What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-04-30 compared with 2024-04-01 · 596 added, 489 removed, 227 unchanged (83% of the section changed)

21 unchanged sentences

We fulfill our customer contracts

by engaging with local construction specialists.

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

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

We manage and

coordinate this process through our proprietary HelioTrack TM software system.

by using in-house installation experts and by engaging with local construction specialists.

We manage the customer experience and complete

all pre-construction activities prior to delivering build-ready projects including hardware, engineering plans, and building permits to

our builder partners.

We manage and coordinate this process through our proprietary software system.

There is substantial doubt

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

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

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

They do not include

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

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

about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The consolidated financial statements included in this Annual Report on Form 10-K 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.

do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts

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

Growth Strategy and Outlook

Complete Solaria’s growth strategy

contains the following elements:

revenue by expanding installation capacity and developing new geographic markets –

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

generated by our sales partners.

By leveraging this network of skilled builders, we aim to

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

new geographies throughout the U.S.

This will enable greater sales growth in existing markets

and create new revenue in expansion markets.

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

partners with a national footprint.

Our growth strategy contains the following

Increase revenue by

expanding installation capacity and developing new geographic markets – We continue to expand our network of partners who

will install systems resulting from sales generated by our sales partners.

By leveraging this network of skilled builders in

addition to our in-house installation experts, we aim to increase our installation capacity in our traditional markets and expand

our offering into new geographies throughout the U.S.

This will enable greater sales growth in existing markets and create new

revenue in expansion markets.

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

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

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

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

of acquisition to both increase revenue and improve margin.

These national accounts have unique customer relationships that we believe will facilitate meaningful sales opportunities and low cost of acquisition to both increase revenue and improve margin.

We entered into an Amended

4 unchanged sentences

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

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

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

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

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

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

Merger, the “Mergers”).

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

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

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

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

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

and the Second Merger, the “ Mergers ”).

The Mergers between Complete

10 unchanged sentences

In October 2023, we completed

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

Under the terms of the Disposal Agreement,

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

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

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

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

As part of the Disposal Transaction,

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

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

We recorded an impairment of $147.5 million associated with the

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

the divestiture of our solar panel business to Maxeon (“ Divestiture ”), pursuant to the terms of the Disposal Agreement.

Under the terms of the Disposal Agreement, Maxeon agreed to acquire certain assets and employees of Complete Solaria, for an aggregate

purchase price of approximately $11.0 million consisting of 1,100,000 shares of Maxeon ordinary shares.

We determined that the criteria

were met for discontinued operations classification as the divestiture represented a strategic shift in our business.

In connection with

the Divestiture, we recognized a loss from discontinued operations of $2.0 million and $173.4 million in the fiscal years ended December

29, 2024 and December 31, 2023, respectively.

We also sold all the Maxeon shares in the year ended December 31, 2023, and recorded a $4.2

million loss on the sale of these shares in our consolidated statements of operations and comprehensive loss.

Below we have discussed our

1 unchanged sentence

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

SunPower Acquisition Transaction

On August 5, 2024, we entered

into the aforementioned APA among us and the SunPower Debtors which provided for the sale and purchase of certain assets relating to the

Blue Raven Solar business, New Homes Business and Non-Installing Dealer network previously operated by the SunPower Debtors (the “Acquired

SunPower Assets”).

The sale by SunPower was approved on September 23, 2024, by the United States Bankruptcy Court for the District

We completed the acquisition (“ Acquisition ”) of the Acquired SunPower Assets (“SunPower Businesses”)

effective September 30, 2024.

Financing of the Acquisition

Complete Solaria financed

the Acquisition by issuing 7% convertible senior notes (“ September 2024 Notes ”) in September 2024, which are due in

The September 2024 Notes mature on July 1, 2029 and are convertible into the Company’s common stock at the option of the holder

at a conversion rate of $2.14 per share.

The September 2024 Notes will become immediately due and payable at the option of the holder

in the event of default and upon a qualifying change of control event.

Key Financial Definitions/Components of Results

of Operations

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

to facilitate the sale and installation of solar energy systems.

Our contracts consist of two performance obligations, which include solar

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

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

is recognized upon inspection.

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

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

The majority of our service revenue is recognized through

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

We perform the solar energy installation

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

Additionally, we enter into a Solar

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

loan partner.

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

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

to be a customer incentive.

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

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

We perform these leveraging our HelioQuote TM

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

proposals for installers.

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

Operating Expenses

Revenue is recognized for

Residential Solar Installation and New Home Business when a customer obtains control of promised products and services and we have satisfied

our performance obligations which is the date by which substantially all of our design and installation is complete for a fully functioning

solar power system to interconnect to the local power grid.

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.

for these services as inputs to a combined output, resulting in a single service-based performance obligation.

The amount of revenue recognized

reflects the consideration which we expect to be entitled to receive in exchange for the products and services.

To achieve this core principle,

we apply the following five steps:

Identification of the contract(s)

with a customer;

Identification of the performance

obligations in the contracts(s);

Determination of the transaction

Allocation of the transaction

price to the performance obligations;

Recognition of the revenue

when, or as, we satisfy a performance obligation.

Residential Solar Installation Revenues

Our Residential Solar Installation

segment sells products through a network of installing and non-installing dealers and resellers, as well as our internal sales team.

contracts with customers include three primary contract types:

agreements – We contract directly with homeowners who purchase the solar energy system and related services from us.

