SunPower Inc. (SPWR)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following
discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related
notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences
include those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual
Report on Form 10-K. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

Complete Solaria was formed
in November 2022 through the merger of Complete Solar and Solaria. Founded in 2010, Complete Solar created a technology platform to offer
clean energy products to homeowners by enabling a national network of sales partners and build partners. Our sales partners generate solar
installation contracts with homeowners on our behalf. To facilitate this process, we provide the software tools, sales support and brand
identity to our sales partners, making them competitive with national providers. This turnkey solution makes it easy for anyone to sell
solar.

We fulfill our customer contracts
by using in-house installation experts and by engaging with local construction specialists. We manage the customer experience and complete
all pre-construction activities prior to delivering build-ready projects including hardware, engineering plans, and building permits to
our builder partners. We manage and coordinate this process through our proprietary software system.

There is substantial doubt
about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
The consolidated financial statements included in this Annual Report on Form 10-K have been prepared assuming the Company will continue to operate
as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. 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.

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Growth Strategy and Outlook

Our growth strategy contains the following
elements:

The Mergers

We entered into an Amended
and Restated Business Combination Agreement with FACT, First Merger Sub, Second Merger Sub, and Solaria on October 3, 2022. The Merger
was consummated on July 18, 2023. Upon the terms and subject to the conditions of the Merger, (i) First Merger Sub merged with and into
Complete Solaria with Complete Solaria surviving as a wholly-owned subsidiary of FACT (the “First Merger”), (ii) immediately
thereafter and as part of the same overall transaction, Complete Solaria merged with and into Second Merger Sub, with Second Merger Sub
surviving as a wholly-owned subsidiary of FACT (the “Second Merger”), and FACT changed its name to “Complete
Solaria, Inc.” and Second Merger Sub changed its name to “CS, LLC” and (iii) immediately after the consummation of the
Second Merger and as part of the same overall transaction, Solaria merged with and into a newly formed Delaware limited liability company
and wholly-owned subsidiary of FACT and changed its name to “The SolarCA LLC” (“Third Merger Sub”), with
Third Merger Sub surviving as a wholly-owned subsidiary of FACT (the “Additional Merger”, and together with the First Merger
and the Second Merger, the “Mergers”).

The Mergers between Complete
Solaria and FACT has been accounted for as a reverse recapitalization. Under this method of accounting, FACT is treated as the acquired
company for financial statement reporting purposes. This determination was primarily based on the Company having a majority of the voting
power of the post-combination company, the Company’s senior management comprising substantially all of the senior management of
the post-combination company, and the Company’s operations comprising the ongoing operations of the post-combination company. Accordingly,
for accounting purposes, the Mergers have been treated as the equivalent of a capital transaction in which Complete Solaria is issuing
stock for the net assets of FACT. The net assets of FACT have been stated at historical cost, with no goodwill or other intangible assets
recorded.

Disposal Transaction

In October 2023, we completed
the divestiture of our solar panel business to Maxeon (“Divestiture”), pursuant to the terms of the Disposal Agreement.
Under the terms of the Disposal Agreement, Maxeon agreed to acquire certain assets and employees of Complete Solaria, for an aggregate
purchase price of approximately $11.0 million consisting of 1,100,000 shares of Maxeon ordinary shares. We determined that the criteria
were met for discontinued operations classification as the divestiture represented a strategic shift in our business. In connection with
the Divestiture, we recognized a loss from discontinued operations of $2.0 million and $173.4 million in the fiscal years ended December
29, 2024 and December 31, 2023, respectively. We also sold all the Maxeon shares in the year ended December 31, 2023, and recorded a $4.2
million loss on the sale of these shares in our consolidated statements of operations and comprehensive loss.

Below we have discussed our
historical results of continuing operations, which excludes our product revenues and related metrics, as all results of operations associated
with the solar panel business have been presented as discontinued operations, unless otherwise noted.

SunPower Acquisition Transaction

On August 5, 2024, we entered
into the aforementioned APA among us and the SunPower Debtors which provided for the sale and purchase of certain assets relating to the
Blue Raven Solar business, New Homes Business and Non-Installing Dealer network previously operated by the SunPower Debtors (the “Acquired
SunPower Assets”). The sale by SunPower was approved on September 23, 2024, by the United States Bankruptcy Court for the District
of Delaware. We completed the acquisition (“Acquisition”) of the Acquired SunPower Assets (“SunPower Businesses”)
effective September 30, 2024.

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Financing of the Acquisition

Complete Solaria financed
the Acquisition by issuing 7% convertible senior notes (“September 2024 Notes”) in September 2024, which are due in
2029. The September 2024 Notes mature on July 1, 2029 and are convertible into the Company’s common stock at the option of the holder
at a conversion rate of $2.14 per share. The September 2024 Notes will become immediately due and payable at the option of the holder
in the event of default and upon a qualifying change of control event.

Key Financial Definitions/Components of Results
of Operations

Revenues

Revenue is recognized for
Residential Solar Installation and New Home Business when a customer obtains control of promised products and services and we have satisfied
our performance obligations which is the date by which substantially all of our design and installation is complete for a fully functioning
solar power system to interconnect to the local power grid.

Installation includes the
design of a solar energy system, the delivery of the components of the solar energy system (i.e., photovoltaic system, inverter, battery
storage, etc.), installation services and services facilitating the connection of the solar energy system to the power grid. We account
for these services as inputs to a combined output, resulting in a single service-based performance obligation.

The amount of revenue recognized
reflects the consideration which we expect to be entitled to receive in exchange for the products and services. To achieve this core principle,
we apply the following five steps:

Step 1. Identification of the contract(s)
with a customer;

Step 2. Identification of the performance
obligations in the contracts(s);

Step 3. Determination of the transaction
price;

Step 4. Allocation of the transaction
price to the performance obligations;

Step 5. Recognition of the revenue
when, or as, we satisfy a performance obligation.

Residential Solar Installation Revenues

Our Residential Solar Installation
segment sells products through a network of installing and non-installing dealers and resellers, as well as our internal sales team. Our
contracts with customers include three primary contract types:

New Home Business Revenues

Our New Homes Business sells
through a network of home builders as well as our internal sales team. Our contracts with customers include two primary contract types:

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Our performance obligation
for both reportable segments is to design and install a fully functioning solar energy system. For all contract types (with the exception
of New Homes Business Lease agreements), we recognize revenue over time. Our over-time revenue recognition begins when the solar power
system is fully installed (as it is at this point that control of the asset begins to be transferred to the customer and the customer
retains the significant risks and rewards of ownership of the solar power system). We recognize revenue using the input method based on
direct costs to install the system and defer the costs of installation until such time that control of the asset transfers to the customer
(installation). For New Homes Business Lease agreements, we consider the performance obligation to be satisfied at a point in time upon
acceptance of the system by the customer.

Revenue is generally recognized
at the transaction price contained within the agreement, net of costs of financing, or other consideration paid to the customers that
is not in exchange for a distinct good or service. Our arrangements may contain clauses that can either increase or decrease the transaction
price. Variable consideration is estimated at each measurement date at its most likely amount to the extent that it is probably that a
significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively as such estimates change.

We record deferred revenue
for amounts invoiced that are received in advance of the provisioning of services. In certain contracts with customers, we arrange for
a third-party financing partner to provide financing to the customer. We collect upfront from the financing partner and the customer will
provide installment payments to the financing partner. We record revenue in the amount received from the financing partner, net of any
financing fees charged to the homeowner, which we consider to be a customer incentive. None of our contracts contain a significant financing
component.

Costs to obtain and fulfill contracts

Our costs to obtain and fulfill contracts, when recognized, associated with systems sales are expensed as sales commission and cost of
revenue, respectively. In addition, incentives we provide to our customers, such as discounts and rebates, are recorded net to the revenue
we have recognized on the solar power system.

Cost of Revenues

Cost of revenues is comprised
primarily of cost of material, internal labor costs, third-party subcontractors, design services, engineering personnel and employee-related
expenses associated with permitting services, associated warranty costs, freight and delivery costs, depreciation, and amortization of
internally developed software. Cost of revenues from these services is recognized when the Company transfers control of the product to
the customer, which is generally upon installation.

Operating Expenses

Sales Commissions

Sales commissions are direct
and incremental costs of obtaining customer contracts. These costs are paid to internal sales teams and third-party vendors who source
residential customer contracts for the sale of solar energy systems.

Sales and Marketing

Sales and marketing expenses
primarily consist of personnel related costs, including salaries and employee benefits, stock-based compensation, and other promotional
and advertising expenses. We expense certain sales and marketing, including promotional expenses, as incurred.

General and Administrative

General and administrative
expenses consist primarily of personnel and related expenses for employees, in our finance, research, engineering, and administrative
teams including salaries, bonuses, payroll taxes, and stock-based compensation. It also consists of legal, consulting, and professional
fees, rent expenses pertaining to our offices, business insurance costs and other costs.

Interest Expense

Interest expense primarily
relates to interest expense on the issuance of debt and convertible notes and the amortization of debt issuance costs.

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Other income (expense), net

Other income (expense), net
consists of changes in the fair value of our convertible notes, the impact of debt extinguishment, troubled debt restructuring, changes
in the fair value of stock warrant liabilities and forward purchase agreements, and loss on the sale of an equity investment.

Income Tax Expense

Income tax expense primarily
consists of income taxes in certain foreign and state jurisdictions in which we conduct business.

Supply Chain Constraints
and Risk

We
rely on a small number of suppliers of solar energy systems and other equipment. If any of our suppliers was unable or unwilling to provide
us with contracted quantities in a timely manner at prices, quality levels and volumes acceptable to us, we would have very limited alternatives
for supply, and we may not be able find suitable replacements for our customers, or at all. Such an event could materially adversely affect
our business, prospects, financial condition and results of operations.

In
addition, the global supply chain and our industry have experienced significant disruptions in recent periods. We have seen supply chain
challenges and logistics constraints increase, including shortages of panels, inverters, batteries and associated component parts for
inverters and solar energy systems available for purchase, which materially impacted our results of operations. In an effort to mitigate
unpredictable lead times, we experienced a substantial build up in inventory on hand commencing in early 2022 in response to global supply
chain constraints. In certain cases, this has caused delays in critical equipment and inventory, longer lead times, and has resulted in
cost volatility. These shortages and delays can be attributed in part to the COVID-19 pandemic and resulting government action, as well
as broader macroeconomic conditions, and have been exacerbated by the ongoing conflicts in Ukraine and Israel. While we believe that a
majority our suppliers have secured sufficient supply to permit them to continue delivery and installations through the end of 2023, if
these shortages and delays persist into 2024, they could adversely affect the timing of when battery energy storage systems can be delivered
and installed, and when (or if) we can begin to generate revenue from those systems. If any of our suppliers of solar modules experienced
disruptions in the supply of the modules’ component parts, for example semiconductor solar wafers or investors, this may decrease
production capabilities and restrict our inventory and sales. In addition, we have experienced and are experiencing varying levels of
volatility in costs of equipment and labor resulting in part from disruptions caused by general global economic conditions. While inflationary
pressures have resulted in higher costs of products, in part due to an increase in the cost of the materials and wage rates, these additional
costs have been offset by the related rise in electricity rates.

We
cannot predict the full effects the supply chain constraints will have on our business, cash flows, liquidity, financial condition and
results of operations at this time due to numerous uncertainties. Given the dynamic nature of these circumstances on our ongoing business,
results of operations and overall financial performance, the full impact of macroeconomic factors, including the conflicts in Ukraine
and Israel, cannot be reasonably estimated at this time. In the event we are unable to mitigate the impact of delays or price volatility
in solar energy systems, raw materials, and freight, it could materially adversely affect our business, prospects, financial condition
and results of operations. For additional information on risk factors that could impact our results, please refer to “Risk Factors”
located elsewhere in this Annual Report on Form 10-K.

Critical Accounting
Estimates

Our
discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been
prepared in accordance with GAAP. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe
to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other
instances, changes in the accounting estimates are reasonably likely to occur from period-to-period. Actual results could differ significantly
from our estimates. Our future financial statements will be affected to the extent that our actual results materially differ from these
estimates. For further information on all of our significant accounting policies, see Note 2 – Summary of Significant Accounting
Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We
believe that policies associated with our revenue recognition and business combination have the greatest impact on our consolidated financial
statements. Therefore, we consider these to be our critical accounting policies and estimates.

