QRHC 10-K & 10-Q changes, risk factors and insider trading

An investment in our securities involves a high degree of risk. Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should carefully consider the risks and uncertainties described below, together with the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs,occur, our business, financial condition, results of operations, cash flow, and future prospects could be seriously harmed. This could cause the trading price of our Common Stock to decline and result in the loss of all or part of your investment.

As a result of historical operating losses, we had an accumulated deficit of $(125.1)$140.5 million as of December 31, 2024.2025. The continued development of our business will require us to continue to make significant expenditures and incur substantial expenses. These significant expenditures and expenses are needed to expand our customer base and recycling services, enhance our technologies, implement internal systems and infrastructure and hire additional personnel. As a result, we may incur losses as we expand our business and there is no assurance that we will maintain profitability in the near future or at all. If we incur substantial losses and are unable to secure additional financing, we could be forced to discontinue or curtail our business operations; sell assets at unfavorable prices; refinance existing debt obligations on terms unfavorable to us; or merge, consolidate, or combine with a company with greater financial resources in a transaction that may be unfavorable to us.

We depend on a small number of customerscustomers, and the loss of one or more major customers could have a material adverse effect on our business. For the years ended December 31, 20242025 and 2023,2024, one of our customers accounted for 27%23% and two of our customers accounted for 29%27% of our revenues, respectively. Given these percentages, the success of our business depends to a certain extent on our relationship with our largest customers and our failure to maintain our business with these customers could have an adverse effect on our business and revenue. Furthermore, our contractual arrangements with our major customers generally are on a multi-year basis and pertain to the management of only certain forms of materials. These contractual arrangements typically have a term of two to three yearsyears, and they do not typically provide us with firm, long-term volume commitments. As a result, our customers are able to cancel, reduce, or delay our services to them at any time which could cause our revenue to decline. The terms of these contractual arrangements with our major customers or with a significant number of our other customers are also subject to change and such changes could have an adverse effect on our company.

We plan to reduce our dependence on our largest customerscustomers, but such reduction will require us to attract additional customers and expand the recycling and waste management services we offer. Our ability to expand successfully will depend upon a number of factors, including the following:

We outsource the collection, processing, recycling, and disposal of waste streams and recyclables to independent third-party subcontractors. We rely on our subcontractors to maintain high levels of service. The loss of our relationships with our subcontractors, or their failure to conduct their services for us as anticipated in terms of cost, quality, and timelinesstimeliness, could adversely affect our ability to service our customers in accordance with certain service, quality, and performance requirements. If this were to occur, the resulting decline in profitability could harm our business. Securing newnew, high-quality and cost-effective subcontractors frequently is time-consuming and may not be successful, which could result in reduced revenue and various unforeseen operational problems.

We operate in an environment characterized by evolving cybersecurity threats including data theft, phishing attacks, and ransomware. We believe risks associated with these threatsrisks are reasonably likely to impact our business operations. Our business relies heavily on information technology systems, applications, and networks. Any disruption, compromise, or failure of these systems could result in operational downtime, customer loss, financial loss, and reputational damage.harm.

We engage third-party vendors and service providers whose security practices may impactaffect our overall cybersecurity posture. The failure of these third parties to maintain adequate security measurescontrols could compromiseresult in unauthorized access to our data, compromise of our information systems, andor negatively impact our customers.

A significant disruption into our computerinformation systemstechnology or problems with our computer and communication systems maycould harm our business.

We rely extensively on our computerinformation technology systems to manage a variety of business processes. ForAs example, an elementpart of our strategystrategy, is towe generate and provide content, data, and reporting on our website portals to andexchange frominformation with third parties. Accordingly, the satisfactory performance, reliability, and availability of our systems, transaction-processing systems, and communications infrastructure are critical to our reputationoperations, reputation, and our ability to attract and retain customers and adequate customer service levels. However, we may experience periodic systems interruptions. Any substantial increase in thetransaction volume ofsystem traffic on our infrastructureusage may require us to expand and upgrade our technology, transaction-processing systems,technology and other features.infrastructure. We canmay provide no assurance that we willnot be able to accurately project accurately the ratetiming or timingscale of increases,such if any, in the use of our infrastructureincreases or timelyto expand andor upgradeimplement upgrades to our systems and infrastructure toin accommodatea suchtimely increases.manner. Our systems are also subject to damage or interruptiondisruption from various sources, including power outages, computer and telecommunications failures, computercyber viruses, vandalism,incidents, severe weather conditions, catastrophic events, and human error. Our disaster recovery planning cannotmay not account for all eventualities. If our systems are damaged,compromised, unavailable, or fail to function properly,as or otherwise become unavailable,intended, we may incur substantial costs to repair or replace them, and we may experiencecosts, loss of critical datadata, and suffer interruptions or delays in ourcritical ability to perform criticalbusiness functions, which could adversely affect our businessbusiness, financial condition, and operating results.