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.

partner agreements – In our financing partner agreements, we contract directly with homeowners for the purchase of the solar energy

system and related services.

We refer the homeowner to a financing partner to finance the system, and the homeowner makes payments directly

to the financing partner.

We receive 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.

purchase agreements and lease agreements – We contract directly with a leasing partner to perform the solar energy system installation,

and the homeowner will finance the system through a power purchase agreement (or lease), which is signed with our leasing partner.

consider the leasing partner to be our customer, as we do not contract directly with the homeowner and the leasing partner takes ownership

of the system upon the completion of installation.

We receive consideration from the leasing 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.

New Home Business Revenues

Our New Homes Business sells

through a network of home builders as well as our internal sales team.

Our contracts with customers include two primary contract types:

● Cash agreements – We contract directly with homebuilders

who purchase the solar energy system from us and are the customers in the transaction.

Our customers are invoiced upon the completion

of installation.

● Lease agreements – Prior to the SunPower Corporation’s

declaration of bankruptcy, certain homeowners had intended to lease a system from the SunPower Corporation, but were unable to consummate

the transaction (as a result of SunPower’s declaration of bankruptcy).

The in-process system inventory (installed on recently constructed

homes) was acquired by us in connection with the SunPower Acquisition.

We contracted directly with a leasing partner to facilitate the

leasing of the system to the impacted homeowners.

We consider the leasing partner to be our customer.

Under the terms of our arrangement

with the leasing partner, control is not transferred to the customer until the completed system is accepted by the customer.

consideration from the leasing partner following the acceptance of the system.

Our performance obligation

for both reportable segments is to design and install a fully functioning solar energy system.

For all contract types (with the exception

of New Homes Business Lease agreements), we recognize revenue over time.

Our over-time revenue recognition begins when the solar power

system is fully installed (as it is at this point that control of the asset begins to be transferred to the customer and the customer

retains the significant risks and rewards of ownership of the solar power system).

We recognize revenue using the input method based on

direct costs to install the system and defer the costs of installation until such time that control of the asset transfers to the customer

(installation).

For New Homes Business Lease agreements, we consider the performance obligation to be satisfied at a point in time upon

acceptance of the system by the customer.

Revenue is generally recognized

at the transaction price contained within the agreement, net of costs of financing, or other consideration paid to the customers that

is not in exchange for a distinct good or service.

Our arrangements may contain clauses that can either increase or decrease the transaction

Variable consideration is estimated at each measurement date at its most likely amount to the extent that it is probably that a

significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively as such estimates change.

We record deferred revenue

for amounts invoiced that are received in advance of the provisioning of services.

In certain contracts with customers, we arrange for

a third-party financing partner to provide financing to the customer.

We collect upfront from the financing partner and the customer will

provide installment payments to the financing partner.

We record revenue in the amount received from the financing partner, net of any

financing fees charged to the homeowner, which we consider to be a customer incentive.

None of our contracts contain a significant financing

Costs to obtain and fulfill contracts

Our costs to obtain and fulfill contracts, when recognized, associated with systems sales are expensed as sales commission and cost of

revenue, respectively.

In addition, incentives we provide to our customers, such as discounts and rebates, are recorded net to the revenue

we have recognized on the solar power system.

Cost of Revenues

Cost of revenues consists

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

Cost of revenues also includes associated

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

Cost of revenues is comprised

primarily of cost of material, internal labor costs, third-party subcontractors, design services, engineering personnel and employee-related

expenses associated with permitting services, associated warranty costs, freight and delivery costs, depreciation, and amortization of

internally developed software.

Cost of revenues from these services is recognized when the Company transfers control of the product to

the customer, which is generally upon installation.

Operating Expenses

Sales Commissions

1 unchanged sentence

and incremental costs of obtaining customer contracts.

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

for the sale of solar energy systems.

These costs are paid to internal sales teams and third-party vendors who source

residential customer contracts for the sale of solar energy systems.

Sales and Marketing

5 unchanged sentences

General and administrative

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

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

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

1 unchanged sentence

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

We expect an increase in audit, tax, accounting,

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

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

Interest Expense

3 unchanged sentences

Other income (expense), net

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

warrant liabilities and forward purchase agreements.

consists of changes in the fair value of our convertible notes, the impact of debt extinguishment, troubled debt restructuring, changes

in the fair value of stock warrant liabilities and forward purchase agreements, and loss on the sale of an equity investment.

Income Tax Expense

42 unchanged sentences

Critical Accounting

Policies and Estimates

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

11 unchanged sentences

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

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

have the greatest impact on our consolidated financial statements.

Therefore, we consider these to be our critical accounting policies

and estimates.

believe that policies associated with our revenue recognition and business combination have the greatest impact on our consolidated financial

Therefore, we consider these to be our critical accounting policies and estimates.

Revenue Recognition

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

to be entitled to in exchange for those services.

Revenue – Solar

Energy System Installations

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

We identify two performance obligations, which include

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

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

We apply judgment

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

to perform our services.

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

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

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

We apply judgment in estimating

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

However, due to the long-term

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

Revenue – Software

Enhanced Services

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

services performed using internally developed and external software applications.

