PROG Holdings, Inc 8-K/A, filed Apr 7, 2026
PROG Holdings, Inc. (PRG)
8-K/A
2026-04-07
For: 2026-01-02
View Original
Added on
April 09, 2026
About this 8-K/A
PROG Holdings, Inc filed this 8-K/A on April 7, 2026, reporting on events of January 2, 2026.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 8-K/A
(Amendment No. 1)
________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): January 2, 2026
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Registrant’s telephone number, including area code: (385 ) 351-1369
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
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INTRODUCTION
On January 2, 2026, PROG Holdings, Inc (the "Company") filed a Current Report on Form 8-K (the "Original Form 8-K") announcing that on that date the Company, through PROG Beach, LLC, a wholly-owned subsidiary, had completed its previously announced acquisition (the "Acquisition") of P-Squared, LLC ("Purchasing Power") from Purchasing Power Parent, LLC, pursuant to the Unit Purchase Agreement, dated as of December 1, 2025.
This Amendment No. 1 to the Original Form 8-K is being filed solely for the purpose of amending Items 9.01(a) and (b). This Form 8-K/A should be read in conjunction with the Original Form 8-K.
The pro forma financial information included as Exhibit 99.3 to this Form 8-K/A has been presented for illustrative purposes only, as required by Form 8-K, and is not intended to, and does not purport to, represent what the combined company's actual results or financial condition would have been if the transactions had occurred on the relevant date, and is not intended to project future results or financial condition that the combined company may achieve following the Acquisition.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The audited consolidated financial statements of Purchasing Power as of and for the year ended December 31, 2024, the notes related thereto, and the independent auditor's report are filed as Exhibit 99.1 to this Form 8-K/A and incorporated by reference herein.
The unaudited condensed consolidated financial statements of Purchasing Power as of and for the nine months ended September 30, 2025 and the notes related thereto, are filed as Exhibit 99.2 to this Form 8-K/A and incorporated by reference herein.
(b) Pro Forma Financial Information
The unaudited pro forma combined financial information of the Company and Purchasing Power as of and for the nine months ended September 30, 2025 and for the year ended December 31, 2024 is filed as Exhibit 99.3 to this Form 8-K/A and incorporated by reference herein.
(d) Exhibits:
Exhibit No. | Description | ||||
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document) | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PROG Holdings, Inc. | |||||||||||
By: | /s/ Brian Garner | ||||||||||
Date: | April 6, 2026 | Brian Garner Chief Financial Officer | |||||||||
1 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-265601, No. 333-231463, No. 333-225385, No. 333-204014, No. 333-171113, No. 333-160357, No. 333-123426, No. 333-76026) of PROG Holdings, Inc. of our report dated March 16, 2026, except for the effects of the revision discussed in Note 2 to the consolidated financial statements, as to which the date is April 6, 2026, relating to the financial statements of P- Squared, LLC, which appears in this Current Report on Form 8-K. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia April 6, 2026 Exhibit 23.1
P-Squared, LLC Consolidated Financial Statements December 31, 2024 Exhibit 99.1
P-Squared, LLC Index December 31, 2024 Page(s) Report of Independent Auditors ........................................................................................................... 1–2 Consolidated Financial Statements Balance Sheet .............................................................................................................................................. 3 Statement of Operations and Comprehensive Loss .................................................................................... 4 Statement of Member’s Equity ..................................................................................................................... 5 Statement of Cash Flows ............................................................................................................................. 6 Notes to Financial Statements ............................................................................................................... 7–26
Report of Independent Auditors To the Board of Managers of P-Squared, LLC Opinion We have audited the accompanying consolidated financial statements of P-Squared, LLC and its subsidiaries (the “Company”), which comprise the consolidated balance sheet as of December 31, 2024, and the related consolidated statements of operations and comprehensive loss, of member’s equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are available to be issued.
2 Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements. In performing an audit in accordance with US GAAS, we • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia March 16, 2026, except for the effects of the revision discussed in Note 2 to the consolidated financial statements, as to which the date is April 6, 2026
P-Squared, LLC Consolidated Balance Sheet December 31, 2024 The accompanying notes are an integral part of these financial statements. 3 Assets Current assets Cash and cash equivalents (Note 3) 25,463,315$ Restricted cash (Notes 3 and 10) 7,220,857 Current portion of receivables, net (Notes 4 and 10) 323,019,433 Current portion of other customer receivables, net (Notes 4 and 10) 33,656,717 Other accounts receivable 31,233,227 Prepaid expenses 2,472,672 Inventories 1,690,348 Total current assets 424,756,569 Restricted cash (Notes 3 and 10) 2,457,696 Premises and equipment, net 30,557,632 Deferred tax assets 1,569,975 Receivables, net 6,524,736 Other customer receivables, net 672,210 Intangible assets, net 36,014,167 Goodwill 83,293,664 Other assets 4,845,951 Total assets 590,692,600$ Liabilities and Member's Equity Current liabilities Accounts payable 62,938,187$ Accrued expenses (Note 7) 37,079,453 Sales tax payable 7,530,695 Current portion of long-term debt 3,120,000 Operating lease liabilities 2,014,886 Total current liabilities 112,683,221 Noncurrent operating lease liabilities 2,657,951 Long-term debt, net (Notes 9 and 10) 489,084,077 Total liabilities 604,425,249 Commitments and contingencies (Note 12) Member's equity (13,732,649) Total liabilities and member's equity 590,692,600$
P-Squared, LLC Consolidated Statement of Operations and Comprehensive Loss Year Ended December 31, 2024 The accompanying notes are an integral part of these financial statements. 4 Revenues Product sales 536,222,207$ Finance income 7,657,847 Total revenues 543,880,054 Costs and expenses Cost of sales 323,614,135 Selling, general and administration expense 112,337,588 Depreciation and amortization expense 23,427,018 Bad debt expense 61,042,905 Loss on impairment of premises and equipment 178,680 Total costs and expenses 520,600,326 Operating income 23,279,728 Interest expense 37,861,869 Loss on debt extinguishment 684,762 Other, net 11,046 Loss before income tax benefit expense (15,277,949) Income tax benefit (126,392) Net loss and comprehensive loss (15,151,557)$
P-Squared, LLC Consolidated Statement of Member’s Equity Year Ended December 31, 2024 The accompanying notes are an integral part of these financial statements. 5 Total Member's Accumulated Member's Equity Deficit (Deficit) Equity Balances as of December 31, 2023 114,588,911$ (6,138,276)$ 108,450,635$ Distributions (107,031,727) - (107,031,727) Net loss - (15,151,557) (15,151,557) Balances as of December 31, 2024 7,557,184$ (21,289,833)$ (13,732,649)$
P-Squared, LLC Consolidated Statement of Cash Flows Year Ended December 31, 2024 The accompanying notes are an integral part of these financial statements. 6 Operating activities Net loss (15,151,557)$ Adjustments to reconcile net loss income to net cash flows from operating activities Depreciation 4,637,018 Amortization of discount and deferred loan costs 2,036,380 Amortization of intangible assets 18,790,000 Amortization of right-of-use assets from operating leases 1,950,657 Bad debt expense 61,042,905 Loss on impairment of premises and equipment 178,680 Write-off of debt issuance costs 684,762 Deferred income taxes (1,781,578) Changes in operating assets and liabilities Receivables (80,237,107) Other accounts receivable (3,521,370) Prepaid expenses (139,979) Inventories (1,369,866) Deposits, net (201,713) Accounts payable and sales tax payable 20,158,294 Accrued expenses 755,067 Operating lease liabilities (2,207,257) Net cash flows used in operating activities 5,623,336 Investing activities Capital expenditures (9,026,853) Payments on other customer receivables (67,933,660) Collections on other customer receivables 59,831,557 Net cash flows used in investing activities (17,128,956) Financing activities Distributions to members (107,031,727) Repayments of long-term debt (255,906,961) Borrowings of long-term debt 374,835,000 Repayments of revolving debt (15,520,000) Borrowings of revolving debt 15,520,000 Payment of deferred loan costs (7,872,342) Net cash flows from financing activities 4,023,970 Net change in cash, cash equivalents, and restricted cash (7,481,650) Cash, cash equivalents, and restricted cash Beginning of year 42,623,518 End of year 35,141,868$ Supplemental disclosure of cash flow information Cash paid during the year for: Interest 36,448,547$ Taxes 2,744,548$ Noncash investing activity Capital expenditures in accounts payable and accrued expenses 526,843$
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 7 1. Summary of Significant Accounting Policies Description of Business P-Squared, LLC and subsidiaries (“the Company”) are in the business of offering a specialty e- retailer experience to employees/members of participating organizations. The employee purchase program provides customers a disciplined and budget-friendly approach to purchasing products, generally over a twelve-month period, coupled with financial and credit education tools to support their long-term financial well-being. Products offered by the Company include name brand computers, electronics, home appliances, furniture, jewelry, fashion and beauty items, fitness equipment, educational services and vacation packages (collectively, “products”) and are complemented with financial wellness related information including financial wellness webinars and seminars, as well as credit management education and tools. The employee purchase programs allow employees of participating organizations to purchase products through payroll deduction plans over a six-, twelve-, or eighteen-month period. Basis of Presentation The consolidated financial statements for the year ended December 31, 2024, include the accounts of P-Squared, LLC, and its wholly owned subsidiaries, FPF Waveland, Inc, FSP III Kendrick Purchasing Power Holdings, Inc, Purchasing Power Holdings, LLC, Purchasing Power, LLC, Power Platform, LLC, Purchasing Power Funding I, LLC, Purchasing Power IT & Business Solutions India LLP, Purchasing Power Funding 2021-A, LLC, Purchasing Power Funding 2023-A, LLC and Purchasing Power Funding 2024-A, LLC. All intercompany accounts and transactions have been eliminated in consolidation. A separate statement of comprehensive income is required under FASB Accounting Standards Update (“ASU”) 2011-05; however, as net income is the only component of comprehensive income, the Company elected not to include a separate statement of comprehensive income because it would not be meaningful to the users of the financial statements. Revenue Recognition The Company accounts for revenue in accordance with FASB Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers. Revenue recorded from product sales, where we act in the capacity of a principal, is reported on a gross basis equal to the full amount of consideration to which we expect in exchange for the good or service transferred. Revenue from product sales is reported net of estimated returns and allowances and excludes sales taxes. Revenue recorded where we act in the capacity of an agent is reported on a net basis, exclusive of any consideration provided to the principal party in the transaction. Retail installment sales are stated at a zero-percentage interest rate, with terms of six, twelve or eighteen months. The principal versus agent evaluation is a matter of judgment that depends on the facts and circumstances of the arrangement and is dependent on whether we control the good or service before it is transferred to the customer or whether we are acting as an agent of a third party. This evaluation is performed separately for each performance obligation identified. For the majority of our contracts, we are considered the principal in the transaction with the customer and recognize revenue gross of any related vendor fees or costs. The Company also has certain agency arrangements, primarily within its service warranty and travel services businesses, where third parties control the goods or services provided to a customer, and we recognize revenue net of any fees owed to these third parties.