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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-04-06 · 715 added, 332 removed, 1 unchanged (100% of the section changed)

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

The following discussion and analysis of the Company’s

financial condition and results of operations should be read in conjunction with our audited financial statements and the notes thereto

which are included in “Item 8.

Financial Statements and Supplementary Data” of this Annual Report.

Certain information contained

in the discussion and analysis set forth below includes forward-looking statements.

Our actual results may differ materially from those

anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding

Forward-Looking Statements and Risk Factor Summary,” “Item 1A.

Risk Factors” and elsewhere in this Annual Report.

We are a blank check company incorporated as a

Cayman Islands exempted company on December 23, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,

reorganization or similar business combination with one or more businesses.

Our sponsor is Freedom Acquisition I LLC, a Cayman Islands

limited liability company.

The registration statement for our initial public

offering (the “Initial Public Offering”) became effective on February 25, 2021.

On March 2, 2021, we consummated the Initial

Public Offering of 34,500,000 units, which included the exercise of the underwriters’ option to purchase an additional 4,500,000

units at the Initial Public Offering price to cover over-allotments (the “Units”, and, with respect to the Class A ordinary

shares included in the Units, the “Public Shares” and, with respect to the one-fourth of one redeemable warrant included in

the Units, the “Public Warrants”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering

costs of approximately $19.18 million, inclusive of approximately $12.08 million in deferred underwriting commissions.

Simultaneously with the closing of the Initial

Public Offering, we consummated the private placement (“Private Placement”) of 6,266,667 warrants (each, a “Private

Placement Warrant” and collectively, the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”),

at a price of $1.50 per Private Placement Warrant with the sponsor, generating gross proceeds of approximately $9.4 million.

Upon the closing of the Initial Public Offering

and the Private Placement, approximately $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain

of the proceeds of the Private Placement were placed in a trust account (“Trust Account”), located in the United States with

Continental Stock Transfer & Trust Company acting as trustee, and, until the 24-month anniversary of the consummation of our initial

public offering, invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment

Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated

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

government treasury obligations.

To mitigate the risk of us being

deemed to have been operating as an unregistered investment company, prior to the 24-month anniversary of the consummation of

our initial public offering, we instructed Continental to liquidate the U.S.

government treasury obligations or money market funds held

in the trust account and to hold all the funds in the trust account in cash in a bank deposit account, until the earlier of:

(i) the completion

of a business combination and (ii) the distribution of the Trust Account as described below.

If we have not completed a business combination

during the Extension Period, we will (i) cease all operations except for the purpose of winding up;

(ii) as promptly as reasonably possible

but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate

amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released

to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding

Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive

further liquidation distributions, if any);

and (iii) as promptly as reasonably possible following such redemption, subject to the approval

of the remaining shareholders and the board of directors, liquidate and dissolve, subject, in each case, to our obligations under Cayman

Islands law to provide for claims of creditors and the requirements of other applicable law.

There will be no redemption rights or liquidating

distributions with respect to our outstanding Warrants, which will expire worthless if we fail to consummate a business combination within

the Combination Period.

Recent Developments

Second Amendment

to the Business Combination Agreement

On January 17, 2023, the Company, Complete Solaria,

First Merger Sub and Second Merger Sub entered into that certain Second Amendment to Business Combination Agreement (the “Second

Amendment”) amending the Business Combination Agreement.

The Second Amendment provides that, if the Company

and Complete Solaria determine in good faith by January 1, 2023 that it is probable that the Business Combination will be consummated

after March 1, 2023, the Company will be required to prepare (with the reasonable cooperation of Complete Solaria) and file with the SEC

a proxy statement pursuant to which it will seek the approval of its shareholders for proposals to amend the Company’s organizational

documents to extend the time period for the Company to consummate its initial business combination for (x) up to an additional six (6)

months, from March 2, 2023 to September 2, 2023 (the original Business Combination Agreement provided for an extension from March 1, 2023

to September 2, 2023) or (y) such other period of time as the Company and Complete Solaria may mutually agree (the original Business Combination

Agreement contemplated no such prong (y)).

In addition, the Second Amendment amends the Business Combination Agreement by changing the

latest permitted Agreement End Date (as defined in the Business Combination Agreement) from September 1, 2023 to September 2, 2023.

to Amended and Restated Memorandum and Articles

On February 28, 2023, Freedom held the Extraordinary

General Meeting of shareholders, at which holders of 35,373,848 ordinary shares, comprised of 26,773,848 Class A ordinary shares

and 8,600,000 Class B ordinary shares, were present in person or by proxy, representing approximately 82.02% of the voting power

of the 43,125,000 Outstanding Shares of Freedom entitled to vote at the Extraordinary General Meeting at the close of business on January

23, 2023, which was the Record Date for the Extraordinary General Meeting.

The Outstanding Shares on the Record Date were comprised of

34,500,000 Class A ordinary shares and 8,625,000 Class B ordinary shares.

At the Extraordinary General Meeting, the shareholders

approved, by special resolution, the Extension Amendment Proposal, which extended the date by which Freedom must (i) consummate a merger,

amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination, which Freedom refers

to as its initial business combination, (ii) cease its operations except for the purpose of winding up if it fails to complete such initial

business combination, and (iii) redeem all of the Class A ordinary shares, included as part of the units sold in the initial public offering,

for an additional three months, from March 2, 2023 to June 2, 2023, and thereafter to up to three (3) times by an additional one month

each time (or up to September 2, 2023).

The voting results for such proposal were as follows:

In connection with the Extension Amendment, public

shareholders elected to redeem an aggregate of 23,256,504 Class A ordinary shares at a redemption price of $10.21 per share, representing

approximately 67.41% of the issued and outstanding Class A ordinary shares, for an aggregate redemption amount of approximately $237,372,952.

Following such redemptions, approximately $114,759,374 remained in the trust account and 11,243,496 Class A ordinary shares remain outstanding.

At the Extraordinary General Meeting, the public

shareholders also approved the proposal to amend the Trust Agreement, by and between Freedom and Continental, as trustee, to reflect the

Extension Amendment.

The amendment to the Trust Agreement provides that Continental shall commence liquidation of the trust account only

and promptly (x) after its receipt of the applicable instruction letter delivered by Freedom in connection with either the consummation

of an initial business combination or Freedom’s inability to effect an initial business combination within the time frame specified

in Freedom’s amended and restated memorandum and articles of association or (y) upon the date that is the later of the end of the

Extension Period and such later date as may be approved by Freedom’s shareholders in accordance with the amended and restated memorandum

and articles of association, if the aforementioned termination letter has not been received by Continental prior to such date.

results for such proposal were as follows:

Promissory Note

On February 28, 2023, we issued an unsecured promissory

note in the amount of up to $2,100,000 to our sponsor.

The proceeds of such promissory note, $1,600,000 of which was drawn down immediately, $400,000 of which may be drawn down, with the mutual consent of us and our sponsor, if we wish to extend the

date by which we will consummate a business combination beyond June 2, 2023, and $100,000 of which may be drawn down on an as-needed basis

at the discretion of our sponsor, will be used for general working capital purposes.

Such promissory note bears no interest and is payable

in full upon the consummation of our business combination.

A failure to pay the principal within five business days of the date specified

above or the commencement of a voluntary or involuntary bankruptcy action shall be deemed an event of default, in which case the promissory

note may be accelerated.

The promissory note shall be forgiven by our sponsor if we are unable to consummate a business combination within

the time frame specified in our amended and restated memorandum and articles of association (as amended from time to time), except to

the extent of any funds held outside of the trust account established in connection with our initial public offering.

