UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A (Amendment No. 1)

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

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)	(I.R.S. Employer Identification No.)
475 Sentry Way Parkway E, Suite 200
Blue Bell, PA	19422
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (484) 804-4585

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock	QTEK	The NASDAQ Stock Market LLC
Warrants	QTEKW	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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. Yes ☒ 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). Yes ☒ 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	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting securities held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, July 2, 2022, was approximately $13,681,607 based upon the closing sale price of $1.46 of our common stock on such date. As of April 21, 2023, there were 27,805,659 shares of Class A Common Stock, $0.0001 par value, issued and outstanding and 23,304,200 shares of our Class B Common Stock, $0.0001 par value, issued and outstanding.

Documents Incorporated by Reference: None.

EXPLANATORY NOTE

This Amendment No. 1 (this “Amendment”) to the Annual Report on Form 10-K of QualTek Services Inc. (the “Company”) is being filed to include a signed copy of the Report of Independent Registered Public Accounting Firm (the “Report”) on the Company’s financial statements filed under Item 8 of Part II of Form 10-K. The original Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (the “Commission”) on April 28, 2023 (the “Original Form 10-K”) inadvertently included an unsigned copy of the Report.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 8 of Part II is hereby amended and restated in its entirety, and Part IV, Item 15 of the Original Form 10-K is hereby amended and restated in its entirety, for the purpose of adding new certifications by our principal executive officer and principal financial officer and a new consent of the Company’s independent registered public accounting firm. Except as otherwise expressly set forth in this Amendment, no portion of the Original Form 10-K is being amended, modified or updated by this Amendment. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K.

Item 8.    Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of QualTek Services Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of QualTek Services Inc. and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring negative cash flows from operations, has suffered recurring losses from operations, its total liabilities exceed its total assets, and there is uncertainty regarding the Company’s ability to obtain additional capital or service current outstanding debt obligations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as a result of adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments, effective January 1, 2022.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company’s auditor since 2012.

Blue Bell, Pennsylvania

April 28, 2023

QUALTEK SERVICES INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)

	December 31,
	2022		2021
Assets
Current assets:
Cash	$	495	$	606
Accounts receivable, net of allowance for doubtful accounts of $5,408 and $5,614, respectively	244,964		201,845
Inventories, net	9,033		5,409
Prepaid expenses	5,289		12,140
Other current assets	2,815		2,021
Current assets of discontinued operations	—		4,502
Total current assets	262,596		226,523
Property and equipment, net of accumulated depreciation of $39,671 and $29,515, respectively	59,818		50,682
Operating lease right-of-use assets	28,566		—
Intangible assets, net	321,686		364,174
Goodwill	14,493		28,723
Other non-current assets	1,768		1,657
Total assets	$	688,927	$	671,759
Liabilities and Deficit
Current liabilities:
Current portion of long-term debt and finance lease obligations, net of deferred financing costs	$	556,426	$	127,375
Current portion of operating lease liability	9,594		—
Accounts payable	83,298		60,726
Accrued expenses	50,510		52,986
Contract liabilities	24,094		14,773
Other current liabilities	—		9,299
Current liabilities of discontinued operations	—		2,048
Total current liabilities	723,922		267,207
Long-term finance lease liabilities	22,875		19,851
Long-term operating lease liability	22,491		—
Long-term debt, net of current portion and deferred finance costs	—		418,813
Tax receivable agreement liabilities	15,084		—
Other non-current liabilities	5,275		32,866
Total liabilities	789,647		738,737
Commitments and contingencies (Note 16)
(Deficit) / Equity:
Class A common stock, $0.0001 par value; 500,000,000 shares authorized, 27,805,659 and 11,923,941 shares issued and outstanding as of December 31, 2022 and 2021, respectively	3		1
Class B common stock, $0.0001 par value; 500,000,000 shares authorized, 23,304,200 and 13,085,488 shares issued and outstanding as of December 31, 2022 and 2021, respectively	2		1
Additional paid in capital	174,112		252,593
Accumulated deficit	(226,648)		(320,080)
Non-controlling interest	(48,189)		—
Accumulated other comprehensive income	—		507
Total deficit	(100,720)		(66,978)
Total liabilities and equity	$	688,927	$	671,759

See notes to the consolidated financial statements.

F-1

QUALTEK SERVICES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share information)

	For the Years Ended December 31,
	2022		2021
Revenue	$	753,856	$	612,241
Costs and expenses:
Cost of revenues, excluding depreciation and amortization	665,291		502,688
General and administrative	69,892		50,994
Transaction expenses	10,749		3,826
Loss on legal settlement	—		2,600
Change in fair value of contingent consideration, net of accretion	(18,058)		(3,575)
Impairment of long-lived assets	1,007		—
Impairment of goodwill	14,160		52,487
Depreciation and amortization	58,377		52,470
Total costs and expenses	801,418		661,490
Loss from operations	(47,562)		(49,249)
Other income (expense):
Gain on sale of property and equipment	2,087		587
Interest expense	(59,317)		(50,477)
Loss on extinguishment of convertible notes	—		(2,436)
Total other expense	(57,230)		(52,326)
Loss from continuing operations	(104,792)		(101,575)
Loss from discontinued operations	—		(8,851)
Net loss	(104,792)		(110,426)
Less: Net loss attributable to non-controlling interests	(68,372)		—
Net loss attributable to QualTek Services Inc.	(36,420)		(110,426)
Other comprehensive income:
Foreign currency translation adjustments	—		111
Comprehensive loss	$	(36,420)	$	(110,315)
Denominator:
Net loss per share - continuing operations - basic	$	(1.45)	$	(8.70)
Net loss per share - continuing operations - diluted	$	(1.47)	$	(8.70)
Net loss per share - discontinued operations - basic and diluted	$	—	$	(0.75)
Weighted average Class A common shares outstanding – basic	22,798,596		11,859,955
Weighted average Class A common shares outstanding - diluted	44,998,609		11,859,955

See notes to the consolidated financial statements

F-2

QUALTEK SERVICES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share information)

	Class A Shares			Class B Shares			Additional Paid- in-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-controlling Interest		Total Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	11,923,941	$	1	13,085,488	$	1	$	252,593	$	(320,080)	$	507	$	—	$	(66,978)
Adoption of ASU 2020-06	—	—		—	—		(12,270)		8,861		—		—		(3,409)
Share based compensation	—	—		—	—		1,926		—		—		—		1,926
P Unit Shares	—	—		462,572	—		6,711		—		—		—		6,711
Business Combination	12,522,343	1		13,115,515	2		(35,621)		120,991		(507)		15,048		99,914
Converted shares	3,359,375	1		(3,359,375)	(1)		(5,135)		—		—		5,135		—
Tax receivable agreement liability	—	—		—	—		(34,092)		—		—		—		(34,092)
Net loss	—	—		—	—		—		(36,420)		—		(68,372)		(104,792)
Balance, December 31, 2022	27,805,659	$	3	23,304,200	$	2	$	174,112	$	(226,648)	$	—	$	(48,189)	$	(100,720)

	Preferred Shares			Class A Shares			Class B Shares			Additional Paid- in-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Equity (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
Issuance of Common Stock	—	—		934,190	—		683,344	—		15,000		—		—		15,000
Issuance of Common Stock - non-return	—	—		—	—		—	—		367		—		—		367
Beneficial conversion feature on convertible notes	—	—		—	—		—	—		16,904		—		—		16,904
Acquisitions (see Note 4)	—	—		—	—		1,228,368	—		12,000		—		—		12,000
Paid in kind preferred unit distribution	—	5,568		—	—		—	—		—		(5,568)		—		—
Preferred shares exchanged for convertible notes	(25,000)	(30,568)		—	—		—	—		—		—		—		(30,568)
Other comprehensive income	—	—		—	—		—	—		—		—		111		111
Net loss	—	—		—	—		—	—		—		(110,426)		—		(110,426)
Balance, December 31, 2021	—	$	—	11,923,941	$	1	13,085,488	$	1	$	252,593	$	(320,080)	$	507	$	(66,978)

See notes to the consolidated financial statements.

F-3

QUALTEK SERVICES INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Years Ended December 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(104,792)	$	(110,426)
Loss from discontinued operations	—		8,851
Adjustments:
Depreciation and amortization	58,377		52,470
Accretion of debt discount	—		11,059
Impairment loss on long-lived assets	1,007		—
Impairment loss on goodwill	14,160		52,487
Change in fair value of tax receivable agreement liabilities	(19,008)		—
Loss on extinguishment of convertible notes	—		2,436
Amortization of debt issuance costs	5,274		4,795
Change in fair value of contingent consideration, net of accretion	(18,058)		(3,575)
Share-based compensation - stock options	1,926		—
Share-based compensation - Class P Units	6,711		—
Provision for bad debt expense	8,533		1,867
Gain on sale of property and equipment	(2,087)		(587)
Other	(730)		—
Changes in assets and liabilities:
Accounts receivable	(51,652)		(11,638)
Inventories	(3,624)		514
Prepaid expenses and other assets	10,559		(8,627)
Accounts payable and accrued liabilities	17,596		(14,042)
Contract liabilities	7,273		(2,595)
Net cash used in operating activities from continuing operations	(68,535)		(17,011)
Net cash used in operating activities from discontinued operations	—		(931)
Net cash used in operating activities	(68,535)		(17,942)
Cash flows from investing activities:
Purchases of property and equipment	(6,072)		(3,014)
Proceeds from sale of property and equipment	2,715		833
Acquisition of businesses, net of cash acquired (see Note 4)	—		(45,849)
Net cash used in investing activities from continuing operations	(3,357)		(48,030)
Net cash provided by investing activities from discontinued operations	—		4,498
Net cash used in investing activities	(3,357)		(43,532)
Cash flows from financing activities:
Proceeds from line of credit	841,210		27,796
Repayment of line of credit	(837,034)		—
Proceeds from convertible notes – related party	—		5,000
Repayment of convertible notes – related party	—		(5,000)
Proceeds from convertible notes – June 2021	—		44,400
Proceeds from senior unsecured convertible notes	124,685		—
Repayment of long-term debt	(9,564)		(9,564)
Repayment of promissory note	(500)		—
Payments for financing fees	(8,928)		(2,295)
Payments of acquisition related contingent consideration	(34,718)		—
Repayment of capital leases	(15,703)		(9,585)
Proceeds from issuance of common stock - PIPE	35,915		—
Proceeds from issuance of equity	—		15,367
Payments for equity issuance costs	(24,999)		—
Tax distributions to members	(128)		—
Net cash provided by financing activities from continuing operations	70,236		66,119
Net cash used in financing activities from discontinued operations	—		(2,746)
Net cash provided by financing activities	70,236		63,373
Effect of foreign currency exchange rate (translation) on cash	—		83
Net increase (decrease) in cash	(1,656)		1,982
Cash:
Beginning of year	2,151		169
End of year	$	495	$	2,151
Balances included in the consolidated balance sheets:
Cash	$	495	$	606
Cash included in current assets of discontinued operations	—		1,545
Cash at end of year	$	495	$	2,151
Supplemental disclosure of cash flow information:
Cash paid for:
Interest from continuing operations	$	53,242	$	31,801
Interest from discontinued operations	$	—	$	195
Non-cash investing and financing activities:
Assets acquired under operating leases from continuing operations	$	9,550	$	—
Assets acquired under financing leases from continuing operations	$	16,698	$	9,804

See notes to the consolidated financial statements.