We rely on third-party service providers to provide services andservices, technology, server,servers, and hardware for our operations and forto maintainingmaintain our data, and a failure of service by these providers could adversely affect our business and reputation.

We rely upon third-party data center providers to host our mainprimary servers. In the event thatIf these providers experience any interruption in operations or cease operations for any reasonreason, or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into relationships with other service providers or assume hosting responsibilities ourselves. If we are forced to switch hosting facilities, we may not be successful in finding alternative service providers on acceptable terms or in hosting the computerour servers ourselves. We may also be limited in our remedies against these providers in the event of a failure of service. We also rely on third-party providers for components of our technology platform, such as hardware and software providers and domain name registrars. A failurefailure, degradation, or limitation of service or available capacity by any of these third-party providers could adversely affect our business.

We rely on third-party vendors to provide critical services, including, among other things, invoice processing and bill payment services, information technology, and network monitoring. We depend on these vendors to ensure thatsupport our corporate infrastructure will consistentlyand meet our business requirements. Upon expiration or termination of any of our agreements with third-party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.

Any inability to adapt to and manage the benefits and risks ofassociated with artificial intelligence could expose us to liability or putplace us at a disadvantage.

Artificial intelligence technology could disrupt certain aspects of our business. SomeWe, ofalong ourwith certain third-party vendorsvendors, incorporate artificial intelligence technologies, including machine learning, into theiraspects of our services. As with many technological innovations, there are significant risks and challenges involvedassociated inwith maintainingdeveloping, maintaining, and deploying these technologies, and there can be no assurance that the usageuse of such technologies will enhance our services or be beneficial to our business, including our efficiency or profitability.

Artificial intelligence technologies are also subject to a variety of laws,existing and emerging laws and regulations, including those related to intellectual property, privacy, data protection and cybersecurity, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and newfuture lawslegal or new applications of existing laws.requirements. Such laws and regulations may increase costs and present aoperational variety ofand compliance risks. The use of artificial intelligence may also result in litigation, ethical concerns, and other legal and business risks. If we are not able to adapt and effectively incorporate potential advantages of artificial intelligence or manage associated risks, in our business, it may negatively impact our ability to compete. If we are not able to effectively manage the risks of artificial intelligence, we may suffer harm to our results of operationsoperations, andor reputation.reputation could be adversely affected.

Regulations affecting the siting, design, and closure of landfills could require our third-party service providers or customers to undertake investigatory or remedial activities, curtail operations, or close landfills temporarily or permanently. Future changes in these regulations may require our third-party service providers or our customers to modify, supplement, or replace equipment or facilities. The costs of complying with these regulations could be substantial,substantial and may reduce the ability or willingness of our customers to use our services. This may adversely affect our results of operations.

The waste materials industry as a whole is dominated by large national players, such as Waste Management and Republic Services. To date, these large companies have concentrated on their traditional business of collecting waste for disposal in their landfills rather than recycling.landfills. The strategies of these large companies could change at any time, and we could begin to experience substantially increased competition from them. These companies have substantially greater market recognition, substantially larger customer bases, and substantially greater financial, technical, marketing, distribution, and other resources than we possess and that afford them competitive advantages over us. As a result, they are able to devote greater resources to the promotion and sale of services similar to those that we provide, to provide comparable services at lower prices, and to introduce new solutions and respond to customer requirements more quickly than we can.

Under the terms of our PNC Loan Agreement and our Credit Agreement (each as defined in Note 7 to the consolidated financial statements), we are subject to certain financial covenants, including a minimum fixed charge coverage ratio and a senior net leverage ratio. In addition, the PNC Loan Agreement and the Credit Agreement each contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other mattermatters customarily restricted in such agreements. The PNC Loan Agreement and the Credit Agreement each also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the PNC Loan Agreement or the Credit Agreement, as applicable, to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the PNC Loan Agreement and/or the Credit Agreement, as applicable, may be accelerated and become immediately due and payable. We can provide no assurance that, if we are unable to comply with these covenants in the future, we will be able to obtain the necessary waivers or amend our PNC Loan Agreement and/or our Credit Agreement to prevent a default.