The issuance of

the promissory note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as

Results of Operations and Known Trends or Future

We have neither engaged in any operations nor generated

any revenues to date.

Our only activities since inception have been organizational activities, those necessary to prepare for our Initial

Public Offering and identifying a target company for our initial business combination.

We do not expect to generate any operating revenues

until after completion of our initial business combination.

We generate non-operating income in the form of interest income on cash and

cash equivalents held in the Trust Account and through changes in the fair value of our warrant liabilities.

We incur expenses as a result

of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the year ended December 31, 2022, we had

net income of $5,982,340, which consisted of an unrealized gain on change in fair value of our warrant liabilities of $5,509,917,

interest income of $4,821,632 on our amounts held in the Trust Account, reduction of transaction costs incurred in

connection with IPO of $271,687, offset by $4,407,058 of operating costs consisting mostly of general and administrative expenses,

foreign currency exchange loss of $17,638 and change in the fair value of convertible notes of $196,200.

For the year ended December 31, 2021, we had

net income of $5,128,650, which consisted of an unrealized gain on change in fair value of our warrant liabilities of $9,381,750,

interest income of $105,681 on our amounts held in the Trust Account, offset by $3,782,028 of operating costs consisting mostly of

general and administrative expenses, foreign currency exchange loss of $1,475 and offering expenses related to warrant issuance of

We classify the Warrants issued in connection

with our Initial Public Offering and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair

value at each reporting period.

These liabilities are subject to remeasurement at each balance sheet date until exercised, and any

change in fair value is recognized in our consolidated statements of operations.

As part of the reclassification to warrant

liability, we recorded a portion of the offering costs associated with the Initial Public Offering as expense in the consolidated

statements of operations in the amount of $575,278 based on a relative fair value basis.

For the period from the Initial Public

Offering to December 31, 2022, the change in fair value of the Warrants was a decrease in the liability of $14,147,084.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following

discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related

notes included elsewhere in this Annual Report on Form 10-K.

This discussion contains forward-looking statements that involve risks and

uncertainties.

Our actual results could differ materially from those discussed below.

Factors that could cause or contribute to such differences

include those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual

Report on Form 10-K.

Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Complete Solaria was formed

in November 2022 through the merger of Complete Solar and Solaria.

Founded in 2010, Complete Solar created a technology platform to offer

clean energy products to homeowners by enabling a national network of sales partners and build partners.

Our sales partners generate solar

installation contracts with homeowners on our behalf.

To facilitate this process, we provide the software tools, sales support and brand

identity to our sales partners, making them competitive with national providers.

This turnkey solution makes it easy for anyone to sell

We fulfill our customer contracts

by engaging with local construction specialists.

We manage the customer experience and complete all pre-construction activities prior

to delivering build-ready projects including hardware, engineering plans, and building permits to its builder partners.

We manage and

coordinate this process through our proprietary HelioTrack TM software system.

There is substantial doubt

about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements

The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going

concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business.

They do not include

any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications

of liabilities that may result from uncertainty related to its ability to continue as a going concern.

Growth Strategy and Outlook

Complete Solaria’s growth strategy

contains the following elements:

revenue by expanding installation capacity and developing new geographic markets –

We continue to expand our network of partners who will install systems resulting from sales

generated by our sales partners.

By leveraging this network of skilled builders, we aim to

increase our installation capacity in our traditional markets and expand our offering into

new geographies throughout the U.S.

This will enable greater sales growth in existing markets

and create new revenue in expansion markets.

revenue and margin by engaging national-scale sales partners – We aim to offer a turnkey solar solution to prospective sales

partners with a national footprint.

These include electric vehicle manufacturers, national home security providers, and real estate brokerages.

We expect to create a consistent offering with a single execution process for such sales partners throughout their geographic territories.

These national accounts have unique customer relationships that we believe will facilitate meaningful sales opportunities and low cost

of acquisition to both increase revenue and improve margin.

We entered into an Amended

and Restated Business Combination Agreement with FACT, First Merger Sub, Second Merger Sub, and Solaria on October 3, 2022.

was consummated on July 18, 2023.

Upon the terms and subject to the conditions of the Merger, (i) First Merger Sub merged with and into

Complete Solaria with Complete Solaria surviving as a wholly-owned subsidiary of FACT (the “First Merger”), (ii) immediately

thereafter and as part of the same overall transaction, Complete Solaria merged with and into Second Merger Sub, with Second Merger Sub

surviving as a wholly-owned subsidiary of FACT (the “Second Merger”), and FACT changed its name to “Complete Solaria,

Inc.” and Second Merger Sub changed its name to “CS, LLC” and (iii) immediately after the consummation of the Second

Merger and as part of the same overall transaction, Solaria merged with and into a newly formed Delaware limited liability company and

wholly-owned subsidiary of FACT and changed its name to “The SolarCA LLC” (“Third Merger Sub”), with Third Merger

Sub surviving as a wholly-owned subsidiary of FACT (the “Additional Merger”, and together with the First Merger and the Second

Merger, the “Mergers”).

The Mergers between Complete

Solaria and FACT has been accounted for as a reverse recapitalization.

Under this method of accounting, FACT is treated as the acquired

company for financial statement reporting purposes.

This determination was primarily based on the Company having a majority of the voting

power of the post-combination company, the Company’s senior management comprising substantially all of the senior management of

the post-combination company, and the Company’s operations comprising the ongoing operations of the post-combination company.

for accounting purposes, the Mergers have been treated as the equivalent of a capital transaction in which Complete Solaria is issuing

stock for the net assets of FACT.

The net assets of FACT have been stated at historical cost, with no goodwill or other intangible assets

Disposal Transaction

In October 2023, we completed

the sale of our solar panel business to Maxeon, pursuant to the terms of the Disposal Agreement.

Under the terms of the Disposal Agreement,

Maxeon agreed to acquire certain assets and employees of Complete Solaria, for an aggregate purchase price of approximately $11.0 million

consisting of 1,100,000 shares of Maxeon ordinary shares.

As of December 31, 2023, we sold all the shares and recorded a loss of $4.2

million in our consolidated statements of operations and comprehensive loss within loss from discontinued operations.

As part of the Disposal Transaction,

we determined that the criteria were met for held for sale and discontinued operations classification as of the end of our third fiscal

quarter as the divestiture represents a strategic shift in our business.

We recorded an impairment of $147.5 million associated with the

recording of the assets as held for sale during the year ended December 31, 2023.

Below, we have discussed our

historical results of continuing operations, which excludes our product revenues and related metrics, as all results of operations associated

with the solar panel business have been presented as discontinued operations, unless otherwise noted.

Key Financial Definitions/Components of Results

of Operations

generate revenue by providing customer solar solutions through a standardized platform to our residential solar providers and companies

to facilitate the sale and installation of solar energy systems.

Our contracts consist of two performance obligations, which include solar

installation services and post-installation services that are performed prior to inspection by the authority having jurisdiction.

significant majority of our service revenue is recognized at a point in time upon the completion of the installation and the remainder

is recognized upon inspection.

Service revenue is recognized net of a reserve for the performance guarantee of solar output.

enter into three types of customer contracts for solar energy installations.

The majority of our service revenue is recognized through

contracts where the homeowner enters into a power purchase agreement with our distribution partner.

We perform the solar energy installation

services on behalf of our distribution partner, who owns the solar energy system upon installation.