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 8 The Company imputes financing income on all contracts with repayment terms greater than twelve months as well as the cost of sales and fees and taxes for those sales that are recognized on a net revenue basis, at an annual interest rate of 12.9%. The interest rate of 12.9% used to calculate imputed finance income has been determined by approximating the rate that would be charged to the customer based upon the average credit risk profile of our customer base if standalone financing contracts were entered into. The financing income is being amortized over the terms of the receivables using the interest method. The unearned portion of interest is classified as unearned revenue and is reflected as a reduction of receivables. Cost of sales relates solely to Product sales as Finance income is imputed from long term receivables using the interest method and does not generate associated costs to the business. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales with a corresponding increase to the reserve. Actual returns within the Company’s return policy guidelines are recorded as a reduction of sales when returned in the monthly period originated, or as a reduction to the reserve when originated in an earlier monthly period. Actual returns outside of the Company’s return policy guidelines are recorded as an increase to customer satisfaction expense within Selling, general and administration expense on the consolidated statement of operations and comprehensive loss. The following table disaggregates revenues by source: Sources of revenue: Federal government employees 80,433,331$ Non federal government employees 455,788,876 Product sales 536,222,207$ Federal government employees 1,148,677 Non federal government employees 6,509,170 Finance income 7,657,847$ Total revenues 543,880,054$ Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company maintains cash accounts at various financial institutions, which may at times exceed federally insured amounts and may at times exceed consolidated balance sheet amounts due to payments in transit. As of December 31, 2024, the Company’s restricted cash of $9,678,553, of which, $2,457,696 is classified as non- current. Restricted cash consists of cash held in various segregated bank accounts as required by the financing arrangements of the Company. Restricted cash classified as non-current relates to three reserve refunds, required to be maintained through maturity of these financing arrangements. Receivables Receivables consist of customer receivables, net of allowance for uncollectible accounts. The receivables are generally secured by the products and are collected in installments over a six to eighteen-month period. Receivables with a remaining twelve-month duration or less at the balance sheet date are classified as current and receivables with a greater than twelve-month duration remaining are classified as noncurrent on the consolidated balance sheet.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 9 The Company accounts for its allowance for uncollectible accounts using the current expected credit losses (“CECL”) model. The Company believes using a roll-rate methodology in conjunction with qualitative factors is the most reasonable methodology available as it is the best indicator of the lifetime of credit losses throughout the life of its customer receivables. The Company performs ongoing credit evaluations of the participating organizations’ financial condition. In addition, employees of the participating organizations must meet certain eligibility requirements, including minimum salary and length of employment, prior to participating in the purchase program. Receivables are deemed uncollectible when individual contracts become delinquent beyond 150 days as of the end of a monthly period. Receivables considered uncollectible are charged against the allowance for doubtful accounts. Recoveries of losses previously charged off are credited to the allowance for doubtful accounts. Receivables are generally pledged as collateral on related long-term debt. Other Accounts Receivable Other accounts receivable consists primarily of vendor rebate receivables and participating employer client withholding in transit remittances. Management evaluates the ability to collect other accounts receivable based upon a combination of factors. All other accounts receivable are short term in nature and are due from recurring vendors or employer clients with established payment histories. An allowance for credit loss is maintained, as necessary, based upon the length of time receivables are past due or the status of a vendor or client’s financial position. An expected loss model is utilized to assess potential future credit loss based on historical payment trends and a reasonable and supportable forecast. The Company writes off other accounts receivable when there is information that indicates a balance will not be collected. As of December 31, 2024, management determined that an allowance was not necessary. Inventories Inventories, consisting of products in transit from the supplier to the customer’s specific delivery destination, as well as returned products, are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out method. Provision for potentially obsolete or slow- moving inventory, if necessary, is made based on management’s analysis of inventory levels and future sales forecasts. Premises and Equipment Premises and equipment are stated at historical cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred, and additions and improvements that extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation is determined using the straight-line method over the estimated useful life of each asset, ranging from three to seven years. Leasehold improvements are amortized over the shorter of their estimated useful life of five years or the remaining term of the related lease. Right-of-use (“ROU”) assets are amortized over the term of the related lease and this amortization is included in lease expense in Selling, general and administration expense on the consolidated statement of operations and comprehensive loss. The amortization of all other premises and equipment is included in Depreciation and amortization expense on the consolidated statement of operations and comprehensive loss. Included in premises and equipment is the cost of internal-use software. Costs incurred during the application development stage are capitalized and once placed in service, are amortized over the
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 10 estimated useful life of the software of five years with amortization classified as depreciation expense. The Company expenses all costs related to the development of internal-use software other than those incurred during the application development stage. Variable Interest Entities – Securitizations and Credit Facilities The Company finances its receivable origination volume through the use of warehouse credit facilities and execution of securitization transactions, which both utilize special purpose entities (“SPEs”). In the warehouse credit facilities, the Company transfers receivables to SPEs. These subsidiaries, in turn, issue notes to the agents, collateralized by such assets and cash. The agents provide funding under the notes to the subsidiaries pursuant to an advance formula, and the subsidiaries forward the funds to the Company in consideration for the transfer of the assets. In the securitizations, the Company transfers receivables to SPEs structured as limited liability companies (“LLCs”), which issue one or more classes of asset-backed securities. The asset- backed securities are in turn sold to investors. The Company’s continuing involvement with the warehouse credit facilities and LLCs consist of servicing assets held by the SPEs and holding residual interests in the assets. These transactions are structured without recourse. The SPEs are considered variable interest entities (“VIE”), in accordance with ASC 810, Consolidation, and are consolidated because the Company has: (i) power over the significant activities of the entities and (ii) an obligation to absorb losses and the right to receive benefits from the VIEs which could be significant to the VIEs. Accordingly, the Company is the primary beneficiary of the VIEs and the receivables, borrowings under the warehouse credit facilities and, following a securitization, the related securitization notes payable remain on the consolidated balance sheet. Refer to Note 10 for further information. The Company is not required and does not currently intend to provide any additional financial support to the SPEs. While these wholly owned subsidiaries are included in the consolidated financial statements, these subsidiaries are separate legal entities and the receivables and cash held by these subsidiaries are legally owned by them and are not available to the Company’s creditors or creditors of the other subsidiaries. Debt Issuance Costs Debt issuance costs incurred relating to the issuance of fully funded debt are amortized over the term of the underlying loan agreements using the effective interest method. Debt issuance costs incurred relating to the issuance of debt accessed over time are amortized over the term of the underlying loan agreements using the straight-line interest method. The related amortization is included in interest expense in the consolidated statement of operations and comprehensive loss. The Company presents debt issuance costs related to fully funded debt in the consolidated balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Costs associated with accessing capital over time meet the definition of an asset and are presented as noncurrent in Other assets in the consolidated balance sheet. The total interest expense related to the amortization of debt issuance costs was $2,036,380 for the year ended December 31, 2024. Goodwill and Intangible Assets The Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets based on their estimated fair values. The excess purchase price over those fair
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 11 values is recognized as goodwill. The fair value assigned to intangible assets acquired is based on the Company’s estimates and management’s assumptions. The Company tests for goodwill impairment under ASU 2017-04. ASU 2017-04 eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. The Company performs its annual impairment evaluation of goodwill during the fourth quarter of its fiscal year or more frequently if an event or changes in circumstances indicate the asset might be impaired. A qualitative assessment is first performed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, an evaluation, based upon discounted cash flows is performed and requires management to estimate future cash flows, growth rates, and economic and market conditions. Based upon the qualitative assessment performed, management has determined that goodwill was not impaired as of December 31, 2024. Intangible assets consist of customer relationships, a trademark and proprietary processes, which are amortized on a straight-line basis over their estimated lives, which approximates the manner in which the economic benefits of the intangible assets will be consumed. Accrued Expenses Accrued expenses consist primarily of costs of sales, interest on debt, commissions, bonus and other accrued expenses. Shipping and Handling Costs The Company classifies amounts billed to customers for shipping and handling charges in product sales and the corresponding expenses in cost of sales in the consolidated statement of operations and comprehensive loss. Advertising Advertising costs are expensed as incurred except for direct response advertising, which is capitalized and amortized over its expected period of future benefits. Direct response advertising consists primarily of direct mailings that include advertisement for the Company’s products. As of December 31, 2024, $17,095 of capitalized advertising costs were reported on the consolidated balance sheet as Prepaid expenses. Advertising expense totaled $7,697,828 for the year ended December 31, 2024, and is included in Selling, general and administration expense in the consolidated statement of operations and comprehensive loss. Long-Lived Assets Long-lived assets, such as definite-lived intangible assets subject to amortization and premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its undiscounted estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the year ended December 31, 2024, there was a loss on impairment of premises and equipment of $178,680 and no impairment of nongoodwill intangible assets subject to amortization.