ and officers’ insurance costs.

We also incurred non-capitalizable preliminary design costs related to our GWh-scale manufacturing facility in Brighton, Colorado.

Net Cash Used in Investing Activities

Our primary use of cash in investing activities is for purchases of property, plant and equipment.

Net cash used in investing activities increased to $1.5 million during the year ended December 31, 2022 from $0.6 million in the prior year due primarily to purchases of pilot production equipment as we continue to expand our manufacturing activities.

Net cash used in investing activities increased to $17.6 million during the year ended December 31, 2023 from $1.5 million during the year ended December 31, 2022 primarily due to purchases of production equipment and improvements made to expand our manufacturing facility in Fremont, California as well as initial designs costs for our manufacturing facility in Brighton, Colorado.

Net Cash Provided by Financing Activities

Our primary source of cash provided by financing activities consist of proceeds from issuance of common stock, exercise of stock warrants and capital contributions from Amprius Holdings.

Our cash usage for our financing activities consists primarily of payments of costs related to the issuance of common stock.

Net cash provided by financing activities increased to $73.6 million during the year ended December 31, 2022 from $20.1 million in the prior year due primarily to the proceeds from the issuance of common stock in connection with the Business Combination, the PIPE investment and proceeds from the exercise of stock warrants, reduced by costs paid in connection with the Business Combination and PIPE investment transactions.

Our cash provided by financing activities during the year ended December 31, 2021 consisted primarily of capital contributions from Amprius Holdings.

Our primary source of cash provided by financing activities consists of proceeds from issuance of common stock.

Our primary cash usage for financing activities consists of payments related to the issuance of common stock.

Net cash provided by financing activities decreased to $19.2 million during the year ended December 31, 2023 from $73.6 million during the year ended December 31, 2022.

Net cash provided by financing activities during the year ended December 31, 2023 consisted primarily of the net proceeds from the issuance of common stock in connection with the Purchase Agreement and Sales Agreement.

The decrease was due primarily to the approximately $70.9 million non-recurring net proceeds from the consummation of the Business Combination and PIPE investment in September 2022.

Related Party Transactions

We had a service agreement with Amprius Holdings, which was terminated upon the closing of the Business Combination.

Prior to its termination, the service agreement required Amprius Holdings to provide us certain services such as administration, management service, information technology and engineering services to support the Company's operations.

The administrative costs, including allocation of stock-based compensation, incurred by Amprius Holdings up to the termination of the service agreement were allocated to us and were treated as capital contributions.

We also previously received cash advances and capital contributions from Amprius Holdings to support our working capital requirements.

Those cash advances were forgiven and were treated as capital contributions.

Additionally, we purchased raw materials and development materials from two previous related parties that were owned and controlled by Amprius Holdings.

Prior to the closing of the Business Combination, we had a service agreement with Amprius Holdings whereby Amprius Holdings provided certain services to us, such as management and administrative services, access to information technology and engineering services.

The expenses incurred by Amprius Holdings in connection with the service agreement were allocated to us and were deemed as capital contributions.

Amprius Holdings also provided cash advances to support our working capital requirements.

Those cash advances were forgiven and deemed as capital contributions.

The total deemed capital contributions during the year ended December 31, 2022 was $0.5 million and none during the year ended December 31, 2023.

We also had a licensing agreement with Amprius Holdings to use their patents and licenses.

In February 2023, Amprius Holdings assigned to us all of its patents, patent applications, registered trademarks and trademark applications.

The transfer of Amprius Holdings’ intellectual properties to us had no impact on our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Additionally, we purchased and may continue to purchase raw materials and development materials from two previous related parties that were owned and controlled by Amprius Holdings, including finished batteries for our SiCore product platform from Berzelius.

We do not have purchase commitments with these previous related parties.

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

Emerging Growth Company and Smaller Reporting Company Status

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

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

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

Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only

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

Index to Consolidated Financial Statements

two years of audited financial statements.

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

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

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

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited financial statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with U.S.

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

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

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with U.S.

The preparation of these consolidated financial statements requires us to make estimates and assumptions.

Our critical accounting estimates include estimates that require significant assumptions or that involve a significant level of uncertainty at the time the estimate was made, and changes in them may likely have a material effect on our financial condition or results of operations.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances.

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

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the accounting estimates discussed below are critical to understanding our historical and future performance.

Revenue Recognition

Our revenue from customers consists mainly of customized design services arrangements and sale of battery products.

We account for a contract with a customer when there is a legally enforceable contract, such as a customers' purchase order, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable.

Revenue from a contract with a customer is recognized at a point in time when control is transferred to the customer, which is generally upon the completion of the battery design and delivery of the final prototype batteries for customized design services or upon shipment of the batteries.

