SunPower Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS COMPLETE SOLARIA, INC. Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 52 Consolidated Balance Sheets as of December 31, 2023 and 2022 53 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022 54 Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2023 and 2022 55 Consolidated Statements of Cash Flows for the for the Years Ended December 31, 2023 and 2022 56 Notes to Consolidated Financial Statements 57 51 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Complete Solaria, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Complete Solaria, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1(c) to the consolidated financial statements, the Company has recurring net losses, accumulated deficit, negative cash outflows from operations and current debt outstanding that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1(c). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /S/ Deloitte & Touche LLP San Francisco, California April 1, 2024 We have served as the Company’s auditor since 2022. 52 COMPLETE SOLARIA, INC. Consolidated Balance Sheets ( in thousands, except share and per share amounts ) December 31, 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 2,593 $ 4,409 Accounts receivable, net 26,281 27,717 Inventories 3,058 13,059 Prepaid expenses and other current assets 5,817 10,071 Total current assets 37,749 55,256 Restricted cash 3,823 3,907 Property and equipment, net 4,317 3,476 Operating lease right-of-use assets 1,235 2,182 Other noncurrent assets 198 1,330 Long-term assets held for sale - discontinued operations - 162,032 Total assets $ 47,322 $ 228,183 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 13,122 $ 14,474 Accrued expenses and other current liabilities 27,870 19,830 Notes payable, net (1) 28,657 20,403 Deferred revenue, current 2,423 5,407 Short-term debt with CS Solis 33,280 - Forward purchase agreement liabilities (2) 3,831 - Total current liabilities 109,183 60,114 Warranty provision, noncurrent 3,416 3,214 Warrant liability 9,817 14,152 Deferred revenue, noncurrent 1,055 Long-term debt with CS Solis - 25,204 Convertible notes, net, noncurrent - 3,434 Convertible notes, net due to related parties, noncurrent - 15,510 Operating lease liabilities, net of current portion 664 1,274 Total liabilities 124,135 122,902 Commitments and contingencies (Note 18) Stockholders’ (deficit) equity: Common stock, $ 0.0001 par value; Authorized 1,000,000,000 and 60,000,000 shares as of December 31, 2023 and December 31, 2022, respectively; issued and outstanding 49,065,361 and 19,932,429 shares as of December 31, 2023 and December 31, 2022, respectively 7 3 Additional paid-in capital 277,965 190,624 Accumulated other comprehensive loss 143 27 Accumulated deficit ( 354,928 ) ( 85,373 ) Total stockholders’ (deficit) equity ( 76,813 ) 105,281 Total liabilities and stockholders’ equity $ 47,322 $ 228,183 (1) Includes $0.4 million and zero due to related parties as of December 31, 2023 and 2022, respectively. (2) Includes $3.2 million and zero of liabilities due to related parties as of December 31, 2023 and 2022, respectively. The accompanying notes are an integral part of these consolidated financial statements. 53 COMPLETE SOLARIA, INC. Consolidated Statements of Operations and Comprehensive Loss ( in thousands, except share and per share amounts ) Fiscal Years Ended December 31, 2023 2022 Revenues $ 87,616 $ 66,475 Cost of revenues 69,828 46,647 Gross profit 17,788 19,828 Operating expenses: Sales commissions 31,127 21,195 Sales and marketing 6,920 6,156 General and administrative 32,099 13,634 Total operating expenses 70,146 40,985 Loss from continuing operations ( 52,358 ) ( 21,157 ) Interest expense (1) ( 14,033 ) ( 4,986 ) Interest income 36 5 Other expense, net (2) ( 29,862 ) ( 1,858 ) Total Other expense ( 43,859 ) ( 6,839 ) Loss from continuing operations before income taxes ( 96,217 ) ( 27,996 ) Income tax benefit (provision) 20 ( 27 ) Net loss from continuing operations ( 96,197 ) ( 28,023 ) Loss from discontinued operations, net of tax ( 25,853 ) ( 1,454 ) Impairment loss from discontinued operations ( 147,505 ) – Net loss from discontinued operations, net of taxes ( 173,358 ) ( 1,454 ) Net loss ( 269,555 ) ( 29,477 ) Other Comprehensive income: Foreign currency translation adjustment 116 27 Comprehensive loss (net of tax) $ ( 269,439 ) $ ( 29,450 ) Net loss from continuing operations per share attributable to common stockholders, basic and diluted $ ( 3.89 ) $ ( 1.24 ) Net loss from discontinued operations per share attributable to common stockholders, basic and diluted $ ( 1.05 ) $ ( 0.07 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 4.94 ) $ ( 1.31 ) Weighted-average shares used to compute net loss per share attributable to common stockholders’, basic and diluted 24,723,370 22,524,400 (1) Includes interest expense to related parties of $0.4 million and $0.3 million during the fiscal years ended December 31, 2023 and 2022, respectively. (2) Other expense, net includes other expense, net to related parties of $0.7 million and $1.4 million during the fiscal years ended December 31, 2023 and 2022, respectively. The accompanying notes are an integral part of these consolidated financial statements. 54 COMPLETE SOLARIA, INC. Consolidated Statements of Stockholders’ Deficit ( in thousands, except number of shares ) Redeemable Convertible Preferred Stock Common Stock Additional Paid-in- Accumulated Accumulated Other Comprehensive Total Stockholders’ Equity Shares Amount Shares Amount Capital Deficit Income (Deficit) Balance as of January 1, 2022 — $ — 9,806,143 $ 2 $ 34,504 $ ( 55,896 ) $ — $ ( 21,390 ) Issuance of Series D-1, D-2, and D-3 redeemable convertible preferred stock upon conversion of convertible notes and SAFEs 1 2,771,551 11,558 — — — — — — Issuance of Series D-4, D-5, D-6 and D-7 redeemable convertible preferred stock upon acquisition 2 6,803,550 52,201 — — — — — — Issuance of Series D-8 redeemable convertible preferred stock upon conversion of SAFE 3 8,171,662 60,470 — — — — — — Issuance of common stock in connection with business combination — — 2,884,550 — 27,295 — — 27,295 Issuance of common stock warrants — — — — 3,589 — — 3,589 Exercise of common stock options — — 335,496 — 105 — — 105 Stock-based compensation — — — — 903 — — 903 Net loss — — — — — ( 29,477 ) — ( 29,477 ) Foreign currency translation adjustment — — — — — — 27 27 Balance as of December 31, 2022, as previously reported 17,746,763 124,229 3,220,046 — 31,892 ( 29,477 ) 27 27 Retroactive application of recapitalization (Note 3) ( 17,746,763 ) ( 124,299 ) 10,126,286 1 124,228 — — — Balance as of December 31, 2022 — — 19,932,429 3 190,624 ( 85,373 ) 27 105,281 Conversion of 2022 Convertible Notes into common stock — — 5,460,075 2 40,950 — — 40,952 Issuance of common stock upon the reverse capitalization, net of offering costs — — 13,458,293 2 4,586 — — 4,588 Reclassification of prepaid PIPE — — 350,000 — 3,500 — — 3,500 Reclassification of warrants between liabilities and equity — — — — 4,329 — — 4,329 Reclassification of Legacy Complete Solaria Common stock into Complete Solaria Common Stock — — — ( 1 ) 2 — — 1 Issuance of common stock in connection with forward purchase agreements — — 1,050,000 — 4,777 — — 4,777 Issuance of common stock in connection with forward purchase agreements due to related party — — 4,508,488 1 30,712 — — 30,713 Issuance of common stock bonus shares in connection with Mergers — — 463,976 — 2,394 — — 2,394 Residual Mergers proceeds — — — — 161 — — 161 Modification of Carlyle warrant — — — — ( 10,862 ) — — ( 10,862 ) Issuance of restricted stock units — — 98,097 — 52 — — 52 Issuance of common stock warrants — — — ( 3,516 ) — — ( 3,616 ) Issuance of common stock to related party — — 3,676,470 — 5,000 — — 5,000 Exercise of common stock options — — 67,533 — 57 — — 57 Stock-based compensation — — — — 5,199 — — 5,199 Foreign currency translation — — — — — — 116 116 Net loss — — — — — ( 269,555 ) — ( 269,555 ) Balance as of December 31, 2023 — $ — 49,065,361 $ 7 $ 277,965 $ ( 354,928 ) $ 143 $ ( 76,813 ) The accompanying notes are an integral part of these consolidated financial statements. 55 COMPLETE SOLARIA, INC. Consolidated Statements of Cash Flows ( in thousands, except number of shares ) Fiscal Years Ended December 31, 2023 2022 Cash flows from operating activities from continuing operations Net loss $ ( 269,555 ) $ ( 29,477 ) Net loss from discontinued operations, net of income taxes ( 173,358 ) ( 1,454 ) Net loss from continuing operations, net of tax ( 96,197 ) ( 28,023 ) Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: Stock-based compensation expense 3,364 433 Non-cash interest expense (1) 4,882 4,810 Non-cash lease expense 947 468 Gain on extinguishment of convertible notes and SAFEs (2) - ( 3,235 ) Depreciation and amortization 930 648 Provision for credit losses 4,274 2,074 Change in reserve for excess and obsolete inventory 6,148 3,631 Issuance of forward purchase agreements (3) ( 76 ) – Change in fair value of forward purchase agreement liabilities (4) 3,906 – Loss on CS Solis debt extinguishment 10,338 – Change in fair value of warrant liabilities ( 29,310 ) 5,211 Loss on sale of equity securities 4,154 – Accretion of debt in CS Solis 6,579 – Loss on issuance of common stock in connection with forward purchase agreements (5) 35,490 – Loss on issuance of common stock bonus shares in connection with the Mergers (6) 2,394 – Issuance of restricted stock units in connection with vendor services 52 – Changes in operating assets and liabilities: Accounts receivable, net ( 12,106 ) ( 9,683 ) Inventories 1,544 ( 4,953 ) Prepaid expenses and other current assets ( 4,197 ) 1,600 Long-term deposits – ( 15 ) Other noncurrent assets 1,132 ( 1,132 ) Accounts payable 2,292 3,252 Accrued expenses and other current liabilities ( 3,313 ) ( 1,154 ) Operating lease right-of-use assets and lease liabilities ( 598 ) ( 617 ) Warranty provision, noncurrent 255 157 Deferred revenue ( 1,685 ) 1,311 Net cash used in operating activities from continuing operations ( 58,802 ) ( 25,217 ) Net cash provided by operating activities from discontinued operations 190 ( 6,296 ) Net cash used in operating activities ( 58,612 ) ( 31,513 ) Cash flows from investing activities from continuing operations Purchase of property and equipment ( 35 ) – Capitalization of internal-use software costs ( 1,939 ) ( 1,513 ) Payments for acquisition of business, net of cash acquired – 4,848 Proceeds from the sale of equity securities 8,145 – Net cash provided by investing activities 6,171 3,335 Cash flows from financing activities from continuing operations Proceeds from issuance of notes payable, net of issuance cost 14,102 5,501 Principal repayment of notes payable ( 9,803 ) ( 9,507 ) Proceeds from issuance of convertible notes, net of issuance cost 17,750 3,400 Proceeds from issuance of convertible notes, net of issuance cost, due to related parties 3,500 8,600 Repayment of convertible notes to related parties - ( 500 ) Proceeds from issuance of long-term debt with CS Solis, net of issuance cost - 25,000 Proceeds from exercise of common stock options 57 128 Proceeds from Mergers and PIPE Financing 4,219 – Proceeds from Mergers and PIPE Financing from related parties 15,600 – Proceeds from common stock 5,000 – Payments for issuance costs of Series D-1, D-2 and D-3 redeemable convertible preferred stock - ( 1,431 ) Net cash provided by financing activities from continuing operations 50,425 31,191 Effect of exchange rate changes 116 27 Net (decrease) increase in cash, cash equivalents and restricted cash ( 1,900 ) 3,040 Cash, cash equivalents, and restricted cash at beginning of period 8,316 5,276 Cash, cash equivalents, and restricted cash at end of period $ 6,416 $ 8,316 Supplemental disclosures of cash flow information: Cash paid during the year for interest 2,147 162 Cash paid during the year for income taxes – 6 Supplemental schedule of noncash investing and financing activities: Operating lease right-of-use assets obtained in exchange for new operating lease liabilities – 245 Carlyle warrant modification 10,862 – Conversion of 2022 Convertible notes into common stock 30,625 – Issuance of common stock warrants 3,516 3,589 Issuance of Series D redeemable convertible preferred stock upon conversion of SAFE – 60,470 Issuance of Series D redeemable convertible preferred stock upon conversion of convertible debt – – Conversion of 2022 Convertible Notes into common stock 21,561 – Conversion of 2022 Convertible Notes issued to related parties into common stock 19,390 – Conversion of preferred stock into common stock 155,630 – Issuance of common stock in connection with forward purchase agreements (5) 35,490 – Issuance of common stock bonus shares in connection with the Mergers (6) 2,394 – Recapitalization of Legacy Complete Solaria Common stock into Complete Solaria Common Stock 1 – Reclassification of investor deposit to PIPE funds 3,500 – Reclassification of warrants between liabilities and equity 4,329 – Issuance of Series D-1, D-2 and D-3 redeemable convertible preferred stock upon conversion of convertible debt, net of issuance costs of $1,431 – 11,558 Acquisition of business through issuance of common stock options – 27,295 Acquisition of business through issuance of Series D redeemable convertible preferred stock – 52,201 Acquisition of business through issuance of Series D redeemable convertible preferred stock warrants – 7,812 (1) Non-cash interest expense to related parties of $0.4 million and $0.3 million during the fiscal years ended December 31, 2023 and 2022, respectively. (2) Gain on extinguishment of convertible notes and SAFEs includes other income from related parties of zero and $1.4 million during the fiscal years ended December 31, 2023 and 2022, respectively. (3) Issuance of forward purchase agreements includes other income from related parties of $0.4 million and zero during the fiscal years ended December 31, 2023 and 2022, respectively. (4) Change in fair value of forward purchase agreement liabilities includes other expense from related parties of ($9.1) million and zero during the fiscal years ended December 31, 2023 and 2022, respectively. (5) Issuance of common stock in connection with forward purchase agreements includes other expense from related parties of ($30.7) million and zero during the fiscal years ended December 31, 2023 and 2022, respectively. (6) Issuance of common stock bonus shares to related parties in connection with the Mergers includes other expense of $0.7 million and zero during the fiscal years ended December 31, 2023 and 2022, respectively. The accompanying notes are an integral part of these consolidated financial statements. 56 Notes to Consolidated Financial Statements (1) Organization (a) Description of Business Complete Solaria, Inc. (the “Company” or “Complete Solaria”) is a residential solar installer headquartered in Fremont, California, which was formed through Complete Solar Holding Corporation’s acquisition of The Solaria Corporation (“Solaria”). Complete Solar, Inc. (“Complete Solar”) was incorporated in Delaware on February 22, 2010. Through February 2022, the Company operated as a single legal entity as Complete Solar, Inc. In February 2022, the Company implemented a holding company reorganization (the “Reorganization”) in which the Company created and incorporated Complete Solar Holding Corporation (“Complete Solar Holdings”). As a result of the Reorganization, Complete Solar Holdings became the successor entity to Complete Solar, Inc. The capitalization structure was not changed because of the Reorganization as all shares of Complete Solar, Inc common stock and preferred stock were exchanged on a one for one basis with shares of Complete Solar Holdings common stock and preferred stock. The Reorganization was accounted for as a change in reporting entity for entities under common control. The historical assets and liabilities of Complete Solar, Inc. were transferred to Complete Solar Holdings at their carrying value, and there are no change to net income, other comprehensive income (loss), or any related per share amounts reported in the consolidated financial statements requiring retrospective application. In October 2022, the Company entered into a business combination agreement, as amended on December 26, 2022 and January 17, 2023 (“Original Business Combination Agreement”) and as amended on May 26, 2023 (“Amended and Restated Business Combination Agreement”), with Jupiter Merger Sub I Corp., a Delaware corporation and a wholly owned subsidiary of Freedom Acquisition I Corp. (“FACT”) (“First Merger Sub”), Jupiter Merger Sub II LLC, a Delaware limited liability company and a wholly owned subsidiary of FACT (“Second Merger Sub”), Complete Solar Holding Corporation, a Delaware corporation, and Solaria, a Delaware corporation. The transactions contemplated by the Amended and Restated Business Combination Agreement were consummated on July 18, 2023 (“Closing Date”). Following the consummation of the Merger on the Closing Date, FACT changed its name to “Complete Solaria, Inc.” As part of the transactions contemplated by the Amended and Restated Business Combination Agreement, FACT affected a deregistration under the Cayman Islands Companies Act and a domestication under Section 388 of the Delaware’s General Corporation Law (the “DGCL” or “Domestication”). On the Closing Date, following the Domestication, First Merger Sub merged with and into Complete Solaria, with Complete Solaria surviving such merger as a wholly owned subsidiary of FACT (the “First Merger”), and immediately following the First Merger, 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 Second Merger Sub changed its name to CS, LLC, and immediately following the Second Merger, Solaria merged with and into a newly formed Delaware limited liability company and wholly-owned subsidiary of FACT and changed its name to The Solaria Corporation 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”). In connection with the closing of the Mergers: ● Each share of the Company’s capital stock, inclusive of shares converted from 2022 Convertible Notes, issued and outstanding immediately prior to the Closing (“Legacy Complete Solaria Capital Stock”) were cancelled and exchanged into an aggregate of 25,494,332 shares of Complete Solaria Common Stock. 