A breach of any of these covenants or requirements could result in a default under our PNC Loan Agreement and/or our Credit Agreement. If we default under our PNC Loan Agreement and/or our Credit AgreementAgreement, and we are unable to cure the default or obtain a waiver, we will not be able to access the credit available under our PNC Loan Agreement and/or our Credit Agreement, as applicable, and there can be no assurance that we would be able to obtain alternative financing. In addition, our level of indebtedness may limit our financial flexibility and could affect our operations. Even if new financing is available, it may not be on terms that are acceptable to us. No assurance can be given that our future operating results will be sufficient to achieve compliance with the covenants and requirements of our PNC Loan Agreement and our Credit Agreement.

Even if we successfully acquire a business entity, there is no assurance that our combined business will become profitable. The process of completing the integration of acquired businesses could cause an interruption of, or loss of momentum in, the activities of our company and the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with the pursuit of business acquisitions and the integration of acquired businesses, and the incurrence of significant,significant acquisition relatedacquisition-related costs in connection with proposed and completed acquisitions, could have an adverse effect on our business, financial condition or results of operations.

If the benefits of any completed acquisition or proposed acquisition do not meet the expectations of investorsinvestors, stockholders or securities analysts, the market price of our Common Stock prior to such acquisition may decline. The market values of our Common Stock at the time of an acquisition may vary significantly from their prices on the date the acquisition target was identified.

Our reporting obligations as a public company place a significant strain on our management and our operational and financial resources and systems for the foreseeable future. If we fail to maintain the adequacy of our internal control over financial reporting, we may not be able to produce reliable financial reports or help prevent fraud. Our failure to maintain effective internal control over financial reporting could prevent us from filing our periodic reports on a timely basis, which could result in the loss of investor confidence in the reliability of our consolidated financial statements, harm our business, and negatively impact the trading price of our Common Stock. Any material weakness in our internal control over financial reporting may also result in a restatement or an adjustment relating to clerical errorserrors. and suchSuch restatement or adjustment may raisegive rise to claims invoking theunder federal and state securities laws, or other claims arising from the restatement or adjustmentadjustment, andincluding claims of material weaknesses in our internal control over financial reporting and the preparation of our financial statements. We can provide no assurance that such litigation or disputeclaims will not arise in the future.

Our success depends to a significant extent upon the continued services of our current management team and key personnel. The loss of one or more of our key executives or employees could have a material adverse effect on our business. We do not maintain “key person” insurance policies on the lives of any of our executives or any of our other employees. We employ all of our executives and key employees on an at-will basis, and their employment can be terminated by us or them at any time, for any reason, and without notice, subject, in certain cases, to severance payment rights. In order to attract and retain valuable employees, in addition to salary and cash incentives, we regard our ability as a public company to grant stock-based compensation as an important component of our ability to attract and retain key personnel. The value to employees of stock-based compensation over time will be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract offers from other companies.

Our success also depends on our ability to attract, retain, and motivate additional skilled management personnel. We plan to continue to expand our work forceworkforce to continue to enhance our business and operating results. We believe that there is significant competition for qualified personnel with the skills and knowledge that we require. Many of the other companies with which we compete for qualified personnel have substantially greater financial and other resources than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those which we have to offer. If we are not able to retain our current key personnel or attract the necessary qualified key personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our business objectives and our ability to pursue our business strategy. New hires require significant training and, in most cases, take significant time before they achieve full productivity. New employees may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If our recruiting, training, and retention efforts are not successful or do not generate a corresponding increase in revenue, our business will be harmed.

Global economic conditions and political events, domestic or international terrorist events and hostilitieshostilities, or complications due to natural, nuclearnuclear, or other disasters and pandemics or other health crises may reduce demand for our services because of reduced global or national economic activity. ItThese events may also cause disruptions and extreme volatility in global financial markets, increase rates of default and bankruptcy, and impact levels of consumer and commercial spending.

All of these factors may have far reachingfar-reaching impacts on our business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of our company’scompany's management and employees, marketing and sales operations, customer and consumer behaviors, and on the overall economy. The scope and nature of these impacts, most of which are beyond our company’scompany's control, continue to evolve and the outcomes are uncertain.

Certain provisions of our articles of incorporation and bylaws and applicable provisions of Nevada law may have the effect of rendering more difficult, delaying, or preventingpreventing, or rendering an acquisition of our company,company more difficult, even when this would be in the best interest of our stockholders.

As of December 31, 2024,2025, we had 3,960,5954,271,325 shares of Common Stock issuable upon the exercise of outstanding stock options, deferred stock units (“DSUs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and warrants under our incentive compensation plan and other option and warrant agreements. Upon the exercise of stock options and warrants, such shares generally will be eligible for sale in the public market, except that affiliates will continue to be subject to volume limitations and other requirements of Rule 144. The issuance or sale of such shares could depress the market price of our Common Stock.

