What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-04-30 compared with 2024-04-01 · 2170 added, 2009 removed, 470 unchanged (90% of the section changed)

2 unchanged sentences

COMPLETE SOLARIA, INC.

Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 52

Consolidated Balance Sheets as of December 31, 2023 and 2022 53

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022 54

Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2023 and 2022 55

Consolidated Statements of Cash Flows for the for the Years Ended December 31, 2023 and 2022 56

Notes to Consolidated Financial Statements 57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Complete Solaria,

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 243 ) F-2

Report of Independent Registered Public Accounting Firm (PCAOB ID 34) F-3

Consolidated Balance Sheets as of December 29, 2024 and December 31, 2023 F-4

Consolidated Statements of Operations and Comprehensive Loss for the Fiscal Years Ended December 29, 2024 and December 31, 2023 F-5

Consolidated Statements of Stockholders’ Deficit for the Fiscal Years Ended December 29, 2024 and December 31, 2023 F-6

Consolidated Statements of Cash Flows for the for the Fiscal Years Ended December 29, 2024 and December 31, 2023 F-7

Notes to Consolidated Financial Statements F-8

Report of Independent Registered Public Accounting

Shareholders and Board of Directors

Complete Solaria, Inc.

Fremont, California

Opinion on the Consolidated

Financial Statements

We have audited the accompanying

consolidated balance sheet of Complete Solaria, Inc.

(the “Company”) as of December 29, 2024, the related consolidated statements

of operations and comprehensive loss, stockholders’ deficit, and cash flows for the fiscal year then ended, and the related notes

collectively referred to as the “consolidated financial statements.” In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company at December 29, 2024, and the results of its operations

and its cash flows for the fiscal year then ended , in conformity with accounting principles generally accepted in the United States

Going Concern Uncertainty

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated

financial statements, the Company has suffered recurring losses, and has negative cash flows that raise substantial doubt about its ability

to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial

statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since

Atlanta, Georgia

April 30, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the shareholders and the Board of Directors

of Complete Solaria, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Complete

Solaria, Inc.

and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements

of operations and comprehensive loss, stockholders’ deficit, and cash flows, for each of the two years in the period ended December

We have audited the accompanying consolidated

balance sheet of Complete Solaria, Inc.

and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated

statements of operations and comprehensive loss, stockholders’ deficit, and cash flows, for the period ended December 31, 2023,

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its

operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles

generally accepted in the United States of America.

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and

its cash flows for the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States

Change in Accounting Principle

As discussed in Notes 2 and 22 to the financial

statements, the accompanying 2023 financial statements have been retrospectively adjusted for the adoption of Accounting Standards Update

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

Going Concern

The accompanying consolidated financial statements have been prepared

assuming that the Company will continue as a going concern.

As discussed in Note 1(c) to the consolidated financial statements, the Company

has recurring net losses, accumulated deficit, negative cash outflows from operations and current debt outstanding that raise substantial

doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1(c) to the consolidated financial

statements, the Company has recurring net losses, accumulated deficit, negative cash outflows from operations and current debt outstanding

that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also

described in Note 1(c).

The consolidated financial statements do not include any adjustments that might result from the outcome of this

Basis for Opinion

These financial statements are the responsibility of the Company’s

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB

and in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due

to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for

the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to

be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,

whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

1 unchanged sentence

San Francisco, California

April 1, 2024

We have served as the Company’s auditor since 2022.

April 1, 2024 (April 30, 2025, as to the effects

of the Company’s adoption of ASU 2023-07, Segment Reporting , as described in Notes 2 and 22).

We began serving as the Company’s auditor in 2022.

In 2024 we became the predecessor auditor.

COMPLETE SOLARIA, INC.

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Prepaid expenses and other current assets

Contract assets, current portion

Total current assets

3 unchanged sentences

Other noncurrent assets

Long-term assets held for sale - discontinued operations

Intangible assets, net

LIABILITIES AND STOCKHOLDERS’ DEFICIT

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Accrued expenses and other current liabilities

Notes payable to related parties

Notes payable, net

Deferred revenue, current

Short-term debt with CS Solis

Contract liabilities

SAFE Agreement with related party

Debt with CS Solis

Forward purchase agreement liabilities with related parties

Forward purchase agreement liabilities

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Warrant liability

Deferred revenue, noncurrent

Long-term debt with CS Solis

Convertible notes, net, noncurrent

Convertible notes, net due to related parties, noncurrent

Contract liabilities, noncurrent

Notes payable and derivative liabilities, net of current portion

Notes payable and derivative liabilities with related parties

Other long-term liabilities

Operating lease liabilities, net of current portion

1 unchanged sentence

Commitments and contingencies (Note 19)

Stockholders’ (deficit) equity:

Stockholders’ (deficit):

Common stock, $ 0.0001 par value;

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Accumulated deficit

Total stockholders’ (deficit) equity

Total stockholders’ (deficit)

Total liabilities and stockholders’ equity

(1) Includes $0.4 million and zero due to related parties as

of December 31, 2023 and 2022, respectively.

(2) Includes $3.2 million and zero of liabilities due to related

parties as of December 31, 2023 and 2022, respectively.

The accompanying notes are an integral part of these consolidated financial

The accompanying notes are an integral part of

these consolidated financial statements.

COMPLETE SOLARIA, INC.

1 unchanged sentence

( in thousands, except share and per share

Fiscal Years Ended

Fiscal Year Ended

Cost of revenues

7 unchanged sentences

Interest income

Other expense, net (2)

Other income (expense), net (2)

Gain on troubled debt restructuring (3)

Total Other expense

2 unchanged sentences

Net loss from continuing operations

Loss from discontinued operations, net of tax

Loss from discontinued operations, net of taxes

Impairment loss from discontinued operations

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$ ( 269,439 )

Net loss from continuing operations per share attributable to common stockholders, basic and diluted

Net loss from discontinued operations per share attributable to common stockholders, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

Net loss from continuing operations per share attributable to common stockholders, basic

Net loss from discontinued operations per share attributable to common stockholders, basic

Net loss per share attributable to common stockholders, basic

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic

Net loss from continuing operations per share attributable to common stockholders, diluted

Net loss from discontinued operations per share attributable to common stockholders, diluted

Net loss per share attributable to common stockholders, diluted

Weighted-average shares used to compute net loss per share attributable to common stockholders’, basic and diluted

(1) Includes interest expense to related parties of $0.4 million

and $0.3 million during the fiscal years ended December 31, 2023 and 2022, respectively.

(2) Other expense, net includes other expense, net to related

parties of $0.7 million and $1.4 million during the fiscal years ended December 31, 2023 and 2022, respectively.

(1) 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.

Refer to Note 15 – Borrowings and Derivative

Liabilities for details.

(2) 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 (defined in the notes to the consolidated financial statements),

(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) income of $0.1 million of expense 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.

(3) Gain includes $12.5 million with a related party in the fiscal year ended December 29, 2024.

Refer to Note 15 – Borrowings and Derivative Liabilities for details.

The accompanying notes are an integral part of

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thousands, except number of shares )

Redeemable Convertible

Preferred Stock

Comprehensive

Stockholders’

Comprehensive

Balance as of January 1, 2023

Issuance of Series D-1, D-2, and D-3

redeemable convertible preferred stock upon conversion of convertible notes and SAFEs 1

Issuance of Series D-4, D-5, D-6 and D-7

redeemable convertible preferred stock upon acquisition 2

Issuance of Series D-8 redeemable convertible preferred stock upon conversion of SAFE 3

Issuance of common stock in connection with business combination

Issuance of common stock warrants

Exercise of common stock options

Stock-based compensation

Foreign currency translation adjustment

Balance as of December 31, 2022, as previously reported

Retroactive application of recapitalization (Note 3)

( 17,746,763 )

Balance as of December 31, 2022

Conversion of 2022 Convertible Notes into common stock

16 unchanged sentences

$ ( 354,928 )

accompanying notes are an integral part of these consolidated financial statements.

SOLARIA, INC.

Statements of Cash Flows

thousands, except number of shares )

Fiscal Years Ended

Cash flows from operating activities from continuing operations

Exercise of common stock options

Vesting of restricted stock units

Stock-based compensation

Issuance of common stock warrants

Issuance of common stock warrants for services

Issuance of common stock upon conversion of SAFEs

Exercise of common stock warrants

Issuance of common stock for exchange of debt

Issuance of common stock

Modification of Warrant Agreement

Offering costs of reverse recapitalization

Foreign currency translation adjustment

Balance as of December 29, 2024

$ ( 411,379 )

Net loss from discontinued operations, net of income taxes

The accompanying notes are an integral part of

these consolidated financial statements.

COMPLETE SOLARIA, INC.

Consolidated Statements of Cash Flows

( in thousands, except number of shares )

Fiscal Year Ended

Cash flows from operating activities from continuing operations

Loss from discontinued operations, net of income taxes

Net loss from continuing operations, net of tax

2 unchanged sentences

Non-cash interest expense (1)

Accretion of debt in CS Solis (2)

Non-cash lease expense

Gain on extinguishment of convertible notes and SAFEs (2)

Gain on troubled debt restructuring (8)

Loss on CS Solis debt extinguishment

Depreciation and amortization

Amortization of debt issuance costs (11)

Other financing costs

Provision for credit losses

Change in reserve for excess and obsolete inventory

Change in fair value of SAFE Agreements with related party

Loss on conversion of SAFE Agreements to shares of common stock with related party

Loss on sale of equity securities

Loss on issuance of derivative liability (3)

Change in fair value of derivative liabilities (12)

Change in fair value of warrant liabilities

Issuance of forward purchase agreements (4)

Change in fair value of forward purchase agreement liabilities (5)

Loss on CS Solis debt extinguishment

Change in fair value of warrant liabilities

Loss on sale of equity securities

Accretion of debt in CS Solis

Loss on issuance of common stock in connection with forward purchase agreements (6)

Non-cash expense in connection with warrants issued for vendor services

Loss on asset impairments and disposals

Loss on issuance of common stock bonus shares in connection with the Mergers (7)

1 unchanged sentence

Changes in operating assets and liabilities:

Accounts receivable, net

Accounts receivable

Contract assets, current portion

Prepaid expenses and other current assets

Long-term deposits

Other noncurrent assets

1 unchanged sentence

Accrued expenses and other current liabilities

Operating lease right-of-use assets and lease liabilities

Operating lease liabilities

Warranty provision, noncurrent

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Cash flows from investing activities from continuing operations

Purchase of property and equipment

Purchases of property and equipment

Capitalization of internal-use-software costs

Payments for acquisition of business, net of cash acquired

Cash paid for acquisitions;

net of cash acquired

Proceeds from the sale of equity securities

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities from continuing operations

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Proceeds from issuance of convertible notes, net of issuance cost

Proceeds from issuance of convertible notes, net of issuance cost, due to related parties

Repayment of convertible notes to related parties

Proceeds from issuance of long-term debt with CS Solis, net of issuance cost

Proceeds from issuance of convertible notes to related parties

Proceeds from issuance of SAFE agreements

Proceeds from issuance of common stock

Proceeds from exercise of common stock options

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Proceeds from common stock

Payments for issuance costs of Series D-1, D-2 and D-3 redeemable convertible preferred stock

Financing lease payments

Net cash provided by financing activities from continuing operations

Effect of exchange rate changes

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

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

Cash, cash equivalents, and restricted cash at beginning of period

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Supplemental schedule of noncash investing and financing activities:

Cancellation of existing indebtedness in Exchange Agreement (9)

Issuance of convertible notes in Exchange Agreement (10)

Issuance of common stock in Exchange Agreement

Conversion of SAFE Agreements to shares of common stock – related party

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities

Carlyle warrant modification

Offering costs

Warrants issued in debt issuance

Carlyle Warrant modification – related party

Conversion of 2022 Convertible notes into common stock

Issuance of common stock warrants

Issuance of Series D redeemable convertible preferred stock upon conversion of SAFE

Issuance of Series D redeemable convertible preferred stock upon conversion of convertible debt

Conversion of 2022 Convertible Notes into common stock

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Reclassification of warrants between liabilities and equity

Issuance of Series D-1, D-2 and D-3 redeemable convertible preferred stock upon conversion of convertible debt, net of issuance costs of $1,431

Acquisition of business through issuance of common stock options

Acquisition of business through issuance of Series D redeemable convertible preferred stock

Acquisition of business through issuance of Series D redeemable convertible preferred stock warrants

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

on extinguishment of convertible notes and SAFEs includes other income from related parties of zero and $1.4 million during the fiscal

years ended December 31, 2023 and 2022, respectively.

of forward purchase agreements includes other income from related parties of $0.4 million and zero during the fiscal years ended December

31, 2023 and 2022, respectively.

in fair value of forward purchase agreement liabilities includes other expense from related parties of ($9.1) million and zero during

the fiscal years ended December 31, 2023 and 2022, respectively.

of common stock in connection with forward purchase agreements includes other expense from related parties of ($30.7) million and zero

during the fiscal years ended December 31, 2023 and 2022, respectively.

(6) Issuance of common stock bonus shares to related parties in connection

with the Mergers includes other expense of $0.7 million and zero during the fiscal years ended December 31, 2023 and 2022, respectively.

accompanying notes are an integral part of these consolidated financial statements.

to Consolidated Financial Statements

(1) Non-cash interest expense to related parties of zero and $0.4 million

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

(2) Identified as a related party transaction in the fiscal year ended December 29, 2024.

(3) Includes $3.0 million loss on a derivative liability issued to the Massey Trust

(as later defined in Note 15 – Borrowings and Derivative Liabilities) a related party.

(4) Issuance of forward purchase agreements includes other income from related parties of zero and $0.4 million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

(5) Change in fair value of forward purchase agreement liabilities from related parties was income of $0.1 million and ($9.1) million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

(6) Issuance of common stock in connection with forward purchase agreements includes other expense from related parties of zero and ($30.7) million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

(7) Issuance of common stock bonus shares to related parties in connection with the Mergers includes other expense of $0.7 million during the fiscal year ended December 31, 2023.

(8) Gain includes $12.5 million with a related party in the fiscal year ended December 29, 2024.

Refer to Note 15 – Borrowings and Derivative Liabilities for details.

(9) Includes related party debt cancellation of $37.2 million.

(10) Includes $23.7 million issuance of convertible notes with related parties.

(11) Includes $1.6 million of amortization of debt issuance costs with related parties.

(12) Includes $0.3 million gain in connection with the change in the fair value of derivative liabilities issued to the Massey Trust and Carlyle (as later defined in Note 15 – Borrowings and Derivative Liabilities) with related parties.

The accompanying notes are an integral part of

these consolidated financial statements.

Notes to Consolidated Financial Statements

(1) Organization

(a) Description of Business

Solaria, Inc.

(the “Company” or “Complete Solaria”) is a residential solar installer headquartered in Fremont,

California, which was formed through Complete Solar Holding Corporation’s acquisition of The Solaria Corporation (“Solaria”).

Complete Solaria, Inc.

(the “Company”

or “Complete Solaria”) is a residential solar installer that offers storage and home energy solutions to customers in North

The Company is headquartered in Fremont, California.

Complete Solar, Inc.

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Complete Solar Holdings became the successor entity to Complete Solar, Inc.

The capitalization structure was not changed because of the

Reorganization as all shares of Complete Solar, Inc common stock and preferred stock were exchanged on a one for one basis with shares

of Complete Solar Holdings common stock and preferred stock.

The Reorganization was accounted for as a change in reporting entity for

entities under common control.

The historical assets and liabilities of Complete Solar, Inc.

were transferred to Complete Solar Holdings

at their carrying value, and there are no change to net income, other comprehensive income (loss), or any related per share amounts reported

in the consolidated financial statements requiring retrospective application.

October 2022, the Company entered into a business combination agreement, as amended on December 26, 2022 and January 17,

2023 (“Original Business Combination Agreement”) and as amended on May 26, 2023 (“Amended and Restated Business

Combination Agreement”), with Jupiter Merger Sub I Corp., a Delaware corporation and a wholly owned subsidiary of Freedom Acquisition

(“FACT”) (“First Merger Sub”), Jupiter Merger Sub II LLC, a Delaware limited liability company and a

wholly owned subsidiary of FACT (“Second Merger Sub”), Complete Solar Holding Corporation, a Delaware corporation, and Solaria,

a Delaware corporation.

transactions contemplated by the Amended and Restated Business Combination Agreement were consummated on July 18, 2023 (“Closing

Following the consummation of the Merger on the Closing Date, FACT changed its name to “Complete Solaria, Inc.”

part of the transactions contemplated by the Amended and Restated Business Combination Agreement, FACT affected a deregistration under

the Cayman Islands Companies Act and a domestication under Section 388 of the Delaware’s General Corporation Law (the “DGCL”

or “Domestication”).

On the Closing Date, following the Domestication, First Merger Sub merged with and into Complete Solaria,

with Complete Solaria surviving such merger as a wholly owned subsidiary of FACT (the “First Merger”), and immediately following

the First Merger, Complete Solaria merged with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned subsidiary

of FACT (the “Second Merger”), and Second Merger Sub changed its name to CS, LLC, and immediately following the Second Merger,

Solaria merged with and into a newly formed Delaware limited liability company and wholly-owned subsidiary of FACT and changed its name

to The Solaria Corporation LLC (“Third Merger Sub”), with Third Merger Sub surviving as a wholly-owned subsidiary of FACT

(the “Additional Merger”, and together with the First Merger and the Second Merger, the “Mergers”).

connection with the closing of the Mergers:

Subsequently, Complete Solar Holdings changed its name to

Complete Solaria, Inc.

In October 2022, the Company entered into a business

combination agreement, as amended on December 26, 2022 and January 17, 2023 (“Original Business Combination Agreement”)

and as amended on May 26, 2023 (“Amended and Restated Business Combination Agreement”), with Jupiter Merger Sub I Corp.,

a Delaware corporation and a wholly owned subsidiary of Freedom Acquisition I Corp.

(“FACT”) (“First Merger Sub”),

Jupiter Merger Sub II LLC, a Delaware limited liability company and a wholly owned subsidiary of FACT (“Second Merger Sub”),

Complete Solar Holding Corporation, a Delaware corporation, and The Solaria Corporation (“Solaria”), a Delaware corporation.

The transactions contemplated by the Amended and

Restated Business Combination Agreement were consummated on July 18, 2023 (“Closing Date”).

Following the consummation

of the Merger on the Closing Date, FACT changed its name to “Complete Solaria, Inc.”

As part of the transactions contemplated by the

Amended and Restated Business Combination Agreement, FACT affected a deregistration under the Cayman Islands Companies Act and a domestication

under Section 388 of the Delaware’s General Corporation Law (the “DGCL” or “Domestication”).

On the Closing

Date, following the Domestication, First Merger Sub merged with and into Complete Solaria, with Complete Solaria surviving such merger

as a wholly owned subsidiary of FACT (the “First Merger”), and immediately following the First Merger, Complete Solaria merged

with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned subsidiary of FACT (the “Second Merger”),

and Second Merger Sub changed its name to CS, LLC, and immediately following the Second Merger, Solaria merged with and into a newly formed

Delaware limited liability company and wholly-owned subsidiary of FACT and changed its name to The Solaria Corporation LLC (“Third

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

with the First Merger and the Second Merger, the “Mergers”).

In connection with the closing of the Mergers:

● Each share of the Company’s capital stock, inclusive of shares converted from 2022 Convertible Notes, issued and outstanding immediately prior to the Closing (“Legacy Complete Solaria Capital Stock”) were cancelled and exchanged into an aggregate of 25,494,332 shares of Complete Solaria Common Stock.

12 unchanged sentences

● Each issued and outstanding FACT Class B Ordinary Share converted, on a one-for-one basis, into one share of Complete Solaria Common Stock.

November 2022, Complete Solar Holdings acquired Solaria (as described in Note 4 – Business Combination) and changed its name to

Complete Solaria, Inc.

On August 18, 2023, the Company entered into a Non-Binding Letter of Intent to sell certain of Complete Solaria’s

North American solar panel assets to Maxeon, Inc.

In October 2023, the Company completed the sale of its solar

panel business to Maxeon.

Refer to Note 1(b) – Divestiture and Note 8 – Divestiture.

On August 18, 2023, the Company entered into a

Non-Binding Letter of Intent to sell certain of Complete Solaria’s North American solar panel assets to Maxeon Solar Technologies,

On August 5, 2024, Complete Solaria entered into

an Asset Purchase Agreement (the “APA”) among Complete Solaria, SunPower Corporation (“SunPower”) and SunPower’s

direct and indirect subsidiaries (collectively, the “SunPower Debtors”) providing for the Company’s 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 (“SunPower Acquisition”).

The APA was entered into in connection with a voluntary petition filed by SunPower under

Chapter 11 of the United States Code, 11 U.S.C.§§ 101-1532.

The sale by SunPower was approved on September 23, 2024, by the

United States Bankruptcy Court for the District of Delaware.

The Company completed the acquisition of the Acquired Assets (as defined

in the APA) effective September 30, 2024, in exchange for consideration of $ 54.5 million, net of $ 1.0 cash acquired.

The acquisition

transactions under the APA are referred to herein as the “Acquisition,” and the assets and businesses acquired by the Company

under the APA are referred to as the “SunPower Businesses.” Refer to Note 4 – Business Combination for a further discussion

of the allocation of consideration transferred.

(b) Divestiture

In October 2023, the Company completed the sale

of its solar panel business to Maxeon, pursuant to the terms of the Asset Purchase Agreement (the “Disposal Agreement”).

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

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

As of December 31, 2023, the Company sold

all the shares and recorded a loss of $ 4.2 million in its consolidated statements of operations and comprehensive loss within loss from

continuing operations.

divestiture represents a strategic shift in Complete Solaria’s business and qualifies as held for sale and as a discontinued operation.

Based on the held for sale classification of the assets, the Company has reduced the carrying value of the disposal group to its fair

value, less cost to sell and recorded an impairment loss associated with the held for sale intangible assets and goodwill.

the Company classified the results of its solar panel business in discontinued operations in its consolidated statements of operations

and comprehensive loss for all periods presented.

The cash flows related to discontinued operations have been segregated and are included

in the consolidated statements of cash flows for all periods presented.

Unless otherwise noted, discussion within the notes to the consolidated

financial statements relates to continuing operations only and excludes the historical activities of the North American panel business.

See Note 8 – Divestiture for additional information.

of its solar panel business to Maxeon (“Divestiture”), pursuant to the terms of the Asset Purchase Agreement (the “Disposal

The Company determined that the Divestiture represented a strategic shift in the Company’s business and qualified

as a discontinued operation.

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.

connection with the divestiture the Company recognized a net 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.

The Company subsequently sold all of its Maxeon shares

received in the Divestiture and recognized a loss upon sale of $ 4.2 million which is classified within continuing operations as Other

income (expense), net within the Company’s consolidated statement of operations and comprehensive loss in the year ended December

Accordingly, the results of operations and cash

flows relating to Solaria were reflected as discontinued operations in the consolidated statements of operations and comprehensive loss

and consolidated statements of cash flows for the fiscal years ended December 29, 2024 and December 31, 2023.

Components of amounts reflected in the consolidated

statements of operations and comprehensive loss related to discontinued operations are presented in the table, as follows (in thousands):

Fiscal Year Ended

Cost of revenues

Operating expenses:

Sales and marketing

General and administrative

Total operating expenses

Loss from discontinued operations

Other income, net

Loss from discontinued operations before income taxes

Income tax benefit

Loss from discontinued operations, net of tax

Impairment loss from discontinued operations

Net loss from discontinued operations

$ ( 173,358 )

1 unchanged sentence

losses and negative cash flows from operations.

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

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

as of December 31, 2023.

The Company had cash and cash equivalents of $ 2.6 million as of December 31, 2023.

The Company believes that

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

These conditions raise substantial doubt

about the Company’s ability to continue as a going concern.

plans to obtain additional funding and restructure its current debt.

Historically, the Company’s activities have been financed

through private placements of equity securities, debt and proceeds from the Merger.

If the Company is not able to secure adequate additional

funding when needed, the Company will need to reevaluate its operating plan and may be forced to make reductions in spending, extend

payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs or cease operations entirely.

actions could materially impact the Company’s business, results of operations and future prospects.

While the Company has been

able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such

financing will be available on terms that are favorable, or at all.

Failure to generate sufficient cash flows from operations, raise

additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve

its intended business objectives.

there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated

financial statements are issued.

The accompanying consolidated financial statements have been prepared assuming the Company will continue

to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business.

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

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

The Company incurred a net loss of $ 56.5 million during the fiscal year ended December

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

The Company had cash

and cash equivalents, excluding restricted cash, of $ 13.4 million as of December 29, 2024.

The Company believes that its operating losses

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

These conditions raise substantial doubt about the Company’s

ability to continue as a going concern.

Management plans to obtain additional funding.

Historically, the Company’s activities have been financed through private placements of equity securities, debt and proceeds from

If the Company is not able to secure adequate additional funding when needed, the Company will need to reevaluate its operating

plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend

or curtail planned programs or cease operations entirely.

These actions could materially impact the Company’s business, results

of operations and future prospects.

While the Company has been able to raise multiple rounds of financing, there can be no assurance that

in the event the Company requires additional financing, such financing will be available on terms that are favorable, or at all.

to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material

adverse effect on the Company’s ability to achieve its intended business objectives.

Therefore, there is substantial doubt about the

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

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

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

They do not include any adjustments

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

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

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

The financial statements and accompanying notes

have been prepared in accordance with generally accepted accounting principles in the U.S.

of America (“U.S.

GAAP”) and pursuant

to the rules and regulations of the Securities and Exchange Commission (“SEC”).

The consolidated financial statements include

the accounts of the Company and its wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements and accompanying

notes have been prepared in accordance with generally accepted accounting principles (“U.S.

GAAP”) and pursuant to the rules

and regulations of the Securities and Exchange Commission (“SEC”).

The consolidated financial statements include the accounts

of the Company and its wholly-owned subsidiaries.

All material intercompany balances and transactions have been eliminated in consolidation.

On March 10, 2025, the Company’s board of

directors approved a change in the Company’s fiscal year end to have a 52-to-53-week fiscal year that ends on the Sunday closest

to December 31.

This change is effective for the fiscal year ended December 29, 2024.

(b) Use of Estimates

preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, as well as related disclosure of contingent assets

and liabilities.

Significant estimates and assumptions made by management include, but are not limited to, the determination of:

allocation of the transaction price to identified performance obligations;

value of warrant liabilities;

reserve methodology for inventory obsolescence;

reserve methodology for product warranty;

reserve methodology for the allowance for credit losses;

The preparation of the Company’s consolidated

financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of

assets, liabilities, revenues, expenses, as well as related disclosure of contingent assets and liabilities.

Significant estimates and

assumptions made by management include, but are not limited to, the determination of:

Fair value of warrant liabilities;

Fair value of the forward purchase agreements

measurement of stock-based compensation

the extent that there are material differences between these estimates and actual results, the Company’s financial condition or

operating results will be affected.

The Company bases its estimates on past experience and other assumptions that the Company believes

are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.

The Company has assessed the impact

and are not aware of any specific events or circumstances that required an update to the Company’s estimates and assumptions or

materially affected the carrying value of the Company’s assets or liabilities as of the date of issuance of this report.

estimates may change as new events occur and additional information is obtained.

The Company conducts its business in one operating

segment that provides custom solar solutions through a standardized platform to its residential solar providers and companies to facilitate

the sale and installation of solar energy systems under a single product group.

The Company’s Chief Executive Officer (“CEO”)

is the Chief Operating Decision Maker (“CODM”).

The CODM allocates resources and makes operating decisions based on financial

information presented on a consolidated basis.

The profitability of the Company’s product group is not a determining factor in allocating

resources and the CODM does not evaluate profitability below the level of the consolidated company.

All the Company’s long-lived

assets are maintained in the U.S.

(d) Concentration of Risks

Concentration

of credit risk

Financial instruments that potentially subject

the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

The Company’s

cash and cash equivalents are on deposit with major financial institutions.

Fair value of Simple Agreements for Future Equity Agreements (“SAFEs”)

The reserve methodology for inventory obsolescence;

The reserve methodology for product warranty;

The reserve methodology for the allowance for credit losses;

Fair value of the derivative liabilities;

The measurement of stock-based compensation.

To the extent that there are material differences

between these estimates and actual results, the Company’s financial condition or operating results will be affected.

bases its estimates on past experience and other assumptions that the Company believes are reasonable under the circumstances, and the

Company evaluates these estimates on an ongoing basis.

The Company has assessed the impact and management is not aware of any specific

events or circumstances that required an update to the Company’s estimates and assumptions or materially affected the carrying value

of the Company’s assets or liabilities as of the date of issuance of this report.

These estimates may change as new events occur

and additional information is obtained.

The Company is exposed to credit losses in the event of nonperformance

by the counterparties to its financial and derivative instruments.

Financial and derivative instruments that potentially subject the Company

to concentrations of credit risk are primarily cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, contract

receivables and forward purchase agreement assets.

