QXO, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Report of Independent Registered Public Accounting Firm (PCAOB ID: 688 ) 26 Consolidated Balance Sheets 27 Consolidated Statements of Operations 28 Consolidated Statements of Stockholders’ Equity 29 Consolidated Statements of Cash Flows 30 Notes to Consolidated Financial Statements 31 25 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of QXO, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of QXO, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. 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 the 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 audits 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. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2004. Marlton, New Jersey March 4, 2025 26 Table of Contents QXO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 5,068,504 $ 6,143 Accounts receivable, net 2,736 2,969 Prepaid expenses and other current assets 18,339 2,684 Total current assets 5,089,579 11,796 Property and equipment, net 445 503 Operating lease right-of-use assets 259 522 Intangible assets, net 4,024 4,919 Goodwill 1,160 1,140 Deferred tax assets 2,603 1,444 Other non-current assets 192 171 Total assets $ 5,098,262 $ 20,495 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 6,194 $ 4,563 Accrued expenses 35,692 2,681 Deferred revenue 2,900 3,161 Long-term debt – current portion — 702 Finance lease obligations – current portion 128 154 Operating lease liabilities – current portion 188 263 Total current liabilities 45,102 11,524 Long-term debt net of current portion — 994 Finance lease obligations net of current portion 190 247 Operating lease liabilities net of current portion 71 259 Total liabilities 45,363 13,024 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, $ 0.001 par value; authorized 10,000,000 shares, 1,000,000 and 0 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 498,621 — Common stock, $ 0.00001 par value; authorized 2,000,000,000 shares, 409,430,195 and 664,448 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 1 4 — Additional paid-in capital 4,560,503 9,419 Accumulated deficit ( 6,229 ) ( 1,948 ) Total stockholders’ equity 5,052,899 7,471 Total liabilities and stockholders’ equity $ 5,098,262 $ 20,495 See accompanying notes to the consolidated financial statements. ________________________________________ 1 Amounts have been adjusted to reflect the 8-for-1 Reverse Stock Split effective June 6, 2024. See Note 3 - Equity for additional details. 27 Table of Contents QXO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2024 2023 Revenue: Software product, net $ 15,261 $ 14,111 Service and other, net 41,612 40,406 Total revenue, net 56,873 54,517 Cost of revenue: Software product 9,434 8,513 Service and other 24,507 24,390 Total cost of revenue 33,941 32,903 Operating expenses: Selling, general and administrative expenses 92,943 22,097 Depreciation and amortization expenses 989 828 Total operating expenses 93,932 22,925 Loss from operations ( 71,000 ) ( 1,311 ) Other income (expense), net: Interest income (expense), net 121,812 ( 56 ) Total other income (expense) 121,812 ( 56 ) Income (loss) before taxes 50,812 ( 1,367 ) Provision (benefit) for income taxes 22,843 ( 297 ) Net income (loss) $ 27,969 $ ( 1,070 ) Loss per common share – basic and diluted (Note 4) $ ( 0.11 ) $ ( 1.63 ) Total weighted average common shares outstanding: 1 Basic 203,998 657 Diluted 203,998 657 See accompanying notes to the consolidated financial statements. ________________________________________ 1 Amounts have been adjusted to reflect the 8-for-1 Reverse Stock Split effective June 6, 2024. See Note 3 - Equity for additional details. 28 Table of Contents QXO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Amount Shares 1 Amount Balance at January 1, 2023 — $ — 657 $ — $ 10,429 $ ( 878 ) $ 9,551 Common stock dividend — — — — ( 1,051 ) — ( 1,051 ) Shares issued for cashless exercise of stock options — — 7 — — — — Share-based compensation — — — — 41 — 41 Net loss — — — — — ( 1,070 ) ( 1,070 ) Balance at December 31, 2023 — $ — 664 $ — $ 9,419 $ ( 1,948 ) $ 7,471 Issuance of convertible preferred stock and warrants, net of issuance costs 1,000 498,621 — — 482,917 — 981,538 Issuance of common stock and pre-funded warrants, net of issuance costs — — 408,766 4 4,051,099 — 4,051,103 Cash paid for fractional shares — — — — ( 45 ) — ( 45 ) Common stock dividend — — — — ( 17,400 ) — ( 17,400 ) Preferred stock dividend — — — — — ( 32,250 ) ( 32,250 ) Share-based compensation — — — — 34,513 — 34,513 Net income — — — — — 27,969 27,969 Balance at December 31, 2024 1,000 $ 498,621 409,430 $ 4 $ 4,560,503 $ ( 6,229 ) $ 5,052,899 See accompanying notes to the consolidated financial statements. ____________________________________ 1 Amounts have been adjusted to reflect the 8-for-1 Reverse Stock Split effective June 6, 2024. See Note 3 - Equity for additional details. 29 Table of Contents QXO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2024 2023 Cash flows from operating activities: Net income (loss) $ 27,969 $ ( 1,070 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Deferred income taxes ( 1,159 ) ( 338 ) Depreciation 247 329 Amortization of intangibles 875 672 Non-cash lease expense 263 126 Provision for expected losses 50 115 Share-based compensation 34,513 41 Changes in assets and liabilities: Accounts receivable 183 103 Prepaid expenses and other current assets ( 12,155 ) ( 179 ) Other assets ( 21 ) 16 Accounts payable 1,631 1,291 Accrued expenses 33,011 222 Deferred revenue ( 261 ) ( 618 ) Operating lease liabilities ( 263 ) ( 126 ) Net cash provided by operating activities 84,883 584 Cash flows from investing activities: Purchase of property and equipment ( 102 ) ( 121 ) Acquisition of assets — ( 279 ) Net cash used in investing activities ( 102 ) ( 400 ) Cash flows from financing activities: Proceeds from the issuance of common stock and pre-funded warrants, net of issuance costs 4,051,103 — Proceeds from issuance of preferred stock and warrants, net of issuance costs 981,538 — Payment of preferred stock dividend ( 32,250 ) — Payment of common-stock dividend ( 17,400 ) ( 1,051 ) Payment of long-term debt ( 1,696 ) ( 784 ) Payment for fractional shares ( 45 ) — Payment of finance lease obligations ( 170 ) ( 215 ) Net cash provided by (used in) financing activities 4,981,080 ( 2,050 ) Net increase (decrease) in cash, cash equivalents and restricted cash 5,065,861 ( 1,866 ) Cash, cash equivalents and restricted cash, beginning of year 6,143 8,009 Cash, cash equivalents and restricted cash, end of year $ 5,072,004 $ 6,143 Cash paid during year for: Interest $ 63 $ 57 Income taxes $ — $ 301 See accompanying notes to the consolidated financial statements. 