WOLFSPEED INC

Note 1 –Basis of Presentation and New Accounting Standards

Wolfspeed, Inc. (the Company) is an innovator of wide bandgap semiconductors, focused on silicon carbide materials and devices for power applications. The Company’s product families include silicon carbide materials and power devices targeted for various applications such as electric vehicles, fast charging and renewable energy and storage.

Previously, the Company designed, manufactured and sold radio-frequency (RF) devices. As discussed more fully below in Note 2, “Discontinued Operations,” on December 2, 2023, the Company completed the sale of certain assets comprising its RF product line. The Company classified the results and cash flows of the RF product line as discontinued operations in its consolidated statements of operations and consolidated statements of cash flows for fiscal 2024. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to the Company's continuing operations.

Basis of Presentation

The consolidated financial statements presented herein have been prepared by the Company and have not been audited. In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at December 29, 2024, and for all periods presented, have been made. All material intercompany accounts and transactions have been eliminated. The consolidated balance sheet at June 30, 2024 has been derived from the audited financial statements as of that date.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (fiscal 2024). The results of operations for the three and six months ended December 29, 2024 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 29, 2025 (fiscal 2025).

Liquidity

In accordance with U.S. GAAP, management considers whether there are conditions or events that raise substantial doubt about the Company's ability to continue as a going concern for the twelve months following the issuance date of its financial statements. Based on the Company's current cash flow projections, the Company has concluded that the entity will be able to meet its obligations as they become due during that period.

Summary of Significant Accounting Policies

There were no material changes to our significant accounting policies during the six months ended December 29, 2024 compared to the significant accounting policies described in our fiscal 2024 Form 10-K.

Financial Statement Details

Accounts Receivable, net

Inventories

Other Current Assets

Investment Tax Credit Receivable

The Company expects to receive refundable federal investment tax credits through the United States CHIPS and Science Act of 2022 (the CHIPS Act) in connection with ongoing expansion projects. As of December 29, 2024, the Company has recorded a receivable for and reduced property and equipment, net by $865.0 million as a result of the expected refundable tax credits in connection with the CHIPS Act. In the second quarter of fiscal 2025, the United States Department of Treasury released final regulations related to the Advanced Manufacturing Investment Credit under Section 48D of the Internal Revenue Code, and the Internal Revenue Service issued Announcement 2024-40 confirming the treatment of CHIPS Act grants for purposes of Section 48D. The Company accounted for the impact of the final regulations and the announcement as part of a change in estimate and increased the investment tax credit receivable by $68.6 million and recorded $5.8 million of contra-depreciation expense which is the cumulative amount that would have been recognized had the receivable been recorded at the time the corresponding assets were placed in service.

Accounts Payable and Accrued Expenses

Other Operating Expense

Accumulated Other Comprehensive Loss, net of taxes

Accumulated other comprehensive loss, net of taxes, consisted of $5.7 million and $11.6 million of net unrealized losses on available-for-sale securities as of December 29, 2024 and June 30, 2024, respectively. Amounts for both periods include a $2.4 million loss related to tax on unrealized loss on available-for-sale securities.

Non-Operating Expense, net

Statements of Cash Flows - non-cash activities

Recently Adopted Accounting Pronouncements

None.

Accounting Pronouncements Pending Adoption

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures, which requires disaggregated information about an entity’s income tax rate reconciliation as well as information regarding cash taxes paid both in the United States and foreign jurisdictions. The amendments should be applied prospectively, with retrospective application permitted. The amendments are effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Segment Reporting Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. In addition, this amendment will require annual disclosures to be provided on an interim basis. These disclosures are also required for entities with a single reportable segment. The amendments require retrospective application to all periods presented. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Disaggregation of Income Statement Expenses, to require additional disclosures of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, and early adoption is permitted. In January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

Note 2 –Discontinued Operations

RF Business Divestiture

On December 2, 2023 (the RF Closing), the Company completed the sale of its RF product line (the RF Business) to MACOM Technology Solutions Holdings, Inc. (MACOM) pursuant to the terms of the previously reported Asset Purchase Agreement (the RF Purchase Agreement). Pursuant to the RF Purchase Agreement, the Company received approximately $75 million in cash and 711,528 shares of MACOM common stock (the MACOM Shares).