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Revenue Recognition

Revenue is recognized for
Residential Solar Installation and New Home Business when a customer obtains control of promised products and services and we have satisfied
our performance obligations which is the date by which substantially all of our design and installation is complete for a fully functioning
solar power system to interconnect to the local power grid.

Installation includes the
design of a solar energy system, the delivery of the components of the solar energy system (i.e., photovoltaic system, inverter, battery
storage, etc.), installation services and services facilitating the connection of the solar energy system to the power grid. We account
for these services as inputs to a combined output, resulting in a single service-based performance obligation.

The amount of revenue recognized
reflects the consideration which we expect to be entitled to receive in exchange for the products and services. To achieve this core principle,
we apply the following five steps:

Step 1. Identification of the contract(s)
with a customer;

Step 2. Identification of the performance
obligations in the contracts(s);

Step 3. Determination of the transaction
price;

Step 4. Allocation of the transaction
price to the performance obligations;

Step 5. Recognition of the revenue
when, or as, we satisfy a performance obligation.

Residential Solar Installation Revenues

Our Residential Solar Installation
segment sells products through a network of installing and non-installing dealers and resellers, as well as our internal sales team. Our
contracts with customers include three primary contract types:

New Home Business Revenues

Our New Homes Business sells
through a network of home builders as well as our internal sales team. Our contracts with customers include two primary contract types:

Our performance obligation for both reportable segments is to design
and install a fully functioning solar energy system. For all contract types (with the exception of New Homes Business Lease agreements),
we recognize revenue over time. Our over-time revenue recognition begins when the solar power system is fully installed (as it is at this
point that control of the asset begins to be transferred to the customer and the customer retains the significant risks and rewards of
ownership of the solar power system). We recognize revenue using the input method based on direct costs to install the system and defer
the costs of installation until such time that control of the asset transfers to the customer (installation). For New Homes Business Lease
agreements, we consider the performance obligation to be satisfied at a point in time upon acceptance of the system by the customer.

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Revenue
is generally recognized at the transaction price contained within the agreement, net of costs of financing, or other consideration paid
to the customers that is not in exchange for a distinct good or service. Our arrangements may contain clauses that can either increase
or decrease the transaction price. Variable consideration is estimated at each measurement date at its most likely amount to the extent
that it is probably that a significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively
as such estimates change.

We record deferred revenue
for amounts invoiced that are received in advance of the provisioning of services. In certain contracts with customers, we arrange for
a third-party financing partner to provide financing to the customer. We collect upfront from the financing partner and the customer will
provide installment payments to the financing partner. We record revenue in the amount received from the financing partner, net of any
financing fees charged to the homeowner, which we consider to be a customer incentive. None of our contracts contain a significant financing
component.

Costs
to obtain and fulfill contracts

Our costs to obtain and fulfill contracts, when recognized, associated with systems sales are expensed as sales commission and cost of
revenue, respectively. In addition, incentives we provide to our customers, such as discounts and rebates, are recorded net to the revenue
we have recognized on the solar power system.

Accounting for
Business Combinations

We
record all acquired assets and liabilities, including goodwill, and other identifiable intangible assets at fair value. The initial recording
of goodwill, other identifiable intangible assets, requires certain estimates and assumptions concerning the determination of the fair
values and useful lives. The judgments made in the context of the purchase price allocation can materially affect our future results of
operations. Accordingly, for significant acquisitions, we obtain assistance from third-party valuation specialists. The valuations calculated
from estimates are based on information available at the acquisition date. Goodwill is not amortized but is subject to annual tests for
impairment or more frequent tests if events or circumstances indicate it may be impaired. Other intangible assets are amortized over their
estimated useful lives and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying
amount.

Recent Accounting
Pronouncements

A
discussion of recently issued accounting standards applicable to Complete Solaria is described in Note 2 – Summary of Significant
Accounting Policies, in the accompanying notes to the consolidated financial statements.

Results of Operations

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

In
this section, we discuss the results of our operations for fiscal 2024 compared to fiscal 2023. We discuss our cash flows and current
financial condition under “Liquidity and Capital Resources”.

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The
following table sets forth our statements of operations data for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
We have derived this data from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This information
should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on
Form 10-K. The results of historical periods are not necessarily indicative of the results of operations for any future period. Within
the tables presented, percentages are calculated based on the underlying whole-dollar amounts and, therefore, may not recalculate exactly
from the rounded numbers used for disclosure purposes.

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

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Revenues

We disaggregate our revenues
based on the following operating segments (in thousands):

Total revenues increased by
$21.1 million or 24%, during 2024 compared to 2023. This increase includes $84.6 million in revenue generated from the SunPower acquisition,
partially offset by a decrease in legacy solar energy system installation of $61.0 million or 70% when compared to the previous year.
The decrease in Residential Solar Installation during 2024 is primarily a result of decreased demand for solar energy systems due to the
net energy metering program (“NEM 3.0”) that went live in California in April 2023, an overall softening in the industry due
to reduced economic outlook in key markets, and rising interest rates.

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

Cost of Revenues

Total
costs of revenues decreased by $0.5 million, during 2024 compared to 2023. This decrease includes $49.0 million in cost of revenue generated
from the SunPower acquisition partially offset by a $49.5 million or 1% decrease in costs attributable to decrease in legacy solar energy
systems revenues

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Gross Margin

Gross margin increased from
20% for the fiscal year ended December 31, 2023 to 36% for the fiscal year ended December 29, 2024. The increase in gross margin is primarily
attributed to the SunPower acquisition. New Homes Business has a higher gross margin because the systems are integrated into new builds
whereas solar system installations require retrofitting that may require additional labor and costly renovations for optimal roof orientation
and proper installation.

Sales Commissions

The decrease in Residential
Solar Installations commissions during 2024 compared to 2023 is attributed to a decrease in sales in solar system installation revenue
and overall decrease in customer acquisition costs.

Sales and Marketing

Residential Solar Installation
expense decreased in 2024 compared to 2023 due to the decrease in revenues and a reduction in incentives and rebates for the solar energy
system installations.

General and Administrative

The increase in general and administrative costs during 2024 compared
to 2023 was primarily attributed to transformation costs as it relates to the SunPower acquisition. Increases in contractors, professional
services such as legal, accounting and other outside services costs of $14.0 million related to the acquisition, payroll of $10.4 million,
bad debt expense of $10.0 million, and overall one-time costs of $13.3 million of integrating the companies include consultants to identify
areas of automation and operational synergies, software implementation, and data migration.

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Interest Expense

Interest
expense for the fiscal year ended December 29, 2024 increased $2.2 million or 16%, compared to the fiscal year ended December 31,
2023. The increase was primarily attributed to debt restructuring that was completed during the third quarter of fiscal 2024.

Other Income (Expense), Net

Other income (expense), net was $7.9 million for the fiscal year ended
December 29, 2024. The expenses consisted primarily of and increased due to $34.0 million gain on remeasurement of derivative liability,
and $6.5 million due to the change in fair value of warrant liability, warrants, forward purchase agreement liabilities and SAFE Agreement.
The increase is offset by $24.7 million loss on issuance of a derivative liability, $1.3 million change in the fair value of FACT public,
private placement and working capital warrants, $1.3 million loss on conversion of SAFE agreements to common stock with a related party
and $3.8 million in other financing costs.

Other
income (expense), net was $29.9 million for the fiscal year ended December 31, 2023. The expenses consisted primarily of $35.4 million
in other expense related to the issuance of common stock in connection with the FPAs, the loss on extinguishment of debt in CS Solis of
$10.3 million, the loss on sale of Maxeon equity securities of $4.2 million, $3.9 million in other expense associated with the change
in fair value of FPAs, $2.4 million for the issuance of bonus shares in connection with the Mergers, $3.0 million relating to expenses
relating to disposed operations and other expenses of $0.4 million. These expenses were offset by $29.3 million related to the change
in fair value of our warrant liabilities.

Net Loss from Continuing Operations

As
a result of the factors discussed above, our net loss from continuing operations for the fiscal year ended December 29, 2024, was $54.4
million a decrease of $41.8 million, as compared to a net loss from continuing operations of $96.2 million for the fiscal year ended December
31, 2023.

Liquidity and Capital Resources

Since inception, we have incurred losses and negative cash flows from
operations. We incurred net losses of $56.5 million and $269.6 million, during the fiscal years ended December 29, 2024, and December
31, 2023, respectively, and had an accumulated deficit of $411.4 million and current debt of $1.5 million as of December 29, 2024. We
had cash and cash equivalents of $13.4 million as of December 29, 2024, which were held for working capital expenditures. We believe our
operating losses and negative operating cash flows will continue into the foreseeable future. We have financed our operations primarily
through sales of equity securities, the issuance of convertible notes and cash generated from operations. Our cash equivalents are on
deposit with major financial institutions. Our cash position raises substantial doubt regarding our ability to continue as a going concern
for 12 months following the issuance of the consolidated financial statements.

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We will receive the proceeds from any cash exercise of any warrants.
The aggregate amount of proceeds could be up to $257.3 million if all the warrants are exercised for cash. However, to the extent the
warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the warrants will decrease.
The Private Warrants and Working Capital Warrants may be exercised for cash or on a “cashless basis.” The Public Warrants
and the Mergers Warrants may only be exercised for cash provided there is then an effective registration statement registering the shares
of common stock issuable upon the exercise of such warrants. If there is not a then-effective registration statement, then such warrants
may be exercised on a “cashless basis,” pursuant to an available exemption from registration under the Securities Act. We
expect to use any such proceeds for general corporate and working capital purposes, which would increase our liquidity. As of April 28,
2025, the price of our common stock was $2.05 per share. The weighted average exercise price of the warrants was $8.12 as of December
29, 2024. We believe the likelihood that warrant holders will exercise their warrants, and therefore the amount of cash proceeds that
we would receive, is dependent upon the market price of our common stock. If the market price for our common stock remains less than the
exercise price, we believe warrant holders will be unlikely to exercise. In which case we will not receive any proceeds from the cash
exercise of the warrants.

Debt Financings

In July 2024 we issued $46.0
million of 12% senior unsecured convertible notes. Of this issuance, $28.0 million was for cash and $18.0 million was in an exchange of
existing debt on our consolidated balance sheet. Also during 2024, we issued $79.8 million of 7% senior unsecured convertible notes for
cash.

12% Unsecured Convertible Senior Notes

In July 2024, we issued $46.0
million of senior unsecured convertible notes (“July 2024 Notes”) to various lenders. Including in connection with the exchange
agreement transactions summarized below. Of the July 2024 Notes, $18.0 million were issued in exchange for the cancellation of indebtedness
as discussed below, which amount included $10.0 million issued to a strategic investor identified by us as a related party. The July 2024
Notes also included $18.0 million issued to a related party affiliated with the Company’s CEO, Rodgers Massey Revocable Living Trust.
The July 2024 Notes bear interest at 12% per annum and mature on July 1, 2029. The interest rate increases by 3% in the event of default.
The July 2024 Notes are convertible into shares of our common stock at the option of the holder at a conversion rate and initially equal
to 595.2381 shares of common stock per $1,000 principal amount of the July notes. The July 2024 Notes may be declared due and payable
at the option of the holder upon event of default and upon a qualifying change of control event.

7% Unsecured Convertible Senior Notes

In September 2024, we
issued $66.8 million of senior unsecured convertible notes to various lenders (the “September 2024 Notes”), $8.0 million of
which were issued to a related party. In December 2024, we issued additional September 2024 Notes for cash proceeds of $13.0 million.
The September 2024 Notes bear interest at 7% per annum and mature on July 1, 2029. The September 2024 Notes are initially convertible
into 467.8363 shares of common stock per $1,000 principal amount of September 2024 Notes. The September 2024 Notes may be declared due
and payable at the option of the holder upon an event of default and upon a qualifying change of control event.