30 Table of Contents QXO INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – DESCRIPTION OF BUSINESS QXO, Inc. (“QXO”, “we”, “our”, or the “Company”) was formerly known as SilverSun Technologies, Inc. (“SilverSun”). On June 6, 2024, we changed the Company’s name from SilverSun to QXO and changed its ticker symbol on the Nasdaq Stock Market, LLC (“Nasdaq”) from SSNT to QXO, upon completing a $ 1.0 billion cash investment in SilverSun by Jacobs Private Equity II, LLC (“JPE”) and certain minority co-investors. Refer to Note 3 - Equity for further details about the investment and related to changes to our capital structure. On January 17, 2025, the Company transferred the listing of its common stock, par value $ 0.00001 per share (the “common stock”), from Nasdaq to the New York Stock Exchange (the “NYSE”). The Company’s listing and trading of the common stock on Nasdaq ended at market close on January 16, 2025. The Company’s common stock began trading on the NYSE on January 17, 2025. QXO is a technology solutions and professional services company that helps businesses manage and monetize their enterprise assets. We do this through our legacy operations, which provide critical software applications, consulting and other professional services, including specialized programming, training, and technical support. Our customers are primarily small and mid-size companies in the manufacturing, distribution and services industries. Our strategy is to build QXO into a tech-forward leader in the $800 billion building products distribution industry with the goal of generating outsized stockholder value through accretive acquisitions and organic growth, including greenfield openings and operational transformation of acquired businesses. We are executing our strategy toward a target of tens of billions of dollars in annual revenue in the next decade. NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of December 31, 2024, the results of operations for the year ended December 31, 2024 and 2023 and cash flows for the years ended December 31, 2024 and 2023 in accordance with accounting principles generally accepted in the United States (“GAAP”). All significant inter-company transactions and accounts have been eliminated in consolidation. Reclassifications The Company has reclassified certain prior period amounts to conform with the current period presentation in the consolidated balance sheets related to unbilled services and deferred charges which are now presented within prepaid expenses and other current assets. Additionally, the Company has reclassified certain prior period amounts to conform with the current period presentation in the consolidated statements of operations related to selling and marketing expenses, general and administrative expenses, share-based compensation, and other expense which is now presented within selling, general, and administrative expenses. As further discussed in Note 3 – Equity , all per share amounts and common share amounts have been adjusted on a retroactive basis to reflect the Reverse Stock Split (as defined below). 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 and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 31 Table of Contents Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains cash balances across a diversified portfolio of global financial institutions that exceed FDIC insured limits. The Company has not experienced any losses in such accounts. Amounts included in restricted cash represent those required to be set aside by a contractual agreement as collateral for the Company’s credit card program. The following table provides a reconciliation of cash and cash equivalents: As of (in thousands) December 31, 2024 December 31, 2023 Cash and cash equivalents $ 5,068,504 $ 6,143 Restricted cash included in prepaid expenses and other current assets 3,500 — Total cash, cash equivalents and restricted cash $ 5,072,004 $ 6,143 Accounts Receivable and Allowance for Credit Losses Accounts receivable consist primarily of invoices for maintenance and professional services. Full payment for software ordered by customers is primarily due in advance of ordering from the software supplier. Payments for maintenance and support plan renewals are due before the beginning of the maintenance period. Terms under our professional service agreements are generally 50% due in advance and the balance on completion of the services. The Company maintains an allowance for bad debt estimated by considering a number of factors, including the length of time the amounts are past due, the Company’s previous loss history and the customer’s current ability to pay its obligations. Accounts are written off against the allowance when deemed uncollectible. Recoveries of receivables previously written off are recorded as a reduction of bad debt expense when received. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 326-20-30-2, Financial Instruments – Credit Losses, requiring a reporting entity to use a pooled approach to estimate expected credit losses for financial assets with similar risk characteristics. If a financial asset does not share similar risk characteristics with other financial assets held by the reporting entity, the allowance for credit losses should be determined on an individual basis. Similar risk characteristics for trade receivables may include customer credit rating, trade receivable aging category (e.g., 30-90 days past due), industry, geographical location of the customer, product line, and other factors that may influence the likelihood of the customer not being able to pay for the goods or services. The Company utilizes this individual approach for its trade receivables and unbilled services as each customer does not share similar risks. Trade receivables and unbilled services with customers are financial assets analyzed by the Company under