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RISK FACTORS

New Amprius will face a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares. You should also read and consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus.

Risks Related to Amprius

The following risk factors will apply to the business and operations of New Amprius following the Closing. These risk factors are not exhaustive, and investors are encouraged to perform their own investigation with respect to the business, financial condition, prospects and results of operations of New Amprius following the Closing. Unless the context otherwise requires, all references in this subsection “—Risks Related to Amprius” to “we,” “us” or “our” refer to Amprius.

Risks Related to Our Technology, Products and Manufacturing

If our batteries fail to perform as expected, our ability to develop, market and sell our batteries would be adversely affected.

Our batteries may contain defects in design and manufacture that may cause them to not perform as expected or that may require repairs, recalls and design changes. Our batteries are inherently complex and incorporate technology and components that have not been used for certain applications and that may contain defects and errors, particularly when first introduced to such applications. Although our batteries undergo quality control testing prior to release for shipment, there can be no assurance that we will be able to detect and fix all defects prior to shipment, and nonconformances, defects or errors could occur or be present in batteries that we release for shipment to customers. If our batteries fail to perform as expected, our customers may delay deliveries, our customer may terminate orders or we may initiate product recalls, each of which could adversely affect our sales and brand and could adversely affect our business, financial condition, prospects and results of operations.

Our battery architecture is different from our peers’ and may behave differently in customer use applications, certain applications of which we have not yet evaluated. This could limit our ability to deliver to certain applications. In addition, our historical data on the performance and reliability of our batteries is limited, and therefore our batteries could fail unexpectedly in the field resulting in significant warranty costs or brand damage in the market. Further, the silicon nanowire anode structure of our battery is different from traditional lithium-ion batteries and therefore our batteries could be susceptible to different and unknown failure modes leading our batteries to fail and cause a safety event in the field. Such an event could result in the failure of our end customers’ product as well as the loss of life or property, resulting in severe financial penalties for us, including the loss of revenue, cancelation of supply contracts and the inability to win new business due to reputational damage in the market. In addition, some of our supply agreements require us to bear certain costs relating to recalls and replacements of end products when such recalls and replacements are due to defects of our battery products that are incorporated in such end products.

We may not succeed in developing a new high-volume manufacturing line that meets our requirements for cell quality, yield, throughput and other performance metrics. Additionally, assuming we are able to develop a high-volume manufacturing line, it may be unreliable, require regular and significant maintenance and could be capital and resource intensive to operate.

To date, we have manufactured on a kWh-scale capacity. Our ability to manufacture our batteries at scale depends on the successful development of an automated, high-volume manufacturing line for our silicon

 

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nanowire anode that meets our requirements for cell quality, throughput, yield, and other performance metrics. Currently, we do not have a manufacturing line capable of producing our silicon nanowire anode batteries at scale. As part of our manufacturing expansion plans, in addition to designing and building a GWh-scale manufacturing facility, we are in the process of developing an automated, high-volume manufacturing line. Although we have tested and validated the performance of our silicon nanowire anode on one supplier’s platform, there is no guarantee that the development and implementation of this manufacturing line will be successful. We, our potential suppliers and other equipment vendors may encounter significant engineering challenges, performance issues, delays, unforeseen development costs and other obstacles in building the high-volume manufacturing line, and if we are not successful, or if we encounter significant delays, our business, financial condition, prospects and results of operations would be adversely affected.

In addition, in order for us to produce our batteries at scale and at a cost advantage, we must achieve levels of cell quality, throughput, and yield demonstrated for mature battery production. As we have not produced our batteries at scale, our ability to achieve such rates is untested and subject to significant constraints and uncertainties. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components of our batteries in a timely manner and at prices and volumes acceptable to us, environmental hazards and remediation costs, costs associated with commissioning of machines, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fires, seismic activity and natural disasters, and problems with equipment vendors. Should operational risks materialize, they may result in lower yield, which would negatively affect our revenue growth and profitability.

Additionally, the development of the manufacturing line will require us to make intensive capital expenditures before we are able to benefit from such development. The manufacturing line may also suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Further, unexpected equipment malfunctions may significantly affect the intended operational efficiency, thus materially and adversely affecting our business, financial condition, prospects and results of operations.

We may not meet our manufacturing cost targets, which would limit the size of our market opportunities.

We will require significant capital to develop and grow our business and expect to incur significant expenses, including those relating to the expansion of our manufacturing capacity, development of our high-volume manufacturing line, raw material procurement, leases, sales and distribution as we build our brand and market our batteries, and general and administrative costs. Our profitability will not only depend on our ability to successfully market our batteries, but also our ability to control our costs. Some of the processes in the manufacturing of our silicon nanowire anodes require CVD, for which equipment is more costly than those involved in standard anode production techniques. If we are unable to cost efficiently design, manufacture, market, sell and distribute our batteries, our margins, profitability and prospects would be materially and adversely affected. We have not yet commenced high-volume production of our batteries, and any cost advantage for the production of our batteries at scale, compared to conventional lithium-ion batteries, will require us to manufacture at rates of cell quality, throughput, and yield demonstrated for mature batteries and battery material that we have not yet achieved. If we are unable to achieve these targeted rates, our business will be adversely impacted.

We rely on, and will continue to rely on, complex equipment for our operations, and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.

We rely heavily on, and will continue to rely heavily on, complex equipment for our operations and the production of our batteries, which involves a significant degree of uncertainty and risk in terms of operational performance and costs. Our manufacturing equipment consists of many components, which may suffer unexpected malfunctions from time to time and may depend on repairs and spare parts to resume operations,

 

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which may not be available when needed. Problems with our manufacturing equipment could result in the loss of manufacturing equipment, damage to manufacturing facilities, monetary losses, delays, unanticipated fluctuations in production and personal injury to or death of workers. Should these precautions be inadequate or an event be larger than expected, we could have significant equipment or facility damage that would impact our ability to deliver our battery products and require additional cash to recover. In addition, in some cases, operational problems may result in environmental damage, administrative fines, increased insurance costs and potential legal liabilities. Any of these operational problems, or a combination of them could have a material adverse effect on our cash flows, business, financial condition, prospects or results of operations.

Furthermore, manufacturing technology may evolve rapidly, and we may decide to update our manufacturing processes more quickly than expected. Moreover, as we scale the commercial production of our batteries, our experience may cause us to discontinue the use of already installed equipment in favor of different or additional equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations could be negatively impacted.

Our establishment of a volume manufacturing facility is subject to many risks, including, among others, risks relating to site acquisition, construction, permitting, delays, cost overruns, supply chain constraints, and operating in a new geographic area away from our current headquarters.

We currently operate only at a kWh-scale manufacturing capacity. As part of our manufacturing expansion plans, we plan to design and build a GWh-scale manufacturing facility for our batteries, concurrently with the development of our high-volume manufacturing line for our silicon nanowire anode. We may not be successful in establishing our GWh-scale manufacturing facility. To date, we have commenced site selection for the new facility, but we have not yet secured a location or obtained the necessary licenses or permits for the manufacturing facility. In connection with the construction of the facility, we will need to identify and acquire the land or obtain leases for a suitable location appropriately zoned for activities involving hazardous materials, which will limit where we are able to locate the facility and may require us to pay a premium. In addition, we will need to operate the manufacturing facility in a new geographic area away from our current headquarters. If we fail to select an appropriate location, fail to complete the construction in an efficient manner, or fail to recruit the required personnel and generally manage our growth effectively, large-scale production of our batteries could be curtailed or delayed. Further, because our silicon nanowire anode process requires different equipment than traditional anode manufacturing, our capital equipment costs are likely to be higher than equipment used for production of graphite anodes. Based on our current expectations, we estimate that our capital equipment expenditures will range between $120.0 million and $150.0 million to achieve 1.0 GWh per year of manufacturing capacity, and that it will take approximately two years following the Closing to start volume manufacturing. The actual costs and time to complete our silicon nanowire process may materially exceed such estimates, if we are able to at all. Even if we are successful in the establishment of the new facility, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, supply chain constraints, natural disasters, including earthquakes, fire, floods and typhoons, power failures, telecommunications failures, break-ins, war, riots, terrorist attacks and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy, or cause the loss or corruption of data or malfunctions of software or hardware, and have a material adverse effect on our business.

We may not succeed in retaining and attracting key employees, particularly technical talent, needed to operate and build our business successfully.

Our success depends on our ability to attract and retain our executive officers, key employees and other qualified personnel, particularly technical talent, and as a relatively small company with key talent residing in a limited number of employees, our operations and prospectus may be severely disrupted if we lost their services. In particular, we are highly dependent on the services of Dr. Kang Sun, our Chief Executive Officer, and other senior technical and management personnel, including our executive officers, who would be difficult to replace.

 

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If Dr. Sun or any other key personnel were to depart, we may not be able to successfully attract and retain senior leadership necessary to grow our business. As we build our brand and becomes better known, there is increased risk that competitors or other companies will seek to hire our personnel. The failure to attract, integrate, train, motivate and retain these personnel could seriously harm our business and prospects.

In addition, large-scale production in our new manufacturing facility will require us to hire and train highly-skilled personnel to operate the facility, including engineers, skilled workers and other laborers, and we may not be able to do so in the location at which our new manufacturing facility will be located. Recruiting and training such skilled staff will take significant cost and time, and an inability to do so timely or at all will inhibit the successful operation of the new manufacturing facility, thus negatively affecting our business.

Certain of our officers and other employees provide services to Amprius, Inc. and other entities formerly affiliated with Amprius, Inc.

Certain of our officers and other employees provide services to Amprius, Inc. Also, Dr. Kang Sun, our Chief Executive Officer, serves on the boards of certain entities that were formerly affiliated with Amprius, Inc. As a result, there could be competition for the time and effort of these individuals. If such officers and other employees do not devote sufficient attention to the management and operation of our business, our financial results may suffer.

We may be unsuccessful in transitioning certain services from Amprius, Inc. to us.

In connection with the Business Combination, we are transitioning certain administrative services and other functions from Amprius, Inc. to us. We may be unsuccessful in implementing this transition and performing these functions on our own, or engaging third parties to provide such services and may pay more for such services than we paid to Amprius, Inc. We could also suffer disruptions to our operations as we make the transition, which could delay the scale up our manufacturing capacity and have an adverse effect on our business, financial condition and results of operations.

We may encounter delays and technical obstacles in developing new battery products such as different cell formats to meet varied market requirements.

Our customers often require unique battery configurations or custom designs for their products. Once we enter into contracts with customers to produce batteries for their products, we expect to tailor the design of our batteries specifically to the products that these customers manufacture. This development process requires not only substantial lead time between the commencement of design efforts for customized batteries and the commencement of volume shipments of the battery cells to the customer, but also the cooperation and assistance of the customer in order to determine the requirements for each specific application. Technical problems may arise that affect the acceptance of our battery products by the customers. Our ability to tailor our batteries to meet the needs of our customers is affected by whether we can, amongst other things:

 

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receive and maintain necessary intellectual property protections;

 

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obtain governmental approvals and registrations;

 

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comply with governmental regulations;

 

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further develop and refine our technology; and

 

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anticipate customer needs and preferences successfully.

If we are unable to design and develop new battery products that meet our customers’ requirements, we may lose opportunities to obtain purchase orders, and our reputation and prospects may be damaged.

 

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Certain components of our batteries are hazardous and pose safety risks that may cause accidents in our manufacturing facility. We may be subject to financial and reputational risks due to product recalls and product liability claims, and we could face substantial liabilities that exceed our resources.

Due to the high energy density inherent in lithium-ion batteries, our batteries can pose certain safety risks, including the risk of fire. Accidents causing death or personal injury or property damage, can occur, and no high energy density battery will ever be 100% safe. For example, under certain abuse conditions, lithium-ion batteries can go into thermal runaway, which can result in fire. Although we incorporate safety procedures in the research, development, manufacture and transportation of batteries that are designed to minimize safety risks, the manufacture or use of our battery products may still cause accidents. Any accident, whether occurring at our manufacturing facilities or from the use of our battery products, may result in significant production interruption, delays or claims for substantial damages caused by personal injuries or property damage.

In addition, due to the harsh environments in which batteries are used—extremely low temperature and pressure, and combat for military applications—our batteries go through rigorous testing to ensure safe behavior under abuse-case conditions. Although such tests been successful to date, we cannot assure you such tests will be successful in the future. If we have to make design changes to address any safety issues, we may have to delay or suspend our planned production, which could materially damage our brand, business, financial condition, prospects and results of operations.

Product liability claims, even those without merit or those that do not involve our battery products, could harm our business, financial condition, prospects and results of operations.

A successful product liability claim against us, resulting from safety issues or otherwise, could require us to pay a substantial monetary award. We may not be able to cover any substantial monetary judgment against us. Moreover, a product liability claim against us or our competitors could generate substantial negative publicity about our battery products and could have a material adverse effect on our brand, business, financial condition, prospects and results of operations.

We may not be able to accurately estimate the future supply and demand for our batteries, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.

We anticipate being required to provide forecasts of our demand to our current and future suppliers prior to the scheduled delivery of products to potential customers. Currently, there is limited historical basis for making judgments on the demand for our batteries and our ability to develop, manufacture, and deliver our battery products. Our customers’ final purchase orders may not be consistent with our estimates. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs and result in unprofitable sales or write-offs. Given that our batteries are often customized to meet our customers’ specifications, they are susceptible to obsolescence due to their limited shelf life. Because we have no history of large-scale production, we may also be unable to forecast accurately the pace of manufacturing or the take-up of our battery products by our customers.

If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt manufacturing of our battery products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of battery components in a timely manner, the delivery of our batteries to our potential customers could be delayed, which would harm our business, financial condition and results of operations. Producing additional battery products to make up for any shortages within a short time frame may be difficult, making us unable to fulfill the purchase orders, especially due to the customized nature of our batteries. In either case, our business, financial condition, prospects and results of operations may be adversely affected.

 

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We may not be able to establish supply relationships for necessary materials, components or equipment or may be required to pay more than anticipated for components or equipment, which could negatively impact our business.

We rely on third-party suppliers for components necessary to develop and manufacture our batteries, including key supplies such as our silane gas, substrate foil, electrolytes, separators, and cathode materials. We face risks relating to the availability of these materials and components, including that we will be subject to demand shortages and supply chain challenges and generally may not have sufficient purchasing power to eliminate the risk of price increases for the raw materials and lines we need. For example, we expect to procure the silane gas needed for our manufacturing from REC Silicon ASA, a global supplier of silane and silicon materials; however, we expect that they will be unable to supply the volume required for highly scaled production. We are also in the process of collaborating with other key suppliers but have not yet entered into agreements for the supply of scaled production quantities of these materials. To the extent that we are unable to enter into commercial agreements with these suppliers on beneficial terms, or these suppliers experience difficulties ramping up their supply of materials to meet our requirements, high-volume production of our batteries will be delayed and we will not be able to meet our production timelines.

Separately, we may be subject to various supply chain requirements regarding, among other things, conflict minerals and labor practices. We may be required to incur substantial costs to comply with these requirements, which may include locating new suppliers to replace existing ones. We may not be able to find any new suppliers for certain raw materials or components required for our operations, or such suppliers may be unwilling or unable to provide us with products.

We expect to incur significant costs related to procuring materials required to manufacture and assemble our batteries. We expect to use various materials in our batteries that will require us to negotiate purchase agreements and delivery lead-times on advantageous terms. We may not be able to control fluctuation in the prices for these materials or negotiate agreement with suppliers on terms that are beneficial to us. Substantial increases in the prices for our raw materials, or our inability to reduce our raw material costs as we scale, would negatively impact our prospects.