We contract with solar installers to generate proposals

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

Under each type of customer contract,

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

Contracts with customers

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

Product Warranties

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

the installation, including roof leaks caused by our performance.

For solar panel sales recognized prior to the Disposal Transaction,

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

We record a liability for estimated

future warranty claims based on historical trends and new installations.

To the extent that warranty claim behavior differs from historical

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

Inventory Excess

and Obsolescence

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

We record a reserve

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

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

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

impact on our inventory reserve balance.

Stock-Based Compensation

We recognize stock-based compensation expense over the requisite

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

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

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

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

Forfeitures are recognized as

For accounting purposes, prior to the Business Combination,

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

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

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

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

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

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

Following the Business Combination, the fair value of common stock

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

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

the Black-Scholes option pricing model.

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

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

of our common stock and expected dividend yield.

We determine these inputs as follows:

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

simplified method.

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

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

We have never paid dividends

and have no plans to pay dividends.

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

Treasury’s rates for the U.S.

Treasury zero-coupon

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

If any assumptions used in

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

to the awards granted previously.

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

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

As of December 31,

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

Revenue is recognized for

Residential Solar Installation and New Home Business when a customer obtains control of promised products and services and we have satisfied

our performance obligations which is the date by which substantially all of our design and installation is complete for a fully functioning

solar power system to interconnect to the local power grid.

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.

for these services as inputs to a combined output, resulting in a single service-based performance obligation.

The amount of revenue recognized

reflects the consideration which we expect to be entitled to receive in exchange for the products and services.

To achieve this core principle,

we apply the following five steps:

Identification of the contract(s)

with a customer;

Identification of the performance

obligations in the contracts(s);

Determination of the transaction

Allocation of the transaction

price to the performance obligations;

Recognition of the revenue

when, or as, we satisfy a performance obligation.

Residential Solar Installation Revenues

Our Residential Solar Installation

segment sells products through a network of installing and non-installing dealers and resellers, as well as our internal sales team.

contracts with customers include three primary contract types:

agreements – We contract directly with homeowners who purchase the solar energy system and related services from us.

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.

partner agreements – In our financing partner agreements, we contract directly with homeowners for the purchase of the solar energy

system and related services.

We refer the homeowner to a financing partner to finance the system, and the homeowner makes payments directly

to the financing partner.

We receive 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.

purchase agreements and lease agreements – We contract directly with a leasing partner to perform the solar energy system installation,

and the homeowner will finance the system through a power purchase agreement (or lease), which is signed with our leasing partner.

consider the leasing partner to be our customer, as we do not contract directly with the homeowner and the leasing partner takes ownership

of the system upon the completion of installation.

We receive consideration from the leasing 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.

New Home Business Revenues

Our New Homes Business sells

through a network of home builders as well as our internal sales team.

Our contracts with customers include two primary contract types:

Cash agreements – We contract directly

with homebuilders who purchase the solar energy system from us and are the customers in the transaction.

Our customers are invoiced upon

the completion of installation.

Lease agreements – Prior to the SunPower Corporation’s declaration of bankruptcy, certain homeowners had intended to lease a system from the SunPower Corporation, but were unable to consummate the transaction (as a result of SunPower’s declaration of bankruptcy).

The in-process system inventory (installed on recently constructed homes) was acquired by us in connection with the SunPower Acquisition.

We contracted directly with a leasing partner to facilitate the leasing of the system to the impacted homeowners.

We consider the leasing partner to be our customer.

Under the terms of our arrangement with the leasing partner, control is not transferred to the customer until the completed system is accepted by the customer.

We receive consideration from the leasing partner following the acceptance of the system.

Our performance obligation for both reportable segments is to design

and install a fully functioning solar energy system.

For all contract types (with the exception of New Homes Business Lease agreements),

we recognize revenue over time.

Our over-time revenue recognition begins when the solar power system is fully installed (as it is at this

point that control of the asset begins to be transferred to the customer and the customer retains the significant risks and rewards of

ownership of the solar power system).

We recognize revenue using the input method based on direct costs to install the system and defer

the costs of installation until such time that control of the asset transfers to the customer (installation).

For New Homes Business Lease

agreements, we consider the performance obligation to be satisfied at a point in time upon acceptance of the system by the customer.

is generally recognized at the transaction price contained within the agreement, net of costs of financing, or other consideration paid

to the customers that is not in exchange for a distinct good or service.

Our arrangements may contain clauses that can either increase

or decrease the transaction price.

Variable consideration is estimated at each measurement date at its most likely amount to the extent

that it is probably that a significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively

as such estimates change.

We record deferred revenue

for amounts invoiced that are received in advance of the provisioning of services.

In certain contracts with customers, we arrange for

a third-party financing partner to provide financing to the customer.

We collect upfront from the financing partner and the customer will

provide installment payments to the financing partner.

We record revenue in the amount received from the financing partner, net of any

financing fees charged to the homeowner, which we consider to be a customer incentive.

None of our contracts contain a significant financing

to obtain and fulfill contracts

Our costs to obtain and fulfill contracts, when recognized, associated with systems sales are expensed as sales commission and cost of

revenue, respectively.

In addition, incentives we provide to our customers, such as discounts and rebates, are recorded net to the revenue

we have recognized on the solar power system.

Accounting for

Business Combinations

record all acquired assets and liabilities, including goodwill, and other identifiable intangible assets at fair value.

