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Borrowings and Derivative Liabilities | 9 Months Ended | 12 Months Ended
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Sep. 28, 2025 | Dec. 29, 2024
Borrowings and Derivative Liabilities [Abstract] |  |
Borrowings and Derivative Liabilities | (9) Borrowings and Derivative Liabilities The Company’s borrowings and derivative liabilities consist of the following (in thousands):
|  | As of |
|  | September 28, |  |  | December 29, |
|  | 2025 |  |  | 2024 |
12.0% senior unsecured convertible notes |  |  |  |  |  |  |  |
July 2024 Notes |  | $ | 36,998 |  |  | $ | 17,965 |
July 2024 Notes derivative liability |  |  | 21,664 |  |  |  | 13,563 |
July 2024 Notes – related parties |  |  | 8,155 |  |  |  | 24,632 |
July 2024 derivative liability – related parties |  |  | 13,940 |  |  |  | 21,127 |
July 2025 Note – related party |  |  | 1,373 |  |  |  | — |
July 2025 Note – derivative liability – related party |  |  | 3,468 |  |  |  | — |
7.0% senior unsecured convertible notes |  |  |  |  |  |  |  |
September 2024 Notes |  |  | 15,750 |  |  |  | 5,636 |
September 2024 Notes derivative liability |  |  | 53,301 |  |  |  | 55,474 |
September 2024 Notes – related party |  |  | 1,714 |  |  |  | 476 |
September 2024 Notes – derivative liability – related party |  |  | 5,922 |  |  |  | 6,958 |
September 2025 Notes |  |  | 4,218 |  |  |  | — |
September 2025 Notes derivative liability |  |  | 16,274 |  |  |  | — |
Note payable to Seller – related party |  |  | 20,000 |  |  |  | — |
Loan with related party |  |  | 1,500 |  |  |  | 1,500 |
Total notes payable |  |  | 204,277 |  |  |  | 147,331 |
Less current portion |  |  | (21,500 | ) |  |  | (1,500 | )
Notes payable and convertible notes, net of current portion |  | $ | 182,777 |  |  | $ | 145,831 |
As classified in the unaudited condensed consolidated balance sheets |  |  |  |  |  |  |  |
Notes payable to related parties |  |  | 21,500 |  |  |  | 1,500 |
Notes payable and derivative liabilities |  |  | 148,205 |  |  |  | 92,638 |
Notes payable and derivative liabilities with related parties, net of current portion |  |  | 34,572 |  |  |  | 53,193 |
Total notes payable |  | $ | 204,277 |  |  | $ | 147,331 |
12.0% senior unsecured convertible notes July 2024 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, $10.0 million were issued to a third party, $18.0 million were issued to a related party affiliated with the Company’s Chief Executive Officer and a director, Rodgers Revocable Trust, and $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 at the date of the exchange. During the thirteen week period ended June 29, 2025, Carlyle was no longer deemed a related party to the Company. Refer to Note 2 (h) – Summary of Significant Accounting Policies – “Changes in related parties” for details. The July 2024 Notes bear interest at 12.0% 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. The interest rate increases by 3% in the event of default. The July 2024 Notes are convertible into shares of the Company’s common stock at the option of the holder at a conversion rate of $1.68 per share. Holders of the 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 an event of default and upon a qualifying change of control event. The conversion option was required to be bifurcated as a derivative liability, and the Company recorded an initial 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 8 – Capital Stock, 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 further described below in the Exchange Agreement. 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. There are no financial covenants. The July 2024 Notes are not in default. However, due to the Company’s delayed filing of its Form 10-K for the year ended December 29, 2024, the Company was required to accrue incremental interest of 0.5% beginning April 16, 2025 through April 30, 2025, the date upon which the Form 10-K was filed. Due to the Company’s delayed filing of its Form 10Q for the third quarter ended September 28, 2025 (“Q3 2025 Form 10Q”), the Company was required to accrue incremental interest of 0.5% beginning November 17, 2025, through December 19, 2025, the date upon which the Q3 2025 Form 10Q was filed. The carrying amount of the convertible July 2024 Notes, inclusive of the fair value of the derivative liabilities was as follows (in thousands):
