UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended: ~~October~~April 1, ~~2022~~2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ________ to ______

Commission File Number: 001-40147

QUALTEK SERVICES INC.

(Exact name of registrant as specified in its charter)


Delaware			83-3584928
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

475 Sentry Parkway E, Suite 200, Blue Bell, PA 19422

(Address of principal executive offices) (Zip Code)

(484) 804-4585

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Class A Common Stock QTEK The NASDAQ Stock Market LLC Warrants QTEKW The NASDAQ Stock Market LLC

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Class A Common Stock

QTEKQ (1)

The NASDAQ Stock Market LLC (1)

Warrants

QTEWQ (1)

The NASDAQ Stock Market LLC (1)

(1) On June 2, 2023, our Class A common stock and warrants were suspended from trading on the Nasdaq Stock Market LLC (“Nasdaq”) and began trading over-the-counter under the symbols “QTEKQ” and “QTEWQ,” respectively. On July 10, 2023, Nasdaq filed a Form 25 with the Securities and Exchange Commission (the “SEC”) to delist our Class A common stock and warrants and to remove them from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The delisting will become effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the deregistration of our Class A common stock and warrants under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, from the date of the Form 25 filing.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 27,805,659 shares of Class A Common Stock, $0.0001 par value, and 23,304,200 shares of Class B Common Stock, $0.0001 par value, outstanding as of ~~November~~July 710, ~~2022~~2023.

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TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION			1
ITEM 1. FINANCIAL STATEMENTS			1
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.			30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS			4342
ITEM 4. CONTROLS AND PROCEDURES			4342
PART II – OTHER INFORMATION			43
ITEM 1. LEGAL PROCEEDINGS.			43
ITEM 1A. RISK FACTORS.			43
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.			4447
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.			4447
ITEM 4. MINE SAFETY DISCLOSURES			4448
ITEM 5. OTHER INFORMATION.			4448
ITEM 6. EXHIBITS.			4549
SIGNATURES			4650

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Cautionary Statement About Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of QualTek, asServices ~~applicable~~Inc. (the "Company" or "QualTek") and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Factors that may impact such forward-looking statements include, but are not limited to, the following:

•~~our~~the ~~limited~~effects ~~operating~~of ~~history~~the asRestructuring aSupport ~~combined~~Agreement ~~company~~or ~~makes~~any itagreement ~~difficult~~between the Company and its lenders and noteholders, including the Company's ability to ~~evaluate~~reduce ~~our~~its ~~current~~debt, ~~business~~strengthen its balance sheet and ~~future~~facilitate ~~prospects~~an infusion of new capital;

•~~our~~the ~~management~~volatility ~~team's~~in ~~limited~~the ~~experience~~price ~~managing~~of our common stock, including as a ~~public~~result ~~company~~of our Chapter 11 reorganization;

•the ability of the Company to continue to operate in the ordinary course of business while the Restructuring and Chapter 11 process are pending and without disruptions to relationships with suppliers, customers, employees and other third parties and regulatory authorities;

•the risks and uncertainties related to our Chapter 11 Cases;

•the effect of delays in our Chapter 11 Cases;

•the accuracy of our assumptions about the effectiveness of our Chapter 11 plan of reorganization;

•the ability of the Company to achieve its goals after the Chapter 11 reorganization;

•the Company’s ability to comply with covenants in the Debtor-in-Possession ("DIP") financing arrangements;

•the possibility that existing claims may not be discharged in the Chapter 11 Cases;

•the impact of the delisting from Nasdaq;

•increased administrative and legal costs related to the Restructuring Transactions and the Chapter 11 process;

•litigation and inherent risks involved in a Restructuring or bankruptcy process;

•the Company's potential need to seek additional strategic alternatives, including by raising additional equity capital or debt, by reducing or delaying its business activities, by initiating reductions in force or by selling assets;

•employee attrition and the Company's ability to retain senior management and other key personnel due to the distractions and uncertainties in connection with the Restructuring Transactions;

•the effect of changes on our capital structure from the Chapter 11 reorganization;

•expectations regarding the Company's liquidity, cash flows and uses of cash;

•expectations regarding the Company's ability to continue as a going concern;

•expectations regarding the Company’s strategies and future financial performance, including its future business plans or objectives, prospective performance and opportunities and competitors, revenues, products and services, pricing, operating expenses, market trends, capital expenditures, and the Company’s ability to invest in growth initiatives and pursue acquisition opportunities;

•our management team’s limited experience managing a public company;

•the highly competitive industries that the Company serves, which are also subject to rapid technological and regulatory changes, as well as customer consolidation;

•unfavorable market conditions, inflation, rising interest rates, supply chain disruptions, market uncertainty, public health outbreaks such as the COVID-19 pandemic and/or economic downturns;

•failure to properly manage projects, or project delays;

•failure to recover adequately on charges against project owners, subcontractors or suppliers for payment or performance;

•the loss of one or more key customers, or a reduction in their demand for the Company'’s services;

•our ability to maintain an appropriately sized workforce;

•our ability to prevent or recover from the operational and physical hazards to which our business is subject to;

•the Company'’s backlog being subject to cancellation and unexpected adjustments;

•the seasonality of the Company'’s business, which is affected by the spending patterns of the Company'’s customers and timing of governmental permitting, as well as weather conditions and natural catastrophes;

•system and information technology interruptions and/or data security breaches;

•failure to comply with environmental laws;

•the Company's significant amount of debt, which could adversely affect its business, financial condition and results of operations or could affect its ability to access capital markets in the future, and may prevent the Company from engaging in transactions that might be beneficial due to restrictive debt covenants; and

•the Company's status as a "controlled company" within the meaning of the NASDAQ rules and, as a result, qualifying for exemptions from certain corporate governance requirements, as a result of which you will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of QualTek prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Except to the extent required by applicable law or regulation, QualTek undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report to reflect the occurrence of unanticipated events.

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•the Company’s significant amount of debt, which could adversely affect its business, financial condition and results of operations or could affect its ability to access capital markets in the future, and may prevent the Company from engaging in transactions that might be beneficial due to restrictive debt covenants; and

•the Company’s status as a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualifying for exemptions from certain corporate governance requirements, as a result of which you will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of QualTek prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q to reflect the occurrence of unanticipated events.

iii

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUALTEK SERVICES INC.

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(Unaudited - in thousands, except share and per share information)

	October 1, 2022		December 31, 2021
	April 1, 2023		December 31, 2022
Assets
Current assets:
Cash	$	~~735~~8,149	$	~~606~~495
Accounts receivable, net of allowance for doubtful accounts of $2,778 and $5,614, respectively	286,898		201,845
Accounts receivable, net of allowance for doubtful accounts of $5,071 thousand and $5,408 thousand, respectively	222,580		244,964
Inventories, net	116,~~568~~728		59,~~409~~033
Prepaid expenses	106,~~575~~843		125,~~140~~289
Other current assets	16,~~914~~536		62,~~523~~815
Total current assets	~~311~~250,~~690~~836		~~226~~262,~~523~~596
Property and equipment, net of accumulated depreciation of $39,344 and $29,515, respectively	54,671		50,682
Property and equipment, net of accumulated depreciation of $43,732 thousand and $39,671 thousand, respectively	63,958		59,818
Intangible assets, net	332,216		364,174
Operating lease right-of-use assets	27,405		28,566
Goodwill	28,653		28,723
Intangible assets, net	311,157		321,686
Other non-current assets	1,842		1,657
Goodwill	14,493		14,493
Total assets	$	729,072	$	671,759
Other non-current assets	4,072		1,768
Total assets	$	671,921	$	688,927
Liabilities and Deficit
Current liabilities:
Current portion of long-term debt and capital lease obligations	$	22,440	$	127,375
Current portion of long-term debt and finance lease obligations, net	$	592,867	$	556,426
Accounts payable	95,417		60,726
Current portion of operating lease liability	9,516		9,594
Accrued expenses	49,944		52,986
Accounts payable	77,311		83,298
Other current liabilities	24,520		26,120
Accrued expenses	48,131		50,510
Total current liabilities	192,321		267,207
Contract liabilities	22,358		24,094
Capital lease obligations, net of current portion	19,180		19,851
Total current liabilities	750,183		723,922
Long-term debt, net of current portion	545,445		418,813
Long-term finance lease liabilities	27,337		22,875
Tax receivable agreement liabilities	32,972		—
Long-term operating lease liability	21,217		22,491
Other non-current liabilities	8,332		32,866
Tax receivable agreement liabilities	15,084		15,084
Total liabilities	798,250		738,737
Other non-current liabilities	5,277		5,275
Commitments and contingencies (Notes 8 and 16)
Total liabilities	819,098		789,647
Commitments and contingencies (Notes 6 and 14)
Deficit:
Class A common stock, $0.0001 par value; 500,000,000 shares authorized, 24,446,284 issued and outstanding at October 1, 2022; 11,923,941 shares authorized, issued, and outstanding at December 31, 2021	2		1
Class A common stock, $0.0001 par value; 500,000,000 shares authorized, 27,805,659 issued and outstanding at April 1, 2023 and December 31, 2022	3		3
Class B common stock, $0.0001 par value; 500,000,000 shares authorized, 26,663,575 issued and outstanding at October 1, 2022; 13,085,488 shares authorized, issued, and outstanding at December 31, 2021	3		1
Class B common stock, $0.0001 par value; 500,000,000 shares authorized, 23,304,200 issued and outstanding at April 1, 2023 and December 31, 2022	2		2
Additional paid-in capital	~~178~~174,~~857~~507		~~252~~174,~~593~~112
Accumulated deficit	(~~209~~251,~~832~~142)		(~~320~~226,~~080~~648)
Non-controlling interest	(3870,~~208~~547)		—(48,189)
Accumulated other comprehensive income	—		507
Total deficit	(147,177)		(100,720)
Total deficit	(69,178)		(66,978)
Total liabilities and deficit	$	671,921	$	688,927
Total liabilities and deficit	$	729,072	$	671,759

See notes to the ~~condensed~~ consolidated financial statements.

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QUALTEK SERVICES INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited - in thousands, except share and per share information)

	~~For the Three Months Ended~~		For the Three Months Ended						~~For the Nine Months Ended~~
	October 1, 2022				October 2, 2021				October 1, 2022		October 2, 2021
			April 1, 2023				April 2, 2022
Revenue	$	~~216,120~~	$	156,246	$	~~215,462~~	$	148,161	$	~~548,503~~	$	~~465,184~~
Costs and expenses:
Cost of revenues, excluding depreciation and amortization	~~188,108~~		143,444		~~157,157~~		132,105		~~484,393~~		~~372,496~~
General and administrative	~~3,890~~		24,376		~~9,495~~		22,141		~~42,668~~		~~33,418~~
Transaction expenses	~~137~~		—		~~1,423~~		9,268		~~10,725~~		~~2,875~~
Depreciation and amortization	~~14,892~~		14,999		~~13,491~~		14,766		~~44,452~~		~~39,136~~
Total costs and expenses	~~207,027~~		182,819		~~181,566~~		178,280		~~582,238~~		~~447,925~~
Income (loss) from operations	9,093				33,896				(33,735)		17,259
Loss from operations			(26,573)				(30,119)
Other income (expense):
Gain on sale/disposal of property and equipment	3		304		~~210~~		1,915		~~2,063~~		~~514~~
Interest expense	~~(16,016)~~		(20,583)		~~(14,640)~~		(12,343)		~~(41,444)~~		~~(35,778)~~
Loss on extinguishment of convertible notes	—				—				—		(2,436)
Total other expense			(20,279)				(10,428)
Total other expense	(16,013)				(14,430)				(39,381)		(37,700)
Net loss			(46,852)				(40,547)
(Loss) income from continuing operations	(6,920)				19,466				(73,116)		(20,441)
Less: Net loss attributable to non-controlling interests			(22,358)				(35,547)
Loss from discontinued operations	—				(4,985)				—		(8,114)
Net loss attributable to QualTek Services Inc.			$	(24,494)			$	(5,000)
Net (loss) income	(6,920)				14,481				(73,116)		(28,555)
Comprehensive loss			$	(24,494)			$	(5,000)
Less: Net loss attributable to non-controlling interests	(3,778)				—				(53,256)		—
Earnings per share:
Net (loss) income attributable to QualTek Services Inc.	(3,142)				14,481				(19,860)		(28,555)
Net loss per share - basic			$	(0.88)			$	(0.20)
Other comprehensive income:
Net loss per share - diluted			$	(0.91)			$	(0.20)
Foreign currency translation adjustments	—				(97)				—		75
Weighted average Class A common shares outstanding - basic			25,530,725				22,171,350
Comprehensive (loss) income	$	(3,142)			$	14,384			$	(19,860)	$	(28,480)
Weighted average Class A common shares outstanding - diluted			44,998,748				22,171,350
Earnings per share:
	Three months endedOctober 1, 2022				Three months endedOctober 2, 2021				February 14, 2022 throughOctober 1, 2022		Nine months ended October 2, 2021
Net (loss) income per share - continuing operations - basic	$	(0.13)			$	1.63			$	(0.81)	$	(1.86)
Net (loss) income per share - continuing operations - diluted	$	(0.13)			$	0.71			$	(0.85)	$	(1.86)
Net loss per share - discontinued operations - basic and diluted	$	—			$	(0.42)			$	—	$	(0.69)
Weighted average Class A common shares outstanding - basic	22,171,350				11,923,941				22,171,350		11,839,015
Weighted average Class A and B common shares outstanding - diluted	44,998,748				27,280,400				44,998,748		11,839,015

See notes to the ~~condensed~~ consolidated financial statements.

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QUALTEK SERVICES INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited - in thousands, except share information)

	Class A Shares			Class B Shares			Additional Paid-InCapital		AccumulatedDeficit		~~AccumulatedOtherComprehensiveIncome~~Non-controllingInterest		~~Non-controllingInterest~~TotalEquity (Deficit)		~~TotalEquity (Deficit)~~
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	11,923,941	$	1	13,085,488	$	1	$	252,593	$	(320,080)	$	507	$	—	$	(66,978)
Balance, December 31, 2022	27,805,659	$	3	23,304,200	$	2	$	174,112	$	(226,648)	$	(48,189)	(100,720)
Adoption of ASU 2020-06	—	—		—	—		(12,270)		8,861		—		—		(3,409)
Share based compensation	—	—		—	—		395		—		—		395
Share based compensation	—	—		462,572	—		6,711		—		—		—		6,711
Net loss	—	—		—	—		—		(24,494)		(22,358)		(46,852)
Business Combination	12,522,343	1		13,115,515	2		(35,621)		121,247		(507)		15,048		100,170
Balance, April 1, 2023	27,805,659	$	3	23,304,200	$	2	$	174,507	$	(251,142)	$	(70,547)	(147,177)
Tax receivable agreement liability	—	—		—	—		(34,092)		—		—		—		(34,092)
Net loss	—	—		—	—		—		(5,000)		—		(35,547)		(40,547)
Balance, April 2, 2022	24,446,284	$	2	26,663,575	$	3	$	177,321	$	(194,972)	$	—	$	(20,499)	$	(38,145)
Share based compensation	—	—		—	—		1,114		—		—		—		1,114
Net loss	—	—		—	—		—		(11,718)		—		(13,931)		(25,649)
Balance, July 2, 2022	24,446,284	$	2	26,663,575	$	3	$	178,435	$	(206,690)	$	—	$	(34,430)	$	(62,680)
Share based compensation	—	—		—	—		422		—		—		—		422
Net loss	—	—		—	—		—		(3,142)		—		(3,778)		(6,920)
Balance, October 1, 2022	24,446,284	$	2	26,663,575	$	3	$	178,857	$	(209,832)	$	—	$	(38,208)	$	(69,178)

	Preferred Shares			Class A Shares			Class B Shares			Additional Paid-InCapital		AccumulatedDeficit		AccumulatedOtherComprehensiveIncome		TotalEquity (Deficit)
	Class A Units			Class A Shares			Class B Shares			Additional Paid-InCapital		AccumulatedDeficit		AccumulatedOtherComprehensiveIncome		Non-controllingInterest		TotalEquity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount
Balance, December 31, 2020	25,000	$	25,000	10,989,751	$	1	11,173,776	$	1	$	208,322	$	(204,086)	$	396	$	29,634
Balance, December 31, 2021	2,258,909	$	252,595	—	$	—	—	$	—	$	—	$	(320,080)	$	507	$	—	$	(66,978)
Issuance of Common Stock	—	—		934,190	—		683,344	—		15,000		—		—		15,000
Adoption of ASU 2020-06	—	—		—	—		—	—		(12,270)		8,861		—		—		(3,409)
Issuance of Common Stock - non-return	—	—		—	—		—	—		367		—		—		367
Share based compensation	—	—		—	—		462,572	—		6,711		—		—		—		6,711
Beneficial conversion feature on convertible notes	—	—		—	—		—	—		4,946		—		—		4,946
Business Combination	(2,258,909)	(252,595)		24,446,284	2		26,201,003	3		216,972		121,247		(507)		15,048		100,170
Acquisition (see Note 4)	—	—		—	—		176,978	—		2,000		—		—		2,000
Tax receivable agreement liability	—	—		—	—		—	—		(34,092)		—		—		—		(34,092)
Other comprehensive income	—	—		—	—		—	—		—		—		172		172
Net loss	—	—		—	—		—	—		—		(5,000)		—		(35,547)		(40,547)
Net loss	—	—		—	—		—	—		—		(21,206)		—		(21,206)
Balance, April 2, 2022	—	$	—	24,446,284	$	2	26,663,575	$	3	$	177,321	$	(194,972)	$	—	$	(20,499)	$	(38,145)
Balance, April 3, 2021	25,000	$	25,000	11,923,941	$	1	12,034,098	$	1	$	230,635	$	(225,292)	$	568	$	30,913
Beneficial conversion feature on convertible notes	—	—		—	—		—	—		11,958		—		—		11,958
Paid in kind preferred unit distribution	—	5,568		—	—		—	—		—		(5,568)		—		—
Preferred shares exchanged for convertible notes	(25,000)	(30,568)		—	—		—	—		—		—		—		(30,568)
Net loss	—	—		—	—		—	—		—		(21,830)		—		(21,830)
Balance, July 3, 2021	—	$	—	11,923,941	$	1	12,034,098	$	1	$	242,593	$	(252,690)	$	568	$	(9,527)
Other Comprehensive loss	—	—		—	—		—	—		—		—		(97)		(97)
Net income	—	—		—	—		—	—		—		14,481		—		14,481
Balance, October 2, 2021	—	$	—	11,923,941	$	1	12,034,098	$	1	$	242,593	$	(238,209)	$	471	$	4,857

See notes to the ~~condensed~~ consolidated financial statements.

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QUALTEK SERVICES INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

	For the Nine Months Ended
	For the Three Months Ended
	October 1, 2022		October 2, 2021
	April 1, 2023		April 2, 2022
Cash flows from operating activities:
Net loss	$	(7346,~~116~~852)	$	(2840,~~555~~547)
Loss from discontinued operations	—		8,114
Adjustments:
Depreciation and amortization	4414,~~452~~999		4614,~~106~~766
Loss on extinguishment of convertible notes	—		2,436
Amortization of debt issuance costs	1,576		1,668
Amortization of debt issuance costs	4,075		3,201
Share-based compensation - stock options	395		—
Change in fair value of contingent consideration	(11,763)		(4,544)
Share-based compensation - Class P Units	—		6,711
Stock-based compensation	8,247		—
Provision for bad debt expense	(196)		(1,006)
Provision for bad debt expense	(683)		2,539
Gain on sale of property and equipment	(304)		(1,915)
Gain on disposal of property and equipment	(2,063)		(514)
Other	231		—
Accretion from contingent consideration	1,050		—
Other	(2,331)		—
Changes in assets and liabilities:
Accounts receivable	~~(84~~22,~~370)~~581		(6310,~~484~~475)
Inventories	(62,~~159)~~306		~~290~~(1,176)
Prepaid expenses and other assets	5(7,~~990~~539)		(41,~~586)~~374
Accounts payable and accrued liabilities	34(8,~~193~~435)		(8,~~729~~827)
Contract liabilities	(1,~~167~~736)		(21,~~691~~259)
Net cash used in operating activities from continuing operations	$	(8122,~~311~~974)	$	(3240,~~959~~686)
Net cash used in operating activities from discontinued operations	—		(3,011)
Net cash provided by operating activities from discontinued operations	$	—	$	1,063
Net cash used in operating activities	$	(8122,~~311~~974)	$	(3539,~~970~~623)
Cash flows from investing activities:
Purchases of property and equipment	(~~4,392~~941)		(~~2,202~~801)
Proceeds from sale of property and equipment	~~2,971~~407		~~726~~2,278
Acquisition of businesses, net of cash acquired (see Note 4)	—		(37,057)
Net cash (used in) provided by investing activities	$	(534)	$	1,477
Net cash used in investing activities from continuing operations	$	(1,421)	$	(38,533)
Net cash provided by investing activities from discontinued operations	—		$	2,178
Net cash used in investing activities	$	(1,421)	$	(36,355)
Cash flows from financing activities:
Proceeds from line of credit	569,410		435,370
Repayment of line of credit	(6,181)		(48,069)
Repayment of line of credit	(554,820)		(398,965)
Proceeds from senior unsecured convertible notes	—		124,685
Proceeds from convertible notes – related party	—		5,000
Proceeds of short-term debt (net)	54,926		—
Repayment of convertible notes – related party	—		(5,000)
Debt issuance costs	(11,089)		—
Proceeds from convertible notes – June 2021	—		44,400
Repayment of short-term debt	(2,391)		(2,391)
Proceeds from senior unsecured convertible notes	124,685		—
Repayment of acquisition debt	—		(34,718)
Repayment of long-term debt	(7,173)		(7,173)
Repayment of promissory note	—		(500)
Repayment of acquisition debt	(39,718)		—
Payments for financing fees	—		(8,928)
Repayment of promissory note	(500)		—
Payments of finance leases	(4,103)		(4,330)
Payments for financing fees	(8,928)		(2,220)
Proceeds from issuance of common stock - PIPE	—		36,948
Payments of capital leases	(11,916)		(7,000)
Payments for equity issuance costs	—		(24,999)
Proceeds from issuance of common stock	36,948		—
Tax distributions to members	—		(98)
Proceeds from issuance of preferred units	—		15,367
Net cash provided by financing activities	$	31,162	$	37,600
Payments for equity issuance costs	(24,999)		—
Effect of foreign currency exchange rate translation on cash	—		(10)
Tax distributions to members	(128)		—
Net increase (decrease) in cash	7,654		(556)
Net cash provided by financing activities from continuing operations	$	82,861	$	79,779
Net cash used in financing activities from discontinued operations	—		(911)
Net cash provided by financing activities	$	82,861	$	78,868
Effect of foreign currency exchange rate (translation) on cash	—		(35)
Net increase in cash	$	129	$	6,508
Cash:
Beginning of period	606		169
Beginning of year	$	495	$	2,151
End of period	$	735	$	6,677
End of year	$	8,149	$	1,595
Balances included in the condensed consolidated balance sheets:
Balances included in the consolidated balance sheets:
Cash	$	~~735~~8,149	$	~~5,405~~180
Cash included in current assets of discontinued operations	—$	—	~~1,272~~$	1,415
Cash at end of period	$	735	$	6,677
Cash at end of year	$	8,149	$	1,595
Supplemental disclosure of cash flow information:
Cash paid for:
Interest from continuing operations	$	13,266	$	12,287
Non-cash investing and financing activities:
Assets acquired under capital leases from continuing operations	$	11,030	$	948
Assets acquired under financing leases from continuing operations	$	8,239	$	5,264

See notes to the ~~condensed~~ consolidated financial statements.

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NOTES TO THE ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business: QualTek Services, Inc. (~~f/k/a Roth CH Acquisition III Co. ("ROCR")) (~~collectively with its consolidated subsidiaries, "“QualTek"”, the "“Company"”, "“we"”, "“our"”, or "“us"”) is a leading provider of communication infrastructure services and renewable solutions, delivering a full suite of critical services to major telecommunications and utility customers across the United States.

We operate in two reportable segments, which reflects the way performance is assessed and resources are allocated by our Chief Executive Officer, who is our chief operating decision maker. Our Telecom segment provides engineering, construction, installation, network design, project management, site acquisition and maintenance services to major telecommunication carriers, cable providers and utility companies in various locations in the United States. Our Renewables and Recovery Logistics segment provides businesses with continuity and disaster recovery operations as well as new fiber optic construction services and maintenance and repair services for telecommunications, renewable energy, commercial and utilities customers across the United States.

On February 14, 2022, QualTek Services Inc. completed the Business Combination (the “Business Combination”) with QualTek HoldCo, LLC ("“QualTek HoldCo"”) (f/k/a BCP QualTek HoldCo, LLC), a Delaware limited liability company (“BCP QualTek”) (the “Closing”), pursuant to the Business Combination Agreement (the “Business Combination Agreement”) dated as of June 16, 2021, by and among (i) ROCR, (ii) Roth CH III Blocker Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of ROCR (“Blocker Merger Sub”), (iii) BCP QualTek Investors, LLC, a Delaware limited liability company (the “Blocker”), (iv) Roth CH III Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of ROCR (“Company Merger Sub”), (v) BCP QualTek and (vi) BCP QualTek, LLC, a Delaware limited liability company, solely in its capacity as representative of the Blocker’s equity holders and BCP QualTek’s equity holders.

The cumulative value of the merger consideration in the Business Combination was $306,888 thousand. Blocker Merger Sub merged with and into the Blocker (the “Blocker Merger”), resulting in the equity interests of the Blocker being converted into the right to receive 11,924 thousand shares of Class A common stock of the Company (the “Class A Common Stock”), and the owners of such equity interests in the Blocker (the “Blocker Owners”) being entitled to such shares of Class A Common Stock at the Closing, and thereafter, the surviving Blocker merged with and into ROCR, with ROCR as the surviving company (the “Buyer Merger”), resulting in the cancellation of the equity interests of the surviving Blocker and ROCR directly owning all of the units of QualTek HoldCo (the “QualTek Units”) previously held by the Blocker. Immediately following the Buyer Merger, Company Merger Sub merged with and into QualTek HoldCo, with QualTek HoldCo as the surviving company (the “QualTek Merger”), resulting in (i) QualTek HoldCo becoming a subsidiary of ROCR, (ii) the QualTek Units (excluding those held by the Blocker and ROCR) being converted into the right to receive 18,765 thousand shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”) and the holders of QualTek Units being entitled to such shares of Class B Common Stock at the Closing, (iii) the QualTek Units held by ROCR being converted into the right to receive a number of common units of QualTek HoldCo (the “Common Units”) equal to the number of shares of Class A Common Stock issued and outstanding (i.e., 21,571 thousand QualTek Units), less the number of Common Units received in connection with the contribution described immediately below (i.e., 16,160 thousand QualTek Units). With respect to the portion of merger consideration to which the Blocker Owners and holders of QualTek Units were entitled as described above, the cumulative value of such merger consideration equaled the Equity Value. The “Equity Value” is the sum of (i) $294,319 thousand, plus (ii) the value of any Equity Interests of the Company issued as consideration for any acquisitions by the Company prior to the Closing (i.e., $10,000 thousand), plus (iii) the amount of interest accrued on that certain convertible promissory note (see Note 86-Debt and Capital Lease Obligations) in an aggregate principal amount of $30,558 thousand issued by the Company to BCP QualTek II in exchange for all of BCP QualTek II’s Class B Units. No portion of the merger consideration was paid in cash. The foregoing represents the total consideration to be paid to the Blocker Owners and holders of QualTek Units in connection with the Business Combination. The Company contributed, as a capital contribution in exchange for a portion of the QualTek Units it acquired in the QualTek Merger (i.e., 16,160 thousand QualTek Units), $161,604 thousand, representing the amount of cash available after payment of the merger consideration under the Business Combination Agreement, which was used in part by QualTek or its Subsidiaries to pay the transaction expenses under the Business Combination Agreement.

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On February 14, 2022, in connection with the Closing of the Business Combination, the Company:

–entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, as trustee (the "Trustee"), and certain guarantors party thereto, including, among others, certain subsidiaries of the Company, in respect of $124,685 thousand in aggregate principal amount of senior unsecured convertible notes due 2027 (“2027 Convertible Notes”, see Note 86-Debt and Capital Lease Obligations) that were issued to certain investors (collectively, the “Convertible Note Investors”). The Convertible Notes were purchased by the Convertible Note Investors pursuant to certain convertible note subscription agreements, dated as of February 14, 2022, between the Company and each of the Convertible Note Investors (collectively, the “Convertible Note Subscription Agreements”);

–received $35,915 thousand in aggregate consideration from Private Investment in Public Equity (“PIPE”) ~~Subscribers~~subscribers ~~Investors~~investors in exchange for 3,989 thousand shares of Class A ~~common~~Common ~~stock, pursuant to PIPE Subscription Agreements (“PIPE Financing”)~~Stock;

–received $1,033 thousand from ROCR at closing, comprised of $1,004 thousand from the trust account for 100 thousand shares that were not redeemed by the public shareholders and $29 thousand of cash from ROCR's closing balance sheet;

–issued 2,275 thousand shares of Class A Common Stock (“Blocker Owner Earnout Shares”) and 3,836 thousand shares of Class B Common Stock (“Earnout Voting Shares”) (collectively, the “Earnout Shares”) that are subject to certain restriction on transfer and voting and potential forfeiture pending the achievement of the earn out targets;

–converted ~~Convertible~~convertible notes –due June 2021 (~~see~~“Convertible ~~Note~~notes 8-~~Debt~~ ~~and~~June ~~Capital Lease Obligations~~2021”) into 2,875 thousand shares of Class A ~~common~~Common ~~stock~~Stock and 4,063 thousand shares of Class B common stock;

–assumed 2,875 thousand warrants (“Public Warrants”) and 102 thousand ~~Private~~private ~~Placement~~placement ~~Warrants~~warrants sold by ROCR as part of its initial public offering (“Private Placement Warrants”);

–fully repaid $34,718 thousand of acquisition debt ~~(see Note 8-Debt and Capital Lease Obligations)~~ plus accrued interest with the proceeds from the transaction;

–paid down $73,000 thousand of debt associated with the QualTek Holdco line of credit ~~(see Note 8-Debt and Capital Lease Obligations)~~;

–paid down $500 thousand of ROCR's promissory note; and

–pursuant to the Tax Receivable Agreement (“TRA”) entered into by and between the Company, QualTek HoldCo, LLC, the TRA Holders (as defined in the TRA) and the TRA Holder Representative (as defined in the TRA), the Company will be required to pay the TRA Holders 85% of the amount of savings, if any, that the Company is deemed to realize in certain circumstances as a result of certain tax attributes that exist following the Business Combination and that are created thereafter, including as a result of payments made under the TRA. Refer to Note 1412-Tax Receivable Agreement regarding the disclosures of the impact of the TRA as of the Closing Date and as of ~~October~~April 1, ~~2022~~2023.

The Business Combination is accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”) with QualTek HoldCo treated as the accounting acquirer. Accordingly, our consolidated financial statements represent a continuation of the financial statements of QualTek HoldCo with net assets of QualTek Services Inc. stated at historical cost. Following the closing of the Business Combination, the combined company is organized in an “Up-C” structure in which QualTek Services Inc. became the sole managing member of QualTek HoldCo and therefore, operates and controls all of the business and affairs of QualTek HoldCo. Accordingly, QualTek Services Inc. consolidates the financial results of QualTek HoldCo, and reports a non-controlling interest in its consolidated financial statements representing the economic interest in QualTek HoldCo owned by the members, other than the Blocker, of QualTek HoldCo referred to as the “Flow-Through Sellers.” As of ~~October~~April 1, ~~2022~~2023, the Company owned an economic interest of approximately 52% in QualTek HoldCo. The remaining approximately 48% economic interest is owned by the Flow-Through Sellers.

Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP, under the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and on a basis consistent with the audited consolidated financial statements and related notes thereto of QualTek HoldCo and its consolidated subsidiaries as of and for the year ended December 31, 2022. The consolidated balance sheet of QualTek HoldCo as of December 31, 2022, was derived from audited annual financial statements but does not contain all of the

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~~economic~~footnote ~~interest~~disclosures offrom ~~approximately~~the ~~45%~~annual financial statements. These unaudited consolidated financial statements should be read in conjunction with such audited consolidated financial statements and related notes thereto of QualTek HoldCo., ~~The~~which ~~remaining~~are ~~approximately~~included ~~55%~~in ~~economic~~the ~~interest~~Company’s isAnnual ~~owned~~Report byon Form 10-K filed with the ~~Flow~~SEC on April 28, 2023 (the “Form 10-~~Through~~K”) ~~Sellers~~and 10-K/A filed with SEC on May 2, 2023 (“Form 10-K/A”).