F-4

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 and disaster recovery services, 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 8-Debt and Financing 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.

F-5

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, 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 8-Debt and Financing Lease Obligations) that were issued to certain investors (collectively, the “Convertible Note Investors”). The 2027 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 Investors in exchange for 3,989 thousand shares of Class A common stock, pursuant to PIPE Subscription Agreements (“PIPE Financing”);

•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 earnout targets;

•converted Convertible notes – June 2021 (see Note 8-Debt and Financing Lease Obligations) into 2,875 thousand shares of Class A common stock and 4,063 thousand shares of Class B common stock;

•assumed 2,875 thousand Public Warrants and 102 thousand Private Placement Warrants sold by ROCR as part of its initial public offering;

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

•paid down $73,000 thousand of debt associated with the line of credit (see Note 8-Debt and Financing 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. See Note 14-Tax Receivable Agreement regarding the disclosures of the impact of the TRA as of the Closing Date and as of December 31, 2022.

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

F-6

the Blocker, of QualTek HoldCo referred to as the “Flow-Through Sellers.” As of December 31, 2022, 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and under the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC").

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

Going Concern

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. This basis of presentation contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. For the year ended December 31, 2022, the Company reported a net loss of $104,792 thousand and net cash used in operating activities of $68,535 thousand.

During 2022, the Company’s project mix, coupled with operating in an inflationary environment, led to lower gross margins particularly within the Telecom segment. In addition, the Company’s interest costs have increased as a result of the Federal Reserve increasing interest rates as well as certain amendments to the ABL Credit Agreement. The Company is subject to various financial covenants as part of its debt agreements, which, if not complied with, may result in the acceleration of the maturity of amounts borrowed. Finally, if the Company is unable to regain compliance with its current deficiencies related to Nasdaq’s Minimum Value of Listed Securities (“MVLS”) Rule and Minimum Bid Price Rule, and the Company’s Class A common shares were to become formally delisted, the holders of the 2027 Convertible Notes could contractually require us to repurchase their 2027 Convertible Notes. Should the Company be unable to improve its profitability or the maturities of the Company’s debt be accelerated, there could be no assurance the Company will have sufficient access to funding to meet its obligations, which raises substantial doubt about the Company’s ability to continue as a going concern. Refer to Nasdaq Notification for further details.

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 backlog, and working to achieve a more sustainable leverage model. On March 16, 2023, the Company, through its wholly-owned subsidiaries QualTek Buyer, LLC and QualTek LLC, entered into an amendment to each of (i) the Term Loan Credit Agreement among QualTek Buyer, LLC, QualTek LLC, certain subsidiaries of QualTek LLC and Citibank, N.A., as administrative agent and collateral agent (the “Term Loan Amendment”) and (ii) the ABL Credit Agreement among QualTek Buyer, LLC, QualTek LLC, certain subsidiaries of QualTek LLC and PNC Bank, National Association, as administrative agent and collateral agent (the “ABL Amendment”). The Term Loan Amendment provided $55,000 thousand of immediately available new money incremental term loans under the Term Loan Credit Agreement. On March 16, 2023, the Company borrowed the full $55,000 thousand of new money incremental term loans. Additionally, 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 that governs the Convertible Notes, the ABL Credit Agreement and the Term Loan Credit Agreement. Pursuant to the Indenture, upon an event of default, the trustee under the Convertible Notes or holders of 25% in aggregate principal amount of the outstanding Convertible Notes may declare the principal of, premium, if any, on and accrued and unpaid interest on, the 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.

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The Company has entered into forbearance agreements with holders of approximately 72% of the aggregate principal amount of the outstanding 2027 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.

We will likely choose or need to obtain alternative sources of capital or otherwise meet our liquidity needs and/or restructure our existing indebtedness through the protections available under applicable bankruptcy or insolvency laws, including Chapter 11 of the U.S. Bankruptcy Code. Holders of our Class A Common Stock will likely not receive any value or payments in a restructuring or similar transaction.

For additional information on the Company’s forbearance agreements and future obligations see Note 8-Debt and Financing Lease Obligations to the consolidated financial statements.

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.

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 Company’s business operations may be adversely impacted by its current liquidity constraints. As a result of these liquidity constraints, the Company will likely choose or need to obtain alternative sources of capital or otherwise meet its liquidity needs and/or restructure its existing indebtedness through the protections available under applicable bankruptcy or insolvency laws, including Chapter 11 of the U.S. Bankruptcy Code. The Company’s business operations may also be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. The ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants continue to stay relevant in the world today and may adversely affect everyday business operations. We cannot predict or control the effects or any events the COVID-19 pandemic may continue to have. The Company cannot predict the complete financial effect the COVID-19 pandemic will have on its daily business operations.

Principles of consolidation: For the periods subsequent to the Business Combination, the 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 consolidated balance sheets and reports the portion of its loss for non-controlling interests as net loss attributable to non-controlling interests in the consolidated statements of operations and comprehensive loss. For the periods subsequent to the

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Business Combination, the non-controlling interests represent the economic interest in QualTek Holdco held by the Flow-through Sellers (see Note 11-Equity).

Discontinued operations: The Company presents discontinued operations when there is a disposal of a component group or a group of components that in our judgment represents a strategic shift that will have a major effect on our operations and financial results. We aggregate the results of operations for discontinued operations into a single line item in the consolidated statements of operations and comprehensive loss for all periods presented. Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2021. As of, and for the year ended, December 31, 2022 there were no discontinued operations See Note 3-Discontinued Operations for additional information.

Revenue Recognition: Revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for the goods and services transferred. A contractual agreement exists when each party involved approves and commits to, the rights of the parties and payment terms are identified, the agreement has commercial substance, and collectability of consideration is probable. The Company’s services are performed for the sole benefit of its customers, whereby the assets being created or maintained are controlled by the customer and the services the Company performs do not have alternative benefits for the Company.

The Company acquires revenue primarily from construction related projects under certain master service agreements and other service agreements contracts. Portions of the contracts include one or multiple performance obligations, which is a contractual promise to deliver a distinct good or transfer of a specific service to a customer. We use different methods of revenue recognition for different types of 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 the promises are not highly interrelated. As a result, the Company concludes that its input method contracts typically include two performance obligations: the sale of materials and construction services.

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 MSAs and other service agreements.

The majority of our performance obligations are completed within one year. The cost-to-cost measure of progress best depicts the continuous transfer of control of goods or services to the customer, and correspondingly, when performance obligations are satisfied, for these contracts.

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.

The Company allocates total contract consideration to each performance obligation using the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation. The Company’s customers simultaneously receive and consume the benefit provided by the Company, and revenue is recognized over time as services are performed for all performance obligations identified in the contract. Output measures such as units delivered are utilized to assess progress against specific contractual performance obligations.

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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. Each service is a separate performance obligation that is recognized upon completion at a point in time as the service is delivered.

Transaction prices for the Company’s contracts may include variable consideration such as contracted materials. Management estimates variable consideration for a performance obligation utilizing estimation methods that it believes best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the estimated transaction price if it is probable that when the uncertainty associated with the variable consideration is resolved, there will not be a significant reversal of the cumulative amount of revenue that has been recognized.

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 41% and 37% of consolidated revenue for the years ended December 31, 2022 and 2021, respectively. Substantially all the Company’s other revenue is recognized over time. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be provided.

Significant Customers

Revenue concentration information for significant customers as a percentage of total consolidated revenue was as follows (in thousands):

	For the Year Ended December 31,
	2022				2021
	Amount		% of Total		Amount		% of Total
Customers:
AT&T	$	292,111	38.7	%	$	249,389	40.7	%
Verizon	106,194		14.1	%	72,584		11.9	%
T-Mobile	102,431		13.6	%	78,442		12.8	%
Entergy (a)	—		—	%	69,268		11.3	%
Total	$	500,736	66.4	%	$	469,683	76.7	%

(a) The company uses a threshold of 10% of total consolidated revenue to determine which customers are significant. Entergy had a balance that was considered significant in 2021 but did not have a balance above the 10% threshold in 2022 and as such was not considered a significant customer in 2022.

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Cash: Cash includes cash on hand and deposits with banks.

Accounts receivable: The Company’s accounts receivable are due primarily from major telecommunication and utility companies operating within 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 condition and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The Company generally does not require collateral. Accounts receivable are considered past due if any portion of the receivables balance is outstanding for more than one day beyond the contractual due date. The Company does not charge interest on past due accounts.

Contract liabilities: Contract liabilities consist of amounts invoiced to customers in excess of revenue recognized. The Company’s contract assets and liabilities are reported in a net position on a contract by contract basis at the end of each reporting period. As of December 31, 2022 and 2021, the contract liabilities balance is classified as a current liability as uncompleted contracts are typically resolved within one year and not considered significant financing components.