|  | As of |
|  | September 28, |  |  | December 29, |
|  | 2025 |  |  | 2024 |
July 2024 Notes |  | $ | 69,876 |  |  | $ | 70,348 |
July 2024 Notes derivative liability |  |  | 35,604 |  |  |  | 34,690 |
Less Unamortized debt discount |  |  | (24,723 | ) |  |  | (27,751 | )
Total carrying amount of July 2024 Notes |  | $ | 80,757 |  |  | $ | 77,287 |
Contingent interest payable upon default and included in the July 2024 Notes was as follows (in thousands):
|  | As of |
|  | September 28, |  |  | December 29, |
|  | 2025 |  |  | 2024 |
Contingent interest payable |  | $ | 2,359 |  |  | $ | 1,255 |
Contingent interest payable – related parties |  |  | — |  |  |  | 1,575 |
Total contingent interest payable |  | $ | 2,359 |  |  | $ | 2,830 |
Interest expense and amortization of debt discount cost were as follows (in thousands):
|  | Thirteen Weeks Ended |  |  | Thirty-Nine Weeks Ended |
|  | September 28, 2025 |  |  | September 29, 2024 |  |  | September 28, 2025 |  |  | September 29, 2024 |
Interest expense |  | $ | 1,410 |  |  | $ | 849 |  |  | $ | 4,182 |  |  | $ | 849 |
Amortization of debt discount |  |  | 1,072 |  |  |  | 864 |  |  |  | 3,028 |  |  |  | 864 |
Total |  | $ | 2,482 |  |  | $ | 1,713 |  |  | $ | 7,210 |  |  | $ | 1,713 |
Related parties’ portion of interest expense and amortization of debt discount included in the above amounts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense — related parties |  | $ | 550 |  |  | $ | 546 |  |  | $ | 1,932 |  |  | $ | 546 |
Amortization of debt discount — related parties |  |  | 421 |  |  |  | 526 |  |  |  | 1,391 |  |  |  | 526 |
Total — related parties |  | $ | 971 |  |  | $ | 1,072 |  |  | $ | 3,323 |  |  | $ | 1,072 |
July 2025 Note – related party On July 10, 2025, the Company issued a convertible promissory note (the “July 2025 Note”) to the Rodgers Revocable Trust in exchange for $5.0 million of proceeds received by the Company. The July 2025 Note has a stated interest rate of 12.0%. The July 2025 Note is a general unsecured obligation of the Company and will mature on July 1, 2029, unless earlier converted, redeemed or repurchased. Interest on the July 2025 Note will accrue at a rate of 12.00% per year from the date of issuance and will be payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2026. The July 2025 Note is convertible at the option of the holder at any time prior to the payment of the payment of the principal amount of the July 2025 Note in full. Upon conversion of the July 2025 Note, the Company will satisfy its conversion obligation by delivering shares of common stock and paying cash in respect of any fractional shares. The conversion rate of the July 2025 Note is initially equal to 558.6592 shares of common stock per $1,000 principal amount due under the July 2025 Note. The conversion rate is subject to adjustment from time to time pursuant to the terms of the July 2025 Note. The conversion option related to the July 2025 Note was required to be bifurcated as a derivative liability, and the Company recorded a derivative liability of $3.7 million on the issuance date. The July 2025 Note has an effective interest rate of 62.8%. The carrying amount of the convertible July 2025 Note, inclusive of the fair value of the derivative liabilities was as follows (in thousands):
|  | As of |
|  | September 28, |  |  | December 29, |
|  | 2025 |  |  | 2024 |
July 2025 Note – related party |  | $ | 5,000 |  |  | $ | — |
July 2025 Note derivative liability – related party |  |  | 3,468 |  |  |  | — |
Less Unamortized debt discount |  |  | (3,627 | ) |  |  | — |
Total carrying amount of July 2025 Note – related party |  | $ | 4,841 |  |  | $ | — |
Interest expense and amortization of debt discount cost, all of which was with a related party were as follows (in thousands):
|  | Thirteen Weeks Ended |  |  | Thirty-Nine Weeks Ended |
|  | September 28, 2025 |  |  | September 29, 2024 |  |  | September 28, 2025 |  |  | September 29, 2024 |
Interest expense – related party |  | $ | 138 |  |  | $ | — |  |  | $ | 138 |  |  | $ | — |
Amortization of debt discount – related party |  |  | 53 |  |  |  | — |  |  |  | 53 |  |  |  | — |
Total – related party |  | $ | 191 |  |  | $ | — |  |  | $ | 191 |  |  | $ | — |
7.0% senior unsecured convertible notes On September 16, 2024, the Company entered into an Indenture agreement with U.S. Bank Trust Company, National Association, as trustee (the “Indenture”), for the issuance of 7.0% senior unsecured convertible notes (“7.0% Senior Notes”). The 7.0% Senior Notes issued under the Indenture bear interest at 7.0% per annum, and the interest is payable semiannually in arrears on January 1 and July 1 of each year beginning on January 1, 2025. The principal is payable in full at maturity on July 1, 2029. The 7.0% Senior 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 the 7.0% Senior Notes may convert at any time. The 7.0% Senior Notes may be declared due and payable at the option of the holder upon an event of default and upon a qualifying change of control event. There are no financial covenants. As described below, the Company has issued multiple tranches under this Indenture. September 2024 Notes In September 2024, the Company issued $66.8 million of the 7.0% Senior Notes to various parties (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 Revocable Trust (collectively with Massey Charitable Trust, “Massey Trusts”), also a related party. The conversion option related to the September 2024 Notes was required to be bifurcated as a derivative liability, and the Company recorded a derivative liability of $91.5 million on the issuance date. As the fair value of the derivative liability exceeded 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 as further described below in the Exchange Agreement. 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. The Company issued an additional $0.2 million of September 2024 Notes in the thirteen week period ended March 30, 2025. The effective interest rates are 27.6%, 47.3% and 7.0% on the September 2024 Notes’ principal amounts of $66.8 million, $13.0 million and $0.2 million, respectively. The carrying amount of the convertible September 2024 Notes, inclusive of the fair value of the derivative liabilities was as follows (in thousands):
|  | As of |
|  | September 28, |  |  | December 29, |
|  | 2025 |  |  | 2024 |
September 2024 Notes |  | $ | 80,000 |  |  | $ | 79,800 |
September 2024 Notes derivative liability |  |  | 59,223 |  |  |  | 62,432 |
Less Unamortized debt discount |  |  | (62,536 | ) |  |  | (73,688 | )
Total carrying amount of September 2024 Notes and derivative liabilities |  | $ | 76,687 |  |  | $ | 68,544 |
Interest expense and amortization of debt discount cost were as follows (in thousands):
|  | Thirteen Weeks Ended |  |  | Thirty-Nine Weeks Ended |
|  | September 28, 2025 |  |  | September 29, 2024 |  |  | September 28, 2025 |  |  | September 29, 2024 |
Interest expense |  | $ | 1,431 |  |  | $ | 52 |  |  | $ | 4,253 |  |  | $ | 52 |
Amortization of debt discount |  |  | 3,790 |  |  |  | 454 |  |  |  | 11,152 |  |  |  | 454 |
Total |  | $ | 5,221 |  |  | $ | 506 |  |  | $ | 15,405 |  |  | $ | 506 |
Related parties’ portion of interest expense and amortization of debt discount included in the above amounts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense – related parties |  | $ | 143 |  |  | $ | 6 |  |  | $ | 425 |  |  | $ | 6 |
Amortization of debt discount – related parties |  |  | 422 |  |  |  | 54 |  |  |  | 1,253 |  |  |  | 54 |
Total – related parties |  | $ | 565 |  |  | $ | 60 |  |  | $ | 1,678 |  |  | $ | 60 |
September 2025 Notes On September 21, 2025, the Company issued an additional $22.0 million of the 7.0% Senior Notes (the “September 2025 Notes”) to various parties. The September 2025 Notes were issued pursuant to the Indenture. The September 2025 Notes contain a conversion option related to which requires bifurcation and recognition of a derivative liability, and the Company recorded a derivative liability of $15.4 million on the issuance date. The Company recognized a $2.2 million debt discount and $0.2 million of debt issuance costs in connection with the September 2025 Notes. The effective interest rate on the September 2025 Notes is 65.1%. The net proceeds of $19.6 million from the issuance of the September 2025 Notes were principally used to pay a portion of the cash consideration for the Company’s acquisition of Sunder. The carrying amount of the convertible September 2025 Notes, inclusive of the fair value of the derivative liabilities was as follows (in thousands):
|  | As of |
|  | September 28, |  |  | December 29, |
|  | 2025 |  |  | 2024 |
September 2025 Notes |  | $ | 22,000 |  |  | $ | — |
September 2025 Notes derivative liability |  |  | 16,274 |  |  |  | — |
Less Unamortized debt discount |  |  | (17,782 | ) |  |  | — |
Total carrying amount of September 2025 Notes and derivative liabilities |  | $ | 20,492 |  |  | $ | — |
Interest expense and amortization of debt discount cost were as follows (in thousands):
|  | Thirteen Weeks Ended |  |  | Thirty-Nine Weeks Ended |
|  | September 28, 2025 |  |  | September 29, 2024 |  |  | September 28, 2025 |  |  | September 29, 2024 |
Interest expense |  | $ | 34 |  |  | $ | — |  |  | $ | 34 |  |  | $ | — |
Amortization of debt discount |  |  | 26 |  |  |  | — |  |  |  | 26 |  |  |  | — |
Total |  | $ | 60 |  |  | $ | — |  |  | $ | 60 |  |  | $ | — |
Note payable to Seller – related party On September 24, 2025, the Company issued a note payable to the sellers of Sunder (“Seller Note”) to the Seller/Member in connection with the acquisition of 100% of the membership interests in Sunder. The Seller Note has an original principal amount of $20.0 million. The Seller Note bears interest at 7.0% per annum, compounded at the end of each calendar quarter. Interest is due and payable concurrent with the payment of the principal balance. The maturity date under the Seller Note is the earlier of (i) May 15, 2026 and (ii) the date on which all amounts under the Seller Note otherwise become due and payable following an event of default. The Seller Note must also be repaid in the event of a change of control of the Company or the sale of all or substantially all of the consolidated assets of the Company and its subsidiaries. The Seller Note includes customary events of default, including: (a) the Company’s failure to pay the Seller Note when due, (b) the Company’s voluntary or involuntary bankruptcy, (c) the Company’s liquidation or dissolution, (d) a change of control of the Company, (e) the Company’s material breach of the covenants applicable to the Company under the Seller Note, subject to applicable cure periods, and (f) if any of the Company’s representations or warranties made in the Seller Note were untrue in any material respect when made. The Company concluded that since the sellers joined the Company and have a level of influence that is not insignificant, they are related parties of the Company and therefore the Seller Note is a related party obligation. Management concluded that the carrying value of the Seller Note approximates its fair value due to the short-term nature of the obligation. Interest expense recognized on the Seller Note was less than $0.1 million in the thirteen and thirty-nine week periods ended September 28, 2025. Exchange Agreement On July 1, 2024, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Carlyle, which was deemed to be a related party beginning in fiscal 2024 and ended as of March 30, 2025 as described in Note 2 (h) Summary of Significant Accounting Policies – Changes in related parties, and Kline Hill (as defined below) providing for:
| (i) | 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;
| (iii) | 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 a secured credit facility (“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; and
| (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”).
At the date of the cancellation under the Exchange Agreement, the Company’s indebtedness to CS Solis was $37.2 million and the indebtedness to Kline Hill was comprised of the 2018 Bridge Notes of $11.7 million, 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 transactions entered into in the Exchange Agreement 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 $19.8 million in the thirteen week and thirty-nine week periods ended September 29, 2024 and recorded an additional gain of $2.5 million in the fourth quarter of fiscal 2024 for an aggregate gain on troubled debt restructuring of $22.3 million in fiscal 2024. Prior to the Exchange Agreement, the Company recorded accretion of the liability of the debt in CS Solis as related party interest expense of zero and $3.9 million in the thirteen and thirty-nine week periods ended September 29, 2024, respectively. Interest expense recognized on the 2018 Bridge Notes was zero and $0.7 million in the thirteen and thirty-nine week periods ended September 29, 2024, respectively. Interest expense on the Secured Credit Facility was zero and $1.0 million in the thirteen and thirty-nine week periods ended September 29, 2024, respectively. Revolving loan with related party Prior to entering into the Exchange Agreement, the Company had a revolving loan (“Aggregate Revolving Loan”) due to Kline Hill and Rodgers Revocable Trust, a related party. The Aggregate Revolving Loan had an annual interest rate equal to the greater of 7.75% or Prime plus 4.5%. In connection with the Exchange Agreement in July 2024, $3.5 million of the Revolving Loan, plus accrued interest owed to Kline Hill, was exchanged for a portion of the July 2024 Notes. The principal balance of $1.5 million (“Related Party Loan”) owing to the Rodgers Revocable Trust (plus accrued interest) remained outstanding as of September 28, 2025, and December 29, 2024. There are no financial covenants. Interest expense recognized on the Aggregate Revolving Loan was less than $0.1 million in each of the thirteen week periods ended September 28, 2025 and September 29, 2024. Interest expense recognized on the Aggregate Revolving Loan was $0.2 million and $0.4 million in the thirty-nine week periods ended September 28, 2025, and September 29, 2024, respectively. Of the total interest expense recognized on the Aggregate Revolving Loan, related party interest expense recognized was less than $0.1 million in each of the thirteen week periods ended September 28, 2025 and September 29, 2024, and $0.2 million and $0.4 million in the thirty-nine week periods ended September 28, 2025, and September 29, 2024. | (15) Borrowings and Derivative Liabilities The Company’s borrowings and derivative liabilities consisted of the following (in thousands):
|  | As of |
|  | December 29, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
12% Notes |  | $ | 17,965 |  |  | $ | - |
12% Notes derivative liability |  |  | 13,563 |  |  |  | - |
12% Notes - related parties |  |  | 24,632 |  |  |  | - |
July 2024 derivative liability - related parties |  |  | 21,127 |  |  |  | - |
7% Notes |  |  | 5,636 |  |  |  | - |
7% Notes derivative liability |  |  | 55,474 |  |  |  | - |
7% Notes - related party |  |  | 476 |  |  |  | - |
7% Notes - derivative liability - related party |  |  | 6,958 |  |  |  | - |
2018 Bridge Notes |  |  | - |  |  |  | 11,031 |
Revolver Loan |  |  | 1,500 |  |  |  | 5,168 |
Secured Credit Facility |  |  | - |  |  |  | 12,158 |
Polar Settlement Agreement |  |  | - |  |  |  | 300 |
Total Notes payable |  |  | 147,331 |  |  |  | 28,657 |
Debt in CS Solis |  |  | - |  |  |  | 33,280 |
Total notes payable and convertible notes, net |  |  | - |  |  |  | 61,937 |
Less current portion |  |  | (1,500 | ) |  |  | (61,937 | )
Notes payable and convertible notes, net of current portion |  | $ | 145,831 |  |  | $ | - |
12% Senior Unsecured Convertible Notes In July 2024, the Company issued $46.0 million of senior unsecured convertible notes (“12% Notes”) to various lenders. Of the 12% 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 12% 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 12% 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 12% Notes may convert at any time. The 12% 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 12% 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 12% 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 12% 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 12% 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 12% 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 33.4% and 31.7% on the 12% 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 12% Notes and 12% 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 “7% 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 7% 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 7% 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 7% Notes may convert at any time. The 7% 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. As the 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 7% 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 7% 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 7% 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 7% 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 7% 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 7% 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:
| (i) | 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 12% Notes;
| (iii) | 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 12% Notes; and
| (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 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 the Company, the outstanding warrants issued were assumed by the parent company, the Company (which at such time had the name Complete Solaria, Inc.). 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 12% Notes. In July 2024, the Company issued the principal amount of $8.0 million of its 12% 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 12% 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 Solar. 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. The 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, the Company (which at such time had the name Complete Solaria, Inc.). 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 12% 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 (“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. The 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 12% 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 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 31, 2023. The remaining balance owed to Polar was paid in full in the fiscal year ended December 29, 2024. Debt in CS Solis 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 the Company in exchange for 100 Class A Membership Units. The Class 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 the Company, 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, the Company issued Carlyle a warrant to purchase up to 2,745,879 shares of Company 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 Company Common Stock based on (a) the greater of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795% of the Company’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 Company 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 2024. 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. 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 the Company 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 the Company 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 Company 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.

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