~~Basis~~These ~~of Presentation: The accompanying~~ unaudited ~~condensed~~ consolidated financial statements ~~have~~include ~~been~~all ~~prepared~~adjustments in(consisting ~~accordance~~only ~~with GAAP, under the rules and regulations~~ of ~~the~~normal ~~U.S.~~recurring ~~Securities~~adjustments ~~and~~unless ~~Exchange~~otherwise ~~Commission~~noted) ~~(the~~that ~~“SEC”)~~management ~~and~~considers onnecessary for a ~~basis~~fair ~~consistent~~statement ~~with~~of the ~~audited~~Company’s ~~consolidated~~results ~~financial~~of ~~statements~~operations, ~~and~~financial ~~related~~condition, ~~notes~~cash ~~thereto~~flows ~~of QualTek HoldCo~~ and ~~its~~stockholders’ ~~consolidated~~equity ~~subsidiaries as of and~~ for the ~~year~~interim ~~ended~~periods ~~December 31, 2021~~presented. ~~The~~Due ~~consolidated~~to ~~balance~~the ~~sheet~~seasonal nature of ~~QualTek~~the ~~HoldCo~~Company's ~~as of December 31~~business, ~~2021,~~interim ~~was~~results ~~derived~~are ~~from audited annual financial statements but does~~ not ~~contain~~necessarily ~~all~~indicative of the ~~footnote~~results ~~disclosures~~to ~~from the annual financial statements. These unaudited condensed consolidated financial statements should~~ be ~~read~~expected infor ~~conjunction with such audited consolidated financial statements and related notes thereto of QualTek HoldCo, which are included in~~ the ~~Company’s~~full ~~Form 8-K filed with the SEC on September 16, 2022 (the "Form 8-K")~~year.

These unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments unless otherwise noted) that management considers necessary for a fair statement of the Company’s results of operations, comprehensive loss, financial condition, cash flows and stockholders’ equity for the interim periods presented. Due to the seasonal nature of the Company's business, interim results are not necessarily indicative of the results to be expected for the full year.

Certain prior-year information has been reclassified to conform to the current-year presentation for comparability purposes.

Going Concern

The accompanying ~~condensed~~ consolidated financial statements have been prepared assuming that the Company will continue as a going concern., ~~This~~which ~~basis~~contemplates the realization of ~~presentation~~assets ~~contemplates~~and satisfaction of liabilities in the ~~recovery~~normal course of ~~our~~business. ~~assets~~The Company has negative working capital and recurring losses from operations, recurring negative cash flows from operations and substantial cumulative net losses to date. As previously reported in the ~~satisfaction~~Company’s Current Reports on Form 8-K filed with the SEC on May 31, 2023 and July 7, 2023, on May 24, 2023 (the "Petition Date"), the Company and certain of ~~liabilities~~its subsidiaries (together with the Company, the “Company Parties”) commenced voluntary cases (the "Chapter 11 Cases") under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Chapter 11 cases are being jointly administered by the Bankruptcy Court under the lead case In re QualTek Services Inc., Case No. 23-90584 (CML). The Company expects to incur significant professional fees and other costs in connection with, and throughout, the Chapter 11 Cases. The Company expects to continue operations in the normal course for the duration of the Chapter 11 Cases. To ensure ordinary course operations, the Company obtained approval from the Bankruptcy Court for certain “first day” motions to continue its ordinary course operations after the filing date. On June 13, 2023, the Company received approval from the Bankruptcy Court for $40,000 thousand of financing from the Term Loan Debtor-in-Possession ("DIP") Facility, which will provide it with immediate liquidity so that the Company can continue operating its business as usual during the Chapter 11 Cases and pay the costs and professional fees associated therewith, although the Company plans to lower its operating budget and further reduce the scale of its operations in connection with the Chapter 11 Cases. However, for the duration of the Chapter 11 Cases, the Company’s operations and ability to develop and execute its business plan, its financial condition, liquidity and its continuation as a going concern are subject to a high degree of risk and uncertainty associated with the Chapter 11 Cases. The outcome of the Chapter 11 Cases is dependent upon factors that are outside of the Company’s control, including actions of the Bankruptcy Court. The Company can give no assurances that it will be able to secure additional sources of funds to support its operations, or, if such funds are available to the Company, that such additional financing will be sufficient to meet its needs. See Note 16. Subsequent Events for further information.

~~During~~As ~~2022~~such, ~~the~~management ~~Company’s~~cannot ~~interest~~conclude ~~costs~~that ~~have~~such ~~increased~~plans aswill abe ~~result~~effectively ofimplemented within one year after the ~~Federal~~date ~~Reserve~~that ~~raising~~the ~~interest~~financial ~~rates~~statements asare ~~well~~issued. asAs ~~the~~a result, ofmanagement ~~certain~~has ~~amendments~~concluded tothat the aforementioned conditions, among others, raise substantial doubt about the Company’s ~~credit~~ability ~~facility. This~~to ~~increased~~continue ~~interest~~as ~~cost~~a ~~will~~going ~~make~~concern itfor ~~more~~one ~~difficult~~year ~~for~~after the ~~Company~~date tothe ~~meet its~~ financial ~~covenants~~statements inare ~~the future~~issued.

~~The~~If ~~ability of~~ the Company ~~to continue as a going concern~~ is ~~subject~~unable to araise ~~number~~additional ~~of risks, including uncertainty related to a dependence on outside sources of~~ capital ~~and operating~~ in ansufficient ~~increased~~amounts ~~interest~~or ~~rate~~on ~~environment.~~terms ~~The~~acceptable, ~~attainment~~or ofimprove ~~profitable~~its ~~operations~~current isdebt ~~dependent on future events~~levels, ~~including~~the ~~obtaining~~Company ~~adequate~~may ~~financing~~have to ~~fulfill~~significantly ~~growth~~scale ~~initiatives~~back ~~and~~its ~~operating~~operations. ~~activities,~~The ~~generating~~consolidated ~~adequate~~financial ~~profitability~~statements todo ~~support~~not ~~the~~reflect ~~current~~any ~~debt~~adjustments ~~structure~~that ~~and~~might ~~reorganizing~~be ~~the~~necessary ~~capital~~if ~~structure,~~the ~~including~~Company ~~maintaining~~is ~~adequate~~unable ~~availability~~to ~~under~~continue ~~our~~as ~~line~~a ofgoing ~~credit to fund ongoing operations~~concern.

~~The~~If the Company’s ~~capital~~raises ~~requirements~~additional ~~will~~funds ~~depend~~by onissuing ~~several~~equity ~~factors~~securities, substantial dilution to existing stockholders will result. ~~The~~If the Company’s ~~plans~~raises toadditional ~~mitigate~~funds ~~against~~by ~~these~~incurring ~~factors~~debt ~~include~~financing, ~~improving~~the ~~profitability~~terms ~~within~~of the ~~Company’s~~debt ~~Telecom~~may ~~Segment,~~involve ~~working~~significant tocash ~~achieve~~payment aobligations ~~more~~as ~~sustainable~~well ~~leverage~~as ~~model~~covenants and ~~reviewing~~specific ~~funding~~financial ~~sources~~ratios tothat ~~support~~may restrict the Company’s ~~business~~ability ~~plan~~to ~~and~~operate ~~current~~its ~~backlog~~business.

Based on evaluation of the significance of the conditions described above, there is substantial doubt the Company will have sufficient funds to meet its obligations within one year from the date the condensed consolidated financial statements were issued and continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the current facts and circumstances. Actual results could differ from those estimates and assumptions.

Emerging Growth Company: The Company is an “Emerging Growth Company” (“EGC”),” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it is exempted from certain reporting requirements that are applicable to other public companies that are not EGCs including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

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from certain reporting requirements that are applicable to other public companies that are not EGCs including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(l) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised, it will have different application dates for public or private companies, the Company, as an EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an EGC nor an EGC which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Risks and uncertainties: The OnCompany’s ~~January~~business ~~30,~~operations ~~2020,~~may ~~the~~be ~~World~~adversely ~~Health~~impacted ~~Organization~~by ~~declared~~its ~~the~~current ~~COVID-19~~liquidity ~~outbreak~~constraints. As a ~~“Public~~result ~~Health Emergency~~ of ~~International~~these ~~Concern”~~liquidity ~~and on March 11~~constraints, ~~2020,~~the ~~declared~~Company ithas tofiled befor apetition ~~pandemic.~~under ~~Actions~~Chapter ~~taken~~11 ~~around~~of the ~~world~~U.S. toBankruptcy ~~help~~Code. ~~mitigate~~For the ~~spread~~duration of the ~~coronavirus~~Chapter ~~include~~11 ~~restrictions~~Cases, onthe ~~travel,~~Company’s operations and ~~quarantines~~ability into ~~certain~~develop ~~areas,~~ and ~~forced~~execute ~~closures~~its ~~for~~business ~~certain~~plan, ~~types~~its offinancial ~~public~~condition, ~~places~~liquidity and ~~businesses.~~its ~~COVID-19~~continuation ~~and~~as ~~actions~~a ~~taken~~going concern are subject to ~~mitigate~~a ~~its~~high ~~spread~~degree ~~have~~of ~~had~~risk and ~~are~~uncertainty. ~~expected~~The toCompany’s ~~continue~~business tooperations ~~have~~may analso ~~adverse~~be ~~impact~~adversely onaffected ~~the~~by ~~economies~~various ~~and~~factors ~~financial~~that ~~markets~~could ofcause ~~many~~economic ~~countries,~~uncertainty ~~including~~and volatility in the ~~geographical~~financial ~~area~~markets, inmany of which ~~the~~are ~~Company~~beyond ~~operates.~~our control.

ItPrinciples isof ~~unknown~~Consolidation: ~~how~~The ~~long~~consolidated financial statements comprise the ~~adverse~~accounts ~~conditions~~of ~~associated~~the ~~with~~Company and its consolidated subsidiaries, including QualTek HoldCo. For the ~~coronavirus~~periods ~~will~~prior ~~last~~to ~~and~~the ~~what~~Business Combination, the ~~complete~~consolidated financial ~~effect~~statements ~~will~~of bethe toCompany comprise the ~~Company~~accounts of QualTek HoldCo and its consolidated subsidiaries.

Summary of Significant Accounting Policies: The Company’s significant accounting policies are discussed in Note 1 to BCP QualTek’s consolidated financial statements in the Form 8-K filed with the SEC on September 16, 2022. There have been no significant changes to these policies which have had a material impact on the Company’s interim unaudited consolidated financial statements and related notes during the three and nine months ended October 1, 2022, except as noted below.

Principles of Consolidation: For the periods subsequent to the Business Combination, the condensed consolidated financial statements comprise the accounts of the Company and its consolidated subsidiaries, including QualTek HoldCo.

For the periods prior to the Business Combination, the consolidated financial statements of the Company comprise the accounts of QualTek HoldCo and its consolidated subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Non-controlling Interests: The Company presents non-controlling interests as a component of equity on its unaudited ~~condensed~~ consolidated balance sheets and reports the portion of its loss for non-controlling interests as net loss attributable to non-controlling interests in the unaudited ~~condensed~~ consolidated statements of operations and comprehensive loss. ~~For~~The ~~the periods subsequent to the Business Combination, the~~ non-controlling interests represent the economic interest in QualTek Holdco held by the Flow-through Sellers (see Note 119-Equity).

~~Stock-Based~~Revenue ~~Compensation~~Recognition: ~~The~~Revenue ~~Company~~is ~~provides~~recognized ~~the~~when, ~~QualTek~~or ~~Services~~as, ~~Inc.~~control ~~2022~~of ~~Long-Term~~promised ~~Incentive~~goods ~~Plan~~and ~~(the~~services ~~“LTIP”),~~is ~~which~~transferred ~~was~~to ~~adopted~~customers, byand the ~~Board~~amount of ~~Directors~~revenue ~~and~~recognized ~~was~~reflects ~~approved by~~ the ~~Company’s~~consideration ~~stockholders~~to onwhich ~~February 14,~~the ~~2022. The~~ Company ~~measures~~expects ~~all stock-based awards granted~~ to ~~employees~~be ~~based~~entitled onin ~~the~~exchange ~~fair~~for ~~value on~~ the ~~date~~goods ofand ~~grant~~services ~~in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”)~~transferred. ~~Compensation~~A ~~expense~~contractual ofagreement ~~those~~exists ~~awards~~when iseach ~~recognized~~party ~~over~~involved ~~the~~approves ~~requisite~~and ~~service~~commits ~~period~~to, ~~which is generally~~ the ~~vesting~~rights ~~period~~ of the ~~respective~~parties ~~award. Generally, the Company issues awards with service-only vesting conditions~~ and ~~records~~payment ~~the~~terms ~~expense~~are ~~using~~identified, the ~~straight-line~~agreement ~~method.~~has ~~The~~commercial ~~Company~~substance, ~~accounts~~and ~~for~~collectability ~~forfeitures~~of asconsideration ~~they~~is ~~occur~~probable. The Company’s ~~uses~~services ~~the~~are ~~Black-Scholes~~performed ~~option-pricing~~for ~~model to determine~~ the ~~fair~~sole ~~value~~benefit of its ~~option~~customers, ~~awards~~whereby at the ~~time~~assets ofbeing ~~grant.~~created ~~The~~or ~~Company~~maintained ~~classifies~~are ~~stock-based~~controlled ~~compensation~~by ~~expense~~the incustomer ~~its~~and ~~unaudited~~the ~~condensed~~services ~~consolidated~~the ~~statements~~Company ofperforms ~~operations~~do innot ~~the~~have ~~same~~alternative ~~manner~~benefits infor ~~which~~ the ~~award recipient’s payroll costs are classified~~Company.

~~Income~~The ~~Taxes:~~Company ~~Prior~~earns torevenue ~~the~~primarily ~~Business~~from ~~Combination,~~construction ~~QualTek~~related ~~HoldCo~~projects ~~was~~under ~~treated~~certain asmaster aservice ~~partnership~~agreements ~~for~~("MSAs") ~~U.S. federal~~ and ~~most~~other ~~applicable~~service ~~state~~agreements ~~and~~contracts. ~~local~~Portions ~~income~~of ~~tax~~the ~~purposes.~~contracts Asinclude aone ~~partnership,~~or ~~QualTek~~multiple ~~HoldCo's~~performance ~~taxable~~obligations, ~~income~~which ~~and~~is ~~losses~~a ~~were~~contractual ~~passed~~promise ~~through~~ to ~~and~~deliver ~~included~~a indistinct ~~the~~good ~~taxable~~or ~~income~~transfer of ~~its~~a ~~members.~~specific ~~Accordingly,~~service ~~amounts~~to ~~related~~a tocustomer. ~~income~~We ~~taxes~~use ~~were~~different ~~zero~~methods ~~for~~of ~~QualTek~~revenue ~~HoldCo~~recognition ~~prior~~for todifferent ~~the~~types ~~Business~~of ~~Combination~~contracts.

For the Company’s projects recognized under the input method, the Company typically identifies two promised goods and services in the contract: (a) delivery of materials, for which revenue is recognized at a point in time, and (b) installation and construction services, for which revenue is recognized over time as related cost are incurred. The Company determined that the materials and the construction services are both considered distinct performance obligations. The Company’s customers are able to benefit from the materials and construction services both on their own and in connection with readily available resources, indicating that both promises are capable of being distinct. The Company further determined that its promises to transfer the materials and to provide the construction services are each separately identifiable from the other promises in the contract. Further, these promises do not represent inputs to a combined output which may represent a single performance obligation as no significant integration services are provided, there is not a high degree of customization, and

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~~Following~~ the ~~Business~~promises ~~Combination,~~are ~~the~~not ~~Company~~highly isinterrelated. ~~subject~~As toa ~~income~~result, ~~taxes at~~ the ~~U.S.~~Company ~~federal,~~concludes ~~state,~~that ~~and~~its ~~local~~input ~~levels~~method ~~for~~contracts ~~income~~typically ~~tax~~include ~~purposes,~~two ~~including~~performance ~~with~~obligations: ~~respect~~the tosale ~~its allocable share~~ of ~~any~~materials ~~taxable income~~ and ~~other~~construction ~~separately stated items of QualTek HoldCo~~services.

~~Income~~Revenue ~~taxes are accounted~~ for ~~using~~engineering, ~~the asset and liability method of accounting. Under this method~~construction, ~~deferred~~project ~~tax~~management ~~assets~~ and ~~liabilities~~site ~~are~~acquisition ~~recognized~~services for the expected future tax consequence on differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are ~~expected~~primarily ~~to reverse. The effect on deferred assets and liabilities of a change in tax rates is~~ recognized inby ~~income~~the inCompany ~~the~~over ~~period~~time ~~when~~utilizing the ~~change is enacted. Deferred tax assets are reduced by a valuation allowance when it is “more~~cost-~~likely~~to-~~than-not”~~cost ~~that~~measure ~~some portion or all~~ of ~~the~~progress, ~~deferred~~which ~~tax~~is ~~assets~~an ~~will~~input ~~not~~method, beon ~~realized.~~contracts ~~The~~for ~~realization~~specific ofprojects, ~~the~~and ~~deferred~~for ~~tax~~certain ~~assets~~MSAs isand ~~dependent~~other onservice ~~the amount of future taxable income~~agreements.

~~Tax Receivable Agreement Liabilities:~~ The ~~TRA~~majority ~~liabilities~~of ~~represent~~our ~~amounts~~performance ~~payable~~obligations ~~to the Flow-through Sellers. The TRA liabilities~~ are ~~carried~~completed atwithin aone ~~value equal to the undiscounted expected future payments due under the TRA~~year. The ~~Company recorded its initial estimate of future payments as an increase in TRA liabilities and a decrease~~ cost-to ~~additional paid~~-incost ~~capital~~measure inof ~~the~~progress ~~consolidated~~best ~~financial~~depicts ~~statements. Subsequent adjustments to~~ the ~~liabilities~~continuous ~~for~~transfer ~~future~~of ~~payments~~control ~~under~~of ~~the~~goods ~~TRA~~or ~~related~~services to ~~changes~~the incustomer, ~~estimated~~and ~~future~~correspondingly, ~~tax~~when ~~rates~~performance orobligations ~~state income tax apportionment~~ are ~~recognized~~satisfied, ~~through~~for ~~current~~these ~~period net loss in the consolidated statements of operations and comprehensive loss~~contracts. ~~See Note 14-Tax Receivable Agreement.~~

~~Basic~~Revenue ~~and Diluted Loss Per Share: The Company applies the two-class method~~ for ~~calculating and presenting loss per share~~engineering, aerial and ~~separately~~underground ~~presents~~construction ~~loss per share~~ for ~~Class~~projects Awith ~~Common~~customer-specified ~~Stock.~~service ~~Shares~~requirements ~~of Class B Common Stock do not participate in the earnings and losses of the Company. As a result, the shares of Class B Common Stock~~ are ~~not~~primarily ~~considered~~performed ~~participating~~under ~~securities~~MSAs and ~~are~~other ~~not~~contracts ~~included~~that incontain ~~the weighted~~customer-~~average~~specified ~~shares~~service ~~outstanding for purposes of loss per share~~requirements. ~~The~~These ~~Company~~agreements ~~has~~include ~~issued~~pricing ~~and~~for ~~outstanding~~individual ~~Earnout Shares~~tasks, including, ~~the~~for ~~Blocker~~example, ~~Owner~~the ~~Earnout~~placement ~~Shares~~of ~~and~~underground ~~Earnout~~or ~~Voting~~aerial ~~Shares~~fiber, ~~which~~directional ~~are~~boring, ~~subject~~and tofiber ~~forfeiture~~splicing, ifeach ~~the~~based ~~achievement~~on ofa ~~certain~~specific ~~stock~~unit ~~price thresholds are not met within five years~~ of ~~the Business Combination~~measure. ~~The~~Revenue ~~basic and diluted net loss per share~~ is ~~presented~~recognized inover ~~conformity~~time ~~with the two-class method required for participating securities,~~ as ~~the~~services ~~Blocker Owner Earnout Shares~~ are ~~considered~~performed ~~participating~~and ~~securities.~~customers ~~Unvested~~simultaneously ~~Blocker~~receive ~~Owner~~and ~~Earnout~~consume ~~Shares are not included in~~ the ~~denominator~~benefits ofprovided ~~the~~by ~~basic and diluted loss per share calculation until~~ the ~~contingent condition is met~~Company. ~~The~~Output ~~Earnout~~measures ~~Voting~~such ~~Shares~~as ~~are~~units ~~not~~delivered ~~considered participating securities and~~ are ~~not~~utilized ~~included~~to inassess ~~the~~progress ~~weighted-average~~against ~~shares~~specific ~~outstanding~~contractual ~~for~~performance ~~purposes of calculating loss per share~~obligations.

~~Warrant Accounting:~~ The Company ~~accounts~~allocates ~~for~~total ~~warrants~~contract asconsideration ~~either~~to ~~equity-classified~~each orperformance ~~liability-classified~~obligation ~~instruments~~using ~~based on an assessment of~~ the ~~warrant’s~~expected ~~specific~~cost ~~terms~~plus ~~and~~a ~~applicable~~margin ~~authoritative~~approach ~~guidance~~to inestimate ~~ASC~~the ~~480,~~standalone ~~Distinguishing~~selling ~~Liabilities~~price ~~from~~of ~~Equity~~each ~~(“ASC~~performance ~~480”) and ASC 815, Derivatives and Hedging (“ASC 815”)~~obligation. The ~~assessment~~Company’s ~~considers~~customers ~~whether~~simultaneously ~~the~~receive ~~warrants~~and ~~are~~consume ~~freestanding~~the ~~financial~~benefit ~~instruments~~provided ~~pursuant~~by ~~to ASC 480, meet~~ the ~~definition of a liability pursuant to ASC 480~~Company, and ~~whether~~revenue ~~the~~is ~~warrants~~recognized ~~meet~~over ~~all~~time ofas ~~the~~services ~~requirements for equity classification under ASC 815, including whether the warrants~~ are ~~indexed~~performed ~~to the Company’s own ordinary shares, among other conditions~~ for ~~equity~~all ~~classification.~~performance ~~This~~obligations ~~assessment~~identified isin ~~conducted at~~ the ~~time~~contract. ofOutput ~~warrant~~measures ~~issuance~~such ~~and~~ as ofunits ~~each~~delivered ~~subsequent~~are ~~quarterly~~utilized ~~period~~to ~~end~~assess ~~date~~progress ~~while~~against ~~the~~specific ~~warrants~~contractual ~~are~~performance ~~outstanding~~obligations.

~~For~~Revenue ~~issued~~from orfulfillment, ~~modified warrants that meet all of the criteria for equity classification~~maintenance, ~~the~~and ~~warrants~~recovery ~~are~~services ~~required~~provided to ~~be recorded as a component of additional paid-in capital at~~ the ~~time~~telecommunication, ofcable ~~issuance.~~and ~~The~~utility ~~Company~~industries ~~recorded~~is ~~the~~recognized ~~Public Warrants assumed~~ as ~~part of~~ the ~~Business~~services ~~Combination~~are ~~as equity (see Note 11-Equity)~~rendered. ~~For~~These ~~issued~~services ~~or modified warrants that do not meet all the criteria for equity classification, the warrants~~ are ~~required~~generally toperformed beunder ~~recorded~~master ator ~~their~~other ~~initial~~service ~~fair~~agreements ~~value on the date of issuance,~~ and ~~each~~billed ~~balance~~on ~~sheet~~a ~~date~~contractually ~~thereafter.~~agreed ~~Changes~~price inper ~~the~~unit ~~estimated~~on ~~fair value of the warrants are recognized as~~ a ~~non-cash~~work ~~gain~~order ~~or loss on the consolidated statements of operations~~basis. ~~The~~Each ~~Company~~service ~~recorded~~is ~~the~~a ~~Private~~separate ~~Placement~~performance ~~Warrants~~obligation ~~assumed~~that asis ~~part~~recognized ofupon ~~the~~completion ~~Business~~at ~~Combination as~~ a ~~liability.~~point ~~The~~in ~~fair~~time ~~value~~as of the ~~Private~~service ~~Placement~~is ~~Warrants (see Note 9-Warrants) was estimated using Black-Scholes call option model (see Note 10-Fair Value Measurements)~~delivered.

~~Earnout~~Transaction ~~Shares:~~prices ~~During~~for the ~~five-year~~Company’s ~~period~~contracts ~~following~~may ~~the~~include ~~closing~~variable ofconsideration ~~the~~such ~~Business~~as ~~Combination~~contracted ~~(the~~materials. ~~“Earnout~~Management ~~Period”),~~estimates ~~(i)~~variable ifconsideration ~~the~~for ~~closing~~a ~~sale~~performance ~~price~~obligation ~~per~~utilizing ~~share~~estimation ofmethods ~~Class~~that Ait ~~Common~~believes ~~Stock~~best ~~equals~~predict orthe ~~exceeds~~amount ~~$15.00~~of ~~per~~consideration ~~share~~to ~~for~~which ~~20 trading days during any 30 consecutive trading day period, 50% of~~ the ~~Earnout~~Company ~~Shares~~ will be ~~earned,~~entitled. ~~and~~Variable ~~(ii)~~consideration ifis included in the ~~closing~~estimated ~~sale~~transaction price ~~per~~if ~~share~~it ofis ~~Class~~probable Athat ~~Common~~when ~~Stock~~the ~~equals~~uncertainty orassociated ~~exceeds~~with ~~$18.00~~the ~~per~~variable ~~share~~consideration ~~for~~is 20resolved, ~~trading~~there ~~days~~will ~~during~~not ~~any~~be 30a ~~consecutive~~significant ~~trading~~reversal ~~day~~of ~~period,~~ the ~~remaining~~cumulative ~~50%~~amount of ~~the~~revenue ~~Earnout~~that ~~Shares~~has ~~will~~been ~~be earned~~recognized. ~~Once the Earnout Shares are earned, they are no longer subject to the restrictions on transfer and voting.~~

Management’s estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on engineering studies, past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer and all other relevant information that is reasonably available at the time of the estimate. The effect of variable consideration on the transaction price of a performance obligation is typically recognized as an adjustment to revenue on a cumulative catch-up basis, as such variable consideration is generally for services encompassed under the existing contract.

To the extent variable consideration reflected in transaction prices are not resolved in accordance with management’s estimates, there could be reductions in, or reversals of, previously recognized revenue. Sales, use and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Most of the Company’s contracts include assurance warranties which do not include any additional distinct services other than the assurance that the services and materials comply with agreed-upon specifications. Therefore, there is not a separate performance obligation for these warranties.

For contracts containing more than one performance obligation, the Company allocates the transaction price on a relative standalone selling price (“SSP”) basis. The Company determines SSP based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, the Company estimates the SSP taking into account available information, such as market conditions and internally approved pricing guidelines related to the performance obligation.

Revenue generated from fulfillment, maintenance, compliance and recovery services as well as certain performance obligations related to material sales is recognized at a point in time. Point in time revenue accounted for approximately 30% and 41% of consolidated revenue for three months ended April 1, 2023 and April 2, 2022, respectively. Substantially

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~~The~~all ~~Earnout Shares are considered legally issued and outstanding shares of common stock subject to restrictions on transfer and voting and potential forfeiture pending~~ the ~~achievement~~Company’s ofother ~~the~~revenue ~~earn~~is ~~out~~recognized ~~targets~~over ~~described above~~time. The ~~Company~~selection ~~evaluated~~of the ~~Earnout~~method ~~Shares~~to ~~and~~measure ~~concluded~~progress ~~that~~towards ~~they~~completion ~~meet~~requires ~~the~~judgment ~~criteria~~and ~~for~~is ~~equity~~based ~~classification.~~on ~~The Earnout Shares were classified in stockholders’ equity, recognized at fair value upon~~ the ~~closing~~nature of the ~~Business~~services ~~Combination~~to ~~and will not~~ be ~~subsequently remeasured~~provided.

~~Convertible~~Significant Instruments: In August 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which is intended to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.Customers

~~For~~Revenue ~~the~~concentration ~~Company,~~information ~~ASU 2020-06 is effective~~ for ~~fiscal~~significant ~~years~~customers ~~beginning~~as ~~after~~a ~~December~~percentage ~~15, 2023, including interim periods within those fiscal years, with early adoption permitted. Adoption~~ of ~~the~~total ~~standard~~consolidated ~~requires~~revenue ~~using~~was ~~either~~as afollows ~~modified~~(in ~~retrospective or a full retrospective approach.~~thousands):

Effective January 1, 2022, the Company early adopted ASU 2020-06 using the modified retrospective method which enables entities to apply the transition requirements in this ASU at the effective date of ASU 2020-06 (rather than as of the earliest comparative period presented) with the effect of initially adopting ASU 2020-06 recognized as a cumulative-effect adjustment to accumulated deficit on the first day of the period adopted. Therefore, this transition method applies the amendments in ASU 2020-06 to outstanding financial instruments as of the beginning of the fiscal year of adoption (January 1, 2022), with the cumulative effect of the change recognized as an adjustment to the opening balance of accumulated deficit as of the date of adoption.


	For the Three Months Ended
	April 1, 2023				April 2, 2022
	Amount		% of Total		Amount		% of Total
Customers:
AT&T	$	67,829	43.4	%	$	55,983	37.8	%
Verizon	20,163		12.9	%	22,851		15.4	%
T-Mobile	18,993		12.2	%	19,183		13.0	%
Total	$	106,985	68.5	%	$	98,017	66.2	%

Stock-Based Compensation: The Company ~~applied~~provides ~~ASU~~the QualTek Services Inc. 2022 Long-~~2020-06~~Term toIncentive ~~all~~Plan ~~outstanding~~(the ~~financial~~“LTIP”), ~~instruments~~which aswas adopted by the Board of ~~January~~Directors 1and was approved by the Company’s stockholders on February 14, 2022. (The Company measures all stock-based awards granted to employees based on the fair value on the date of ~~adoption~~grant ofin ~~ASU~~accordance ~~2020-06).~~with ~~The~~ASC ~~Convertible~~718, ~~Notes~~Compensation -~~June~~ ~~2021~~Stock Compensation (~~see~~“ASC ~~Note~~718”). ~~8-Debt~~Compensation ~~and~~expense ~~Capital~~of ~~Lease~~those ~~Obligations)~~awards ~~issued~~is onrecognized ~~June~~over 16the requisite service period, ~~2021~~which ~~was~~is generally the ~~only~~vesting ~~outstanding~~period ~~financial~~of ~~instrument~~the ~~affected~~respective byaward. ~~this~~Generally, ~~new~~the ~~accounting~~Company ~~standard~~issues asawards ofwith ~~January~~service-only 1,vesting ~~2022.~~conditions ~~Therefore~~and records the ~~application~~expense ofusing ~~ASU~~the straight-~~2020-06~~line tomethod. ~~this~~The ~~convertible~~Company ~~note~~accounts ~~payable~~for ~~was~~forfeitures ~~used~~as they occur. The Company uses the Black-Scholes option-pricing model to determine the ~~cumulative~~fair ~~effect~~value of ~~the~~its ~~adoption~~option ofawards at the ~~new~~time ~~accounting~~of ~~standard~~grant. ~~(see~~The ~~Note~~Company 8classifies stock-~~Debt~~based compensation expense in its unaudited consolidated statements of operations and ~~Capital~~comprehensive ~~Lease~~loss ~~Obligations)~~in the same manner in which the award recipient’s payroll costs are classified.

~~Transaction~~Income ~~Costs~~Taxes: The Company ~~incurred~~is ~~$24,999~~subject ~~thousand in direct and incremental costs associated with the Business Combination and PIPE Financing related~~ to ~~the~~income ~~equity~~taxes ~~issuance,~~at ~~consisting primarily of investment banking, legal, accounting and other professional fees, which were capitalized and charged against~~ the proceeds of the Business Combination and PIPE Financing as a reduction of additional paid-in capital in the accompanying unaudited condensed consolidated balance sheets in accordance with Staff Accounting Bulletin (“SAB”) Topic 5U.~~A, Expenses of Offering~~S. ~~The~~federal, ~~Company~~state, ~~also incurred $137 thousand~~ and ~~$10,725~~local ~~thousand~~levels ~~of expenses~~ for ~~the~~income ~~three~~tax ~~and nine months ended October 1~~purposes, ~~2022,~~including ~~respectively,~~with ~~and~~respect ~~$1,423~~to ~~thousand~~its ~~and~~allocable ~~$2,875~~share ~~thousand~~ of ~~expenses~~any ~~for~~taxable ~~the~~income ~~three~~ and ~~nine~~other ~~months~~separately ~~ended~~stated ~~October 2,~~items ~~2021, respectively, that were not direct and incremental costs and accordingly, were recorded in "Transaction expenses" on condensed consolidated statements~~ of ~~operations~~QualTek ~~and comprehensive loss~~HoldCo.

~~Recent~~Income ~~accounting~~taxes ~~pronouncements:~~are Inaccounted ~~February~~for ~~2016,~~using the ~~FASB~~asset ~~issued~~and ~~ASU~~liability ~~2016-02,~~method ~~Leases~~of ~~(Topic~~accounting. ~~842)~~Under this method, ~~requiring~~deferred antax ~~entity~~assets toand ~~recognize~~liabilities are recognized for the expected future tax consequence on differences between the carrying amounts of assets and liabilities ~~arising~~and ~~from~~their ~~operating~~respective ~~leases~~tax ~~with~~basis, ~~terms~~using ~~longer~~tax ~~than~~rates 12in ~~months~~effect for the year in which the differences are expected to reverse. The ~~updated~~effect ~~standard~~on ~~replaces~~deferred ~~most~~assets ~~existing~~and ~~lease~~liabilities ~~recognition~~of ~~guidance~~a change in ~~GAAP~~tax rates is recognized in income in the period when itthe ~~becomes~~change ~~effective~~is enacted. ~~The~~Deferred ~~updated~~tax ~~standard~~assets are reduced by a valuation allowance when it is ~~effective~~“more-likely-than-not” ~~for~~that ~~annual~~some ~~reporting~~portion ~~periods~~or ~~beginning~~all ~~after~~of ~~December~~the ~~15,~~deferred ~~2021~~tax assets will not be realized. WeThe ~~have~~realization ~~adopted~~of ~~this~~the ~~standard~~deferred ~~effective~~tax ~~January~~assets is dependent on the amount of future taxable income.