Additionally, we enter into a Solar

Purchase and Installation Agreement directly with homeowners, whereby the homeowner either pays cash or obtains financing through a third-party

loan partner.

In cash contracts with homeowners, we recognize service revenue based on the price we charge to the homeowner.

service revenue in the amount received from the financing partner, net of any financing fees charged to the homeowner, which we consider

to be a customer incentive.

part of our service revenue, we also enter into contracts to provide our software enhanced service offerings, including design and proposal

services, to customers that include solar installers and solar sales organizations.

We perform these leveraging our HelioQuote TM

platform and other software tools to create computer aided drawings, structural letters, and electrical reviews for installers and

proposals for installers.

We charge a fixed fee per service offering, which we recognize in the period the service is performed.

Operating Expenses

Cost of Revenues

Cost of revenues consists

primarily of the cost of solar energy systems, installation and other subcontracting costs.

Cost of revenues also includes associated

warranty costs, shipping and handling, allocated overhead costs, depreciation, and amortization of internally developed software.

Sales Commissions

Sales commissions are direct

and incremental costs of obtaining customer contracts.

These costs are paid to third-party vendors who source residential customer contracts

for the sale of solar energy systems.

Sales and Marketing

Sales and marketing expenses

primarily consist of personnel related costs, including salaries and employee benefits, stock-based compensation, and other promotional

and advertising expenses.

We expense certain sales and marketing, including promotional expenses, as incurred.

General and Administrative

General and administrative

expenses consist primarily of personnel and related expenses for our employees, in our finance, research, engineering, and administrative

teams including salaries, bonuses, payroll taxes, and stock-based compensation.

It also consists of legal, consulting, and professional

fees, rent expenses pertaining to our offices, business insurance costs and other costs.

We expect an increase in audit, tax, accounting,

legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor

relations, and other costs associated with being a public company.

Interest Expense

Interest expense primarily

relates to interest expense on the issuance of debt and convertible notes and the amortization of debt issuance costs.

Other Income (Expense), Net

Other income (expense), net

consists of changes in the fair value of our convertible notes, the impact of debt extinguishment, and changes in the fair value of stock

warrant liabilities and forward purchase agreements.

Income Tax Expense

Income tax expense primarily

consists of income taxes in certain foreign and state jurisdictions in which we conduct business.

Supply Chain Constraints

rely on a small number of suppliers of solar energy systems and other equipment.

If any of our suppliers was unable or unwilling to provide

us with contracted quantities in a timely manner at prices, quality levels and volumes acceptable to us, we would have very limited alternatives

for supply, and we may not be able find suitable replacements for our customers, or at all.

Such an event could materially adversely affect

our business, prospects, financial condition and results of operations.

addition, the global supply chain and our industry have experienced significant disruptions in recent periods.

We have seen supply chain

challenges and logistics constraints increase, including shortages of panels, inverters, batteries and associated component parts for

inverters and solar energy systems available for purchase, which materially impacted our results of operations.

In an effort to mitigate

unpredictable lead times, we experienced a substantial build up in inventory on hand commencing in early 2022 in response to global supply

chain constraints.

In certain cases, this has caused delays in critical equipment and inventory, longer lead times, and has resulted in

cost volatility.

These shortages and delays can be attributed in part to the COVID-19 pandemic and resulting government action, as well

as broader macroeconomic conditions, and have been exacerbated by the ongoing conflicts in Ukraine and Israel.

While we believe that a

majority our suppliers have secured sufficient supply to permit them to continue delivery and installations through the end of 2023, if

these shortages and delays persist into 2024, they could adversely affect the timing of when battery energy storage systems can be delivered

and installed, and when (or if) we can begin to generate revenue from those systems.

If any of our suppliers of solar modules experienced

disruptions in the supply of the modules’ component parts, for example semiconductor solar wafers or investors, this may decrease

production capabilities and restrict our inventory and sales.

In addition, we have experienced and are experiencing varying levels of

volatility in costs of equipment and labor resulting in part from disruptions caused by general global economic conditions.

While inflationary

pressures have resulted in higher costs of products, in part due to an increase in the cost of the materials and wage rates, these additional

costs have been offset by the related rise in electricity rates.

cannot predict the full effects the supply chain constraints will have on our business, cash flows, liquidity, financial condition and

results of operations at this time due to numerous uncertainties.

Given the dynamic nature of these circumstances on our ongoing business,

results of operations and overall financial performance, the full impact of macroeconomic factors, including the conflicts in Ukraine

and Israel, cannot be reasonably estimated at this time.

In the event we are unable to mitigate the impact of delays or price volatility

in solar energy systems, raw materials, and freight, it could materially adversely affect our business, prospects, financial condition

and results of operations.

For additional information on risk factors that could impact our results, please refer to “ Risk Factors ”

located elsewhere in this Annual Report on Form 10-K.

Critical Accounting

Policies and Estimates

discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been

prepared in accordance with GAAP.

GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,

revenue, expenses and related disclosures.

We base our estimates on historical experience and on various other assumptions that we believe

to be reasonable under the circumstances.

In many instances, we could have reasonably used different accounting estimates, and in other

instances, changes in the accounting estimates are reasonably likely to occur from period-to-period.

Actual results could differ significantly

from our estimates.

Our future financial statements will be affected to the extent that our actual results materially differ from these

For further information on all of our significant accounting policies, see Note 2 – Summary of Significant Accounting

Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

believe that policies associated with our revenue recognition, product warranties, inventory excess and obsolescence and stock-based compensation

have the greatest impact on our consolidated financial statements.

Therefore, we consider these to be our critical accounting policies

and estimates.

Revenue Recognition

recognize revenue when control of goods or services is transferred to customers, in an amount that reflects the consideration we expect

to be entitled to in exchange for those services.

Revenue – Solar

Energy System Installations

majority of our revenue is generated from the installation of solar energy systems.

We identify two performance obligations, which include

installation services and post-installation services, and we recognize revenue when control transfers to the customer, upon the completion

of the installation and upon the solar energy system passes inspection by the authority having jurisdiction, respectively.

We apply judgment

in allocating the transaction price between the installation and post-installation performance obligations, based on the estimated costs

to perform our services.

Changes in such estimates could have a material impact on the timing of our revenue recognition.

contracts with customers generally contain a performance guarantee of system output, and we will issue payments to customers if output

falls below contractually stated thresholds over the performance guarantee period, which is typically 10 years.

We apply judgment in estimating

the reduction in revenue associated with the performance guarantee, which is historically not material.

However, due to the long-term

nature of the guarantee, changes in future estimates could have a material impact on the estimate of our revenue reserve.

Revenue – Software

Enhanced Services

recognize revenue from software enhanced services, which include proposals generated from our HelioQuote TM platform and design

services performed using internally developed and external software applications.

We contract with solar installers to generate proposals

and we contract with solar sales entities to perform design services for their potential customers.

Under each type of customer contract,

we generate a fixed number of proposals or designs for the customer in the month the services are contracted.

Contracts with customers

are enforceable on a month-to-month basis and we recognize revenue each month based on the volume of services performed.

Product Warranties

typically provide a 10-year warranty on our solar energy system installations, which provides assurance over the workmanship in performing

the installation, including roof leaks caused by our performance.

For solar panel sales recognized prior to the Disposal Transaction,

we provide a 30-year warranty that the products will be free from defects in material and workmanship.

We record a liability for estimated

future warranty claims based on historical trends and new installations.

To the extent that warranty claim behavior differs from historical

trends, we may experience a material change in our warranty liability.