The Company’s cash and cash equivalents are on deposit with major financial institutions.

Such deposits may be in excess of insured limits.

believes that the financial institutions that hold the Company’s cash are financially sound, and accordingly, minimum credit risk

exists with respect to these balances.

The Company has not experienced any losses due to institutional failure or bankruptcy.

performs credit evaluations of its customers and generally does not require collateral for sales on credit.

The Company reviews accounts

receivable balances to determine if any receivables will potentially be uncollectible and includes any amounts that are determined to

be uncollectible in the allowance for credit losses.

As of December 31, 2023, two customers had an outstanding balance that represented

38 % and 16 % of the total accounts receivable balance.

As of December 31, 2022, three single customers had outstanding balances that represented

27 %, 18 %, and 14 %, respectively, of the total accounts receivable balance.

Concentration

Company defines major customers as those customers who generate revenues that exceed 10 % of the Company’s annual net revenues.

For the years ended December 31, 2023 and 2022 one customer represented 55 % and 47 % of gross revenues, respectively.

Concentration

the year ended December 31, 2023, one supplier represented 40 % of the Company’s inventory purchases.

For the year ended December

31, 2022, three suppliers represented 74 % of the Company’s inventory purchases.

(e) Cash and Cash Equivalents

Company considers all highly liquid securities that mature within three months or less from the original date of purchase to be cash

The Company maintains the majority of its cash balances with commercial banks in interest bearing accounts.

Cash and cash

equivalents include cash held in checking and savings accounts and money market accounts consisting of highly liquid securities with

original maturity dates of three months or less from the original date of purchase.

(f) Restricted Cash

Company classifies all cash for which usage is limited by contractual provisions as restricted cash.

Restricted cash balance as of December

31, 2023 and 2022, was $ 3.8 million and $ 3.9 million, respectively.

The restricted cash consists of deposits in money market accounts,

which is used as cash collateral backing letters of credit related to customs duty authorities’ requirements.

The Company has presented

these balances under restricted cash, as a long-term asset, in the consolidated balance sheets.

The Company believes that the financial institutions that hold the Company’s cash

are financially sound, and accordingly, minimum credit risk exists with respect to these balances.

The Company has not experienced any

losses due to institutional failure or bankruptcy.

The Company performs credit evaluations of its customers and generally does not require

collateral for sales on credit.

As of December 29, 2024, no customer had an outstanding balance that represented more than 10% of the

total accounts receivable balance.

As of December 31, 2023, two customers had an outstanding balance that represented 38 % and 16 % of the

total accounts receivable balance.

Concentration of Customers

The Company defines major customers as those customers

who generate revenues that exceed 10% of the Company’s annual net revenues.

For the fiscal years ended December 29, 2024 and December

31, 2023, three customers and one customer represented 36 % and 55 % of gross revenues, respectively, all from the Residential Solar Installation

reportable segment.

Concentration of Suppliers

For the fiscal year ended December 29, 2024, the

Company expanded its preferred supplier list, as such there was no concentration of suppliers.

For the fiscal year ended December 31,

2023, one supplier represented 40 % of the Company’s inventory purchases.

(d) Cash and Cash Equivalents

The Company considers all highly liquid securities

that mature within three months or less from the original date of purchase to be cash equivalents.

The Company maintains the majority

of its cash balances with commercial banks in interest bearing accounts.

Cash and cash equivalents include cash held in checking and savings

accounts and money market accounts consisting of highly liquid securities with maturity dates of three months or less from the original

date of purchase.

As of December 29, 2024 and December 31, 2023, the Company had cash balances of $ 13.4 million and $ 2.6 million, respectively,

in excess of federally insured limits.

(e) Restricted Cash

The Company classifies all cash for which usage

is limited by contractual provisions as restricted cash.

The restricted cash consists of deposits in money market accounts, which is used

as cash collateral backing letters of credit related to customs duty authorities’ requirements.

The Company has presented these

balances under restricted cash, as a long-term asset, in the consolidated balance sheets.

The Company reconciles cash, cash equivalents,

and restricted cash reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated

statements of cash flows as follows (in thousands):

As of December 31,

and restricted cash reported in its consolidated balance sheets that aggregate to the beginning and ending balances shown in the Company’s

consolidated statements of cash flows as follows (in thousands):

Cash and cash equivalents

1 unchanged sentence

Total cash, cash equivalents, and restricted cash

(g) Accounts Receivable, Net

Accounts receivable are recorded at the invoiced

amount and do not bear interest.

The Company maintains an allowance for credit losses for estimated losses inherent in its accounts receivable

In establishing the required allowance, management considers historical losses adjusted to take into account current market

conditions and customers’ financial condition, the amount of receivables in dispute, the current receivables aging and customer

payment patterns.

Account balances are written off against the allowance after all means of collection have been exhausted and the potential

for recovery is considered remote.

Recoveries of accounts receivable previously written off are recorded when received.

The following

table summarizes the allowance for doubtful accounts as of December 31, 2023 and 2022 (in thousands):

As of December 31,

(f) Estimated Credit Losses

The Company recognizes an allowance for credit

loss at the time a receivable is recorded based on the Company’s estimate of expected credit losses, historical write-off experience,

and current account knowledge, and adjusts this estimate over the life of the receivable as needed.

The Company evaluates the aggregation

and risk characteristics of a receivable pool and develops loss rates that reflect historical collections, current forecasts of future

economic conditions over the time horizon that the Company is exposed to credit risk, and payment terms or conditions that may materially

affect future forecasts.

The Company performs ongoing credit evaluations of its customers’

financial condition when deemed necessary.

The Company maintains an allowance for credit losses based on the expected collectability of

all accounts receivable, which takes into consideration an analysis of historical bad debts, specific customer creditworthiness and current

economic trends.

The Company believes that its concentration of credit risk is limited because of the large number of customers, credit

quality of the customer base, small account balances for most of these customers, and customer geographic diversification.

The following table summarizes the allowance for

credit losses as follows (in thousands):

Balance at beginning of period

Provision charged to earnings

Amounts written off, recoveries and other adjustments

Amounts written off, net of recoveries and other adjustments

Balance at end of period

Company does not have any off-balance sheet credit exposure relating to its customers.

(h) Inventories

consist of solar panels and the components of solar energy systems which the Company classifies as finished goods.

Costs are computed

under the average cost method.

The Company identifies inventory which is considered obsolete or in excess of anticipated demand based

on a consideration of marketability and product life cycle stage, component cost trends, demand forecasts, historical revenues, and assumptions

about future demand and market conditions to state inventory at the lower of cost or net realizable value.

(i) Revenue Recognition

is recognized when a customer obtains control of promised products and services and the Company has satisfied its performance obligations.

The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for the products

and services.

To achieve this core principle, the Company applies the following five steps:

Identification of the contract(s) with a customer;

Identification of the performance obligations in the contracts(s);

Determination of the transaction price;

Allocation of the transaction price to the performance obligations;

Recognition of the revenue when, or as, the Company satisfies a performance obligation.

– Solar Energy System Installations

Company generates revenue primarily from the design and installation of a solar energy system and performing post-installation services.

The Company’s contracts with customers include three primary contract types:

agreements – The Company contracts directly with homeowners who purchase the solar energy system and related services from

Customers are invoiced on a billing schedule, where the majority of the transaction price is due upon installation with

an additional payment due when the system passes inspection by the authority having jurisdiction.

partner agreements – In its financing partner agreements, the Company contracts directly with homeowners for the purchase of

the solar energy system and related services.

The Company refers the homeowner to a financing partner to finance the system, and the

homeowner makes payments directly to the financing partner.

The Company receives consideration from the financing partner on a billing

schedule where the majority of the transaction price is due upon installation with an additional payment due when the system passes inspection

by the authority having jurisdiction.

purchase agreements – The Company contracts directly with a distribution partner to perform the solar energy system installation,

and the homeowner will finance the system through a power purchase agreement, which is signed with the Company’s distribution partner.

The Company considers the distribution partner to be its customer, as the Company does not contract directly with the homeowner.

Company receives consideration from the distribution partner on a billing schedule where the majority of the transaction price is due

upon installation with an additional payment due when the system passes inspection by the authority having jurisdiction.

each of the Company’s customer contract types, the Company’s revenue consists of two performance obligations, which include

the performance of the installation of the solar energy system and post- installation services.

includes the design of a solar energy system, the delivery of the components of the solar energy system (i.e., photovoltaic system, inverter,

battery storage, etc.), installation services and services facilitating the connection of the solar energy system to the power grid.

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

Company recognizes revenue upon the completion of installation services, which occurs upon the transfer of control of the solar energy

system and title of the related hardware components to the homeowner or distribution partner.

Post-installation

services consist primarily of administrative services and customer support, which the Company performs between the completion of installation

and the date of inspection of the solar energy system by the authority having jurisdiction.

The Company recognizes revenue at a point

in time, which is when the inspection occurs.

the Company’s contracts with customers contain multiple performance obligations, the transaction price is allocated to each performance

obligation based on its standalone selling price.

The Company generally determines the standalone selling price based on the estimated

costs incurred in the delivery of each performance obligation, relative to the total costs to be incurred under the contract.

Company records deferred revenue for amounts invoiced that are not subject to refund upon termination.

In certain contracts with customers,

the Company arranges for a third-party financing partner to provide financing to the customer.

The Company collects upfront from the

financing partner and the customer will provide installment payments to the financing partner.

The Company records revenue in the amount

received from the financing partner, net of any financing fees charged to the homeowner, which the Company considers to be a customer

None of the Company’s contracts contain a significant financing component.

Company guarantees to customers certain specified minimum solar energy production output of the solar energy system for 10-years after

the installation.

The Company monitors the solar energy systems to determine whether these specified minimum outputs are being achieved.

The Company will issue payments to customers if the output falls below contractually stated thresholds over the performance guarantee

Revenue is recognized to the extent it is probable that a significant reversal of such revenue will not occur.

– Software Enhanced Services

Company generates revenue from software enhanced services through the provision of design and proposal services.

The Company’s

customers for design services are solar installers who leverage the Company’s expertise and software platforms to obtain structural

letters, computer aided designs and electrical reviews.

The Company charges the customer a per design fixed fee for each type of service

that is performed, and the Company recognizes revenue in the period the services are performed.

The customer contracts contain the customer

right to terminate the contract each month and are therefore enforceable only for the contracted services purchased each month.

is recognized for design services in the month the services are performed.

Company’s customers for proposal services for solar sales organizations who contract with the Company to develop proposals for

their potential residential solar customers.

The Company generates proposals for the customer using the HelioQuote platform.

may purchase a fixed number of proposals for a given month or may contract on a pay as you go basis, and the performance obligation is

defined by the number of proposals purchased by the customer each month.

The customer contracts contain the customer right to terminate

the contract each month and are therefore enforceable only for the services purchased each month.

Revenue is recognized for proposal

services in the month the services are performed.

Company typically provides a 10-year warranty on its solar energy system installations, which provides assurance over the workmanship

in performing the installation, including roof leaks caused by the Company’s performance.

For solar panel sales recognized prior

to the Disposal Transaction, the Company provides a 30-year warranty that the products will be free from defects in material and workmanship.

the revenues are recognized for the solar energy systems installations services, the Company accrues liabilities for the estimated future

costs of meeting its warranty obligations.

The Company makes and revises these estimates based primarily on the volume of new sales that

contain warranties, historical experience with and projections of warranty claims, and estimated solar energy system and panel replacement

The Company records a provision for estimated warranty expenses in cost of revenues within the accompanying consolidated statements

of operations and comprehensive loss.

and handling costs and certain taxes

are recognized net of taxes collected from customers and remitted to governmental authorities.

Shipping and handling costs associated

with outbound freight are accounted for as a fulfillment cost and are included in both revenues and cost of revenues in the accompanying

consolidated statements of operations and comprehensive loss.

The Company does not have any off-balance sheet credit exposure relating

to its customers.

In fiscal year 2024, the Company identified customer accounts receivable balances that were deemed to be uncollectible,

which were reserved and written off.

(g) Contract Assets and Contract Liabilities

Contract assets consist of unbilled receivables

which represent revenue that has been recognized in advance of billing the customer.

Contract liabilities consist of deferred revenue

and customer advances, which represent consideration received from a customer prior to transferring control of goods or services to the

customer under the terms of a sales contract.

Total contract assets and contract liabilities balances as of the respective dates

are as follows (in thousands):

Contract assets

Contract liabilities current and noncurrent

During the fiscal year ended December 29, 2024,

the increase in contract assets of $ 26.1 million was primarily driven by an increase in residential project sales that have met revenue

recognition based on applicable milestones but have not been billed.

The increase in contract assets and contract liabilities is primarily

attributed to the SunPower Acquisition in fiscal year 2024.

The Company typically invoices its customers upon

2 unchanged sentences

Standard payment terms to customers range from 30 to 60 days.

When the Company receives consideration, or when

such consideration is unconditionally due, from a customer prior to delivering goods or services to the customer under the terms of a

customer agreement, the Company records deferred revenue.

As installation projects are typically completed within 12-months, the Company’s

deferred revenue is reflected in current liabilities in the accompanying consolidated balance sheets.

The amount of revenue recognized

during the years ended December 31, 2023 and 2022 that was included in deferred revenue at the beginning of each period was $ 2.1 million

and $ 3.9 million, respectively.

Disaggregation

to the table below for the Company’s revenue recognized by product and service type (in thousands):

When the Company receives payment, or when such

payment is unconditionally due from a customer prior to delivering goods or services to the customer under the terms of a customer agreement,

the Company records this deferred revenue as a contract liability.

As installation projects are typically completed within 12-months,

the Company’s contract liability is reflected within current liabilities in the accompanying consolidated balance sheets.

of revenue recognized during the years ended December 29, 2024, and December 31, 2023, that was included in contract liabilities at the

beginning of each period was $ 3.5 million and $ 2.1 million, respectively.

(h) Inventories

Inventories consist of solar panels and the components

of solar energy systems all of which is classified as finished goods within current assets at December 29, 2024 and December 31, 2023.

Inventory is valued using the average cost method.

The Company identifies inventory which is considered obsolete or in excess of anticipated

demand based on a consideration of marketability and product life cycle stage, component cost trends, demand forecasts, historical revenues,

and assumptions about future demand and market conditions, and such inventory has been adjusted to its lower of cost or net realizable

(i) Revenue Recognition

Revenue is recognized for Residential Solar Installation

and New Home Business when a customer obtains control of promised products and services and the Company has satisfied its performance

obligations which is the date by which substantially all of its 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.

The Company accounts 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 the Company expects to be entitled to receive in exchange for the products and services.

To achieve this core principle,

the Company applies the following five steps:

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, the Company satisfies a performance obligation.

Residential Solar Installation Revenues

The Company’s Residential Solar Installation

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

Company’s contracts with customers include three primary contract types:

Cash agreements – The Company contracts directly with homeowners who purchase the solar energy system and related services from the Company.

Customers are invoiced on a billing schedule, where the majority of the transaction price is due upon installation with an additional payment due when the system passes inspection by the authority having jurisdiction.

Financing partner agreements – In its financing partner agreements, the Company contracts directly with homeowners for the purchase of the solar energy system and related services.

The Company refers the homeowner to a financing partner to finance the system, and the homeowner makes payments directly to the financing partner.

The Company receives consideration from the financing partner on a billing schedule where the majority of the transaction price is due upon installation with an additional payment due when the system passes inspection by the authority having jurisdiction.

Power purchase agreements and lease agreements – The Company contracts 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 the Company’s leasing partner.

The Company considers the leasing partner to be its customer, as the Company does not contract directly with the homeowner and the leasing partner takes ownership of the system upon the completion of installation.

The Company receives 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

The Company’s New Homes Business sells through

a network of home builders as well as its internal sales team.

The Company’s contracts with customers include two primary contract

Cash agreements – The Company contracts

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

The Company’s

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 the Company in connection with the SunPower Acquisition.

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

The Company considers the leasing partner to be its customer.

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

The Company receives consideration from the leasing partner following the acceptance of the system.

The Company’s 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), the Company recognizes revenue over time.

The Company’s 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).

The Company recognizes revenue using the input method based

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

customer (installation).

For New Homes Business Lease agreements, the Company considers 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.

The Company’s 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.

The Company records deferred revenue for amounts

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

In certain contracts with customers, the Company arranges for a

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

The Company collects upfront from the financing partner and the customer

will provide installment payments to the financing partner.

The Company records revenue in the amount received from the financing partner,

net of any financing fees charged to the homeowner, which the Company considers to be a customer incentive.

None of the Company’s

contracts contain a significant financing component.

Costs to obtain and fulfill contracts

The Company’s 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 the Company provides to its customers, such as discounts and rebates, are recorded

net to the revenue the Company has recognized on the solar power system.

The Company typically provides a 10 -year warranty

on its solar energy system installations, which provides assurance over the workmanship in performing the installation, including roof

leaks caused by the Company’s performance.

For solar panel sales recognized prior to the Divestiture, the Company provides a 30 -year

warranty that the products will be free from defects in material and workmanship.

The Company retained its warranty obligations associated

with panel sales prior to the Divestiture.

When the revenues are recognized for the solar

energy systems installations services, the Company accrues liabilities for the estimated future costs of meeting its warranty obligations.

The Company makes and revises these estimates based primarily on the volume of new sales that contain warranties, historical experience

with and projections of warranty claims, and estimated solar energy system and panel replacement costs.

The Company records a provision

for estimated warranty expenses in cost of revenues within the accompanying consolidated statements of operations and comprehensive loss.

Warranty costs primarily consist of replacement materials and equipment and labor costs for service personnel.

Disaggregation of revenue

Refer to the table below for the Company’s

revenue recognized (in thousands):

Fiscal Year Ended

Solar energy system installations

Software enhanced services

Residential Solar Installations

Revenue recognized over time

Revenue recognized at a point in time

Total Residential Solar Installations

New Homes Business

Revenue recognized over time

Revenue recognized at a point in time

Total New Homes Business

Total revenue

For the years ended December 31, 2023 and 2022,

all revenue recognized was generated in the U.S.

performance obligations

The Company has elected the practical expedient not to disclose remaining

performance obligations for contracts that are less than one year in length.

As of December 31, 2023, the Company has deferred $ 1.2 million

associated with a long-term service contract, which will be recognized evenly through 2028.

The Company has deferred $ 1.3 million associated

with a long-term service contract as of December 31, 2022.

costs of obtaining customer contracts

For the fiscal years ended December 29, 2024,

and December 31, 2023, all revenue recognized was generated in the U.S.

Remaining performance obligations

The Company elected the practical expedient not

to disclose the remaining performance obligations for contracts that are less than one year in length.

As of December 29, 2024, the Company

has deferred $ 0.9 million associated with a long-term service contract, which will be recognized evenly through 2028.

The Company had

deferred $ 1.2 million associated with a long-term service contract as of December 31, 2023.

Incremental costs of obtaining customer contracts

Incremental costs of obtaining customer contracts consist of sales

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by the Company.

The Company defers sales commissions and recognizes expense in accordance with the timing of the related revenue recognition.

The Company defers sales commissions and recognizes expenses in accordance with the timing of the related revenue recognition.

Amortization of deferred commissions is recorded as sales commissions in the accompanying consolidated statements of operations and comprehensive

As of December 31, 2023 and 2022, deferred commissions were $ 4.2 million and $ 2.8 million, respectively, which were included in

As of December 29, 2024 and December 31, 2023, deferred commissions were zero and $ 4.2 million, respectively, and classified within

prepaid expenses and other current assets in the accompanying consolidated balance sheets.

(j) Property and Equipment, Net

and equipment are stated at cost less accumulated depreciation and amortization.

When assets are retired or disposed of, the cost and

accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the current period.

maintenance costs are expensed as incurred.

Depreciation and amortization are calculated using the straight-line method over the following

estimated useful lives of the assets:

Property and equipment are stated at cost less

accumulated depreciation and amortization.

When assets are retired or disposed of, the cost and accumulated depreciation are removed from

the accounts, and any resulting gain or loss is included in the current period.

Repair and maintenance costs are expensed as incurred.

Depreciation and amortization are calculated using the straight-line method over the following estimated useful lives of the assets:

Manufacturing equipment

Developed software

Internal-use software

Furniture & equipment

Leasehold improvements

Shorter of 3 to 5 years of the asset or the term of the lease.

(k) Internal-Use Software

Company capitalizes costs to develop its internal-use software when preliminary development efforts are successfully completed, management

has authorized and committed project funding, it is probable that the project will be completed, and the software will be utilized as

These costs include personnel and related employee benefits and expenses for employees who are directly associated with and

who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining software.

Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred.

Costs incurred for enhancements that are expected to provide additional material functionality are capitalized and amortized over the

estimated useful life of the related upgrade.

During the years ended December 31, 2023 and 2022, the Company capitalized $ 1.9 million

and $ 1.5 million, respectively, of internal-use software development costs.

The remaining unamortized balance as of December 31, 2023

and December 31, 2022 of $ 3.8 million and $ 2.7 million, respectively, is included in property and equipment, net within the accompanying

consolidated balance sheets.

The Company capitalizes costs to develop its internal-use software

when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable

that the project will be completed, and the software will be utilized as intended.

These costs include personnel and related employee

benefits and expenses for employees who are directly associated with and who devote time to software projects, and external direct costs

of materials and services consumed in developing or obtaining software.

Costs incurred prior to meeting these criteria, together with

costs incurred for training and maintenance, are expensed as incurred.

Costs incurred for enhancements that are expected to provide additional

material functionality are capitalized and amortized over the estimated useful life of the related upgrade.

During the fiscal years ended

December 29, 2024 and December 31, 2023, the Company capitalized $ 1.2 million and $ 1.9 million, respectively, of internal-use software

development costs.

The remaining unamortized balance as of December 29, 2024 and December 31, 2023, of $ 0.2 million and $ 3.8 million,

respectively, is included in property and equipment, net within the accompanying consolidated balance sheets.

(l) Cost of Revenues

of revenues includes actual cost of material, labor and related overhead incurred for revenue-producing units, and includes associated

warranty costs, freight and delivery costs, depreciation, and amortization of internally developed software.

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

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

is generally upon installation.

(m) Advertising and Promotional Expenses

and promotional costs are expensed as incurred and included in sales and marketing expense in the accompanying consolidated statements

of operations and comprehensive loss.

Advertising costs were not material for the years ended December 31, 2023 and 2022.

Advertising and promotional costs are expensed

as incurred and included in sales and marketing expense in the accompanying consolidated statements of operations and comprehensive loss.

Advertising costs were not material for the fiscal years ended December 29, 2024 and December 31, 2023.

(n) Income Taxes

taxes are accounted for under the asset-and-liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences

attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective

tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected

to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred

tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

recognizes the effect of income tax positions only if those positions are more likely than not to be sustained.

Recognized income tax

positions are measured at the largest amount that is greater than 50 % likely of being realized.

Changes in recognition or measurement

are reflected in the period in which the change in judgment occurs.

The Company recognizes accrued interest and penalties, if any, related

to unrecognized tax benefits in income tax provision.

(o) Foreign Currency

Company’s reporting currency is the US dollar.

The functional currency for each of the Company’s foreign subsidiaries is

the local currency, as it is the monetary unit of account of the principal economic environments in which the Company’s foreign

subsidiaries operate.

Assets and liabilities of the foreign subsidiaries are translated at the current exchange rate as of the end of

the period, and revenue and expenses are translated at the average exchange rates in effect during the period.

The gain or loss resulting

from the process of translating foreign currency financial statements into US dollar financial statements is accounted for as a foreign

currency cumulative translation adjustment and is reported as a component of accumulated other comprehensive loss.

Foreign currency transaction

gains and losses resulting from transactions denominated in a currency other than the functional currency are recognized in Other Income

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

Income taxes are accounted for under the liability

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial

statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those

temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates

is recognized in income in the period that includes the enactment date.

The Company recognizes the effect of income tax positions only

if those positions are more likely than not to be sustained.

Recognized income tax positions are measured at the largest amount that is

greater than 50 % likely of being realized.

Changes in recognition or measurement are reflected in the period in which the change in judgment

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in its income tax provision.

The Company tests goodwill at the reporting unit

level for impairment annually on the first day of the fourth quarter, or more frequently if an event occurs or circumstances change that

would more likely than not reduce the fair value of the reporting unit below its carrying amount.

The Company may elect to perform a qualitative

assessment that considers economic, industry and company-specific factors.

If, after completing the assessment, it is determined that

it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to a quantitative

Quantitative testing requires a comparison of the fair value of each reporting unit to its carrying value.

If the carrying value

of the reporting unit exceeds its fair value, goodwill impairment is measured as the amount by which the reporting unit’s carrying

value exceeds its fair value, not to exceed the carrying value of goodwill.

(p) Comprehensive Loss

Comprehensive

loss consists of two components, net loss and other comprehensive income (loss), net.

The Company’s other comprehensive loss consists

of foreign currency translation adjustments that result from the consolidation of its foreign entities and is reported net of tax effects.

Comprehensive loss consists of two components,

net loss and other comprehensive income (loss), net.

The Company’s other comprehensive loss consists of foreign currency translation

adjustments that result from the consolidation of its foreign entities and is reported net of their related tax effects.

(q) Impairment of Long-Lived Assets

assets, such as property and equipment, ROU assets, and intangible assets subject to amortization, are reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If circumstances require a long-lived

asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by

that asset or asset group to its carrying value.

If the carrying value of the long-lived asset or asset group is not recoverable on an

undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value.

Fair value is

determined through various valuation techniques including discounted cash flow models, and quoted market values, as considered necessary.

were no impairment charges recorded in continuing operations for the years ended December 31, 2023 and 2022.

Long-lived assets, such as property and equipment,

ROU assets, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate

that the carrying amount of an asset may not be recoverable.

If circumstances require a long-lived asset or asset group to be tested for

possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying

If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment

is recognized to the extent that the carrying value exceeds its fair value.

Fair value is determined through various valuation techniques

including discounted cash flow models, and quoted market values, as considered necessary.

The Company recognized an impairment loss in the

fiscal year ended December 29, 2024 as disclosed in Note 9 - Property and equipment, net.

There were no impairment charges recorded in

continuing operations for the fiscal year ended December 31, 2023.

(r) Intangible Assets, Net

assets are recorded at the cost, less accumulated amortization.

Intangible assets are recorded at cost, less accumulated

amortization.

Amortization is recorded using the straight-line method.

All intangible

assets that have been determined to have definite lives are amortized over their estimated useful life as indicated below:

Assembled workforce

(s) Deferred Transaction Costs

Deferred transaction costs, which consist of

direct incremental legal, consulting and accounting fees related to the merger with Freedom in July 2023, are capitalized until they

were recorded against proceeds upon the consummation of the transaction.

In accounting for the Mergers, direct offering costs of

approximately $ 5.7 million were reclassified to additional paid-in capital and netted against the Mergers proceeds received upon

As of December 31, 2023, there were no deferred transaction costs.

As of December 31, 2022, the Company had recorded $ 1.1

million of deferred transaction costs in other noncurrent assets on the consolidated balance sheets.

(t) Stock-Based Compensation

Company recognizes stock-based compensation expense over the requisite service period on a straight- line basis for all stock-based payments

that are expected to vest to employees, non-employees and directors, including grants of employee stock options and other stock-based

Equity-classified awards issued to employees, non-employees such as consultants and non-employee directors are measured at the

grant-date fair value of the award.

All intangible assets that have been determined to have definite

lives are amortized over their estimated useful life as indicated below:

Trademarks 10 years

Developed technology 3 years

(s) Stock-Based Compensation

The Company recognizes stock-based compensation expense over the requisite

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

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

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

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

Forfeitures are recognized as they occur.

For accounting purposes, the Company estimates grant-date

fair value of stock options using the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires the input of

highly subjective assumptions, including the fair value of the underlying common stock prior to the Mergers, the expected term of the

option the expected volatility of the price of the Company’s common stock and expected dividend yield.

The Company determines these

inputs as follows:

Term —Expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is

determined using the simplified method.

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.

The Company has never paid

dividends and has no plans to pay dividends.

Interest Rate —The Company derives the risk-free interest rate assumption from the U.S.

Treasury’s rates for the U.S.

Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued.

(u) Fair Value Measurements

Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent

The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability

in the principal or most advantageous market.

considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable

and unobservable inputs, which are categorized in one of the following levels:

Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement

Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly,

for substantially the full term of the asset or liability.

Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available,

thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

assets and liabilities held by the Company measured at fair value on a recurring basis as of December 31, 2023 and 2022 include cash

and cash equivalents, accounts receivable, accounts payable, accrued expenses, the warrant liabilities and FPA liabilities.

carrying amounts of cash, accounts receivable, accounts payable and accrued expenses approximate their fair value because of their short-term

nature (classified as Level 1).

warrant liabilities and FPA liabilities are measured at fair value using Level 3 inputs.

The Company records subsequent adjustments to

reflect the increase or decrease in estimated fair value at each reporting date within the consolidated statements of operations and

comprehensive loss as a component of other income.