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 12 Estimates and Uncertainties The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentrations For the year ended December 31, 2024, sales to customers within a specific client business channel totaled $80,433,331, or 15% of product sales and $1,148,677, or 15% of finance income in the year. Receivables from customers in this business channel totaled $53,631,093 or 15% of gross receivables and $5,685,389 or 15% of other customer receivables, as of December 31, 2024. The Company does not expect that this business channel’s operations will be significantly disrupted. Fair Value of Financial Instruments ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1), the next highest priority to inputs from observable data other than quoted prices (Level 2) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The carrying amounts of cash and cash equivalents, restricted cash, current receivables, accounts payable, accrued expenses and sales tax payable approximate fair value due to the short-term maturity of these instruments. The carrying amount of outstanding balances of the floating-rate debt would approximate fair value as the rates would be comparable to those at which the Company could currently borrow under similar terms. As such, the fair value of the floating rate debt was classified as a Level 2 measurement. Income Taxes P-Squared, LLC complies with ASU Topic 740, Income Taxes, which requires an asset and liability approach for financial reporting for income taxes. At inception, the Company adopted ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The ASU eliminates the requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations are required to classify all deferred tax assets and liabilities as noncurrent. Therefore, all of the Company’s deferred income taxes are classified as a net noncurrent amount. P-Squared, LLC is a limited liability company that has elected to be taxed as a partnership for federal income tax purposes. Accordingly, the members report their distributive share of P- Squared, LLC’s income, gains, losses, deductions and credits on their respective income tax returns. The consolidated financial statements do not reflect a provision for income taxes from P- Squared, LLC’s operations. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc are, however, taxable entities thus a provision for income taxes is reflected in the consolidated financial statements.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 13 FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc’s effective tax rate differs from the expected federal corporate tax due primarily to state income taxes and a federal valuation allowance. Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset or liability on the consolidated balance sheet as of December 31, 2024 was comprised of differences in amortization of intangibles, certain accrued expenses and interest limitation. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized on a more likely-than-not basis. The net deferred tax assets have been offset by a valuation allowance of $2,060,826 as of December 31,2024, due to the Company’s lack of U.S. taxable earnings history in relation to previously suspended interest expense. Undistributed earnings totaling approximately $3,000,000 of our foreign subsidiary in India are considered to be permanently reinvested and accordingly, no deferred U.S. income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. income tax. At the present time, it is not practicable to estimate the amount of U.S. income taxes that might be payable if these earnings were repatriated. At December 31, 2024, the Company had $0 estimated federal and state net operating loss carryforwards because all available NOLs were used on 2024 returns. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc are required to evaluate the recognition and measurement of uncertain tax positions (“UTPs”) by determining whether their tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. De-recognition of a tax benefit previously recognized results in FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc recording a tax liability that increases income tax expense and reduces ending members’ equity. Based on its analysis, FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc have determined that UTPs did not exist as of December 31, 2024. However, FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, ongoing analyses of and changes to tax laws, regulations and interpretations thereof. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc file income tax returns in the U.S. federal jurisdiction and in various U.S. states. Generally, FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc are no longer subject to income tax examinations by major taxing authorities for years before 2017. Sales Taxes The Company’s policy is to present taxes collected from customers and remitted to governmental authorities in its consolidated balance sheet. The Company reports the amounts collected as a current liability until remitted to the taxing authority, without impacting revenues or expenses.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 14 Leases In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which with subsequent amendments, requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a ROU model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective and adopted by the Company on January 1, 2022. The ROU assets are included in the Premises and equipment, net caption on the consolidated balance sheet while the operating lease liabilities are included in the Operating lease liabilities and Noncurrent operating lease liabilities captions on the consolidated balance sheet. Refer to Note 9 for additional information. Subsequent Events The Company has evaluated subsequent events for potential recognition and disclosure through March 16, 2026, the date the consolidated financial statements were available to be issued. In connection with the reissuance of the financial statements, the Company has evaluated subsequent events through April 6, 2026, the date the financial statements were available to be reissued.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 15 2. Revision of December 31, 2024 Financial Statements Following the issuance of the year ended December 31, 2024 financial statements, the Company discovered an error in its previously reported December 31, 2024 financial statements related to certain customer receivables. Upon further review of transactions, including consideration of relevant guidance within ASC 310, Receivables, the Company determined that for transactions in which it acts as an agent for revenue recognition purposes, receivables associated with amounts attributable to third parties, including cost of goods sold, taxes, and fees, should be accounted for separately from trade receivables. These amounts are presented separately on the Company's balance sheets, and interest is imputed over the applicable collection period. The Company believes the impact of these errors, when assessed quantitatively and qualitatively, are not material to the previously issued financial statements. However, the Company decided to revise its December 31, 2024 financial statements as follows: Balance Sheet as of December 31, 2024 As Reported Adjustment As Revised Current portion of receivables, net 357,759,149$ (34,739,716)$ 323,019,433$ Current portion of other customer receivables, net - 33,656,717 33,656,717 Total current assets 425,839,568 (1,082,999) 424,756,569 Receivables, net 7,228,481 (703,745) 6,524,736 Other customer receivables, net - 672,210 672,210 Total assets 591,807,134 (1,114,534) 590,692,600 Member's equity (12,618,115) (1,114,534) (13,732,649) Total liabilities and member's equity 591,807,134$ (1,114,534)$ 590,692,600$ Statement of Operations and Comprehensive Loss for As Reported Adjustment As Revised the year ended December 31, 2024 Product sales 540,086,090$ (3,863,883)$ 536,222,207$ Finance income 3,793,964 3,863,883 7,657,847 Statement of Member's Equity for the year ended December 31, 2024 As Reported Adjustment As Revised Accumulated deficit - December 31, 2023 (5,023,742)$ (1,114,534)$ (6,138,276)$ Total Member's Deficit Equity - December 31, 2023 109,565,169 (1,114,534) 108,450,635 Accumulated deficit - December 31, 2024 (20,175,299) (1,114,534) (21,289,833) Total member's deficit - December 31, 2024 (12,618,115) (1,114,534) (13,732,649) Statement of Cash Flows for the year ended December 31, 2024 As Reported Adjustment As Revised Operating activities Receivables (88,339,210)$ 8,102,103$ (80,237,107)$ Net cash flows used in operating activities (2,478,767) 8,102,103 5,623,336 Payments on other customer receivables - (67,933,660) (67,933,660) Collections on other customer receivables - 59,831,557 59,831,557 Net cash flows used in investing activities (9,026,853) (8,102,103) (17,128,956) As a result of the correction of this error, Notes 1 and 4 have been adjusted to reflect the impact of the changes.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 16 3. Cash and Cash Equivalents and Restricted Cash 2024 Cash and cash equivalents 25,463,315$ Restricted cash - current 7,220,857 Restricted cash - noncurrent 2,457,696 Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows 35,141,868$ 4. Receivables and Other Client Receivables, Net Receivables, net are comprised of retail installment sales contracts as of December 31, 2024: Receivables Other Customer Receivables Current Receivables 362,264,268$ 38,400,560$ Allowance for doubtful accounts (34,535,774) (3,660,844) Allowance for sales returns (1,541,589) - Unearned revenue (3,167,472) (1,082,999) 323,019,433$ 33,656,717$ Noncurrent Receivables 7,311,850$ 777,905$ Allowance for doubtful accounts (723,531) (74,160) Unearned revenue (63,583) (31,535) 6,524,736$ 672,210$ The combined receivables and other client receivables activity for the year ended December 31, 2024, in the allowance for doubtful accounts is as follows (includes current and noncurrent): Beginning balances 29,240,216$ Provision for bad debts 61,042,905 Charge-offs (62,214,138) Recoveries 10,925,326 Ending balances 38,994,309$
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 17 5. Premises and Equipment, Net Premises and equipment, net consist of the following at December 31, 2024: Useful Lives Computer software 5 years 32,658,079$ Computer equipment 3-5 years 3,451,505 Furniture and fixtures 7 years 469,500 Shorter of lease Leasehold improvements term or 5 years 1,678,536 ROU assets Lease term 9,372,477 47,630,097 Accumulated depreciation (17,072,465) 30,557,632$ Depreciation expense of $4,637,018 was recorded for the year ended December 31, 2024. 6. Intangible Assets, Net Intangible assets, net consist of the following at December 31, 2024: Life Customer relationships 10 125,000,000$ Trademark 10 27,400,000 Proprietary processes 10 35,500,000 187,900,000 Accumulated amortization (151,885,833) 36,014,167$ Amortization expense of $18,790,000 was recorded for each of the year ended December 31, 2024. Expected future aggregate amortization associated with these intangible assets subsequent to the year ended December 31, 2024, is as follows: Year Ending December 31, 2025 18,790,000$ 2026 17,224,167 36,014,167$
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 18 7. Accrued Expenses Accrued expenses consist of the following at December 31, 2024: Accrued broker commissions 9,844,860$ Accrued cost of sales 8,877,173 Other accrued expenses 18,357,420 Total accrued expenses 37,079,453$ 8. Income Taxes Federal and state income taxes are only allocated to the regarded entities in the Company. The Company is organized as a limited liability company and the members are liable for their proportionate share of the Company’s taxable income except for those subsidiaries that are separate taxpayers. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc are otherwise directly responsible for income taxes related to their proportional share of the Company’s taxable operations. The following reflects disclosure of the income tax (benefit) provision recognized by the Company. 2024 Income tax provision Current income tax provision - federal 1,553,775$ Current income tax provision - state 101,411 Deferred income tax provision - federal (1,568,707) Deferred income tax benefit - state (212,871) Income tax benefit (126,392)$ 2024 Federal statutory tax rate 21.00% State taxes, net of federal benefit 1.94 Permanent differences (0.68) Change in valuation allowance (19.26) Other (.22) Effective tax rate 2.78%