The majority of our contracts have a single performance obligation, which do not require us to do a transaction price allocation.

The transaction price set in the contract is fixed, with payment terms for a customized design service contract generally based on the achievement of agreed upon milestones specified in the contract.

We do not accept returns unless the batteries are defective as manufactured.

We also generate revenue from U.S.

federal government expense reimbursement grants that is recognized in the period in which the qualifying costs have been incurred.

We determine 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.

We determine 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.

We recognize a right-of-use ("ROU") asset and a lease liability on the lease commencement date based upon the present value of the fixed lease payments over the non-cancelable lease term using an incremental borrowing rate.

We include in the calculation of the present value of the lease payments amounts attributable to the renewal period if we have the option to renew and if, based on present facts and circumstances, we believe that it is reasonably certain that the renewal will be exercised.

We do not recognize an ROU asset on a lease arrangement with a term of 12 months or less.

When there are modifications to our lease, we assess the terms of the modification to determine whether incremental differences result in new contract terms, which would be 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.

Our summary of significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We recognize on the commencement date a right-of-use (“ROU”) asset and a lease liability on our lease agreements, or agreements that contains a lease.

The lease liability is estimated based upon the present value of the fixed lease payments over the non-cancelable lease term.

The ROU asset is estimated based on the amount of initial lease liability recorded and adjustment for certain lease-related transactions.

When we estimate the lease liability, we use an incremental borrowing rate(“IBR”) if the implicit rate of the lease is not determinable.

The IBR is estimated by using a recovery rate approach, which includes certain subjective assumptions such as performing a credit analysis on the company, leveraging the corporate default and recovery rates published by a credit rating agency, and using risk-free and undiscounted rates of comparable companies based on our credit analysis.

Changes in the IBR, or the assumptions used to estimate the IBR, may significantly affect the amount of lease liability and ROU asset that we recognize.

Stock-Based Compensation

We measure stock-based compensation for stock options at fair value on the date of grant using the Black-Scholes option-pricing model, which requires the use of the following highly subjective assumptions.

Index to Consolidated Financial Statements

• Expected Term — This is the estimated period that the stock options are expected to be outstanding.

Since we do not have sufficient historical experience for determining the expected term, we derived the expected term based on the simplified method for awards that qualify as plain-vanilla options.

• Expected Volatility — Prior to the Business Combination, we estimated volatility for stock option grants 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 grant’s expected term.

We measure stock-based compensation for stock options at fair value on the date of grant using the Black-Scholes option-pricing model, which requires the use of certain assumptions such as the expected term, expected volatility, risk-free interest rate and expected dividend.

The inputs used in the Black-Scholes option-pricing model are based on subjective estimates.

Additionally, the Black-Scholes option-pricing model requires us to input the fair value of our common stock.

Prior to becoming a public company, we estimated the fair value of our common stock based on the determination of the board of directors, input from management and a contemporaneous valuation analysis from a third-party.

Due to the subjective nature of the inputs used to measure the grant-date fair value of stock options, any changes in those inputs may significantly affect the amount of stock-based compensation expense that we recognize.

• Expected Term — Since we do not have sufficient historical experience for determining the expected term, we derive the expected term based on the simplified method for awards that qualify as plain-vanilla options.

• Expected Volatility — Since we have limited trading history on our common stock, we estimate volatility for stock option grants 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 grant’s expected term.

• Risk-Free Interest Rate — We base the risk-free interest rate on the implied yield available on the U.S.

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• Expected Dividend — We estimate expected dividend yield to be zero because we have not paid dividends in the past and have no plans to pay dividends on our common stock.

The Black-Scholes option-pricing model also requires us to input the fair value of the underlying common stock.

Prior to becoming a public company, we estimated the fair value of our common stock based on the determination of the board of directors, with input from management and contemporaneous valuations from a third-party.

We discuss in further detail below the valuation of our common stock prior to becoming a public company.

We recognize stock-based compensation expense on a straight-line basis over the period from the date of the grant to the date the award is fully vested, which is generally over four years.

We elected to account for forfeitures as they occur.

Common Stock Valuations

Since there was no public market for Legacy Amprius' common stock and Amprius Holdings’ common stock prior to the Business Combination, we estimated the fair value of Legacy Amprius common stock and Amprius Holdings’ common stock based on the determination of their respective board of directors at the date of the stock option grant, with input from their respective management and third-party valuations.

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”).

• Fair Value of Common Stock — For stock option grants made prior to the Business Combination, we estimated the fair value of Legacy Amprius common stock based on the determination of our board of directors at the date of the stock option grant, with inputs from management and third-party valuations.

The third-party valuations were performed in accordance with the American Institute of Certified Public Accountants’ Accounting and

Index to Consolidated Financial Statements

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 Legacy Amprius’ common stock at each valuation date.