57 ● In July 2023, (i) Meteora Special Opportunity Fund I, LP (“MSOF”), Meteora Capital Partners, LP (“MCP”) and Meteora Select Trading Opportunities Master, LP (“MSTO”) (with MSOF, MCP, and MSTO collectively as “Meteora”); (ii) Polar Multi-Strategy Master Fund (“Polar”), and (iii) Diametric True Alpha Market Neutral Master Fund, LP, Diametric True Alpha Enhanced Market Neutral Master Fund, LP, and Pinebridge Partners Master Fund, LP (collectively, “Sandia”) (together, the “FPA Funding PIPE Investors”) entered into separate subscription agreements (the “FPA Funding Amount PIPE Subscription Agreements”) pursuant to which, the FPA Funding PIPE Investors subscribed for on the Closing Date, an aggregate of 6,300,000 shares of FACT Class A Ordinary Shares, less, in the case of Meteora, 1,161,512 FACT Class A Ordinary Shares purchased by Meteora separately from third parties through a broker in the open market (“Recycled Shares”) in connection with the Forward Purchase Agreements (“FPAs”). Subsequent to the Closing Date, Complete Solaria entered into an additional FPA Funding PIPE Subscription Agreement with Meteora, to subscribe for and purchase, and Complete Solaria agreed to issue and sell, an aggregate of 420,000 shares of Complete Solaria Common Stock. The Company issued shares of Complete Solaria Common Stock underlying the FPAs as of the latter of the closing of the Mergers or execution of the FPAs. ● All certain investors (the “PIPE Investors”) purchased from the Company an aggregate of 1,570,000 shares of Complete Solaria Common Stock (the “PIPE Shares”) for a purchase price of $ 10.00 per share, for aggregate gross proceeds of $ 15.7 million (the “PIPE Financing”), including $ 3.5 million that was funded prior to the Closing Date, pursuant to subscription agreements (the “Subscription Agreements”). At the time of the PIPE Financing, Complete Solaria issued an additional 60,000 shares to certain investors as an incentive to participate in the PIPE Financing. ● On or around the Closing Date, pursuant to the New Money PIPE Subscription Agreements, certain investors affiliated with the New Money PIPE Subscription Agreements (“New Money PIPE Investors”) agreed to subscribe for and purchase, and Complete Solaria agreed to issue and sell to the New Money PIPE Investors an aggregate of 120,000 shares of Complete Solaria Common Stock for a purchase price of $ 5.00 per share, for aggregate gross proceeds of $ 0.6 million. Pursuant to its New Money PIPE Subscription Agreement, Complete Solaria issued an additional 60,000 shares of Complete Solaria Common Stock in consideration of certain services provided by it in the structuring of its FPA and the transactions described therein. ● Subsequent to the Closing, Complete Solaria issued an additional 193,976 shares of Complete Solaria Common Stock to the sponsors for reimbursing sponsors’ transfer to certain counterparties and issued an additional 150,000 shares of Complete Solaria Common Stock to an FPA investor for services provided in connection with the Mergers. ● In March 2023, holders of 23,256,504 of the originally issued 34,500,000 FACT Class A Ordinary shares exercised their rights to redeem those shares for cash, and immediately prior to the Closing there were 11,243,496 FACT Class A Ordinary Shares that remained outstanding. At the Closing, holders of 7,784,739 shares of Class A common stock of FACT exercised their rights to redeem those shares for cash, for an aggregate of approximately $ 82.2 million which was paid to such holders at Closing. The remaining FACT Class A Ordinary Share converted, on a one-for-one basis, into one share of Complete Solaria Common Stock. ● Each issued and outstanding FACT Class B Ordinary Share converted, on a one-for-one basis, into one share of Complete Solaria Common Stock. In November 2022, Complete Solar Holdings acquired Solaria (as described in Note 4 – Business Combination) and changed its name to Complete Solaria, Inc. On August 18, 2023, the Company entered into a Non-Binding Letter of Intent to sell certain of Complete Solaria’s North American solar panel assets to Maxeon, Inc. (“Maxeon”). In October 2023, the Company completed the sale of its solar panel business to Maxeon. Refer to Note 1(b) – Divestiture and Note 8 – Divestiture. 58 (b) Divestiture In October 2023, the Company completed the sale of its solar panel business to Maxeon, pursuant to the terms of the Asset Purchase Agreement (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, the Company sold all the shares and recorded a loss of $ 4.2 million in its consolidated statements of operations and comprehensive loss within loss from continuing operations. This divestiture represents a strategic shift in Complete Solaria’s business and qualifies as held for sale and as a discontinued operation. Based on the held for sale classification of the assets, the Company has reduced the carrying value of the disposal group to its fair value, less cost to sell and recorded an impairment loss associated with the held for sale intangible assets and goodwill. As a result, the Company classified the results of its solar panel business in discontinued operations in its consolidated statements of operations and comprehensive loss for all periods presented. The cash flows related to discontinued operations have been segregated and are included in the consolidated statements of cash flows for all periods presented. Unless otherwise noted, discussion within the notes to the consolidated financial statements relates to continuing operations only and excludes the historical activities of the North American panel business. See Note 8 – Divestiture for additional information. (c) Liquidity and Going Concern Since inception, the Company has incurred recurring losses and negative cash flows from operations. The Company 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. The Company had cash and cash equivalents of $ 2.6 million as of December 31, 2023. The Company believes that its operating losses and negative operating cash flows will continue into the foreseeable future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to obtain additional funding and restructure its current debt. Historically, the Company’s activities have been financed through private placements of equity securities, debt and proceeds from the Merger. If the Company is not able to secure adequate additional funding when needed, the Company will need to reevaluate its operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs or cease operations entirely. These actions could materially impact the Company’s business, results of operations and future prospects. While the Company has been able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such financing will be available on terms that are favorable, or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives. Therefore, 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 are issued. 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. 59 (2) Summary of Significant Accounting Policies (a) Basis of Presentation The financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the U.S. of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. (b) Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, as well as related disclosure of contingent assets and liabilities. Significant estimates and assumptions made by management include, but are not limited to, the determination of: ● The allocation of the transaction price to identified performance obligations; ● Fair value of warrant liabilities; ● The reserve methodology for inventory obsolescence; ● The reserve methodology for product warranty; ● The reserve methodology for the allowance for credit losses; and ● The fair value of the forward purchase agreements ● The measurement of stock-based compensation To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be affected. The Company bases its estimates on past experience and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. The Company has assessed the impact and are not aware of any specific events or circumstances that required an update to the Company’s estimates and assumptions or materially affected the carrying value of the Company’s assets or liabilities as of the date of issuance of this report. These estimates may change as new events occur and additional information is obtained. (c) Segment Information The Company conducts its business in one operating segment that provides custom solar solutions through a standardized platform to its residential solar providers and companies to facilitate the sale and installation of solar energy systems under a single product group. The Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker (“CODM”). The CODM allocates resources and makes operating decisions based on financial information presented on a consolidated basis. The profitability of the Company’s product group is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company. All the Company’s long-lived assets are maintained in the U.S. of America. 60 (d) Concentration of Risks Concentration of credit risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents are on deposit with major financial institutions. Such deposits may be in excess of insured limits. The Company believes that the financial institutions that hold the Company’s cash are financially sound, and accordingly, minimum credit risk exists with respect to these balances. The Company has not experienced any losses due to institutional failure or bankruptcy. The Company performs credit evaluations of its customers and generally does not require collateral for sales on credit. The Company reviews accounts receivable balances to determine if any receivables will potentially be uncollectible and includes any amounts that are determined to be uncollectible in the allowance for credit losses. As of December 31, 2023, two customers had an outstanding balance that represented 38 % and 16 % of the total accounts receivable balance. As of December 31, 2022, three single customers had outstanding balances that represented 27 %, 18 %, and 14 %, respectively, of the total accounts receivable balance. Concentration of customers The Company defines major customers as those customers who generate revenues that exceed 10 % of the Company’s annual net revenues. For the years ended December 31, 2023 and 2022 one customer represented 55 % and 47 % of gross revenues, respectively. Concentration of suppliers For the year ended December 31, 2023, one supplier represented 40 % of the Company’s inventory purchases. For the year ended December 31, 2022, three suppliers represented 74 % of the Company’s inventory purchases. (e) Cash and Cash Equivalents The Company considers all highly liquid securities that mature within three months or less from the original date of purchase to be cash equivalents. The Company maintains the majority of its cash balances with commercial banks in interest bearing accounts. Cash and cash equivalents include cash held in checking and savings accounts and money market accounts consisting of highly liquid securities with original maturity dates of three months or less from the original date of purchase. (f) Restricted Cash The Company classifies all cash for which usage is limited by contractual provisions as restricted cash. Restricted cash balance as of December 31, 2023 and 2022, was $ 3.8 million and $ 3.9 million, respectively. The restricted cash consists of deposits in money market accounts, which is used as cash collateral backing letters of credit related to customs duty authorities’ requirements. The Company has presented these balances under restricted cash, as a long-term asset, in the consolidated balance sheets. The Company reconciles cash, cash equivalents, and restricted cash reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated statements of cash flows as follows (in thousands): As of December 31, 2023 2022 Cash and cash equivalents $ 2,593 $ 4,409 Restricted cash 3,823 3,907 Total cash, cash equivalents, and restricted cash $ 6,416 $ 8,316 61 (g) Accounts Receivable, Net Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for credit losses for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, the current receivables aging and customer payment patterns. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Recoveries of accounts receivable previously written off are recorded when received. The following table summarizes the allowance for doubtful accounts as of December 31, 2023 and 2022 (in thousands): As of December 31, 2023 2022 Balance at beginning of period $ ( 4,812 ) $ ( 2,569 ) Provision charged to earnings ( 5,083 ) ( 2,243 ) Amounts written off, recoveries and other adjustments 49 - Balance at end of period $ ( 9,846 ) $ ( 4,812 ) The Company does not have any off-balance sheet credit exposure relating to its customers. (h) Inventories Inventories consist of solar panels and the components of solar energy systems which the Company classifies as finished goods. Costs are computed under the average cost method. The Company identifies 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 to state inventory at the lower of cost or net realizable value. (i) Revenue Recognition Revenue is recognized when a customer obtains control of promised products and services and the Company has satisfied its performance obligations. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for the products and services. To achieve this core principle, the Company applies the following five steps: Step 1. Identification of the contract(s) with a customer; Step 2. Identification of the performance obligations in the contracts(s); Step 3. Determination of the transaction price; Step 4. Allocation of the transaction price to the performance obligations; Step 5. Recognition of the revenue when, or as, the Company satisfies a performance obligation. Revenues – Solar Energy System Installations The Company generates revenue primarily from the design and installation of a solar energy system and performing post-installation services. The Company’s contracts with customers include three primary contract types: ● Cash agreements – The Company contracts directly with homeowners who purchase the solar energy system and related services from the Company. Customers are invoiced on a billing schedule, where the majority of the transaction price is due upon installation with an additional payment due when the system passes inspection by the authority having jurisdiction. 62 ● Financing partner agreements – In its financing partner agreements, the Company contracts directly with homeowners for the purchase of the solar energy system and related services. The Company refers the homeowner to a financing partner to finance the system, and the homeowner makes payments directly to the financing partner. The Company receives consideration from the financing partner on a billing schedule where the majority of the transaction price is due upon installation with an additional payment due when the system passes inspection by the authority having jurisdiction. ● Power purchase agreements – The Company contracts directly with a distribution partner to perform the solar energy system installation, and the homeowner will finance the system through a power purchase agreement, which is signed with the Company’s distribution partner. The Company considers the distribution partner to be its customer, as the Company does not contract directly with the homeowner. The Company receives consideration from the distribution partner on a billing schedule where the majority of the transaction price is due upon installation with an additional payment due when the system passes inspection by the authority having jurisdiction. In each of the Company’s customer contract types, the Company’s revenue consists of two performance obligations, which include the performance of the installation of the solar energy system and post- installation services. Installation includes the design of a solar energy system, the delivery of the components of the solar energy system (i.e., photovoltaic system, inverter, battery storage, etc.), installation services and services facilitating the connection of the solar energy system to the power grid. The Company accounts for these services as inputs to a combined output, resulting in a single service-based performance obligation. The Company recognizes revenue upon the completion of installation services, which occurs upon the transfer of control of the solar energy system and title of the related hardware components to the homeowner or distribution partner. Post-installation services consist primarily of administrative services and customer support, which the Company performs between the completion of installation and the date of inspection of the solar energy system by the authority having jurisdiction. The Company recognizes revenue at a point in time, which is when the inspection occurs. As the Company’s contracts with customers contain multiple performance obligations, the transaction price is allocated to each performance obligation based on its standalone selling price. The Company generally determines the standalone selling price based on the estimated costs incurred in the delivery of each performance obligation, relative to the total costs to be incurred under the contract. The Company records deferred revenue for amounts invoiced that are not subject to refund upon termination. In certain contracts with customers, the Company arranges for a third-party financing partner to provide financing to the customer. The Company collects upfront from the financing partner and the customer will provide installment payments to the financing partner. The Company records revenue in the amount received from the financing partner, net of any financing fees charged to the homeowner, which the Company considers to be a customer incentive. None of the Company’s contracts contain a significant financing component. The Company guarantees to customers certain specified minimum solar energy production output of the solar energy system for 10-years after the installation. The Company monitors the solar energy systems to determine whether these specified minimum outputs are being achieved. The Company will issue payments to customers if the output falls below contractually stated thresholds over the performance guarantee period. Revenue is recognized to the extent it is probable that a significant reversal of such revenue will not occur. 63 Revenues – Software Enhanced Services The Company generates revenue from software enhanced services through the provision of design and proposal services. The Company’s customers for design services are solar installers who leverage the Company’s expertise and software platforms to obtain structural letters, computer aided designs and electrical reviews. The Company charges the customer a per design fixed fee for each type of service that is performed, and the Company recognizes revenue in the period the services are performed. The customer contracts contain the customer right to terminate the contract each month and are therefore enforceable only for the contracted services purchased each month. Revenue is recognized for design services in the month the services are performed. The Company’s customers for proposal services for solar sales organizations who contract with the Company to develop proposals for their potential residential solar customers. The Company generates proposals for the customer using the HelioQuote platform. Customers may purchase a fixed number of proposals for a given month or may contract on a pay as you go basis, and the performance obligation is defined by the number of proposals purchased by the customer each month. The customer contracts contain the customer right to terminate the contract each month and are therefore enforceable only for the services purchased each month. Revenue is recognized for proposal services in the month the services are performed. Warranties The Company typically provides a 10-year warranty on its solar energy system installations, which provides assurance over the workmanship in performing the installation, including roof leaks caused by the Company’s performance. For solar panel sales recognized prior to the Disposal Transaction, the Company provides a 30-year warranty that the products will be free from defects in material and workmanship. When the revenues are recognized for the solar energy systems installations services, the Company accrues liabilities for the estimated future costs of meeting its warranty obligations. The Company makes and revises these estimates based primarily on the volume of new sales that contain warranties, historical experience with and projections of warranty claims, and estimated solar energy system and panel replacement costs. The Company records a provision for estimated warranty expenses in cost of revenues within the accompanying consolidated statements of operations and comprehensive loss. Shipping and handling costs and certain taxes Revenues are recognized net of taxes collected from customers and remitted to governmental authorities. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in both revenues and cost of revenues in the accompanying consolidated statements of operations and comprehensive loss. Deferred revenue The Company typically invoices its customers upon completion of set milestones, generally upon installation of the solar energy system with the remaining balance invoiced upon passing final building inspection. Standard payment terms to customers range from 30 to 60 days. When the Company receives consideration, or when such consideration is unconditionally due, from a customer prior to delivering goods or services to the customer under the terms of a customer agreement, the Company records deferred revenue. As installation projects are typically completed within 12-months, the Company’s deferred revenue is reflected in current liabilities in the accompanying consolidated balance sheets. The amount of revenue recognized during the years ended December 31, 2023 and 2022 that was included in deferred revenue at the beginning of each period was $ 2.1 million and $ 3.9 million, respectively. Disaggregation of revenue Refer to the table below for the Company’s revenue recognized by product and service type (in thousands): Fiscal Year Ended December 31, 2023 2022 Solar energy system installations $ 84,858 $ 62,896 Software enhanced services 2,758 3,579 Total revenue $ 87,616 $ 66,475 For the years ended December 31, 2023 and 2022, all revenue recognized was generated in the U.S. 64 Remaining performance obligations The Company has elected the practical expedient not to disclose remaining performance obligations for contracts that are less than one year in length. As of December 31, 2023, the Company has deferred $ 1.2 million associated with a long-term service contract, which will be recognized evenly through 2028. The Company has deferred $ 1.3 million associated with a long-term service contract as of December 31, 2022. Incremental costs of obtaining customer contracts Incremental costs of obtaining customer contracts consist of sales commissions, which are costs paid to third-party vendors who source residential customer contracts for the sale of solar energy systems by the Company. The Company defers sales commissions and recognizes expense in accordance with the timing of the related revenue recognition. Amortization of deferred commissions is recorded as sales commissions in the accompanying consolidated statements of operations and comprehensive loss. As of December 31, 2023 and 2022, deferred commissions were $ 4.2 million and $ 2.8 million, respectively, which were included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. (j) Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and amortization. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the current period. Repair and maintenance costs are expensed as incurred. Depreciation and amortization are calculated using the straight-line method over the following estimated useful lives of the assets: Useful Lives Manufacturing equipment 1 – 3 years Developed software 5 years Furniture & equipment 3 – 5 years Leasehold improvements 3 – 5 years (k) Internal-Use Software The Company capitalizes costs to develop its internal-use software when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be utilized as intended. These costs include personnel and related employee benefits and expenses for employees who are directly associated with and who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining software. Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred. Costs incurred for enhancements that are expected to provide additional material functionality are capitalized and amortized over the estimated useful life of the related upgrade. During the years ended December 31, 2023 and 2022, the Company capitalized $ 1.9 million and $ 1.5 million, respectively, of internal-use software development costs. The remaining unamortized balance as of December 31, 2023 and December 31, 2022 of $ 3.8 million and $ 2.7 million, respectively, is included in property and equipment, net within the accompanying consolidated balance sheets. 65 (l) Cost of Revenues Cost of revenues includes actual cost of material, labor and related overhead incurred for revenue-producing units, and includes associated warranty costs, freight and delivery costs, depreciation, and amortization of internally developed software. (m) Advertising and Promotional Expenses Advertising and promotional costs are expensed as incurred and included in sales and marketing expense in the accompanying consolidated statements of operations and comprehensive loss. Advertising costs were not material for the years ended December 31, 2023 and 2022. (n) Income Taxes Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 % likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income tax provision. (o) Foreign Currency The Company’s reporting currency is the US dollar. The functional currency for each of the Company’s foreign subsidiaries is the local currency, as it is the monetary unit of account of the principal economic environments in which the Company’s foreign subsidiaries operate. Assets and liabilities of the foreign subsidiaries are translated at the current exchange rate as of the end of the period, and revenue and expenses are translated at the average exchange rates in effect during the period. The gain or loss resulting from the process of translating foreign currency financial statements into US dollar financial statements is accounted for as a foreign currency cumulative translation adjustment and is reported as a component of accumulated other comprehensive loss. Foreign currency transaction gains and losses resulting from transactions denominated in a currency other than the functional currency are recognized in Other Income (expense), net in the consolidated statements of operations and comprehensive loss. (p) Comprehensive Loss Comprehensive loss consists of two components, net loss and other comprehensive income (loss), net. The Company’s other comprehensive loss consists of foreign currency translation adjustments that result from the consolidation of its foreign entities and is reported net of tax effects. (q) Impairment of Long-Lived Assets Long-lived assets, such as property and equipment, ROU assets, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, and quoted market values, as considered necessary. There were no impairment charges recorded in continuing operations for the years ended December 31, 2023 and 2022. 66 (r) Intangible Assets, Net Intangible assets are recorded at the cost, less accumulated amortization. Amortization is recorded using the straight-line method. All intangible assets that have been determined to have definite lives are amortized over their estimated useful life as indicated below: Useful Lives Assembled workforce 2 years (s) Deferred Transaction Costs Deferred transaction costs, which consist of direct incremental legal, consulting and accounting fees related to the merger with Freedom in July 2023, are capitalized until they were recorded against proceeds upon the consummation of the transaction. In accounting for the Mergers, direct offering costs of approximately $ 5.7 million were reclassified to additional paid-in capital and netted against the Mergers proceeds received upon close. As of December 31, 2023, there were no deferred transaction costs. As of December 31, 2022, the Company had recorded $ 1.1 million of deferred transaction costs in other noncurrent assets on the consolidated balance sheets. (t) Stock-Based Compensation The Company recognizes 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, non-employees such as consultants and non-employee directors are measured at the grant-date fair value of the award. Forfeitures are recognized as they occur. For accounting purposes, the Company estimates 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 the Company’s common stock and expected dividend yield. The Company determines these inputs as follows: Expected Term —Expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method. Expected Volatility —Expected volatility is estimated by studying the volatility of comparable public companies for similar terms. Expected Dividend —The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company has never paid dividends and has no plans to pay dividends. Risk-free Interest Rate —The Company derives 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. (u) Fair Value Measurements The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: ● Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. 67 ● Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities held by the Company measured at fair value on a recurring basis as of December 31, 2023 and 2022 include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, the warrant liabilities and FPA liabilities. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses approximate their fair value because of their short-term nature (classified as Level 1). The warrant liabilities and FPA liabilities are measured at fair value using Level 3 inputs. The Company records subsequent adjustments to reflect the increase or decrease in estimated fair value at each reporting date within the consolidated statements of operations and comprehensive loss as a component of other income. (v) Net Loss Per Share The Company computes net loss per share following ASC 260, Earnings Per Share . Basic net loss per share is measured as the income or loss available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted net loss per share presents the dilutive effect on a per-share basis from the potential exercise of options and/or warrants. The potentially dilutive effect of options or warrants are computed using the treasury stock method. Securities that potentially have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the diluted loss per share calculation. (w) Convertible Debt Embedded Derivative Liabilities The Company evaluates the embedded conversion feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations and comprehensive loss. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the consolidated balance sheets as current or non-current based on whether net-cash settlement of the derivative instrument could be required within twelve months after the balance sheet date. The derivative is subject to re-measurement at the end of each reporting period, with changes in fair value recognized as a component of other income (expense), net, in the consolidated statements of operations and comprehensive loss. The Company’s embedded derivative liabilities were extinguished in the first quarter of 2022. (x) Leases Effective January 1, 2021, the Company early adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as amended (“ASC 842”). The Company determines if a contract is a lease or contains a lease at the inception of the contract and reassesses that conclusion if the contract is modified. The Company’s lease agreements generally contain lease and non-lease components. Payments under lease arrangements are primarily fixed. The Company combines lease and non-lease components and accounts for them together as a single lease component. All leases are assessed for classification as an operating lease or a finance lease. Operating lease right-of-use (“ROU”) assets are presented separately on the Company’s consolidated balance sheets. Operating lease liabilities are separated into a current portion and non-current portion and are presented separately on the Company’s consolidated balance sheets. The Company does not have finance lease ROU assets or liabilities. 68 ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. The Company does not obtain and control its right to use the identified asset until the lease commencement date. The Company generally uses its incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date. The Company’s lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company generally uses the base, non-cancelable, lease term when determining the lease assets and liabilities. The Company also records a corresponding right-of-use asset and applicable lease commencement date, which is calculated based on the amount of the lease liability, adjusted for any advance lease payments made, lease incentives received, and initial direct costs incurred. Right-of-use assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets. The Company has elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term. (y) Warrant Liabilities The Company accounts for its warrant liabilities in accordance with the guidance in ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity , under which the warrants that do not meet the criteria for equity classification and must be recorded as liabilities. The warrant liabilities are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement , with any subsequent changes in fair value recognized in other income (expense), net on the consolidated statements of operations and comprehensive loss. Refer to Note 5 – Fair Value Measurements and Note 14 – Warrants. (z) Forward Purchase Agreements The Company accounts for its forward purchase agreements (“FPAs”) in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity , as the agreements embody an obligation to transfer assets to settle a forward contract. The warrant liabilities are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement , with any subsequent changes in fair value recognized in other income (expense), net on the consolidated statements of operations and comprehensive loss. Refer to Note 5 – Fair Value Measurements and Note 6 – Forward Purchase Agreements. (aa) Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , and subsequent related ASUs, which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for public and private companies’ fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and December 15, 2022, respectively. The Company adopted ASU 2016-13 under the private company transition guidance beginning January 1, 2023. The adoption did not have a material impact on the Company’s consolidated financial statements. 69 (bb) Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. The Company is currently evaluating ASU 2023-07 but expects the impact of the disclosures to be immaterial to the Company’s consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024. The Company is currently evaluating ASU 2023-09 but expects the impact of the disclosures to be immaterial to the Company’s consolidated financial statements. (3) Reverse Recapitalization As discussed in Note 1 – Organization, on July 18, 2023, the Company consummated the Mergers pursuant to the Amended and Restated Business Combination Agreement. The Mergers was accounted for as a reverse recapitalization, rather than a business combination, for financial accounting and reporting purposes. Accordingly, Complete Solaria was deemed the accounting acquirer (and legal acquiree) and FACT was treated as the accounting acquiree (and legal acquirer). Complete Solaria has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances: ● Complete Solaria’s pre-combination stockholders have the majority of the voting power in the post- merged company; ● Legacy Complete Solaria’s stockholders have the ability to appoint a majority of the Complete Solaria Board of Directors; ● Legacy Complete Solaria’s management team is considered the management team of the post-merged company; ● Legacy Complete Solaria’s prior operations is comprised of the ongoing operations of the post-merged company; ● Complete Solaria is the larger entity based on historical revenues and business operations; and ● the post-merged company has assumed Complete Solaria’s operating name. Under this method of accounting, the reverse recapitalization was treated as the equivalent of Complete Solaria issuing stock for the net assets of FACT, accompanied by a recapitalization. The net assets of FACT are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities, and results of operations prior to the Mergers are those of Legacy Complete Solaria. All periods prior to the Mergers have been retrospectively adjusted in accordance with the Amended and Restated Business Combination Agreement for the equivalent number of preferred or common shares outstanding immediately after the Mergers to effect the reverse recapitalization. 70 Upon the closing of the Mergers and the PIPE Financing in July 2023, the Company received net cash proceeds of $ 19.7 million. The following table reconciles the elements of the Mergers to the audited consolidated statements of cash flows and the audited consolidated statements of stockholders’ deficit for the year-ended December 31, 2023 (in thousands): Recapitalization Cash proceeds from FACT, net of redemptions $ 36,539 Cash proceeds from PIPE Financing 12,800 Less: cash payment of FACT transaction costs and underwriting fees ( 10,680 ) Less: cash payment to FPA investors for rebates and recycled shares ( 17,831 ) Less: cash payment for Promissory Note ( 1,170 ) Net cash proceeds upon the closing of the Mergers and PIPE financing 19,658 Less: non-cash net liabilities assumed from FACT ( 10,135 ) Net contributions from the Mergers and PIPE financing upon closing $ 9,523 Immediately upon closing of the Mergers, the Company had 45,290,553 shares issued and outstanding of Class A Common Stock. The following table presents the number of shares of Complete Solaria Common Stock outstanding immediately following the consummation of the Mergers: Recapitalization FACT Class A Ordinary Shares, outstanding prior to Mergers 34,500,000 FACT Class B Ordinary Shares, outstanding prior to Mergers 8,625,000 Bonus shares issued to sponsor 193,976 Bonus shares issued to PIPE investors 120,000 Bonus shares issued to FPA investors 150,000 Shares issued from PIPE financing 1,690,000 Shares issued from FPA agreements, net of recycled shares 5,558,488 Less: redemption of FACT Class A Ordinary Shares ( 31,041,243 ) Total shares from the Mergers and PIPE Financing 19,796,221 Legacy Complete Solaria shares 20,034,257 2022 Convertible Note Shares 5,460,075 Shares of Complete Solaria Common stock immediately after Mergers 45,290,553 71 In connection with the Mergers, the Company incurred direct and incremental costs of approximately $ 16.4 million related to legal, accounting, and other professional fees, which were offset against the Company’s additional paid-in capital. Of the $ 16.4 million, $ 5.8 million was incurred by Legacy Complete Solaria and $ 10.6 million was incurred by FACT. As of December 31, 2023, the Company made cash payments totaling $ 5.4 million to settle transaction costs. As a result of the Closing, outstanding 2022 Convertible Notes were converted into shares of Complete Solaria Common Stock. (4) Business Combination Solaria Acquisition On November 4, 2022, Complete Solar Holdings acquired Solaria for aggregate consideration paid of $ 89.1 million, comprising of $ 0.1 million in cash, 2,884,550 shares of common stock with an aggregate fair value of $ 17.3 million, 6,803,549 shares of preferred stock with an aggregate fair value of $ 52.2 million, 78,962 common stock warrants for an aggregate value of $ 0.2 million, 1,376,414 preferred stock warrants for an aggregate fair value of $ 7.8 million, 5,382,599 stock options with an aggregate fair value of $ 10.0 million attributable to services provided prior to the acquisition date, and the payment of seller incurred transaction expenses of $ 1.5 million. In addition, the Company assumed $ 14.1 million of unvested Solaria stock options, which has been and will be recorded as stock-based expense over the remaining service period. Solaria designs, develops, manufactures, and generates revenue from the sale of silicon photovoltaic solar panels and licensing of its technology to third