In connection with the divestiture of the RF Business (the RF Business Divestiture), MACOM will assume control of the Company’s 100mm gallium nitride (GaN) wafer fabrication facility in Research Triangle Park, North Carolina (the RTP Fab) approximatelytwo years following the RF Closing (the RTP Fab Transfer). The RTP Fab Transfer will occur in the future to accommodate the Company’s relocation of certain production equipment currently located in the RTP Fab to its fabrication facility in Durham, North Carolina. Prior to the RTP Fab Transfer, the MACOM Shares are subject to restrictions on transfer. The Company will forfeit one-quarter of the MACOM Shares if the RTP Fab Transfer has not occurred by the fourth anniversary of the RF Closing.

The Company and MACOM also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to MACOM certain intellectual property owned by the Company and its affiliates and licensed to MACOM certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (the RF TSA), pursuant to which the Company provides MACOM certain limited transition services following the RF Closing, (iii) a Master Supply Agreement, pursuant to which the Company will continue to operate the RTP Fab and supply MACOM with Epi-wafers and fabrication services (the RF Master Supply Agreement) through the date on which the RTP Fab Transfer is complete (the RTP Fab Transfer Date), (iv) a Long-Term Epi Supply Agreement (the Long-Term Epi Supply Agreement), pursuant to which MACOM will purchase from the Company Epi-wafers from the RTP Fab Transfer Date until the fifth anniversary of the RTP Fab Transfer Date, (v) an Epi Research and Development Agreement, pursuant to which the Company will provide MACOM certain research and development activities and other technical manufacturing support services related to the RF Business during the period between the RF Closing and expiration of the Long-Term Epi Supply Agreement, and (vi) a Real Estate License Agreement (the RF RELA), which allows MACOM to use certain portions of the RTP Fab to conduct the RF Business through the RTP Fab Transfer Date. In connection with the RTP Fab Transfer, the Company and MACOM will enter into a Lease Agreement (the RTP Fab Lease Agreement), which allows MACOM to lease the premises of the RTP Fab for a period of 15 years after the RTP Fab Transfer Date.

Because the RF Business Divestiture represented a strategic shift that had and will continue to have a major effect on the Company’s operations and financial results, the Company classified the results of the RF Business as discontinued operations in the Company’s consolidated statements of operations for fiscal 2024. The Company ceased recording depreciation and amortization of long-lived assets that conveyed in the RF Purchase Agreement upon classification as discontinued operations in August 2023. The RTP Fab is not considered within the RF Business Divestiture disposal group and the current and long-term assets associated with the RTP Fab are not classified as held for sale from discontinued operations in the consolidated balance sheets.

The following table presents the financial results of the RF Business as loss from discontinued operations, net of income taxes in the Company's consolidated statements of operations:

At the inception of the RF Master Supply Agreement, the Company recorded a supply agreement liability of $95.0 million, of which $45.2 million was outstanding as of December 29, 2024. The supply agreement liability is recognized in other current liabilities on the consolidated balance sheet as of December 29, 2024 and in other current liabilities and other long-term liabilities on the consolidated balance sheet as of June 30, 2024. A receivable of $5.8 million in connection with the RF Master Supply Agreement is included in other current assets in the consolidated balance sheet as of December 29, 2024.

Additionally, the Company recorded a supply agreement liability of $58.0 million for the Long-Term Epi Supply Agreement, which is recognized in other long-term liabilities in the consolidated balance sheets. The Company recorded a liability of $38.0 million for the future transfer of assets in connection with the RTP Fab Transfer. This liability is recognized in other current liabilities on the consolidated balance sheet as of December 29, 2024 and in other long-term liabilities on the consolidated balance sheet as of June 30, 2024.

LED Business Divestiture

On March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment (the LED Business) to SMART Global Holdings, Inc. (SGH) and its wholly owned subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) (the LED Business Divestiture) pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended.

In connection with the closing of the LED Business Divestiture, the Company and CreeLED also entered into certain ancillary and related agreements, including a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company supplied CreeLED with certain silicon carbide materials and fabrication services. In fiscal 2024, the Company entered into an amendment to the Wafer Supply Agreement to terminate the agreement as of September 30, 2024.

For the three and six months ended December 29, 2024, the Company recognized a net loss of $9.2 million in non-operating expense, net related to the Wafer Supply Agreement. For the three and six months ended December 31, 2023, the Company recognized a net loss of $6.6 million and $13.5 million in non-operating expense, net related to the Wafer Supply Agreement.

