SunPower Inc. Fair Value Disclosure

(5) Fair Value Measurements

 

The following tables set forth the Company’s financial assets and liabilities that are measured at fair value, on a recurring basis (in thousands):

 

		As of December 28, 2025
		Level 1				Level 2				Level 3				Total
Financial Assets
Restricted cash		$	3,841			$	—			$	—			$	3,841
Total		$	3,841			$	—			$	—			$	3,841
Financial Liabilities
July 2024 Notes derivative liability (1)		$	—			$	—			$	19,604			$	19,604
July 2024 Notes derivative liability – related parties (1)			—				—				12,615				12,615
September 2024 Notes derivative liability (1)			—				—				37,930				37,930
September 2024 Notes derivative liability – related parties (1)			—				—				5,870				5,870
July 2025 Note derivative liability– related party (1)			—				—				3,246				3,246
September 2025 Notes derivative liability (1)			—				—				14,756				14,756
November 2025 Note derivative liability – related party (1)			—				—				1,488				1,488
Forward purchase agreement liabilities			—				—				3,965				3,965
SAFE Agreement with related party			—				—				535				535
Private placement warrants			—				—				1,692				1,692
Working capital warrants			—				—				194				194
Public warrants			2,475				—				—				2,475
Deferred Sunder Consideration Shares			10,840				—				—				10,840
Deferred Ambia Consideration Shares			—				—				16,879				16,879
Total		$	13,315			$	—			$	118,774			$	132,089

 

		As of December 29, 2024
		Level 1				Level 2				Level 3				Total
Financial Assets
Restricted cash		$	3,841			$	—			$	—			$	3,841
Total		$	3,841			$	—			$	—			$	3,841
Financial Liabilities
July 2024 Notes derivative liability (1)		$	—			$	—			$	13,563			$	13,563
July 2024 Notes derivative liability – related parties (1)			—				—				21,127				21,127
September 2024 Notes derivative liability (1)			—				—				55,474				55,474
September 2024 Notes derivative liability – related parties (1)			—				—				6,958				6,958
Forward purchase agreement liabilities (2)			—				—				3,494				3,494
SAFE Agreement with related party			—				—				384				384
Private placement warrants			—				—				627				627
Working capital warrants			—				—				72				72
Public warrants			862				—				—				862
Total		$	862			$	—			$	101,699			$	102,561

 

(1)	The derivative liabilities are associated with the Company’s outstanding senior unsecured convertible notes with stated interest rates of 7.0% (the “September 2024 Notes” and “September 2025 Notes”) and 12.0% (the “July 2024 Notes”, “July 2025 Note”, and “November 2025 Note”) all of which are defined in Note 10 – Borrowings and Derivative Liabilities.
(2)	Includes $1.3 million due to related parties as of and December 29, 2024.

The reconciliation of liabilities by class and categorized within Level 3 under the fair value hierarchy is as follows for the fiscal years ended December 28, 2025 and December 29, 2024 (in thousands):

 

		Fiscal Year Ended December 28, 2025
		Derivative liabilities				Forward Purchase Agreements				SAFE Agreements				Warrant liabilities				Deferred Ambia Consideration Shares				Total
Balance as of December 29, 2024		$	97,122			$	3,494			$	384			$	699			$	—			$	101,699
Additions			20,808				—				—				—				16,879				37,687
Conversions			(10,931	)			—				—				—				—				(10,931	)
Net (gain)/loss recognized within Other non-operating income, net in the consolidated statement of operations			(11,490	)			471				151				1,187				—				(9,681	)
Balance as of December 28, 2025		$	95,509			$	3,965			$	535			$	1,886			$	16,879			$	118,774

 

 

		Fiscal Year Ended December 29, 2024
		Derivative liabilities				Forward Purchase Agreements				SAFE Agreements				Warrant liabilities				Total
Balance as of December 31, 2023		$	—			$	3,831			$	—			$	10,960			$	14,791
Additions			131,108				—				6,000				—				137,108
Conversions			—				—				(6,250	)			(7,306	)			(13,556	)
Net (gain)/loss recognized within Other non-operating income, net in the consolidated statement of operations			(33,986	)			(337	)			634				(2,955	)			(36,644	)
Balance as of December 29, 2024		$	97,122			$	3,494			$	384			$	699			$	101,699

 

Subsequent to issuance, changes in the fair value of derivative liabilities, FPAs, SAFEs and liability classified warrants, are recorded within Other non-operating income, net on the Company’s consolidated statements of operations and comprehensive loss. Refer to Note 11 – Other Non-Operating Income, Net for details.