Exchange Agreement

On July 1, 2024, we entered into an Exchange Agreement
(the “Exchange Agreement”) with CSEF Holdings, LLC and its affiliates (“Carlyle”) and Kline Hill (as defined below)
providing for:

As a result of the Exchange Agreement, we settled
our obligations relating to (i) 2018 Bridge Notes issued in 2018 which bore interest at 8% per annum, (ii) $3.7 million of the Revolving
Loan entered into in 2020 which bore interest at the greater of 7.75% or Prime plus 4.5%; (iii) a Secured Credit Facility entered into
in December 2022 which required the Company to repay amounts borrowed based upon a multiplier of 1.15 if repaid within 75 days and 1.175
if repaid after 75 days; and (iv) debt with CS Solis, an investment by Carlyle. The cancellation of existing indebtedness of these obligations
in the Exchange Agreement aggregated to $65.9 million.

The Revolving Loan has a remaining outstanding
balance of $1.5 million as of December 29, 2024 due to the Rodgers Massey Revocable Living Trust, a related party.

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Polar Settlement Agreement

In September 2023, in connection with the Mergers,
we entered into a settlement and release agreement with Polar Multi-Strategy Master Fund (“Polar”) for the settlement of a
working capital loan that had been made by Polar to the Sponsor, prior to the closing of the Mergers. The settlement agreement required
us to pay Polar $0.5 million in ten equal monthly installments and did not accrue interest. The balance outstanding was $0.3 million as
of December 31, 2023. The remaining balance owed to Polar was paid in full in 2024.

Forward Purchase Agreements

In
July 2023, FACT and Legacy Complete Solaria, Inc. entered into FPAs with each of (i) Meteora; (ii) Polar, and (iii) Sandia (each
individually, a “Seller”, and together, the “FPA Sellers”).

Pursuant
to the terms of the FPAs, the FPA Sellers may purchase through a broker in the open market, from holders of Shares other than the Company
or affiliates thereof, FACT’s ordinary shares, par value of $0.0001 per share, (the “Shares”). While the FPA Sellers
have no obligation to purchase any Shares under the FPAs, the aggregate total Shares that may be purchased under the FPAs shall be no
more than 6,720,000 in aggregate. The FPA Sellers may not beneficially own greater than 9.9% of issued and outstanding Shares
following the Mergers as per the Amended and Restated Business Combination Agreement.

The key terms of the
forward contracts are as follows:

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We
entered into four separate FPAs, three of which, associated with the obligation to issue 6,300,000 Shares, were entered into prior to
the closing of the Mergers. Upon signing the FPAs, we incurred an obligation to issue a fixed number of shares to the FPA Sellers contingent
upon the closing of the Mergers in addition to the terms and conditions associated with the settlement of the FPAs.

On
December 18, 2023, we and the FPA Sellers entered into separate amendments to the FPA (the “Amendments”). The Amendments lowered
the reset floor price of each FPA from $5.00 to $3.00 and allow us to raise up to $10.0 million of equity from existing stockholders without
triggering certain anti-dilution provisions contained in the FPA; provided, the insiders pay a price per share for their initial investment
equal to the closing price per share as quoted on the Nasdaq on the day of purchase; provided, further, that any subsequent investments
are made at a price per share equal to the greater of (a) the closing price per share as quoted by Nasdaq on the day of the purchase or
(b) the amount paid in connection with the initial investment.

On
May 7 and 8, 2024, respectively, we entered into and executed separate amendments to the FPAs (collectively the “Second Amendments”)
with Sandia (the “Sandia Second Amendment”) and Polar (the “Polar Second Amendment”). The Second Amendments lowered
the reset price of each FPA from $3.00 to $1.00 per share and amended the VWAP Trigger Event provision to read as “After
December 31, 2024, an event that occurs if the VWAP Price, for any 20 trading days during a 30 consecutive trading day-period, is below
$1.00 per Share”. The Sandia Second Amendment is not effective until we execute similar amendments with both Polar and Meteora.

On
June 14, 2024, we 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, we entered into an amendment to the FPA with Polar pursuant to which we and Polar agreed that Section 2 (Most Favored Nation)
of the FPA is applicable to all 2,450,000 shares subject to the FPA.

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Simple Agreement for Future Equity (“SAFE”)
Agreements

First SAFE

On
January 31, 2024, we entered into a SAFE (“First SAFE”) with the Rodgers Massey Freedom and Free Markets Charitable
Trust (the “Purchaser”) in connection with the Purchaser investing $1.5 million in the Company. The First SAFE is
convertible into shares of our common stock, par value $0.0001 per share, upon the initial closing of a bona fide transaction or
series of transactions with the principal purpose of raising capital, pursuant to which we issue and sell common stock at a fixed
valuation (an “Equity Financing”), at a per share conversion price which is equal to the lower of (i) (a) $53.54 million
divided by (b) our capitalization immediately prior to such Equity Financing (such conversion price, the “SAFE Price”),
and (ii) 80% of the price per share of our common stock sold in the Equity Financing. If we consummate a change of control prior to
the termination of the First SAFE, the Purchaser will be automatically entitled to receive a portion of the proceeds of such
liquidity event equal to the greater of (i) $1.5 million and (ii) the amount payable on the number of shares of our common stock
equal to (a) $1.5 million divided by (b)(1) $53.54 million divided by (2) our capitalization immediately prior to such liquidity
event (the “Liquidity Price”), subject to certain adjustments as set forth in the First SAFE. The First SAFE was
convertible into a maximum of 1,431,297 shares of our common stock, assuming a per share conversion price of $1.05, which is the
product of (i) $1.31, the closing price of our common stock on January 31, 2024, multiplied by (ii) 80%.

On April 21, 2024, we entered into an amendment (“First SAFE
Amendment”) that converted the First SAFE investment of $1.5 million into 4,166,667 shares of our common stock based on a conversion
price of $0.36 per share, defined in the First SAFE Amendment as the product of (i) $0.45, the closing price of our common stock
on April 19, 2024, multiplied by (ii) 80%. Upon conversion, we recorded a debit to SAFE Agreement of $1.5 million, a credit to Additional
paid-in-capital of $1.9 million and recognized expense of $0.4 million within Other income (expense), net in our consolidated statement
of operations for the fiscal year ended December 29, 2024.

Second SAFE

On
February 15, 2024, we entered into a second SAFE (the “Second SAFE”) with the Purchaser, in connection with the Purchaser
investing $3.5 million in the Company. The Second SAFE did not accrue interest. The Second SAFE was initially convertible into shares
of our common stock upon the initial closing of an Equity Financing at a per share conversion price which was equal to the lower of (i)
the Second SAFE Price, and (ii) 80% of the price per share of our common stock sold in the Equity Financing. If we consummated a change
of control prior to the termination of the Second SAFE, the Purchaser would have been automatically entitled to receive an amount equal
to the greater of (i) $3.5 million and (ii) the amount payable on the number of shares of our common stock equal to $3.5 million divided
by the Liquidity Price, subject to certain adjustments as set forth in the Second SAFE. The Second SAFE was convertible into a maximum
of 3,707,627 shares of our common stock, assuming a per share conversion price of $0.94, which is the product of (i) $1.18, the closing
per share price of our common stock on February 15, 2024, (ii) 80%.

On April 21, 2024, we entered into an amendment (“Second SAFE
Amendment”) that converted the Second SAFE investment of $3.5 million into 9,722,222 shares of our common stock based on a conversion
price of $0.36 per share, defined in the Second SAFE Amendment as the product of (i) $0.45, the closing price of our common stock
on April 19, 2024, multiplied by (ii) 80%. Upon conversion, we recorded a debit to SAFE Agreement of $3.5 million, a credit to Additional
paid-in-capital of $4.4 million and recognized expense of $0.9 million within Other income (expense), net in our consolidated statement
of operations for the fiscal year ended December 29, 2024.

Third SAFE

On
May 13, 2024, we entered into a third SAFE (the “Third SAFE”) with the Purchaser, in connection with the Purchaser investing
$1.0 million in the Company. The Third SAFE is convertible into shares of our common stock upon the initial closing of a bona fide transaction
or series of transactions with the principal purpose of raising capital, pursuant to which the Company issues and sells shares of its
common stock in an Equity Financing, at a per share conversion price which is equal to 50% of the price per share of our common stock
sold in the Equity Financing. If we consummate a change of control prior to the termination of the Third SAFE, the Purchaser will be automatically
entitled to receive a portion of the proceeds of such liquidity event equal to $1.0 million, subject to certain adjustments as set forth
in the Third SAFE. The Third SAFE is convertible into a maximum of 2,750,000 shares of our common stock, assuming a per share conversion
price of $0.275, which is the product of (i) $0.55, the closing price of our common stock on May 13, 2024, multiplied by (ii) 50%. Given
that the SAFE could be settled in cash or a variable number of shares, we have accounted for the instrument as a liability at its fair
value.

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As
of December 29, 2024, we estimated the fair value of the Third SAFE at $0.4 million based upon the assumptions disclosed in Note
5 – Fair Value Measurements to our consolidated financial statements.

Cash Flows for the Fiscal Years Ended December
29, 2024 and December 31, 2023

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

Cash Flows from Operating Activities

Net cash used in operating activities from continuing operations of
$54.6 million for the fiscal year ended December 29, 2024 was primarily due to the net loss from continuing operations, net of tax of
$54.4 million and net cash outflows of $6.6 million from changes in our operating assets and liabilities which was partially offset by
non-cash adjustments of $6.4 million. Non-cash charges primarily consisted of $24.7 million for loss on issuance of derivative liability,
$9.1 million provision for credit losses, $5.8 million of amortization of debt issuance costs, $9.2 million of non-cash expense in connection
with warrants issued for vendor services, $3.1 million of stock-based compensation expense, $3.9 million accretion of debt in CS Solis,
$3.8 million for asset impairment and disposals, $2.7 million for depreciation and amortization, $1.8 million for non-cash interest expense,
$0.8 million for lease expense, and $1.3 million for loss on conversion of SAFE Agreements to shares of common stock, and $0.4 million
of other financing costs, partially offset by a decrease of $34.0 million for the change in fair value of derivative liabilities, $22.3
gain on troubled debt restructuring, $2.9 million change in fair value of warrant liabilities, and $1.0 million change due to fair value
adjustments. The main drivers of net cash outflows derived from the changes in operating assets and liabilities were related to an increase
in contract assets of $21.5 million, a $10.4 million decrease in accounts payable, a $0.8 million decrease in operating lease liabilities,
and a $0.2 million increase in prepaid expenses and other current assets, partially offset by an $8.7 million decrease in inventories,
a $3.3 million decrease in accounts receivable, a $14.1 million increase in accrued expenses and $0.2 million of other.

Net cash used in operating
activities from continuing operations of $58.8 million for the fiscal year ended December 31, 2023 was primarily due to the net loss from
continuing operations, net of tax of $96.2 million and net cash outflows of $17.4 million from changes in our operating assets and liabilities,
adjusted for non-cash charges of $54.1 million. Non-cash charges primarily consisted of $35.5 million for the issuance of common stock
in connection with FPAs, $10.3 million loss on CS Solis debt extinguishment, $4.2 million loss on sale of equity securities, $3.9 million
change in fair value of FPAs, $4.3 million change in allowance for credit losses, $4.9 million of interest expense, $6.6 million accretion
of long-term debt in CS Solis, $2.4 million related to the issuance of bonus common stock shares in connection with the Mergers, $3.4
million of stock-based compensation expense, and $6.1 million change in reserve for excess and obsolete inventory, $0.9 million in lease
expense and $0.9 million in depreciation and amortization, partially offset by a decrease in the fair value of warrant liabilities of
$29.3 million. The main drivers of net cash outflows derived from the changes in operating assets and liabilities were related to an increase
in accounts receivable, net of $12.1 million, an increase in prepaid expenses and other current assets of $4.2 million, a decrease in
deferred revenue of $1.7 million, a decrease in accrued expenses and other liabilities of $3.3 million and a decrease in operating lease
liabilities of $0.6 million, partially offset a decrease in inventory of $1.5 million, an increase in accounts payable of $2.3 million,
and a decrease in other noncurrent assets of $1.1 million.

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Cash Flows from Investing Activities

Net cash used by investing activities of $54.7 million for the fiscal
year ended December 29, 2024 was primarily due to the acquisition of SunPower of $53.5 million and $1.2 million in capital expenditures.

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

Cash Flows from Financing Activities

Net cash provided by financing
activities of $120.1 million for the fiscal year ended December 29, 2024 was primarily due to proceeds from the issuance of convertible
notes, net of $107.7 million, proceeds from SAFE agreements of $6.0 million, proceeds from the issuance of common stock of $6.7 million
and proceeds from the exercise of common stock options of $0.5 million. The proceeds were partially offset by finance lease payments and
the payment of a note aggregating $0.8 million.