The initial recording

of goodwill, other identifiable intangible assets, requires certain estimates and assumptions concerning the determination of the fair

values and useful lives.

The judgments made in the context of the purchase price allocation can materially affect our future results of

Accordingly, for significant acquisitions, we obtain assistance from third-party valuation specialists.

The valuations calculated

from estimates are based on information available at the acquisition date.

Goodwill is not amortized but is subject to annual tests for

impairment or more frequent tests if events or circumstances indicate it may be impaired.

Other intangible assets are amortized over their

estimated useful lives and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying

Recent Accounting

3 unchanged sentences

Results of Operations

Year ended December

31, 2023 compared to year ended December 31, 2022

Fiscal year ended

December 29, 2024 (“2024”) compared to year ended December 31, 2023 (“2023”)

this section, we discuss the results of our operations for fiscal 2024 compared to fiscal 2023.

We discuss our cashflows and current financial

condition under “Capital Resources and Liquidity.”

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

We have derived

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

This information should be

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

We discuss our cash flows and current

financial condition under “Liquidity and Capital Resources”.

following table sets forth our statements of operations data for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

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

This information

should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on

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

Within the tables

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

rounded numbers used for disclosure purposes.

Years Ended December 31,

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

from the rounded numbers used for disclosure purposes.

Fiscal Year Ended

(in thousands)

9 unchanged sentences

Interest income

Other expense, net (3)

Other income (expense), net (3)

Gain on troubled debt restructuring (4)

Loss from continuing operations before taxes

1 unchanged sentence

Net loss from continuing operations

(1) Includes stock-based compensation expense.

See table below.

(2) Includes interest expense to related parties of $7.6 million and $0.4

million during the fiscal years ended December 29, 2024, and December 31, 2023, respectively.

Other income (expense), net, in the fiscal

year ended December 29, 2024, includes the following related party transactions;

(i) $0.7 million of expense in connection with the conversion

of SAFE Agreements into shares of common stock and the change in the fair value of SAFE Agreements, (ii) $3.0 million of expense in connection

with the loss on issuance of a derivative liability and $0.3 million of income due to the change in the value of derivative liabilities,

and (iii) $0.1 million of income in connection with the change in the fair value of forward purchase agreements.

Other income (expense), net in the fiscal year

ended December 31, 2023, includes the following related party transaction;

$0.7 million of expense for bonus shares issued in connection

with the Mergers;

$0.4 million of forward purchase agreements entered into and $9.1 million of change in the fair value of the forward

purchase agreements;

and $30.7 million of expense for shares issued in connection with the forward purchase agreements

Gain includes $12.5 million with a related party in the fiscal year

ended December 29, 2024.

Percentage change not meaningful.

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

Years Ended December 31,

Includes stock-based

compensation expense as follows (in thousands):

Fiscal Year Ended

Cost of revenues

2 unchanged sentences

Total stock-based compensation expense

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

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

We disaggregate our revenues

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

Years Ended December 31,

Solar energy system installations

Software enhanced services

based on the following operating segments (in thousands):

Fiscal Year Ended

Residential Solar Installation

New Homes Business

Total revenue

Revenues from solar energy

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

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

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

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

Revenues from software enhanced

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

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

Total revenues increased by

$21.1 million or 24%, during 2024 compared to 2023.

This increase includes $84.6 million in revenue generated from the SunPower acquisition,

partially offset by a decrease in legacy solar energy system installation of $61.0 million or 70% when compared to the previous year.

The decrease in Residential Solar Installation during 2024 is primarily a result of decreased demand for solar energy systems due to the

net energy metering program (“NEM 3.0”) that went live in California in April 2023, an overall softening in the industry due

to reduced economic outlook in key markets, and rising interest rates.

The decrease in software enhanced

services during 2024 was the result of a shift in focus towards solar energy installations.

Cost of Revenues

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

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

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

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

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

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

The decrease in gross margin is primarily attributed to the increasing

cost of revenues as described above.

Fiscal Year Ended

Residential Solar Installations

New Homes Business

Total cost of revenues

Total gross margin

costs of revenues decreased by $0.5 million, during 2024 compared to 2023.

This decrease includes $49.0 million in cost of revenue generated

from the SunPower acquisition partially offset by a $49.5 million or 1% decrease in costs attributable to decrease in legacy solar energy

systems revenues

Gross margin increased from

20% for the fiscal year ended December 31, 2023 to 36% for the fiscal year ended December 29, 2024.

The increase in gross margin is primarily

attributed to the SunPower acquisition.

New Homes Business has a higher gross margin because the systems are integrated into new builds

whereas solar system installations require retrofitting that may require additional labor and costly renovations for optimal roof orientation

and proper installation.

Sales Commissions

Sales commissions for the

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

The increase in sales commissions

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

Fiscal Year Ended

Residential Solar Installations

New Homes Business

Sales Commission

The decrease in Residential

Solar Installations commissions during 2024 compared to 2023 is attributed to a decrease in sales in solar system installation revenue

and overall decrease in customer acquisition costs.

Sales and Marketing

Sales and marketing expense

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

The increase is

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

Fiscal Year Ended

Residential Solar Installations

New Homes Business

Sales & Marketing

Residential Solar Installation

expense decreased in 2024 compared to 2023 due to the decrease in revenues and a reduction in incentives and rebates for the solar energy

system installations.