Note 3 –Revenue Recognition

Contract liabilities and distributor-related reserves were $67.9 million as of December 29, 2024 and $88.0 million as of June 30, 2024. Contract liabilities are recorded within contract liabilities and distributor-related reserves and other long-term liabilities on the consolidated balance sheets.

Product Line Revenue

The Company's continuing operations sells products from withintwo product lines: Power Products and silicon carbide and GaN materials (Materials Products). Revenue from thesetwo product lines is as follows:

Geographic Information

The Company conducts business in several geographic areas. Revenue is attributed to a particular geographic region based on the shipping address for the products. Disaggregated continuing operations revenue from external customers by geographic area is as follows:

(1) Excluding China and Hong Kong

Note 4 –Leases

The Company primarily leases manufacturing and office spaces and bulk gas equipment. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's silicon carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities are as follows (in millions of U.S. Dollars):

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Interest expense for finance leases was immaterial for all periods presented.

Cash Flows

Cash flow information consisted of the following(1):

(1) See Note 1, "Statements of Cash Flows - non-cash activities," for non-cash activities related to leases.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of December 29, 2024 were as follows (in millions of U.S. Dollars):

Supplemental Disclosures

(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 23 months.

(2) Weighted average discount rate of finance leases without the 49-year ground lease is 3.87%.

Lease Income

On December 1, 2023 and in connection with the RF Business Divestiture discussed in Note 2, “Discontinued Operations,” the Company entered into the RF RELA pursuant to which the Company leases to MACOM approximately 25,659 square feet of its property and certain facilities in the Research Triangle Park, North Carolina for a total of $0.7 million per year. The lease term is the earlier of (i)24 full fiscal months following the RF Closing or (ii) the date on which the Company and MACOM enter into the RTP Fab Lease Agreement. The Company in its sole discretion may extend the term fortwo additional periods of 12 months by providing notice to MACOM at leastsix months prior to the last day of the then-current term. In addition, the Company leases space to a third party at one of its owned facilities.

Note 5 –Commitments and Contingencies

Litigation

The Company is currently a party to various legal proceedings, including the cases described below. While management presently believes that the ultimate outcome of such proceedings, individually and in the aggregate, will not materially harm the Company’s financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages or, in matters for which injunctive relief or other conduct remedies may be sought, an injunction prohibiting the Company from selling one or more products at all or in particular ways. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on the Company’s business, results of operations, financial position and overall trends. The outcomes in these matters are not reasonably estimable.

In October 2021, The Trustees of Purdue University (Purdue) filed a complaint against the Company in the U.S. District Court for the Middle District of North Carolina, alleging infringement of U.S. Patent Nos. 7,498,633 (the '633 Patent), entitled "High-voltage power semiconductor device," and 8,035,112 (the '112 Patent), entitled "SIC power DMOSFET with self-aligned source contact." In the complaint, Purdue also alleges willful infringement, and seeks unspecified monetary damages and attorneys’ fees. In August 2022, Purdue voluntarily withdrew all allegations as to the '112 Patent after having disclaimed all rights to that patent. The Company denies Purdue’s remaining allegations and has developed numerous defenses, including non-infringement, multiple invalidity grounds, and unenforceability due to inequitable conduct before the U.S. Patent & Trademark Office. Discovery in this matter concluded in September 2024; the parties are currently in the middle of summary judgment briefing, and the trial will most likely occur in the second half of 2025. Due to the stage of the case, the Company is unable to estimate the possible range of loss, if any, at this time.

On November 15, 2024, the Company and certain current and former executive officers were named as defendants in a securities class action lawsuit captioned Gary Zagami v Wolfspeed, Inc., et al., Case No. 6:24-cv-01395, which was filed in the United States District Court for the Northern District of New York. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint seeks unspecified compensatory damages and other relief. On January 8, 2025, two additional lawsuits were filed in the United States District Court for the Northern District of New York by shareholders regarding these same matters and name as defendant the Company and current and former officers. The Company denies allegations of wrongdoing and intends to vigorously defend against the claims in the above-referenced actions.

Grant Disbursement Agreement (GDA) with the State of New York

The Company currently has a GDA with the State of New York Urban Development Corporation (doing business as Empire State Development). The GDA provides a potential total grant amount of $500.0 million to partially and fully reimburse the Company for certain property, plant and equipment costs related to the Company's construction of its silicon carbide device fabrication facility in Marcy, New York.

The GDA was signed in the fourth quarter of fiscal 2020 and requires the Company to satisfy a number of objectives for the Company to receive reimbursements through the span of the 13-year agreement. These objectives include maintaining a certain level of local employment, investing a certain amount in locally administered research and development activities and the payment of an annual commitment fee for the firstsix years. Additionally, the Company has agreed, under a separate agreement (the SUNY Agreement), to sponsor the creation oftwo endowed faculty chairs and fund a scholarship program at SUNY Polytechnic Institute.

As of December 29, 2024, the annual cost of satisfying the objectives of the GDA and the SUNY Agreement, excluding the direct and indirect costs associated with employment, varies from $2.2 million to $5.2 million per year through fiscal 2031.

As of December 29, 2024, the Company has reduced property and equipment, net by a total of $500.0 million as a result of GDA reimbursements, of which $467.2 million has been received in cash and an additional $32.8 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheet.

Supply Commitments

From time to time, the Company may enter into agreements with its suppliers which require the Company to commit to a minimum of product purchases or make capacity reservation deposits.

In fiscal 2023, the Company entered into an agreement with a supplier which requires a minimum commitment of product purchases on a take-or-pay basis of $200.0 million over the life of the contract. During the three and six months ended December 29, 2024, the Company purchased $5.8 million and $12.5 million, respectively, of product under this agreement. As of December 29, 2024, the minimum future product purchases have been satisfied for fiscal 2025, and the remaining future product purchases for fiscal years 2026, 2027 and 2028 are $36.0 million, $50.1 million and $73.7 million, respectively.

In addition, the Company will pay quarterly capacity reservation deposits through the second quarter of fiscal 2026. The capacity reservation deposits will total $60.0 million and are refundable through credits on future product purchases. As of December 29, 2024, the Company has paid $48.9 million in connection with the agreement, which is recognized in prepaid expenses and other long-term assets on the consolidated balance sheet.

In fiscal 2024, the Company entered into an agreement with another supplier which requires a minimum commitment of product purchases on a take-or-pay basis of $86.4 million over the life of the contract. During the three and six months ended December 29, 2024, the Company purchased $7.2 million and $14.4 million, respectively, of product under this agreement which satisfied the minimum future product purchases for the period. Minimum future product purchase for the remainder of fiscal 2025 and fiscal years 2026 and 2027 are $14.4 million, $28.8 million and $9.6 million, respectively.

Note 6 –Investments

All short-term investments are classified as available-for-sale. The following tables present the gross unrealized losses and estimated fair value of the Company’s short-term investments, aggregated by investment type and the length of time that individual securities have been in a continuous unrealized loss position (in millions of U.S. Dollars):

Additionally, the Company heldsix cash equivalent securities with an aggregate fair value of $14 million in unrealized loss positions as of December 29, 2024. The aggregate unrealized loss was less than $0.1 million.

The Company does not include accrued interest in estimated fair values of short-term investments and does not record an allowance for credit losses on receivables related to accrued interest. Accrued interest receivable was $9.9 million and $11.6 million as of December 29, 2024 and June 30, 2024, respectively, and is recorded in other current assets on the consolidated balance sheets. When necessary, write-offs of noncollectable interest income are recorded as a reversal to interest income. There wereno write-offs of noncollectable interest income during the three and six months ended December 29, 2024 and December 31, 2023.

The Company evaluates its investments for expected credit losses. The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of December 29, 2024 until the investments fully recover in market value. No allowance for credit losses was recorded as of December 29, 2024.

The contractual maturities of short-term investments as of December 29, 2024 were as follows:

Note 7 –Fair Value of Financial Instruments

Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is categorized into three levels based on the reliability of inputs as follows:

•Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

•Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The following table sets forth financial instruments carried at fair value within the U.S. GAAP hierarchy:

Other long-term investments consists of the MACOM Shares which the Company received as partial consideration in connection with the RF Business Divestiture. These shares are remeasured to fair value each period with changes in the fair value of the shares recognized in non-operating expense (income), net.

Note 8 –Goodwill and Intangible Assets

Goodwill

There wereno changes to goodwill during the three and six months ended December 29, 2024.

The Company performs an annual assessment of its goodwill during the fourth quarter of each calendar year or more frequently if indicators of potential impairment exist, such as an adverse change in business climate, declines in market capitalization or a decline in the overall industry demand, that would indicate it is more likely than not that the fair value of its single reporting unit is less than its carrying value. If the Company determines that it is more likely than not that the fair value of its single reporting unit is less than the carrying value, the Company measures the amount of impairment as the amount the carrying value of its single reporting unit exceeds the fair value, up to the carrying value of goodwill, by using a discounted cash flow method and market approach method.

Although the Company’s market capitalization further declined in the second quarter of fiscal 2025, the Company does not believe that it is more likely than not that the fair value of its single reporting unit is less than its carrying value. Using the market capitalization approach, which the Company expects would be similar to the discounted cash flow method, the fair value of the single reporting unit is estimated based on the trading price of the Company’s stock at the test date, which is further adjusted by an acquisition control premium representing the synergies a market participant would obtain when obtaining control of the business. If the Company's market capitalization continues to decline or future performance falls below the Company’s current expectations, assumptions, or estimates, including assumptions related to current macroeconomic uncertainties, this may trigger a future material non-cash impairment charge, which could have a material adverse effect on the Company’s business, financial condition, and results of operations in the reporting period in which a charge would be necessary. The Company will continue to monitor developments, including updates to the Company’s forecasts and market capitalization. An update of the Company’s assessment and related estimates may be required in the future.

Intangible Assets, net

The following table presents the components of intangible assets, net:

(1) Relates to developed technology

Note 9 –Long-term Debt

(1) Presented in convertible notes

(2) Presented in long-term debt

As of December 29, 2024, the Company was in compliance with all covenants relating to the senior secured notes due 2030 (the 2030 Senior Notes) and the Unsecured Customer Refundable Deposit Agreement entered into in July 2023 with a customer (the CRD Agreement).

2030 Senior Notes Amended and Restated Indenture

On October 11, 2024, the Company entered into the Amended and Restated Indenture (the 2030 Senior Notes Indenture), which amends certain terms and conditions of the 2030 Senior Notes and permits the Company to issue and sell $750.0 million of additional notes, subject to the fulfillment of certain conditions precedent. Pursuant to the 2030 Senior Notes Indenture, the 2030 Senior Notes bear interest (a) for the period from the effectiveness of the original Indenture related to the 2030 Senior Notes entered into on June 23, 2023 to October 11, 2024 at a rate of 9.875% per annum; (b) for the period from October 11, 2024 through and including June 22, 2025 at a rate of 9.875% per annum (payable in cash), plus 2% per annum (payable at the Company's option, in cash or in-kind); (c) for the period commencing on June 23, 2025 through June 22, 2026 (i) if the Interest Rate Step-Down Condition (as defined below) is satisfied as of June 23, 2025, at a rate of 10.875% per annum (payable in cash) plus 2% per annum (payable at the Company's option in cash or in-kind) and (ii) if the Interest Rate Step-Down Condition is not satisfied as of June 23, 2025 at a rate of 11.875% per annum (payable in cash), plus 2% per annum (payable at the Company's option, in cash or in-kind); and (d) for the period commencing on June 23, 2026 and at all times thereafter, (i) if the Interest Rate Step-Down Condition is satisfied as of June 23 of the most recent year, at a rate of 13.875% per annum (payable in cash) and (ii) if the Interest Rate Step-Down Condition is not satisfied, at a rate of 15.875% per annum (payable in cash). The Interest Rate Step-Down Condition is met if (a)(i) the Company redeems or repurchases (other than redemptions or repurchases with the proceeds of dispositions) the 2030 Senior Notes, resulting in the aggregate principal amount of 2030 Senior Notes outstanding being less than $1.0 billion and (ii) the Company receives at least $450.0 million of awards under the CHIPS Act or (b) as of the most recent June 23rd, the ratio of outstanding principal amount of the 2030 Senior Notes to EBITDA (as defined in the 2030 Senior Notes Indenture) for the most recently ended four fiscal quarter period for which financial statements have been or are required to have been delivered under the 2030 Senior Notes Indenture is less than or equal to 2:1. The 2030 Senior Notes will mature on the earlier of (x) June 23, 2030 and (y) September 1, 2029, if more than $175 million in aggregate principal amount of the Company's 1.875% convertible senior notes due December 1, 2029 remains outstanding on such date.