Net cash provided by financing
activities of $50.4 million for the fiscal year ended December 31, 2023 was primarily due to total proceeds from the issuance of convertible
notes, net of $21.3 million, total proceeds from the Mergers and PIPE Financing of $19.8 million, and proceeds from the issuance of notes
payable, net of $14.1 million, partially offset by the repayment of notes payable of $9.8 million.

Emerging Growth Company
Status

Section 102(b)(1) of the Jumpstart
Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised
financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the
requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition
period is irrevocable.

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Complete Solaria is an “emerging
growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the benefits of the extended
transition period for new or revised financial accounting standards. Following the closing of the Mergers, our Post-Combination Company
remains an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock
that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last
day of the fiscal year in which we has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation),
(iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year period, or (iv)
the last day of the fiscal year ending after the fifth anniversary of our IPO. Complete Solaria expects to continue to take advantage of the benefits of the extended transition period, although
it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult
or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth
company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of
the potential differences in accounting standards used.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following
discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related
notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences
include those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual
Report on Form 10-K. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

Complete Solaria was formed
in November 2022 through the merger of Complete Solar and Solaria. Founded in 2010, Complete Solar created a technology platform to offer
clean energy products to homeowners by enabling a national network of sales partners and build partners. Our sales partners generate solar
installation contracts with homeowners on our behalf. To facilitate this process, we provide the software tools, sales support and brand
identity to our sales partners, making them competitive with national providers. This turnkey solution makes it easy for anyone to sell
solar.

We fulfill our customer contracts
by engaging with local construction specialists. We manage the customer experience and complete all pre-construction activities prior
to delivering build-ready projects including hardware, engineering plans, and building permits to its builder partners. We manage and
coordinate this process through our proprietary HelioTrackTM software system.

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

Growth Strategy and Outlook

Complete Solaria’s growth strategy
contains the following elements:

The Mergers

We entered into an Amended
and Restated Business Combination Agreement with FACT, First Merger Sub, Second Merger Sub, and Solaria on October 3, 2022. The Merger
was consummated on July 18, 2023. Upon the terms and subject to the conditions of the Merger, (i) First Merger Sub merged with and into
Complete Solaria with Complete Solaria surviving as a wholly-owned subsidiary of FACT (the “First Merger”), (ii) immediately
thereafter and as part of the same overall transaction, Complete Solaria merged with and into Second Merger Sub, with Second Merger Sub
surviving as a wholly-owned subsidiary of FACT (the “Second Merger”), and FACT changed its name to “Complete Solaria,
Inc.” and Second Merger Sub changed its name to “CS, LLC” and (iii) immediately after the consummation of the Second
Merger and as part of the same overall transaction, Solaria merged with and into a newly formed Delaware limited liability company and
wholly-owned subsidiary of FACT and changed its name to “The SolarCA LLC” (“Third Merger Sub”), with Third Merger
Sub surviving as a wholly-owned subsidiary of FACT (the “Additional Merger”, and together with the First Merger and the Second
Merger, the “Mergers”).

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The Mergers between Complete
Solaria and FACT has been accounted for as a reverse recapitalization. Under this method of accounting, FACT is treated as the acquired
company for financial statement reporting purposes. This determination was primarily based on the Company having a majority of the voting
power of the post-combination company, the Company’s senior management comprising substantially all of the senior management of
the post-combination company, and the Company’s operations comprising the ongoing operations of the post-combination company. Accordingly,
for accounting purposes, the Mergers have been treated as the equivalent of a capital transaction in which Complete Solaria is issuing
stock for the net assets of FACT. The net assets of FACT have been stated at historical cost, with no goodwill or other intangible assets
recorded.

Disposal Transaction

In October 2023, we completed
the sale of our solar panel business to Maxeon, pursuant to the terms of the Disposal Agreement. Under the terms of the Disposal Agreement,
Maxeon agreed to acquire certain assets and employees of Complete Solaria, for an aggregate purchase price of approximately $11.0 million
consisting of 1,100,000 shares of Maxeon ordinary shares. As of December 31, 2023, we sold all the shares and recorded a loss of $4.2
million in our consolidated statements of operations and comprehensive loss within loss from discontinued operations.

As part of the Disposal Transaction,
we determined that the criteria were met for held for sale and discontinued operations classification as of the end of our third fiscal
quarter as the divestiture represents a strategic shift in our business. We recorded an impairment of $147.5 million associated with the
recording of the assets as held for sale during the year ended December 31, 2023.

Below, we have discussed our
historical results of continuing operations, which excludes our product revenues and related metrics, as all results of operations associated
with the solar panel business have been presented as discontinued operations, unless otherwise noted.

Key Financial Definitions/Components of Results
of Operations

Revenues

We
generate revenue by providing customer solar solutions through a standardized platform to our residential solar providers and companies
to facilitate the sale and installation of solar energy systems. Our contracts consist of two performance obligations, which include solar
installation services and post-installation services that are performed prior to inspection by the authority having jurisdiction. The
significant majority of our service revenue is recognized at a point in time upon the completion of the installation and the remainder
is recognized upon inspection. Service revenue is recognized net of a reserve for the performance guarantee of solar output.

We
enter into three types of customer contracts for solar energy installations. The majority of our service revenue is recognized through
contracts where the homeowner enters into a power purchase agreement with our distribution partner. We perform the solar energy installation
services on behalf of our distribution partner, who owns the solar energy system upon installation. Additionally, we enter into a Solar
Purchase and Installation Agreement directly with homeowners, whereby the homeowner either pays cash or obtains financing through a third-party
loan partner. In cash contracts with homeowners, we recognize service revenue based on the price we charge to the homeowner. We record
service revenue in the amount received from the financing partner, net of any financing fees charged to the homeowner, which we consider
to be a customer incentive.

As
part of our service revenue, we also enter into contracts to provide our software enhanced service offerings, including design and proposal
services, to customers that include solar installers and solar sales organizations. We perform these leveraging our HelioQuoteTM
platform and other software tools to create computer aided drawings, structural letters, and electrical reviews for installers and
proposals for installers. We charge a fixed fee per service offering, which we recognize in the period the service is performed.

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Operating Expenses

Cost of Revenues

Cost of revenues consists
primarily of the cost of solar energy systems, installation and other subcontracting costs. Cost of revenues also includes associated
warranty costs, shipping and handling, allocated overhead costs, depreciation, and amortization of internally developed software.

Sales Commissions

Sales commissions are direct
and incremental costs of obtaining customer contracts. These costs are paid to third-party vendors who source residential customer contracts
for the sale of solar energy systems.

Sales and Marketing

Sales and marketing expenses
primarily consist of personnel related costs, including salaries and employee benefits, stock-based compensation, and other promotional
and advertising expenses. We expense certain sales and marketing, including promotional expenses, as incurred.

General and Administrative

General and administrative
expenses consist primarily of personnel and related expenses for our employees, in our finance, research, engineering, and administrative
teams including salaries, bonuses, payroll taxes, and stock-based compensation. It also consists of legal, consulting, and professional
fees, rent expenses pertaining to our offices, business insurance costs and other costs. We expect an increase in audit, tax, accounting,
legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor
relations, and other costs associated with being a public company.

Interest Expense

Interest expense primarily
relates to interest expense on the issuance of debt and convertible notes and the amortization of debt issuance costs.

Other Income (Expense), Net

Other income (expense), net
consists of changes in the fair value of our convertible notes, the impact of debt extinguishment, and changes in the fair value of stock
warrant liabilities and forward purchase agreements.

Income Tax Expense

Income tax expense primarily
consists of income taxes in certain foreign and state jurisdictions in which we conduct business.

Supply Chain Constraints
and Risk

We
rely on a small number of suppliers of solar energy systems and other equipment. If any of our suppliers was unable or unwilling to provide
us with contracted quantities in a timely manner at prices, quality levels and volumes acceptable to us, we would have very limited alternatives
for supply, and we may not be able find suitable replacements for our customers, or at all. Such an event could materially adversely affect
our business, prospects, financial condition and results of operations.

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In
addition, the global supply chain and our industry have experienced significant disruptions in recent periods. We have seen supply chain
challenges and logistics constraints increase, including shortages of panels, inverters, batteries and associated component parts for
inverters and solar energy systems available for purchase, which materially impacted our results of operations. In an effort to mitigate
unpredictable lead times, we experienced a substantial build up in inventory on hand commencing in early 2022 in response to global supply
chain constraints. In certain cases, this has caused delays in critical equipment and inventory, longer lead times, and has resulted in
cost volatility. These shortages and delays can be attributed in part to the COVID-19 pandemic and resulting government action, as well
as broader macroeconomic conditions, and have been exacerbated by the ongoing conflicts in Ukraine and Israel. While we believe that a
majority our suppliers have secured sufficient supply to permit them to continue delivery and installations through the end of 2023, if
these shortages and delays persist into 2024, they could adversely affect the timing of when battery energy storage systems can be delivered
and installed, and when (or if) we can begin to generate revenue from those systems. If any of our suppliers of solar modules experienced
disruptions in the supply of the modules’ component parts, for example semiconductor solar wafers or investors, this may decrease
production capabilities and restrict our inventory and sales. In addition, we have experienced and are experiencing varying levels of
volatility in costs of equipment and labor resulting in part from disruptions caused by general global economic conditions. While inflationary
pressures have resulted in higher costs of products, in part due to an increase in the cost of the materials and wage rates, these additional
costs have been offset by the related rise in electricity rates.

We
cannot predict the full effects the supply chain constraints will have on our business, cash flows, liquidity, financial condition and
results of operations at this time due to numerous uncertainties. Given the dynamic nature of these circumstances on our ongoing business,
results of operations and overall financial performance, the full impact of macroeconomic factors, including the conflicts in Ukraine
and Israel, cannot be reasonably estimated at this time. In the event we are unable to mitigate the impact of delays or price volatility
in solar energy systems, raw materials, and freight, it could materially adversely affect our business, prospects, financial condition
and results of operations. For additional information on risk factors that could impact our results, please refer to “Risk Factors”
located elsewhere in this Annual Report on Form 10-K.

Critical Accounting
Policies and Estimates

Our
discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been
prepared in accordance with GAAP. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe
to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other
instances, changes in the accounting estimates are reasonably likely to occur from period-to-period. Actual results could differ significantly
from our estimates. Our future financial statements will be affected to the extent that our actual results materially differ from these
estimates. For further information on all of our significant accounting policies, see Note 2 – Summary of Significant Accounting
Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We
believe that policies associated with our revenue recognition, product warranties, inventory excess and obsolescence and stock-based compensation
have the greatest impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies
and estimates.

Revenue Recognition

We
recognize revenue when control of goods or services is transferred to customers, in an amount that reflects the consideration we expect
to be entitled to in exchange for those services.

Revenue – Solar
Energy System Installations

The
majority of our revenue is generated from the installation of solar energy systems. We identify two performance obligations, which include
installation services and post-installation services, and we recognize revenue when control transfers to the customer, upon the completion
of the installation and upon the solar energy system passes inspection by the authority having jurisdiction, respectively. We apply judgment
in allocating the transaction price between the installation and post-installation performance obligations, based on the estimated costs
to perform our services. Changes in such estimates could have a material impact on the timing of our revenue recognition.

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Our
contracts with customers generally contain a performance guarantee of system output, and we will issue payments to customers if output
falls below contractually stated thresholds over the performance guarantee period, which is typically 10 years. We apply judgment in estimating
the reduction in revenue associated with the performance guarantee, which is historically not material. However, due to the long-term
nature of the guarantee, changes in future estimates could have a material impact on the estimate of our revenue reserve.

Revenue – Software
Enhanced Services

We
recognize revenue from software enhanced services, which include proposals generated from our HelioQuoteTM platform and design
services performed using internally developed and external software applications. We contract with solar installers to generate proposals
and we contract with solar sales entities to perform design services for their potential customers. Under each type of customer contract,
we generate a fixed number of proposals or designs for the customer in the month the services are contracted. Contracts with customers
are enforceable on a month-to-month basis and we recognize revenue each month based on the volume of services performed.