Inventory Excess

and Obsolescence

inventory consists of completed solar energy systems and related components, which we classify as finished costs.

We record a reserve

for inventory which is considered obsolete or in excess of anticipated demand based on a consideration of marketability and product life

cycle stage, component cost trends, demand forecasts, historical revenues, and assumptions about future demand and market conditions.

We apply judgment in estimating the excess and obsolete inventory, and changes in demand for our inventory components could have a material

impact on our inventory reserve balance.

Stock-Based Compensation

We recognize stock-based compensation expense over the requisite

service period on a straight-line basis for all stock-based payments that are expected to vest to employees, non-employees and directors,

including grants of employee stock options and other stock-based awards.

Equity-classified awards issued to employees and non-employees,

such as consultants and non-employee directors, are measured at the grant-date fair value of the award.

Forfeitures are recognized as

For accounting purposes, prior to the Business Combination,

the fair value of the shares of common stock underlying stock options had historically been determined by our board of directors.

there had been no public market for our common stock, the board of directors exercised reasonable judgment and considered a number of

objective and subjective factors to determine the best estimate of the fair value of our common stock, including important developments

in our operations, sales of redeemable convertible preferred stock, actual operating results and financial performance, the conditions

in the renewable solar energy industry and the economy in general, the stock price performance and volatility of comparable public companies,

and the lack of liquidity of our common stock, among other factors.

Following the Business Combination, the fair value of common stock

is based on the closing stock price on the date of grant as reported on the Nasdaq Global Select Market.

We estimate the grant-date fair value of stock options using

the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires the input of highly subjective assumptions, including

the fair value of the underlying common stock prior to the Mergers, the expected term of the option, the expected volatility of the price

of our common stock and expected dividend yield.

We determine these inputs as follows:

Term—Expected term represents the period that our stock-based awards are expected to be outstanding and is determined using the

simplified method.

Volatility—Expected volatility is estimated by studying the volatility of comparable public companies for similar terms.

Dividend—The Black-Scholes valuation model calls for a single expected dividend yield as an input.

We have never paid dividends

and have no plans to pay dividends.

Interest Rate – We derive the risk-free interest rate assumption from the U.S.

Treasury’s rates for the U.S.

Treasury zero-coupon

bonds with maturities similar to those of the expected term of the awards being valued.

If any assumptions used in

the Black-Scholes option pricing model change significantly, stock-based compensation for future awards may differ materially compared

to the awards granted previously.

For the years ended December 31, 2023 and 2022, stock-based compensation expense was $5.2 million and

$0.9 million, respectively, of which $2.4 million and $0.5 million, respectively, related to discontinued operations.

As of December 31,

2023, we had approximately $20.1 million of total unrecognized stock-based compensation expense related to stock options.

Recent Accounting

Pronouncements

discussion of recently issued accounting standards applicable to Complete Solaria is described in Note 2 – Summary of Significant

Accounting Policies, in the accompanying notes to the consolidated financial statements.

Results of Operations

Year ended December

31, 2023 compared to year ended December 31, 2022

this section, we discuss the results of our operations for fiscal 2023 compared to fiscal 2022.

We discuss our cashflows and current financial

condition under “Capital Resources and Liquidity.”

following table sets forth our statements of operations data for the years ended December 31, 2023 and 2022, respectively.

We have derived

this data from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

This information should be

read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

The results of historical periods are not necessarily indicative of the results of operations for any future period.

Within the tables

presented, percentages are calculated based on the underlying whole-dollar amounts and, therefore, may not recalculate exactly from the

rounded numbers used for disclosure purposes.

Years Ended December 31,

(in thousands)

Cost of revenues (1)

Gross margin %

Operating expenses:

Sales commissions

Sales and marketing (1)

General and administrative (1)

Total operating expenses

Loss from continuing operations

Interest expense (2)

Interest income

Other expense, net (3)

Loss from continuing operations before taxes

Income tax benefit (provision)

Net loss from continuing operations

Percentage change not meaningful.

Includes stock-based compensation expense as follows (in thousands):

Years Ended December 31,

Cost of revenues

Sales and marketing

General and administrative

Total stock-based compensation expense

Includes interest expense to related party of $0.4 million and $0.3 million during the years ended December 31, 2023 and 2022, respectively.

Includes other income from related parties of $0.7 million and $1.4 million during the years ended December 31, 2023 and 2022, respectively.

We disaggregate our revenues

based on the following types of services (in thousands):

Years Ended December 31,

Solar energy system installations

Software enhanced services

Total revenue

Revenues from solar energy

system installations for the year ended December 31, 2023 was $84.9 million compared to $62.9 million for the year ended December 31,

The increase in solar energy system installation revenues of $22.0 million, or 35%, was primarily due to an increase in the volume

of solar energy systems installations, a portion of which related to the fulfillment of delayed installations experienced in the fourth

quarter of 2022 due to unusual inclement California weather, as well as an increase in average selling price of solar energy system installations.

Revenues from software enhanced

services for the year ended December 31, 2023 was $2.8 million compared to $3.6 million for the year ended December 31, 2022.

of $0.8 million was the result of a shift in focus towards solar energy installations.

Cost of Revenues

Cost of revenues for the year ended December 31, 2023 was $69.8 million

compared to $46.6 million for the year ended December 31, 2022.

The increase in cost of revenues of $23.2 million, or 50%, was primarily

due to the increase in revenues of 32%, higher inventory write-offs and rising costs associated with supply chain constraints.

Gross margin decreased 10% year over year, from 30% for the year ended

December 31, 2022 to 20% for the year ended December 31, 2023.

The decrease in gross margin is primarily attributed to the increasing

cost of revenues as described above.

Sales Commissions

Sales commissions for the

year ended December 31, 2023, increased by $9.9 million, or 47%, compared to the year ended December 31, 2022.

The increase in sales commissions

was primarily due to the increase in solar system installation revenue of 35% and higher selling costs.

Sales and Marketing

Sales and marketing expense

for the year ended December 31, 2023 increased by $0.8 million, or 12%, compared to the year ended December 31, 2022.

The increase is

primarily attributable to an increase in stock-based compensation expenses due to options issued during the year ended December 31, 2023.

General and Administrative

General and administrative costs for the year ended December 31, 2023

increased by $18.5 million, or 135%, compared to the year ended December 31, 2022.

The increase was primarily attributed to increases

in contractors and outside services costs of $6.6 million related to the Mergers, payroll of $3.9 million, bad debt expense of $3.4 million,

$2.0 million in stock-based compensation expenses due to options and RSUs issued, certain legal expenses of $1.8 million and office occupancy

related costs of $1.1 million for the year ended December 31, 2023.

Interest Expense

expense for the year ended December 31, 2023 increased by $9.0 million, or 181%, compared to the year ended December 31, 2022.

was primarily attributed $5.4 million of interest related to debt acquired as part of the acquisition of Solaria in November 2022, which

was retained upon the divestiture from the business, as well as an increase of $2.7 million in interest expense related to the convertible

notes and long-term debt in CS Solis for the year ended December 31, 2023.

Other Expense, Net

Other expense, net was $29.9 million for the year ended December 31,

The expenses consisted primarily of $35.4 million in other expense related to the issuance of common stock in connection with the

FPAs, the loss on extinguishment of debt in CS Solis of $10.3 million, the loss on sale of Maxeon equity securities of $4.2 million, $3.9

million in other expense associated with the change in fair value of FPAs, $2.4 million for the issuance of bonus shares in connection

with the Mergers, $3.0 million relating to expenses relating to disposed operations and other expenses of $0.4 million.