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 19 The tax effects of the Company’s temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their respective tax bases which give rise to deferred tax assets and liabilities at December 31, 2024 would be as follows: Deferred tax assets Reserves 3,144,034$ Loss carry forwards 96,943 Interest limitation 2,261,881 Operating lease liabilities 321,470 Other 34,409 Deferred tax assets 5,858,737 Valuation allowance (2,060,826) Net deferred tax assets 3,797,911 Deferred tax liabilities Premises, equipment and intangible assets (1,548,260) ROU assets (510,421) Other (169,255) Deferred tax liabilities (2,227,936) Net deferred taxes 1,569,975$ 9. Long-Term Debt The Company’s long-term debt at December 31, 2024 consists of the following: Note payable 2024 206,960,000 Asset backed notes Purchasing Power Funding I, Series A 40,850,250 Purchasing Power Funding I, Series B 5,649,750 Class A, Series 2023-A 34,222,222 Class B, Series 2023-A 9,777,778 Class A, Series 2024-A 109,880,000 Class B, Series 2024-A 27,870,000 Class C, Series 2024-A 26,220,000 Class D, Series 2024-A 17,990,000 Class E, Series 2024-A 18,400,000 497,820,000 Less: Debt discount 5,615,923 492,204,077 Less: Current portion of long-term debt 3,120,000 Long-term debt, net 489,084,077$
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 20 Year Ended December 31, 2024 On February 28, 2024, the Company entered into a loan agreement for asset backed fixed rate notes through a newly created, 100% wholly owned special purpose limited liability company, Purchasing Power Funding 2024-A, LLC (2024-A), whereby it issued $200,360,000 worth of notes across five classes (A-E). The Class A, B, C, D and E notes have fixed rates, through maturity, of 5.89%, 6.43%, 6.80%, 7.26% and 10.18%, respectively. The weighted average fixed interest rate through the revolving period is 6.60%. The revolving termination date and the final maturity date are February 16, 2026 and August 15, 2028, respectively. The notes can be called by the Company after eighteen months. On December 31, 2024, the outstanding balance on the 2024-A notes payable was $200,360,000. The 2024-A original debt issuance costs of $2,227,003 and a debt discount of $31,230 are reflected as a direct deduction from the carrying value of the associated debt liability, as a debt discount, on the consolidated balance sheet and are amortized over the remaining asset backed note payable period of 53.5 months. As of December 31, 2024, the remaining unamortized debt issuance costs were $1,806,453 and debt discount of $25,333. In connection with the closing of 2024-A, two Takeout Transactions occurred. Both Takeout Transactions occurred on February 28, 2024. Receivables totaling $114,941,890 were repurchased from Purchasing Power Funding I, LLC warehouse facility (PPF I) and $134,179,320 from 2023-A for a principal amount paid to those respective lenders of $93,000,000 and $108,500,000, respectively. PPF I and 2023-A continue to be active lending facilities with an outstanding balance post-closing of 2024-A. No amendments or extinguishments were made to either PPF I or 2023-A related to this transaction. In January and February of 2024, the Company exercised its call option to early extinguish Classes C and D of Series 2021-A. The Company incurred a total debt extinguishment loss of $678,007 due to early termination of the 2021-A credit facility. On August 29, 2024, the Company amended its August 24, 2022, loan agreement through its wholly owned special purpose limited liability company, PPF I, to extend the revolving termination date and the final maturity date to August 28, 2026 and February 26, 2027, respectively. The floating rate on the notes per annum for Class A is equal to 2.45% plus the greater of the one- month Secured Overnight Financing Rate (“SOFR”) or the floor rate of 1% and Class B, is equal to 7.10% plus the greater of the one-month SOFR or the floor rate of 1%. Fees for unused facility balances up to $150 million are assessed at 0.50% and 0.40% for balances less than 50% and over 50%, respectively, on the undrawn balance. As of December 31, 2024, the outstanding balance on the 2024 PPF I note payable was $46,500,000. Additional debt issuance costs related to the PPF I loan amendment of $2,037,540 were capitalized as Other assets on the consolidated balance sheet and are amortized over the remaining note payable period of 30 months along with PPF I loan debt issuance costs of $232,880. As of December 31, 2024, the remaining unamortized debt costs were $1,960,374. On August 29, 2024, the Company also entered into an agreement with existing lenders and new lenders for an incremental term loan of $112,075,000, at a rate of the greater of the one-month SOFR or the floor rate of 1% plus an applicable margin of 5.50% per annum. This incremental term loan increased the existing term loan outstanding balance as of August 29, 2024 from $95,925,000 to $208,000,000. The agreement includes an additional $10,000,000 revolver. As of December 31, 2024, the outstanding balance on the 2024 term note payable was $206,960,000 and $0 on the revolver. The note matures on August 29, 2029.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 21 The 2024 term note payable debt issuance costs of $3,565,569, along with original remaining term loan debt issuance costs of $513,509, are also reflected as a direct deduction from the carrying value of the associated debt liability, as a debt discount, on the consolidated balance sheet and are amortized over the remaining asset backed note payable period of 60 months. As of December 31, 2024, the remaining unamortized debt costs were $3,784,137. The Company used the proceeds from the issuance of the 2024 term note payable to provide a dividend of $104,287,179 to the Company’s Series A unitholders and pay expenses of $767,821. The Company retained $3,750,000 in proceeds. New debt issuance costs of $3,565,569 along with existing term loan debt issuance costs of $513,509 are being amortized over the term of the new 2024 note payable. The Company incurred a total debt extinguishment loss of $6,755 from unamortized debt issuance costs due to the change in the composition of the lenders. On August 29, 2024, the Company amended its Purchasing Power funding 2023-A, LLC (2023-A) warehouse loan facility agreement. This amendment adjusted EBITDA add-back and leverage ratio debt covenants. On December 24, 2024, the Company amended its 2023-A warehouse loan facility agreement. This amendment reduced the floating rate on the notes per annum for Class A to 2.10% plus the greater of the CP Rate (as defined in the agreement) or the floor rate of 0% and Class B to 7.10% plus the greater of the term SOFR plus 0.11448% or the floor rate of 3.0%. Fees for unused facility balances increased to 0.40% for the Class A loan undrawn balances. The amendment also adjusted applicable margin and post-default rates. The 2023-A original debt issuance costs of $2,313,958 and additional $11,000 are reflected as a direct deduction from the carrying value of the associated debt liability, as a debt discount, on the consolidated balance sheet and are amortized over the remaining note payable period of 55.5 months. As of December 31, 2024, the remaining unamortized debt issuance costs were $1,558,472. The Company’s debt agreements contain certain restrictive covenants which, among other matters, require maintenance of certain financial ratios. As of December 31, 2024, the Company was in compliance with all such requirements. Aggregate maturities of long-term debt for the year subsequent to December 31, 2024, are as follows: Year Ending December 31, 2025 3,120,000$ 2026 5,200,000 2027 53,780,000 2028 252,680,000 2029 183,040,000 497,820,000$
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 22 10. Variable Interest Entities The following table summarizes the assets and liabilities related to the Company’s consolidated VIEs at December 31, 2024: Restricted cash - current 5,066,891$ Restricted cash - noncurrent 2,457,696 Receivables and other customer receivables 375,591,832 Total assets 383,116,419$ Secured debt 290,860,000$ Total liabilities 290,860,000$ 11. Leases The Company accounts for leases in accordance with Topic 842, which was adopted on January 1, 2022, using the modified retrospective method. The Company’s office space and certain equipment are leased under operating leases. The Company leases the office space to limit exposure to risks related to ownership, such as fluctuations in real estate prices. In addition, the Company leases equipment primarily to support its operational needs. The Company only leases from reputable companies and the leased assets are not specialized in the Company’s industry. The Company has options to extend the lease term of certain office space in Atlanta, Georgia and Chennai, India, as well as certain equipment leases. The beginning of the noncancelable lease period for these leases ranged from 2019 to 2024 and the lease periods end between 2025 and 2029. These lease agreements contain 60-month renewal options for each of the office leases and 12-month renewals for certain equipment. The Company also has an early termination option after a 36-month noncancellable term for its 2024 Chennai, India office lease. As of December 31, 2024, the exercise of the renewal options for these leases was not reasonably certain and, as a result, the payments associated with these renewals are not included in the measurement of the lease liability and ROU asset. The Company is reasonably certain to not exercise the early termination option for the 2024 Chennai, India lease. The Company’s leases do not contain residual value guarantees nor are there any restrictions or covenants imposed by the leases. The significant assumptions or judgments include the determination of whether a contract contains a lease. The rate implicit in the Company’s lease contracts is not readily determinable. The Company adopted the following practical expedients in Topic 842 for all asset classes, which included (i) not being required to reassess whether any expired or existing contracts are or contain leases; (ii) not being required to reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases); (iii) not being required to reassess initial direct costs for any existing leases; and (iv) not recognizing ROU assets and lease liabilities that arise from short-term leases of twelve months or less for any class of underlying assets. The Company adopted the following practical expedient in Topic 842 for all asset classes, except office space leased assets: not allocating consideration in a contract between lease and nonlease (e.g., maintenance services) components.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 23 ROU assets, net of amortization (included in the Premises and equipment, net caption on the consolidated balance sheet) and operating lease liabilities (included in the Operating lease liabilities and Noncurrent operating lease liabilities captions on the consolidated balance sheet) were as follows as of December 31: 2024 ROU assets – operating 4,231,798$ Operating lease liabilities, current 2,014,886 Noncurrent operating lease liabilities 2,657,951 Lease cost and other information Operating lease cost (included in selling, general and administration expense) 1,950,657 Other information Operating cash outflows from operating leases (2,207,257) ROU assets obtained in exchange for new operating lease liabilities 1,165,147 Weighted-average remaining lease term (years) – operating leases 2.71 Weighted-average discount rate – operating leases 4.65 % The Company recognizes lease expense incurred or allocated in Selling, general and administration expense in the consolidated statement of operations and comprehensive loss. Lease expense related to operating leases, including lease expense incurred or allocated to the Company, was as follows: Year Ended December 31, 2024 Lease expense 1,963,861$
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 24 Future minimum lease payments due under noncancelable leases as of December 31, 2024 are as follows: Operating Leases Year Ending December 31, 2025 2,090,134$ 2026 2,001,549 2027 395,806 2028 293,384 2029 195,589 4,976,462 Less: Interest 303,625 4,672,837 Less: Current portion of operating lease liabilities 2,014,886 Noncurrent operating lease liabilities 2,657,951$ 12. Commitments and Contingencies As of December 31, 2024, the Company is not a party to any significant legal proceedings incidental to its business. 13. Member’s Interests The Company maintains a single class of member’s interest, which is not unitized and 100% of the equity interest is owned by the parent company. 14. Related Party Transactions Related party transactions were comprised of distributions totaling $107,031,727, which represented distributions to members as well as tax payments made on behalf of members. Related party transactions were comprised of management fees to a member totaling $1,000,000 for the year ended December 31, 2024 and is included in Selling, general and administration expense in the consolidated statement of operations and comprehensive loss. 15. Employee Benefit Plan The Company has a defined contribution plan covering substantially all employees. Full-time employees of the Company who have completed 90 days of service and are age 21 or older are eligible to receive employer contributions, as defined. The Company matched 50% of participant contributions up to 3% of qualifying compensation for the 2024 plan years. Contributions of $1,578,546 were made for the year ended December 31, 2024.