Tax Receivable Agreement Liabilities: The TRA liabilities represent amounts payable to the Flow-through Sellers. The TRA liabilities are carried at a value equal to the undiscounted expected future payments due under the TRA. The Company recorded its initial estimate of future payments as an increase in TRA liabilities and a decrease to additional paid-in capital in the consolidated financial statements. Subsequent adjustments to the liabilities for future payments under the TRA related to changes in estimated future tax rates or state income tax apportionment are recognized through current period net loss in the consolidated statements of operations and comprehensive loss. See Note 12-Tax Receivable Agreement.

Basic and Diluted Loss Per Share: The Company applies the two-class method for calculating and presenting loss per share, and separately presents loss per share for Class A Common Stock. Shares of Class B Common Stock do not participate in the earnings and losses of the Company. As a result, the shares of Class B Common Stock are not considered participating securities and are not included in the weighted-average shares outstanding for purposes of loss per share. The Company has issued and outstanding Earnout Shares, including the Blocker Owner Earnout Shares and Earnout Voting Shares, which are subject to forfeiture if the achievement of certain stock price thresholds are not met within five years of the Business Combination. The basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities, as the Blocker Owner Earnout Shares are considered participating securities. Unvested

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1,Blocker ~~2022,~~Owner ~~for~~Earnout ~~non-interim~~Shares ~~periods,~~are ~~with~~not ~~the~~included ~~impact resulting~~ in the ~~Company~~denominator ~~recognizing right-~~of~~-use~~ ~~assets~~the basic and ~~operating~~diluted ~~lease~~loss ~~liabilities~~per onshare ~~our~~calculation ~~balance~~until ~~sheets~~the ~~upon~~contingent ~~adoption,~~condition ~~which~~is ~~increases~~met. ~~our~~The ~~total~~Earnout ~~assets~~Voting Shares are not considered participating securities and ~~liabilities~~are not included in the weighted-average shares outstanding for purposes of calculating loss per share.

InWarrant ~~June~~Accounting: ~~2016,~~The ~~the~~Company ~~FASB~~accounts ~~issued~~for ~~ASU~~warrants ~~No.~~as ~~2016~~either equity-~~13,~~classified ~~Financial~~or ~~Instruments~~liability-classified —instruments ~~Credit~~based ~~Losses~~on ~~(Topic~~an ~~326):~~assessment ~~Measurement~~ of ~~Credit~~the ~~Losses~~warrant’s onspecific ~~Financial~~terms ~~Instruments~~and ~~(“ASU~~applicable ~~No.~~authoritative ~~2016-13”),~~guidance ~~which~~in ~~requires~~ASC ~~the~~480, ~~measurement~~Distinguishing ~~and~~Liabilities ~~recognition~~from ofEquity ~~expected~~(“ASC ~~credit~~480”) ~~losses~~and ~~for~~ASC ~~certain financial assets~~815, ~~including~~Derivatives ~~trade~~and ~~accounts~~Hedging ~~receivable~~(“ASC 815”). ~~ASU~~The ~~No.~~assessment ~~2016-13~~considers ~~replaces~~whether the ~~existing~~warrants ~~incurred~~are ~~loss~~freestanding ~~impairment~~financial ~~model~~instruments ~~with~~pursuant anto ~~expected~~ASC ~~loss~~480, ~~model~~meet ~~that requires~~ the ~~use~~definition of ~~relevant~~a ~~information,~~liability ~~including~~pursuant anto ~~entity’s~~ASC ~~historical experience~~480, ~~current conditions~~ and ~~other~~whether ~~reasonable~~the ~~and~~warrants ~~supportable~~meet ~~forecasts~~all ~~that~~of ~~affect collectability over~~ the ~~life~~requirements offor aequity ~~financial~~classification ~~asset.~~under ~~The~~ASC ~~amendments~~815, inincluding ~~ASU~~whether ~~No.~~the ~~2016-13~~warrants are ~~effective~~indexed ~~for~~to ~~fiscal~~the ~~years~~Company’s ~~beginning~~own ~~after~~ordinary ~~December 15~~shares, ~~2022,~~among ~~with~~other ~~early~~conditions ~~adoption~~for ~~permitted~~equity classification. WeThis ~~expect~~assessment tois ~~adopt~~conducted ~~this~~at ~~standard~~the ~~effective~~time ~~January~~of 1,warrant ~~2023~~issuance and ~~are~~as ~~currently~~of ~~evaluating~~each ~~the~~subsequent ~~impact~~quarterly ~~that~~period ~~the~~end ~~adoption~~date ofwhile ~~this~~the ~~new~~warrants ~~standard~~are ~~will have on our financial statements~~outstanding.

InFor ~~October~~issued ~~2021,~~or ~~the~~modified ~~FASB~~warrants ~~issued~~that ~~ASU~~meet ~~2021-08,~~all ~~Business~~of ~~Combinations~~the ~~(Topic~~criteria ~~805)—Accounting~~ for ~~Contract~~equity ~~Assets~~classification, ~~and~~the ~~Contract~~warrants ~~Liabilities~~are ~~from~~required ~~Contracts with Customers~~ to ~~improve~~be ~~the~~recorded ~~accounting~~as ~~for~~a ~~acquired~~component ~~revenue~~of ~~contracts~~additional ~~with customers~~ paid-in ~~business~~capital ~~combination~~at bythe ~~addressing~~time ~~diversity~~of inissuance. ~~practice~~The ~~and~~Company ~~inconsistency~~recorded ~~related~~the toPublic ~~(i)~~Warrants ~~the~~assumed ~~recognition~~as part of anthe ~~acquired~~Business ~~contract~~Combination ~~liability~~as ~~and~~equity (iisee Note 9-Equity). ~~payment~~For ~~terms~~issued ~~and~~or ~~their~~modified ~~effect~~warrants onthat ~~subsequent~~do ~~revenue~~not ~~recognized~~meet byall the ~~acquirer.~~criteria ~~This~~for ~~amendment~~equity ~~requires that~~classification, atthe ~~acquisition~~warrants ~~date,~~are anrequired ~~entity~~to ~~recognize~~be ~~and~~recorded ~~measure~~at ~~contract~~their ~~assets~~initial ~~and~~fair ~~contract~~value ~~liabilities~~on ~~acquired~~the indate aof ~~business~~issuance, ~~combination~~and ineach ~~accordance~~balance ~~with~~sheet ~~ASC~~date ~~Topic~~thereafter. ~~606,~~Changes ~~Revenue~~in ~~from~~the ~~Contracts~~estimated ~~with~~fair ~~Customers~~value ~~(“ASC~~of ~~606”)~~the aswarrants ifare itrecognized ~~had~~as ~~originated~~a ~~the~~non-cash ~~contracts,~~gain ~~while~~or ~~also~~loss ~~taking~~on ~~into~~the ~~account~~consolidated ~~how~~statements ~~the~~of ~~acquiree~~operations ~~applied~~and ~~ASC~~comprehensive ~~606~~loss. ~~This~~The ~~guidance~~Company isrecorded ~~effective~~the ~~for~~Private ~~fiscal~~Placement ~~years,~~Warrants ~~and~~assumed ~~interim~~as ~~periods~~part ~~within~~of ~~those~~the ~~fiscal~~Business ~~years,~~Combination ~~beginning~~as ~~after~~a ~~December~~liability. ~~15,~~The ~~2023,~~fair ~~with~~value ~~early~~of ~~adoption~~the ~~permitted.~~Private WePlacement ~~are~~Warrants ~~currently~~(see ~~evaluating~~Note ~~the~~7-Warrants) ~~effect~~was ~~that~~estimated ~~the~~using ~~updated~~Black-Scholes ~~standard~~call ~~will~~option ~~have~~model on(see ~~our~~Note ~~financial~~8-Fair ~~statements~~Value Measurements).

~~Note~~Earnout 2Shares: During the five-year period following the closing of the Business Combination, (i) if the closing sale price per share of Class A Common Stock equals or exceeds $15. ~~Earnings~~00 ~~Per~~per ~~Share~~share for 20 trading days during any 30 consecutive trading day period, 50% of the Earnout Shares will be earned, and (ii) if the closing sale price per share of Class A Common Stock equals or exceeds $18.00 per share for 20 trading days during any 30 consecutive trading day period, the remaining 50% of the Earnout Shares will be earned. Once the Earnout Shares are earned, they are no longer subject to the restrictions on transfer and voting.

~~Prior~~The toEarnout ~~the~~Shares ~~Business~~are ~~Combination,~~considered ~~the~~legally ~~QualTek~~issued ~~HoldCo~~and ~~membership~~outstanding ~~structure~~shares ~~included~~of ~~Class~~common Astock ~~Units,~~subject ~~Preferred~~to ~~Class~~restrictions Bon ~~Units,~~transfer and ~~Class~~voting Pand ~~Units~~potential ~~with~~forfeiture ~~only~~pending ~~Class~~the Aachievement ~~Units~~of ~~outstanding upon~~ the ~~Closing~~earn ofout ~~the~~targets ~~Business~~described ~~Combination~~above. The Company ~~analyzed~~evaluated the ~~calculation~~Earnout ofShares ~~net loss per unit for periods prior to the Business Combination~~ and ~~determined~~concluded that itthey ~~resulted~~meet inthe ~~values~~criteria ~~that~~for ~~would~~equity ~~not~~classification. beThe ~~meaningful~~Earnout toShares ~~the~~were ~~users~~classified ofin ~~these~~stockholders’ ~~unaudited condensed consolidated financial statements. Therefore~~equity, ~~the~~recognized ~~basic~~at ~~and~~fair ~~diluted~~value ~~loss~~upon ~~per share for~~ the ~~nine~~closing ~~months~~of ~~ended October 1, 2022 represents only~~ the ~~period~~Business ~~from~~Combination ~~February~~and ~~14,~~will ~~2022~~not tobe ~~October 1,~~subsequently ~~2022~~remeasured.

Transaction Costs: The Company ~~calculated~~incurred ~~the~~$24,999 ~~basic~~thousand ~~and~~in ~~diluted~~direct ~~loss~~and ~~per~~incremental ~~share~~costs ~~for~~associated ~~the~~with ~~period following~~ the Business Combination ~~under the two-class method. The Earnout Shares are considered legally issued~~ and ~~outstanding~~PIPE ~~shares~~Financing ofrelated ~~Class A and Class B common stock, subject~~ to ~~restrictions~~the onequity ~~transfer and voting. The Blocker Owner Earnout Shares are entitled to receive~~issuance, ~~ratably~~consisting ~~with~~primarily ~~the~~of ~~other~~investment ~~outstanding Class A common stock~~banking, ~~dividends~~legal, accounting and other ~~distributions~~professional ~~prior~~fees, towhich ~~vesting.~~were ~~The~~capitalized ~~Earnout Voting Shares have only voting rights~~ and ~~therefore~~charged ~~are~~against ~~not~~the ~~entitled~~proceeds toof ~~receive~~the ~~any~~Business ~~distributions.~~Combination ~~The basic~~ and ~~diluted~~PIPE ~~net~~Financing ~~loss~~as ~~per~~a ~~share~~reduction isof ~~presented~~additional paid-in ~~conformity~~capital ~~with~~in the ~~two-class~~accompanying ~~method~~unaudited ~~required~~consolidated ~~for~~balance ~~participating~~sheets ~~securities,~~in asaccordance ~~the~~with ~~Blocker~~Staff ~~Owner~~Accounting ~~Earnout~~Bulletin ~~Shares~~(“SAB”) ~~are~~Topic ~~considered~~5.A, ~~participating~~Expenses ~~securities~~of Offering. The ~~net~~Company ~~loss~~incurred ~~per~~$9,268 ~~share~~thousand ~~amounts~~of isexpenses ~~the same~~ for ~~Class A common stock and~~ the ~~Blocker~~three ~~Owner~~months ~~Earnout~~ended ~~Shares because the holders of each are legally entitled to equal per share earnings~~April 2, ~~losses, and distributions, whether through dividends or liquidation~~2022. ~~Shares~~These ofexpenses ~~Class~~were ~~B common stock do~~ not ~~participate~~direct inand ~~the~~incremental ~~earnings~~costs ~~or losses of the Company~~ and, ~~therefore~~accordingly, ~~are~~were ~~not~~recorded ~~participating~~in ~~securities.~~"Transaction Asexpenses" ~~such,~~on aconsolidated ~~separate~~statements ~~presentation~~ of ~~basic~~operations and ~~diluted~~comprehensive ~~earnings~~loss. ~~per~~For ~~share~~the ofthree ~~Class~~months Bended ~~common~~April 1, ~~stock~~2023, ~~under~~there ~~the~~were ~~two-class~~no ~~method~~transaction ~~has~~expenses ~~not been presented~~recorded.

~~The~~Recent ~~basic~~accounting ~~loss~~pronouncements: ~~per~~In ~~share~~June ~~was~~2016, ~~computed~~the byFASB ~~dividing~~issued ~~net~~ASU ~~loss~~No. ~~attributable~~2016-13, toFinancial ~~common~~Instruments ~~shareholders~~— ~~for~~Credit ~~the~~Losses ~~period~~(Topic ~~subsequent~~326): toMeasurement ~~the~~of ~~Business~~Credit ~~Combination~~Losses byon Financial Instruments (“ASU No. 2016-13”), which requires the ~~weighted~~measurement ~~average~~and ~~number~~recognition of ~~shares~~expected ofcredit ~~Class~~losses Afor ~~common~~certain ~~stock~~financial ~~outstanding~~assets, ~~for~~including ~~the~~trade ~~same~~accounts ~~period~~receivable. ~~Diluted~~ASU ~~loss~~No. ~~per~~2016-13 ~~share~~replaces ~~was~~the ~~computed~~existing inincurred aloss ~~manner~~impairment ~~consistent~~model with an expected loss model that requires the use of ~~basic~~relevant ~~loss~~information, ~~per~~including ~~share~~an ~~while~~entity’s ~~giving~~historical ~~effect~~experience, tocurrent ~~all~~conditions ~~shares~~and ofother ~~potentially~~reasonable ~~dilutive~~and ~~common~~supportable ~~stock~~forecasts that ~~were~~affect ~~outstanding~~collectability ~~during~~over the ~~period~~life of a financial asset. The amendments in ASU No. 2016-13 are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted this standard effective January 1, 2023 and the impact of adoption was not material to our financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to improve the accounting for acquired revenue contracts with customers in business combination by addressing diversity in practice and inconsistency related to (i) the recognition of an acquired contract liability and (ii) payment terms and their effect on subsequent revenue recognized by the acquirer.

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~~The~~This ~~following~~amendment ~~tables~~requires ~~present~~that, ~~the~~at ~~calculation~~acquisition ofdate, ~~basic~~an entity recognize and ~~diluted~~measure ~~loss~~contract ~~per~~assets ~~share~~and ~~for~~contract ~~the~~liabilities ~~three~~acquired ~~months~~in ~~ended~~a ~~October 1,~~business ~~2022~~combination ~~and~~in ~~for~~accordance ~~the~~with ~~period~~ASC Topic 606, Revenue from ~~February~~Contracts ~~14,~~with ~~2022~~Customers to(“ASC ~~October 1,~~606”) ~~2022~~as ~~following~~if it had originated the ~~Business~~contracts, ~~Combination~~while ~~when~~also taking into account how the ~~Company~~acquiree ~~had~~applied ~~Class~~ASC A606. ~~common~~This ~~stock~~guidance ~~outstanding~~is ~~(in~~effective ~~thousands,~~for ~~except~~fiscal ~~share~~years, and ~~per~~interim ~~share~~periods ~~data):~~within those fiscal years, beginning after December 15, 2023, with early adoption permitted. We are currently evaluating the effect that the updated standard will have on our financial statements.

Basic:
	Three months endedOctober 1, 2022		February 14, 2022 throughOctober 1, 2022
Numerator:
Net loss	$	(6,920)	$	(43,513)
Less: Loss attributable to non-controlling interests	(3,778)		(23,725)
Net loss attributable to QualTek Services Inc.	(3,142)		(19,788)
Less: Loss attributable to participating securities	(292)		(1,841)
Net loss attributable to Class A common shareholders, basic	$	(2,850)	$	(17,947)
Denominator:
Weighted average Class A common shares outstanding	24,446,284		24,446,284
Less: Weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,934)		(2,274,934)
Weighted average Class A common shares outstanding, basic	22,171,350		22,171,350
Net loss per share - basic	$	(0.13)	$	(0.81)

Note 2. Earnings Per Share

Diluted:
	Three months endedOctober 1, 2022		February 14, 2022 throughOctober 1, 2022
Numerator:
Net loss	$	(6,920)	$	(43,513)
Less: Loss attributable to non-controlling interests	(544)		(3,418)
Net loss attributable to Class A and B common shareholders, diluted	(6,376)		(40,095)
Less: Loss attributable to participating securities	(307)		(1,930)
Net loss attributable to Class A common shareholders, diluted	$	(6,069)	$	(38,165)
Denominator:
Weighted average Class A common shares outstanding	24,446,284		24,446,284
Less: weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,934)		(2,274,934)
Add: Weighted-average Class B common shares if converted to Class A common shares outstanding (excluding Earnout Voting shares)	22,827,398		22,827,398
Weighted average Class A and B common shares outstanding, diluted	44,998,748		44,998,748
Net loss per share - diluted	$	(0.13)	$	(0.85)

The Company calculated the basic and diluted loss per share for the period following the Business Combination under the two-class method. The Earnout Shares are considered legally issued and outstanding shares of Class A and Class B common stock, subject to restrictions on transfer and voting. The Blocker Owner Earnout Shares are entitled to receive, ratably with the other outstanding Class A Common Stock, dividends, and other distributions prior to vesting. The Earnout Voting Shares have only voting rights and therefore are not entitled to receive any distributions. The basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities, as the Blocker Owner Earnout Shares are considered participating securities. The net loss per share amounts is the same for Class A Common Stock and the Blocker Owner Earnout Shares because the holders of each are legally entitled to equal per share earnings, losses, and distributions, whether through dividends or liquidation. Shares of Class B common stock do not participate in the earnings or losses of the Company and, therefore, are not participating securities. As such, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

The basic loss per share was computed by dividing net loss attributable to common shareholders for the period subsequent to the Business Combination by the weighted average number of shares of Class A Common Stock outstanding for the same period. Diluted loss per share was computed in a manner consistent with that of basic loss per share while giving effect to all shares of potentially dilutive common stock that were outstanding during the period.

The following tables present the calculation of basic and diluted net loss per share for the current year period from the three months ended April 1, 2023 and the prior year period from February 14, 2022 to April 2, 2022 (in thousands except share and per share data):


Basic:
	For the Three months ended April 1, 2023

Numerator:
Net loss	$	(46,852)
Less: Loss attributable to non-controlling interests	(22,358)
Net loss attributable to QualTek Services Inc.	(24,494)
Less: Loss attributable to participating securities	(2,004)
Net loss attributable to Class A common shareholders, basic	$	(22,490)

Denominator:
Weighted average Class A common shareholders outstanding	27,805,659
Less: Weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,934)
Weighted average Class A common shareholders outstanding, basic	25,530,725

Net loss per share - basic	$	(0.88)

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The condensed consolidated statements of operations and comprehensive loss reflect a net loss in the period presented and therefore the effect of the following securities are not included in the calculation of diluted loss per share as including them would have had an anti-dilutive effect:


Diluted:
	For the Three months ended April 1, 2023

Numerator:
Net loss	$	(46,852)
Less: Loss attributable to non-controlling interests	(3,680)
Net loss attributable to QualTek Services, Inc.	(43,172)
Less: Loss attributable to participating securities	(2,078)
Net loss attributable to Class A common shareholders, diluted	$	(41,094)

Denominator:
Weighted average Class A common shares outstanding	27,805,659
Less: weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,934)
Add: Weighted-average Class B common shares if converted to Class A common shares outstanding (excluding Earnout Voting shares)	19,468,023
Weighted average Class A common shares outstanding, diluted	44,998,748

Net loss per share - diluted	$	(0.91)

	Three months endedOctober 1, 2022	February 14, 2022 throughOctober 1, 2022
Excluded from the calculation (1)
Stock options	5,161,375	5,161,375
Private Placement Warrants	101,992	101,992
Public Warrants	2,874,979	2,874,979
Convertible Notes	12,468,500	12,468,500
Total potentially dilutive shares excluded from calculation	20,606,846	20,606,846

____________________________________

(1)This table excludes Earnout Voting Shares as the earn out contingency has not been met at period end.

	Three months endedOctober 2, 2021		Nine months endedOctober 2, 2021
Numerator
Income (loss) from continuing operations	$	19,466	$	(20,441)
Loss from discontinued operations	(4,985)		(8,114)
Net income (loss)	14,481		(28,555)
Less: accrued preferred return	—		1,638
Net income (loss) attributable to Class A common shareholders - basic and diluted	$	14,481	$	(30,193)
Denominator
Weighted average Class A common shares outstanding - basic	11,923,941		11,839,015
Add: weighted average Class B common shares if converted to Class A common shares	12,034,098		—
Add: Pre-PIPE Notes	3,322,361		—
Weighted average Class A and B common shares outstanding - diluted	27,280,400		11,839,015
Continuing operations - basic	$	1.63	$	(1.86)
Continuing operations - diluted	$	0.71	$	(1.86)
Discontinued operations - Class A - basic and diluted	$	(0.42)	$	(0.69)
Net income (loss) - basic	$	1.21	$	(2.55)
Net income (loss) - diluted	$	0.30	$	(2.55)

									Nine months endedOctober 2, 2021
Excluded from the calculation
Class B common stock									12,034,098
Pre-PIPE Notes									3,322,361
Total potentially dilutive shares excluded from calculation									15,356,459

Note 3. Discontinued Operations

At the end of the third quarter of 2021, we suspended all operations associated with our Canadian subsidiary within the Telecom segment, which ceased our foreign operations. The disposition of the Canadian subsidiary was considered a

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strategic shift that had a major effect on our operations and financial results. As a result of the suspension of operations, any new business with customers was terminated and remaining orders were canceled/settled.


	February 14, 2022 through April 1, 2022
Numerator:
Net loss	$	(11,016)
Less: Loss attributable to non-controlling interests	(6,016)
Net loss attributable to QualTek Services, Inc.	(5,000)
Less: Loss attributable to participating securities	(465)
Net loss attributable to Class A common shareholders, basic and diluted	$	(4,535)

Denominator:
Weighted average Class A common shares outstanding	24,446,284
Less: weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,934)
Weighted average Class A common shares outstanding, basic and diluted	22,171,350

Net loss per share - basic and diluted	$	(0.20)

The ~~following~~consolidated ~~table~~statements ~~presents~~of ~~the~~operations ~~aggregate~~and ~~carrying~~comprehensive ~~amounts~~loss ofreflect ~~the~~a ~~classes~~net ofloss ~~assets~~in ~~and~~the ~~liabilities~~period ofpresented ~~discontinued~~and ~~operations~~therefore ~~included~~the ineffect ~~"Other~~of ~~current~~the ~~assets"~~following ~~and~~securities ~~"Other~~are ~~current~~not ~~liabilities"~~included onin the ~~condensed~~calculation ~~consolidated~~of ~~balance~~diluted ~~sheets~~loss ~~(in~~per ~~thousands).~~share ~~The~~as ~~amounts~~including atthem ~~October~~would 1,have ~~2022~~had ~~were~~an ~~not~~anti-dilutive ~~material.~~effect:

		December 31, 2021
	For the Three months endedApril 1, 2023	February 14, 2022 throughApril 2, 2022
Carrying amounts of assets included as part of discontinued operations:
Excluded from the calculation (1)
Cash		$	1,545
Stock options	5,632,011	—
Accounts receivable, net of allowance		1,292
Class B common stock	—	22,827,398
Other current assets		1,665
Private Placement Warrants	101,992	101,992
Total current assets of discontinued operations		$	4,502
Public Warrants	2,874,979	2,874,979
Carrying amounts of liabilities included as part of discontinued operations:
Convertible Notes	12,468,500	12,468,500
Current portion of long-term debt and capital lease obligations		$	14
Total potentially dilutive shares excluded from calculation	21,077,482	38,272,869
Accounts payable		559
Accrued expenses		1,475
Total current liabilities of discontinued operations		$	2,048

~~The financial results are presented as loss from discontinued operations on the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):~~____________________________________

	For The Three Months EndedOctober 2, 2021		For The Nine Months EndedOctober 2, 2021
Revenue	$	454	$	5,850
Costs and expenses:
Cost of revenues	696		8,025
General and administrative	133		275
Depreciation and amortization	5,690		6,667
Total costs and expenses	6,519		14,967
Loss from operations of discontinued operations	(6,065)		(9,117)
Other expense:
Gain on sale/disposal of property and equipment	1,101		1,101
Interest expense	(21)		(98)
Loss from discontinued operations	$	(4,985)	$	(8,114)

(1)This table excludes Earnout Voting Shares as the earn out contingency has not been met at period end.

Note 4. Acquisitions

On January 26, 2021, the Company purchased 100% of the membership interests of Fiber Network Solutions, LLC (“FNS”), a Texas based company that provides new fiber optic construction services, as well as maintenance and repair services to renewable energy, commercial, and utility clientele in the United States. The overall consideration transferred was $20,059 thousand of cash and rollover equity valued at $2,000 thousand. The purchase price is subject to adjustment based upon FNS exceeding predetermined EBITDA thresholds for the years ending 2021, 2022, 2023, and 2024, as defined in the agreement, subject to a maximum additional payment of $20,000 thousand. As of the acquisition date, the fair value of the contingent consideration was determined to be $8,200 thousand. The cash consideration was funded by the issuance of equity, as well as the issuance of convertible notes with the majority member of QualTek HoldCo (see Note 8-Debt and Capital Lease Obligation).

On August 6, 2021, the Company acquired certain assets and liabilities from Broken Arrow Communications, Inc. (“Broken Arrow”), a New Mexico based company that provided a wide variety of services for the installation, construction, and maintenance of wireless communication facilities. The consideration transferred was $5,000 thousand of cash. The

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~~purchase~~Note price is subject to adjustment based upon Broken Arrow exceeding predetermined crew count and EBITDA thresholds for certain markets for the 5-month period of August 2021 through December 2021 and for the year ending December 31, 2022, as defined in the agreement, subject to a maximum additional payment of $10,000 thousand3. Property As of the acquisition date, the fair value of the contingent consideration was determined to be $7,552 thousand. The cash consideration was funded by the issuance of convertible notes in June 2021 (see Note 8-Debt and ~~Capital Lease Obligation).~~Equipment

On August 30, 2021, the Company purchased 100% of the membership interests of Concurrent Group LLC (“Concurrent”), a Florida based company that provides construction, maintenance, and restoration services for utilities, electric membership co-ops, and municipally owned power providers. The overall consideration transferred was $13,828 thousand of cash, rollover equity valued at $6,000 thousand, and acquisition debt of $14,143 thousand. The purchase price is subject to adjustment based upon Concurrent exceeding predetermined EBITDA thresholds for LTM periods ending at the closing of the third quarter of 2022, 2023 and 2024, as defined in the agreement, subject to a maximum additional payment of $30,000 thousand. As of the acquisition date, the fair value of the contingent consideration was determined to be $7,000 thousand. The cash consideration was funded by convertible notes issued by the Company in June 2021. (see Note 8-Debt and Capital Lease Obligation).

On October 15, 2021, the Company purchased 100% of the membership interests of Urban Cable Technology, LLC (“Urban Cable”), a Pennsylvania based company that provides a range of services, including aerial and underground construction, engineering, multiple dwelling units wiring and rewiring, and fiber placement to broadband and telecom cable operators. The overall consideration transferred was $8,436 thousand of cash and rollover equity valued at $4,000 thousand. The purchase price is subject to adjustment based upon Urban Cable exceeding predetermined EBITDA for the years ending 2021, 2022, 2023, and 2024, as defined in the agreement. As of the acquisition date, the fair value of the contingent consideration was determined to be $3,450 thousand. The cash consideration was funded by line of credit.

The acquisitions were recognized as business combinations with FNS and associated goodwill reporting within our Renewables and Recovery Logistics Segment and Broken Arrow, Concurrent, and Urban Cable and associated goodwill reporting within our Telecom Segment. The identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition dates. Goodwill resulted from expected synergies and revenue growth from combining operations with the Company. The goodwill recognized from these acquisitions is not expected to be deductible for income tax purposes.

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The following table summarizes the final fair value of the assets and liabilities acquired at the date of the acquisitions (in thousands):

	FNS		Broken Arrow		Concurrent		Urban Cable
Purchase consideration:
Cash paid	$	20,059	$	5,000	$	13,828	$	8,436
Rollover equity	2,000		—		6,000		4,000
Contingent consideration	8,200		7,552		7,000		3,450
Acquisition debt	—		—		14,143		—
Due from seller	—		—		(510)		(151)
	$	30,259	$	12,552	$	40,461	$	15,735
Purchase price allocations:
Cash	$	—	$	—	$	1,289	$	185
Accounts receivable	—		5,126		8,458		3,695
Inventories	—		133		25		—
Prepaid expenses	—		94		—		14
Other current assets	—		—		10		28
Property and equipment	9,978		219		5,263		1,361
Other long-term assets	—		32		60		—
Customer relationships	17,370		5,750		22,330		10,910
Trademarks and trade names	270		80		760		340
Goodwill	8,082		5,319		8,552		799
	35,700		16,753		46,747		17,332
Accounts payable	—		(1,987)		(1,938)		(1,184)
Accrued expenses	—		(156)		(799)		(323)
Contract liabilities	—		(2,058)		(367)		—
Capital lease obligations	(5,441)		—		(3,182)		(90)
	$	30,259	$	12,552	$	40,461	$	15,735

The measurement period adjustments made during 2022 and direct acquisition-related expenses associated with these acquisitions were not material.

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Note 5. Property and Equipment

Property and equipment consisted of the following (in thousands):

	October 1,2022		December 31,2021
	April 1,2023		December 31, 2022
Office furniture	$	2,~~130~~287	$	12,~~382~~229
Computers	2,~~279~~284		12,~~856~~296
Machinery, equipment and vehicles	2627,~~522~~914		1727,~~331~~178
Land	140		140
Building	340		340
Leasehold improvements	5,~~159~~224		45,~~552~~178
Software	2,~~418~~449		2,~~320~~416
Assets under capital lease	53,649		50,941
Assets under financing lease	65,712		57,905
Construction in process	1,~~378~~340		1,~~335~~807
	94,015		80,197
	107,690		99,489
Less: accumulated depreciation	(3943,~~344~~732)		(2939,~~515~~671)
Property and equipment, net	$	5463,~~671~~958	$	5059,~~682~~818

Property and equipment include assets acquired under ~~capital~~financing leases of $5365,~~649~~712 thousand and $5057,~~941~~905 thousand ~~and~~as well as accumulated depreciation of $1617,~~446~~517 thousand and $1415,~~899~~096 thousand as of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021~~2022, respectively. Depreciation expense was $4,~~132~~470 thousand and $113,~~745~~785 thousand for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022,~~2023 ~~respectively,~~ and ~~was $2,485 thousand and $9,418 thousand for the three and nine months ended October~~April 2, ~~2021~~2022, respectively.

Note 64. Accounts Receivable, Contract Assets and Liabilities, and Customer Credit Concentration

The following provides further details on the ~~condensed~~ consolidated balance sheet accounts of accounts receivable, contract assets and contract liabilities.

Accounts Receivable

The Company is party to non-recourse financing arrangements in the ordinary course of business, under which certain receivables are settled with the customer’'s bank in return for a nominal fee. Discount charges related to these arrangements, which are included ~~within~~in ~~interest~~"Interest expense," on the consolidated statements of operations and comprehensive loss were not material in all periods presented.

Contract Assets and Liabilities

Contract assets represent our right to consideration from our customers when such right is conditioned on something other than the passage of time. Contract assets, which primarily consist of retainage (an agreed-upon portion of billed amounts not expected to be collected until the projects have been completed), were not material at ~~October~~April 1, ~~2022~~2023 orand December 31, ~~2021~~2022. Our accounts receivable represent unconditional rights to consideration, including unbilled revenues for the estimated value of unbilled work for projects with performance obligations recognized over time.

Contract liabilities primarily represent advanced billing and payment received in excess of revenues recognized and before our performance obligations have been satisfied. Contract liabilities, ~~included in "Other current liabilities" on the condensed consolidated balance sheets,~~ were $1722,~~988~~358 thousand and $1424,~~773~~094 thousand at ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021~~2022, respectively. The amount of revenue recognized for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 ~~from the amount~~ that was previously included in contract liabilities at ~~December~~the ~~31,~~beginning ~~2021~~of ~~and~~the ~~2020~~period was $1113,~~636~~432 thousand and $87,~~132~~215 thousand, respectively.