 

Derivative liabilities

 

The Company recognized derivative liabilities arising from the conversion features of its senior unsecured convertible notes issued in the years ended December 28, 2025 and December 29, 2024 (refer to Note 10 – Borrowings and Derivative Liabilities). Derivative liabilities are measured at fair value in accordance with ASC 820, Fair Value Measurement. The fair value of each respective derivative liability is measured using a Monte Carlo simulation that incorporates a binomial lattice model. Significant inputs to the binomial lattice model include the terms of the senior unsecured convertible notes (including the interest rate, conversion rate and conversion price), the underlying price of the Company’s common stock, risk-free rate and volatility. Certain of these inputs are unobservable. Thus, these derivative liabilities are classified within Level 3 of the fair value hierarchy. The binomial lattice model produces an estimated fair value based on changes in the price of the underlying shares of the Company’s common stock over successive periods of time. As a result of these interrelationships and inherent unobservable assumptions, the fair value of a derivative liability is subject to significant measurement uncertainty, and alternative reasonable assumptions could have produced materially different results as of December 28, 2025 and December 29, 2024.

The assumptions used to value the derivative liabilities as of December 28, 2025 were as follows:

 

		12.0% Senior Unsecured Convertible Notes												7.0% Senior Unsecured Convertible Notes
		July 2024 Notes				July 2025 Note				November 2025 Note				September 2024 Notes				September 2025 Notes
Coupon rate			12.0	%			12.0	%			12.0	%			7.0	%			7.0	%
Conversion rate			595.24				558.66				626.96				467.84				467.84
Conversion price		$	1.68			$	1.79			$	1.60			$	2.14			$	2.14
Common stock price		$	1.62			$	1.62			$	1.62			$	1.62			$	1.62
Risk-free interest rate			3.6	%			3.6	%			3.6	%			3.58	%			3.58	%
Volatility			82.2	%			83.2	%			81.3	%			85.6	%			85.6	%
Dividend yield			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%

 

The assumptions used to value the derivative liabilities as of December 29, 2024 were as follows:

 

		Senior Unsecured Convertible Notes
		12.0% Notes				7.0% Notes
		July 2024 Notes				September 2024 Notes
Coupon rate			12.0	%			7.0	%
Conversion rate			595.24				467.84
Conversion price		$	1.68			$	2.14
Common stock price		$	1.81			$	1.81
Risk-free interest rate			4.43	%			4.43	%
Volatility			62.0	%			66.6	%
Dividend yield			0.00	%			0.00	%

 

Forward purchase agreement liabilities

 

FPAs are measured at fair value on a recurring basis using a Monte Carlo simulation analysis based upon the following inputs:

 

		As of
		December 28,				December 29,
		2025				2024
VWAP stock price		$	1.66			$	1.78
Simulation period			0.55 years				0.55 years
Risk-free rate			3.57	%			4.28	%
Volatility			77.3	%			117.0	%

The volume-weighted average price (“VWAP”) reflects management’s judgment regarding expected future trading activity and price behavior as an active forward market does not exist for the Company’s common stock. Reasonably possible alternative VWAP outcomes at the reporting date could have resulted in a materially different fair value. The risk-free rate is derived from the applicable tenor of the U.S. Treasury yield curve. Changes in the risk-free rate would alter the present value of the simulated settlement amounts and could significantly impact the fair value estimate. The expected volatility is determined based on the historical equity volatility of comparable companies over a period that matches the simulation period. Because expected volatility drives the dispersion of simulated price paths, reasonably higher or lower volatility assumptions could materially increase or decrease the estimated fair value. These inputs are interrelated, and changes in one may affect the others. As a result of these interrelationships and inherent unobservable assumptions, the fair value of FPAs is subject to significant measurement uncertainty, and alternative reasonable assumptions could have produced materially different results as of December 28, 2025 and December 29, 2024. Thus, FPAs are classified within Level 3 of the fair value hierarchy.

 

Private placement and working capital warrants

 

The Company valued the private placement and working capital warrants, based on a binomial lattice model, which included the following inputs:

 

		As of
		December 28,				December 29,
		2025				2024
Expected term			2.56 years				3.56 years
Stock price		$	1.62			$	1.81
Exercise price		$	11.50			$	11.50
Expected volatility			179.0	%			68.1	%
Risk-free rate			3.50	%			4.39	%
Expected dividend yield			0.00	%			0.00	%

 

The expected term is the time period to the expiration date of the warrants. The risk-free rate is interpolated from the U.S. Constant Maturity Treasury curve for a term matching the corresponding remaining life. Volatility was calibrated based on the public warrants closing price as of the valuation date. As the private and working capital warrants have terms nearly identical to the publicly traded warrants, the volatility was calibrated until the model price equaled the public warrants closing price. These inherent unobservable assumptions are subject to significant measurement uncertainty, and alternative reasonable assumptions could have produced materially different results as of December 28, 2025 and December 29, 2024. Thus, the private placement and working capital warrant liabilities are classified within Level 3 of the fair value hierarchy.

 

Public warrants

 

The public warrants are measured at fair value on a recurring basis. The public warrants were valued based on the closing price of the publicly traded instrument and therefore are considered a Level 1 instrument in the fair value hierarchy.

 

SAFE agreement with related party

 

The Company measured the fair value of its SAFE using a valuation technique that incorporates significant unobservable inputs and is therefore classified within Level 3 of the fair value hierarchy. The fair value of the SAFE is subject to estimation uncertainty because it depends on management’s judgments about future events that are not directly observable in active markets. Management assigned a 50% probability that the SAFE will convert into shares of the Company’s stock in connection with a qualifying financing or other specified event. If the SAFE does not convert, management expects cash repayment in fiscal 2026 or fiscal 2027, with a 50% probability assigned to each repayment year.

The SAFE valuation also considers assumptions such as discount rates implied by the Company’s convertible notes as of the valuation date, the timing and likelihood of financing or liquidity events, and, for the conversion path, the expected equity valuation and any applicable conversion economics (e.g., discounts or valuation caps). Settlement of the SAFE is contingent on future financing or liquidity events and the Company’s funding plans. Accordingly, the measurement requires judgment about the likelihood and timing of conversion versus repayment and, where relevant, assumptions about the Company’s equity value at conversion. Because these factors are not directly observable, reasonably possible alternative assumptions at the reporting date could produce a materially different fair value. Increasing the probability of conversion would generally increase the fair value if the conversion terms imply a beneficial outcome to the holder relative to repayment; decreasing that probability would place more weight on the repayment scenarios and could increase or decrease the fair value depending on the applicable discount rate and timing of cash flows. Within the non-conversion path, shifting probability weight toward repayment in fiscal year 2026 would generally increase fair value (lower discounting), while shifting weight toward fiscal 2027 would generally decrease fair value (greater discounting), holding other inputs constant. A higher discount rate would decrease the present value of expected cash flows (and thus fair value), while a lower rate would increase fair value. Higher expected equity values or more favorable conversion economics would increase the fair value under the conversion path; lower expected equity values or less favorable terms would decrease it. These inputs are interrelated and unobservable. Because the valuation depends on significant unobservable inputs—including a 50% probability of conversion to equity and an even allocation between fiscal years 2026 and 2027 of repayment if conversion does not occur—there is significant measurement uncertainty, and alternative reasonable assumptions at the reporting date could have resulted in a materially different fair value of the SAFE liability as of December 28, 2025 and December 29, 2024. Thus, the SAFE liability is classified within Level 3 of the fair value hierarchy.

 

Financial liabilities not measured at fair value

 

The Company’s senior unsecured convertible notes were fair valued using a binomial lattice model, which includes Level 3, unobservable inputs. The key inputs used are consistent with those used to fair value the derivative liabilities as discussed under Derivative Liabilities above. The following table sets forth the Company’s financial liabilities that were not measured at fair value and are considered a Level 3 instrument in the fair value hierarchy (in thousands):

 

		As of December 28, 2025
		Principal amount (1)				Unamortized debt discount and debt issuance costs				Net carrying amount excluding capitalized interest (1)				Fair value
12.0% senior unsecured convertible notes
July 2024 Notes		$	27,973			$	(5,832	)		$	22,141			$	33,165
July 2024 Notes – related parties			18,000				(10,369	)			7,631				21,204
Subtotal July 2024 Notes			45,973				(16,201	)			29,772				54,369
July 2025 Note – related party			5,000				(3,557	)			1,443				5,641
November 2025 Note – related party			2,000				(1,509	)			491				2,360
7.0% senior unsecured convertible notes
September 2024 Notes			56,543				(42,211	)			14,332				59,425
September 2024 Notes – related parties			8,750				(6,404	)			2,346				8,880
Subtotal September 2024 Notes			65,293				(48,615	)			16,678				68,305
September 2025 Notes			22,000				(18,646	)			3,354				24,227
Total		$	140,266			$	(88,528	)		$	51,738			$	154,902

		As of December 29, 2024
		Principal amount (1)				Unamortized debt discount and debt issuance costs				Net carrying amount excluding capitalized interest (1)				Fair value
12.0% senior unsecured convertible notes
July 2024 Notes		$	17,973			$	(6,205	)		$	11,768			$	21,390
July 2024 Notes – related parties			28,000				(10,785	)			17,215				33,323
Subtotal July 2024 Notes			45,973				(16,990	)			28,983				54,713
7.0% senior unsecured convertible notes
September 2024 Notes			71,800				(66,164	)			5,636				77,245
September 2024 Notes – related parties			8,000				(7,524	)			476				8,583
Subtotal September 2024 Notes			79,800				(73,688	)			6,112				85,828
Total		$	125,773			$	(90,678	)		$	35,095			$	140,541

 

(1)	Excludes capitalized interest (coupon interest, default interest and failure to file interest) of $10.8 million and $13.6 million as of December 28, 2025 and December 29, 2024, respectively, included in the July 2024 Notes.