These expenses

were offset by $29.3 million related to the change in fair value of the Company’s warrant liabilities.

Other expense, net was $1.9 million for the year ended December 31,

The expenses consisted primarily of $5.2 million relating to the change of fair value of warrant liabilities, partially offset by

a $3.2 million gain on sale of securities and $0.1 million of other income.

Net Loss from Continuing Operations

a result of the factors discussed above, our net loss from continuing operations for the year ended December 31, 2023 was $96.2 million,

an increase of $67.5 million, as compared to a net loss from continuing operations of $28.0 million for the year ended December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2022, we had cash outside the Trust Account of $72,923

in its operating bank accounts, $349,927,313 in marketable securities held in the Trust Account to be used for a business combination,

or to repurchase or redeem its stock in connection therewith, and a working capital deficit of $5,493,215.

As of December 31, 2022, none

of the amount in the Trust Account was available to be withdrawn as described above.

On each of April 1, 2022 and June 6, 2022, we

issued an unsecured promissory note in the amount of up to $500,000 to our sponsor (the “Sponsor Notes”).

On December 14,

2022, we issued an unsecured promissory note in the amount of up to $325,000 to Tidjane Thiam, Adam Gishen, Edward Zeng, and Abhishek

Bhatia (collectively, the “Payees”) (such note, together with the Sponsor Notes, the “Convertible Notes”).

proceeds of the Convertible Notes, which may be drawn down from time to time until we consummate our initial business combination, will

be used for general working capital purposes.

The Convertible Notes bear no interest and are payable in full upon the earlier to occur

of (i) twenty-four (24) months from the closing of our initial public offering (or such later date as may be extended in accordance with

the terms of our amended and restated memorandum and articles of association) or (ii) the consummation of our business combination.

failure to pay the principal within five business days of the date specified above or the commencement of a voluntary or involuntary bankruptcy

action shall be deemed an event of default, in which case the Convertible Notes may be accelerated.

Prior to our first payment of all

or any portion of the principal balance of the Convertible Notes in cash, our sponsor and the Payees, as applicable, have the option to

convert all, but not less than all, of the principal balance of the Convertible Notes into private placement warrants (the “Conversion

Warrants”), each warrant exercisable for one of our ordinary shares at an exercise price of $1.50 per share.

The terms of the Conversion

Warrants would be identical to the Private Placement Warrants.

Our sponsor and the Payees shall be entitled to certain registration rights

relating to the Conversion Warrants.

The issuances of the Convertible Notes were made pursuant to the exemption from registration contained

in Section 4(a)(2) of the Securities Act of 1933, as amended.

As of December 31, 2022, the Company had drawn a total of $1,225,000 on

the Convertible Notes.

In addition, on February 28, 2023, we issued an

additional unsecured promissory note in the amount of up to $2,100,000 to our sponsor, as further described under “—Recent

Developments—Promissory Note.”

We may raise additional capital through loans

or additional investments from the sponsor or an affiliate of the sponsor or certain of its directors and officers.

The sponsor may, but

is not obligated to, lend us funds, from time to time in whatever amounts it deems reasonable in its sole discretion, to meet our working

capital needs.

There can be no assurance that we will be able to obtain additional financing, however.

Moreover, we may need to obtain

additional financing either to complete our business combination or because we become obligated to redeem a significant number of its

public shares upon consummation of its business combination, in which case we may issue additional securities or incur debt in connection

with such business combination.

Subject to compliance with applicable securities laws, we would only complete such financing simultaneously

with the completion of its business combination.

If we are unable to raise additional capital,

it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing

operations, suspending the pursuit of a potential transaction and reducing overhead expenses.

We cannot provide any assurance that new

financing will be available to it on commercially acceptable terms, if at all.

Going Concern

In connection with our assessment of going concern

considerations in accordance with Accounting Standards Codification (“ASC”) Topic 205-40, “Presentation of Financial Statements

– Going Concern,” pursuant to its Amended and Restated Certificate of Incorporation, we have until the end of the Extension Period

to consummate a business combination.

If a business combination is not consummated during the Extension Period, we will have a mandatory

liquidation and subsequent dissolution.

Although we intend to consummate a business combination during the Extension Period, it is uncertain

that we will be able to do so.

This, as well as our liquidity condition, raise substantial doubt about our ability to continue as a going

No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate at the end

of the Extension Period.

Contractual Obligations

We do not have any long-term debt obligations,

capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities other than described below.

We have an agreement to pay the sponsor a total

of up to $10,000 per month for office space, utilities and secretarial and administrative support services.

We began incurring these fees

on February 25, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and

our liquidation.

We have an agreement to pay the underwriters

of our Initial Public Offering a deferred fee of $12,075,000 in the aggregate, which will become payable to them from the amounts

held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting

As of October 25, 2022, and November 2, 2022, respectively, J.P.

Morgan Securities LLC and Deutsche Bank Securities Inc.

have waived their portions of the deferred underwriting fee which is reflected in the consolidated statement of operations and the

consolidated statement of changes in shareholders’ deficit as a reduction of transaction costs incurred in connection

Therefore, the deferred underwriting fee was reduced by $9,056,250, of which $271,687 is shown in the consolidated statement of operations as a reduction of transaction

costs incurred in connection with the IPO and $8,784,563 is charged to additional paid-in capital in the consolidated statement of changes

in shareholders’ deficit.

As a result of the reductions, the outstanding deferred underwriting fee payable was reduced to $3,018,750.

Critical Accounting Policies

This management’s discussion and analysis

of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts

of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements.

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

We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable

under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities

that are not readily apparent from other sources.

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

There have been no significant changes in our critical accounting policies as discussed in the Annual Report on Form 10-K filed by us

with the SEC on April 13, 2022.

Our critical accounting policies are presented below:

Class A Ordinary Shares Subject to Possible

We account for our Class A ordinary shares subject

to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A

ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value.

Conditionally

redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder

or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity.

all other times, Class A ordinary shares are classified as shareholders’ deficit.

Our Class A ordinary shares feature certain redemption

rights that are considered to be outside of our control and subject to the occurrence of uncertain future events.

Accordingly, as of December

31, 2022 and 2021, 34,500,000 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity,

outside of the shareholders’ deficit section of our consolidated balance sheets.

Derivative Warrant Liabilities

We do not use derivative instruments to hedge

exposures to cash flow, market, or foreign currency risks.

We evaluate all of our financial instruments, including issued share purchase

Warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480

and ASC 815-15.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or

as equity, is reassessed at the end of each reporting period.

We account for our 14,891,667 Warrants issued

in connection with our Initial Public Offering (8,625,000) and Private Placement (6,266,667) as derivative warrant liabilities in accordance

with ASC 815-40.

Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value

at each reporting period.

The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in

fair value is recognized in our statements of operations.

The fair value of the Private Placement Warrants has been estimated using binomial lattice simulations at each measurement date.

The fair value of the Public Warrants was initially estimated using Monte Carlo simulations.

After the Public Warrants were separately traded, the measurement of the Public Warrants used an observable market quote in an active

Net Income per Ordinary Share

We have two classes of shares, which are referred

to as Class A ordinary shares and Class B ordinary shares.

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

The 14,891,667 potential ordinary shares issuable upon the exercise of the Warrants were excluded from diluted earnings per share for

the year ended December 31, 2022 and 2021 because the Warrants are contingently exercisable, and the contingencies have not yet been met.