(v) Net Loss Per Share

Company computes net loss per share following ASC 260, Earnings Per Share .

Basic net loss per share is measured as the income

or loss available to common stockholders divided by the weighted average common shares outstanding for the period.

Diluted net loss per

share presents the dilutive effect on a per-share basis from the potential exercise of options and/or warrants.

The potentially dilutive

effect of options or warrants are computed using the treasury stock method.

Securities that potentially have an anti-dilutive effect

(i.e., those that increase income per share or decrease loss per share) are excluded from the diluted loss per share calculation.

(w) Convertible Debt Embedded Derivative Liabilities

Company evaluates the embedded conversion feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine

if the conversion feature meets the definition of a liability and, if so, whether to bifurcate the conversion feature and account for

it as a separate derivative liability.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument

is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the

consolidated statements of operations and comprehensive loss.

The classification of derivative instruments, including whether such instruments

should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Derivative instrument liabilities are

classified in the consolidated balance sheets as current or non-current based on whether net-cash settlement of the derivative instrument

could be required within twelve months after the balance sheet date.

The derivative is subject to re-measurement at the end of each reporting

period, with changes in fair value recognized as a component of other income (expense), net, in the consolidated statements of operations

and comprehensive loss.

The Company’s embedded derivative liabilities were extinguished in the first quarter of 2022.

January 1, 2021, the Company early adopted Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842), as amended

For accounting purposes, the Company estimates grant-date fair value of stock options using the Black-Scholes option pricing model.

Black-Scholes option pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common

stock as of the grant date, the expected term of the option, the expected volatility of the price of the Company’s common stock

and expected dividend yield.

(t) Fair Value Measurements

The Company utilizes valuation techniques that

maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

The Company determines fair

value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.

When considering market participant assumptions

in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized

in one of the following levels:

Level 1 inputs:

Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 inputs:

Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 inputs:

Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Financial assets and liabilities held by the Company measured at fair

value every reporting period as of December 29, 2024 and December 31, 2023 include cash and cash equivalents, accounts receivable, accounts

payable, accrued expenses, the warrant liabilities, FPAs, and derivative liabilities associated with the Company’s debt.

The carrying amounts of cash, accounts receivable,

accounts payable and accrued expenses approximate their fair value because of their short-term nature (classified as Level 1).

The warrant liabilities, derivative liabilities and FPAs are measured

at fair value using Level 3 inputs.

The Company records subsequent adjustments to reflect the increase or decrease in estimated fair value

at each reporting date within Other income (expense), net in its consolidated statements of operations and comprehensive loss.

(u) Net Loss Per Share

The Company computes net loss per share following ASC 260, Earnings

Basic net loss per share is measured as the loss attributable to common stockholders divided by the weighted average common

shares outstanding during periods with undistributed losses.

Diluted net loss per share of common stock is computed by dividing the net

loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined

using the treasury-stock method and if-converted method, as applicable.

Securities that potentially have an anti-dilutive effect (i.e.,

those that increase income per share or decrease loss per share) are excluded from the diluted loss per share calculation.

The Company accounts for its leases following

ASC 842, Leases .

The Company determines if a contract is a lease or contains a lease at the inception of the contract and reassesses

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All leases are assessed for classification as an operating lease or a finance lease.

Operating lease right-of-use

(“ROU”) assets are presented separately on the Company’s consolidated balance sheets.

Operating lease liabilities are

separated into a current portion and non-current portion and are presented separately on the Company’s consolidated balance sheets.

The Company does not have finance lease ROU assets or liabilities.

assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation

to make lease payments arising from the lease.

The Company does not obtain and control its right to use the identified asset until the

lease commencement date.

Company generally uses its incremental borrowing rate to discount the lease payments to present value.

The estimated incremental borrowing

rate is derived from information available at the lease commencement date.

The Company’s lease terms include periods under options

to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The Company generally uses the base,

non-cancelable, lease term when determining the lease assets and liabilities.

The Company also records a corresponding right-of-use asset

and applicable lease commencement date, which is calculated based on the amount of the lease liability, adjusted for any advance lease

payments made, lease incentives received, and initial direct costs incurred.

Right-of-use assets are subject to evaluation for impairment

or disposal on a basis consistent with other long-lived assets.

Company has elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of

twelve months or less.

Lease cost for short-term leases is recognized on a straight-line basis over the lease term.

(y) Warrant Liabilities

Company accounts for its warrant liabilities in accordance with the guidance in ASC 815-40, Derivatives and Hedging – Contracts

in Entity’s Own Equity , under which the warrants that do not meet the criteria for equity classification and must be recorded

as liabilities.

The warrant liabilities are measured at fair value at inception and at each reporting date in accordance with the guidance

in ASC 820, Fair Value Measurement , with any subsequent changes in fair value recognized in other income (expense), net on the

consolidated statements of operations and comprehensive loss.

Refer to Note 5 – Fair Value Measurements and Note 14 – Warrants.

(z) Forward Purchase Agreements

Company accounts for its forward purchase agreements (“FPAs”) in accordance with the guidance in ASC 480, Distinguishing

Liabilities from Equity , as the agreements embody an obligation to transfer assets to settle a forward contract.

The warrant liabilities

are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement ,

with any subsequent changes in fair value recognized in other income (expense), net on the consolidated statements of operations and

comprehensive loss.

Each of operating lease right-of-use

(“ROU”) assets and financed lease assets are presented separately on the Company’s consolidated balance sheets.

lease liabilities and finance lease obligations are separated into their respective current portion and non-current portions and are presented

separately on the Company’s consolidated balance sheets.

ROU assets represent the Company’s right

to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized on the date in which the lessor makes the underlying asset available for use,

based upon the present value of the lease payments over the respective lease term.

Lease expense is recognized on a straight-line basis

over the lease term, subject to any changes in the lease or expectation regarding the terms.

Variable lease costs such as common area

maintenance, property taxes and insurance are expensed as incurred.

The Company generally uses its incremental borrowing

rate to discount the lease payments to present value.

The estimated incremental borrowing rate is derived from information available at

the lease commencement date.

The Company’s lease terms include periods under options to extend or terminate the lease.

renew or extend leases beyond their initial term have been excluded from measurement of the ROU assets and lease liabilities as exercise

of such options is not reasonably certain.

The Company generally uses the base, non-cancellable, lease term when determining the lease

assets and liabilities.

The Company records a right-of-use asset which is calculated based on the amount of the lease liability, adjusted

for any advance lease payments made, lease incentives received, and initial direct costs incurred.

Right-of-use assets are subject to

evaluation for impairment or disposal on a basis consistent with other long-lived assets.

The Company has elected, for all classes of underlying assets, not

to recognize ROU assets and lease liabilities for leases with an initial term of twelve months or less.

Lease cost for short-term leases

is recognized on a straight-line basis over the lease term.

(w) Warrant Liabilities

The Company accounts for its warrant liabilities in accordance with

the guidance in ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity , under which the warrants that

do not meet the criteria for equity classification and must be recorded as liabilities.

The warrant liabilities are measured at fair value

at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement , with any subsequent

changes in fair value recognized in Other income (expense), net on the consolidated statements of operations and comprehensive loss.

to Note 5 – Fair Value Measurements and Note 14 – Warrants.

(x) Forward Purchase Agreements

The Company accounts for its FPAs in accordance with the guidance in

ASC 480, Distinguishing Liabilities from Equity , as the agreements embody an obligation to transfer assets to settle a forward

The FPAs are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair

Value Measurement , with any subsequent changes in fair value recognized in Other income (expense), net on the consolidated statements

of operations and comprehensive loss.

Refer to Note 5 – Fair Value Measurements and Note 6 – Forward Purchase Agreements.

(aa) Recently Adopted Accounting Pronouncements

June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments , and subsequent related ASUs, which amends the guidance on the impairment of financial instruments by requiring measurement

and recognition of expected credit losses for financial assets held.

ASU 2016-13 is effective for public and private companies’

fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and December 15, 2022, respectively.

The Company adopted ASU 2016-13 under the private company transition guidance beginning January 1, 2023.

The adoption did not have a

material impact on the Company’s consolidated financial statements.

(bb) Accounting Pronouncements Not Yet Adopted

(y) Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU No.

“Segment Reporting (Topic 280):

2023-07 “Segment Reporting

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

The ASU expands

public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the

CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment

items, and interim disclosures of a reportable segment’s profit or loss and assets.

This guidance is effective for fiscal years

beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective

The Company is currently evaluating ASU 2023-07 but expects the impact of the disclosures to be immaterial to the Company’s

consolidated financial statements.

The ASU expands public entities’

segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within

each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures

of a reportable segment’s profit or loss and assets.

This guidance is effective for fiscal years beginning after December 15, 2023,

and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption.

The Company adopted ASU

2023-07 in its fourth quarter of 2024 using a retrospective transition method.

See Note 22 – Segment Information for the Company’s

disclosures reflecting the adoption.

(z) Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09,

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ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024.

Company is currently evaluating ASU 2023-09 but expects the impact of the disclosures to be immaterial to the Company’s consolidated

financial statements.

Company is currently evaluating this ASU to determine its impact upon the Company’s disclosures.

In November 2024, the FASB issued ASU 2024-03,

Income Statement (Topic 220) Reporting Comprehensive Income – Expense Disaggregation Disclosure.

The objective of ASU 2024-03 is

to disclose disaggregated information about certain income statement expense line items.

ASU 2024-03 is effective for public companies

starting in annual periods beginning after December 15, 2026.

The Company is currently evaluating this ASU to determine its impact on

the Company’s disclosures.

(3) Reverse Recapitalization

discussed in Note 1 – Organization, on July 18, 2023, the Company consummated the Mergers pursuant to the Amended and Restated

Business Combination Agreement.

The Mergers was accounted for as a reverse recapitalization, rather than a business combination, for

financial accounting and reporting purposes.

Accordingly, Complete Solaria was deemed the accounting acquirer (and legal acquiree) and

FACT was treated as the accounting acquiree (and legal acquirer).

Complete Solaria has been determined to be the accounting acquirer

based on evaluation of the following facts and circumstances:

Solaria’s pre-combination stockholders have the majority of the voting power in the

post- merged company;

Complete Solaria’s stockholders have the ability to appoint a majority of the Complete

Solaria Board of Directors;

Complete Solaria’s management team is considered the management team of the post-merged

Complete Solaria’s prior operations is comprised of the ongoing operations of the post-merged

Solaria is the larger entity based on historical revenues and business operations;

post-merged company has assumed Complete Solaria’s operating name.

this method of accounting, the reverse recapitalization was treated as the equivalent of Complete Solaria issuing stock for the net assets

of FACT, accompanied by a recapitalization.

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

assets recorded.

The consolidated assets, liabilities, and results of operations prior to the Mergers are those of Legacy Complete Solaria.

All periods prior to the Mergers have been retrospectively adjusted in accordance with the Amended and Restated Business Combination

Agreement for the equivalent number of preferred or common shares outstanding immediately after the Mergers to effect the reverse recapitalization.

Upon the closing of the Mergers and the PIPE Financing in July 2023,

the Company received net cash proceeds of $ 19.7 million.

The following table reconciles the elements of the Mergers to the audited consolidated

statements of cash flows and the audited consolidated statements of stockholders’ deficit for the year-ended December 31, 2023 (in

As discussed in Note 1 – Organization, on

July 18, 2023, the Company consummated the Mergers pursuant to the Amended and Restated Business Combination Agreement.

The Mergers was

accounted for as a reverse recapitalization, rather than a business combination, for financial accounting and reporting purposes.

Complete Solaria was deemed the accounting acquirer (and legal acquiree) and FACT was treated as the accounting acquiree (and legal acquirer).

Complete Solaria was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

Complete Solaria’s pre-combination stockholders have the majority of the voting power in the post- merged company;

Legacy Complete Solaria’s stockholders have the ability to appoint a majority of the Complete Solaria Board of Directors;

Legacy Complete Solaria’s management team is considered the management team of the post-merged company;

Legacy Complete Solaria’s prior operations are comprised of the ongoing operations of the post-merged company;

Complete Solaria is the larger entity based on historical revenues and business operations;

the post-merged company has assumed Complete Solaria’s operating name.

Under this method of accounting, the reverse recapitalization

was treated as the equivalent of Complete Solaria issuing stock for the net assets of FACT, accompanied by a recapitalization.

assets of FACT were stated at historical cost, with no goodwill or other intangible assets recorded.

The consolidated assets, liabilities,

and results of operations prior to the Mergers are those of Legacy Complete Solaria.

All periods prior to the Mergers have been retrospectively

adjusted in accordance with the Amended and Restated Business Combination Agreement for the equivalent number of preferred or common shares

outstanding immediately after the Mergers to effect the reverse recapitalization.

Upon the closing of the Mergers and the PIPE Financing

in July 2023, the Company received net cash proceeds of $ 19.7 million.

The following table reconciles the elements of the Mergers to the

audited consolidated statements of cash flows and the audited consolidated statements of stockholders’ deficit for the year-ended

December 31, 2023 (in thousands):

Recapitalization

7 unchanged sentences

Net contributions from the Mergers and PIPE financing upon closing

upon closing of the Mergers, the Company had 45,290,553 shares issued and outstanding of Class A Common Stock.

The following table presents

the number of shares of Complete Solaria Common Stock outstanding immediately following the consummation of the Mergers:

Immediately upon closing of the Mergers, the Company

had 45,290,553 shares issued and outstanding of Class A Common Stock.

The following table presents the number of shares of Complete Solaria

Common Stock outstanding immediately following the consummation of the Mergers:

Recapitalization

18 unchanged sentences

As of December 31, 2023, the Company made cash payments totaling $ 5.4 million to settle transaction

As a result of the Closing, outstanding 2022 Convertible Notes were converted into shares of Complete Solaria Common Stock.

As a result of the Closing, the outstanding 2022 Convertible Notes were converted into shares of Complete Solaria Common Stock.

(4) Business Combination

On November 4, 2022, Complete Solar Holdings acquired

Solaria for aggregate consideration paid of $ 89.1 million, comprising of $ 0.1 million in cash, 2,884,550 shares of common stock with an

aggregate fair value of $ 17.3 million, 6,803,549 shares of preferred stock with an aggregate fair value of $ 52.2 million, 78,962 common

stock warrants for an aggregate value of $ 0.2 million, 1,376,414 preferred stock warrants for an aggregate fair value of $ 7.8 million,

5,382,599 stock options with an aggregate fair value of $ 10.0 million attributable to services provided prior to the acquisition date,

and the payment of seller incurred transaction expenses of $ 1.5 million.

In addition, the Company assumed $ 14.1 million of unvested Solaria

stock options, which has been and will be recorded as stock-based expense over the remaining service period.

Solaria designs, develops,

manufactures, and generates revenue from the sale of silicon photovoltaic solar panels and licensing of its technology to third parties.

At the time of the acquisition, the Company believed that the acquisition of Solaria would establish the Company as a full system operator,

with a compelling customer offering with best-in-class technology, financing, and project fulfilment, which would enable the Company to

sell more product across more geographies in the U.S.

This transaction was accounted for as a business combination in accordance

with ASC 805, Business Combinations .

Subsequent to the acquisition as discussed above, the Company sold certain intangible assets

constituting the Solaria business in October of 2023, resulting in the results of the Solaria business to be reflected as discontinued

operations and certain intangible assets and goodwill to be recognized as held-for-sale.

Refer to Note 8 – Divestiture for further

costs of $ 1.3 million were expensed by the Company and are included in general and administrative expenses within the consolidated statements

of operations and comprehensive loss for the year ended December 31, 2022.

fair value of assets acquired and liabilities assumed was based upon a preliminary valuation and the Company’s estimates and assumptions

are subject to change within the measurement period.

The following table summarized the provisional fair value of identifiable assets

SunPower Acquisition

On September 30, 2024, the Company completed the

acquisition of certain assets and assumption of certain liabilities of SunPower for an aggregate cash consideration paid of $ 54.5 million,

net of $ 1.0 million of cash acquired.

SunPower Corporation is a solar technology and energy services provider that offers fully integrated

solar, storage, and home energy solutions to customers in the United States through an array of hardware, software, and “Smart Energy”

The financial results of the SunPower Acquisition have been included in the Company’s consolidated financial statements

since the date of Acquisition.

This transaction was accounted for as a business combination in accordance with ASC 805, Business Combinations .

Transaction costs incurred in connection with

the close of the acquisition totaled $ 7.2 million and were expensed by the Company and are included in general and administrative expenses

within the consolidated statements of operations and comprehensive loss for the fiscal year ended December 29, 2024.

The fair values of assets acquired and liabilities

assumed were based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement

Due to the complexities of acquiring assets out of bankruptcy the purchase price accounting remains open for certain assets acquired

and liabilities assumed.

The primary areas that remain preliminary relate to the cash consideration for the transaction for balances remaining

in escrow, fair value of intangible assets and goodwill.

The following table summarizes the provisional fair value of identifiable assets

acquired and liabilities assumed (in thousands):

Cash, cash equivalents and restricted cash

Net assets acquired:

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Property and equipment

Operating lease right-of-use asset

Intangible assets

Other non-current assets

Total identifiable assets acquired

Operating lease right-of-use assets

Other noncurrent assets

Deferred revenue

Accounts payable

Accrued expenses and other current liabilities

Notes payable

Deferred revenue

Operating lease liabilities, net of current portion

Warranty provision, noncurrent

SAFE agreements

Total identifiable liabilities assumed

Net identifiable liabilities assumed

Total aggregate consideration paid

Operating lease liabilities

Other long-term liabilities

Fair value of net assets acquired

Consideration transferred

Goodwill recognized

Goodwill represents the excess of the preliminary

estimated consideration transferred over the fair value of the net tangible and intangible assets acquired and has been allocated to the

Company’s single reporting unit.

Goodwill was subsequently reclassified to long-term assets held for sale – discontinued operations,

on the Company’s balance sheet as of December 31, 2022, stemming from the sale of the Solaria business discussed in Note 8 –

Divestiture below.

assets acquired and subsequently disposed of as part of the Solaria sale discussed in Note 8 – Divestiture below are as follows

(in thousands):

Developed technology

Customer relationships

Total intangible assets

income approach, using the relief from royalty method, was used to value trademarks and developed technology.

Significant assumptions

included in the valuation of trademarks and developed technology include projected revenues, the selected royalty rate and the economic

life of the underlying asset.

income approach, using the multi-period excess earning method, was used to value customer relationships.

Significant assumptions included

in the valuation of customer relationships include projected revenues, customer attrition and expense growth over the forecasted period.

As a result of the Solaria acquisition, the Company

recognized $ 45.9 million of deferred tax assets.

Due to the uncertainty surrounding the Company’s ability to realize such deferred

income tax assets, a full valuation allowance has been established.

Net operating losses were incurred by Solaria from November 4, 2022

through the divestiture in 2023.

An unrecognized tax benefit was recorded in 2023 related to all acquired losses and post-acquisition

losses due to the divestiture.

Refer to Note 19 – Income Taxes for additional details.

(5) Fair Value Measurements

following table sets forth the Company’s financial assets and liabilities that were measured at fair value, on a recurring basis

(in thousands):

estimated consideration transferred over the fair value of the net tangible and intangible assets acquired that is associated with the

excess cash flows that the acquisition is expected to generate in the future and has been allocated to the Company’s Residential

Solar Installation and New Homes Business reporting units.

The goodwill is tax deductible.

The income approach, using the relief from royalty

method, was used to value the trademarks, and the cost approach was used for developed technology.

Significant assumptions included in

the valuation of trademarks include projected revenues, the selected royalty rate, discount rate, and the economic life of the underlying

Significant assumptions included in the valuation of the acquired technology include the estimated costs to reconstruct the asset

(inclusive of a third-party profit margin) as well as the value of the opportunity cost of foregone returns over the period that the Company

has estimated to recreate the asset.

Contract assets and liabilities were measured

at fair value using the cost approach which approximates the carrying value at date of acquisition.

The SunPower Acquisition contributed $ 83.8 million

and $ 6.5 million in revenue and income before income taxes, respectively for the period from the acquisition date to fiscal year ended

December 29, 2024.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information

represents the consolidated financial statements of the Company for the periods presented, as if the acquisition occurred on January 1,

The unaudited pro forma combined financial information

does not give effect to any cost savings, operating synergies or revenue synergies that may result from the Acquisition.

The pro forma

results do not necessarily reflect the actual results of operations of the combined business (in thousands).

Fiscal Year Ended

Pro forma revenue

Pro forma net loss from continuing operations

(5) Fair Value Measurements

The following table sets forth the Company’s

financial assets and liabilities that were measured at fair value, on a recurring basis (in thousands):

As of December 29, 2024

Financial Assets

Restricted cash

Financial Liabilities

July 2024 derivative liability (1)

September 2024 derivative liability (1)

Forward purchase agreements (2)

Public warrants

Private placement warrants

Working capital warrants

SAFE Agreement with related party

As of December 31, 2023

Financial Assets

Restricted cash

Financial Liabilities

Carlyle Warrants

3 unchanged sentences

Replacement warrants

Forward purchase agreement liabilities

December 31, 2022

Financial Liabilities

Redeemable convertible preferred stock warrant liability

Forward purchase agreements (1)

(1) A portion of these balances are with related parties.

Refer to Note 15 – Borrowings and Derivative Liabilities for details.

(2) A portion of these balances are with related parties.

Refer to Note 6 – Forward Purchase Agreements for details.

Subsequent to issuance, changes in the fair value

of liability classified warrants, forward purchase agreements and SAFEs are recorded within other income (expense), net in the Company’s

consolidated statements of operations and comprehensive loss.

Derivative liabilities

The Company issued derivative liabilities in conjunction

with the issuance of certain convertible notes in July 2024 and September 2024 (refer to Note 15

– Borrowings and Derivative Liabilities).

The Company valued the derivative liabilities as of their issuance date and as of December

29, 2024 using a binomial lattice model, which includes level 3 unobservable inputs.

The key inputs used were dividend yield, the Company’s

common stock price, volatility, risk-free rate and the expected term of the derivative liabilities.

The derivative liability valuation

included the following inputs as of December 29, 2024:

Conversion rate

Conversion price

Common stock price

Dividend Yield

Carlyle Warrants

As part of the Company’s amended and restated

warrant agreement with CRSEF Solis Holdings, LLC (“Carlyle”), dated July 18, 2023, the Company issued Carlyle a warrant to

purchase up to 2,745,879 shares of Complete Solaria Common Stock at a price per share of $ 0.01 , which is inclusive of the outstanding

warrant to purchase 1,995,879 shares at the time of modification.

The warrant, which expires on July 18, 2030, provides Carlyle with the

right to purchase shares of Complete Solaria Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares

equal to 2.795% of Complete Solaria’s issued and outstanding shares of common stock, on a fully-diluted basis; plus (b) on

and after the date that is ten (10) days after the date of the amended and restated warrant agreement, an additional 350,000 shares;

plus (c) on and after the date that is thirty (30) days after the date of the amended and restated warrant agreement, if the original

investment amount has not been repaid, an additional 150,000 shares; plus (d) on and after the date that is ninety (90) days after

the date of the amended and restated warrant agreement, if the original investment amount has not been repaid, an additional 250,000 shares,

in each case, of Complete Solaria Common Stock at a price of $0.01 per share .

As the warrant is exercisable into a variable number of

shares based on the Company’s fully diluted capitalization table, the Company has classified the warrants as liabilities.

valued the warrants based on a Black-Scholes Option Pricing Method, which included the following inputs:

warrant agreement with CRSEF Solis Holdings, LLC and its affiliates (“Carlyle”), the Company issued Carlyle a warrant to purchase

shares of Complete Solaria Common Stock at a price per share of $ 0.01 .

Refer to Note 14 – Warrants for further details.

In connection

with an exchange of debt effective July 1, 2024, as discussed in Note 15 – Borrowings and Derivative Liabilities, the number of

shares expected to be issued in connection with the Carlyle Warrant became fixed and the Carlyle Warrant was reclassified from liability

Accordingly, the Carlyle Warrant is not subject to a fair value measurement as of December 29, 2024.

The Company valued the Carlyle Warrants as of

December 31, 2023, based on a Black-Scholes Option Pricing Method, which included the following inputs:

Expected term

2 unchanged sentences

Expected dividend yield

Public Warrants

The public warrants are measured at fair value

on a recurring basis.

The public warrants were valued based on the closing price of the publicly traded instrument.

Private Placement and Working Capital Warrants

public, private placement and working capital warrants are measured at fair value on a recurring basis.

The public warrants were valued

based on the closing price of the publicly traded instrument.

The private placement and working capital warrants were valued using observable

inputs for similar publicly traded instruments.

Purchase Agreement Liabilities

FPA liabilities are measured at fair value on a recurring basis using a Monte Carlo simulation analysis.

The expected volatility is determined

based on the historical equity volatility of comparable companies over a period that matches the simulation period, which included the

following inputs:

Common stock trading price

Simulation period

Risk-free rate

Convertible Preferred Stock Warrant Liabilities

Company historically issued redeemable convertible warrants, which were classified as liabilities and adjusted to fair value using the

Black Scholes Option Pricing Method.

The terms of the redeemable convertible preferred stock warrants are described in Note 14 –

B Redeemable Convertible Preferred Stock Warrant

Expected term

Expected volatility

Risk-free interest rate

Expected dividend yield

C Redeemable Convertible Preferred Stock Warrant

The private placement and working capital warrants

are measured at fair value.

The Company valued the private placement and working capital warrants, based on a Black-Scholes Option

Pricing Method, which included the following inputs:

Expected term

2 unchanged sentences

Expected dividend yield

D-7 Redeemable Convertible Preferred Stock Warrant

As of December 31, 2023, the private placement and working capital warrants

were valued using observable inputs for similar publicly traded instruments.

Forward Purchase Agreement Liabilities

FPAs are measured at fair value on a recurring

basis using a Monte Carlo simulation analysis.

The expected volatility is determined based on the historical equity volatility of comparable

companies over a period that matches the simulation period, which included the following inputs:

Simulation period

Risk-free rate

SAFE Agreement

The SAFE Agreement was valued based on a conversion

probability of 50 % based on historical SAFE agreements and a 50 % discount rate at the time of conversion as of December 29, 2024.

Replacement Warrants

There were no replacement warrants as of December

The Company valued the Replacement Warrants as of December 31, 2023, based on a Black-Scholes Option Pricing Method, which included

the following inputs:

Expected term

2 unchanged sentences

Expected dividend yield

The redeemable convertible preferred stock warrant

liabilities were measured at fair value at the issuance date and as of each subsequent reporting period with changes in the fair value

recorded within other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.

The following table sets forth the Company’s

financial liabilities that were not measured at fair value, on a non-recurring basis (in thousands):

As of December 29, 2024

Financial Liabilities

July 2024 Notes

July 2024 Notes - related parties

September 2024 Notes

September 2024 Notes - related parties

As of December 29, 2024, the July 2024 Notes and

the September 2024 Notes were fair valued using a binomial lattice model, which includes Level 3, unobservable inputs.

The key inputs

used are consistent with those used to fair value the derivative liabilities as discussed under Derivative liabilities above.

(6) Forward Purchase Agreements

July 2023, FACT and Legacy Complete Solaria, Inc.

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

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

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

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

While the FPA

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

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

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

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

key terms of the forward contracts are as follows:

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

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

Seller shall terminate the transaction

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

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

number of terminated shares multiplied by a reset price.

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

subject to a $ 5.00 floor.

FPA contains multiple settlement outcomes.

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

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

settlement amount adjustment exceed the settlement amount.

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

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

trading days.

In July 2023, FACT and Legacy Complete Solaria,

entered into FPAs with each of (i) Meteora; (ii) Polar, and (iii) Sandia (each individually, a “Seller”, and together,

the “FPA Sellers”).

In connection with the FPAs, the Company recognized other expense of $ 30.7 million in the fiscal year

ended December 31, 2023 in connection with the issuance of 5,670,000 shares of the Company’s common stock to the related party FPA

Pursuant 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 forward contracts are as

● The FPA Sellers can terminate the transaction following the Optional Early Termination (“OET”) Date which shall specify the quantity by which the number of shares is to be reduced (such quantity, the “Terminated Shares”).

Seller shall terminate the transaction in respect of any shares sold on or prior to the maturity date.

The counterparty is entitled to an amount from the Seller equal to the number of terminated shares multiplied by a reset price.

The reset price is initially $ 10.56 (the “Initial Price”) and is subject to a $ 5.00 floor.

● The FPA contains multiple settlement outcomes.

Per the terms of the agreements, the FPAs will (1) settle in cash in the event the Company is due cash upon settlement from the FPA Sellers or (2) settle in either cash or shares, at the discretion of the Company, should the settlement amount adjustment exceed the settlement amount.

Should the Company elect to settle via shares, the equity will be issued in Complete Solaria Common Stock, with a per share price based on the volume-weighted average price (“VWAP”) Price over 15 scheduled trading days.

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

(1) Number of shares

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

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

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

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

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

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

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

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

than the then applicable Reset Price.