parties. At the time of the acquisition, the Company believed that the acquisition of Solaria would establish the Company as a full system operator, with a compelling customer offering with best-in-class technology, financing, and project fulfilment, which would enable the Company to sell more product across more geographies in the U.S. and Europe. This transaction was accounted for as a business combination in accordance with ASC 805, Business Combinations . Subsequent to the acquisition as discussed above, the Company sold certain intangible assets constituting the Solaria business in October of 2023, resulting in the results of the Solaria business to be reflected as discontinued operations and certain intangible assets and goodwill to be recognized as held-for-sale. Refer to Note 8 – Divestiture for further details. Acquisition costs of $ 1.3 million were expensed by the Company and are included in general and administrative expenses within the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022. The fair value of assets acquired and liabilities assumed was based upon a preliminary valuation and the Company’s estimates and assumptions are subject to change within the measurement period. The following table summarized the provisional fair value of identifiable assets acquired and liabilities assumed (in thousands): Cash, cash equivalents and restricted cash $ 5,402 Accounts receivable 4,822 Inventories 5,354 Prepaid expenses and other current assets 8,569 Property and equipment 830 Operating lease right-of-use asset 1,619 Intangible assets 43,100 Other non-current assets 112 Total identifiable assets acquired 69,808 Accounts payable 4,210 Accrued expenses and other current liabilities 11,845 Notes payable 20,823 Deferred revenue 73 Operating lease liabilities, net of current portion 1,132 Warranty provision, noncurrent 1,566 SAFE agreements 60,470 Total identifiable liabilities assumed 100,119 Net identifiable liabilities assumed 30,311 Goodwill 119,422 Total aggregate consideration paid $ 89,111 72 Goodwill represents the excess of the preliminary estimated consideration transferred over the fair value of the net tangible and intangible assets acquired and has been allocated to the Company’s single reporting unit. Goodwill was subsequently reclassified to long-term assets held for sale – discontinued operations, on the Company’s balance sheet as of December 31, 2022, stemming from the sale of the Solaria business discussed in Note 8 – Divestiture below. Intangible assets acquired and subsequently disposed of as part of the Solaria sale discussed in Note 8 – Divestiture below are as follows (in thousands): Trademarks $ 5,700 Developed technology 12,700 Customer relationships 24,700 Total intangible assets $ 43,100 The income approach, using the relief from royalty method, was used to value trademarks and developed technology. Significant assumptions included in the valuation of trademarks and developed technology include projected revenues, the selected royalty rate and the economic life of the underlying asset. The income approach, using the multi-period excess earning method, was used to value customer relationships. Significant assumptions included in the valuation of customer relationships include projected revenues, customer attrition and expense growth over the forecasted period. As a result of the Solaria acquisition, the Company recognized $ 45.9 million of deferred tax assets. Due to the uncertainty surrounding the Company’s ability to realize such deferred income tax assets, a full valuation allowance has been established. Net operating losses were incurred by Solaria from November 4, 2022 through the divestiture in 2023. An unrecognized tax benefit was recorded in 2023 related to all acquired losses and post-acquisition losses due to the divestiture. Refer to Note 19 – Income Taxes for additional details. (5) Fair Value Measurements The following table sets forth the Company’s financial assets and liabilities that were measured at fair value, on a recurring basis (in thousands): December 31, 2023 Level 1 Level 2 Level 3 Total Financial Liabilities Carlyle warrants $ - $ - $ 9,515 $ 9,515 Public warrants 167 - - 167 Private placement warrants - 122 - 122 Working capital warrants - 14 - 14 Replacement warrants – – 1,310 1,310 Forward purchase agreement liabilities - - 3,831 3,831 Total $ 167 $ 136 $ 14,656 $ 14,959 73 December 31, 2022 Level 1 Level 2 Level 3 Total Financial Liabilities Redeemable convertible preferred stock warrant liability $ — $ — $ 14,152 $ 14,152 Total $ — $ — $ 14,152 $ 14,152 Carlyle Warrants As part of the Company’s amended and restated warrant agreement with CRSEF Solis Holdings, LLC (“Carlyle”), dated July 18, 2023, the Company issued Carlyle a warrant to purchase up to 2,745,879 shares of Complete Solaria Common Stock at a price per share of $ 0.01 , which is inclusive of the outstanding warrant to purchase 1,995,879 shares at the time of modification. The warrant, which expires on July 18, 2030, provides Carlyle with the right to purchase shares of Complete Solaria Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795% of Complete Solaria’s issued and outstanding shares of common stock, on a fully-diluted basis; plus (b) on and after the date that is ten (10) days after the date of the amended and restated warrant agreement, an additional 350,000 shares; plus (c) on and after the date that is thirty (30) days after the date of the amended and restated warrant agreement, if the original investment amount has not been repaid, an additional 150,000 shares; plus (d) on and after the date that is ninety (90) days after the date of the amended and restated warrant agreement, if the original investment amount has not been repaid, an additional 250,000 shares, in each case, of Complete Solaria Common Stock at a price of $0.01 per share . As the warrant is exercisable into a variable number of shares based on the Company’s fully diluted capitalization table, the Company has classified the warrants as liabilities. The Company valued the warrants based on a Black-Scholes Option Pricing Method, which included the following inputs: December 31, 2023 2022 Expected term 7.0 years — Expected volatility 77.0 % — Risk-free interest rate 3.92 % — Expected dividend yield 0.0 % — Public, Private Placement and Working Capital Warrants The public, private placement and working capital warrants are measured at fair value on a recurring basis. The public warrants were valued based on the closing price of the publicly traded instrument. The private placement and working capital warrants were valued using observable inputs for similar publicly traded instruments. 74 Forward Purchase Agreement Liabilities The FPA liabilities are measured at fair value on a recurring basis using a Monte Carlo simulation analysis. The expected volatility is determined based on the historical equity volatility of comparable companies over a period that matches the simulation period, which included the following inputs: December 31, 2023 2022 Common stock trading price $ 1.66 $ — Simulation period 1.55 years — Risk-free rate 4.48 % — Volatility 95.0 % — Redeemable Convertible Preferred Stock Warrant Liabilities The Company historically issued redeemable convertible warrants, which were classified as liabilities and adjusted to fair value using the Black Scholes Option Pricing Method. The terms of the redeemable convertible preferred stock warrants are described in Note 14 – Warrants. Series B Redeemable Convertible Preferred Stock Warrant December 31, 2023 2022 Expected term — 3.1 years Expected volatility — 72.5 % Risk-free interest rate — 4.2 % Expected dividend yield — 0.0 % Series C Redeemable Convertible Preferred Stock Warrant December 31, 2023 2022 Expected term — 3.6 years Expected volatility — 72.5 % Risk-free interest rate — 4.0 % Expected dividend yield — 0.0 % 75 Series D-7 Redeemable Convertible Preferred Stock Warrant December 31, 2023 2022 Expected term 0.3 years 1.5 years Expected volatility 78.5 % 78.5 % Risk-free interest rate 5.4 % 4.7 % Expected dividend yield 0.0 % 0.0 % The redeemable convertible preferred stock warrant liabilities were measured at fair value at the issuance date and as of each subsequent reporting period with changes in the fair value recorded within other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss. (6) Forward Purchase Agreements In 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”). Pursuant 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: ● The 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. ● The 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 period. 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 . 76 ● The 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. The 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. The Company 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. Through 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 in association with the FPAs. As 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. On 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. 77 (7) Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): As of December 31, 2023 2022 Inventory deposits $ 616 $ 6,255 Prepaid sales commissions 4,185 2,838 Other 1,016 978 Total prepaid expenses and other current assets $ 5,817 $ 10,071 (8) Divestiture Discontinued operations As previously described in Note 1 – Organization, on August 18, 2023, the Company entered into a Non-Binding Letter of Intent to sell certain of Complete Solaria’s North American solar panel assets, inclusive of intellectual property and customer contracts, to Maxeon. In October 2023, the Company completed the sale of its solar panel business to Maxeon, pursuant to the terms of the Asset Purchase Agreement Disposal Agreement. Under the terms of the Disposal Agreement, Maxeon agreed to acquire certain assets and employees of Complete Solaria. The Company determined that this divestiture represented a strategic shift in the Company’s business and qualified as a discontinued operation. Accordingly, the results of operations and cash flows relating to Solaria have been reflected as discontinued operations in the consolidated statements of operations and comprehensive loss for the fiscal year ended December 31, 2023 and the consolidated statements of cash flows for the fiscal year ended December 31, 2023. Components of amounts reflected in the consolidated statements of operations and comprehensive loss related to discontinued operations are presented in the table, as follows (in thousands): Fiscal year ended December 31, 2023 Revenues $ 29,048 Cost of revenues 30,609 Gross loss ( 1,561 ) Operating expenses: Sales and marketing 6,855 General and administrative 17,472 Total operating expenses 24,327 Loss from discontinued operations ( 25,888 ) Other income, net 31 Loss from discontinued operations before income taxes ( 25,857 ) Income tax benefit 4 Loss from discontinued operations, net of tax ( 25,853 ) Impairment loss from discontinued operations ( 147,505 ) Net loss from discontinued operations $ ( 173,358 ) 78 (9) Property and Equipment, Net Property and equipment, net consist of the following (in thousands, except year data): Estimated As of December 31, Useful Lives (Years) 2023 2022 Developed software 5 $ 6,993 $ 5,054 Manufacturing equipment 3 131 102 Furniture and equipment 3 96 90 Leasehold improvements 5 708 708 Total property and equipment 7,928 5,954 Less: accumulated depreciation and amortization ( 3,611 ) ( 2,478 ) Total property and equipment, net $ 4,317 $ 3,476 Depreciation and amortization expense on tangible assets totaled $ 0.9 million and $ 0.6 million for the fiscal years ended December 31, 2023 and 2022. There were no impairment charges on tangible assets recognized for the fiscal years ended December 31, 2023 and 2022. (10) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (in thousands): As of December 31, 2023 2022 Accrued compensation and benefits $ 3,969 $ 3,940 Customer deposits 544 930 Uninvoiced contract costs 671 1,914 Inventory received but not invoiced – 972 Accrued term loan and revolving loan amendment and final payment fees 2,400 2,400 Accrued legal settlements 7,700 1,853 Accrued taxes 931 1,245 Accrued rebates and credits 677 1,076 Operating lease liabilities, current 607 958 Accrued warranty, current 1,433 767 Other accrued liabilities 8,938 3,775 Total accrued expenses and other current liabilities $ 27,870 $ 19,830 79 (11) Employee Benefit Plan The Company sponsors a 401(k) defined contribution and profit-sharing plan (“401(k) Plan”) for its eligible employees. This 401(k) Plan provides for tax-deferred salary deductions for all eligible employees. Employee contributions are voluntary. Employees may contribute the maximum amount allowed by law, as limited by the annual maximum amount as determined by the Internal Revenue Service. The Company may match employee contributions in amounts to be determined at the Company’s sole discretion. The Company made no contributions to the 401(k) Plan for the fiscal years ended December 31, 2023 and 2022. (12) Other Expense, Net Other expense, net consist of the following (in thousands): Fiscal Years Ended December 31, 2023 2022 Change in fair value of redeemable convertible preferred stock warrant liability $ 8,513 $ – Change in fair value of Carlyle warrants 14,373 – Change in fair value of warrant liabilities – ( 5,211 ) Change in fair value of FACT public, private placement and working capital warrants 6,424 – Gain on extinguishment of convertible notes and SAFE agreements (1) – 3,235 Loss on sale of equity securities ( 4,154 ) – Loss on CS Solis debt extinguishment ( 10,338 ) – Bonus shares issued in connection with the Mergers (2) ( 2,394 ) – Issuance of forward purchase agreements (3) 76 – Change in fair value of forward purchase agreement liabilities (4) ( 3,906 ) – Loss on issuance of shares in connection with the forward purchase agreements (5) ( 35,490 ) – Loss on discontinued Solaria business and other, net ( 2,966 ) 118 Total other expense, net $ ( 29,862 ) $ ( 1,858 ) (1) Includes zero and $ 1.4 million of other income for the fiscal years ended December 31, 2023 and 2022, respectively, recognized upon the conversion of related party convertible notes and SAFEs. (2) Includes $ 0.7 million of other expense for the fiscal year ended December 31, 2023 for bonus shares issued to related parties in connection with the Mergers. (3) Includes $ 0.4 million of other income for the fiscal year ended December 31, 2023 for forward purchase agreements entered into with related parties. (4) Includes $ 9.1 million of other expense for the fiscal year ended December 31, 2023 for forward purchase agreements entered into with related parties. (5) Includes $ 30.7 million of other expense the fiscal year ended December 31, 2023 for shares issued to related parties in connection with the forward purchase agreements. (13) Common Stock The Company has authorized the issuance of 1,000,000,000 shares of common stock and 10,000,000 shares of preferred stock as of December 31, 2023. No preferred stock has been issued. 80 Common Stock Purchase Agreements On December 18, 2023, the Company entered into separate common stock purchase agreements (the “Purchase Agreements”) with the Rodgers Massey Freedom and Free Markets Charitable Trust and the Rodgers Massey Revocable Living Trust (each a “Purchaser”, and together, the “Purchasers”). Pursuant to the terms of the Purchase Agreements, each Purchaser purchased 1,838,235 shares of common stock of the Company, par value $ 0.0001 , (the “Shares”), at a price per share of $ 1.36 , representing an aggregate purchase price of $ 4,999,999.20 . The Purchasers paid for the Shares in cash. Thurman J. Rodgers is a trustee of each Purchaser and is the Executive Chairman of the board of directors of the Company. The Company has reserved shares of common stock for issuance related to the following: As of December 31, 2023 Common stock warrants 27,637,266 Employee stock purchase plan 2,628,996 Stock options and RSUs, issued and outstanding 11,774,743 Stock options and RSUs, authorized for future issuance 3,850,462 Total shares reserved 45,891,467 (14) Warrants Series B Warrants (Converted to Common Stock Warrants) In February 2016, the Company issued a warrant to purchase 5,054 shares of Series B preferred stock (the “Series B warrant”) in connection with a 2016 credit facility. The Series B warrant is immediately exercisable at an exercise price of $ 4.30 per share and has an expiration date of February 2026. The fair value of the Series B warrant was less than $ 0.1 million as of December 31, 2022 and as of July 18, 2023, when the Series B warrant was reclassified from warrant liability to additional paid-in capital, as the warrant is exercisable into shares of Complete Solaria Common Stock upon the close of the Mergers. The relative fair value of the Series B warrant at issuance was recorded as a debt issuance cost within other non-current liabilities on the accompanying consolidated balance sheets, and changes in fair value have been recorded in other income (expense), net on the accompanying consolidated statements of operations and comprehensive loss for the fiscal years ended December 31, 2023 and 2022. Series C Warrants (Converted to Common Stock Warrants) In July 2016, the Company issued a warrant to purchase 148,477 shares of Series C preferred stock (the “Series C warrant”) in connection with the Series C financing. The Series C warrant agreement also provided for an additional number of Series C shares calculated on a monthly basis commencing on June 2016 based on the principal balance outstanding of the notes payable outstanding. The maximum number of shares exercisable under the Series C warrant agreement is 482,969 shares of Series C preferred stock. The Series C warrant was immediately exercisable at an exercise price of $ 1.00 per share and has an expiration date of July 2026. The fair value of the Series C warrant was $ 6.3 million as of December 31, 2022. The fair value of the Series C warrant was $ 2.3 million as of July 18, 2023, when the Series B warrant was reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital, as the warrant is exercisable into shares of Complete Solaria Common Stock upon the close of the Mergers. The relative fair value of the Series C warrant at issuance was recorded as Series C preferred stock issuance costs and redeemable convertible preferred stock warrant liability on the accompanying consolidated balance sheets, and changes in fair value have been recorded in other income (expense), net on the accompanying consolidated statements of operations and comprehensive loss for the fiscal years ended December 31, 2023 and 2022. 