General and Administrative

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

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

The increase was primarily attributed to increases

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

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

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

Fiscal Year Ended

Residential Solar Installations

New Homes Business

Sales & Marketing

The increase in general and administrative costs during 2024 compared

to 2023 was primarily attributed to transformation costs as it relates to the SunPower acquisition.

Increases in contractors, professional

services such as legal, accounting and other outside services costs of $14.0 million related to the acquisition, payroll of $10.4 million,

bad debt expense of $10.0 million, and overall one-time costs of $13.3 million of integrating the companies include consultants to identify

areas of automation and operational synergies, software implementation, and data migration.

Interest Expense

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

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

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

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

Other Expense, Net

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

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

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

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

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

These expenses

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

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

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

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

expense for the fiscal year ended December 29, 2024 increased $2.2 million or 16%, compared to the fiscal year ended December 31,

The increase was primarily attributed to debt restructuring that was completed during the third quarter of fiscal 2024.

Other Income (Expense), Net

Other income (expense), net was $7.9 million for the fiscal year ended

December 29, 2024.

The expenses consisted primarily of and increased due to $34.0 million gain on remeasurement of derivative liability,

and $6.5 million due to the change in fair value of warrant liability, warrants, forward purchase agreement liabilities and SAFE Agreement.

The increase is offset by $24.7 million loss on issuance of a derivative liability, $1.3 million change in the fair value of FACT public,

private placement and working capital warrants, $1.3 million loss on conversion of SAFE agreements to common stock with a related party

and $3.8 million in other financing costs.

income (expense), net was $29.9 million for the fiscal year ended December 31, 2023.

The expenses consisted primarily of $35.4 million

in other expense related to the issuance of common stock in connection with the FPAs, the loss on extinguishment of debt in CS Solis of

$10.3 million, the loss on sale of Maxeon equity securities of $4.2 million, $3.9 million in other expense associated with the change

in fair value of FPAs, $2.4 million for the issuance of bonus shares in connection with the Mergers, $3.0 million relating to expenses

relating to disposed operations and other expenses of $0.4 million.

These expenses were offset by $29.3 million related to the change

in fair value of our warrant liabilities.

Net Loss from Continuing Operations

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

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

a result of the factors discussed above, our net loss from continuing operations for the fiscal year ended December 29, 2024, was $54.4

million a decrease of $41.8 million, as compared to a net loss from continuing operations of $96.2 million for the fiscal year ended December

Liquidity and Capital Resources

Since our inception, we have

incurred losses and negative cash flows from operations.

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

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

as of December 31, 2023.

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

expenditures.

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

We have financed

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

equivalents are on deposit with major financial institutions.

Our cash position raises substantial doubt regarding our ability to continue

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

We will receive the proceeds

from any cash exercise of any Warrants.

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

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

the exercise of the Warrants will decrease.

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

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

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

If there is not a then-effective registration

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

under the Securities Act.

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

our liquidity.

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

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

December 31, 2023.

We believe the likelihood that warrant holders

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

common stock.

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

Since inception, we have incurred losses and negative cash flows from

We incurred net losses of $56.5 million and $269.6 million, during the fiscal years ended December 29, 2024, and December

31, 2023, respectively, and had an accumulated deficit of $411.4 million and current debt of $1.5 million as of December 29, 2024.

had cash and cash equivalents of $13.4 million as of December 29, 2024, which were held for working capital expenditures.

We believe our

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

We have financed our operations primarily

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

Our cash equivalents are on

deposit with major financial institutions.

Our cash position raises substantial doubt regarding our ability to continue as a going concern

for 12 months following the issuance of the consolidated financial statements.

We will receive the proceeds from any cash exercise of any warrants.

The aggregate amount of proceeds could be up to $257.3 million if all the warrants are exercised for cash.

However, to the extent the

warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the warrants will decrease.

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

and the Mergers Warrants may only be exercised for cash provided there is then an effective registration statement registering the shares

of common stock issuable upon the exercise of such warrants.

If there is not a then-effective registration statement, then such warrants

may be exercised on a “cashless basis,” pursuant to an available exemption from registration under the Securities Act.

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

As of April 28,

2025, the price of our common stock was $2.05 per share.

The weighted average exercise price of the warrants was $8.12 as of December

We believe the likelihood that warrant holders will exercise their warrants, and therefore the amount of cash proceeds that

we would receive, is dependent upon the market price of our common stock.

If the market price for our common stock remains less than the

exercise price, we believe warrant holders will be unlikely to exercise.

In which case we will not receive any proceeds from the cash

exercise of the warrants.

Debt Financings

2018 Bridge Notes

In December 2018, Solaria

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

exchange for cash.

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

of the 2018 Notes at maturity.

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

of the assets of Complete Solaria.

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

In connection

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

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

As part of the Business Combination

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

In December 2022, we entered

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

In connection with the amendment,

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

the principal and accrued interest at the time of repayment.

The Company concluded that

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

in a concession to the Company.

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

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

The incremental repayment premium

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

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

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

Interest expense recognized for the years ended December 31, 2023

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

The terms of the 2018 Notes are currently being renegotiated.

Revolver Loan

In October 2020, Solaria entered

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

The Loan Agreement

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

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

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

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

The Revolving Loan has a term

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

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

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

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

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

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

Secured Credit Facility

In December 2022, we entered

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

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

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

The purchase orders are backed by relevant customer sales orders which

serve as collateral.