As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods presented.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other

Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”)

to simplify accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial

conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining

to equity classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible

debt and freestanding instruments that are indexed to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings

per share guidance, including the requirement to use the if-converted method for all convertible instruments.

ASU 2020-06 is effective

January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1,

The guidance was adopted starting January 1, 2022.

Adoption of the ASU did not impact our financial position, results of operations

or cash flows.

Management does not believe that any recently

issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated

financial statements.

Off-Balance Sheet Arrangements

As of December 31, 2022 and 2021, we did not have

any off-balance sheet arrangements.

The Jumpstart Our Business Startups Act of 2012

(the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public

We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting

pronouncements based on the effective date for private (not publicly traded) companies.

We are electing to delay the adoption of new or

revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which

adoption of such standards is required for non-emerging growth companies.

As a result, the financial statements may not be comparable

to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating

the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth

in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among

other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to

Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank

Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory

audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements

(auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive

compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

These exemptions will apply

for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth

company,” whichever is earlier.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined

by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Financial Statements and Supplementary Data

This information appears following Item 15 of

this Report and is included herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Since our inception, we have

incurred losses and negative cash flows from operations.

We incurred net losses of $269.6 million and $29.5 million, during the fiscal

years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of $354.9 million and current debt of $61.9 million

as of December 31, 2023.

We had cash and cash equivalents of $2.6 million as of December 31, 2023, which were held for working capital

expenditures.

We believe our operating losses and negative operating cash flows will continue into the foreseeable future.

We have financed

our operations primarily through sales of equity securities, issuance of convertible notes and cash generated from operations.

equivalents are on deposit with major financial institutions.

Our cash position raises substantial doubt regarding our ability to continue

as a going concern for 12 months following the issuance of the consolidated financial statements.

We will receive the proceeds

from any cash exercise of any Warrants.

The aggregate amount of proceeds could be up to $254.1 million if all the Warrants are exercised

However, to the extent the Warrants are exercised on a “cashless basis,” the amount of cash we would receive from

the exercise of the Warrants will decrease.

The Private Warrants and Working Capital Warrants may be exercised for cash or on a “cashless

basis.” The Public Warrants and the Mergers Warrants may only be exercised for cash provided there is then an effective registration

statement registering the shares of common stock issuable upon the exercise of such warrants.

If there is not a then-effective registration

statement, then such warrants may be exercised on a “cashless basis,” pursuant to an available exemption from registration

under the Securities Act.

We expect to use any such proceeds for general corporate and working capital purposes, which would increase

our liquidity.

As of March 26, 2024, the price of our common stock was $0.64 per share.

The weighted average exercise price of the warrants was $7.85 as of

December 31, 2023.

We believe the likelihood that warrant holders

will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the market price of our

common stock.

If the market price for our common stock remains less than the exercise price, we believe warrant holders will be unlikely

Debt Financings

2018 Bridge Notes

In December 2018, Solaria

Corporation issued senior subordinated convertible secured notes (“2018 Notes”) totaling approximately $3.4 million in

exchange for cash.

The notes bear interest at the rate of 8% per annum and the investors are entitled to receive twice the face value

of the 2018 Notes at maturity.

The 2018 Notes were assumed in the acquisition by Complete Solaria and are secured by substantially all

of the assets of Complete Solaria.

In 2021, the 2018 Notes were amended extending the maturity date to December 13, 2022.

In connection

with the 2021 amendment, Solaria had issued warrants to purchase shares of Series E-1 redeemable convertible preferred stock of Solaria.

The warrants were exercisable immediately in whole or in part at and expire on December 13, 2031.

As part of the Business Combination

with Complete Solar, all the outstanding warrants issued to the lenders were assumed by the parent company, Complete Solaria.

In December 2022, we entered

into an amendment to the 2018 Notes extending the maturity date from December 13, 2022 to December 13, 2023.

In connection with the amendment,

the 2018 Notes will continue to bear interest at 8% per annum and are entitled to an increased repayment premium from 110% to 120% of

the principal and accrued interest at the time of repayment.

The Company concluded that

the modification was a troubled debt restructuring as the Company was experiencing financial difficulty and the amended terms resulted

in a concession to the Company.

As the future undiscounted cash payments under the modified terms exceeded the carrying amount of the

Solaria Bridge Notes on the date of modification, the modification was accounted for prospectively.

The incremental repayment premium

is being amortized to interest expense using the effective interest rate method.

As of December 31, 2023 and 2022, the carrying value

of the 2018 Notes was $11.0 million and $9.8 million, respectively.

Interest expense recognized for the years ended December 31, 2023

and 2022 was $1.2 million and $0.7 million, respectively.

The terms of the 2018 Notes are currently being renegotiated.

Revolver Loan

In October 2020, Solaria entered

into a loan agreement (“Loan Agreement”) with Structural Capital Investments III, LP (“SCI”).

The Loan Agreement

with SCI is comprised of two facilities, a term loan (the “Term Loan”) and a revolving loan (the “Revolving Loan”)

for $5.0 million each with a maturity date of October 31, 2023.

Both the Term Loan and the Revolving Loan were fully drawn upon closing.

The Term Loan was repaid prior to the acquisition of Solaria by Complete Solar and was not included in the business combination.

The Revolving Loan has a term

of thirty-six months, with the principal due at the end of the term and an annual interest rate of 7.75% or Prime rate plus 4.5%, whichever

Interest expense recognized for the years ended December 31, 2023 and 2022 was $0.6 million and $0.1 million, respectively.

In October 2023, the Company entered into an Assignment and Acceptance Agreement whereby Structural Capital Investments III, LP assigned

the SCI debt to Kline Hill Partners Fund LP, Kline Hill Partners IV SPV LLC, Kline Hill Partners Opportunity IV SPV LLC, and Rodgers Massey

Revocable Living Trust for a total purchase price of $5.0 million.

The terms of the SCI Revolving Loan are currently being renegotiated.

Secured Credit Facility

In December 2022, we entered

into a secured credit facility agreement with Kline Hill Partners IV SPV LLC and Kline Hill Partners Opportunity IV SPV LLC.

credit facility agreement, which matures in April 2023, allows us to borrow up to 70% of the net amount of our eligible vendor purchase

orders with a maximum amount of $10.0 million at any point in time.

The purchase orders are backed by relevant customer sales orders which

serve as collateral.

The amounts drawn under the secured credit facility may be reborrowed provided that the aggregate borrowing does

not exceed $20.0 million.

The repayment under the secured credit facility is the borrowed amount multiplied by 1.15x if repaid within

75 days and borrowed amount multiplied by 1.175x if repaid after 75 days.

We may prepay any borrowed amount without premium or penalty.

Under the original terms, the secured credit facility agreement was due to mature in April 2023.

We are in the process of amending the

secured credit facility agreement to extend its maturity date.

At December 31, 2023, the

outstanding net debt amounted to $12.2 million, including accrued financing cost of $2.1 million, and as of December 31, 2022, the balance

outstanding was $5.6 million, including accrued financing cost of $0.1 million.

Debt in CS Solis

February 2022, we received an investment from CRSEF Solis Holdings, LLC (“CRSEF”).

The investment was made pursuant to a subscription

agreement, under which CRSEF contributed $25.6 million in exchange for 100 Class B Membership Units of CS Solis.

The Class B Membership

Units are mandatorily redeemable by us on the three-year anniversary of the effective date of the CS Solis amended and restated LLC agreement.

The Class B Membership Units accrue interest that is payable upon redemption at a rate of 10.5% which is accrued as an unpaid dividend,

compounded annually, and subject to increases in the event we declare any dividends.