We are a national provider of waste and recycling management services to customers from across multiple industry sectors that are typically larger, multi-location businesses. We create customer-specific programs and perform the related services for the collection, processing, recycling, disposal, and tracking of waste streams and recyclables to maximize resource utilization. Our programs and services enable our customers to address their business,business sustainability and ESG goals and responsibilities.responsibilities while also receiving optimized operational efficiencies and lower costs.

We believe our services are comprehensive, innovative, and cost effective.cost-effective. Our services are designed to enable our business customers to capture the commodity value of their waste streams and recyclables, better manage their disposal and total operating costs, enhance their management of environmental risks, enhance their legal and regulatory compliance, and achieve their business and environmental goals while maximizing the efficiency of their assets. Our services currently focus on the waste streams and recyclables from big box and small box retailers, including grocers and other specialty retailers; transportation, logistics, and fleet operators; manufacturing and industrial facilities; automotive after-market operations such as automotive maintenance, quick lube, dealerships, and collision repair; multi-familymultifamily and commercial properties; restaurant chains and food operations; and construction and demolition projects. We currently concentrate on recycling programs for recyclingthe following items: cardboard, pallets, wood waste, metal, glass, motor oil and automotive lubricants, oil filters, scrap tires, oily water, goods destruction, food waste, meat renderings, cooking oil and grease trap waste, plastics, mixed paper, construction debris, as well as a large variety of regulated and non-regulated solid, liquid, and gas wastes. In addition, we offer products such as antifreeze and windshield washer fluid, dumpster and compacting equipment, and other minor ancillary services.

WeQuest also provideprovides information and data that tracks and reports the detailed transactional and environmental results of our services and provides actionable data to improve business operations. The data we generate enables our customers to address their environmental goals and responsibilities and to report to internal and external parties such as employees, investors, business partners, and governmental agencies.

There has been heightened uncertainty in the macroeconomic environment, characterizedespecially byas increasingit relates to fluctuations in unemployment, significant inflation, and decreasedtariffs, consumer and business spending.spending, and government actions or inactions, including government shutdowns. There are also significant geopolitical concerns, including the ongoing conflictglobal between Ukraine and Russia,conflicts, which have created extreme volatility in the global capital markets and are expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our costs, including salary costs. Any significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition.

For the year ended December 31, 2024,2025, revenue was $288.5$250.2 million, ana increasedecrease of $0.1$38.3 million, or 0.1%,13.3%, compared with revenue of $288.4$288.5 million for the year ended December 31, 2023.2024.

Revenue,To a lesser extent, generally, revenue, gross profit, and gross profit margins are affected period to period by the volumes of waste and recyclable materials generated by our customers, the frequency and type of services provided, the price and mix of the services provided, price changes for recyclable materials, the cost and mix of subcontracted services provided in any one reporting period, and the timing of acquisitionscustomer on-boarding and integrations.divestitures. Volumes of waste and recyclable materials generated by our customers are impacted period to period based on several factors including their production or sales levels, demand of their product or services in the market, supply chain reliability, and labor force stability, among other business factors.

For the year ended December 31, 2024,2025, operating expenses increaseddecreased to $54.5$48.7 million from $47.2$54.5 million for the year ended December 31, 2023.2024.

WeIn connection with the sale of the divested business operations, we recognized a $4.4 million loss on sale of assets for the year ended December 31, 2025 as a result of the final purchase price and additional post-closing adjustments. As of December 31, 2024, we recorded a $5.5 million impairment charge for the yearestimated endedfair Decembervalue 31,of 2024the associated with an assetdisposal group which was classified as held for sale. See Note 3 to our consolidated financial statements for further discussion.

For the year ended December 31, 2024,2025, interest expense increaseddecreased to $10.3$9.2 million from $9.7$10.3 million for the year ended December 31, 2023,2024, primarily due to increasedreduced borrowings under our revolving credit facility and our equipment term loan in 2024.facility. We are amortizing debt issuance costs of $4.8 million and loan discount costs of $1.8$5.3 million to interest expense over the life of the related debt arrangements as discussed in Note 7 to our consolidated financial statements.

We recorded a provision for income taxes of $0.3$16 millionthousand and $0.4$291 millionthousand for the years ended December 31, 20242025 and 2023,2024, respectively. The provision for income taxes for both periods is primarily attributable to state tax obligations based on current estimated state tax apportionmentsincome multiplied by the state tax apportionment percentage for states with no net operating loss carryforwards and other timing differences.carryforwards.

We recordedcontinued to record a full valuation allowance against all of our deferred tax assets (“DTAs”) as of both December 31, 20242025 and 2023.2024. We intend on maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. However,Over giventhe ournear current earnings and anticipated future earnings,term, we believedo thatnot thereanticipate is a reasonable possibility that within the next 48 to 60 months, sufficient positive evidence may become available to allow us to reach a conclusion thatreversing a significant portion of thethis valuation allowance will no longer be needed.allowance. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

Net loss for the year ended December 31, 20242025 was $(15.115.4) million compared to net loss of $(7.315.1) million for the year ended December 31, 2023.2024. The discussions above explain the primarymajority of the changes relatedwhich contributed to the change in net results.results year-over-year.

Our operating results, including revenue, operating expenses, and operating margins, vary from period to period depending on commodity prices of recycled materials, the volumes and mix of services provided, as well as customer mix during the reporting period, and the timing of acquisitions and integrations.divestitures.

Net loss per basic and diluted share attributable to common stockholders was $(0.73) andfor ($0.36) forboth the years ended December 31, 20242025 and 2023, respectively.2024. The basic and diluted weighted average number of shares of Common Stock outstanding was approximately 20.621.0 million for the year ended December 31, 2024,2025, compared to basic and diluted weighted average number of shares of Common Stock outstanding of approximately 20.120.6 million for the year ended December 31, 2023.2024.

For the year ended December 31, 2024,2025, Adjusted EBITDA, a non-GAAP financial measure, decreased (10.7)%35.7% to $14.5$9.3 million from $16.2$14.5 million for the year ended December 31, 2023.2024.

We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, acquisition-related costs, and other adjustments, or “Adjusted EBITDA,” to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is also frequently used by analysts, investorsinvestors, and other interested parties to evaluate the market value of companies considered to be in similar industries. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

As of December 31, 2024,2025, we had working capital of $30.7$11.7 million, including $0.4$1.0 million of cash and cash equivalents, compared with working capital of $15.7$30.7 million, including cash and cash equivalents of $0.3$0.4 million, as of December 31, 2023.2024. Working capital at December 31, 2024 included $9.9 million assets held for sale which were sold in the first quarter of 2025.

We believe our existing cash and cash equivalents of $0.4$1.0 million, our borrowing availability under our $45.0 million ABL Facility (as defined and discussed in Note 7 to our consolidated financial statements), and cash expected to be generated from operations will be sufficient to fund our operations for the next 12 months and thereafter for the foreseeable future. Our known current- and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securitiessecurities, and any such placements could be dilutive to our stockholders.

Our Credit Agreement (as described in Note 7 to our consolidated financial statements) provides for, among other things, a senior secured term loan facility inwhich thehad a principal amount of $54.0$51.1 million as of December 31, 2024.2025. The maturity date of the term loan facility is June 28, 2030 (the “Maturity Date”). The senior secured term loan will amortize in aggregate annual amounts equal to 1.00% of the original principal amount of the senior secured term loan facility with the balance payable on the Maturity Date. The Credit Agreement also contains a delayed draw term loan facility in the maximum principal amount of $25.0 million. Loans under the delayed draw term loan facility may be requested at any time until December 30, 2026. Proceeds of the delayed draw term loan are permitted to be used for Permitted Acquisitions (as defined in the Credit Agreement). There were no borrowings on this facility at December 31, 2025.

Net cash used in financing activities was $(13.5) million for the year ended December 31, 2025, primarily driven by the net repayments of $5.7 million on our notes payable and net repayments of $7.5 million on our ABL Facility. Net cash provided by financing activities was $12.1 million for the year ended December 31, 2024, primarily from the net borrowings of $9.9 million on our ABL Facility, $2.9 million borrowings from our PNC equipment term loan, and $1.4 million proceeds from stock option exercises and shares issued under our 2014 Employee Stock Purchase Plan (“2014 ESPP”), partially offset by $1.3 million repayments of long termlong-term debt. Net cash used in financing activities was $(6.0) million for the year ended December 31, 2023, primarily from $8.1 million repayment of notes payable, which was partially offset by net borrowings of $1.0 million on our ABL Facility and $1.1 million proceeds from stock option exercises and shares issued under our 2014 ESPP. See Note 7 to our consolidated financial statements for a discussion of the ABL Facility and other notes payable.

There has been heightened uncertainty in the macroeconomic environment, especially as it relates to fluctuations in unemployment, inflation, tariffs, consumer and business spending, and government actions or inactions, including government shutdowns. There are also significant geopolitical concerns, including ongoing global conflicts and recent military actions involving Iran and the broader Middle East, which have caused volatility in capital markets and may continue to have further global economic consequences, including disruptions of the global supply chains and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest, war, military actions, or regional conflict, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our operating costs. Any significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition.