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

not exceed $20.0 million.

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

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

We may prepay any borrowed amount without premium or penalty.

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

We are in the process of amending the

secured credit facility agreement to extend its maturity date.

At December 31, 2023, the

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

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

Debt in CS Solis

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

The investment was made pursuant to a subscription

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

The Class B Membership

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

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

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

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

part of the closing of the Mergers.

The modification did not change the interest rate.

The modification accelerates the redemption date

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

As of December 31,

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

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

consolidated balance sheets.

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

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

than $0.7 million and $1.2 million, respectively.

In July 2024 we issued $46.0

million of 12% senior unsecured convertible notes.

Of this issuance, $28.0 million was for cash and $18.0 million was in an exchange of

existing debt on our consolidated balance sheet.

Also during 2024, we issued $79.8 million of 7% senior unsecured convertible notes for

12% Unsecured Convertible Senior Notes

In July 2024, we issued $46.0

million of senior unsecured convertible notes (“July 2024 Notes”) to various lenders.

Including in connection with the exchange

agreement transactions summarized below.

Of the July 2024 Notes, $18.0 million were issued in exchange for the cancellation of indebtedness

as discussed below, which amount included $10.0 million issued to a strategic investor identified by us as a related party.

The July 2024

Notes also included $18.0 million issued to a related party affiliated with the Company’s CEO, Rodgers Massey Revocable Living Trust.

The July 2024 Notes bear interest at 12% per annum and mature on July 1, 2029.

The interest rate increases by 3% in the event of default.

The July 2024 Notes are convertible into shares of our common stock at the option of the holder at a conversion rate and initially equal

to 595.2381 shares of common stock per $1,000 principal amount of the July notes.

The July 2024 Notes may be declared due and payable

at the option of the holder upon event of default and upon a qualifying change of control event.

7% Unsecured Convertible Senior Notes

In September 2024, we

issued $66.8 million of senior unsecured convertible notes to various lenders (the “September 2024 Notes”), $8.0 million of

which were issued to a related party.

In December 2024, we issued additional September 2024 Notes for cash proceeds of $13.0 million.

The September 2024 Notes bear interest at 7% per annum and mature on July 1, 2029.

The September 2024 Notes are initially convertible

into 467.8363 shares of common stock per $1,000 principal amount of September 2024 Notes.

The September 2024 Notes may be declared due

and payable at the option of the holder upon an event of default and upon a qualifying change of control event.

Exchange Agreement

On July 1, 2024, we entered into an Exchange Agreement

(the “Exchange Agreement”) with CSEF Holdings, LLC and its affiliates (“Carlyle”) and Kline Hill (as defined below)

providing for:

the cancellation of all indebtedness, inclusive of the CS Solis Debt, owed to Carlyle by the Company, termination of all debt instruments by and between the Company and Carlyle (through the transfer of Carlyle’s interest in CS Solis, LLC, to the Company), and the satisfaction of all obligations owed to Carlyle by the Company under the terminated debt instruments;

the issuance of a note for the principal amount of $10.0 million to Carlyle as part of the July 2024 Notes;

the cancellation of all indebtedness owed to Kline Hill Partners Fund LP, Kline Hill Partners IV SPV LLC, and Kline Hill Partners Opportunity IV SPV, LLC (collectively “Kline Hill”).

by the Company, termination of all debt instruments by and between the Company and Kline Hill, including the 2018 Bridge Notes, the revolving loan and the secured credit facility, and the satisfaction of all obligations owed to Kline Hill by the Company under the terminated debt instruments;

the issuance of a note for the principal amount of $8.0 million to Kline Hill as part of the July 2024 Notes;

the issuance of 1,500,000 shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) to Kline Hill (the “Shares”)

As a result of the Exchange Agreement, we settled

our obligations relating to (i) 2018 Bridge Notes issued in 2018 which bore interest at 8% per annum, (ii) $3.7 million of the Revolving

Loan entered into in 2020 which bore interest at the greater of 7.75% or Prime plus 4.5%;

(iii) a Secured Credit Facility entered into

in December 2022 which required the Company to repay amounts borrowed based upon a multiplier of 1.15 if repaid within 75 days and 1.175

if repaid after 75 days;

and (iv) debt with CS Solis, an investment by Carlyle.

The cancellation of existing indebtedness of these obligations

in the Exchange Agreement aggregated to $65.9 million.

The Revolving Loan has a remaining outstanding

balance of $1.5 million as of December 29, 2024 due to the Rodgers Massey Revocable Living Trust, a related party.

Polar Settlement Agreement

In September 2023, in connection with the Mergers,

we 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 required

us to pay Polar $0.5 million in ten equal monthly installments and did not accrue interest.

The balance outstanding was $0.3 million as

of December 31, 2023.

The remaining balance owed to Polar was paid in full in 2024.

Forward Purchase Agreements

2 unchanged sentences

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

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

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

While the FPA

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

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

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

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

to the terms of the FPAs, the FPA Sellers may 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

8 unchanged sentences

subject to a $5.00 floor.

FPA contains multiple settlement outcomes.

FPAs contains multiple settlement outcomes.

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

15 unchanged sentences

than the then applicable Reset Price.