Any disruption in the supply of components or materials could temporarily disrupt research and development activities or production of our batteries until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Any of the foregoing could materially and adversely affect our business, financial condition, prospects and results of operations.

We are actively monitoring the impacts of Russia’s invasion of Ukraine and continuing to assess its potential to adversely affect our business. 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. To date, we have not experienced any material disruption in our business. Accordingly, we have not yet taken measures to mitigate potential adverse effects of such conflict. However, the length and outcome of Russia’s invasion of Ukraine is highly unpredictable. The conflict may continue to cause significant market and other disruptions, including significant volatility in commodity prices, supply of components and supply chain interruptions, which could adversely and adversely affect our business, financial condition, prospects and results of operations.

Currency fluctuations, geopolitics, trade barriers, embargoes, tariffs or shortages and other general economic or political conditions may limit our ability to obtain key components for our batteries or significantly increase freight charges, raw material costs and other expenses associated with our business, which could further materially and adversely affect our business, financial condition, prospects and results of operations.

 

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Risks Related to Our Business and Industry

The battery market is intensely competitive. Competitors include new entrants and established companies, many of which have significantly greater resources than us. Our battery products must compete with advances in new battery chemistries and manufacturing methods as well as continued improvements in conventional batteries and battery anodes.

The battery market in which we compete continues to evolve rapidly and is highly competitive. To date, we have focused our efforts on our silicon nanowire technology, which is designed to outperform conventional lithium-ion battery technology and other battery technologies. However, lithium-ion battery technology has been widely adopted and our current competitors have, and future competitors may have, greater resources than us and may also be able to devote greater resources to the development of their current and future technologies. These competitors also may have greater access to customers and may be able to establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and competitive positioning. In addition, lithium-ion battery manufacturers may make improvements in energy density faster than they have historically, continue to reduce cost and expand supply of conventional batteries and therefore reduce our energy density advantage and price premium, which would negatively impact the prospects for our business or negatively impact our ability to sell our battery products at a market-competitive price and sufficient margins.

There are a number of companies seeking to develop alternative approaches to lithium-ion battery technology. We expect competition in battery technology to intensify. Developments in alternative technologies or improvements in batteries technology made by competitors may materially adversely affect the sales, pricing and gross margins of our batteries. If a competing technology is developed that has superior operational or price performance, our business will be harmed. If we fail to accurately predict and ensure that our battery technology can address customers’ changing needs or emerging technological trends, or if our customers fail to achieve the benefits expected from our silicon nanowire technology, our business will be harmed.

We expect to commit significant resources to scale our battery manufacturing capacity and maintain a competitive position, and these commitments may be made without knowing whether such investments will result in products potential customers will accept. There is no assurance we will successfully identify new customer requirements, develop and bring our batteries to market on a timely basis, or that products and technologies developed by others will not render our batteries obsolete or noncompetitive, any of which would adversely affect our business, financial condition and results of operations.

Customers will be less likely to purchase our batteries if they are not convinced that our business will succeed in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed in the long term. Accordingly, in order to build and maintain our business, we must maintain confidence among current and future partners, customers, suppliers, analysts, ratings agencies and other parties in our long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history, market unfamiliarity with our battery products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition and uncertainty regarding our production and sales performance compared with market expectations.

Our future sales opportunities depend in part on the growth of markets for battery-powered aviation applications. These applications may develop slower or at a size that is less than expected, to the extent they develop at all.

Our growth and future demand for our battery products is dependent in part upon the adoption by consumers of alternative fuel vehicles in general and battery-powered aviation applications in particular. The market for new energy vehicles is still evolving, characterized by changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards, and changing consumer demands and behaviors.

 

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Market estimates and growth forecasts are also subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. For example, if the assumptions that we base our market forecasts on, including the continued development and availability of high performance batteries at a competitive price point, OEM investment in aircraft and software, consumer preference and, with respect to electric air transportation, regulatory approval and the requisite infrastructure, are incorrect, this expected growth may occur slower than expected, if it occurs at all. If the market for battery-powered applications in general does not develop as expected, or develops more slowly than expected, our business, financial condition, prospects and results of operations could be harmed.

Developments in alternative technology or other fossil fuel alternatives may adversely affect the demand for our battery products.

Significant developments in alternative technologies, such as fuel cell technology, advanced diesel, ethanol or natural gas, or breathing batteries, may materially and adversely affect our business, financial condition, prospects and results of operations in ways that we may not currently anticipate. Existing and other battery technologies, fuels or sources of energy may emerge as customers’ preferred alternatives to our battery products. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced alternative products, which could result in decreased revenue and adversely affect our prospects.

Our research and development efforts may not be sufficient to adapt to changes in alternative fuels or aviation and EV technology. As technologies evolve, we plan to develop more efficient manufacturing process, and advanced battery chemistry, which may also negatively impact the adoption of our other battery products. However, we may not compete effectively with alternative systems if we are not able to develop, source and integrate the latest technology into our battery products.

We have pursued and may continue to pursue development agreements and other strategic alliances, which could have an adverse impact on our business if they are unsuccessful.

We have entered into development agreements and master supply agreements with certain of our customers, and may in the future enter into similar arrangements and development agreements with our customers, including with Airbus and the U.S. Army. While offering potential benefits, these strategic alliances with OEMs and others could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by our partners and costs of establishing and maintaining new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of our partners and, to the extent any of them suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with them. For example, if we rely on our partners’ manufacturing facilities, those operations would be outside of our control. We could experience delays if our partners do not meet agreed-upon timelines or experience capacity constraints, and in turn, we could lose customers and face reputational harm.

Our ability to grow will depend, in part, on our ability to contract with aviation and EV OEMs to incorporate our batteries in their products, which will require significant time and expense, and may not come to fruition.

Our success, and our ability to increase revenue and operate profitably, depends in part on our ability to contract with aviation and EV OEMs. This process will require significant time and resources, especially for incorporation into EVs. For example, EV manufacturers frequently require several years of evaluation prior to incorporating new products, like our batteries, into their EVs. This evaluation process includes, among other things, extensive safety and abuse tests, performance tests and cost modeling. We have not begun this process with any EV manufacturers. Thus, our efforts to expand our manufacturing and sales to OEMs may not be successful, and may never result in products that achieve market acceptance, create additional revenue or become profitable, thus harming our business, financial condition, prospects and results of operations.

 

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Our research and development efforts strive to create products that are on the cutting edge of technology and meeting the evolving requirements of our customers, but competition in our industry is high. To secure acceptance of our battery products, we must also constantly develop and introduce cost-effective, increasingly more scalable silicon nanowire batteries with enhanced functionality and performance to meet evolving industry standards. If we are unable to retain and grow our existing customer relationships, or convert early trial deployments into meaningful orders, our business, financial condition, prospects and results of operations could be materially adversely affected.

If existing customers do not make subsequent purchases from us or renew their contracts with us, our revenue could decline, and our results of operations would be adversely impacted.

We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments of our existing customers is an important part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy.

For our customers who individually represent 10% or more of period revenue, our top two customers together represented 80% of our revenue for the year ended December 31, 2021, our top three customers together accounted for 95% of our revenue for the year ended December 31, 2020, our top four customers together represented 84% of our revenue for the six months ended June 30, 2022 and our top two customers together represented 85% of our revenue for the six months ended June 30, 2021. Certain of our customers, including customers that represent a significant portion of our business, have in the past reduced their spend with us or terminated their agreements with us, which has reduced our anticipated future cash receipts or revenue from these customers. It is not possible for us to predict the future level of demand from our larger customers for our battery products, and there can be no assurance that our existing customers will continue to purchase from us.

Achieving renewal or expansion of deployments may require us to increasingly engage in sophisticated and costly sales efforts that may not result in additional sales. In addition, our customers’ decisions to expand the use of our battery products depends on a number of factors, including general economic conditions, the functioning of our batteries, and our customers’ satisfaction with our battery products. If our efforts to expand within our existing customer base are not successful, our business may suffer.

We may require additional capital to support business growth, and this capital might not be available on commercially reasonable terms or at all.

We may need additional capital before we commence production at scale, and it may not be available on acceptable terms, if at all. For example, our capital budget assumes, among other things, that (i) Kensington will satisfy the Minimum Cash Condition, which is a condition that we may choose to waive if not satisfied, and (ii) our development timeline progresses as planned and our corresponding expenditures are consistent with current expectations, both of which are subject to various risks and uncertainties, including those described herein. To date, Kensington has not received any commitments from any PIPE Investors.

More specifically, we expect our capital expenditures and working capital requirements to increase materially in the near future, as we design our automated, high-volume manufacturing line and scale up production. Through this process, we expect our operating expenses will increase substantially on account of increased headcount and other general and administrative expenses necessary to support a rapidly growing company.

As a result, we may need to access the debt and equity capital markets to obtain additional financing in the future. However, these sources of financing may not be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to a number of factors, including:

 

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market conditions;

 

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the level of success with our current manufacturing capabilities;

 

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our operating performance;

 

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investor sentiment; and

 

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our ability to incur additional debt in compliance with any agreements governing our then-outstanding debt.

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 are impossible to predict, but could be material.

These factors may make the timing, amount, terms or conditions of additional financings unattractive to us. If we raise additional funds by issuing equity, equity-linked or debt securities, those securities may have rights, references or privileges senior to the rights of our currently issued and outstanding equity or debt, and our existing stockholders may experience dilution. If we are unable to generate sufficient funds from operations or raise additional capital, we may be forced to take actions to reduce our capital or operating expenditures, including by eliminating redundancies, or reducing or delaying our production facility expansions, which may adversely affect our business, financial condition, prospects and results of operations.

Our future growth and success depend in part on our ability to grow our customer base and effectively sell to a wide variety of customers.

Our potential customers are manufacturers of products that tend to be large enterprises or governmental agencies. Therefore, our future success will depend on our ability to grow our customer base and effectively sell to a wide variety of customers. Sales to these end-customers involve risks that may not be present (or that are present to a lesser extent) with sales to smaller customers. These risks include, but are not limited to, (i) increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us and (ii) longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our solutions.

Large organizations often undertake a significant evaluation process that results in a lengthy sales cycle. In addition, product purchases by large organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. Finally, large organizations typically have longer implementation cycles, require greater product functionality and scalability, require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead to a delay in revenue recognition and expect greater payment flexibility. All of these factors can add further risk to business conducted with these potential customers.

In addition, if we were unable to maintain or increase our customer retention rates or generate new customers in a cost-effective manner, our business, financial condition and results of operations would likely be adversely affected. We cannot assure you that we will be able to maintain or grow our customer base in a cost-effective way. If we are unable to develop high quality products at scale, or introduce new products, we may fail to attract new customers or lose our existing customers, which could adversely affect our growth and profitability.

 

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Our business model has yet to be tested and any failure to realize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

There is additional risk associated with new enterprises like Amprius, that are encountering new challenges and issues for the first time, many of which are beyond our control, including substantial risks and expenses in the course of establishing or entering new markets, organizing operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business plan will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the capital requirements of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenue to cover expenditures. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.

It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our business, financial condition, prospects and results of operations could be materially affected.

We are an early stage company with a history of financial losses and expect to incur significant expenses and continuing losses for the foreseeable future.

We incurred a net loss of approximately $9.9 million and $7.0 million during the year ended December 31, 2021 and the six months ended June 30, 2022, respectively. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin scaled production of our batteries.

We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things: continues to incur significant expenses in connection with building out our high-volume manufacturing facility and manufacturing line; hiring the experienced scientific, quality-control, and manufacturing personnel needed to operate our scaled manufacturing processes; building up inventories of components for our batteries; increasing our sales and marketing activities; develop our distribution infrastructure; and increasing our general and administrative functions to support our growing operations. We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.

Our history of recurring losses and anticipated expenditures raise substantial doubts about our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.

We have incurred operating losses to-date and it is possible we will never generate profit. We have concluded that substantial doubt exists regarding our ability to continue as a going concern for 12 months following the issuance of our interim unaudited condensed financial statements included elsewhere in this proxy statement/prospectus. Our unaudited condensed financial statements included elsewhere in this proxy statement/prospectus have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties related to our ability to operate on a going concern basis.

If we are unable to raise sufficient capital when needed, our business, financial condition and results of operations will be materially and adversely affected, and we will need to significantly modify our operational

 

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plans to continue as a going concern. If we are unable to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. Our lack of cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relations with third parties due to concerns about our ability to meet our contractual obligations.

If we fail to effectively manage our future personnel growth, we may not be able to market and sell our batteries successfully.

Our future success depends upon our ability to grow, and if we are unable to manage our personnel growth effectively, we may incur unexpected expenses and be unable to meet our eventual customers’ requirements, all of which could materially adversely affect our business, financial condition, prospects and results of operations. To manage our current and anticipated future growth effectively, we must continue to maintain and enhance our infrastructure, financial and accounting systems and controls. We must also attract, train and retain a significant number of scientists, engineers, sales and marketing personnel, technical and manufacturing personnel and management personnel, and the availability of such personnel may be constrained. For more information, see “—We may not succeed in retaining and attracting key employees, particularly technical talent, needed to operate and build our business successfully.”

As we continue to grow, including from the integration of employees and businesses acquired in connection with future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our profitability and our ability to retain and recruit qualified personnel who are essential for our future success. If we do not effectively manage our growth, we may not be able to execute on our growth plan, respond to competitive pressures, take advantage of market opportunities, satisfy customer requirements or manufacture high-quality battery products. Additionally, we may not be able to expand and upgrade our infrastructure to accommodate future growth.

Failure to effectively manage our growth could also lead us to over-invest or under-invest in development and operations; result in weaknesses in our infrastructure, systems or controls; give rise to operational mistakes, financial losses, loss of productivity or business opportunities; and result in loss of employees and reduced productivity of remaining employees. Our growth is expected to require significant capital expenditures, which may lower our earnings, and may divert financial resources from other projects such as the development of new products and services. If we are unable to manage our growth effectively, our expenses may increase more than expected, our revenue may not increase or may grow more slowly than expected and we may be unable to implement our business strategy.

We have been, and may in the future be, adversely affected by the global COVID-19 pandemic and/or any other pandemic.

We face various risks related to epidemics, pandemics and other outbreaks, including the recent COVID-19 pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. If a significant portion of our workforce is unable to work due to COVID-19 illness, quarantine or other government restrictions in connection with COVID-19, our operations may be negatively impacted. The spread of COVID-19 has also impacted our potential customers and suppliers by disrupting the manufacturing, delivery and overall supply chain of battery and device manufacturers. As a result, the effects of the COVID-19 pandemic could impact the availability of materials and resources necessary for our operations.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business

 

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shutdowns. For example, some employees at our headquarters located in Fremont, California were subject to a stay-at-home order from the state government for a period of time. These measures have and may continue to adversely impact our employees and operations and the operations of our suppliers, vendors and business partners, and may negatively impact our sales and marketing activities. In addition, various aspects of our business cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and could adversely affect our future manufacturing plans, sales and marketing activities, business and results of operations. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, suppliers, vendors and business partners.

The extent to which the COVID-19 pandemic continues to impact our business, financial condition, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Even 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 recession that has occurred or may occur in the future.

There are no comparable recent events that may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain.