81 Series C-1 Warrants (Converted to Common Stock Warrants) In January 2020, the Company issued a warrant to purchase 173,067 shares of common stock in conjunction with the Series C-1 preferred stock financing. The warrant is immediately exercisable at an exercise price of $ 0.01 per share and has an expiration date of January 2030. The warrant remains outstanding as of December 31, 2023. At issuance, the relative fair value of the warrant was determined to be $ 0.1 million using the Black-Scholes model with the following weighted average assumptions: expected term of 10 years; expected volatility of 62.5 %; risk-free interest rate of 1.5 %; and no dividend yield. The fair value of the warrant was recorded within additional paid-in capital on the consolidated balance sheets. The warrant is not remeasured in future periods as it meets the conditions for equity classification. Carlyle Warrants In February 2022, as part of a debt financing from Carlyle (refer to Note 15 – Borrowing Arrangements), the Company issued a warrant to purchase 2,886,952 shares of common stock in conjunction with the redeemable investment in CS Solis. The warrant contained two tranches, the first of which is immediately exercisable for 1,995,879 shares. The second tranche, which was determined to be a separate unit of account, was exercisable upon a subsequent investment from Carlyle in CS Solis. No subsequent investment was made and the investment period expired on December 31, 2022 and the second tranche of warrants expired prior to becoming exercisable. The vested warrant had an exercise price of $ 0.01 per share and had an expiration date of February 2029. At issuance, the relative fair value of the warrant was determined to be $ 3.4 million using the Black-Scholes model with the following weighted average assumptions: expected term of 7 years; expected volatility of 73.0 %; risk-free interest rate of 1.9 %; and no dividend yield. The fair value of the warrant was recorded within additional paid-in capital and as a discount on the long-term debt in CS Solis on the consolidated balance sheets as of December 31, 2022. In July 2023, and in connection with the closing of the Mergers, the Carlyle debt and warrants were modified. Based on the exchange ratio included in the Mergers, the 1,995,879 outstanding warrants to purchase Legacy Complete Solaria Common Stock prior to modification were exchanged into warrants to purchase 1,995,879 shares of Complete Solaria Common Stock. As part of the modification, the warrant, which expires on July 18, 2030 , provides Carlyle with the right to purchase shares of Complete Solaria Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795 % of Complete Solaria’s issued and outstanding shares of common stock, on a fully-diluted basis; plus (b) on and after the date that is ten (10) days after the date of the agreement, an additional 350,000 shares; plus (c) on and after the date that is thirty (30) days after the date of the agreement, if the original investment amount has not been repaid, an additional 150,000 shares; plus (d) on and after the date that is ninety (90) days after the date of the agreement, if the original investment amount has not been repaid, an additional 250,000 shares, in each case, of Complete Solaria Common Stock at a price of $ 0.01 per share. Of the additional warrants that become exercisable after the modification, the tranches of 350,000 warrants vesting ten days after the date of the agreement and 150,000 warrants vesting thirty days after the date of the agreement are exercisable as of December 31, 2023. The modification of the warrant resulted in the reclassification of previously equity classified warrants to liability classification, which was accounted for in accordance with ASC 815 and ASC 718, Compensation – Stock Compensation . The Company recorded the fair value of the modified warrants as a warrant liability of $ 20.4 million, the pre-modification fair value of the warrants as a reduction to additional paid-in capital of $ 10.9 million and an expense of $ 9.5 million to other income (expense), net equal to the incremental value of the warrants upon the modification. The fair value of the warrant was determined based on its intrinsic value, given a nominal exercise price. At issuance, the relative fair value of the warrant was determined to be $ 20.4 million using the Black-Scholes model with the following weighted average assumptions: expected term of 7 years; expected volatility of 77.0 %; risk-free interest rate of 3.9 %; and no dividend yield. As of December 31, 2023, the fair value of the warrant was $ 6.0 million, and the Company recorded an expense of $ 14.4 million as other income (expense), net on the consolidated statements of operations and comprehensive loss. 82 Series D-7 Warrants (Converted to Common Stock Warrants) In November 2022, the Company issued warrants to purchase 656,630 shares of Series D-7 preferred stock (the “Series D-7 warrants”) in conjunction with the Business Combination. The warrant contains two tranches. The first tranche of 518,752 shares of Series D-7 preferred stock is exercisable at an exercise price of $ 2.50 per share upon consummation of a merger transaction, or at an exercise price of $ 2.04 per share upon remaining private and has an expiration date of April 2024. The second tranche of 137,878 shares of Series D-7 preferred stock is exercisable at an exercise price of $ 5.00 per share upon consummation of a merger transaction, or at an exercise price of $ 4.09 per share upon remaining private and has an expiration date of April 2024. The fair value of the Series D-7 warrants was $ 7.8 million as of December 31, 2022 and $ 2.4 million as of July 18, 2023 when the warrants were reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital, as the exercise price of the warrants is fixed at $ 2.50 per share of Complete Solaria Common Stock for the first tranche and $ 5.00 per share of Complete Solaria Common Stock for the second tranche upon the closing of the Mergers. In October 2023, the Company entered into an Assignment and Acceptance Agreement (“Assignment Agreement”), (refer to Note 15 – Borrowing Arrangements). In connection with the Assignment Agreement, the Company also entered into the First Amendment to Warrant to Purchase Stock Agreements with the holders of the Series D-7 warrants. Pursuant to the terms of the agreement, the warrants to purchase 1,376,414 shares of Series D-7 preferred stock converted into warrants to purchase 656,630 shares of common stock (the “replacement warrants”). As a result of the warrant amendment, the Company reclassified the replacement warrants from equity to liability. The replacement warrants were remeasured to the fair value on the amendment effective date and the Company will record subsequent changes in fair value in other income (expense), net on its condensed consolidated statements of operations and comprehensive loss. The Series D-7 Warrants remain outstanding as of December 31, 2023. November 2022 Common Stock Warrants In November 2022, the Company issued a warrant to a third-party service provider to purchase 78,962 shares of common stock in conjunction with the Business Combination. The warrant was immediately exercisable at an exercise price of $ 8.00 per share and had an expiration date of April 2024. In May 2023, the Company amended the warrant, modifying the shares of common stock to be purchased to 31,680 , the exercise price to $ 0.01 , and the expiration date to the earlier of October 2026 or the closing of an IPO. The impact of the modification was not material to the consolidated financial statements. At issuance and upon the modification, the relative fair value of the warrant was determined to be $ 0.1 million using the Black-Scholes model with the following weighted average assumptions: expected term of 1.5 years; expected volatility of 78.5 %; risk-free interest rate of 4.7 %; and no dividend yield. The fair value of the warrant was recorded within additional paid-in capital on the consolidated balance sheets. The warrant is not remeasured in future periods as it meets the conditions for equity classification. Upon the Closing of the Mergers, the warrant was net exercised into 31,680 shares of Complete Solaria Common Stock. July 2023 Common Stock Warrants In July 2023, the Company issued a warrant to a third-party service provider to purchase 38,981 shares of common stock in exchange for services provided in obtaining financing at the Closing of the Mergers. The warrant is immediately exercisable at a price of $ 0.01 per share and has an expiration date of July 2028. At issuance, the fair value of the warrant was determined to be $ 0.2 million, based on the intrinsic value of the warrant and the $ 0.01 per share exercise price. As the warrant is accounted for as an equity issuance cost, the warrant is recorded only within additional paid-in capital on the consolidated balance sheets. The warrant is not remeasured in future periods as it meets the conditions for equity classification. 83 Warrant Consideration In July 2023, in connection with the Mergers, the Company issued 6,266,572 warrants to purchase Complete Solaria Common Stock to holders of Legacy Complete Solaria Redeemable Convertible Preferred Stock, Legacy Complete Solaria Common Stock. The exercise price of the common stock warrants is $ 11.50 per share and the warrants expire 10 years from the date of the Mergers. The warrant consideration was issued as part of the close of the Mergers and was recorded within additional paid-in capital, net of the issuance costs of the Mergers. As of December 31, 2023, all warrants issued as warrant consideration remain outstanding. Public, Private Placement, and Working Capital Warrants In conjunction with the Mergers, Complete Solaria, as accounting acquirer, was deemed to assume 6,266,667 warrants to purchase FACT Class A Ordinary Shares that were held by the sponsor at an exercise price of $ 11.50 (“Private Placement Warrants”) and 8,625,000 warrants to purchase FACT’s shareholders FACT Class A Ordinary Shares at an exercise price of $ 11.50 (“Public Warrants”). Subsequent to the Mergers, the Private Placement Warrants and Public Warrants are exercisable for shares of Complete Solaria Common Stock and meet liability classification requirements since the warrants may be required to be settled in cash under a tender offer. In addition, Private Placement Warrants are potentially subject to a different settlement amount as a result of being held by the Sponsor which precludes the Private Placement Warrants from being considered indexed to the entity’s own stock. Therefore, these warrants are classified as liabilities on the consolidated balance sheets. The Company determined the Public and Private warrants to be classified as a liability and fair valued the warrants on the issuance date using the publicly available price for the warrants of $ 6.7 million. The fair value of these warrants was $ 0.3 million as of December 31, 2023, and the Company recorded the change in fair value of $ 6.4 million in other income (expense), net in the consolidated statements of operations and comprehensive loss for the fiscal year ended December 31, 2023. Additionally, at the closing of the Mergers, the Company issued 716,668 Working Capital warrants, which have identical terms as the Private Placement Warrants to the sponsor in satisfaction of certain liabilities of FACT. The warrants were fair valued at $ 0.3 million upon the closing of the Mergers, which was recorded in warrant liability on the consolidated balance sheets. As of December 31, 2023, the Working Capital warrants had a fair value of $ 0.01 million, and the Company recorded the change in fair value of $ 0.1 million as other income (expense), net on the consolidated statements of operations and comprehensive loss. 84 (15) Borrowing Arrangements Notes payable, net, Convertible notes, net and convertible notes, net, due to related parties As of December 31, 2023 and 2022, the Company’s notes payable and convertible notes consisted of the following (in thousands): As of December 31, 2023 2022 2018 Bridge Notes $ 11,031 $ 9,780 Revolver Loan 5,168 5,000 Secured Credit Facility 12,158 5,623 Polar Settlement Agreement 300 — Total Notes payable 28,657 20,403 Debt in CS Solis 33,280 25,204 2022 Convertible Notes — 3,434 2022 Convertible Notes due to related parties — 15,510 Total notes payable and convertible notes, net 61,937 64,551 Less current portion ( 61,937 ) ( 20,403 ) Notes payable and convertible notes, net of current portion $ — $ 44,148 Notes Payable 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 are secured by substantially all of the assets of Solaria Corporation. 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 as discussed in Note 4 – Business Combination. In December 2022, the Company entered into an amendment to the 2018 Bridge Notes extending the maturity date from December 13, 2022 to December 13, 2023, and the 2018 Notes remain outstanding as of December 31, 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 December 31, 2022, the carrying value of the Bridge Notes was $ 11.0 million and $ 9.8 million, respectively. Interest expense recognized for fiscal years ended December 31, 2023 and 2022 was $ 1.2 million and $ 0.7 million, respectively. As of December 31, 2023, the carrying value of the 2018 Notes approximates their fair value. Revolver Loan In October 2020, Solaria entered into a loan agreement (“SCI Loan Agreement”) with Structural Capital Investments III, LP (“SCI”). The SCI Loan Agreement is comprised of two facilities, a term loan (the “Term Loan”) and a revolving loan (the “Revolving Loan”) (together “Original Agreement”) 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. 85 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 is higher. The SCI Loan Agreement requires the Company to meet certain financial covenants relating to the maintenance of specified restricted cash balance, achieve specified revenue targets and maintain specified contribution margins (“Financial Covenants”) over the term of the Revolving Loan. The Revolving Loan is collateralized by substantially all assets and property of the Company. In the years ended December 31, 2022 and December 31, 2021, Solaria entered into several Amended and Restated Loan and Security Agreements with SCI to forbear SCI from exercising any rights and remedies available to it as a result of the Company not meeting certain Financial Covenants required by the Original Agreement. As a result of these amendments changes were made to the Financial Covenants, and Solaria recorded a total of $ 1.9 million amendment fees in Other Liabilities and this liability was included in the acquired liabilities for purchase price accounting. Solaria had historically issued warrants to purchase shares of Series E-1 redeemable convertible preferred stock of Solaria (“SCI Series E-1 warrants”). The warrants were fully exercisable in whole or in part at any time during the term of the Original agreement. As part of the Business Combination with Complete Solar, all the outstanding SCI Series E-1 warrants were assumed by the parent company, Complete Solaria as discussed in Note 4 – Business Combination. The Revolving Loan outstanding on the date of the Business Combination was fair valued at $ 5.0 million for the purpose of purchase price accounting discussed in Note 4 – Business Combination. The Revolving Loan principal balance at December 31, 2023 and December 31, 2022 amounted to $ 5.1 million and $ 5.0 million, respectively. Interest expense recognized for the fiscal year ended December 31, 2023 was $ 0.6 million. The Company was in compliance with all the Financial Covenants as of December 31, 2023. In October 2023, the Company entered into an Assignment 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 Company has identified this as a related party transaction, as discussed in Note 21 – Related Party Transactions. The SCI Revolving Loan continued to remain outstanding as of December 31, 2023 and is currently being renegotiated. Secured Credit Facility In December 2022, the Company entered into a secured credit facility agreement with Kline Hill Partners IV SPV LLC and Kline Hill Partners Opportunity IV SPV LLC. The secured credit facility agreement allows the Company to borrow up to 70 % of the net amount of its 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 serves 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. The Company 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. The Company is in the process of amending the secured credit facility agreement to extend its maturity date. At December 31, 2023, the balance outstanding was $ 12.2 million, including accrued financing cost of $ 4.5 million, and as of December 31, 2022, the balance outstanding was $ 5.6 million, including accrued financing cost of $ 0.1 million. The Company recognized interest expense of $ 3.5 million and $ 0.1 million related to the Secured Credit Facility during the fiscal years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the total estimated fair value of the Secured Credit Facility approximates its carrying value. 86 Polar Settlement Agreement In September 2023, in connection with the Mergers, the Company entered into a settlement and release agreement with Polar Multi-Strategy Master Fund (“Polar”) for the settlement of a working capital loan that had been made by Polar to the Sponsor, prior to the closing of the Mergers. The settlement agreement requires the Company to pay Polar $ 0.5 million in ten equal monthly installments and does not accrue interest. During the fiscal year ended December 31, 2023, the Company paid $ 0.2 million, and as of December 31, 2023, $ 0.3 million remains outstanding. Debt in CS Solis As described above, as part of the reorganization of the Company in February 2022, the Company received an investment from Carlyle. The investment was made pursuant to a subscription agreement, under which Carlyle contributed $ 25.6 million in exchange for 100 Class B Membership Units of CS Solis and the Company contributed the net assets of Complete Solar, Inc. in exchange for 100 Class A Membership Units. The Class B Membership Units are mandatorily redeemable by the Company on the three-year anniversary of the effective date of the CS Solis amended and restated LLC agreement (February 14, 2025). The Class B Membership Units accrue interest that is payable upon redemption at a rate of 10.5 % (which is structured as a dividend payable based on 25 % of the investment amount measured quarterly), compounded annually, and subject to increases in the event the Company declares any dividends. In connection with the investment, the Company issued a warrant to purchase 5,978,960 shares of the Company’s common stock at a price of $ 0.01 per share, of which, 4,132,513 shares are immediately exercisable. The Company has accounted for the mandatorily redeemable investment from Carlyle in accordance with ASC 480, Distinguishing Liabilities from Equity, and has recorded the investment as a liability, which was accreted to its redemption value under the effective interest method. The Company has recorded the warrants as a discount to the liability. Refer to Note 13 – Common Stock, for further discussion of the warrants issued in connection with the Class B Membership Units. On July 17 and July 18, 2023, and in connection with obtaining consent for the Mergers, Legacy Complete Solaria, FACT and Carlyle entered into an Amended and Restated Consent to the Business Combination Agreement (“Carlyle Debt Modification Agreement”) and an amended and restated warrant agreement (“Carlyle Warrant Amendment”), which modified the terms of the mandatorily redeemable investment made by Carlyle in Legacy Complete Solaria. The Carlyle Debt Modification Agreement accelerates the redemption date of the investment, which was previously February 14, 2025 and is March 31, 2024 subsequent to the modification. The acceleration of the redemption date of the investment, resulted in the total redemption amount to be 1.3 times the principal at December 31, 2023. The redemption amount will increase to 1.4 times the original investment at March 31, 2024. Additionally, as part of the amendment, the parties entered into an amended and restated warrant agreement. As part of the Carlyle Warrant Amendment, Complete Solaria issued Carlyle a warrant to purchase up to 2,745,879 shares of Complete Solaria Common Stock at a price per share of $0.01, which is inclusive of the outstanding warrant to purchase 1,995,879 shares at the time of modification. The warrant, which expires on July 18, 2030, provides Carlyle with the right to purchase shares of Complete Solaria Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795% of Complete Solaria’s issued and outstanding shares of common stock, on a fully-diluted basis; plus (b) on and after the date that is ten (10) days after the date of the agreement, an additional 350,000 shares; plus (c) on and after the date that is thirty (30) days after the date of the agreement, if the original investment amount has not been repaid, an additional 150,000 shares; plus (d) on and after the date that is ninety (90) days after the date of the agreement, if the original investment amount has not been repaid, an additional 250,000 shares, in each case, of Complete Solaria Common Stock at a price of $0.01 per share. The warrants are classified as liabilities under ASC 815 and are recorded within warrant liability on the consolidated statements of operations and comprehensive loss. The Company accounted for the modification of the long-term debt due CS Solis as a debt extinguishment in accordance with ASC 480 and ASC 470. As a result of the extinguishment, the Company recorded a loss on extinguishment, of $ 10.3 million, which is recorded within other expense on the consolidated statements of operations and comprehensive loss. As of the modification date, the Company recorded the fair value of the new debt of $ 28.4 million as short-term debt in CS Solis, and the amount will have a redemption value of $ 35.8 million under the amended agreement. 