Enovix Corp

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Organization

Enovix Corporation (“we,” “us,” “our,” or “Enovix” or the “Company”) was incorporated in Delaware in 2006. We develop, manufacture, and commercialize next generation Lithium-ion, or Li-ion, battery cells that significantly increase the amount of energy density and storage capacity relative to conventional battery cells. Our batteries’ mechanical design, or “architecture,” allows us to use high performance chemistries while enabling safety and charge time advantages. Enovix is headquartered in Silicon Valley with facilities in India, South Korea, and Malaysia.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include our accounts, our wholly-owned subsidiaries and majority-owned subsidiaries, the business combinations from the closing dates and a variable interest entity (“VIE”) under the variable interest model. All intercompany balances and transactions have been eliminated in consolidation.

Liquidity and Capital Resources

We have incurred operating losses and negative cash flows from operations since our inception through September 29, 2024 and expect to incur operating losses for the foreseeable future. As of September 29, 2024, we had working capital of $164.5 million and an accumulated deficit of $783.6 million. During the fiscal year-to-date ended September 29, 2024, we received net proceeds of $40.0 million from the issuance of our common stock through an at-the-market (“ATM”) offering. Based on the anticipated spending and timing of expenditures, we currently expect that our cash will be sufficient to meet our funding requirements over the next twelve months. Going forward, we may require additional financing for our future operations and expansion. The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Unaudited Interim Condensed Consolidated Financial Statements

These accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary to present fairly our financial condition, results of operations, comprehensive income (loss), stockholders’ equity and cash flows for the periods presented above. The results of operations for the quarter and fiscal year-to-date ended September 29, 2024 are not necessarily indicative of the operating results for the full year, and therefore should not be relied upon as an indicator of future results. The Condensed Consolidated Balance Sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date and the accompanying consolidated financial statements and related notes are included in our Annual Report on Form 10-K.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the condensed consolidated financial statements and accompanying notes during the reporting periods. Estimates and assumptions include but are not limited to: depreciable lives for property and equipment and intangible assets, valuation for inventory, valuation allowance on deferred tax assets, assumptions used in income tax provisions, valuation for assets acquired and liabilities assumed in business combination, valuation of goodwill and intangible assets, assumptions used in stock-based compensation, incremental borrowing rate for operating right-of-use assets and lease liabilities, restructuring costs and estimates to fair value common stock warrants. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances.

Summary of Significant Accounting Policies

There have been no changes to our significant accounting policies disclosed in Note 2 “Summary of Significant Accounting Policies,” of the notes to the consolidated financial statements for the fiscal year ended December 31, 2023, included in Part II, Item 8 of our Form 10-K.

Revenue

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. We generate revenue from our product revenue and service revenue for the development of lithium-ion battery technology.

Product Revenue

Our product revenue is primarily generated from selling lithium-ion batteries or battery packs to commercial customers and military contractors. Product revenue is recognized once we have satisfied the performance obligations as defined in the sales agreement, which is generally satisfied upon transfer of control of goods. Control is transferred upon delivery for our products. For certain customized products with customer acceptance criteria specified in the sales agreement, the performance obligations is generally satisfied upon our customer’s acceptance. Payment terms can vary depending on the contract and it is generally required within 90 days or less from the delivery date or the acceptance date of our product. The amounts of revenue recognized reflects the consideration for the product sold.

For the quarter and fiscal year-to-date ended September 29, 2024, our product revenue were $4.3 million and $13.4 million, respectively. Of our total product revenue for the quarter andfiscal year-to-date ended September 29, 2024, approximately 42% and 41%, respectively, were from South Korea based on the billing location of the customers. For the quarter and fiscal year-to-date ended October 1, 2023, our product revenue were immaterial.

Service Revenue

Service revenue contracts generally include the design and development efforts to conform our existing battery technology with customers’ required specifications. Consideration for service revenue contracts generally become payable when we meet specific contractual milestones, which include the design and approval of custom cells, procurement of fabrication tooling to meet the customer’s specifications, and fabrication and delivery of custom cells from our pilot production line. Within the existing service revenue contracts, the amount of consideration is fixed, the contracts contain a single performance obligation, and revenue is recognized at the point in time the final milestone is met (i.e., a final working prototype meeting all required specifications) and the customer obtains control of the deliverable. There wasno service revenue recognizedthe quarters and fiscal years-to-date ended September 29, 2024 and October 1, 2023

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of significant segment expenses and other segment items on an annual and interim basis. This ASU will be effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on our financial statement disclosures and plan to adopt it for the fiscal year ended December 29, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures, which expanded the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the annual periods beginning December 15, 2024, with early adoption permitted. We are currently evaluating the potential impact of the adoption of this ASU on our financial statement disclosures.