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 25 16. Subsequent Events On February 10, 2025, the Company amended the August 29, 2024 amended and restated the PPF I loan agreement to adjust the managed pool net roll ratio target definition for three monthly periods. On August 15, 2025, the Company amended its August 25, 2023, 2023-A loan agreement. This amendment extended the revolving termination date from August 25, 2025, to September 25, 2025, while the maturity date remained unchanged as February 25, 2028. In exchange, the Company agreed to pay upfront fees to the Class A and Class B lenders for the month-long extension period. The total borrowing commitment and Class A and Class B lenders remained unchanged. On September 23, 2025, the Company amended 2023-A. This amendment extended the revolving termination date from September 25, 2025, to October 24, 2025, while the maturity date remained unchanged as February 25, 2028. In exchange, the Company agreed to pay upfront fees to the Class A and Class B lenders for the month-long extension period. The total borrowing commitment and Class A and Class B lenders remained unchanged. On October 23, 2025, the Company amended its August 25, 2023, 2023-A loan agreement. The amendment extended the revolving termination date from October 24, 2025 to November 4, 2025, while the maturity date remained unchanged as February 25, 2028. In exchange, the Company agreed to pay upfront fees to the Class A and Class B lenders for the extension period. The total borrowing commitment and Class A and Class B lenders remained unchanged. On October 28, 2025, the Company amended its August 29, 2024 amended and restated PPF I loan agreement. The amendment changed the revolving termination date from August 28, 2026 to November 30, 2025, while the maturity date remained unchanged as February 26, 2027. In exchange, the Company agreed to pay amendment fees of $25,000 to the Class B lenders. The total borrowing commitment and Class A and Class B lenders remained unchanged. On November 4, 2025, the Company amended its August 25, 2023 2023-A loan agreement. The amendment extended the revolving termination date from November 4, 2025, to November 6, 2025, while the maturity date remained unchanged as February 25, 2028. The total borrowing commitment and Class A and Class B lenders remained unchanged. On November 6, 2025, the Company amended its August 25, 2023 2023-A loan agreement, to extend the revolving termination date and the final maturity date to October 25, 2027, and April 25, 2030, respectively. The floating rate on the notes per annum for Class A is equal to 2.05% plus the greater of the CP Rate (as defined in the agreement) or the floor rate of 0% and Class B is equal to 8.25% plus the greater of the term SOFR plus 0.11448% or the floor rate of 3.0%. Fees for unused facility balances up to $173.3 million are assessed at 0.40% for the Class A loan (up to $137.6 million) and 0.50% for the Class B loan (up to $35.7 million) undrawn balances. Additional debt issuance costs related to the 2023-A loan amendments of $1,237,771 were capitalized as Other assets on the consolidated balance sheet and are amortized over the remaining note payable period along with the original 2023-A unamortized loan debt issuance costs of $1,139,020. On January 2, 2026, PROG Beach LLC, a wholly owned subsidiary of PROG Holdings, Inc., a financial technology holding company that provides transparent and competitive payment options to consumers, acquired P-Squared LLC and its wholly owned subsidiaries (“Purchasing Power”)
P-Squared, LLC Notes to Consolidated Financial Statements December 31, 2024 26 from Purchasing Power Parent, LLC for $420,000,000 in cash. Purchasing Power became a wholly owned subsidiary of PROG Holdings, Inc. on that date. On January 2, 2026, in conjunction with PROG Holdings, Inc.’s acquisition of the Purchasing Power, the Company repaid the then remaining $193,840,000 balance of the Note payable 2024. In addition, restrictive covenants, among other matters, including maintenance of certain financial ratios, were removed from all Asset backed notes facility agreements, except for 2024-A. On February 6, 2026, the Company paid off the then remaining $24,015,203 balance of PPF I. On February 17, 2026, the Company paid off the then remaining $201,471,677 balance of 2024-A. On February 26, 2026, the Company entered into a loan agreement for asset backed fixed rate notes through a newly created, 100% wholly owned special purpose limited liability company, Purchasing Power Funding 2026-A, LLC (2026-A), whereby it issued $225,000,000 worth of Notes across five classes (A-E). The Class A, B, C, D and E Notes have fixed rates, through maturity, of 4.37%, 4.81%, 5.25%, 5.40% and 7.54%, respectively. The Company retained $5,000,000 Class of the E Notes. In connection with the closing of 2026-A, a Takeout Transaction occurred. The Takeout Transaction occurred on February 26, 2026. Receivables totaling $63,095,743 were taken out of 2023-A for a principal amount paid to those respective lenders of $50,000,000. 2023-A continues to be an active lending facility with an outstanding balance post-closing of 2026-A. No amendments or extinguishments were made to 2023-A related to this transaction.
P-Squared, LLC Condensed Consolidated Interim Financial Statements (Unaudited) September 30, 2025 Exhibit 99.2
P-Squared, LLC Index September 30, 2025 Page(s) Condensed Consolidated Financial Statements (Unaudited) Balance Sheet .............................................................................................................................................. 1 Statement of Operations and Comprehensive Loss .................................................................................... 2 Statement of Member’s Deficit ..................................................................................................................... 3 Statement of Cash Flows ............................................................................................................................. 4 Notes to Financial Statements ............................................................................................................... 5–25
P-Squared, LLC Condensed Consolidated Balance Sheet (Unaudited) September 30, 2025 The accompanying notes are an integral part of these condensed consolidated financial statements. Assets Current assets Cash and cash equivalents (Note 3) 8,249,307$ Restricted cash (Notes 3 and 10) 15,954,438 Current portion of receivables, net (Notes 4 and 10) 266,764,541 Current portion of other customer receivables, net (Notes 4 and 10) 34,397,082 Other accounts receivable 25,164,320 Prepaid expenses 4,380,188 Inventories 249,957 Total current assets 355,159,833 Restricted cash (Notes 3 and 10) 2,868,038 Premises and equipment, net 32,181,387 Deferred tax assets 3,856,022 Receivables, net 1,978,936 Other customer receivables, net 349,656 Intangible assets, net 21,921,663 Goodwill 83,293,664 Other assets 2,369,205 Total assets 503,978,404$ Liabilities and Member's Equity Current liabilities Accounts payable 24,213,835$ Accrued expenses (Note 7) 29,380,599 Sales tax payable 2,865,030 Current portion of long-term debt 4,680,000 Operating lease liabilities 2,282,470 Total current liabilities 63,421,934 Noncurrent operating lease liabilities 1,261,314 Long-term debt, net (Notes 9 and 10) 477,962,553 Total liabilities 542,645,801 Commitments and contingencies (Note 12) Member's deficit (38,667,397) Total liabilities and member's deficit 503,978,404$
P-Squared, LLC Condensed Consolidated Statement of Operations and Comprehensive Loss (Unaudited) Nine Months Ended September 30, 2025 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Revenues Product sales 344,080,330$ Finance income 6,764,093 Total revenues 350,844,423 Costs and expenses Cost of sales 204,265,188 Selling, general and administration expense 83,102,186 Depreciation and amortization expense 18,465,475 Bad debt expense 37,417,210 Total costs and expenses 343,250,059 Operating income 7,594,364 Interest expense 33,768,245 Other, net 56,421 Loss before income tax benefit (26,230,302) Income tax benefit (2,285,541) Net loss and comprehensive loss (23,944,761)$
P-Squared, LLC Condensed Consolidated Statement of Member’s Deficit (Unaudited) Nine Months Ended September 30, 2025 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Total Member's Accumulated Member's Equity Deficit Deficit Balances as of December 31, 2024 7,557,184$ (21,289,833)$ (13,732,649)$ Distributions (989,987) - (989,987) Net loss - (23,944,761) (23,944,761) Balances as of September 30, 2025 6,567,197$ (45,234,594)$ (38,667,397)$
P-Squared, LLC Condensed Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2025 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Operating activities Net loss (23,944,761)$ Adjustments to reconcile net loss to net cash flows from operating activities Depreciation 4,372,975 Amortization of discount and deferred loan costs 2,070,920 Amortization of intangible assets 14,092,500 Amortization of right-of-use assets from operating leases 1,509,783 Bad debt expense 37,417,210 Deferred income taxes (2,286,047) Changes in operating assets and liabilities Receivables 25,963,105 Other accounts receivable 6,068,907 Prepaid expenses and other (1,562,541) Inventories 85,356 Deposits, net 95,817 Accounts payable and sales tax payable (43,519,191) Accrued expenses (7,761,166) Operating lease liabilities (1,197,030) Net cash flows from operating activities 11,405,837 Investing activities Capital expenditures (7,247,153) Payments on other customer receivables (52,689,858) Collections on other customer receivables 52,031,076 Net cash flows used in investing activities (7,905,935) Financing activities Distributions to members (989,987) Repayments of long-term debt (49,580,000) Borrowings of long-term debt 39,000,000 Net cash flows used in financing activities (11,569,987) Net change in cash, cash equivalents, and restricted cash (8,070,085) Cash, cash equivalents, and restricted cash Beginning of period 35,141,868 End of period 27,071,783$ Supplemental disclosure of cash flow information Cash paid during the period for: Interest 31,700,750$ Taxes 989,987$ Noncash investing activity Capital expenditures in accounts payable and accrued expenses 191,488$
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 7 1. Summary of Significant Accounting Policies Description of Business and Seasonality P-Squared, LLC and subsidiaries (“the Company”) are in the business of offering a specialty e- retailer experience to employees/members of participating organizations. The employee purchase program provides customers a disciplined and budget-friendly approach to purchasing products, generally over a twelve-month period, coupled with financial and credit education tools to support their long-term financial well-being. Products offered by the Company include name brand computers, electronics, home appliances, furniture, jewelry, fashion and beauty items, fitness equipment, educational services and vacation packages (collectively, “products”) and are complemented with financial wellness related information including financial wellness webinars and seminars, as well as credit management education and tools. The employee purchase programs allow employees of participating organizations to purchase products through payroll deduction plans over a six-, twelve- or eighteen-month period. The Company’s revenue is subject to material seasonal fluctuations. Typically, there is higher revenue in the fourth quarter due to the timing of certain holidays and key retail shopping periods. Basis of Presentation The consolidated financial statements for the nine months ended September 30, 2025 include the accounts of P-Squared, LLC and its wholly owned subsidiaries FPF Waveland, Inc, FSP III Kendrick Purchasing Power Holdings, Inc, Purchasing Power Holdings, LLC, Purchasing Power, LLC, Power Platform, LLC, Purchasing Power Funding I, LLC, Purchasing Power IT & Business Solutions India LLP, Purchasing Power Funding 2021-A, LLC, Purchasing Power Funding 2023-A, LLC and Purchasing Power Funding 2024-A, LLC. We believe the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of September 30, 2025, our results of operations for the nine months ended September 30, 2025, and cash flows for the nine months ended September 30, 2025. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s 2024 consolidated financial statements. A separate statement of comprehensive income is required under FASB Accounting Standards Update (“ASU”) 2011-05; however, as net loss is the only component of comprehensive loss, the Company elected not to include a separate statement of comprehensive income because it would not be meaningful to the users of the financial statements. Revenue Recognition The Company accounts for revenue in accordance with FASB Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers. Revenue recorded from product sales, where we act in the capacity of a principal, is reported on a gross basis equal to the full amount of consideration to which we expect in exchange for the good or service transferred. Revenue from product sales is reported net of estimated returns and allowances and excludes sales taxes. Revenue recorded where we act in the capacity of an agent is reported on a net basis, exclusive of any consideration provided to the principal party in the transaction. Retail installment sales are stated at a zero-percentage interest rate, with terms of six, twelve or eighteen months. The principal versus agent evaluation is a matter of judgment that depends on the facts and circumstances of the arrangement and is dependent on whether we control the good or service