Product Warranties

We
typically provide a 10-year warranty on our solar energy system installations, which provides assurance over the workmanship in performing
the installation, including roof leaks caused by our performance. For solar panel sales recognized prior to the Disposal Transaction,
we provide a 30-year warranty that the products will be free from defects in material and workmanship. We record a liability for estimated
future warranty claims based on historical trends and new installations. To the extent that warranty claim behavior differs from historical
trends, we may experience a material change in our warranty liability.

Inventory Excess
and Obsolescence

Our
inventory consists of completed solar energy systems and related components, which we classify as finished costs. We record a reserve
for inventory which is considered obsolete or in excess of anticipated demand based on a consideration of marketability and product life
cycle stage, component cost trends, demand forecasts, historical revenues, and assumptions about future demand and market conditions.
We apply judgment in estimating the excess and obsolete inventory, and changes in demand for our inventory components could have a material
impact on our inventory reserve balance.

Stock-Based Compensation

We recognize stock-based compensation expense over the requisite
service period on a straight-line basis for all stock-based payments that are expected to vest to employees, non-employees and directors,
including grants of employee stock options and other stock-based awards. Equity-classified awards issued to employees and non-employees,
such as consultants and non-employee directors, are measured at the grant-date fair value of the award. Forfeitures are recognized as
they occur.

For accounting purposes, prior to the Business Combination,
the fair value of the shares of common stock underlying stock options had historically been determined by our board of directors. Because
there had been no public market for our common stock, the board of directors exercised reasonable judgment and considered a number of
objective and subjective factors to determine the best estimate of the fair value of our common stock, including important developments
in our operations, sales of redeemable convertible preferred stock, actual operating results and financial performance, the conditions
in the renewable solar energy industry and the economy in general, the stock price performance and volatility of comparable public companies,
and the lack of liquidity of our common stock, among other factors. Following the Business Combination, the fair value of common stock
is based on the closing stock price on the date of grant as reported on the Nasdaq Global Select Market.

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We estimate the grant-date fair value of stock options using
the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including
the fair value of the underlying common stock prior to the Mergers, the expected term of the option, the expected volatility of the price
of our common stock and expected dividend yield. We determine these inputs as follows:

If any assumptions used in
the Black-Scholes option pricing model change significantly, stock-based compensation for future awards may differ materially compared
to the awards granted previously. For the years ended December 31, 2023 and 2022, stock-based compensation expense was $5.2 million and
$0.9 million, respectively, of which $2.4 million and $0.5 million, respectively, related to discontinued operations. As of December 31,
2023, we had approximately $20.1 million of total unrecognized stock-based compensation expense related to stock options.

Recent Accounting
Pronouncements

A
discussion of recently issued accounting standards applicable to Complete Solaria is described in Note 2 – Summary of Significant
Accounting Policies, in the accompanying notes to the consolidated financial statements.

Results of Operations

Year ended December
31, 2023 compared to year ended December 31, 2022

In
this section, we discuss the results of our operations for fiscal 2023 compared to fiscal 2022. We discuss our cashflows and current financial
condition under “Capital Resources and Liquidity.”

The
following table sets forth our statements of operations data for the years ended December 31, 2023 and 2022, respectively. We have derived
this data from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This information should be
read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
The results of historical periods are not necessarily indicative of the results of operations for any future period. Within the tables
presented, percentages are calculated based on the underlying whole-dollar amounts and, therefore, may not recalculate exactly from the
rounded numbers used for disclosure purposes.

42

Revenues

We disaggregate our revenues
based on the following types of services (in thousands):

Revenues from solar energy
system installations for the year ended December 31, 2023 was $84.9 million compared to $62.9 million for the year ended December 31,
2022. The increase in solar energy system installation revenues of $22.0 million, or 35%, was primarily due to an increase in the volume
of solar energy systems installations, a portion of which related to the fulfillment of delayed installations experienced in the fourth
quarter of 2022 due to unusual inclement California weather, as well as an increase in average selling price of solar energy system installations.

Revenues from software enhanced
services for the year ended December 31, 2023 was $2.8 million compared to $3.6 million for the year ended December 31, 2022. The decrease
of $0.8 million was the result of a shift in focus towards solar energy installations.

43

Cost of Revenues

Cost of revenues for the year ended December 31, 2023 was $69.8 million
compared to $46.6 million for the year ended December 31, 2022. The increase in cost of revenues of $23.2 million, or 50%, was primarily
due to the increase in revenues of 32%, higher inventory write-offs and rising costs associated with supply chain constraints.

Gross Margin

Gross margin decreased 10% year over year, from 30% for the year ended
December 31, 2022 to 20% for the year ended December 31, 2023. The decrease in gross margin is primarily attributed to the increasing
cost of revenues as described above.

Sales Commissions

Sales commissions for the
year ended December 31, 2023, increased by $9.9 million, or 47%, compared to the year ended December 31, 2022. The increase in sales commissions
was primarily due to the increase in solar system installation revenue of 35% and higher selling costs.

Sales and Marketing

Sales and marketing expense
for the year ended December 31, 2023 increased by $0.8 million, or 12%, compared to the year ended December 31, 2022. The increase is
primarily attributable to an increase in stock-based compensation expenses due to options issued during the year ended December 31, 2023.

General and Administrative

General and administrative costs for the year ended December 31, 2023
increased by $18.5 million, or 135%, compared to the year ended December 31, 2022. The increase was primarily attributed to increases
in contractors and outside services costs of $6.6 million related to the Mergers, payroll of $3.9 million, bad debt expense of $3.4 million,
$2.0 million in stock-based compensation expenses due to options and RSUs issued, certain legal expenses of $1.8 million and office occupancy
related costs of $1.1 million for the year ended December 31, 2023.

Interest Expense

Interest
expense for the year ended December 31, 2023 increased by $9.0 million, or 181%, compared to the year ended December 31, 2022. The increase
was primarily attributed $5.4 million of interest related to debt acquired as part of the acquisition of Solaria in November 2022, which
was retained upon the divestiture from the business, as well as an increase of $2.7 million in interest expense related to the convertible
notes and long-term debt in CS Solis for the year ended December 31, 2023.

Other Expense, Net

Other expense, net was $29.9 million for the year ended December 31,
2023. The expenses consisted primarily of $35.4 million in other expense related to the issuance of common stock in connection with the
FPAs, the loss on extinguishment of debt in CS Solis of $10.3 million, the loss on sale of Maxeon equity securities of $4.2 million, $3.9
million in other expense associated with the change in fair value of FPAs, $2.4 million for the issuance of bonus shares in connection
with the Mergers, $3.0 million relating to expenses relating to disposed operations and other expenses of $0.4 million. These expenses
were offset by $29.3 million related to the change in fair value of the Company’s warrant liabilities.

Other expense, net was $1.9 million for the year ended December 31,
2022. The expenses consisted primarily of $5.2 million relating to the change of fair value of warrant liabilities, partially offset by
a $3.2 million gain on sale of securities and $0.1 million of other income.

Net Loss from Continuing Operations

As
a result of the factors discussed above, our net loss from continuing operations for the year ended December 31, 2023 was $96.2 million,
an increase of $67.5 million, as compared to a net loss from continuing operations of $28.0 million for the year ended December 31, 2022.

Liquidity and Capital Resources

Since our inception, we have
incurred losses and negative cash flows from operations. We incurred net losses of $269.6 million and $29.5 million, during the fiscal
years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of $354.9 million and current debt of $61.9 million
as of December 31, 2023. We had cash and cash equivalents of $2.6 million as of December 31, 2023, which were held for working capital
expenditures. We believe our operating losses and negative operating cash flows will continue into the foreseeable future. We have financed
our operations primarily through sales of equity securities, issuance of convertible notes and cash generated from operations. Our cash
equivalents are on deposit with major financial institutions. Our cash position raises substantial doubt regarding our ability to continue
as a going concern for 12 months following the issuance of the consolidated financial statements.

44

We will receive the proceeds
from any cash exercise of any Warrants. The aggregate amount of proceeds could be up to $254.1 million if all the Warrants are exercised
for cash. However, to the extent the Warrants are exercised on a “cashless basis,” the amount of cash we would receive from
the exercise of the Warrants will decrease. The Private Warrants and Working Capital Warrants may be exercised for cash or on a “cashless
basis.” The Public Warrants and the Mergers Warrants may only be exercised for cash provided there is then an effective registration
statement registering the shares of common stock issuable upon the exercise of such warrants. If there is not a then-effective registration
statement, then such warrants may be exercised on a “cashless basis,” pursuant to an available exemption from registration
under the Securities Act. We expect to use any such proceeds for general corporate and working capital purposes, which would increase
our liquidity. As of March 26, 2024, the price of our common stock was $0.64 per share. The weighted average exercise price of the warrants was $7.85 as of
December 31, 2023. We believe the likelihood that warrant holders
will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the market price of our
common stock. If the market price for our common stock remains less than the exercise price, we believe warrant holders will be unlikely
to exercise.

Debt Financings

2018 Bridge Notes

In December 2018, Solaria
Corporation issued senior subordinated convertible secured notes (“2018 Notes”) totaling approximately $3.4 million in
exchange for cash. The notes bear interest at the rate of 8% per annum and the investors are entitled to receive twice the face value
of the 2018 Notes at maturity. The 2018 Notes were assumed in the acquisition by Complete Solaria and are secured by substantially all
of the assets of Complete Solaria. In 2021, the 2018 Notes were amended extending the maturity date to December 13, 2022. In connection
with the 2021 amendment, Solaria had issued warrants to purchase shares of Series E-1 redeemable convertible preferred stock of Solaria.
The warrants were exercisable immediately in whole or in part at and expire on December 13, 2031. As part of the Business Combination
with Complete Solar, all the outstanding warrants issued to the lenders were assumed by the parent company, Complete Solaria.

In December 2022, we entered
into an amendment to the 2018 Notes extending the maturity date from December 13, 2022 to December 13, 2023. In connection with the amendment,
the 2018 Notes will continue to bear interest at 8% per annum and are entitled to an increased repayment premium from 110% to 120% of
the principal and accrued interest at the time of repayment.

The Company concluded that
the modification was a troubled debt restructuring as the Company was experiencing financial difficulty and the amended terms resulted
in a concession to the Company. As the future undiscounted cash payments under the modified terms exceeded the carrying amount of the
Solaria Bridge Notes on the date of modification, the modification was accounted for prospectively. The incremental repayment premium
is being amortized to interest expense using the effective interest rate method. As of December 31, 2023 and 2022, the carrying value
of the 2018 Notes was $11.0 million and $9.8 million, respectively. Interest expense recognized for the years ended December 31, 2023
and 2022 was $1.2 million and $0.7 million, respectively. The terms of the 2018 Notes are currently being renegotiated.

Revolver Loan

In October 2020, Solaria entered
into a loan agreement (“Loan Agreement”) with Structural Capital Investments III, LP (“SCI”). The Loan Agreement
with SCI is comprised of two facilities, a term loan (the “Term Loan”) and a revolving loan (the “Revolving Loan”)
for $5.0 million each with a maturity date of October 31, 2023. Both the Term Loan and the Revolving Loan were fully drawn upon closing.
The Term Loan was repaid prior to the acquisition of Solaria by Complete Solar and was not included in the business combination.

The Revolving Loan has a term
of thirty-six months, with the principal due at the end of the term and an annual interest rate of 7.75% or Prime rate plus 4.5%, whichever
is higher. Interest expense recognized for the years ended December 31, 2023 and 2022 was $0.6 million and $0.1 million, respectively.
In October 2023, the Company entered into an Assignment and Acceptance Agreement whereby Structural Capital Investments III, LP assigned
the SCI debt to Kline Hill Partners Fund LP, Kline Hill Partners IV SPV LLC, Kline Hill Partners Opportunity IV SPV LLC, and Rodgers Massey
Revocable Living Trust for a total purchase price of $5.0 million. The terms of the SCI Revolving Loan are currently being renegotiated.