Certain members of our management do not have experience in operating a public company.

Certain of our executive officers do not have experience in the management of a publicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the policies, practices or internal controls over financial reporting required of public companies in the United States. As a result, we may be required to pay higher outside legal, accounting or consulting costs than our competitors, and our management team members may have to devote a higher proportion of their time to issues relating to compliance with the laws applicable to public companies, both of which might put us at a disadvantage relative to competitors.

We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.

We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is likely that we will expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we have created, or will create, new Board committees and adopted, or will adopt, new internal controls and disclosure controls and procedures. In addition, we will incur expenses associated with SEC reporting requirements. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over

 

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financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of us. It will also be more expensive to obtain director and officer liability insurance. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to spend money that could otherwise be used on our research and development programs and to achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

Our insurance coverage may not be adequate to protect us from all business risks.

We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God, and other claims against us, for which we may have no insurance coverage. As a general matter, the policies that we do have may include significant deductibles or self-insured retentions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our business, financial condition and results of operations.

Our auditors identified material weaknesses in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our stock price, business and operating results.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner. In connection with the audit of our financial statements for the year ended December 31, 2021, our auditors identified two material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The first material weakness related to us not designing or maintaining an effective control environment specific to the areas of our financial reporting and close process, including ineffective review, analysis and approval of journal entries and ineffective review of monthly financial statements. This material weakness resulted in misstatements that were corrected prior to the completion and issuance of our audited financial statements.

The second material weakness related to inadequate segregation of incompatible duties due to the small size of our accounting and finance team.

In order to address these identified material weaknesses, we are in the process of increasing resources within our finance department, including the expansion of our accounting, control and compliance functions to develop and implement continued improvements and enhancements to address the overall deficiencies that led to the material weaknesses. Our management believes that these actions will enable us to address the material weaknesses that were identified in a timely manner and maintain properly designed and effective system of internal control over financial reporting and provide appropriate segregation of duties. However, these remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify. We cannot assure you that the measures we have taken to date and may take in the future, will be sufficient to remediate the control deficiencies that led to

 

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our material weaknesses in internal control over financial reporting or that it will prevent or avoid potential future material weaknesses. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If we are unable to remediate the material weaknesses, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the forms of the SEC, could be adversely affected which, in turn, to may adversely affect our reputation and business and the market price of New Amprius’ common stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.

In addition, it is possible that control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified. Such a failure could result in regulatory scrutiny and cause investors to lose confidence in our reported financial condition, lead to a default under future indebtedness and otherwise have a material adverse effect on our business, financial condition, cash flow or results of operations.

As a public company, New Amprius will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting for future annual reports on Form 10-K to be filed with the SEC. This assessment will need to include disclosure of any material weaknesses identified by New Amprius’ management in its internal control over financial reporting. Eventually, it is possible that New Amprius’ independent registered public accounting firm will also be required to audit the effectiveness of its internal control over financial reporting in future annual reports on Form 10-K to be filed with the SEC. New Amprius will be required to disclose changes made in its internal control over financial reporting on a quarterly basis. Failure to comply with the Sarbanes-Oxley Act could potentially subject New Amprius to sanctions or investigations by the SEC, the applicable stock exchange or other regulatory authorities, which would require additional financial and management resources. We have begun the process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 in the future, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion.

New Amprius’ ability to utilize its net operating losses, tax credit carryforwards, and certain other tax attributes to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If Amprius has experienced an ownership change at any time since its incorporation, New Amprius may already be subject to limitations on its ability to utilize Amprius’ existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, the Business Combination and future changes in New Amprius’ stock ownership, which may be outside of New Amprius’ control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit New Amprius’ use of accumulated state tax attributes. As a result, even if New Amprius earns net taxable income in the future, its ability to use its or Amprius’ pre-change NOL carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to New Amprius. Further, because Amprius and Amprius, Inc. were members of a consolidated group for U.S. federal income tax purposes up to the Effective Date of the Business Combination, NOLs and other tax attributes of Amprius are available to be utilized by any member of the consolidated group. Accordingly, Amprius’ existing NOLs and other tax attributes may not be available to offset future income tax liabilities.

There is also a risk that changes in law or regulatory changes made in response to the need for some jurisdictions to raise additional revenue to help counter the fiscal impact from the COVID-19 pandemic or for

 

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other unforeseen reasons, including suspensions on the use of net operating losses, tax credits, and other tax attributes, possibly with retroactive effect, may result in New Amprius and Amprius’ existing net operating losses, tax credits, or other tax attributes expiring or otherwise being unavailable to offset future income tax liabilities. Also, starting in fiscal year 2022, the Tax Cuts and Jobs Act requires taxpayers to capitalize research and development expenditures and to amortize domestic expenditures over five years and foreign expenditures over 15 years. If Congress does not modify or repeal this provision, it may result in the acceleration of future taxable income (and associated income tax liabilities) for New Amprius, beginning in fiscal year 2022. Any resulting income tax liabilities may reduce New Amprius’ cash flows beginning in fiscal year 2022.

The Internal Revenue Service (“IRS”) or other taxing authority could assert income tax liability against Amprius, notwithstanding the provisions of the Tax Sharing Agreement.

Under the Tax Sharing Agreement between Amprius and Amprius, Inc., Amprius, Inc. generally would be required to indemnify Amprius for the U.S. federal income tax liabilities of the U.S. federal consolidated group of which Amprius, Inc. and Amprius are members (and any similar consolidated, combined or unitary tax group for state tax purposes) for taxable periods prior to (and including) the Effective Date of the Business Combination (a “Consolidated Return Year”). The Tax Sharing Agreement also provides that Amprius, Inc. will generally control any tax returns and any tax audits or other proceedings for the taxes addressed by the Tax Sharing Agreement. However, the Tax Sharing Agreement is not binding on the IRS or other state taxing authority, and does not prevent the IRS or other state taxing authority from asserting a tax claim against Amprius or New Amprius for any unpaid income tax liabilities of Amprius or Amprius, Inc. for any Consolidated Return Year. If that were to occur, Amprius would be required to seek indemnification against Amprius, Inc. for payment of any amounts on such claims, and Amprius, Inc.’s ability to satisfy such claims may depend on whether Amprius, Inc. is able to sell sufficient shares of New Amprius to satisfy the tax liability.

The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, financial condition, prospects and results of operations.

We currently, and expect to continue to, benefit from certain government subsidies and economic incentives including tax credits, rebates and other incentives that support the development and adoption of clean energy technology. We cannot assure you that these subsidies and incentive programs will be available to us at the same or comparable levels in the future. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of clean and renewable energy products or other reasons, may require us to seek additional financing, which may not be obtainable on commercially attractive terms or at all, and may result in the diminished competitiveness of the battery cell industry generally or our silicon nanowire battery cells in particular. Any change in the level of subsidies and incentives from which we benefit could materially and adversely affect our business, financial condition, prospects and results of operations.

A significant portion of our business depends on sales to the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.

We currently rely on U.S. government contracts (as a prime contractor or subcontractor) for a material portion of our revenue and to partially fund our research and development activities, and we believe that the success and growth of our business will continue to depend on our successful procurement of government contracts.

Sales to government agencies are subject to a number of challenges and risks. Selling to government agencies can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts.

 

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Accordingly, our business, financial condition, prospects and results of operations may be adversely affected by certain events or activities, including, but not limited to:

 

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changes in fiscal or contracting policies or decreases in available government funding;

 

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changes in government programs or applicable requirements;

 

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changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding;

 

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appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government;

 

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the adoption of new laws or regulations or changes to existing laws or regulations;

 

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influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; and

 

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increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.

Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain from purchasing our battery products in the future, reduce the size or payment amounts of purchases from existing or new government customers, or otherwise have an adverse effect on our business, financial condition, prospects and results of operations.

Government contracts often also contain provisions and are subject to laws and regulations that provide government customers with additional rights and remedies not typically found in commercial contracts. These rights and remedies allow government customers, among other things, to:

 

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terminate existing contracts for convenience;

 

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reduce orders under or otherwise modify contracts;

 

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for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current;

 

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for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated;

 

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decline to exercise an option to renew a multi-year contract;

 

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claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position;

 

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prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest;

 

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suspend or debar us from doing business with the applicable government; and

 

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control or prohibit the export of our battery products and technology.

Government contracts are also generally subject to greater scrutiny by the government, which can initiate reviews, audits and investigations regarding our compliance with government contract requirements. Current and

 

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new regulations or procurement requirements (including, for example regulations regarding counterfeit and corrupt parts, supply chain diligence, mandatory socioeconomic compliance requirements and cybersecurity) or changes to current requirements could increase our costs and risk of non-compliance. Failure to comply with government contracting laws, regulations and contract requirements, or adverse findings from a government audit or investigation can lead to criminal, civil or administrative proceedings (including pursuant to the False Claims Act), termination of contracts, forfeiture of profits, suspension of payments, adverse media coverage, fines and suspension or debarment from doing business with U.S. government agencies, all of which may have an adverse effect on our reputation, business, financial condition, prospects and results of operations.

Our technology and our website, systems, and data we maintain may be subject to intentional disruption, security breaches and other security incidents, or alleged violations of laws, regulations, or other obligations relating to data handling that could result in liability and adversely impact our reputation and future sales. We may be required to expend significant resources to continue to modify or enhance our protective measures to detect, investigate and remediate vulnerabilities to security breaches and incidents. Any actual or alleged failure to comply with applicable cybersecurity or data privacy legislation or regulation could have a material adverse effect on our business, reputation, results of operations or financial condition.

We expect to face significant challenges with respect to information security and maintaining the security and integrity of our systems and other systems used in our business, as well as with respect to the data stored on or processed by these systems. We also anticipate receiving and storing confidential business information of our partners and customers. Advances in technology, an increased level of sophistication and expertise of hackers, and new discoveries in the field of cryptography can result in a compromise or breach of the systems used in our business or of security measures used in our business to protect confidential information, personal information, and other data. We may be a target for attacks designed to disrupt our operations or to attempt to gain access to our systems or to data that we possess, including proprietary information that we obtain from our partners pursuant to our agreements with them. We also are at risk for interruptions, outages and breaches of our and our outsourced service providers’ operational systems and security systems, our integrated software and technology, and data that we or our third-party service providers process or possess. These may be caused by, among other causes, physical theft, viruses, or other malicious code, denial or degradation of service attacks, ransomware, social engineering schemes, and insider theft or misuse. We have suffered security incidents in the past. In December 2021, we experienced a ransomware incident and notified certain employees of such incident. The security risks we and our outsourced service providers face could also be elevated in connection with the Russian invasion of Ukraine, as we and our outsourced service providers are vulnerable to a heightened risk of cyberattacks from or affiliated with nation-state actors, including retaliatory attacks from Chinese or Russian actors against U.S.-based companies.

The availability and effectiveness of our silicon nanowire anode technology and our ability to conduct our business and operations depend on the continued operation of information technology and communications systems, some of which we have yet to develop or otherwise obtain the ability to use. Systems we currently use or may use in the future in conducting our business, including data centers and other information technology systems, will be vulnerable to damage or interruption. Such systems could also be subject to break-ins, sabotage and intentional acts of vandalism, as well as disruptions and security breaches and security incidents as a result of non-technical issues, including intentional or inadvertent acts or omissions by employees, service providers, or others. We currently use, and may use in the future, outsourced service providers to help provide certain services, and any such outsourced service providers face similar security and system disruption risks as us. Our ability to monitor our outsourced service providers’ security measures is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of personal, confidential, or other data, including data relating to individuals. Some of the systems used in our business will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any data security incidents or other disruptions to any data centers or other systems used in our business could result in lengthy interruptions in our service and may adversely affect our reputation, business, financial condition, prospects and results of operations.

 

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Significant capital and other resources may be required in efforts to protect against information security breaches, security incidents, and system disruptions, or to alleviate problems caused by actual or suspected information security breaches and other data security incidents and system disruptions. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities and otherwise seeking to obtain unauthorized access to systems or data, and to disrupt systems, are increasingly sophisticated and constantly evolving. In particular, ransomware attacks have become more prevalent in the industrial sector, which could materially and adversely affect our ability to operate and may result in significant expense.

In addition, we may face increased compliance burdens regarding such requirements with regulators and customers regarding our battery products and also incur additional costs for oversight and monitoring of our supply chain. These additional compliance and logistical burdens are attenuated through our international partnerships. We also cannot be certain that these systems, networks, and other infrastructure or technology upon which we rely, including those of our third-party suppliers or service providers, will be effectively implemented, maintained or expanded as planned, or will be free from bugs, defects, errors, vulnerabilities, viruses, ransomware, or other malicious code. We may be required to expend significant resources to make corrections or to remediate issues that are identified or to find alternative sources.

Any failure or perceived failure by us or our service providers to prevent information security breaches or other security incidents or system disruptions, or any compromise of security that results in or is perceived or reported to result in unauthorized access to, or loss, theft, alteration, release or transfer of, our information, or any personal information, confidential information, or other data could result in loss or theft of proprietary or sensitive data and intellectual property, could harm our reputation and competitive position and could expose us to legal claims, regulatory investigations and proceedings, and fines, penalties, and other liability. Any such actual or perceived security breach, security incident or disruption could also divert the efforts of our technical and management personnel and could require us to incur significant costs and operational consequences in connection with investigating, remediating, eliminating and putting in place additional tools, devices, policies, and other measures designed to prevent actual or perceived security breaches and other incidents and system disruptions. Moreover, we could be required or otherwise find it appropriate to expend significant capital and other resources to respond to, notify third parties of, and otherwise address the incident or breach and its root cause, and most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data.

Further, we cannot assure that any limitations of liability provisions in our current or future contracts that may be applicable would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security-related matter. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover claims related to a security breach or incident, or that the insurer will not deny coverage as to any future claim. The successful assertion of claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our reputation, financial condition, and results of operations.

Additionally, laws, regulations, and other actual and potential obligations relating to privacy, data hosting and other processing of data, data protection, and data security are evolving rapidly, and we expect to potentially be subject to new laws and regulations, or new interpretations of laws and regulations, in the future in various jurisdictions. These laws, regulations, and other obligations, and changes in their interpretation, could require us to modify our operations and practices, restrict our activities, and increase our costs. Further, these laws, regulations, and other obligations are complex and evolving rapidly, and we cannot provide assurance that we will not be subject to claims, allegations, or other proceedings related to actual or alleged obligations relating to privacy, data protection, or data security. It is possible that these laws, regulations, and other obligations may be inconsistent with one another or be interpreted or asserted to be inconsistent with our business or practices. We

 

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anticipate needing to dedicate substantial resources to comply with laws, regulations, and other obligations relating to privacy and data security in order to comply. Any failure or alleged or perceived failure to comply with any applicable laws, regulations, or other obligations relating to privacy, data protection, or data security could also result in regulatory investigations and proceedings, and misuse of or failure to secure data relating to individuals could also result in claims and proceedings against us by governmental entities or others, penalties and other liability, and damage to our reputation and credibility, and could have a negative impact on our business, financial condition, prospects and results of operations.

Risks Related to Intellectual Property

We rely heavily on our intellectual property portfolio. If we are unable to protect our intellectual property rights, our business and competitive position would be harmed.