In July 2023, we amended the debt of with CSREF as

part of the closing of the Mergers.

The modification did not change the interest rate.

The modification accelerates the redemption date

of the investment, which was previously February 14, 2025, and is now March 31, 2024 as a result of the modification.

As of December 31,

2023 and 2022, we have recorded a liability of $33.3 million and zero, respectively, included in short-term debt due CS Solis on the consolidated

balance sheets and we have recorded a liability of zero and $25.2 million, respectively, included in long-term debt due CS Solis on the

consolidated balance sheets.

For the years ended December 31, 2023 and 2022, we have recorded an accretion of the liability as interest

expense of $7.2 million and $2.4 million, respectively, and we have recorded amortization of issuance costs as interest expense of less

than $0.7 million and $1.2 million, respectively.

Forward Purchase Agreements

July 2023, FACT and Legacy Complete Solaria, Inc.

entered into FPAs with each of (i) Meteora; (ii) Polar, and (iii) Sandia (each

individually, a “Seller”, and together, the “FPA Sellers”).

to the terms of the FPAs, the FPA Sellers may (i) purchase through a broker in the open market, from holders of Shares other than the

Company or affiliates thereof, FACT’s ordinary shares, par value of $0.0001 per share, (the “Shares”).

While the FPA

Sellers have no obligation to purchase any Shares under the FPAs, the aggregate total Shares that may be purchased under the FPAs shall

be no more than 6,720,000 in aggregate.

The FPA Sellers may not beneficially own greater than 9.9% of issued and outstanding

Shares following the Mergers as per the Amended and Restated Business Combination Agreement.

The key terms of the

forward contracts are as follows:

FPA Sellers can terminate the transaction following the Optional Early Termination (“OET”) Date which shall specify the quantity

by which the number of shares is to be reduced (such quantity, the “Terminated Shares”).

Seller shall terminate the transaction

in respect of any shares sold on or prior to the maturity date.

The counterparty is entitled to an amount from the seller equal to the

number of terminated shares multiplied by a reset price.

The reset price is initially $10.56 (the “Initial Price”) and is

subject to a $5.00 floor.

FPA contains multiple settlement outcomes.

Per the terms of the agreements, the FPAs will (1) settle in cash in the event the Company

is due cash upon settlement from the FPA Sellers or (2) settle in either cash or shares, at the discretion of the Company, should the

settlement amount adjustment exceed the settlement amount.

Should the Company elect to settle via shares, the equity will be issued in

Complete Solaria Common Stock, with a per share price based on the volume-weighted average price (“VWAP”) Price over 15 scheduled

trading days.

The magnitude of the settlement is based on the Settlement Amount, an amount equal to the product of:

(1) Number of shares

issued to the FPA Seller pursuant to the FPA, less the number of Terminated Shares multiplied by (2) the VWAP Price over the valuation

The Settlement amount will be reduced by the Settlement Adjustment, an amount equal to the product of (1) Number of shares in

the Pricing Date Notice, less the number of Terminated Shares multiplied by $2.00.

Settlement occurs as of the Valuation Date, which is the earlier to occur of (a) the date that is two years after the date of the Closing

Date of the Mergers (b) the date specified by Seller in a written notice to be delivered to Counterparty at Seller’s discretion

(which Valuation Date shall not be earlier than the day such notice is effective) after the occurrence of certain triggering events;

and (c) 90 days after delivery by the Counterparty of a written notice in the event that for any 20 trading days during a 30 consecutive

trading day-period (the “Measurement Period”) that occurs at least 6 months after the Closing Date, the VWAP Price is less

than the then applicable Reset Price.

Company entered into four separate FPAs, three of which, associated with the obligation to issue 6,300,000 Shares, were entered into prior

to the closing of the Mergers.

Upon signing the FPAs, the Company incurred an obligation to issue a fixed number of shares to the FPA

Sellers contingent upon the closing of the Mergers in addition to the terms and conditions associated with the settlement of the FPAs.

The Company accounted for the contingent obligation to issue shares in accordance with ASC 815, Derivatives and Hedging , and recorded

a liability and other income (expense), net based on the fair value upon of the obligation upon the signing of the FPAs.

The liability

was extinguished in July 2023 upon the issuance of Complete Solaria Common Stock to the FPA sellers.

Additionally,

in accordance with ASC 480, Distinguishing Liabilities from Equity , the Company has determined that the forward contract is

a financial instrument other than a share that represent or are indexed to obligations to repurchase the issuer’s equity shares

by transferring assets, referred to herein as the “forward purchase liability” on its consolidated balance sheets.

initially measured the forward purchase liability at fair value and has subsequently remeasured it at fair value with changes in fair

value recognized in earnings.

the date of issuance of the Complete Solaria Common Stock in satisfaction of the Company’s obligation to issue shares around the

closing of the Mergers, the Company recorded $35.5 million to other income (expense), net associated with the issuance of 6,720,000 shares

of Complete Solaria Common Stock.

of the closing of the Mergers and issuance of the Complete Solaria Common Stock underlying the FPAs, the fair value of the prepaid FPAs

was an asset balance of $0.1 million and was recorded on the Company’s consolidated balance sheets and within other income

(expense), net on the consolidated statements of operations and comprehensive loss.

Subsequently, the change of fair value of the forward

purchase liability amounted to an expense of $3.9 million for the fiscal year ended December 31, 2023.

As of December 31, 2023, the

forward purchase liabilities amounted to $3.8 million.

December 18, 2023, the Company and the FPA Sellers entered into separate amendments to the FPA (the “Amendments”).

The Amendments

lower the reset floor price of each FPA from $5.00 to $3.00 and allow the Company to raise up to $10.0 million of equity from existing

stockholders without triggering certain anti-dilution provisions contained in the FPA;

provided, the insiders pay a price per share for

their initial investment equal to the closing price per share as quoted on the Nasdaq on the day of purchase;

provided, further, that

any subsequent investments are made at a price per share equal to the greater of (a) the closing price per share as quoted by Nasdaq on

the day of the purchase or (b) the amount paid in connection with the initial investment.

January 31, 2024, we entered into a simple agreement for future equity (the “First SAFE”) with the Rodgers Massey Freedom

and Free Markets Charitable Trust (the “Purchaser”) in connection with the Purchaser investing $1.5 million in the Company.

The First SAFE is convertible into shares of our common stock, par value $0.0001 per share, upon the initial closing of a bona fide transaction

or series of transactions with the principal purpose of raising capital, pursuant to which we issue and sell common stock at a fixed valuation

(an “Equity Financing”), at a per share conversion price which is equal to the lower of (i)(a) $53.54 million divided by (b)

our capitalization immediately prior to such Equity Financing (such conversion price, the “SAFE Price”), and (ii) 80% of the

price per share of Common Stock sold in the Equity Financing.

If the Company consummates a change of control prior to the termination

of the First SAFE, the Purchaser will be automatically entitled to receive a portion of the proceeds of such liquidity event equal to

the greater of (i) $1.5 million and (ii) the amount payable on the number of shares of Common Stock equal to (a) $1.5 million divided

by (b)(1) $53.54 million divided by (2) our capitalization immediately prior to such liquidity event (the “Liquidity Price”),

subject to certain adjustments as set forth in the First SAFE.

The First SAFE is convertible into a maximum of 1,431,297 shares of Common

Stock, assuming a per share conversion price of $1.05, which is the product of (i) $1.31, the closing price of the Common Stock on January

31, 2024, multiplied by (ii) 80%.