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 8 before it is transferred to the customer or whether we are acting as an agent of a third party. This evaluation is performed separately for each performance obligation identified. For the majority of our contracts, we are considered the principal in the transaction with the customer and recognize revenue gross of any related vendor fees or costs. The Company also has certain agency arrangements, primarily within its service warranty and travel services businesses, where third parties control the goods or services provided to a customer, and we recognize revenue net of any fees owed to these third parties. The Company imputes financing income on all contracts with repayment terms greater than twelve months as well as the cost of sales and fees and taxes for those sales that are recognized on a net revenue basis, at an annual interest rate of 12.9%. The interest rate of 12.9% used to calculate imputed finance income has been determined by approximating the rate that would be charged to the customer based upon the average credit risk profile of our customer base if standalone financing contracts were entered into. The financing income is being amortized over the terms of the receivables using the interest method. The unearned portion of interest is classified as unearned revenue and is reflected as a reduction of receivables. Cost of sales relates solely to Product sales as Finance income is imputed from long term receivables using the interest method and does not generate associated costs to the business. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales with a corresponding increase to the reserve. Actual returns within the Company’s return policy guidelines are recorded as a reduction of sales when returned in the monthly period originated, or as a reduction to the reserve when originated in an earlier monthly period. Actual returns outside of the Company’s return policy guidelines are recorded as an increase to customer satisfaction expense within Selling, general and administration expense on the condensed consolidated statement of operations and comprehensive loss. The following table disaggregates revenues by source: Sources of revenue: Federal government employees 31,311,310$ Non federal government employees 312,769,020 Product sales 344,080,330$ Federal government employees 615,532 Non federal government employees 6,148,561 Finance income 6,764,093$ Total revenues 350,844,423$ Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company maintains cash accounts at various financial institutions, which may at times exceed federally insured amounts and may at times exceed condensed consolidated balance sheet amounts due to payments in transit. As of September 30, 2025, the Company’s restricted cash is $18,822,476, of which, $2,868,038 is classified as non- current. Restricted cash consists of cash held in various segregated bank accounts as required by the financing arrangements of the Company. Restricted cash classified as non-current relates to three reserve refunds, required to be maintained through maturity of these financing arrangements.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 9 Receivables Receivables consist of customer receivables, net of allowance for uncollectible accounts. The receivables are generally secured by the products and are collected in installments over a six- to eighteen-month period. Receivables with a remaining twelve-month duration or less at the balance sheet date are classified as current and receivables with a greater than twelve-month duration remaining are classified as noncurrent on the condensed consolidated balance sheet. The Company accounts for its allowance for uncollectible accounts using the current expected credit losses (“CECL”) model. The Company believes using a roll-rate methodology in conjunction with qualitative factors is the most reasonable methodology available as it is the best indicator of the lifetime of credit losses throughout the life of its customer receivables. The Company performs ongoing credit evaluations of the participating organizations’ financial condition. In addition, employees of the participating organizations must meet certain eligibility requirements, including minimum salary and length of employment, prior to participating in the purchase program. Receivables are deemed uncollectible when individual contracts become delinquent beyond 150 days as of the end of a monthly period. Receivables considered uncollectible are charged against the allowance for doubtful accounts. Recoveries of losses previously charged off are credited to the allowance for doubtful accounts. Receivables are generally pledged as collateral on related long-term debt. Other Accounts Receivable Other accounts receivable consists primarily of vendor rebate receivables and participating employer client withholding in transit remittances. Management evaluates the ability to collect other accounts receivable based upon a combination of factors. All other accounts receivable are short term in nature and are due from recurring vendors or employer clients with established payment histories. An allowance for credit loss is maintained, as necessary, based upon the length of time receivables are past due or the status of a vendor or client’s financial position. An expected loss model is utilized to assess potential future credit loss based on historical payment trends and a reasonable and supportable forecast. The Company writes off other accounts receivable when there is information that indicates a balance will not be collected. As of September 30, 2025, management determined that an allowance was not necessary. Inventories Inventories, consisting of products in transit from the supplier to the customer’s specific delivery destination, as well as returned products, are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out method. Provision for potentially obsolete or slow- moving inventory, if necessary, is made based on management’s analysis of inventory levels and future sales forecasts. Premises and Equipment Premises and equipment are stated at historical cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred, and additions and improvements that extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation is determined using the straight-line method over the estimated useful life of each asset, ranging from three to ten years. Leasehold improvements are amortized over the shorter of their estimated useful life of five years or the remaining term of the related lease. Right-of-use (“ROU”) assets are amortized over the term of
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 10 the related lease and this amortization is included in lease expense in Selling, general and administration expense on the condensed consolidated statement of operations and comprehensive loss. The amortization of all other premises and equipment is included in Depreciation and amortization expense on the condensed consolidated statement of operations and comprehensive loss. Included in premises and equipment is the cost of internal-use software. Costs incurred during the application development stage are capitalized and once placed in service, are amortized over the estimated useful life of the software of five to ten years with amortization classified as depreciation expense. The Company expenses all costs related to the development of internal-use software other than those incurred during the application development stage. Variable Interest Entities – Securitizations and Credit Facilities The Company finances its receivable origination volume through the use of warehouse credit facilities and execution of securitization transactions, which both utilize special purpose entities (“SPEs”). In the warehouse credit facilities, the Company transfers receivables to SPEs. These subsidiaries, in turn, issue notes to the agents, collateralized by such assets and cash. The agents provide funding under the notes to the subsidiaries pursuant to an advance formula, and the subsidiaries forward the funds to the Company in consideration for the transfer of the assets. In the securitizations, the Company transfers receivables to SPEs structured as limited liability companies (“LLCs”), which issue one or more classes of asset-backed securities. The asset- backed securities are in turn sold to investors. The Company’s continuing involvement with the warehouse credit facilities and LLCs consist of servicing assets held by the SPEs and holding residual interests in the assets. These transactions are structured without recourse. The SPEs are considered variable interest entities (“VIE”), in accordance with ASC 810, Consolidation, and are consolidated because the Company has: (i) power over the significant activities of the entities and (ii) an obligation to absorb losses and the right to receive benefits from the VIEs which could be significant to the VIEs. Accordingly, the Company is the primary beneficiary of the VIEs and the receivables, borrowings under the warehouse credit facilities and, following a securitization, the related securitization notes payable remain on the condensed consolidated balance sheet. Refer to Note 10 for further information. The Company is not required and does not currently intend to provide any additional financial support to the SPEs. While these wholly owned subsidiaries are included in the condensed consolidated financial statements, these subsidiaries are separate legal entities and the receivables and cash held by these subsidiaries are legally owned by them and are not available to the Company’s creditors or creditors of the other subsidiaries. Debt Issuance Costs Debt issuance costs incurred relating to the issuance of fully funded debt are amortized over the term of the underlying loan agreements using the effective interest method. Debt issuance costs incurred relating to the issuance of debt accessed over time are amortized over the term of the underlying loan agreements using the straight-line interest method. The related amortization is included in interest expense in the condensed consolidated statement of operations and comprehensive loss. The Company presents debt issuance costs related to fully funded debt in the condensed consolidated balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Costs associated with accessing
