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 design, 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, a region of California, with offices and facilities in Asia.

Note 2. Basis of Presentation and 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 and our wholly-owned subsidiaries and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

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. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 (the “Form 10-K”).

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 fiscal quarter ended March 30, 2025 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.

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 of goodwill and intangible assets, assumptions used in stock-based compensation, incremental borrowing rate for operating right-of-use assets and lease liabilities 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.

Liquidity and Capital Resources

We have incurred operating losses and negative cash flows from operations since our inception through March 30, 2025 and expect to incur operating losses for the foreseeable future. As of March 30, 2025, we had working capital of $212.4 million and an accumulated deficit of $844.6 million. 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.

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 29, 2024, included in Part II, Item 8 of our Form 10-K.

Segment Reporting

We operate inone segment. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. Our Chief Executive Officer (“CEO”) has been identified as our CODM, who reviews operating results to make decisions and assesses performance for the Company as a whole. Total available cash and cash equivalents, total revenues and net loss are used by our CEO to evaluate key operating decisions, such as company strategy, and determine and allocate resources on a consolidated basis. Since we operate in one segment, all significant segment expenses and financial information required by “Segment Reporting” can be found in the condensed consolidated financial statements and the accompanying notes of the condensed consolidated financial statements.

Revenue

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our revenue consists of product revenue, resulting from the sale of lithium-ion batteries and battery pack products (“Product Revenue”), and service revenue, resulting from payments received from our customers based on executed engineering revenue contracts for the development of lithium-ion battery technology (“Service Revenue”).

Product Revenue

Product Revenue mainly relates to sales of lithium-ion batteries or battery packs. We recognize Product Revenue at a point in time when the performance obligation has been satisfied upon transfer of control of goods, which is upon product shipment, delivery or customer acceptance, depending on the applicable contract terms. For certain customized products with customer acceptance criteria specified in the contract, the performance obligation is satisfied upon our customer’s formal acceptance.

For the fiscal quarters ended March 30, 2025 and March 31, 2024, our product revenue were $5.1 million and $5.3 million, respectively. Of our total product revenue for the fiscal quarters ended March 30, 2025 and March 31, 2024, approximately 47% and 42%, respectively, were from South Korea based on the billing location of the customers.

Service Revenue

We did not recognize Service Revenue for either of the fiscal quarters ended March 30, 2025 and March 31, 2024.

Income Tax

In accordance with the Accounting Standards Update (“ASU”) 740-270, Income Taxes - Interim Reporting, issued by Financial Accounting Standards Board (“FASB”) for interim reporting for income tax, we calculate our income tax provision using the annualized effective tax rate method. For both fiscal quarters ended March 30, 2025 and March 31, 2024, we had immaterial amounts of income tax benefits. Our effective tax rate differs from the statutory tax rate primarily due to valuation allowances on the U.S. operations, and a mix of income and losses among foreign jurisdictions.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve the reportable segment disclosure requirements. The amendments require disclosure of significant segment expenses that are regularly provided to the CODM, one or more measures of segment profit or loss, and other segment items on an annual and interim basis. This ASU is 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 adopted this ASU for our fiscal year 2024 annual financial statements and interim financial statements beginning in the first quarter of fiscal year 2025. The adoption of ASU 2023-07 did not change the way that we identify our reportable segment. Please see “Segment Reporting” above for our interim segment reporting disclosure.

Recently Issued Accounting Pronouncements

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 reporting periods beginning December 15, 2024, with early adoption permitted. As ASU 2023-09 only has an impact to our financial statement disclosures, we do not expect this ASU to have a significant impact to our consolidated financial statements and plan to adopt this ASU in our Annual Report on Form 10-K for the fiscal year ending December 28, 2025.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,” which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. The standard is effective for the annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the potential impact of the adoption of this ASU on our financial statement disclosures.

Note 3. 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 March 30, 2025 and December 29, 2024, 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 March 30, 2025 and December 29, 2024, we had cash and cash equivalents of $189.9 million and $272.9 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 March 30, 2025 and December 29, 2024 (in thousands).

Cash Equivalents and Short-term Investments:

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

As of March 30, 2025 and December 29, 2024, 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 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. As of both periods ended March 30, 2025 and December 29, 2024, we had 5,500,000 Private Placement Warrants outstanding. The fair value of the Private Placement Warrants was $2.29 per share as of March 30, 2025. 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 March 30, 2025, the fair value of the convertible senior notes was approximately $145.2 million. As of March 30, 2025, our long-term loans are approximately close to their carrying value of $0.6 million.

Note 4. 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 March 30, 2025 and December 29, 2024, 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 connection with our strategic realignment in 2023, 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 first quarter ended March 30, 2025.

Note 5. 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.

As of both March 30, 2025 and December 29, 2024, we had animmaterial amount of inventory reserve, including excess or obsolete inventory reserve.

Note 6. 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 March 30, 2025 (in thousands).

Note 7. Borrowings

Short-Term Debt

Our asset secured loans have fixed and floating interest rates with various maturity dates. From time to time, we renew our short-term loans once they reach the maturity dates. The current portion of long-term loans is recorded as short-term debt based on time remaining until maturity. As of March 30, 2025, short-term debt was $10.4 million, which comprised of $10.2 million of short-term loans with less than one-year term and $0.2 million of the current portion of long-term loans. As of December 29, 2024, short-term debt was $9.5 million, which comprised of $9.3 million of short-term loans with less than one-year term and $0.2 million of the current portion of long-term loans. As of March 30, 2025 and December 29, 2024, the weighted average interest rates on the short-term loans were approximately 5.1%. and 5.2%, respectively.