The 2030 Senior Notes Indenture contains certain customary affirmative covenants, negative covenants and events of default, including a liquidity maintenance financial covenant requiring the Company to have an aggregate amount of unrestricted cash and cash equivalents maintained in accounts over which the trustee and collateral agent has been granted a perfected first lien security interest of at least (a) $630.0 million as of the last day of any calendar month ending on or prior to March 31, 2025 and (b) $750.0 million as of April 1, 2025 and as of the last day of any calendar month ending thereafter. Upon the Company having received at least $450.0 million of award disbursements pursuant to governmental grants under the CHIPS Act, the level of minimum liquidity shall be permanently reduced to $500.0 million. Upon the Company having received at least $750.0 million of award disbursements pursuant to governmental grants under the CHIPS Act, the level of minimum liquidity shall be permanently reduced to $250.0 million.

On October 22, 2024, the Company issued $250.0 million in aggregate principal amount of 2030 Senior Notes pursuant to the 2030 Senior Notes Indenture. The Company may issue up to an additional $500.0 million in aggregate principal amount of 2030 Senior Notes, subject to certain conditions.

2033 CRD Agreement Amendment

On October 15, 2024, the Company entered into Amendment No. 1 to the CRD Agreement, which amends the existing agreement to, among other things, permit the Company to pay the accrued interest on the outstanding loans payable under the existing agreement on the last business day of each of December 2024 and June 2025 (together, the PIK Amounts) by adding the PIK Amounts to the then outstanding principal amount of the loans rather than in cash. The interest rate on the PIK Amounts will accrue at a rate of 15.0% per annum. The amendment also permits the Company to grant liens on additional assets in Siler City, North Carolina in connection with disbursements pursuant to governmental grants or awards under the CHIPS Act, and permits the Company to pay a portion of interest on the 2030 Senior Notes in-kind subject to the limitations set forth in the amendment to the CRD Agreement.

Interest Expense

The interest expense, net recognized related to the corporate debt holdings and the deposits under the CRD Agreement is as follows:

The Company capitalizes interest in connection with ongoing capacity expansions.

Note 10 –Loss Per Share

The details of the computation of basic and diluted loss per share are as follows:

Diluted net loss per share is the same as basic net loss per share for the periods presented due to potentially dilutive items being anti-dilutive given the Company's net loss.

For the three and six months ended December 29, 2024,9.5 million and 9.2 million of weighted average shares, respectively, were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive. For the three and six months ended December 31, 2023,3.9 million and 3.8 million of weighted average shares, respectively, were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

Note 11 –Stock-Based Compensation

Total stock-based compensation expense was classified in the consolidated statements of operations as follows:

Stock-based compensation expense may differ from the impact of stock-based compensation to additional paid in capital due to manufacturing related stock-based compensation capitalized within inventory.

Note 12 –Income Taxes

In general, the variation between the Company's effective income tax rate and the U.S. statutory rate of 21% is primarily due to: (i) changes in the Company’s valuation allowances against deferred tax assets in the U.S., (ii) projected income for the full year derived from international locations with differing tax rates than the U.S. and (iii) projected tax credits generated.

The Company assesses all available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction. As of December 29, 2024, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S. deferred tax assets.

U.S. GAAP requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is cumulatively more than 50% likely to be realized upon ultimate settlement.

As of June 30, 2024, the Company's liability for unrecognized tax benefits was $9.4 million. During the six months ended December 29, 2024, the Company recognized a $0.9 million increase to the liability for unrecognized tax benefits primarily due to an increase in generated research and development credits. As a result, the total liability for unrecognized tax benefits as of December 29, 2024 was $10.3 million. If any portion of this $10.3 million is recognized, the Company will then include that portion in the computation of its effective tax rate. Although the ultimate timing of the resolution and/or closure of audits is highly uncertain, the Company believes it is reasonably possible that $0.5 million of gross unrecognized tax benefits will change in the next 12 months as a result of statutory requirements or settlement with tax authorities.

The Company files U.S. federal, U.S. state and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to tax examinations for fiscal years prior to 2018. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for fiscal years prior to 2019. For foreign purposes, the Company is generally no longer subject to examination for tax periods prior to 2014. Certain carryforward tax attributes generated in prior years remain subject to examination, adjustment and recapture.