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 11 capital over time meet the definition of an asset and are presented as noncurrent in Other assets in the condensed consolidated balance sheet. The total interest expense related to the amortization of debt issuance costs was $2,070,920 for the nine months ended September 30, 2025. Goodwill and Intangible Assets The Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets based on their estimated fair values. The excess purchase price over those fair values is recognized as goodwill. The fair value assigned to intangible assets acquired is based on the Company’s estimates and management’s assumptions. The Company tests for goodwill impairment under ASU 2017-04. ASU 2017-04 eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. The Company performs its annual impairment evaluation of goodwill during the fourth quarter of its fiscal year or more frequently if an event or changes in circumstances indicate the asset might be impaired. A qualitative assessment is first performed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, an evaluation, based upon discounted cash flows is performed and requires management to estimate future cash flows, growth rates, and economic and market conditions. There have not been any triggering events requiring a goodwill evaluation during the nine months ended September 30, 2025. Intangible assets consist of customer relationships, a trademark and proprietary processes, which are amortized on a straight-line basis over their estimated lives, which approximates the manner in which the economic benefits of the intangible assets will be consumed. Accrued Expenses Accrued expenses consist primarily of costs of sales, interest on debt, commissions, bonus and other miscellaneous accrued expenses. Shipping and Handling Costs The Company classifies amounts billed to customers for shipping and handling charges in product sales and the corresponding expenses in cost of sales in the condensed consolidated statement of operations and comprehensive loss. Advertising Advertising costs are expensed as incurred except for direct response advertising, which is capitalized and amortized over its expected period of future benefits. Direct response advertising consists primarily of direct mailings that include advertisement for the Company’s products. As of September 30, 2025, $74,905 of capitalized advertising costs were reported on the condensed consolidated balance sheet as Prepaid expenses. Advertising expense totaled $5,561,884 for the nine months ended September 30, 2025, and is included in Selling, general and administration expense in the condensed consolidated statement of operations and comprehensive loss. Long-Lived Assets Long-lived assets, such as definite-lived intangible assets subject to amortization and premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 12 that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its undiscounted estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the nine months ended September 30, 2025, there was no impairment of any long-lived assets. Estimates and Uncertainties The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentrations For the nine months ended September 30, 2025, sales to customers within a specific client business channel totaled $31,311,310 or 9.1% of product sales and $615,532 or 9.1% of finance income in the year. Receivables from customers in this business channel totaled $33,638,916 or 11.0% of gross receivables and $4,441,291 or 11% of other customer receivables, as of September 30, 2025. The Company does not expect that this business channel’s operations will be significantly disrupted. Fair Value of Financial Instruments ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1), the next highest priority to inputs from observable data other than quoted prices (Level 2) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The carrying amounts of cash and cash equivalents, restricted cash, current receivables, accounts payable, accrued expenses and sales tax payable approximate fair value due to the short-term maturity of these instruments. The carrying amount of outstanding balances of the floating-rate debt would approximate fair value as the rates would be comparable to those at which the Company could currently borrow under similar terms. As such, the fair value of the floating rate debt was classified as a Level 2 measurement. Income Taxes P-Squared, LLC complies with ASU Topic 740, Income Taxes, which requires an asset and liability approach for financial reporting for income taxes. At inception, the Company adopted ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The ASU eliminates the requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations are required to classify all deferred tax assets and liabilities as noncurrent. Therefore, all of the Company’s deferred income taxes are classified as a net noncurrent amount.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 13 P-Squared, LLC is a limited liability company that has elected to be taxed as a partnership for federal income tax purposes. Accordingly, the members report their distributive share of P- Squared, LLC’s income, gains, losses, deductions and credits on their respective income tax returns. The condensed consolidated financial statements do not reflect a provision for income taxes from P-Squared, LLC’s operations. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc are, however, taxable entities, thus a provision for income taxes is reflected in the condensed consolidated financial statements. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc’s effective tax rate differs from the expected federal corporate tax rate due primarily to release of a federal valuation allowance. Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset or liability on the condensed consolidated balance sheet as of September 30, 2025 was comprised of differences in amortization of intangibles, certain accrued expenses and interest limitation. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized on a more likely-than-not basis. A valuation allowance was determined not to be necessary at September 30, 2025. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of interest tax expense. The Company did not recognize interest or penalties as a component of income tax expense during the nine months ended September 30, 2025. There is no accrued interest and penalties as of September 30, 2025. Undistributed earnings totaling approximately $4,000,000 of our foreign subsidiary in India are considered to be permanently reinvested and accordingly, no deferred U.S. income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. income tax. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc are required to evaluate the recognition and measurement of uncertain tax positions (“UTPs”) by determining whether their tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. De-recognition of a tax benefit previously recognized results in FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc recording a tax liability that increases income tax expense and reduces ending member’s equity. Based on its analysis, FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc have determined that UTPs did not exist as of September 30, 2025. However, FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, ongoing analyses of and changes to tax laws, regulations and interpretations thereof. FSP III Kendrick Purchasing Power Holdings, Inc and FPF Waveland, Inc file income tax returns in the U.S. federal jurisdiction and in various U.S. states. Generally, FSP III Kendrick Purchasing
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 14 Power Holdings, Inc and FPF Waveland, Inc are no longer subject to income tax examinations by major taxing authorities for years before 2018. Sales Taxes The Company’s policy is to present taxes collected from customers and remitted to governmental authorities in its condensed consolidated balance sheet. The Company reports the amounts collected as a current liability until remitted to the taxing authority, without impacting revenues or expenses. Leases In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which with subsequent amendments, requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a ROU model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The ROU assets are included in the Premises and equipment, net caption on the condensed consolidated balance sheet while the operating lease liabilities are included in the Operating lease liabilities and Noncurrent operating lease liabilities captions on the condensed consolidated balance sheet. Refer to Note 11 for additional information. Subsequent Events The Company has evaluated subsequent events for potential recognition and disclosure through March 16, 2026, the date the condensed consolidated financial statements were available to be issued. In connection with the reissuance of the financial statements, the Company has evaluated subsequent events through April 6, 2026, the date the condensed consolidated financial statements were available to be reissued.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 15 2. Revision of September 30, 2025 Interim Financial Statements (Unaudited) Following the issuance of the financial statements for the 9-month period ended September 30, 2025, the Company discovered an error in its previously reported interim financial statements related to certain customer receivables. Upon further review of transactions, including consideration of relevant guidance within ASC 310, Receivables, the Company determined that for transactions in which it acts as an agent for revenue recognition purposes, receivables associated with amounts attributable to third parties, including cost of goods sold, taxes, and fees, should be accounted for separately from trade receivables. These amounts are presented separately on the Company's balance sheets, and interest is imputed over the applicable collection period. The Company believes the impact of these errors, when assessed quantitatively and qualitatively, are not material to the previously issued financial statements. However, the Company decided to revise its September 30, 2025 interim financial statements as follows: Balance Sheet as of September 30, 2025 As Reported Adjustment As Revised Current portion of receivables, net 302,244,622$ (35,480,081)$ 266,764,541$ Current portion of other customer receivables, net - 34,397,082 34,397,082 Total current assets 356,242,832 (1,082,999) 355,159,833 Receivables, net 2,360,127 (381,191) 1,978,936 Other customer receivables, net - 349,656 349,656 Total assets 505,092,938 (1,114,534) 503,978,404 Member's equity (37,552,863) (1,114,534) (38,667,397) Total liabilities and member's equity 505,092,938$ (1,114,534)$ 503,978,404$ Statement of Operations and Comprehensive Loss for As Reported Adjustment As Revised the 9-months ended September 30, 2025 Product sales 347,296,131$ (3,215,801)$ 344,080,330$ Finance income 3,548,292$ 3,215,801$ 6,764,093$ Statement of Member's Deficit for the 9-months ended September 30, 2025 As Reported Adjustment As Revised Accumulated deficit - December 31, 2024 (20,175,299)$ (1,114,534)$ (21,289,833)$ Total Member's Deficit - December 31, 2024 (12,618,115) (1,114,534) (13,732,649) Accumulated deficit - September 30, 2025 (44,120,060) (1,114,534) (45,234,594) Total member's deficit - September 30, 2025 (37,552,863)$ (1,114,534)$ (38,667,397)$ Statement of Cash Flows for the 9-months ended September 30, 2025 As Reported Adjustment As Revised Operating activities Receivables 25,304,323$ 658,782$ 25,963,105$ Net cash flows used in operating activities 10,747,055 658,782 11,405,837 Payments on other customer receivables - (52,689,858) (52,689,858) Collections on other customer receivables - 52,031,076 52,031,076 Net cash flows used in investing activities (7,247,153)$ (658,782)$ (7,905,935)$ As a result of the correction of this error, Notes 1 and 4 have been adjusted to reflect the impact of the changes.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 16 3. Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents and restricted cash as of September 30, 2025: Cash and cash equivalents 8,249,307$ Restricted cash - current 15,954,438 Restricted cash - noncurrent 2,868,038 Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows 27,071,783$ 4. Receivables and Other Client Receivables, Net Receivables, net are comprised of retail installment sales contracts as of September 30, 2025: Current Receivables Other Customer Receivables Receivables 299,067,642$ 39,413,793$ Allowance for doubtful accounts (29,848,587) (3,933,712) Allowance for sales returns (687,494) - Unearned revenue (1,767,020) (1,082,999) 266,764,541$ 34,397,082$ Noncurrent Receivables 2,664,884$ 423,454$ Allowance for doubtful accounts (650,438) (42,263) Unearned revenue (35,510) (31,535) 1,978,936$ 349,656$ The activity for the nine months ended September 30, 2025, in the allowance for doubtful accounts is as follows (includes current and noncurrent): Beginning balances 38,994,309$ Provision for bad debts 37,417,210 Charge-offs (49,233,526) Recoveries 7,297,007 Ending balances 34,475,000$