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

prior to the closing of the Mergers.

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

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

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.

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

The Settlement amount will be reduced by the Settlement Adjustment, an amount equal to the product of (1) Number of shares in the Pricing Date Notice, less the number of Terminated Shares multiplied by $ 2.00 .

The Settlement occurs as of the Valuation Date, which is the earlier to occur of (a) the date that is two years after the date of the Closing Date of the Mergers (b) the date specified by Seller in a written notice to be delivered to Counterparty at Seller’s discretion (which Valuation Date shall not be earlier than the day such notice is effective) after the occurrence of certain triggering events;

and (c) 90 days after delivery by the Counterparty of a written notice in the event that for any 20 trading days during a 30 consecutive trading day-period (the “Measurement Period”) that occurs at least 6 months after the Closing Date, the VWAP Price is less than the then applicable Reset Price.

The Company entered into four separate FPAs, three

of which, associated with the obligation to issue 6,300,000 Shares, were entered into prior to the closing of the Mergers.

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 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

Distinguishing Liabilities from Equity , the Company determined that the forward contract is a financial instrument other than a

share that represents or is 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.

1 unchanged sentence

purchase liability at fair value and has subsequently remeasured it at fair value with changes in fair value recognized in earnings.

Through the date of issuance of the Complete Solaria

Common Stock in satisfaction of the Company’s obligation to issue shares around the closing of the Mergers, the Company recorded

$ 35.5 million to other income (expense), net associated with the issuance of 6,720,000 shares of Complete Solaria Common Stock in association

with the FPAs.

As of the closing of the Mergers and issuance

2 unchanged sentences

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.

On December 18, 2023, the Company 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 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.

On May 7 and 8, 2024, respectively, the Company

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 the Company executes similar amendments with both Polar and

On June 14, 2024, the Company entered into and

executed an amendment to the FPA with Sandia (the “Sandia Third Amendment”).

The Sandia 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.”

On July 17, 2024, the Company entered into an

amendment to the FPA with Polar pursuant to which the Company and Polar agreed that Section 2 (Most Favored Nation) of the FPA is applicable

to all 2,450,000 shares subject to the FPA.

Through the date of issuance of the Complete Solaria

Common Stock in satisfaction of the Company’s obligation to issue shares around the closing of the Mergers, the Company recorded

$ 35.5 million to Other expense, in the fiscal year ended December 31, 2023, net associated with the issuance of 6,720,000 shares of Complete

Solaria Common Stock in association with the FPAs.

The FPA liability balance was $ 3.5 million and

$ 3.8 million, as of December 29, 2024 and December 31, 2023, respectively.

The Company concluded that $ 1.3 million and $ 3.2 million of

the FPA liability was with related parties as of December 29, 2024 and December 31, 2023, respectively.

The change in the fair value of

the forward purchase liabilities amounted to income of $ 0.3 million and expense of $ 3.9 million for the fiscal years ended December 29,

2024 and December 31, 2023, respectively.

The change in the fair value of the FPA liability with related parties was income of $ 0.1 million

and expense of $ 8.7 million ($ 9.1 million of expense upon issuance, net of $ 0.4 million of income) in the fiscal years ended December

29, 2024 and December 31, 2023, respectively.

(7) Prepaid Expenses and Other Current Assets

expenses and other current assets consist of the following (in thousands):

As of December 31,

Prepaid expenses and other current assets consist

of the following (in thousands):

Inventory deposits

Deferred costs

Prepaid sales commissions

Total prepaid expenses and other current assets

(8) Divestiture

As previously described in Note 1 – Organization,

on August 18, 2023, the Company entered into a Non-Binding Letter of Intent to sell certain of Complete Solaria’s North American

solar panel assets, inclusive of intellectual property and customer contracts, to Maxeon.

In October 2023, the Company completed the sale

of its solar panel business to Maxeon, pursuant to the terms of the Asset Purchase Agreement Disposal Agreement.

Under the terms of the

Disposal Agreement, Maxeon agreed to acquire certain assets and employees of Complete Solaria.

The Company determined that this divestiture

represented a strategic shift in the Company’s business and qualified as a discontinued operation.

Accordingly, the results of operations

and cash flows relating to Solaria have been reflected as discontinued operations in the consolidated statements of operations and comprehensive

loss for the fiscal year ended December 31, 2023 and the consolidated statements of cash flows for the fiscal year ended December 31,

of amounts reflected in the consolidated statements of operations and comprehensive loss related to discontinued operations are presented

in the table, as follows (in thousands):

Fiscal year ended

Cost of revenues

Operating expenses:

Sales and marketing

General and administrative

Total operating expenses

Loss from discontinued operations

Other income, net

Loss from discontinued operations before income taxes

Income tax benefit

Loss from discontinued operations, net of tax

Impairment loss from discontinued operations

Net loss from discontinued operations

$ ( 173,358 )

(8) Goodwill and Other Intangible Assets

On September 30, 2024, the Company

completed the SunPower Acquisition.

Goodwill presented on the Company’s consolidated financial statements represents Goodwill

recognized from the SunPower Acquisition.

The goodwill recognized was assigned to the Residential Solar Installation and New Homes Business

reportable segments as $ 18.3 million and $ 0.2 million, respectively.

The Company performed a qualitative assessment of goodwill and determined

that at the acquisition date and the date at which the Company performed an impairment analysis, there were no relevant events or circumstances

that would result in the reportable segment being less than its carrying amount.

The Company concluded that as of December 29, 2024, there

is no impairment.

Other Intangible Assets

The following table represents our other intangible

assets with finite useful lives as of December 29, 2024 (in thousands):

Gross Carrying

Trademark – Blue Raven Solar

Trademark – SunPower

Developed technology

Aggregate amortization expense for intangible assets was $ 0.7 million

and zero for the fiscal years ended December 29, 2024, and December 31, 2023, respectively.

Amortization expense is recognized in general

and administrative expenses in the consolidated statement of operations.

No impairment loss was recorded for intangible assets for the

fiscal year 2024.

The weighted average remaining life of these intangible assets is 8.1 years as of December 29, 2024.

The estimated amortization expense related to

intangible assets with finite useful lives is as follows (in thousands):

(9) Property and Equipment, Net

and equipment, net consist of the following (in thousands, except year data):

As of December 31,

Developed software

Property and equipment, net consist of the following

(in thousands):

Internal-use software

Manufacturing equipment

4 unchanged sentences

Total property and equipment, net

and amortization expense on tangible assets totaled $ 0.9 million and $ 0.6 million for the fiscal years ended December 31, 2023 and 2022.

There were no impairment charges on tangible assets recognized for the fiscal years ended December 31, 2023 and 2022.

Depreciation and amortization expense on totaled $ 2.0 million and $ 0.9

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

Finance leases are included within vehicles and makes up $ 3.9

million of the total balance as of fiscal year ended December 29, 2024.

The Company recognized a total of $ 3.8 million

on impairment and loss on disposal of property and equipment for the fiscal year ended December 29, 2024 consisting primarily of $ 3.4

million relating to its proprietary HelioTrackTM software system.

The Company impaired the value of its HelioTrackTM software as this

software has no future use following the completion of the migration to software acquired in the SunPower Acquisition.

There were no impairment

charges on tangible assets recognized for the fiscal year ended December 31, 2023.

(10) Accrued Expenses and Other Current Liabilities

expenses and other current liabilities consist of the following (in thousands):

As of December 31,

Accrued expenses and other current liabilities

consist of the following (in thousands):

Accrued compensation and benefits

Customer deposits

Uninvoiced contract costs

Inventory received but not invoiced

Accrued term loan and revolving loan amendment and final payment fees

Professional fees

Installation costs

Term loan and revolving loan amendment final payment fees

Accrued legal settlements

2 unchanged sentences

Operating lease liabilities, current

Finance lease liabilities, current

Accrued warranty, current

accrued liabilities

Deferred financing fees

Accrued interest

Accrued interest due to related parties

Other accrued liabilities

Total accrued expenses and other current liabilities

(11) Employee Benefit Plan

Company sponsors a 401(k) defined contribution and profit-sharing plan (“401(k) Plan”) for its eligible employees.

Plan provides for tax-deferred salary deductions for all eligible employees.

The Company sponsors a 401(k) defined contribution

and profit-sharing plan (“401(k) Plan”) for its eligible employees.

This 401(k) Plan provides for tax-deferred salary deductions

for all eligible employees.

Employee contributions are voluntary.

Employees may contribute

the maximum amount allowed by law, as limited by the annual maximum amount as determined by the Internal Revenue Service.

may match employee contributions in amounts to be determined at the Company’s sole discretion.

The Company made no contributions

to the 401(k) Plan for the fiscal years ended December 31, 2023 and 2022.

(12) Other Expense, Net

expense, net consist of the following (in thousands):

Fiscal Years Ended

Employees may contribute the maximum amount allowed by law, as limited

by the annual maximum amount as determined by the Internal Revenue Service.

The Company may match employee contributions in amounts to

be determined at the Company’s sole discretion.

The Company made no contributions to the 401(k) Plan for the fiscal years ended

December 29, 2024 and December 31, 2023.

(12) Other Income (Expense), Net

Other income (expense), net consist of the following (in thousands):

Fiscal Year Ended

Change in fair value of redeemable convertible preferred stock warrant liability

Change in fair value of Carlyle Warrants (1)

Change in fair value of warrant liabilities

Change in fair value of FACT public, private placement and working capital warrants

Gain on extinguishment of convertible notes and SAFE agreements (1)

Loss on conversion of SAFE agreements to common stock with related party

Change in fair value of SAFE Agreement with related party

Loss on sale of equity securities

3 unchanged sentences

Change in fair value of forward purchase agreement liabilities (4)

Loss on issuance of shares

in connection with the forward purchase agreements (5)

Loss on issuance of shares in connection with the forward purchase agreements (5)

Loss on discontinued Solaria business and other, net

Total other expense, net

zero and $ 1.4 million of other income for the fiscal years ended December 31, 2023 and 2022, respectively, recognized upon the conversion

of related party convertible notes and SAFEs.

$ 0.7 million of other expense for the fiscal year ended December 31, 2023 for bonus shares issued to related parties in connection with

$ 0.4 million of other income for the fiscal year ended December 31, 2023 for forward purchase agreements entered into with related parties.

$ 9.1 million of other expense for the fiscal year ended December 31, 2023 for forward purchase agreements entered into with related parties.

$ 30.7 million of other expense the fiscal year ended December 31, 2023 for shares issued to related parties in connection with the forward

purchase agreements.

Loss on issuance of derivative liability (6)

Gain on remeasurement of derivative liabilities (7)

Other financing costs

Total Other income (expense), net

(1) Deemed to be a related party in the fiscal year ended December 29, 2024.

Refer to Note 15 – Borrowings and Derivative Liabilities for details.

(2) Includes $ 0.7 million of other expense for the fiscal year ended December

31, 2023, for bonus shares issued to related parties in connection with the Mergers.

(3) Includes $ 0.4 million of other income for the fiscal year ended December

31, 2023, for forward purchase agreements entered into with related parties.

(4) Includes income of $ 0.1 million and $ 9.1 million of other expenses

for the fiscal years ended December 29, 2024, and December 31, 2023, for the change in fair value of FPAs entered into with related parties.

(5) Includes $ 30.7 million of other expense the fiscal year ended December 31, 2023 for shares issued to related parties in connection with the forward purchase agreements.

(6) Includes a loss of $ 3.0 million on the issuance of a derivative liability with a related party in the fiscal year ended December 29, 2024.

Refer to Note 15 – Borrowings and Derivative Liabilities for details.

(7) Includes a gain of $ 0.3 million on the change in the fair value of derivative liabilities with related parties in the fiscal year ended December 29, 2024.

Refer to Note 15 – Borrowings and Derivative Liabilities for details.

(13) Common Stock

Company has authorized the issuance of 1,000,000,000 shares of common stock and 10,000,000 shares of preferred stock as of December 31,

No preferred stock has been issued.

Stock Purchase Agreements

December 18, 2023, the Company entered into separate common stock purchase agreements (the “Purchase Agreements”) with the

Rodgers Massey Freedom and Free Markets Charitable Trust and the Rodgers Massey Revocable Living Trust (each a “Purchaser”,

and together, the “Purchasers”).

Pursuant to the terms of the Purchase Agreements, each Purchaser purchased 1,838,235 shares

of common stock of the Company, par value $ 0.0001 , (the “Shares”), at a price per share of $ 1.36 , representing an aggregate

purchase price of $ 4,999,999.20 .

The Purchasers paid for the Shares in cash.

Rodgers is a trustee of each Purchaser and is

the Executive Chairman of the board of directors of the Company.

Company has reserved shares of common stock for issuance related to the following:

The Company’s authorized capital stock comprises 1,000,000,000

shares of common stock and 10,000,000 shares of preferred stock as of December 29, 2024.

No preferred stock has been issued and none are

outstanding as of December 29, 2024.

Common Stock Purchase Agreements

On December 18, 2023, the Company entered into

separate common stock purchase agreements (the “Purchase Agreements”) with the Rodgers Massey Freedom and Free Markets Charitable

Trust and the Rodgers Massey Revocable Living Trust (each a “Purchaser”, and together, the “Purchasers”).

to the terms of the Purchase Agreements, each Purchaser purchased 1,838,235 shares of common stock of the Company, par value $ 0.0001 ,

(the “Shares”), at a price per share of $ 1.36 , representing an aggregate purchase price of $ 5.0 million.

The Purchasers paid

for the shares in cash.

Rodgers is a trustee of each Purchaser, Executive Chairman of the Company’s board of directors

and Chief Executive Officer of the Company (“Rodgers” or “CEO”).

On July 16, 2024, the Company entered into a common

stock purchase agreement with White Lion Capital, LLC (“White Lion”), as amended on July 24, 2024 (“White Lion SPA”),

and a related registration rights agreement for an equity line of credit financing facility.

Pursuant to the White Lion SPA, the Company

has the right, but not the obligation, to require White Lion to purchase, from time to time up to $ 30 million in aggregate gross purchase

price of newly issued shares of the Company’s common stock, subject to the caps and certain limitations and conditions set forth

in the White Lion SPA, including terms that restrict the ability of the Company to issue shares of common stock to White Lion that would

result in White Lion beneficially owning more than 9.99 % of the Company’s outstanding common stock.

On August 14, 2024, the Company entered into Amendment No.

White Lion SPA (collectively with the White Lion SPA “White Lion Amended SPA”).

The White Lion Amended SPA provides that the

Company may notify White Lion to exercise the Company’s right to sell shares of its common stock by delivering an Hour Rapid Purchase

If the Company delivers an Hour Rapid Purchase Notice, the Company shall deliver to White Lion shares of common stock not to exceed

the lesser of (i) five percent of the Average Daily Trading Volume on the date of an Hour Rapid Purchase Notice and (ii) 100,000 shares

of common stock.

The closing of the transactions under an Hour Rapid Purchase Notice will occur one Business Day following the date on

which the Hour Rapid Purchase Notice is delivered.

At such closing, White Lion will pay the Company the Hour Rapid Purchase Investment

Amount equal to the number of shares of common stock subject to the applicable Hour Rapid Purchase Notice multiplied by the lowest traded

price of the Company’s common stock during the one-hour period following White Lion’s consent to the acceptance of the applicable

Hour Rapid Purchase Notice.

Under the White Lion Amended SPA, the Company issued a total of 2.9 million shares of common stock for net

proceeds of $ 6.7 million in the fiscal year ended December 29, 2024.

The Company has reserved shares of common stock

for issuance related to the following:

Common stock warrants

2 unchanged sentences

Stock options and RSUs, authorized for future issuance

SAFE Agreement

Forward purchase agreements

Convertible notes

Total shares reserved

(14) Warrants

B Warrants (Converted to Common Stock Warrants)

February 2016, the Company issued a warrant to purchase 5,054 shares of Series B preferred stock (the “Series B warrant”)

in connection with a 2016 credit facility.

The Series B warrant is immediately exercisable at an exercise price of $ 4.30 per share and

has an expiration date of February 2026.

The fair value of the Series B warrant was less than $ 0.1 million as of December 31, 2022 and

as of July 18, 2023, when the Series B warrant was reclassified from warrant liability to additional paid-in capital, as the warrant

is exercisable into shares of Complete Solaria Common Stock upon the close of the Mergers.

The relative fair value of the Series B warrant

at issuance was recorded as a debt issuance cost within other non-current liabilities on the accompanying consolidated balance sheets,

and changes in fair value have been recorded in other income (expense), net on the accompanying consolidated statements of operations

and comprehensive loss for the fiscal years ended December 31, 2023 and 2022.

C Warrants (Converted to Common Stock Warrants)

July 2016, the Company issued a warrant to purchase 148,477 shares of Series C preferred stock (the “Series C warrant”) in

connection with the Series C financing.

The Series C warrant agreement also provided for an additional number of Series C shares calculated

on a monthly basis commencing on June 2016 based on the principal balance outstanding of the notes payable outstanding.

The maximum number

of shares exercisable under the Series C warrant agreement is 482,969 shares of Series C preferred stock.

The Series C warrant was immediately

exercisable at an exercise price of $ 1.00 per share and has an expiration date of July 2026.

The fair value of the Series C warrant was

$ 6.3 million as of December 31, 2022.

The fair value of the Series C warrant was $ 2.3 million as of July 18, 2023, when the Series B

warrant was reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital, as the warrant

is exercisable into shares of Complete Solaria Common Stock upon the close of the Mergers.

The relative fair value of the Series C warrant

at issuance was recorded as Series C preferred stock issuance costs and redeemable convertible preferred stock warrant liability on the

accompanying consolidated balance sheets, and changes in fair value have been recorded in other income (expense), net on the accompanying

consolidated statements of operations and comprehensive loss for the fiscal years ended December 31, 2023 and 2022.

C-1 Warrants (Converted to Common Stock Warrants)

January 2020, the Company issued a warrant to purchase 173,067 shares of common stock in conjunction with the Series C-1 preferred stock

The warrant is immediately exercisable at an exercise price of $ 0.01 per share and has an expiration date of January 2030.

The warrant remains outstanding as of December 31, 2023.

At issuance, the relative fair value of the warrant was determined to be $ 0.1

million using the Black-Scholes model with the following weighted average assumptions:

expected term of 10 years;

expected volatility

risk-free interest rate of 1.5 %;

and no dividend yield.

The fair value of the warrant was recorded within additional paid-in

capital on the consolidated balance sheets.

The warrant is not remeasured in future periods as it meets the conditions for equity classification.

February 2022, as part of a debt financing from Carlyle (refer to Note 15 – Borrowing Arrangements), the Company issued a warrant

to purchase 2,886,952 shares of common stock in conjunction with the redeemable investment in CS Solis.

Liability-classified warrants

Liability classified warrants are as follows (in thousands):

placements warrants

capital warrants

Total liability classified warrants

Series D-7 Warrants (Converted to Common Stock

Warrants “Replacement Warrants”)

In November 2022, the Company issued warrants

to purchase 656,630 shares of Series D-7 preferred stock (the “Series D-7 warrants”) in conjunction with the Business Combination.

The warrant contained two tranches.

the first of which is immediately exercisable for 1,995,879 shares.

The second tranche, which was determined to be a separate unit of

account, was exercisable upon a subsequent investment from Carlyle in CS Solis.

No subsequent investment was made and the investment

period expired on December 31, 2022 and the second tranche of warrants expired prior to becoming exercisable.

The vested warrant had

an exercise price of $ 0.01 per share and had an expiration date of February 2029.

issuance, the relative fair value of the warrant was determined to be $ 3.4 million using the Black-Scholes model with the following weighted

average assumptions:

The first tranche of 518,752 shares of Series D-7 preferred stock was exercisable at an exercise price

of $ 2.50 per share upon consummation of a merger transaction, or at an exercise price of $ 2.04 per share upon remaining private and had

an expiration date of April 2024.

The second tranche of 137,878 shares of Series D-7 preferred stock was exercisable at an exercise price

of $ 5.00 per share upon consummation of a merger transaction, or at an exercise price of $ 4.09 per share upon remaining private and had

an expiration date of April 2024.

The fair value of the Series D-7 warrants was $ 2.4 million as of July 18, 2023 when the warrants were

reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital, as the exercise price of the

warrants was fixed at $ 2.50 per share of Complete Solaria Common Stock for the first tranche and $ 5.00 per share of Complete Solaria Common

Stock for the second tranche upon the closing of the Mergers.

In October 2023, the Company entered into an Assignment and Acceptance

Agreement (“Assignment Agreement”), (refer to Note 15 – Borrowings and Derivative Liabilities).

In connection with the

Assignment Agreement, the Company also entered into the First Amendment to Warrant to Purchase Stock Agreements with the holders of the

Series D-7 warrants.

Pursuant to the terms of the agreement, the warrants to purchase 1,376,414 shares of Series D-7 preferred stock converted

into warrants to purchase 656,630 shares of common stock (the “Replacement Warrants”).

As a result of the warrant amendment,

the Company reclassified the Replacement Warrants from equity to liability.

The Replacement Warrants were remeasured to fair value on

the amendment effective date and the Company recorded subsequent changes in fair value within Other income (expense), net in its consolidated

statements of operations and comprehensive loss.

The Replacement Warrants expired in April 2024

and the Company released the $ 1.3 million liability recognized in connection with the warranty liability.

The $ 1.3 million of income was

classified in Other income (expense), net within its consolidated statements of operations and comprehensive loss.

Public, Private Placement, and Working Capital Warrants

In conjunction with the Mergers, Complete Solaria,

as accounting acquirer, was deemed to assume 6,266,667 warrants to purchase FACT Class A Ordinary Shares that were held by the sponsor

at an exercise price of $ 11.50 (“Private Placement Warrants”) and 8,625,000 warrants to purchase FACT’s shareholders

FACT Class A Ordinary Shares at an exercise price of $ 11.50 (“Public Warrants”).

Subsequent to the Mergers, the Private Placement

Warrants and Public Warrants are exercisable for shares of Complete Solaria Common Stock and meet liability classification requirements

since the warrants may be required to be settled in cash under a tender offer.

In addition, Private Placement Warrants are potentially

subject to a different settlement amount as a result of being held by the Sponsor which precludes the Private Placement Warrants from

being considered indexed to the entity’s own stock.

Therefore, these warrants are classified as liabilities on the consolidated

balance sheets.

The fair values of the warrant liabilities were

$ 1.5 million and $ 0.3 million as of December 29, 2024, and December 31, 2023, respectively.

The Company recorded a $ 1.2 million and $ 6.4

million increase in the fair value of these warrants for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

These changes were recorded in Other income (expense), net in the Company’s consolidated statements of operations and comprehensive

Additionally, at the closing of the Mergers, the Company issued 716,668

Working Capital warrants, which have identical terms as the Private Placement Warrants to the sponsor in satisfaction of certain liabilities

The warrants were fair valued at $ 0.3 million upon the closing of the Mergers, which was recorded in warrant liability on the

Company’s consolidated balance sheets.

As of December 29, 2024 and December 31, 2023, the Working Capital warrants had a fair value

of $ 0.08 million and $ 0.01 million, respectively and the Company recorded the change in fair value of less than $ 0.07 million and $ 0.1

million in Other income (expense), net within the Company’s consolidated statements of operations and comprehensive loss in the

years ended December 29, 2024 and December 31, 2023, respectively.

Previous Liability Classified Warrant Now Classified

Carlyle Warrant

In February 2022, as part of a debt financing from Carlyle (“CS

Solis Debt”) (refer to Note 15 – Borrowings and Derivative Liabilities), the Company issued a warrant to Carlyle to purchase

2,886,952 shares of common stock (“Carlyle Warrant”).

The warrant contained two tranches, the first of which was immediately

exercisable for 1,995,879 shares of Legacy Complete Solaria common stock.

The second tranche, which was determined to be a separate unit

of account, expired on December 31, 2022 prior to becoming exercisable.

At issuance, the relative fair value of the warrant was determined

to be $ 3.4 million using the Black-Scholes model and was initially recorded within additional paid-in capital as it met the conditions

for equity classification.

The Carlyle Warrant has an exercise price of $ 0.01 per share.

In July 2023, and in connection with the closing

of the Mergers, the Carlyle debt and warrants were modified.

Based on the exchange ratio included in the Mergers, the 1,995,879 outstanding

warrants to purchase Legacy Complete Solaria Common Stock prior to modification were exchanged

into warrants to purchase 1,995,879 shares of Complete Solaria Common Stock .

the modification, the warrant, which expires on July 18, 2030 , provides Carlyle with the right to purchase shares of Complete Solaria

Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795 % of Complete Solaria’s

issued and outstanding shares of common stock, on a fully-diluted basis;

plus (b) on and after the date that is ten (10) days after the

date of the agreement, an additional 350,000 shares;

plus (c) on and after the date that is thirty (30) days after the date of the agreement,

if the original investment amount has not been repaid, an additional 150,000 shares;

plus (d) on and after the date that is ninety (90)

days after the date of the agreement, if the original investment amount has not been repaid, an additional 250,000 shares, in each case,

of Complete Solaria Common Stock at a price of $ 0.01 per share.

Of the additional warrants that become exercisable after the modification,

the tranches of 350,000 warrants vesting ten days after the date of the agreement and 150,000 warrants vesting thirty days after the date

of the agreement were exercisable as of October 31, 2023.

In December 2023, Carlyle was issued an additional

warrant to purchase an additional 2,190,604 shares of the Company’s common stock related to an anti-dilution provision within the

CS Solis Debt that provides for such additional warrants under such circumstances as provided within the CS Solis Debt.

The modification of the warrant resulted in the reclassification of

previously equity-classified warrants to liability classification, which was accounted for in accordance with ASC 815 and ASC 718, Compensation

– Stock Compensation.

The fair value of the warrant liability was determined based on its intrinsic value, given a nominal exercise

At issuance, the relative fair value of the warrant was determined to be $ 20.4 million using the Black-Scholes model with the following

weighted average assumptions:

expected term of 7 years;

1 unchanged sentence

risk-free interest rate of 3.9 %;

and no dividend yield.

The fair value of the warrant was recorded within additional paid-in capital and as a discount on the long-term debt in CS Solis on the

consolidated balance sheets as of December 31, 2022.

July 2023, and in connection with the closing of the Mergers, the Carlyle debt and warrants were modified.

Based on the exchange ratio

included in the Mergers, the 1,995,879 outstanding warrants to purchase Legacy Complete Solaria Common Stock prior to modification were

exchanged into warrants to purchase 1,995,879 shares of Complete Solaria Common Stock.

As part of the modification, the warrant, which

expires on July 18, 2030 , provides Carlyle with the right to purchase shares of Complete Solaria Common Stock based on (a) the greater

of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795 % of Complete Solaria’s issued and outstanding shares of common

stock, on a fully-diluted basis;

plus (b) on and after the date that is ten (10) days after the date of the agreement, an additional

350,000 shares;

plus (c) on and after the date that is thirty (30) days after the date of the agreement, if the original investment amount

has not been repaid, an additional 150,000 shares;

plus (d) on and after the date that is ninety (90) days after the date of the agreement,

if the original investment amount has not been repaid, an additional 250,000 shares, in each case, of Complete Solaria Common Stock at

a price of $ 0.01 per share.

Of the additional warrants that become exercisable after the modification, the tranches of 350,000 warrants

vesting ten days after the date of the agreement and 150,000 warrants vesting thirty days after the date of the agreement are exercisable

and no dividend

The Company recorded the fair value of the modified warrants as a warrant liability of $ 20.4 million, the pre-modification fair

value of the warrants as a reduction to additional paid-in capital of $ 10.9 million and an expense of $ 9.5 million to Other income (expense),

net in the fiscal year ended December 31, 2023, equal to the incremental value of the warrants upon the modification.

As of December 31,

The modification of the warrant resulted in the

reclassification of previously equity classified warrants to liability classification, which was accounted for in accordance with ASC

815 and ASC 718, Compensation – Stock Compensation .

The Company recorded the fair value of the modified warrants as a warrant

liability of $ 20.4 million, the pre-modification fair value of the warrants as a reduction to additional paid-in capital of $ 10.9 million

and an expense of $ 9.5 million to other income (expense), net equal to the incremental value of the warrants upon the modification.

fair value of the warrant was determined based on its intrinsic value, given a nominal exercise price.

At issuance, the relative fair

value of the warrant was determined to be $ 20.4 million using the Black-Scholes model with the following weighted average assumptions:

expected term of 7 years;

expected volatility of 77.0 %;

risk-free interest rate of 3.9 %;

and no dividend yield.

2023, the fair value of the warrant was $ 9.5 million, and the Company recorded an expense of $ 14.4 million as other income (expense),

net on the consolidated statement of operations and comprehensive loss.

On July 1, 2024, in connection with the Exchange Agreement (as defined

in Note 15 – Borrowings and Derivative Liabilities), the Carlyle Warrant was modified, and the modification fixed the number of

shares of the Company’s common stock that may be issued upon exercise of the Carlyle Warrant at 4,936,483 .

At the modification date,

the Carlyle Warrant had a fair value of $ 7.3 million.