87 The Company has recorded a liability of $ 33.3 million and zero included in short-term debt due CS Solis on the consolidated balance sheets as of December 31, 2023 and 2022, respectively. The Company recorded a liability of zero and $ 25.2 million included in long-term debt due CS Solis on the consolidated balance sheets as of December 31, 2023 and 2022, respectively. The Company has recorded accretion of the liability as interest expense of $ 7.2 million for the fiscal year ended December 31, 2023, and made payments of interest expense of $ 0.6 million during the fiscal year ended December 31, 2023. The Company has recorded accretion of the liability as interest expense of $ 2.4 million for the fiscal year ended December 31, 2022. Prior to the modification, during the fiscal years ended December 31, 2023 and 2022 the Company recorded amortization of issuance costs as interest expense of $ 0.7 million and $ 1.2 million, respectively. As of December 31, 2023, the total estimated fair value of the Company’s debt with CS Solis was $ 33.3 million, which was estimated based on Level 3 inputs. 2022 Convertible Notes In connection with the Original Business Combination Agreement, the Company raised a series of convertible notes (“2022 Convertible Notes”) during the fiscal year ended December 31, 2022 with an aggregate purchase price of $ 12.0 million, and during the fiscal year ended December 31, 2023 for an additional total purchase price of $ 21.3 million. Additionally, as part of the acquisition of Solaria, the Company assumed a note from an existing investor for its fair value of $ 6.7 million. The note contained the same terms as the other 2022 Convertible Notes. The Company did not incur significant issuance costs associated with the 2022 Convertible Notes. The 2022 Convertible Notes accrued interest at a rate of 5 % per annum. Immediately prior to the closing of the Mergers, the 2022 Convertible Notes were converted into the number of shares of common stock of Complete Solaria equal to (x) the principal amount together with all accrued interest of the 2022 Convertible Notes divided by 0.75 , divided by (y) the price of a share of common stock of Complete Solaria used to determine the conversion ratio in the Amended and Restated Business Combination Agreement. This resulted in the issuance of 5,316,460 shares of Complete Solaria common stock to the noteholders and no debt remains outstanding associated with the 2022 Convertible Notes as of December 31, 2023. The Company recognized interest expense of $ 0.7 million related to the 2022 Convertible Notes during the fiscal year ended December 31, 2023. The Company did not recognize any interest expense related to the 2022 Convertible Notes during the fiscal year ended December 31, 2022. 2019-A Convertible Notes In 2019, the Company issued a series of convertible notes (“2019-A Convertible Notes”) for $ 0.1 million in proceeds, with immaterial debt issuance costs, and which were due and payable on demand by the holders after August 2020. The notes carried simple interest of 6.0 % and contained a conversion feature whereby the notes would convert at 80 % of the issuance price of the preferred shares in the next equity financing. The notes also contained other embedded features such as conversion options that were exercisable upon the occurrence of various contingencies. All of the embedded features were analyzed to determine whether they should be bifurcated and separately accounted for as a derivative. Pursuant to such analysis, the Company valued and bifurcated the share-settled redemption feature, which enabled the holders to convert the notes to the preferred shares at a predefined discount from the issuance price and recorded its initial fair value of less than $ 0.1 million as a discount on the convertible notes face amount. The debt discount was amortized to interest expense at a weighted-average effective interest rate of 17.6 % through the maturity dates of the notes. The fair value of the share-settled redemption feature was estimated based on a probability-weighted analysis of the discounted value of the notes converting under a Next Equity Financing, a change in control, default, or maturity, and the changes in fair value were recognized as a component of other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss. The Company recorded zero expense during the fiscal years ended December 31, 2023 and 2022, related to the change in the fair value of the convertible notes embedded derivative liability. The convertible notes were carried within the accompanying consolidated balance sheets at their original issuance value, net of unamortized debt discount and issuance costs. In March 2022, as part of the Company’s Series D Preferred Stock issuance, the 2019-A Convertible Notes converted into 62,500 shares of Series D-2 redeemable convertible preferred stock. The Company recognized a gain on the conversion of less than $ 0.1 million in other income (expense), net on the consolidated statements of operations and comprehensive loss. As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining for the note at December 31, 2022 and thereafter remained zero . The Company did not recognize any interest expense related to the 2019-A Convertible Notes during the fiscal year ended December 31, 2023. Interest expense recognized related to the 2019-A Convertible Notes during the fiscal year ended December 31, 2022 was immaterial. 88 2020-A Convertible Notes In 2020, the Company issued a series of convertible notes (“2020-A Convertible Notes”) for $ 3.8 million in proceeds, with immaterial debt issuance costs, and which were due and payable on demand by the holders after April 2021. The notes carried simple interest of 2.0 % and contained a conversion feature whereby the notes would convert at 80 % of the issuance price of the preferred shares in the next equity financing. The notes also contained other embedded features such as conversion options that were exercisable upon the occurrence of various contingencies. All of the embedded features were analyzed to determine whether they should be bifurcated and separately accounted for as a derivative. Pursuant to such analysis, the Company valued and bifurcated the share-settled redemption feature, which enables the holders to convert the notes to the preferred shares at a predefined discount from the issuance price and recorded its initial fair value of $ 0.5 million as a discount on the convertible notes face amount. The debt discount was amortized to interest expense at a weighted-average effective interest rate of 25.6 % through the maturity dates of the notes. The fair value of the share-settled redemption feature was estimated based on a probability-weighted analysis of the discounted value of the notes converting under a Next Equity Financing, a change in control, default, or maturity, and the changes in fair value were recognized as a component of other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss. The Company recorded zero in expense during the fiscal year ended December 31, 2023 and 2022, related to the change in the fair value of the convertible notes embedded derivative liability. The convertible notes were carried within the accompanying consolidated balance sheets at their original issuance value, net of unamortized debt discount and issuance costs. In March 2022, as part of the Company’s Series D Preferred Stock issuance, the 2020-A Convertible Notes converted into 785,799 shares of Series D-1 redeemable convertible preferred stock. The Company recognized a gain on the conversion of $ 0.9 million in other income (expense), net on the consolidated statements of operations and comprehensive loss. As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining for the note at December 31, 2022 and thereafter remained zero. The Company did not recognize any interest expense related to the 2020-A Convertible Notes during the fiscal year ended December 31, 2023. Interest expense recognized during the fiscal year ended December 31, 2022 was immaterial. 2021 Promissory Notes In July 2021, the Company issued a short-term promissory note for $ 0.5 million in proceeds, with immaterial debt issuance costs. The promissory note carried simple interest of 2.0 % and was due and payable after February 2022. In February 2022, the Company repaid the 2021 Promissory Note. In October 2021, the Company issued a short-term promissory note for $ 2.0 million in proceeds, with immaterial debt issuance costs. The promissory note contained a financing fee of $ 0.3 million, which was due and payable along with the principal amount in January 2022. In connection with the promissory note, the Company issued a warrant to purchase 50,000 shares of common stock at an exercise price of $ 0.01 per share. The principal and accrued interest of the note payable were repaid in January 2022, and no amounts remained outstanding as of December 31, 2022 and thereafter. 2021-A Convertible Notes In 2020, the Company issued a series of convertible notes (“2021-A Convertible Notes”) for $ 4.3 million in proceeds, with immaterial debt issuance costs, and which are due and payable on demand by the holders after February 2022. The holders are existing investors and are not expected to demand cash settlement, as the Company expects to raise additional preferred financing under which the notes will convert into preferred shares. The notes carry simple interest of 2.0 % and contained a conversion feature whereby the notes would convert at 80 % of the issuance price of the preferred shares in the next equity financing. The notes also contained other embedded features such as conversion options that were exercisable upon the occurrence of various contingencies. All of the embedded features were analyzed to determine whether they should be bifurcated and separately accounted for as a derivative. Pursuant to such analysis, the Company valued and bifurcated the share-settled redemption feature, which enables the holders to convert the notes to the preferred shares at a predefined discount from the issuance price and recorded its initial fair value of $ 0.6 million as a discount on the convertible notes face amount. The debt discount was amortized to interest expense at a weighted-average effective interest rate of 18.1 % through the maturity dates of the notes. 89 The fair value of the share-settled redemption feature was estimated based on a probability-weighted analysis of the discounted value of the notes converting under a Next Equity Financing, a change in control, default, or maturity, and the changes in fair value were recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company recorded zero in expense during the fiscal years ended December 31, 2023 and 2022, related to the change in the fair value of the convertible notes embedded derivative liability. The convertible notes were carried on the consolidated balance sheets at their original issuance value, net of unamortized debt discount and issuance costs. In March 2022, as part of the Company’s Series D Preferred Stock issuance, the 2021-A Convertible Notes converted into 869,640 shares of Series D-1 redeemable convertible preferred stock. The Company recognized a gain on the conversion of $ 0.8 million in other income (expense), net on the consolidated statements of operations and comprehensive loss. As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining for the note at December 31, 2022 and thereafter remained zero. As part of the 2021-A Convertible Notes financing, the Company entered into an additional convertible note with an existing investor for $ 0.5 million. The note carried PIK interest of 3.0 % and was due and payable on demand at any time after June 30, 2021. The note contained an embedded conversion feature, which allowed the holder to convert the note into a fixed number of shares of Series C-1 preferred stock at any time after June 30, 2021 . The Company concluded the conversion feature was not required to be bifurcated as an embedded derivative liability, and the note was carried at its principal plus accrued PIK interest. As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining for the note at December 31, 2022 and thereafter remained zero. The Company did not recognize any interest expense related to the 2021-A Convertible Notes during the fiscal year ended December 31, 2023. Interest expense recognized during the fiscal year ended December 31, 2022 was immaterial. Current Insight Promissory Note In January 2021, the Company issued a promissory note for a principal amount of $ 0.1 million in connection with the purchase of Current Insight, with immaterial debt issuance costs. The promissory note bears interest at 0.14 % per annum and has equal monthly installments due and payable through the maturity date of January 2022. The principal and accrued interest were repaid in January 2022, and no amounts remained outstanding as of December 31, 2022 and thereafter. SAFE Agreements 2019 SAFE In September 2019, the Company issued the 2019 SAFE for $ 0.1 million in proceeds, with immaterial debt issuance costs. No interest was accrued on the 2019 SAFE. The 2019 SAFE contained conversion features that allowed the holder to convert the 2019 SAFE into shares of preferred stock upon the next equity financing, subject to a valuation cap. The 2019 SAFE was reported at fair value based on the probability-weighted expected return method (“PWERM”), which assigns value to the multiple settlement scenarios based on the probability of occurrence. The fair value of the 2019 SAFE was $ 0.2 million as of December 31, 2021. In March 2022, the Company converted the 2019 SAFE into 48,258 shares of Series D-3 redeemable convertible preferred stock. The Company recognized a gain on the conversion of the 2019 SAFE of less than $ 0.1 million in other income (expense), net on the consolidated statements of operations and comprehensive loss. As the full carrying value of the SAFE was converted to Series D Preferred Stock, the balance remaining for the SAFE at December 31, 2022 and thereafter remained zero . 2021 SAFE In December 2021, the Company issued the 2021 SAFE for $ 5.0 million in proceeds, with immaterial debt issuance costs. No interest is accrued on the 2021 SAFE. The 2021 SAFE contained conversion features that allowed the holder to convert the 2021 SAFE into shares of preferred stock upon the next equity financing, subject to a valuation cap. The 2019 SAFE was reported at fair value based on the PWERM, which assigns value to the multiple settlement scenarios based on the probability of occurrence. The fair value of the 2021 SAFE was $ 6.3 million as of December 31, 2021. In March 2022, the Company converted the 2021 SAFE into 1,005,366 shares of Series D-1 redeemable convertible preferred stock. The Company recognized a gain on the conversion of the 2021 SAFE of $ 1.4 million in other income (expense), net on the consolidated statements of operations and comprehensive loss. As the full carrying value of the SAFE was converted to Series D Preferred Stock, the balance remaining for the SAFE at December 31, 2022 and thereafter remained zero . 90 Solaria SAFE As part of the acquisition of Solaria (refer to Note 4 – Business Combination) the Company acquired the Solaria SAFEs. The number of shares to be issued upon conversion of the SAFE notes contained various features to convert or redeem the Solaria SAFEs in the event of an equity financing, public offering, change of control or a dissolution event. The Company historically elected to account for all of the SAFE notes at estimated fair value pursuant to the fair value option and recorded the change in estimated fair value as other income (expense), net in the consolidated statements of operations and comprehensive loss until the notes are converted or settled. The SAFE notes were amended through the SAFE Assumption Amendment, Assignment and Assumption Agreement on November 4, 2022, as part of the Business Combination with Complete Solar, whereby all the SAFE notes were assumed by Complete Solar. As part of the purchase price accounting discussed in Note 3 – Reverse Recapitalization, the estimated fair value of the SAFE notes was determined to be $ 60.5 million. Post consummation of the Business Combination the SAFE notes were converted to 8,171,662 shares of Series D-8 preferred stock as discussed in Note 4 – Business Combination. (16) Stock-Based Compensation In July 2023, the Company’s board of directors adopted and stockholders approved the 2023 Incentive Equity Plan (the “2023 Plan”). The 2023 Plan became effective immediately upon the closing of the Amended and Restated Business Combination Agreement. Initially, a maximum number of 8,763,322 shares of Complete Solaria Common Stock may be issued under the 2023 Plan. In addition, the number of shares of Complete Solaria Common Stock reserved for issuance under the 2023 Plan will automatically increase on January 1 of each year, starting on January 1, 2024 and ending on January 1, 2033, in an amount equal to the lesser of (1) 4% of the total number of shares of Complete Solaria’s Common Stock outstanding on December 31 of the preceding year, or (2) a lesser number of shares of Complete Solaria Common Stock determined by Complete Solaria’s Board prior to the date of the increase. The maximum number of shares of Complete Solaria Common Stock that may be issued on the exercise of ISOs under the 2023 Plan is three times the number of shares available for issuance upon the 2023 Plan becoming effective (or 26,289,966 shares). Historically, awards were granted under the Amended and Restated Complete Solaria Omnibus Incentive Plan (“2022 Plan”), the Complete Solar 2011 Stock Plan (“2011 Plan”), the Solaria Corporation 2016 Stock Plan (“2016 Plan”) and the Solaria Corporation 2006 Stock Plan (“2006 Plan”) (together with the Complete Solaria, Inc. 2023 Incentive Equity Plan (“2023 Plan”), “the Plans”). The 2022 Plan is the successor of the Complete Solar 2021 Stock Plan, which was amended and assumed in connection with the acquisition of Solaria. The 2011 Plan is the Complete Solar 2011 Stock Plan that was assumed by Complete Solaria in the Required Transaction. The 2016 Plan and the 2006 Plan are the Solaria stock plans that were assumed by Complete Solaria in the Required Transaction. Under the Plans, the Company has granted service and performance-based stock options and restricted stock units (“RSUs”). A summary of stock option activity for the fiscal year ended December 31, 2023 under the Plans is as follows: Number of Shares Weighted Average Exercise Price per Share Weighted Average Contractual Term (Years) Aggregate Intrinsic Value (in thousands) Outstanding—December 31, 2022 4,970,419 $ 4.86 6.99 $ 34,180 Options granted 6,961,979 2.58 Options exercised ( 67,534 ) 0.89 Options canceled ( 148,218 ) 9.17 Outstanding—December 31, 2023 11,716,646 $ 3.48 8.53 $ 2,756 Vested and expected to vest— December 31, 2023 11,716,646 $ 3.48 8.53 $ 2,756 Vested and exercisable— December 31, 2023 3,141,940 $ 5.30 4.93 $ 763 91 A summary of RSU activity for the fiscal year ended December 31, 2023 under the Plans is as follows: Number of RSUs Weighted Average Grant Date Fair Value Unvested at December 31, 2022 — Granted 864,792 $ 6.89 Vested and released ( 265,686 ) $ 2.76 Cancelled or forfeited ( 541,010 ) $ 9.44 Unvested at December 31, 2023 58,097 $ 2.07 Determination of Fair Value Prior to the Mergers, the Company estimated grant-date fair value of stock options using the Black-Scholes-Merton option- pricing model. The determination of the fair value of each stock award using this option-pricing model is affected by the Company’s assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards. Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. The following assumptions were used to calculate the fair value of stock-based compensation: Fiscal Years Ended December 31, 2023 2022 Expected term (in years) 5.50 – 6.32 1.0 – 7.5 Expected volatility 77.0 % 60.0 % - 78.5 % Risk-free interest rate 1.7 % - 4.7 % 3.4 % - 4.8 % Expected dividends 0.0 % 0.0 % Expected term — The Company has opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). Expected volatility — Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of peer companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. Risk-free interest rate — The risk-free rate assumption is based on U.S. Treasury instruments with maturities similar to the expected term of the Company’s stock options. Expected dividends — The Company has not issued any dividends in its history and does not expect to issue dividends over the life of the options and therefore has estimated the dividend yield to be zero . Fair value of common stock — The fair value of the shares of common stock underlying the stock-based awards has historically been determined by the Board of Directors, with input from management. Because there has been no public market for the Company’s common stock, the Board of Directors has determined the fair value of the common stock on the grant-date of the stock-based award by considering a number of objective and subjective factors. Such factors include a valuation of the Company’s common stock performed by an unrelated third-party specialist, valuations of comparable companies, sales of the Company’s redeemable convertible preferred stock to unrelated third-parties, operating and financial performance, the lack of liquidity of the Company’s capital stock, as well as general and industry-specific economic outlooks. For financial reporting purposes, the Company considers the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation or a straight-line interpolation between the two valuation dates. The determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date. 92 Stock-based compensation expense The following table summarizes stock-based compensation expense and its allocation within the accompanying consolidated statements of operations and comprehensive loss (in thousands): Fiscal Years Ended December 31, 2023 2022 Cost of revenues $ 84 $ 22 Sales and marketing 487 168 General and administrative 2,252 243 Loss from discontinued operations, net of tax 2,376 470 Total stock-based compensation expense $ 5,199 $ 903 As of December 31, 2023, there was a total of $ 20.1 million and zero unrecognized stock-based compensation costs related to service-based options and RSUs, respectively. Such compensation cost is expected to be recognized over a weighted-average period of approximately 2.4 years for service-based options. In July 2023, the Company’s board of directors approved the modification to accelerate the vesting of 52,167 options for employees that were terminated. Additionally, at the same time, the board of directors approved an extension of the post termination exercise period for 280,412 vested options of terminated employees. In connection with the modifications, the Company recorded incremental stock-based compensation expense of $ 0.1 million. (17) Employee Stock Purchase Plan The Company adopted an Employee Stock Purchase Plan (the “ESPP Plan”) in connection with the consummation of the Mergers in July 2023. All qualified employees may voluntarily enroll to purchase the Company’s common stock through payroll deductions at a price equal to 85 % of the lower of the fair market values of the stock of the offering periods or the applicable purchase date. As of December 31, 2023, 2,628,996 shares were reserved for future issuance under the ESPP Plan. (18) Commitments and Contingencies Operating Leases The Company leases its facilities under non-cancelable operating lease agreements. The Company’s leases have remaining terms of 0.2 years to 2.8 years. Options to renew or extend leases beyond their initial term have been excluded from measurement of the ROU assets and lease liabilities as exercise is not reasonably certain. Operating leases are reflected on the consolidated balance sheets within operating lease ROU assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement. Operating lease ROU assets and liabilities are recognized at the commencement date, or the date on which the lessor makes the underlying asset available for use, based upon the present value of the lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred. Variable lease cost was $ 0.3 million and $ 0.2 million for the fiscal year ended December 31, 2023 and 2022, respectively. Total lease expense for the fiscal years ended December 31, 2023 and 2022 was $ 1.4 million and $ 0.7 million, respectively. The Company made $ 1.0 million and $ 1.0 million of cash payments related to operating leases during the fiscal years ended December 31, 2023 and 2022, respectively. New operating lease right-of-use assets obtained in exchange for operating lease liabilities were zero and $ 1.9 million during the fiscal years ended December 31, 2023 and 2022, respectively. The weighted average remaining lease term and the discount rate for the Company’s operating leases are as follows: December 31, 2023 Remaining average remaining lease term 2.48 years Weighted average discount rate 15.57 % 93 Future minimum lease payments under non-cancelable operating leases as of December 31, 2023 are as follows (in thousands): 2024 $ 743 2025 592 2026 477 Total undiscounted liabilities 1,812 Less: imputed interest ( 539 ) Total operating lease liabilities $ 1,273 Warranty Provision The Company typically provides a 10-year warranty on its solar energy system installations, which provides assurance over the workmanship in performing the installation, including roof leaks caused by the Company’s performance. For solar panel sales, the Company provides a 30-year warranty that the products will be free from defects in material and workmanship. The Company will retain its warranty obligation associated with its panel sales, subsequent to the disposal of its panel business. The Company accrues warranty costs when revenue is recognized for solar energy systems sales and panel sales, based primarily on the volume of new sales that contain warranties, historical experience with and projections of warranty claims, and estimated solar energy system and panel replacement costs. The Company records a provision for estimated warranty expenses in cost of revenues within the accompanying consolidated statements of operations and comprehensive loss. Warranty costs primarily consist of replacement materials and equipment and labor costs for service personnel. Activity by period relating to the Company’s warranty provision was as follows (in thousands): Fiscal Years Ended December 31, 2023 2022 Warranty provision, beginning of period $ 3,981 $ 2,281 Warranty liability from Business Combination – 1,943 Accruals for new warranties issued 2,968 1,492 Settlements ( 2,100 ) ( 1,735 ) Warranty provision, end of period $ 4,849 $ 3,981 Warranty provision, current $ 1,433 $ 767 Warranty provision, noncurrent 3,416 3,214 Indemnification Agreements From time to time, in its normal course of business, the Company may indemnify other parties, with which it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company. The Company may agree to hold other parties harmless against specific losses, such as those that could arise from breach of representation, covenant or third-party infringement claims. It may not be Possible to determine the maximum potential amount of liability under such indemnification agreements due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, there have been no such indemnification claims. In the opinion of management, any liabilities resulting from these agreements will not have a material adverse effect on the business, financial position, results of operations, or cash flows. Legal Matters The Company is a party to various legal proceedings and claims which arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be reasonably estimated, the Company discloses the reasonably possible loss. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Legal costs are expensed as incurred. Although claims are inherently unpredictable, the Company is not aware of any matters that have a material adverse effect on the business, financial position, results of operations, or cash flows. The Company has recorded $ 7.7 million and $ 1.9 million as a loss contingency in accrued expenses and other current liabilities on the consolidated balance sheets as of December 31, 2023 and 2022, respectively, primarily associated with the pending settlement of the following legal matters. 94 Katerra Litigation On July 22, 2022, Katerra, Inc. filed a complaint for breach of contract and turnover of property under Section 542(b) of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas. The complaint sought damages for the amounts due under the Settlement Agreement and for attorney’s fees. The Company filed an answer to the complaint on September 6, 2022. On May 11, 2023, the parties reached a settlement in which Solaria agreed to pay Katerra $ 0.8 million, paid in monthly payments beginning on May 25, 2023 and ending by October 25, 2023. The settlement had been paid in full as of December 31, 2023. SolarPark Litigation In January 2023, SolarPark Korea Co., LTD (“SolarPark”) demanded approximately $ 80.0 million during discussions between the Company and SolarPark. In February 2023, the Company submitted its statement of claim seeking approximately $ 26.4 million in damages against SolarPark. The ultimate outcome of this arbitration is currently unknown and could result in a material liability to the Company. However, the Company believes that the allegations lack merit and intends to vigorously defend all claims asserted. No liability has been recorded in the Company’s consolidated financial statements as the likelihood of a loss is not probable at this time. On March 16, 2023, SolarPark filed a complaint against Solaria and the Company in the U.S. District Court for the Northern District of California (“the court”). The complaint alleges a civil conspiracy involving misappropriation of trade secrets, defamation, tortious interference with contractual relations, inducement to breach of contract, and violation of California’s Unfair Competition Law. The complaint indicates that SolarPark has suffered in excess of $ 220.0 million in damages. On May 11, 2023, SolarPark filed a motion for preliminary injunction to seek an order restraining the Company from using or disclosing SolarPark’s trade secrets, making or selling shingled modules other than those produced by SolarPark, and from soliciting solar module manufacturers to produce shingled modules using Solaria’s shingled patents. On May 18, 2023, the Company responded by filing a motion for partial dismissal and stay. On June 1, 2023, SolarPark filed an opposition to the Company’s motion for dismissal and stay and a reply in support of their motion for preliminary injunction. On June 8, 2023, the Company replied in support of its motion for partial dismissal and stay. On July 11, 2023, the court conducted a hearing to consider SolarPark and the Company’s respective motions. On August 3, 2023, the court issued a ruling, which granted the preliminary injunction motion with respect to any purported misappropriation of SolarPark’s trade secrets. The court’s ruling does not prohibit the Company from producing shingled modules or from utilizing its own patents for the manufacture of shingled modules. The court denied SolarPark’s motion seeking a defamation injunction. The court denied the Company’s motion to dismiss and granted the Company’s motion to stay the entire litigation pending the arbitration in Singapore. On September 1, 2023, the Company filed a Limited Notice of Appeal to appeal the August 2023 order granting SolarPark’s motion for preliminary injunction. On September 26, 2023, Solaria filed a Notice of Withdrawal of Appeal and will not appeal the Court’s Preliminary Injunction Order. No liability has been recorded in the Company’s consolidated financial statements as the likelihood of a loss is not probable at this time. Siemens Litigation On July 22, 2021, Siemens filed a lawsuit in which Siemens alleged that the Company breached express and implied warranties under a purchase order that Siemens placed with the Company for a solar module system. Siemens claimed damages of approximately $ 6.9 million, inclusive of amounts of the Company’s indemnity obligations to Siemens, plus legal fees. On February 22, 2024, the Court issued an order against the Company which awarded Siemens approximately $ 6.9 million, inclusive of the Company’s indemnity obligations to Siemens, plus legal fees, the amount of which will be determined at a later hearing. On March 15, 2024, Siemens filed a motion seeking to recover $ 2.67 million for attorneys’ fees, expenses, and pre-judgment interest. The Court will conduct a hearing on Siemens’ motion in late May 2024. Pending entry of a final judgment by the Court, the Company intends to appeal such judgment. The Company has recorded $ 6.9 million and zero as a legal loss related to this litigation in accrued expenses and other current liabilities on the consolidated balance sheets as of December 31, 2023 and 2022, respectively. 95 China Bridge Litigation On August 24 2023, China Bridge Capital Limited (“China Bridge”) alleged breach of contract and demanded $ 6.0 million. The complaint names FACT as the defendant. The complaint alleges China Bridge and FACT entered into a financial advisory agreement in October 2022 whereby FACT engaged China Bridge to advise and assist FACT in identifying a company for FACT to acquire. As part of the agreement, China Bridge claims that FACT agreed to pay China Bridge a $ 6.0 million advisory fee if FACT completed such an acquisition. China Bridge claims it introduced Complete Solaria to FACT and is therefore owed the $ 6.0 million advisory fee. The Company believes that the allegations lack merit and intends to vigorously defend all claims asserted. No liability has been recorded in the Company’s consolidated financial statements as the likelihood of a loss is not probable at this time. Letters of Credit The Company had $ 3.5 million of outstanding letters of credit related to normal business transactions as of December 31, 2023. These agreements require the Company to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder. As discussed in Note 2 – Summary of Significant Accounting Policies, the cash collateral in these restricted cash accounts was $ 3.8 million and $ 3.9 million as of December 31, 2023 and 2022, respectively. (19) Income Taxes The Company’s loss from continuing operations before provision for income taxes for the years ended December 31, 2023 and 2022, was as follows (in thousands): Years Ended December 31, 2023 2022 Domestic $ ( 94,222 ) $ ( 27,996 ) Foreign ( 1,995 ) – Total $ ( 96,217 ) $ ( 27,996 ) The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows (in thousands): Years Ended December 31, 2023 2022 Statutory federal income tax $ ( 20,206 ) $ ( 6,184 ) State income taxes, net of federal tax benefits 7,833 ( 1,207 ) Stock compensation 637 64 Non-deductible interest expense 887 78 Mark to market adjustments 615 397 Debt extinguishment 2,171 – Nondeductible Expenses 141 279 Foreign earnings taxed at different rates 419 157 Forward Purchase Agreements 9,780 – Prior year adjustments 719 – Liability for warrants ( 6,155 ) – Other ( 6 ) ( 8 ) Valuation allowance 3,145 6,451 Tax Provision $ ( 20 ) $ 27 96 Significant components of our deferred tax assets and liabilities are as follows (in thousands): Years Ended December 31, 2023  2022  Deferred income tax assets NOL carryforwards $ 17,957 $ 60,710 Credits – 195 Bad debt reserve 2,799 1,382 Inventory reserve 3,764 2,724 Warranty reserve 619 651 Revenue warranty 529 155 Interest expense carryover 5,503 3,445 Accrued compensation 404 678 Deferred revenue 131 195 ASC 842 leases 10 12 Fixed assets 219 328 Intangibles 32 – Capitalized research and development 808 509 Other 6,985 2,837 Total 39,760 73,821 Valuation allowance ( 38,407 ) ( 63,737 ) Net deferred tax assets 1,353 10,084 Deferred income tax liabilities Accounting method change – ( 18 ) Capitalized software ( 594 ) ( 234 ) Fixed assets — — Intangibles – ( 9,084 ) Convertible debt ( 759 ) ( 748 ) Refundable and deferred income taxes $ – $ — The Company has established a valuation allowance to offset the gross deferred tax assets as of December 31, 2023 and December 31, 2022, due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets. The valuation allowance balance was $ 38.4 million and $ 63.7 million for the years ended December 31, 2023 and December 31, 2022, respectively. In assessing the realizability of deferred income tax assets, the Company considered whether it is more likely than not that some portion or all of its deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty surrounding the Company’s ability to realize such deferred income tax assets, a full valuation allowance has been established. The valuation allowance decreased by $ 25.3 million during the year ended December 31, 2023, and increased by $ 52.4 million during the year ended December 31, 2022. The decrease in fiscal year 2023 is related to net operating loss and credit carryforwards which were deemed unavailable, offset by current year losses, and the increase in fiscal 2022 was due to acquired net operating loss and credit carryforwards as well as current year losses. As of December 31, 2023 and 2022, the Company had federal net operating loss carryforwards of approximately $ 267.5 million and $ 237.7 million, respectively, and state net operating loss carryforwards of approximately $ 194.2 million and $ 157.1 million, respectively. The federal net operating loss carryforwards that will expire between the years 2030 and 2037 total $ 114.6 million. As of December 31, 2023 and 2022, the Company had state research and development credit carryforwards of $ 1.6 million for both years, respectively. These credits do not expire. The utilization of the Company’s net operating loss and R&D credit carryforwards may be subject to limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and similar foreign provisions. Such limitations may result in the expiration of these carryforwards before their utilization. The Company’s acquired net operating loss carryforwards have been reduced based on the estimated amount which will be lost due to these limitations. The Company has not reported a deferred tax asset related to remaining acquired loss carryforwards which the Company believes will be lost due to continuation of business enterprise rules. The Company has not completed a Section 382 analysis related to the 2023 sale of assets and it is possible the loss may not be disallowed. The Company has recorded an unrecognized tax benefit related to this uncertain tax position. 