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

to the closing of the Mergers.

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

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

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

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

The liability

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

Additionally,

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

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

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

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

value recognized in earnings.

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

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

of Complete Solaria Common Stock.

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

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

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

Subsequently, the change of fair value of the forward

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

As of December 31, 2023, the

forward purchase liabilities amounted to $3.8 million.

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

The Amendments

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

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

provided, the insiders pay a price per share for

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

provided, further, that

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Second SAFE is

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

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

If we consummate

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

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

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

The Second SAFE is convertible into a maximum of

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

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

Cash Flows for the Years Ended December 31,

2023 and 2022

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, we 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.

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

The Amendments lowered

the reset floor price of each FPA from $5.00 to $3.00 and allow us 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.

May 7 and 8, 2024, respectively, we entered into and executed separate amendments to the FPAs (collectively the “Second Amendments”)

with Sandia (the “Sandia Second Amendment”) and Polar (the “Polar Second Amendment”).

The Second Amendments lowered

the reset price of each FPA from $3.00 to $1.00 per share and amended the VWAP Trigger Event provision to read as “ After

December 31, 2024, an event that occurs if the VWAP Price, for any 20 trading days during a 30 consecutive trading day-period, is below

$1.00 per Share”.

The Sandia Second Amendment is not effective until we execute similar amendments with both Polar and Meteora .

June 14, 2024, we entered into and executed an amendment to the FPA with Sandia (the “Sandia Third Amendment”).

Third Amendment set the reset price of each FPA to $1.00 per share and amended the VWAP Trigger Event provision to read as “After

December 31, 2024, an event that occurs if the VWAP Price, for any 20 trading days during a 30 consecutive trading day-period, is below

$1.00 per Share.”

July 17, 2024, we entered into an amendment to the FPA with Polar pursuant to which we and Polar agreed that Section 2 (Most Favored Nation)

of the FPA is applicable to all 2,450,000 shares subject to the FPA.

Simple Agreement for Future Equity (“SAFE”)

January 31, 2024, we entered into a SAFE (“First SAFE”) with the Rodgers Massey Freedom and Free Markets Charitable

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

The First SAFE is

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

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

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

divided by (b) our capitalization immediately prior to such Equity Financing (such conversion price, the “SAFE Price”),

and (ii) 80% of the price per share of our common stock sold in the Equity Financing.

If we consummate 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 our common stock

equal to (a) $1.5 million divided by (b)(1) $53.54 million divided by (2) our capitalization immediately prior to such liquidity

event (the “Liquidity Price”), subject to certain adjustments as set forth in the First SAFE.

The First SAFE was

convertible into a maximum of 1,431,297 shares of our common stock, assuming a per share conversion price of $1.05, which is the

product of (i) $1.31, the closing price of our common stock on January 31, 2024, multiplied by (ii) 80%.

On April 21, 2024, we entered into an amendment (“First SAFE

Amendment”) that converted the First SAFE investment of $1.5 million into 4,166,667 shares of our common stock based on a conversion

price of $0.36 per share, defined in the First SAFE Amendment as the product of (i) $0.45, the closing price of our common stock

on April 19, 2024, multiplied by (ii) 80%.

Upon conversion, we recorded a debit to SAFE Agreement of $1.5 million, a credit to Additional

paid-in-capital of $1.9 million and recognized expense of $0.4 million within Other income (expense), net in our consolidated statement

of operations for the fiscal year ended December 29, 2024.

February 15, 2024, we entered into a second SAFE (the “Second SAFE”) with the Purchaser, in connection with the Purchaser

investing $3.5 million in the Company.

The Second SAFE did not accrue interest.

The Second SAFE was initially convertible into shares

of our common stock upon the initial closing of an Equity Financing at a per share conversion price which was equal to the lower of (i)

the Second SAFE Price, and (ii) 80% of the price per share of our common stock sold in the Equity Financing.

If we consummated a change

of control prior to the termination of the Second SAFE, the Purchaser would have been 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 our 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 was convertible into a maximum

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

per share price of our common stock on February 15, 2024, (ii) 80%.

On April 21, 2024, we entered into an amendment (“Second SAFE

Amendment”) that converted the Second SAFE investment of $3.5 million into 9,722,222 shares of our common stock based on a conversion

price of $0.36 per share, defined in the Second SAFE Amendment as the product of (i) $0.45, the closing price of our common stock

on April 19, 2024, multiplied by (ii) 80%.

Upon conversion, we recorded a debit to SAFE Agreement of $3.5 million, a credit to Additional

paid-in-capital of $4.4 million and recognized expense of $0.9 million within Other income (expense), net in our consolidated statement

of operations for the fiscal year ended December 29, 2024.

May 13, 2024, we entered into a third SAFE (the “Third SAFE”) with the Purchaser, in connection with the Purchaser investing

$1.0 million in the Company.

The Third SAFE is convertible into shares of our common stock 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 shares of its

common stock in an Equity Financing, at a per share conversion price which is equal to 50% of the price per share of our common stock

sold in the Equity Financing.

If we consummate a change of control prior to the termination of the Third SAFE, the Purchaser will be automatically

entitled to receive a portion of the proceeds of such liquidity event equal to $1.0 million, subject to certain adjustments as set forth

in the Third SAFE.