Concentration of credit risk: Financial instruments that potentially subject the Company to concentration of credit risks consist principally of cash and accounts receivable.

The Company maintains certain cash balances with the financial institutions and, from time to time, the Company may have balances in excess of the federally insured deposit limit.

Inventories: Inventories are valued at the lower of cost or net realizable value. The cost of inventory is maintained using the weighted average-cost method. Consideration is given to excess, obsolescence and other factors in determining estimated net realizable value.

Property and equipment: Property and equipment acquired through business combinations are stated at the estimated fair value at the date of acquisition. Purchases are recorded at cost. Maintenance and repairs are expensed as incurred. Renewals and betterments that materially extend the useful life of assets are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 7 years. Leasehold improvements are amortized over the shorter of the estimated useful life of the improvement or the remaining lease term.

Lease Accounting: The Company enters into contracts for the right to utilize certain office facilities, office equipment, and vehicles from third parties. The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. When a contract is determined to contain a lease, a determination is made as to whether the lease is an operating or finance lease. At lease commencement, for contracts greater than 12 months, we recognize a right of use asset and a corresponding lease liability on our consolidated balance sheet. The present value of each lease is based on the future minimum lease payments and is determined by discounting these payments using an incremental borrowing rate.

Goodwill and intangible assets: Goodwill is assessed annually for impairment as of the first day of the fourth fiscal quarter of each year, or more frequently if events occur that would indicate a potential reduction in the fair value of a reporting unit below its carrying value. The Company performs an annual impairment review of goodwill at the reporting unit level, which is one level below the operating segment. The Company determines the fair value of the reporting units using a weighting of fair values derived 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. If the Company determines the fair value of the reporting unit’s goodwill is less than its carrying value, an impairment loss is recognized and reflected in the operating income or loss in the consolidated statements of operations and comprehensive loss.

The profitability of individual reporting units may suffer periodically due to downturns in customer demand, increased costs of providing services, and the level of overall economic activity. Our customers may reduce capital expenditures and defer or cancel pending projects due to changes in technology, a slowing or uncertain economy, merger or acquisition activity, a decision to allocate resources to other areas of their business, or other reasons. The profitability of reporting units may also suffer if actual costs of providing services exceed the costs anticipated when the Company enters into contracts. Additionally, adverse conditions in the economy and future volatility in the equity and credit markets could impact the

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valuation of our reporting units. The cyclical nature of our business, the high level of competition existing within our industry, and the concentration of our revenues from a limited number of customers may also cause results to vary. These factors may affect individual reporting units disproportionately, relative to the Company as a whole. As a result, the performance of one or more of the reporting units could decline, resulting in an impairment of goodwill or intangible assets. Additionally, due to the liquidity challenges in the business and the substantial doubt about the Company's ability to continue as a going concern, there could be future impairments of goodwill or intangible assets.

Intangible assets consist of customer relationships, trademarks and trade names. Intangible assets that have finite useful lives are amortized on a straight-line basis over their estimated useful lives ranging from 1 year to 15 years.

Impairment of long-lived and intangible assets: The Company reviews its long-lived assets, including property and equipment, operating lease right-of-use assets, finance lease assets and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company measures recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets or asset group are not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. Based on the liquidity challenges in the business, and substantial doubt about the Company's ability to continue as a going concern there could be future impairments of long-lived and intangible assets.

For the Company's operating leases, the circumstances that might lead to an impairment of the associated right-of-use assets may include situations when the space is sublet or available for sublease and we do not fully recover the costs of the lease. During the year ended December 31, 2022, the Company recognized an impairment charge of $1,007 thousand related to operating lease right-of-use assets, which was recorded as "Impairment of long-lived assets" in the consolidated statements of operations and comprehensive loss. See Note 17 - Leases for additional information.

Business combinations: The Company accounts for business combinations under the acquisition method of accounting. The purchase price of each business acquired is allocated to the tangible and intangible assets acquired and the liabilities assumed based on information regarding their respective fair values on the date of acquisition. Any excess of the purchase price over the fair value of the separately identifiable assets acquired and the liabilities assumed is allocated to goodwill. Management determines the fair values used in purchase price allocations for intangible assets based on historical data, estimated discounted future cash flows, expected royalty rates for trademarks and trade names, as well as certain other information. The valuation of assets acquired, and liabilities assumed requires a number of judgments and is subject to revision as additional information about the fair value of assets and liabilities becomes available. Additional information, which existed as of the acquisition date but unknown to us at that time, may become known during the remainder of the measurement period. This measurement period may not exceed 12 months from the acquisition date. The Company recognizes any adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustments are determined. Additionally, in the same period in which adjustments are recognized, the Company records the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting adjustment had been completed at the acquisition date. Acquisition costs are expensed as incurred. The results of operations of businesses acquired are included in the consolidated statements of operations and comprehensive loss from their dates of acquisition.

Deferred financing costs: Deferred financing costs are presented in the consolidated balance sheets as a direct deduction from the carrying amount of long-term debt and are amortized over the term of the related debt. For the years ended December 31, 2022 and 2021, the Company amortized $5,274 thousand and $4,795 thousand, respectively, which is included in "Interest expense" on the consolidated statements of operations and comprehensive loss.

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 taxable income and losses were passed through to and included in the taxable income of its members. Accordingly, amounts related to income taxes were zero for QualTek HoldCo prior to the Business Combination. 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 and other separately stated items of QualTek HoldCo.

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

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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.

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 14-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 Blocker Owner Earnout Shares are not included in the denominator of the basic and diluted loss per share calculation until the contingent condition is met. The Earnout Voting Shares are not considered participating securities and are not included in the weighted-average shares outstanding for purposes of calculating loss per share.

Warrant accounting: The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. The Company recorded the Public Warrants assumed as part of the Business Combination as equity (see Note 11-Equity). For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations. The Company recorded the Private Placement Warrants assumed as part of the Business Combination as a liability. The fair value of the Private Placement Warrants (see Note 9-Warrants) was estimated using the Black-Scholes call option model (see Note 10-Fair Value Measurements).

Earnout shares: During the five-year period following the closing of the Business Combination (the “Earnout Period”), (i) if the closing sale price per share of Class A Common Stock equals or exceeds $15.00 per 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.

The 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 of the earnout targets described above. The Company evaluated the Earnout Shares and concluded that they meet the criteria for equity classification. The Earnout Shares were classified in stockholders’ equity, recognized at fair value upon the closing of the Business Combination and will not be subsequently remeasured.

Convertible 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

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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.

For the Company, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach.

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.

The Company applied ASU 2020-06 to all outstanding financial instruments as of January 1, 2022 (the date of adoption of ASU 2020-06). The Convertible Notes - June 2021 (see Note 8-Debt and Financing Lease Obligations) issued on June 16, 2021 were the only outstanding financial instruments affected by this new accounting standard as of January 1, 2022. Therefore the application of ASU 2020-06 to these convertible notes payable was used to determine the cumulative effect of the adoption of the new accounting standard (see Note 8-Debt and Financing Lease Obligations).

Stock-based compensation: The Company provides the QualTek Services Inc. 2022 Long-Term Incentive Plan (the “LTIP”), which was adopted by the Board of Directors and was approved by the Company’s stockholders on February 14, 2022 (see Note 12 - Stock-Based Compensation). The Company measures all stock-based awards granted to employees based on the fair value on the date of grant in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). Compensation expense of those awards is recognized over the requisite service period, which is the vesting period of the respective award. The Company issues awards with service-only vesting conditions and records the expense using the straight-line method. The Company accounts for forfeitures as they occur. The Company uses the Black-Scholes option-pricing model to determine the fair value of its option awards at the time of grant. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified.

Transaction costs: The Company incurred $24,999 thousand in direct and incremental costs associated with the Business Combination and PIPE Financing related to the equity issuance, 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 consolidated balance sheets in accordance with Staff Accounting Bulletin (“SAB”) Topic 5.A, Expenses of Offering. The Company also incurred $10,749 thousand and $3,826 thousand of expenses for the years ended December 31, 2022 and 2021, respectively, that were not direct and incremental costs and accordingly, were recorded in "Transaction expenses" on consolidated statements of operations and comprehensive loss.

Recent accounting pronouncements: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring an entity to recognize assets and liabilities arising from operating leases with terms longer than 12 months. The updated standard replaces most existing lease recognition guidance in GAAP and is effective for annual reporting periods beginning after December 15, 2021. The Company adopted ASU 2016-02 using the modified retrospective method on

F-14

January 1, 2022. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, permits the Company to: (1) not reassess whether any expired or existing contracts were or contained leases; (2) retain the existing classification of lease contracts as of the date of adoption; (3) not reassess initial direct costs for any existing lease; and (4) not separate non-lease components for all classes of leased assets. The Company also elected to continue to recognize lease payments related to short-term leases as an expense on a straight-line basis over the lease term. The impact of ASC 842 adoption resulted in the Company recognizing a right-of-use asset of $29,256 thousand (net of (1) a tenant improvement allowance of $2,966 thousand and (2) an impairment on a leased office building of $1,007 thousand) and a lease liability of $33,229 thousand on its consolidated balance sheet upon adoption, which increased our total assets and liabilities. See Note 17-Leases for additional information.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which requires the measurement and recognition of expected credit losses for certain financial assets, including trade accounts receivable. ASU No. 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of relevant information, including an entity’s historical experience, current conditions and other reasonable and supportable forecasts that affect collectability over the life of a financial asset. The amendments in the updated standard are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. While the Company is finalizing its evaluation of the impact the new standard will have on its financial statements, the adoption of the new standard in the first quarter of 2023 is not currently expected to have a material impact.

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. This amendment requires that, at acquisition date, an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) as if it had originated the contracts, while also taking into account how the acquiree applied ASC 606. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the effect that the updated standard will have on its financial statements.

Note 2.    Earnings Per Share

Prior to the Business Combination, the QualTek HoldCo membership structure included Class A Units, Preferred Class B Units, and Class P Units with only Class A Units outstanding upon the Closing of the Business Combination. The Company analyzed the calculation of net loss per unit for periods prior to the Business Combination and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements. Therefore, the basic and diluted loss per share for the year ended December 31, 2022 represents only the period from February 14, 2022 to December 31, 2022.

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.

F-15

The basic and diluted net loss per share calculations are as follows (in thousands, except share and per share amounts):

Basic:
	February 14, 2022 through December 31, 2022
Numerator:
Net loss	$	(75,189)
Less: Loss attributable to non-controlling interests	(38,841)
Net loss attributable to QualTek Services Inc.	(36,348)
Less: Loss attributable to participating securities	(3,298)
Net loss attributable to Class A common shareholders, basic	$	(33,050)
Denominator:
Weighted average Class A common shares outstanding	25,073,531
Less: Weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,935)
Weighted average Class A common shares outstanding, basic	22,798,596
Net loss per share - basic	$	(1.45)

Diluted:
	February 14, 2022 through December 31, 2022
Numerator:
Net loss	$	(75,189)
Less: Loss attributable to non-controlling interests	(5,906)
Net loss attributable to QualTek Services, Inc.	(69,283)
Less: Loss attributable to participating securities	(3,334)
Net loss attributable to Class A common shareholders, diluted	$	(65,949)
Denominator:
Weighted average Class A common shares outstanding	25,073,531
Less: weighted average unvested Blocker Owner Earnout Shares outstanding	(2,274,935)
Add: weighted average Class B common shares if converted to Class A common	22,200,013
Weighted average Class A commons shares outstanding, diluted	44,998,609
Net loss per share - diluted	$	(1.47)

The 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:

F-16

	February 14, 2022 through December 31, 2022
Excluded from the calculation:
Stock options	5,632,011
Private Placement Warrants	101,992
Public Warrants	2,874,979
Convertible Notes	12,468,500
Class B common stock	—
Pre-PIPE Notes	—
Total potentially dilutive shares excluded from calculation	21,077,482

Note 3.    Discontinued Operations

During 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 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.

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations included in "Other current assets" and "Other current liabilities" on the consolidated balance sheet (in thousands). As of, and for the year ended, December 31, 2022 there were no discontinued operations.

	For the Year Ended December 31, 2021
Carrying amounts of assets included as part of discontinued operations:
Cash	$	1,545
Accounts receivable, net of allowance	1,292
Other current assets	1,665
Total current assets of discontinued operations	$	4,502
Carrying amounts of liabilities included as part of discontinued operations:
Current portion of long-term debt and financing lease obligations	$	14
Accounts payable	559
Accrued expenses	1,475
Total current liabilities of discontinued operations	$	2,048

F-17

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

	For the Year Ended December 31, 2021
Revenue	$	5,850
Costs and expenses:
Cost of revenues	9,562
General and administrative	381
Depreciation and amortization	6,798
Total costs and expenses	16,741
Loss from operations of discontinued operations	(10,891)
Other income (expense):
Gain on sale of property and equipment	2,235
Interest expense	(195)
Loss from discontinued operations	$	(8,851)

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 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 Financing Lease Obligation). The purchase price is subject to adjustment based upon FNS exceeding predetermined EBITDA thresholds for the years ending 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. Results of operations subsequent to the acquisition date and changes to management’s forecasts, as well as the accretion of the liability, resulted in a total decrease in fair value of the contingent consideration of $9,063 thousand (see Note 10 - Fair Value Measurements). The Company recognized $20,104 thousand and $29,371 thousand in revenue for the years ended December 31, 2022 and December 31, 2021, respectively, as a result of the acquisition.

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 purchase 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 thousand. The cash consideration was funded by the issuance of convertible notes in June 2021 (see Note 8-Debt and Financing Lease Obligation). As of the acquisition date, the fair value of the contingent consideration was determined to be $7,552 thousand. Results of operations subsequent to the acquisition date and changes to management’s forecasts resulted in a total decrease in fair value of the contingent consideration of $5,553 thousand (see Note 10 - Fair Value Measurements). The Company recognized $11,195 thousand and $5,479 thousand in revenue for the years ended December 31, 2022 and December 31, 2021, respectively, as a result of the acquisition.

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 net cash of $12,539 thousand which includes cash acquired of $1,289 thousand, rollover equity valued at $6,000 thousand, and acquisition debt of $14,143 thousand. The cash consideration was funded by convertible notes issued by the Company in June 2021 (see Note 8-Debt and Financing Lease Obligation). 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. Results of operations subsequent to the acquisition date and changes to management’s forecasts resulted in a total decrease in fair

F-18

value of the contingent consideration of $3,634 thousand (see Note 10 - Fair Value Measurements). The Company recognized $44,286 thousand and $16,823 thousand in revenue for the years ended December 31, 2022 and December 31, 2021, respectively, as a result of the acquisition.

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 net cash of $8,251 thousand which includes cash acquired of $185 thousand and rollover equity valued at $4,000 thousand. The cash consideration was funded by line of credit (see Note 8-Debt and Financing Lease Obligation). 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. Results of operations subsequent to the acquisition date and changes to management’s forecasts resulted in a total decrease in fair value of the contingent consideration of $2,543 thousand (see Note 10 - Fair Value Measurements). The Company recognized $31,294 thousand and $4,800 thousand in revenue for the years ended December 31, 2022 and December 31, 2021, respectively, as a result of the acquisition.

The acquisitions were recognized as business combinations with FNS and associated goodwill reported within our Renewables and Recovery Logistics Segment and Broken Arrow, Concurrent, and Urban Cable and associated goodwill reported 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. For the year ended December 31, 2022, the Company recognized goodwill impairment in both the FNS and Concurrent business units, see Note 7 - Goodwill and Intangible Assets for further information.

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)		—
Lease obligations	(5,441)		—		(3,182)		(90)
	$	30,259	$	12,552	$	40,461	$	15,735

F-19

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

Note 5.    Property and Equipment

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

	December 31,
	2022		2021
Office furniture	$	2,229	$	1,382
Computers	2,296		1,856
Machinery, equipment and vehicles	27,178		17,331
Land	140		140
Building	340		340
Leasehold improvements	5,178		4,552
Software	2,416		2,320
Assets under financing lease	57,905		50,941
Construction in process	1,807		1,335
	99,489		80,197
Less: accumulated depreciation	(39,671)		(29,515)
Property and equipment, net	$	59,818	$	50,682

Property and equipment include assets acquired under financing leases of $57,905 thousand and $50,941 thousand as well as accumulated depreciation of $15,096 thousand and $14,899 thousand as of December 31, 2022 and December 31, 2021, respectively. Depreciation expense was $16,190 thousand and $13,017 thousand for the years ended December 31, 2022 and 2021, respectively.

Note 6.    Accounts Receivable, Contract Assets and Liabilities, and Customer Credit Concentration

The following provides further details on the 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 in "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 December 31, 2022 and 2021. 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 were $24,094 thousand and $14,773 thousand at December 31, 2022 and 2021, respectively. The amount of revenue recognized for the years ended December 31, 2022 and 2021 that was previously included in contract liabilities at the beginning of the period was $12,610 thousand and $13,747 thousand, respectively.

F-20

Customer Credit Concentration

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

	December 31,
	2022				2021
	Amounts		% of Total		Amounts		% of Total
AT&T	$	76,816	30.7	%	$	56,280	27.1	%
Verizon	56,551		22.6	%	50,218		24.2	%
T-Mobile	36,663		14.6	%	35,756		17.2	%
Total	$	170,030	67.9	%	$	142,254	68.5	%

Allowance for Doubtful Accounts

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

	December 31,
	2022		2021
Balance at beginning of year	$	5,614	$	3,933
Charged to expense	8,533		1,867
Deductions for uncollectible receivables written off	(8,739)		(186)
Balance at end of year	$	5,408	$	5,614

Note 7.    Goodwill and Intangible Assets

Goodwill

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

	Renewables and Recovery Logistics		Telecom		Total
Goodwill as of January 1, 2021	$	13,598	$	44,924	$	58,522
Additions from acquisitions (Note 4)	8,082		14,606		22,688
Impairment loss	—		(52,487)		(52,487)
Goodwill as of December 31, 2021 (a)	$	21,680	$	7,043	$	28,723
Impairment loss	(8,082)		(6,078)		(14,160)
Measurement period adjustments, net	—		(70)		(70)
Goodwill as of December 31, 2022 (a)	$	13,598	$	895	$	14,493

__________________________________

(a) The Company accumulated impairment charges of $6,078 thousand and $52,487 thousand at December 31, 2022 and 2021 in the Telecom segment. We recognized $8,082 thousand of accumulated impairment charges at December 31, 2022 within the Renewables and Recovery Logistics segment.

Factors considered by management in determining the reporting units for which quantitative assessments were performed included the sustained environment of operational losses, the decrease in market capitalization and the impairment in 2021. We completed quantitative assessments and determined that the carrying value exceeded the fair value of two of our reporting units in 2022 within our Telecom and Renewables and Recovery Logistics segments, and one reporting unit within the Telecom segment during 2021.

The Company identified a material weakness related to its’s process for performing interim impairment trigger analyses. In the third quarter 2022, the Company concluded that there was substantial doubt it would have sufficient funds

F-21

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. The Company 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, the Company recorded an out-of-period non-cash goodwill impairment charge of $14,160 thousand. Had the Company 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. The net loss reported in the Company's previously filed unaudited third quarter 2022 Form 10-Q was $6,920 thousand (unaudited) for the three months ended and $73,116 thousand (unaudited) year to date; however, had the goodwill impairment charge been recorded in the third quarter 2022, the net loss would have been $21,080 thousand (unaudited) for the three months ended and $87,276 thousand (unaudited) year to date. The basic net loss per share reported in the previously filed unaudited third quarter 2022 Form 10-Q was $0.13 (unaudited) for the three month ended and $0.81 (unaudited) year to date; however had the goodwill impairment charge been recorded in the third quarter 2022, the basic net loss per share would have been $0.39 (unaudited) for the three months ended and $1.07 (unaudited) year to date.

In 2022, the Company recorded goodwill impairment charges for two reporting units, one within the Telecom segment and one within the Renewable and Recovery Logistics segment. Within the Telecom segment, the Company recorded a goodwill impairment charge of $6,078 thousand associated with its Concurrent business, primarily due to lower forecasted operating margins which adversely impacted operating cash flows. Within the Renewable and Recovery Logistics segment, the Company recorded a goodwill impairment charge of $8,082 thousand associated with its FNS business. The impairment in FNS was primarily due to reduced customer demand which led to lower volumes from a key customer, which adversely impacted the projected operating cash flows.

In the fourth quarter of 2021, the Company recorded a goodwill impairment charge of $52,487 thousand, which was due to a decrease to the future discounted cash flows for one of our reporting units within our Telecom segment, which resulted in a carrying value in excess of its estimated fair value. This decrease was attributable to a significant wind down of a large customer program, delays resulting from spectrum auctions impacting build plans, and, to a lesser degree, impacts of the COVID-19 pandemic.

The goodwill impairment charges did not affect the Company's compliance with its financial covenants and conditions under its ABL Credit Agreement. The estimated fair value of the Company's remaining reporting units exceeded their carrying values.

Intangible Assets

Intangible assets consisted of the following (in thousands):

	December 31, 2022
	Weighted Average Remaining Useful Life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships	8.8	$	424,260	$	(133,535)	$	290,725
Trademarks and trade names	9.3	59,969		(29,008)		30,961
		$	484,229	$	(162,543)	$	321,686

	December 31, 2021
	Weighted Average Remaining Useful Life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships	9.5	$	424,560	$	(98,307)	$	326,253
Trademarks and trade names	9.5	59,969		(22,048)		37,921
		$	484,529	$	(120,355)	$	364,174

F-22

Amortization expense of intangible assets was $42,187 thousand and $39,453 thousand for the years ended December 31, 2022 and 2021, respectively.

The following table provides estimated future amortization expense related to the intangible assets (in thousands):

Years ending December 31:
2023	$	40,827
2024	38,778
2025	37,786
2026	37,087
2027	35,522
Thereafter	131,686
	$	321,686

Note 8.    Debt and Financing Lease Obligations

Convertible notes — related party: On June 16, 2021, the Company issued a convertible note (“Convertible Note – Related Party – June 2021”) in the aggregate principal amount of $30,568 thousand to BCP QualTek II LLC, an affiliate of its majority member, in exchange for the 25,000 outstanding Preferred Class B Units (Preferred Units) and the associated accumulated preferred return. The Convertible Note – Related Party - June 2021 converted under its mandatory conversion provision, as defined in the agreement, upon the consummation of the Business Combination on February 14, 2022, as noted in Note 1-Nature of Business and Summary of Significant Accounting Policies.

Convertible notes — June 2021: On June 16, 2021, the Company issued convertible promissory notes (the “Convertible Notes — June 2021”) with an aggregate principal amount of $44,400 thousand. The Convertible Notes – June 2021 did not require interest to be accrued or payable and did not have a fixed maturity date. The Convertible Notes – June 2021 converted under its mandatory conversion provision, as defined in the agreement, upon the consummation of the Business Combination on February 14, 2022 (See Note 1-Nature of Business and Summary of Significant Accounting Policies). There was a beneficial conversion feature of $12,270 thousand related to the Convertible Notes – June 2021 that was amortized over the life of the notes, using the effective interest method.

Effective January 1, 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 – June 2021 outstanding as of January 1, 2022 was removed from additional paid-in capital and the debt discount. A cumulative impact adjustment was recorded to account for a reduction in interest expense due to a decrease in the discount, which is recognized as interest expense upon conversion of the convertible debt. Adoption of the new standard resulted in a decrease to additional paid-in capital of $12,270 thousand, an increase to convertible debt, net of $3,409 thousand, and a decrease to accumulated deficit of $8,861 thousand.

Line of credit: The Company, through its wholly-owned subsidiaries, has an ABL Credit Agreement with PNC. Under the ABL Credit Agreement, the Company has available an aggregate revolving credit facility, including a swingline subfacility and a letter of credit subfacility, in the amount of $103,500 thousand, for working capital needs and general corporate purposes. 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.

On January 28, 2022, the Company executed an amendment to the ABL 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 reduced to 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.

On May 13, 2022, the Company executed an amendment to the ABL 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. Funds borrowed under the ABL Credit Agreement are classified as long-term debt.

F-23

On September 19, 2022, the Company executed an amendment to the ABL Credit Agreement that increased the aggregate maximum revolving credit commitments to $130,000 thousand from September 15 through December 31 of each year (the “Seasonal Increase Period”). The aggregate revolving commitments from January 1 through September 14 of each year will remain at $103,500 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 ABL Credit Agreement, including the maturity date, remained the same.

On 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. Interest on the principal amounts outstanding under the amended ABL Credit Agreement, payable in arrears monthly, was 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 provided for a 0.50% increase in the Applicable Margin for all time periods provided for in the amended ABL Credit Agreement. In addition, the Ninth Amendment revised the fixed charge coverage ratio covenant to require the borrower's compliance with the fixed charge coverage ratio at the end of every fiscal quarter. Further, PNC prospectively waived the fixed charge coverage ratio covenant for the third quarter 2022 under the ABL Credit Agreement.

On December 23, 2022, the Company executed the Tenth Amendment to the ABL Credit Agreement which revised the aggregate revolving commitment amounts available under the ABL Credit Agreement, such that $130,000 thousand was to be available until June 30, 2023, $120,000 thousand was to be available from July 1, 2023 through December 31, 2023, and $103,500 thousand will be available thereafter. The Tenth Amendment provides that from the date of the Tenth Amendment through December 31, 2023, the Applicable Margin shall be 3.00% for Base Rate loans and 4.00% for Bloomberg Short Term Bank Yield (BSBY) Rate loans and, on and after January 1, 2024, 2.75% for Base Rate loans and 3.75% for BSBY Rate loans. The interest rate under the ABL Credit Agreement as of December 31, 2022 was 10.50%.

The Company’s ability to borrow under the ABL Facility is subject to periodic borrowing base determinations. The borrowing base consists primarily of certain eligible accounts receivable and eligible inventory. The Tenth Amendment modified the cap on the amount of eligible unbilled accounts receivable included in the borrowing base from 75% to 50% of the aggregate borrowing base beginning on September 1, 2023. The Tenth Amendment also amended the fixed charge coverage ratio covenant such that the Company will not need to comply with such covenant until the first quarter of 2024. In addition, the Tenth Amendment added a new financial covenant applicable starting with the fourth quarter 2022 through the fourth quarter 2023, which requires a minimum Consolidated Adjusted EBITDA (as defined in the ABL Credit Agreement) level that the Company must maintain for each of the aforementioned fiscal quarters, as further detailed in the Amendment.

The Company is required to make mandatory prepayments (i) when aggregate principal exceed the maximum revolving credit commitments or the applicable borrowing base and (ii) during a cash dominion period, which occurs if (a) the availability under the ABL Credit Agreement is less than the greater of (i) $9,750 thousand and (ii) 15% of the lesser of (x) the maximum revolving credit commitments and (y) the borrowing base, for five consecutive business days or (b) certain events of default have occurred and are continuing.

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 Facility was approximately $33,477 thousand as of December 31, 2022.

As a result of the Company not making an interest payment of $3,700 thousand due on March 15, 2023 associated with the 2027 Convertible Notes, an event of default has occurred on the ABL Facility. As a result of the event of default, the lenders under the ABL Facility can accelerate the repayment of the outstanding borrowings thereunder and exercise other rights and remedies that they have under applicable laws. Currently, the Company has not received any notices of acceleration. See subsequent events section below for further details.

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. 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. As a result of the Company not making an interest payment of $3,700 thousand due on March 15, 2023 associated with the 2027 Convertible Notes, an event of default has occurred on the Term Loan Facility. As a result of the event of default, the lenders under the 2027 can accelerate the repayment of the outstanding borrowings thereunder and exercise other rights and remedies that they have under applicable laws. Currently, the Company has not received any notices of acceleration. See subsequent events section

F-24

below for further details. 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 (12.75% at December 31, 2022), or an adjusted Eurodollar rate, plus an applicable rate (10.66% at December 31, 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 December 31, 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 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. As a result of the event of default, the trustee under the Convertible Notes or holders of 25% in aggregate principal amount of the outstanding Convertible Notes may declare the principal of, premium, if any, on and accrued and unpaid interest on, the Convertible Notes to be due and payable immediately, which would require the Company to pay approximately $130 million immediately. Currently, the Company has not received any notices of acceleration. See subsequent events section below for further details. 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 2.00% per annum upon the occurrence of an event of default (as defined in the Indenture). Interest became payable on a quarterly basis commencing on June 15, 2022. For the year ended December 31, 2022, the Company recorded interest expense of $12,891 thousand related to the 2027 Convertible Notes. As of December 31, 2022, the 2027 Convertible Notes are presented net of a debt discount of $7,324 thousand on the consolidated balance sheet with accretion of $1,554 thousand.

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 adjustment as provided in the Indenture) per $1 thousand principal amount of the 2027 Convertible Note. If a fundamental change, such as suspension or delisting of our common stock or the commencement of delisting proceedings (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.

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 20.00% of the free float of the Company’s Class A Common Stock.

The Company determined that there was no derivative liability associated with the 2027 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 consolidated 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 December 31, 2022, the conversion feature does not meet derivative classification.

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The 2027 Convertible Notes have customary anti-dilution protections and customary negative covenants, including limitations on indebtedness, restricted payments, and permitted investments. As of December 31, 2022, the Company was in compliance with the covenants under the Indenture.

Nasdaq Notice: On January 3, 2023, we received a written notice from Nasdaq indicating that, for the last 30 consecutive business days prior to the date of the written notice, the market value of our listed securities (the “MVLS”) has been below the minimum requirement of $35,000 thousand for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2). Subsequently, on January 5, 2023, we received an additional deficiency notification letter from the Listing Qualifications Staff of Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Company’s common stock had closed below $1.00 per share for the previous 30 consecutive business days prior to the date of the written notice. If we are unable to regain compliance with either requirement, this could result in the holders of the 2027 Convertible Notes requiring us to repurchase their 2027 Convertible Notes, for which we may not have enough available cash or be able to obtain financing. There can be no assurance that we will regain compliance with either requirement.

On April 18, 2023, we received a written notice from Nasdaq stating that because the Company has not yet filed its Form 10-K (the “Form 10-K”), the Company is no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission (the “SEC”). This notification has no immediate effect on the listing of the Company’s shares on Nasdaq. However, if the Company fails to timely regain compliance with the Nasdaq Listing Rule, the Company’s common stock will be subject to delisting from Nasdaq. Under Nasdaq rules, the Company has 60 calendar days to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rule. If Nasdaq accepts the Company’s plan, then Nasdaq may grant the Company up to 180 days from the prescribed due date for filing the Form 10-K to regain compliance. If Nasdaq does not accept the Company’s plan, then the Company will have the opportunity to appeal that decision to a Nasdaq Hearings Panel.

Debt outstanding was as follows (in thousands):

	December 31,
Current Maturities:	2022		2021
Current maturities of long-term debt, net of deferred financing costs (1)(2)	$	543,404	$	115,224
Current portion of financing lease obligations	13,022		12,151
Current portion of long-term debt and financing lease obligations, net of deferred financing costs	$	556,426	$	127,375
Long-term borrowings:
Line of credit	$	—	$	87,633
Term loan	—		351,481
Acquisition debt	—		34,718
Convertible notes – related party	—		30,567
Convertible notes – June 2021	—		44,400
Less: current maturities of long-term debt	—		(115,224)
Less: unamortized financing fees	—		(11,354)
Less: convertible debt discount	—		(3,408)
Long-term debt, net of current portion	$	—	$	418,813
Lease obligations:
Financing lease obligations	$	35,897	$	32,002
Less: current portion of financing lease obligations	(13,022)		(12,151)
Lease obligations, net of current portion	22,875		19,851
Total long-term borrowings	$	22,875	$	438,664

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(1)	The current maturities of long-term debt, net of deferred financing costs and convertible debt discount, consist of the Line of Credit of $91,665 thousand, the Term Loan of $334,378 thousand, the 2027 Convertible Notes of $117,361 thousand.
(2)	The current maturities of long-term debt for the years ended December 31, 2022 and December 31, 2021 is net of deferred financing costs and convertible debt discount of $15,007 thousand and $4,024 thousand, respectively.

The scheduled principal repayments of the Company's long-term debt and financing lease obligations for the next five years ending December 31 and thereafter are as follows (in thousands):

	Line of credit		Term loan		Convertible notes		Finance Lease obligations		Total
2023	$	91,809	$	341,917	$	124,685	$	13,022	$	571,433
2024	—		—		—		10,442		10,442
2025	—		—		—		7,762		7,762
2026	—		—		—		4,383		4,383
2027	—		—		—		288		288
Thereafter	—		—		—		—		—
Total	$	91,809	$	341,917	$	124,685	$	35,897	$	594,308

Subsequent Events: Subsequent to December 31, 2022, on March 16, 2023, the Company, through its wholly-owned subsidiaries QualTek Buyer, LLC and QualTek LLC, entered into an amendment to each of (i) the Term Loan Credit Agreement among QualTek Buyer, LLC, QualTek LLC, certain subsidiaries of QualTek LLC and Citibank, N.A., as administrative agent and collateral agent (the “Term Loan Amendment”) and (ii) the ABL Credit Agreement among QualTek Buyer, LLC, QualTek LLC, certain subsidiaries of QualTek LLC and PNC Bank, National Association, as administrative agent and collateral agent (the “ABL Amendment”).

The Term Loan Amendment provides for $55,000 thousand of immediately available new money incremental term loans under the Term Loan Credit Agreement. 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.

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. The interest rate on the new money incremental term loans will be the secured overnight financing rate (“SOFR”) plus 12.00%, with a minimum cash pay requirement of SOFR plus 1.00% and the remainder to be paid-in-kind. The maturity date on the new money incremental term loans will be June 15, 2024. The Term Loan Amendment also implements modifications to certain affirmative covenants, negative covenants and events of default and certain other amendments. Modifications to affirmative covenants include furnishing information regarding the Company’s ABL Facility, providing budgetary reports with variance analysis, weekly status updates and achievement of contractual milestones. Negative covenant modifications include a reduction in the outstanding indebtedness and the addition of maintaining a minimum liquidity. The interest rate and maturity date of the rollover loans will remain consistent with the existing term loans.

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 will also implement modifications to certain of the affirmative covenants, negative covenants and events of default.

Additionally, 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 has not made the interest payment, and, as a result, an event of default has occurred under the Indenture, the 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

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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 a forbearance agreement with holders of approximately 72% of the aggregate principal amount of the outstanding 2027 Convertible Notes (the “Forbearing Holders”), pursuant to which the Forbearing Holders have agreed to (i) forbear from exercising any of their rights and remedies, including with respect to an acceleration, under the Indenture or applicable law with respect to any default or any event of default arising under the Indenture relating to or as a proximate result of the Company’s failure to pay interest on the 2027 Convertible Notes on March 15, 2023 or during the subsequent 30-day grace period and (ii) exercise their rights pursuant to the Indenture to direct the trustee to forbear from exercising any remedy available to the trustee or exercising any trust or power conferred upon the trustee with respect to such defaults or events of default, in each case during the period commencing on April 24, 2023 and ending upon the earliest to occur of (a) 11:59 p.m. (New York City time) on May 15, 2023, (b) the occurrence of any event of default other than the defaults and events of default specified above, (c) payment of interest that was due March 15, 2023 to each Forbearing Holder, (d) the Company’s failure to pay any amounts owed to certain of the Forbearing Holders’ advisors, (e) an event of default, acceleration, or similar event in connection with any of the Company’s funded and/or revolving indebtedness, provided that the Company has not entered into a forbearance or similar agreement with respect to the foregoing clause (e), and (f) any borrowing or further extension of credit under the Company’s term loan facility, any provision of additional collateral to or for the benefit of the lenders under such term loan facility or any other lenders, agents, trustees or other parties under any credit facility or any other financing or similar instrument, or entry into any other non-ordinary course financing or similar transaction or any material asset disposition, in each case without the express written consent of the Forbearing Holders.

The Company has entered into a forbearance agreement with the administrative agent and lenders (the “ABL Forbearing Holders”) under the ABL Credit Agreement, dated as of July 18, 2018 (as amended, supplemented or otherwise modified from time to time, the “ABL Credit Agreement”), pursuant to which the ABL Forbearing Holders have agreed to forbear from exercising any of their rights and remedies, including with respect to an acceleration, in respect of a cross-payment event of default arising under Section 8.1(b)(i) of the ABL Credit Agreement and any event of default that may arise under Section 8.1(e)(ii) of the ABL 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, among other changes and forbearances, including a reduction in the aggregate commitment from $105,000 thousand to $90,000 thousand. The forbearance period shall expire on the earliest of: (i) May 15, 2023, (ii) the time at which any of the representations and warranties in the forbearance agreement is inaccurate in any material respect or any covenant is breached in any material respect, (iii) the occurrence of any other default or event of default under the ABL Credit Agreement or (iv) the trustee under the 2027 Convertible Notes exercises any remedy under the Indenture.

The Company has entered into a limited waiver agreement with the administrative agent and required lenders (the “Term Loan Waiving Holders”) under the Term Loan Credit Agreement, dated as of July 18, 2018 (as amended, supplemented or otherwise modified from time to time, the “Term Loan Credit Agreement”), pursuant to which the Term Loan Waiving Holders have agreed to waive certain defaults, including with respect to an acceleration, due to a cross-payment event of default under Section 8.1(b)(i) of the Term Loan Credit Agreement and any event of default that may arise under Section 8.1(e)(ii) of 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, among other changes and waivers that will allow the Company to request additional borrowings in the form of new money incremental term loans in an amount of up to $20,000 thousand, subject to the approval of the Required Lenders (as defined in the Term Loan Credit Agreement). The waiver period shall expire on the earliest of: (i) May 15, 2023, (ii) the time at which any of the representations and warranties in the limited waiver agreement is inaccurate in any material respect or any covenant is breached in any material respect, (iii) the occurrence of any other default or event of default under the Term Loan Credit Agreement or (iv) the trustee under the 2027 Convertible Notes exercises any remedy under the Indenture.

Due to the substantial doubt about the Company's ability to continue as a going concern, and the Company's default in March 2023 under the indenture that governs the Company's senior unsecured convertible notes, as of December 31, 2022, the Company has reclassified $548,847 thousand of its outstanding debt from long-term to current. We will likely choose

F-28

or need to obtain alternative sources of capital or otherwise meet our liquidity needs and/or restructure our existing indebtedness through the protections available under applicable bankruptcy or insolvency laws, including Chapter 11 of the U.S. Bankruptcy Code. Holders of our Class A Common Stock will likely not receive any value or payments in a restructuring or similar transaction.

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 (see Note 10 - Fair Value Measurements). 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, 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 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;

•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 days 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 10.    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

F-29

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 1 Unadjusted 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.

Level 2 Quoted 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 3 Unobservable 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 years ended December 31, 2022 and 2021.

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 issued 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 9-Warrants). The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within other non-current liabilities on the accompanying consolidated balance sheet. As of the Closing Date and December 31, 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 December 31, 2022 and 2021 and the related activities for the years ended December 31, 2022 and 2021.

	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

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

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

The following table sets forth a summary of the changes in fair value of the Company’s Level 3 financial liabilities:

	Warrant liability		Contingent consideration
January 1, 2021	$	—	$	18,129
Acquisitions (see Note 4)	—		26,202
Accretion	—		1,205
Change in fair value	—		(4,780)
Reclassification to acquisition debt	—		(10,000)
December 31, 2021	—		30,756
Assumption of private placement warrants in Business Combination	77		—
Accretion	—		1,440
Reclassification to short term debt	—		(7,498)
Change in fair value	—		(19,498)
December 31, 2022	$	77	$	5,200

Note 11.    Equity

Prior to the Business Combination (see Note 1-Nature of Business and Summary of Significant Accounting Policies), profits and losses of the Company are allocated to the Members in accordance with the BCP QualTek Holdco, LLC Agreement (“HoldCo LLC Agreement”), as amended and restated on October 4, 2019. Distributions made by the Company are based on the HoldCo LLC agreement.

Preferred equity: On October 4, 2019, an affiliate of the Company’s majority member, BCP QualTek II LLC, contributed $25,000 thousand in exchange for 25,000 Preferred Units, as defined in the Holdco LLC Agreement. The Preferred Units had a liquidation preference equal to the initial price per unit of $1,000 plus a preferred return accrued through the date of liquidation of 12.00% per annum, compounding quarterly, as defined in the Holdco LLC Agreement. The Preferred Units had a perpetual term, with no fixed maturity date and no voting rights. The Company had the right to redeem any or all of the Preferred Units, including the accrued return, at any time. The Preferred Units were not convertible or exchangeable with any of the equity interest of the Company.

On June 16, 2021, the 25,000 Preferred Units and accumulated preferred return, which totaled $5,568 thousand was exchanged for the Convertible Note — Related Party — June 2021 (see Note 8-Debt and Financing Lease Obligations).

Profits interests: The Company granted certain Class P Units, as defined in the Holdco LLC Agreement, to certain employees and executives of the Company. The Class P Units would vest over five years, subject to certain criteria. All Class P Units vested immediately upon the sale of the Company on February 14, 2022, as defined in the Holdco LLC Agreement. Each Class P Unit entitled a participant to a residual profits interest payable after certain thresholds are met. Such profits are considered compensation expense for the Company, and the Company recognized a compensation expense of $6,711 thousand for the year ended December 31, 2022. All of the Class P Units were eliminated as of February 14, 2022, as described below.

Distributions: There were no tax distributions for the year ended December 31, 2022. Tax distributions to the majority members of $11,409 thousand were unpaid and are recorded in "Other non-current liabilities" on the consolidated balance sheets at December 31, 2021.

Immediately prior to the Business Combination, management made a non-cash discretionary distribution to effectively settle all existing Class P Units in exchange for Historical LLC Interests in QualTek HoldCo. In addition, as mentioned in Note 1 - Nature of Business and Summary of Significant Accounting Policies, per the Business Combination Agreement, QualTek HoldCo issued the Convertible Note – Related Party – June 2021 (see in Note 8-Debt and Financing Lease 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. The post-Business Combination capital structure of QualTek Services Inc. are as follows.

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QualTek Services Inc. Preferred Stock: The Company is authorized to issue 1 million shares of preferred stock with a par value of $0.0001 per share. At December 31, 2022 and 2021, there were no shares of preferred stock issued or outstanding.

QualTek Services Inc. Class A common stock: The Company is authorized to issue 500 million shares of Class A Common Stock with a par value of $0.0001 per share. At December 31, 2022 and 2021, there were 27,805,659 and 11,923,941 shares issued and outstanding, respectively. 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 million shares of Class B Common Stock with a par value of $0.0001 per share. At December 31, 2022 and 2021, there were 23,304,200 and 13,085,488 shares issued and outstanding, respectively. 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 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 December 31, 2022:

	Common Units	Ownership Percentage
Common Units held by QualTek Services Inc. (1)	25,530,724	52	%
Common Units held by Flow-through Sellers	23,304,200	48	%
Balance at end of period	48,834,924	100	%

(1) Earnouts related to QualTek Services Inc are contingently issuable shares where the underlying units are not issued, and as such the earnout amount is not included in the calculation of NCI.

Each Common Unit held through the Flow-Through Sellers 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. on a one-to-one 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 of Class B Common Stock, which the Company will cancel for no consideration on a one-for-one basis with the number of Common Units so exchanged. For the year ended December 31, 2022, the Company converted 3,359 thousand QualTek HoldCo units and shares of Class B Common Stock of the Company into 3,359 thousand shares of Class A Common Stock of the Company after receiving requests for conversion from the holders thereof.

Public Warrants: In connection with the Business Combination, the Company assumed the Public Warrants which are recorded as a component of equity. At December 31, 2022, there were 2,875 thousand Public Warrants outstanding. See Note 9-Warrants for additional information.

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 earnout 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 Voting Share has a corresponding Common Unit of QualTek HoldCo which is subject to the same vesting conditions. At December 31, 2022, the earnout targets have not been achieved and all Earnout Shares are unvested.

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Note 12.    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 December 31, 2022, there were 1.8 million shares of Class A Common Stock available for future grant under the Plan. The number of shares of Class A common stock reserved for issuance under the 2022 Plan 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 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 year ended December 31, 2022, the Company granted stock options for 6.8 million shares of Class A Common Stock under the LTIP, with an aggregate grant date fair value of $8,445 thousand.

On February 14, 2022, the Company granted 5.2 million stock options of which $900 thousand vested immediately on the grant date. During the year ended December 31, 2022, primarily as a result of the accelerated vesting associated with the February 14, 2022 grant, 718,404 stock options vested and the total fair value of stock options vested was $1,041 thousand. There were no stock options exercised during the year ended December 31, 2022.

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As of December 31, 2022, 4.9 million outstanding stock options were unvested, which had a weighted average grant date fair value of $1.24. A summary of option activity under the stock option plan as of December 31, 2022, and changes during the year ended is presented below. There were no stock options outstanding as of December 31, 2021.

Options	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2022	—	—
Granted	6,831,789	$6.20
Exercised	—	—
Forfeited or expired	(1,172,154)	$7.50
Cancelled	(27,625)	$7.50
Outstanding at December 31, 2022	5,632,010	$5.92	5.62	—
Exercisable at December 31, 2022	718,404	$7.50	5.50	—

The assumptions used to calculate our weighed average grant date fair value of $1.24 per share follows the Black Scholes methodology. See below for the inputs used:

Black-Scholes inputs
Expected term (in years)	5.71
Annualized volatility	157.5	%
Risk-free-rate	3.7	%
Expected dividends	—	%

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

	For the Year Ended
	December 31, 2022
Cost of revenue	$	214
General and administrative expenses	1,712
Total	$	1,926

Absent the 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)
	December 31, 2022		December 31, 2022
Stock options	$	4,820	3.0

	Total Unrecognized Compensation Cost
	Total		2023		2024		2025		2026 and beyond
Stock options	$	4,820	$	1,668	$	1,485	$	1,429	$	238

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Note 13.     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 tax effects of temporary differences and carryforwards which give rise to deferred tax assets and deferred tax liabilities are summarized as follows (in thousands):

	For the Year Ended
	December 31, 2022		December 31, 2021
Deferred income tax assets:
Tax receivable agreement	$	—	$	—
Partnership outside basis difference	28,023		—
Net operating losses and other tax attributes	33,194		12,756
Gross deferred tax assets	61,217		12,756
Valuation allowance	(61,217)		(12,756)
Deferred tax assets, net of valuation allowance	$	—	$	—

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.

After assessing both positive and negative evidence to consider whether the existing deferred tax assets will be realized in a future period, the Company has recorded a full valuation allowance against its net deferred tax assets at December 31, 2022 and December 31, 2021, concluding that it is more-likely-than-not that these assets will not be realized.

As of December 31, 2022 and 2021, we had approximately $100,000 thousand and $51,900 thousand, respectively, of net operating loss (NOL) carry forwards available to offset future federal taxable income, all of which can be carried forward indefinitely. As of December 31, 2022 and 2021, we had approximately $91,700 thousand and $43,600 thousand, respectively, of NOL carryforwards available to offset future state taxable income that will expire beginning in 2039. These losses may be subject to a limitation on their utilization under Section 382. The Company has not performed the analysis to determine if the limitation applies or the limitation amount.

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The following is a reconciliation of income tax benefit at the Federal statutory rate with income tax benefit recorded by the Company for the years ended December 31, 2022 and December 31, 2021.

	December 31, 2022					December 31, 2021
Federal income tax expense at statutory rate	$	22,006	21.0		%	$	23,189	21.0		%
State income tax, net of federal benefit	4,035		3.9		%	5,172		4.7		%
Gain or reduction of TRA liability	3,992		3.8		%	—		—		%
Permanent differences	(407)		(0.4)		%	—		—		%
Non-controlling interest	(17,503)		(16.7)		%	(28,361)		(25.7)		%
Valuation allowance	(12,123)		(11.6)		%	—		—		%
Effective income tax rate	$	—	$	—		$	—	$	—

The effective tax rate was 0% for years ended December 31, 2022 and 2021. The Company, based on the consideration of the relevant positive and negative evidence available, maintained a full valuation allowance against its deferred tax assets.

We did not have unrecognized tax benefits as of December 31, 2022, and December 31, 2021, and do not expect this to change significantly over the next twelve months. We recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements. Accrued interest and penalties, where appropriate, are recorded in income tax expense. As of December 31, 2022, and December 31, 2021, we had not accrued interest or penalties related to any uncertain tax positions.

We file income tax returns in the U.S. and various state jurisdictions. The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2019 through December 31, 2022. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.

Note 14.    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. 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 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 and comprehensive loss. As of December 31, 2022, 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 $43,364 thousand. If subsequent adjustments to the liability for future payments occur, those changes would be recognized through current period earnings.

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Note 15.    Segments and Related Information

The Chief Operating Decision Maker ("CODM") of the Company manages its operations 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.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the key metric used by management to assess the operating and financial performance of our business in order to make decisions on resource allocation. The Company believes this non-U.S. GAAP measure provides meaningful information and helps investors understand the Company's financial results in the same manner as our management. Segment EBITDA is calculated in a manner consistent with consolidated EBITDA.

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

	For the Years Ended December 31,
	2022		2021
Revenue:
Telecom	$	665,511	$	498,221
Renewables and Recovery Logistics	88,345		114,020
Total consolidated revenue	$	753,856	$	612,241

	December 31,
	2022		2021
Total Assets:
Telecom	$	607,975	$	570,750
Renewables and Recovery Logistics	67,953		90,638
Corporate (1)	12,999		10,371
Total consolidated assets	$	688,927	$	671,759

(1)Corporate includes both corporate assets and intercompany eliminations

	For the Years Ended December 31,
	2022		2021
Capital Expenditures:
Telecom	$	19,221	$	11,109
Renewables and Recovery Logistics	3,020		330
Corporate	529		1,379
Total consolidated capital expenditures (1)	$	22,770	$	12,818

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(1)Capital Expenditures include both cash purchases of property and equipment and assets acquired under financing leases

	For the Years Ended December 31,
	2022		2021
EBITDA:
Telecom	$	22,374	$	(19,729)
Renewables and Recovery Logistics	24,738		46,359
Corporate	(34,210)		(25,258)
Consolidated EBITDA	$	12,902	$	1,372
EBITDA Reconciliation:
Loss on Continuing Operations	$	(104,792)	$	(101,575)
Plus:
Interest expense	59,317		50,477
Depreciation	16,190		13,017
Amortization	42,187		39,453
Total consolidated EBITDA	$	12,902	$	1,372

	For the Years Ended December 31,
	2022		2021
Amortization and Depreciation:
Amortization and depreciation
Telecom	$	46,321	$	41,105
Renewables and Recovery Logistics	11,208		10,383
Corporate	848		982
Total consolidated amortization and depreciation	$	58,377	$	52,470

	For the Years Ended December 31,
Interest Expense:	2022	2021
Telecom	4,179	1,711
Renewables and Recovery Logistics	1,285	818
Corporate	53,853	47,948
Total consolidated interest expense	59,317	50,477

Note 16.    Commitments and Contingencies

Litigation: During the fourth quarter of 2021, we recognized a $2,600 thousand expense for a legal settlement with a customer in our Renewables and Recovery Logistics segment to settle a dispute regarding the progress of work on a specific project and to release the Company for any future liability regarding the project. The settlement is reflected in "Loss on legal settlement" on the consolidated statements of operations and comprehensive loss.

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

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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 17.     Leases

The Company leases office facilities, office equipment, and vehicles for use in its operations. Leases with an initial term of 12 months or less are not recorded on the balance sheet; rather, the Company records rent expense on a straight-line basis over the expected lease term.

The Company accounts for lease and non-lease components as a single lease component. For calculating lease liabilities, we may deem lease terms to include options to extend or terminate the lease when it’s reasonably certain that we will exercise that option. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants.

Lease liabilities and corresponding right-of-use assets are recorded based on the present value of the lease payments over the expected lease term. All other variable payments are expensed as incurred. Since the Company’s lease agreements do not provide an implicit interest rate, we utilize our incremental borrowing rate to determine the discount rate used to present value the lease payments.

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Supplemental balance sheet information related to our leases as follows (in thousands):

	For the Year Ended December 31,
	2022
Assets
Operating leases	$	28,566
Finance leases, net	42,809
Total lease assets	$	71,375
Liabilities
Current:
Operating leases	$	9,594
Finance leases	13,022
Non-current:
Operating leases	22,491
Finance leases	22,875
Total lease liabilities	$	67,982

Components of our total lease cost were as follows (in thousands):

	For the Year Ended December 31,
	2022
Operating lease cost	$	11,955
Finance lease cost:
Amortization of right-of-use asset	9,270
Interest on lease liabilities	2,429
Variable lease cost	1,751
Sublease income	(162)
Total lease cost	$	25,243

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Other information related to our leases was as follows (in thousands):

	For the Year Ended December 31,
	2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	11,108
Operating cash flows from finance leases	$	2,429
Financing cash flows from finance leases	$	15,703
Weighted average remaining lease term (in years):
Operating leases	4.03
Finance leases	2.42
Weighted average discount rate:
Operating leases	6		%
Finance leases	7		%

Future lease payments under non-cancellable leases as of December 31, 2022, were as follows (in thousands):

	Operating Leases		Finance Leases
2023	$	11,108	$	14,825
2024	8,893		11,584
2025	6,029		8,282
2026	4,276		4,518
2027	2,189		393
Thereafter	4,056		—
Total future undiscounted lease payments	36,551		39,602
Less: imputed interest	(4,466)		(3,705)
Total reported lease liability	$	32,085	$	35,897

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). Rent expense totaled $11,955 thousand and $10,502 thousand for the years ended December 31, 2022 and 2021, respectively. The Company leases six of its locations from lessors, who are partially owned by members of the Company. The rent expense related to these leases were not material for the years ended December 31, 2022 and 2021.

In 2013, the Company signed a 10 year lease for an office building in King of Prussia, PA to provide working space for its corporate and office employees. The Company outgrew its office space in King of Prussia, PA and moved their corporate and office employees into a new leased office building at in Blue Bell, PA in July 2020. By December 2020, the King of Prussia, PA office was fully vacated and the Company was unable to sublet or find an alternative use for the office. In connection with the Company's adoption of the FASB's updated accounting standard on leases, effective January 1, 2022, the company performed an assessment of the previously vacated King of Prussia, PA lease to determine proper treatment. Management determined the lease to have no expected cash inflows and the carrying amount of the right-of-use asset was determined to be not recoverable. As a result, an impairment of $1,007 thousand was recorded for the year ended December 31, 2022.

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Note 18.    Retirement Plan

The Company sponsors a defined contribution 401(K) savings plan for eligible employees. The plan provides for discretionary employer matching contributions. The Company made $1,543 thousand of the employer matching contributions to the plan for the year ended December 31, 2022. The Company made no matching contributions to the plan for the year ended December 31, 2021.

Note 19.    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. The Company incurred $125 thousand and $889 thousand in advisory fees for the years ended December 31, 2022 and 2021, respectively.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a)Exhibits.

Exhibit	Description
2.1 †	Business Combination Agreement, dated as of June 16, 2021, by and among BCP QualTek HoldCo, LLC, Roth CH Acquisition III Co., Roth CH III Blocker Merger Sub, LLC, BCP QualTek Investors, LLC, Roth CH III Merger Sub, LLC, and BCP QualTek, LLC (incorporated by reference to Exhibit 2.1 of ROCR’s Current Report on Form 8-K filed on June 16, 2021)
2.2 †	Waiver and Consent Agreement, dated as of January 14, 2022, by and among Roth CH Acquisition III Co., Roth CH III Blocker Merger Sub, LLC, BCP QualTek Investors LLC, Roth CH III Merger Sub, LLC, BCP QualTek HoldCo, LLC and BCP QualTek, LLC (incorporated by reference to Exhibit 2.1 of ROCR’s Current Report on Form 8-K filed on January 14, 2022)
3.1	Second Amended and Restated Certificate of Incorporation of QualTek Services Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
3.2	Bylaws of QualTek Services Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
4.1	Description of registered securities (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K filed on April 15, 2022)
10.1	Amendment to Term Credit and Guaranty Agreement, dated March 16, 2023, by and among 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 of the Company’s Current Report on Form 8-K filed on March 16, 2023)
10.2	Amendment to ABL Credit and Guaranty Agreement, dated March 16, 2023, by and among 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 4.1 of the Company’s Current Report on Form 8-K filed on March 16, 2023)
10.3	Third Amended and Restated Limited Liability Company Agreement of QualTek HoldCo, LLC, dated as of February 14, 2022, by and among QualTek Services Inc. and the Members (as defined therein) set forth on Exhibit A thereto (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
10.4	Indenture, dated as of February 14, 2022, by and among QualTek Services Inc., the Guarantors (as defined in the Indenture) party thereto and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
10.5	Form of Convertible Notes (included in Exhibit 10.4)

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10.6#	QualTek Services Inc. 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
10.7#	Form of Nonqualified Stock Option Agreement pursuant to the QualTek Services Inc. 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
10.8#	QualTek Services Inc. 2022 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
10.9#	Form of Indemnification Agreement (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
10.10#	Employment Agreement between Matthew J. McColgan and QualTek Services Inc., dated December 10, 2022 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December 13, 2022)
10.11	Term Credit and Guaranty Agreement, dated as of July 18, 2018, as amended by Amendment No. 2, dated as of February 14, 2022, by and among QualTek Buyer, LLC, QualTek LLC, and certain of its subsidiaries, the lenders party thereto, and Citibank, N.A. as administrative and collateral agent (conformed copy through Amendment No. 2) (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on May17, 2022)
10.11	Ninth Amendment and Waiver to ABL Credit and Guaranty Agreement, dated as of November 11, 2022 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on November 15, 2022)
10.12*	Tenth Amendment to ABL Credit and Guaranty Agreement, dated as of December 23, 2022
10.13*	ABL Credit and Guaranty Agreement, dated as July 18, 2018, as amended by that Tenth Amendment, dated December 23, 2022, by and among QualTek Buyer, LLC, QualTek LLC, and certain of its subsidiaries, the lenders party thereto, and PNC Bank, National Association, as administrative and collateral agent (conformed copy through Tenth Amendment)
14.1	QualTek Services Inc. Code of Ethics (incorporated by reference to Exhibit 14.1 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
16.1	Letter from Marcum LLP to Securities and Exchange Commission, dated February 16, 2022 (incorporated by reference to Exhibit 16.1 of the Company’s Current Report on Form 8-K filed on February 16, 2022)
21.1	List of subsidiaries of QualTek Services Inc. (incorporated by reference to Exhibit 21.1 of the Company’s Annual Report on Form 10-K filed on April 28, 2023)
23.1*	Consent of RSM US LLP Independent Registered Public Accounting Firm (49)
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.

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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 Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

__________________________________________

*Filed herewith.

# Indicates a management contract or compensatory plan, contract or arrangement.

†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 Act, the registrant has duly caused this Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

	QUALTEK SERVICES INC.
Date: May 1, 2023	By:	/s/ Christopher S. Hisey
		Name: Christopher S. Hisey
		Title: Chief Executive Officer and Director
Date: May 1, 2023	By:	/s/ Matthew J. McColgan
		Name: Matthew J. McColgan
		Title: Chief Financial Officer

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