97 The Company is subject to income taxes in the U.S. federal jurisdiction, and various foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company’s tax years remain open for examination by all tax authorities since inception. The Company is not currently under examination in any tax jurisdictions. As of December 31, 2023 and 2022, the Company had unrecognized tax benefits of $ 53.2 million and $ 1.3 million, respectively. The reversal of the uncertain tax benefits would not affect the Company’s effective tax rate to the extent that it continues to maintain a full valuation allowance against its deferred tax assets. The Company applies the provisions set forth in FASB ASC Topic 740, Income Taxes, to account for the uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of income tax laws. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands): Years Ended December 31,   2023    2022  Unrecognized tax benefits as of beginning of year $ 1,335 $ — Increases related to prior year tax positions 5 1,335 Increases related to current year tax positions 51,813 — Decreases related to prior year tax positions — — Unrecognized tax benefits as of end of year — — $ 53,153 $ 1,335 The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the statements of operations and comprehensive loss. Accrued interest and penalties are included as part of income tax payable in the consolidated balance sheets. No accrued interest or penalties have been recorded for the years ended December 31, 2023 or December 31, 2022. The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiary as of December 31, 2023 and December 31, 2022 because it intends to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place under the 2017 Tax Cuts and Jobs Act. (20) Basic and Diluted Net Loss Per Share The Company uses the two-class method to calculate net loss per share. No dividends were declared or paid for the fiscal years ended December 31, 2023 and 2022. Undistributed earnings for each period are allocated to participating securities, including the redeemable convertible preferred stock, based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed. The Company’s basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average shares of common stock outstanding during periods with undistributed losses. The basic and diluted shares and net loss per share for the fiscal year ended December 31, 2022 has been retroactively restated to give effect to the conversion of shares of legal acquiree’s convertible instruments into shares of legal acquiree common stock as though the conversion had occurred as of the beginning of the period. The retroactive restatement is consistent with the presentation on the accompanying consolidated statements of stockholders’ deficit. 98 The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders for the fiscal years ended December 31, 2023 and 2022 (in thousands, except share and per share amounts): Fiscal Years Ended December 31, 2023 2022 Numerator: Net loss from continuing operations $ ( 96,197 ) $ ( 28,023 ) Net loss from discontinued operations ( 25,853 ) ( 1,454 ) Impairment loss from discontinued operations ( 147,505 ) – Net loss $ ( 269,555 ) $ ( 29,477 ) Denominator: Weighted average common shares outstanding, basic and diluted 24,723,370 22,524,400 Net loss per share: Continuing operations – basic and diluted $ ( 3.89 ) $ ( 1.24 ) Discontinued operations – basic and diluted ( 1.05 ) ( 0.07 ) Net loss per share – basic and diluted ( 4.94 ) ( 1.31 ) The computation of basic and diluted net loss per share attributable to common stockholders is the same for the fiscal years ended December 31, 2023 and 2022 because the inclusion of potential shares of common stock would have been anti-dilutive for the periods presented. The following table presents the potential common shares outstanding that were excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been anti-dilutive: As of December 31, 2023 2022 Common stock warrants 23,024,556 43,135 Convertible notes – 1,912,493 Preferred stock warrants – 1,152,790 Stock options and RSUs issued and outstanding 11,774,743 4,970,419 Potential common shares excluded from diluted net loss per share 34,799,299 8,078,837 (21) Related Party Transactions Related Party Convertible Promissory Notes In 2020, the Company issued convertible promissory notes (“2020-A Convertible Notes”) of approximately $ 3.8 million to various investors, out of which $ 3.3 million was issued to nine related parties. The principal amount of the outstanding balance accrued interest at 2.0 % per annum. In 2021, the Company subsequently issued convertible promissory notes (“2021-A Convertible Notes”) of approximately $ 4.8 million to various investors, out of which $ 3.6 million was issued to four related parties. The principal amount of the outstanding balance accrued interest at 2.0 % per annum. Refer to Note 15 – Borrowing Arrangements for further details. In March 2022, as part of the Company’s Series D redeemable convertible preferred stock issuance, the Company converted all of the outstanding convertible note series. As part of the conversion, the Company recognized a gain on the extinguishment of related party convertible notes of $ 1.4 million, which was recorded in other income (expense), net on the consolidated statements of operations and comprehensive loss. In October 2022 through June 2023, the Company issued convertible promissory notes (“2022 Convertible Notes”) of approximately $ 33.3 million to various investors, out of which $ 12.1 million was issued to five related parties. Additionally, the Company acquired a related party convertible note, on the same terms as the 2022 Convertible Notes as part of the acquisition of Solaria, with a fair value of $ 6.7 million at the time of the acquisition. The related party debt is presented as convertible notes, net, due to related parties, noncurrent in the accompanying consolidated balance sheets. The principal amount of the outstanding balance on the 2022 Convertible Notes accrues at 5.0 %, compounded annually. For the fiscal years ended December 31, 2023 and 2022, the Company has recognized $ 0.4 million and $ 0.2 million, respectively, in interest expense related to the related party 2022 Convertible Promissory Notes. 99 In June 2023, the Company received $ 3.5 million of prefunded PIPE proceeds from a related party investor in conjunction with the Company’s merger with Freedom Acquisition I Corp (refer to Note 1(a) – Description of Business and Note 3 – Reverse Recapitalization). The $ 3.5 million investment converted to equity for reclassification of prepaid PIPE, which is reflected in the consolidated statements of redeemable convertible preferred stock and stockholders’ deficit for fiscal year ended December 31, 2023. In July 2023, in connection with the Mergers, in addition to the $ 3.5 million of related party PIPE proceeds noted above, the Company received additional PIPE proceeds from related parties of $ 12.1 million, which is reflected in the consolidated statements of redeemable convertible preferred stock and stockholders’ deficit for the fiscal year ended December 31, 2023. In July 2023, in connection with the Mergers, the Company issued 120,000 shares to a related party as a transaction bonus. As a result of the issuance, the Company recognized $ 0.7 million of expense within other income (expense), net in its consolidated statements of operations and comprehensive loss for the fiscal year ended December 31, 2023. In July 2023, the Company entered into a series of FPAs as described in Note 6 – Forward Purchase Agreements. In connection with the FPAs, the Company recognized other expense of $ 30.7 million for the fiscal year ended December 31, 2023 in connection with the issuance of 5,670,000 shares of Complete Solaria Common Stock to the related party FPA Sellers. The Company also recognized other income of $ 0.3 million in connection with the issuance of the FPAs with related parties. As of December 31, 2023, the Company has recognized a liability associated with the FPAs of $ 3.2 million due to related parties in its consolidated balance sheets, and the Company has recognized other expense associated with the change in fair value of the FPA liability due to related parties of $ 3.5 million in its consolidated statements of operations and comprehensive loss for both the fiscal year ended December 31, 2023. In September 2023, in connection with the Mergers, the Company entered into a settlement and release agreement with a related party for the settlement of a working capital loan made to the Sponsor, prior to the closing of the Mergers. As part of the settlement agreement, the Company agreed to pay the related party $ 0.5 million as a return of capital, which is paid in ten equal monthly installments and does not accrue interest. During fiscal year ended December 31, 2023, the Company made one payment of $ 0.2 million. As of December 31, 2023, $ 0.3 million remains outstanding. There were no other material related party transactions during the fiscal years ended December 31, 2023 and 2022. (22) Subsequent Events On January 16, 2024, Complete Solaria, Inc. (the “Company”) announced a workforce reduction (the “Workforce Reduction”) of 15 employees and 19 contractors, constituting approximately 14 % of the Company’s workforce. The Company is taking this action to decrease its costs and strategically realign its resources. The Company expects to recognize the majority of these charges in the first quarter of 2024, and that the Workforce Reduction will be substantially complete during the first quarter of 2024. In addition, the Company may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Workforce Reduction. The Company does not expect that the Workforce Reduction will have a material impact on its consolidated financial statements. Departure of a Named Executive Officer – William J. Anderson The Company previously announced in its Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 16, 2023, that William J. Anderson had stepped down as the Company’s Chief Executive Officer but remained employed with the Company. On January 16, 2024, in connection with the Workforce Reduction, the Company terminated Mr. W. Anderson’s employment with the Company, effective as of January 16, 2024 (the “William Anderson Separation Date”). Following the William Anderson Separation Date, Mr. W. Anderson will continue to serve as a member the board of directors of the Company, in addition to other advisory and support roles pursuant to a consulting agreement to be entered into with Mr. W. Anderson. 100 Subject to the terms of Mr. W. Anderson’s employment agreement, dated as of May 9, 2023, the form of which was filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-4 filed with the SEC on May 11, 2023 (the “William Anderson Employment Agreement”), Mr. W. Anderson will be entitled to receive: ● cash severance in an amount equal to 12 months of his base salary in effect as of the William Anderson Separation Date, payable in installments beginning on the date that is the 60th day following the William Anderson Separation Date; ● a lump sum amount equal to any earned but unpaid annual bonus from the prior fiscal year ended December 31, 2023, plus a pro rata portion of Mr. W. Anderson’s annual bonus for the fiscal year ended December 31, 2024, to the extent such annual bonus would have been earned by Mr. W. Anderson pursuant to the terms of the William Anderson Employment Agreement; ● (A) a payment of continued health coverage for him and his eligible dependents under COBRA for the earlier of (1) a period of 12 months, (2) the expiration of his eligibility for the continuation coverage under COBRA or (3) the date when Mr. W. Anderson becomes eligible for substantially equivalent health insurance coverage in connection with new employment; or (B) a taxable payment in lieu of such payment; ● extension of the period of time in which Mr. W. Anderson may exercise all of his vested stock options until the earlier of (A) the 12-month anniversary of the William Anderson Separation Date, (B) the expiration date of the applicable stock option and (C) termination of the stock options upon a corporate transaction as provided under the applicable equity incentive plan under which such stock options were granted; and ● acceleration of 50 % of Mr. W. Anderson’s remaining unvested and outstanding stock options subject to time-based vesting as of the William Anderson Separation Date Departure of a Named Executive Officer – David Anderson Additionally, on January 16, 2024, and in connection with the Workforce Reduction, the Company terminated David Anderson’s employment as the Company’s Chief Marketing Officer and Head of Strategic Partnerships, effective as of January 16, 2024 (the “David Anderson Separation Date”). Subject to the terms of Mr. D. Anderson’s employment agreement, dated as of May 9, 2023, a form of which was filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-4 filed with the SEC on May 11, 2023 (the “David Anderson Employment Agreement”), Mr. D. Anderson will be entitled to receive: ● cash severance in an amount equal to 12 months of Mr. D. Anderson’s base salary in effect as of the David Anderson Separation Date, payable in installments beginning on the date that is the 60th day following the David Anderson Separation Date; ● a lump sum amount equal to any earned but unpaid annual bonus from the prior fiscal year ended December 31, 2023 plus a pro rata portion of Mr. D. Anderson’s annual bonus for the fiscal year ended December 31, 2024, to the extent such annual bonus would have been earned by Mr. D. Anderson pursuant to the terms of the David Anderson Employment Agreement; ● (A) a payment of continued health coverage for him and his eligible dependents under COBRA for the earlier of (1) a period of 12 months, (2) the expiration of his eligibility for the continuation coverage under COBRA or (3) the date when Mr. D. Anderson becomes eligible for substantially equivalent health insurance coverage in connection with new employment; or (B) a taxable payment in lieu of such payment; 101 ● extension of the period of time in which Mr. D. Anderson may exercise all of his vested stock options until the earlier of (A) the 12-month anniversary of the David Anderson Separation Date, (B) the expiration date of the applicable stock option and (C) termination of the stock options upon a corporate transaction as provided under the applicable equity incentive plan under which such stock options were granted; and ● acceleration of 50 % of Mr. D. Anderson’s remaining unvested and outstanding stock options subject to time-based vesting as of the David Anderson Separation Date. The Company expects that the departure of the named executive officers will not have a material financial impact on its consolidated financial statements. First SAFE On January 31, 2024, the Company 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 the Company’s 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 the Company issues and sells 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) the Company’s 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) the Company’s 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 %. On February 15, 2024, the Company 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 the Company consummates 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 %. Departure of Directors or Certain Officers On March 6, 2024, Brian Wuebbels, the Chief Financial Officer of Complete Solaria, Inc. (the “Company”), notified the Company of his resignation effective April 30, 2024. Mr. Wuebbels will continue in his role as Chief Financial Officer to assist the Company in the filing of its Annual Report on Form 10-K for the year ended December 31, 2023. Mr. Wuebbels will also provide transition services to the Company through his resignation date. 102 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On July 18, 2023, the Audit Committee of the Company’s board of directors approved the engagement of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ending December 31, 2023. Deloitte previously served as the independent registered public accounting firm of Legacy Complete Solaria prior to the Business Combination. Accordingly, Marcum LLP (“Marcum”), FACT’s independent registered public accounting firm prior to the Business Combination, was informed that it would be replaced by Deloitte as the Company’s independent registered public accounting firm, following the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. Marcum’s report of independent registered public accounting firm dated April 6, 2023 on the FACT balance sheet as of December 31, 2022, the related statements of operations, changes in shareholders’ deficit and cash flows for each of the two years in the period ended December 31, 2022, and the related notes to the financial statements did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainties, audit scope or accounting principles, except for an explanatory paragraph in such report regarding substantial doubt about FACT’s ability to continue as a going concern. FACT determined that a material weakness exists in its internal control over financial reporting related to the accounting for complex financial instruments, accrued expenses and accounts payable, and foreign exchange transactions. During the period from December 23, 2020 (FACT’s inception) through December 31, 2022 and the subsequent interim period through March 31, 2023, there were no “disagreements” (as such term is defined in Item 304(a)(1)(iv) of Regulation S-K) with Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Marcum, would have caused Marcum to make reference thereto in its reports on FACT’s financial statements for such periods. During the period from December 23, 2020 (FACT’s inception) through December 31, 2022 and the subsequent interim period through March 31, 2023, there have been no “reportable events” (as such term is defined in Item 304(a)(1)(v) of Regulation S-K). During the period from December 23, 2020 (FACT’s inception) through December 31, 2022 and the subsequent interim period through March 31, 2023, (i) the Company did not both (a) consult with Deloitte as to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements and (b) receive a written report or oral advice that Deloitte concluded was an important factor considered by the Company in reaching a decision as to such accounting, auditing, or financial reporting issue; and (ii) the Company did not consult Deloitte on any matter that was either the subject of a “disagreement” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K). The Company has provided Marcum with a copy of the disclosures made by the registrant in this Item 4.01 in response to Item 304(a) of Regulation S-K under the Exchange Act and requested that Marcum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the registrant in this Item 4.01 in response to Item 304(a) of Regulation S-K under the Exchange Act and, if not, stating the respects in which it does not agree. A letter from Marcum is attached hereto as Exhibit 16.1.