For the quarterthree months ended MarchJune 31,30, 2026, revenue was $61.7$64.1 million, an increase of $4.6 million, or 7.6%, compared to $59.5 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, revenue was $125.8 million, a decrease of $6.7$2.2 million, or 9.8%,1.7%, compared to $68.4$128.0 million for the quartersix months ended MarchJune 31,30, 2025.

Gross profit for the quarterthree months ended MarchJune 31,30, 2026 was $9.7$10.4 million, compared to $10.9$11.0 million for the quarterthree months ended MarchJune 31,30, 2025. Our gross profit margin was 15.7%16.3% for the quarterthree months ended MarchJune 31,30, 2026, compared with 18.5% for the three months ended June 30, 2025. Gross profit for the six months ended June 30, 2026 was $20.1 million, compared to $22.0 million for the six months ended June 30, 2025. The gross profit margin was 16.0% for the quartersix months ended MarchJune 31,30, 2026, compared to 17.2% for the six months ended June 30, 2025. The declines in both gross profit and gross margin for the three and six months ended June 30, 2026, compared to the prior year periods, were primarily isolated to themargin headwindspressure fromwith the selectcertain industrial clients,customers. whichThese contributedgross toprofit lower volumes as well as isolatedand margin pressure. These declines were slightlypartially offset by improved gross profit and marginsgross margin across the remainder of theour business, aswhere operating initiatives, maturing margins from new clients,initiatives and wallet share expansionsexpansion continued to take hold.

Operating expenses for the quartersthree months ended MarchJune 31,30, 2026 and 2025 included depreciation and amortization of $1.0$1.1 million and $1.5$1.3 million, respectively. Operating expenses for the six months ended June 30, 2026 and 2025 included depreciation and amortization of $2.1 million and $2.8 million, respectively. The decrease in depreciation and amortization expense for the six months ended June 30, 2026, compared to the prior year period, is primarily due to a lower customer relationship intangible balance. During the first quarter ended March 31,of 2025, as a result of certain client attrition, we determined a customer relationship intangible was impaired and recorded an impairment charge of $1.7 million, which reduced the intangible value. See Note 6 to our condensed consolidated financial statements for further discussion.

On March 31, 2025, we completed the sale of substantially all of the assets used in an underperforming business operation. The selling price of the assets was approximately $5.0 million in cash plus (i) additional amounts, not to exceed $6.5 million, based on future performance of the contracts sold over the three years following the date of closing and (ii) a one-time payment based on the purchaser’s ability to collect the accounts receivable and other monies due for sales and deliveries of goods, performance of services and other business transactions, subject to certain other adjustments as set forth in the asset purchase agreement. In connection with the sale, we recognized a $4.4$4.5 million loss on sale of assets duringfor the quartersix months ended MarchJune 31,30, 2025. See Note 3 to our condensed consolidated financial statements for further discussion.

Interest expense was $2.1$2.2 million and $2.3$2.4 million for the quartersthree months ended MarchJune 31,30, 2026 and 2025, respectively. Interest expense was $4.3 million and $4.6 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in expense is primarily due to lower borrowings on our PNCTCB ABL Facility (as defined below) for the firstthree quarterand ofsix months ended June 30, 2026 compared to borrowings on our PNC ABL Facility in the firstprior quarteryear of 2025.periods.

During the quarterthree months ended March 31, 2026, we entered into a Loan and Security Agreement with Texas Capital Bank (the “TCB Loan Agreement”). In connection with the execution and delivery of the TCB Loan Agreement, which provides for an asset-based revolving credit facility (the “TCB ABL Facility”), the PNC Loan Agreement was terminated, and all outstanding amounts were paid in full. The termination of the PNC Loan Agreement resulted in a loss on debt extinguishment of $488 thousand, primarily dueattributable to the write-off of unamortized debt issuance costs.

Additionally, in March 2026, we amended our Credit Agreement (the “Credit Agreement”) with Monroe Capital Management Advisors LLC (“Monroe”) to, among other things, modify its financial covenants, which resulted in overall favorable terms for us. As a result of this modification, we entered into a fee arrangement with Monroe for the payment of an exit fee upon the occurrence of certain triggering events, which include a change in control, a debt refinancing, or the maturity of the Credit Agreement. The calculation of the exit fee is dependent upon the financial performance of our business at the time of the triggering event, and the fee has a minimum value of $2.0 million. While the exit fee does not include a limit on the maximum fee to be paid, we do not believe that any amount paid by us will be materially different from the $2.0 million. Therefore, as of MarchJune 31,30, 2026, we recorded the estimated exit fee of $2.0 million is recorded as an other long-term liability, and the fee has been included in our debt issuance costs which is amortized to interest expense over the remaining term of the Credit Agreement. The value of the estimated liability for the exit fee will be adjusted, in addition to interest expense, if there is a material change in our estimate prior to a triggering event.

We also incurred approximately $868$914 thousand in additional debt issuance costs resulting from the March 2026 financing transactions. As a result of these transactions, as of MarchJune 31,30, 2026, our unamortized debt issuance costs and debt discount is $4.6$4.4 million. See Note 8 to our condensed consolidated financial statements for further discussion.

We recorded a provision for income taxes of $22$46 thousand and an income tax benefit of $(22) thousand for the quartersthree months ended MarchJune 31,30, 2026 and 2025, respectively. We recorded a provision for income taxes of $68 thousand and an income tax benefit of $(44) thousand for the six months ended June 30, 2026 and 2025, respectively. The provision/(benefit) for income tax is primarily attributable to state tax obligations based on current estimated state tax income/(loss) multiplied by the state tax apportionment percentage for states with no net operating loss carryforwards.

We continued to record a full valuation allowance against all our deferred tax assets (“DTAs”) as of both MarchJune 31,30, 2026 and December 31, 2025. We intend on maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. Over the near term, we do not anticipate reversing a significant portion of this allowance. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

Net loss for the quarterthree months ended MarchJune 31,30, 2026 was $(2.312.2) million, compared to a net loss of $(10.42.0) million for the quarterthree months ended MarchJune 31,30, 2025. Net loss for the six months ended June 30, 2026 was $(14.5) million, compared to net loss of $(12.4) million for the six months ended June 30, 2025. The discussions above explain the majority of the changes which contributed to the change in net results year-over-year.

Our operating results, including revenue, operating expenses, and operating margins, vary from period to period depending on commodity prices of recyclable materials, the volumes and mix of services provided, as well as customer mix during the reporting period, and the timing of acquisitionsacquisitions, divestitures, and divestitures.impairments.

Net loss per basic and diluted share attributable to common stockholders was $(0.110.57) and $(0.500.09) for the quartersthree months ended MarchJune 31,30, 2026 and 2025, respectively. Net loss per basic and diluted share attributable to common stockholders was $(0.68) and $(0.59) for the six months ended June 30, 2026 and 2025, respectively. The basic and diluted weighted average number of shares of common stock outstanding was approximately 21.221.3 million for the three and six months ended June 30, 2026 and 20.9 million for the three and six months ended MarchJune 31,30, 2026 and 2025, respectively.2025.

For the three months ended MarchJune 31,30, 2026, Adjusted EBITDA (as defined below), a non-GAAP financial measure, increased 15.2%4.0% to $1.8$2.8 million from $1.6$2.7 million for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, Adjusted EBITDA increased 8.1% to $4.6 million from $4.2 million for the same period in 2025.

We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, and certain other adjustments, or “Adjusted EBITDA”, to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar businesses. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with GAAP.

The following table reflects the reconciliation of net loss to Adjusted EBITDA for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):

For the three and six months ended MarchJune 31,30, 2026, other adjustments result primarily from an adjustment to estimated severance costs recorded in the prior year.costs. For the three and six months ended MarchJune 31,30, 2025, other adjustments primarily related to severance and retirement costs, incertain additionloan toamendment certaincosts, and other professional fees.

As of MarchJune 31,30, 2026, we had working capital of $11.9$7.9 million, including $1.1$1.0 million of cash and cash equivalents, compared with working capital of $11.7 million, including $1.0 million of cash and cash equivalents as of December 31, 2025.

The following table presents a summary of our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

For the threesix months ended MarchJune 31,30, 2026, our net loss of $(2.314.5) million included a non-cash goodwill impairment loss of $11.0 million and loss on debt extinguishment of $488 thousand. Other non-cash items included in our net loss for the threesix months ended MarchJune 31,30, 2026 totaled approximately $1.8$3.8 million and related primarily to depreciation, amortization of intangible assets and debt issuance costs and discounts, a provision for doubtful accounts, and stock-based compensation. For the threesix months ended MarchJune 31,30, 2025, our net loss of $(10.412.4) million included a non-cash net loss on sale of $4.4$4.5 million and ana non-cash intangible asset impairment loss of $1.7 million. Other non-cash items included in our net loss for the threesix months ended MarchJune 31,30, 2025 totaled approximately $2.9$5.3 million and related primarily to depreciation, amortization of intangible assets and debt issuance costs and discounts, a provision for doubtful accounts, and stock-based compensation.

The favorable change in our net cash provided by operating activities primarily results from improved working capital management, especially related to our continued focus on strong collection efforts and improved billing cycle times, which contributed to an improvement in days sales outstanding. Days sales outstanding compared(defined as “Accounts receivable, less allowance for doubtful accounts” at quarter end divided by “Revenue” for the most recent quarter multiplied by 91.25 days) decreased from 75.9 days at December 31, 2025 to the70.5 firstdays quarterat ofJune 2025.30, 2026. During the threesix months ended MarchJune 31,30, 2026, we also recognized decreased spending for operating expenses as a result of our cost savings initiatives. These positive impacts to our cash provided by operating activities were partially offset by the net decline in client activity during the threesix months ended MarchJune 31,30, 2026. See Management’s Discussion and Analysis of Financial Condition: Results of Operations for further discussion of our cost savings initiatives and client activity.

Cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 was $(0.40.7) million and primarily relates to software development costs. Cash provided by investing activities for the threesix months ended MarchJune 31,30, 2025 was $4.5$4.2 million and primarily related to the sale of our divested business operations, which generated cash proceeds of approximately $5.0 million. These proceeds were used to repay a portion of our outstanding debt at March 31,in 2025. Other investing activities for the three months ended March 31, 2025 related to software development costs and the purchase of other property and equipment.

Net cash providedused byin financing activities for the threesix months ended MarchJune 31,30, 2026 was $0.3$(4.0) million.million, Duringprimarily due to the three months ended March 31, 2026, we had net borrowingsrepayment of $2.7 million from our credit facilities, which were partially offset by repayments of $2.1$4.3 million on our notes payable and payments for debt issuance costs of $178$0.2 thousandmillion resulting from the March 2026 financingdebt transactions.refinancing Additionally,transactions, duringpartially theoffset threeby monthsnet ended March 31, 2026, we paid $41 thousand in tax withholding costs for the vestingborrowings of certain$0.5 restrictedmillion stockfrom units.our credit facilities.

Net cash used in financing activities for the threesix months ended MarchJune 31,30, 2025 was $(2.57.0) million, primarily due to the repayment of $3.5 million on our notes payable using proceeds from the sale of certain divested business operations as further discussed in Note 3 to our condensed consolidated financial statements. Other financing activities included net borrowingsrepayment of $0.9$2.8 million on our credit facility, which included a repayment of $1.5 million using the proceeds from the sale of assets, and $0.4 million of borrowings from our PNC equipment term loan.facility. See Note 8 to our condensed consolidated financial statements for further discussion.

Although the overall economy has experienced some inflationary pressures, we do not believe that inflation had a material impact on us during the threesix months ended MarchJune 31,30, 2026 and 2025. We believe our flexible pricing structures and cost recovery fees may help mitigate volatility in costs, such as fuel, labor, and certain capital items, by allowing us to recover certain inflation-related cost increases from our customer base. Ongoing geopolitical conflicts, including recent military actions involving Iran and the broader Middle East, may contribute to further volatility in energy markets and fuel costs, which could increase inflationary pressure on our business or create timing delays in our ability to recover such costs from customers. However, consistent with industry practice, we believe many of our contracts allow us to pass through certain costs to our customers or adjust pricing. While we believe that we should be able to offset many cost increases that result from inflation in the ordinary course of business, we may be required to absorb at least part of these cost increases due to competitive pressures or delays in timing of rate increases. Although we have not been materially affected by inflation to date, we can provide no assurance that we will not be affected in the future by higher rates of inflation, increases in interest rates, or continued volatility in energy and fuel costs.

Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, the liability for estimated exit fees, stock-based compensation expense, and deferred taxes. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report. There have been no significant changes in our critical accounting policies during the threesix months ended MarchJune 31,30, 2026, except as follows:

Upon the amendment of our Credit Agreement with Monroe Capital, we entered into a fee arrangement with Monroe for the payment of an exit fee upon the occurrence of certain triggering events, which include a change in control, a debt refinancing, or the maturity of the Credit Agreement. The calculation of the exit fee is dependent upon the financial performance of our business at the time of the triggering event. The fee has a minimum value of $2.0 million, and there is not a limit to the maximum fee that could be paid. As of MarchJune 31,30, 2026, we believe the estimated fee to be paid approximates the minimum value of $2.0 million. As a result, we recorded the estimated exit fee as an other long-term liability, and the fee has been included in debt issuance costs which is amortized to interest expense over the remaining term of the Credit Agreement. The variable portion of the estimated fee, or the estimated amount exceeding the minimum value, will be reassessed each reporting period by taking into consideration the probability of the triggering event occurring and our estimated value at that time. Any changes to the estimated value of the variable portion of the fee will increase other long-term liabilities and increase our interest expense.