the expected credit loss model. To measure expected credit losses, trade receivables are grouped based on shared risk characteristics (i.e., the relevant industry sector and customer's geographical location) and days past due (i.e., delinquency status), while considering the following, if appropriate: • Customers in the same geographical location share similar risk characteristics associated with the macroeconomic environment of their region. • The expected credit loss rate is likely to increase as receivables move to older aging buckets. The Company used the following aging categories to estimate the risk of delinquency status: (i) 0 days past due; (ii) 1-30 days past due; (iii) 31-60 days past due; (iv) 61-90 days past due; and (v) over 90 days past due. The following table represents the roll-forward of the allowance for expected credit losses: (in thousands) December 31, 2024 December 31, 2023 Balance at beginning of year $ 510 $ 490 Current period provision for expected losses 50 115 Write-offs ( 13 ) ( 95 ) Balance at end of year $ 547 $ 510 32 Table of Contents Prepaid Expenses and Other Current Assets The following table presents the components of prepaid expenses and other current assets: As of (in thousands) December 31, 2024 December 31, 2023 Interest receivable $ 11,051 $ — Restricted cash 3,500 — Prepaid expenses and other current assets 3,788 2,684 Total prepaid expenses and other current assets $ 18,339 $ 2,684 Leases The Company accounts for its leases in accordance with ASC 842, Leases. The Company leases office space and equipment. The Company concludes on whether an arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right to the Company to control the use of identified property, plant or equipment for period of time in exchange for consideration. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the lease term. The Company has assessed its contracts and concluded that its leases consist of finance and operating leases. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s credit rating, country risk, treasury and corporate bond yields, as well as comparison to the Company’s borrowing rate on its most recent loan. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. The Company finances purchases of hardware and computer equipment through finance lease agreements. Finance lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Goodwill Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. The Company completed its impairment analysis as of December 31, 2024. No impairment losses were identified or recorded for the years ended December 31, 2024 and 2023. Definite Lived Intangible Assets and Long-lived Assets Purchased intangible assets are recorded at fair value using an independent valuation at the date of acquisition and are amortized over the useful lives of the asset using the straight-line amortization method. 33 Table of Contents The Company assesses potential impairment of its intangible assets and other long-lived assets when there is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value unlikely. Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results. No impairment losses were identified and recorded for the years ended December 31, 2024 and 2023, respectively. Accrued Expenses The following table presents the components of accrued expenses: As of (in thousands) December 31, 2024 December 31, 2023 Accrued payroll and benefits $ 8,142 $ 1,910 Accrued income taxes 24,002 — Accrued other 3,548 771 Total accrued expenses $ 35,692 $ 2,681 Financial Instruments Fair value is defined as 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. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The Company’s current financial assets and liabilities approximate fair value due to their short-term nature and include cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities. Property and Equipment The following is a summary of property and equipment, net: As of (in thousands) December 31, 2024 December 31, 2023 Leasehold improvements $ 99 $ 166 Equipment, furniture, and fixtures 4,198 3,943 Property and equipment 4,297 4,109 Less: Accumulated depreciation and amortization ( 3,852 ) ( 3,606 ) Property and equipment, net $ 445 $ 503 Depreciation expense related to these assets for the years ended December 31, 2024 and 2023 was $ 246,900 and $ 328,900 , respectively. 34 Table of Contents Revenue Recognition The Company has elected the significant financing component practical expedient in accordance with ASC 606, Revenue from Contracts with Customers. In determining the transaction price, the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. The Company determines revenue recognition through the following five steps: • Identify the contract with a customer; • Identify the performance obligations in the contract; • Determine the transaction price; • Allocate the transaction price to the performance obligation in the contract; and • Recognize revenue when or as the entity satisfies a performance obligation Software product revenue is recognized when the product is delivered to the customer and the Company’s performance obligation is fulfilled. Service revenue is recognized when the professional consulting, maintenance or other ancillary services are provided to the customer. Most of our service revenue is based on time arrangements which require the client to pay based on the number of hours worked at agreed-upon rates. The Company recognizes revenues for these arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient because we have a right to consideration for services completed to date. For all performance obligations related to contracts with a duration for less than one year, the Company has elected to apply the optional exemption provided in ASC 606 and, therefore, is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of the reporting period. With respect to professional, maintenance, and ancillary services revenue that are included in deferred revenue, these revenues are earned and recognized over the contractual or stated period, which generally ranges three to twelve months. Deferred revenue also includes deposits for future consulting, which are recognized when earned and billed to customer. Maintenance and subscription revenue is recognized on a gross basis when the Company primarily acts as the principal in these transactions. Maintenance and subscription revenue is recognized on a net basis when the Company primarily acts as an agent in a transaction. Shipping and handling costs charged to customers are classified as revenue, and the shipping and handling costs incurred are included in cost of revenues. Share-Based Compensation The Company recognizes share-based compensation expense based on the equity award’s grant date fair value. For grants of restricted stock units (“RSUs”) subject to service-based vesting conditions, the fair value is established based on the market price of the common stock on the date of the grant. For grants of performance-based restricted stock units (“pRSUs”) subject to market-based vesting conditions, the fair value is established using a Monte Carlo simulation lattice model. The determination of the fair value of share-based awards is affected by the Company’s stock price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. The Company accounts for forfeitures as they occur. The grant date fair value of each RSU is amortized over the requisite service period. Advertising and Marketing Advertising and marketing expenses consist of advertising and payroll related expenses for personnel engaged in marketing, business development and selling activities. These costs are expensed as incurred. 35 Table of Contents Interest Income (Expense), net The following table presents the components of interest income (expense), net: Year Ended December 31, (in thousands) 2024 2023 Interest income $ 121,872 $ 20 Interest expense ( 60 ) ( 76 ) Interest income (expense), net $ 121,812 $ ( 56 ) Income Taxes The Company accounts for income taxes using the asset and liability method. Deferred tax assets are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company regularly assesses the likelihood that its deferred income tax assets will be realized. To the extent that the Company believes any amounts are not more likely than not to be realized, a valuation allowance is recorded to reduce the deferred income tax assets. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognizes interest and penalties related to income tax matters as income tax expense. During the years ended December 31, 2024 and 2023 the Company did not incur any expense related to interest or penalties for income tax matters, and no such amounts were accrued as of December 31, 2024 and 2023. Deferred Revenue Deferred revenue consists of maintenance on proprietary products (contract liabilities), customer telephone support services (contract liabilities) and deposits for future consulting services that will be earned as such services are performed over the contractual or stated period, which generally ranges from three to twelve months. Recent Authoritative Pronouncements Recently Adopted Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in the ASU increase reportable segment disclosure requirements primarily through enhanced disclosures for significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and provide new segment disclosure requirements for entities with a single reportable segment, among other disclosure requirements. This update became effective beginning with the Company’s 2024 fiscal year annual reporting period. The impact is limited to financial statement disclosures. See Note 13 – Segment Information . Recently Issued Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expense, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for the fiscal years beginning after December 15, 2026, and for interim periods within the fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosure. 36 Table of Contents In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective beginning with the Company’s 2025 annual reporting period. The Company is currently evaluating the timing and impacts of adoption of this ASU. In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. This update requires the: i) disclosure and presentation of income or loss related to common stock transactions on the face of the income statement, ii) modification of the existing classification and measurement of redeemable preferred shares and redeemable equity-classified shares, and iii) modification of accounting treatment for stock-based compensation. The FASB has not set an effective date for ASU 2023-03 and early adoption is permitted. The Company is currently evaluating the impact of the provisions of ASU 2023-03 on its consolidated financial statement disclosures. NOTE 3 – EQUITY Investment Agreement On April 14, 2024, the Company entered into the Amended and Restated Investment Agreement (the “Investment Agreement”) among the Company, JPE and the other investors party thereto (collectively, the “Investors”), providing for, among other things, an aggregate investment by the Investors of $ 1.0 billion in cash in the Company. Pursuant to the Investment Agreement, we issued and sold an aggregate of 1,000,000 shares of Convertible Perpetual Preferred Stock, par value $ 0.001 per share (the “Convertible Preferred Stock”), which were initially convertible into an aggregate of 219,010,074 shares of common stock at an initial conversion price of $ 4.566 per share and issued and sold warrants exercisable for an aggregate of 219,010,074 shares of common stock (the “Warrants”). Additionally, we amended the Company’s certificate of incorporation to, among other things, effect an 8:1 reverse stock split with respect to the Company’s common stock (the “Reverse Stock Split”). The Investment Agreement and related transactions closed on June 6, 2024 (the “Equity Investment”) and generated gross proceeds of approximately $ 1.0 billion before deducting fees and offering expenses. Following the closing of the Equity Investment, the Board of Directors of the Company (the “Board”) was reconstituted such that: i) the number of seats on the Board was designated by JPE, ii) each of the directors (including Mr. Jacobs) was designated by JPE, iii) each standing committee of the Board was reconstituted in a manner designated by JPE, and iv) Mr. Jacobs was appointed as Chairman of the Board and Chief Executive Officer of the Company. Issuance of Convertible Preferred Stock On June 6, 2024, under the terms of the Investment Agreement, the Company issued 1,000,000 shares of Convertible Preferred Stock. The Convertible Preferred Stock has an initial liquidation preference of $ 1.0 thousand per share, for an aggregate initial liquidation preference of $ 1 billion. The Convertible Preferred Stock is convertible at any time, in whole or in part and from time to time, at the option of the holder thereof into a number of shares of common stock equal to the then-applicable liquidation preference divided by the conversion price, which initially is $ 4.566 per share of common stock (subject to customary anti-dilution adjustments). Shares of Convertible Preferred Stock are initially convertible into an aggregate of 219,010,074 shares of common stock (after giving effect to the Reverse Stock Split). The Convertible Preferred Stock is not redeemable or subject to any required offer to purchase. The Convertible Preferred Stock ranks, with respect to dividend rights and distribution of assets upon liquidation, winding-up or dissolution, senior to the Company’s common stock. Holders of Convertible Preferred Stock will vote together with the holders of the Company’s common stock on an “as-converted” basis on all matters, except as otherwise required by law. In addition, the approval of holders of at least a majority of the outstanding shares of the Convertible Preferred Stock, voting separately as a single class, will be required for certain matters set forth in the Certificate of Designation for the Convertible Preferred Stock. 37 Table of Contents Dividends on the Convertible Preferred Stock are payable quarterly, when, as and if declared by the Board at the rate per annum of 9 % per share on the then-applicable liquidation preference (subject to certain exceptions in the event that the Company pays dividends on shares of its common stock). During the year ended December 31, 2024, the Company paid $ 32.3 million of quarterly dividends to holders of Convertible Preferred Stock. Subsequent to the close of the year ended December 31, 2024, the Company paid an additional $ 22.5 million of quarterly dividends to holders of Convertible Preferred Stock. Warrants The aggregate number of shares of the Company’s common stock subject to the Warrants is 219,010,074 shares. The Warrants are exercisable at the option of the holder at any time until June 6, 2034. The Warrants have an exercise price of $ 4.566 per share of common stock with respect to 50 % of the Warrants, $ 6.849 per share of common stock with respect to 25 % of the Warrants, and $ 13.698 per share of common stock with respect to the remaining 25 % of the Warrants. Each Warrant may be exercised, in whole or in part, at any time or times on or after the issuance date and on or before the expiration date at the election of the holder (in such holder’s sole discretion) by means of a “cashless exercise” in which the holder will be entitled to receive a number of shares of the Company’s common stock equal to the quotient of the product of the Closing Sale Price (as defined in the Warrant Certificate) of a share of the Company’s common stock on the trading day immediately preceding the date on which the holder elects to exercise its Warrant, less the adjusted exercise price, multiplied by the number of shares of the Company’s common stock issuable upon exercise of such Warrant, divided by the aforementioned Closing Sale Price of a share of the Company’s common stock on the trading day immediately preceding the date on which the holder elects to exercise its Warrant. Equity Investment Dividend Under the terms of the Investment Agreement, the Company declared a $ 17.4 million special cash dividend to its stockholders of record as of the day before the closing of the Equity Investment. The dividend was paid on June 12, 2024 from proceeds received by the Company from the Equity Investment. Reverse Stock Split On June 6, 2024, as contemplated by the Investment Agreement, the Company effected an 8:1 Reverse Stock Split, which reduced the Company's issued and outstanding share count of common stock from 5,315,581 to 664,284 shares (par value $ 0.00001 per share). The Company has recast all share and per-share data and amounts to show the effects of the Reverse Stock Split. Private Placements On June 13, 2024, the Company entered into purchase agreements with certain institutional and accredited investors to issue and sell in a private placement an aggregate of 340,932,212 shares of our common stock at a price of $ 9.14 per share, and pre-funded warrants (the "Pre-Funded Warrants") to purchase 42,000,000 shares of our common stock at a price of $ 9.13999 per Pre-Funded Warrant. Each Pre-Funded Warrant has an exercise price of $ 0.00001 per share, is exercisable immediately and until the Pre-Funded Warrant is exercised in full. The closing of the issuance and sale of these securities was consummated on July 19, 2024, and generated gross proceeds of approximately $ 3.5 billion before deducting agent fees and offering expenses. On July 22, 2024, we entered into additional purchase agreements with certain institutional and accredited investors to issue and sell in a private placement an aggregate of 67,833,699 shares of our common stock at a price of $ 9.14 per share. The closing of the issuance and sale of these securities was consummated on July 25, 2024, and generated gross proceeds of approximately $ 620 million, before deducting agent fees and offering expenses. 38 NOTE 4 – EARNINGS (LOSS) PER COMMON SHARE The Company’s Convertible Preferred Stock is classified as a participating security. Basic and diluted earnings (loss) per share is computed using the two-class method, which is an earnings allocation method that determines earnings (loss) per share for common shares and participating securities. The weighted-average number of common shares outstanding used in the basic and diluted net loss per share calculation include pre-funded warrants as the pre-funded warrants are exercisable at any time for nominal consideration. Both basic and diluted earnings (loss) per common share are adjusted on a retroactive basis to reflect the Reverse Stock Split as discussed in Note 2 – Basis of Presentation and Significant Accounting Policies. Year Ended December 31, 2024 2023 (in thousands, except per share data) Basic and diluted loss per share computation: Net income (loss) $ 27,969 $ ( 1,070 ) Less: Preferred stock dividend ( 51,000 ) - Less: Undistributed earnings allocated to participating securities - - Loss attributable to common shareholders ( 23,031 ) ( 1,070 ) Weighted-average common shares 184,949 657 Weighted average pre-funded warrants 19,049 - Total weighted-average common shares outstanding 203,998 657 Basic and diluted loss per share $ ( 0.11 ) $ ( 1.63 ) The following table summarizes securities that, if exercised, would have an antidilutive effect on diluted loss per share attributable to the common shareholder. Year Ended December 31, (in thousands) 2024 2023 Stock options — — Convertible Preferred Stock 219,010 — Warrants 219,010 — Stock-based awards 21,890 — Total potential dilutive securities not included in loss per share 459,910 — 39 Table of Contents NOTE 5 – INTANGIBLE ASSETS Intangible assets consist of proprietary developed software, intellectual property, and customer lists. Proprietary developed software is carried at cost less accumulated amortization; intellectual property, customer lists and acquired contracts are carried at acquisition date fair value less accumulated amortization. On November 13, 2023, SWK Technologies, Inc. acquired the customer list and prepaid time from clients of JCS Computer Resource Corporation (“JCS”) pursuant to an Asset Purchase Agreement for cash of $ 278,500 , and a promissory note in the amount of $ 1.0 million (the JCS Note”) for a total of $ 1.3 million. The JCS Note balance was paid in full on July 24, 2024. The customer list was recognized as an intangible asset and will be amortized over its estimated useful life of seven years . The following table provides information about the Company’s identified intangible assets : As of Estimated Useful Lives (in thousands) December 31, 2024 December 31, 2023 Proprietary developed software $ 390 $ 390 5 – 7 Intellectual property, customer list, and acquired contracts 9,049 9,069 5 – 15 $ 9,439 $ 9,459 Less: accumulated amortization ( 5,415 ) ( 4,540 ) Total intangible assets $ 4,024 $ 4,919 Amortization expense related to the above intangible assets was $ 875,300 and $ 672,000 , respectively, the years ended December 31, 2024 and 2023. There was no impairment of intangible assets for the years ended December 31, 2024 and 2023, respectively. The Company expects future amortization expense to be the following: (in thousands) Amortization 2025 $ 883 2026 875 2027 749 2028 639 2029 363 thereafter 515 Total intangible asset amortization $ 4,024 NOTE 6 – LONG-TERM DEBT During the year ended December 31, 2024, the Company extinguished all long-term debt obligations. As of December 31, 2023, the Company’s long-term debt was $ 1.7 million. 40 Table of Contents NOTE 7 – LEASES The Company leases its corporate offices and data centers under non-cancelable operating lease agreements. The terms of the Company’s real estate leases generally range from 3 to 5 years. Corporate office leases expire at various dates through 2026. The Company also leases certain equipment under finance leases. The terms of equipment leases generally range from 3 to five years . These leases expire at various dates through 2027. The following table presents the operating and financing lease-related assets and liabilities recorded on the consolidated balance sheets: (in thousands) As of Leases Balance Sheet Classification December 31, 2024 December 31, 2023 Assets Operating Operating lease right-of-use assets $ 259 $ 522 Finance Property and equipment, net 197 332 Total lease assets $ 456 $ 854 Liabilities Current: Operating Operating lease liabilities – current portion $ 188 $ 263 Finance Finance lease obligations – current portion 128 154 Non-current: Operating Operating lease liabilities net of current portion 71 259 Finance Finance lease obligations net of current portion 190 247 Total lease liabilities $ 577 $ 923 The following table presents supplemental weighted-average information for operating and finance leases as follows: As of December 31, 2024 December 31, 2023 Weighted average remaining lease term Operating 1.4 years 2.1 years Finance 2.4 years 2.9 years Weighted-average discount rate Operating 4.77 % 4.77 % Finance 7.77 % 7.15 % The following table presents components of lease cost for operating and finance leases as follows: (in thousands) Year Ended December 31, Lease cost 2024 2023 Operating lease cost $ 279 $ 376 Finance lease cost: Amortization of leased assets 247 329 Interest on lease liabilities 28 2 Short-term lease cost and variable lease cost 155 38 Net lease cost $ 709 $ 745 41 Table of Contents The following table presents supplemental cash flow information related to operating and finance leases as follows: Year Ended December 31, (in thousands) 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 279 $ 376 Financing cash flows for finance leases $ 170 $ 215 Leased assets obtained in exchange for new lease obligations: Operating leases $ — $ 562 Finance leases $ 87 $ — The table below presents the maturity of lease liabilities as of December 31, 2024: (in thousands) Operating Leases Finance Leases 2025 $ 197 $ 149 2026 73 148 2027 — 62 Total lease payments 270 359 Less: interest ( 11 ) ( 41 ) Present value of lease liabilities $ 259 $ 318 NOTE 8 – COMMITMENTS AND CONTINGENCIES Legal Matters Various legal claims arise from time to time in the normal course of business. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. The Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable, and does not believe that the ultimate resolution of any matters to which it is presently a party will have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s financial condition, results of operations or cash flows. NOTE 9 – ASSET PURCHASE AGREEMENT On November 13, 2023, SWK Technologies, Inc. acquired the customer list and prepaid time from clients of JCS Computer Resource Corporation (“JCS”) pursuant to an Asset Purchase Agreement for cash of $ 278,500 and a promissory note in the amount of $ 1.0 million (the “JCS Note”) for a total consideration of $ 1.3 million. The customer list was recognized as an intangible asset and will be amortized over its estimated useful life. The JCS Note balance was paid in full on July 24, 2024. NOTE 10 – EQUITY-BASED COMPENSATION At the special meeting of the Company's stockholders on May 30, 2024, the stockholders approved the QXO, Inc. 2024 Omnibus Incentive Plan (the “2024 Plan”). The 2024 Plan provides for the grant of options intended to qualify as incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted share awards, RSUs, performance awards, cash incentive awards, deferred share units and other equity-based and equity-related awards, as well as cash-based awards. Subject to adjustment for changes in capitalization, the maximum aggregate number of shares of common stock that may be delivered pursuant to awards granted under the 2024 Plan shall be equal to 30,000,000 (the “Plan Share Limit”), of which 30,000,000 shares of common stock may be delivered pursuant to ISOs granted under the 2024 Plan (such amount, 42 Table of Contents the “Plan ISO Limit”). The Company may act prior to the first day of any calendar year to provide that there shall be no increase in the Plan Share Limit for such calendar year or that the increase in the Plan Share Limit for such calendar year shall be a lesser number of shares than would otherwise occur. The Omnibus Plan provides that the Plan Share Limit automatically increase on January 2 of each calendar year commencing on January 1, 2025 and ending on January 1, 2034, in an amount equal to three percent ( 3 %) of the sum of: i) the number of shares of common stock outstanding as of December 31 of the preceding calendar year, and ii) the number of shares of common stock into which the Convertible Preferred Stock outstanding on December 31 of the preceding calendar year are convertible. The Compensation and Talent Committee took no action to alter the automatic increase effective January 1, 2025 in the Plan Share Limit under the Omnibus Plan. The automatic renewal increased the share pool availability from 8.1 million shares at December 31, 2024 to 27.0 million shares available under the Plan for fiscal 2025. RSUs The Company granted RSUs which vest subject to the employee’s continued employment with the Company through the applicable vesting date. The Company recorded share-based compensation expense for RSUs on a straight-line basis over the requisite service period. The following table summarizes the activity related to the Company’s RSUs awards for the year ended December 31, 2024: (in thousands, except for weighted average grant date fair value) Number of RSUs Weighted Average Grant Date Fair Value Balance at beginning of period — $ — Granted 13,470 11.57 Balance at end of period 13,470 $ 11.57 As of December 31, 2024, total unrecognized compensation expense related to unvested RSUs was $ 143.1 million and is expected to be recognized over a weighted-average period of 4.93 years. pRSUs The Company granted pRSUs which include a service-based vesting condition and a market condition for exercisability. The service condition is subject to the employee’s continued employment with the Company through the applicable vesting date. The vesting of certain pRSUs is also subject to achievement of performance goals relating to the Company’s TSR compared to the TSR ranking of each company that is in the S&P 500 index. The performance goals for a portion of the pRSUs will be measured over a cumulative performance period ending on December 31, 2028, and the performance goals for the remainder of the pRSUs will be measured based on designated performance periods that occur within such cumulative period. The following table summarizes the market based conditions: Percentile Position vs. S&P 500 Index Companies Units Earned as a Percentage of Target Below 55th Percentile — % 55th Percentile 100 % 65th Percentile 150 % 75th Percentile 175 % 80th Percentile 200 % 90th Percentile 225 % 43 Table of Contents The following table summarizes the activity related to the Company’s pRSUs for the year ended December 31, 2024: (in thousands, except for weighted average grant date fair value) Number of pRSUs Weighted Average Grant Date Fair Value Balance at beginning of period — $ — Granted 8,420 20.24 Balance at end of period 8,420 $ 20.24 As of December 31, 2024, total unrecognized compensation expense related to unvested pRSUs was $ 148.5 million and is expected to be recognized over a weighted-average period of 3.52 years. The fair value of the RSUs with a market condition was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for the Company and peer companies with the following assumptions: Performance Period 4.42 years Weighted-average risk-free interest rate 4.03 % Weighted-average expected volatility 40 % Weighted-average dividend yield 0 % The risk-free interest rate is based on the U.S. Treasury yield curve with a term equal to the expected term of the pRSU in effect at the time of grant. Expected volatility is based on historical volatility of the stock of the Company’s peer industry group. Share-Based Compensation Expense Share-based compensation expense is included within selling, general and administrative expenses in the consolidated statements of operations. The Company recognized share-based compensation expense as follows: (in thousands) Year Ended December 31, 2024 2023 pRSUs $ 21,860 $ — RSUs 12,653 — Stock options — 41 Total share-based compensation expense $ 34,513 $ 41 The RSUs and pRSUs may vest in whole or in part before the applicable vesting date if the grantee’s employment is terminated by the Company without cause or by the grantee with good reason (as defined in the grant agreement), upon death or disability of the grantee or in the event of a change in control of the Company. Upon vesting, the RSUs and pRSUs result in the issuance of shares of the Company’s common stock after required tax withholdings. The holders of the RSUs and pRSUs do not have the rights of a stockholder and do not have voting rights until shares are issued and delivered in settlement of the awards. 44 Table of Contents NOTE 11 – INCOME TAXES The components of income (loss) before taxes and the income tax provision (benefit) are as follows: Year Ended December 31, (in thousands) 2024 2023 United States income (loss) before provision (benefit) for income taxes $ 50,812 $ ( 1,367 ) Current: Federal $ 16,588 $ 26 State and local 7,414 15 Total current tax provision 24,002 41 Deferred: Federal ( 644 ) ( 240 ) State and local ( 515 ) ( 98 ) Total deferred tax (benefit) ( 1,159 ) ( 338 ) Total provision (benefit) $ 22,843 $ ( 297 ) The Company’s effective income tax rate reconciliation is as follows for the periods presented: Year Ended December 31, 2024 2023 Federal income tax rate 21.0 % 21.0 % State income tax, net of federal benefit 10.7 % 5.0 % Permanent items 13.5 % ( 1.0 %) Return to provision for prior year — % ( 8.0 %) Change in valuation allowance ( 0.2 %) 5.0 % Effective income tax rate 45.0 % 22.0 % 45 Table of Contents Deferred taxes are the result of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities are comprised of the following: As of (in thousands) December 31, 2024 December 31, 2023 Deferred tax assets: Net operating loss carry forwards $ 656 $ 1,417 Long lived assets 1,645 210 Share based payments 1,416 5 Accrued expenses 98 84 Allowance for doubtful accounts 154 135 Other 6 61 Deferred tax assets 3,975 1,912 Deferred tax liabilities: Long lived assets ( 1,236 ) ( 128 ) Deferred tax liabilities ( 1,236 ) ( 128 ) Net deferred tax asset 2,739 1,784 Less: Valuation allowance ( 136 ) ( 340 ) Net deferred tax assets $ 2,603 $ 1,444 The company regularly assesses the need for a valuation allowance of its deferred tax assets, and to the extent it is determined that an adjustment is needed, such adjustment will be recorded in the period that the determination is made. As of December 31, 2024 and 2023, the Company had U.S. federal net operating loss carryforwards of $ 3.4 million and $ 5.8 million, respectively. The federal net operating loss carryforwards will expire at various amounts beginning in the year ending December 31, 2026, if not utilized. Utilization of the net operating losses remaining as of December 31, 2024 is subject to an annual limitation provided for in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and any annual limitation could result in the expiration of net operating loss carryforwards before utilization. Approximately $ 3.4 million of federal net operating losses are currently limited from use under such provisions the annual limitation could result in the expiration of net operating loss carryforwards before utilization. The Company has a valuation allowance recorded for the deferred tax asset related to the net operating losses that are more-likely-than-not to expire unutilized. As of December 31, 2024 and 2023, the Company had state net operating loss carryforwards of $ 0 and $ 1.7 million, respectively. NOTE 12 – RELATED PARTY TRANSACTIONS Upon the closing of the Equity Investment, pursuant to the execution of the Investment Agreement, the Company reimbursed JPE for certain transactional, market research and employee costs related to establishing the foundation for QXO to move forward. These costs, as defined in the Investment Agreement, equated to a total reimbursement of $ 15.3 million, which was treated as a reduction of the proceeds received from the Equity Investment. In connection with the Equity Investment, Mark Meller was terminated as CEO of SilverSun Technologies, Inc. and entered into a new employment agreement to serve as President of SWK Technologies, a wholly-owned subsidiary of QXO. Mr. Meller received a lump-sum payment of $ 2.8 million in connection with this agreement. In connection with the private placement that closed on July 25, 2024, certain directors and officers of the Company purchased an aggregate of 262,585 shares of common stock for $ 2.4 million. 46 Table of Contents NOTE 13 – SEGMENT INFORMATION Operating segments are defined as components of an entity for which separate discrete financial information is available and regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company provides technology solutions to help customers manage their enterprise assets. Through its legacy operations, the Company provides a package of solutions to assist customers in their digital transformations. All of the Company’s long-lived assets held in the United States and all the Company’s revenues are derived from the United States. Because of the nature of the Company’s technology solutions being highly integrated to support each customer, the CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating performance. As such, the Company has determined it operates in one operating segment and one reportable segment. The CODM uses Adjusted EBITDA and consolidated net income, the measure consistent with U.S. GAAP, to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews significant expenses at the consolidated level to manage the Company’s operations. Other segment items included in consolidated net income are depreciation and amortization, interest income, and the provision for income taxes, which are reflected in the consolidated statements of operations. The following table presents information regarding the components of revenue, significant segment expenses and consolidated net income representative of the significant categories regularly provided to the CODM when managing the Company’s one operating segment: (in thousands) Year Ended December 31, 2024 2023 Revenue: Software revenue $ 15,261 $ 14,111 Professional consulting revenue 17,916 18,648 Maintenance revenue 5,356 5,203 Ancillary service revenue 18,340 16,555 Total revenue, net $ 56,873 $ 54,517 Less: Purchased software and services 20,894 20,964 Employee compensation and benefits 46,984 26,696 Share-based compensation 34,513 41 Professional Fees 18,572 1,155 General and administrative expenses (1) 5,788 5,972 Other segment items ( 97,847 ) 759 Net income (loss) $ 27,969 $ ( 1,070 ) (1) Includes advertising and marketing, and other corporate overhead expenditures. NOTE 14 – SUBSEQUENT EVENTS In January 2025, the Company and its wholly owned subsidiary, Queen MergerCo, Inc., announced a cash tender offer to acquire all outstanding shares of Beacon Roofing Supply, Inc. (“Beacon”), a specialty distributor of building products, at a purchase price of $ 124.25 per share. The offer is subject to several conditions and is scheduled to expire at 5:00 p.m., New York City time, on March 10, 2025, unless further extended. The Company has secured full financing commitments. These commitments, combined with the Company’s cash on hand, fully cover the purchase price, any required refinancing of Beacon’s debt, and associated transaction costs. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 47 Table of Contents