45

Secured Credit Facility

In December 2022, we entered
into a secured credit facility agreement with Kline Hill Partners IV SPV LLC and Kline Hill Partners Opportunity IV SPV LLC. The secured
credit facility agreement, which matures in April 2023, allows us to borrow up to 70% of the net amount of our eligible vendor purchase
orders with a maximum amount of $10.0 million at any point in time. The purchase orders are backed by relevant customer sales orders which
serve as collateral. The amounts drawn under the secured credit facility may be reborrowed provided that the aggregate borrowing does
not exceed $20.0 million. The repayment under the secured credit facility is the borrowed amount multiplied by 1.15x if repaid within
75 days and borrowed amount multiplied by 1.175x if repaid after 75 days. We may prepay any borrowed amount without premium or penalty.
Under the original terms, the secured credit facility agreement was due to mature in April 2023. We are in the process of amending the
secured credit facility agreement to extend its maturity date.

At December 31, 2023, the
outstanding net debt amounted to $12.2 million, including accrued financing cost of $2.1 million, and as of December 31, 2022, the balance
outstanding was $5.6 million, including accrued financing cost of $0.1 million.

Debt in CS Solis

In
February 2022, we received an investment from CRSEF Solis Holdings, LLC (“CRSEF”). The investment was made pursuant to a subscription
agreement, under which CRSEF contributed $25.6 million in exchange for 100 Class B Membership Units of CS Solis. The Class B Membership
Units are mandatorily redeemable by us on the three-year anniversary of the effective date of the CS Solis amended and restated LLC agreement.
The Class B Membership Units accrue interest that is payable upon redemption at a rate of 10.5% which is accrued as an unpaid dividend,
compounded annually, and subject to increases in the event we declare any dividends. In July 2023, we amended the debt of with CSREF as
part of the closing of the Mergers. The modification did not change the interest rate. The modification accelerates the redemption date
of the investment, which was previously February 14, 2025, and is now March 31, 2024 as a result of the modification. As of December 31,
2023 and 2022, we have recorded a liability of $33.3 million and zero, respectively, included in short-term debt due CS Solis on the consolidated
balance sheets and we have recorded a liability of zero and $25.2 million, respectively, included in long-term debt due CS Solis on the
consolidated balance sheets. For the years ended December 31, 2023 and 2022, we have recorded an accretion of the liability as interest
expense of $7.2 million and $2.4 million, respectively, and we have recorded amortization of issuance costs as interest expense of less
than $0.7 million and $1.2 million, respectively.

Forward Purchase Agreements

In
July 2023, FACT and Legacy Complete Solaria, Inc. entered into FPAs with each of (i) Meteora; (ii) Polar, and (iii) Sandia (each
individually, a “Seller”, and together, the “FPA Sellers”).

Pursuant
to the terms of the FPAs, the FPA Sellers may (i) purchase through a broker in the open market, from holders of Shares other than the
Company or affiliates thereof, FACT’s ordinary shares, par value of $0.0001 per share, (the “Shares”). While the FPA
Sellers have no obligation to purchase any Shares under the FPAs, the aggregate total Shares that may be purchased under the FPAs shall
be no more than 6,720,000 in aggregate. The FPA Sellers may not beneficially own greater than 9.9% of issued and outstanding
Shares following the Mergers as per the Amended and Restated Business Combination Agreement.

The key terms of the
forward contracts are as follows:

46

The
Company entered into four separate FPAs, three of which, associated with the obligation to issue 6,300,000 Shares, were entered into prior
to the closing of the Mergers. Upon signing the FPAs, the Company incurred an obligation to issue a fixed number of shares to the FPA
Sellers contingent upon the closing of the Mergers in addition to the terms and conditions associated with the settlement of the FPAs.
The Company accounted for the contingent obligation to issue shares in accordance with ASC 815, Derivatives and Hedging, and recorded
a liability and other income (expense), net based on the fair value upon of the obligation upon the signing of the FPAs. The liability
was extinguished in July 2023 upon the issuance of Complete Solaria Common Stock to the FPA sellers.

Additionally,
in accordance with ASC 480, Distinguishing Liabilities from Equity, the Company has determined that the forward contract is
a financial instrument other than a share that represent or are indexed to obligations to repurchase the issuer’s equity shares
by transferring assets, referred to herein as the “forward purchase liability” on its consolidated balance sheets. The Company
initially measured the forward purchase liability at fair value and has subsequently remeasured it at fair value with changes in fair
value recognized in earnings.

Through
the date of issuance of the Complete Solaria Common Stock in satisfaction of the Company’s obligation to issue shares around the
closing of the Mergers, the Company recorded $35.5 million to other income (expense), net associated with the issuance of 6,720,000 shares
of Complete Solaria Common Stock.

As
of the closing of the Mergers and issuance of the Complete Solaria Common Stock underlying the FPAs, the fair value of the prepaid FPAs
was an asset balance of $0.1 million and was recorded on the Company’s consolidated balance sheets and within other income
(expense), net on the consolidated statements of operations and comprehensive loss. Subsequently, the change of fair value of the forward
purchase liability amounted to an expense of $3.9 million for the fiscal year ended December 31, 2023. As of December 31, 2023, the
forward purchase liabilities amounted to $3.8 million.

On
December 18, 2023, the Company and the FPA Sellers entered into separate amendments to the FPA (the “Amendments”). The Amendments
lower the reset floor price of each FPA from $5.00 to $3.00 and allow the Company to raise up to $10.0 million of equity from existing
stockholders without triggering certain anti-dilution provisions contained in the FPA; provided, the insiders pay a price per share for
their initial investment equal to the closing price per share as quoted on the Nasdaq on the day of purchase; provided, further, that
any subsequent investments are made at a price per share equal to the greater of (a) the closing price per share as quoted by Nasdaq on
the day of the purchase or (b) the amount paid in connection with the initial investment.

47

First SAFE

On
January 31, 2024, we entered into a simple agreement for future equity (the “First SAFE”) with the Rodgers Massey Freedom
and Free Markets Charitable Trust (the “Purchaser”) in connection with the Purchaser investing $1.5 million in the Company.
The First SAFE is convertible into shares of our common stock, par value $0.0001 per share, upon the initial closing of a bona fide transaction
or series of transactions with the principal purpose of raising capital, pursuant to which we issue and sell common stock at a fixed valuation
(an “Equity Financing”), at a per share conversion price which is equal to the lower of (i)(a) $53.54 million divided by (b)
our capitalization immediately prior to such Equity Financing (such conversion price, the “SAFE Price”), and (ii) 80% of the
price per share of Common Stock sold in the Equity Financing. If the Company consummates a change of control prior to the termination
of the First SAFE, the Purchaser will be automatically entitled to receive a portion of the proceeds of such liquidity event equal to
the greater of (i) $1.5 million and (ii) the amount payable on the number of shares of Common Stock equal to (a) $1.5 million divided
by (b)(1) $53.54 million divided by (2) our capitalization immediately prior to such liquidity event (the “Liquidity Price”),
subject to certain adjustments as set forth in the First SAFE. The First SAFE is convertible into a maximum of 1,431,297 shares of Common
Stock, assuming a per share conversion price of $1.05, which is the product of (i) $1.31, the closing price of the Common Stock on January
31, 2024, multiplied by (ii) 80%.

On
February 15, 2024, we entered into a simple agreement for future equity (the “Second SAFE” and together with the First SAFE,
the “SAFEs”) with the Purchaser in connection with the Purchaser investing $3.5 million in the Company. The Second SAFE is
convertible into shares of Common Stock upon the initial closing of an Equity Financing at a per share conversion price which is equal
to the lower of (i) the SAFE Price, and (ii) 80% of the price per share of Common Stock sold in the Equity Financing. If we consummate
a change of control prior to the termination of the Second SAFE, the Purchaser will be automatically entitled to receive an amount equal
to the greater of (i) $3.5 million and (ii) the amount payable on the number of shares of Common Stock equal to $3.5 million divided by
the Liquidity Price, subject to certain adjustments as set forth in the Second SAFE. The Second SAFE is convertible into a maximum of
3,707,627 shares of Common Stock, assuming a per share conversion price of $0.94, which is the product of (i) $1.18, the closing price
of the Common Stock on February 15, 2024, multiplied by (ii) 80%.

Cash Flows for the Years Ended December 31,
2023 and 2022

The following table summarizes
Complete Solaria’s cash flows from operating, investing, and financing activities for the years ended December 31, 2023 and 2022
(in thousands):

Cash Flows from Operating Activities

Net cash used in operating activities from continuing operations of
$58.8 million for the year ended December 31, 2023 was primarily due to the net loss from continuing operations, net of tax of $96.2 million
and net cash outflows of $17.4 million from changes in our operating assets and liabilities, adjusted for non-cash charges of $54.1 million.
Non-cash charges primarily consisted of $35.5 million for the issuance of common stock in connection with FPAs, $10.3 million loss on
CS Solis debt extinguishment, $4.2 million loss on sale of equity securities, $3.9 million change in fair value of FPAs, $4.3 million
change in allowance for credit losses, $4.9 million of interest expense, $6.6 million accretion of long-term debt in CS Solis, $2.4 million
related to the issuance of bonus common stock shares in connection with the Mergers, $3.4 million of stock-based compensation expense,
and $6.1 million change in reserve for excess and obsolete inventory, $0.9 million in lease expense and $0.9 million in depreciation and
amortization, partially offset by a decrease in the fair value of warrant liabilities of $29.3 million. The main drivers of net cash outflows
derived from the changes in operating assets and liabilities were related to an increase in accounts receivable, net of $12.1 million,
an increase in prepaid expenses and other current assets of $4.2 million, a decrease in deferred revenue of $1.7 million, a decrease in
accrued expenses and other liabilities of $3.3 million and a decrease in operating lease liabilities of $0.6 million, partially offset
a decrease in inventory of $1.5 million, an increase in accounts payable of $2.3 million, and a decrease in other noncurrent assets of
$1.1 million.

48

Net cash used in operating
activities from continuing operations of $25.2 million for the year ended December 31, 2022 was primarily due the net loss from continuing
operations of $28.0 million, and net cash outflows of $11.2 million from changes in our operating assets and liabilities, adjusted for
non-cash charges of $13.8 million. The main drivers of net cash outflows derived from the changes in operating assets and liabilities
were related to an increase in accounts receivable of $9.7 million, and an increase in inventories of $4.9 million, and a decrease in
prepaid expenses and other current assets of $1.6 million, partially offset by an increase in accounts as payable of $3.3 million and
a decrease in prepaid expenses and other current assets of $1.2 million. Non-cash charges primarily consisted of $5.2 million change in
the fair value of warrant liability, interest expense primarily related to long-term debt in CS Solis of $4.8 million, reserve for obsolete
inventory of $3.6 million, increase in the allowance for doubtful accounts of $2.1 million, and depreciation and amortization expense
of $0.6 million, partially offset by non-cash income recognized upon conversion of convertible notes and SAFE agreements of $3.2 million.

The net increase in cash,
cash equivalents and restricted cash from discontinued operations of $0.2 million for the year ended December 31, 2023 was entirely attributable
to net cash provided by operating activities from discontinued operations. This increase was primarily due to the net loss from discontinued
operations, net of tax of $173.4 million, adjusted for non-cash charges of $5.4 million and net cash inflows of $20.7 million from changes
in our operating assets and liabilities. Non-cash charges primarily consisted of impairment of goodwill of $119.4 million, impairment
of intangible assets of $28.1 million, depreciation and amortization expense of $2.4 million, stock-based compensation expense of $1.8
million and a $1.1 million change in allowance for credit losses. The main drivers of net cash inflows derived from the changes in operating
assets and liabilities were related to a decrease in accounts receivable, net of $8.2 million, an increase in accrued expenses and other
current liabilities of $6.0 million, a decrease in decrease in prepaids of $2.8 million, a decrease in inventories of $2.3 million, partially
offset by a decrease of $2.9 million in accounts payable.

Cash Flows from Investing Activities

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

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

Cash Flows from Financing Activities

Net cash provided by financing
activities of $50.4 million for the year ended December 31, 2023 was primarily due to total proceeds from the issuance of convertible
notes, net of $21.3 million, total proceeds from the Mergers and PIPE Financing of $19.8 million, and proceeds from the issuance of notes
payable, net of $14.1 million, partially offset by the repayment of notes payable of $9.8 million.

Net cash provided by financing
activities of $31.2 million for the year ended December 31, 2022 was primarily due to net proceeds from issuance of long-term debt in
CS Solis of $25.0 million, proceeds from the issuance of the 2022 Convertible Notes of $12.0 million, and proceeds from the issuance of
notes payable of $5.5 million. This was partially offset by the repayment of notes payable of $9.5 million, payments for issuance costs
of Series D redeemable convertible preferred shares of $1.4 million, and repayment of convertible notes payable to related parties of
$0.5 million.

49

Off Balance Sheet
Arrangements

As
of the date of this Annual Report on Form 10-K, Complete Solaria does not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures, or capital resources that are material to investors. The term “off-balance sheet arrangement”
generally means any transaction, agreement, or other contractual arrangement to which an entity unconsolidated with Complete Solaria is
a party, under which it has any obligation arising under a guaranteed contract, derivative instrument, or variable interest or a retained
or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity, or market risk support
for such assets.

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

Emerging Growth Company
Status

Section 102(b)(1) of the Jumpstart
Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised
financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the
requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition
period is irrevocable.

Complete Solaria is an “emerging
growth company” as defined in Section 2(a) of the Securities Act, and has elected to take advantage of the benefits of the extended
transition period for new or revised financial accounting standards. Following the closing of the Mergers, our Post-Combination Company
will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock
that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last
day of the fiscal year in which we has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation),
(iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year period, or (iv)
December 31, 2025. Complete Solaria expects to continue to take advantage of the benefits of the extended transition period, although
it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult
or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth
company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of
the potential differences in accounting standards used.

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s
financial condition and results of operations should be read in conjunction with our audited financial statements and the notes thereto
which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding
Forward-Looking Statements and Risk Factor Summary,” “Item 1A. Risk Factors” and elsewhere in this Annual Report.

Overview

We are a blank check company incorporated as a
Cayman Islands exempted company on December 23, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses. Our sponsor is Freedom Acquisition I LLC, a Cayman Islands
limited liability company.

The registration statement for our initial public
offering (the “Initial Public Offering”) became effective on February 25, 2021. On March 2, 2021, we consummated the Initial
Public Offering of 34,500,000 units, which included the exercise of the underwriters’ option to purchase an additional 4,500,000
units at the Initial Public Offering price to cover over-allotments (the “Units”, and, with respect to the Class A ordinary
shares included in the Units, the “Public Shares” and, with respect to the one-fourth of one redeemable warrant included in
the Units, the “Public Warrants”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering
costs of approximately $19.18 million, inclusive of approximately $12.08 million in deferred underwriting commissions.

Simultaneously with the closing of the Initial
Public Offering, we consummated the private placement (“Private Placement”) of 6,266,667 warrants (each, a “Private
Placement Warrant” and collectively, the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”),
at a price of $1.50 per Private Placement Warrant with the sponsor, generating gross proceeds of approximately $9.4 million.

Upon the closing of the Initial Public Offering
and the Private Placement, approximately $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain
of the proceeds of the Private Placement were placed in a trust account (“Trust Account”), located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and, until the 24-month anniversary of the consummation of our initial
public offering, invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government treasury obligations. To mitigate the risk of us being
deemed to have been operating as an unregistered investment company, prior to the 24-month anniversary of the consummation of
our initial public offering, we instructed Continental to liquidate the U.S. government treasury obligations or money market funds held
in the trust account and to hold all the funds in the trust account in cash in a bank deposit account, until the earlier of: (i) the completion
of a business combination and (ii) the distribution of the Trust Account as described below.

If we have not completed a business combination
during the Extension Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible
but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released
to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding
Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the remaining shareholders and the board of directors, liquidate and dissolve, subject, in each case, to our obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating
distributions with respect to our outstanding Warrants, which will expire worthless if we fail to consummate a business combination within
the Combination Period.

53

Recent Developments

Second Amendment
to the Business Combination Agreement

On January 17, 2023, the Company, Complete Solaria,
First Merger Sub and Second Merger Sub entered into that certain Second Amendment to Business Combination Agreement (the “Second
Amendment”) amending the Business Combination Agreement.

The Second Amendment provides that, if the Company
and Complete Solaria determine in good faith by January 1, 2023 that it is probable that the Business Combination will be consummated
after March 1, 2023, the Company will be required to prepare (with the reasonable cooperation of Complete Solaria) and file with the SEC
a proxy statement pursuant to which it will seek the approval of its shareholders for proposals to amend the Company’s organizational
documents to extend the time period for the Company to consummate its initial business combination for (x) up to an additional six (6)
months, from March 2, 2023 to September 2, 2023 (the original Business Combination Agreement provided for an extension from March 1, 2023
to September 2, 2023) or (y) such other period of time as the Company and Complete Solaria may mutually agree (the original Business Combination
Agreement contemplated no such prong (y)). In addition, the Second Amendment amends the Business Combination Agreement by changing the
latest permitted Agreement End Date (as defined in the Business Combination Agreement) from September 1, 2023 to September 2, 2023.

Amendment
to Amended and Restated Memorandum and Articles

On February 28, 2023, Freedom held the Extraordinary
General Meeting of shareholders, at which holders of 35,373,848 ordinary shares, comprised of 26,773,848 Class A ordinary shares
and 8,600,000 Class B ordinary shares, were present in person or by proxy, representing approximately 82.02% of the voting power
of the 43,125,000 Outstanding Shares of Freedom entitled to vote at the Extraordinary General Meeting at the close of business on January
23, 2023, which was the Record Date for the Extraordinary General Meeting. The Outstanding Shares on the Record Date were comprised of
34,500,000 Class A ordinary shares and 8,625,000 Class B ordinary shares.

At the Extraordinary General Meeting, the shareholders
approved, by special resolution, the Extension Amendment Proposal, which extended the date by which Freedom must (i) consummate a merger,
amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination, which Freedom refers
to as its initial business combination, (ii) cease its operations except for the purpose of winding up if it fails to complete such initial
business combination, and (iii) redeem all of the Class A ordinary shares, included as part of the units sold in the initial public offering,
for an additional three months, from March 2, 2023 to June 2, 2023, and thereafter to up to three (3) times by an additional one month
each time (or up to September 2, 2023). The voting results for such proposal were as follows:

In connection with the Extension Amendment, public
shareholders elected to redeem an aggregate of 23,256,504 Class A ordinary shares at a redemption price of $10.21 per share, representing
approximately 67.41% of the issued and outstanding Class A ordinary shares, for an aggregate redemption amount of approximately $237,372,952.
Following such redemptions, approximately $114,759,374 remained in the trust account and 11,243,496 Class A ordinary shares remain outstanding.

At the Extraordinary General Meeting, the public
shareholders also approved the proposal to amend the Trust Agreement, by and between Freedom and Continental, as trustee, to reflect the
Extension Amendment. The amendment to the Trust Agreement provides that Continental shall commence liquidation of the trust account only
and promptly (x) after its receipt of the applicable instruction letter delivered by Freedom in connection with either the consummation
of an initial business combination or Freedom’s inability to effect an initial business combination within the time frame specified
in Freedom’s amended and restated memorandum and articles of association or (y) upon the date that is the later of the end of the
Extension Period and such later date as may be approved by Freedom’s shareholders in accordance with the amended and restated memorandum
and articles of association, if the aforementioned termination letter has not been received by Continental prior to such date. The voting
results for such proposal were as follows:

54

Promissory Note

On February 28, 2023, we issued an unsecured promissory
note in the amount of up to $2,100,000 to our sponsor. The proceeds of such promissory note, $1,600,000 of which was drawn down immediately, $400,000 of which may be drawn down, with the mutual consent of us and our sponsor, if we wish to extend the
date by which we will consummate a business combination beyond June 2, 2023, and $100,000 of which may be drawn down on an as-needed basis
at the discretion of our sponsor, will be used for general working capital purposes. Such promissory note bears no interest and is payable
in full upon the consummation of our business combination. A failure to pay the principal within five business days of the date specified
above or the commencement of a voluntary or involuntary bankruptcy action shall be deemed an event of default, in which case the promissory
note may be accelerated. The promissory note shall be forgiven by our sponsor if we are unable to consummate a business combination within
the time frame specified in our amended and restated memorandum and articles of association (as amended from time to time), except to
the extent of any funds held outside of the trust account established in connection with our initial public offering. The issuance of
the promissory note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as
amended.

Results of Operations and Known Trends or Future
Events

We have neither engaged in any operations nor generated
any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our Initial
Public Offering and identifying a target company for our initial business combination. We do not expect to generate any operating revenues
until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and
cash equivalents held in the Trust Account and through changes in the fair value of our warrant liabilities. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the year ended December 31, 2022, we had
net income of $5,982,340, which consisted of an unrealized gain on change in fair value of our warrant liabilities of $5,509,917,
interest income of $4,821,632 on our amounts held in the Trust Account, reduction of transaction costs incurred in
connection with IPO of $271,687, offset by $4,407,058 of operating costs consisting mostly of general and administrative expenses,
foreign currency exchange loss of $17,638 and change in the fair value of convertible notes of $196,200.

For the year ended December 31, 2021, we had
net income of $5,128,650, which consisted of an unrealized gain on change in fair value of our warrant liabilities of $9,381,750,
interest income of $105,681 on our amounts held in the Trust Account, offset by $3,782,028 of operating costs consisting mostly of
general and administrative expenses, foreign currency exchange loss of $1,475 and offering expenses related to warrant issuance of
$575,278.

We classify the Warrants issued in connection
with our Initial Public Offering and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair
value at each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any
change in fair value is recognized in our consolidated statements of operations. As part of the reclassification to warrant
liability, we recorded a portion of the offering costs associated with the Initial Public Offering as expense in the consolidated
statements of operations in the amount of $575,278 based on a relative fair value basis. For the period from the Initial Public
Offering to December 31, 2022, the change in fair value of the Warrants was a decrease in the liability of $14,147,084.

Liquidity and Capital Resources

As of December 31, 2022, we had cash outside the Trust Account of $72,923
in its operating bank accounts, $349,927,313 in marketable securities held in the Trust Account to be used for a business combination,
or to repurchase or redeem its stock in connection therewith, and a working capital deficit of $5,493,215. As of December 31, 2022, none
of the amount in the Trust Account was available to be withdrawn as described above.

On each of April 1, 2022 and June 6, 2022, we
issued an unsecured promissory note in the amount of up to $500,000 to our sponsor (the “Sponsor Notes”). On December 14,
2022, we issued an unsecured promissory note in the amount of up to $325,000 to Tidjane Thiam, Adam Gishen, Edward Zeng, and Abhishek
Bhatia (collectively, the “Payees”) (such note, together with the Sponsor Notes, the “Convertible Notes”). The
proceeds of the Convertible Notes, which may be drawn down from time to time until we consummate our initial business combination, will
be used for general working capital purposes. The Convertible Notes bear no interest and are payable in full upon the earlier to occur
of (i) twenty-four (24) months from the closing of our initial public offering (or such later date as may be extended in accordance with
the terms of our amended and restated memorandum and articles of association) or (ii) the consummation of our business combination. A
failure to pay the principal within five business days of the date specified above or the commencement of a voluntary or involuntary bankruptcy
action shall be deemed an event of default, in which case the Convertible Notes may be accelerated. Prior to our first payment of all
or any portion of the principal balance of the Convertible Notes in cash, our sponsor and the Payees, as applicable, have the option to
convert all, but not less than all, of the principal balance of the Convertible Notes into private placement warrants (the “Conversion
Warrants”), each warrant exercisable for one of our ordinary shares at an exercise price of $1.50 per share. The terms of the Conversion
Warrants would be identical to the Private Placement Warrants. Our sponsor and the Payees shall be entitled to certain registration rights
relating to the Conversion Warrants. The issuances of the Convertible Notes were made pursuant to the exemption from registration contained
in Section 4(a)(2) of the Securities Act of 1933, as amended. As of December 31, 2022, the Company had drawn a total of $1,225,000 on
the Convertible Notes.

55

In addition, on February 28, 2023, we issued an
additional unsecured promissory note in the amount of up to $2,100,000 to our sponsor, as further described under “—Recent
Developments—Promissory Note.”

We may raise additional capital through loans
or additional investments from the sponsor or an affiliate of the sponsor or certain of its directors and officers. The sponsor may, but
is not obligated to, lend us funds, from time to time in whatever amounts it deems reasonable in its sole discretion, to meet our working
capital needs. There can be no assurance that we will be able to obtain additional financing, however. Moreover, we may need to obtain
additional financing either to complete our business combination or because we become obligated to redeem a significant number of its
public shares upon consummation of its business combination, in which case we may issue additional securities or incur debt in connection
with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously
with the completion of its business combination.

If we are unable to raise additional capital,
it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of a potential transaction and reducing overhead expenses. We cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all.

Going Concern

In connection with our assessment of going concern
considerations in accordance with Accounting Standards Codification (“ASC”) Topic 205-40, “Presentation of Financial Statements
– Going Concern,” pursuant to its Amended and Restated Certificate of Incorporation, we have until the end of the Extension Period
to consummate a business combination. If a business combination is not consummated during the Extension Period, we will have a mandatory
liquidation and subsequent dissolution. Although we intend to consummate a business combination during the Extension Period, it is uncertain
that we will be able to do so. This, as well as our liquidity condition, raise substantial doubt about our ability to continue as a going
concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate at the end
of the Extension Period.

Contractual Obligations

We do not have any long-term debt obligations,
capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities other than described below.

We have an agreement to pay the sponsor a total
of up to $10,000 per month for office space, utilities and secretarial and administrative support services. We began incurring these fees
on February 25, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and
our liquidation.

We have an agreement to pay the underwriters
of our Initial Public Offering a deferred fee of $12,075,000 in the aggregate, which will become payable to them from the amounts
held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting
agreement. As of October 25, 2022, and November 2, 2022, respectively, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc.
have waived their portions of the deferred underwriting fee which is reflected in the consolidated statement of operations and the
consolidated statement of changes in shareholders’ deficit as a reduction of transaction costs incurred in connection
with IPO. Therefore, the deferred underwriting fee was reduced by $9,056,250, of which $271,687 is shown in the consolidated statement of operations as a reduction of transaction
costs incurred in connection with the IPO and $8,784,563 is charged to additional paid-in capital in the consolidated statement of changes
in shareholders’ deficit. As a result of the reductions, the outstanding deferred underwriting fee payable was reduced to $3,018,750.

56

Critical Accounting Policies

This management’s discussion and analysis
of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with
U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On
an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued
expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes in our critical accounting policies as discussed in the Annual Report on Form 10-K filed by us
with the SEC on April 13, 2022.

Our critical accounting policies are presented below:

Class A Ordinary Shares Subject to Possible
Redemption

We account for our Class A ordinary shares subject
to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A
ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally
redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At
all other times, Class A ordinary shares are classified as shareholders’ deficit. Our Class A ordinary shares feature certain redemption
rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of December
31, 2022 and 2021, 34,500,000 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders’ deficit section of our consolidated balance sheets.

Derivative Warrant Liabilities

We do not use derivative instruments to hedge
exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued share purchase
Warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or
as equity, is reassessed at the end of each reporting period.

We account for our 14,891,667 Warrants issued
in connection with our Initial Public Offering (8,625,000) and Private Placement (6,266,667) as derivative warrant liabilities in accordance
with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value
at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our statements of operations. The fair value of the Private Placement Warrants has been estimated using binomial lattice simulations at each measurement date. The fair value of the Public Warrants was initially estimated using Monte Carlo simulations.
After the Public Warrants were separately traded, the measurement of the Public Warrants used an observable market quote in an active
market.

Net Income per Ordinary Share

We have two classes of shares, which are referred
to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares.
The 14,891,667 potential ordinary shares issuable upon the exercise of the Warrants were excluded from diluted earnings per share for
the year ended December 31, 2022 and 2021 because the Warrants are contingently exercisable, and the contingencies have not yet been met.
As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods presented.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”)
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining
to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective
January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1,
2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact our financial position, results of operations
or cash flows.

Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated
financial statements.

57

Off-Balance Sheet Arrangements

As of December 31, 2022 and 2021, we did not have
any off-balance sheet arrangements.

JOBS Act

The Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public
companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable
to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating
the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to
Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory
audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply
for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth
company,” whichever is earlier.

Overview

We
are a blank check company incorporated as a Cayman Islands exempted company on December 23, 2020 for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Our sponsor
is Freedom Acquisition I LLC, a Cayman Islands limited liability company.

The
registration statement for our initial public offering (the “Initial Public Offering”) became effective on February 25,
2021. On March 2, 2021, we consummated the Initial Public Offering of 34,500,000 units, which included the exercise of the underwriters’
option to purchase an additional 4,500,000 units at the Initial Public Offering price to cover over-allotments (the “Units”,
and, with respect to the Class A ordinary shares included in the Units, the “Public Shares” and, with respect to the one-fourth
of one redeemable warrant included in the Units, the “Public Warrants”), at $10.00 per Unit, generating gross proceeds of
$345.0 million, and incurring offering costs of approximately $19.18 million, inclusive of approximately $12.08 million in deferred underwriting
commissions.

Simultaneously
with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,266,667
warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants” and, together
with the Public Warrants, the “Warrants”), at a price of $1.50 per Private Placement Warrant with the sponsor, generating
gross proceeds of approximately $9.4 million.

Upon
the closing of the Initial Public Offering and the Private Placement, approximately $345.0 million ($10.00 per Unit) of the net proceeds
of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”),
located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in United States
“government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days
or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest
only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a business combination
and (ii) the distribution of the Trust Account as described below.

If
we have not completed a business combination within 24 months from the closing of the Initial Public Offering, or March 2, 2023 (the
“Combination Period”), we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously
released to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of
the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including
the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject, in each case, to our
obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no
redemption rights or liquidating distributions with respect to our outstanding Warrants, which will expire worthless if we fail to consummate
a business combination within the Combination Period.

Recent
Developments

We
have issued an unsecured promissory note (the “Note”) in the amount of up to $500,000 to our sponsor. The proceeds of the
Note, which may be drawn down from time to time until we consummate our initial business combination, will be used for general working
capital purposes. The Note bears no interest and is payable in full upon the earlier to occur of (i) twenty-four (24) months from the
closing of our initial public offering (or such later date as may be extended in accordance with the terms of our amended and restated
memorandum and articles of association) or (ii) the consummation of our business combination. A failure to pay the principal within five
business days of the date specified above or the commencement of a voluntary or involuntary bankruptcy action shall be deemed an event
of default, in which case the Note may be accelerated. Prior to the Company’s first payment of all or any portion of the principal
balance of the Note in cash, our sponsor has the option to convert all, but not less than all, of the principal balance of the Note into
private placement warrants (the “Conversion Warrants”), each warrant exercisable for one ordinary share of the Company at
an exercise price of $1.50 per share. The terms of the Conversion Warrants would be identical to the warrants issued by the Company to
the sponsor in a private placement that was consummated in connection with our initial public offering. Our sponsor shall be entitled
to certain registration rights relating to the Conversion Warrants. The issuance of the Note was made pursuant to the exemption from
registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

46

Results
of Operations and Known Trends or Future Events

We
have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational
activities, those necessary to prepare for our Initial Public Offering and identifying a target company for our initial business combination.
We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating
income in the form of interest income on cash and cash equivalents held in the Trust Account. We incur expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For
the year ended December 31, 2021, we had a net income of $5,128,650, which consisted of unrealized gain on change in fair value of warrant
liability of $9,381,750 and investment income of $105,681 on our amounts held in the Trust Account, offset by $3,782,028 of operating
costs consisting mostly of general and administrative expenses, foreign currency exchange loss of $1,475 and offering expenses related
to warrant issuance of $575,278.

For
the period from December 23, 2020 (inception) through December 31, 2020, we had net loss of approximately $5,494, which consists of formation
and operation costs.

We
classify the Warrants issued in connection with our Initial Public Offering and Private Placement as liabilities at their fair value
and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to remeasurement at each balance
sheet date until exercised, and any change in fair value is recognized in our statement of operations. As part of the reclassification
to warrant liability, we reclassed a portion of the offering costs associated with the Initial Public Offering originally charged to
shareholders’ equity, to an expense in the statement of operations in the amount of $575,278 based on a relative fair value basis. For
the period from the Initial Public Offering to December 31, 2021, the change in fair value of the Warrants was a decrease in the liability
of approximately $9,381,750.

Liquidity
and Capital Resources

As
of December 31, 2021, we had cash outside the Trust Account of $277,583 available for working capital needs. All remaining cash held
in the Trust Account are generally unavailable for our use, prior to an initial business combination, and is restricted for use either
in a business combination or to redeem ordinary shares. As of December 31, 2021, none of the amount in the Trust Account was available
to be withdrawn as described above.

Through
December 31, 2021, our liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, the promissory
note of $90,996, which was used to cover expenses related to the Initial Public Offering and was fully repaid as of the Initial
Public Offering date, and the remaining net proceeds from the Initial Public Offering and the sale of Private Placement
Warrants.

We
anticipate that the $277,583 outside of the Trust Account as of December 31, 2021, together with the $500,000 working capital loan
from our sponsor, as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Recent Developments”, will be sufficient to allow us to operate for at least the next twelve (12) months from the issuance of the financial statements,
assuming that a business combination is not consummated during that time. Until consummation of our business combination, we will be
using the funds not held in the Trust Account, and any additional working capital loans from the initial shareholders, our officers
and directors, or their respective affiliates, for identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of
prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the
target business to acquire and structuring, negotiating and consummating the business combination.

We
do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However,
if our estimates of the costs of undertaking in-depth due diligence and negotiating a business combination is less than the actual amount
necessary to do so, we may have insufficient funds available to operate our business prior to the business combination. Moreover, we
will need to raise additional capital through additional loans from our sponsor, officers, directors, or third parties. None of the sponsor,
officers or directors are under any obligation to advance funds to, or to invest in, us. If we are unable to raise additional capital,
it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of its business plan, and reducing overhead expenses. We cannot provide any assurance that new financing
will be available to it on commercially acceptable terms, if at all.

Going
Concern

In
connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting
Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” we have until March 2, 2023 (absent any extensions of such period with shareholder approval) to consummate our initial
business combination. It is uncertain that we will be able to consummate our initial business combination by this time. If a business
combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. Management has determined
that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt
about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should
we be required to liquidate after March 2, 2023. We intend to complete our initial business combination before the mandatory liquidation
date. However, there can be no assurance that we will be able to consummate any business combination by March 2, 2023.

47

Contractual
Obligations

We
do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term
liabilities other than described below.

We
have an agreement to pay the sponsor a total of up to $10,000 per month for office space, utilities and secretarial and administrative
support services. We began incurring these fees on February 25, 2021 and will continue to incur these fees monthly until the earlier
of the completion of the business combination and our liquidation.

We
have an agreement to pay the underwriters of our Initial Public Offering a deferred fee of $12,075,000 in the aggregate, which will become
payable to them from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the
terms of the underwriting agreement.

Critical
Accounting Policies

This
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair
value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various
other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Class
A Ordinary Shares Subject to Possible Redemption

We
account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument
and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that
are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control)
are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class
A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, as of December 31, 2021, 34,500,000 Class A ordinary shares subject to possible redemption are
presented at redemption value as temporary equity, outside of the shareholders’ equity section of our balance sheet.

Derivative
Warrant Liabilities

We
do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial
instruments, including issued share purchase Warrants, to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

48

We
account for our 14,891,667 Warrants issued in connection with our Initial Public Offering (8,625,000) and Private Placement (6,266,667)
as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at
fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Private
Placement Warrants has been estimated using Monte Carlo simulations at each measurement date. The fair value of the Public Warrants was
initially estimated using Monte Carlo simulations. After the Public Warrants were separately traded, the measurement of the Public Warrants used an observable market quote in an active market.

Net
Income (Loss) per Ordinary Share

We
have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared
pro rata between the two classes of shares. The 14,891,667 potential ordinary shares issuable upon the exercise of the Warrants were
excluded from diluted earnings per share for the year ended December 31, 2021 because the Warrants are contingently exercisable, and
the contingencies have not yet been met. As a result, diluted net loss per common share is the same as basic net loss per common share
for the periods.

Recent
Accounting Pronouncements

In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06,
Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for
all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06 would have
on its financial position, results of operations or cash flows.

Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on our financial statements.

Off-Balance Sheet Arrangements

As
of December 31, 2021, we did not have any off-balance sheet arrangements.