We may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position. We rely upon a combination of various intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractual protections afforded by license agreements and other agreements, to establish, maintain and enforce rights in our proprietary technologies. In addition, we seek to protect our intellectual property rights through nondisclosure and invention assignment agreements with our employees and consultants, and through non-disclosure agreements with business partners and other third parties. Despite our efforts to protect our proprietary rights, third parties may, without proper authorization, attempt to copy or otherwise obtain and use our intellectual property or be able to design around our intellectual property. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take to prevent misappropriation may not be adequate, sufficient, or effective. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert management’s attention, which could harm our business, results of operations and financial condition. Moreover, certain proprietary technology that is stored on computer systems could be penetrated by intruders and potentially misappropriated. There is no guarantee that our efforts to protect our computer systems will be effective. In addition, existing intellectual property laws and contractual remedies may afford less protection than needed to safeguard our intellectual property portfolio.

Patent, copyright, trademark and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States and efforts to protect against the unauthorized use of our intellectual property rights, technology and other proprietary rights may be more expensive and difficult outside of the United States. Further, we have not established our intellectual property rights in all countries in the world, and competitors may copy our designs and technology and operate in countries in which it has not prosecuted our intellectual property. Failure to adequately protect our intellectual property rights could result in our competitors using our intellectual property to offer products, and competitors’ ability to design around our intellectual property would enable competitors to offer similar or better batteries, in each case potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue which, would adversely affect our business, financial condition, prospects and results of operations.

We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs.

Companies, organizations or individuals, including our current and future competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, distribute, or sell our battery products, which could make it more difficult for us to operate our business. From time to time, we may receive inquiries from holders of patents or trademarks inquiring whether we are infringing their proprietary rights and/or seek court declarations that they do not infringe upon our intellectual property rights. Companies holding patents or other intellectual property rights relating to batteries, electric

 

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motors or electronic power management systems may bring suits alleging infringement by our battery products of such rights or otherwise asserting their rights and seeking licenses. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

 

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cease selling, incorporating or using products that incorporate the challenged intellectual property;

 

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pay substantial damages;

 

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obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; or

 

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redesign our batteries.

We have in the past experienced infringement claims from non-practicing organizations (sometimes referred to as “patent trolls”) filing lawsuits for patent infringement. For example, in December 2020, we settled a patent infringement case against us and agreed to make licensing payments in connection with such settlement. We may be subject to additional infringement claims in the future, and even if we believe such claims are without merit, such claims are time-consuming, expensive to litigate or settle and can divert management’s resources and attention. An adverse determination could require that we pay damages, which could be substantial, or stop using technologies found to be in violation of a third-party’s rights and could prevent us from selling our batteries. In order to avoid these restrictions, we may have to seek a license for the technology. Any such license may not be available on reasonable terms or at all, could require us to pay significant royalties and may significantly increase our operating expenses or otherwise seriously harm our business or operating results.

In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology, our business, financial condition, prospects and results of operations could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and management’s attention.

We also license patents and other intellectual property from third parties, and we may face claims that our use of this intellectual property infringes the rights of others. In such cases, we may seek indemnification from our licensors under our license contracts with them. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses, depending on our use of the technology, whether we choose to retain control over conduct of the litigation, and other factors.

Our patent applications may not result in issued patents or our patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on our ability to prevent others from interfering with our commercialization of our batteries.

Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours. The status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us will afford protection against competitors with similar technology. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and is and will be developing our technology. In addition to those who may claim priority, any of our existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable. Furthermore, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued.

Even if our patent applications succeed and we are issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented, invalidated or limited in scope in the future. The rights granted under any issued patents may not provide us with meaningful protection or competitive

 

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advantages, and some foreign countries provide significantly less effective patent enforcement than what the United States provides. In addition, the claims under any patents that issued to us may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar or limit us from licensing, exploiting, or enforcing any patents issued to us. In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that it needs to license or design around, either of which would increase costs and may adversely affect our business, financial condition, prospects and results of operations.

We may obtain licenses on technology that has not been commercialized or has been commercialized only to a limited extent, and the success of our business may be adversely affected if such technology does not perform as expected.

From time to time, we may license from third parties technologies that have not been commercialized or which have been commercialized only to a limited extent. These technologies may not perform as expected within our silicon nanowire battery cells and related products. If the cost, performance characteristics, manufacturing process or other specifications of these licensed technologies fall short of our targets, our expected sales, costs, time to market, competitive advantage, future product pricing and potential operating margins may be adversely affected.

Risks Related to Litigation and Regulatory Compliance

Our operations expose us to litigation, environmental and other legal compliance risks. Compliance with laws and regulations can be expensive, and our failure to comply with these laws and regulations may result in monetary damages and fines, adverse publicity and a material adverse effect on our business.

We are subject to a variety of litigation, environmental, health and safety, investment screening and national security laws, and other legal compliance risks. These risks include, among other things, possible liability relating to product liability matters, personal injuries, intellectual property rights, contract-related claims, health and safety liabilities, employment-related liabilities, environmental matters, investment screening and national security laws, and compliance with U.S. and foreign laws, competition laws and laws governing improper business practices.

Our operations in the United States are subject to numerous environmental laws and regulations, including federal, state and local laws and regulations relating to, among other things: water; natural resources; discharges; emissions; chemicals; solid and hazardous waste storage, treatment and disposal; remediation of releases of hazardous materials; and contamination. Compliance with these laws can be difficult and costly. For example, battery life cycle management regulations and regulations governing the transport of batteries may impose substantial requirements on our operations in the United States. Our operations may be required to obtain and comply with environmental permits, many of which may be difficult and expensive to obtain and must be renewed on a periodic basis. A failure to comply with these laws, regulations or permits could result in substantial liabilities, including fines, penalties, the suspension or loss of permits, and possibly orders to cease the non-compliant operations. Our manufacturing process will have hazards such as, but not limited to, hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents. There may be safety incidents that damage machinery or manufacturing components, slow or stop production, or harm employees. Consequences may include litigation, regulation, fines, increased insurance premiums, mandates to temporarily halt production, workers’ compensation claims, or other actions that impact our brand, finances or ability to operate.

As a business with international reach, we are subject to complex laws and regulations, including investment screening laws, in jurisdictions in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses and payments, and uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights.

 

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Changes in environmental and climate laws or regulations, including laws relating to greenhouse gas emissions, could lead to new or additional investment in manufacturing designs, subject us to additional costs and restrictions, including increased energy and raw materials costs, and could increase environmental compliance expenditures. We are subject to various environmental laws and regulations on air emission, waste water discharge, solid waste, noise and the disposal of hazardous materials. Cobalt and lithium are toxic materials that are important raw materials in our batteries. We also use, generate and discharge other toxic, volatile and hazardous chemicals and wastes in our research, development and manufacturing activities. Under U.S. environmental regulations, we are required to maintain the pollutant emission levels at the facility within the levels prescribed by the relevant governmental authorities and obtain a pollution discharge permit for water and air emissions. Future changes to environmental laws or permit requirements could require us to install new control equipment or otherwise change operations in order to comply with any such change in laws or permit requirements. In addition, certain laws and regulations require enterprises like us that generate hazardous wastes to engage companies which are licensed and qualified to process the hazardous wastes, and to collect, store, dispose of and transfer the hazardous waste.

If we fail to comply with national and local environmental protection laws and regulations, the relevant governmental authorities may impose fines or deadlines to cure instances of noncompliance, and may even order us to cease operations if we fail to comply with their requirements. In particular, any breach by us in connection with requirements relating to the handling of hazardous wastes may subject us to monetary damages and fines. In addition, if any third party suffers any loss as a result of our pollutant emission practices, our improper handling of hazardous wastes or our noncompliance with environmental regulations, such third parties may seek damages from us.

We cannot assure you that we will be able to comply with all environmental laws and regulations at all times as the environmental legal regime is evolving and becoming more stringent, especially in the United States. Therefore, if these or other governments where we do business impose more stringent regulations in the future, we will have to incur additional substantial costs and expenses in order to comply with new regulations, which may negatively affect our results of operations. If we fail to comply with any of the present or future environmental regulations in any material aspect or cause any loss to any third parties due to our pollutant emission practices, improper handling of hazardous wastes or other environmental noncompliance, we may suffer from negative publicity and may be required to pay substantial fines, pay damages to such third parties, or suspend or even cease operations, all of which may materially and adversely affect our business, financial condition, prospects and results of operations. Environmental laws and regulations may become more stringent in the future, which could increase costs of compliance or require us to manufacture with alternative technologies and materials.

We may be subject to review and enforcement actions under domestic and foreign laws that screen investments and to other national-security-related laws and regulations. In certain jurisdictions, these legal and regulatory requirements may be more stringent than in the United States and may impact battery companies more specifically. As a result of these laws and regulations, investments by particular investors may need to be filed with local regulators, which in turn may impose added costs on our business, impact our operations, and/or limit our ability to engage in strategic transactions that might otherwise be beneficial to us and our investors.

We are subject to a variety of laws and regulations related to the safety and transportation of our batteries. Our failure to comply with these laws and regulations may have a material adverse effect on our business and results of operations.

Many federal, state and local authorities require certification by Underwriters Laboratory, Inc., an independent, not-for-profit corporation engaged in the testing of products for compliance with certain public safety standards, or other safety regulation certification prior to marketing battery cells. Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products. Our batteries may not meet the specifications required by these authorities. A determination that any of our battery products are not in

 

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compliance with these rules and regulations could result in the imposition of fines or an award of damages to private litigants.

In addition, lithium batteries have been identified as a Class 9 dangerous good during transport. To be safely transported (by air, sea, rail or roadways), they must meet various international, national, state and local authorities, including, for example, the provisions laid out in United Nations standard UN 38.3. This standard applies to batteries transported either on their own or installed in a device. UN 38.3 has been adopted by regulators and competent authorities around the world, thus making it a requirement for global market access. Our failure to manage the transportation of our batteries could subject us to increased costs or future liabilities.

Failure to comply with certain health and production safety laws and regulations governing hazardous materials could materially adversely affect our business and results of operations.

In the sourcing of our battery products throughout the world, we process, store, dispose of and otherwise use large amounts of hazardous materials. As a result, we are subject to extensive and evolving health and production safety laws and regulations governing, among other things: the health of our employees and safety production requirements regarding the generation, handling, storage, use and transportation of hazardous materials. Compliance with these laws and regulations results in ongoing costs. Failure to comply with these laws or regulations, or to obtain or comply with the relevant permits, could result in fines, criminal charges or other sanctions by regulators. Furthermore, we may be ordered to rectify a noncompliance within a stipulated deadline; and if we fail to do so, we may be ordered to cease operations. Our ongoing compliance with health and safety laws, regulations and permits could require us to incur significant expenses, limit our ability to modify or expand our facilities or continue manufacturing and make other capital improvements. In addition, private parties, including current or former employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us or contained in our batteries.

We are or will be subject to anti-corruption and anti-bribery and anti-money laundering and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and possibly other anti-bribery and anti-corruption laws and anti-money laundering laws in various jurisdictions in which we conduct, or in the future may conduct, activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit us and our officers, directors, employees, business partners agents, representatives and third-party intermediaries from corruptly offering, promising, authorizing or providing, directly or indirectly anything of value to recipients in the public or private sector.

We may leverage third parties to sell our battery products and conduct our business abroad. We, our officers, directors, employees, business partners agents, representatives and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners or third-party intermediaries even if we do not explicitly authorize such activities. We cannot assure you that all of our officers, directors, employees, business partners agents, representatives and third-party intermediaries will not take actions in violation of applicable law, for which we may be ultimately held responsible. As our international activities and sales expand, our risks under these laws may increase.

These laws also require companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls and compliance procedures designed to prevent any such actions. While we have certain policies and procedures to

 

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address compliance with such laws, we cannot assure you that none of our officers, directors, employees, business partners agents, representatives and third-party intermediaries will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.

Any allegations or violation of the FCPA or other applicable anti-bribery and anti-corruption laws and anti-money laundering laws could subject us to whistleblower complaints, adverse media coverage, investigations, settlements, prosecutions, enforcement actions, fines, damages, loss of export privileges, and severe administrative, civil and criminal sanctions, suspension or debarment from government contracts, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our reputation, business, financial condition, prospects and results of operations. Responding to any investigation or action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate these controls.

Our battery products may be subject to U.S. export control laws and regulations including the Export Administration Regulations (“EAR”), the International Traffic in Arms Regulations (“ITAR”), and trade and economic sanctions maintained by the Office of Foreign Assets Control (“OFAC”). As such, an export license may be required to export, reexport, or transfer our battery products to certain countries, end-users, and end-uses. If we were to fail to comply with such U.S. export controls laws and regulations, U.S. economic sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges. Obtaining the necessary export license for a particular sale or offering may not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the export of products to certain U.S. embargoed or sanctioned countries, governments, and persons, as well as for prohibited end-uses. Even though we take precautions to ensure that we and our partners comply with all relevant export control laws and regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations and penalties.

Changes in our battery products or changes in export and import regulations in such countries may create delays in the introduction of our products into international markets, prevent our end-customers with international operations from deploying our battery products globally or, in some cases, prevent or delay the export or import of our battery products to certain countries, governments or persons altogether. Any change in export or import laws or regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing export, import or sanctions laws or regulations, or change in the countries, governments, persons, or technologies targeted by such export, import or sanctions laws or regulations, could result in decreased use of our battery products by, or in our decreased ability to export or sell our battery products to, existing or potential end-customers with international operations. Any decreased use of our battery products or limitation on our ability to export to or sell our battery products in international markets could adversely affect our business, financial condition, and results of operations.

We may be subject to U.S. foreign investment regulations which may impose conditions on or limit certain investors’ ability to purchase our stock or otherwise participate in the Business Combination, potentially making the stock less attractive to investors. Our future investments in U.S. companies may also be subject to U.S. foreign investment regulations.

Certain investments that involve the acquisition of, or investment in, a U.S. business by a non-U.S. investor may be subject to review and approval by the Committee on Foreign Investment in the United States (“CFIUS”). Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, including the level of beneficial ownership interest and the

 

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nature of any information or governance rights involved. For example, investments that result in “control” of a U.S. business by a foreign person always are subject to CFIUS jurisdiction. Significant CFIUS reform legislation, which was fully implemented through regulations that became effective on February 13, 2020, expanded the scope of CFIUS’s jurisdiction to investments that do not result in control of a U.S. business by a foreign person but afford certain foreign investors certain information or governance rights in a U.S. business that has a nexus to “critical technologies,” “critical infrastructure” and/or “sensitive personal data.” Based on its export control classification, our battery technology is considered a “critical technology.”

CFIUS could choose to review past or proposed transactions involving new or existing foreign investors in us or in our parent, Amprius, Inc., even if a filing with CFIUS is or was not required at the time of the transaction. Any review and approval of an investment or transaction by CFIUS may have outsized impacts on transaction certainty, timing, feasibility, and cost, among other things. CFIUS policies and practices are rapidly evolving, and in the event that CFIUS reviews one or more proposed or existing investment by investors, there can be no assurances that such investors will be able to maintain, or proceed with, such investments on terms acceptable to such investors. CFIUS could seek to impose limitations or restrictions on, or prohibit, investments by such investors (including, but not limited to, limits on purchasing our stock, limits on information sharing with such investors, requiring a voting trust, governance modifications, or forced divestiture, among other things).

Recent and potential tariffs imposed by the U.S. government or a global trade war could increase the cost of our products, which could have a material adverse effect on our business, financial condition and results of operations.