Long-Term Debt

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

Long-term Loans

Our long-term loans bear interest at either fixed or floating rates, as indicated in the table above. As of March 30, 2025, total long-term loans outstanding was $0.6 million, including a current portion of the long-term loans of $0.2 million. As of December 29, 2024, total long-term loans outstanding was $1.5 million, including a current portion of the long-term loans of $0.2 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 March 30, 2025 and December 29, 2024, 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 March 30, 2025 and December 29, 2024, 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 8. Commitments and Contingencies

Purchase Commitments

As of March 30, 2025 and December 29, 2024, our commitments included approximately $3.5 million and $17.4 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 the requirements based on our business needs prior to the delivery of goods or performance of services. For lease obligations, please refer to Note 6 “Leases” for more details. For the Convertible Senior Notes obligation and other borrowings, please refer to Note 7 “Borrowings” for more details.

Performance Obligations

As of March 30, 2025, we had $6.9 million of performance obligations, which comprised of total deferred revenue and customer order deposits. We currently expect to recognize approximately 96% 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 Lawsuit

In 2023, a former employee filedtwo complaints against Enovix. The first complaint asserted a putative class action, alleging various wage and hour violations, and individual claims alleging constructive discharge and adverse employment actions. The second complaint asserted claims under California’s Private Attorney General Act (“PAGA”) for alleged wage and hour violations. The cases are captioned Kody Walker v. Enovix Corporation, 23CV028923 and 23CV039290 (the “Walker Complaints”). The Walker Complaints were consolidated in April 2024. In November 2024, the parties entered into settlement agreements resolving the individual and PAGA claims, and plaintiff dismissed without prejudice the putative class action claims. The court approved a final settlement in March 2025.

Securities Class Action Complaint

In January 2023, purported Company stockholders filed securities class action complaints in the U.S. District Court for the Northern District of California against Enovix and certain of its current and former officers and directors (collectively, the “defendants”). The complaints, which were later consolidated, allege violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, relating to alleged material misstatements or omissions in public statements related to our manufacturing scale-ups and testing of new equipment. Following consolidation of the cases and court appointment oftwo purported Company stockholder lead plaintiffs, a consolidated complaint, In re Enovix Corp. Securities Litigation, Case No. 23-cv-00071-SI (N.D. Cal.), was filed on July 7, 2023. The consolidated complaint alleges substantially similar claims, including allegations that the defendants made material misstatements or omissions in public statements related to testing of new equipment.

On January 30, 2024, the court granted the defendants’ motion to dismiss the consolidated complaint. Plaintiffs subsequently filed a second amended complaint on March 19, 2024. On July 23, 2024, the court granted in part and denied in part defendants’ motion to dismiss the second amended complaint. The plaintiffs seek unspecified damages, interest, fees and costs on behalf of a putative class of persons and entities that purchased and/or acquired shares of Enovix or its predecessor entity’s common stock between August 10, 2021 and October 3, 2023.

We and the other defendants intend to continue to vigorously defend against the remaining claims in this action. In September 2024, we received two Section 220 demands for corporate books and records related to this matter, which could result in separate proceedings. In November 2024, a related derivative lawsuit was filed in Alameda County, California, which lawsuit has been stayed pending resolution of the securities action.

Based on information currently available, we have not recorded a liability related to these matters in our condensed consolidated financial statements as of March 30, 2025, because we cannot reasonably estimate the amount or range of potential losses.

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 9. 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 10. 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).

For the fiscal quarter ended March 31, 2024, we capitalized $0.4 million of stock-based compensation as property and equipment, net on the Condensed Consolidated Balance Sheet. For the fiscal quarter ended March 30, 2025, there was no capitalized 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 March 30, 2025.

As of March 30, 2025, there was approximately $88.1 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 2.9 years. As of March 30, 2025, there was approximately $0.4 million of total unrecognized stock-based compensation related to the ESPP, which is expected to be recognized over a period of 1.1 years.

Stock Option Activity

The following table summarizes stock option activities for the fiscal quarter ended March 30, 2025 (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 March 30, 2025,15,384 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 March 30, 2025 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 quarter ended March 30, 2025 (in thousands, except share and per share amount).

Note 11. 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 our strategic goals. The restructuring liability was included in Other current liability on our Condensed Consolidated Balance Sheets. The 2024 Restructuring Plan was substantially complete in fiscal year 2024. As of December 29, 2024, we had $0.4 million of the restructuring liability and majority of the restructuring liability was paid in cash during the first quarter of 2025. As of March 30, 2025, we had animmaterial balance of restructuring liability on our Condensed Consolidated Balance Sheets.

Note 12. Related Party Transactions

Employment Relationship

As of March 30, 2025, we employedone family member of our CEO, 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 fiscal quarters ended March 30, 2025 and March 31, 2024, we recorded $0.1 million for each respective quarter, of interest expense related to the Affiliate Notes in our Condensed Consolidated Statements of Operations. See Note 7 “Borrowings” for more information.

Note 13. Subsequent Event

On April 1, 2025, we entered into an asset transfer agreement for the acquisition of battery cell manufacturing assets from SolarEdge, located in South Korea, for a cash purchase consideration of $10.0 million. These assets includea battery cell manufacturing facility with approximately 330,000 square feet, land and certain machinery and equipment, which currently have certain liens associated with them. The seller is responsible for clearing these liens, which are currently pending for the government approval to release. We are in the process of evaluating the purchase accounting of this acquisition. We believe this acquisition will expand our manufacturing footprint, expedite scaled production and better position us to meet growing demand in the defense industry.