February 15, 2024, we entered into a simple agreement for future equity (the “Second SAFE” and together with the First SAFE,

the “SAFEs”) with the Purchaser in connection with the Purchaser investing $3.5 million in the Company.

The Second SAFE is

convertible into shares of Common Stock upon the initial closing of an Equity Financing at a per share conversion price which is equal

to the lower of (i) the SAFE Price, and (ii) 80% of the price per share of Common Stock sold in the Equity Financing.

If we consummate

a change of control prior to the termination of the Second SAFE, the Purchaser will be automatically entitled to receive an amount equal

to the greater of (i) $3.5 million and (ii) the amount payable on the number of shares of Common Stock equal to $3.5 million divided by

the Liquidity Price, subject to certain adjustments as set forth in the Second SAFE.

The Second SAFE is convertible into a maximum of

3,707,627 shares of Common Stock, assuming a per share conversion price of $0.94, which is the product of (i) $1.18, the closing price

of the Common Stock on February 15, 2024, multiplied by (ii) 80%.

Cash Flows for the Years Ended December 31,

2023 and 2022

The following table summarizes

Complete Solaria’s cash flows from operating, investing, and financing activities for the years ended December 31, 2023 and 2022

(in thousands):

Years Ended December 31,

Net cash used in operating activities from continuing operations

Net cash provided by investing activities from continuing operations

Net cash provided by financing activities from continuing operations

Net increase in cash, cash equivalents and restricted cash from discontinued operations

Net decrease in cash, cash equivalents and restricted cash

Cash Flows from Operating Activities

Net cash used in operating activities from continuing operations of

$58.8 million for the year ended December 31, 2023 was primarily due to the net loss from continuing operations, net of tax of $96.2 million

and net cash outflows of $17.4 million from changes in our operating assets and liabilities, adjusted for non-cash charges of $54.1 million.

Non-cash charges primarily consisted of $35.5 million for the issuance of common stock in connection with FPAs, $10.3 million loss on

CS Solis debt extinguishment, $4.2 million loss on sale of equity securities, $3.9 million change in fair value of FPAs, $4.3 million

change in allowance for credit losses, $4.9 million of interest expense, $6.6 million accretion of long-term debt in CS Solis, $2.4 million

related to the issuance of bonus common stock shares in connection with the Mergers, $3.4 million of stock-based compensation expense,

and $6.1 million change in reserve for excess and obsolete inventory, $0.9 million in lease expense and $0.9 million in depreciation and

amortization, partially offset by a decrease in the fair value of warrant liabilities of $29.3 million.

The main drivers of net cash outflows

derived from the changes in operating assets and liabilities were related to an increase in accounts receivable, net of $12.1 million,

an increase in prepaid expenses and other current assets of $4.2 million, a decrease in deferred revenue of $1.7 million, a decrease in

accrued expenses and other liabilities of $3.3 million and a decrease in operating lease liabilities of $0.6 million, partially offset

a decrease in inventory of $1.5 million, an increase in accounts payable of $2.3 million, and a decrease in other noncurrent assets of

$1.1 million.

Net cash used in operating

activities from continuing operations of $25.2 million for the year ended December 31, 2022 was primarily due the net loss from continuing

operations of $28.0 million, and net cash outflows of $11.2 million from changes in our operating assets and liabilities, adjusted for

non-cash charges of $13.8 million.

The main drivers of net cash outflows derived from the changes in operating assets and liabilities

were related to an increase in accounts receivable of $9.7 million, and an increase in inventories of $4.9 million, and a decrease in

prepaid expenses and other current assets of $1.6 million, partially offset by an increase in accounts as payable of $3.3 million and

a decrease in prepaid expenses and other current assets of $1.2 million.

Non-cash charges primarily consisted of $5.2 million change in

the fair value of warrant liability, interest expense primarily related to long-term debt in CS Solis of $4.8 million, reserve for obsolete

inventory of $3.6 million, increase in the allowance for doubtful accounts of $2.1 million, and depreciation and amortization expense

of $0.6 million, partially offset by non-cash income recognized upon conversion of convertible notes and SAFE agreements of $3.2 million.

The net increase in cash,

cash equivalents and restricted cash from discontinued operations of $0.2 million for the year ended December 31, 2023 was entirely attributable

to net cash provided by operating activities from discontinued operations.

This increase was primarily due to the net loss from discontinued

operations, net of tax of $173.4 million, adjusted for non-cash charges of $5.4 million and net cash inflows of $20.7 million from changes

in our operating assets and liabilities.

Non-cash charges primarily consisted of impairment of goodwill of $119.4 million, impairment

of intangible assets of $28.1 million, depreciation and amortization expense of $2.4 million, stock-based compensation expense of $1.8

million and a $1.1 million change in allowance for credit losses.

The main drivers of net cash inflows derived from the changes in operating

assets and liabilities were related to a decrease in accounts receivable, net of $8.2 million, an increase in accrued expenses and other

current liabilities of $6.0 million, a decrease in decrease in prepaids of $2.8 million, a decrease in inventories of $2.3 million, partially

offset by a decrease of $2.9 million in accounts payable.

Cash Flows from Investing Activities

Net cash provided by investing

activities of $6.2 million for the year ended December 31, 2023 was primarily due to sale of an investment.

Net cash used in investing

activities of $3.3 million for the year ended December 31, 2022 was due to additions to internal-use-software.

Cash Flows from Financing Activities

Net cash provided by financing

activities of $50.4 million for the year ended December 31, 2023 was primarily due to total proceeds from the issuance of convertible

notes, net of $21.3 million, total proceeds from the Mergers and PIPE Financing of $19.8 million, and proceeds from the issuance of notes

payable, net of $14.1 million, partially offset by the repayment of notes payable of $9.8 million.

Net cash provided by financing

activities of $31.2 million for the year ended December 31, 2022 was primarily due to net proceeds from issuance of long-term debt in

CS Solis of $25.0 million, proceeds from the issuance of the 2022 Convertible Notes of $12.0 million, and proceeds from the issuance of

notes payable of $5.5 million.

This was partially offset by the repayment of notes payable of $9.5 million, payments for issuance costs

of Series D redeemable convertible preferred shares of $1.4 million, and repayment of convertible notes payable to related parties of

$0.5 million.

Off Balance Sheet

of the date of this Annual Report on Form 10-K, Complete Solaria does not have any off-balance sheet arrangements that have or are reasonably

likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of

operations, liquidity, capital expenditures, or capital resources that are material to investors.

The term “off-balance sheet arrangement”

generally means any transaction, agreement, or other contractual arrangement to which an entity unconsolidated with Complete Solaria is

a party, under which it has any obligation arising under a guaranteed contract, derivative instrument, or variable interest or a retained

or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity, or market risk support

for such assets.

Complete Solaria does not engage in off-balance sheet financing arrangements.

Emerging Growth Company

Section 102(b)(1) of the Jumpstart

Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised

financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the

requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition

period is irrevocable.

Complete Solaria is an “emerging

growth company” as defined in Section 2(a) of the Securities Act, and has elected to take advantage of the benefits of the extended

transition period for new or revised financial accounting standards.

Following the closing of the Mergers, our Post-Combination Company

will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock

that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last

day of the fiscal year in which we has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation),

(iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year period, or (iv)

December 31, 2025.

Complete Solaria expects to continue to take advantage of the benefits of the extended transition period, although

it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards.

This may make it difficult

or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth

company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of

the potential differences in accounting standards used.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis