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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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

Commission File Number 001-40910

Rubicon Technologies, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		88-3703651
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

950 E Paces Ferry Rd NE, Suite 810
Atlanta, GA		30326
(Address of Principal Executive Offices)		(Zip Code)

(844) 479-1507

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value $0.0001 per share		RBT		N/A*

On June 7, 2024, our Class A common stock was suspended from trading on the New York Stock Exchange and began trading under the symbol “RBTC” on the OTC Pink Marketplace maintained by the OTC Markets Group, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

As of August 20, 2024, 68,914,542 shares of Class A Common Stock, par value $0.0001 per share, and 771,305 shares of Class V Common Stock, par value $0.0001 per share, were issued and outstanding; and 20,000 shares of Series A Convertible Perpetual Preferred Stock, $0.0001 par value, were issued and outstanding.

Table of Contents

		Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Result of Operations		45
Item 3. Quantitative and Qualitative Disclosures About Market Risk		66
Item 4. Controls and Procedures		67

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		68
Item 1A. Risk Factors		68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		68
Item 3. Defaults Upon Senior Securities		68
Item 4. Mine Safety Disclosures		68
Item 5. Other Information		68
Item 6. Exhibits		69

Signatures		70

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)


	June 30, 2024			December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	8,153		$	18,695
Accounts receivable, net		54,791			62,930
Contract assets		54,917			75,567
Prepaid expenses		21,431			13,197
Current assets of discontinued operations		-			5,257
Due from affiliates		1,276			-
Other current assets		2,811			3,742
Total Current Assets		143,379			179,388

Property and equipment, net		466			632
Operating right-of-use assets		1,287			567
Other noncurrent assets		1,661			2,114
Goodwill		20,692			19,872
Intangible assets, net		5,831			7,111
Noncurrent assets of discontinued operations		-			13,603
Total Assets	$	173,316		$	223,287

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	61,412		$	65,465
Line of credit		52,179			71,121
Accrued expenses		62,914			76,645
Contract liabilities		1,229			1,499
Operating lease liabilities, current		215			725
Warrant liabilities		9,506			26,493
Derivative liabilities		8,825			9,375
Long-term debt, current portion		50,926			-
Current liabilities of discontinued operations		-			6,216
Total Current Liabilities		247,206			257,539

Long-Term Liabilities:
Deferred income taxes		258			197
Operating lease liabilities, noncurrent		1,087			-
Debt obligations, net of debt issuance costs		1,422			81,001
Related-party debt obligations, net of debt issuance costs		17,363			16,302
Derivative liabilities		-			3,683
Earn-out liabilities		9			142
Other long-term liabilities		2,640			3,395
Total Long-Term Liabilities		22,779			104,720
Total Liabilities		269,985			362,259

Redeemable convertible preferred class A stock, $0.0001 par value; 10,000,000 shares authorized and 20,000 shares issued and outstanding as of June 30, 2024 and 0 shares issued and outstanding as of December 31, 2023, respectively. (Aggregate liquidation preference and aggregate redemption amount of $20,236)		15,661			-

Stockholders’ Deficit:
Common stock – Class A, par value of $0.0001 per share, 690,000,000 shares authorized, 68,914,542 and 39,643,584 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		7			4
Common stock – Class V, par value of $0.0001 per share, 275,000,000 shares authorized, 776,097 and 4,425,388 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		-			-
Preferred stock – par value of $0.0001 per share, 10,000,000 shares authorized, 0 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		-			-
Additional paid-in capital		266,189			221,986
Accumulated deficit		(384,444	)		(394,804	)
Total stockholders’ deficit attributable to Rubicon Technologies, Inc.		(118,248	)		(172,814	)
Noncontrolling interests		5,918			33,842
Total Stockholders’ Deficit		(112,330	)		(138,972	)
Total Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit	$	173,316		$	223,287

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue:
Service	$	146,725		$	158,027		$	293,978		$	322,350
Recyclable commodity		16,422			13,923			32,232			28,656
Total revenue		163,147			171,950			326,210			351,006

Costs and Expenses:
Cost of revenue (exclusive of amortization and depreciation):
Service		143,575			149,307			283,922			306,821
Recyclable commodity		14,893			11,968			28,947			25,155
Total cost of revenue (exclusive of amortization and depreciation)		158,468			161,275			312,869			331,976
Sales and marketing		2,332			1,947			4,020			4,391
Product development		5,271			6,568			11,896			14,009
General and administrative		10,667			13,698			23,754			31,886
Gain on settlement of incentive compensation		-			-			-			(18,622	)
Amortization and depreciation		950			1,074			1,881			2,187
Total Costs and Expenses		177,688			184,562			354,420			365,827
Loss from continuing operations		(14,541	)		(12,612	)		(28,210	)		(14,821	)

Other Income (Expense):
Interest earned		26			5			59			6
Gain (loss) on change in fair value of warrant liabilities		3,718			(414	)		13,469			(469	)
Gain on change in fair value of earnout liabilities		22			470			133			5,290
Loss on change in fair value of derivatives		(721	)		(335	)		(2,020	)		(2,533	)
Gain on service fee settlements in connection with the Mergers		-			6,364			-			6,996
Loss on extinguishment of debt obligations		(8,782	)		(6,783	)		(8,782	)		(8,886	)
Interest expense		(8,413	)		(8,119	)		(19,163	)		(15,295	)
Related party interest expense		(540	)		(661	)		(1,062	)		(1,254	)
Other expense, net		(666	)		(482	)		(1,617	)		(903	)
Total Other Expense, Net		(15,356	)		(9,955	)		(18,983	)		(17,048	)
Loss from Continuing Operations Before Income Taxes		(29,897	)		(22,567	)		(47,193	)		(31,869	)

Income tax expense		102			17			114			33
Net Loss from Continuing Operations, net of tax	$	(29,999	)	$	(22,584	)	$	(47,307	)		(31,902	)

Discontinued Operations:
Loss from discontinued operations		(456	)		(233	)		(1,125	)		(366	)
Net gain on sale of discontinued operations		59,674			-			59,674			-
Income tax expense		(1,881	)		-			(1,881	)		-
Net income (loss) from discontinued operations, net of tax		57,337			(233	)		56,668			(366	)
Net income (loss)		27,338			(22,817	)		9,361			(32,268	)
Net loss from continuing operations attributable to noncontrolling interests		(479	)		(9,508	)		(1,915	)		(15,742	)
Net loss from continuing operations attributable to Class A common stockholders		(29,520	)		(13,076	)		(45,392	)		(16,160	)
Net income (loss) from discontinued operations attributable to noncontrolling interests		960			(107	)		914			(195	)
Net income (loss) from discontinued operations attributable to Class A common stockholders	$	56,377		$	(126	)	$	55,754		$	(171	)

Net loss from continuing operations per Class A Common share – basic and diluted		(0.32	)		(0.98	)		(0.65	)		(1.56	)
Net earnings (loss) from discontinued operations per Class A Common share – basic and diluted		0.61			(0.01	)		0.80			(0.02	)
Net earnings (loss) per Class A Common share – basic and diluted		0.29			(0.99	)		0.15			(1.58	)
Weighted average shares outstanding – basic		58,854,594			13,276,407			52,461,596			10,367,920
Weighted average shares outstanding – diluted		58,854,594			13,276,407			52,461,596			10,367,920

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

(in thousands, except shares and units data)


		Common Stock – Class A (As Revised)					Common Stock – Class V					Preferred Stock				Additional Paid-in Capital		Accumulated Deficit			Non-controlling Interest				Total Deficit
		Shares			Amount		Shares			Amount		Shares		Amount		(As Revised)		(As Revised)			(As Revised)				(As Revised)
Balance, December 31, 2023	-		39,643,584		$	4		4,425,388		$	-		-	$	-	$	221,986	$	(394,804	)	$	33,842		-	$	(138,972	)

Equity-based compensation			-			-		-			-		-		-		563		-			-				563

Issuance of common stock for services rendered			2,246,182			-		-			-		-		-		3,750		-			-				3,750

RSU Settlement			(32,446	)		-		-			-		-		-		-		-			-				-

Issuance of common stock for the FPA Termination Agreement Settlement			1,657,727			-		-			-		-		-		2,000		-			-				2,000

Exchange of Class V Common Stock to Class A Common Stock			3,350,489			-		(3,350,489	)		-		-		-		24,605		-			(24,605	)			-

Exercise and conversion of liability classified warrants			5,541,523			1		-			-		-		-		5,096		-			-				5,097

Net loss	-		-			-		-			-		-		-		-		(16,497	)		(1,482	)	-		(17,979	)

Balance, March 31, 2024, as revised	-		52,406,059		$	5		1,074,899		$	-		-	$	-	$	258,000	$	(411,301	)	$	7,755		-	$	(145,541	)

Equity-based compensation			-			-		-			-		-		-		531									531

Issuance of common stock for services rendered			8,423,303			1		-			-		-		-		3,394		-			-				3,395

RSU Settlement			192,027			-		-			-		-		-		-		-			-				-

Exchange of Class V Common Stock to Class A Common Stock			298,802			-		(298,802	)		-		-		-		2,318		-			(2,318	)			-

Exercise and conversion of liability classified warrants			7,594,351			1		-			-		-		-		1,946		-			-				1,947

Net income	-		-			-		-			-		-		-		-		26,857			481		-		27,338

Balance, June 30, 2024	-		68,914,542		$	7		776,097		$	-		-	$	-	$	266,189	$	(384,444	)	$	5,918		-	$	(112,330	)

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED) (Continued)

(in thousands, except shares and units data)


	Members’ Units				Common Stock – Class A				Common Stock – Class V						Preferred Stock				Additional Paid-in			Accumulated			Non controlling			Total
	Units		Amount		Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			Interest			Deficit
Balance, December 31, 2022		-	$	-		55,886,692	$	6		115,463,646		$	12			-	$	-	$	34,658		$	(337,875	)	$	148,747		$	(154,452	)

Equity-based compensation		-		-		-		-		-			-			-		-		9,302			-			-			9,302

Issuance of common stock for services rendered		-		-		9,318,052		1		-			-			-		-		10,244			-			-			10,245

Issuance of equity-classified warrants		-		-		-		-		-			-			-		-		945			-			-			945

Issuance of common stock for vested RSUs		-		-		3,711,682		-		-			-			-		-		-			-			-			-

RSUs withheld to pay taxes		-		-		-		-		-			-			-		-		(1,067	)		-			-			(1,067	)

Conversion of debt obligations to common stock		-		-		2,849,962		-		-			-			-		-		3,130			-			-			3,130

Proceeds from issuance of common stock		-		-		1,222,222		-		-			-			-		-		1,100			-			-			1,100

Net loss		-		-		-		-		-			-			-		-		-			(3,129	)		(6,322	)		(9,451	)

Balance, March 31, 2023		-	$	-		72,988,610	$	7		115,463,646		$	12			-	$	-	$	58,312		$	(341,004	)	$	142,425		$	(140,248	)

Equity-based compensation		-		-		-		-		-			-			-		-		1,803			-			-			1,803

Issuance of common stock for vested DSUs		-		-		84,818		-		-			-			-		-		-			-			-			-

Conversion of debt obligations to common stock		-		-		17,288,298		2		-			-			-		-		7,714			-			-			7,716

Exercise and conversion of liability classified warrants		-		-		2,559,375		-		-			-			-		-		1,073			-			-			1,073

Proceeds from issuance of common stock		-		-		56,836,444		6		-			-			-		-		23,661			-			-			23,667

Exchange of Class V Common Stock to Class A Common Stock		-		-		80,060,825		8		(80,060,825	)		(8	)		-		-		94,270			-			(94,270	)		-

Common stock issuance costs		-		-		-		-		-			-			-		-		(32	)		-			-			(32	)

Net loss		-		-		-		-		-			-			-		-		-			(13,202	)		(9,615	)		(22,817	)

Balance, June 30, 2023		-	$	-		229,818,370	$	23		35,402,821		$	4			-	$	-	$	186,802		$	(354,206	)	$	38,540		$	(128,838	)

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	9,361		$	(32,268	)
Net income (loss) from discontinued operations		56,668			(366	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Loss on disposal of property and equipment		-			13
Amortization and depreciation		2,037			2,172
Amortization of deferred debt charges		6,538			3,338
Amortization of related party deferred debt charges		271			504
Paid-in-kind interest capitalized to principal of debt obligations		2,313			3,473
Paid-in-kind interest capitalized to principal of related party debt obligations		400			641
Allowances for accounts receivables and contract assets		760			1,360
(Gain) loss on change in fair value of warrant liabilities		(13,469	)		469
Loss on change in fair value of derivatives		2,020			2,533
Gain on change in fair value of earn-out liabilities		(133	)		(5,290	)
Loss on extinguishment of debt obligations		8,782			8,886
Equity-based compensation		1,095			11,106
Settlement of accrued incentive compensation		-			(26,826	)
Service fees settled in common stock		7,144			3,808
Gain on service fee settlement in connection with the Mergers		-			(6,995	)
Deferred income taxes		61			17
Change in operating assets and liabilities:
Accounts receivable		11,426			(905	)
Contract assets		21,704			3,863
Prepaid expenses		(8,529	)		(2,667	)
Other current assets		(425	)		(11	)
Operating right-of-use assets		(721	)		622
Other noncurrent assets		117			(112	)
Accounts payable		(4,846	)		(3,082	)
Accrued expenses		(13,664	)		(785	)
Contract liabilities		(269	)		190
Operating lease liabilities		577			(933	)
Other liabilities		(759	)		(1,679	)
Total adjustments and changes in operating assets and liabilities		22,430			(6,290	)
Net cash from operating activities – continuing operations		(24,877	)		(38,192	)
Net cash from operating activities – discontinued operations:
Gain on business disposition – discontinued operations		(59,674	)		-
Adjustments to reconcile net income (loss) to net cash flows from discontinued operations		562			1,249
Net cash from operating activities – discontinued operations		(2,444	)		883
Net cash flows from operating activities		(27,321	)		(37,309	)

Cash flows from investing activities:
Cash flows from investing activities – continuing operations:
Property and equipment purchases		(251	)		(231	)
Net cash from investing activities – continuing operations		(251	)		(231	)
Cash flows from investing activities – discontinued operations:
Property and equipment purchases		-			(397	)
Net cash from sale of business		61,989			-
Net cash from investing activities – discontinued operations		61,989			(397	)
Net cash flows from investing activities		61,738			(628	)

Cash flows from financing activities:
Net repayments on Revolving Credit Facility		(18,942	)		(5,625	)
Proceeds from debt obligations		-			86,226
Repayments of debt obligations		(45,600	)		(53,500	)
Proceeds from related party debt obligations		-			14,520
Financing costs paid		-			(13,916	)
Proceeds from issuance of common stock		-			24,767
Proceeds from issuance of redeemable convertible Class A preferred stock		20,000			-
Equity Issuance Cost		(417	)		(31	)
RSUs withheld to pay taxes		-			(1,067	)
Net cash flows from financing activities		(44,959	)		51,374

Net change in cash and cash equivalents		(10,542	)		13,437
Cash and cash equivalents, beginning of period		18,695			10,079
Cash and cash equivalents, end of period	$	8,153		$	23,516

Supplemental disclosure of cash flow information:
Cash paid for interest	$	9,945		$	7,010

Supplemental disclosures of non-cash investing and financing activities:
Exchange of warrant liability for common stock	$	7,794		$	1,050
Settlement of the FPA Termination Agreement in common stock	$	2,000		$	-
Issuance of common stock for services rendered	$	7,149		$	-
Proceeds allocation between sale of business and issuance of redeemable convertible Class A preferred stock	$	3,922		$	-
Fair value of derivatives issued as debt discount and issuance cost	$	-		$	12,739
Conversions of debt obligations to common stock	$	-		$	5,500
Conversions of related-party debt obligations to common stock	$	-		$	3,080
Equity issuance costs waived	$	-		$	6,364
Equity issuance costs settled with common stock	$	-		$	7,069
Loan commitment asset reclassed to deferred debt discount	$	-		$	2,062

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Nature of operations and summary of significant accounting policies

Description of Business – Rubicon Technologies, Inc. and all subsidiaries are hereafter referred to as “Rubicon” or the “Company.”

Rubicon is a digital marketplace for waste and recycling services and provides cloud-based waste and recycling solutions to businesses and governments. Rubicon’s sustainable waste and recycling solutions provide comprehensive management of customers’ waste streams through a platform that powers a modern, digital experience and delivers data-driven insights and transparency for the customers and hauling and recycling partners.

Rubicon also provides consultation and management services to customers for waste removal, waste management, logistics, and recycling solutions. Consultation and management services include planning, consolidation of billing and administration, cost savings analyses, and vendor performance monitoring and management. The combination of Rubicon’s technology and services provides a holistic audit of customer waste streams. Rubicon also provides logistics services and markets and resells recyclable commodities.

Reverse Stock Split – On September 26, 2023, the Company effected a reverse stock split of its outstanding shares of voting common stock at a ratio of one-for-eight (1:8) pursuant to a Certificate of Amendment to its Certificate of Incorporation filed with the Secretary of State of the State of Delaware. The reverse stock split was reflected on the New York Stock Exchange (the “NYSE”) beginning with the opening of trading on September 27, 2023. Pursuant to the reverse stock split, every eight shares of the Company’s issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any change in the number of authorized shares or the par value per share of the common stock. No fractional shares were issued in connection with the reverse stock split. Any stockholder who would otherwise be entitled to receive a fractional share instead became entitled to receive one whole share of common stock in lieu of such fractional share. Equitable adjustments corresponding to the reverse stock split ratio were made to all (i) issued and outstanding shares of all other classes of stock of the Company, (ii) the exercise prices of and number of shares of common stock underlying the Company’s public and private warrants, (iii) the number of shares of common stock underlying the Company’s outstanding equity awards, and (iv) the number of shares of common stock issuable under the Company’s equity incentive plan. All share and per share amounts of the common stock included in the accompanying condensed consolidated financial statements and these notes to the condensed consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.

Mergers – Rubicon Technologies, Inc. was initially incorporated in the Cayman Islands on April 26, 2021 as a special purposes acquisition company under the name “Founder SPAC” (“Founder”). Founder was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. On August 15, 2022 (the “Closing Date”), Founder consummated the mergers (the “Mergers”), pursuant to that certain Agreement and Plan of Merger, dated December 15, 2021 (the “Merger Agreement”) (the “Closing”).

In connection with the Mergers, the Company was reorganized into an Up-C structure, in which substantially all of the assets and business of the Company are held by Rubicon Technologies Holdings, LLC (“Holdings LLC”) and continue to operate through Rubicon Technologies Holdings, LLC and its subsidiaries, and Rubicon Technologies, Inc.’s material assets are the equity interests of Rubicon Technologies Holdings, LLC indirectly held by it. Pursuant to the Merger Agreement, the Mergers were accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) (the “Reverse Recapitalization”). Under this method of accounting, Founder was treated as the acquired company and Holdings LLC was treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Holdings LLC issuing stock for the net assets of Founder, accompanied by a recapitalization. Thus, the accompanying condensed consolidated financial statements reflect (i) the historical operating results of Holdings LLC prior to the Mergers; (ii) the results of Rubicon Technologies, Inc. following the Mergers; and (iii) the acquired assets and liabilities of Founder stated at historical cost, with no goodwill or other intangible assets recorded.

Sale of Business – During the first quarter of 2024, the Company’s Board of Directors (“Board”) approved a plan to sell the Software-as-a-Service business (the “SaaS Business”). On May 7, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) and completed the sale of SaaS Business. In connection with the Sale, the Company recognized a gain of $59.7 million on the sale of SaaS Business during the period ended June 30, 2024 presented within the accompanying condensed consolidated statement of operations. See Note 4 for additional information. In conjunction to the sale of SaaS Business, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement” or “SPA”) with MBI Holdings, LP (the “Buyer”), an affiliate of Rodina Capital (“Rodina”). See Note 12 for additional information.

Basis of Presentation and Consolidation – The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to U.S. generally accepted accounting principles (“U.S. GAAP) and reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results of the interim periods presented, under the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). These condensed consolidated financial statements include all adjustments consisting of only normal recurring adjustments, necessary for a fair statement of the results of the interim periods presented. The Company’s condensed consolidated financial statements include the accounts of Rubicon Technologies, Inc., and subsidiaries. The Company’s condensed consolidated financial statements reflect the elimination of all significant inter-company accounts and transactions. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. Certain information and note disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes prepared in accordance with U.S. GAAP have been condensed in, or omitted from, these interim financial statements. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements for the fiscal year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2024 and Form 10-K/A filed with SEC on May 20, 2024 due to restatements related to additional paid-in capital and noncontrolling interest.

Liquidity and going concern consideration – The Company has historically incurred losses from operations and generated negative cash flows from operating activities. The Company also has negative working capital and stockholders’ deficit as of June 30, 2024. The Company has net income for the six months ended June 30, 2024, primarily driven by the gain on sale of its SaaS business, see Note 4 – Discontinued operations and business disposition for further details.

As of June 30, 2024, cash and cash equivalents totaled $8.2 8,153 million, accounts receivable totaled $54.8 54,791 million and unbilled accounts receivable totaled $54.9 million. Through the sale of SaaS Business, the Company received cash for a total amount of $81.7 million, of which $57 million was used to prepay the outstanding balances for the June 2023 Term Loan (as defined in Note 6) and the June 2023 Revolving Credit Facility (as defined in Note 6), $20 million was used to repay the outstanding balances for accounts payable, and $3.2 million was used to pay expenses incurred for the sale. Availability under the June 2023 Revolving Credit Facility, which provided the ability to borrow up to $90.0 million, was $0.2 million, and the June 2023 Revolving Credit Facility is scheduled to mature on March 9, 2025. In conjunction to the sale of SaaS Business, the Company also entered into side letters with lenders of the June 2023 Term Loan, the June 2023 Revolving Credit Facility, and the December 2021 Subordinated Term Loan. All side letters required the Company to initiate a sale process to sell all or substantially all of the equity interests and assets of the Company within 300 days of the completion of the sale of SaaS Business on May 7, 2024. The letter required two milestones of the sale process, (i) within four-months of May 7, 2024, the Company should enter into a binding letter of intent to consummate the sale of the Company and (ii) within ten-months of May 7, 2024, the Company should consummate the sale of the Company and repay the outstanding balances of the debts in full. If any of the milestones are not met and such failure is not cured by the Company in accordance with such terms, the outstanding balances for the June 2023 Term Loan, the June 2023 Revolving Credit Facility, and the December 2021 Subordinated Term Loan will become due in full within ten months of May 7, 2024. The side letters effectively accelerate the maturity of the June 2023 Term Loan, the June 2023 Revolving Credit Facility, and the December 2021 Subordinated Term Loan, resulting in potential negative impacts on the Company’s cash position and liquidity. Pursuant to the Cantor Sales Agreement, the Company may offer and sell up to $50.0 million shares of Class A Common Stock through Cantor. However, it is uncertain how quickly Cantor will be able to sell such shares of Class A Common Stock at the price the Company requests to deliver additional liquidity to the Company.

The Company currently projects that it will not have sufficient cash on hand or available liquidity under existing arrangements to meet the Company’s projected liquidity needs for the next 12 months. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

To address liquidity needs, the Company has been working to execute various initiatives to modify its operations to reduce spending and improve cash flow. Initiatives the Company has undertaken in recent periods include (i) increased focus on operational efficiencies and cost reduction measures, (ii) eliminating redundancies that have been the byproduct of the Company’s recent growth and expansion, (iii) evaluating the Company’s portfolio and less profitable accounts to better ensure the Company is deploying resources efficiently, and (iv) exercising strict capital discipline for future investments, such as requiring investments to meet minimum hurdle rates. Additionally, on May 7, 2024, the Company completed the sale of its SaaS Business (see Note 4 for further information) and entered into the Rodina SPA (see Note 12 for further information) which provided the Company with additional cash.

The Company believes that additional capital will be needed to provide sufficient liquidity to meet the Company’s known liquidity needs for the next 12 months given that the June 2023 Revolving Credit Facility is scheduled to mature and the borrowings under the facility will become due and payable on the maturity date. However, while management believes the Company will be able to obtain additional capital through debt and equity financing, including sales of Class A Common Stock under the Cantor Sales Agreement, to the extent necessary, the Company has obtained no firm commitment from current or prospective investors to date and no assurance can be provided that such additional financing will be obtained at the level acceptable to the Company within the necessary timeframe, if at all. Failure to secure sufficient additional funding in a timely manner or at all will impact the Company’s liquidity, including its ability to service its debt and other liabilities, and may require the Company to modify, delay, or abandon some of its planned future expansion or development, or to otherwise enact additional operating cost reductions available to management, which could have a material adverse effect on the Company’s business, operating results, financial condition, and could force the Company to limit its business activities or discontinue its operations entirely.

The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Segments – The Company operates in one operating segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance. The Company’s CODM role is fulfilled by the Executive Leadership Team (“ELT”), who allocates resources and assesses performance based upon consolidated financial information.

Use of Estimates – The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of any contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Emerging Growth Company – The Company is an emerging growth company (“EGC”), as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company did not opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an EGC, will be required to adopt the new or revised standard at the time the new or revised standard becomes applicable to private companies. The effective dates shown in Note 2 below reflect the election to use the extended transition period.

Revenue Recognition – The Company recognizes service revenue over time, consistent with efforts performed and when the customer simultaneously receives and consumes the benefits provided by the Company’s services. The Company recognizes recyclable commodity revenue at the point in time when the ownership, risks, and rewards transfer. The Company derives its revenue from waste removal, waste management and consultation services, software subscriptions prior to the disposition of the SaaS business (Note 4), and the sale of recyclable commodities.

Service Revenue:

Service revenues are primarily derived from long-term contracts with waste generator customers including multiple promises delivered through the Company’s digital marketplace platform. The promises include waste removal, consultation services, billing administration and consolidation, cost savings analyses, and vendor procurement and performance management, each of which constitutes an input to the combined service managed through the digital platform. The digital platform and services are highly interdependent, and accordingly, each contractual promise is not considered a distinct performance obligation in the context of the contract and is combined into a single performance obligation. In general, fees are invoiced, and revenue is recognized over time as control is transferred. Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing the service. The Company invoices for certain services prior to performance. These advance invoices are included in contract liabilities and recognized as revenue in the period service is provided.

Service revenues also include software-as-a-service subscription, maintenance, equipment and other professional services, which represent separate performance obligations. Once the performance obligations and the transaction price are determined, including an estimate of any variable consideration, the Company then allocates the transaction price to each performance obligation in the contract using a relative standalone selling price method. The Company determines standalone selling price based on the price at which the good or service is sold separately. The Company invoices for certain services prior to performance. These advance invoices are included in contract liabilities and recognized as revenue in the period service is provided.

Recyclable Commodity Revenue:

The Company recognizes recyclable commodity revenue through the sales of old corrugated cardboard (OCC), old newsprint (ONP), aluminum, glass, pallets, and other recyclable materials at market prices. The Company purchases recyclable commodities from certain waste generator customers and sells the recyclable materials to recycling and processing facilities. Revenue recognized under these agreements is variable in nature based on the market, type and volume or weight of the materials sold. The amount of revenue recognized is based on commodity prices at the time of sale, which are unknown at contract inception. Fees are billed, and revenue is recognized at a point in time when control is transferred to the recycling and processing facilities.

Management reviews contracts and agreements the Company has with its waste generator customers and hauling and recycling partners and performs an evaluation to consider the most appropriate manner in accordance with ASC 606-10, Revenue Recognition: Principal Agent Considerations, by which revenue is presented on the condensed consolidated statements of operations.

Judgment is required in evaluating the presentation of revenue on a gross versus net basis based on whether the Company controls the service provided to the end-user and is the principal in the transaction (gross), or the Company arranges for other parties to provide the service to the end-user and is the agent in the transaction (net). Management has concluded that the Company is the principal in most arrangements as it controls the waste removal service and is the primary obligor in the transactions.

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) which we recognize revenue at the amount to which the Company has the right to invoice for services performed and (iii) variable consideration which is allocated entirely to a wholly unsatisfied performance obligation. After applying these optional exemptions, the aggregate amount of the transaction price allocated to unsatisfied or partially satisfied performance obligations as of June 30, 2024 and December 31, 2023 was insignificant.

Cost of Revenue, exclusive of amortization and depreciation – Cost of service revenues primarily consists of expenses related to delivering the Company’s service and providing support, including third-party hauler costs, costs of data center capacity, certain fees paid to various third parties for the use of their technology, services and data, and employee-related costs, such as salaries and benefits.

Cost of recyclable commodity revenues primarily consists of expenses related to purchases of OCC, ONP, aluminum, glass, pallets and other recyclable materials, and any associated transportation fees.

The Company recognizes the cost of revenue exclusive of any amortization or depreciation expenses, which are recognized in amortization and depreciation expenses on the condensed consolidated statements of operations.

Cash and Cash Equivalents – The Company considers all highly liquid investments purchased with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash in bank deposit accounts, which at times exceed the Federal Deposit Insurance Corporation insurance limits.

Accounts Receivable and Contract Balances – Accounts receivable consist of trade accounts receivable for services provided to customers. Accounts receivable is stated at the amount the Company expects to collect. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses and allowance for unbilled receivables based upon the Company’s assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Past-due balances and other higher-risk amounts are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. As of June 30, 2024 and December 31, 2023, the allowances for accounts receivable and contract assets were $3.0 million and $2.7 million, respectively.

In cases where customers pay for services in arrears, the Company accrues revenue in advance of billings as long as the criteria for revenue recognition are met, thus creating a contract asset (unbilled receivable). As of June 30, 2024 and December 31, 2023, the Company’s continuing operations had unbilled receivables of $54.9 million and $75.6 million, respectively. These unbilled balances were the result of services provided in the period, but not yet billed to the customer. During the six months ended June 30, 2024, the Company invoiced its customers $74.6 million pertaining to contract assets for services delivered prior to December 31, 2023. As further described in Note 4, $-0- million and $1.1 million of contract assets were classified to current assets of discontinued operations on the accompanying condensed balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Contract liabilities (deferred revenue) consist of amounts collected prior to having satisfied the performance obligation. The Company periodically invoices customers for recurring front load services in advance monthly basis. As of June 30, 2024 and December 31, 2023, the Company’s continuing operations had deferred revenue balances of $1.2 million and $1.5 million, respectively. During the six months ended June 30, 2024, the Company recognized $1.5 million of revenue that was included in the contract liabilities balance as of December 31, 2023. As further described in Note 4, $-0- million and $5.9 million of contract liabilities were classified to current liabilities held for sale on the accompanying condensed balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Accrued Hauler Expenses – The Company recognizes hauler costs and the cost of recyclable products when services are performed. Accounting for accrued hauler costs and the cost of recyclable commodities requires estimates and assumptions regarding the quantity of waste collected by the vendors and the frequencies of the collections. The Company estimates quantities and frequencies using historical transaction and market data based on the waste stream composition, equipment type, and equipment size. Accrued hauler expenses are presented within accrued expenses on the condensed consolidated balance sheets.

Fair Value Measurements – In accordance with U.S. GAAP, the Company groups its financial assets and financial liabilities at fair value in three levels, based on the markets in which the financial assets and financial liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuations for financial assets and financial liabilities traded in active exchange markets, such as the NYSE.

Level 2 – Valuations are obtained from readily available pricing sources via independent providers for market transactions involving similar financial assets and financial liabilities.

Level 3 – Valuations for financial assets and financial liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models, and similar techniques and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such financial assets or financial liabilities.

See Note 16 for further information regarding fair value measurements.

Redeemable Convertible Preferred Class A Stock – The Company recorded its redeemable convertible preferred class A stock at the allocated issuance price, less issuance costs on the dates of issuance, May 7, 2024. The redeemable convertible preferred class A stock is classified outside of permanent equity as temporary equity in the condensed consolidated balance sheet. The redeemable convertible preferred class A stock is redeemable at the holder’s option when the redemption will not result in an event of default or similar concept under any existing debt agreements; upon certain change in control events that are outside of the Company’s control such as a change of control of the Company; or an event of insolvency. Holders also have the rights to receive their liquidation preference upon an event of insolvency. The Company has not adjusted the carrying values of the redeemable convertible preferred class A stock since it was not probable of becoming redeemable at June 30, 2024. Subsequent adjustments to the carrying values will be made only when it becomes probable that such redemption will occur. See Note 12 for additional information.

Customer Acquisition Costs – The Company makes certain expenditures related to acquiring contracts for future services. These expenditures are capitalized and amortized in proportion to the expected future revenue from the customer, which in most cases results in straight-line amortization over the estimated life of the customer. Amortization of these customer acquisition costs is presented within amortization and depreciation on the condensed consolidated statements of operations.

Warrants – The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded in liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the liability-classified warrants are recognized as a component of other income (expense) on the consolidated statement of operations.

Earn-out Liabilities– Pursuant to the Merger Agreement, (i) Blocked Unitholders immediately before the Closing received a right to receive a pro rata portion of 186,064 shares of Class A Common Stock (the “Earn-Out Class A Shares”) and (ii) Rubicon Continuing Unitholders (as defined in Note 3) immediately before the Closing received a right to receive a pro rata portion of 1,112,605 Class B Units (as defined in Note 3) (“Earn-Out Units”) and an equivalent number of shares of the Company’s Class V common stock, par value $0.0001 (“Class V Common Stock”) (“Earn-Out Class V Shares”, and together with Earn-Out Class A Shares and Earn-Out Units, “Earn-Out Interests”), in each case, depending upon the performance of Class A Common Stock during the five year period after the Closing (the “Earn-Out Period”), as set forth below upon satisfaction of any of the following conditions (each, an “Earn-Out Condition”).

(1)

50% of the Earn-Out Interests if the volume weighted average price (the “VWAP”) of the Class A Common Stock equals or exceeds $112.00 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for twenty (20) of thirty (30) consecutive trading days during the Earn-Out Period; and

(2)

50% of the Earn-Out Interests if the VWAP of the Class A Common Stock equals or exceeds $128.00 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for twenty (20) of any thirty (30) consecutive trading days during the Earn-Out Period.

The Company accounts for these Earn-Out Interests as either equity-classified or liability-classified instruments based on an assessment of the specific terms (as further defined in Note 3) and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

Earn-Out Interests were classified as liability transactions at initial issuance, which offset against additional paid-in capital as of the Closing. At each period end, Earn-Out Interests are remeasured to their fair value, with the changes during that period recognized as a component of other income (expense) on the consolidated statement of operations. Upon issuance and release of the shares after each Earn-Out Condition is met, the related Earn-Out Interests will be remeasured to their fair value at that time with the changes recognized as a component of other income (expense), and such Earn-Out Interests will be reclassed to stockholders’ deficit on the consolidated balance sheet. As of June 30, 2024 and December 31, 2023, the Earn-Out Interests had a fair value of $-0- million and $0.1 million, respectively, with the changes in the fair value of $0.1 million recognized as a gain on change in fair value of earn-out liabilities under other income (expense) within the accompanying condensed consolidated statements of operations.

Noncontrolling Interest – Noncontrolling interest represents the Company’s noncontrolling interest in consolidated subsidiaries which are not attributable, directly or indirectly, to the controlling Class A Common Stock ownership of the Company.

Shares of Class V Common Stock are exchangeable into an equal number of Class A Common Stock. Shares of Class V Common Stock are non-economic voting shares in Rubicon Technologies, Inc., where shares of Class V Common Stock each have one vote per share.

The financial results of Holdings LLC were consolidated into Rubicon Technologies, Inc. and 1.67% and (14.42)% of Holdings LLC’s net loss during the three and six months ended June 30, 2024 was allocated to noncontrolling interests (“NCI”), respectively.

Income Taxes – Rubicon Technologies, Inc. is a corporation and is subject to U.S. federal as well as state income taxes including the income or loss allocated from its investment in Rubicon Technologies Holdings, LLC. Rubicon Technologies Holdings, LLC is taxed as a partnership for which the taxable income or loss is allocated to its members. Certain of the Rubicon Technologies Holdings, LLC operating subsidiaries are considered taxable corporations for U.S. income tax purposes. Prior to the Mergers, Holdings LLC was not subject to U.S. federal and certain state income taxes at the entity level.

The Company accounts for income taxes in accordance with ASC Topic 740, Accounting for Income Taxes (“ASC Topic 740”), which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax bases of its assets and liabilities by applying the enacted tax rates in effect for the year in which the differences are expected to reverse. Such net tax effects on temporary differences are reflected on the Company’s consolidated balance sheets as deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when the Company believes that it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company calculates the interim tax provision in accordance with the provisions of ASC Subtopic 740-270, Income Taxes; Interim Reporting. For interim periods, the Company estimates the annual effective income tax rate (“AETR”) and applies the estimated rate to the year-to-date income or loss before income taxes.

ASC Topic 740 prescribes a two-step approach for the recognition and measurement of tax benefits associated with the positions taken or expected to be taken in a tax return that affect amounts reported in the financial statements. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. As of June 30, 2024 or December 31, 2023, the Company has no tax positions that met this threshold and, therefore, has not recognized such benefits. The Company has reviewed and will continue to review the conclusions reached regarding uncertain tax positions, which may be subject to review and adjustment at a later date based on ongoing analyses of tax laws, regulations and interpretations thereof. To the extent that the Company’s assessment of the conclusions reached regarding uncertain tax positions changes as a result of the evaluation of new information, such change in estimates will be recorded in the period in which such determination is made. The Company reports income tax-related interest and penalties relating to uncertain tax positions, if applicable, as a component of income tax expense.

The Company’s income tax expense was $2.0 million and $0 for the three months ended June 30, 2024 and 2023, respectively, with an effective tax rate of 6.80% and (0.1)%, respectively. The Company’s income tax expense was $2.0 million and $0 million for the six months ended June 30, 2024 and 2023, respectively, with an effective tax rate of 17.57% and (0.1)%, respectively. The provision for income taxes differs from the amount that would result from applying statutory rates primarily due to the changes in the deferred tax valuation allowance including a release of valuation allowance on net operating losses, expense related to the gain on the sale of the SaaS business, loss attributable to noncontrolling interest, and differences in the deductibility of certain book and tax expenses, including the changes in fair value of earn-out liabilities, warrant liabilities and derivatives. The Company’s net operating losses utilized are limited under Section 382 and were generated during 2022.

During the six months ended June 30, 2024 and the year ended December 31, 2023, the Company recorded a full valuation allowance against its deferred tax assets. The Company intends to maintain this position until there is sufficient evidence to support the reversal of all or some portion of the allowance. The Company also has certain assets with indefinite lives for which the basis is different for book and tax. As a result, the Company is in a net deferred tax liability position of $0.3 million and $0.2 million as of June 30, 2024 and December 31, 2023, respectively.

Tax Receivable Agreement Obligation – The Company and Holdings LLC entered into a Tax Receivable Agreement (the “Tax Receivable Agreement” or “TRA”) with Rubicon Continuing Unitholders (as defined in Note 3) and Blocked Unitholders (as defined in Note 3) (together, the “TRA Holders”). Pursuant to the Tax Receivable Agreement, among other things, the Company is required to pay to the TRA Holders 85% of certain of the Company’s realized (or in certain cases deemed realized) tax savings as a result of certain tax benefits related to the transactions contemplated by the Merger Agreement and future exchanges of Class B Units for Class A Common Stock or cash. The actual tax benefit, as well as the amount and timing of any payments under the TRA, will vary depending on a number of factors, including the price of Class A Common Stock at the time of the exchange; the timing of future exchanges; the extent to which exchanges are taxable; the amount and timing of the utilization of tax attributes; the amount, timing and character of the Company’s income; the U.S. federal, state and local tax rates then applicable; the depreciation and amortization periods that apply to the increases in tax basis; the timing and amount of any earlier payments that the Company may have made under the TRA; and the portion of the Company’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.

The Company accounts for the effects of these increases in tax basis and associated payments under the TRAs if and when exchanges occur as follows:

recognizes a contingent liability for the TRA obligation when it is deemed probable and estimable, with a corresponding adjustment to additional paid-in-capital, based on the estimate of the aggregate amount that the Company will pay;

records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the exchange;

to the extent the Company estimates that the full benefit represented by the deferred tax asset will not be fully realized based on an analysis that will consider, among other things, the expectation of future earnings, the Company reduces the deferred tax asset with a valuation allowance; and

the effects of changes in any of the estimates and subsequent changes in the enacted tax rates after the initial recognition will be included in the Company’s net loss.

A TRA liability is determined and recorded under ASC 450, “Contingencies”, as a contingent liability; therefore, the Company is required to evaluate whether the liability is both probable and the amount can be estimated. Since the TRA liability is payable upon cash tax savings and the Company has not determined that positive future taxable income is probable based on the Company’s historical loss position and other factors that make it difficult to rely on forecasts, the Company has not recorded the TRA liability as of June 30, 2024 or December 31, 2023. The Company will evaluate this on a quarterly basis, which may result in an adjustment in future periods.

Earnings (Loss) Per Share (“EPS”) – Basic income (loss) per share is computed by dividing net income (loss) attributable to Rubicon Technologies, Inc. by the weighted-average number of shares of Class A Common Stock outstanding during the period.

Diluted income (loss) per share is computed giving effect to all potential weighted-average dilutive shares for the period. The dilutive effect of outstanding awards or financial instruments, if any, is reflected in diluted income (loss) per share by application of the treasury stock method or if converted method, as applicable. Stock awards are excluded from the calculation of diluted EPS in the event they are antidilutive or subject to performance conditions for which the necessary conditions have not been satisfied by the end of the reporting period. See Note 15 for additional information on dilutive securities.

Derivative Financial Instruments – From time to time, the Company utilizes derivative instruments as part of our overall strategy. The Company’s derivative instruments are recorded at fair value on the consolidated balance sheets. These derivative instruments have not been designated as hedges; therefore, both realized and unrealized gains and losses are recognized in earnings. For the purposes of cash flow presentation, realized and unrealized gains or losses are included under cash flows from operating activities. Upfront cash payments received upon the issuance of derivative instruments are included within cash flows from financing activities, while the prepayments made upon the issuance of derivative instruments are included within cash flows from investing activities within the consolidated statements of cash flows.

Stock-Based Compensation – The Company measures fair value of employee stock-based compensation awards on the date of grant and uses the straight-line attribution method to recognize the related expense over the requisite service period, and accounts for forfeitures as they occur. The fair value of equity-classified restricted stock units and performance-based restricted stock units is equal to the market price of Class A Common Stock on the date of grant. The liability-classified restricted stock units are recognized at their fair value that is equal to the market price of Class A Common Stock on the date of grant and remeasured to the market price of Class A Common Stock at each period-end with related changes in the fair value recognized in general and administrative expense on the consolidated statements of operations.

The Company accounts for nonemployee stock-based transactions using the fair value of the consideration received (i.e., the value of the goods or services) or the fair value of the equity instruments issued, whichever is more reliably measurable.

Note 2—Recent accounting pronouncements

Accounting pronouncements issued, but not adopted as of June 30, 2024

In November 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosure of significant segment expenses on an annual and interim basis. This ASU will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, this ASU should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact this ASU will have on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU will be effective for the annual periods beginning the year ended December 31, 2026. Early adoption is permitted. Upon adoption, this ASU can be applied prospectively or retrospectively. The Company is currently evaluating the impact this ASU will have on the Company’s consolidated financial statements.

Note 3—Revision of Prior Period Financial Statements

Revision of Previously Issued Condensed Consolidated Financial Statements

In connection with the preparation of the Company’s condensed consolidated financial statements for the quarter ended June 30, 2024, the Company noted that certain YA warrants (see Note 10) were improperly reclassified to equity from liability in the end of February 2024. Specifically, the Company (a) did not appropriately perform full analysis on all the terms within the agreement that could trigger liability classification resulting in an overstatement of shareholders’ equity and understatement of warrant liabilities; and (b) did not fair value warrant liabilities through the end of March 31, 2024 due to the reclassification of warrant liabilities to equity during the period ended March 31, 2024 resulting in an overstatement of the gain from the change in fair value of the YA warrants for the period ended March 31, 2024.

The Company has revised its condensed consolidated financial statements for the quarter ended March 31, 2024, and revised the impacted amounts within the accompanying notes to condensed consolidated financial statements. The Company elected to correct immaterial errors that it identified in the condensed consolidated financial statements as of and for the quarter ended March 31, 2024 previously issued.

Description of Revision Tables

The following tables present the revised amounts in the condensed consolidated financial statements as of and for the quarter ended March 31, 2024 including the revised amounts in the condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of stockholders’ deficit, and the condensed consolidated statements of cash flows. The Revision Reference column corresponds to the listing of revision adjustments noted immediately above.

Revised amounts in the condensed consolidated balance sheets:


	March 31, 2024
(in thousands)	As Previously Reported			Adjustments			As Revised			Revision Reference
Current liabilities:
Warrant liabilities	$	2,697		$	10,598		$	13,295		a, b
Total current liabilities	$	226,013		$	10,598		$	236,611
Total liabilities	$	333,270		$	10,598		$	343,868

Stockholders’ Deficit:
Additional paid-in capital	$	267,772		$	(9,772	)	$	258,000		a, b
Accumulated deficit	$	(410,475	)	$	(770	)	$	(411,245	)
Total stockholders’ deficit attributable to Rubicon Technologies, Inc.	$	(142,698	)	$	(10,542	)	$	(153,240	)	b
Noncontrolling interests	$	7,755		$	(56	)	$	7,699		b
Total stockholders’ Deficit	$	(134,943	)	$	(10,598	)	$	(145,541	)	b
Total Liabilities and Stockholders’ Deficit	$	198,327		$	-		$	198,327		a, b

Revised amounts in the condensed consolidated statements of operations:


	March 31, 2024
(in thousands)	As Previously Reported			Adjustments			As Revised			Revision Reference
Other Income (Expense):
Gain (loss) on change in fair value of warrant liabilities	$	10,577		$	(826	)	$	9,751		b
Total other expense	$	(2,802	)	$	(826	)	$	(3,628	)	b
Loss from continuing operations before income taxes	$	(16,472	)	$	(826	)	$	(17,298	)	b
Net loss from continuing operations	$	(16,484	)	$	(826	)	$	(17,310	)	b
Net loss	$	(17,153	)	$	(826	)	$	(17,979	)	b

Net loss from continuing operations attributable to noncontrolling interests	$	(1,437	)	$	(56	)	$	(1,493	)	b
Net loss from continuing operations attributable to Class A common stockholders	$	(15,047	)	$	(770	)	$	(15,817	)	b

Net loss from continuing operations per Class A Common shares – basis and diluted	$	(0.33	)	$	(0.01	)	$	(0.34	)	b

Condensed consolidated statements of stockholders’ deficit:

As Previously Reported:


	Common Stock – Class A				Additional Paid-in		Accumulated			Non controlling			Total
	Shares		Amount		Capital		Deficit			Interest			Deficit
Exercise and conversion of liability classified warrants		3,831,232	$	1	$	4,023	$	-		$	-		$	4,024

Reclassification of liability classified warrants to equity		-		-		10,845		-			-			10,845

Exercise and conversion of equity classified warrants		1,710,291		-		-		-			-			-

Net loss		-		-		-		(15,671	)		(1,482	)		(17,153	)

Balance, March 31, 2024, as previously reported		52,406,059	$	5	$	267,772	$	(410,475	)	$	7,755		$	(134,943	)

Revision impacts:


	Common Stock – Class A					Additional Paid-in			Accumulated			Non controlling		Total
	Shares			Amount		Capital			Deficit			Interest		Deficit
Exercise and conversion of liability classified warrants		1,710,291		$	-	$	1,073		$	-		$	-	$	1,073

Reclassification of liability classified warrants to equity		-			-		(10,845	)		-			-		(10,845	)

Exercise and conversion of equity classified warrants		(1,710,291	)		-		-			-			-		-

Net loss		-			-		-			(826	)		-		(826	)

Revision impacts to balance, March 31, 2024		-		$	5	$	(9,772	)	$	(826	)	$	-	$	(10,598	)

As Revised:


	Common Stock –				Additional					Non
	Class A				Paid-in		Accumulated			controlling			Total
	Shares		Amount		Capital		Deficit			Interest			Deficit
Exercise and conversion of liability classified warrants		5,541,523	$	1	$	5,096	$	-		$	-		$	5,097

Reclassification of liability classified warrants to equity		-		-		-		-			-			-

Exercise and conversion of equity classified warrants		-		-		-		-			-			-

Net loss		-		-		-		(16,497	)		(1,482	)		(17,979	)

Balance, March 31, 2024, as revised		52,406,059	$	5	$	258,000	$	(411,301	)	$	7,755		$	(145,541	)

Revised amounts in the condensed consolidated statements of cash flows:


	March 31, 2024
(in thousands)	As Previously Reported			Adjustments			As Revised			Revision Reference
Cash flows from operating activities:
Net loss	$	(17,153	)	$	(826	)	$	(17,979	)	b
Loss on change in fair value of warrant liabilities	$	(10,577	)	$	826		$	(9,751	)	b
Net cash flows from operating activities – continuing operations	$	(6,112	)	$			$	(6,112	)	b
Net cash flows from operating activities	$	(5,680	)	$	-		$	(5,680	)	b

Supplemental disclosures of non-cash investing and financing activities:
Reclassification of liability classified warrants to equity	$	10,845		$	(10,845	)	$	-		a

Revised amounts and language in the Note 16, Fair value measurements, of the notes to the condensed consolidated financial statements:

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis for level 2 within the fair value hierarchy as of the dates indicated (in thousands):


	As of March 31, 2024
Liabilities	Level 3 (previously reported)		Adjustments			Level 3 (as revised)
Warrant liabilities	$	-	$	(10,598	)	$	(10,598	)
Total	$	-	$	(10,598	)	$	(10,598	)

The roll-forward schedule for level 3 classified warrant liabilities related to YA Warrants is as follows (in thousands):

Schedule of warrant liabilities
Level 3 Roll-forward	YA Warrants Liabilities
December 31, 2023 balances	$	-
Reclassified from level 2		(18,601	)
Additions		-
Exercise of warrants		4,167
Changes in fair value		3,836
Reclassified to level 2		-
March 31, 2024 balances, as revised	$	(10,598	)

Warrant liabilities – The outstanding warrants which were classified as warrant liabilities, as of June 30, 2024, were the YA Warrant and the June 2023 Term Loan Warrants. The June 2023 Term Loan Warrants were classified as level 2. The YA warrant liabilities were classified to level 3 as of June 30, 2024 and level 2 as of December 31, 2023, respectively. The sole underlying asset of the outstanding warrant liabilities of level 2 warrant liabilities as of March 31, 2024 was Class A Common Stock, which is an observable input, however the value of the warrants themselves were not directly or indirectly observable. The fair value of the warrant liabilities for the June 2023 Term Loan Warrants were determined based on price of the underlying share and the terms of each warrant, specifically whether each warrant is exercisable for a fixed number of shares of Class A Common Stock, hence the value of the total shares a warrant is exercisable for is variable, or a fixed value of shares of Class A Common Stock thus the number of the total shares a warrant is exercisable for is variable. The exercise prices of the liability-classified warrants which were outstanding as of March 31, 2024 were minimal ($0.08 per Class A Common Stock share) and did not have significant impact to the fair value measurements of these warrants. The fair value of the YA Warrant liability was determined using the redemption value of the warrant upon the occurrence of a Fundamental Transaction, as defined in the Warrant Agreement. See Note 10 for further information regarding the warrant liabilities.

Note 4—Discontinued Operations and Business Disposition

Discontinued Operations

During the three months ended March 31, 2024, the Company commenced a strategic evaluation of its SaaS Business. As of March 31, 2024, the Company had committed to a plan to sell the business within one year and was actively marketing it in its current condition. The SaaS Business met the held for sale criteria and represented a strategic shift in the Company’s operations. As a result, the SaaS Business have been presented as discontinued operations and, as such, have been excluded from both continuing operations for all periods and the notes to the condensed consolidated financial statements have been adjusted on a retrospective basis.

The Company only has one reporting unit. The SaaS Business met the criteria for classification as held for sale and discontinued operations, therefore, goodwill is allocated to noncurrent assets of discontinued operations on the accompanying balance sheets as December 31, 2023 based on the relative fair value of the SaaS Business and the remaining business.

On May 7, 2024, the Company entered into an agreement to sell the SaaS Business to an entity affiliated with Andres Chico, chairman of the Company’s board of directors, and Jose Miguel Enrich, a beneficial owner of greater than 10% of the issued and outstanding Class A Common Stock and Class V Common Stock. Refer to Business disposition below for further discussion on the sale of the SaaS business.

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of the SaaS Business disposed as of May 7, 2024 (disposition date) and December 31, 2023 (in thousands):


Assets and Liabilities of Discontinued Operations	May 7, 2024		December 31, 2023
Accounts receivable, net	$	680	$	4,047
Contract assets, net		-		1,054
Prepaid expenses		83		108
Other current assets		129		48
Current assets of discontinued operations		892		5,257
Deferred commissions		142		-
Property and equipment, net		787		793
Goodwill		11,440		12,260
Intangible assets, net		318		550
Total assets of discontinued operations	$	13,579	$	18,860

Accrued expenses	$	645	$	356
Contract liabilities		6,697		5,860
Current liabilities of discontinued operations	$	7,342	$	6,216

The results of operations are recorded as net loss from discontinued operations, net of tax on the accompanying condensed consolidated statements of operations for all periods presented. The following table presents the aggregate results of discontinued operations of the SaaS Business for three months ended June 30, 2024 and 2023 (in thousands):


Results of Discontinued Operations	June 30, 2024			June 30, 2023
Revenue: Service	$	1,045		$	2,614
Cost of revenue (exclusive of amortization and depreciation): Service		440			887
Sales and marketing		593			800
Product development		277			656
General and administrative		79			234
Amortization and depreciation		112			270
Total costs and expense		1,501			2,847
Loss before income taxes		(456	)		(233	)
Pre-tax gain on sale of discontinued operations		59,674			-
Income taxes expenses		(1,881	)		-
Net income (loss) from discontinued operations, net of taxes	$	57,337		$	(233	)

The results of operations are recorded as net loss from discontinued operations, net of tax on the accompanying condensed consolidated statements of operations for all periods presented. The following table presents the aggregate results of discontinued operations of the SaaS Business for six months ended June 30, 2024 and 2023 (in thousands):

Results of Discontinued Operations	June 30, 2024			June 30, 2023
Revenue: Service	$	4,058		$	4,656
Cost of revenue (exclusive of amortization and depreciation): Service		1,440			1,374
Sales and marketing		2,093			1,630
Product development		977			1,307
General and administrative		279			193
Amortization and depreciation		394			518
Total costs and expense		1,501			2,847
Loss before income taxes		(1,125	)		(366	)
Pre-tax gain on sale of discontinued operations		59,674			-
Income taxes expenses		(1,881	)		-
Net income (loss) from discontinued operations, net of taxes	$	56,668		$	(366	)

Business Disposition

On May 7, 2024, the Company completed the sale of the SaaS Business to an entity affiliated with Andres Chico, chairman of the Company’s board of directors, and Jose Miguel Enrich, a beneficial owner of greater than 10% of the issued and outstanding Class A Common Stock and Class V Common Stock. The total consideration was $61.7 million, which was calculated based on total closing date consideration of $68.2 million minus the working capital adjustment of $6.5 million. In conjunction with the sale of the SaaS business, on May 7, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement” or “SPA”) with MBI Holdings, LP (the “Buyer”), which is also commonly controlled by Andres Chico and Jose Miguel Enrich. Pursuant to the SPA, the Company issued and sold to the Buyer 20,000 shares of Series A Convertible Perpetual Preferred Stock, at $0.0001 par value per share (the “Preferred Stock”), for an aggregate purchase price of $20 million. The Company evaluated both events and identified two units of accounting, which is the Asset Purchase Agreement (“APA”) of the sale of the SaaS business and the SPA of the issuance of Series A Convertible Perpetual Preferred Stock. As such, the total cash proceeds from the sale of the SaaS business and the issuance of Series A Convertible Perpetual Preferred Stock were allocated between the two transactions based on the relative fair value of the SaaS business and the Series A Convertible Perpetual Preferred Stock, resulting in $65.9 million allocated to the sale of the SaaS business and $16.1 million allocated to the issuance of the Series A Convertible Perpetual Preferred Stock (See Note 12).

The APA provides a potential earn-out payment to the Company of $12.5 million if the SaaS Business, after the transaction, achieves a certain annual recurring revenue target on or prior to December 31, 2024. The potential earn-out payment will be decreased by the amount of contingent payment of $2.5 million from the “Take-private Transaction” discussed below. Given that the earn-out payment depends on the SaaS business sold achieving a certain level of annual recurring revenue target, the earnout consideration is not accounted for as derivative. The Company records the earnout consideration at its fair value at the transaction date and determined that the fair value of the earn-out payment was $0.3 million at the closing of the transaction on May 7, 2024, and recognized a $0.3 million contingent consideration receivable on its condensed consolidated balance sheet as of June 30, 2024 since the fair value of the earn-out consideration did not change significantly. The Company will perform subsequent assessments at each reporting date to evaluate and adjust the fair value for the receivable, if needed.

Additionally, the APA also provides a contingent payment of $2.5 million from the Buyer if the shareholder approval of a “Take-private Transaction” with the Buyer or the Buyer’s affiliates occurs prior to December 31, 2024. In order for the Company to receive the contingent payment of $2.5 million, a business combination, a merger, or other change of control must occur between the Buyer or the Buyer’s Affiliates or the Buyer’s Parent resulting in a delisting and deregistration of the Company’s stock with the SEC. The payment of the $2.5 million is based on a binary event, which is a business combination, which either occurs or does not occur and is outside the control of the Company. Therefore, this contingent payment of $2.5 million does not qualify as a derivative, and is concluded as a contingent gain, which is recognized when it occurs.

To determine the gain derived from the sale of the SaaS business, the Company performed the calculation based on the allocated proceeds of the sale of the SaaS business and the closing balances of the SaaS businesses reported as of May 7, 2024, which consisted of total assets in the amount of $13.6 million, total liabilities of $7.3 million, for a net assets disposed of $6.3 million, compared to the allocated proceeds of $65.9 million. As such, the Company recognized $59.7 million in gain from the sale of the SaaS business on May 7, 2024.

The Company has only one reporting unit and evaluates goodwill for impairment at the single reporting unit level. As a result, there is no goodwill assigned specifically to the SaaS business and goodwill pertaining to the sale of the SaaS business is allocated based on the relative fair value of the SaaS Business and the remaining business. As such, the Company allocated goodwill in the amount of $11.4 million to the SaaS business at the close of the sale on May 7, 2024, at which such goodwill was part of total assets in the gain calculation above.

Note 5—Property and equipment

Property and equipment, net is comprised of the following as of June 30, 2024 and December 31, 2023 (in thousands):

Schedule of property and equipment
	June 30,			December 31,
	2024			2023
Computers, equipment and software	$	2,361		$	2,324
Furniture and fixtures		210			210
Leasehold improvements		1,495			1,441
Total property and equipment		4,066			3,975
Less accumulated amortization and depreciation		(3,600	)		(3,343	)
Total property and equipment, net	$	466		$	632

Property and equipment of discontinued operations:
Customer equipment	$	-		$	1,891
Less: accumulated amortization and depreciation		-			(1,098	)
Total property and equipment, net	$	-		$	793

Property and equipment amortization and depreciation expense of continuing operations for the three months ended June 30, 2024 and 2023 was $0.2 million and $0.3 million, respectively. Property and equipment amortization and depreciation expense of continuing operations for the six months ended June 30, 2024 and 2023 was $0.4 million and $0.7 million, respectively. As further described in Note 4, $1.9 million of customer equipment and $1.1 million of related accumulated depreciation were classified to noncurrent assets of discontinued operations on the accompanying condensed consolidated balance sheet as of December 31, 2023. On May 7, 2024, $2.0 million of customer equipment and $1.3 million of related accumulated depreciation were disposed as part of the sale of the SaaS business.

Note 6—Debt

Revolving Credit Facilities

Revolving Credit Facility – On December 14, 2018, the Company entered into a $60.0 million “Revolving Credit Facility” secured by all assets of the Company including accounts receivable, intellectual property, and general intangibles. The Revolving Credit Facility’s maturity was December 14, 2023 and bore an interest rate of SOFR plus 5.60%. On February 7, 2023, the Company entered into an amendment to the Revolving Credit Facility, which increased the maximum borrowing amount to $75.0 million and amended the interest rate to between 4.8% up to SOFR plus 4.9%. On March 22, 2023, the Company entered into another amendment which included a modification of the maturity date and a lender’s consent to an amendment to the Subordinated Term Loan agreement. In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company concluded that these Revolving Credit Facility amendments were debt modifications.

On June 7, 2023, the Company fully prepaid the borrowing under the Revolving Credit Facility in the amount of $48.6 million and terminated the facility. As a result, the Company recorded $2.6 million of a loss on extinguishment of debt obligations on the statement of operations for the year ended December 31, 2023.

June 2023 Revolving Credit Facility – On June 7, 2023, the Company entered into a $90.0 million “June 2023 Revolving Credit Facility” secured by the Company’s accounts receivable, all contracts and contract rights and general intangibles, with a maturity date of the earlier of (i) June 7, 2026 or (ii) 90 days prior to the maturity date of the June 2023 Term Loan (defined below) (the “Springing Maturity”). The June 2023 Revolving Credit Facility bears an interest rate of SOFR plus 4.25% (or 3.95% if the Company meets certain conditions defined in the agreement) (9.7% as of June 30, 2024). The borrowing capacity is calculated based on the Company’s borrowing base collateral as defined in the June 2023 Revolving Credit Facility agreement, which is comprised of qualified billed and unbilled receivables and the September 2023 Rodina Letter of Credit (as defined below). The fee on the average daily balance of unused loan commitments is 0.5%. Interest and fees are payable monthly in arrears on the first day of each month.

The June 2023 Revolving Credit Facility requires a lockbox arrangement, which provides for receipts to be swept daily to reduce borrowings outstanding at the discretion of the lender. This arrangement, combined with the existence of the subjective acceleration clause in the Line of Credit agreement, necessitates the Line of Credit be classified as a current liability on the consolidated balance sheets. The acceleration clause allows for amounts borrowed under the facility to become immediately due in the event of a material adverse change in the Company’s business condition (financial or otherwise), operations, properties or prospects, change of management, or change in control.

On September 22, 2023, an entity affiliated with Andres Chico and Jose Miguel Enrich issued a standby letter of credit in the amount of $15.0 million (the “September 2023 Rodina Letter of Credit”) to the lender of the June 2023 Revolving Credit Facility on behalf of the Company, which increased the Company’s borrowing base collateral under the facility by $15.0 million. The expiration date of the September 2023 Rodina Letter of Credit is September 30, 2024 with an automatic renewal option for one additional year through September 30, 2025.

On December 5, 2023, the Company entered into an amendment to the June 2023 Revolving Credit Facility. The amendment temporally modified the calculation methodology of the borrowing base collateral, resulting in its increase by $5.0 million through January 15, 2024, which was subsequently extended to March 15, 2024 with an option to be further extended to June 15, 2024. To date, the modified calculation methodology of the borrowing base has been extended on a month-to-month basis.

On May 7, 2024, the Company entered into an amendment to the June 2023 Revolving Credit Facility. Pursuant to the amendment, (i) the lender consented to the SaaS Business sale and (ii) the Company agreed to make a partial prepayment of $11.4 million upon close of the sale of SaaS Business. Concurrently, the Company executed a side letter with the lender of the June 2023 Revolving Credit Facility, which included additional non-financial covenants for certain time-based milestones in relation to potential transactions the Company may enter into in future periods, including an agreement of a sale of all or substantially all of the Company’s equity interests and assets or a merger. The side letter required the Company to initiate a sale process within 300 days of the completion of the sale of SaaS Business on May 7, 2024. The letter required two milestones of the sale process, (i) within four-months of May 7, 2024, the Company should enter into a binding letter of intent to consummate the sale of the Company and (ii) within ten-months of May 7, 2024, the Company should consummate the sale of the Company and repay the outstanding balance of the debts in full. If any of the milestones are not met and such failure is not cured by the Company in accordance with such terms, the June 2023 Revolving Credit Facility will become due in full within ten months of May 7, 2024. The Company prepaid the $11.4 million at the close of the sale of SaaS Business on May 7, 2024. The prepayment did not result a change in the borrowing capacity of June 2023 Revolving Credit Facility.

In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company concluded that these Revolving Credit Facility amendments were debt modifications and not extinguishments.

As of June 30, 2024, the Company’s total outstanding borrowings under the Line of Credit were $72.0 million and $0.2 million remained available to draw, after accounting for all the changes discussed above. The June 2023 Revolving Credit Facility is subject to certain financial covenants. As of June 30, 2024, the Company was in compliance with these financial covenants.

The Company capitalized $2.9 million in deferred debt charges related to the June 2023 Revolving Credit Facility during the year ended December 31, 2023, which has been recorded to prepaid expenses on the accompanying condensed consolidated balance sheet and are amortized over the remaining term of the June 2023 Revolving Credit Facility. The deferred debt charges balances as of June 30, 2024 and December 31, 2023 were $1.8 million and $2.3 million, respectively. Amortization of deferred debt charges related to the June 2023 Revolving Credit Facility were $0.2 million and $0.2 million for the three months ended June 30, 2024 and 2023, respectively. Amortization of deferred debt charges related to the June 2023 Revolving Credit Facility were $0.5 million and $0.2 million for the six months ended June 30, 2024 and 2023, respectively.

Term Loan Facilities

Term Loan – On March 29, 2019, the Company entered into a $20.0 million “Term Loan” agreement secured by a second lien on all assets of the Company including accounts receivable, intellectual property and general intangibles. The Term Loan was subsequently upsized to $60.0 million and bore an interest rate of LIBOR plus 9.5% with a maturity date of the earlier of March 29, 2024, or the maturity date of the Revolving Credit Facility.

On November 18, 2022, the Company entered into an amendment to the Term Loan agreement, in which the lender consented to the amendments to the Revolving Credit Facility agreement and the Subordinated Term Loan (as defined below) agreement. Per the amended Term Loan agreement, an additional fee was incurred in the amount of $2.0 million, out of which $1.0 million became due in cash and the other $1.0 million was accrued to the principal balance of the Term Loan as the Company did not repay the Term Loan in full on or before March 27, 2023. Furthermore, beginning on April 3, 2023, an additional $0.15 million fee accrued to the principal balance of the Term Loan each week thereafter until the Term Loan was fully repaid.

On February 7, 2023, the Company entered into an amendment, which (i) amended the interest rate to SOFR plus 9.6% and (ii) required the Company to make a prepayment of $10.3 million, including $10.0 million of the principal and $0.3 million of the prepayment premium. Pursuant to the amended agreement, the Company made a $10.3 million payment to the Term Loan lender on February 7, 2023 and recorded $0.8 million as a loss on extinguishments of debt obligations on the accompanying consolidated statements of operations.

On May 19, 2023, the Company entered into an amendment to the Term Loan agreement, which extended the maturity date to May 23, 2024.

In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company concluded that these Term Loan amendments were debt modifications.

On June 7, 2023, the Company fully prepaid the borrowing under the Term Loan in the amount of $40.5 million and terminated the facility. As a result, the Company recorded $2.5 million of a loss on extinguishment of debt obligations on the statement of operations for the year ended December 31, 2023.

Subordinated Term Loan – On December 22, 2021, the Company entered into a $20.0 million “Subordinated Term Loan” agreement secured by a third lien on all assets of the Company including accounts receivable, intellectual property and general intangibles. The Subordinated Term Loan was originally scheduled to mature on December 22, 2022, bore an interest rate of 15.0% through the original maturity and 14.0% thereafter. Pursuant to the Subordinated Term Loan agreement, the Company entered into warrant agreements and issued common unit purchase warrants (the “Subordinated Term Loan Warrants”).

On December 12, 2022, the Subordinated Term Loan Warrants were exercised and converted into Class A Common Stock. On December 30, 2022, the Company entered into an agreement with the lender of the Subordinated Term Loan, pursuant to which the Company agreed to compensate, in cash or shares of Class A Common Stock, the lender for the calculated amount between (a) the closing share price of Class A Common Stock on the business day immediately prior to the lender’s exercise of the Subordinated Term Loan Warrants on December 12, 2022 multiplied by the number of shares of Class A Common Stock issued for such exercise (the “December 2022 Warrant Shares”) and (b) the closing share price of Class A Common Stock on the business day immediately prior to the lender’s sale of the December 2022 Warrant Shares multiplied by the number of the December 2022 Warrant Shares sold by the lender (the “Subordinated Term Loan Warrants Make-Whole Agreement”). The Subordinated Term Loan Warrants Make-Whole Agreement expires on December 12, 2027.

The maturity of the Subordinated Term Loan was subsequently extended to December 31, 2023 with the amendment entered into on November 18, 2022. On March 22, 2023, the Company entered into an amendment modifying its maturity date to March 29, 2024, which was subsequently amended to May 23, 2024 with an amendment entered into on May 19, 2023. Concurrently, the Company entered into amendments to the Subordinated Term Loan Warrants agreements (see Note 10 for further information regarding the Subordinated Term Loan Warrants and the Subordinated Term Loan Warrants Make-Whole Agreement).

On June 7, 2023, the Company entered into an amendment to the Subordinated Term Loan agreement, which modified (a) its maturity to the earlier of (i) the scheduled maturity date (June 7, 2025, which the Company has an option to extend to June 7, 2026 upon achievement of certain conditions) and (ii) the maturity date of the June 2023 Revolving Credit Facility, unless the Springing Maturity applies, and (b) the interest rate the Subordinated Term Loan bears to 15%, of which 11% is to be paid in cash and 4% is to be paid in kind by capitalizing such interest accrued to the principal each month in arrears. Any accrued, capitalized and uncapitalized paid-in-kind interest charges will be due and payable in cash at maturity. Concurrently, the Company entered into an amendment to the Subordinated Term Loan Warrants agreements (see Note 10 for further information regarding the Subordinated Term Loan Warrants).

In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company concluded that these Subordinated Term Loan amendments were debt modifications.

On May 7, 2024, the Company entered into an amendment to the Subordinated Term Loan agreement. Pursuant to the amendment, the lender consented to the sale of the SaaS Business. Concurrently, the Company executed a side letter with the lender of the Subordinated Term Loan, which included additional non-financial covenants for certain time-based milestones in relation to potential transactions the Company may enter into in future periods, including an agreement of a sale of all or substantially all of the Company’s equity interest and assets or a merger. The side letter required the Company to initiate a sale process within 300 days of the completion of the sale of SaaS Business on May 7, 2024. The letter required two milestones of the sale process, (i) within four-months of May 7, 2024, the Company should enter into a binding letter of intent to consummate the sale of the Company and (ii) within ten-months of May 7, 2024, the Company should consummate the sale of the Company and repay the outstanding balance of the debts in full. If any of the milestones are not met and such failure is not cured by the Company in accordance with such terms, the Subordinated Term Loan will become due in full within ten months of May 7, 2024.

In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company concluded that these Subordinate Term Loan amendments were debt modifications and not extinguishments.

The Company capitalized $12.5 million in deferred debt charges related to the Subordinated Term Loan during the year ended December 31, 2023. Balance of deferred debt charges as of June 30, 2024 and December 31, 2023 was $7.9 million and $10.3 million, respectively. Amortization of deferred debt charges related to the Subordinated Term Loan agreement was $1.3 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively. Amortization of deferred debt charges related to the Subordinated Term Loan agreement was $2.4 million and $0.9 million for the six months ended June 30, 2024 and 2023, respectively.

June 2023 Term Loan – On June 7, 2023, the Company entered into a $75.0 million “June 2023 Term Loan” agreement secured by the Company’s intellectual property, with a maturity date of the earlier of (i) the scheduled maturity date (June 7, 2025, which the Company has an option to extend to June 7, 2026 upon achievement of certain conditions) and (ii) the maturity date of the June 2023 Revolving Credit Facility, unless the Springing Maturity applies. The June 2023 Term Loan bears an interest rate of the prime rate plus a margin of 8.75% or 8.25% if the Company meets certain conditions defined in the agreement. The Company had the option to pay the interest in kind each month in arrears by capitalizing such interest which accrues through August 31, 2023 as additional principal, and in such instance, the margin applicable for the interest rate was 10.25%. The Company elected to pay the interest accrued through August 31, 2023 in kind. The Company also has the option to pay in kind any excess interest over 13.5% after paying the first 13.5% in cash from September 1, 2023 through the maturity, and the Company elected to pay such excess interest in kind since September 2023. As of June 30, 2024, the applicable interest rate of the June 2023 Term Loan was 16.8%. At the time of any repayment of the June 2023 Term Loan, the Company is required to pay a fee in the amount of 12.0% of the principal repaid. Such repayment fee amount has been accrued as additional principal on the accompanying condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023. Beginning on October 7, 2023 until the June 2023 Term Loan is fully repaid, the lender has the option to elect to convert the outstanding principal into Class A Common Stock. The aggregate number of shares delivered to the lender cannot result in the lender’s ownership exceeding (i) 19.99% of the number shares of Class A Common Stock issued and outstanding or (ii) $10.0 million. Concurrently, the Company entered into warrant agreements and issued common stock purchase warrants (the “June 2023 Term Loan Warrants”) (see Note 10 for further information regarding the June 2023 Term Loan Warrants).

On May 7, 2024, the Company entered into an amendment to the June 2023 Term Loan agreement. Pursuant to the amendment, (i) the lender consented to the sale of SaaS Business and (ii) the Company agreed to make a partial prepayment of $45.6 million, including $43.4 million of the principal and $2.2 million of the accrued exit fee, upon close of the SaaS Business sale. On May 15, 2024, the Company executed a side letter with one of the three lenders of the June 2023 Term Loan, and interest rate (including cash interest and paid-in-kind interest) was capped at 14%. The side letter also included additional non-financial covenants for certain time-based milestones in relation to potential transactions the Company may enter into in future periods, including an agreement of a sale of all or substantially all of the Company’s equity interests and assets or a merger. The side letter required the Company to initiate a sale process within 300 days of the completion of the sale of SaaS Business on May 7, 2024. The letter required two milestones of the sale process, (i) within four-months of May 7, 2024, the Company should enter into a binding letter of intent to consummate the sale of the Company and (ii) within ten-months of May 7, 2024, the Company should consummate the sale of the Company and repay the outstanding balance of the debts in full. If any of the milestones are not met and such failure is not cured by the Company in accordance with such terms, the June 2023 Term Loan will become due in full within ten months of May 7, 2024.

In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company concluded that the prepayment of $45.6 million under the amendments to the June 2023 Term Loan was a partial extinguishment of the debt obligation and a debt modification for the remaining debt obligation. The Company recorded $8.5 million as a loss on extinguishments of debt obligations on the accompanying consolidated statements of operations for the partial extinguishment of the debt obligation.

The Company capitalized $24.0 million in deferred debt charges related to the June 2023 Term Loan during the ended December 31, 2023. Balance of deferred debt charges as of June 30, 2024 and December 31, 2023 was $6.6 million and $19.5 million, respectively. Amortization of deferred debt charges related to the June 2023 Term Loan agreement was $1.7 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively. Amortization of deferred debt charges related to the June 2023 Term Loan agreement was $4.3 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

The June 2023 Revolving Credit Facility, the June 2023 Term Loan and the Subordinated Term Loan are subject to certain cross-default provisions under the intercreditor agreement. In addition, the June 2023 Revolving Credit Facility, the June 2023 Term Loan and the Subordinated Term Loan agreements include covenants, which reduce the available borrowing base collateral under the June 2023 Revolving Credit Facility initially by $19.0 million (the “Minimum Excess Availability Reserve”). During the terms of the agreements, the Minimum Excess Availability Reserve could be decreased by up to $9.0 million, which will make the Minimum Excess Availability Reserve $10.0 million, upon the Company’s achievement of certain financial conditions defined in the agreements. As of June 30, 2024, the Minimum Excess Availability Reserve was $19.0 million. Furthermore, the June 202

Rubicon Technologies, Inc. 10-Q