At the modification date, the Company recognized $ 0.7 million of expense related

to the remeasurement of the liability which was classified within “Gain on Troubled Debt Restructuring” within the Company’s

consolidated statement of operations and comprehensive loss.

The modification of the warrant resulted in the reclassification of the previously

liability-classified warrant to equity classification, resulting in an increase to additional paid-in capital of $ 7.3 million, a reduction

in the warrant liability of $ 7.3 million.

The Company recorded income of $ 2.9 million and

$ 14.4 million within Other income (expense), net in its consolidated statements of operations and comprehensive loss for the fiscal years

ended December 29, 2024 and December 31, 2023, respectively, related to the Carlyle Warrant.

The warrant remains outstanding as of December

Equity Classified Warrants

Series B Warrants

In February 2016, the Company issued a warrant

to purchase 5,054 shares of Series B preferred stock (the “Series B warrant”) in connection with a 2016 credit facility.

Series B warrant was immediately exercisable at an exercise price of $ 4.30 per share and has an expiration date of February 2026.

relative fair value of the Series B warrant at issuance was recorded as a debt issuance cost within other noncurrent liabilities upon

The fair value of the Series B warrant was less than $ 0.1 million as of July 18, 2023, when the Series B warrant was reclassified

from warrant liability to additional paid-in capital, upon the warrant becoming exercisable into shares of Complete Solaria common stock

upon the close of the Mergers.

Prior to its reclassification during 2023, changes in the fair value of the liability-classified warrants

were recorded in Other income (expense), net in the Company’s consolidated statement of operations and comprehensive loss for the

fiscal year ended December 31, 2023.

The Series B warrant is not remeasured in future periods as it meets the conditions for equity classification.

The warrants remain outstanding as of December 29, 2024.

Series C Warrants

In July 2016, the Company issued a warrant to

purchase 148,477 shares of Series C preferred stock (the “Series C warrant”) in connection with the Series C financing.

Series C warrant agreement also provided for an additional number of Series C shares calculated on a monthly basis commencing on June

2016 based on the principal balance outstanding of the notes payable outstanding.

The maximum number of shares exercisable under the Series

C warrant agreement was 482,969 shares of Series C preferred stock.

The Series C Warrant was immediately exercisable at an exercise price

of $ 1.00 per share and has an expiration date of July 2026.

The fair value of the Series C Warrant was $ 2.3 million as of July 18, 2023,

when the Series C warrant was reclassified from redeemable convertible preferred stock warrant liability to additional paid-in capital,

as the warrant became exercisable into shares of Complete Solaria common stock upon the close of the Mergers.

The Series C warrant is

not remeasured in future periods as it meets the conditions for equity classification.

The warrants remain outstanding as of December

Series C-1 Warrants

In January 2020, the Company issued a warrant

to purchase 173,067 shares of common stock in conjunction with the Series C-1 preferred stock financing.

The warrant was immediately exercisable

at an exercise price of $ 0.01 per share and has an expiration date of January 2030.

The warrant remains outstanding as of December 29,

At issuance, the relative fair value of the warrant was determined to be $ 0.1 million using the Black-Scholes.

The fair value of

the warrant was recorded within additional paid-in capital on the Company’s consolidated balance sheets.

The warrant is not remeasured

in future periods as it meets the conditions for equity classification.

SVB Common Stock Warrants

In May and August 2021, the Company issued warrants

to purchase 2,473 and 2,525 shares of common stock, respectively, in conjunction with the Fifth and Sixth Amendments to the Loan and Security

Agreement (“Loan Agreement”) with Silicon Valley Bank (“SVB”).

These warrants are immediately exercisable at exercise

prices of $ 0.38 and $ 0.62 per share, respectively, and have expiration dates in 2033.

The warrants remain outstanding as of December 29,

The fair value of the warrant was recorded within additional paid-in-capital on the accompanying consolidated balance sheets.

warrants are not remeasured in future periods as they meet the conditions for equity classification.

Promissory Note Common Stock Warrants

In October 2021, the Company issued a warrant

to purchase 50,000 shares of the Company’s common stock in connection with the issuance of a short-term promissory note.

As of December

the fair value of the warrant was $ 6.0 million, and the Company recorded an expense of $ 14.4 million as other income (expense), net on

the consolidated statements of operations and comprehensive loss.

D-7 Warrants (Converted to Common Stock Warrants)

November 2022, the Company issued warrants to purchase 656,630 shares of Series D-7 preferred stock (the “Series D-7 warrants”)

in conjunction with the Business Combination.

The warrant contains two tranches.

The first tranche of 518,752 shares of Series D-7 preferred

stock is exercisable at an exercise price of $ 2.50 per share upon consummation of a merger transaction, or at an exercise price of $ 2.04

per share upon remaining private and has an expiration date of April 2024.

The second tranche of 137,878 shares of Series D-7 preferred

stock is exercisable at an exercise price of $ 5.00 per share upon consummation of a merger transaction, or at an exercise price of $ 4.09

per share upon remaining private and has an expiration date of April 2024.

The fair value of the Series D-7 warrants was $ 7.8 million

as of December 31, 2022 and $ 2.4 million as of July 18, 2023 when the warrants were reclassified from redeemable convertible preferred

stock warrant liability to additional paid-in capital, as the exercise price of the warrants is fixed at $ 2.50 per share of Complete

Solaria Common Stock for the first tranche and $ 5.00 per share of Complete Solaria Common Stock for the second tranche upon the closing

of the Mergers.

October 2023, the Company entered into an Assignment and Acceptance Agreement (“Assignment Agreement”), (refer to Note 15

– Borrowing Arrangements).

In connection with the Assignment Agreement, the Company also entered into the First Amendment to Warrant

to Purchase Stock Agreements with the holders of the Series D-7 warrants.

Pursuant to the terms of the agreement, the warrants to purchase

1,376,414 shares of Series D-7 preferred stock converted into warrants to purchase 656,630 shares of common stock (the “replacement

As a result of the warrant amendment, the Company reclassified the replacement warrants from equity to liability.

replacement warrants were remeasured to the fair value on the amendment effective date and the Company will record subsequent changes

in fair value in other income (expense), net on its condensed consolidated statements of operations and comprehensive loss.

D-7 Warrants remain outstanding as of December 31, 2023.

2022 Common Stock Warrants

November 2022, the Company issued a warrant to a third-party service provider to purchase 78,962 shares of common stock in conjunction

with the Business Combination.

The warrant was immediately exercisable at an exercise price of $ 8.00 per share and had an expiration

date of April 2024.

In May 2023, the Company amended the warrant, modifying the shares of common stock to be purchased to 31,680 , the

exercise price to $ 0.01 , and the expiration date to the earlier of October 2026 or the closing of an IPO.

The impact of the modification

was not material to the consolidated financial statements.

At issuance and upon the modification, the relative fair value of the warrant

was determined to be $ 0.1 million using the Black-Scholes model with the following weighted average assumptions:

expected term of 1.5

29, 2024, the warrant for 24,148 shares of the Company’s common stock remains unexercised.

The warrant was immediately exercisable

at an exercise price of $ 0.01 per share and has an expiration date of October 2031.

The warrant remains outstanding as of December 29,

The fair value of the warrant was recorded within additional paid-in capital on the Company’s consolidated balance sheets.

The warrant is not remeasured in future periods as it meets the conditions for equity classification.

July 2023 Common Stock Warrants

In July 2023, the Company issued a warrant to

a third-party service provider to purchase 38,981 shares of the Company’s common stock in exchange for services provided in obtaining

financing at the Closing of the Mergers.

The warrant was immediately exercisable at a price of $ 0.01 per share and has an expiration date

of July 2028 .

At issuance, the fair value of the warrant was determined to be $ 0.2 million, based on the intrinsic value of the warrant

and the $ 0.01 per share exercise price.

As the warrant is accounted for as an equity issuance cost, the fair value of the warrant was

recorded within additional paid-in capital on the Company’s consolidated balance sheet.

The warrant is not remeasured in future

periods as it meets the conditions for equity classification.

Warrant Consideration

In July 2023, in connection with the Mergers,

the Company issued 6,266,572 warrants to purchase Complete Solaria Common Stock to holders of Legacy Complete Solaria Redeemable Convertible

Preferred Stock, Legacy Complete Solaria Common Stock.

The exercise price of the common stock warrants is $ 11.50 per share and the warrants

expire 10 years from the date of the Mergers.

The warrant consideration was issued as part of the close of the Mergers and was recorded

within additional paid-in capital, net of the issuance costs of the Mergers.

As of December 29, 2024, this warrant remains outstanding.

The warrant is not remeasured in future periods as it meets the conditions for equity classification.

On June 17, 2024, a warrant to purchase shares of the Company’s

common stock (“Ayna Warrant”) was issued to Ayna.AI LLC (“Ayna”) for the purchase of 6,000,000 shares of the Company’s

common stock at an exercise price per share of $ 0.01 , subject to the provisions and upon the terms and conditions set forth in the Ayna

The Ayna Warrant expires on June 17, 2029.

The issuance of the Ayna Warrant by the Company to Ayna is in satisfaction of the

compensation for services provided to the Company by Ayna under the terms of a statement of work (“Ayna SOW”), signed May

21, 2024 (and effective as of March 12, 2024), as incorporated into a master services agreement dated March 12, 2024.

Under the Ayna SOW,

Ayna provides services in connection with the anticipated return of the Company to cash-flow positive performance.

The Ayna Warrant became

fully exercisable for the 6,000,000 shares on September 9, 2024 and Anya exercised the Ayna Warrant in full for cash in January 2025.

In lieu of exercising the Ayna Warrant for cash,

Ayna may from time to time convert the Ayna Warrant, in whole or in part, into a number of shares of the Company’s common stock

determined by dividing (a) the aggregate fair market value of the shares of the Company’s common stock or other securities otherwise

issuable upon exercise of the Ayna Warrant minus the aggregate warrant price of such shares of the Company’s common stock by (b)

the fair market value (“Ayna Warrant FMV”) of one share of the Company’s common stock.

If the Company’s shares of common

stock are traded regularly in a public market, the Ayna Warrant FMV shall be the weighted average price for the 30 trading days ending

on the trading day immediately before Ayna delivers its notice of exercise to the Company.

If the Company’s shares of common stock

are not regularly traded in a public market, the Company’s Board of Directors shall determine that the Ayna Warrant FMV in its reasonable

good faith judgment.

The foregoing notwithstanding, if Ayna advises the Company’s Board of Directors in writing that Ayna disagrees

with such determination, then the Company and Ayna shall promptly agree upon a reputable investment banking firm or a third party independent

appraiser to undertake such valuation.

If the valuation of such investment banking firm is greater than that determined by the Board of

Directors, then all fees and expenses of such investment banking firm shall be paid by the Company.

In all other circumstances, such fee

and expenses shall be paid by Ayna.

At issuance, the fair value of the Ayna Warrant

was determined to be $ 9.2 million, based on the intrinsic value of the Ayna Warrant and the $ 0.01 per share exercise price.

Warrant is accounted for as stock-based compensation under ASC 718, the Ayna Warrant is recorded within additional paid-in capital on

the consolidated balance sheets.

The Ayna Warrant is not remeasured in future periods as it meets the conditions for equity classification.

As the Ayna statement of work period is different than the date of the warrant agreement, the differences in dates cause an accrued expense

for services rendered by Ayna.

The Company recognized expenses incurred to date of $ 9.2 million for the fiscal year ended December 29,

2024, within General and administrative expenses on the Company’s consolidated statement of operations.

The full amount of the

Ayna Warrant, $ 9.2 million, was recorded within additional paid-in-capital as of December 29, 2024.

Cantor Warrant

In July 2024, the Company issued a warrant

(“Cantor Warrant”) to a third-party service provider to purchase 3,066,141 shares of the Company’s common stock in exchange

for services provided in the issuance of the July 2024 Notes (refer to Note 15 – Borrowings

and Derivative Liabilities).

The Cantor Warrant was immediately exercisable at a price of $ 1.68 per share and has an expiration date

in July 2029.

At issuance, the fair value of the Cantor Warrant was determined to be $ 1.4 million, of which $ 0.9 million was recorded

as a debt discount and $ 0.5 million was attributable to the convertible notes issued in the Exchange Agreement and reduced the gain on

the troubled debt restructuring (refer to Note 15 – Borrowings and Derivative Liabilities).

The fair value of this warrant was derived using the Black-Scholes model with the following assumptions:

expected volatility of 55 %;

risk-free interest rate of 4.7 %;

interest rate of 4.2 %;

expected term of 5 years;

and no dividend yield.

The fair value of the warrant was recorded

within additional paid-in capital on the consolidated balance sheets.

The warrant is not remeasured in future periods as it meets the

conditions for equity classification.

Upon the Closing of the Mergers, the warrant was net exercised into 31,680 shares of Complete Solaria

Common Stock.

2023 Common Stock Warrants

July 2023, the Company issued a warrant to a third-party service provider to purchase 38,981 shares of common stock in exchange for services

provided in obtaining financing at the Closing of the Mergers.

The warrant is immediately exercisable at a price of $ 0.01 per share and

has an expiration date of July 2028.

At issuance, the fair value of the warrant was determined to be $ 0.2 million, based on the intrinsic

value of the warrant and the $ 0.01 per share exercise price.

As the warrant is accounted for as an equity issuance cost, the warrant

is recorded only within additional paid-in capital on the consolidated balance sheets.

The warrant is not remeasured in future periods

as it meets the conditions for equity classification.

Consideration

July 2023, in connection with the Mergers, the Company issued 6,266,572 warrants to purchase Complete Solaria Common Stock to holders

of Legacy Complete Solaria Redeemable Convertible Preferred Stock, Legacy Complete Solaria Common Stock.

The exercise price of the common

stock warrants is $ 11.50 per share and the warrants expire 10 years from the date of the Mergers.

The warrant consideration was issued

as part of the close of the Mergers and was recorded within additional paid-in capital, net of the issuance costs of the Mergers.

of December 31, 2023, all warrants issued as warrant consideration remain outstanding.

Private Placement, and Working Capital Warrants

conjunction with the Mergers, Complete Solaria, as accounting acquirer, was deemed to assume 6,266,667 warrants to purchase FACT Class

A Ordinary Shares that were held by the sponsor at an exercise price of $ 11.50 (“Private Placement Warrants”) and 8,625,000

warrants to purchase FACT’s shareholders FACT Class A Ordinary Shares at an exercise price of $ 11.50 (“Public Warrants”).

Subsequent to the Mergers, the Private Placement Warrants and Public Warrants are exercisable for shares of Complete Solaria Common Stock

and meet liability classification requirements since the warrants may be required to be settled in cash under a tender offer.

Private Placement Warrants are potentially subject to a different settlement amount as a result of being held by the Sponsor which precludes

the Private Placement Warrants from being considered indexed to the entity’s own stock.

Therefore, these warrants are classified

as liabilities on the consolidated balance sheets.

The Company determined the Public and Private

warrants to be classified as a liability and fair valued the warrants on the issuance date using the publicly available price for the

warrants of $ 6.7 million.

The fair value of these warrants was $ 0.3 million as of December 31, 2023, and the Company recorded the change

in fair value of $ 6.4 million in other income (expense), net in the consolidated statements of operations and comprehensive loss for the

fiscal year ended December 31, 2023.

Additionally,

at the closing of the Mergers, the Company issued 716,668 Working Capital warrants, which have identical terms as the Private Placement

Warrants to the sponsor in satisfaction of certain liabilities of FACT.

The warrants were fair valued at $ 0.3 million upon the closing

of the Mergers, which was recorded in warrant liability on the consolidated balance sheets.

As of December 31, 2023, the Working Capital

warrants had a fair value of $ 0.01 million, and the Company recorded the change in fair value of $ 0.1 million as other income (expense),

net on the consolidated statements of operations and comprehensive loss.

(15) Borrowing Arrangements

Notes payable, net, Convertible notes, net and convertible

notes, net, due to related parties

As of December 31, 2023 and 2022, the

Company’s notes payable and convertible notes consisted of the following (in thousands):

As of December 31,

The fair value of this warrant was recorded within additional

paid-in capital on the Company’s consolidated balance sheets and is not remeasured in future periods as it meets the conditions

for equity classification.

(15) Borrowings and Derivative

The Company’s borrowings and derivative

liabilities consisted of the following (in thousands):

July 2024 Notes

July 2024 Notes derivative liability

July 2024 Notes – related parties

July 2024 derivative liability – related parties

September 2024 Notes

September 2024 Notes derivative liability

September 2024 Notes – related party

September 2024 Notes – derivative liability – related party

2018 Bridge Notes

4 unchanged sentences

Debt in CS Solis

2022 Convertible Notes

2022 Convertible Notes due to related parties

Total notes payable and convertible notes, net

1 unchanged sentence

Notes payable and convertible notes, net of current portion

Notes Payable

12% Senior Unsecured Convertible Notes

In July 2024, the Company issued $ 46.0 million

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

Of the July 2024 Notes, $ 18.0 million were issued

to a related party affiliated with the Company’s Chief Executive Officer and a director, Rodgers Massey Revocable Living Trust,

$ 18.0 million were issued in exchange for the cancellation of indebtedness as discussed below of which $ 10.0 million were issued to Carlyle

which was also deemed to be a related party in the fiscal year ended December 29, 2024.

The July 2024 Notes bear interest at 12 % per annum,

and the principal is payable in full at maturity on July 1, 2029 .

The interest is payable in cash on January 1 and July 1 of each year,

beginning on July 1, 2025.

Upon default, principal and interest become immediately due and payable.

The interest rate increases by 3 %

in the event of default.

The July 2024 Notes are convertible into the Company’s common stock at the option of the holder at a conversion

rate of $ 1.68 per share.

Holders of July 2024 Notes may convert at any time.

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.

The conversion option is required to be bifurcated

as a derivative liability, and the Company recorded a derivative liability of $ 28.7 million on the issuance date with a corresponding

debt discount.

In connection with the issuance of the July 2024 Notes, the Company issued the Cantor Warrant, as described in Note 14

– Warrants, to purchase shares of the Company’s common stock.

At issuance, the Cantor Warrant had a fair value of $ 1.4 million,

of which $ 0.9 million was recorded as a debt discount, and $ 0.5 million was included in the calculation of the Company’s gain on

the troubled debt restructuring, as discussed above.

As of December 29, 2024, the carrying amount of the convertible July 2024 Notes inclusive

of the fair value of the derivative liability was $ 77.3 million, which reflects a derivative liability of $ 34.7 million and convertible

notes of $ 70.4 million, less an unamortized debt discount of $ 27.8 million.

Interest expense recognized on the July 2024 Notes

was $ 2.8 million and zero in the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

Of the total interest expense,

related party interest expense was $ 1.7 million and zero in the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

Debt discount expense recognized on the July 2024 Notes was $ 1.8 million and zero in the fiscal years ended December 29, 2024 and December

31, 2023, respectively.

Of the total debt discount expense, related party expense was $ 1.1 million and zero in the fiscal years ended

December 29, 2024, and December 31, 2023, respectively.

There are no financial covenants.

The July 2024 Notes are not in default.

due to the Company’s delayed filing of its Form 10K for the year ended December 29, 2024, the Company will be required to pay incremental

default interest of 0.5 % beginning April 16, 2025, which will cease upon the Company’s filing of its Form 10K.

The effective interest rate is 33.4 % and 31.7 %

on the July 2024 Notes’ principal amounts of $ 28.0 million and $ 18.0 million, respectively.

As of December 29, 2024, $ 1.3 million and $ 1.6

million of contingent interest which is payable upon default is included in the July 2024 Notes and July 2024 Notes - related parties,

respectively.

7% Senior Unsecured Convertible Notes

In September 2024, the Company issued $ 66.8 million of senior unsecured

convertible notes to various lenders (the “September 2024 Notes”), $ 4.0 million of which were issued to Rodgers Family Freedom

and Free Markets Charitable Trust (“Massey Charitable Trust”), a related party and $ 4.0 million were issued to Rodgers Massey

Revocable Living Trust (collectively with Massey Charitable Trust, “Massey Trusts”), also a related party.

The September 2024

Notes bear interest at 7 % per annum, and the principal is payable in full at maturity on July 1, 2029 .

The interest is payable in cash

on January 1 and July 1 of each year, beginning on July 1, 2025.

Upon default, principal and interest become immediately due and payable.

The September 2024 Notes are convertible into shares of the Company’s common stock at the option of the holder at a conversion rate

of $ 2.14 per common share.

Holders of September 2024 Notes may convert at any time.

The September 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.

The conversion option is required to

be bifurcated as a derivative liability, and the Company recorded a derivative liability of $ 91.5 million on the issuance date.

fair value of the derivative liability exceeds the proceeds received, the Company recorded a corresponding financing loss of $ 24.7 million

and debt discount for $ 66.8 million as of the issuance date.

In December 2024, the Company issued an additional $ 13.0 million of September

2024 Notes for cash.

The Company recognized a $ 10.9 million debt discount in connection with these additional proceeds.

As of December 29, 2024, the carrying amount of

the September 2024 Notes inclusive of the fair value of the derivative liability was $ 68.5 million, which reflects a derivative liability

of $ 62.4 million and convertible notes of $ 79.8 million, less an unamortized debt discount of $ 73.7 million.

Interest expense recognized on the September 2024

Notes was $ 1.4 million and zero in the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

Of the total interest

expense, related party interest expense was $ 0.2 million and zero in the fiscal years ended December 29, 2024 and 2023, respectively.

Debt discount expense recognized on the September 2024 Notes was $ 4.0 million and zero in the fiscal years ended December 29, 2024 and

December 31, 2023, respectively.

Of the total debt discount expense, related party expense was $ 0.5 million and zero in the fiscal years

ended December 29, 2024, and December 31, 2023, respectively.

There are no financial covenants.

The September 2024 Notes are not in default.

However, due to the Company’s delayed filing of its Form 10K for the year ended December 29, 2024, the Company will be required

to pay incremental default interest of 0.5 % beginning April 16, 2025, which will cease upon the Company’s filing of its Form 10K.

The effective interest rate is 27.6 % and 47.3 %

on the September 2024 Notes’ principal amounts of $ 66.8 million and $ 13.0 million, respectively.

Exchange Agreement

On July 1, 2024, the Company entered into an Exchange

Agreement (the “Exchange Agreement”) with 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;

(ii) 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;

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

(v) 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”).

2018 Bridge Notes

In December 2018, Solaria Corporation

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

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

The 2018 Notes are secured by substantially all of the assets of Solaria Corporation.

In 2021, the 2018 Notes were amended

extending the maturity date to December 13, 2022.

In connection with the 2021 amendment, Solaria had issued warrants to purchase shares

of Series E-1 redeemable convertible preferred stock of Solaria.

The warrants were exercisable immediately in whole or in part at and

expire on December 13, 2031.

As part of the Business Combination with Complete Solar, all the outstanding warrants issued to the lenders

were assumed by the parent company, Complete Solaria as discussed in Note 4 – Business Combination.

In December 2022, the Company entered

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

remain outstanding as of December 31, 2023.

In connection with the amendment, the 2018 Notes will continue to bear interest at 8 % per

annum and are entitled to an increased repayment premium from 110 % to 120 % of the principal and accrued interest at the time of repayment.

The Company concluded that the modification

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

to the Company.

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

on the date of modification, the modification was accounted for prospectively.

The incremental repayment premium is being amortized to

interest expense using the effective interest rate method.

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

Notes was $ 11.0 million and $ 9.8 million, respectively.

Interest expense recognized for fiscal years ended December 31, 2023 and 2022

was $ 1.2 million and $ 0.7 million, respectively.

As of December 31, 2023, the carrying value of the 2018 Notes approximates their fair

Revolver Loan

In October 2020, Solaria entered into

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

The SCI Loan Agreement is comprised

of two facilities, a term loan (the “Term Loan”) and a revolving loan (the “Revolving Loan”) (together “Original

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

Both the Term Loan and the Revolving Loan were fully

drawn upon closing.

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

The Revolving Loan has a term of thirty-six

months, with the principal due at the end of the term and an annual interest rate of 7.75 % or Prime rate plus 4.5 %, whichever is higher.

The SCI Loan Agreement requires the Company to meet certain financial covenants relating to the maintenance of specified restricted cash

balance, achieve specified revenue targets and maintain specified contribution margins (“Financial Covenants”) over the term

of the Revolving Loan.

The Revolving Loan is collateralized by substantially all assets and property of the Company.

In the years ended December 31, 2022

and December 31, 2021, Solaria entered into several Amended and Restated Loan and Security Agreements with SCI to forbear SCI from exercising

any rights and remedies available to it as a result of the Company not meeting certain Financial Covenants required by the Original Agreement.

As a result of these amendments changes were made to the Financial Covenants, and Solaria recorded a total of $ 1.9 million amendment fees

in Other Liabilities and this liability was included in the acquired liabilities for purchase price accounting.

Solaria had historically issued warrants

to purchase shares of Series E-1 redeemable convertible preferred stock of Solaria (“SCI Series E-1 warrants”).

were fully exercisable in whole or in part at any time during the term of the Original agreement.

As part of the Business Combination

with Complete Solar, all the outstanding SCI Series E-1 warrants were assumed by the parent company, Complete Solaria as discussed in

Note 4 – Business Combination.

The Revolving Loan outstanding on the

date of the Business Combination was fair valued at $ 5.0 million for the purpose of purchase price accounting discussed in Note 4 –

Business Combination.

The Revolving Loan principal balance at December 31, 2023 and December 31, 2022 amounted to $ 5.1 million and $ 5.0

million, respectively.

Interest expense recognized for the fiscal year ended December 31, 2023 was $ 0.6 million.

The Company was in compliance

with all the Financial Covenants as of December 31, 2023.

October 2023, the Company entered into an Assignment Agreement whereby Structural Capital Investments III, LP assigned the SCI debt to

Kline Hill Partners Fund LP, Kline Hill Partners IV SPV LLC, Kline Hill Partners Opportunity IV SPV LLC, and Rodgers Massey Revocable

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

The Company has identified this as a related party transaction, as discussed

in Note 21 – Related Party Transactions.

The SCI Revolving Loan continued to remain outstanding as of December 31, 2023 and is

currently being renegotiated.

In 2018, Solaria issued senior subordinated convertible

secured notes (“2018 Notes”) totaling approximately $ 3.4 million in exchange for cash.

The 2018 Notes were secured by

substantially all of the assets of Solaria, bore interest at the rate of 8 % per annum, and the investors were entitled to receive twice

the face value of the 2018 Notes at maturity.

In connection with an amendment in 2021 to extend the maturity date of the 2018 Notes, Solaria

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, the outstanding warrants

issued were assumed by the parent company, Complete Solaria.

In December 2022, the Company entered into an

amendment to the 2018 Notes further extending the maturity date from December 13, 2022 to December 13, 2023 in exchange for an increased

repayment premium from 110 % to 120 % of the principal and accrued interest at the time of repayment.

The amendment represented 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 2018 Notes on the date of modification,

the modification was accounted for prospectively.

The incremental repayment premium was being amortized to interest expense using the

effective interest rate method.

The 2018 Bridge Notes were settled as part of

the Exchange Agreement.

In connection with the Exchange Agreement, the balance of the 2018 Bridge Notes was exchanged for the July 2024

In July 2024, the Company issued the principal amount of $ 8.0 million of its July 2024 Notes and 1,500,000 shares of the Company’s

common stock in exchange for the cancellation of all indebtedness with Kline Hill.

At the date of the cancellation, such indebtedness

was comprised of the 2018 Notes of $ 11.7 million, the portion of the Revolving Loan balance assigned to Kline Hill of $ 3.9 million, and

the Secured Credit Facility balance of $ 13.1 million.

The Company concluded that the exchange represented a troubled debt restructuring

as the Company was experiencing financial difficulty, and the new terms of the July 2024 Notes resulted in a concession to the Company.

As the carrying amount of the debt exceeded the future undiscounted cash payments under the new terms on the date of the exchange, the

Company recorded a gain on the troubled debt restructuring of $ 9.8 million.

Interest expense recognized on the 2018 Bridge

Notes was $ 0.7 million and $ 1.2 million , for the fiscal year ended December 29, 2024 and

December 31, 2023, respectively.

Revolving Loan

In October 2020, Solaria entered into a loan agreement

(“SCI Loan Agreement”) with Structural Capital Investments III, LP (“SCI”).

The SCI Loan Agreement was comprised of two facilities,

a term loan (the “Term Loan”) and a revolving loan (the “Revolving Loan”) (together “Original Agreement”)

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

The Term Loan was repaid prior to the acquisition of Solaria by Complete

The Revolving Loan had 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 was higher.

SCI Loan Agreement required the Company to meet certain financial covenants relating to the maintenance of specified restricted cash balance,

achieve specified revenue targets and maintain specified contribution margins (“Financial Covenants”) over the term of the

Revolving Loan.

The Revolving Loan was collateralized by substantially all assets and property of the Company.

Solaria had historically issued warrants to purchase

shares of Series E-1 redeemable convertible preferred stock of Solaria (“SCI Series E-1 warrants”).