1715

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Customer Credit Concentration

Customers whose accounts receivable exceeded 10% of the total gross accounts receivable were as follows (in thousands):

	October 1, 2022				December 31, 2021
	April 1, 2023				December 31, 2022
	Amounts		% of Total		Amounts		% of Total
AT&T	$	8870,~~870~~239	30.79	%	$	5676,~~280~~816	2730.17	%
Verizon	5330,~~681~~917		1813.56	%	3556,~~756~~551		1722.26	%
T-Mobile	4228,~~595~~873		1412.7	%	5036,~~218~~663		2414.26	%
Total	$	~~185~~130,~~146~~029	6357.92	%	$	~~142~~170,~~254~~030	6867.59	%

~~Note~~Allowance ~~7. Goodwill~~for ~~and~~Doubtful ~~Intangible Assets~~Accounts

The following table summarizes the changes in the Company's allowance for doubtful accounts (in thousands):


	For the Three Months Ended
	April 1, 2023		December 31, 2022
Balance at beginning of year	$	5,408	$	5,614
Charged to expense	(196)		8,533
Deductions for uncollectible receivables written off	(141)		(8,739)
Balance at end of period	$	5,071	$	5,408

Note 5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill by reportable segment is as follows (in thousands):

	RenewablesandRecoveryLogistics		Telecom		Total
Goodwill as of December 31, 2021 (a)	$	21,680	$	7,043	$	28,723
Goodwill as of December 31, 2022	$	13,598	$	895	$	14,493
Measurement period adjustments, net	—		~~(70)~~—		~~(70)~~—
Goodwill as of October 1, 2022 (a)	$	21,680	$	6,973	$	28,653
Goodwill as of April 1, 2023	$	13,598	$	895	$	14,493

____________________________________

~~(a)Goodwill~~Due isto ~~net~~the ofsubstantial ~~accumulated~~doubt ~~impairment~~about ~~charges~~the ofCompany's ~~$89~~ability to continue as a going concern,~~421~~ ~~thousand~~the Company determined that a triggering event existed as of ~~October~~ April 1, ~~2022~~2023, ~~and~~which ~~December 31,~~warranted ~~2021~~an ininterim ~~the~~goodwill ~~Telecom~~impairment ~~segment~~assessment. As ~~There~~of ~~have~~April ~~been~~1, no2023, ~~impairment~~we ~~charges~~performed ~~within~~a ~~the~~quantitative ~~Renewables~~assessment and ~~Recovery~~determined ~~Logistics~~that ~~segment~~none of the Company's goodwill was impaired.

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Intangible Assets

Intangible assets consisted of the following (in thousands):

	October 1, 2022
	April 1, 2023
	WeightedAverage RemainingUseful Life	Gross CarryingAmount		Accumulatedamortization		Net carrying Amount
Customer relationships	98.16	$	424,260	$	(~~124~~142,~~727~~341)	$	~~299~~281,~~533~~919
Trademarks and trade names	9.3	59,969		(2730,~~286~~731)		3229,~~683~~238
		$	484,229	$	(~~152~~173,~~013~~072)	$	~~332~~311,~~216~~157

December 31, 2021

December 31, 2022

WeightedAverage RemainingUseful Life

Gross carryingamount

Accumulatedamortization

Net carrying Amount

Customer relationships

98.58

424,~~560~~260

(98133,~~307~~535)

~~326~~290,~~253~~725

Trademarks and trade names

9.53

59,969

(2229,~~048~~008)

3730,~~921~~961

484,~~529~~229

(~~120~~162,~~355~~543)

~~364~~321,~~174~~686

Amortization expense of intangible assets was $10,~~553~~529 thousand and ~~$31,658 thousand~~ for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023, ~~respectively~~ and was $710,~~910~~572 thousand ~~and $29,020 thousand~~ for the three ~~and nine~~ months ended ~~October~~April 2, ~~2021~~2022, respectively.

Note 6. Debt and Finance Lease Obligations

The filing of the Chapter 11 Cases constituted an event of default that accelerated the Company Parties’ respective obligations under the Indenture, the ABL Credit Agreement and the Term Loan Credit Agreement (collectively, the “Debt Instruments”). The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases, and the stakeholders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

In addition, on March 15, 2023, the Company did not make an interest payment of approximately $3,700 thousand due on its 2027 Convertible Notes. The Company had a 30-day grace period, or until April 14, 2023, to make the interest payment. The Company did not make the interest payment, and, as a result, an event of default occurred under the Indenture, the ABL Credit Agreement and the Term Loan Credit Agreement.

Due to the substantial doubt about the Company’s ability to continue as a going concern, and the Company’s defaults under the Debt Instruments, as of December 31, 2022 and April 1, 2023, the Company reclassified $548,847 thousand and $595,074 thousand of its outstanding debt from long-term to current, respectively.

Line of credit: The Company, through its wholly-owned subsidiaries, has an Asset Based Lending Credit Agreement (“ABL Credit Agreement”) with PNC Bank, National Association (“PNC”). Under the ABL Credit Agreement, the Company has access to an aggregate revolving credit facility, including a swingline subfacility and a letter of credit subfacility for working capital needs and general corporate purposes. The Company's ability to borrow under the ABL credit facility is subject to periodic borrowing base determinations, which borrowing base consists primarily of certain eligible accounts receivable and eligible inventory. Interest on the outstanding principal amount, payable in arrears monthly, is based on either an elected Base Rate plus an applicable margin, or an adjusted Eurodollar rate, plus an applicable margin, as defined in the agreement. The interest rate under the ABL Credit Agreement as of April 1, 2023 was 12.00%.

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Standby letters of credit totaling $5,903 thousand, issued for our insurance carriers and in support of performance under certain contracts, were outstanding and the borrowing capacity available under the ABL Credit Agreement was approximately $3,866 thousand as of April 1, 2023.

On March 16, 2023, the Company, through its wholly-owned subsidiaries QualTek Buyer, LLC and QualTek LLC, entered into an amendment to the ABL Credit Agreement among QualTek Buyer, LLC, QualTek LLC, certain subsidiaries of QualTek LLC and PNC, as administrative agent and collateral agent (the “ABL Amendment”). The ABL Amendment provides for a reduction in the aggregate commitment from $130,000 thousand to $105,000 thousand, a modification of the interest rate to SOFR plus 5.00% and a modification of the maturity date of the ABL facility to be June 16, 2024. The ABL Amendment also implemented modifications to certain of the affirmative covenants, negative covenants and events of default.

In connection with the proposed joint plan of reorganization (as amended, supplemented or modified, the "Plan"), the ABL Credit Agreement and the ABL Amendment have been replaced by the Company’s debtor-in-possession financing arrangements. For information about subsequent events related to the Company’s debtor-in-possession financing arrangements, see Note 1 6 – Subsequent Events.

Term loan: The Company has a Senior Secured Term Credit and Guaranty Agreement (“Term Loan Credit Agreement”) with UMB Bank, N.A. as the administrative agent and collateral agent, for $380,000 thousand. On a quarterly basis, principal payments of $2,391 thousand plus interest are due with all unpaid principal and interest due at maturity on July 17, 2025.

On March 16, 2023, the Company, through its wholly-owned subsidiaries QualTek Buyer, LLC and QualTek LLC, entered into an amendment to the Term Loan Credit Agreement among QualTek Buyer, LLC, QualTek LLC, certain subsidiaries of QualTek LLC and UMB Bank, N.A., as administrative agent and collateral agent (the “Term Loan Amendment”) due June 16, 2024. The Term Loan Amendment provides for $55,000 thousand of immediately available new money incremental term loans under the Term Loan Credit Agreement. Each of the lenders providing the new money incremental term loans, and existing term lenders who agree to take new money incremental term loans by assignment after the closing date and participate in the reallocation process, will be entitled to receive rollover loans structured as a new facility of term loans under the Term Loan Credit Agreement. Pursuant to the payment waterfall, the new money incremental term loans will be senior to the rollover loans, and the rollover loans will be senior to the existing term loans. On March 16, 2023, the Company borrowed the full $55,000 thousand of new money incremental term loans. The Term Loan Amendment also provides for $20,000 thousand of additional new money incremental term loans under the Term Loan Credit Agreement, subject to the satisfaction of certain conditions precedent. On May 12, 2023, the Company borrowed $10,000 thousand of additional new money incremental term loans.

In connection with the Plan, the Term Loan Credit Agreement and the Term Loan Amendment have been overridden by the Company’s debtor-in-possession financing arrangements. For information about subsequent events related to the Company’s debtor-in-possession financing arrangements, see Note 1 6 – Subsequent Events.

Senior Unsecured Convertible Notes: In connection with the Business Combination, on February 14, 2022, the Company entered into the Indenture pursuant to which the Company issued the 2027 Convertible Notes due February 15, 2027, in an aggregate principal amount of $124,685 thousand, receiving $122,191 thousand in net cash proceeds. The 2027 Convertible Notes have an original issue discount of $2,494 thousand. Further, $6,384 thousand in debt issuance costs were incurred. The total of $8,878 thousand recorded as debt discount is being amortized using the effective interest method through the maturity dates of the 2027 Convertible Notes. The 2027 Convertible Notes provide for an interest rate that is set quarterly based on gross leverage with a minimum interest rate of 9.50% per annum and up to a maximum of 11.75% per annum, with an additional interest of 2% per annum in certain circumstances as described in the Indenture. Interest is payable on a quarterly basis commencing on June 15, 2022. For the three months ended April 1, 2023 and April 2, 2022, the Company recorded interest expense of $3,622 thousand and $1,913 thousand, respectively. As of April 1, 2023 and April 2, 2022, the 2027 Convertible Notes are presented net of a debt discount of $6,880 thousand and $8,656 thousand on the consolidated balance sheet with accretion of $444 thousand and $222 thousand, respectively.

Subject to and upon compliance with the provisions of the Indenture, each holder of a 2027 Convertible Note is provided with the right, at such holder’s option, to convert all or any portion (if the portion to be converted is $1 thousand principal amount or an integral multiple thereof) of such 2027 Convertible Note at any time prior to the close of business on the second scheduled trading day immediately preceding February 15, 2027, at an initial conversion rate of 100 shares of the Company’s Class A Common Stock, which is equal to an initial conversion price of $10.00 per share (subject to

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~~Note~~adjustment 8as provided in the Indenture) per $1 thousand principal amount of the 2027 Convertible Note. ~~Debt~~ ~~and~~If ~~Capital~~a ~~Lease~~fundamental ~~Obligations~~change (as defined in the Indenture) occurs prior to February 15, 2027, holders of the 2027 Convertible Notes will have the right to require the Company to repurchase all or any portion of their 2027 Convertible Notes in principal amounts of $1 thousand or an integral multiple thereof, at a repurchase price equal to the principal amount of the 2027 Convertible Notes to be repurchased, plus accrued and unpaid interest.

~~Convertible~~The ~~notes~~2027 –Convertible ~~related~~Notes ~~party:~~may Onbe ~~June 16,~~converted ~~2021,~~by the Company ~~issued~~any atime ~~convertible~~after ~~note~~the ~~(“Convertible~~two-year ~~Note~~anniversary –of ~~Related~~the ~~Party~~Closing –of ~~June~~the ~~2021~~Business Combination on February 14, 2022 (the “Company Forced Conversion Date”) insubject to the ~~aggregate~~following ~~principal~~conditions: ~~amount~~(i) ofthe ~~$30,568~~Company’s ~~thousand~~share toprice ~~BCP~~trading ~~QualTek~~at IIor ~~LLC,~~above an$14 ~~affiliate~~per share for 20 out of ~~its~~any ~~majority~~30 ~~member,~~consecutive intrading ~~exchange~~days ~~for~~after the ~~25,000~~Company ~~outstanding~~Forced ~~Preferred~~Conversion ~~Class~~Date; B(ii) ~~Units~~the ~~(Preferred~~holders ~~Units)~~receive ~~and~~a make-whole payment in the ~~associated~~form ~~accumulated~~of ~~preferred~~cash ~~return.~~or ~~The~~additional ~~Convertible~~shares ~~Note~~at –the ~~Related~~time ~~Party~~of such conversion; (iii) the 60-day ~~June~~average ~~2021~~daily ~~converted~~trading ~~under~~volume ~~its~~ending ~~mandatory~~on ~~conversion~~the ~~provision,~~last astrading ~~defined~~day inof the ~~agreement~~applicable exercise period being greater than or equal to $15,000 ~~upon~~thousand; (iv) the ~~consummation~~conversion of the ~~Business~~2027 ~~Combination~~Convertible Notes being made on ~~February 14,~~a ~~2022~~pro-rata basis across all 2027 Convertible Note investors; and (v) the conversion of the 2027 Convertible Notes, astogether ~~noted~~with all previously converted 2027 Convertible Notes, resulting in ~~Note~~no ~~1-Nature~~more than 20% of ~~Business~~the ~~and~~free ~~Summary~~float of ~~Significant~~the ~~Accounting~~Company’s ~~Policies~~Class A Common Stock.

~~Convertible~~The ~~notes~~Company –determined ~~June~~that ~~2021:~~there Onwas ~~June 16,~~no ~~2021,~~derivative ~~the~~liability ~~Company~~associated ~~issued~~with ~~convertible promissory notes (~~the “2027 Convertible Notes –under ~~June~~ASC ~~2021”)~~815-15, ~~with~~Derivatives anand ~~aggregate~~Hedging. ~~principal~~Per ~~amount~~ASC ~~of $44~~815-10-15-74(a),~~400~~ ~~thousand.~~contracts ~~The~~that ~~Convertible~~are ~~Notes~~both –indexed ~~June~~to ~~2021~~its ~~did~~own ~~not~~stock ~~require~~and ~~interest~~classified toin bestockholders’ ~~accrued~~equity orin ~~payable~~its ~~and~~statement ~~did~~of financial position are not ~~have~~considered ato ~~fixed~~be ~~maturity~~derivative ~~date~~instruments. The ~~Convertible~~conversion ~~Notes~~feature –is ~~June~~indexed ~~2021~~to ~~converted~~the ~~under~~Company’s ~~its~~own ~~mandatory~~stock ~~conversion~~and ~~provision,~~is asclassified ~~defined~~ in ~~the~~stockholders’ ~~agreement,~~equity ~~upon~~on the ~~consummation~~consolidated ofbalance ~~the~~sheets. ~~Business~~As ~~Combination~~the onconversion ~~February~~features ~~14,~~would ~~2022~~meet ~~(See~~the ~~Note~~scope ~~1-Nature~~exception ofas ~~Business~~described ~~and~~in ~~Summary~~paragraphs ofASC ~~Significant Accounting Policies~~815-15-74(a)., ~~There~~the ~~was~~conversion afeatures ~~beneficial~~are ~~conversion~~not ~~feature~~required ofto ~~$12,270~~be ~~thousand~~separated ~~related~~from to the ~~Convertible~~host ~~Notes~~instrument –and ~~June~~accounted ~~2021~~for ~~that~~separately. ~~was~~As ~~amortized~~a ~~over~~result, ~~the~~at ~~life~~April 1, of2023, the ~~notes,~~conversion ~~using~~feature ~~the~~does ~~effective~~not ~~interest~~meet ~~method.~~derivative classification.

~~Effective~~The ~~January 1,~~2027 ~~2022, the Company early adopted ASU 2020-06 using the modified retrospective method. As a result of the adoption of ASU 2020-06, previously recognized beneficial conversion feature for the~~ Convertible Notes –have ~~June~~customary ~~2021 outstanding as of January 1, 2022 was removed from additional paid~~anti-indilution ~~capital~~protections and ~~the~~customary ~~debt~~negative ~~discount. A cumulative impact adjustment was recorded to account for a reduction in interest expense due to a decrease in the discount~~covenants, ~~which~~including islimitations ~~recognized~~on ~~as interest expense upon conversion of the convertible debt. Adoption of the new standard resulted in a decrease to additional paid-in capital of $12~~indebtedness,~~270~~ ~~thousand,~~restricted ~~an increase to convertible debt~~payments, ~~net of $3,409 thousand,~~ and apermitted ~~decrease to accumulated deficit of $8,861 thousand~~investments.

~~Line~~In ofconnection ~~credit:~~with ~~The~~the ~~Company~~Plan, ~~through~~each ~~its~~holder ~~wholly-owned~~of ~~subsidiaries,~~allowed ~~has~~Convertible anNotes ~~Asset~~Claims ~~Based~~(as ~~Lending~~defined ~~Credit~~in ~~Agreement~~the ~~(“Credit Agreement”~~"Plan") ~~with~~will ~~PNC~~receive ~~Bank, National Association~~ (~~“PNC”~~i). ~~Under~~its ~~the~~pro ~~Credit~~rata ~~Agreement,~~share ~~the~~of ~~Company~~10% ~~has~~(subject ~~available~~to andilution) ~~aggregate~~of ~~revolving~~the ~~credit~~new ~~facility,~~equity ~~including~~interests ato ~~swingline~~be ~~subfacility~~issued ~~and~~by athe ~~letter~~Company ofon ~~credit~~the ~~subfacility,~~Plan inEffective ~~the~~Date ~~amount~~and of(ii) ~~$103,500~~its ~~thousand,~~pro ~~for~~rata ~~working~~share ~~capital~~of ~~needs~~the ~~and~~warrants ~~general~~to ~~corporate~~purchase ~~purposes~~7.5% ~~Interest~~of on the ~~outstanding~~new ~~principal~~equity ~~amount,~~interests ~~payable~~to inbe ~~arrears~~issued ~~monthly,~~by isthe ~~based~~Company on ~~either~~the anPlan ~~elected~~Effective ~~Base Rate plus an applicable margin~~Date, orand anthe ~~adjusted~~2027 ~~Eurodollar~~Convertible ~~rate,~~Notes ~~plus~~will anbe ~~applicable~~canceled ~~margin,~~or asotherwise ~~defined~~retired in ~~the agreement~~full.

OnDebt ~~January 28,~~outstanding 2022, the Company executed an amendment to the Credit Agreement to temporarily increase the maximum availability of the revolving credit facility to the amount of $115,000 thousand until February 15, 2022. On February 14, 2022, the maximum availability was ~~automatically~~as ~~reduced~~follows to(in ~~the amount of $103,500 thousand. In connection with the Business Combination, on February 14, 2022, the Company repaid $73,000 thousand of debt associated with the line of credit.~~ thousands):

On May 13, 2022, the Company executed an amendment to the Credit Agreement that extended the maturity date by two years from July 18, 2023 to July 17, 2025 and clarified certain provisions to exclude the payment of the earn-out obligations made in February 2022 from the proceeds from the Business Combination in the calculation of the Consolidated Fixed Charges Coverage Ratio.


	April 1, 2023		December 31, 2022
Current Maturities:
Line of credit	$	85,498	$	91,665
Term loan	376,930		334,378
2027 Convertible Notes	117,805		117,361
Current portion of finance lease obligations	12,634		13,022
Current portion of long-term debt and finance lease obligations, net of deferred financing costs (1)	$	592,867	$	556,426
Long-term borrowings:
Finance lease obligations	$	39,971	$	35,897
Less: current portion of finance lease obligations	(12,634)		(13,022)
Finance lease obligations, net of current portion	27,337		22,875
Total long-term borrowings	$	27,337	$	22,875

On(1) ~~September~~The ~~19,~~current ~~2022,~~maturities ~~the~~of ~~Company~~long-term ~~executed~~debt anfor ~~amendment to~~ the ~~Credit~~years ~~Agreement~~ended ~~that~~April ~~increased the aggregate revolving commitments to $130~~1,~~000~~ ~~thousand~~2023 ~~from~~and ~~September 15 through~~ December 31, of2022 ~~each~~is ~~year~~net ~~(the~~of ~~“Seasonal~~deferred ~~Increase~~financing ~~Period”). The~~costs ~~aggregate~~and ~~revolving~~convertible ~~commitments~~debt ~~from~~discount ~~January 1 through September 14~~ of ~~each year will remain at~~ $~~103~~24,~~500~~405 thousand. ~~The amendment provides for a 0.50% increase in the applicable margin during the Seasonal Increase Period~~ and ~~a 0.25% increase in the applicable margin for all other time periods. All other terms of the Credit Agreement~~$15,007 ~~including the maturity date~~thousand, ~~remained the same~~respectively. ~~The interest rate under the Credit Agreement as of October 1, 2022 was 8.25%.~~

OnNote ~~November 11, 2022, the Company through its wholly-owned subsidiaries QualTek Buyer, LLC and QualTek LLC, entered into the Ninth Amendment and Waiver to ABL Credit and Guaranty Agreement~~7. Interest on the principal amounts outstanding under the Amended Credit Agreement, payable in arrears monthly, is based on either an elected Base Rate plus an applicable margin, or an adjusted Eurodollar rate, plus an applicable margin, as defined in the agreement (the “Applicable Margin”). The Ninth Amendment provides for a 0.50% increase in the Applicable Margin for all time periods provided for in the Amended Credit Agreement. In addition, the Amendment revises the fixed charge coverage ratio covenant such that the borrower must be in compliance with the fixed charge coverage ratio at the end of every fiscal Warrants

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~~quarter~~Warrants. ~~and~~The asPublic ~~amended~~Warrants bybecame exercisable on 30 days after the ~~Amendment~~completion (of the ~~“Amended~~Business ~~Credit~~Combination ~~Agreement”~~(See Note 8 - Fair Value Measurement). No ~~Further,~~warrants ~~PNC~~will ~~prospectively~~be ~~waived~~exercisable ~~fixed~~for ~~charge~~cash ~~coverage~~unless ~~ratio~~the ~~covenant~~Company ~~for~~has an effective and current registration statement covering the ~~third~~shares ~~quarter~~of ~~2022~~Class A Common Stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Class A Common Stock. Notwithstanding the foregoing, during any period when the Company shall have failed to maintain an effective registration statement, warrant holders may exercise warrants on a cashless basis pursuant to an available exemption from registration under the ~~Credit~~Securities ~~Agreement~~Act. The warrants will expire five years from the closing of the Business Combination.

Standby letters of credit totaling $5,031 thousand, issued for our insurance carriers and in support of performance under certain contracts, were outstanding and the borrowing capacity available under the Credit Facility was $18,197 thousand as of October 1, 2022.

Term loan: The Company has a Senior Secured Term Credit and Guaranty Agreement (“Term Loan”) with Citibank as the administrative agent for $380,000 thousand. The Term Loan interest is payable either monthly or quarterly, in arrears, based on the Company’s interest election. The Company may elect either a Base Rate plus an applicable rate (11.50% at October 1, 2022), or an adjusted Eurodollar rate, plus an applicable rate (10.00% at October 1, 2022), as defined in the agreement. The Term Loan agreement requires an excess cash calculation, as defined in the agreement, which could result in additional required principal payments on the loan. There were no excess cash principal payments due October 1, 2022.

Acquisition debt: Acquisition debt consists of deferred purchase price due to the sellers in the Recovery Logistics, Inc., Vertical Limit LLC, Vinculums Services, LLC, and Concurrent acquisitions. The acquisition debt was paid in full with proceeds from the Business Combination on February 14, 2022 (see Note 1 - Nature of Business and Summary of Significant Accounting Policies).

Senior Unsecured Convertible Notes: In connection with the Business Combination, on February 14, 2022, the Company entered into an Indenture with Wilmington Trust, National Association (the “Trustee”) where the Company has issued senior unsecured convertible notes (the “Convertible Notes”) due February 15, 2027, in an aggregate principal amount of $124,685 thousand, receiving $122,191 thousand in net cash proceeds. The Convertible Notes have an original issue discount of $2,494 thousand. Further, $6,384 thousand in debt issuance costs were incurred. The total of $8,878 thousand recorded as debt discount is being amortized using the effective interest method through the maturity dates of the Convertible Notes. The Convertible Notes provide for an interest rate that is set quarterly based on gross leverage with a minimum interest rate of 9.50% per annum and up to a maximum of 11.75% per annum, with an additional interest of 2% per annum upon the occurrence of an event of default (as defined in the Indenture). Interest is payable on a quarterly basis commencing on June 15, 2022. For the three and nine months ended October 1, 2022, the Company recorded interest expense of $3,581 thousand and $9,197 thousand, respectively. As of October 1, 2022, the Convertible Notes are presented net of a debt discount of $7,768 thousand on the condensed consolidated balance sheet with accretion of $444 thousand and $1,110 thousand for the three and nine months ended October 1, 2022, respectively.

Subject to and upon compliance with the provisions of the Indenture, each holder of a Convertible Note is provided with the right, at such holder’s option, to convert all or any portion (if the portion to be converted is $1 thousand principal amount or an integral multiple thereof) of such Convertible Note at any time prior to the close of business on the second scheduled trading day immediately preceding February 15, 2027, at an initial conversion rate of 100 shares of the Company’s Class A common stock, which is equal to an initial conversion price of $10.00 per share (subject to adjustment as provided in the Indenture) per $1 thousand principal amount of the Convertible Note. If a fundamental change (as defined in the Indenture) occurs prior to February 15, 2027, holders of the Convertible Notes will have the right to require the Company to repurchase all or any portion of their Convertible Notes in principal amounts of $1 thousand or an integral multiple thereof, at a repurchase price equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest.

The Convertible Notes may be converted by the Company any time after the two-year anniversary of the Closing of the Business Combination on February 14, 2022 (the “Company Forced Conversion Date” ) subject to the following conditions: (i) the Company’s share price trading at or above $14.00 per share for 20 out of any 30 consecutive trading days after the Company Forced Conversion Date; (ii) the holders receive a make-whole payment in the form of cash or additional shares at the time of such conversion; (iii) the 60-day average daily trading volume ending on the last trading day of the applicable exercise period being greater than or equal to $15,000 thousand; (iv) the conversion of the Convertible Notes being made on a pro-rata basis across all Convertible Note investors; and (v) the conversion of the Convertible Notes, together with all previously converted Convertible Notes, resulting in no more than 20% of the free float of the Company’s Class A Common Stock.

The Company determined that there was no derivative liability associated with the Convertible Notes under ASC 815-15, Derivatives and Hedging. Per ASC 815-10-15-74(a), contracts that are both indexed to its own stock and classified in stockholders’ equity in its statement of financial position are not considered to be derivative instruments. The conversion feature is indexed to the Company’s own stock and is classified in stockholders’ equity on the condensed consolidated

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balance sheets. As the conversion features would meet the scope exception as described in paragraphs ASC 815-15-74(a), the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at October 1, 2022, the conversion feature does not meet derivative classification.

The Convertible Notes have customary anti-dilution protections and customary negative covenants, including limitations on indebtedness, restricted payments, and permitted investments. As of October 1, 2022, the Company was in compliance with the covenants under the Indenture.

Debt outstanding was as follows (in thousands):

	October 1,2022		December 31,2021
Current Maturities:
Current maturities of long-term debt	$	9,564	$	115,224
Current portion of capital lease obligations	12,876		12,151
Current portion of long-term debt and capital lease obligations	$	22,440	$	127,375
Long-term borrowings:
Line of credit	$	102,223	$	87,633
Term loan	344,308		351,481
Acquisition debt	—		34,718
Convertible notes – related party	—		30,567
Convertible notes – June 2021	—		44,400
Senior unsecured convertible notes	124,685		—
Less: current maturities of long-term debt	(9,564)		(115,224)
Less: unamortized financing fees	(8,439)		(11,354)
Less: convertible debt discount	(7,768)		(3,408)
Long-term debt, net of current portion	$	545,445	$	418,813
Capital lease obligations:
Capital lease obligations	$	32,056	$	32,002
Less: current portion of capital lease obligations	(12,876)		(12,151)
Capital lease obligations, net of current portion	19,180		19,851
Total long-term borrowings	$	564,625	$	438,664

Note 9. Warrants

Prior to the Business Combination, ROCR issued 2,875 thousand Public Warrants and 102 thousand Private Placement Warrants (collectively, the “Warrants”). Upon the closing of the Business Combination, the Company assumed the Warrants. The Public Warrants became exercisable on 30 days after the completion of the Business Combination. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of Class A Common Stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Class A Common Stock. Notwithstanding the foregoing, if there is no effective registration statement covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants within 120 days following the consummation of the Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. The warrants will expire five years from the closing of the Business Combination.

Once the warrants become exercisable, the Company may redeem the Public Warrants:

–in whole and not in part;

–at a price of $0.01 per warrant;

–at any time after the warrants become exercisable;

–upon not less than 30 days’ prior written notice of redemption to each warrant holder;

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–if, and only if, the reported last sale price of the shares of Class A Common Stock equals or exceeds $18.00 per share, for any 20 trading days within a 30-day trading period commencing after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and

–if, and only if, there is a current registration statement in effect with respect to the shares of Class A Common Stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A Common Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of shares of Class A Common Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or saleable until completion of the Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are nonredeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

~~Note~~In ~~10. Fair~~connection ~~Value~~with ~~Measurements~~the Plan, all existing equity interests, including the Warrants, will be cancelled, released and extinguished and such equity interests will have no further force or effect.

Note 8. Fair Value Measurements

The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e. observable inputs) and the lowest priority to data lacking transparency (i.e. unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant inputs to its valuation. The following is a description of the three hierarchy levels.

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

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Level 2Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.

Level 3Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022, respectively.

Acquisition-related contingent consideration is measured at fair value on a recurring basis using unobservable inputs such as projections of financial results and cash flows for the acquired businesses and a discount factor based on the weighted average cost of capital which fall within Level 3 of the fair value hierarchy.

As a result of the Business Combination, the Company has ~~issued and~~ outstanding Private Placement Warrants and Public Warrants. The Private Placement Warrants are substantially similar to the Public Warrants, but not directly traded or quoted on an active market and not subject to the redemption right under certain circumstances (see Note 97 -Warrants). The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the accompanying consolidated balance sheet. As of the Closing Date and April 1, 2023, the Private Placement Warrants were valued using a Black-Scholes call option model. The Black-Scholes call option model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the Public Warrants implied volatility adjusted for the redemption feature, which is considered to be a Level 3 fair value measurement.

22In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial liabilities that are measured at fair value on a recurring basis at April 1, 2023 and December 31, 2022 and the related activity for the three months ended April 1, 2023 and April 2, 2022 (in thousands).


	Fair Value at April 1, 2023
	Carrying Value		Level 1		Level 2		Level 3
Financial liabilities
Contingent consideration (1)	$	5,200	$	—	$	—	$	5,200
Warrant liability (1)	77		—		—		77
	$	5,277	$	—	$	—	$	5,277


	Fair Value at December 31, 2022
	Carrying Value		Level 1		Level 2		Level 3
Financial liabilities:
Contingent consideration (1)	$	5,200	$	—	$	—	$	5,200
Warrant liability (1)	77		—		—		77
	$	5,277	$	—	$	—	$	5,277

(1) Included in "Other non-current liabilities" on the consolidated balance sheets.

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warrant liability on the accompanying condensed consolidated balance sheet. As of the Closing Date and October 1, 2022, the Private Placement Warrants were valued using a Black-Scholes call option model. The Black-Scholes call option model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the Public Warrants implied volatility adjusted for the redemption feature, which is considered to be a Level 3 fair value measurement.

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial liabilities that are measured at fair value on a recurring basis at October 1, 2022 and December 31, 2021 and the related activity for the nine months ended October 1, 2022 and October 2, 2021 (in thousands).

	Fair Value at October 1, 2022
	Carrying Value		Level 1		Level 2		Level 3
Financial liabilities
Contingent consideration (1)	$	15,043	$	—	$	—	$	15,043
Warrant liability (2)	77		—		—		77
	$	15,120	$	—	$	—	$	15,120

	Fair Value at December 31, 2021
	Carrying Value		Level 1		Level 2		Level 3
Financial liabilities
Contingent consideration (1)	$	30,756	$	—	$	—	$	30,756
	$	30,756	$	—	$	—	$	30,756

(1) Included in "Other current liabilities" and "Other non-current liabilities" on the condensed consolidated balance sheets.

(2) Included in "Other non-current liabilities" on the condensed consolidated balance sheets.

The following table sets forth a summary of the changes in fair value of the Company’s financial liabilities (in thousands):

	Warrantliability		Contingentconsideration
January 1, 2022	$	—	$	30,756
January 1, 2023	$	77	$	5,200
Assumption of private placement warrants in Business Combination	77		—
Change in fair value	—		—
Accretion	—		1,050
April 1, 2023	$	77	$	5,200
Reclassification to short term debt	—		(5,000)
Change in fair value	—		(11,763)
October 1, 2022	$	77	$	15,043

	Contingentconsideration
	Warrantliability		Contingentconsideration
January 1, 2021	$	18,129
January 1, 2022	$	—	$	30,756
Acquisition (see Note 4)	8,200
Assumption of private placement warrants in Business Combination	77		—
Accretion	~~440~~—		410
Reclassification to acquisition debt	(10,000)
April 2, 2022	$	77	$	31,166
October 2, 2021	$	16,769

Note 119. Equity

~~Immediately~~QualTek ~~prior~~Services toInc. ~~the~~Class ~~Business~~A ~~Combination,~~Common ~~management~~Stock: ~~made~~The aCompany ~~non-cash~~is ~~discretionary~~authorized ~~distribution~~ to ~~effectively~~issue ~~settle~~500,000 ~~all~~thousand ~~existing~~shares of Class PA ~~Units~~Common inStock ~~exchange~~with ~~for~~a ~~Historical~~par ~~LLC~~value ~~Interests~~of in$0.0001 ~~QualTek~~per ~~HoldCo~~share. InAt ~~addition~~April 1, as2023, ~~mentioned~~there inwere ~~Note~~27,806 1thousand -shares ~~Nature~~of Class A Common Stock (inclusive of ~~Business~~2,275 thousand shares of Blocker Owner Earnout Shares) issued and ~~Summary~~outstanding. Holders of ~~Significant~~Class ~~Accounting~~A ~~Policies~~Common Stock are entitled to full economic rights, ~~per~~including the ~~Business~~right ~~Combination~~to ~~Agreement,~~receive ~~QualTek~~dividends ~~HoldCo~~when ~~issued~~and if declared by the ~~Convertible~~Board. ~~Note~~Each –holder ~~Related~~of ~~Party~~Class –A ~~June~~Common ~~2021~~Stock ~~(see~~is entitled to one vote for each share of Class A Common Stock held. Upon liquidation of the Company, holders of Class A Common Stock are entitled to share ratably in ~~Note~~all ~~8-Debt~~assets ~~and~~remaining ~~Capital~~after ~~Lease~~payment of debts and other liabilities.

QualTek Services Inc. Class B Common Stock: The Company is authorized to issue 500,000 thousand shares of Class B Common Stock with a par value of $0.0001 per share. At April 1, 2023 and December 31, 2022, there were 23,304 thousand shares of Class B Common Stock (inclusive of 3,836 thousand shares of Earnout Voting Shares) issued and outstanding. Holders of Class B Common Stock do not have economic rights but are entitled to one vote for each share of Class B Common Stock held. Upon liquidation of the Company, holders are not entitled to receive any assets remaining after payment of debts and other liabilities.

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Obligations) in an aggregate principal amount of $30,568 thousand to BCP QualTek II, LLC in exchange for all the Preferred Class B units, which automatically converted into Common Units upon closing of the Business Combination.

QualTek Services Inc. Preferred Stock: The Company is authorized to issue 1,000 thousand shares of preferred stock with a par value of $0.0001 per share. At October 1, 2022, there were no shares of preferred stock issued or outstanding.

QualTek Services Inc. Class A Common Stock: The Company is authorized to issue 500,000 thousand shares of Class A Common Stock with a par value of $0.0001 per share. At October 1, 2022, there were 24,446 thousand shares of Class A Common Stock (inclusive of 2,275 thousand shares of Blocker Owner Earnout Shares) issued and outstanding. Holders of Class A Common Stock are entitled to full economic rights, including the right to receive dividends when and if declared by the Board. Each holder of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held. Upon liquidation of the Company, holders of Class A Common Stock are entitled to share ratably in all assets remaining after payment of debts and other liabilities.

QualTek Services Inc. Class B Common Stock: The Company is authorized to issue 500,000 thousand shares of Class B Common Stock with a par value of $0.0001 per share. At October 1, 2022, there were 26,664 thousand shares of Class B Common Stock (inclusive of 3,836 thousand shares of Earnout Voting Shares) issued and outstanding. Holders of Class B Common Stock do not have economic rights but are entitled to one vote for each share of Class B Common Stock held. Upon liquidation of the Company, holders are not entitled to receive any assets remaining after payment of debts and other liabilities.

Holders of Class A Common Stock and Class B Common Stock vote as a single class on all matters requiring a shareholder vote.

Non-controlling Interests: QualTek Services Inc. is the sole managing member of QualTek HoldCo and consolidates the financial results of QualTek HoldCo. The non-controlling interests balance represents the economic interest in QualTek HoldCo held by the Flow-through Sellers. The following table summarizes the ownership of QualTek HoldCo as of ~~October~~April 1, 2023 and December 31, 2022:

	Common Units	Ownership Percentage
Common Units held by QualTek Services Inc.	22,171,350	45	%
Common Units held by QualTek Services Inc. (1)	25,530,724	52	%
Common Units held by Flow-through Sellers	2623,~~663~~304,~~575~~200	5548	%
Balance at end of period	48,834,~~925~~924	100	%

~~Each~~(1) ~~Common~~Earnouts ~~Unit~~related ~~corresponds~~ to ~~a share of Class B Common Stock. Common Unit holders share in~~ QualTek ~~HoldCo’s profits or loss and distributions on a pro rata basis. The Flow-through Sellers have the right to exchange their Common Units in QualTek HoldCo for shares of Class A Common Stock of QualTek~~ Services Inc. onare acontingently ~~one-to-one~~issuable basis after the expiration of the Lock-Up Period (as defined in the Third Amended and Restated Limited Liability Company Agreement of QualTek HoldCo). In connection with the exercise of the exchange of the Common Units, the Flow-through Sellers will be required to surrender a number of shares ofwhere ~~Class B Common Stock, which~~ the ~~Company~~underlying ~~will~~units ~~cancel~~are ~~for~~not ~~no consideration on a one-for-one basis with the number of Common Units so exchanged. Between October 2~~issued, ~~2022~~ and ~~the~~as ~~date~~such ~~hereof,~~ the ~~Company~~earnout ~~converted~~amount ~~3,359,375~~is ~~QualTek~~not ~~HoldCo~~included ~~units~~in ~~and shares of Class B Common Stock of~~ the ~~Company~~calculation ~~into 3,359,375 shares~~ of ~~Class A Common Stock of the Company after receiving requests for conversion from the holders thereof~~NCI.

~~Public~~Each ~~Warrants:~~Common InUnit ~~connection~~corresponds ~~with~~to ~~the~~a ~~Business~~share ~~Combination,~~of ~~the~~Class ~~Company~~B ~~assumed~~Common ~~the~~Stock. ~~Public~~Common ~~Warrants~~Unit ~~which~~holders ~~are~~share ~~recorded~~in asQualTek aHoldCo’s ~~component~~profits ofor ~~equity.~~loss Atand ~~October 1,~~distributions ~~2022,~~on ~~there~~a ~~were~~pro ~~2,875 thousand~~rata ~~Public~~basis. ~~Warrants~~The ~~outstanding.~~Flow-through ~~Refer~~Sellers tohave ~~Note~~the ~~9-Warrants~~right ~~for~~to ~~additional~~exchange ~~information.~~their

Earnout Shares: As discussed in Note 1-Nature of Business and Summary of Significant Accounting Policies, the Company issued 2,275 thousand shares of Class A Common Stock (Blocker Owner Earnout Shares) and 3,836 thousand shares of Class B Common Stock (Earnout Voting Shares) that are subject to certain restriction on transfer and voting and potential forfeiture pending the achievement of the earn out targets. Blocker Owner Earnout Shares are entitled to receive, ratably with the other outstanding shares of Class A Common Stock, dividends, and other distributions prior to vesting. Earnout Voting Shares have only voting rights and therefore are not entitled to receive any distributions. Each Earnout 22

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~~Voting~~Common ~~Share~~Units ~~has~~in aQualTek ~~corresponding~~HoldCo for shares of Class A Common ~~Unit~~Stock of QualTek ~~HoldCo~~Services ~~which~~Inc. ison ~~subject~~a one-to-one basis after the ~~same~~expiration ~~vesting~~of ~~conditions~~the Lock-Up Period (as defined in the Third Amended and Restated Limited Liability Company Agreement of QualTek HoldCo). AtIn ~~October 1~~connection with the exercise of the exchange of the Common Units, ~~2022~~the Flow-through Sellers will be required to surrender a number of shares of Class B Common Stock, which the ~~earn~~Company ~~out~~will ~~targets~~cancel ~~have~~for ~~not~~no ~~been~~consideration ~~achieved~~on ~~and~~a ~~all~~one-for-one ~~Earnout~~basis ~~Shares~~with ~~are~~the ~~unvested~~number of Common Units so exchanged.

~~Note~~Public 12Warrants: In connection with the Business Combination, the Company assumed the Public Warrants, which are recorded as a component of equity. ~~Stock~~ As of April 1, 2023 and December 31, 2022, there were 2,875 thousand Public Warrants outstanding. Refer to Note 7 -~~Based~~ ~~Compensation~~Warrants for additional information.

In connection with the Plan, all existing equity interests will be cancelled, released and extinguished and such equity interests will have no further force or effect.

Note 10. Stock-Based Compensation

Long-term Incentive Plan

The Company's Long-term Incentive Plan ("LTIP") allows for the award of equity incentives, including stock options, restricted shares, performance awards, stock appreciation rights, other share-based awards and other cash-based awards to certain employees, directors, officers, or consultants to the Company or its subsidiaries. As of ~~October~~April 1, ~~2022~~2023, there were 2.3,194 ~~million~~thousand shares of Class A Common Stock available for future grant under the ~~Plan~~LTIP. The number of shares of Class A ~~common~~Common ~~stock~~Stock reserved for issuance under the 2022 ~~Plan~~LTIP will automatically increase on January 1st each year, starting on January 1, 2023 and continuing through January 1, 2032, by the lesser of (a) the lesser of (i) two percent (2%) of the total number of shares of the Company’s Class A Common Stock and Class B Common Stock outstanding on December 31st of the immediately preceding calendar year and (ii) such number of shares of Class A Common Stock that would result in the number of shares of Class A Common Stock reserved being equal to 15% of the aggregate number of shares of Class A Common Stock and Class B Common Stock outstanding as of the final day of the immediately preceding calendar year, and (b) a lesser number determined by the Company’s Board of Directors prior to the applicable January 1st. ~~There was not a similar plan in 2021.~~

Stock Options

Stock options under the LTIP are granted at the discretion of the Board of Directors or its Committee and expire no more than ten years from the grant date. Outstanding stock options generally vest in equal installments over a four-year period subject to the grantee’s continued service on each applicable vesting. All options under the ~~Plan~~LTIP are exercisable, upon vesting, for shares of Class A Common Stock of the Company. Outstanding stock options expire 10 years from the grant date.

During the ~~nine~~three months ended ~~October~~ April 1, ~~2022~~2023, ~~the~~there ~~Company~~were ~~granted~~no stock options ~~for~~granted 5or exercised.~~2 million~~ ~~shares~~There ofwere ~~Class~~356 ~~A Common Stock under the LTIP, with an aggregate grant date fair value of $7,605~~ thousand. ~~During the nine months ended October 1, 2022, 645,563~~ stock options vested and the total fair value of stock options vested was $~~936~~477 thousand. ~~There were no stock options exercised during the nine months ended October 1, 2022.~~

As of ~~October~~April 1, ~~2022~~2023, 4.4,304 ~~million~~thousand outstanding stock options were unvested, which had a weighted average grant date fair value of $1.4508. There were 5.1,279 ~~million~~thousand stock options outstanding as of ~~October~~April 1, ~~2022~~2023, with a weighted average exercise price of $15.4538. There were no stock options outstanding or granted as of ~~October~~April 2, ~~2021~~2022.

~~The following table summarizes stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):~~23

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Cost of revenue	$	46	$	—	$	167	$	—
General and administrative expenses	376		—		8,080		—
Total	$	422	$	—	$	8,247	$	—

As of October 1, 2022, there was $5,788 thousand of total unrecognized compensation cost related to unvested stock options. The unrecognized compensation cost as of October 1, 2022 is expected to be fully amortized over the next 3.4 years. Absent the effect of forfeiture of stock compensation cost for any departures of employees, the following tables

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summarize the unrecognized compensation cost, the weighted average period the cost is expected to be amortized, and the estimated annual compensation cost for the future periods indicated below (excludes any future award) (in thousands):


Options	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2023	5,632,011	$5.92
Granted	—	—
Exercised	—	—
Forfeited or expired	(228,063)	6.80
Cancelled	(125,250)	7.50
Outstanding at April 1, 2023	5,278,698	$5.38	5.67	—
Exercisable at April 1, 2023	1,074,716	$7.27	5.51	—

	Unrecognized Compensation Cost				WeightedAverage RemainingPeriod to beRecognized (in Years)
	October 1,2022		October 2,2021		October 1,2022	October 2,2021
Stock options	$	5,788	$	—	3.4	0

The following table summarizes stock-based compensation expense recognized in the consolidated statements of operations and comprehensive loss (in thousands):

	Total Unrecognized Compensation Cost
	Three Months Ended
	Total		2022		2023		2024		2025 and beyond
	April 1, 2023		April 2, 2022
Stock options	$	5,788	$	431	$	1,713	$	1,713	$	1,931
Cost of revenue	$	33	$	—
General and administrative expenses	362		—
Total	$	395	$	—

~~Note~~Absent ~~13. Income~~the ~~Taxes~~effect of forfeiture of stock compensation cost for any departures of employees, the following tables summarize the unrecognized compensation cost, the weighted average period the cost is expected to be amortized, and the estimated annual compensation cost for the future periods indicated below (excludes any future award) (in thousands):


	Unrecognized Compensation Cost		Weighted Average Remaining Period to be Recognized (in Years)
	April 1, 2023		April 1, 2023
Stock options	$	4,162	2.8


	Total Unrecognized Compensation Cost
	Total		2023		2024		2025		2026 and beyond
Stock options	$	4,162	$	1,155	$	1,414	$	1,358	$	235

In connection with the Plan, all existing options will be cancelled, released and extinguished and such options will have no further force or effect.

Note 11. Income Taxes

Prior to the Business Combination, QualTek HoldCo was treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, QualTek HoldCo’s is not subject to U.S. federal and certain state and local income taxes. Any taxable income and losses were passed through to and included in the taxable income of its members.

Following the Business Combination, the Company is subject to income taxes at the U.S. federal, state, and local levels for income tax purposes, including with respect to its allocable share of any taxable income of QualTek HoldCo.

The effective tax rate was 0% for three and nine months ended October 1, 2022. The Company, based on the consideration of the relevant positive and negative evidence available, maintained a full valuation allowance against its deferred tax assets.24

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The effective tax rate was 0% for three months ended April 1, 2023 and April 2, 2022, respectively. The Company, based on the consideration of the relevant positive and negative evidence available, maintained a full valuation allowance against its deferred tax assets.

The Company provides for income taxes and related accounts using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence on differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when it is “more-likely-than-not” that some portion or all of the deferred tax assets will not be realized. The realization of the deferred tax assets is dependent on the amount of future taxable income.

Note 1412. Tax Receivable Agreement

As part of the Business Combination, the Company entered into the TRA. Under the terms of the TRA, the Company will be required to pay to the TRA Holders 85% of the applicable cash tax savings, if any, in the U.S. federal, state and local tax that the Company realizes or is deemed to realize in certain circumstances as a result of (i) existing tax basis in certain assets of QualTek HoldCo and certain of its direct and indirect subsidiaries allocable to the Company as a result of the acquisition of Common Units by the Company as part of the Business Combination, (ii) tax basis adjustments resulting from taxable exchanges of Common Units acquired by the Company, (iii) tax deductions in respect to portions of certain payments made under the TRA, and (iv) certain tax attributes of the Company that were acquired directly or indirectly pursuant to the Business Combination. The Company generally retains the benefit of the remaining 15% of the applicable tax savings.

The TRA liabilities are carried at a value equal to the undiscounted expected future payments due under the TRA. ~~The~~As of the date of the Business Combination, the Company recorded $34,092 thousand as an estimate of future payments as an increase in TRA liabilities and a decrease to additional paid-in capital in the ~~condensed~~ consolidated financial statements. As of December 31, 2022, based upon management’s long-term plan of the Company’s future taxable income, management concluded that it is more likely than not that the applicable cash tax savings subject to the TRA would not be realized; therefore, the Company reduced its TRA liability by $19,008 thousand, which was recognized as reduction to “General and administrative” expense in the consolidated statement of operations. As of April 1, 2023, there has been no change in management's long-term plan of the Company's future taxable income, and the balance of the TRA liability is $15,084 thousand. The Company estimates it will be able to utilize some, but not all, of the tax attributes based on current tax forecasts. If there was sufficient income to utilize all tax attributes, the TRA liabilities would be $4443,~~396~~364 thousand. If subsequent adjustments to the liability for future payments occur, those changes would be recognized through current period earnings. During the three months ended October 1, 2022, the Company reduced the TRA liabilities to $32,972 thousand and recognized a gain of $1,120 thousand included in "General and administrative" expense on the condensed consolidated statements of operations and comprehensive loss.

26It is anticipated that pursuant to the Restructuring, the TRA will be cancelled and rejected, in which case the Company would have no liability thereunder.

~~Table~~ Note of13. Segments ~~Contents~~and Related Information

~~Note~~The ~~15. Segments~~Chief Operating Decision Maker (“CODM”) of the Company manages its operation under two operating segments, which represent its two reportable segments: (1) Telecom and ~~Related~~(2) ~~Information~~Renewables and Recovery Logistics.

The Chief Operating Decision Maker ("CODM") of the Company manages its operation under two operating segments, which represent its two reportable segments: (1) Telecom and (2) Renewables and Recovery Logistics.

The Telecom segment performs site acquisition, engineering, project management, installation, testing, last mile installation, and maintenance solutions of communication infrastructure for telecommunication and cable providers, businesses, public venues, government facilities, and residential subscribers. The Renewables and Recovery Logistics segment derives its revenue from providing new fiber optic construction services, maintenance and repair services as well as businesses with continuity and disaster relief services to renewable energy, commercial, telecommunication and utility companies. The segment also provides business-as-usual services such as generator storage and repair and cell maintenance services.

The accounting policies of the reportable segments are the same as those described in Note 1-Nature of Business and Summary of Significant Accounting Policies. All intercompany transactions and balances are eliminated in consolidation. Intercompany revenue and costs between entities within a reportable segment are eliminated to arrive at segment totals. ~~Corporate results include amounts related to corporate functions such as administrative costs, professional fees, acquisition-related transaction costs and other discrete items.~~

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Corporate results include amounts related to corporate functions such as administrative costs, professional fees, acquisition-related transaction costs and other discrete items.

We present adjusted EBITDA as the key metric used by our management to assess the operating and financial performance of our operations in order to make decisions on allocation of resources. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Summarized financial information for the Company’s reportable segments is presented and reconciled to the Company’s ~~condensed~~ consolidated financial information in the following tables (in thousands).

For the Three Months Ended

For The Nine Months Ended

For The Three Months Ended

Revenue:

~~October~~April 1, ~~2022~~2023

~~October~~April 2, ~~2021~~2022

~~October 1, 2022~~

~~October 2, 2021~~

Telecom

~~188~~149,~~297~~712

~~135~~132,~~581~~664

~~496,134~~

~~360,020~~

Renewables and Recovery Logistics

276,~~823~~534

7915,~~881~~497

~~52,369~~

~~105,164~~

Total consolidated revenue

~~216~~156,~~120~~246

~~215~~148,~~462~~161

~~548,503~~

~~465,184~~

Total Assets:	~~October~~April 1,~~2022~~2023		~~December~~April 312,~~2021~~2022
Telecom	$	~~620~~586,~~277~~496	$	~~570~~588,~~750~~755
Renewables and Recovery Logistics	9766,~~792~~049		9081,~~638~~288
Corporate(1)	1119,~~003~~376		102,~~371~~541
Total consolidated assets	$	~~729~~671,~~072~~921	$	~~671~~672,~~759~~584

(1)Corporate includes both corporate assets and intercompany eliminations

	For The Nine Months Ended
	For The Three Months Ended
Capital Expenditures:	~~October~~April 1, ~~2022~~2023		~~October~~April 2, ~~2021~~2022
Telecom	$	138,~~350~~536	$	15,~~843~~533
Renewables and Recovery Logistics	~~1,544~~644		~~248~~366
Corporate	~~528~~—		~~1,059~~166
Total consolidated capital expenditures	$	159,~~422~~180	$	36,~~150~~065


	For the Three Months Ended
Amortization and Depreciation:	April 1, 2023		April 2, 2022
Amortization and depreciation
Telecom	$	12,140	$	11,661
Renewables and Recovery Logistics	2,652		2,895
Corporate	207		210
Total consolidated amortization and depreciation	$	14,999	$	14,766


	For The Three Months Ended
Interest Expense:	April 1, 2023		April 2, 2022
Telecom	$	1,584	$	517
Renewables and Recovery Logistics	222		204
Corporate	18,777		11,623
Total consolidated interest expense	$	20,583	$	12,343

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	For The Three Months Ended
	April 1, 2023		April 2, 2022
EBITDA:
Telecom	$	6,025	$	3,578
Renewables and Recovery Logistics	(220)		5,380
Corporate	(17,075)		(22,396)
Consolidated EBITDA	$	(11,270)	$	(13,438)

EBITDA Reconciliation:
Loss on Operations	$	(46,852)	$	(40,547)
Plus:
Interest expense	20,583		12,343
Depreciation	4,470		3,785
Amortization	10,529		10,981
Total consolidated EBITDA	$	(11,270)	$	(13,438)

Note 14. Commitments and Contingencies

Litigation: From time to time, we are subject to certain legal proceedings and claims arising in the ordinary course of business. These matters are subject to many uncertainties, and it is possible that some of these matters ultimately could be decided, resolved or settled in a manner that could have an adverse effect on us. Although the resolution and amount of liability cannot be predicted with certainty, it is the opinion of management, based on information available at this time, that such legal proceedings and claims are not expected to have a material effect on the Company’s financial position, results of operations, and cash flows.

Note 15. Related Party Transactions

On July 18, 2018, the Company entered into an Advisory Services Agreement with its majority member. The agreement requires quarterly advisory fees of $125 thousand paid at the beginning of each quarter. As of March 1, 2022, this business agreement was completed and no longer exists. For the three months ended April 2, 2022, the Company incurred $126 thousand in advisory fees.

Note 16. Subsequent Events

Voluntary Filing under Chapter 11: As previously reported in the Company’s Current Reports on Form 8-K filed with the SEC on May 31, 2023 and July 7, 2023, on the Petition Date, the Company Parties, commenced voluntary cases under the Bankruptcy Code in the Bankruptcy Court. The Chapter 11 Cases are being jointly administered by the Bankruptcy Court under the lead case In re QualTek Services Inc., Case No. 23-90584 (CML). On May 24, 2023, the Company Parties filed a proposed joint plan of reorganization (as amended, supplemented or modified, the “Plan”) and associated disclosure statement (the “Disclosure Statement”) in the Bankruptcy Court. Later that day, the Bankruptcy Court entered an order that, among other things, approved the Disclosure Statement on a conditional basis. On June 29, 2023, the Company Parties filed the Debtors’ Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (Technical Modifications), which incorporated certain technical modifications to the Plan. On June 30, 2023, the Bankruptcy Court entered the Order Approving the Debtors’ Disclosure Statement for, and Confirming, the Debtors’ Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the “Confirmation Order”), which approved the

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	For the Three Months Ended				For The Nine Months Ended
Amortization and Depreciation:	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Amortization and depreciation
Telecom	$	11,779	$	10,205	$	35,145	$	29,767
Renewables and Recovery Logistics	2,892		3,040		8,672		8,644
Corporate	221		246		635		725
Total consolidated amortization and depreciation	$	14,892	$	13,491	$	44,452	$	39,136

Disclosure Statement on a final basis and confirmed the Plan. The Company Parties expect that the effective date of the Plan will occur once all conditions precedent to the Plan have been satisfied (the “Plan Effective Date”).

	For the Three Months Ended				For The Nine Months Ended
Adjusted EBITDA Reconciliation:	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Telecom adjusted EBITDA	$	14,103	$	10,891	$	35,946	$	26,907
Renewables and Recovery Logistics adjusted EBITDA	8,671		38,162		13,379		42,181
Corporate adjusted EBITDA	(7,041)		(4,448)		(19,407)		(13,097)
Total adjusted EBITDA - continuing operations	$	15,733	$	44,605	$	29,918	$	55,991
Total adjusted EBITDA - discontinued operations (1)	—		726		—		(1,349)
Total adjusted EBITDA	$	15,733	$	45,331	$	29,918	$	54,642
Less:
Management fees	(37)		(129)		(163)		(751)
Transaction expenses	(137)		(1,423)		(10,725)		(2,875)
Share based compensation	(422)		—		(8,247)		—
Depreciation and amortization	(14,892)		(13,491)		(44,452)		(39,136)
Interest expense	(16,016)		(14,640)		(41,444)		(35,778)
Loss on extinguishment of convertible notes	—		—		—		(2,436)
Change in fair value of contingent consideration	11,763		4,544		11,763		4,544
Expenses associated with public company readiness	(1,042)		—		(1,693)		—
Net losses from certain regional market shutdowns (2)	(2,990)		—		(9,193)		—
Remeasurement of TRA liabilities	1,120		—		1,120		—
Net (loss) income from continuing operations	$	(6,920)	$	19,466	$	(73,116)	$	(20,441)
Net loss from discontinued operations	—		(4,985)		—		(8,114)
Net (loss) income	$	(6,920)	$	14,481	$	(73,116)	$	(28,555)

Since the Petition Date, the Company Parties have been operating their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. The Company Parties received approval from the Bankruptcy Court for a variety of “first day” motions designed to facilitate the administration of the Chapter 11 Cases and minimize disruption to the Company Parties’ operations by, among other things, easing the strain on the Company Parties’ relationships with employees, vendors, and customers following the commencement of the Chapter 11 Cases. The Company Parties received Bankruptcy Court authority to honor trade claims in the ordinary course of business during the Chapter 11 Cases.

Restructuring Support Agreement: As previously reported in the Company’s Form 8-K filed with the SEC on May 31, 2023, on the Petition Date, the Company Parties entered into a Restructuring Support Agreement (1the “Restructuring Support Agreement”) ~~Represents~~, ~~suspended~~which ~~Canadian~~became ~~operations~~effective ~~within~~on May 25, 2023, with certain of their creditors (the ~~Telecom~~“Consenting ~~segment~~Creditors”) and certain of the Company’s stockholders (the “Consenting Stockholders” and, together with the Consenting Creditors, the “Consenting Stakeholders”). The Restructuring Support Agreement contemplates agreed-upon terms for a financial restructuring and recapitalization of the Company Parties’ capital structure (the “Restructuring”) to be implemented through the commencement of the Chapter 11 Cases.

~~(2)~~Pursuant ~~Primarily~~to ~~represents~~the ~~net~~Restructuring ~~losses~~Support ~~associated~~Agreement, ~~with~~the Consenting Stakeholders agreed, subject to certain ~~regional~~terms ~~markets~~and conditions, to support the Plan to implement the Restructuring, which Plan was filed in the Chapter 11 Cases and which was approved pursuant to the Confirmation Order. The material terms of the Restructuring are set forth in the term sheets attached to the Restructuring Support Agreement (collectively, the “Term Sheets” and the transactions described therein, the “Restructuring Transactions”), which terms include that, ~~did~~among ~~not~~other ~~meet~~things: (i) trade claims will be paid in the ~~classification~~ordinary course of ~~discontinued~~business ~~operations~~during ~~under~~and ~~GAAP~~after ~~but~~the ~~operations~~Chapter 11 Cases; (ii) on the effective date of the Plan Effective Date, the Company (as reorganized, the “Reorganized Company”) will issue a single class of common equity interests to certain classes of creditors pursuant to the Plan; (iii) on the Plan Effective Date, the Company Parties will enter into a new asset-based credit facility on terms consistent with those set forth in ~~these~~the ~~markets~~Term ~~have~~Sheets ~~been~~attached ~~ceased~~to orthe ~~are~~Restructuring ~~expected~~Support Agreement; (iv) on the Plan Effective Date, the Reorganized Company will enter into exit financing facilities, including $25,000 thousand in principal amount of first lien term loans to be ~~ceased~~funded ~~within~~by new money investments from the ~~next~~Company’s ~~twelve~~post-petition ~~months~~term loan lenders and such other terms as set forth in the Term Sheets attached to the Restructuring Support Agreement; and (v) on the Plan Effective Date, there will be no recovery for holders of the Company’s existing equity interests.

~~Revenue~~Debtor-in-Possession byFinancing: ~~Service~~Prior ~~Offerings~~to the Petition Date, the Company Parties and certain of the lenders from time to time under the Term Loan Credit Agreement (as defined below) (the “Term Loan DIP Lenders”) agreed to enter into a senior secured super-priority debtor‑in‑possession term loan credit facility consisting of $40,000 thousand of new money term loan commitments, as well as $66,900 thousand of roll-up term loans, subject to the terms and conditions set forth therein (the “Term Loan DIP Credit Agreement,” and the facility thereunder, the “Term Loan DIP Facility”). Additionally, prior to the Petition Date, the Company Parties and certain of the lenders from time to time under the ABL Credit Agreement (as defined below) (the “ABL DIP Lenders”) agreed to enter into a senior secured super-priority debtor‑in‑possession asset‑based revolving credit facility in an aggregate principal amount of up to the lesser of $101,200 thousand and the borrowing base (minus the amount of prepetition ABL obligations) subject to the terms and conditions set forth therein (the “ABL DIP Credit Agreement,” and together with the Term Loan DIP Credit Agreement, the “DIP Credit Agreements;” and the facility under the ABL DIP Credit Agreement, the “ABL DIP Facility,” and together with the Term Loan DIP Facility, the “DIP Facilities”). On May 24, 2023, the Bankruptcy Court entered an order approving entry into the DIP Facilities on an interim basis.

~~Revenue~~The Term Loan DIP Facility consists of the following tranches: (i) (x) $25,000 thousand in new money DIP term loans made in a single draw on May 25, 2023 upon entry of the order approving the DIP Facilities on an interim basis and (y) $25,000 thousand in roll-up term loans deemed made on May 25, 2023, which loans constitute a dollar-for-dollar ~~each~~roll-up of prepetition Amendment No. 3 Term Loans (as defined in the ~~Company’s~~Term ~~end~~Loan Credit Agreement) held by the Term Loan DIP Lenders funding the $25,000 thousand of new money DIP term loans, and (ii) (x) $15,000 thousand in new money delayed draw term loan commitments to be made in a single draw following entry of the final DIP order which was entered on June 13, 2023 and (y) additional roll-~~market~~up ~~services~~term ~~offerings~~loans isto ~~presented~~be ~~below~~deemed made on such date, which loans constitute a roll-up of the remaining outstanding amount of prepetition Amendment No. 3 Term Loans (as defined in ~~thousands~~the Term Loan Credit Agreement): held by the Term Loan DIP Lenders. Furthermore, the lenders under the Term Loan DIP Facility have committed to provide $25,000 thousand in new money exit financing. The ABL DIP Facility is a senior secured super-

	For the Three Months Ended				For The Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Telecom Wireless	$	136,003	$	102,479	$	353,062	$	278,125
Telecom Wireline	41,810		24,502		117,745		73,296
Telecom Power	10,484		8,598		25,327		8,598
Renewables	7,311		11,568		14,959		25,086
Recovery Logistics	20,512		68,315		37,410		80,079
Total	$	216,120	$	215,462	$	548,503	$	465,184

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~~Significant~~priority ~~Customers~~revolving facility in an aggregate principal amount of up to the lesser of $101,200 thousand and the borrowing base (minus the amount of prepetition ABL obligations). The ABL DIP Facility contains a “creeping” roll-up through the entry of the Final Order (as defined in the Plan), at which time all remaining outstanding prepetition asset-backed loan facility obligations shall convert to ABL DIP Facility obligations.

~~Revenue~~The ~~concentration~~DIP ~~information~~Credit ~~for~~Agreements ~~significant~~contain ~~customers~~various asrepresentations aand ~~percentage~~warranties, ofaffirmative ~~total~~and ~~consolidated~~negative ~~revenue~~covenants ~~was~~and asevents ~~follows~~of (default customary for debtor-in-possession ~~thousands):~~financings of this type, including covenants mandating compliance by the Company with a 13-week budget, variance testing and other reporting requirements.

	For the Three Months Ended								For The Nine Months Ended
	October 1, 2022				October 2, 2021				October 1, 2022				October 2, 2021
Customers:	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
AT&T	$	82,901	38.4	%	$	65,689	30.5	%	$	216,146	39.4	%	$	189,381	40.7	%
Verizon	29,738		13.8	%	16,897		7.8	%	82,381		15.0	%	51,773		11.1	%
T-Mobile	32,392		15.0	%	22,817		10.6	%	73,571		13.4	%	59,369		12.8	%
Total	$	145,031	67.2	%	$	105,403	48.9	%	$	372,098	67.8	%	$	300,523	64.6	%

The proceeds of all or a portion of the DIP Credit Agreements may be used for, among other things, post-petition working capital for the Company and its subsidiaries, payment of costs to administer the Chapter 11 Cases, payment of expenses and fees of the transactions contemplated by the Chapter 11 Cases, payment of court-approved adequate protection obligations under the DIP Credit Agreements, and payment of other costs, in each case, subject to an approved budget and such other purposes permitted under the DIP Credit Agreements and the Interim DIP Order (as defined in the Plan) or any other order of the Bankruptcy Court.

~~Note~~Automatic 16Stay: Pursuant to Section 362 of the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed most actions against or on behalf of the Company Parties. ~~Commitments~~ Subject to certain exceptions under the Bankruptcy Code, the filing of the Company Parties’ Chapter 11 Cases automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Company Parties or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Company Parties’ bankruptcy estates, unless and ~~Contingencies~~until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

~~Litigation~~Nasdaq Delisting: ~~From~~On ~~time~~May to24, ~~time~~2023, wethe ~~are~~Company ~~subject~~received towritten ~~certain~~notice ~~legal~~(the ~~proceedings~~“Delisting ~~and~~Notice”) ~~claims~~from ~~arising~~the inListing Qualifications Department of the ~~ordinary~~Nasdaq ~~course~~Stock Market LLC (“Nasdaq”) notifying the Company that, as a result of ~~business.~~the ~~These~~Chapter ~~matters~~11 ~~are~~Cases ~~subject~~and toin ~~many~~accordance ~~uncertainties~~with Nasdaq Listing Rules 5101, 5110(b) and itIM-5101-1, isthe ~~possible~~staff of Nasdaq had determined that ~~some~~the ofCompany’s ~~these~~Class ~~matters~~A ~~ultimately~~Common ~~could~~Stock and warrants would be ~~decided,~~delisted ~~resolved~~from orNasdaq, ~~settled~~effective inJune a2, ~~manner~~2023. ~~that~~In ~~could~~the ~~have~~Delisting anNotice, ~~adverse~~the ~~effect~~staff onof ~~us.~~Nasdaq ~~Although~~referenced the ~~resolution~~Chapter ~~and~~11 ~~amount~~Cases ofand ~~liability~~associated ~~cannot~~public beconcerns ~~predicted~~raised ~~with~~by ~~certainty~~them, itconcerns isregarding the ~~opinion~~residual equity interest of ~~management,~~the ~~based~~existing listed securities holders and concerns about the Company’s ability to sustain compliance with all requirements for continued listing on ~~information~~Nasdaq. ~~available~~In ataccordance ~~this~~with ~~time~~the Delisting Notice, ~~that~~trading ~~such~~of ~~legal~~the ~~proceedings~~Company’s Class A Common Stock and ~~claims~~warrants ~~are~~on ~~not~~Nasdaq ~~expected~~was tosuspended ~~have~~at athe ~~material~~opening ~~effect~~of business on June 2, 2023, and at such time, the Company’s ~~financial~~Class ~~position~~A common stock and warrants commenced trading on the Pink Open Market under the symbols “QTEKQ” and "QTEWQ," ~~results~~respectively. On July 10, 2023, Nasdaq filed a Form 25 with the SEC to delist our Class A Common Stock and warrants and to remove them from registration under Section 12(b) of ~~operations~~the Exchange Act. The delisting will become effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the deregistration of our Class A Common Stock and ~~cash~~warrants ~~flows~~under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, from the date of the Form 25 filing.

Operating leases: The Company has entered into non-cancellable operating leases for various vehicles, equipment, office and warehouse facilities, which contain provisions for future rent increases or rent-free periods. The total amount of rental payments due over the lease terms is charged to rent expense on the straight-line method over the respective term of the lease. The leases expire at various dates through the year 2031. In addition, the agreements generally require the Company to pay executory costs (real estate taxes, insurance, and repairs).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the accompanying unaudited interim ~~condensed~~ consolidated financial statements and related notes. Pursuant to SEC rules for reports covering interim periods, we have prepared this analysis to enable you to assess material changes in our financial condition and results of operations since December 31, ~~2021~~2022, ~~the~~which ~~date~~are ofincluded ~~our~~in Annual Report on Form 10-K filed April 28, 2023, as amended by our form 10-K/A filed on May 2, 2023, which should be read in conjunction with this discussion and analysis.

Overview

We are a technology-driven, leading provider of communications infrastructure services, power grid modernization, and renewables solutions to the telecommunications and utilities industries across the United States. We provide a variety of mission-critical services across the telecom and renewable energy value chain, including wireline and fiber optic terminations, wireless, fiber-to-the-home, or FTTH, and customer fulfillment activities. Our experienced management team has leveraged our technical expertise, rigorous quality and safety standards, and execution track record to establish and maintain long-standing relationships with blue-chip customers.

We operate in two segments: (i) Telecom and (ii) Renewables & Recovery Logistics. Our Telecom segment provides engineering, construction, installation, network design, project management, site acquisition and maintenance services to major telecommunication, utility, and cable carriers in various locations in the United States. Our Renewables & Recovery Logistics segment provides businesses with continuity and disaster recovery operations as well as new fiber optic construction services to renewable energy, commercial and utilities customers across the United States.

~~The~~Voluntary ~~Transaction~~Filing under Chapter 11

OnAs ~~February 14,~~previously ~~2022,~~reported ~~QualTek~~in ~~Services~~the ~~Inc.~~Company’s ~~completed~~Current ~~the~~Reports ~~Business~~on ~~Combination~~Form ~~(the~~8-K ~~“Business~~filed ~~Combination”)~~ with ~~QualTek~~the ~~HoldCo,~~SEC ~~LLC~~on ~~(f/k/a~~May ~~BCP~~31, ~~QualTek~~2023 ~~HoldCo~~and July 7, ~~LLC)~~2023, aon ~~Delaware~~May ~~limited~~24, ~~liability~~2023 ~~company~~ (~~“BCP~~the ~~QualTek”~~"Petition Date"), (the ~~“Closing”),~~Company ~~pursuant~~Parties tocommenced voluntary cases under Chapter 11 of the ~~Business~~Bankruptcy ~~Combination~~Code ~~Agreement~~in (the ~~“Business~~Bankruptcy ~~Combination~~Court. ~~Agreement”)~~The ~~dated~~Chapter as11 ofCases ~~June~~are ~~16,~~being ~~2021,~~administered by ~~and~~the ~~among~~Bankruptcy ~~(i)~~Court ~~ROCR,~~under ~~(ii)~~the ~~Roth~~lead CHcase ~~III~~In ~~Blocker~~re ~~Merger~~QualTek ~~Sub~~Services Inc. Case No. 23-90584 (CML). On May 24, ~~LLC~~2023, athe ~~Delaware~~Company ~~limited~~Parties ~~liability~~filed ~~company~~a ~~and~~proposed ~~wholly-owned~~joint ~~subsidiary~~plan of ~~ROCR~~reorganization (~~“Blocker~~as ~~Merger Sub”)~~amended, ~~(iii)~~supplemented ~~BCP~~or ~~QualTek Investors~~modified, ~~LLC,~~the a“Plan”) ~~Delaware~~and ~~limited~~associated ~~liability~~disclosure ~~company~~statement (the “~~Blocker~~Disclosure Statement”), ~~(iv)~~in ~~Roth~~the CHBankruptcy ~~III~~Court. ~~Merger~~Later ~~Sub,~~that ~~LLC~~day, athe ~~Delaware~~Bankruptcy ~~limited~~Court ~~liability~~entered ~~company~~an ~~and~~order ~~wholly-owned~~that, ~~subsidiary~~among ofother ~~ROCR~~things, ~~(“Company~~approved ~~Merger~~the ~~Sub”),~~Disclosure ~~(v)~~Statement ~~BCP~~on ~~QualTek~~a ~~and~~conditional ~~(vi)~~basis. ~~BCP~~On ~~QualTek~~June 29, ~~LLC~~2023, athe ~~Delaware~~Company ~~limited~~Parties ~~liability~~filed ~~company,~~the ~~solely~~Debtors’ inJoint ~~its~~Plan ~~capacity~~of asReorganization ~~representative~~Pursuant to Chapter 11 of the ~~Blocker’s~~Bankruptcy ~~equity~~Code ~~holders~~(Technical ~~and~~Modifications), ~~BCP~~which ~~QualTek’s~~incorporated ~~equity~~certain ~~holders~~technical modifications to the Plan. ~~See~~On ~~Note~~June 130, -2023, ~~Nature~~the ofBankruptcy ~~Business~~Court entered the Confirmation Order, which approved the Disclosure Statement on a final basis and ~~Summary~~confirmed ofthe ~~Significant~~Plan. ~~Accounting~~The ~~policies~~Company Parties continue to expect that the ~~condensed~~Plan ~~consolidated~~Effective ~~financial~~Date ~~statements~~will ~~for~~occur ~~additional~~once ~~information~~all onconditions precedent to the ~~Business~~Plan ~~Combination~~have been satisfied.

AsSince athe ~~consequence~~Petition ofDate the ~~Business~~Company ~~Combination,~~Parties wehave ~~became~~been ~~the~~operating ~~successor~~their tobusinesses anas ~~SEC~~debtors-~~registered~~in-possession ~~and~~under ~~Nasdaq-listed~~the ~~company~~jurisdiction ~~which~~of ~~required~~the usBankruptcy toCourt ~~hire~~in ~~additional~~accordance ~~personnel~~with ~~and~~the ~~implement~~applicable ~~procedures~~provisions of the Bankruptcy Code and ~~processes~~orders toof ~~address~~the ~~public~~Bankruptcy ~~company~~Court. ~~regulatory~~The ~~requirements~~Company ~~and~~Parties ~~customary~~received ~~practices.~~approval Wefrom ~~expect~~the Bankruptcy Court for a variety of “first day” motions designed to ~~incur~~facilitate ~~additional~~the ~~ongoing~~administration ~~annual~~of ~~expenses~~the asChapter a11 ~~public~~Cases ~~company~~and ~~for~~minimize disruption to the Company Parties’ operations by, among other things, ~~directors’~~easing ~~and~~the ~~officers~~strain on the Company Parties’ ~~liability~~relationships ~~insurance~~with employees, ~~director~~vendors, ~~fees~~ and ~~additional~~customers ~~internal~~following ~~and~~the ~~external~~commencement ~~accounting,~~of ~~legal~~the ~~and~~Chapter ~~administrative~~11 ~~resources,~~Cases. ~~including~~The ~~increased~~Company ~~audit~~Parties ~~and~~received ~~legal~~Bankruptcy ~~fees~~Court authority to honor trade claims in the ordinary course of business during the Chapter 11 Cases.

~~Key~~Restructuring ~~Financial~~Support ~~and Operating Measures~~Agreement

WeAs ~~monitor~~previously reported in the ~~following~~Company’s ~~key~~Form ~~financial~~8-K ~~and~~filed ~~operational~~with ~~metrics~~the toSEC ~~evaluate~~on ~~our~~May ~~business~~31, ~~measure~~2023, ~~our~~on ~~performance~~the Petition Date, ~~identify~~the ~~trends~~Company ~~affecting~~Parties ~~our~~entered ~~business~~into the Restructuring Support Agreement, ~~formulate~~which ~~business~~became ~~plans~~effective on May 25, ~~and~~2023, ~~make~~with ~~strategic~~the ~~decisions~~Consenting Stakeholders. WeThe ~~believe~~Restructuring ~~that~~Support ~~these~~Agreement ~~financial~~contemplates ~~performance~~agreed-upon ~~metrics~~terms ~~represent~~for ~~the~~a ~~primary~~Restructuring ~~drivers~~to ofbe ~~value~~implemented ~~enhancement,~~through ~~balancing~~the ~~both~~commencement ~~short-~~of ~~and~~the ~~long-term~~Chapter 11 Cases.

Pursuant to the Restructuring Support Agreement, the Consenting Stakeholders agreed, subject to certain terms and conditions, to support the Plan to implement the Restructuring, which Plan was filed in the Chapter 11 Cases and which was approved pursuant to the Confirmation Order. The material terms of the Restructuring are set forth in the Term Sheets, which terms include that, among other things: (i) trade claims will be paid in the ordinary course of business during and

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~~indicators~~after the Chapter 11 Cases; (ii) on the Plan Effective Date, the Reorganized Company will issue a single class of ~~increased~~common ~~shareholder~~equity ~~value.~~interests ~~These~~to ~~are~~certain classes of creditors pursuant to the ~~metrics~~Plan; we(iii) ~~use~~on the Plan Effective Date, the Company Parties will enter into a new asset-based credit facility on terms consistent with those set forth in the Term Sheets attached to ~~measure~~the ~~our~~Restructuring ~~results~~Support ~~and~~Agreement; ~~evaluate~~(iv) ~~our~~on ~~business.~~the ~~See~~Plan “—Effective ~~Results~~Date, the Reorganized Company will enter into exit financing facilities, including $25,000 thousand in principal amount of ~~Operations”~~first lien term loans to be funded by new money investments from the Company’s post-petition term loan lenders and such other terms as set forth in the Term Sheets attached to the Restructuring Support Agreement; and (v) on the Plan Effective Date, there will be no recovery for ~~further~~holders ~~detail.~~of the Company’s existing equity interests.

	For the Three Months Ended				For the Nine Months Ended
(in thousands)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenue	$	216,120	$	215,462	$	548,503	$	465,184
(Loss) income from continuing operations	$	(6,920)	$	19,466	$	(73,116)	$	(20,441)
Adjusted EBITDA - continuing operations	$	15,733	$	44,605	$	29,918	$	55,991
Adjusted EBITDA - discontinued operations	$	—	$	726	$	—	$	(1,349)
Total Adjusted EBITDA	$	15,733	$	45,331	$	29,918	$	54,642

Debtor-in-Possession Financing

~~For~~Prior ~~further~~to ~~information~~the ~~about~~Petition ~~how~~Date, wethe ~~calculate~~Company ~~EBITDA~~Parties and ~~Adjusted~~the ~~EBITDA~~Term Loan DIP Lenders agreed to enter into a senior secured super-priority debtor‑in‑possession term loan credit facility consisting of $40,000 thousand of new money term loan commitments, as well as ~~limitations~~$66,900 ofthousand ~~its~~roll-up ~~use~~term loans, subject to the terms and conditions set forth therein. Additionally, prior to the Petition Date, the Company Parties and the ABL DIP Lenders agreed to enter into a ~~reconciliation~~senior secured super-priority debtor‑in‑possession asset‑based revolving credit facility in an aggregate principal amount of ~~EBITDA~~up to the lesser of $101,200 thousand and ~~Adjusted~~the ~~EBITDA~~borrowing base (minus the amount of prepetition ABL obligations) subject to ~~net~~the ~~loss~~terms and conditions set forth therein. On May 24, ~~see~~2023, “—the ~~Non-GAAP~~Bankruptcy ~~Financial~~Court ~~Measures”~~entered ~~below~~an order approving entry into the DIP Facilities on an interim basis.

The Term Loan DIP Facility consists of the following tranches: (i) (x) $25,000 thousand in new money DIP term loans made in a single draw on May 25, 2023 upon entry of the order approving the DIP Facilities on an interim basis and (y) $25,000 thousand in roll-up term loans deemed made on May 25, 2023, which loans constitute a dollar-for-dollar roll-up of prepetition Amendment No. 3 Term Loans held by the Term Loan DIP Lenders funding the $25,000 thousand of new money DIP term loans and (ii) (x) $15,000 thousand in new money delayed draw term loan commitments to be made in a single draw following entry of the final DIP order which was approved June 13, 2023 and (y) additional roll-up term loans to be deemed made on such date, which loans constitute a roll-up of the remaining outstanding amount of prepetition Amendment No. 3 Term Loans held by the Term Loan DIP Lenders. Furthermore, the lenders under the Term Loan DIP Facility have committed to provide $25,000 thousand in new money exit financing. The ABL DIP Facility is a senior secured super-priority revolving facility in an aggregate principal amount of up to the lesser of $101,200 thousand and the borrowing base (minus the amount of prepetition ABL obligations). The ABL DIP Facility contains a “creeping” roll-up through the entry of the Final Order, at which time all remaining outstanding prepetition asset-backed loan facility obligations shall convert to ABL DIP Facility obligations.

The DIP Credit Agreements contain various representations and warranties, affirmative and negative covenants and events of default customary for debtor-in-possession financings of this type, including covenants mandating compliance by the Company with a 13-week budget, variance testing and other reporting requirements.

The proceeds of all of a portion of the DIP Credit Agreements may be used for, among other things, post-petition working capital for the Company and its subsidiaries, payment of costs to administer the Chapter 11 Cases, payment of expenses and fees of the transactions contemplated by the Chapter 11 Cases, payment of court-approved adequate protection obligations under the DIP Credit Agreements, and payment of other costs, in each case, subject to an approved budget and such other purposes permitted under the DIP Credit Agreements and the Interim DIP Order or any other order of the Bankruptcy Court.

Automatic Stay

Pursuant to Section 362 of the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed most actions against or on behalf of the Company Parties. Subject to certain exceptions under the Bankruptcy Code, the filing of the Company Parties’ Chapter 11 Cases automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Company Parties or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Company Parties’ bankruptcy estates, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

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Nasdaq Delisting

On May 24, 2023, the Company received the Delisting Notice from Nasdaq notifying the Company that, as a result of the Chapter 11 Cases and in accordance with Nasdaq Listing Rules 5101, 5110(b) and IM-5101-1, the staff of Nasdaq had determined that the Company’s Class A Common Stock and warrants would be delisted from Nasdaq, effective June 2, 2023. In the Delisting Notice, the staff of Nasdaq referenced the Chapter 11 Cases and associated public concerns raised by them, concerns regarding the residual equity interest of the existing listed securities holders and concerns about the Company’s ability to sustain compliance with all requirements for continued listing on Nasdaq. In accordance with the Delisting Notice, trading of the Company’s Class A Common Stock and warrants on Nasdaq was suspended at the opening of business on June 2, 2023, and at such time, the Company’s Class A Common Stock and warrants commenced trading on the Pink Open Market under the symbols “QTEKQ” and “QTEWQ,” respectively. On July 10, 2023, Nasdaq filed a Form 25 with the SEC to delist our Class A Common Stock and warrants and to remove them from registration under Section 12(b) of the Exchange Act. The delisting will become effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the deregistration of our Class A Common Stock and warrants under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, from the date of the Form 25 filing.

Key Financial and Operating Measures

We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. We believe that these financial performance metrics represent the primary drivers of value enhancement, balancing both short- and long-term indicators of increased shareholder value. These are the metrics we use to measure our results and evaluate our business. See “Results of Operations” for further detail.


	For the Three Months Ended
(in thousands)	April 1, 2023		April 2, 2022
Revenue	$	156,246	$	148,161
Net loss	(46,852)		(40,547)
Adjusted EBITDA	$	(1,536)	$	4,027

For further information about how we calculate Adjusted EBITDA as well as limitations of its use and a reconciliation of Adjusted EBITDA to net loss, see “— Non-GAAP Financial Measures” below.

Non-GAAP Financial Measures

In order to provide additional information regarding our financial results, we have disclosed in the table above Adjusted EBITDA, which is a non-GAAP financial measure that we calculate as our net ~~income (~~loss) before interest, taxes, depreciation and amortization, management fees, ~~transaction~~restructuring ~~expenses~~and other professional fees, share-based compensation, ~~change~~gain ~~in fair value of contingent consideration, remeasurement of TRA liabilities, loss~~ on ~~extinguishment~~legal ~~of convertible notes~~settlement, ~~expenses associated with public company readiness~~ and ~~net~~job ~~income (~~loss) ~~from certain regional market shutdowns~~accrual. The reconciliation of net loss to Adjusted EBITDA is provided below.

We present Adjusted EBITDA as a key measure used by our management to assess the operating and financial performance of our operations in order to make decisions on the allocation of resources. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:

•although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of non-cash stock-based compensation; (3) tax payments that may represent a reduction in cash available to us; or (4) net interest expense/income; and

~~•other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.~~32

Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including net loss, cash flow metrics and our GAAP financial results.

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~~The~~•other ~~following~~companies, ~~table~~including ~~provides~~companies ain ~~reconciliation~~our ofindustry, ~~net~~may ~~income~~calculate ~~(loss) to~~ Adjusted EBITDA: or similarly titled measures differently, which reduces its usefulness as a comparative measure.

	For the Three Months Ended				For the Nine Months Ended
(in thousands)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
(Loss) income continuing operations	$	(6,920)	$	19,466	$	(73,116)	$	(20,441)
Loss discontinued operations	—		(4,985)		—		(8,114)
Net (loss) income	$	(6,920)	$	14,481	$	(73,116)	$	(28,555)
Management fees	37		129		163		751
Transaction expenses	137		1,423		10,725		2,875
Share-based compensation	422		—		8,247		—
Depreciation and amortization	14,892		13,491		44,452		39,136
Interest expense	16,016		14,640		41,444		35,778
Loss on extinguishment of convertible notes	—		—		—		2,436
Change in fair value of contingent consideration	(11,763)		(4,544)		(11,763)		(4,544)
Expenses associated with public company readiness	1,042		—		1,693		—
Net losses from certain regional market shutdowns (1)	2,990		—		9,193		—
Loss from discontinued operations	—		4,985		—		8,114
Remeasurement of TRA liabilities	(1,120)		—		(1,120)		—
Adjusted EBITDA - continuing operations	$	15,733	$	44,605	$	29,918	$	55,991
Adjusted EBITDA - discontinued operations (2)	—		726		—		(1,349)
Total Adjusted EBITDA	$	15,733	$	45,331	$	29,918	$	54,642

We believe these non-GAAP financial measures, when viewed together with our GAAP financial performance measures and our GAAP financial results, provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

~~(1)Primarily~~The ~~represents~~following ~~net~~table ~~losses~~provides ~~associated~~a ~~with~~reconciliation ~~certain regional markets that did not meet the classification~~ of ~~discontinued~~net ~~operations~~loss ~~under GAAP but operations in these markets have been ceased or are expected~~ to beAdjusted ~~ceased within the next twelve months.~~EBITDA:

(2)Represents suspended Canadian operations within the Telecom segment


	For the Three Months Ended
(in thousands)	April 1, 2023		April 2, 2022
Net loss	$	(46,852)	$	(40,547)
Management fees	—		126
Restructuring and other professional fees (1)	9,901		9,268
Share based compensation	395		6,711
Depreciation and amortization	14,999		14,766
Interest expense	20,583		12,343
Job loss accrual	—		1,360
Gain on legal settlement	(562)		—
Total Adjusted EBITDA	$	(1,536)	$	4,027

____________________________________

(1) Non-recurring professional fees related to strategic planning and Chapter 11 Cases.

Factors Impacting Our Performance

Our historical financial performance and future financial performance depends on several factors that present significant opportunities but also pose risks and challenges, including those discussed below and in the section “— Risk Factors.”

Acquisitions

As part of our growth strategy, we may acquire companies that expand, complement, or diversify our business. We regularly review opportunities and periodically engage in discussions regarding possible acquisitions.

The Company completed the acquisitions of FNS, Broken Arrow, Concurrent, and Urban Cable during 2021. The operations of the acquired entities are included in our results for the periods following the closing of the acquisition. See Note 4-Acquisitions to the condensed consolidated financial statements.

Seasonality and Cyclical Nature of Business

Certain services provided by the Company are seasonal and vary from market to market in different geographic areas. As a majority of our work is performed in an outdoor environment, adverse weather such as heavy snow or rain or extreme low temperature could affect our performance. Conversely, demand for some services within the Company’s Renewables & Recovery Logistics businesses are dependent upon the occurrence of adverse weather events.

The telecommunication industry has been and likely will continue to be highly cyclical. Fluctuations in demand can be caused by many factors such as new technology adoption, need for higher bandwidth, and change in spending environments. We generally expect growth in our industry given the national roll out of 5G network and home adoption of fiber optic internet. However, the demand can be subject to volatility from factors such as our customers’ access to capital and changes in regional and global economic conditions. Since ~~For~~adverse ~~instance,~~weather inevents ~~2021,~~are wemore ~~experienced~~likely ~~delays~~to occur in ~~certain~~higher 5Gfrequency ~~rollout~~and ~~projects,~~greater ~~including~~severity ~~equipment~~during ~~delays~~winter, ~~which~~our ~~delayed~~first orand ~~reduced~~fourth ~~our~~quarter ~~anticipated~~results ~~revenue~~might orbe ~~profits~~impacted ~~from~~by ~~these~~conditions ~~projects.~~that ~~The~~are out of our control.

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effects of the COVID-19 pandemic could also result in greater seasonal and cyclical volatility than would otherwise exist under normal conditions. Since adverse weather events are more likely to occur in higher frequency and greater severity during winter, our first and fourth quarter results might be impacted by conditions that are out of our control.

Regulations

We are subject to many complex, overlapping local, state and federal laws, rules, regulations, policies and legal interpretations (collectively, “laws and regulations”) in the markets in which we operate. These laws and regulations govern, among other things, consumer protection, state and municipal licensing, privacy and data protection, labor and employment, competition, and marketing and communications practices, to name a few. These laws and regulations will likely have evolving interpretations and applications, and it can often be difficult to predict how such laws and regulations may be applied to our business.

~~COVID-19 Impact~~33

~~During~~Table ~~the COVID-19 pandemic, our services have mostly been considered essential in nature. As the situation continues to evolve, we are closely monitoring the impact~~ of the COVID-19 pandemic on all aspects of our business, in addition to how the COVID-19 pandemic impacts our ability to provide services to our customers. As the COVID-19 pandemic is expected to continue to affect our future business activities for an unknown period of time, we believe there could be impacts to our financial performance. These impacts include lost productivity from governmental permitting approval delays, reduced crew productivity due to social distancing, other mitigation measures or other factors, the health and availability of work crews or other key personnel, including subcontractors or supply chain disruptions, and/or delayed project start dates or project shutdowns or cancellations that may be mandated or requested by governmental authorities or others, all of which could result in lower revenue or higher costs. Additionally, disruptions in economic activity as a result of the COVID-19 pandemic have had, and may continue to have, adverse effects across our end markets. To the extent that future business activities are adversely affected by the pandemic, we intend to take appropriate actions designed to mitigate these impacts. Given the uncertainty regarding the magnitude and duration of the pandemic’s effects, we are unable to predict with specificity or quantify any potential future impact on our business, financial condition and/or results of operations.Contents

Components of Our Results of Operations

Revenue

We generate revenue from engineering, construction, installation, network design, project management, site acquisition, maintenance services, business continuity, disaster recovery operations, and fiber optic construction services in the United States.

Cost of Revenues

Cost of revenues primarily consists of employee and subcontractor direct labor costs, as well as materials, equipment, vehicle and overhead costs incurred in the services sold in the period as well as insurance costs incurred in performing those services. Labor and overhead costs consist of direct and indirect service costs, including wages and fringe benefits, and operating expenses including field facility expenses, rent, and travel. We expect our cost of ~~revenues~~revenue to ~~continue~~grow toproportionately ~~change proportionally and remain relatively flat~~ as a percentage of revenue as we scale our business.

General and Administrative Expenses

General and administrative expenses consist primarily of payroll and related benefit costs for our employees involved in general corporate functions, professional fees, consulting, and changes in ~~fair~~certain ~~value~~accounting ofestimates ~~contingent~~such ~~considerations~~as ~~from~~TRA ~~business~~liabilities, ~~acquisitions~~etc., as well as costs associated with the use by these functions of facilities and equipment, such as rent, insurance, and other occupancy expenses. ~~General and administrative expenses also include legal, consulting and professional fees.~~

Depreciation and Amortization Expenses

Depreciation and amortization expenses primarily consist of depreciation on assets under ~~capital~~financing lease, machinery, equipment, vehicles, office furniture, computers, leasehold improvements, software, and amortization of defined-lived intangible assets. ~~We expect depreciation and amortization expenses to increase for the foreseeable future as we scale our business.~~

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Other Expense, Net

Other expense, net, consists primarily of interest expense, loss on extinguishment of convertible notes, and gain/loss on the sale/ disposal of property and equipment.

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Results of Operations

Comparison of the Three Months Ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022

The following table sets forth our ~~condensed~~ consolidated results of operations for the periods presented:

	For the Three Months Ended
(in thousands)	~~October~~April 1, ~~2022~~2023		~~October~~April 2, ~~2021~~2022		($) Change		(%) Change
Revenue	$	~~216~~156,~~120~~246	$	~~215~~148,~~462~~161	$	~~658~~8,085	05.35	%
Cost and Expenses:
Cost and expenses:
Cost of revenues	~~188~~143,~~108~~444		~~157~~132,~~157~~105		3011,~~951~~339		198.76	%
General and administrative	324,~~890~~376		922,~~495~~141		(52,~~605)~~235		~~(59~~10.0)1	%
Transaction expense	~~137~~—		19,~~423~~268		(19,~~286~~268)		(90100.40)	%
Depreciation and amortization	14,~~892~~999		1314,~~491~~766		~~1,401~~233		101.46	%
Total costs and expenses	~~207~~182,~~027~~819		~~181~~178,~~566~~280		254,~~461~~539		142.05	%
Income from operations	9,093		33,896		(24,803)		(73.2)	%
Loss from operations	(26,573)		(30,119)		3,546		(11.8)	%
Other income (expense):
Gain on sale/disposal of property and equipment	3304		~~210~~1,915		(~~207~~1,611)		(9884.61)	%
Interest expense	(1620,~~016~~583)		(1412,~~640~~343)		(18,~~376~~240)		966.48	%
Total other expense	(1620,~~013~~279)		(1410,~~430~~428)		(19,~~583~~851)		1194.05	%
Net (loss) income from continuing operations	(6,920)		19,466		(26,386)		(135.5)	%
Net loss	$	(46,852)	$	(40,547)	$	(6,305)	15.5	%
Net loss from discontinued operations	—		(4,985)		4,985		(100.0)	%
Net (loss) income	$	(6,920)	$	14,481	$	(21,401)	(147.8)	%

Revenue

Revenue increased $~~0.7~~8,085 ~~million~~thousand, or 05.35%, for the three months ended ~~October~~April 1, ~~2022~~2023, compared to the three months ended ~~October~~April 2, ~~2021~~2022, primarily driven by aan ~~$52.7~~increase ~~million~~in ~~increase~~our Telecom segment in support of 5G and C-Band spectrum deployment. Specifically, the Telecom ~~revenues~~increase ~~primarily~~was ~~due~~driven toby ~~new~~the ~~customer~~Wireless ~~programs~~division ~~and~~as ~~growth~~their major customers are continuing to make significant investments in support of 5G and ~~C-Band~~fiber ~~deployment~~builds. The Telecom ~~revenue~~increase ~~growth~~ was ~~mostly~~partially offset by ~~timing~~a decrease in Renewables and Recovery Logistics segment in the amount of ~~event-based~~$9,183 ~~revenues~~thousand ~~within~~primarily ~~our~~due ~~Recovery~~to ~~business~~a less impactful winter storm season compared to the prior year.

Cost of Revenues

Cost of revenues increased by $~~31.0~~11,339 ~~million~~thousand, or 198.76%, for the three months ended ~~October~~April 1, ~~2022~~2023, compared to the three months ended ~~October~~April 2, ~~2021,~~2022. ~~primarily~~Higher ~~due~~project tovolume ~~higher~~for ~~labor,~~5G ~~fuel,~~ and ~~material~~fiber ~~costs.~~builds ~~Cost~~drove ofan ~~revenues~~overall ~~was~~increase ~~also~~in ~~impacted~~delivery bycosts ~~a higher mix~~ of ~~Telecom~~$21,945 ~~revenue~~thousand, ~~versus~~which ~~the~~was ~~prior~~partially ~~year~~offset ~~period~~by of a ~~higher~~timing-driven ~~mix~~$10,959 ofthousand ~~Renewables~~decrease ~~and~~in ~~Recovery~~materials ~~revenue~~fulfillment costs.

General and Administrative

General and administrative expenses ~~decreased~~increased by $~~5.6~~2,235 ~~million~~thousand, or 5910.01%, for the three months ended ~~October~~April 1, ~~2022~~2023, compared to the three months ended ~~October~~April 2, ~~2021~~2022. The ~~decrease~~increase was primarily related to ~~changes~~professional infees ~~fair~~for ~~value~~restructuring ofservices ~~contingent consideration of $11.8 million and a $1.1 million gain from remeasurement of TRA liabilities during the three months ended October 1, 2022,~~ partially offset by ~~increased~~less ~~salary and compensation costs,~~ share-based compensation ~~related~~expense tofrom ~~the~~Q1 ~~Company’s~~2022 ~~Long-Term~~related ~~Incentive~~to ~~Plan~~our ~~(“LTIP”)~~February ~~and~~14, ~~incremental~~2022 ~~costs~~Business ~~required~~Combination of(the ~~being~~"Business ~~a public company~~Combination").

Transaction Expenses

Transaction expenses ~~decreased~~which bywere ~~$1.3 million,~~exclusively orrelated ~~90.4%,~~to ~~for~~ the ~~three~~Business ~~months~~Combination ~~ended~~in ~~October~~February 1, 2022, ~~compared~~were to$9,268 thousand for the three months ended ~~October~~April 2, ~~2021~~2022. ~~due~~There ~~primarily~~were to no ~~acquisitions~~Transaction ~~closing~~expenses infor the ~~2022~~three ~~period~~months ended April 1, 2023.

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Depreciation and Amortization

Depreciation and amortization expenses increased by $1.4 million, or 10.4%, for the three months ended October 1, 2022, compared to the three months ended October 2, 2021. The increase was driven primarily by depreciation and amortization related to the 2021 business acquisitions.

Gain on sale/disposal of property and equipment

There was no material change to the gain on sale/disposal of property and equipment for the three months ended October 1, 2022.

Interest Expense, Net

Interest expense increased by $1.4 million, or 9.4%, for the three months ended October 1, 2022, compared to the three months ended October 2, 2021. This was due to the issuance of $124.7 million unsecured convertible notes in connection with the Business Combination as well as higher interest rates on both our Term loan and line of credit.

Comparison of the Nine Months Ended October 1, 2022 and October 2, 2021

The following table sets forth our condensed consolidated results of operations for the periods presented:

	For the Nine Months Ended
(in thousands)	October 1, 2022		October 2, 2021		($) Change		(%) Change
Revenue	$	548,503	$	465,184	$	83,319	17.9	%
Costs and Expenses:
Cost of revenues	484,393		372,496		111,897		30.0	%
General and administrative	42,668		33,418		9,250		27.7	%
Transaction expense	10,725		2,875		7,850		273.0	%
Depreciation and amortization	44,452		39,136		5,316		13.6	%
Total costs and expenses	582,238		447,925		134,313		30.0	%
(Loss) income from operations	(33,735)		17,259		(50,994)		(295.5)	%
Other income (expense):
Gain on sale/disposal of property and equipment	2,063		514		1,549		301.4	%
Interest expense	(41,444)		(35,778)		(5,666)		15.8	%
Loss on extinguishment of convertible notes	—		(2,436)		2,436		(100.0)	%
Total other expense	(39,381)		(37,700)		(1,681)		4.5	%
Net loss from continuing operations	(73,116)		(20,441)		(52,675)		257.7	%
Net loss from discontinued operations	—		(8,114)		8,114		(100.0)	%
Net loss	$	(73,116)	$	(28,555)	$	(44,561)	156.1	%

Revenue

Revenue increased $83.3 million, or 17.9%, for the nine months ended October 1, 2022, compared to the nine months ended October 2, 2021, driven by a $136.1 million, or 37.8%, increase in Telecom revenues primarily due to new customer programs and growth in 5G and C-Band deployment, partially offset by timing of event-based revenues within our Recovery business.

Cost of Revenues

Cost of revenues increased by $111.9 million, or 30.0%, for the nine months ended October 1, 2022, compared to the nine months ended October 2, 2021, due to increased revenues, higher labor and material costs, and a higher mix of Telecom revenue.

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General and Administrative

General and administrative expenses increased by $9.3 million, or 27.7%, for the nine months ended October 1, 2022, compared to the nine months ended October 2, 2021. The increase was primarily related to share-based compensation triggered by the close of the Business Combination and the Company’s LTIP, increased salary and compensation costs, and incremental costs required of being a public company, partially offset by changes in fair value of contingent consideration of $11.8 million and a $1.1 million gain from remeasurement of TRA liabilities during the three months ended October 1, 2022.

Transaction Expenses

Transaction expenses increased by $7.9 million for the nine months ended October 1, 2022, compared to the nine months ended October 2, 2021 due to the closing of the Business Combination on February 14, 2022.

Depreciation and Amortization

Depreciation and amortization expenses increased by $~~5.3~~233 ~~million~~thousand, or 131.6%, for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared to the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. The increase was driven primarily by ~~the~~an ~~depreciation~~increase ~~and~~of ~~amortization~~property, ~~related~~plant, toand ~~the~~equipment ~~2021~~as ~~business~~of ~~acquisitions~~April 1, 2023.

Gain on sale/disposal of property and equipment

Gain on sale/disposal of property and equipment ~~increased~~decreased by $1.5,611 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 1, ~~2022,~~2023. ~~primarily~~This decrease was due to vehicle sales in the ~~remarketing~~prior ofyear. ~~vehicles~~This ~~during~~sale was unique to the first quarter of 2022 and as such, sale activity returned to normal levels for the first quarter of 2023.

Interest Expense~~, Net~~

Interest expense increased by $~~5.7~~8,240 ~~million~~thousand, or 1566.8%, for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared to the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. ~~This~~ The increase was primarily due to ~~the~~debt issuance ofcosts ~~$124.6~~related ~~million~~to ~~unsecured~~the ~~convertible~~Company's ~~notes~~additional inborrowing ~~connection~~of ~~with~~$55,000 ~~the~~thousand ~~Business~~on ~~Combination~~March as16, ~~well~~2023. asIn ~~higher~~addition ~~interest~~to ~~rates~~the onnew ~~both~~debt ~~our~~issuance ~~Term~~costs, ~~loan~~the ~~and~~interest ~~line~~expense ofincreased ~~credit~~due to higher interest rates.

Review of Operating Segments

Comparison of the Three Months Ended ~~October~~April 1, ~~2022~~2023, and ~~October~~April 2, ~~2021~~2022

	For the Three Months Ended
(in thousands)	~~October~~April 1, ~~2022~~2023		~~October~~April 2, ~~2021~~2022		($) Change		(%) Change
Revenue:
Telecom	$	~~188~~149,~~297~~712	$	~~135~~132,~~581~~664	$	5217,~~716~~048	3812.9	%
Renewables & Recovery Logistics	276,~~823~~534		7915,~~881~~497		(528,~~058~~963)		(6557.28)	%
Total revenue	$	~~216~~156,~~120~~246	$	~~215~~148,~~462~~161	$	~~658~~8,085	05.35	%
Adjusted EBITDA:
Telecom	$	145,~~103~~561	$	104,~~891~~812	$	~~3,212~~749	2915.56	%
Renewables & Recovery Logistics	~~8,671~~(173)		385,~~162~~309		(295,~~491~~482)		(77103.3)	%
Corporate	(76,~~041~~924)		(46,~~448~~094)		(~~2,593~~830)		5813.36	%
Total Adjusted EBITDA - continuing operations	$	15,733	$	44,605	$	(28,872)	(64.7)	%
Total Adjusted EBITDA	$	(1,536)	$	4,027	$	(5,563)	(138.1)	%
Total Adjusted EBITDA - discontinued operations	—		726		(726)		(100.0)	%
Total Adjusted EBITDA	$	15,733	$	45,331	$	(29,598)	(65.3)	%

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Telecom

Revenue

Revenue increased by $~~52.7~~17,048 ~~million~~thousand, or 3812.9%, for the three months ended ~~October~~April 1, ~~2022~~2023, compared to the three months ended ~~October~~April 2, ~~2021.~~2022 ~~The~~due ~~increase~~to ~~was~~the ~~primarily~~higher ~~due~~levels toof ~~increased~~ 5G and C-Band spectrum deployment, asversus ~~well~~the asprior ~~growth outside of our top two customers~~year.

Adjusted EBITDA ~~– Continuing Operations~~

Telecom Adjusted EBITDA increased by $~~3.2~~749 ~~million~~thousand, or 2915.56%, for the three months ended ~~October~~April 1, ~~2022~~2023, compared to the three months ended ~~October~~April 2, ~~2021~~2022. The increase in Telecom Adjusted EBITDA was primarily due to increased revenues, improved margins, and ~~improved~~better scalability of ~~our~~the Telecom business, partially offset by higher ~~labor,~~subcontractor ~~fuel, and material~~ costs ~~from sustained levels of inflation~~.

~~Renewables and Recovery Logistics~~36

Revenue

Revenue decreased by $52.1 million, or 65.2%, for the three months ended October 1, 2022, compared to the three months ended October 2, 2021. The decrease was primarily driven by the timing of event-based revenues within our Recovery business.

Adjusted EBITDA – Continuing Operations

Renewables & Recovery Logistics Adjusted EBITDA decreased by $29.5 million, or 77.3%, for the three months ended October 1, 2022, compared to the three months ended October 2, 2021. The decrease was primarily driven by the timing of event-based revenue within our Recovery business.

Comparison of the Nine Months Ended October 1, 2022, and October 2, 2021

	For the Nine Months Ended
(in thousands)	October 1, 2022		October 2, 2021		($) Change		(%) Change
Revenue:
Telecom	$	496,134	$	360,020	$	136,114	37.8	%
Renewables & Recovery Logistics	52,369		105,164		(52,795)		(50.2)	%
Total revenue	$	548,503	$	465,184	$	83,319	17.9	%
Adjusted EBITDA:
Telecom	$	35,946	$	26,907	$	9,039	33.6	%
Renewables & Recovery Logistics	13,379		42,181		(28,802)		(68.3)	%
Corporate	(19,407)		(13,097)		(6,310)		48.2	%
Total Adjusted EBITDA - continuing operations	$	29,918	$	55,991	$	(26,073)	(46.6)	%
Total Adjusted EBITDA - discontinued operations	—		(1,349)		1,349		(100.0)	%
Total Adjusted EBITDA	$	29,918	$	54,642	$	(24,724)	(45.2)	%

Telecom

Revenue

Revenue increased by $136.1 million, or 37.8%, for the nine months ended October 1, 2022, compared to the nine months ended October 2, 2021. The growth was primarily due to increased 5G and C-Band deployment as well as growth outside of our top 2 customers.

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Adjusted EBITDA – Continuing Operations

Telecom Adjusted EBITDA increased by $9.0 million, or 33.6%, for the nine months ended October 1, 2022, compared to the nine months ended October 2, 2021. The increase in Telecom Adjusted EBITDA was primarily due increased revenues from 5G and C-Band deployment offset by higher labor, fuel, and material costs.

Renewables and Recovery Logistics

Revenue

Revenue decreased by $~~52.~~8,963 ~~million~~thousand, or 5057.28%, for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared to the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. The decrease was primarily driven by ~~the~~a ~~timing~~less ofimpactful ~~event-based~~winter ~~revenue~~storm ~~within~~season ~~our~~compared ~~Recovery~~to ~~business.~~the prior year.

Adjusted EBITDA ~~– Continuing Operations~~

Renewables & Recovery Logistics Adjusted EBITDA decreased by $~~28.8~~5,482 ~~million~~thousand, or 68103.3%, for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared to the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. The decrease was primarily driven by ~~the~~a ~~timing~~less ofimpactful ~~event-based~~winter ~~revenue~~storm ~~within~~season ~~our~~compared ~~Recovery~~to ~~business.~~the prior year.

Liquidity and Capital Resources

WeVoluntary ~~have~~Filing ~~historically~~Under ~~financed~~Chapter our operations primarily through cash flows generated by operations and, as needed, with borrowings under our revolving credit facility with PNC Bank (“PNC Facility”), and Senior Secured Term Credit Guaranty Agreement with Citibank (“Term Loan”). On September 19, 2022, we executed an amendment of the PNC Facility that increased the aggregate revolving commitments to $130.0 million from September 15 through December 31 of each year. The aggregate revolving commitments from January 1 through September 14 of each year will remain at $103.5 million. See Note 8-Debt and Capital Lease Obligations to the condensed consolidated financial statements for additional information on the amendment. Our uses of cash have been primarily to fund acquisitions, for the purchase of inventory, payroll, capital expenditures, and payment of our debt obligations and related interest expense. Our most significant contractual obligation for future uses of cash is our Term Loan and the senior unsecured convertible notes. As of October 1, 2022, $344.3 million was outstanding under our Term Loan and $124.7 million senior unsecured convertible notes were outstanding. On a quarterly basis, the Company is required to make principal payments of $2.4 million plus interest with all unpaid principal and interest due at maturity on July 17, 2025, on the Term Loan and quarterly interest payments commencing June 15, 2022 on the senior unsecured convertible notes with all unpaid principal due at maturity on February 15, 2027. On October 1, 2022, we had cash of $0.7 million and net working capital of $141.1 million, and on December 31, 2021, we had cash of $0.6 million and net working capital of $78.8 million. Our net working capital at October 1, 2022 increased by $62.3 million compared to December 31, 2021, mainly as a result of timing differences resulting in higher unbilled revenues, lower accrued amounts for annual year-end activities (insurance and compensation related items), lower accrued interest, as well as SPAC convertible debt of $3.4 million.11

We expect to continue operations in the normal course for the duration of the Chapter 11 Cases. However, for the duration of our Chapter 11 Cases, our operations and our ability to develop and execute our business plan, our financial condition, our liquidity and our continuation as a going concern are subject to a high degree of risk and uncertainty associated with our Chapter 11 Cases. The outcome of the Chapter 11 Cases is dependent upon factors that are outside of our control, including actions of the Bankruptcy Court. For a discussion of our ongoing bankruptcy proceedings and our debtor-in-possession financing arrangements, see Note 1 6 - Subsequent Events of the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Going Concern

~~Our~~The ~~interest~~accompanying ~~costs~~consolidated financial statements have ~~increased~~been ~~during~~prepared ~~2022~~assuming that the Company will continue as a ~~result~~going concern, which contemplates the realization of assets and satisfaction of liabilities in the ~~Federal~~normal ~~Reserve~~course ~~increasing~~of ~~interest~~business. ~~rates~~The asCompany ~~well~~has asnegative working capital and recurring losses from operations, recurring negative cash flows from operations and substantial cumulative net losses to date. The Company expects to incur significant professional fees and other costs in connection with, and throughout, the ~~result~~Chapter 11 Cases. The Company expects to continue operations in the normal course for the duration of the Chapter 11 Cases. To ensure ordinary course operations, the Company obtained approval from the Bankruptcy Court for certain ~~amendments~~“first day” motions to continue its ordinary course operations after the ~~Credit~~filing ~~Agreement~~date. ~~This~~On ~~increased~~June ~~interest~~13, ~~cost~~2023, ~~will~~the ~~make~~Company received final approval from the Bankruptcy Court for $40,000 thousand of financing from the Term Loan DIP Facility, providing it ~~more~~with ~~difficult~~immediate liquidity so that the Company can continue operating its business as usual during the Chapter 11 Cases and pay the costs and professional fees associated therewith, although the Company plans to lower its operating budget and further reduce the scale of its operations in connection with the Chapter 11 Cases. However, for the duration of the Chapter 11 Cases, the Company’s operations and ability to ~~meet~~develop and execute its business plan, its financial condition, liquidity and its continuation as a going concern are subject to a high degree of risk and uncertainty associated with the ~~fixed~~Chapter ~~charge~~11 ~~coverage~~Cases. ~~ratio~~The ~~covenant~~outcome inof the ~~future~~Chapter 11 Cases is dependent upon factors that are outside of the Company’s control, including actions of the Bankruptcy Court. The Company can give no assurances that it will be able to secure additional sources of funds to support its operations, or, if such funds are available to the Company, that such additional financing will be sufficient to meet its needs.

WeAs ~~are~~such, ~~subject~~management tocannot aconclude ~~number~~that ofsuch ~~risks,~~plans ~~including~~will ~~uncertainty~~be ~~related~~effectively toimplemented awithin ~~dependence~~one onyear ~~outside~~after ~~sources~~the ofdate ~~capital;~~that ~~and~~the ~~operating~~financial instatements anare ~~increased interest rate environment~~issued. ~~The~~As ~~attainment~~a ofresult, ~~profitable~~management ~~operations~~has isconcluded ~~dependent~~that onthe ~~future~~aforementioned ~~events~~conditions, ~~including~~among ~~obtaining~~others, ~~adequate~~raise ~~financing~~substantial todoubt ~~fulfill~~about ~~our~~the ~~growth~~Company’s ~~and~~ability ~~operating activities, generating adequate profitability~~ to ~~support~~continue ~~our~~as ~~debt~~a ~~structure;~~going ~~and~~concern ~~reorganizing~~for ~~our~~one ~~capital~~year ~~structure,~~after ~~including~~the ~~maintaining~~date ~~adequate~~the ~~availability~~financial ~~under~~statements ~~our~~are ~~line of credit to fund ongoing operations~~issued.

~~Management~~If ~~has evaluated~~ the ~~significance~~Company ofis ~~the~~unable ~~conditions~~to ~~described~~raise ~~above~~additional capital in ~~relation~~sufficient toamounts ~~our~~or ~~ability~~on toterms ~~meet~~acceptable, ~~our~~the ~~obligations~~Company ~~and~~may ~~concluded~~have ~~that,~~to ~~without~~significantly ~~additional~~scale ~~funding,~~back ~~there~~its isoperations. ~~substantial~~The ~~doubt~~consolidated wefinancial ~~will~~statements ~~have~~do ~~sufficient~~not ~~funds~~reflect toany ~~meet~~adjustments ~~our~~that ~~obligations~~might ~~within~~be ~~one~~necessary ~~year~~if ~~from~~ the ~~date~~Company ~~the~~is ~~condensed~~unable ~~consolidated~~to ~~financial statements were issued and~~ continue as a going concern.

If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company raises additional funds by incurring debt financing, the terms of the debt may involve significant

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cash payment obligations as well as covenants and specific financial ratios that may restrict the Company’s ability to operate its business. We are subject to uncertainty related to a dependence on outside sources of capital and operating in an increased interest rate environment. The attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill our growth and operating activities, generating adequate profitability to support our debt structure; and reorganizing our capital structure, including maintaining adequate availability under our line of credit to fund ongoing operations.

Management believes that the Company’s capital requirements will depend on many factors. These factors include improving profitability within our Telecom Segment, reviewing funding sources to support our business plan relating to our $1,600,000 thousand backlog, and working to achieve a more sustainable leverage model. There can be no assurances we will be successful with these initiatives.

Amendment to the Term Loan

Summary of Cash Flows

The following table summarizes our cash flows for the periods presented for our continuing operations:


	For the Three Months Ended
(in thousands)	April 1, 2023		April 2, 2022
Net cash used in operating activities	$	(22,974)	$	(40,686)
Net cash (used in) provided by investing activities	(534)		1,477
Net cash provided by financing activities	31,162		37,600
Effect of foreign currency exchange rate translation on cash	—		(10)
Net increase (decrease) in cash	$	7,654	$	(1,619)

Following the consummation of the Business Combination, the Company is now obligated to make payments under the Tax Receivable Agreement. The actual timing and amount of any payments that may be made under the Tax Receivable Agreement are unknown at this time and will vary based on a number of factors. For more information about these factors, see Note 12-Tax Receivable Agreement to the consolidated financial statements. However, the Company expects that the payments that it will be required to make in connection with the Tax Receivable Agreement will be substantial. Any payments made under the Tax Receivable Agreement could generally reduce the amount of cash that might have otherwise been available to the Company. For so long as the Company is the managing member of QualTek HoldCo, the Company intends to cause QualTek HoldCo to make ordinary distributions and tax distributions to the holders of QualTek Common Units on a pro rata basis in amounts sufficient to enable the Company to cover payments under the Tax Receivable Agreement. However, QualTek HoldCo’s ability to make such distributions may be subject to various limitations and restrictions, including, but not limited to, retention of amounts necessary to satisfy the obligations of QualTek HoldCo and its subsidiaries and restrictions on distributions that would violate any applicable restrictions contained in QualTek HoldCo’s debt agreements, or any applicable law, or that would have the effect of rendering QualTek HoldCo insolvent. To the extent the Company is unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid. Additionally, nonpayment for a specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable

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~~Management~~Agreement ~~believes~~and ~~that~~therefore accelerate payments under the ~~Company’s~~Tax ~~capital~~Receivable ~~requirements~~Agreement, ~~will~~which ~~depend~~could onbe ~~many~~substantial ~~factors.~~and ~~These~~as ~~factors~~a ~~include~~result, ~~improving~~could ~~profitability~~have ~~within~~a substantial negative impact on our ~~Telecom~~liquidity ~~Segment,~~or ~~working~~financial tocondition. ~~achieve~~It ais ~~more~~anticipated ~~sustainable~~that ~~leverage~~pursuant ~~model~~to ~~and~~the ~~reviewing~~Restructuring, ~~funding~~the ~~sources~~TRA towill ~~support~~be ~~our~~cancelled ~~business~~and ~~plan~~rejected, ~~relating~~in towhich ~~our~~case ~~$2.4~~the ~~billion~~Company ~~backlog.~~would have no liability thereunder.

~~The~~Comparison ~~accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. This basis~~ of ~~presentation~~the ~~contemplates~~Three ~~the~~Months ~~recovery~~Ended ofApril ~~our~~1, ~~assets~~2023, and ~~the~~April 2, ~~satisfaction of liabilities in the normal course of business.~~2022

For additional information on the Company’s future obligations see Note 8-Debt and Capital Lease Obligations to the condensed consolidated financial statements. As of October 1, 2022, we had $18.2 million available capacity under our PNC Facility.

The following table summarizes our cash flows for the periods presented:

	For the Nine Months Ended
(in thousands)	October 1, 2022		October 2, 2021
Net cash used in operating activities from continuing operations	$	(81,311)	$	(32,959)
Net cash used in investing activities from continuing operations	$	(1,421)	$	(38,533)
Net cash provided by financing activities from continuing operations	$	82,861	$	79,779
Net increase in cash	$	129	$	6,508

____________________________________

Note: The following discussions related to our cash flows are presented on a continuing operations basis, which excludes the cash flows from our former operations associated with our Canadian subsidiary within the Telecom segment which are accounted for as discontinued operations. See Note 3-Discontinued Operations to the condensed consolidated financial statements.

Following the consummation of the Business Combination, the Company is now obligated to make payments under the Tax Receivable Agreement. The actual timing and amount of any payments that may be made under the Tax Receivable Agreement are unknown at this time and will vary based on a number of factors. For more information about these factors, see Note 14-Tax Receivable Agreement to the condensed consolidated financial statements. However, the Company expects that the payments that it will be required to make in connection with the Tax Receivable Agreement will be substantial. Any payments made under the Tax Receivable Agreement could generally reduce the amount of cash that might have otherwise been available to the Company. For so long as the Company is the managing member of QualTek HoldCo, the Company intends to cause QualTek HoldCo to make ordinary distributions and tax distributions to the holders of QualTek Common Units on a pro rata basis in amounts sufficient to enable the Company to cover payments under the Tax Receivable Agreement. However, QualTek HoldCo’s ability to make such distributions may be subject to various limitations and restrictions, including, but not limited to, retention of amounts necessary to satisfy the obligations of QualTek HoldCo and its subsidiaries and restrictions on distributions that would violate any applicable restrictions contained in QualTek HoldCo’s debt agreements, or any applicable law, or that would have the effect of rendering QualTek HoldCo insolvent. To the extent the Company is unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid. Additionally, nonpayment for a specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments under the Tax Receivable Agreement, which could be substantial and as a result, could have a substantial negative impact on our liquidity or financial condition.

Comparison of the Nine Months Ended October 1, 2022, and October 2, 2021

Operating Activities

~~Cash~~Net cash used inby the Company’s operating activities was $~~81.3~~22,974 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared to net cash used in operating activities of $~~33.0~~40,686 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. The ~~primary~~decrease ~~driver~~ of ~~this~~$17,712 ~~cash~~thousand ~~used~~was inprimarily ~~operating~~driven ~~activities~~by isthe ~~attributed~~Company’s effort to animprove ~~increase~~collections inof ~~working~~accounts ~~capital~~receivable ~~associated~~from ~~with~~ our ~~Telecom segment period over period as well as accrued transaction expense, settled at the close of the SPAC transaction~~customers.

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Investing Activities

Net cash used in the Company’s investing activities was $~~1.4~~534 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared with net cash ~~used~~provided of $~~38.5~~1,477 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. The primary driver of the change is ~~attributed~~$1,871 tothousand ~~cash~~in ~~paid~~proceeds ~~related~~from toa ~~the~~non-recurring ~~acquisitions~~sale of ~~FNS,~~vehicles ~~Broken~~for ~~Arrow~~the ~~and~~three ~~Concurrent~~months ~~from~~ended ~~prior~~April ~~year~~2, 2022.

Financing Activities

Net cash provided by the Company’s financing activities ~~increased~~decreased to $~~82.9~~31,162 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, compared to net cash provided by financing activities of $~~79.8~~37,600 ~~million~~thousand for the ~~nine~~three months ended ~~October~~April 2, ~~2021~~2022. The ~~primary~~decrease ~~driver~~ of ~~the~~$6,807 ~~change~~thousand inis ~~cash~~a ~~inflows~~result isof ~~attributable~~the tonet activity ~~related~~of ~~to the~~ Business Combination ~~that~~proceeds ~~resulted~~and inpayments ~~$124.7 million~~ of ~~cash~~$60,028 ~~proceeds~~thousand ~~from~~for the ~~issuance~~three ofmonths ~~the~~ended ~~senior~~April ~~unsecured~~2, ~~convertible~~2022 ~~notes~~ and the ~~issuance~~Term ofLoan ~~common~~Amendment ~~stock,~~proceeds ~~partially~~of ~~offset by payments to settle the acquisition related debt~~$55,000 ~~along~~thousand ~~with~~for ~~payments related to~~ the ~~equity~~three ~~issuance~~months ~~costs~~ended ~~and~~April ~~lower~~1, ~~net borrowings from the line of credit~~2023.

Critical Accounting Policies and Estimates

The following is not intended to be a comprehensive list of all our accounting policies. Our significant accounting policies are more fully described in Note 1-Nature of Business and Summary of Significant Accounting Policies to the ~~condensed~~ consolidated financial statements. The discussion and analysis of our financial conditions and results of operations is based on our ~~condensed~~ consolidated financial statements. These statements have been prepared in accordance with GAAP. In conformity with GAAP, the preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in these ~~condensed~~ consolidated financial statements and accompanying notes. Given that management estimates, by their nature, involve judgment regarding future uncertainties, actual results may differ from these estimates if conditions change or if certain key assumptions used in making these estimates ultimately proven to be inaccurate.

We believe the following critical accounting policies contain the more significant judgments and estimates used in the preparation of our ~~condensed~~ consolidated financial statements.

•Revenue Recognition

•Accounts Receivable

•Concentration of Credit Risk

•Business Combination

•Impairment of Goodwill and Long-Lived Assets

•Income Taxes

Revenue Recognition

The Company recognizes revenue from contracts with customers using the five-step model prescribed in ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). Revenue for engineering, construction, project management, and site acquisition services are primarily recognized by the Company over time utilizing the cost-to-cost measure of progress, which is an input method, on contracts for specific projects, and for certain master service and other service agreements. Revenue for engineering, aerial and underground construction for projects with customer-specified service requirements are primarily performed under master service agreements and other contracts that contain customer-specified service requirements. These agreements include pricing for individual tasks, including, for example, the placement of underground or aerial fiber, directional boring, and fiber splicing, each based on a specific unit of measure. Revenue is recognized over time as services are performed and customers simultaneously receive and consume the benefits provided by the Company. Output measures such as units delivered are utilized to assess progress against specific contractual performance obligations. Revenue from fulfillment, maintenance, compliance, and recovery services provided to the telecommunication, cable and utility industries is recognized as the services are rendered. These services are generally performed under master or other service agreements and billed on a contractually agreed price per unit on a work order basis.

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progress, which is an input method, on contracts for specific projects, and for certain master service agreements ("MSAs") and other service agreements. Revenue for engineering, aerial and underground construction for projects with customer-specified service requirements are primarily performed under MSAs and other contracts that contain customer-specified service requirements. These agreements include pricing for individual tasks, including, for example, the placement of underground or aerial fiber, directional boring, and fiber splicing, each based on a specific unit of measure. Revenue is recognized over time as services are performed and customers simultaneously receive and consume the benefits provided by the Company. Output measures such as units delivered are utilized to assess progress against specific contractual performance obligations. Revenue generated from fulfillment, maintenance, compliance and recovery services as well as certain performance obligations related to material sales is recognized at a point in time. These services are generally performed under master or other service agreements and billed on a contractually agreed price per unit on a work order basis.

Accounts Receivable

The Company’s accounts receivable are due primarily from large telecommunications carriers, cable providers, and utility companies operating across the United States and are carried at original contract amount less an estimate for uncollectible amounts based on historical experience. Management determines the allowance for doubtful receivables by regularly evaluating individual customer receivables and considering a customer’s financial conditions and current economic conditions. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivables previously written off are recorded when received.

Concentration of Credit Risk

We have established relationships with many leading telecommunications carriers, cable providers and utility companies but our business is concentrated among relatively few customers.

For the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, our top three customers accounted for 68% and 66% of our total revenues, and the same three customers accounted for 6457% and 68% of our total accounts receivable at ~~October~~April 1, 2023 and April 2, 2022. See Note 64-Accounts Receivable, Contract Assets and Liabilities, and Customer Credit Concentration and Note 1513-Segments and Related Information to the ~~condensed~~ consolidated financial statements for additional information.

Business Combination

The Company accounts for acquired businesses using the acquisition method of accounting, which requires that any assets acquired, and liabilities assumed be at their respective fair values on the date of acquisition. Any excess between the purchase price and the fair value of acquired net assets and liabilities assumed is recognized as goodwill. The assumptions made in calculating the fair value of assets acquired and liability assumed in business combinations require several significant judgements and estimates and is subject to revision if additional information, which existed as of the date of acquisition, about the fair values become available during the measurement period of up to 12 months from the acquisition date. The Company will recognize any adjustments to preliminary amounts that are identified during the measurement period in the reporting period in which the adjustments are determined.

Impairment of Goodwill and Long-lived Assets

Goodwill represents the excess purchase price paid to acquire a business over the fair value of net assets acquired. The Company has goodwill and long-lived intangible assets that have been recorded in connection with business acquisitions. We perform our annual impairment review of goodwill and long- lived intangible assets at the reporting unit level inat the start of the fourth quarter of each year or more frequently when changes in circumstances indicate that the carrying value may not be recoverable. Such circumstances may include a significant adverse change in the business climate ~~for~~or ~~one~~growth ofopportunities for our reporting units; or a decision to dispose of a reporting unit or a significant portion of a reporting unit; changes in the economic environment; or a sustained decrease in share price.

WeThe ~~perform~~Company initially performs a qualitative assessment as to ~~test goodwill for impairment on~~ the ~~first~~likelihood ~~day~~ of the ~~fourth~~occurrence ~~quarter,~~of oran ~~more~~impairment. ~~frequently~~For ~~if events or changes in~~ the ~~business~~qualitative ~~warrant it~~assessment, bythe ~~determining~~Company determines whether it is more likely than not (a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying value. Qualitative factors that we consider include, but are not limited to, macroeconomics conditions, customer relations, market conditions, a significant adverse change in legal factors or in the business climate and reporting unit specific events. If, based on the qualitative assessment, we determine a quantitative assessment is necessary, we estimate the fair value of the reporting unit and compare that to its carrying value. To the extent the carrying value exceeds the fair value of a reporting unit, an impairment loss is recorded in an amount equal to that excess. Under our quantitative test, our estimate of fair value is primarily determined using a weighting of fair values derived ~~in equal proportions~~ from the income approach and market approach valuation methodologies. The income approach uses the discounted cash flow method, and the market approach uses the guideline public company method. Changes in our judgments and projections could result in significantly different estimates of fair value, potentially resulting in impairments of goodwill and other intangible assets. If any impairment exists, we record the impairment to the statement of operations in the period the impairment is ~~recognized~~identified.

AsThe profitability of ~~and~~individual ~~for~~reporting ~~the~~units ~~three~~may ~~and~~be ~~nine~~impacted ~~months~~by ~~ended~~changes ~~October 1,~~in ~~2022~~customer ~~and October 2~~demand, ~~2021,~~increased ~~there~~costs ~~were~~of noproviding ~~indications~~services, ~~that~~and ~~it was more likely than not that~~ the ~~fair~~level ~~value~~ of aoverall ~~reporting~~economic ~~unit~~activity. ~~was~~Our ~~less~~customers ~~than~~may ~~its~~reduce ~~carrying~~capital ~~value. As~~expenditures ~~such,~~and ~~there~~defer ~~were~~or nocancel ~~goodwill~~pending ~~impairment~~projects ~~charges. For~~for ~~additional~~a ~~information~~variety onof ~~goodwill,~~reasons. ~~see~~The ~~Note~~profitability ~~7-Goodwill~~of ~~and~~reporting ~~Intangible~~units ~~Assets,~~may tobe ~~the~~negatively ~~condensed~~impacted ~~consolidated~~if ~~financial~~actual ~~statements.~~

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Wecosts ~~review~~of ~~long-lived~~providing ~~assets,~~services ~~which~~exceed ~~primarily~~the ~~includes~~forecasted ~~finite-lived~~costs ~~intangible~~anticipated ~~assets~~when ~~and~~the ~~property~~Company ~~and~~enters ~~equipment,~~into ~~for~~contracts. ~~impairment~~Additionally, ~~whenever~~adverse ~~events~~conditions ~~or changes~~ in ~~circumstances~~the ~~indicate~~economy ~~that~~and ~~the~~future ~~carrying~~volatility ~~amount~~in of the ~~assets~~equity ~~may~~and ~~not~~credit bemarkets ~~fully~~could ~~recoverable.~~impact ~~This analysis is performed by comparing~~ the ~~respective~~valuation ~~carrying values~~ of the ~~assets~~Company’s toreporting ~~the~~units. ~~current~~The ~~and~~cyclical ~~expected~~nature ~~future~~of ~~cash~~our ~~flows~~business, onthe anhigh ~~undiscounted~~level ~~basis,~~of tocompetition bewithin ~~generated~~our ~~from~~industry, ~~such~~and ~~assets.~~the Ifconcentration ~~such~~of ~~analysis~~its ~~indicates~~revenues ~~that~~from ~~the~~a ~~carrying~~limited ~~value~~number of ~~these~~customers ~~assets~~may isalso ~~not~~cause ~~recoverable,~~results ~~the~~to ~~carrying~~vary. ~~value~~These offactors ~~such~~may ~~assets~~affect isindividual ~~reduced~~reporting tounits ~~fair~~disproportionately, ~~value.~~relative Noto ~~impairments have occurred during~~ the ~~three~~Company ~~and~~as ~~nine~~a ~~months~~whole. ~~ended~~As ~~October 1~~a result, ~~2022~~the ~~and~~performance ~~October 2,~~of ~~2021.~~one ~~For~~or ~~additional~~more ~~information~~of on the ~~impairment~~reporting ~~charge,~~units ~~see~~could ~~Note~~decline, ~~7-Goodwill~~resulting ~~and~~in ~~Intangible~~an ~~Assets,~~impairment toof ~~the~~goodwill ~~condensed~~or ~~consolidated~~intangible ~~financial statements~~assets.

~~Income~~Additionally, ~~Taxes~~as of December 31, 2022, we identified a material weakness related to the Company’s process for performing interim impairment trigger analyses. In the third quarter 2022, we concluded that there was substantial doubt the Company would have sufficient funds to meet its obligations within one year from the date the consolidated financial statements were issued, and as a result, disclosed there was substantial doubt about the Company’s ability to continue as a going concern in its third quarter 2022 Form 10-Q. We did not consider the implications of the going concern conclusion when assessing whether events or circumstances existed that would suggest it was more likely than not that an impairment exists. In the fourth quarter of 2022, in conjunction with performing its annual goodwill impairment assessment on October 2, 2022, we recorded an out-of-period non-cash goodwill impairment charge of $14,160 thousand. Had management performed an interim impairment trigger analysis in the third quarter 2022, the goodwill impairment charge would have been recorded in the third quarter financial statements for the period-ended October 1, 2022.

~~Prior~~Due to the ~~Business~~substantial ~~Combination,~~doubt ~~QualTek~~about ~~HoldCo,~~the isCompany's ~~treated~~ability to continue as a ~~partnership~~going ~~for~~concern, ~~U.S.~~we ~~federal~~determined ~~and~~that ~~most~~a ~~applicable~~triggering ~~state~~event ~~and~~existed ~~local~~as ~~income~~of ~~tax~~April ~~purposes.~~1, 2023, which warranted an interim goodwill impairment assessment. As aof ~~partnership~~April 1, ~~QualTek~~2023, ~~HoldCo's~~we ~~taxable~~performed ~~income~~a ~~and~~quantitative ~~losses~~assessment ~~were~~and ~~passed~~determined ~~through~~that tothe ~~and~~fair ~~included~~value inof the ~~taxable~~Company's ~~income~~reporting units with goodwill are in excess of ~~its~~their ~~members.~~carrying ~~Accordingly~~values, ~~amounts~~concluding ~~related~~that tonone ~~income~~of ~~taxes~~the ~~were~~Company's ~~zero~~goodwill ~~for~~was ~~QualTek~~impaired. For ~~HoldCo~~additional ~~prior~~information on goodwill, see Note 5-Goodwill and Intangible Assets, to the ~~Business~~consolidated ~~Combination~~financial statements.

~~Following~~We ~~the~~review ~~Business~~long-lived ~~Combination~~assets, which primarily includes finite-lived intangible assets and property and equipment, for impairment whenever events or changes in circumstances indicate that the ~~Company~~carrying amount of the assets may not be fully recoverable. This analysis is ~~subject~~performed toby ~~income~~comparing ~~taxes~~the atrespective carrying values of the ~~U.S.~~assets ~~federal,~~to ~~state,~~the current and ~~local~~expected ~~levels~~future ~~for~~cash ~~income~~flows, ~~tax~~on ~~purposes~~an undiscounted basis, ~~including~~to ~~with~~be ~~respect~~generated tofrom ~~its~~such ~~allocable~~assets. ~~share~~If such analysis indicates that the carrying value of ~~any~~these ~~taxable~~assets ~~income~~is not recoverable, the carrying value of ~~QualTek~~such ~~HoldCo~~assets is reduced to fair value. No impairments have occurred during the three months ended April 1, 2023 and April 2, 2022. For additional information on long-lived assets, see Note 5-Goodwill and Intangible Assets, to the consolidated financial statements.

Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence on differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is "more-likely-than-not" that some portion or all of the deferred tax assets will not be realized. The realization of the deferred tax assets is dependent on the amount of future taxable income.

Emerging Growth Company Status

We qualify as an emerging growth company (“EGC”) pursuant to the provisions of the JOBS Act. For as long as we are an EGC, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and registration statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

In addition, under the JOBS Act, EGCs can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to take advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act until we are no longer an EGC. Our election to use the phase-in periods permitted by this election may make it difficult to compare our financial statements to those of non-EGCs and other EGCs that have opted out of the longer phase-in periods permitted under the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply with public company effective dates, such election would be irrevocable pursuant to the JOBS Act.

Recent Accounting Pronouncements

See Note 1-Nature of Business and Summary of Significant Accounting Policies to the ~~condensed~~ consolidated financial statements for more information.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISKS

~~Interest~~We ~~Rate~~are ~~Risk~~a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Our credit facilities provide a $130.0 million revolving line of credit and $380.0 million of term loan debt at October 1, 2022. On September 19, 2022, we executed an amendment of the PNC Facility that increased the aggregate revolving commitments to $130.0 million from September 15 through December 31 of each year. The aggregate revolving commitments from January 1 through September 14 of each year will remain at $103.5 million. See Note 8-Debt and Capital Lease Obligations to the condensed consolidated financial statements for additional information on the amendment. The revolving line of credit bears interest at a variable rate based on either BSBY Loan or a base rate plus an applicable 41

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margin with an unused commitment fee paid quarterly. Interest on the outstanding principal amount, payable in arrears monthly, is based on either an elected Base Rate plus an applicable margin, or an adjusted Eurodollar rate, plus an applicable margin, as defined in the agreement. The interest rate under the Credit Agreement as of October 1, 2022 was 8.25%. On the term loan, the Company may elect either a Base Rate plus an applicable rate (11.50% at October 1, 2022), or an adjusted Eurodollar rate, plus an applicable rate (10.00% at October 1, 2022), as defined in the agreement. As of October 1, 2022, we had $102.2 million and $344.3 million of borrowings outstanding under the revolving facility and term loan, respectively. Further increases in the interest rate set by the Federal Reserve Bank will increase our interest rate risk.

Credit Risk

We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the counterparty to make payment or otherwise perform. We generally seek to minimize our risk of exposure by limiting to reputable financial institutions the counterparties with which we enter into financial transactions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

ITEM 4. CONTROLS AND PROCEDURES

~~Disclosure~~Limitations on Effectiveness of Controls and Procedures

WeThe ~~maintain~~effectiveness ~~disclosure~~of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, ~~that~~and ~~are~~the ~~designed~~inability to ~~provide~~eliminate ~~reasonable~~misconduct ~~assurance~~completely. ~~that~~Accordingly, ~~material~~any ~~information~~system ~~required~~of tointernal becontrol ~~disclosed~~over infinancial ~~our~~reporting, ~~periodic~~including ~~reports~~ours, ~~filed~~no ~~under~~matter ~~the~~how ~~Exchange~~well ~~Act~~designed isand ~~recorded~~operated, ~~processed~~can only provide reasonable, ~~summarized~~not absolute assurances. In addition, ~~and~~projections ~~reported~~of ~~within~~any ~~the~~evaluation ~~time~~of effectiveness to future periods ~~specified~~are insubject to the ~~SEC’s~~risk ~~rules~~that ~~and~~controls ~~forms~~may ~~and~~become toinadequate ~~provide~~because ~~reasonable~~of ~~assurance~~changes in conditions, or that ~~such~~the ~~information~~degree isof ~~accumulated~~compliance ~~and~~with ~~communicated~~the topolicies ~~our~~or ~~management,~~procedures ~~our~~may ~~chief~~deteriorate. ~~executive~~We ~~officer~~intend to continue to monitor and upgrade our ~~principal~~internal ~~financial~~controls ~~officer~~as necessary or appropriate for our business, but there can be no assurance that such improvements will be sufficient to ~~allow~~provide ~~timely~~us ~~decisions~~with ~~regarding~~effective ~~required~~internal ~~disclosure~~control over financial reporting.

Evaluation of Disclosure Controls and Procedures

WeManagement ~~carried~~conducted ~~out~~ an evaluation, under the supervision and with the participation of our ~~management,~~Chief ~~including~~Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), of the effectiveness of the design and operation of our disclosure controls and procedures, (as defined in ~~Rule~~Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as ofamended) ~~the~~as ~~end~~ of ~~the~~April 1, ~~period~~2023. ~~covered~~Based byon ~~this~~the ~~Quarterly~~evaluation ~~Report~~of onour ~~Form~~disclosure ~~10-Q.~~controls ~~Based~~and onprocedures ~~this~~as ~~evaluation~~of April 1, 2023, our ~~principal~~Chief ~~executive~~Executive ~~officer~~Officer and ~~principal~~Chief ~~financial~~Financial ~~officer~~Officer concluded that, as of such date, our disclosure controls and procedures were not effective asdue ofto ~~October 1,~~the ~~2022~~material weaknesses in our internal control over financial reporting described below.

Management’s Report on Internal Control over Financial Reporting

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures are being made in accordance with appropriate authorizations of our management and board of directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In conducting the evaluation of disclosure controls and procedures and internal control over financial reporting as of December 31, 2022, as described in the 2022 Form 10-K, management identified a material weakness related to information technology (“IT”) general controls. Management determined that we did not design and maintain effective controls over IT general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (i) program change management controls for the financial systems to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) appropriate user access controls to ensure appropriate segregation of duties and that adequately restrict user access and privileged access to financial applications, programs and data to appropriate personnel.

Additionally, as of December 31, 2022, management identified a material weakness related to the Company’s process for performing interim impairment trigger analyses. In the third quarter 2022, management concluded that there was substantial doubt the Company would have sufficient funds to meet its obligations within one year from the date the consolidated financial statements were issued, and as a result, disclosed there was substantial doubt about the Company’s ability to continue as a going concern in its Quarterly Report on Form 10-Q for the quarter ended October 2, 2022. Management did not consider the implications of the going concern conclusion when assessing whether events or circumstances existed that would suggest it was more likely than not that an impairment exists. In the fourth quarter of 2022, in conjunction with performing its annual goodwill impairment assessment on October 2, 2022, we recorded an out-of-period non-cash goodwill impairment charge of $14,160 thousand. Had management performed an interim impairment

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trigger analysis in the third quarter 2022, the goodwill impairment charge would have been recorded in the third quarter financial statements for the period-ended October 1, 2022.

Remediation Measures

The Company and its Board of Directors are committed to maintaining a strong internal control environment. Management has begun the initial steps in developing its remediation plan to address the material weaknesses described above. The initial steps the Company has taken include identifying the appropriate resources to execute its remediation plan, which will include internal resources and third-party specialists, as well as the creation of additional internal procedures, performing additional analytical procedures and reviews of journal entries, reconciliations, and other transactions. The Company is still developing its full remediation plan and is in the early phase of what will be a multi-step remediation process to completely and fully remediate the material weaknesses identified and described above. To remediate the material weakness relative to identifying interim impairment triggering events, on a quarterly basis, the Company has implemented formalized and rigorous procedures to assess whether any triggering events have occurred which would require an interim impairment review of its goodwill.

Changes in Internal Control over Financial Reporting

~~During~~Other than the ~~quarter~~changes ~~ended~~associated ~~October 1,~~with ~~2022~~the material weaknesses and remediation actions noted above, there ~~were~~have been no changes in our internal control over financial reporting ~~identified~~during inthe ~~management’s~~quarter ~~evaluation~~ended ~~pursuant~~April 1, to2023 ~~Rules 13a 15(d) or 15d 15(d) of the Exchange Act~~ that have materially affected, or are reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We know of no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which our Company or our subsidiary is a party or of which any of their property is subject.

~~ITEM~~Effect ~~1A.~~of ~~RISK~~Automatic ~~FACTORS.~~Stay

~~Except~~Pursuant asto ~~noted~~Section ~~below~~362 of the Bankruptcy Code, ~~there~~the ~~were~~filing noof ~~material~~the ~~changes~~Chapter to11 Cases automatically stayed most actions against or on behalf of the ~~risk~~Company ~~factors~~Parties. ~~discussed~~Subject into ~~“Risk~~certain ~~Factors”~~exceptions inunder ~~Part~~the IBankruptcy Code, ~~Item 1A~~the filing of ~~our~~the ~~Annual~~Company ~~Report~~Parties’ onChapter ~~Form~~11 ~~10-K~~Cases ~~for~~automatically stayed the ~~fiscal~~continuation ~~year~~of ~~ended~~most ~~December~~legal 31proceedings or the filing of other actions against or on behalf of the Company Parties or their property to recover on, ~~2021~~collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Company Parties’ bankruptcy estates, ~~filed~~unless ~~with~~and until the ~~SEC~~Bankruptcy onCourt ~~April~~modifies 15or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, ~~2022~~governmental authorities may determine to continue actions brought under their police and regulatory powers.

WeITEM ~~may~~1A. beRISK ~~impacted by unionization or attempts to unionize by our workforce.~~FACTORS

Our ~~personnel~~Annual ~~may~~Report ~~attempt~~on Form 10-K for the year ended December 31, ~~successfully~~2022, orfiled ~~unsuccessfully~~with the SEC on April 28, 2023, as amended by the Amendment No. 1 on Form 10-K/A filed with the SEC on May 2, 2023 (collectively, the “Form 10-K”), in Part I –Item 1A, Risk Factors, describes important risk factors that could cause our business, financial condition, results of operations and growth prospects to ~~form~~differ ~~one~~materially from those indicated or ~~more~~suggested ~~unions~~by forward-looking statements made in this Quarterly Report on Form 10-Q or presented elsewhere by management from time to time. ~~The~~Except ~~outcome~~as ofset ~~any~~forth ~~election~~below, ~~process~~there ishave ~~uncertain~~been no material changes in our risk factors since the filing of the Form 10-K. ~~Further~~Additional ~~disruptions~~risks and uncertainties not currently known to us or ~~organizing~~that ~~efforts~~we ~~within~~currently ~~our~~deem ~~workforce~~to ~~could~~be ~~negatively~~immaterial ~~impact~~may also materially and adversely affect our business.

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~~business,~~Risks ~~result~~Related ~~in adverse publicity, and lead~~ to ~~delays in project completion. Additionally, any action against us relating to any unionized workforce could have a material adverse effect on~~ our ~~liquidity, cash flows and results of operations.~~Bankruptcy

~~The~~We ~~Company~~are ~~believes~~in ~~its~~the ~~current~~process ~~cash~~of ~~and~~Chapter ~~cash~~11 ~~equivalents~~reorganization ~~will~~cases ~~not~~under ~~likely~~the beBankruptcy ~~sufficient~~Code, towhich ~~fund~~may ~~its~~cause ~~business~~our ~~for~~common ~~the~~stock ~~next~~to ~~twelve~~decrease ~~months~~in ~~from~~value ~~the~~and ~~date~~may ~~these~~eventually ~~condensed~~render ~~consolidated~~our ~~financial~~common ~~statements~~stock ~~are~~worthless. ~~issued,~~For ~~raising~~a ~~substantial~~full ~~doubt~~description ~~about~~of the ~~Company's~~terms ~~ability~~and toconditions ~~continue~~of asthe aDIP ~~going~~Facility, ~~concern~~you should refer to the Bankruptcy Docket.

As ~~of October~~previously 1,reported ~~2022,~~in the Company’s ~~had~~Current ~~approximately $0.7~~Reports ~~million of~~Form ~~cash~~8-K filed with the SEC on May 31, 2023 and ~~cash~~July ~~equivalents.~~7, ~~Based~~2023, on the Petition Date, the Company’s ~~current~~Parties ~~business~~commenced ~~plan,~~voluntary ~~management~~cases ~~believes~~under ~~that~~Chapter 11 the ~~Company’s~~Bankruptcy ~~available~~Code ~~cash~~in ~~and~~the ~~cash~~Bankruptcy ~~equivalents~~Court. ~~will~~The ~~not~~Chapter ~~likely~~11 beproceedings ~~sufficient~~are tobeing ~~fund~~jointly ~~its~~administered ~~operations~~by ~~for~~the Bankruptcy Court under the ~~next~~lead ~~twelve~~case ~~months~~In ~~from~~re ~~the~~QualTek ~~issuance~~Services ofInc., Case No. 23-90584 (CML). On June 30, 2023, the ~~condensed~~Bankruptcy ~~consolidated~~Court ~~financial~~entered ~~statements~~into ~~that~~the ~~are~~Confirmation ~~included~~Order, ~~elsewhere~~which inapproved ~~this~~the ~~Quarterly~~associated ~~Report~~disclosure onstatement ~~Form~~(the ~~10-Q~~“Disclosure ~~without~~Statement”) ~~generating~~on ~~positive~~a ~~cash~~final ~~flows~~basis and byconfirmed ~~raising~~a ~~additional~~proposed ~~funds~~joint plan of reorganization (as amended, supplemented or modified, the “Plan”). ~~These~~ ~~conditions~~Any ~~raise~~trading ~~substantial~~in ~~doubt~~our ~~about~~common stock during the ~~Company’s~~pendency ~~ability~~of our Chapter 11 Cases is highly speculative and poses substantial risks to ~~continue~~purchasers of our common stock, as athe ~~going~~price ~~concern~~of our common stock may decrease in value or become worthless. InRecoveries ~~addition,~~in the ~~Company’s~~Chapter ~~current~~11 ~~operating~~Cases ~~plan~~for isholders ~~based~~of oncommon ~~current~~stock, ~~assumptions~~if ~~that~~any, ~~may~~will ~~prove~~depend toupon, beamong ~~inaccurate~~other things, our ability to consummate a plan of reorganization with respect to the Chapter 11 Cases and the ~~Company~~value ~~could~~of ~~use~~our ~~its~~assets. ~~available~~As ~~capital~~contemplated ~~resources~~under ~~sooner~~the ~~than~~Plan, iton ~~currently~~the ~~expects.~~Plan ~~The~~Effective ~~Company~~Date, ~~may~~there will be ~~forced~~no torecovery ~~reduce~~for ~~its~~holders ~~expansion~~of ~~plans~~the ~~and/or~~Company’s ~~curtail~~ existing ~~operations~~equity ifinterests. itConsequently, isthe ~~unable~~holders toof ~~obtain~~our ~~additional~~common ~~funding~~stock towill ~~support~~receive ~~its~~no ~~current~~recovery ~~business~~under ~~plan~~the Chapter 11 Cases and our common stock will be worthless.

~~ITEM~~We 2.are ~~UNREGISTERED~~subject ~~SALES~~to OFother ~~EQUITY~~risks ~~SECURITIES~~and ~~AND~~uncertainties ~~USE~~associated OFwith ~~PROCEEDS~~our Chapter 11 Cases.

Our operations and ability to develop and execute our business plan, our financial condition, our liquidity and our continuation as a going concern are subject to the risks and uncertainties associated with our Chapter 11 Cases. These risks include the following:

a.our ability to consummate a plan of reorganization with respect to the Chapter 11 Cases;

b.the high costs of bankruptcy cases and related fees;

c.our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence;

d.our ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties;

e.our ability to maintain contracts that are critical to our operations;

f.our ability to execute competitive contracts with third parties;

g.our ability to attract, motivate, and retain key employees;

h.the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;

i.our ability to retain our current management team;

j.the actions and decisions of our stockholders, creditors and other third parties who have interests in our Chapter 11 Cases that may be inconsistent with our plans.

Delays in our Chapter 11 Cases increase the risks of us being unable to reorganize our business and emerge from bankruptcy and increase our costs associated with the bankruptcy process.

These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with our Chapter 11 Cases could adversely affect our relationships with our suppliers, service providers, customers, employees and other third parties, which in turn could adversely affect our operations and financial condition. Also, pursuant to the Bankruptcy Code, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with our Chapter 11 Cases, we cannot accurately

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predict or quantify the ultimate impact or timing of events that occur during our Chapter 11 Cases and the impact that same will have on our business, financial condition and results of operations, and there is no certainty as to our ability to continue as a going concern.

If the Restructuring Support Agreement is terminated, our ability to consummate the Plan may be materially and adversely affected.

On May 24, 2023, the Company Parties and the Consenting Stakeholders entered into the Restructuring Support Agreement. The Restructuring Support Agreement contains a number of termination events, some of which would permit the Consenting Stakeholders the right to terminate such Restructuring Support Agreement, which could adversely affect our ability to consummate the Plan. Such termination events include, but are not limited to, for example: (i) the breach in any material respect by any Company Party, Consenting Sponsor, Consenting Term Lender, Consenting ABL Lenders, or Consenting Convertible Noteholder (each as defined in the Restructuring Support Agreement) of any of the representations, warranties, or covenants of such party, (ii) a failure to meet certain milestones as detailed in the Restructuring Support Agreement, (iii) the events of default under any of the applicable credit agreements, or (iv) the termination of any Company Party’s authorization to use cash collateral. If the Restructuring Support Agreement is terminated, we may be unable to consummate the Plan, and there can be no assurance that we would be able to enter into a new plan or that any new plan would be as favorable to holders of claims as the Plan. In addition, any Chapter 11 Cases may become protracted, which could significantly and detrimentally impact our relationships with our partners, suppliers, service providers, customers, employees, and other third parties.

The Plan is based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, we may not be able to achieve our stated goals and continue as a going concern.

The Plan will affect both our capital structure and the ownership, structure and operation of our business and reflects assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. In addition, the Plan relies upon financial projections developed by us with the assistance of our financial advisor/investment banker, including with respect to fees, revenues, debt service, and cash flow. Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, including but not limited to (i) our ability to substantially change our capital structure, (ii) our ability to obtain adequate liquidity and financing sources, (iii) our ability to maintain clients’, investors’ and strategic partners’ confidence in our viability as a continuing enterprise and to attract and retain sufficient business from and partnership endeavors with them, (iv) our ability to retain key employees, and (v) the overall strength and stability of general economic conditions. The failure of any of these factors could materially adversely affect the successful reorganization of our business and the value of the Company. Consequently, at this time, there can be no assurance that the results or developments that are contemplated the Plan, will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our businesses or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful execution of the Plan.

Even if the Plan is consummated, we may not be able to achieve our stated goals and continue as a going concern.

Even if the Plan is consummated, we may continue to face a number of risks that are beyond our control, such as changes in economic conditions, changes in the financial markets, changes in investment values or the industry in general, changes in demand for our products and increasing expenses. Some of these risks typically become more acute when a case under the Bankruptcy Code continues for a protracted period of time without indication of how or when the transactions under a Chapter 11 plan of reorganization will close. As a result of these and other risks, we cannot guarantee that the Plan will achieve our stated goals. Furthermore, even if our debts are reduced or discharged through the Plan, we may need to raise additional funds through one or more public or private debt or equity financings or other means to fund our business after the completion of the Chapter 11 Cases. Our access to additional capital may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms. As a result, the Plan may not become effective or implemented and, thus, we cannot assure you of our ability to continue as a going concern.

The DIP Facility has substantial restrictions and covenants and if we are unable to comply with the covenant requirements under the DIP Facility, it could have a material adverse impact on our financial condition, operating results and cash flows.

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Prior to the Petition Date, the Company Parties and the Term Loan DIP Lenders agreed to enter into a senior secured super-priority debtor‑in‑possession term loan credit facility consisting of $40,000 thousand of new money term loan commitments, as well as $66,900 thousand roll-up term loans, subject to the terms and conditions set forth therein. Additionally, prior to the Petition Date, the Company Parties and the ABL DIP Lenders agreed to enter into a senior secured super-priority debtor‑in‑possession asset‑based revolving credit facility in an aggregate principal amount of up to the lesser of $101,200 thousand and the borrowing base (minus the amount of prepetition ABL obligations) subject to the terms and conditions set forth therein. On May 24, 2023, the Bankruptcy Court entered an order approving entry into the DIP Facilities on an interim basis.

The Term Loan DIP Facility consists of the following tranches: (i) (x) $25,000 thousand in new money DIP term loans made in a single draw on May 25, 2023 upon entry of the order approving the DIP Facilities on an interim basis and (y) $25,000 thousand in roll-up term loans deemed made on May 25, 2023, which loans constitute a dollar-for-dollar roll-up of prepetition Amendment No. 3 Term Loans held by the Term Loan DIP Lenders funding the $25,000 thousand of new money DIP term loans and (ii) (x) $15,000 thousand in new money delayed draw term loan commitments to be made in a single draw following entry of the final DIP order and (y) additional roll-up term loans to be deemed made on such date, which loans constitute a roll-up of the remaining outstanding amount of prepetition Amendment No. 3 Term Loans held by the Term Loan DIP Lenders. Furthermore, the lenders under the Term Loan DIP Facility have committed to provide $25,000 thousand in new money exit financing. The ABL DIP Facility is a senior secured super-priority revolving facility in an aggregate principal amount of up to the lesser of $101,200 thousand and the borrowing base (minus the amount of prepetition ABL obligations). The ABL DIP Facility contains a “creeping” roll-up through the entry of the Final Order, at which time all remaining outstanding prepetition asset-backed loan facility obligations shall convert to ABL DIP Facility obligations.

If the Company Parties are unable to comply with the requirements under the DIP Facilities, it could prevent them from drawing funds thereunder and have a material adverse impact on our financial condition, operating results and cash flows.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from, among other things, substantially all debts arising prior to consummation of a plan of reorganization. Thus, while generally all claims against us that arose prior to the filing of the Chapter 11 Cases or before consummation of the Plan (i) would be subject to compromise and/or treatment under the Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Plan, certain exceptions may arise. Subject to the terms of the Plan and orders of the Bankruptcy Court, any claims not ultimately discharged pursuant to the Plan could be asserted against us and may have an adverse effect on our business, cash flows, liquidity, financial condition and results of operations on a post‑reorganization basis.

If we operate under the Bankruptcy Court’s protection for a long period of time, or for a longer period of time than expected, our business may be harmed.

Our future results are dependent upon the successful implementation of the Plan. Our being subject to a long period of operations under the Bankruptcy Court’s protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. So long as the proceedings related to the Chapter 11 Cases continue, our senior management will be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations. A prolonged period of operating under the Bankruptcy Court’s protection also may make it more difficult to retain management and other key personnel necessary to the success and

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growth of our business. In addition, the longer the proceedings related to the Chapter 11 Cases continue, the more likely it is that our clients, investors, strategic partners and service providers will lose confidence in our ability to reorganize our businesses successfully and seek to establish alternative advisory and/or other commercial relationships, as applicable. Furthermore, so long as the Chapter 11 Cases continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 Cases. These fees and expenses will take a priority over many other claims and expenses. We cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to any plan of reorganization. Even once the Plan is consummated, our operating results may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that recently emerged from Chapter 11 protection.

Changes to our capital structure may have a material adverse effect on existing and future debt and security holders, including holders of our common stock.

Pursuant to the Plan, our post-bankruptcy capital structure will change significantly. The reorganization of our capital structure pursuant to the Plan includes exchanges of new debt or equity securities for our existing debt and claims against us. Such new debt will be issued at different interest rates, payment schedules and maturities than our existing debt securities. Our existing equity securities will be cancelled. There can be no guarantees regarding the success of changes to our capital structure. Holders of our debt or of claims against us may find their holdings no longer have any value or are materially reduced in value, or they may be converted to equity and be diluted or may be modified or replaced by debt with a principal amount that is less than the outstanding principal amount, longer maturities and reduced interest rates. Our existing equity securities will no longer have any value and holders of such existing equity securities will receive no recovery under the Plan. There can be no assurance that any new debt or equity securities will maintain their value at the time of issuance. If existing debt or equity holders are adversely affected by a reorganization, it may adversely affect our ability to issue new debt or equity in the future.

The negotiations regarding the Restructuring have consumed and will continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.

Our management has spent, and continues to be required to spend, a significant amount of time and effort focusing on the Restructuring. This diversion of attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Restructuring and the Chapter 11 Cases are protracted. During the pendency of the Restructuring, our employees will face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience losses of customers or business partners who may be concerned about our ongoing long-term viability.

As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future financial performance, which may be volatile.

During the Chapter 11 Cases, we expect our financial results to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period covered by this Quarterly Report on Form 10-Q, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

~~None~~On March 16, 2023, the Company did not make an interest payment of approximately $3,700 thousand due on its 2027 Convertible Notes. The Company had a 30-day grace period, or until April 14, 2023, to make the interest payment. The Company has not made the interest payment, and, as a result, an event of default has occurred under the Indenture, the

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ABL Credit Agreement and the Term Loan Credit Agreement. Pursuant to the Indenture, upon an event of default, the trustee under the 2027 Convertible Notes or holders of 25% in aggregate principal amount of the outstanding 2027 Convertible Notes may declare the principal of, premium, if any, on and accrued and unpaid interest on, the 2027 Convertible Notes to be due and payable immediately, which would require the Company to pay approximately $130,000 thousand immediately. In addition, pursuant to each of the ABL Credit Agreement and the Term Loan Credit Agreement, upon an event of default, the lenders under such facilities can accelerate the repayment of the outstanding borrowings thereunder and exercise other rights and remedies that they have under applicable laws. The Company has not received any notices of acceleration as of the date hereof. The Company has entered into forbearance agreements with holders of approximately 72% of the aggregate principal amount of the outstanding Convertible Notes and the administrative agent and lenders under the ABL Credit Agreement and a limited waiver agreement with the administrative agent and required lenders under the Term Loan Credit Agreement with respect to this event of default, as well as any event of default that may arise under the ABL Credit Agreement or the Term Loan Credit Agreement as a result of our failure to deliver an unqualified audit report (a report not containing an explanatory paragraph regarding “going concern”) with respect to our financial statements for the fiscal year ended December 31, 2022.

On May 24, 2023, the Company Parties entered into the Restructuring Support Agreement, which contemplates agreed upon terms from the Company’s Restructuring to be implemented through the Chapter 11 Cases. In addition, the filing of the Chapter 11 Cases constituted an event of default that accelerated the Company Parties’ respective obligations under the Debt Instruments. The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases, and the stakeholders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Item 1~~None.~~01. Entry into a Material Definitive Agreement.~~

On November 11, 2022, QualTek Services Inc. (the “Company”), through its wholly-owned subsidiaries QualTek Buyer, LLC and QualTek LLC, entered into an amendment (the “Amendment”) among QualTek Buyer, LLC, QualTek LLC, certain of the Company’s subsidiaries party thereto and PNC Bank, National Association, as administrative agent, collateral agent and lender (in such capacity, the “Agent”), to that certain ABL Credit and Guaranty Agreement, dated as of July 18, 2018, as amended, among QualTek Buyer, LLC, QualTek LLC, certain of the Company’s subsidiaries party thereto, the Agent, PNC Capital Markets LLC as sole lead arranger and sole bookrunner, and the lenders party thereto (the “Credit Agreement”, and as amended by the Amendment, the “Amended Credit Agreement”).48

Interest on the principal amounts outstanding under the Amended Credit Agreement, payable in arrears monthly, is based on either an elected Base Rate plus an applicable margin, or an adjusted Eurodollar rate, plus an applicable margin, as defined in the agreement (the “Applicable Margin”). The Amendment provides for a 0.50% increase in the Applicable Margin for all time periods provided for in the Amended Credit Agreement. In addition, the Amendment revises the fixed charge coverage ratio covenant such that the borrower must be in compliance with the fixed charge coverage ratio at the end of every fiscal quarter.

The description of the Amendment and the Amended Credit Agreement is a summary of, and is qualified in its entirety by, the terms of the Amendment filed as an exhibit to this Quarterly Report on Form 10-Q.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 above regarding the amendment to the Amended Credit Agreement is incorporated herein by reference.

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ITEM 6. EXHIBITS.

Exhibit Number						Description
10.1*						Ninth Amendment and Waiver to ABL Credit and Guaranty Agreement, dated as of November 11, 2022.
2.1						Order Approving the Debtors’ Disclosure Statement for, and Confirming, the Debtors’ Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 7, 2023).
10.1						Amendment No.3 to the Term Credit and Guaranty Agreement and Amendment No.1 to the Term Pledge and Security Agreement, dated March 16, 2023, by and among QualTek Buyer, LLC (f/k/a BCP QualTek Buyer, LLC), QualTek LLC, certain subsidiaries of QualTek LLC and Citibank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 16, 2023).
10.2						Eleventh Amendment to ABL Credit and Guaranty Agreement, dated March 16, 2023, by and among QualTek Buyer, LLC (f/k/a BCP QualTek Buyer, LLC), QualTek LLC, certain subsidiaries of QualTek LLC and PNC Bank, National Association, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 16, 2023).
10.3*†						Super-Priority Senior Secured Debtor-In-Possession Term Credit and Guaranty Agreement, dated May 25, 2023, among QualTek Buyer, LLC (f/k/a BCP QualTek Buyer, LLC), QualTek LLC (f/k/a QualTek USA, LLC), certain subsidiaries of QualTek LLC and each other debtor party thereto, the lenders party thereto and UMB Bank, N.A., as administrative agent and collateral agent.
10.4*†						Super-Priority Senior Secured Debtor-In-Possession ABL Credit and Guaranty Agreement, dated May 25, 2023, among QualTek Buyer, LLC (f/k/a BCP QualTek Buyer, LLC), QualTek LLC (f/k/a QualTek USA, LLC), certain subsidiaries of QualTek LLC, the lenders party thereto and PNC Bank, National Association, as administrative agent and collateral agent.
10.5						Restructuring Support Agreement, dated May 24, 2023, by and among the Company Parties and the Consenting Stakeholders (incorporated by reference to Exhibit 10.1 the Company’s Current Report on Form 8-K filed on May 31, 2023).
10.6						Letter Agreement, dated as of June 26, 2023, by and between QualTek LLC and C. Scott Hisey (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 7, 2023).
31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						INLINE XBRL INSTANCE DOCUMENT
101.SCH*						INLINE XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*						INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*						INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*						INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*						INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
104*						Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

____________________________________

* Filed herewith.

** Furnished herewith.

45† Schedules and similar attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of such omitted materials to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

QUALTEK SERVICES INC. /s/ Christopher S. Hisey Christopher S. Hisey Chief Executive Officer (Principal Executive Officer) Date: ~~November~~July 1513, ~~2022~~2023 /s/ ~~Adam~~Matthew ~~Spittler~~J. ~~Adam~~McColgan ~~Spittler~~Matthew ~~Principal~~J. McColgan Chief Financial Officer (Principal Financial and Accounting Officer) Date: ~~November~~July 1513, ~~2022~~2023

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Filing Compare · QualTek Services Inc.