Note 3. Business Combinations

Routejade Acquisition

On October 31, 2023, we acquired 95.8% of the outstanding shares of Routejade, Inc. (“Routejade”). The following table summarizes the considerations for the acquisition.

This acquisition (the “Routejade Acquisition”) constituted a business acquisition in accordance with FASB Accounting Standards Codification (“ASC”) (Topic 805), Business Combinations (“ASC 805”) for business combinations and, therefore, was accounted for as a business combination using the acquisition method of accounting. The tangible and intangible assets acquired and liabilities assumed were recorded based on their estimated fair values at the acquisition date.

The following table summarizes the final purchase price allocation based on the fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands).

Goodwill

The excess of the purchase price over the fair value of net assets acquired was recorded to goodwill. Goodwill is primarily attributable to the expected synergies from future expected economic benefits, including integrating electrode coating and battery pack manufacturing. Goodwill from this acquisition is not expected to be deductible for tax purposes.

The following table summarizes the change in goodwill (in thousands) during the fiscal year-to-date ended September 29, 2024.

(1) Our purchase price allocation was finalized in the first quarter of 2024, which included a net adjustment of $0.1 million to goodwill and immaterial adjustments to other assets.

Intangible Assets

Intangible assets consist of customer relationships, developed technology and trade names and trademarks. Customer relationships relate to Routejade’s existing customer relationships for current and future business. Developed technology relates to Routejade’s technology for manufacturing standard lithium-ion batteries with varying chemistries, which allows for design flexibility and the production of customized battery cells.

The following table summarizes the intangible assets subject to amortization, net (in thousands) as of September 29, 2024.

We acquired these intangible assets through the Routejade Acquisition in October 2023. For the quarter and fiscal year-to-date ended September 29, 2024, amortization of the intangible assets were $1.2 million and $3.6 million, respectively. As of September 29, 2024, the weighted average remaining useful lives for intangible assets was approximately 8.3 years.

The following is a schedule of expected amortization for the intangible assets as of September 29, 2024 (in thousands).

Revenue and net loss from operations

For the quarter ended September 29, 2024, our results of operations included $4.3 million of Routejade’s revenue and $2.3 million of Routejade’s net operating loss from operations. For the fiscal year-to-date ended September 29, 2024, our results of operations included $13.3 million of Routejade’s revenue and $7.4 million of Routejade’s net operating loss from operations.

Proforma information

The condensed consolidated unaudited proforma revenue for the quarters ended of September 29, 2024 and October 1, 2023, which included Routejade assuming the acquisition occurred on January 1, 2023, were approximately $4.3 million and $3.9 million, respectively. The condensed consolidated unaudited proforma revenue for fiscal years-to-date ended September 29, 2024 and October 1, 2023, which included Routejade assuming the acquisition occurred on January 1, 2023, were approximately $13.4 million and $12.9 million, respectively.

The condensed consolidated unaudited proforma net income related to this acquisition was not included because the impact on our consolidated results of operations was not material for the quarters and fiscal years-to-date ended September 29, 2024 and October 1, 2023.

Note 4. Fair Value Measurement

The fair value of our financial assets and liabilities are determined in accordance with the fair value hierarchy established in ASC 820, Fair Value Measurements, issued by the FASB. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Our financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, notes receivable, accounts payable, short-term and long-term debt, and warrant liabilities. Cash and cash equivalents are reported at their respective fair values on our Condensed Consolidated Balance Sheets. As of September 29, 2024 and December 31, 2023, the carrying values of accounts and notes receivables, accounts payable, short-term debt and accrued liabilities approximated the fair value based on the short maturity of those instruments. As of September 29, 2024 and December 31, 2023, we had cash and cash equivalents of $200.9 million and $233.1 million, respectively.

The following table details the fair value measurements of assets and liabilities that were measured at fair value on a recurring basis based on the following three-tiered fair value hierarchy per ASC 820, Fair Value Measurement, as of September 29, 2024 and December 31, 2023 (in thousands).