The warrants were fully

exercisable in whole or in part at any time during the term of the Original agreement.

As part of the Business Combination with Complete

Solar, all the outstanding SCI Series E-1 warrants were assumed by the parent company, Complete Solaria.

In October 2023, the Company entered into an Assignment

Agreement whereby Structural Capital Investments III, LP assigned the SCI debt to Kline Hill and Rodgers Massey Revocable Living Trust

for a total purchase price of $ 5.0 million.

The Company identified this arrangement as a related party transaction, as discussed in Note

23 – Related Party Transactions.

A portion of the SCI Revolving Loan was cancelled as part of the Exchange Agreement.

In connection

with the Exchange Agreement, the principal amount of $ 3.5 million of the Revolving Loan was exchanged for the July 2024 Notes.

The principal

portion of the Revolving Loan owing to the Rodgers Massey Revocable Living Trust of $ 1.5 million (plus accrued interest) remains outstanding

as of December 29, 2024.

The outstanding amount is due on demand plus accrued interest.

Interest expense recognized for the fiscal years

ended December 29, 2024 and December 31, 2023, was $ 0.5 million and $ 0.5 million, respectively.

Related party interest was $ 0.2 million

in the year ended December 29, 2024.

There are no financial covenants.

Secured Credit Facility

In December 2022, the Company entered

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

credit facility agreement allows the Company to borrow up to 70 % of the net amount of its eligible vendor purchase orders with a maximum

amount of $ 10.0 million at any point in time.

The purchase orders are backed by relevant customer sales orders which serves as collateral.

The amounts drawn under the secured credit facility may be reborrowed provided that the aggregate borrowing does not exceed $ 20.0 million.

The repayment under the secured credit facility is the borrowed amount multiplied by 1.15x if repaid within 75 days and borrowed amount

multiplied by 1.175x if repaid after 75 days.

The Company may prepay any borrowed amount without premium or penalty.

Under the original

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

The Company is in the process of amending the secured credit

facility agreement to extend its maturity date.

At December 31, 2023, the balance outstanding

was $ 12.2 million, including accrued financing cost of $ 4.5 million, and as of December 31, 2022, the balance outstanding was $ 5.6 million,

including accrued financing cost of $ 0.1 million.

The Company recognized interest expense of $ 3.5 million and $ 0.1 million related to

the Secured Credit Facility during the fiscal years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the total

estimated fair value of the Secured Credit Facility approximates its carrying value.

In December 2022, the Company entered into a secured

credit facility agreement with Kline Hill Partners IV SPV LLC and Kline Hill Partners Opportunity IV SPV LLC (“Secured Credit Facility”).

The Secured Credit Facility agreement allowed the Company to borrow up to 70 % of the net amount of its eligible vendor purchase orders

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

The purchase orders were backed by relevant customer sales orders which served

as collateral.

The amounts drawn under the Secured Credit Facility were eligible to be reborrowed provided that the aggregate borrowing

did not exceed $ 20.0 million.

The repayment terms under the Secured Credit Facility were (i) the borrowed amount multiplied by 1.15x if

repaid within 75 days and (ii) the borrowed amount multiplied by 1.175x if repaid after 75 days.

The Company could have repaid any borrowed

amount without premium or penalty.

Under the original terms, the Secured Credit Facility agreement was due to mature in April 2023.

Company set the balance outstanding as part of the Exchange Agreement, whereby the balance of $ 13.1 million of the Secured Credit Facility

was exchanged for the July 2024 Notes.

The Secured Credit Facility outstanding was

zero and $ 12.2 million, including accrued financing cost of $ 4.5 million as of December 29, 2024 and December 31, 2023,

respectively.

The Company recognized interest expense of $ 1.0 million and $ 3.5 million related to the Secured Credit Facility during

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

Polar Settlement Agreement

In September 2023, in connection with

the Mergers, the Company entered into a settlement and release agreement with Polar Multi-Strategy Master Fund (“Polar”) for

the settlement of a working capital loan that had been made by Polar to the Sponsor, prior to the closing of the Mergers.

The settlement

agreement requires the Company to pay Polar $ 0.5 million in ten equal monthly installments and does not accrue interest.

During the fiscal

year ended December 31, 2023, the Company paid $ 0.2 million, and as of December 31, 2023, $ 0.3 million remains outstanding.

In September 2023, in connection with the Mergers, the Company entered

into a settlement and release agreement with Polar Multi-Strategy Master Fund (“Polar”) for the settlement of a working capital

loan that had been made by Polar to the Sponsor, prior to the closing of the Mergers.

The settlement agreement required the Company 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

The remaining balance owed to Polar was paid in full in the fiscal year ended December 29, 2024.

Debt in CS Solis

As described above, as part of the

reorganization of the Company in February 2022, the Company received an investment from Carlyle.

The investment was made pursuant to a

subscription agreement, under which Carlyle contributed $ 25.6 million in exchange for 100 Class B Membership Units of CS Solis and the

Company contributed the net assets of Complete Solar, Inc.

As part of the Reorganization described in Note

1(a) Organization - Description of Business, the Company received cash and recorded debt for an investment by Carlyle.

The investment

was made pursuant to a subscription agreement, under which Carlyle contributed $ 25.6 million in exchange for 100 Class B Membership Units

of CS Solis and the Company contributed the net assets of Complete Solar, Inc.

in exchange for 100 Class A Membership Units.

The Class B Membership Units

are mandatorily redeemable by the Company on the three-year anniversary of the effective date of the CS Solis amended and restated LLC

agreement (February 14, 2025).

The Class B Membership Units accrue interest that is payable upon redemption at a rate of 10.5 % (which

is structured as a dividend payable based on 25 % of the investment amount measured quarterly), compounded annually, and subject to increases

in the event the Company declares any dividends.

In connection with the investment, the Company issued a warrant to purchase 5,978,960

shares of the Company’s common stock at a price of $ 0.01 per share, of which, 4,132,513 shares are immediately exercisable.

Company has accounted for the mandatorily redeemable investment from Carlyle in accordance with ASC 480, Distinguishing Liabilities from

Equity, and has recorded the investment as a liability, which was accreted to its redemption value under the effective interest method.

The Company has recorded the warrants as a discount to the liability.

Refer to Note 13 – Common Stock, for further discussion of

the warrants issued in connection with the Class B Membership Units.

On July 17 and July 18, 2023, and in

connection with obtaining consent for the Mergers, Legacy Complete Solaria, FACT and Carlyle entered into an Amended and Restated Consent

to the Business Combination Agreement (“Carlyle Debt Modification Agreement”) and an amended and restated warrant agreement

(“Carlyle Warrant Amendment”), which modified the terms of the mandatorily redeemable investment made by Carlyle in Legacy

Complete Solaria.

The Carlyle Debt Modification Agreement accelerates

the redemption date of the investment, which was previously February 14, 2025 and is March 31, 2024 subsequent to the modification.

acceleration of the redemption date of the investment, resulted in the total redemption amount to be 1.3 times the principal at December

The redemption amount will increase to 1.4 times the original investment at March 31, 2024.

Additionally, as part of the amendment,

the parties entered into an amended and restated warrant agreement.

As part of the Carlyle Warrant Amendment, Complete Solaria issued

Carlyle a warrant to purchase up to 2,745,879 shares of Complete Solaria Common Stock at a price per share of $0.01, which is inclusive

of the outstanding warrant to purchase 1,995,879 shares at the time of modification.

The warrant, which expires on July 18, 2030, provides

Carlyle with the right to purchase shares of Complete Solaria Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the

number of shares equal to 2.795% of Complete Solaria’s issued and outstanding shares of common stock, on a fully-diluted basis;

plus (b) on and after the date that is ten (10) days after the date of the agreement, an additional 350,000 shares; plus (c) on and

after the date that is thirty (30) days after the date of the agreement, if the original investment amount has not been repaid, an additional

150,000 shares; plus (d) on and after the date that is ninety (90) days after the date of the agreement, if the original investment

amount has not been repaid, an additional 250,000 shares, in each case, of Complete Solaria Common Stock at a price of $0.01 per share.

The warrants are classified as liabilities under ASC 815 and are recorded within warrant liability on the consolidated statements of operations

and comprehensive loss.

The Company accounted for the modification of

the long-term debt due CS Solis as a debt extinguishment in accordance with ASC 480 and ASC 470.

As a result of the extinguishment, the

Company recorded a loss on extinguishment, of $ 10.3 million, which is recorded within other expense on the consolidated statements of

operations and comprehensive loss.

As of the modification date, the Company recorded the fair value of the new debt of $ 28.4 million as

short-term debt in CS Solis, and the amount will have a redemption value of $ 35.8 million under the amended agreement.

The Company has recorded a liability of $ 33.3

million and zero included in short-term debt due CS Solis on the consolidated balance sheets as of December 31, 2023 and 2022, respectively.

The Company recorded a liability of zero and $ 25.2 million included in long-term debt due CS Solis on the consolidated balance sheets

as of December 31, 2023 and 2022, respectively.

The Company has recorded accretion of the liability as interest expense of $ 7.2 million

for the fiscal year ended December 31, 2023, and made payments of interest expense of $ 0.6 million during the fiscal year ended December

The Company has recorded accretion of the liability as interest expense of $ 2.4 million for the fiscal year ended December 31,

Prior to the modification, during the fiscal years ended December 31, 2023 and 2022 the Company recorded amortization of issuance

costs as interest expense of $ 0.7 million and $ 1.2 million, respectively.

As of December 31, 2023, the total estimated fair value of the

Company’s debt with CS Solis was $ 33.3 million, which was estimated based on Level 3 inputs.

B Membership Units were mandatorily redeemable by the Company on the three-year anniversary of the effective date of the CS Solis amended

and restated LLC agreement (February 14, 2025).

The Class B Membership Units accrued interest that was payable upon redemption at a rate

of 10.5 % (which was structured as a dividend payable based on 25 % of the investment amount measured quarterly), compounded annually, and

subject to increases in the event the Company declared any dividends.

In connection with the investment by Carlyle, the Company issued

to Carlyle a warrant to purchase 5,978,960 shares of the Company’s common stock at a price of $ 0.01 per share, of which, the purchase

of 4,132,513 shares of the Company’s common stock is immediately exercisable.

The Company has accounted for the mandatorily redeemable

investment from Carlyle in accordance with ASC 480 and recorded the investment as a liability, which was accreted to its redemption value

under the effective interest method.

The Company recorded the warrants as a discount to the liability.

On July 17 and July 18, 2023, and in connection

with obtaining consent for the Mergers, Legacy Complete Solaria, FACT and Carlyle entered into an Amended and Restated Consent to the

Business Combination Agreement (“Carlyle Debt Modification Agreement”) and an amended and restated warrant agreement (“Carlyle

Warrant Amendment”), which modified the terms of the mandatorily redeemable investment made by Carlyle in Legacy Complete Solaria.

The Carlyle Debt Modification Agreement accelerated

the redemption date of the investment to March 31, 2024 subsequent to the modification.

The acceleration of the redemption date of the

investment resulted in the total redemption amount to be 1.3 times the principal at December 31, 2023.

The redemption amount increased

to 1.4 times the original investment as of March 31, 2024.

Additionally, as part of the amendment, the parties entered into an amended

and restated warrant agreement.

As part of the Carlyle Warrant Amendment, Complete Solaria issued Carlyle a warrant to purchase up to

2,745,879 shares of Complete Solaria Common Stock at a price per share of $ 0.01 , which is inclusive of the outstanding warrant to purchase

1,995,879 shares at the time of modification.

The warrant, which expires on July 18, 2030, provides Carlyle with the right to purchase

shares of Complete Solaria Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795%

of Complete Solaria’s issued and outstanding shares of common stock, on a fully-diluted basis; plus (b) on and after the date

that is ten (10) days after the date of the agreement, an additional 350,000 shares; plus (c) on and after the date that is thirty

(30) days after the date of the agreement, if the original investment amount has not been repaid, an additional 150,000 shares; plus

(d) on and after the date that is ninety (90) days after the date of the agreement, if the original investment amount has not been repaid,

an additional 250,000 shares, in each case, of Complete Solaria Common Stock at a price of $0.01 per share.

The warrants are classified

as liabilities under ASC 815 and are recorded within warrant liability on the Company’s consolidated statements of operations and

comprehensive loss.

The Company accounted for the modification of the long-term debt due

CS Solis as a debt extinguishment in accordance with ASC 480 and ASC 470.

As a result of the extinguishment, the Company recorded a loss

on extinguishment, of $10.3 million, which is recorded within other income (expense), net in the consolidated statements of operations

and comprehensive loss in the fiscal year ended December 31, 2023.

The Company had a liability of $ 33.3 million in short-term debt due

CS Solis on the consolidated balance sheet as of December 31, 2023.

The Company recorded accretion of the liability as interest expense

of $ 7.2 million for the fiscal year ended December 31, 2023, and made payments of interest expense of $ 0.6 million during the fiscal year

ended December 31, 2023 Prior to the modification, during the fiscal years ended December 31, 2023 the Company recorded amortization of

issuance costs as interest expense of $ 0.7 million.

The Company determined that the Carlyle was a related party beginning

In July 2024, the Company issued $ 10.0 million of senior unsecured convertible notes in exchange for the cancellation of all

indebtedness with CS Solis of $ 37.2 million.

The Company concluded that the exchange represented a troubled debt restructuring as the

Company was experiencing financial difficulty, and the new terms under the convertible notes resulted in a concession to the Company.

As the carrying amount of the debt exceeded the future undiscounted cash payments under the new terms on the date of the exchange, the

Company recorded a gain on the troubled debt restructuring of $ 12.5 million.

The convertible notes have the same terms and conditions

as the other convertible notes issued in July 2024 described above.

For the fiscal years ended December 29, 2024

and December 31, 2023, the Company recorded accretion of the liability as interest expense of $ 3.9 million and $ 2.7 million, respectively,

and made no payments of interest expense.

For the fiscal years ended December 29, 2024

and December 31, 2023, the Company recorded amortization of issuance costs as interest expense of zero and $ 0.7 million, respectively.

2022 Convertible Notes

In connection with

the Original Business Combination Agreement, the Company raised a series of convertible notes (“2022 Convertible Notes”) during

the fiscal year ended December 31, 2022 with an aggregate purchase price of $ 12.0 million, and during the fiscal year ended December 31,

2023 for an additional total purchase price of $ 21.3 million.

Additionally, as part of the acquisition of Solaria, the Company assumed

a note from an existing investor for its fair value of $ 6.7 million.

In connection with the Original

Business Combination Agreement, the Company raised a series of convertible notes (“2022 Convertible Notes”) during the fiscal

year ended December 31, 2022 with an aggregate purchase price of $ 12.0 million, and during the fiscal year ended December 31, 2023 for

an additional total purchase price of $ 21.3 million.

Of the $ 33.3 million 2022 Convertible Notes issued, $ 12.1 million was issued to five

related parties.

Additionally, as part of the acquisition of Solaria, the Company assumed a note from an existing investor for its fair

value of $ 6.7 million.

The note contained the same terms as the other 2022 Convertible Notes.

The Company did not incur significant issuance costs associated with the 2022 Convertible Notes.

The 2022 Convertible Notes accrued interest

at a rate of 5 % per annum.

Immediately prior to the closing of the Mergers, the 2022 Convertible Notes were converted into the number

of shares of common stock of Complete Solaria equal to (x) the principal amount together with all accrued interest of the 2022 Convertible

Notes divided by 0.75 , divided by (y) the price of a share of common stock of Complete Solaria used to determine the conversion ratio

in the Amended and Restated Business Combination Agreement.

This resulted in the issuance of 5,316,460 shares of Complete Solaria common

stock to the noteholders and no debt remains outstanding associated with the 2022 Convertible Notes as of December 31, 2023.

The Company recognized

interest expense of $ 0.7 million related to the 2022 Convertible Notes during the fiscal year ended December 31, 2023.

The Company did

not recognize any interest expense related to the 2022 Convertible Notes during the fiscal year ended December 31, 2022.

2019-A Convertible Notes

In 2019, the Company issued a series

of convertible notes (“2019-A Convertible Notes”) for $ 0.1 million in proceeds, with immaterial debt issuance costs, and which

were due and payable on demand by the holders after August 2020.

The notes carried simple interest of 6.0 % and contained a conversion

feature whereby the notes would convert at 80 % of the issuance price of the preferred shares in the next equity financing.

The notes also

contained other embedded features such as conversion options that were exercisable upon the occurrence of various contingencies.

the embedded features were analyzed to determine whether they should be bifurcated and separately accounted for as a derivative.

to such analysis, the Company valued and bifurcated the share-settled redemption feature, which enabled the holders to convert the notes

to the preferred shares at a predefined discount from the issuance price and recorded its initial fair value of less than $ 0.1 million

as a discount on the convertible notes face amount.

The debt discount was amortized to interest expense at a weighted-average effective

interest rate of 17.6 % through the maturity dates of the notes.

The fair value

of the share-settled redemption feature was estimated based on a probability-weighted analysis of the discounted value of the notes converting

under a Next Equity Financing, a change in control, default, or maturity, and the changes in fair value were recognized as a component

of other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.

The Company recorded

zero expense during the fiscal years ended December 31, 2023 and 2022, related to the change in the fair value of the convertible notes

embedded derivative liability.

The convertible notes were carried within the accompanying consolidated balance sheets at their original

issuance value, net of unamortized debt discount and issuance costs.

In March 2022, as part of the Company’s Series D Preferred

Stock issuance, the 2019-A Convertible Notes converted into 62,500 shares of Series D-2 redeemable convertible preferred stock.

recognized a gain on the conversion of less than $ 0.1 million in other income (expense), net on the consolidated statements of operations

and comprehensive loss.

As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining for the

note at December 31, 2022 and thereafter remained zero .

The Company did not recognize any interest

expense related to the 2019-A Convertible Notes during the fiscal year ended December 31, 2023.

Interest expense recognized related to

the 2019-A Convertible Notes during the fiscal year ended December 31, 2022 was immaterial.

2020-A Convertible Notes

In 2020, the Company issued a series

of convertible notes (“2020-A Convertible Notes”) for $ 3.8 million in proceeds, with immaterial debt issuance costs, and which

were due and payable on demand by the holders after April 2021.

The notes carried simple interest of 2.0 % and contained a conversion feature

whereby the notes would convert at 80 % of the issuance price of the preferred shares in the next equity financing.

The notes also contained

other embedded features such as conversion options that were exercisable upon the occurrence of various contingencies.

All of the embedded

features were analyzed to determine whether they should be bifurcated and separately accounted for as a derivative.

Pursuant to such analysis,

the Company valued and bifurcated the share-settled redemption feature, which enables the holders to convert the notes to the preferred

shares at a predefined discount from the issuance price and recorded its initial fair value of $ 0.5 million as a discount on the convertible

notes face amount.

The debt discount was amortized to interest expense at a weighted-average effective interest rate of 25.6 % through

the maturity dates of the notes.

The fair value of the share-settled

redemption feature was estimated based on a probability-weighted analysis of the discounted value of the notes converting under a Next

Equity Financing, a change in control, default, or maturity, and the changes in fair value were recognized as a component of other income

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

The Company recorded zero in expense

during the fiscal year ended December 31, 2023 and 2022, related to the change in the fair value of the convertible notes embedded derivative

The convertible notes were carried within the accompanying consolidated balance sheets at their original issuance value, net

of unamortized debt discount and issuance costs.

In March 2022, as part of the Company’s Series D Preferred Stock issuance, the

2020-A Convertible Notes converted into 785,799 shares of Series D-1 redeemable convertible preferred stock.

The Company recognized a

gain on the conversion of $ 0.9 million in other income (expense), net on the consolidated statements of operations and comprehensive loss.

As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining for the note at December 31, 2022

and thereafter remained zero.

The Company did not recognize any interest

expense related to the 2020-A Convertible Notes during the fiscal year ended December 31, 2023.

Interest expense recognized during the

fiscal year ended December 31, 2022 was immaterial.

2021 Promissory Notes

In July 2021, the Company issued a

short-term promissory note for $ 0.5 million in proceeds, with immaterial debt issuance costs.

The promissory note carried simple interest

of 2.0 % and was due and payable after February 2022.

In February 2022, the Company repaid the 2021 Promissory Note.

In October 2021, the Company issued

a short-term promissory note for $ 2.0 million in proceeds, with immaterial debt issuance costs.

The promissory note contained a financing

fee of $ 0.3 million, which was due and payable along with the principal amount in January 2022.

In connection with the promissory note,

the Company issued a warrant to purchase 50,000 shares of common stock at an exercise price of $ 0.01 per share.

The principal and accrued

interest of the note payable were repaid in January 2022, and no amounts remained outstanding as of December 31, 2022 and thereafter.

2021-A Convertible Notes

In 2020, the Company issued a series

of convertible notes (“2021-A Convertible Notes”) for $ 4.3 million in proceeds, with immaterial debt issuance costs, and which

are due and payable on demand by the holders after February 2022.

The holders are existing investors and are not expected to demand cash

settlement, as the Company expects to raise additional preferred financing under which the notes will convert into preferred shares.

notes carry simple interest of 2.0 % and contained a conversion feature whereby the notes would convert at 80 % of the issuance price of

the preferred shares in the next equity financing.

The notes also contained other embedded features such as conversion options that were

exercisable upon the occurrence of various contingencies.

All of the embedded features were analyzed to determine whether they should

be bifurcated and separately accounted for as a derivative.

Pursuant to such analysis, the Company valued and bifurcated the share-settled

redemption feature, which enables the holders to convert the notes to the preferred shares at a predefined discount from the issuance

price and recorded its initial fair value of $ 0.6 million as a discount on the convertible notes face amount.

The debt discount was amortized

to interest expense at a weighted-average effective interest rate of 18.1 % through the maturity dates of the notes.

The fair value of the share-settled

redemption feature was estimated based on a probability-weighted analysis of the discounted value of the notes converting under a Next

Equity Financing, a change in control, default, or maturity, and the changes in fair value were recognized as a component of other income

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

The Company recorded zero in expense during the fiscal

years ended December 31, 2023 and 2022, related to the change in the fair value of the convertible notes embedded derivative liability.

The convertible notes were carried on the consolidated balance sheets at their original issuance value, net of unamortized debt discount

and issuance costs.

In March 2022, as part of the Company’s Series D Preferred Stock issuance, the 2021-A Convertible Notes converted

into 869,640 shares of Series D-1 redeemable convertible preferred stock.

The Company recognized a gain on the conversion of $ 0.8 million

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

As the full carrying value of the

note was converted to Series D Preferred Stock, the balance remaining for the note at December 31, 2022 and thereafter remained zero.

As part of the 2021-A Convertible Notes

financing, the Company entered into an additional convertible note with an existing investor for $ 0.5 million.

The note carried PIK interest

of 3.0 % and was due and payable on demand at any time after June 30, 2021.

The note contained an embedded conversion feature, which allowed

the holder to convert the note into a fixed number of shares of Series C-1 preferred stock at any time after June 30, 2021 .

concluded the conversion feature was not required to be bifurcated as an embedded derivative liability, and the note was carried at its

principal plus accrued PIK interest.

As the full carrying value of the note was converted to Series D Preferred Stock, the balance remaining

for the note at December 31, 2022 and thereafter remained zero.

The Company did not recognize any interest

expense related to the 2021-A Convertible Notes during the fiscal year ended December 31, 2023.

Interest expense recognized during the

fiscal year ended December 31, 2022 was immaterial.

Current Insight Promissory Note

In January 2021, the Company issued

a promissory note for a principal amount of $ 0.1 million in connection with the purchase of Current Insight, with immaterial debt issuance

The promissory note bears interest at 0.14 % per annum and has equal monthly installments due and payable through the maturity date

of January 2022.

The principal and accrued interest were repaid in January 2022, and no amounts remained outstanding as of December 31,

2022 and thereafter.

The Company did not incur significant issuance

costs associated with the 2022 Convertible Notes.

The 2022 Convertible Notes accrued interest at a rate of 5 % per annum.

Immediately prior

to the closing of the Mergers, the 2022 Convertible Notes were converted into the number of shares of common stock of Complete Solaria

equal to (x) the principal amount together with all accrued interest of the 2022 Convertible Notes divided by 0.75, divided by (y) the

price of a share of common stock of Complete Solaria used to determine the conversion ratio in the Amended and Restated Business Combination

This resulted in the issuance of 5,316,460 shares of Complete Solaria common stock to the noteholders and no debt remains outstanding

associated with the 2022 Convertible Notes as of December 31, 2023.

The Company recognized interest expense of $ 0.7 million related to

the 2022 Convertible Notes during the fiscal year ended December 31, 2023.

Of this interest expense, $ 0.4 million was with related parties.

SAFE Agreements

In September 2019, the Company issued

the 2019 SAFE for $ 0.1 million in proceeds, with immaterial debt issuance costs.

No interest was accrued on the 2019 SAFE.

The 2019 SAFE

contained conversion features that allowed the holder to convert the 2019 SAFE into shares of preferred stock upon the next equity financing,

subject to a valuation cap.

The 2019 SAFE was reported at fair value based on the probability-weighted expected return method (“PWERM”),

which assigns value to the multiple settlement scenarios based on the probability of occurrence.

The fair value of the 2019 SAFE was $ 0.2

million as of December 31, 2021.

In March 2022, the Company converted the 2019 SAFE into 48,258 shares of Series D-3 redeemable convertible

preferred stock.

The Company recognized a gain on the conversion of the 2019 SAFE of less than $ 0.1 million in other income (expense),

net on the consolidated statements of operations and comprehensive loss.

As the full carrying value of the SAFE was converted to Series

D Preferred Stock, the balance remaining for the SAFE at December 31, 2022 and thereafter remained zero .

In December 2021, the Company issued

the 2021 SAFE for $ 5.0 million in proceeds, with immaterial debt issuance costs.

No interest is accrued on the 2021 SAFE.

The 2021 SAFE

contained conversion features that allowed the holder to convert the 2021 SAFE into shares of preferred stock upon the next equity financing,

subject to a valuation cap.

The 2019 SAFE was reported at fair value based on the PWERM, which assigns value to the multiple settlement

scenarios based on the probability of occurrence.

The fair value of the 2021 SAFE was $ 6.3 million as of December 31, 2021.

In March 2022,

the Company converted the 2021 SAFE into 1,005,366 shares of Series D-1 redeemable convertible preferred stock.

The Company recognized

a gain on the conversion of the 2021 SAFE of $ 1.4 million in other income (expense), net on the consolidated statements of operations

and comprehensive loss.

As the full carrying value of the SAFE was converted to Series D Preferred Stock, the balance remaining for the

SAFE at December 31, 2022 and thereafter remained zero .

As part of the acquisition of Solaria

(refer to Note 4 – Business Combination) the Company acquired the Solaria SAFEs.

The number of shares to be issued upon conversion

of the SAFE notes contained various features to convert or redeem the Solaria SAFEs in the event of an equity financing, public offering,

change of control or a dissolution event.

The Company historically elected to

account for all of the SAFE notes at estimated fair value pursuant to the fair value option and recorded the change in estimated fair

value as other income (expense), net in the consolidated statements of operations and comprehensive loss until the notes are converted

The SAFE notes were amended through the SAFE Assumption Amendment, Assignment and Assumption Agreement on November 4, 2022,

as part of the Business Combination with Complete Solar, whereby all the SAFE notes were assumed by Complete Solar.

As part of the purchase

price accounting discussed in Note 3 – Reverse Recapitalization, the estimated fair value of the SAFE notes was determined to be

$ 60.5 million.

Post consummation of the Business Combination the SAFE notes were converted to 8,171,662 shares of Series D-8 preferred

stock as discussed in Note 4 – Business Combination.

On January 31, 2024, the Company entered into a Simple Agreement for

Future Equity (“SAFE”) (the “First SAFE”) with the Rodgers Massey Freedom and Free Markets Charitable Trust (the

“Purchaser”), a related party, affiliated with Thurman J.

Rodgers, the Company’s Chief Executive Officer and a director,

in connection with the Purchaser investing $1.5 million in the Company.

The First SAFE did not accrue interest.

The First SAFE was initially

convertible into shares of the Company’s common stock, par value $0.0001 per share, upon the closing of a bona fide transaction

or series of transactions with the principal purpose of raising capital, pursuant to which the Company would have issued and sold shares

of its common stock at a fixed valuation (an “Equity Financing”), at a per share conversion price which was equal to the lower

of (i) (a) $53.54 million divided by (b) the Company’s capitalization immediately prior to such Equity Financing (such conversion

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

If the Company

consummated a change of control prior to the termination of the First SAFE, the Purchaser would have been automatically entitled to receive

a portion of the proceeds of such liquidity event equal to the greater of (i) $1.5 million and (ii) the amount payable on the number of

shares of common stock equal to (a) $1.5 million divided by (b)(1) $53.54 million divided by (2) the Company’s capitalization immediately

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

First SAFE was convertible into a maximum of 1,431,297 shares of the Company’s common stock, assuming a per share conversion price

of $1.05, which is the product of (i) $1.31, the closing price per share of the Company’s common stock on January 31, 2024, multiplied

On April 21, 2024, the Company entered into an amendment (“First

SAFE Amendment”) that converted the First SAFE investment of $1.5 million into 4,166,667 shares of the Company’s 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 the Company’s common stock on April 19, 2024, multiplied by (ii) 80%.