The U.S. government has and continues to make significant changes in U.S. trade policy and has taken certain actions that could negatively impact U.S. trade, including imposing tariffs on certain goods imported into the United States. In retaliation, China has implemented, and continues to evaluate imposing additional tariffs on a wide range of American products. There is also a concern that the imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries as well, leading to a global trade war. More specifically, the U.S. government has from time to time imposed significant tariffs on certain product categories imported from China. Such tariffs, if expanded to other categories, could have a significant impact on our business, particularly the importation of parts of our batteries and certain production equipment that are manufactured in China. If we attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective. We might also consider increasing prices to the end consumer; however, this could reduce the competitiveness of our products and adversely affect net sales. If we fail to manage these dynamics successfully, gross margins and profitability could be adversely affected. As of the date of this report, tariffs have not had a material impact on our business, but increased tariffs or trade restrictions implemented by the United States or other countries in connection with a global trade war could have a material adverse effect on our business, financial condition and results of operations. We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. Any further deterioration in the relations between the United States and China could exacerbate these actions and other governmental intervention. For example, a future event that created additional U.S.-China tensions could potentially increase the risks associated with the business and operations of U.S.-based technology companies in China.    

The U.S. or foreign governments may take additional administrative, legislative, or regulatory action that could materially interfere with our ability to sell products in certain countries. Sustained uncertainty about, or worsening of, current global economic conditions and further escalation of trade tensions between the United States and its trading partners, especially China, could result in a global economic slowdown and long-term changes to global trade, including retaliatory trade restrictions that restrict our ability to operate in China. Any alterations to our business strategy or operations made in order to adapt to or comply with any such changes would be time-consuming and expensive, and certain of our competitors may be better suited to withstand or react to these changes.

 

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From time to time, we may be involved in legal proceedings and commercial or contractual disputes, which could have an adverse impact on our profitability and consolidated financial position.

We may be involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with potential customers and suppliers, intellectual property matters, personal injury claims, environmental issues, tax matters and employment matters.

It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurance that any such exposure will not be material. Such claims may also negatively affect our reputation.

Risks Related to Kensington and the Business Combination

Unless the context otherwise requires, all references in this subsection “—Risks Related to Kensington and the Business Combination” to “we,” “us” or “our” refer to Kensington.

New Amprius may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.

New Amprius will have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of New Amprius Common Stock equals or exceeds $18.00 per share (as may be adjusted) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which New Amprius sends the notice of redemption to Public Warrant holders and provided certain other conditions are met. If and when the Public Warrants become redeemable by New Amprius, New Amprius may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, New Amprius may redeem the Public Warrants as set forth above even if the holders are otherwise unable to exercise the Public Warrants. Redemption of the outstanding Public Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, Kensington expects would be substantially less than the market value of your Public Warrants. None of the Private Warrants will be redeemable by New Amprius.

Kensington will require Public Shareholders who wish to redeem their Kensington Class A Ordinary Shares in connection with the Business Combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

Kensington will require the Public Shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to Kensington’s transfer agent prior to the expiration date set forth in the tender offer documents mailed to such holders, or in the event Kensington distributes proxy materials, up to two business days prior to the vote on the proposal to approve the Business Combination, or to deliver their Kensington New Units to the transfer agent electronically using DTC’s Deposit/Withdrawal At Custodian System (“DWAC System”), at the holder’s option. In order to obtain a physical share certificate, a shareholder’s broker and/or clearing broker, DTC and Kensington’s transfer agent will need to act to facilitate this request. It is Kensington’s understanding that shareholders should generally allot at least one week to obtain physical certificates from the transfer agent. However, because Kensington does not have any control over this process or over the brokers or DTC, it may take significantly longer than one week to obtain a physical share certificate. While Kensington has been advised that it takes a short time to deliver

 

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Kensington New Units through the DWAC System, this may not be the case. In addition, in order for shareholders to exercise their redemption rights with respect to their Public Shares, they must separate the Kensington Original Units and receive, for each Kensington Original Unit, one Kensington Class 1 Warrant and one Kensington New Unit. It is Kensington’s understanding that this separation generally takes at least two business days to complete. As such, to the extent shareholders desire to execute their redemption rights, this separation must occur a sufficient amount of time in advance of the redemption deadline to be able to timely submit the Kensington New Unit for redemption of their Public Share in order to redeem their Public Share. Under the Existing Governing Documents, Kensington is required to provide at least five clear days’ advance notice of any general meeting, which would be the minimum amount of time a shareholder would have to determine whether to exercise redemption rights. Accordingly, if it takes longer than Kensington anticipates for shareholders to submit their Kensington New Units in order to redeem their shares, shareholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their shares. In the event that a shareholder fails to comply with the various procedures that must be complied with in order to validly tender or redeem Public Shares, its shares may not be redeemed.

Additionally, despite Kensington’s compliance with the proxy rules, shareholders may not become aware of the opportunity to redeem their shares.

There is uncertainty regarding the U.S. federal income tax consequences of the redemption to the Public Shareholders and related forfeiture of the Kensington Class 2 Warrants.

There is some uncertainty regarding the U.S. federal income tax consequences to Public Shareholders who exercise their redemption rights.

The uncertainty of tax consequences relates to the treatment of the Kensington Class 2 Warrant that will be forfeited upon the redemption of a Public Share. If the Kensington Class 2 Warrants are treated as outstanding for U.S. federal income tax purposes from the time of the issuance of the Kensington Units (see “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination —Allocation of Purchase Price and Characterization of a Kensington Unit and Kensington New Unit” below), the redemption of a Public Share should be treated as a redemption of a Public Share and the Kensington Class 2 Warrant associated with such Public Share, and the redemption price should be allocated between the Public Shares and the Kensington Class 2 Warrants based upon their then relative fair market values. The redemption of the Kensington Class 2 Warrants generally will be treated as a taxable disposition to the U.S. Holder. If the Kensington Class 2 Warrants are not treated as outstanding for U.S. federal income tax purposes prior to the consummation of the Business Combination (see “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination—Potential Deemed Distribution of Kensington Class 2 Warrant in Connection with the Business Combination”), only the Public Shares (and not the Kensington Class 2 Warrants) would be treated as redeemed and the redemption price would be wholly allocated to the Public Shares that are being redeemed.

Also, there is uncertainty related to the individual circumstances of the taxpayer as to whether the redemption results in a dividend, taxable as ordinary income, or a sale, taxable as capital gain that would be taxable at short-term capital gain rates if the taxpayer’s holding period for the shares so disposed of does not exceed one year. Whether the redemption qualifies for sale treatment, resulting in taxation as capital gain rather than ordinary income, will depend largely on the total number of Public Shares treated as owned by the holder (including any Public Shares constructively owned by the holder as a result of owning warrants) relative to all of New Amprius’ shares outstanding both before and after such redemption. The redemption generally will be treated as a sale, rather than a dividend, if the redemption (i) is “substantially disproportionate” with respect to the holder, (ii) results in a “complete termination” of the holder’s interest in New Amprius or (iii) is “not essentially equivalent to a dividend” with respect to the holder. Due to the personal and subjective nature of certain of such tests and the absence of clear guidance from the Internal Revenue Services (“IRS”), there is uncertainty as to whether a holder who elects to exercise his, her or its redemption rights will be taxed on any gain from the redemption as ordinary income or capital gain. See the section entitled “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination.”

 

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Kensington does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for Kensington to complete the Business Combination even if a substantial majority of the Public Shareholders elect to have their shares redeemed in the business combination.

The Existing Governing Documents do not provide a specified maximum redemption threshold, except that Kensington will only redeem its Public Shares so long as (after such redemption) Kensington’s net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of its initial business combination and after payment of underwriters’ fees and commissions (so that Kensington does not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement that may be contained in the agreement relating to the Business Combination. As a result, Kensington may be able to complete the Business Combination even if a substantial majority of the Public Shareholders elect to have their shares redeemed in the business combination. In the event the aggregate cash consideration Kensington would be required to pay for all Kensington Class A Ordinary Shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Business Combination exceed the aggregate amount of cash available to Kensington, Kensington will not complete the Business Combination or redeem any shares, all Kensington Class A Ordinary Shares submitted for redemption will be returned to the holders thereof, and Kensington instead may search for an alternate business combination.

Waiver of the Minimum Cash Condition could adversely affect the Public Shareholders and the other shareholders of New Amprius.

The closing of the Business Combination is subject to the satisfaction or waiver of certain closing conditions set forth in the Business Combination Agreement. See “The Business Combination Agreement—Conditions to Closing.” One of those conditions is the Minimum Cash Condition, which provides that the obligation of Amprius to consummate the Business Combination is conditioned on Kensington having unrestricted cash on hand at closing of the Business Combination of at least $200 million (without giving effect to transaction expenses) after distribution of the funds in the Trust Account. As of July 31, 2022, the Minimum Cash Condition would not have been satisfied if more than 3,025,611 Kensington Class A Ordinary Shares had been redeemed in connection with the Closing.

In the event the Minimum Cash Condition is waived by Amprius, New Amprius will not have the same liquidity at closing it would have had if the condition was satisfied and, as a result, may take actions to reduce the production capacity of its large scale facility if additional equity or debt financing is not available on acceptable terms. Waiver of the Minimum Cash Condition could result in a material adverse effect on our cash flows, business, financial condition, prospects or results of operations. See “—Risk Related to Amprius—Risks Related to Our Business and Industry—We may require additional capital to support business growth, and this capital might not be available on commercially reasonable terms or at all” and “Amprius Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Kensington Class 2 Warrants that are attached to Kensington Class A Ordinary Shares redeemed in connection with the Business Combination will expire.

Prior to the Closing, the Kensington Class A Ordinary Shares will not separately trade. Instead, they will only trade as part of the Kensington Original Units, each of which consists of one Kensington Class A Ordinary Share, one Kensington Class 1 Warrant and one Kensington Class 2 Warrant, or as part of the Kensington New Units, each of which consists of one Kensington Class A Ordinary Share and one Kensington Class 2 Warrant. If you elect to redeem any Public Shares, any Kensington Class 2 Warrants that are attached (as part of the Kensington New Units) to Public Shares that are redeemed will expire upon such redemption. Further, you may not submit any Kensington Original Units for redemption. In order to exercise your redemption rights with respect to your Public Shares, you must separate the Kensington Original Units and receive, for each Kensington Original Unit, one Kensington Class 1 Warrant and one Kensington New Unit. It is Kensington’s understanding that this separation generally takes at least two business days to complete. As such, to the extent you desire to

 

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execute your redemption right, it is important that this separation occurs a sufficient amount of time in advance of the redemption deadline to ensure you are able to timely submit the Kensington New Unit for redemption of your Public Share in order to redeem your Public Share. Once you hold Kensington New Units, you are able to exercise the redemption right with respect to the underlying Public Share by timely submitting that Kensington New Unit for redemption of your Public Share. In connection with such redemption, the Kensington Class 2 Warrant in such Kensington New Unit will expire.

There can be no assurance that New Amprius’ Common Stock will be approved for listing on the NYSE or that New Amprius will be able to comply with the continued listing standards of the NYSE.

Kensington intends to apply to list shares of New Amprius Common Stock and New Amprius Public Warrants on the NYSE under the symbols “AMPX” and “AMPX.W,” respectively. New Amprius’ continued eligibility for listing may depend on the number of Kensington’s shares that are redeemed. If, after the Business Combination, the NYSE delists New Amprius’ shares from trading on its exchange for failure to meet the listing standards and Kensington is not able to list such securities on another national securities exchange, Kensington expects such securities could be quoted on an over-the-counter market. If this were to occur, New Amprius and its stockholders could face significant material adverse consequences including:

 

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a limited availability of market quotations for New Amprius’ securities;

 

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reduced liquidity for New Amprius’ securities;

 

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a determination that the New Amprius Common Stock is a “penny stock,” which will require brokers trading the New Amprius Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of New Amprius Common Stock;

 

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a limited amount of news and analyst coverage; and

 

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a decreased ability to issue additional securities or obtain additional financing in the future.

The Sponsor and Kensington’s officers and directors have agreed to vote in favor of the Business Combination, regardless of how the Public Shareholders vote.

The Sponsor and Kensington’s officers and directors (including its independent directors) have agreed to vote any Kensington Ordinary Shares held by them in favor of the Business Combination. Kensington expects that the Sponsor and Kensington’s officers and directors (and their permitted transferees) will own shares representing approximately 39.9% of the outstanding Kensington Ordinary Shares at the time of any such shareholder vote. Accordingly, it is more likely that the necessary shareholder approval will be received than would be the case if such persons agreed to vote their Sponsor Shares in accordance with the majority of the votes cast by the Public Shareholders.

The Kensington Board did not obtain a fairness opinion in determining whether or not to proceed with the Business Combination and, as a result, the terms may not be fair from a financial point of view to the Public Shareholders.

In analyzing the Business Combination, the Kensington Board conducted significant due diligence on Amprius. For a complete discussion of the factors utilized by the Kensington Board in approving the Business Combination, see the section entitled “The Business Combination—Kensington’s Board of Directors’ Reasons for the Approval of the Business Combination.” The Kensington Board believes because of the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to its shareholders and that Amprius’ fair market value was at least 80% of the value of the Trust Account.

 

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Notwithstanding the foregoing, the Kensington Board did not obtain a fairness opinion to assist it in its determination. Accordingly, the Kensington Board may be incorrect in its assessment of the Business Combination.

The Sponsor or Kensington’s directors, officers, advisors or their respective affiliates may enter into certain transactions, including purchasing shares or warrants from the public, which may influence the outcome of the Business Combination and reduce the public “float” of the Kensington Class A Ordinary Shares.

The Sponsor or Kensington’s directors, officers, advisors or their respective affiliates may purchase Public Shares or Public Warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the Closing, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record holder of Kensington’s shares is no longer the beneficial owner thereof and therefore agrees not to exercise his, her or its redemption rights. In the event that the Sponsor or Kensington’s directors, officers, advisors or their respective affiliates purchase shares in privately negotiated transactions from Public Shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. Additionally, at any time at or prior to the Business Combination, subject to applicable securities laws (including with respect to material nonpublic information), the Sponsor or Kensington’s directors, officers, advisors or their respective affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of the Business Combination or not redeem their Public Shares. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. The purpose of any such transaction could be to (a) vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining shareholder approval of the Business Combination, or (b) reduce the number of Kensington Warrants outstanding or to vote such Kensington Warrants on any matters submitted to the Kensington Warrant holders for approval in connection with the Business Combination, where it appears that such requirement would otherwise not be met. This may result in the Closing that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of Kensington Class A Ordinary Shares or Kensington Warrants and the number of beneficial holders of Kensington’s securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of Kensington’s securities on a national securities exchange.

If third parties bring claims against Kensington, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $10.00 per share.

Kensington’s placing of funds in the Trust Account may not protect those funds from third-party claims against Kensington. Although Kensington has sought to have all vendors, service providers, prospective target businesses and other entities with which it does business execute agreements with Kensington waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against Kensington’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, Kensington’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to Kensington than any alternative. Making such a request of potential target businesses may make Kensington’s acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that Kensington might pursue. Marcum

 

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LLP, Kensington’s independent registered public accounting firm, will not execute agreements with Kensington waiving such claims to the monies held in the Trust Account.

Examples of possible instances where Kensington may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with Kensington and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if Kensington has not completed its initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with its initial business combination, Kensington will be required to provide for payment of claims of creditors that were not waived that may be brought against Kensington within the 10 years following redemption. Accordingly, the per share redemption amount received by Public Shareholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.

The Sponsor has agreed that it will be liable to Kensington if and to the extent any claims by a third party (except for Kensington’s independent registered public accounting firm) for services rendered or products sold to Kensington, or by a prospective target business with which Kensington has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under Kensington’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, then the Sponsor will not be responsible to the extent of any liability for such third-party claims. Kensington has not independently verified whether the Sponsor, which is a newly formed entity, has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor’s only assets are securities of Kensington. Kensington has not asked the Sponsor to reserve for such indemnification obligations. Therefore, Kensington cannot assure you that the Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for Kensington’s initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, Kensington may not be able to complete its initial business combination, and its shareholders would receive such lesser amount per Public Share in connection with any redemption of their Public Shares. None of Kensington’s officers will indemnify Kensington for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Public Shareholders will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate their investment, therefore, Public Shareholders may be forced to sell their Public Shares or Public Warrants, potentially at a loss.

Public Shareholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (a) the completion of Kensington’s initial business combination, and then only in connection with those Kensington Class A Ordinary Shares that such Public Shareholder properly elected to redeem, subject to the limitations described herein, (b) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend Kensington’s Existing Governing Documents (i) to modify the substance or timing of Kensington’s obligation to allow redemption in connection with its initial business combination or to redeem 100% of the Public Shares if Kensington does not complete its initial business combination within 24 months from the closing of the IPO or (ii) with respect to any other provisions relating to shareholders’ rights or pre-initial business combination activity and (c) the redemption of the Public Shares if Kensington has not completed its initial business combination within 24 months from the closing of the IPO, subject to applicable

 

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law and as further described herein. In no other circumstances will a Public Shareholder have any right or interest of any kind to the funds in the Trust Account. Holders of Kensington Warrants will not have any right to the proceeds held in the Trust Account with respect to the Kensington Warrants. Accordingly, to liquidate their investment, the Public Shareholders may be forced to sell their Public Shares or Public Warrants, potentially at a loss.

Kensington’s independent directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to the Public Shareholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, Kensington’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While Kensington currently expects that its independent directors would take legal action on Kensington’s behalf against the Sponsor to enforce its indemnification obligations to Kensington, it is possible that Kensington’s independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If Kensington’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to the Public Shareholders may be reduced below $10.00 per share.

If Kensington has not completed its initial business combination within the allotted time period, the Public Shareholders may be forced to wait beyond such allotted time period before redemption from the Trust Account.

If Kensington has not completed its initial business combination within 24 months from the closing of the IPO or during any Extension Period, Kensington will distribute the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to Kensington to pay its taxes, net of taxes payable (less up to $100,000 of interest to pay dissolution expenses), pro rata to the Public Shareholders by way of redemption and cease all operations except for the purposes of winding up of its affairs, as further described herein. Any redemption of Public Shareholders from the Trust Account shall be effected automatically by function of Kensington’s Existing Governing Documents prior to any voluntary winding up. If Kensington is required to windup, liquidate the Trust Account and distribute such amount therein, pro rata, to its Public Shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the Companies Act. In that case, investors may be forced to wait beyond the allotted time period before the redemption proceeds of the Trust Account become available to them and they receive the return of their pro rata portion of the proceeds from the Trust Account. Kensington has no obligation to return funds to investors prior to the date of its redemption or liquidation unless, prior thereto, Kensington consummates its initial business combination or amends certain provisions of its Existing Governing Documents and then only in cases where investors have properly sought to redeem their Kensington Class A Ordinary Shares. Only upon Kensington’s redemption or any liquidation will Public Shareholders be entitled to distributions if Kensington has not completed its initial business combination within the required time period and does not amend certain provisions of its Existing Governing Documents prior thereto.

Kensington’s shareholders may be held liable for claims by third parties against Kensington to the extent of distributions received by them upon redemption of their shares.

If Kensington is forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the

 

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distribution was made, Kensington was unable to pay its debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by Kensington’s shareholders. Furthermore, Kensington’s directors may be viewed as having breached their fiduciary duties to Kensington or its creditors and/or may have acted in bad faith, thereby exposing themselves and Kensington to claims, by paying public shareholders from the Trust Account prior to addressing the claims of creditors. Kensington cannot assure its shareholders that claims will not be brought against Kensington for these reasons. Kensington and its directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of Kensington’s share premium account while Kensington was unable to pay its debts as they fall due in the ordinary course of business would be guilty of an offense and may be liable to a fine of approximately $18,000 and to imprisonment for five years in the Cayman Islands.

If, after Kensington distributes the proceeds in the Trust Account to Kensington’s Public Shareholders, Kensington files a bankruptcy or winding up petition or an involuntary bankruptcy or winding up petition is filed against Kensington that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and Kensington and the Kensington Board may be exposed to claims of punitive damages.

If, after Kensington distributes the proceeds in the Trust Account to Kensington’s Public Shareholders, Kensington files a bankruptcy or winding up petition or an involuntary bankruptcy or winding up petition is filed against Kensington that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek to recover some or all amounts received by Kensington’s shareholders. In addition, the Kensington Board may be viewed as having breached its fiduciary duty to Kensington’s creditors and/or having acted in bad faith, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors, thereby exposing itself and Kensington to claims of punitive damages.

If, before distributing the proceeds in the Trust Account to Kensington’s Public Shareholders, Kensington files a bankruptcy or winding up petition or an involuntary bankruptcy or winding up petition is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in Kensington’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Kensington’s shareholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by Kensington’s shareholders in connection with Kensington’s liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to Kensington’s Public Shareholders, Kensington files a bankruptcy or winding up petition or an involuntary bankruptcy or winding up petition is filed against Kensington that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy or insolvency law, and may be included in Kensington’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Kensington’s shareholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by Kensington’s shareholders in connection with Kensington’s liquidation may be reduced.

Kensington may amend the terms of the Kensington Warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of at least 50% of the then outstanding Public Warrants. As a result, the exercise price of your Kensington Warrants could be increased, the exercise period could be shortened and the number of Kensington Class A Ordinary Shares purchasable upon exercise of a Kensington Warrant could be decreased, all without your approval.

The Kensington Warrants were issued in registered form under the Kensington Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Kensington. The Kensington Warrant Agreement provides that the terms of the Kensington Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at

 

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least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants and, solely with respect to any amendment to the terms of the Private Warrants or working capital warrants or any provision of the Kensington Warrant Agreement with respect to the Private Warrants or working capital warrants, 50% of the number of the then outstanding Private Warrants or working capital warrants, as applicable. Accordingly, Kensington may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although Kensington’s ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Kensington Warrants, convert the Kensington Warrants into cash or shares, shorten the exercise period or decrease the number of Kensington Class A Ordinary Shares issuable upon exercise of a Kensington Warrant.

The issuance of shares in the Business Combination will dilute the interest of Kensington’s shareholders.

The Proposed Certificate of Incorporation authorizes one class of New Amprius Common Stock. Holders of New Amprius Common Stock will be entitled to one vote per share. The Proposed Certificate of Incorporation authorizes the issuance of up to 950,000,000 shares of New Amprius Common Stock and 50,000,000 shares of New Amprius Preferred Stock.

As disclosed in the section entitled “Summary of the Proxy Statement/Prospectus—Ownership of New Amprius After the Closing,” (including the assumptions described in “Frequently Used Terms”), it is anticipated that, upon the Closing and subject to the assumptions disclosed in that section, there will be approximately 98,739,098 shares of New Amprius Common Stock and approximately 112,857,088 shares of New Amprius Common Stock if all the options that relate to the Amprius Options are exercised. Of these shares:

 

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other than with respect to Public Shares owned by the Sponsor (as discussed below), the Public Shareholders will own 19,732,500 shares of New Amprius Common Stock, representing approximately 20.0% of the total shares then outstanding (and, assuming exercise of all of the options that relate to the Amprius Options that will be assumed by New Amprius at Closing, Public Shareholders will own 19,732,500 shares of New Amprius Common Stock, which will represent approximately 17.5% of the total shares then outstanding); and

 

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the holder of Sponsor Shares will own 13,124,642 shares of New Amprius Common Stock, which consists of 9,857,142 Sponsor Shares and 3,267,500 Public Shares, representing approximately 13.3% of the total shares then outstanding (and, assuming exercise of all of the options that relate to the Amprius Options that will be assumed by New Amprius at Closing, the holder of Sponsor Shares will own 13,124,642 shares of New Amprius Common Stock, which will represent approximately 11.6% of the total shares then outstanding).

Accordingly, the issuance of shares in the Business Combination will dilute the interest of Kensington’s shareholders. If the actual facts differ from the assumptions set forth in the section entitled “Summary of the Proxy Statement/Prospectus—Ownership of New Amprius After the Closing,” the numbers of shares and percentage interests set forth above will be different.

Kensington may issue additional securities to complete the Business Combination and New Amprius may issue additional securities under an employee incentive plan (including the Amprius Technologies, Inc. 2022 Equity Incentive Plan and the Amprius Technologies, Inc. 2022 Employee Stock Purchase Plan) after completion of the Business Combination. Any such issuances would dilute the interest of our shareholders and likely present other risks.

Kensington may issue a substantial number of additional securities to complete the Business Combination and New Amprius may issue a substantial number of additional securities under an employee incentive plan (including the Amprius Technologies, Inc. 2022 Equity Incentive Plan and the Amprius Technologies, Inc. 2022

 

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Employee Stock Purchase Plan) after completion of the Business Combination. The issuance of additional securities:

 

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may result in a potential termination of the Business Combination Agreement if its securities are not listed on another national exchange mutually agreed to by Amprius;

 

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may significantly dilute the equity interests of its investors;

 

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may subordinate the rights of shareholders if preferred stock is issued with rights senior to those afforded Kensington Ordinary Shares;

 

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could cause a change in control if a substantial number of securities are issued, which may affect, among other things, Kensington’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of Kensington’s present officers and directors; and

 

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may adversely affect prevailing market prices for the Kensington Units, Kensington Ordinary Shares and/or the Kensington Warrants.

Because Kensington has no current plans to pay cash dividends on Kensington Class A Ordinary Shares for the foreseeable future, you may not receive any return on investment unless you sell Kensington Class A Ordinary Shares for a price greater than that which you paid for it.

Kensington may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of the Kensington Board and will depend on, among other things, Kensington’s results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Kensington Board may deem relevant. In addition, Kensington’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness Kensington or its subsidiaries incur. As a result, you may not receive any return on an investment in Kensington Class A Ordinary Shares unless you sell Kensington Class A Ordinary Shares for a price greater than that which you paid for it. See the section entitled “Price Range of Securities and Dividends—Dividends.”

The unaudited pro forma financial information included herein may not be indicative of what New Amprius’ actual financial position or results of operations would have been.

The unaudited pro forma financial information in this proxy statement/prospectus is presented for illustrative purposes only and has been prepared based on a number of assumptions including, but not limited to, Amprius being considered the accounting acquirer in the Business Combination, cash and cash equivalents of Amprius at the Closing and the number of Public Shares that are redeemed in connection with the Business Combination. Accordingly, such pro forma financial information may not be indicative of our future operating or financial performance and our actual financial condition and results of operations may vary materially from our pro forma results of operations and balance sheet contained elsewhere in this proxy statement/prospectus, including as a result of such assumptions not being accurate. Additionally, the final acquisition accounting adjustments could differ materially from the unaudited pro forma adjustments presented in this proxy statement/prospectus. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Business Combination. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

The Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to shareholders rather than liquidate.

In addition to the 3,267,500 Kensington Original Units purchased by the Sponsor in the IPO at the public offering price, the Sponsor and its affiliates has invested in Kensington an aggregate of $8,225,000, comprised of the $25,000 purchase price for 9,857,142 Sponsor Shares, the $8,000,000 purchase price for the Private Warrants and a $200,000 loan to Kensington. Assuming a trading price of $9.48 per share (based on the difference between the closing price of

 

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the Kensington New Units (each Kensington New Unit consisting of one Kensington Class A Ordinary Share and one Kensington Class 2 Warrant) of $9.75 on the NYSE on August 30, 2022, minus the closing price of the Public Warrants of $0.27 on the NYSE on August 30, 2022) upon consummation of the Business Combination, the 9,857,142 Sponsor Shares would have an aggregate implied value of $93,445,706.16 and, assuming a trading price of $0.27 per Private Warrant (based on the closing price of the Public Warrants of $0.27 on the NYSE on August 30, 2022), the Private Warrants would have an aggregate implied value of $4,320,000. Even if the trading price of the shares of Kensington Class A Ordinary Shares were as low as $1.00 per share, and the Private Warrants are worthless, the value of the Sponsor Shares would be greater than the Sponsor’s initial investment in Kensington. As a result, the Sponsor is likely to be able to make a substantial profit on its investment in Kensington at a time when its public shares have lost significant value. On the other hand, if Kensington liquidates without completing a business combination, the Sponsor will likely lose its entire investment in Kensington. Accordingly, the Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to shareholders rather than liquidate.

The process of taking a company public by means of a business combination with a special purpose acquisition company is different from taking a company public through an underwritten offering and may create risks for our unaffiliated investors.

An underwritten offering involves a company engaging underwriters to purchase its shares and resell them to the public. An underwritten offering imposes statutory liability on the underwriters for material misstatements or omissions contained in the registration statement unless they are able to sustain the burden of providing that they did not know and could not reasonably have discovered such material misstatements or omissions. This is referred to as a “due diligence” defense and results in the underwriters undertaking a detailed review of the company’s business, financial condition and results of operations. Going public via a business combination with a special purpose acquisition company (“SPAC”) does not involve any underwriters and does not generally necessitate the level of review required to establish a “due diligence” defense as would be customary on an underwritten offering.

In addition, going public via a business combination with a SPAC does not involve a book-building process as is the case in an underwritten public offering. In any underwritten public offering, the initial value of a company is set by investors who indicate the price at which they are prepared to purchase shares from the underwriters. In the case of a SPAC transaction, the value of the company is established by means of negotiations between the target company, the SPAC and, in some cases, “PIPE” investors who agree to purchase shares at the time of the business combination. The process of establishing the value of a company in a SPAC business combination may be less effective than the bookbuilding process in an underwritten public offering and also does not reflect events that may have occurred between the date of the business combination agreement and the closing of the transaction. In addition, underwritten public offerings are frequently oversubscribed resulting in additional potential demand for shares in the aftermarket following the underwritten public offering. There is no such book of demand built up in connection with a SPAC transaction and no underwriters with the responsibility of stabilizing the share price that may result in the share price being harder to sustain after the transaction.

Additional Risks Related to Ownership of New Amprius Stock Following the Business Combination and New Amprius Operating as a Public Company

Anti-takeover provisions in the Proposed Certificate of Incorporation, Proposed Bylaws and Delaware law could make an acquisition of New Amprius more difficult, limit attempts by New Amprius stockholders to replace or remove New Amprius’ management and limit the market price of New Amprius Common Stock.