Cash Equivalents and Short-term Investments:

The following is a summary of cash equivalents and short-term investments (in thousands).

As of December 31, 2023, the short-term investments had contractual maturity due within one year.

Private Placement Warrants

Our liabilities are measured at fair value on a recurring basis, including 6,000,000 warrants that were held by Rodgers Capital, LLC (the “Sponsor”) and certain of its members (the “Private Placement Warrants”). The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. Each whole Private Placement Warrant became exercisable forone whole share of our common stock at a price of $11.50 per share on December 5, 2021.

During the third quarter of 2024, there was a cashless exercise of 500,000 shares of the Private Placement Warrants with an exercise price of $11.50 per share and we issued 153,822 shares of our common stock.

As of September 29, 2024 and December 31, 2023, we had 5,500,000 and 6,000,000 Private Placement Warrants outstanding, respectively. The fair value of the Private Placement Warrants was $4.23 per share as of September 29, 2024. The following tables summarize the changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs (in thousands).

The following table summarizes the key assumptions used for determining the fair value of the Private Placement warrants.

Convertible Senior Notes and Long-term Loans

We consider the fair value of our convertible senior notes to be a Level 2 measurement as they are not actively traded in the market. As of September 29, 2024, the fair value of the convertible senior notes was approximately $157.0 million. As of September 29, 2024, our long-term loans are approximately close to their carrying value of $0.7 million.

Note 5. Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Property and equipment as of September 29, 2024 and December 31, 2023, consisted of the following (in thousands).

The following table summarizes the depreciation and amortization expenses related to property and equipment, which are recorded within cost of revenue, research and development expense and selling, general and administrative expense in the Condensed Consolidated Statements of Operations (in thousands).

In the fourth quarter of 2023, we announced our strategic realignment of our first production line (“Fab1”) in Fremont, California and transformed our Fremont location to “Center for Innovation,” focused on new product development. In connection with this strategic realignment, we recognized accelerated depreciation expenses of approximately $18.4 million for Fab1 equipment in the first quarter of 2024, of which approximately $18.3 million and $0.1 million were recorded as research and development expense, and selling, general and administrative expense, respectively, in the Condensed Consolidated Statements of Operations. We didnot record any accelerated depreciation expenses in the second quarter of 2024 and the third quarter ended September 29, 2024.

Fab1 Long-Lived Asset Disposals

During the quarter and fiscal year-to-date ended September 29, 2024, we recorded $3.1 million and $38.2 million, respectively, of loss on disposal of our Fab1 long-lived assets, including machinery and equipment, leasehold improvements and other assets located in Fremont, California as a part of the 2024 Restructuring Plan (as defined below) and it was recorded as Restructuring Cost in the Condensed Consolidated Statements of Operations. See Note 12 “Restructuring Costs” for more information.

Equipment Impairment

During the second quarter of 2023, we disposed a group of machinery and equipment and recorded an impairment charge of$4.4 million. There wasno impairment charge recorded in the quarter ended October 1, 2023 and the impairment charge for the fiscal year-to-date ended October 1, 2023 was $4.4 million. These impaired assets were previously capitalized as “Machinery and equipment” category of property and equipment, net on the Condensed Consolidated Balance Sheets. There wasno impairment charge recorded in the quarter ended and fiscal year-to-date ended September 29, 2024.

Note 6. Inventory

Inventory consists of the following components (in thousands).

Inventory is stated at the lower of cost or net realizable value (“NRV”) on a first-in and first-out basis. Inventory costs include direct materials, direct labor, and manufacturing overhead. When the estimated net realizable values are below the manufacturing costs, a charge to cost of revenue is recorded for finished goods and work in process inventories.

For the quarter and fiscal year-to-date ended September 29, 2024, we had recorded immaterial amounts of inventory reserve, including excess or obsolete inventory reserve, in the Condensed Consolidated Statement of Operations. As of December 31, 2023, we didnot have excess or obsolete inventory reserve.

In connection with the restructuring plan as described in the Note 12 “Restructuring Costs,” we wrote off $0.6 million of raw materials as Restructuring cost in the Condensed Consolidated Statement of Operations for the quarter and fiscal year-to-date ended October 1, 2023.

