Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Prior to the Business Combination, we did not file separate income tax returns as they were included in the consolidated income tax returns of Amprius Holdings. As a result, our provision for income taxes prior to the Business Combination was determined using a method consistent with a separate return basis, as if we were a separate taxpayer.

The components of loss before provision for income taxes were as follows (in thousands):

	Year ended December 31,
	2023		2022
Domestic	$	(36,776)	$	(17,332)
Foreign	—		—
Total	$	(36,776)	$	(17,332)

There were no provision for income taxes during the years ended December 31, 2023 and 2022.

The provision for income taxes differed from the amount computed by applying the federal statutory rate, which was 21.0% during the years ended December 31, 2023 and 2022, to the loss before provision for income taxes as follows (in thousands):

	Year ended December 31,
	2023		2022
Expected benefit at U.S. federal statutory tax rate	$	(7,723)	$	(3,640)
State tax	(1,449)		(764)
Change in valuation allowance	8,228		(8,858)
Transaction costs	515		—
Stock-based compensation and other	429		(56)
Deconsolidation adjustment	—		13,318
Provision for income taxes	$	—	$	—

The components of deferred tax assets and deferred tax liabilities were as follows (in thousands):

	December 31,
	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	16,699	$	10,326
Operating lease liabilities	9,078		783
Tax credits	1,080		819
Capitalized research and development	1,511		336
Accruals and other	1,016		624
Stock-based compensation	715		725
Total deferred tax assets	30,099		13,613
Valuation allowance	(21,128)		(12,900)
Deferred tax assets	8,971		713
Deferred tax liabilities:
Operating lease right-of-use assets	(8,971)		(713)
Total deferred tax liabilities	(8,971)		(713)
Net deferred taxes	$	—	$	—

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. We assess available positive and negative evidences to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets. A significant piece of objective negative evidence is the cumulative losses incurred since inception, supported by negative subjective evidence of no expectations of future taxable income. Based on this evaluation, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $8.2 million and decreased by $7.8 million during the years ended December 31, 2023 and 2022, respectively.

Net operating losses (“NOL”) and tax credit carryforwards were as follows as of December 31, 2023:

	Amount (In thousands)		Expiration years
NOL, federal (after December 31, 2017)	$	58,825	Do not expire
NOL, federal (before January 1, 2018)	$	3,799	2037
NOL, state	$	52,061	2037—2043
Tax credits, federal	$	952	2037—2043
Tax credits, state	$	618	Do not expire

The utilization of NOL and tax credit carryforwards are subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, in the event of a change in our ownership, as defined in the current income tax regulations. Ownership changes prior to the Business Combination did not result in a limitation that will materially reduce the total amount of NOL carryforwards and credits that can be utilized. Subsequent ownership changes may affect the limitation in future years.

During the year ended December 31, 2022, we were deconsolidated from Amprius Holdings for federal and state income tax purposes as a result of the Business Combination. The Internal Revenue Code and related regulations provide for a methodology for the allocation of the cumulative NOL carryovers between us and Amprius Holdings upon deconsolidation. Based on the methodology used, our federal and state NOL carryovers during the year ended December 31, 2022 were reduced by approximately $43.1 million and $40.3 million, respectively, and our federal and state R&D tax credit carryovers were reduced by approximately $0.7 million and $1.0 million, respectively.

A reconciliation of the unrecognized tax benefits is as follows (in thousands):

	Year ended December 31,
	2023		2022
Balance at beginning of year	$	297	$	709
Addition based on tax positions during the current year	96		2
Reduction of tax positions from prior years	—		(414)
Balance at end of year	$	393	$	297

The entire amount of the unrecognized tax benefits would not impact our effective tax rate if recognized and there would be no cash tax impact. We have elected to include interest and penalties as a component of income tax expense. During the years ended December 31, 2023 and 2022, we did not recognize interest and penalties related to unrecognized tax benefits. We do not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.

Prior to the Business Combination, we had been included in Amprius Holdings’ consolidated income tax returns in the U.S. federal and California tax jurisdictions. For periods after the Business Combination, we filed income tax returns separate from Amprius Holdings. The federal and state income tax returns from inception to December 31, 2023 remain subject to examination.