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trueSUNPOWER CORP000086777312/312023Q2In particular, the unaudited condensed consolidated financial statements as of and for the first and second quarters of fiscal year 2023 and 2022 have been restated to reflect the corrections related to the value of consignment inventory of microinverter (“MI”) components at certain third-party locations as further described below, along with other immaterial items as of and for the first and second quarters of fiscal year 2023 and 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2023

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34166


https://cdn.kscope.io/0b014a761f71c62146a2d986346f3cbe-sp2014logoa01a34.gif
SunPower Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware94-3008969
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
880 Harbour Way SouthSuite 600RichmondCalifornia94804
(Address of Principal Executive Offices)(Zip Code)

(408) 240-5500
(Registrant's Telephone Number, Including Area Code)

1414 Harbour Way South, Suite 1901, Richmond, California, 94804
(Former address, if changed since last report)


_________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.001 par value per shareSPWRThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Emerging growth company Non-accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐ No  x

The total number of outstanding shares of the registrant’s common stock as of July 28, 2023 was 175,191,707.

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EXPLANATORY NOTE

SunPower Corporation (“we,” “SunPower” or the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (“Form 10-Q/A” or “Amendment No. 1”) to amend and restate certain items in the Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2023, originally filed with the Securities and Exchange Commission (the “SEC”) on August 2, 2023 (the “Original Form 10-Q”). This Amendment No. 1 includes the restated condensed consolidated balance sheet as of January 1, 2023, derived from the restated consolidated financial statements included in our Annual Report on Form 10-K/A filed with the SEC on December 18, 2023, and the unaudited restated condensed consolidated financial statements as of July 2, 2023 and for the three and six months ended July 2, 2023 and July 3, 2022.

Restatement Background

On October 19, 2023, the Audit Committee of the Board of Directors (the “Board”) of the Company, based upon the recommendation of management, determined that our (i) audited consolidated financial statements included in our Annual Report on Form 10-K for the period ended January 1, 2023, filed with the SEC on March 10, 2023 (the “Original Form 10-K”), (ii) unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2023, filed with the SEC on May 3, 2023 (the “Q1 2023 Form 10-Q”), and (iii) unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2023, filed with the SEC on August 2, 2023 (the “Original Q2 2023 Form 10-Q,” and collectively, the “Affected Periods”), as well as the relevant portions of any communication which describe or are based on such consolidated financial statements, should no longer be relied upon, and that the previously issued financial statements for the Affected Periods should be restated.

As described in Item 4.02 of the Company’s Form 8-K filed with the SEC on October 24, 2023, we identified certain misstatements in prior periods’ condensed consolidated financial statements relating to the accounting treatment for the value of consignment inventory of microinverter (“MI”) components at certain third-party locations.

In connection with the preparation of the financial statements for the third quarter of fiscal year 2023, we identified that the consumption of certain MI costs in photo-voltaic module manufacturing had been inaccurately recorded starting in the first quarter of fiscal year 2022. We also identified deficiencies relating to the reconciliations of inventory at our prepositioned inventory (“PPI”) dealer locations. In light of these matters, management concluded that our internal controls around the review of certain inventory reconciliations were not operating effectively and hence was determined to be a material weakness. This material weakness resulted in a net overstatement of costs included in inventory, and a net understatement of cost of revenues for the impacted periods.

In fiscal year 2023, we identified errors related to the classification of certain expenses as cost of revenues instead of operating expenses and as continuing operations instead of discontinued operations. We identified deficiencies in the design of the controls related to the mapping of the chart of accounts for expenses to the statements of operations and we further identified an operating deficiency related to the review of the accounting evaluation regarding the classification of certain discontinued operations items within the statements of operations. These deficiencies in aggregate were determined to be a material weakness. This material weakness resulted in the misclassification of certain expenses on our consolidated statements of operations for the three and six months ended July 2, 2023 and July 3, 2022.

This Amendment No. 1 includes the unaudited restated condensed consolidated balance sheet as of January 1, 2023, and the unaudited restated condensed consolidated financial statements as of July 2, 2023 and for the three and six months ended July 2, 2023 and July 3, 2022, correcting the misstatements described above. In addition, the restated condensed consolidated financial information also includes adjustments to correct certain other previously identified misstatements that the Company determined to be immaterial, both individually and in the aggregate. For additional information,, see Note 2. “Restatement of Previously Issued Condensed Consolidated Financial Statements” of the Notes to the Condensed Consolidated Financial Statements.

The Company’s management has concluded that in light of the findings described above, the Company’s disclosure controls and procedures as of July 2, 2023 were not effective because of material weaknesses in its internal control over financial reporting. Refer to “Item 4. Controls and Procedures” for additional details.

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Items Amended in this Filing

This Form 10-Q/A amends and restates the following items included in the Original Form 10-Q as appropriate to reflect the restatement and revision of the relevant periods:

Part I, Item 1-Financial Statements (unaudited);
Part I, Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations;
Part I, Item 4-Controls and Procedures;
Part II, Item 1A-Risk Factors; and
Part II, Item 6-Exhibits.

The Company is including with this Form 10-Q/A currently dated certifications of the Company’s Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, and 32.2).

Except as discussed above and as further described in Note 1 and Note 2 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q/A, the Company has not modified or updated the disclosures presented in the Original Form 10-Q to reflect events that occurred at a later date or facts that subsequently became known to the Company. Accordingly, forward-looking statements included in this Amendment No. 1 may represent management’s views as of the Original Form 10-Q and should not be assumed to be accurate as of any date thereafter.
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SunPower Corporation
Form 10-Q for the quarterly period ended July 2, 2023

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Page


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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SunPower Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share par values)
(unaudited)

 July 2, 2023January 1, 2023
(As Restated)(As Restated)
Assets
Current assets:
Cash and cash equivalents$114,104 $377,026 
Restricted cash and cash equivalents, current portion2,075 10,668 
Short-term investments 132,480 
Accounts receivable, net1
220,196 169,674 
Contract assets49,357 57,070 
Loan receivables held for sale, net11,947  
Inventories402,375 295,731 
Advances to suppliers, current portion4,645 12,059 
Prepaid expenses and other current assets1
228,874 197,811 
Total current assets1,033,573 1,252,519 
Restricted cash and cash equivalents, net of current portion19,679 18,812 
Property, plant and equipment, net95,785 76,473 
Operating lease right-of-use assets35,219 36,926 
Solar power systems leased, net39,767 41,779 
Goodwill125,998 125,998 
Other intangible assets, net20,682 24,192 
Other long-term assets1
185,999 186,927 
Total assets$1,556,702 $1,763,626 
Liabilities and Equity  
Current liabilities:  
Accounts payable1
$227,386 $243,139 
Accrued liabilities1
133,530 148,119 
Operating lease liabilities, current portion11,501 11,356 
Contract liabilities, current portion1
223,846 141,863 
Short-term debt48,054 82,240 
Convertible debt, current portion1
 424,919 
Total current liabilities644,317 1,051,636 
Long-term debt305,709 308 
Operating lease liabilities, net of current portion26,873 29,347 
Contract liabilities, net of current portion11,057 11,588 
Other long-term liabilities1
112,771 114,702 
Total liabilities1,100,727 1,207,581 
Commitments and contingencies (Note 9)
Equity:  
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding as of July 2, 2023 and January 1, 2023
  
Common stock, $0.001 par value, 367,500 shares authorized; 189,644 shares issued and 175,173 shares outstanding as of July 2, 2023; 188,287 shares issued and 174,269 shares outstanding as of January 1, 2023
175 174 
Additional paid-in capital2,847,884 2,855,930 
Accumulated deficit(2,171,628)(2,085,784)
Accumulated other comprehensive income11,586 11,568 
Treasury stock, at cost: 14,471 shares of common stock as of July 2, 2023; 14,018 shares of common stock as of January 1, 2023
(232,940)(226,646)
Total stockholders' equity455,077 555,242 
Noncontrolling interests in subsidiaries898 803 
Total equity455,975 556,045 
Total liabilities and equity$1,556,702 $1,763,626 

1 We have related-party balances for transactions made with TotalEnergies SE and its affiliates, Maxeon Solar Technologies, Ltd. (“Maxeon Solar”), and unconsolidated entities in which we have a direct equity investment. These related-party balances are recorded within the “accounts receivable, net,” “prepaid expenses and other current assets,” “other long-term assets,” “accounts payable,” “accrued liabilities,” “convertible debt, current portion,” “contract liabilities, current portion,” and “other long-term liabilities” financial statement line items on our condensed consolidated balance sheets (see Note 3, Note 9, Note 10, and Note 12).


The accompanying notes are an integral part of these condensed consolidated financial statements.
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SunPower Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)

 Three Months EndedSix Months Ended
 July 2, 2023July 3, 2022July 2, 2023July 3, 2022
(As Restated)(As Restated)(As Restated)(As Restated)
Total revenues1
$463,360 $417,464 $897,627 $767,582 
Total cost of revenues1
389,431 326,737 742,660 595,010 
Gross profit73,929 90,727 154,967 172,572 
Operating expenses:
Research and development1
6,508 7,182 13,755 12,353 
Sales, general, and administrative1
90,498 105,360 194,816 193,227 
Restructuring charges (credits) (494) 133 
Expense (income) from transition services agreement, net1
84 (494)(140)(228)
 Total operating expenses97,090 111,554 208,431 205,485 
Operating (loss) income(23,161)(20,827)(53,464)(32,913)
Other (expense) income, net:
Interest income329 92 1,160 134 
Interest expense1
(5,786)(6,460)(11,464)(11,511)
Other, net289 (14,652)(10,694)(13,208)
Other (expense) income, net(5,168)(21,020)(20,998)(24,585)
(Loss) income from continuing operations before income taxes and equity in earnings (losses) of unconsolidated investees(28,329)(41,847)(74,462)(57,498)
(Provision for) benefits from income taxes(378)793 (1,706)8,922 
Equity in earnings (losses) of unconsolidated investees232  420  
Net (loss) income from continuing operations(28,475)(41,054)(75,748)(48,576)
(Loss) income from discontinued operations before income taxes and equity in earnings (losses) of unconsolidated investees1
(2,796)(21,560)(10,156)(47,858)
Benefits from (provision for) income taxes from discontinued operations77 107 155 440 
Net (loss) income from discontinued operations(2,719)(21,453)(10,001)(47,418)
Net (loss) income(31,194)(62,507)(85,749)(95,994)
Net (income) loss from continuing operations attributable to noncontrolling interests(14)(785)(95)(446)
Net loss (income) from discontinued operations attributable to noncontrolling interests   250 
Net (income) loss attributable to noncontrolling interests(14)(785)(95)(196)
Net (loss) income from continuing operations attributable to stockholders(28,489)(41,839)(75,843)(49,022)
Net (loss) income from discontinued operations attributable to stockholders(2,719)(21,453)(10,001)(47,168)
Net (loss) income attributable to stockholders$(31,208)$(63,292)$(85,844)$(96,190)
Net (loss) income per share attributable to stockholders - basic and diluted:
Continuing operations$(0.16)$(0.24)(0.43)$(0.28)
Discontinued operations$(0.02)$(0.12)(0.06)$(0.27)
Net (loss) income per share - basic and diluted
$(0.18)$(0.36)(0.49)$(0.55)
Weighted-average shares:
Basic175,042 173,951 174,785 173,664 
Diluted175,042 173,951 174,785 173,664 

1 We have related-party transactions with TotalEnergies SE and its affiliates, Maxeon Solar, and unconsolidated entities in which we have a direct equity investment. These related-party transactions are recorded within the “total revenues,” “total cost of revenues,” “operating expenses: research and development,” “operating expenses: sales, general, and administrative,” “operating expenses: (income) expense from transition services agreement, net,” “other income (expense), net: interest expense,” and “(loss) income from discontinued operations before income taxes” financial statement line items in our condensed consolidated statements of operations (see Note 3, Note 10, and Note 12).


The accompanying notes are an integral part of these condensed consolidated financial statements.
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SunPower Corporation
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands)
(unaudited)

 Three Months EndedSix Months Ended
July 2, 2023July 3, 2022July 2, 2023July 3, 2022
(As Restated)(As Restated)(As Restated)(As Restated)
Net (loss) income $(31,194)$(62,507)$(85,749)$(95,994)
Components of other comprehensive income (loss):
Translation adjustment13 (31)18 (29)
Total other comprehensive income (loss)13 (31)18 (29)
Total comprehensive (loss) income(31,181)(62,538)(85,731)(96,023)
Comprehensive (income) loss attributable to noncontrolling interests(14)(785)(95)(196)
Comprehensive (loss) income attributable to stockholders$(31,195)$(63,323)$(85,826)$(96,219)


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

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SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 1, 2023 (as reported)
174,269 $174 $2,855,930 $(226,646)$11,568 $(2,066,175)$574,851 $803 $575,654 
Cumulative restatement adjustments
     (19,609)(19,609) (19,609)
Balances at January 1, 2023 (as restated)
174,269 $174 $2,855,930 $(226,646)$11,568 $(2,085,784)$555,242 $803 $556,045 
Net (loss) income— — — — — (54,636)(54,636)81 (54,555)
Other comprehensive income— — — — 5 — 5 — 5 
Issuance of restricted stock to employees, net of cancellations959 1 — — — — 1 — 1 
Stock-based compensation expense— — 6,877 — — — 6,877 — 6,877 
Purchases of treasury stock(327)— — (5,071)— — (5,071)— (5,071)
Net working capital settlement related to the sale of our C&I Solutions business, net of taxes of $0.3 million
— — (23,574)— — — (23,574)— (23,574)
Balances at April 2, 2023 (as restated)
174,901 $175 $2,839,233 $(231,717)$11,573 $(2,140,420)$478,844 $884 $479,728 
Net (loss) income— — — — — (31,208)(31,208)14 (31,194)
Other comprehensive income— — — — 13 — 13 — 13 
Issuance of restricted stock to employees, net of cancellations399 — — — — — — — — 
Stock-based compensation expense— — 8,659 — — — 8,659 — 8,659 
Purchases of treasury stock(127)— — (1,223)— — (1,223)— (1,223)
Other adjustments— — (8)— — — (8)— (8)
Balances at July 2, 2023 (as restated)
175,173 $175 $2,847,884 $(232,940)$11,586 $(2,171,628)$455,077 $898 $455,975 
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SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 2, 2022 (as reported)
173,051 $173 $2,714,500 $(215,240)$11,168 $(2,122,212)$388,389 $1,635 $390,024 
Cumulative restatement adjustments
     (6,421)(6,421) (6,421)
Balances at January 2, 2022 (as restated)
173,051 $173 $2,714,500 $(215,240)$11,168 $(2,128,633)$381,968 $1,635 $383,603 
Net (loss) income— — — — — (32,898)(32,898)(589)(33,487)
Other comprehensive income— — — — 2 — 2 — 2 
Issuance of restricted stock to employees, net of cancellations1,201 1 — — — — 1 — 1 
Stock-based compensation expense— — 5,427 — — — 5,427 — 5,427 
Purchases of treasury stock(407)— — (7,333)— — (7,333)— (7,333)
Balances at April 3, 2022 (as restated)
173,845 $174 $2,719,927 $(222,573)$11,170 $(2,161,531)$347,167 $1,046 $348,213 
Net income (loss)— — — — — (63,292)(63,292)785 (62,507)
Other comprehensive income— — — — (31)— (31)— (31)
Issuance of restricted stock to employees, net of cancellations359 — — — — — — — — 
Stock-based compensation expense— — 7,071 — — — 7,071 — 7,071 
Purchases of treasury stock(123)— — (2,256)— — (2,256)— (2,256)
Gain on sale of C&I Solutions business, net of tax — 113,030 — — — 113,030 3,943 116,973 
Balances at July 3, 2022 (as restated)
174,081 $174 $2,840,028 $(224,829)$11,139 $(2,224,823)$401,689 $5,774 $407,463 




The accompanying notes are an integral part of these condensed consolidated financial statements.
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SunPower Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
    
Six Months Ended
 July 2, 2023July 3, 2022
(As Restated)(As Restated)
Cash flows from operating activities:
Net (loss) income$(85,749)$(95,994)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization23,212 15,523 
Amortization of cloud computing arrangements2,812 1,992 
Stock-based compensation15,536 12,499 
Amortization of debt issuance costs1,163 1,559 
Equity in (earnings) losses of unconsolidated investees(420) 
(Gain) loss on equity investments10,805 13,940 
Unrealized (gain) loss on derivatives(294)504 
Dividend from equity method investees596  
Loss (gain) on loan receivables held for sale
25  
Deferred income taxes(532)(11,185)
Other, net:575 949 
Changes in operating assets and liabilities:
Accounts receivable(51,101)(37,739)
Contract assets7,713 6,053 
Inventories(106,644)(8,860)
Project assets 295 
Loan receivables held for sale(11,972) 
Prepaid expenses and other assets(19,504)(166,415)
Operating lease right-of-use assets5,516 5,619 
Advances to suppliers7,414 (2,072)
Accounts payable and other accrued liabilities(32,639)42,900 
Contract liabilities81,452 66,319 
Operating lease liabilities(6,134)(7,878)
Net cash (used in) provided by operating activities(158,170)(161,991)
Cash flows from investing activities:
Purchases of property, plant, and equipment(26,283)(23,997)
Investments in software development costs(2,320)(2,725)
Cash paid for working capital settlement related to C&I Solutions sale(30,892) 
Cash received from C&I Solutions sale, net of de-consolidated cash 146,303 
Cash paid for equity investments under the Dealer Accelerator Program and other(7,500)(16,420)
Proceeds from sale of equity investment121,675 149,830 
Cash paid for investments in unconsolidated investees(7,677)(3,318)
Dividend from equity method investee, in excess of cumulative earnings
149  
Net cash provided by (used in) investing activities47,152 249,673 
Cash flows from financing activities:
Proceeds from bank loans and other debt439,101 100,276 
Repayment of bank loans and other debt(165,641)(97,891)
Repayment of convertible debt(424,991) 
Payments for financing leases(1,806)(149)
Purchases of stock for tax withholding obligations on vested restricted stock(6,293)(9,588)
Net cash (used in) provided by financing activities(159,630)(7,352)
Net (decrease) increase in cash, cash equivalents, and restricted cash(270,648)80,330 
Cash, cash equivalents, and restricted cash, beginning of period406,506 152,599 
Cash, cash equivalents, and restricted cash, end of period$135,858 $232,929 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents$114,104 $206,355 
Restricted cash and cash equivalents, current portion2,075 1,798 
Restricted cash and cash equivalents, net of current portion19,679 24,776 
Total cash, cash equivalents, and restricted cash$135,858 $232,929 
Supplemental disclosure of non-cash activities:
Property, plant and equipment acquisitions funded by liabilities (including financing leases)$8,717 $4,587 
Right-of-use assets obtained in exchange for lease obligations$3,809 $509 
Net working capital settlement related to C&I Solutions sale$ $6,265 
Supplemental cash flow disclosures:
Cash paid for interest$18,004 $11,186 
Cash paid for income taxes$1,236 $2,500 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

SunPower Corporation (together with its subsidiaries, “SunPower,” the “Company,” “we,” “us,” or “our”) is a leading residential solar technology and energy services provider that offers fully integrated solar, storage, and home energy solutions to customers in North America. Through a multi-channel strategy of distributed dealer network, SunPower direct sales channel, and new home builder partnerships, we provide customers control over electricity consumption, resiliency during power outages, and cost savings, while also reducing carbon emissions and contributing to a more sustainable grid.

SunPower was a majority-owned subsidiary of TotalEnergies Solar INTL SAS (“Total,” formerly Total Solar International SAS) and TotalEnergies Gaz & Electricité Holdings France SAS (“Total Gaz,” formerly Total Gaz Electricité Holdings France SAS), each a subsidiary of TotalEnergies SE (“TotalEnergies SE,” formerly Total SE). On September 12, 2022, Total and Total Gaz sold to GIP III Sol Acquisition, LLC (“GIP Sol”) 50% less one unit of the equity interests in a newly formed Delaware limited liability company, Sol Holding, LLC (“HoldCo”), which is now the record holder of all of the shares of SunPower common stock (see Note 3. Transactions with Total and TotalEnergies SE).

Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Subsequent to the filing of our Original Form 10-Q, as of October 1, 2023, we breached a financial covenant and a reporting covenant of our Credit Agreement, dated as of September 12, 2022 (as amended, the “Credit Agreement”) (see Note 11. Debt and Credit Sources). The breaches created events of default thereunder (the “Existing Defaults”), which enables the requisite lenders under the Credit Agreement to demand immediate payment of $246.3 million borrowings outstanding as of October 1, 2023, or exercise other remedies. As a result of the events of default, we no longer had the ability to borrow from the remaining capacity of $53.7 million of revolving commitments. On December 8, 2023 (the “Amendment Effective Date”), the Company obtained a waiver and amendment to the Credit Agreement (the “Amendment and Waiver”) as amended by the First Amendment to Credit Agreement, dated as of January 26, 2023 (together and as amended, the “Amended Credit Agreement”) by and among the Company, certain of its subsidiaries as guarantors, Bank of America, N.A. (“Bank of America”), BMO Bank, N.A., Citibank, N.A. and JPMorgan Chase Bank, N.A. as the lenders and L/C issuers party thereto (together, the “Existing Lenders”), and Bank of America, as administrative agent which provides for, among other things, a temporary waiver until January 19, 2024 of the breaches, and modification to the remaining available commitments through (i) the Existing Lenders to provide access to $25 million of existing revolving commitments and (ii) commitments by HoldCo, as a new lender, to provide an additional $25 million of capacity. Subsequent to the amendment, we borrowed the entire $50 million against the remaining capacity on the revolving credit facility. Although we entered into the Amendment and Waiver to temporarily address the Existing Defaults, we are also projecting to be noncompliant with certain debt covenants, which would cause further defaults under our existing debt arrangements. Following the expiration of the Amendment and Waiver, absent additional waivers, the events of default enable the requisite lenders under the Credit Agreement to demand immediate payment or exercise other remedies, such as subject all or a portion of obligations to a default rate of interest. Further, the Company also breached a financial covenant set forth in the Loan and Security Agreement, dated June 30, 2022, entered into by a wholly owned indirect subsidiary of the Company, the lenders party thereto from time to time, Atlas Securitized Products Holdings, L.P., as administrative agent and Computershare Trust Company, National Association, as paying agent (as amended, the “Loan Facility with Credit Suisse AG,” the “Credit Suisse Warehouse Loan,” or the “Atlas Credit Agreement”) (see Note 11. Debt and Credit Sources), due to delay in delivery of the quarterly financials for the third quarter of 2023 (the “Quarterly Financials Default”), which results in an event of default, thereby enabling the requisite lenders to demand immediate payment of $65.3 million borrowings outstanding as of October 1, 2023, or exercise other remedies. The Company is in discussion with the lenders under the Atlas Credit Agreement regarding a waiver of any breaches. There can be no assurance that such waiver will be obtained. Absent a waiver, the event of default enables the requisite lenders under the Atlas Credit Agreement to demand immediate payment or exercise other remedies, such as subject all or a portion of obligations to a default rate of interest. If the lenders under the Credit Agreement and the Atlas Credit Agreement were to demand immediate repayment, the Company would not have sufficient liquidity to meet its obligations and pay its liabilities arising from normal business operations when they come due. As such, substantial doubt exists about the Company's ability to continue as a going concern.

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To address our liquidity needs, management is currently seeking additional waivers and evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, which may include related parties, the capital markets, or through obtaining credit from financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. The outcome of these matters cannot be predicted with any certainty at this time.

Basis of Presentation and Preparation
    
Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles in the United States (“United States” or “U.S.,” and such accounting principles, “U.S. GAAP”) for interim financial information, and include the accounts of SunPower, all of our subsidiaries and special purpose entities, as appropriate under U.S. GAAP. All intercompany transactions and balances have been eliminated in consolidation. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The January 1, 2023 consolidated balance sheet data was derived from SunPower’s audited consolidated financial statements included in our Annual Report on Form 10-K/A for the fiscal year ended January 1, 2023, as filed with the Securities and Exchange Commission (“SEC”) on December 18, 2023, but does not include all disclosures required by U.S. GAAP. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in SunPower's Annual Report on Form 10-K/A for the fiscal year ended January 1, 2023. The operating results for the three and six months ended July 2, 2023 are not necessarily indicative of the results that may be expected for fiscal year 2023, or for any other future period.

We have a 52-to-53-week fiscal year that ends on the Sunday closest to December 31. Accordingly, every fifth or sixth year will be a 53-week fiscal year. Both the current fiscal year, fiscal 2023, and prior fiscal year, fiscal 2022, are 52-week fiscal years. The second quarter of fiscal 2023 ended on July 2, 2023, while the second quarter of fiscal 2022 ended on July 3, 2022.

Management Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities reported in these condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. Our actual financial results could materially differ from those estimates. Significant estimates in these condensed consolidated financial statements include revenue recognition, specifically nature and timing of satisfaction of performance obligations, standalone selling price of performance obligations, and variable consideration; credit losses, including estimating macroeconomic factors affecting historical recovery rate of receivables; inventory write-downs; long-lived assets and goodwill impairment, specifically estimates for valuation assumptions including discount rates and future cash flows; fair value of investments, including equity investments for which we apply the fair value option and other financial instruments; actuarial estimates related to our self-insured health benefits; valuation of goodwill and intangible assets acquired in a business combination; valuation of contingent consideration in a business combination; valuation of contingencies such as warranty and litigation; the incremental borrowing rate used in discounting of lease liabilities; the fair value of indemnities provided to customers and other parties; and income taxes and tax valuation allowances.

Restatement of Previously Issued Condensed Consolidated Financial Statements

As described in Note 2. Restatement of Previously Issued Condensed Consolidated Financial Statements, our condensed consolidated financial statements as of July 2, 2023 and January 1, 2023, and for the three and six months ended July 2, 2023 and July 3, 2022 (collectively, the “Affected Periods”), are restated in this Quarterly Report on Form 10-Q/A (this “Amendment No. 1”, this “Quarterly Report” or this “Form 10-Q/A”) to reflect the corrections related to the value of consignment inventory of microinverter (“MI") components at certain warehouse and third-party locations and corrections related to reclassification of certain expenses in our statements of operations, along with other immaterial corrections. The restated condensed consolidated financial statements are indicated as “Restated” in the unaudited condensed consolidated financial statements and accompanying notes, as applicable. See Note 2. Restatement of Previously Issued Condensed Consolidated Financial Statements for further discussion.

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Segment Information

We operate in a single operating segment, providing solar power systems and services to residential customers. While our chief executive officer, as the chief operating decision maker (“CODM”), reviews financial information by different functions and revenue streams, he considers the business on a consolidated basis for purposes of allocating resources and reviewing overall business performance.

Summary of Selected Significant Accounting Policies
    
The following significant accounting policies are updates to our significant accounting policies from our Annual Report on Form 10-K/A for the fiscal year ended January 1, 2023. Refer to our Annual Report on Form 10-K/A for the fiscal year ended January 1, 2023 for the full list of our significant accounting policies. There have been no material changes or updates to our significant accounting policies disclosed in the Form 10-K/A except as updated below.

Revenue Recognition

We recognize revenue from contracts with customers when we have completed our performance obligations under an identified contract. The revenue is recognized in an amount that reflects the consideration for the corresponding performance obligations for the goods and services transferred.

Solar Power Systems and Component Sales

A majority of our revenue is generated by sales of fully functioning solar power systems to our customers. We sell our products through a network of installing and non-installing dealers and resellers, as well as our internal sales team. Usually, our performance obligation is to design and install a fully functioning solar energy system. We recognize revenue when the solar power system is fully installed and the final permit is received from the authority having jurisdiction, as we deem our performance obligation under the contract to be complete at such time, and the customer retains all of the significant risks and rewards of ownership of the solar power system. In situations when we are not responsible for construction and installation of solar power systems, usually when the sales are made by one of our installing dealers or resellers, we recognize revenue when the components of the solar power system are delivered at the customer site. Our costs to obtain and fulfill contracts associated with systems sales are expensed as sales, general, and administrative expense 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. In addition, we expense sales commissions when incurred if the amortization period is one year or less, and record within sales, general, and administrative expense in our condensed consolidated statements of operations.

Revenue is generally recognized at transaction price, net of costs of financing, or other consideration paid to the customers that is not in exchange for a distinct good or service. Also, 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 probable that a significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively as such estimates change.

We also provide solar power systems to our customers in the form of 20-year lease agreements which are entered into by the customer with our third-party leasing partners. These third-party leasing partners are special-purpose entities that we do not control or consolidate. We recognize revenue when the system is fully installed, when permit to operate is given by the local utility company, and the solar system has produced meterable quantities of electricity, as we deem our performance obligation under the contract to be complete at such time.

Transfers of financial assets

In April 2023, to support the expansion of our residential solar and storage loan funding capacity, we entered into a series of agreements to sell solar loan receivables to a special-purpose entity in our existing joint venture, SunStrong, with Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“HASI”). Under the agreements, we have secured financing commitments to fund more than $450.0 million for our residential solar and storage loan program, including a $300.0 million revolving credit facility from Credit Agricole Corporate & Investment Bank (“CA-CIB”). The CA-CIB credit revolver serves as a warehouse facility for SunStrong to temporarily finance solar assets prior to arranging long-term financings, such as asset-backed securities. The revolving warehouse facility will allow SunStrong to fund the acquisition of solar loans entered into by SunPower Financial's customers and issue asset-backed securities on an ongoing basis.

In May 2023, to further support the expansion of our residential solar and storage loan funding capacity, we also entered into a series of agreements to sell solar loan receivables to a newly created special-purpose trust beneficially owned by one or more affiliates of KKR Credit Advisors (US) LLC (“KKR Credit”). Under the agreements, we have secured financing commitments to fund up to $550.0 million for our residential solar and storage loan program over a 15-month term, with annual renewal options.
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These agreements to sell solar loan receivables to third-parties are accounted for in accordance with ASC 860, Transfers and Servicing. We make judgments, based in part, on supporting legal opinions, on whether these entities should be consolidated as a variable interest entity, as defined in ASC 810, Consolidation, and whether the transfers to these entities are accounted for as a sale of a financial asset or a secured borrowing under ASC 860 (see Note 10. Equity Investments for a discussion of our conclusion under ASC 810).

Under ASC 860, for our loan receivables that are held for sale and the transfer of the financial assets to be considered a sale, the asset must be legally isolated from the transferor and the transferee must have actual and effective control of the asset. When the sale criteria are met, we, as the transferor, derecognize the lower of cost or fair value of the financial asset transferred and recognize a net gain or loss on the sale based on the difference between proceeds received (less any transaction costs) over the carrying value or fair value. Even though we serve as the primary or master servicer of the special-purpose entity, which represents a form of continuing involvement under ASC 860, this does not preclude sale accounting, because as the servicer, we do not have the power to make significant decisions or any other form of control impacting the performance of the entity. We do not retain actual or effective control in the transferred loan receivables, and therefore, the transfers are accounted for as a sale with the gain or loss from the sales included in our condensed consolidated statements of operations. The gain or loss, and cash proceeds, related to the sales of the financial assets are classified as operating activities in our condensed consolidated statements of cash flows.

Our loan receivables are held for sale and recorded at the net present value of the loan payments upon loan origination, adjusted for the significant financing component using the same interest rate that the Company would use if it was to enter into a separate financing transaction with the customer. We subsequently measure our loan receivables held for sale at the lower of cost or fair value on a loan-by-loan basis until the loan receivables are sold. Our loan receivables held for sale are typically sold within 30 days of origination. If the purchased loans do not meet the eligibility criteria to be sold, the loan receivables are transferred to held to maturity and included at amortized cost within “accounts receivable, net” and “other long-term assets” on our condensed consolidated balance sheets. These loan receivable agreements held to maturity have a term of typically 20 - 25 years and relate to loans that our customers enter into to pay for their solar power systems.

The sale of loan receivables that are outside of the scope of ASC 860 is accounted for as the sale of future revenues. The upfront payments received from third-party purchasers are classified as deferred income until revenue is recognized, and are presented within “contract liabilities” on our condensed consolidated balance sheets.

Note 2. RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restatement Background

On October 19, 2023, the Audit Committee of the Board of Directors (the “Board”) of the Company, based upon the recommendation of management, determined that our (i) audited consolidated financial statements included in our Annual Report on Form 10-K for the period ended January 1, 2023, filed with the SEC on March 10, 2023 (the “Original Form 10-K”), (ii) unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2023, filed with the SEC on May 3, 2023 (the “Q1 2023 Form 10-Q”), and (iii) unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2023, filed with the SEC on August 2, 2023 (the “Original Q2 2023 Form 10-Q,” and collectively, the “Affected Periods”), as well as the relevant portions of any communication which describe or are based on such consolidated financial statements, should no longer be relied upon, and that the previously issued financial statements for the Affected Periods should be restated.

This Note discloses the nature of the restatement adjustments and discloses the cumulative effects of these adjustments on the condensed consolidated balance sheets, statements of operations, and statements of cash flows for the periods included in the Original Form 10-Q. The consolidated statements of comprehensive income (loss) and statements of equity for the three and six months ended July 2, 2023 and July 3, 2022 have also been restated for the correction to net income (loss).

The unaudited condensed consolidated balance sheet as of January 1, 2023, and the unaudited condensed consolidated financial statements as of July 2, 2023 and for the three and six months ended July 2, 2023 and July 3, 2022, have been restated to reflect the corrections related to the value of consignment inventory of MI costs at certain warehouse and third-party locations, and reclassification of certain expenses in our condensed consolidated statements of operations as further described below, along with other immaterial items pertaining to the periods noted above. The effects of the restatement, including the related income tax impacts have been reflected in the impacted tables and footnotes throughout these condensed consolidated financial statements in this Amendment No. 1. The restatement adjustments and their impacts on the previously issued condensed consolidated financial statements included in the Original Q2 2023 Form 10-Q are described below.

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Description of Restatement Adjustments

The categories of the restatement adjustments and their impact on the previously reported condensed consolidated financial statements included in the Original Q2 2023 Form 10-Q are described below.

a.Inventory Related Adjustments - In the third quarter of fiscal year 2023, while reviewing our inventory account reconciliations, we identified that the consumption of certain MI costs in photo-voltaic module manufacturing had been inaccurately recorded starting in the first quarter of fiscal year 2022. This resulted in an overstatement of MI costs included in finished goods inventory, and an understatement of cost of revenues for the impacted periods. The impact of the correction is to recognize an increase in cost of revenues for the relevant MI costs, with a corresponding reduction to our finished goods inventory and increase in accrued liabilities related to additional accruals for sales and use taxes. In addition, we also identified other immaterial miscellaneous inventory-related misstatements during the first and second quarters of fiscal years 2023 and 2022, pertaining to the physical inventory counts and classifications between financial statement line items related to inventories.
The aggregated impact to the condensed consolidated statements of operations for the three and six months ended July 2, 2023 is an increase to total cost of revenues of $1.1 million and $0.9 million, respectively. The impact to the condensed consolidated balance sheets as of July 2, 2023 is a decrease in inventories of $20.5 million, an increase in advances to suppliers, current portion of $2.8 million, an increase in prepaid expenses and other current assets of $0.1 million, a decrease in accounts payable of $1.6 million, and an increase in accrued liabilities of $0.6 million.
The aggregated impact to the condensed consolidated statements of operations for the three and six months ended July 3, 2022 is an increase to total cost of revenues of $4.3 million and $7.5 million, respectively. The impact to the condensed consolidated balance sheets as of January 1, 2023 is a decrease in inventories of $19.7 million, an increase in advances to suppliers, current portion of $2.8 million, an increase in prepaid expenses and other current assets of $2.4 million, an increase in accounts payable of $0.8 million, and an increase in accrued liabilities of $0.4 million.

b.Classification of Expense in the Statements of Operations - In fiscal year 2023, we identified errors related to the classification of certain expenses as cost of revenues instead of operating expenses. This resulted in the reclassification of certain expenses from cost of revenues to selling, general, and administrative expense for the three and six months ended July 2, 2023 and July 3, 2022.
The aggregated impact to the condensed consolidated statements of operations for the three and six months ended July 2, 2023 is a decrease to total cost of revenues of $9.7 million and $23.5 million, respectively, and an increase to sales, general, and administrative expenses of $9.7 million and $23.5 million, respectively.
The aggregated impact to the condensed consolidated statements of operations for the three and six months ended July 3, 2022 is a decrease to total cost of revenues of $14.8 million and $25.6 million, respectively, and an increase to sales, general, and administrative expenses of $14.8 million and $25.6 million, respectively.

c.Timing of Revenue Recognition for Certain Revenue Contracts - In the fourth quarter of fiscal year 2022, we determined that a portion of revenue earned from sales through our New Homes channel were incorrectly deferred. We concluded that our performance obligations related to these contracts had been satisfied and revenue should have been recognized.
There was no impact to the condensed consolidated statements of operations for the three months ended July 2, 2023. For the six months ended July 2, 2023, the impact to the condensed consolidated statements of operations is a decrease to total revenues of $6.4 million and a decrease to total cost of revenues of $4.0 million.
The impact to the condensed consolidated balance sheets as of January 1, 2023 is an increase in contract assets of $6.4 million and a decrease in prepaid expenses and other current assets of $4.0 million.

d.Other Restatement Adjustments - There are other restatement adjustments otherwise not described in items (a) through (c) above, which are individually and in the aggregate insignificant for the periods of the three and six months ended July 2, 2023 and July 3, 2022.

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Condensed Consolidated Financial Statements - Restatement Reconciliation Tables

In light of the foregoing, in accordance with ASC 250, Accounting Changes and Error Corrections, we are restating the previously issued condensed consolidated financial statements as of July 2, 2023 and January 1, 2023, and for the three and six months ended July 2, 2023 and July 3, 2022 to reflect the effects of the restatement adjustments, and to make certain corresponding disclosures. In the following tables, we have presented a reconciliation of our condensed consolidated balance sheets, statements of operations, and cash flows as previously reported for these periods to the restated and revised amounts.

Summary of Restatement - Condensed Consolidated Balance Sheets

 July 2, 2023January 1, 2023
(In thousands)As Previously ReportedRestatement AdjustmentsRestatement Reference As RestatedAs Previously ReportedRestatement AdjustmentsRestatement Reference As Restated
Assets
Current assets:
Cash and cash equivalents$114,104 $ $114,104 $377,026 $ $377,026 
Restricted cash and cash equivalents, current portion1,233 842 d2,075 9,855 813 d10,668 
Short-term investments   132,480  132,480 
Accounts receivable, net214,378 5,818 d220,196 174,577 (4,903)d169,674 
Contract assets49,357  49,357 50,692 6,378 c57,070 
Loan receivables held for sale, net12,917 (970)d11,947    
Inventories424,040 (21,665)a, d402,375 316,815 (21,084)a, d295,731 
Advances to suppliers, current portion1,895 2,750 a4,645 9,309 2,750 a12,059 
Prepaid expenses and other current assets228,283 591 a, d228,874 197,760 51 a, c, d197,811 
Total current assets1,046,207 (12,634)1,033,573 1,268,514 (15,995)1,252,519 
Restricted cash and cash equivalents, net of current portion15,937 3,742 d19,679 15,151 3,661 d18,812 
Property, plant and equipment, net95,715 70 d95,785 74,522 1,951 d76,473 
Operating lease right-of-use assets35,219  35,219 36,926  36,926 
Solar power systems leased, net39,767  39,767 41,779  41,779 
Goodwill126,338 (340)d125,998 126,338 (340)d125,998 
Other intangible assets, net20,682  20,682 24,192  24,192 
Other long-term assets193,912 (7,913)d185,999 192,585 (5,658)d186,927 
Total assets$1,573,777 $(17,075)$1,556,702 $1,780,007 $(16,381)$1,763,626 
Liabilities and Equity  
Current liabilities:  
Accounts payable$229,008 $(1,622)a