The Proposed Certificate of Incorporation, Proposed Bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by the New Amprius Board. These provisions include:

 

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authorizing “blank check” preferred stock, which could be issued by the New Amprius Board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to New Amprius Common Stock;

 

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limiting the liability of, and providing indemnification to, New Amprius’ directors and officers;

 

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prohibiting cumulative voting in the election of directors;

 

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providing that vacancies on the New Amprius Board may be filled only by majority of directors then in office of the New Amprius Board, even though less than a quorum;

 

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prohibiting the ability of New Amprius stockholders to call special meetings;

 

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establishing an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to the New Amprius Board;

 

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dividing directorships of New Amprius into three classes, each to be elected for a term of three years, so that only one class of directorships is up for election at each annual meeting of the New Amprius stockholders; and

 

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specifying that special meetings of New Amprius stockholders can be called only by a majority of the New Amprius Board, the chair of the New Amprius Board, or the Chief Executive Officer of New Amprius.

These provisions may frustrate or prevent any attempts by New Amprius stockholders to replace or remove New Amprius’ current management by making it more difficult for stockholders to replace members of the New Amprius Board, which is responsible for appointing the members of New Amprius’ management. In addition, because New Amprius is incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

The Proposed Bylaws provide, subject to limited exceptions, that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the sole and exclusive forum for certain stockholder litigation matters, which could limit New Amprius stockholders’ ability to obtain a chosen judicial forum for disputes with New Amprius or its directors, officers, employees or stockholders.

The Proposed Bylaws provide that, unless otherwise consented to by New Amprius in writing, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for the following types of actions or proceedings: (i) any derivative action or proceeding brought on behalf of New Amprius; (ii) any action asserting a claim of breach of a fiduciary duty owed by, or otherwise wrongdoing by, any of New Amprius’ directors, officers, or other employees to New Amprius or its stockholders; (iii) any action arising pursuant to any provision of the DGCL or the Proposed Certificate of Incorporation or the Proposed Bylaws; (iv) any action to interpret, apply, enforce or determine the validity of the Proposed Certificate of Incorporation or the Proposed Bylaws; or (v) any other action asserting a claim that is governed by the internal affairs doctrine, in all cases subject to the court having jurisdiction over indispensable parties named as defendants. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. The Proposed Bylaws further provide that, unless otherwise consented to by New Amprius in writing, the federal district courts of the United States will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in New Amprius’ securities shall be deemed to have notice of and consented to this provision. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with New Amprius or any of its directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal

 

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proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision contained in the Proposed Bylaws to be inapplicable or unenforceable in an action, New Amprius may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, operating results and financial condition.

Concentration of ownership among New Amprius’ executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

Upon the Closing, New Amprius’ executive officers, directors and their affiliates as a group will beneficially own approximately 17.0% of New Amprius Common Stock outstanding. Additionally, certain of New Amprius’ executive officers and directors own interests in Amprius, Inc., which is expected to own approximately 66.5% of the New Amprius Common Stock outstanding at Closing, and certain directors of New Amprius are members of Amprius, Inc.’s board of directors. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, any amendment of the Proposed Certificate of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of New Amprius or changes in its management and will make the approval of certain transactions difficult or impossible without the support of these stockholders and of their votes.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including those described in “Frequently Used Terms.” If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

New Amprius does not expect to declare any dividends in the foreseeable future.

After the Closing, New Amprius does not anticipate declaring any cash dividends to holders of its common stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of New Amprius’ securities may decline.

As with most special purpose acquisition company (“SPAC”) initial public offerings in recent years, Kensington issued securities for $10.00 per share upon the closing of the IPO. As with other SPACs, the $10.00 per share price of Kensington reflected each share having a one-time right to redeem such share for a pro rata portion of the proceeds held in the Trust Account equal to approximately $10.00 per share prior to the closing of the Business Combination. Following Closing, the shares outstanding will no longer have any such redemption right and will be solely dependent upon the fundamental value of the combined company, and if the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of New Amprius’ securities subsequent to the Closing may decline which, like the securities of other companies formed through SPAC mergers in recent years, may be significantly less than $10.00 per share. The market values of Kensington’s securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement/prospectus, or the date on which Kensington shareholders vote on the Business Combination. Because the number of shares to be issued pursuant to the Business Combination Agreement is based on the per share value of the amount in the Trust Account and will not be adjusted to reflect any changes in the market price of Kensington Class A Ordinary Shares, the market value of New Amprius Common Stock issued in the Business Combination may be higher or lower than the values of these shares on earlier dates.

 

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Following the Closing, New Amprius will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

Following the Closing, New Amprius will face increased legal, accounting, administrative and other costs and expenses as a public company that Amprius does not incur as a private company. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require New Amprius to carry out activities Amprius has not done previously. For example, New Amprius will create new board committees and adopt new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), New Amprius could incur additional costs rectifying those issues, and the existence of those issues could adversely affect New Amprius’ reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks associated with New Amprius’ status as a public company may make it more difficult to attract and retain qualified persons to serve on New Amprius’ board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require New Amprius to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about New Amprius, its business, or its market, or if they change their recommendations regarding New Amprius’ securities adversely, the price and trading volume of New Amprius’ securities could decline.

The trading market for New Amprius’ securities will be influenced by the research and reports that industry or securities analysts may publish about New Amprius, its business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on New Amprius. If no securities or industry analysts commence coverage of New Amprius, New Amprius’ share price and trading volume would likely be negatively impacted. If any of the analysts who may cover New Amprius change their recommendation regarding New Amprius Common Stock adversely, or provide more favorable relative recommendations about New Amprius’ competitors, the price of New Amprius Common Stock would likely decline. If any analyst who may cover New Amprius were to cease coverage of New Amprius or fail to regularly publish reports on it, New Amprius could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.

Subsequent to the Closing, New Amprius may be required to take write-downs or write-offs, restructuring, impairment or other charges that could have a significant negative effect on New Amprius’ financial condition, results of operations and the price of New Amprius Common Stock, which could cause you to lose some or all of your investment.

Although Kensington has conducted due diligence on Amprius, Kensington cannot assure you that this diligence will surface all material issues that may be present with Amprius’ business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Amprius’ and outside of Kensington’s control will not later arise. As a result of these factors, New Amprius may be forced to later write-down or write-off assets (including the equity it owns in the Surviving Corporation), restructure its

 

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operations, or incur impairment or other charges that could result in New Amprius reporting losses. Even if Kensington’s due diligence successfully identified certain risks, unexpected risks may arise, and previously known risks may materialize in a manner not consistent with Kensington’s preliminary risk analysis. Even though these charges may be non-cash items and therefore not have an immediate impact on New Amprius’ liquidity, the fact that New Amprius reports charges of this nature could contribute to negative market perceptions about New Amprius or its securities. In addition, charges of this nature may cause New Amprius to be unable to obtain future financing on favorable terms or at all. Accordingly, any shareholders or Kensington Warrant holders who choose to remain a shareholder or Kensington Warrant holder following the initial business combination could suffer a reduction in the value of their securities. Such security holders are unlikely to have a remedy for such reduction in value.

We expect New Amprius to qualify as an “emerging growth company” and a “smaller reporting company” within the meaning of the Securities Act, and if it takes advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make New Amprius’ securities less attractive to investors and may make it more difficult to compare New Amprius’ performance with other public companies.

We expect New Amprius to qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, New Amprius will be eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. As a result, New Amprius stockholders may not have access to certain information they may deem important. New Amprius will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of New Amprius Common Stock that are held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of Kensington Units in the IPO. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as New Amprius is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Kensington has elected not to opt out of such extended transition period and, therefore, New Amprius may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find New Amprius Common Stock less attractive because New Amprius will rely on these exemptions, which may result in a less active trading market for the New Amprius Common Stock and its price may be more volatile.

Additionally, we expect New Amprius to qualify as 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 expect New Amprius to remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of New Amprius Common Stock held by non-affiliates exceeds $250,000,000 as of the prior June 30, or (ii) its annual revenues exceeded $100,000,000 during such completed fiscal year and the market value of New Amprius Common Stock held by non-affiliates exceeds $700,000,000 as of the prior June 30. To the extent New Amprius takes advantage of such reduced disclosure obligations, it may also make comparison of New Amprius’ financial statements with other public companies difficult or impossible.

 

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A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the future. This could cause the market price of New Amprius Common Stock to drop significantly, even if New Amprius’ business is doing well.

Sales of a substantial number of shares of New Amprius Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of New Amprius Common Stock.

It is anticipated that, upon completion of the Business Combination, (i) the existing holders of Amprius Common Stock will collectively own approximately 66.7% of the outstanding shares of New Amprius Common Stock and (ii) the Kensington Initial Shareholders will own approximately 13.3% of the outstanding shares of New Amprius Common Stock, in each case, based on the assumptions described in “Frequently Used Terms.” The New Amprius Common Stock owned at Closing, or issuable in respect of Amprius Options outstanding at Closing, that are held by the existing holders of Amprius Common Stock and the Kensington Initial Shareholders will be subject to the lock-up restrictions in the Proposed Bylaws, which will provide that, without the prior unanimous consent of the New Amprius Board and subject to certain customary exceptions, each holder of New Amprius Common Stock issued (i) as consideration pursuant to the Business Combination Agreement, (ii) upon the exercise of warrants or other convertible securities outstanding following the Effective Time in respect of warrants or convertible securities of Amprius outstanding immediately prior to the Effective Time (iii) to directors, officers and employees upon the settlement or exercise of stock options, restricted stock units, or other equity awards outstanding as of immediately following the Closing in respect of awards of Amprius outstanding immediately prior to the Effective Time or (iv) held by the Sponsor and the Insiders (as defined in the Letter Agreement, dated March 1, 2022, by and among Kensington, the Sponsor and the other signatories thereto) outstanding immediately following the Effective Time, will not, for a period ending one year following the Effective Time, directly or indirectly, sell their shares of New Amprius Common Stock. If, following the 150th day after the Effective Time, the closing price per share of New Amprius Common Stock for any 20 trading days within any 30 consecutive trading day period is at least $12.50, the lock-up restrictions will no longer apply. Upon expiration of such lock-up restrictions, such stockholders could sell their New Amprius Common Stock pursuant to the registration statement that we will be obligated to file under the Registration Rights Agreement. Further, the Kensington Initial Shareholders are also expected to own 16,400,000 Private Warrants, which will become exercisable in accordance with the Kensington Warrant Agreement following the Closing. The Private Warrants will not be subject to any separate lock-up restrictions. As such, once the Private Warrants become exercisable and a registration statement is declared effective that covers the resale of the Private Warrants or the New Amprius Common Stock issuable upon exercise of the Private Warrants (each of which we expect will be covered by the registration statement that we will be obligated to file under the Registration Rights Agreement), the applicable holder of the Private Warrants or such New Amprius Common Stock issuable in respect thereof will be able to resell such securities to the market, subject to other applicable law. The market price of our securities could decline if such equity holders sell or are perceived by the market as intending to sell any such securities.

The Kensington Warrants will become exercisable for New Amprius Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

If the Business Combination is completed, outstanding warrants to purchase an aggregate of 62,400,000 shares of New Amprius Common Stock will become exercisable in accordance with the terms of the warrant agreement governing those securities, assuming no redemptions in connection with the Closing. These warrants will become exercisable on the date that is 30 days after the Closing Date. The exercise price of these warrants will be $11.50 per share. To the extent such warrants are exercised, additional shares of New Amprius Common Stock will be issued, which will result in dilution to the holders of New Amprius Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of New Amprius Common Stock. However, there is no guarantee that the Public Warrants will ever be in the money prior to their expiration, and as such, such warrants may expire worthless.

 

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Risks Related to the Consummation of the Domestication

The Domestication may result in adverse tax consequences for holders of Kensington Class A Ordinary Shares and Kensington Warrants.

U.S. Holders (as defined in the section entitled “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination” below) may be subject to U.S. federal income tax as a result of the Domestication. Because the Domestication will occur immediately prior to the redemption of New Amprius Common Stock, U.S. Holders exercising redemption rights will be subject to the potential tax consequences of the Domestication.

As discussed more fully under “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination,” the Domestication should constitute a reorganization within the meaning of Section 368(a)(l)(F) of the Code. However, due to the absence of direct guidance on the application of Section 368(a)(1)(F) of the Code to a statutory conversion of a corporation holding only investment-type assets, such as Kensington, this result is not entirely clear. If the Domestication so qualifies, U.S. Holders (as defined in the section entitled “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination”) generally should not recognize taxable gain or loss for U.S. federal income tax purposes on the Domestication. However, such U.S. Holder will be subject to Section 367(b) of the Code and, as a result:

 

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a U.S. Holder who on the date of the Domestication beneficially owns (actually or constructively) Kensington Class A Ordinary Shares with a fair market value of less than $50,000 on the date of the Domestication will not recognize any gain or loss and will not be required to include any part of our earnings and profits in income; and

 

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a U.S. Holder who on the date of the Domestication beneficially owns (actually or constructively) Kensington Class A Ordinary Shares with a fair market value of $50,000 or more, but is not a U.S. Shareholder, generally will recognize gain (but not loss) in respect of the Domestication as if such U.S. Holder exchanged its Kensington Class A Ordinary Shares for shares of New Amprius Common Stock in a taxable transaction, unless such U.S. Holder elects in accordance with applicable Treasury Regulations to include in income as a deemed dividend the “all earnings and profits amount” (as defined in the Treasury Regulations under Section 367 of the Code) attributable to the Kensington Class A Ordinary Shares held directly by such U.S. Holder. A U.S. Shareholder will generally be required to include in income as a deemed dividend the “all earnings and profits amount” (as defined in the Treasury Regulations) attributable to the Kensington Class A Ordinary Shares held by such U.S. Shareholder.

Additionally, proposed Treasury Regulations with a retroactive effective date have been promulgated under Section 1291(f) of the Code, which generally require that a U.S. person who disposes of stock of a PFIC (including for this purpose exchanging warrants for newly issued warrants in the Domestication) must recognize gain equal to the excess of the fair market value of such PFIC stock over its adjusted tax basis, notwithstanding any other provision of the Code. Because we are a blank check company with no current active business, we believe that it is likely that Kensington is classified as a PFIC for U.S. federal income tax purposes. As a result, these proposed Treasury Regulations, if finalized in their current form, would generally require a U.S. Holder of Kensington Class A Ordinary Shares to recognize gain on the exchange of Kensington Class A Ordinary Shares for shares of New Amprius Common Stock pursuant to the Domestication. However, if such U.S. Holder timely makes or has timely made a QEF Election (as defined in “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination—PFIC Considerations—D. QEF Election and Mark-to-Market Election”), along with a purging election, or a mark-to-market election with respect to such U.S. Holder’s Kensington Class A Ordinary Shares, such U.S. Holder should not be subject to the same gain recognition rules under the proposed Treasury Regulations under Section 1291(f) of the Code. Further, the proposed Treasury Regulations, if finalized in their current form, would also apply to a U.S. Holder whose Kensington Warrants are modified into warrants entitled to acquire New Amprius Common Stock; currently, however, the election mentioned above does not apply to Kensington Warrants (for discussion regarding the unclear application of the PFIC rules to Kensington Warrants, see “Material U.S. Federal Income Tax Considerations of the Redemption and the Business Combination—PFIC

 

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Considerations”). Any gain recognized from the application of the PFIC rules described above would be taxable income with no corresponding receipt of cash. The tax on any such gain would be imposed at the rate applicable to ordinary income and an interest charge could apply based on complex rules designed to offset the tax deferral to such U.S. Holder on the undistributed earnings, if any, of Kensington. It is not possible to determine at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code may be adopted or how any such Treasury Regulations would apply.

Upon consummation of the Business Combination, the rights of holders of New Amprius Common Stock arising under the DGCL as well as the new organizational documents of New Amprius will differ from and may be less favorable to the rights of holders of Kensington Class A Ordinary Shares arising under the Companies Act as well as Kensington’s Existing Governing Documents.

Upon consummation of the Business Combination, the rights of holders of New Amprius Common Stock will arise under the Proposed Governing Documents as well as the DGCL. The Proposed Governing Documents and the DGCL contain provisions that differ in some respects from those in Kensington’s Existing Governing Documents and the Companies Act and, therefore, some rights of holders of New Amprius Common Stock could differ from the rights that holders of Kensington Class A Ordinary Shares currently possess. For instance, while class actions are generally not available to shareholders under the Companies Act, such actions are generally available under the DGCL. This change could increase the likelihood that New Amprius becomes involved in costly litigation, which could have a material adverse effect on New Amprius.

In addition, there are differences between the Proposed Governing Documents and the Existing Governing Documents. For a more detailed description of the rights of holders of New Amprius Common Stock and how they may differ from the rights of holders of Kensington Class A Ordinary Shares, please see the section entitled “Comparison of Corporate Governance and Stockholder Rights.” The forms of the Proposed Certificate of Incorporation and the Proposed Bylaws of New Amprius are attached as Annexes B and C, respectively, to this proxy statement/prospectus and we urge you to read them.

Risks Related to the Redemption

If a Public Shareholder fails to receive notice of Kensington’s offer to redeem their Kensington Class A Ordinary Shares in connection with the Business Combination, or fails to comply with the procedures for tendering its Kensington Class A Ordinary Shares, such shares may not be redeemed.

Kensington will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with the initial business combination. Despite Kensington’s compliance with these rules, if a shareholder fails to receive Kensington’s tender offer or proxy materials, as applicable, such shareholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that Kensington will furnish to holders of its Public Shares in connection with the initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem Public Shares. For example, Kensington may require Kensington’s Public Shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to Kensington’s transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the Business Combination in the event Kensington distributes proxy materials, or to deliver their Kensington New Units to the transfer agent electronically. In the event that a shareholder fails to comply with these or any other procedures, its shares may not be redeemed.

If a shareholder or a “group” of shareholders are deemed to hold in excess of 15% of the Kensington Class A Ordinary Shares, such shareholder or group will lose the ability to redeem all such shares in excess of 15% of the Kensington Class A Ordinary Shares.

The Existing Governing Documents provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined

 

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under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the IPO, which Kensington refers to as the “Excess Shares,” without Kensington’s prior written consent. However, the Existing Governing Documents do not restrict Kensington shareholders’ ability to vote all of their shares (including Excess Shares) for or against Kensington’s initial business combination. The inability of a shareholder to redeem the Excess Shares will reduce its influence over Kensington’s ability to complete its initial business combination and such shareholder could suffer a material loss on its investment in Kensington if it sells such Excess Shares in open market transactions. Additionally, a shareholder will not receive redemption distributions with respect to the Excess Shares if Kensington completes its initial business combination. As a result, such shareholder will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell its shares in open market transactions, potentially at a loss.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Amprius and Kensington adjusted to give effect to the Business Combination. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

Kensington was incorporated on March 19, 2021, as a Cayman Islands exempted company incorporated with limited liability. Kensington was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Kensington has neither engaged in any operations nor generated any revenue to date. On March 4, 2022, Kensington consummated its initial public offering of 23,000,000 units at $10.00 per unit, generating gross proceeds, before expenses, of $230.0 million. Simultaneously with the closing of the initial public offering, Kensington consummated the private placement of 16,000,000 warrants at a price of $0.50 per warrant to the Sponsor, generating proceeds of approximately $8.0 million. Upon the closing of the Initial Public Offering and the Private Placement, an amount equal to $230.0 million was placed in a Trust Account. The Trust Account may be invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government obligations. As of June 30, 2022, funds in the Trust Account totaled approximately $230.3 million.

Amprius, incorporated in the state of Delaware on March 16, 2015, has developed and, since 2018, been in commercial production of an ultra-high energy density lithium-ion battery for mobility applications leveraging a disruptive silicon nanowire anode. Amprius’ silicon nanowire 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 its batteries providing superior performance compared to conventional graphite lithium-ion batteries. Today, Amprius’ batteries are primarily used for existing and emerging aviation applications, including unmanned aerial systems, such as drones and high-altitude pseudo satellites. Amprius believes its proprietary technology has the potential for broad application in electric transportation.

The unaudited pro forma condensed combined balance sheet as of June 30, 2022 combines the historical balance sheets of Amprius and Kensington on a pro forma basis as if the Business Combination had been consummated on June 30, 2022. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2022 and year ended December 31, 2021 combines the historical statements of operations of Amprius and Kensington for such period on a pro forma basis as if the Business Combination had been consummated on January 1, 2021, the beginning of the earliest period presented.

The pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of New Amprius following the Closing. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The unaudited pro forma condensed combined financial information was derived from and should be read together with the accompanying notes to the unaudited pro forma condensed combined financial statements, audited and unaudited financial statements of Amprius and Kensington included in this proxy statement/ prospectus, the sections titled “Amprius Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Kensington Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the other information relating to Amprius and Kensington contained in this proxy statement/ prospectus, including the Business Combination Agreement and the description of certain terms thereof set forth in the section titled “Proposal No. 1: The Business Combination Proposal.”

The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with GAAP, whereby Kensington is treated as the acquired company and Amprius is treated as the acquirer.

 

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Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Amprius issuing stock for the net assets of Kensington, accompanied by a recapitalization. The net assets of Kensington will be stated at historical cost, with no goodwill or other intangible assets recorded. Subsequently, results of operations presented for the period prior to the Business Combination will be those of Amprius.

Amprius has been determined to be the accounting acquirer in the Business Combination based on the following predominate factors:

 

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the holders of Amprius Common Stock prior to the Business Combination will own over 65% of New Amprius immediately following the Closing under the three redemption scenarios;

 

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the New Amprius Board following the Closing will be comprised of all of the members of the Amprius board of directors, which members will represent more than a majority of the New Amprius Board;

 

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Amprius’ senior management will be the senior management of New Amprius following the Closing; and

 

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Amprius is the larger entity based on historical operating activity and has the larger employee base.

Pursuant to the Existing Governance Documents, any holders of Public Shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the Closing, if the Business Combination is consummated.

The unaudited pro forma condensed combined financial statements present three redemption scenarios as follows:

 

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Assuming No Redemptions: This presentation assumes that none of the holders of Kensington Class A Ordinary Shares exercise redemption rights with respect to such shares.

 

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Assuming Maximum Redemptions: This presentation assumes that holders of 3,025,611 Kensington Class A Ordinary Shares exercise redemption rights with respect to such shares for their pro rata portion of the funds in the Trust Account (approximately $10.01 per share). The Business Combination Agreement includes a condition to closing the Business Combination that, at the Closing, Kensington will have a minimum of $200.0 million in cash comprising (i) the cash held in the Trust Account after giving effect to any Kensington share redemptions and (ii) an aggregate amount of cash proceeds received from investors in connection with any Equity Financing. The Minimum Cash Amount shall be calculated without reduction for any payments in respect of transaction expenses, which will reduce the amount of cash available following the Closing. The share redemption amount in this maximum redemption scenario is derived from the maximum number of shares that may be redeemed without causing the Minimum Cash Amount to be unsatisfied at the Closing of the Business Combination.

 

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Assuming Full Redemptions: This presentation assumes that holders of 19,732,500 Kensington Class A Ordinary Shares exercise redemption rights with respect to such shares for their pro rata portion of the funds in the Trust Account (approximately $10.01 per share). This scenario presents a situation where Kensington’s public shareholders (other than the Sponsor, which purchased 3,267,500 Kensington Original Units in the IPO) redeem all available shares. Under this scenario, the Minimum Cash Condition would not be satisfied. Amprius has the right, in its sole discretion, to waive such condition pursuant to the Business Combination Agreement. If the Minimum Cash Condition is not met and Amprius does not waive such condition, the Business Combination would not occur.

Since Kensington has currently not received any commitments from any PIPE Investors, the foregoing scenarios assume that no PIPE Units are sold.

Description of the Business Combination

On May 11, 2022, Kensington, Merger Sub and Amprius entered into the Business Combination Agreement, pursuant to which, among other things, Merger Sub will merge with and into Amprius, with Amprius surviving

 

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the merger and becoming a wholly-owned direct subsidiary of Kensington. At the Effective Time, by virtue of the Merger and without any action on the part of Kensington, Merger Sub, Amprius or the holders of any of Amprius’ securities:

 

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each outstanding share of Amprius Common Stock that is outstanding immediately prior to the Closing will be cancelled and automatically converted into the right to receive a number of shares of New Amprius Common Stock, determined in each case by reference to an “Exchange Ratio,” calculated in accordance with the Business Combination Agreement;

 

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all shares of Amprius Common Stock held in the treasury of Amprius will be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto;

 

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each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of the Surviving Corporation; and

 

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each Amprius Option that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be converted into an option to purchase a number of shares of New Amprius Common Stock equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Amprius Common Stock subject to the Amprius Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Amprius Option immediately prior to the Effective Time divided by (B) the Exchange Ratio. The transaction will not have any effect on the options to acquire shares of Amprius, Inc. that may be outstanding at the Closing.

Based on the assumptions set forth in “Frequently Used Terms,” the Exchange Ratio has been assumed to be approximately 1.45823.

Additionally, in connection with the Business Combination, Kensington will change its jurisdiction of incorporation by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. Automatically upon the Domestication, each Kensington Class A Ordinary Share and Kensington Class B Ordinary Share outstanding will be converted into a share of New Amprius Common Stock on a one for one basis.

For more information about the Business Combination, please see the section titled “Proposal No. 1: The Business Combination Proposal.” A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A.

The following summarizes the pro forma capitalization of New Amprius expected immediately following the Closing, presented under the three redemption scenarios:

 

		Assuming No Redemptions								Assuming Maximum Redemptions								Assuming Full Redemptions
		Shares				%				Shares				%				Shares				%
Kensington’s public shareholders (1)			19,732,500				20.0	%			16,706,889				17.5	%			—				0.0	%
Kensington’s Initial Shareholders (2)			13,124,642				13.3	%			13,124,642				13.7	%			13,124,642				16.6	%
Amprius stockholders			65,881,956				66.7	%			65,881,956				68.8	%			65,881,956				83.4	%
Pro Forma Common Stock (3)			98,739,098				100.0	%			95,713,487				100.0	%			79,006,598				100.0	%

 

(1)	Excludes 3,267,500 Public Shares included in the Kensington Original Units purchased by the Sponsor in the IPO.

(2)	Includes 9,857,142 Sponsor Shares and 3,267,500 Public Shares included in the Kensington Original Units purchased by the Sponsor in the IPO.

 

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(3)	The pro forma capitalization excludes the following:

 

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14,117,990 unexercised Amprius Options;

 

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23,000,000 unexercised Kensington Class 1 Warrants;

 

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23,000,000, 19,974,389 and 3,267,500 unexercised Kensington Class 2 Warrants in the no redemption scenario, maximum redemption scenario and full redemption scenario, respectively;

 

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16,000,000 unexercised Private Warrants; and

 

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400,000 unexercised warrants to be issued in respect of the Working Capital Loans.

Assumptions and estimates underlying the unaudited pro forma adjustments included in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of New Amprius following the completion of the Business Combination. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date on which these unaudited pro forma condensed combined financial statements are prepared and are subject to change as additional information becomes available and analyses are performed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2022

(in thousands)

 

		Amprius (Historical)				Kensington (Historical)				Autonomous Entity Adjustments (Note 3)				Transaction Accounting Adjustments (Assuming No Redemptions) (Note 3)								Pro Forma Combined (Assuming No Redemptions)				Additional Transaction Accounting Adjustments (Assuming Maximum Redemptions) (Note 3)								Pro Forma Combined (Assuming Maximum Redemptions)				Additional Transaction Accounting Adjustments (Assuming Full Redemptions) (Note 3)								Pro Forma Combined (Assuming Full Redemptions)
Assets
Cash and cash equivalents		$	5,243			$	1,966							$	230,295				(a	)		$	210,694			$	(30,295	)			(j)			$	181,458			$	(167,283	)			(l)			$	17,141
															(8,050	)			(b	)							1,059				(k)								2,966				(m)
															(18,760	)			(c	)
Accounts receivable			490				—																490												490												490
Inventories, net			329				—																329												329												329
Prepaid expenses and other current assets			106				223																329												329												329
Deferred costs, current			1,591				—																1,591												1,591												1,591
Total current assets			7,759				2,189				—				203,485								213,433				(29,236	)							184,197				(164,317	)							19,880
Investment and cash held in Trust Account			—				230,295								(230,295	)			(a	)			—												—												—
Prepaid expenses - long-term			—				109																109												109												109
Restricted cash, non current			333																				333												333												333
Deferred costs, non current			112				—																112												112												112
Deferred offering costs			3,033				—								(3,033	)			(c	)			—												—												—
Property and equipment, net			3,652				—																3,652												3,652												3,652
Right of use asset, net			2,907				—																2,907												2,907												2,907
Total assets			17,796				232,593				—				(29,843	)							220,546				(29,236	)							191,310				(164,317	)							26,993
Liabilities
Accounts payable			2,081				30								(1,753	)			(c	)			358												358												358
Accrued liabilities			1,907				1,154								(501	)			(c	)			2,020												2,020												2,020
															(540	)			(c	)
Deferred revenue, current			1,706				—																1,706												1,706												1,706
Operating lease liabilities, current			514				—																514												514												514
Total current liabilities			6,208				1,184				—				(2,794	)							4,598				—								4,598				—								4,598
Derivative warrant liabilities			—				11,310								(11,310	)			(f	)			—												—												—
Deferred underwriting fees			—				8,050								(8,050	)			(b	)			—												—												—
Working capital loan—related party			—				200								(200	)			(g	)			—												—												—
Deferred revenue, non current			404				—																404												404												404
Operating lease liabilities, non current			2,652				—																2,652												2,652												2,652
Total liabilities			9,264				20,744				—				(22,354	)							7,654				—								7,654				—								7,654
Commitments and contingencies
Class A ordinary shares subject to possible redemption			—				230,195								(230,195	)			(d	)			—												—												—
Stockholders’ equity
Preference shares			—				—																—												—												—
Ordinary shares
Class A			—				—								2				(d	)			—												—												—
															(2	)			(e	)
Class B			—				1								(1	)			(e	)			—												—												—
Amprius Common Stock			1				—								(1	)			(h	)			—												—												—
New Amprius Common Stock			—				—								3				(e	)			10				—				(j)				10				(2	)			(l)				8
															7				(h	)
Additional paid-in capital			91,117				—								(11,950	)			(c	)			295,468				(30,295	)			(j)				266,232				(167,281	)			(l)				101,917
															230,193				(d	)							1,059				(k)								2,966				(m)
															11,310				(f	)
															200				(g	)
															(6	)			(h	)
															(25,396	)			(i	)
Accumulated deficit			(82,586	)			(18,347	)							(7,049	)			(c	)			(82,586	)											(82,586	)											(82,586	)
															25,396				(i	)
Total stockholders’ equity			8,532				(18,346	)			—				222,706								212,892				(29,236	)							183,656				(164,317	)							19,339
Total liabilities and stockholders’ equity		$	17,796			$	232,593			$	—			$	(29,843	)						$	220,546			$	(29,236	)						$	191,310			$	(164,317	)						$	26,993

 

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