The probability-weighed expected return method (“PWERM”) and the Option Pricing Method (“OPM”) were the most appropriate methods for determining the fair value of Legacy Amprius common stock and Amprius Holdings’ common stock based on their respective stage of development and other relevant factors.

In addition to the third-party valuations, the respective board of directors considered various objective and subjective factors to determine the fair value of such common as of each grant date, including:

• the rights, preferences, and privileges of Amprius Holdings’ preferred securities as compared to those of Legacy Amprius common stock and Amprius Holdings’ common stock, including liquidation preferences of Amprius Holdings’ preferred stock;

The probability-weighed expected return method and the Option Pricing Method were the most appropriate methods used for determining the fair value of Legacy Amprius’ common stock.

In addition to the third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of the grant date, including:

• stage of development;

• external market conditions affecting the industry and trends within the industry, including a review of the performance and metrics of guideline public companies;

• the respective company’s financial position, including cash on hand, and historical and forecasted performance and operating results;

• the lack of an active public market for such common stock and Amprius Holdings’ preferred stock;

• the likelihood of achieving a liquidity event, such as a Special Purpose Acquisition Company (“SPAC”) transaction or sale of our company in light of prevailing market conditions;

• financial position, including cash on hand, and historical and forecasted performance and operating results;

• the lack of an active public market for such common stock;

• the likelihood of achieving a liquidity event, such as a “Special Purpose Acquisition Company” transaction or sale of our company in light of prevailing market conditions;

• an analysis of initial public offerings and the market performance of similar companies in the industry.

Valuation of Legacy Amprius' common stock

• Valuation as of March 29, 2022

The valuation as of March 29, 2022 was determined by applying the Hybrid Method, whereby the implied equity value was determined using various scenarios based in part on the latest round of financing of Amprius

Index to Consolidated Financial Statements

Holdings at that time (i.e., Series E-2 convertible preferred stock).

In addition, the following scenarios were also considered at that time:

• Two SPAC term sheet values that we received;

• Backsolve OPM based on Amprius Holdings’ Series E-2 convertible preferred stock financing completed in June 2021;

• A discounted cash flow analysis as of the March 2022 valuation date.

The relative probability of each type of future-event scenario was determined based on management’s best estimate as of the date of valuation, including then-current expectations as to the timing and likely prospects of the future event scenarios.

The two SPAC scenarios were weighted 12.5% each, the Backsolve analysis based on the Series E-2 financing was weighted 25%, and the discounted cash flow analysis was weighted 50%.

The weighted average implied equity value was then used to determine the common stock value based on an OPM.

Valuation of Amprius Holdings' common stock

• Valuation as of June 30, 2021

The valuation as of June 30, 2021 was determined based on both a market approach and an income approach, applying weightings to each value to arrive at an equity value estimate.

In addition, consideration was given to the implied equity value from the Backsolve analysis based on Amprius Holdings’ Series E-2 financing at that time.

The two market approaches were weighted a combined 37.5%, the discounted cash flow analysis was weighted 12.5%, and the Backsolve analysis based on the Series E-2 financing was weighted 50%.

The weighted average implied equity value was then used to determine the common stock value based on an OPM.

• Valuation as of March 29, 2022

Subsequent to Amprius Holdings’ divestiture of its subsidiaries in early 2022, its only assets were the shares of Legacy Amprius common stock it owned and cash.

As such, the estimated fair value of Amprius Holdings common stock was adjusted based on the analysis performed for Legacy Amprius, making an adjustment for cash to value the equity based on an asset-based approach.

This value was then allocated to the securities in the capital structure based on an OPM, in order to estimate the value of the common stock in Amprius Holdings as of the valuation date.

For purposes of determining the fair value of stock option grants in December 2021, Amprius Holdings adjusted the March 29, 2022 in order to derive an interpolated value by taking into consideration that its three subsidiaries had not been divested at that time.

After becoming a public company, our Board of Directors determines the fair value of our common stock based upon the closing market price as reported on the NYSE.

Carve-out Basis of Historical Financial Statements

Prior to the Business Combination, our financial statements were presented on a carve-out basis using our historical results of operations and historical basis of assets and liabilities derived from the accounting records of Amprius Holdings and adjusted as necessary to conform with U.S.

Those carve-out basis financial statements include certain general and administrative expenses that were allocated to us from Amprius Holdings.

Those allocations were based on estimates, and if those estimates were not accurate or not complete, the amounts reported on our historical balance sheet and statements of operations prior to the Business Combination may not be reasonable.

We believe that the assumptions we used were reasonable and consistently applied for the periods presented prior to the Business Combination.

Recent Accounting Pronouncements

See Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.

Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide information under Item 7A.

Index to Consolidated Financial Statements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis