| Warrants | (12) Warrants Liability-classified
warrants (in thousands)
As of
September 29, December 31,
2024 2023
Carlyle warrant $ — $ 9,515
Replacement warrants — 1,310
Public warrants 2,242 167
Private placements warrants 3,908 122
Working capital warrants 447 13
$ 6,597 $ 11,127 Carlyle
Warrant In February 2022, as part of a debt financing
from Carlyle (refer to Note 13 – Borrowings and Derivative Liabilities), the Company issued a warrant to purchase 2,886,952 shares
of common stock in conjunction with long-term debt issued to Carlyle (“CS Solis Debt”). 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, expired on December 31, 2022 prior to becoming exercisable. 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. At
issuance, the relative fair value of the warrant was determined to be $3.4 million using the Black-Scholes model with the following weighted
average assumptions: expected term of 7 years; expected volatility of 73.0%; risk-free interest rate of 1.9%; and no In
July 2023, and in connection with the closing of the Mergers, the Carlyle debt and warrants were modified. Based on the exchange ratio
included in the Mergers, the 1,995,879 outstanding warrants to purchase Legacy Complete Solaria Common Stock prior to modification were
exchanged into warrants to purchase 1,995,879 shares of Complete Solaria Common Stock. As part of the modification, the warrant, which
expires on July 18, 2030, provides Carlyle with the right to purchase shares of Complete Solaria Common Stock based on (a) the greater
of (i) 1,995,879 shares and (ii) the number of shares equal to 2.795% of Complete Solaria’s issued and outstanding shares of common
stock, on a fully-diluted basis; plus (b) on and after the date that is ten (10) days after the date of the agreement, an additional
350,000 shares; plus (c) on and after the date that is thirty (30) days after the date of the agreement, if the original investment amount
has not been repaid, an additional 150,000 shares; plus (d) on and after the date that is ninety (90) days after the date of the agreement,
if the original investment amount has not been repaid, an additional 250,000 shares, in each case, of Complete Solaria Common Stock at
a price of $0.01 per share. Of the additional warrants that become exercisable after the modification, the tranches of 350,000 warrants
vesting ten days after the date of the agreement and 150,000 warrants vesting thirty days after the date of the agreement were exercisable
as of October 31, 2023. The modification of the warrant resulted in the reclassification of
previously equity-classified warrants to liability classification, which was accounted for in accordance with ASC 815 and ASC 718, Compensation
– Stock Compensation no On July 1, 2024, in connection with the Exchange Agreement (as defined
in Note 13 – 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. The modification of the warrant resulted in the reclassification of previously classified
warrant from liability to equity classification, resulting in an increase to additional paid-in capital of $7.3 million, a reduction in
the warrant liability of $6.6 million, and $0.7 million of expense related to the remeasurement of the liability as of the modification
date which was classified within “Gain on Extinguishment of Debt” within the Company’s statements of operations for
the thirteen weeks and thirty-nine weeks ended September 29, 2024. The Company recorded zero and a $2.9 million decrease in the fair value
of this warrant, as Other expense, net on its unaudited condensed consolidated statements of operations and comprehensive loss for thirteen
weeks and thirty-nine weeks ended September 29, 2024, respectively. 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 contains two tranches. The first tranche of 518,752 shares of Series D-7 preferred
stock were 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 is fixed at $2.50 per share of Complete Solaria Common Stock for the first tranche and
$5.00 per share of Complete Solaria Common Stock for the second tranche upon the closing of the Mergers. In October 2023, the Company entered into an Assignment
and Acceptance Agreement (“Assignment Agreement”), (refer to Note 13 – 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 their fair value
on the amendment effective date, and the Company recorded subsequent changes in fair value in Other expense, net on its unaudited condensed
consolidated statements of operations and comprehensive loss. The Replacement Warrants expired in April 2024 and the Company released
the $1.3 million liability in the thirteen week period ended June 30, 2024. The $1.3 million of income was classified within Other expense,
net. 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,
the 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 Company’s unaudited condensed 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 $6.1 million as of September 29, 2024. The Company recorded a $5.6
million and $5.9 million increase in the fair value of these warrants for the thirteen weeks and thirty-nine weeks ended September 29,
2024, respectively. The Company recorded a $4.0 million decrease in the fair value of the Public and Private Placement Warrants for each
of the thirteen weeks and thirty-nine weeks ended October 1, 2023. These changes were recorded in Other expense, net in the unaudited
condensed consolidated statements of operations and comprehensive loss. 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 Company’s unaudited condensed consolidated balance sheets. As of September 29, 2024, the Working Capital warrants
had a fair value of $0.4 million. The Company recorded a $0.4 million increase in the fair value of these warrants for each of the thirteen
weeks and thirty-nine weeks ended September 29, 2024. The Company recorded a change in the Working Capital Warrants of $0.2 million
for each of the thirteen and thirty-nine weeks ended October 1, 2023. These changes were recorded in Other expense, net on the unaudited
condensed consolidated statements of operations and comprehensive loss. Equity
Classified Warrants Series
B Warrants (Converted to Common Stock Warrants) In February 2016, the Company issued a warrant
to purchase 5,054 shares of Series B preferred stock (the “Series B warrant”) in connection with a 2016 credit facility.
The Series B warrant is immediately exercisable at an exercise price of $4.30 per share and has an expiration date of February 2026.
The relative fair value of the Series B warrant at issuance was recorded as a debt issuance cost within other noncurrent liabilities
upon issuance. 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, 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 expense, net in the Company’s unaudited condensed consolidated
statements of operations and comprehensive loss. Series
C Warrants (Converted to Common Stock Warrants) In July 2016, the Company issued a warrant to
purchase 148,477 shares of Series C preferred stock (the “Series C warrant”) in connection with the Series C financing. The
Series C warrant agreement also provided for an additional number of Series C shares calculated on a monthly basis commencing in 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 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 and changes in the fair value of
the warrant were recorded in Other expense, net on the accompanying unaudited condensed consolidated statements of operations and comprehensive
loss. 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, upon the warrant becoming exercisable into shares of Complete
Solaria Common Stock. Series
C-1 Warrants (Converted to Common Stock Warrants) In January 2020, the Company issued a warrant to purchase 173,067 shares
of common stock in conjunction with the Series C-1 preferred stock financing. The warrant is immediately exercisable at an exercise price
of $0.01 per share and has an expiration date of January 2030. The warrant remains outstanding as of September 29, 2024. The fair
value of the warrant was recorded within additional paid-in capital on the unaudited condensed 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”). The 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 September 29, 2024.
The fair value of the warrant was recorded within additional paid-in-capital on the accompanying unaudited condensed consolidated balance
sheets. The 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 24,148 shares
of common stock in conjunction with the issuance of a short-term promissory note. The warrant is 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 September 29, 2024. The
fair value of the warrant was recorded within additional paid-in capital on the unaudited condensed 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 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 within additional paid-in capital on the unaudited condensed consolidated balance sheets. 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 September 29, 2024, all warrants issued as warrant consideration remain outstanding. Ayna
Warrant On
June 17, 2024, a warrant to purchase shares of the Company’s common stock (“Ayna Warrant”) was executed which certifies
that Ayna.AI LLC (“Ayna”) is entitled to purchase 6,000,000 shares of the Company’s common stock at the exercise price
per share of $0.01, subject to the provisions and upon the terms and conditions set forth in the Ayna Warrant. 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 owed by the Company
to 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 will provide services in connection with
the anticipated return of the Company to cash-flow positive performance. On
or after the earlier of (i) September 9, 2024; and (ii) the first trading day after March 12, 2024 with a closing price of the Company’s
common stock greater than or equal to $1.00 for 45 days out of the trailing consecutive 60-trading-day period (the earlier of the preceding
clauses (i) and (ii) the “Exercise Date”), Ayna may exercise the Ayna Warrant for up to 4,000,000 shares of the Company’s
common stock. On or after September 9, 2024, Ayna may exercise the Ayna Warrant for up to the remaining 2,000,000 shares of the Company’s
common stock. Prior to the Exercise Date, Ayna may not exercise the Ayna Warrant. 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. As the Ayna Warrant is accounted
for as stock-based compensation under ASC 718, the Ayna Warrant is recorded within additional paid-in capital on the unaudited condensed
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 but consideration has not vested as of September 29, 2024. The Company recognized expenses earned to
date of $3.8 million and $5.4 million for the thirteen weeks and thirty-nine weeks ended September 29, 2024, respectively, within
General and administrative expenses on the Company’s unaudited condensed consolidated statement of operations. The full amount of
the Ayna Warrant, $9.2 million, was recorded within additional paid-in-capital as of September 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 13 – Borrowings and Derivative Liabilities). The Cantor Warrant is 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 13 – Borrowings
and Derivative Liabilities). The fair value of the warrant was derived using the Black-Scholes model with the following assumptions: expected
volatility of 55%; risk-free interest rate of 4.2%; expected term of 5 years; and no dividend yield. The warrant is recorded within additional
paid-in capital on the Company’s unaudited condensed consolidated balance sheets and is not remeasured in future periods as it meets
the conditions for equity classification. |