The Third SAFE is convertible into a maximum of 2,750,000 shares of our common stock, assuming a per share conversion

price of $0.275, which is the product of (i) $0.55, the closing price of our common stock on May 13, 2024, multiplied by (ii) 50%.

that the SAFE could be settled in cash or a variable number of shares, we have accounted for the instrument as a liability at its fair

of December 29, 2024, we estimated the fair value of the Third SAFE at $0.4 million based upon the assumptions disclosed in Note

5 – Fair Value Measurements to our consolidated financial statements.

Cash Flows for the Fiscal Years Ended December

29, 2024 and December 31, 2023

The following table summarizes

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

(in thousands):

Years Ended December 31,

Complete Solaria’s cash flows from operating, investing, and financing activities for the fiscal years ended (in thousands):

Fiscal Year Ended

Net cash used in operating activities from continuing operations

2 unchanged sentences

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

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash Flows from Operating Activities

Net cash used in operating activities from continuing operations of

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

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

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

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

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

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

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

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

The main drivers of net cash outflows

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

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

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

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

$1.1 million.

$54.6 million for the fiscal year ended December 29, 2024 was primarily due to the net loss from continuing operations, net of tax of

$54.4 million and net cash outflows of $6.6 million from changes in our operating assets and liabilities which was partially offset by

non-cash adjustments of $6.4 million.

Non-cash charges primarily consisted of $24.7 million for loss on issuance of derivative liability,

$9.1 million provision for credit losses, $5.8 million of amortization of debt issuance costs, $9.2 million of non-cash expense in connection

with warrants issued for vendor services, $3.1 million of stock-based compensation expense, $3.9 million accretion of debt in CS Solis,

$3.8 million for asset impairment and disposals, $2.7 million for depreciation and amortization, $1.8 million for non-cash interest expense,

$0.8 million for lease expense, and $1.3 million for loss on conversion of SAFE Agreements to shares of common stock, and $0.4 million

of other financing costs, partially offset by a decrease of $34.0 million for the change in fair value of derivative liabilities, $22.3

gain on troubled debt restructuring, $2.9 million change in fair value of warrant liabilities, and $1.0 million change due to fair value

The main drivers of net cash outflows derived from the changes in operating assets and liabilities were related to an increase

in contract assets of $21.5 million, a $10.4 million decrease in accounts payable, a $0.8 million decrease in operating lease liabilities,

and a $0.2 million increase in prepaid expenses and other current assets, partially offset by an $8.7 million decrease in inventories,

a $3.3 million decrease in accounts receivable, a $14.1 million increase in accrued expenses and $0.2 million of other.

Net cash used in operating

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

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

non-cash charges of $13.8 million.

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

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

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

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

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

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

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

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

The net increase in cash,

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

to net cash provided by operating activities from discontinued operations.

This increase was primarily due to the net loss from discontinued

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

in our operating assets and liabilities.

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

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

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

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

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

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

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

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

continuing operations, net of tax of $96.2 million and net cash outflows of $17.4 million from changes in our operating assets and liabilities,

adjusted for non-cash charges of $54.1 million.

Non-cash charges primarily consisted of $35.5 million for the issuance of common stock

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

change in fair value of FPAs, $4.3 million change in allowance for credit losses, $4.9 million of interest expense, $6.6 million accretion

of long-term debt in CS Solis, $2.4 million related to the issuance of bonus common stock shares in connection with the Mergers, $3.4

million of stock-based compensation expense, and $6.1 million change in reserve for excess and obsolete inventory, $0.9 million in lease

expense and $0.9 million in depreciation and amortization, partially offset by a decrease in the fair value of warrant liabilities of

$29.3 million.

The main drivers of net cash outflows derived from the changes in operating assets and liabilities were related to an increase

in accounts receivable, net of $12.1 million, an increase in prepaid expenses and other current assets of $4.2 million, a decrease in

deferred revenue of $1.7 million, a decrease in accrued expenses and other liabilities of $3.3 million and a decrease in operating lease

liabilities of $0.6 million, partially offset a decrease in inventory of $1.5 million, an increase in accounts payable of $2.3 million,

and a decrease in other noncurrent assets of $1.1 million.

Cash Flows from Investing Activities

Net cash used by investing activities of $54.7 million for the fiscal

year ended December 29, 2024 was primarily due to the acquisition of SunPower of $53.5 million and $1.2 million in capital expenditures.

Net cash provided by investing

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

Net cash used in investing

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

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

Cash Flows from Financing Activities

Net cash provided by financing

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

activities of $120.1 million for the fiscal year ended December 29, 2024 was primarily due to proceeds from the issuance of convertible

notes, net of $107.7 million, proceeds from SAFE agreements of $6.0 million, proceeds from the issuance of common stock of $6.7 million

and proceeds from the exercise of common stock options of $0.5 million.

The proceeds were partially offset by finance lease payments and

the payment of a note aggregating $0.8 million.

Net cash provided by financing

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

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

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

Net cash provided by financing

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

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

notes payable of $5.5 million.

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

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

$0.5 million.

Off Balance Sheet

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

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

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

The term “off-balance sheet arrangement”

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

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

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

for such assets.

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

Emerging Growth Company

9 unchanged sentences

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

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

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

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

1 unchanged sentence

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

December 31, 2025.

the last day of the fiscal year ending after the fifth anniversary of our IPO.

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

5 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis