(9) Borrowings and Derivative Liabilities

During the thirteen and twenty-six weeks ended June 28, 2026, the Company completed a series of integrated capital restructuring transactions to secure operational liquidity and restructure its near-term debt obligations. These transactions included a private offering of $41.0 million of 10.0% Convertible Senior Secured Notes (the “April 2026 Notes”), the proceeds of which were utilized to restructure $21.25 million of outstanding 7.0% Notes (the “September 2024 and September 2025 Notes”), retire and restructure the outstanding $20.0 million Seller Note, and convert $6.0 million of related-party Simple Agreements for Future Equity (SAFEs). Concurrently, on May 20, 2026, the Company issued and sold an incremental $5.0 million aggregate principal amount of 10.0% Convertible Senior Unsecured Notes due 2029 (the “May 2026 Note”) to Foris Ventures, LLC.

For accounting purposes, the restructuring of the September 2024 and September 2025 Notes was disaggregated. A subset of the transaction representing $8.5 million in principal was accounted for under FASB ASC 470-60, Troubled Debt Restructuring (TDR), because the Company was experiencing financial difficulties and the terms represented a concession granted by the creditors. A subset of $9.8 million in principal was accounted for as debt extinguishment under FASB ASC 470-50. The remaining $3.0 million in principal was accounted for as a debt modification. The restructuring of the Seller Note and the conversion of the related-party SAFEs were also accounted for as debt extinguishments under FASB ASC 470-50, as the newly issued instruments introduced substantive conversion options and represented a substantial change in the debt structures. The aggregate debt extinguishments resulted in a loss of $0.7 million.

The Company’s borrowings and derivative liabilities consisted of the following (in thousands):

Short-term debt

Standby Equity Purchase Agreement and $1.9 Million Note

On January 27, 2026 (the “Effective Date”), SunPower entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD., a Cayman Islands exempt limited company (“YA”). Pursuant to the SEPA, YA agreed to advance up to $20.0 million (the “Pre-Paid Advances”) to the Company in the form of convertible promissory notes (each “Promissory Note”), subject to the terms and conditions of the SEPA. Each Promissory Note bears interest at 0% per annum, which increases to 18% per annum upon the occurrence and continuance of an Event of Default (as defined in the Promissory Notes) for so long as such event remains uncured. Each tranche is funded at a 10% discount to its principal amount. The Promissory Notes are initially convertible into 540.5405 shares of the Company’s common stock per $1,000 principal amount, subject to adjustment.

The SEPA also provides the Company the right, subject to certain conditions, to require YA to purchase up to $25.0 million of the Company’s common stock (“Commitment Amount”) through January 27, 2029.

In connection with the SEPA, the Company paid YA total fees of $0.4 million consisting of $0.05 million of cash and 175,000 shares of the Company’s common stock, with a fair value of $0.3 million, as a due diligence, structuring and commitment fee.

The SEPA will automatically terminate on the earliest to occur of (i) January 27, 2029 or (ii) the date on which YA has purchased from the Company under the SEPA the Commitment Amount in full. The Company may terminate the SEPA at any time upon five trading days’ prior written notice to YA, provided that there are no outstanding advance notices under which the Company is yet to issue shares of its common stock, there are no amounts outstanding under the Promissory Notes, and provided that the Company has paid all amounts owed to YA pursuant to the SEPA. The Company and YA may also agree to terminate the SEPA by mutual written consent.

On January 27, 2026, the first Pre-Paid Advance was disbursed. The gross amount of the borrowing under the Pre-Paid Advance was $1.9 million which was advanced under a Promissory Note (“$1.9 Million Note”), and the Company received net proceeds of $1.71 million after the contractual discount. The $1.9 Million Note matures on January 27, 2027, which may be extended at YA’s option. The Company’s rights for further Pre-Paid Advances under the SEPA terminated pursuant to the terms of the SEPA.

The Company elected the fair value option under ASC 825, Financial Instruments, for the $1.9 Million Note. Accordingly, the $1.9 Million Note is recorded at fair value upon issuance and are subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in “non-operating Other non-operating income, net” in the Company’s unaudited condensed consolidated statements of operations and comprehensive income. As a result of this election, the original issue discount, transaction costs, and embedded conversion features are not separately accounted for and are instead reflected in the fair value of $1.9 Million Note. The $1.9 Million Note is classified as a Level 3 liability within the fair value hierarchy established by ASC 820, Fair Value Measurement, due to the use of significant unobservable inputs in the valuation. Refer to Note 5 – Fair Value Measurements for a description of the inputs and assumptions used in the valuation of the $1.9 Million Note.

The initial amount of the $1.9 Million Note was recorded at its estimated fair value of $1.7 million on the issuance date. As of June 28, 2026, the $1.9 Million Note had a fair value of $1.3 million. The change in the fair value of the $1.9 Million Note was included in “Other non-operating income, net” within the unaudited condensed consolidated statement of operations and comprehensive income in the twenty-six week period ended June 28, 2026.

March 2026 Bridge Note

On March 6, 2026, the Company entered into a purchase agreement (“Purchase Agreement”) with YA pursuant to which the Company issued a convertible debenture in the principal amount of $10.0 million (the “March 2026 Bridge Note”). The Company received net proceeds of $9.0 million at issuance, after deducting fees payable under the Purchase Agreement. The March 2026 Bridge Note matures on March 6, 2027, unless extended at YA’s option. The March 2026 Bridge Note bears interest at 0% per annum; however, upon the occurrence and continuance of an event of default, the interest rate increases to 18% per annum.

The Company elected the fair value option under ASC 825 for the March 2026 Bridge Note. As a result, the March 2026 Bridge Note is carried at fair value, with changes in fair value recognized in earnings within “non-operating Other non-operating income, net” in the Company’s unaudited condensed consolidated statements of operations and comprehensive income. As a result of this election, the original issue discount, transaction costs, and embedded conversion features are not separately accounted for and are instead reflected in the fair value of the March 2026 Bridge Note. The March 2026 Bridge Note is classified as a Level 3 liability within the fair value hierarchy established by ASC 820 due to the use of significant unobservable inputs in the valuation. See Note 5 – Fair Value Measurements for additional information regarding the valuation of the March 2026 Bridge Note, including key assumptions and valuation methodologies.

The initial amount of the March 2026 Bridge Note was recorded at its estimated fair value of $9.0 million on the issuance date. As of June 28, 2026, the March 2026 Bridge Note had a fair value of $2.2 million. The change in the fair value of the March 2026 Bridge Note was included in “Other non-operating income, net” within the Company’s unaudited condensed consolidated statement of operations and comprehensive income in the twenty-six week period ended June 28, 2026.

The March 2026 Bridge Note required installment payments on May 6, 2026, June 6, 2026, July 6, 2026, August 6, 2026, and September 6, 2026 (each, an “Installment Date”). On each Installment Date, the Company was required to pay an amount equal to (i) $2.0 million of principal, (ii) a payment premium of $0.06 million, and (iii) any accrued and unpaid interest (collectively, the “Installment Amount”). The Company may satisfy each Installment Amount, at its option, (a) in cash, (b) by submitting an advance notice pursuant to the SEPA, or (c) through a combination of cash and such advance notice. On April 21, 2026, the Company and YA agreed to amend the Installment Dates in connection with a $5.0 million prepayment of the March 2026 Bridge Note. As amended, on each of May 5, 2026, June 5, 2026, July 5, 2026 and August 5, 2026, the Company is required to pay an amount equal to (i) $1.25 million of principal, (ii) a payment premium of $0.0375 million, and (iii) any accrued and unpaid interest.

At any time after issuance, YA may convert all or a portion of the outstanding principal balance into shares of the Company’s common stock at an adjusted fixed conversion price of $1.64 per share (the “Fixed Price”). In addition, any Installment Amount that remains unpaid following an Installment Date may be converted at a price equal to 95% of the volume weighted average price (“VWAP”) of the Company’s common stock during the five trading days immediately preceding the conversion date, subject to a minimum conversion price equal to the then-applicable floor price.

The Company may, at its option, redeem all or a portion of the outstanding balance of the March 2026 Bridge Note (an “Optional Redemption”) upon written notice to YA, provided that the VWAP of the Company’s common stock at the time of such notice is less than the Fixed Price. The redemption price equals (i) the principal amount redeemed, (ii) a premium of 3% of such principal amount, and (iii) any accrued and unpaid interest; provided that the premium does not apply to Optional Redemptions completed on or prior to April 30, 2026.

On April 21, 2026, in connection with the offering of the 10% Senior Secured Notes, the Company and YA entered into a letter agreement (the “YA Letter”). Pursuant to the YA Letter, the Company agreed to voluntarily prepay $5.0 million of the outstanding principal amount of March 2026 Bridge Note, resulting in a revised outstanding principal balance under the March 2026 Bridge Note of $5.0 million. The company further agreed to repay the remaining principal balance and accrued interest under the YA Debenture in four equal monthly installments of $1.3 million, with the first payment made in May 2026. Pursuant to the YA Letter, YA further consented to the issuance of the 10% Senior Secured Notes and the grant of the liens to secure the obligations under the 10% Senior Secured Notes.

Seller Note – related party 

On September 24, 2025, the Company issued a note payable to CPP (“Seller Note”) in connection with the Company’s acquisition of 100% of the membership interests in Sunder and concluded that the Seller Note is a related party obligation (see Note 3 – Business Combinations). The Seller Note has an original principal amount of $20.0 million. The Seller Note bears interest at 7.0% per annum, compounded at the end of each calendar quarter. Interest is due and payable concurrent with the payment of the principal balance. The maturity date of the Seller Note was initially the earlier of (i) May 15, 2026 and (ii) the date on which all amounts under the Seller Note otherwise become due and payable following an event of default. The Seller Note must also be repaid in the event of a change of control of the Company or the sale of all or substantially all of the consolidated assets of the Company and its subsidiaries. The Seller Note includes customary events of default, including: (a) the Company’s failure to pay the Seller Note when due, (b) the Company’s voluntary or involuntary bankruptcy, (c) the Company’s liquidation or dissolution, (d) a change of control of the Company, (e) the Company’s material breach of the covenants applicable to the Company under the Seller Note, subject to applicable cure periods, and (f) if any of the Company’s representations or warranties made in the Seller Note were untrue in any material respect when made. Management concluded that the carrying value of the Seller Note approximates its fair value due to the short-term nature of the obligation.

On March 5, 2026, the Company entered into an amendment of the Seller Note (“Amendment”) providing that if the terms of the SEPA would restrict repayment of the Seller Note on May 15, 2026, then the maturity date of the Seller Note will be extended to the earlier of (a) the date that is two business days following the date on which the Seller Note may be repaid pursuant to the restrictions set forth in the SEPA Debenture and (b) September 30, 2026 (or, if the registration statement required to be filed pursuant to the Registration Rights Agreement has not been declared effective prior to April 30, 2026, then the outside maturity date will extend to December 31, 2026). Additionally, the Company and CPP agreed that the interest rate applicable to the Seller Note will increase to 10.0% per annum if the principal amount of the Seller Note remains outstanding after May 15, 2026. As an inducement to CPP’s agreement to the foregoing, the Amendment also provides that, within two business days following approval by the Company’s stockholders of the issuance of shares under the Sunder MIPA in accordance with applicable Nasdaq rules, the Company will issue the remaining shares of common stock otherwise issuable to CPP pursuant to the Sunder MIPA. On April 8, 2026, the Company issued the remaining 6.7 million shares of the Company’s common stock due under the Seller Note.

Interest expense recognized on this obligation was $0.2 and $0.4 million in the thirteen weeks and twenty-six week periods ended June 28, 2026, respectively.

On April 21, 2026, the Company entered into a Note Purchase Agreement with CPP (“the CPP Note Purchase Agreement”) which provided the following in exchange for the outstanding Seller Note: (i) $4.0 million in cash to CPP at the closing under the CPP Note Purchase Agreement, (ii) $10.0 million aggregate principal amount of April 2026 Notes, and (iii) executed and delivered an amended and restated $7.0 million seller note (the “A&R Seller Note”).

Because the newly issued 10.0% Secured Notes contained a substantive conversion option that was not present in the original instrument, the transaction was accounted for as a debt extinguishment under FASB ASC 470-50. This related-party transaction resulted in a net gain on extinguishment of $1.7 million.

A&R Seller Note – related party

The A&R Seller Note has a principal balance of $7.0 million and bears interest at 7.0% per annum, compounded quarterly, increasing to 10% per annum beginning May 15, 2026. The A&R Seller Note is payable in four installments between October 2026 and January 2027, subject to extension if payment is restricted under the April 2026 Notes. The A&R Seller Note is unsecured and contains customary events of default and change of control provisions.

Interest expense recognized on this obligation was $0.1 million in the thirteen week and twenty-six week periods ended June 28, 2026.

Loan with related party

The Company has a loan with a principal balance of $1.5 million owed to the Rodgers Revocable Trust, a related party. This loan has an annual interest rate equal to the greater of 7.75% or Prime plus 4.5%. There are no financial covenants.

Interest expense recognized on this obligation was less than $0.1 million in each of the thirteen week periods ended June 28, 2026 and June 29, 2025. Interest expense recognized on this obligation was $0.1 million in each of the twenty-six week periods ended June 28, 2026 and June 29, 2025, respectively.

Cobalt Loan

In connection with the acquisition of Cobalt, the Company assumed a loan (“Cobalt Loan”). Cobalt originally entered into the loan on July 1, 2024, with Santa Cruz County Bank. The principal amount of the Cobalt Loan was $3.0 million and has a final maturity on June 5, 2034. The Cobalt Loan is secured by all of Cobalt’s business assets pursuant to a blanket lien as well as additional collateral, including limited guarantees secured with a third deed of trust on certain real estate properties and other assets of the former owners of Cobalt. The interest rate on the Cobalt loan is Prime plus 2.75%.

The Cobalt Loan 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.

Long-term debt

12.0% Senior Unsecured Convertible Notes

July 2024 Notes

In July 2024, the Company issued $46.0 million of senior unsecured convertible notes (“July 2024 Notes”) consisting of $28.0 million in cash proceeds. The remaining $18.0 million of the July 2024 Notes arose from an exchange of debt accounted for as a troubled debt restructuring (“Debt Exchange”). Refer to Note 10 – Borrowings and Derivative Liabilities, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2025 for details regarding $18.0 million of debt arising from the Debt Exchange.

Cash proceeds of $28.0 million included $18.0 million from the Rodgers Revocable Trust, a related party and $10.0 million of the debt exchanged was issued to Carlyle, also a related party. Carlyle was no longer deemed a related party to the Company subsequent to March 30, 2025.

The July 2024 Notes bear interest at 12.0% per annum, and the principal is payable in full at maturity on July 1, 2029. The interest is payable in cash on January 1 and July 1 of each year, beginning on July 1, 2025. The interest rate increases by 3% in the event of default. The conversion rate of the July 2024 Notes is initially equal to 595.2381 shares of common stock per $1,000 of principal amount due under the July 2024 Notes. Holders of July 2024 Notes may convert at any time. The July 2024 Notes may be declared due and payable at the option of the holder upon an event of default and upon a qualifying change of control event. The conversion option was required to be bifurcated as a derivative liability, and the Company recorded a derivative liability of $28.7 million on the issuance date.

The effective interest rate on the July 2024 Notes cash proceeds of $28.0 million approximates 45% as of June 28, 2026. Coupon interest, default interest and failure to file interest on the $18.0 million Debt Exchange were capitalized as part of the July 2024 Notes. Accordingly, the effective interest rate on the $18.0 million arising from the Debt Exchange is nil as of June 28, 2026.

The carrying amount of the July 2024 Notes was as follows (in thousands):

In the thirteen week periods ended June 28, 2026 and June 29, 2025, total interest expense was $1.4 million and $1.2 million, respectively, with coupon interest expense of $0.8 million and $0.8 million, and debt discount and issuance costs of $0.6 and $0.4 million in the thirteen week periods ended June 28, 2026 and June 29, 2025, respectively. Of the coupon interest expense, related party interest expense was $0.5 million and $0.6 million and related party amortization expense was $0.4 million and $0.2 million in the thirteen week periods ended June 28, 2026 and June 29, 2025, respectively.

In the twenty-six week periods ended June 28, 2026 and June 29, 2025, total interest expense was $2.7 million and $2.4 million, respectively, with coupon interest expense of $1.7 million and $1.7 million in each periods, and debt discount and issuance costs of $1.0 million and $0.7 million in the twenty-six week periods ended June 28, 2026 and June 29, 2025, respectively. Of the coupon interest expense, related party interest expense was $1.1 million and $1.1 million in each period. Related party amortization expense was $0.7 million and $0.4 million in the twenty-six week periods ended June 28, 2026 and June 29, 2025, respectively.

July 2025 Note – related party

On July 10, 2025, the Company issued a convertible promissory note (the “July 2025 Note”) to the Rodgers Revocable Trust, a related party, in exchange for $5.0 million of proceeds.

The July 2025 Note is a general unsecured obligation of the Company and will mature on July 1, 2029, unless earlier converted, redeemed or repurchased. The July 2025 Note has an annual coupon interest rate of 12.0% which is payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2026. The July 2025 Note is convertible at the option of the holder at any time prior to the payment of the principal amount of the July 2025 Note in full. Upon conversion of the July 2025 Note, the Company will satisfy its conversion obligation by delivering shares of the Company’s common stock and paying cash in respect of any fractional shares. The conversion rate of the July 2025 Note is initially equal to 558.6592 shares of common stock per $1,000 of principal amount due under the July 2025 Note. The conversion rate is subject to adjustment from time to time pursuant to the terms of the July 2025 Note. The conversion option related to the July 2025 Note was required to be bifurcated as a derivative liability. The Company recorded a derivative liability of $3.7 million with a corresponding offset to debt discount on the issuance date. The July 2025 Note has an effective interest rate of 62%.

The carrying amount of the July 2025 Note was as follows (in thousands):

For the thirteen week and twenty-six week periods ended June 28, 2026, the total interest expense was $0.2 million and $0.5 million, respectively with coupon interest expense $0.2 million and $0.3 million in each period, and debt discount and issuance costs of less than $0.1 million and $0.2 million in the thirteen and twenty-six week periods ending June 28, 2026, respectively.

November 2025 Note – related party

On November 20, 2025, the Company issued a convertible note (the “November 2025 Note”) to the Rodgers Massey Freedom and Free Markets Charitable Trust in exchange for $2.0 million of proceeds.

The November 2025 Note is a general unsecured obligation of the Company and will mature on July 1, 2029, unless earlier converted, redeemed or repurchased. The November 2025 Note has an annual coupon interest rate of 12.0% which is payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2026. The November 2025 Note is convertible at the option of the holder at any time prior to the payment of the principal amount of the November 2025 Note in full. The conversion rate of the November 2025 Note is initially equal to 626.9592 shares of the Company’s common stock per $1,000 principal amount due under the November 2025 Note. The conversion rate shall be subject to adjustment from time to time pursuant to the terms of the November 2025 Note. The Company may not redeem the November 2025 Note prior to July 5, 2026. The conversion option related to the November 2025 Note was required to be bifurcated as a derivative liability, and the Company recorded a derivative liability of $1.5 million on the issuance date with a corresponding offset to debt discount. The November 2025 Note has an effective interest rate of 71% as of June 28, 2025.

The carrying amount of the November 2025 Note was as follows (in thousands):

In the thirteen week and twenty-six week periods ended June 28, 2026, the total interest expense was less than $0.1 million and $0.2 million, respectively. In the thirteen week period ended June 28, 2026 each of coupon interest and amortization of debt discount and issuance costs were less than $0.1 million. In the twenty-six week period ended June 28, 2026, each of coupon interest and amortization of debt discount and issuance costs were $0.1 million.

January 2026 Note – related party

The Company received a deposit of $2.0 million from the Rodgers Revocable Trust, a related party, in the fiscal year ended December 28, 2025. In January 2026, the Company received an additional $1.3 million in proceeds from the Rodgers Revocable Trust. On January 29, 2026, the Company issued a convertible promissory note in the original principal amount of $3.3 million (the “January 2026 Note”) with respect to the aggregate proceeds received.

The January 2026 Note bears an interest rate of 12.0% and is a general unsecured obligation of the Company. The January 2026 Note will mature on July 1, 2029, unless earlier converted, redeemed or repurchased. Interest on the January 2026 Note is payable semiannually in arrears on January1 and July 1 of each year, beginning on July 1, 2026. The January 2026 Note is convertible at the option of the holder at any time prior to the payment of the principal amount of the January 2026 Note in full. The conversion rate of the January 2026 Note is initially equal to 540.5405 shares of the Company’s common stock per $1,000 of principal amount due under the January 2026 Note. The conversion rate is subject to adjustment from time to time pursuant to the terms of the January 2026 Note. The January 2026 Note has an effective interest rate of 61% as of June 28, 2026.

The carrying amount of the January 2026 Note was as follows (in thousands):

In the thirteen week and twenty-six week periods ended June 28, 2026, the total interest expense was $0.2 million and $0.3 million, respectively. In the thirteen week period ended June 28, 2026, each of coupon interest and amortization of debt discount and issuance costs were $0.1 million. In the twenty-six week period ended June 28, 2026, coupon interest and amortization of debt discount and issuance costs were $0.2 million and $0.1 million, respectively.

7.0% Senior Unsecured Convertible Notes

On September 16, 2024, the Company entered into an Indenture agreement with U.S. Bank Trust Company, National Association, as trustee (the “Indenture”), for the issuance of 7.0% senior unsecured convertible notes (“7.0% Notes”). The 7.0% Notes issued under the Indenture bear interest at 7.0% per annum, and the interest is payable semiannually in arrears on January 1 and July 1 of each year beginning on January 1, 2025. The principal is payable in full at maturity on July 1, 2029. Holders of the 7.0% Senior Notes may convert all or any portion of their 7% Notes at any time, in integral multiples of $1,000 principal amount, at the option of the holder. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in the manner and subject to the terms, conditions and limitations provided in the Indenture. The 7.0% Senior Notes may be declared due and payable at the option of the holder upon an event of default and upon a qualifying change of control event. There are no financial covenants. As described below, the Company has issued multiple tranches under this Indenture.

The conversion rate for the 7.0% Notes was initially 467.8363 shares of common stock per $1,000 principal amount of 7.0% Notes. The conversion rate for the 7.0% Notes is subject to adjustment from time to time in accordance with the terms of the Indenture, and as of December 28, 2025 the 7.0% Notes were convertible at the rate of 584.7953 shares of common stock per $1,000 principal amount of the notes. In addition, upon a conversion of the 7.0% Notes, following certain corporate events that occur prior to the maturity date of the 7.0% Notes or if the Company delivers a notice of redemption in respect of the 7.0% Notes, the Company will, under certain circumstances, increase the conversion rate of the 7.0% Notes for a holder who elects to convert its 7.0% Notes following September 16, 2025, in connection with such a corporate event that occurs prior to the maturity date, or if the Company delivers a notice of redemption in respect of the 7.0% Notes.

September 2024 Notes

The Company issued an aggregate of $80.0 million of 7.0% Notes to various lenders (the “September 2024 Notes”), of which the Company received cash proceeds in two tranches of $66.8 million and $13.0 million in fiscal 2024. The remainder was received in fiscal 2025.

The cash proceeds of $66.8 million included $4.0 million from the Rodgers Family Freedom and Free Markets Charitable Trust (“Massey Charitable Trust”), a related party, and $4.0 million from the Rodgers Revocable Trust (collectively with Massey Charitable Trust, “Massey Trusts”), also a related party. In fiscal 2025, a holder of $0.75 million of the September 2024 Notes became a member of the Company’s board of directors and this note is now deemed to be with a related party beginning in fiscal 2025. As the $66.8 million of notes were issued with a debt discount in excess of the principal amount, the initial net carrying amount of the September 2024 Notes was zero. The debt discount is being amortized on a straight-line basis over the term of the September 2024 Notes.

In December 2024, the Company received proceeds of $13.0 million in a second tranche. The Company recognized a $10.9 million debt discount in connection with these additional proceeds. The effective interest rate on this tranche is 64% as of June 28, 2026.

Certain holders of the September 2024 Notes exercised their rights to convert this debt to shares of the Company’s common stock.

The carrying amount of the convertible September 2024 Notes was as follows (in thousands):

In the thirteen week periods ended June 28, 2026 and June 29, 2025, total interest expense was $3.1 million and $5.0 million with coupon interest expense of $0.9 million and $1.4 million, respectively, and debt discount and issuance costs of $2.2 million and $3.6 million, respectively. Of the coupon interest expense, related party interest expense was $0.1 million and $0.2 million in the thirteen week periods ended June 28, 2026 and June 29, 2025, respectively. Related party amortization expense was $0.4 million and $0.4 million in the thirteen week periods ended June 28, 2026 and June 29, 2025, respectively.

In the twenty-six week periods ended June 28, 2026 and June 29, 2025, total interest expense was $7.0 million and $10.0 million with coupon interest expense of $2.0 million and $2.8 million, respectively, and debt discount and issuance costs of $5.0 million and $7.2 million, respectively. Of the coupon interest expense, related party interest expense was $0.3 million and $0.3 million in the twenty-six week periods ended June 28, 2026 and June 29, 2025, respectively. Related party amortization expense was $0.9 million and $0.9 million in the twenty-six week periods ended June 28, 2026 and June 29, 2025, respectively.

September 2025 Notes

On September 21, 2025, the Company issued an additional $22.0 million of the 7.0% Notes (the “September 2025 Notes”) pursuant to the Indenture to various parties. The September 2025 Notes contain a conversion option which required bifurcation and recognition of a derivative, and the Company recorded a derivative liability of $15.4 million on the issuance date. The Company also recognized a $3.6 million debt discount and issuance costs in connection with the September 2025 Notes. The debt issuance costs include an estimate of the value of a warrant issued in the second quarter of fiscal 2026 to the entity that arranged the financing. The effective interest rate on the September 2025 Notes approximated 78% as of June 28, 2026. The net proceeds from the issuance of the September 2025 Notes were principally used to pay a portion of the cash consideration for the Company’s acquisition of Sunder.

The carrying amount of the September 2025 Notes, inclusive of the fair value of the derivative liabilities was as follows (in thousands):

In the thirteen week and twenty-six week periods ended June 28, 2026, total interest expense was $0.7 million and $1.3 million, respectively, with coupon interest expense of $0.4 million and $0.7 million, respectively, and debt discount and issuance costs of $0.3 million and $0.6 million respectively.

On April 21, 2026, concurrently with the closing of the April 2026 Notes offering (see below), the Company entered into privately negotiated exchange agreements with four major creditor groups holding its outstanding 7.0% Convertible Senior Notes (comprising both the September 2024 Notes and the September 2025 Notes). Pursuant to these agreements, the holders surrendered and cancelled an aggregate of $21.3 million in principal amount ($16.3 million of September 2024 Notes and $5.0 million of September 2025 Notes) in exchange for 18.8 million shares of common stock, $0.5 million of cash representing accrued but unpaid interest, and the subscription of $25.0 million of the new 10.0% Senior Secured Notes.

For accounting purposes, the restructuring of the September 2024 and September 2025 Notes was disaggregated. A subset of the transaction representing $11.5 million in principal was accounted for under FASB ASC 470-60, Troubled Debt Restructuring (TDR), because the company was experiencing financial difficulties and the terms represented a concession granted by the creditors. No gain on troubled debt restructuring was recorded because the total undiscounted future cash payments of the new debt did not exceeded the carried-over net carrying amounts of the historical notes immediately prior to the exchange.

The remaining subset of $9.8 million in principal was accounted for as a standard Debt Extinguishment under FASB ASC 470-50 pursuant to a management accounting election. This resulted in a $2.5 million loss on extinguishment of debt.

10% Senior Secured Convertible Notes

April 2026 Notes 

As referenced above, on April 21, 2026 the Company entered into note purchase agreements in connection with a private offering of $41.0 million aggregate principal amount of 10.0% Convertible Senior Secured Notes due 2029 (the “April 2026 Notes”). The offering included (i) $25.0 million of April 2026 Notes issued to institutional investors, (ii) $6.0 million of April 2026 Notes issued to an affiliate of the Company’s Chief Executive Officer in exchange for amounts previously advanced under the Third SAFE and Fourth SAFE, and (iii) $10.0 million of April 2026 Notes issued in connection with the exchange of the Seller Note and execution of the A&R Seller Note.

The April 2026 Notes mature on May 1, 2029 and bear interest at 10.0% per annum, payable quarterly in arrears beginning July 1, 2026. The April 2026 Notes are senior secured obligations of the Company and are fully and unconditionally guaranteed by a wholly owned subsidiary. The notes and guarantees are secured by first-priority liens on substantially all of the assets of the Company and the guarantor, subject to permitted liens and specified exceptions.

The April 2026 Notes are convertible at the option of the holders into shares of the Company’s common stock at an initial conversion price of approximately $1.64 per share (610.3143 shares of common stock per $1,000 principal amount of the 10% Senior Secured Notes). In addition, following certain corporate events that occur prior to the maturity date of the 10% Senior Secured Notes, the Company will, under certain circumstances, increase the conversion rate of the April 2026 Notes for a holder who elects to convert its April 2026 Notes in connection with such a corporate event, subject to a maximum conversion rate of $1.13 per share (884.9557 shares of the Company’s common stock per $1,000 principal amount of April 2026 Notes). The April 2026 Notes are not redeemable by the Company and include customary covenants, events of default, and change-of-control repurchase provisions.

The proceeds of the offering of the April 2026 Notes were used to: (i) prepay $5.0 million principal amount of the March 2026 Bridge Note; (ii) pay $4.75 million pursuant to the Company’s settlement agreement with Siemens (as amended, the “Siemens Settlement”); (iii) pay $4.0 million to CPP in connection with the transactions under the CPP Note Purchase Agreement; and (iv) pay approximately $1.5 million of fees and expenses incurred in connection with the offering. The net proceeds of the offering, after making the foregoing payments, were approximately $9.75 million. The Company used the net proceeds of the offering for working capital and general corporate purposes, including the partial paydown of the remaining outstanding balance of the YA Debenture.

The carrying amount of the April 2026 Notes were as follows (in thousands): 

In the thirteen week and twenty-six week periods ended June 28, 2026, total interest expense was $1.6 million, with coupon interest expense of $0.8 million, and debt discount and issuance costs of $0.8 million. Of the coupon interest expense, related party interest expense was less than $0.3 million and related party amortization expense was $0.3 million in the thirteen and twenty-six week periods ended June 28, 2026.

May 2026 Note

On May 20, 2026, pursuant to a note purchase agreement dated May 19, 2026, the Company issued and sold an additional $5.0 million aggregate principal amount of 10% Senior Secured Notes in a private placement to an institutional investor (the “May 2026 Note”). While the May 2026 Note has coupon, maturity, and collateral terms substantially similar to the April 2026 Notes, it contains distinct net-settlement provisions.

Unlike the April 2026 Notes, the embedded conversion option of the May 2026 Note failed the criteria for equity classification under FASB ASC 815-40 due to these specific net-settlement provisions, requiring the Company to bifurcated and account for the conversion option as a compound derivative liability under FASB ASC 815-15.

The carrying amount of the May 2026 Note was as follows (in thousands): 

In the thirteen week and twenty-six week periods ended June 28, 2026, total interest expense was $0.1 million, with coupon interest expense of less than $0.1 million, and debt discount and issuance costs of less than $0.1 million.

Principal payments due

The principal amount of all short and long-term debt, excluding capitalized contingent interest in connection with the July 2024 Notes, is as follows (in thousands):