Note 7. Leases

We have operating lease agreements primarily for offices and manufacturing spaces located in various locations with lease periods expiring between 2024 and 2030, some of which include options to extend the leases for up tofive years.

The components of lease costs were as follows (in thousands):

Supplemental lease information:

Supplemental cash flow information related to leases are as follows (in thousands):

Maturities of Lease Liabilities

The following is a schedule of maturities of lease liabilities as of September 29, 2024 (in thousands).

Note 8. Borrowings

Short-Term Debt

In connection with the Routejade Acquisition, we assumed asset secured loans with fixed and floating interest rates. These loans have various maturity dates. As of September 29, 2024, short-term debt was $11.6 million, which comprised of $11.4 million of short-term loans with less than one-year term and $0.2 million of the current portion of long-term loans. From time to time, we renew our short-term loans once they reach the maturity dates. During the fiscal year-to-dated ended September 29, 2024, we obtained $4.6 million of short-term loans with less than one-year term. As of December 31, 2023, short-term debt was $5.9 million, which comprised of $4.3 million of short-term loans with less than one-year term and $1.6 million of the current portion of long-term loans. The current portion of long-term debt is recorded as short-term debt based on time remaining until maturity. As of September 29, 2024 and December 31, 2023, the weighted average interest rates on the short-term loans were approximately 5.2%. and 5.3%, respectively.

Long-Term Debt

Our long-term debt, net consists of the following (in thousands).

Long-term Loans

In connection with the Routejade Acquisition, we assumed long-term loans. These long-term loans are either with fixed rate or floating rate loans as stated in the table above. As of September 29, 2024, total long-term loans outstanding was $0.7 million, including a current portion of the long-term loans of $0.2 million. As of December 31, 2023, total long-term loans outstanding was $3.3 million, including a current portion of the long-term loans of $1.6 million.

Convertible Senior Notes

On April 20, 2023, we issued $172.5 million aggregate principal amount of 3.0% convertible senior notes due 2028 (the “Convertible Senior Notes”), including $10.0 million principal amount of the Convertible Senior Notes (the “Affiliate Notes”) issued to an entity affiliated with Thurman John Rodgers, Chairman of our Board of Directors, in a concurrent private placement. As of both periods ended September 29, 2024 and December 31, 2023, total outstanding Convertible Senior Notes was $172.5 million.

The Convertible Senior Notes are unsecured obligations of the Company and bear interest at a rate of 3.0% per year from April 20, 2023, and will be payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2023. The Convertible Senior Notes will mature on May 1, 2028 unless earlier converted, redeemed or repurchased.

The following table summarizes the interest expenses related to Convertible Senior Notes and loans, which are recorded within Interest expense in the Condensed Consolidated Statements of Operations (in thousands).

As of September 29, 2024 and December 31, 2023, we had $2.2 million and $0.9 million of accrued interest liability, respectively.

Debt Maturity

The following table summarizes our long-term debt maturities, based on outstanding principal by years (in thousands).

Note 9. Commitments and Contingencies

Purchase Commitments

As of September 29, 2024 and December 31, 2023, our commitments included approximately $24.6 million and $62.5 million, respectively, of our open purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract manufacturers and suppliers for which we have not received goods or services, commitments for capital expenditures and construction-related activities for which we have not received the goods or services. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us an option to cancel, reschedule, and adjust its requirements based on our business needs prior to the delivery of goods or performance of services. For lease obligations, please refer to Note 7 “Leases” for more details. For the Convertible Senior Notes obligation and other borrowings, please refer to Note 8 “Borrowings” for more details.

Performance Obligations

As of September 29, 2024, we had $10.0 million of performance obligations, which comprised of total deferred revenue and customer order deposits. We currently expect to recognize approximately 62% of deferred revenue as revenue within the next twelve months.

Litigation

From time to time, we are subject to a variety of claims, lawsuits, investigations, and proceedings concerning matters arising in connection with our business activities, including product liability, intellectual property, commercial, insurance, securities laws, contract disputes, and employment matters. Certain of these lawsuits and claims are described in further detail below. We intend to vigorously defend against each of these allegations.

A liability and related charge to earnings is recorded in the condensed consolidated financial statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to each case. The outcomes of outstanding legal matters are inherently unpredictable and subject to uncertainties. While there can be no assurance of favorable outcome of these legal matters, we currently believe that the outcome of these matters will not have a material adverse effect on our results of operations, liquidity or financial position.

Former Employee Class Action Lawsuits

On January 21, 2022, two former machine operator employees filed a putative wage and hour class action lawsuit against Enovix and co-defendant Legendary Staffing, Inc. in the Superior Court of California, County of Alameda. The case is captioned Sopheak Prak & Ricardo Pimentel v Enovix Corporation and Legendary Staffing, Inc., 22CV005846 (the “Prak Complaint”). The Prak Complaint alleged, among other things, on a putative class-wide basis, that the defendants failed to pay all overtime wages and committed meal period, rest period and wage statement violations under the California Labor Code and applicable Wage Orders. The plaintiffs sought unpaid wages, statutory penalties and interest and reasonable costs and attorney fees. We began the mediation process in September 2022 and on June 6, 2024, a final settlement was approved by the court. All settlement funds were distributed in July 2024.

On March 8, 2023, a former employee filed a putative class action lawsuit against Enovix in the Superior Court of California, County of Alameda. The case is captioned Kody Walker v. Enovix Corporation, 23CV028923 (the “Walker Complaint”). The Walker Complaint alleges, among other things, on a putative class-wide basis, that we failed to pay minimum wages, overtime and sick time wages, failed to reimburse employees for required expenses, failed to provide meal and rest periods and issued inaccurate wage statement under the California Labor Code and applicable Wage Orders. The Walker Complaint asserts on an individual basis that Walker was constructively discharged. The plaintiff seeks unpaid wages, statutory penalties and interest and reasonable costs and attorney fees. We have a mediation scheduled on October 30, 2024 with plaintiff’s counsel in the Walker matter.

Securities Class Action Complaint

On January 6, 2023, a purported Company stockholder filed a securities class action complaint in the U.S. District Court for the Northern District of California against Enovix and certain of our current and former officers and directors (collectively, the “defendants”). The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making material misstatements or omissions in public statements related to our manufacturing scale-ups and testing of new equipment. A substantially identical complaint was filed on January 25, 2023 by another purported Company stockholder. Following consolidation of the cases and court appointment oftwo purported Company stockholder lead plaintiffs, a consolidated complaint alleging substantially similar claims, including allegations that the defendants made material misstatements or omissions in public statements related to testing of new equipment, was filed on July 7, 2023.

The court granted the motion to dismiss the consolidated complaint on January 30, 2024. The plaintiffs filed a second amended complaint on March 19, 2024, which seeks unspecified damages, interest, fees and costs on behalf of all persons and entities that purchased and/or acquired shares of Enovix or its predecessor entity’s common stock between June 24, 2021 and October 3, 2023. On July 23, 2024, the court issued an order granting in part and denying in part defendants’ motion to dismiss. We and the other defendants intend to vigorously defend against the remaining claims in this action.

In September, 2024, we receivedtwo Section 220 book and records demand notices fromtwo separate defendants related to this case.

Guarantees and Indemnifications

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. In addition, we purchased performance bonds for guarantee of our performance obligations for certain projects. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

We also have indemnification obligations to our officers and directors for specified events or occurrences, subject to some limits, while they are serving at our request in such capacities. There have been no claims to date and we have director and officer insurance that may enable us to recover a portion of any amounts paid for future potential claims. We believe the fair value of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities relating to these obligations for the period presented.

Note 10. Net Loss per Share

The following table sets forth the computation of our basic and diluted net EPS of common stock for the periods presented below (in thousands, except share and per share amount).

The following table discloses shares of the securities that were not included in the diluted EPS calculation above because they are anti-dilutive for the periods presented above.

Note 11. Stock-based Compensation

We issue equity awards to our employees and non-employees in the form of stock options, restricted stock units (“RSUs”) and performance based RSUs (“PRSUs”). Additionally, we also offer an employee stock purchase plan (“ESPP”) to our eligible employees. We use Black-Scholes option pricing model to value our stock options granted and the estimated shares to be purchased under the ESPP. For both RSUs and PRSUs, we use our common stock price, which is the last reported sales price on the grant date to value those securities.

In general, we recognize stock-based compensation expense on a straight-line basis over the requisite service period and records forfeitures as they occur. For PRSUs, we use the graded vesting method to calculate the stock-based compensation expense. At each reporting period, we would recognize and adjust the stock-based compensation expense based on its probability assessment in meeting its PRSUs' performance conditions.

Stock-based Compensation Expense

The following table summarizes the total stock-based compensation expense, by operating expense category, recognized in the Condensed Consolidated Statements of Operations for the periods presented below (in thousands).

(1) During the quarter ended June 30, 2024, we engaged a consulting company for its services and issued RSUs in exchange for its services. In connection with this service agreement, we recorded approximately $4.4 million and $9.1 million of stock-based compensation expense for the quarter and fiscal year-to-date ended September 29, 2024, respectively.

For the fiscal years-to-date ended September 29, 2024 and October 1, 2023, we capitalized $2.4 million and $0.8 million, respectively, of stock-based compensation as property and equipment, net on the Condensed Consolidated Balance Sheet. There wasno recognized tax benefit related to stock-based compensation for the periods presented. In addition, we accrued animmaterial amount of bonus to be settled in equity awards as accrued compensation on the Condensed Consolidated Balance Sheet as of September 29, 2024.

As of September 29, 2024, there was approximately $123.5 million of total unrecognized stock-based compensation expense related to unvested equity awards, which are expected to be recognized over a weighted-average period of 3.2 years. As of September 29, 2024, there was approximately $0.5 million of total unrecognized stock-based compensation related to the ESPP, which is expected to be recognized over a period of 1.1 years.

Equity Award Modification

In connection with the 2024 Restructuring Plan (as defined in Note 12 “Restructuring Costs”), there wasone equity award modification, which accelerated the vesting condition of a former executive’s RSUs as a part of his consulting and separation agreement. During the third quarter of 2024, we recognized an immaterial amount of stock-based compensation expense related to the equity modifications. For the fiscal year-to-date ended September 29, 2024, we recognized $1.3 million of stock-based compensation expense related to the modifications.

For the quarter ended October 1, 2023, there wasno equity award modification. For the fiscal year-to-date ended October 1, 2023, we recognized $21.1 million of stock-based compensation expense related to the modifications in connection with the retirement or resignation of several of our former officers and executives, which impacted the vesting conditions as the term of equity award exercise period was extended and certain of the equity awards were accelerated and vested immediately.

Stock Option Activity

The following table summarizes stock option activities for the fiscal year-to-date ended September 29, 2024 (in thousands, except share and per share amount).

Unvested early exercised stock options which are subject to repurchase by us are not considered participating securities as those shares do not have non-forfeitable rights to dividends or dividend equivalents. Unvested early exercised stock options are not considered outstanding for purposes of the weighted average outstanding share calculation until they vest.

Early Exercise of Options

As of September 29, 2024,91,620 shares remained subject to our right of repurchase as a result of early exercised stock options. The remaining liability related to early exercised shares as of September 29, 2024 was immaterial and was recorded in other current and non-current liabilities in the Condensed Consolidated Balance Sheet.

Restricted Stock Unit and Performance Restricted Stock Unit Activities

The following table summarizes RSUs and PRSUs activities for the fiscal year-to-date ended September 29, 2024 (in thousands, except share and per share amount).

Note 12. Restructuring Costs

2024 Restructuring Plan

In May 2024, our Board of Directors approved a restructuring plan (the “2024 Restructuring Plan”) designed to reduce operating costs and support the Company’s strategic goals. As part of the 2024 Restructuring Plan, we relocated our manufacturing operations from our Fab1 facility in Fremont, California to Malaysia, resulting in a plan of workforce reduction in the U.S, as well as long-lived asset disposals related to Fab1. Currently, we expect the 2024 Restructuring Plan to be substantially complete by the end of 2024.

In connection with the 2024 Restructuring Plan, we recorded estimated pre-tax restructuring and related charges of $3.7 million and $41.8 million for the quarter ended and fiscal year-to-date ended September 29, 2024, respectively. These restructuring costs were reflected in Restructuring cost in the Condensed Consolidated Statements of Operations.

The restructuring costs for the fiscal year-to-date ended September 29, 2024 included non-cash charges of $38.2 million of loss on disposals of Fab1 long-lived asset in Fremont, California and $1.2 million of stock-based compensation expense, and cash charges of $1.6 million of severance and termination benefits and $0.8 million of other charges. We may incur additional restructuring charges and costs in the fourth quarter of 2024.

During the third quarter of 2024, we paid $1.2 million of cash costs related to the restructuring costs. As of September 29, 2024, we had $1.1 million of the restructuring liability, which was included in Other current liability on the Condensed Consolidated Balance Sheets.

2023 Restructuring Plan

On October 3, 2023, we announced a strategic realignment (the “2023 Restructuring Plan”) of our first production line (“Fab1”) in Fremont designed to refocus the facility from a manufacturing hub to our “Center for Innovation,” focused on new product development, including a plan of workforce reduction.

In connection with the 2023 Restructuring Plan, we recorded approximately $3.0 million of restructuring costs for the quarter and fiscal year-to-date ended October 1, 2023, which consisted of severance, termination benefits, stock-based compensation expense and inventory costs. These restructuring costs were reflected in Restructuring cost in the Condensed Consolidated Statements of Operations. As of October 1, 2023, we did not pay any of the restructuring costs and had $2.1 million of the restructuring liability was included in Accrued compensation on the Condensed Consolidated Balance Sheet.

Note 13. Variable Interest Entity

On July 26, 2023, we entered into a manufacturing agreement (the “Agreement”) with YBS International Berhad (“YBS”). We concluded that Orifast Solution Sdn Bhd (“OSSB”), a subsidiary of YBS, is considered a VIE and we are the primary beneficiary of OSSB based on certain assumptions and judgments made by us. In accordance with GAAP, we consolidate 100% of OSSB’s financials. During the quarter and fiscal year-to-date ended September 29, 2024, OSSB had immaterial operating activities. As of September 29, 2024, we didnot have an equity investment in OSSB.

OSSB entered into a $70.0 million of foreign currency term loan agreement (the “Term Loan”) with OCBC Bank (Malaysia) Berhad (“OCBC”) in July 2023, for the purpose of financing its manufacturing operations. The Term Loan is expected to be repaid within five years. On September 13, 2023, we entered into a cash deposit agreement with OCBC to collateralize the Term Loan.

As of September 29, 2024, we hadno outstanding balance on the Term Loan and we had not made any deposits to OCBC for collateralization. We invested $70.0 million on deposit in an interest-bearing account with OCBC as of September 29, 2024.

Note 14. Related Party

Employment Relationship

As of September 29, 2024, we employedone family member of our Chief Executive Officer, who assists with sales in North America.

Affiliate Notes

On April 20, 2023, we issued $172.5 million aggregate principal amount of Convertible Senior Notes, which included $10.0 million principal amount of the Affiliate Notes that were issued to an entity affiliated with Thurman John “T.J.” Rodgers, our Chairman, in a concurrent private placement. The Affiliate Notes were recorded in Long-term debt, net on our Condensed Consolidated Balance Sheets. For the quarter and fiscal year-to-date ended September 29, 2024, we recorded $0.1 million and $0.2 million, respectively, of interest expense related to the Affiliate Notes in our Condensed Consolidated Statements of Operations. For the quarter and fiscal year-to-date ended October 1, 2023, we recorded $0.1 million of interest expense related to the Affiliate Notes in our Condensed Consolidated Statements of Operations. See Note 8 “Borrowings” for more information.

Note 15. Subsequent Event

On October 29, 2024, we entered into an amendment (the “Amendment”) to the Agreement with YBS dated July 26, 2023 in which Enovix and YBS agreed to share responsibility for the Gen2 Line 1 equipment and facilitization costs. Pursuant to the terms of the initial Agreement, we contributed 30% of the initial investment and YBS had the obligation to finance the remaining 70%. Pursuant to the Amendment, Enovix shall be fully responsible for the initial investment of $100.0 million for the Gen2 Line 1 equipment and facilitization costs at 100% instead of 30%. YBS shall be fully responsible for obtaining and managing its working capital requirements to fulfill its obligations to provide manufacturing services to us, including direct and indirect materials, direct labor utilities and repair and maintenance. As a part of the Amendment, YBS shall purchase the tooling and fixtures for manufacturing of the products as designed by Enovix.

Pricing under the Agreement is set on a cost-plus basis and we are subject to a minimum commitment pursuant to the Agreement, which provisions were modified under the terms of the Amendment. The Agreement has an initialten-year term with eight years and nine months remaining as of October 2024, which will automatically renew for one successive five-year period unless earlier terminated.