Upon conversion, the Company 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 its consolidated statement of operations for the fiscal year ended December 29, 2024.

On February 15, 2024, the Company 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 the Company’s 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 the Company’s common stock sold in the Equity Financing.

If the Company 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 the Company’s 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 the Company’s 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 its common stock on February 15, 2024, (ii) 80%.

On April 21, 2024, the Company entered into an amendment (“Second

SAFE Amendment”) that converted the Second SAFE investment of $3.5 million into 9,722,222 shares of the Company’s 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 the Company’s common stock on April 19, 2024, multiplied by (ii) 80%.

Upon conversion, the Company 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 its consolidated statement of operations for the fiscal year ended December 29, 2024.

On May 13, 2024, the Company entered into a third

SAFE (the “Third SAFE”) with the Purchaser, in connection with the Purchaser investing $1.0 million in the Company.

SAFE is convertible into shares of the Company’s 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 the Company’s common stock sold

in the Equity Financing.

If the Company consummates 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 the Company’s common stock,

assuming a per share conversion price of $0.275, which is the product of (i) $0.55, the closing price of the Company’s common stock

on May 13, 2024, multiplied by (ii) 50%.

Given that the SAFE could be settled in cash or a variable number of shares, the Company has

accounted for the instrument as a liability at its fair value.

As of December 29, 2024, the Company estimated

the fair value of the Third SAFE at $ 0.4 million based upon the assumptions disclosed in Note 5

– Fair Value Measurements .

(17) Stock-Based Compensation

In July 2023, the Company’s board

of directors adopted and stockholders approved the 2023 Incentive Equity Plan (the “2023 Plan”).

The 2023 Plan became effective

immediately upon the closing of the Amended and Restated Business Combination Agreement.

Initially, a maximum number of 8,763,322 shares

of Complete Solaria Common Stock may be issued under the 2023 Plan.

In addition, the number of shares of Complete Solaria Common Stock

reserved for issuance under the 2023 Plan will automatically increase on January 1 of each year, starting on January 1, 2024 and ending

on January 1, 2033, in an amount equal to the lesser of (1) 4% of the total number of shares of Complete Solaria’s Common Stock

outstanding on December 31 of the preceding year, or (2) a lesser number of shares of Complete Solaria Common Stock determined by Complete

Solaria’s Board prior to the date of the increase.

The maximum number of shares of Complete Solaria Common Stock that may be issued

on the exercise of ISOs under the 2023 Plan is three times the number of shares available for issuance upon the 2023 Plan becoming effective

(or 26,289,966 shares).

Historically, awards were granted under

the Amended and Restated Complete Solaria Omnibus Incentive Plan (“2022 Plan”), the Complete Solar 2011 Stock Plan (“2011

Plan”), the Solaria Corporation 2016 Stock Plan (“2016 Plan”) and the Solaria Corporation 2006 Stock Plan (“2006

Plan”) (together with the Complete Solaria, Inc.

In July 2023, the Company’s board of directors

adopted and stockholders approved the 2023 Incentive Equity Plan (the “2023 Plan”).

The 2023 Plan became effective immediately

upon the closing of the Amended and Restated Business Combination Agreement.

Initially, a maximum number of 8,763,322 shares of Complete

Solaria Common Stock may be issued under the 2023 Plan.

In addition, the number of shares of Complete Solaria Common Stock reserved for

issuance under the 2023 Plan will automatically increase on January 1 of each year, starting on January 1, 2024 and ending on January

1, 2033, in an amount equal to the lesser of (1) 4 % of the total number of shares of Complete Solaria’s Common Stock outstanding

on December 31 of the preceding year, or (2) a lesser number of shares of Complete Solaria Common Stock determined by Complete Solaria’s

Board prior to the date of the increase.

The maximum number of shares of Complete Solaria Common Stock that may be issued on the exercise

of incentive stock options (“ISOs”) under the 2023 Plan is three times the number of shares available for issuance upon the

2023 Plan becoming effective (or 26,289,966 shares).

Historically, awards were granted under the Amended

and Restated Complete Solaria Omnibus Incentive Plan (“2022 Plan”), the Complete Solar 2011 Stock Plan (“2011 Plan”),

the Solaria Corporation 2016 Stock Plan (“2016 Plan”) and the Solaria Corporation 2006 Stock Plan (“2006 Plan”)

(together with the Complete Solaria, Inc.

2023 Incentive Equity Plan (“2023 Plan”), “the Plans”).

The 2022 Plan is the successor of the Complete Solar 2021 Stock Plan, which was amended and assumed in connection with the acquisition

The 2011 Plan is the Complete Solar 2011 Stock Plan that was assumed by Complete Solaria in the Required Transaction.

2016 Plan and the 2006 Plan are the Solaria stock plans that were assumed by Complete Solaria in the Required Transaction.

Under the Plans, the Company has granted

service and performance-based stock options and restricted stock units (“RSUs”).

A summary of stock option activity

for the fiscal year ended December 31, 2023 under the Plans is as follows:

Under the Plans, the Company has granted service-based

stock options and restricted stock units (“RSUs”).

Compensation expense for stock options under the Company’s cliff

vesting schedule is generally recognized equally over the vesting period of five years.

RSUs granted during the fiscal year ended December

29, 2024 are also generally recognized under the cliff vesting schedule that is recognized equally over the vesting period of five years.

The information below summarizes the stock option activity under the

Shares Weighted

Share Weighted

(Years) Aggregate

(in thousands)

6 unchanged sentences

Vested and exercisable— December 29, 2024 4,264,705 3.54 3.75 1,857

A summary of RSU activity for the fiscal

year ended December 31, 2023 under the Plans is as follows:

Number of RSUs

The information below summarizes the RSU activity.

Unvested at December 31, 2023

2 unchanged sentences

Unvested at December 29, 2024

The aggregate fair value of the Company’s stock options vested

during 2024 and 2023 was $ 1.9 million and $ 3.8 million, respectively.

Determination of Fair Value

Prior to the Mergers, the Company estimated grant-date fair

value of stock options using the Black-Scholes-Merton option- pricing model.

The determination of the fair value of each stock award using

this option-pricing model is affected by the Company’s assumptions regarding a number of complex and subjective variables.

variables include, but are not limited to, the expected stock price volatility over the term of the awards.

Stock-based compensation is

measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite

service period, which is generally the vesting period of the respective award.

The following assumptions were used to calculate the fair

value of stock-based compensation:

Fiscal Years Ended

The Company estimated the grant-date fair value

of stock options using the Black-Scholes-Merton option-pricing model.

The determination of the fair value of each stock award using this

option-pricing model is affected by the Company’s assumptions regarding a number of complex and subjective variables.

These variables

include, but are not limited to, the expected stock price volatility over the term of the awards.

Stock-based compensation is measured

at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service

period, which is generally the vesting period of the respective award.

The following assumptions were used to calculate the fair value of

stock-based compensation:

Fiscal Year Ended

Expected term (in years)

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Expected dividends

Expected term — The Company has opted to use

the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average

Expected term — The Company uses the simplified method to calculate the expected term

of stock option grants to employees as the Company does not have sufficient comparable historical exercise data to provide a reasonable

basis upon which to estimate the expected term of stock options granted to employees.

The expected term equals the arithmetic average

of the vesting term and the original contractual term of the option (generally 10 years).

Expected volatility — Due to the Company’s

limited operating history and a lack of company specific historical and implied volatility data, the Company has based its estimate of

expected volatility on the historical volatility of a group of peer companies that are publicly traded.

The historical volatility data

was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected

term of the stock-based awards.

Risk-free interest rate — The risk-free rate

assumption is based on U.S.

Expected volatility — Due to the

Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company has based

its estimate of expected volatility on the historical volatility of a group of peer companies that are publicly traded.

The historical

volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the

calculated expected term of the stock-based awards.

Risk-free interest rate — The risk-free

rate assumption is based on U.S.

Treasury instruments with maturities similar to the expected term of the Company’s stock options.

Expected dividends — The Company has not issued

any dividends in its history and does not expect to issue dividends over the life of the options and therefore has estimated the dividend

yield to be zero .

Fair value of common stock — The fair value

of the shares of common stock underlying the stock-based awards has historically been determined by the Board of Directors, with input

from management.

Because there has been no public market for the Company’s common stock, the Board of Directors has determined the

fair value of the common stock on the grant-date of the stock-based award by considering a number of objective and subjective factors.

Such factors include a valuation of the Company’s common stock performed by an unrelated third-party specialist, valuations of comparable

companies, sales of the Company’s redeemable convertible preferred stock to unrelated third-parties, operating and financial performance,

the lack of liquidity of the Company’s capital stock, as well as general and industry-specific economic outlooks.

For financial

reporting purposes, the Company considers the amount of time between the valuation date and the grant date to determine whether to use

the latest common stock valuation or a straight-line interpolation between the two valuation dates.

The determination included an evaluation

of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and

the grant date.

Expected dividends — The Company

has not issued any dividends in its history and does not expect to issue dividends over the life of the options and therefore has estimated

the dividend yield to be zero .

Fair value of common stock — Prior

to the Mergers, fair value of the shares of common stock underlying the stock-based awards has historically been determined by the Board

of Directors, with input from management.

Because there has been no public market for the Company’s common stock prior to the Mergers,

the Board of Directors has determined the fair value of the common stock on the grant-date of the stock-based award by considering a

number of objective and subjective factors.

Such factors include a valuation of the Company’s common stock performed by an unrelated

third-party specialist, valuations of comparable companies, sales of the Company’s redeemable convertible preferred stock to unrelated

third-parties, operating and financial performance, the lack of liquidity of the Company’s capital stock, as well as general and

industry-specific economic outlooks.

For financial reporting purposes, the Company considers the amount of time between the valuation

date and the grant date to determine whether to use the latest common stock valuation or a straight-line interpolation between the two

valuation dates.

The determination included an evaluation of whether the subsequent valuation indicated that any significant change in

valuation had occurred between the previous valuation and the grant date.

Subsequent to the Mergers, the fair value of the shares of common stock

underlying the stock-based awards is based on the price of the Company’s common stock in the open market on the date of the grant.

Stock-based compensation expense

The following table summarizes stock-based

compensation expense and its allocation within the accompanying consolidated statements of operations and comprehensive loss (in thousands):

Fiscal Years Ended

The following table summarizes stock-based compensation

expense and its allocation within the accompanying consolidated statements of operations and comprehensive loss (in thousands):

Fiscal Year Ended

Cost of revenues

3 unchanged sentences

Total stock-based compensation expense

As of December 31, 2023, there was

a total of $ 20.1 million and zero unrecognized stock-based compensation costs related to service-based options and RSUs, respectively.

Such compensation cost is expected to be recognized over a weighted-average period of approximately 2.4 years for service-based options.

In July 2023, the Company’s board

of directors approved the modification to accelerate the vesting of 52,167 options for employees that were terminated.

Additionally, at

the same time, the board of directors approved an extension of the post termination exercise period for 280,412 vested options of terminated

In connection with the modifications, the Company recorded incremental stock-based compensation expense of $ 0.1 million.

As of December 29, 2024, there was a total of $ 15.1 million and $ 4.2

million unrecognized stock-based compensation costs related to service-based options and RSUs, respectively.

Such compensation cost is

expected to be recognized over a weighted-average period of approximately 2.2 years and 4.7 years, respectively.

In 2024 and 2023, the Company’s board of

directors approved the modification to accelerate the vesting of 788,192 and 52,167 options, respectively, for employees that were terminated.

Additionally, the board of directors approved an extension of the post termination exercise period for 4,343,172 and 280,412 vested options

of terminated employees in the years ended December 29, 2024, and December 31, 2023, respectively.

In connection with the modifications,

the Company recorded incremental stock-based compensation expense of $ 0.7 million and $ 0.1 million in the fiscal years ended December

29, 2024, and December 31, 2023, respectively.

(18) Employee Stock Purchase Plan

The Company adopted an Employee Stock

Purchase Plan (the “ESPP Plan”) in connection with the consummation of the Mergers in July 2023.

All qualified employees may

voluntarily enroll to purchase the Company’s common stock through payroll deductions at a price equal to 85 % of the lower of the

fair market values of the stock of the offering periods or the applicable purchase date.

As of December 31, 2023, 2,628,996 shares were

reserved for future issuance under the ESPP Plan.

The Company adopted the Employee Stock Purchase Plan (the “ESPP

Plan”) in connection with the consummation of the Mergers in July 2023.

All qualified employees may voluntarily enroll to purchase

the Company’s common stock through payroll deductions at a price equal to 85 % of the lower of the fair market values of the stock

of the offering periods or the applicable purchase date.

As of December 29, 2024, 2,628,996 shares were reserved for future issuance under

the ESPP Plan.

Commitments and Contingencies

The Company leases its facilities under non-cancelable

operating lease agreements.

The Company leases vehicles under finance lease agreements.

Operating and financing lease activity for the

fiscal years ended December 29, 2024 and 2023 is as follows (dollars in thousands):

Fiscal Year Ended

December 29, December 31,

Finance lease cost:

Amortization of right-of-use assets $ 553 $ —

Interest on lease liabilities 77 —

Operating lease cost 1,003 1,380

Variable lease cost -

Total lease cost $ 1,633 $ 1,722

Other information

Cash paid for amounts included in the measurement of lease liabilities

Finance leases $ 551 $ —

Operating leases 1,039 1,047

The Company leases its facilities under

non-cancelable operating lease agreements.

The Company’s leases have remaining terms of 0.2 years to 2.8 years.

Options to renew

or extend leases beyond their initial term have been excluded from measurement of the ROU assets and lease liabilities as exercise is

not reasonably certain.

Operating leases are reflected on the consolidated balance sheets within operating lease ROU assets and the related

current and non-current operating lease liabilities.

ROU assets represent the right to use an underlying asset for the lease term, and

lease liabilities represent the obligation to make lease payments arising from lease agreement.

Operating lease ROU assets and liabilities

are recognized at the commencement date, or the date on which the lessor makes the underlying asset available for use, based upon the

present value of the lease payments over the respective lease term.

Lease expense is recognized on a straight-line basis over the lease

term, subject to any changes in the lease or expectation regarding the terms.

Variable lease costs such as common area maintenance, property

taxes and insurance are expensed as incurred.

Variable lease cost was $ 0.3 million and $ 0.2 million for the fiscal year ended December

31, 2023 and 2022, respectively.

Total lease expense for the fiscal years ended December 31, 2023 and 2022 was $ 1.4 million and $ 0.7 million,

respectively.

The Company made $ 1.0 million and $ 1.0

million of cash payments related to operating leases during the fiscal years ended December 31, 2023 and 2022, respectively.

New operating

lease right-of-use assets obtained in exchange for operating lease liabilities were zero and $ 1.9 million during the fiscal years ended

December 31, 2023 and 2022, respectively.

The weighted average remaining lease

term and the discount rate for the Company’s operating leases are as follows:

Remaining average remaining lease term

Weighted-average remaining lease term (in years):

Finance leases 2 —

Operating leases 2.5 2.48

Weighted-average discount rate:

Future minimum lease payments under

non-cancelable operating leases as of December 31, 2023 are as follows (in thousands):

Finance Leases 7 % —

Operating leases 9.5 % 15.57 %

Future minimum lease payments under non-cancellable

leases are as follows as of December 29, 2024 (in thousands):

Fiscal year ending

Total undiscounted liabilities

imputed interest

Total operating lease liabilities

Warranty Provision

The Company typically provides a 10-year

warranty on its solar energy system installations, which provides assurance over the workmanship in performing the installation, including

roof leaks caused by the Company’s performance.

For solar panel sales, the Company provides a 30-year warranty that the products

will be free from defects in material and workmanship.

The Company will retain its warranty obligation associated with its panel sales,

subsequent to the disposal of its panel business.

The Company accrues warranty costs

when revenue is recognized for solar energy systems sales and panel sales, based primarily on the volume of new sales that contain warranties,

historical experience with and projections of warranty claims, and estimated solar energy system and panel replacement costs.

records a provision for estimated warranty expenses in cost of revenues within the accompanying consolidated statements of operations

and comprehensive loss.

Warranty costs primarily consist of replacement materials and equipment and labor costs for service personnel.

Activity by period relating to the

Company’s warranty provision was as follows (in thousands):

Fiscal Years Ended

Total lease liabilities

As of December 29, 2024, the Company’s

consolidated balance sheet classified the current portion of finance lease liabilities of $ 2.1 million and operating lease liabilities

of $ 1.4 million within Accrued expenses and other current liabilities and the noncurrent portion of finance lease liabilities of $ 1.8

million and operating lease liabilities of $ 2.3 million within Other long-term liabilities.

Activity by period relating to the Company’s

warranty provision was as follows (in thousands):

Fiscal Year Ended

Warranty provision, beginning of period

5 unchanged sentences

Indemnification Agreements

From time to time, in its normal course

of business, the Company may indemnify other parties, with which it enters into contractual relationships, including customers, lessors,

and parties to other transactions with the Company.

The Company may agree to hold other parties harmless against specific losses, such

as those that could arise from breach of representation, covenant or third-party infringement claims.

It may not be Possible to determine

the maximum potential amount of liability under such indemnification agreements due to the unique facts and circumstances that are likely

to be involved in each particular claim and indemnification provision.

From time to time, in its normal course of business,

the Company may indemnify other parties, with which it enters into contractual relationships, including customers, lessors, and parties

to other transactions with the Company.

The Company may agree to hold other parties harmless against specific losses, such as those that

could arise from breach of representation, covenant or third-party infringement claims.

It may not be possible to determine the maximum

potential amount of liability under such indemnification agreements due to the unique facts and circumstances that are likely to be involved

in each particular claim and indemnification provision.

Historically, there have been no such indemnification claims.

the opinion of management, any liabilities resulting from these agreements will not have a material adverse effect on the business, financial

position, results of operations, or cash flows.

In the opinion of

management, any liabilities resulting from these agreements will not have a material adverse effect on the business, financial position,

results of operations, or cash flows of the Company.

Legal Matters

The Company is a party to various legal

proceedings and claims which arise in the ordinary course of business.

The Company records a liability when it is probable that a loss

has been incurred and the amount of the loss can be reasonably estimated.

If the Company determines that a loss is reasonably possible

and the loss or range of loss can be reasonably estimated, the Company discloses the reasonably possible loss.

The Company adjusts its

accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining

to a particular case.

The Company is a party to various legal proceedings

and claims which arise in the ordinary course of business.

The Company records a liability when it is probable that a loss has been incurred

and the amount of the loss can be reasonably estimated.

If the Company determines that a loss is reasonably possible and the loss or range

of loss can be reasonably estimated, the Company discloses the reasonably possible loss.

The Company adjusts its accruals to reflect the

impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

Legal costs are expensed as incurred.

Although claims are inherently unpredictable, the Company is not aware of

any matters that have a material adverse effect on the business, financial position, results of operations, or cash flows.

has recorded $ 7.7 million and $ 1.9 million as a loss contingency in accrued expenses and other current liabilities on the consolidated

balance sheets as of December 31, 2023 and 2022, respectively, primarily associated with the pending settlement of the following legal

Katerra Litigation

On July 22, 2022, Katerra, Inc.

filed a complaint

for breach of contract and turnover of property under Section 542(b) of the Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern

District of Texas.

The complaint sought damages for the amounts due under the Settlement Agreement and for attorney’s fees.

Company filed an answer to the complaint on September 6, 2022.

On May 11, 2023, the parties reached a settlement in which Solaria agreed

to pay Katerra $ 0.8 million, paid in monthly payments beginning on May 25, 2023 and ending by October 25, 2023.

The settlement had been

paid in full as of December 31, 2023.

Although claims are inherently unpredictable, the Company is not aware of any matters that may have

a material adverse effect on the Company’s business, financial position, results of operations, or cash flows.

The Company has recorded

$ 7.7 million and $ 7.7 million as a loss contingency in accrued expenses and other current liabilities on its consolidated balance sheets

as of December 29, 2024 and December 31, 2023, respectively.

SolarPark Litigation

In January 2023, SolarPark Korea Co.,

LTD (“SolarPark”) demanded approximately $ 80.0 million during discussions between the Company and SolarPark.

In February 2023,

the Company submitted its statement of claim seeking approximately $ 26.4 million in damages against SolarPark.

The ultimate outcome of

this arbitration is currently unknown and could result in a material liability to the Company.

However, the Company believes that the

allegations lack merit and intends to vigorously defend all claims asserted.

No liability has been recorded in the Company’s consolidated

financial statements as the likelihood of a loss is not probable at this time.

In January 2023, SolarPark Korea Co., LTD (“SolarPark”)

demanded approximately $ 80.0 million during discussions between the Company and SolarPark.

In February 2023, the Company submitted its

statement of claim seeking approximately $ 26.4 million in damages against SolarPark.

The ultimate outcome of this arbitration is currently

unknown and could result in a material liability to the Company.

However, the Company believes that the allegations lack merit and intends

to vigorously defend all claims asserted.

No liability has been recorded in the Company’s consolidated financial statements as the

likelihood of a loss is not probable at this time.

On March 16, 2023, SolarPark filed a complaint

6 unchanged sentences

suffered in excess of $ 220.0 million in damages.

On May 11, 2023, SolarPark filed a

motion for preliminary injunction to seek an order restraining the Company from using or disclosing SolarPark’s trade secrets, making

or selling shingled modules other than those produced by SolarPark, and from soliciting solar module manufacturers to produce shingled

modules using Solaria’s shingled patents.

On May 11, 2023, SolarPark filed a motion for

preliminary injunction to seek an order restraining the Company from using or disclosing SolarPark’s trade secrets, making or selling

shingled modules other than those produced by SolarPark, and from soliciting solar module manufacturers to produce shingled modules using

Solaria’s shingled patents.

On May 18, 2023, the Company responded by filing a motion for partial dismissal and stay.

On June 1, 2023, SolarPark filed an opposition to the Company’s motion for dismissal and stay and a reply in support of their motion

for preliminary injunction.

2023, SolarPark filed an opposition to the Company’s motion for dismissal and stay and a reply in support of their motion for preliminary

On June 8, 2023, the Company replied in support of its motion for partial dismissal and stay.

2023, the court conducted a hearing to consider SolarPark and the Company’s respective motions.

On August 3, 2023, the court issued

a ruling, which granted the preliminary injunction motion with respect to any purported misappropriation of SolarPark’s trade secrets.

The court’s ruling does not prohibit the Company from producing shingled modules or from utilizing its own patents for the manufacture

of shingled modules.

On July 11, 2023, the court

conducted a hearing to consider SolarPark and the Company’s respective motions.

On August 3, 2023, the court issued a ruling, which

granted the preliminary injunction motion with respect to any purported misappropriation of SolarPark’s trade secrets.

ruling does not prohibit the Company from producing shingled modules or from utilizing its own patents for the manufacture of shingled

The court denied SolarPark’s motion seeking a defamation injunction.

The court denied the Company’s motion

to dismiss and granted the Company’s motion to stay the entire litigation pending the arbitration in Singapore.

On September 1,

2023, the Company filed a Limited Notice of Appeal to appeal the August 2023 order granting SolarPark’s motion for preliminary injunction.

On September 26, 2023, Solaria filed a Notice of Withdrawal of Appeal and will not appeal the Court’s Preliminary Injunction Order.

No liability has been recorded in the Company’s consolidated financial statements as the likelihood of a loss is not probable at

The court denied the Company’s motion to dismiss

and granted the Company’s motion to stay the entire litigation pending the arbitration in Singapore.

On September 1, 2023, the Company

filed a Limited Notice of Appeal to appeal the August 2023 order granting SolarPark’s motion for preliminary injunction.

26, 2023, Solaria filed a Notice of Withdrawal of Appeal and will not appeal the Court’s Preliminary Injunction Order.

Between August

2023 and March 2024, the parties were engaged in discovery negotiations and the Company produced documents to SolarPark.

The Company produced

its last set of documents on March 14, 2024.

Since then, SolarPark has been reviewing the documents, and the case has remained stayed.

No liability has been recorded in the Company’s

consolidated financial statements as the likelihood of a loss is not probable at this time.

Siemens Litigation

On July 22, 2021, Siemens filed a lawsuit

in which Siemens alleged that the Company breached express and implied warranties under a purchase order that Siemens placed with the

Company for a solar module system.

Siemens claimed damages of approximately $ 6.9 million, inclusive of amounts of the Company’s indemnity

obligations to Siemens, plus legal fees.

On July 22, 2021, Siemens Government Technologies,

(“Siemens Government Technologies”) filed a lawsuit against Solaria Corporation in Fairfax Circuit Court (the “Court”)

in Fairfax, Virginia.

On July 27, 2023, Siemens Government Technologies, moved to amend the complaint to add Siemens Industry Inc.

a co-plaintiff.

This motion was granted on August 25, 2023.

On October 23,2023, Siemens Government Technologies and Siemens Industry Inc.

(collectively, “Siemens”) and Solaria Corporation stipulated to add Solar CA, LLC as a co-defendant.

Solaria Corporation and

Solar CA, LLC (collectively, the “Subsidiaries”) are both wholly-owned subsidiaries of Complete Solaria, Inc.

In the lawsuit,

Siemens alleged that the Subsidiaries breached express and implied warranties under a purchase order that Siemens placed with the Subsidiaries

for a solar module system.

Siemens claimed damages of approximately $ 6.9 million, inclusive of amounts of the Subsidiaries’ indemnity

obligations to Siemens, plus attorneys’ fees.

On February 22, 2024, the Court issued an order

against the Company which awarded Siemens approximately $ 6.9 million, inclusive of the Company’s indemnity obligations to Siemens,

plus legal fees, the amount of which will be determined at a later hearing.

On March 15, 2024, Siemens filed a motion seeking to recover

$ 2.67 million for attorneys’ fees, expenses, and pre-judgment interest.

The Court will conduct a hearing on Siemens’ motion

in late May 2024.

Pending entry of a final judgment by the Court, the Company intends to appeal such judgment.

The Company has recorded

$ 6.9 million and zero as a legal loss related to this litigation in accrued expenses and other current liabilities on the consolidated

balance sheets as of December 31, 2023 and 2022, respectively.

China Bridge Litigation

On August 24 2023, China Bridge Capital

Limited (“China Bridge”) alleged breach of contract and demanded $ 6.0 million.

The complaint names FACT as the defendant.

The complaint alleges China Bridge and FACT entered into a financial advisory agreement in October 2022 whereby FACT engaged China Bridge

to advise and assist FACT in identifying a company for FACT to acquire.

As part of the agreement, China Bridge claims that FACT agreed

to pay China Bridge a $ 6.0 million advisory fee if FACT completed such an acquisition.

China Bridge claims it introduced Complete Solaria

to FACT and is therefore owed the $ 6.0 million advisory fee.

The Company believes that the allegations lack merit and intends to vigorously

defend all claims asserted.

No liability has been recorded in the Company’s consolidated financial statements as the likelihood

of a loss is not probable at this time.

against the Subsidiaries which awarded Siemens approximately $ 6.9 million, inclusive of the amounts of the Subsidiaries’ indemnity

obligations to Siemens, plus attorney’s fees, the amount of which would be determined at a later hearing.

On March 15, 2024, Siemens

filed a motion seeking to recover $ 2.67 million for attorneys’ fees, expenses, and pre-and post-judgment interest.

The Company opposed

Siemens’ motion for attorneys’ fees, expenses, and pre- and post-judgment interest on April 5, 2024.

On June 17, 2024, the

Court entered a final order which awarded Siemens a total of $ 2.0 million in attorneys’ fees and costs.

The Company has appealed

these judgments.

In addition to the above, on August 19, 2024, Siemens applied for the

enforcement to a sister state judgment in the Superior Court of Alameda, California and the court entered a judgement in favor of Siemens.

On December 9, 2024, Siemens moved to amend the judgment to add Complete Solaria, Inc.

as a judgement debtor.

The subsidiaries opposed

the Siemens motion.

The court heard the motion by submission on April 3, 2025, but has not yet issued a ruling.

The Company recognized $ 6.9 million as a legal

loss related to this litigation in 2023, and in 2024, the Company recorded an additional accrual for $ 2.0 million for attorneys’

fees, expenses, and pre-judgment interest, in accrued expenses and other current liabilities within its consolidated balance sheet as

of December 29, 2024.

This legal loss was recognized in loss from discontinued operations, net of tax on the consolidated statements of

operations and comprehensive loss.

The Company recorded a liability of $ 6.9 million as a legal loss related to this litigation, excluding

amounts for attorneys’ fees and costs, in accrued expenses and other current liabilities within its consolidated balance sheets

at each of December 29, 2024 and December 31, 2023.

Letters of Credit

The Company had $ 3.5 million of outstanding

letters of credit related to normal business transactions as of December 31, 2023.

The Company had $ 3.5 million of outstanding letters

of credit related to normal business transactions as of December 29, 2024.

These agreements require the Company to maintain specified

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As discussed in Note 2 –

Summary of Significant Accounting Policies, the cash collateral in these restricted cash accounts was $ 3.8 million and $ 3.9 million as

of December 31, 2023 and 2022, respectively.

Summary of Significant Accounting Policies, the cash collateral in these restricted cash accounts was $ 3.8 million as of December 29,

2024 and December 31, 2023, respectively.

(20) Income Taxes

The Company’s loss from continuing operations

before provision for income taxes for the years ended December 31, 2023 and 2022, was as follows (in thousands):

The reconciliation of federal statutory

income tax rate to our effective income tax rate is as follows (in thousands):

The Company’s loss

from continuing operations before provision for income taxes for the fiscal years ended December 29, 2024 and December 31, 2023,

was as follows (in thousands):

Fiscal Year Ended

The following is a reconciliation of the Company’s income tax

applied at the federal statutory income tax rate compared to the income tax provision in its consolidated statements of operations for

continuing operations.

Certain prior year amounts have been reclassified to conform to the current year presentation (in thousands):

Fiscal Year Ended

Statutory federal income tax

1 unchanged sentence

Stock compensation

Non-deductible interest expense

Mark to market adjustments

Fair value adjustments

Nondeductible items

Debt extinguishment

Nondeductible Expenses

Foreign earnings taxed at different rates

Forward purchase agreements

Effect of changes in tax rates

Prior year adjustments

Liability for warrants

Valuation allowance

Tax Provision

Significant components of our deferred

tax assets and liabilities are as follows (in thousands):

Significant components of our deferred tax assets and liabilities are

Certain prior year amounts have been reclassified to conform to the current year presentation (in thousands):

Deferred income tax assets

NOL carryforwards

Net operating loss

Debt derivatives

Bad debt reserve

Inventory reserve

Warranty reserve

Revenue warranty

Stock based compensation

Lease liability

Other reserves

Interest expense carryover

Accrued compensation

Deferred revenue

ASC 842 leases

Capitalized research and development

2 unchanged sentences

Deferred income tax liabilities

Accounting method change

Capitalized software

Convertible debt

Refundable and deferred income taxes

The Company has established a valuation allowance

to offset the gross deferred tax assets as of December 31, 2023 and December 31, 2022, due to the uncertainty of realizing future tax

benefits from its net operating loss carryforwards and other deferred tax assets.

The valuation allowance balance was $ 38.4 million and

$ 63.7 million for the years ended December 31, 2023 and December 31, 2022, respectively.

In assessing the realizability of deferred income

tax assets, the Company considered whether it is more likely than not that some portion or all of its deferred income tax assets will

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the

periods in which those temporary differences become deductible.

Due to the uncertainty surrounding the Company’s ability to realize

such deferred income tax assets, a full valuation allowance has been established.

The valuation allowance decreased by $ 25.3 million during

the year ended December 31, 2023, and increased by $ 52.4 million during the year ended December 31, 2022.

The decrease in fiscal year

2023 is related to net operating loss and credit carryforwards which were deemed unavailable, offset by current year losses, and the increase

in fiscal 2022 was due to acquired net operating loss and credit carryforwards as well as current year losses.

As of December 31, 2023 and 2022, the Company

had federal net operating loss carryforwards of approximately $ 267.5 million and $ 237.7 million, respectively, and state net operating

loss carryforwards of approximately $ 194.2 million and $ 157.1 million, respectively.

The federal net operating loss carryforwards that

will expire between the years 2030 and 2037 total $ 114.6 million.

As of December 31, 2023 and 2022, the Company

had state research and development credit carryforwards of $ 1.6 million for both years, respectively.

These credits do not expire.

The utilization of the Company’s

net operating loss and R&D credit carryforwards may be subject to limitation due to the “change in ownership provisions”

under Section 382 of the Internal Revenue Code and similar foreign provisions.

Such limitations may result in the expiration of these

carryforwards before their utilization.

The Company’s acquired net operating loss carryforwards have been reduced based on the estimated

amount which will be lost due to these limitations.

The Company has not reported a deferred tax asset related to remaining acquired loss

carryforwards which the Company believes will be lost due to continuation of business enterprise rules.

The Company has not completed

a Section 382 analysis related to the 2023 sale of assets and it is possible the loss may not be disallowed.

The Company has recorded

an unrecognized tax benefit related to this uncertain tax position.

The Company is subject to income taxes

federal jurisdiction, and various foreign jurisdictions.

Tax regulations within each jurisdiction are subject to the interpretation

of the related tax laws and regulations and require significant judgment to apply.

The Company’s tax years remain open for examination

by all tax authorities since inception.

Convertible loan discount

Total deferred tax liabilities

Net deferred tax assets

Management regularly assess its ability to realize

deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected

future taxable income on a jurisdiction by jurisdiction basis.

In the event that the Company changes its determination as to the amount

or realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income

taxes in the period in which such determination is made.

The Company’s management believes that, based upon a number of factors,

it is more likely than not that all or some portion of the deferred tax assets will not be realized.

Accordingly, for the fiscal years

ended December 29, 2024, and December 31, 2023, the Company provided a valuation allowance against its U.S.

net deferred tax assets of

$ 55.7 million and $ 38.4 million, respectively.

The valuation allowance increased by $ 17.3 million in the year ended December 29, 2024.

As of December 29, 2024, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $ 127.3 million and $ 106.7 million, respectively.

Excluding $ 111.5 million of federal net operating losses which carryforward indefinitely, the net operating loss carryforwards will expire between 2030 and 2044.

The Internal Revenue Code (“IRC”)

of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change”

of a corporation.

Accordingly, a company’s ability to use net operating losses may be limited as prescribed under IRC Section 382.

Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are

not limited to, a cumulative ownership change of more than 50 % over a three-year period.

Utilization of the federal and state net operating

losses may be subject to substantial annual limitation due to the ownership change limitations provided by IRC Section 382 and similar

Such limitations may result in the expiration of these carryforwards before their utilization.

The Company’s acquired

net operating loss carryforwards have been reduced based on the estimated amount which will be lost due to these limitations.

If the Company

has experienced subsequent ownership changes, our losses may be further limited, which may result in the expiration of net operating losses

before utilization.

To date, Company has not yet completed a Section 382 ownership change analysis.

During the current year, the Company

has undergone restructuring and strategic transformation, including the completion of the SunPower businesses.

As a result of this change

in facts and lack of certainty regarding the acquired losses of the legacy Solaria business, the Company has written off the remaining

acquired net operating losses as the Company does not intend to pursue the potential tax benefits as it believes those benefits will be

lost due to continuation of business enterprise rules.

As a result, the corresponding uncertain tax position is also reversed as the Company

does not intend to pursue utilization of those attributes.

The Company files income tax returns in the

U.S for federal and various state jurisdictions as well as foreign jurisdictions each of which have varying statutes of limitations.

The Company is in the process of filing returns for prior years, and the penalties related to the delinquent filings are not

Due to the history of losses, the Company’s tax years remain open for examination by all tax authorities since

The Company is not currently under examination in any tax jurisdictions.

As of December 31, 2023 and 2022, the Company

had unrecognized tax benefits of $ 53.2 million and $ 1.3 million, respectively.

The Company has unrecognized tax benefit of zero

and $ 53.1 million at December 29, 2024 and December 31, 2023, respectively.

The reversal of the uncertain tax benefits would not affect

the Company’s effective tax rate to the extent that it continues to maintain a full valuation allowance against its deferred tax

The Company applies the provisions

set forth in FASB ASC Topic 740, Income Taxes, to account for the uncertainty in income taxes.

In the preparation of income tax returns

in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of income

The following is a tabular reconciliation

of the total amounts of unrecognized tax benefits (in thousands):

Years Ended December 31,

As outlined above, the reduction in the uncertain tax positions during the current period is a result of the Company’s decision

to forgo the right to certain acquired attributes for which the Company does not intend to claim any tax benefits.

The Company applies the provisions set forth

in FASB ASC Topic 740, Income Taxes, to account for the uncertainty in income taxes.

In the preparation of income tax returns in federal

and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of income tax laws.

The following is a tabular reconciliation of the

total amounts of unrecognized tax benefits (in thousands):

Fiscal Year Ended

Unrecognized tax benefits as of beginning of year

3 unchanged sentences

Unrecognized tax benefits as of end of year

The Company recognizes interest and

penalties related to unrecognized tax benefits within the income tax expense line in the statements of operations and comprehensive loss.

Accrued interest and penalties are included as part of income tax payable in the consolidated balance sheets.

The Company recognizes interest and penalties

related to unrecognized tax benefits within the income tax expense line in the statements of operations and comprehensive loss.

interest and penalties are included as part of income tax payable in the consolidated balance sheets.

No accrued interest or penalties

have been recorded for the years ended December 31, 2023 or December 31, 2022.

have been recorded for the fiscal years ended December 29, 2024 and December 31, 2023.

The Company has not provided U.S.

5 unchanged sentences

(21) Basic and Diluted Net Loss Per Share

The Company uses the two-class method

to calculate net loss per share.

No dividends were declared or paid for the fiscal years ended December 31, 2023 and 2022.

Undistributed

earnings for each period are allocated to participating securities, including the redeemable convertible preferred stock, based on the

contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed.

The Company’s basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average

shares of common stock outstanding during periods with undistributed losses.

The basic and diluted shares and net

loss per share for the fiscal year ended December 31, 2022 has been retroactively restated to give effect to the conversion of shares

of legal acquiree’s convertible instruments into shares of legal acquiree common stock as though the conversion had occurred as

of the beginning of the period.

The retroactive restatement is consistent with the presentation on the accompanying consolidated statements

of stockholders’ deficit.

The following table sets forth the

computation of the Company’s basic and diluted net loss per share attributable to common stockholders for the fiscal years ended

December 31, 2023 and 2022 (in thousands, except share and per share amounts):

Fiscal Years Ended

The Company uses the two-class method to calculate

net loss per share.

No dividends were declared or paid for the fiscal years ended December 29, 2024 and December 31, 2023.

The following table sets forth the computation of the Company’s

basic and diluted net loss per share attributable to common stockholders for the fiscal years ended December 29, 2024 and December 31,

2023 (in thousands, except share and per share amounts):

Fiscal Year Ended

Numerator for basic loss per share:

Net loss from continuing operations

1 unchanged sentence

Impairment loss from discontinued operations

Numerator for diluted loss per share

Impact of September 2024 Notes derivative liability and interest expense, net of tax

$ ( 269,555 )

Weighted average common shares outstanding, basic and diluted

Weighted average shares:

Denominator for basic loss per share

Effect of dilutive securities:

September 2024 Notes derivative liability

Denominator for diluted loss per share

Net loss per share:

Continuing operations – basic and diluted

Discontinued operations – basic and diluted

Net loss per share – basic and diluted

The computation of basic and diluted net loss

per share attributable to common stockholders is the same for the fiscal years ended December 31, 2023 and 2022 because the inclusion

of potential shares of common stock would have been anti-dilutive for the periods presented.

Continuing operations – basic

Discontinued operations - basic

Net loss - basic

Continuing operations – diluted

Discontinued operations – diluted

Net loss – diluted

The computation of basic net loss per share attributable

to common stockholders is inclusive of warrants with an insignificant exercise price.

The Company’s calculation of the

weighted average shares outstanding is inclusive of 3,427,324 warrants with an insignificant exercise price (which assumes that the warrants

were outstanding as of the beginning of the period or the date of the grant, whichever is earlier) for the fiscal year ended December

The computation of diluted net loss per share attributable to common stockholders is inclusive of the impact of the Company’s

September 2024 Notes (which were dilutive) using the if-converted method for the year ended December 29, 2024.

The computation of basic

and diluted net loss per share attributable to common stockholders is the same for the fiscal year ended December 31, 2023 because the

inclusion of potential shares of common stock would have been anti-dilutive.

The following table presents the potential common

1 unchanged sentence

including them would have been anti-dilutive:

Fiscal Year Ended

Common stock warrants

Convertible notes

Preferred stock warrants

Stock options and RSUs issued and outstanding

Potential common shares excluded from diluted net loss per share

(21) Related Party Transactions

Related Party Convertible Promissory Notes

In 2020, the Company issued convertible

promissory notes (“2020-A Convertible Notes”) of approximately $ 3.8 million to various investors, out of which $ 3.3 million

was issued to nine related parties.

The principal amount of the outstanding balance accrued interest at 2.0 % per annum.

In 2021, the Company

subsequently issued convertible promissory notes (“2021-A Convertible Notes”) of approximately $ 4.8 million to various investors,

out of which $ 3.6 million was issued to four related parties.

The principal amount of the outstanding balance accrued interest at 2.0 %

Refer to Note 15 – Borrowing Arrangements for further details.

In March 2022, as part of the Company’s

Series D redeemable convertible preferred stock issuance, the Company converted all of the outstanding convertible note series.

of the conversion, the Company recognized a gain on the extinguishment of related party convertible notes of $ 1.4 million, which was recorded

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

In October 2022 through June 2023, the Company

issued convertible promissory notes (“2022 Convertible Notes”) of approximately $ 33.3 million to various investors, out of

which $ 12.1 million was issued to five related parties.

Additionally, the Company acquired a related party convertible note, on the same

terms as the 2022 Convertible Notes as part of the acquisition of Solaria, with a fair value of $ 6.7 million at the time of the acquisition.

The related party debt is presented as convertible notes, net, due to related parties, noncurrent in the accompanying consolidated balance

The principal amount of the outstanding balance on the 2022 Convertible Notes accrues at 5.0 %, compounded annually.

For the fiscal

years ended December 31, 2023 and 2022, the Company has recognized $ 0.4 million and $ 0.2 million, respectively, in interest expense related

to the related party 2022 Convertible Promissory Notes.

In June 2023, the Company received

$ 3.5 million of prefunded PIPE proceeds from a related party investor in conjunction with the Company’s merger with Freedom Acquisition

I Corp (refer to Note 1(a) – Description of Business and Note 3 – Reverse Recapitalization).

The $ 3.5 million investment converted

to equity for reclassification of prepaid PIPE, which is reflected in the consolidated statements of redeemable convertible preferred

stock and stockholders’ deficit for fiscal year ended December 31, 2023.

In July 2023, in connection with the

Mergers, in addition to the $ 3.5 million of related party PIPE proceeds noted above, the Company received additional PIPE proceeds from

related parties of $ 12.1 million, which is reflected in the consolidated statements of redeemable convertible preferred stock and stockholders’

deficit for the fiscal year ended December 31, 2023.

In July 2023, in connection with the

Mergers, the Company issued 120,000 shares to a related party as a transaction bonus.

As a result of the issuance, the Company recognized

$ 0.7 million of expense within other income (expense), net in its consolidated statements of operations and comprehensive loss for the

(22) Segment Information

The segment information is presented on a basis

that is consistent with the Company’s internal management reporting.

The Company’s Chief Executive Officer (“CEO”)

is the Chief Operating Decision Maker (“CODM”).

The CODM manages the Company and report financial results based on two reportable

segments which are the same as our operating segments.

CODM evaluates the performance of these reportable segments and allocates resources

to make operating decisions based on certain financial information, including segmented internal income/(loss) from continuing operations

prepared on a basis consistent with U.S.

The measurement criteria is based on their operating revenue and operating income (loss)

and excluding any corporate costs which are not allocatable to the operating segments.

The CODM’s measurement criteria does not

include segment assets.

During the periods presented, the Company reported its financial performance through the following two reportable

Residential Solar Installation and New Homes Business.

Residential Solar Installation .

This segment performs solar system, storage and battery installations for residential homeowners.

New Homes Business .

is new in fiscal year 2024 as a result of the SunPower Acquisition which occurred in the fourth quarter of fiscal 2024.

The Company developed

a method to allocate direct expenses for the respective reportable segments.

This segment performs solar system installations for new

home builders.

Fiscal Year Ended December 29, 2024

In July 2023, the Company entered into a series

of FPAs as described in Note 6 – Forward Purchase Agreements.

In connection with the FPAs, the Company recognized other expense

of $ 30.7 million for the fiscal year ended December 31, 2023 in connection with the issuance of 5,670,000 shares of Complete Solaria Common

Stock to the related party FPA Sellers.

The Company also recognized other income of $ 0.3 million in connection with the issuance of the

FPAs with related parties.

As of December 31, 2023, the Company has recognized a liability associated with the FPAs of $ 3.2 million due

to related parties in its consolidated balance sheets, and the Company has recognized other expense associated with the change in fair

value of the FPA liability due to related parties of $ 3.5 million in its consolidated statements of operations and comprehensive loss

for both the fiscal year ended December 31, 2023.

In September 2023, in connection with

the Mergers, the Company entered into a settlement and release agreement with a related party for the settlement of a working capital

loan made to the Sponsor, prior to the closing of the Mergers.

As part of the settlement agreement, the Company agreed to pay the related

party $ 0.5 million as a return of capital, which is paid in ten equal monthly installments and does not accrue interest.

During fiscal

year ended December 31, 2023, the Company made one payment of $ 0.2 million.

As of December 31, 2023, $ 0.3 million remains outstanding.

There were no other material related

party transactions during the fiscal years ended December 31, 2023 and 2022.

(22) Subsequent Events

On January 16, 2024, Complete Solaria, Inc.

(the “Company”)

announced a workforce reduction (the “Workforce Reduction”) of 15 employees and 19 contractors, constituting approximately

14 % of the Company’s workforce.

The Company is taking this action to decrease its costs and strategically realign its resources.

The Company expects to recognize the majority of these charges in the first quarter of 2024, and that the Workforce Reduction will be

substantially complete during the first quarter of 2024.

In addition, the Company may incur other charges or cash expenditures not currently

contemplated due to unanticipated events that may occur, including in connection with the implementation of the Workforce Reduction.

The Company does not expect that the Workforce Reduction will have a material impact on its consolidated financial statements.

Departure of a Named Executive Officer

The Company previously announced in

its Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 16, 2023, that William

Anderson had stepped down as the Company’s Chief Executive Officer but remained employed with the Company.

On January 16, 2024,

in connection with the Workforce Reduction, the Company terminated Mr.

Anderson’s employment with the Company, effective as of

January 16, 2024 (the “William Anderson Separation Date”).

Following the William Anderson Separation Date, Mr.

will continue to serve as a member the board of directors of the Company, in addition to other advisory and support roles pursuant to

a consulting agreement to be entered into with Mr.

Subject to the terms of Mr.

employment agreement, dated as of May 9, 2023, the form of which was filed as Exhibit 10.22 to the Company’s Registration Statement

on Form S-4 filed with the SEC on May 11, 2023 (the “William Anderson Employment Agreement”), Mr.

Anderson will be entitled

● cash severance in an amount equal to 12 months of his base

salary in effect as of the William Anderson Separation Date, payable in installments beginning on the date that is the 60th day following

the William Anderson Separation Date;

● a lump sum amount equal to any earned but unpaid annual bonus

from the prior fiscal year ended December 31, 2023, plus a pro rata portion of Mr.

Anderson’s annual bonus for the fiscal year

ended December 31, 2024, to the extent such annual bonus would have been earned by Mr.

Anderson pursuant to the terms of the William

Anderson Employment Agreement;

● (A) a payment of continued health coverage for him and his

eligible dependents under COBRA for the earlier of (1) a period of 12 months, (2) the expiration of his eligibility for the continuation

coverage under COBRA or (3) the date when Mr.

Anderson becomes eligible for substantially equivalent health insurance coverage in

connection with new employment;

or (B) a taxable payment in lieu of such payment;

● extension of the period of time in which Mr.

exercise all of his vested stock options until the earlier of (A) the 12-month anniversary of the William Anderson Separation Date, (B)

the expiration date of the applicable stock option and (C) termination of the stock options upon a corporate transaction as provided

under the applicable equity incentive plan under which such stock options were granted;

● acceleration of 50 % of Mr.

Anderson’s remaining unvested

and outstanding stock options subject to time-based vesting as of the William Anderson Separation Date

Departure of a Named Executive Officer

– David Anderson

Additionally, on January 16, 2024,

and in connection with the Workforce Reduction, the Company terminated David Anderson’s employment as the Company’s Chief

Marketing Officer and Head of Strategic Partnerships, effective as of January 16, 2024 (the “David Anderson Separation Date”).

Subject to the terms of Mr.

Anderson’s employment agreement, dated as of May 9, 2023, a form of which was filed as Exhibit 10.22

to the Company’s Registration Statement on Form S-4 filed with the SEC on May 11, 2023 (the “David Anderson Employment Agreement”),

Anderson will be entitled to receive:

● cash severance in an amount equal to 12 months of Mr.

base salary in effect as of the David Anderson Separation Date, payable in installments beginning on the date that is the 60th day following

the David Anderson Separation Date;

● a lump sum amount equal to any earned but unpaid annual bonus

from the prior fiscal year ended December 31, 2023 plus a pro rata portion of Mr.

Anderson’s annual bonus for the fiscal year

ended December 31, 2024, to the extent such annual bonus would have been earned by Mr.

Anderson pursuant to the terms of the David

Anderson Employment Agreement;

● (A) a payment of continued health coverage for him and his

eligible dependents under COBRA for the earlier of (1) a period of 12 months, (2) the expiration of his eligibility for the continuation

coverage under COBRA or (3) the date when Mr.

Anderson becomes eligible for substantially equivalent health insurance coverage in

connection with new employment;

or (B) a taxable payment in lieu of such payment;

● extension of the period of time in which Mr.

exercise all of his vested stock options until the earlier of (A) the 12-month anniversary of the David Anderson Separation Date, (B)

the expiration date of the applicable stock option and (C) termination of the stock options upon a corporate transaction as provided

under the applicable equity incentive plan under which such stock options were granted;

● acceleration of 50 % of Mr.

Anderson’s remaining unvested

and outstanding stock options subject to time-based vesting as of the David Anderson Separation Date.

The Company expects that the departure of the

named executive officers will not have a material financial impact on its consolidated financial statements.

On January 31, 2024, the Company entered

into a simple agreement for future equity (the “First SAFE”) with the Rodgers Massey Freedom and Free Markets Charitable Trust

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

The First SAFE is convertible into

shares of the Company’s common stock, par value $ 0.0001 per share, upon the initial closing of a bona fide transaction or series

of transactions with the principal purpose of raising capital, pursuant to which the Company issues and sells common stock at a fixed

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

by (b) the Company’s capitalization immediately prior to such Equity Financing (such conversion price, the “SAFE Price”),

and (ii) 80 % of the price per share of Common Stock sold in the Equity Financing.

If the Company consummates a change of control prior

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

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

divided by (b)(1) $ 53.54 million divided by (2) the Company’s capitalization immediately prior to such liquidity event (the “Liquidity

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

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

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

Stock on January 31, 2024, multiplied by (ii) 80 %.

On February 15, 2024, the Company entered

into a simple agreement for future equity (the “Second SAFE” and together with the First SAFE, the “SAFEs”) with

the Purchaser in connection with the Purchaser investing $ 3.5 million in the Company.

The Second SAFE is convertible into shares of Common

Stock upon the initial closing of an Equity Financing at a per share conversion price which is equal to the lower of (i) the SAFE Price,

and (ii) 80 % of the price per share of Common Stock sold in the Equity Financing.

If the Company consummates a change of control prior

to the termination of the Second SAFE, the Purchaser will be automatically entitled to receive an amount equal to the greater of (i) $ 3.5

million and (ii) the amount payable on the number of shares of Common Stock equal to $ 3.5 million divided by the Liquidity Price, subject

to certain adjustments as set forth in the Second SAFE.

The Second SAFE is convertible into a maximum of 3,707,627 shares of Common Stock,

assuming a per share conversion price of $ 0.94 , which is the product of (i) $ 1.18 , the closing price of the Common Stock on February 15,

2024, multiplied by (ii) 80 %.

Departure of Directors or Certain

On March 6, 2024, Brian Wuebbels, the

Chief Financial Officer of Complete Solaria, Inc.

(the “Company”), notified the Company of his resignation effective April

Wuebbels will continue in his role as Chief Financial Officer to assist the Company in the filing of its Annual Report on

Form 10-K for the year ended December 31, 2023.

Wuebbels will also provide transition services to the Company through his resignation

(in thousands)

Operating revenues

Cost of revenues

Sales commissions

Sales and marketing

General and administrative (1)

Operating income (loss)

Reconciliation of segment loss from continuing operations before income taxes:

Unallocated amounts:

General corporate expense

Interest expense

Interest income

Other income (expense), net

Gain on troubled debt restructuring

Loss from continuing operations before taxes

(1) For the year ended December 29, 2024, depreciation and amortization

expense was $ 2.6 million and $ 0.1 million for the Residential Solar Installation and New Homes Business reportable segments, respectively.

Fiscal Year Ended December 31, 2023

(in thousands)

Operating revenues

Cost of revenues

Sales commissions

Sales and marketing

General and administrative (1)

Operating income (loss)

Reconciliation of segment loss from continuing operations before income taxes:

Unallocated amounts:

General corporate expense

Interest expense

Interest income

Other income (expense), net

Gain on troubled debt restructuring

Loss from continuing operations before taxes

(1) For the year ended December 31, 2023, depreciation and amortization

expense was $ 0.9 million for the Residential Solar Installation reportable segment.

Assets by segment are as follows (in thousands):

Residential Solar Installation

New Homes Business

(23) Related Party Transactions

Refer to the following notes to the Company’s

consolidated financial statements for details regarding the related party transactions entered into by the Company;

Description of Business;

Note 3 – Reverse Recapitalization, Note 6 – Forward Purchase Agreements, Note 12 – Other Income

(Expense), Net;

Note 15 – Borrowings and Derivative Liabilities and Note 16 – SAFE Agreements.

All other related party transactions

are described herein.

In December 2023, the Company entered into separate

common stock purchase agreements with the Rodgers Massey Freedom and Free Markets Charitable Trust and the Rodgers Massey Revocable Living

Trust , each a related party affiliated with Thurman J.

Rodgers, the Company’s Chief Executive Officer and a director, for

an aggregate purchase price of $ 5.0 million.

The Company determined that SameDay Solar became

a related party in fiscal 2024 with which the Company does business.

Revenue, cost of revenue and commission expense with SameDay Solar

were $ 1.6 million and $ 0.6 million and $ 1.2 million for the fiscal year ended December 29, 2024.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

On July 18, 2023, the Audit

Committee of the Company’s board of directors approved the engagement of Deloitte & Touche LLP (“Deloitte”) as the

Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year

ending December 31, 2023.

Deloitte previously served as the independent registered public accounting firm of Legacy Complete Solaria prior

to the Business Combination.

Accordingly, Marcum LLP (“Marcum”), FACT’s independent registered public accounting firm

prior to the Business Combination, was informed that it would be replaced by Deloitte as the Company’s independent registered public

accounting firm, following the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

Marcum’s report of independent

registered public accounting firm dated April 6, 2023 on the FACT balance sheet as of December 31, 2022, the related statements of operations,

changes in shareholders’ deficit and cash flows for each of the two years in the period ended December 31, 2022, and the related

notes to the financial statements did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as

to uncertainties, audit scope or accounting principles, except for an explanatory paragraph in such report regarding substantial doubt

about FACT’s ability to continue as a going concern.

FACT determined that a material weakness exists in its internal control over

financial reporting related to the accounting for complex financial instruments, accrued expenses and accounts payable, and foreign exchange

transactions.

During the period from December

23, 2020 (FACT’s inception) through December 31, 2022 and the subsequent interim period through March 31, 2023, there were no “disagreements”

(as such term is defined in Item 304(a)(1)(iv) of Regulation S-K) with Marcum on any matter of accounting principles or practices, financial

statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Marcum, would have

caused Marcum to make reference thereto in its reports on FACT’s financial statements for such periods.

During the period from December

23, 2020 (FACT’s inception) through December 31, 2022 and the subsequent interim period through March 31, 2023, there have been

no “reportable events” (as such term is defined in Item 304(a)(1)(v) of Regulation S-K).

During the period from December

23, 2020 (FACT’s inception) through December 31, 2022 and the subsequent interim period through March 31, 2023, (i) the Company

did not both (a) consult with Deloitte as to the application of accounting principles to a specified transaction, either completed or

proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements and (b) receive

a written report or oral advice that Deloitte concluded was an important factor considered by the Company in reaching a decision as to

such accounting, auditing, or financial reporting issue;

and (ii) the Company did not consult Deloitte on any matter that was either the

subject of a “disagreement” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions)

or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

The Company has provided Marcum

with a copy of the disclosures made by the registrant in this Item 4.01 in response to Item 304(a) of Regulation S-K under the Exchange

Act and requested that Marcum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made

by the registrant in this Item 4.01 in response to Item 304(a) of Regulation S-K under the Exchange Act and, if not, stating the respects

in which it does not agree.

A letter from Marcum is attached hereto as Exhibit 16.1.

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 8. Financial Statements and Supplementary Data