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 17 5. Premises and Equipment, Net Premises and equipment, net consist of the following at September 30, 2025: Useful Lives Computer software 5-10 years 39,147,915$ Computer equipment 3–5 years 3,928,188 Furniture and fixtures 7 years 522,745 Shorter of lease Leasehold improvements term or 5 years 1,398,265 ROU assets Lease term 8,978,285 53,975,398 Accumulated depreciation (21,794,011) 32,181,387$ Depreciation expense of $4,372,974 was recorded for the nine months ended September 30, 2025. 6. Intangible Assets, Net Intangible assets, net consist of the following at September 30, 2025: Life Customer relationships 10 125,000,000$ Trademark 10 27,400,000 Proprietary processes 10 35,500,000 187,900,000 Accumulated amortization (165,978,337) 21,921,663$ Amortization expense of $14,092,500 was recorded for the nine months ended September 30, 2025. Expected future aggregate amortization associated with these intangible assets subsequent to the nine months ended September 30, 2025, is as follows: 2025 4,697,500$ 2026 17,224,163 21,921,663$
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 18 7. Accrued Expenses Accrued expenses consist of the following at September 30, 2025: Accrued broker commissions 6,339,710$ Accrued cost of sales 5,036,461 Other accrued expenses 18,004,428 Total accrued expenses 29,380,599$ 8. Income Taxes Income tax benefit for the nine months ended September 30, 2025 was a benefit of $2,285,541. The effective income tax rate was 29.2% for the nine months ended September 30, 2025. 9. Long-Term Debt The Company’s long-term debt at September 30, 2025 consists of the following: Note payable 2024 204,880,000 Asset backed notes Purchasing Power Funding I, Series A 21,523,250 Purchasing Power Funding I, Series B 2,976,750 Class A, Series 2023-A 44,722,222 Class B, Series 2023-A 12,777,778 Class A, Series 2024-A 109,880,000 Class B, Series 2024-A 27,870,000 Class C, Series 2024-A 26,220,000 Class D, Series 2024-A 17,990,000 Class E, Series 2024-A 18,400,000 487,240,000 Less: Debt discount 4,597,447 482,642,553 Less: Current portion of long-term debt 4,680,000 Long-term debt, net 477,962,553$ On May 2, 2022, the Company entered into an agreement with an existing lender and several new lenders for a $110,000,000 note payable, at a rate of the greater of the one-month SOFR or the floor rate of 1% plus an applicable margin of 6.50% per annum. The agreement included an additional $10,000,000 revolver. The Note payable 2022 had a maturity date of May 2, 2027. The proceeds from the issuance of the Note payable 2022 were used to retire the then $78,377,300 balance on the 2019 note payable and distribute the remaining proceeds, net of issuance costs, to Series A unit holders. The retirement of the 2019 note payable was accounted for as an extinguishment. New debt issuance costs of $1,034,035 were being amortized over the term of the Note payable 2022. On August 29, 2024, the Company entered into an agreement with existing lenders and new lenders for an incremental term loan of $112,075,000, at a rate of the greater of the one-month SOFR or the floor rate of 1% plus an applicable margin of 5.50% per annum. This incremental term loan increased the then existing term loan outstanding balance as of August 29,
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 19 2024 from $95,925,000 (Note payable 2022) to $208,000,000 (Note payable 2024). The agreement included an additional $10,000,000 revolver. As of September 30, 2025, the outstanding balance on the Note payable 2024 term note payable was $204,880,000 and $0 on the revolver. The note had a maturity date of August 29, 2029. See Note 16 for subsequent events impacting long-term debt. The Company used the proceeds from the issuance of the Note payable 2024 to provide a dividend of $104,287,179 to the Company’s Series A unitholders and pay expenses of $767,821. The Company retained $3,750,000 in proceeds. The Note payable 2024 had debt issuance costs of $3,565,569, along with remaining debt issuance costs from Note payable 2022 of $513,509. These debt issuance costs are reflected as a direct deduction from the carrying value of the associated debt liability, as a debt discount, on the condensed consolidated balance sheet and were being amortized over the remaining note payable period. As of September 30, 2025, the remaining unamortized debt issuance costs were $3,143,649. On July 26, 2019, the Company entered into a loan agreement and subsequently issued a total of $58,178,336 aggregate principal of asset backed floating rate notes through a newly created, 100% wholly owned special purpose limited liability company, Purchasing Power Funding I, LLC (PPF I) as issuer. On August 24, 2022, the Company amended its July 26, 2019 PPF I facility to extend the revolving termination date and the final maturity date to August 23, 2024, and February 24, 2025, respectively. Debt issuance costs related to the PPF I loan amendment of $978,155 were capitalized as Other assets on the condensed consolidated balance sheet and were amortized over the remaining note payable period, along with existing PPFI debt issuance costs of $162,897. On August 29, 2024, the Company amended its August 24, 2022 PPF I facility to extend the revolving termination date and the final maturity date to August 28, 2026 and February 26, 2027, respectively. The floating rate on the notes per annum for Class A is equal to 2.45% plus the greater of the one-month Secured Overnight Financing Rate (“SOFR”) or the floor rate of 1% and Class B, is equal to 7.10% plus the greater of the one-month SOFR or the floor rate of 1%. Fees for unused facility balances up to $150 million are assessed at 0.50% and 0.40% for balances less than 50% and over 50%, respectively, on the undrawn balance. Additional debt issuance costs related to the PPF I loan amendment of $2,037,540 were capitalized as Other assets on the condensed consolidated balance sheet and are amortized over the remaining note payable period along with PPF I original loan debt issuance costs of $232,880. As of September 30, 2025, the remaining unamortized debt costs were $1,279,248. On February 10, 2025, the Company amended the August 29, 2024 amended and restated the PPF I loan agreement to adjust the managed pool net roll ratio target definition for three monthly periods. As of September 30, 2025, the outstanding balance on PPF I was $24,500,000. On August 25, 2023, the Company entered into a warehouse loan facility agreement with two new lenders through its wholly owned special purpose limited liability company, Purchasing Power Funding 2023-A, LLC (2023-A), whereby it issued $176,965,714 worth of notes across two classes (A-B). This facility included a two-year revolving period and a maturity date that was 30 months past the revolving termination date. The revolving termination date and the final maturity date were August 25, 2025 and February 25, 2028, respectively. The floating rate on the notes per annum for Class A was equal to 2.75% plus the greater of the CP Rate (as defined in the agreement) or the floor rate of 0% and Class B was equal to 8.25% plus the greater of the term SOFR plus 0.11448% or the floor rate of 3.0%. Fees for unused facility balances up to $177 million were assessed at 0.35% for the Class A loan (up to $137.6 million) and 0.50% for the Class B loan (up to $39.3 million) undrawn balances. The proceeds from 2023-A were used to fund Company growth. Debt issuance costs of $2,313,958 were capitalized as Other assets on the condensed consolidated balance sheet and were amortized over the term of the agreement. On August 29, 2024, the Company amended its 2023-A warehouse loan facility agreement. This amendment adjusted EBITDA add-back and leverage ratio debt covenants. On December 24, 2024, the Company
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 20 amended its 2023-A warehouse loan facility agreement. This amendment reduced the floating rate on the notes per annum for Class A to 2.10% plus the greater of the CP Rate (as defined in the agreement) or the floor rate of 0% and Class B to 7.10% plus the greater of the term SOFR plus 0.11448% or the floor rate of 3.0%. Fees for unused facility balances increased to 0.40% for the Class A loan undrawn balances. The amendment also adjusted applicable margin and post-default rates. The 2023-A original debt issuance costs of $2,313,958 and an additional $11,000 are reflected as Other assets on the condensed consolidated balance sheet and are amortized over the remaining term of the agreement. As of September 30, 2025, the remaining unamortized debt issuance costs were $1,187,154. On August 15, 2025, the Company amended its August 25, 2023 2023-A loan agreement. This amendment extended the revolving termination date from August 25, 2025, to September 25, 2025, while the maturity date remained unchanged as February 25, 2028. In exchange, the Company agreed to pay upfront fees to the Class A and Class B lenders for the month-long extension period. The total borrowing commitment and Class A and Class B lenders remained unchanged. On September 23, 2025, the Company amended 2023-A. This amendment extended the revolving termination date from September 25, 2025, to October 24, 2025, while the maturity date remained unchanged as February 25, 2028. In exchange, the Company agreed to pay upfront fees to the Class A and Class B lenders for the month-long extension period. The total borrowing commitment and Class A and Class B lenders remained unchanged. As of September 30, 2025, the outstanding balance on 2023-A was $57,500,000. On February 28, 2024, the Company entered into a loan agreement for asset backed fixed rate notes through a newly created, 100% wholly owned special purpose limited liability company, Purchasing Power Funding 2024-A, LLC (2024-A), whereby it issued $200,360,000 worth of notes across five classes (A-E). The Class A, B, C, D and E notes have fixed rates, through maturity, of 5.89%, 6.43%, 6.80%, 7.26% and 10.18%, respectively. The weighted average fixed interest rate through the revolving period is 6.60%. The revolving termination date and the final maturity date are February 16, 2026 and August 15, 2028, respectively. The notes could have been called by the Company after eighteen months. The 2024-A original debt issuance costs of $2,227,003 and a debt discount of $31,230 are reflected as a direct deduction from the carrying value of the associated debt liability, as a debt discount, on the condensed consolidated balance sheets and are amortized over the remaining asset backed note payable period. As of September 30, 2025, the remaining unamortized debt issuance costs were $1,433,693 and debt discount of $20,105. In connection with the closing of 2024-A, two Takeout Transactions occurred. Both Takeout Transactions occurred on February 28, 2024. Receivables totaling $114,941,890 were repurchased from PPF I and $134,179,320 from 2023-A for a principal amount paid to those respective lenders of $93,000,000 and $108,500,000, respectively. On September 30, 2025, the outstanding balance on 2024-A was $200,360,000. The Company’s debt agreements contained certain restrictive covenants which, among other matters, required maintenance of certain financial ratios. These covenants were removed through an amendment on 1/2/2026. Refer to Note 16 for subsequent events impacting long-term debt.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 21 Aggregate maturities of long-term debt for the years subsequent to September 30, 2025, are as follows: 2025 1,040,000$ 2026 5,200,000 2027 31,780,000 2028 266,180,000 2029 183,040,000 487,240,000$ 10. Variable Interest Entities The following table summarizes the assets and liabilities related to the Company’s consolidated VIEs at September 30, 2025: Restricted cash - current 15,014,539$ Restricted cash - noncurrent 2,868,038 Receivables and other customer receivables 360,590,340 Total assets 378,472,917$ Secured debt 282,360,000$ Total liabilities 282,360,000$ 11. Leases The Company accounts for leases in accordance with Topic 842, which was adopted on January 1, 2022, using the modified retrospective method. The Company’s office space and certain equipment are leased under operating leases. The Company leases the office space to limit exposure to risks related to ownership, such as fluctuations in real estate prices. In addition, the Company leases equipment primarily to support its operational needs. The Company only leases from reputable companies and the leased assets are not specialized in the Company’s industry. The Company has options to extend the lease term of certain office space in Atlanta, Georgia and Chennai, India, as well as certain equipment leases. The beginning of the noncancelable lease period for these leases ranged from 2019 to 2025 and the lease periods end between 2025 and 2029. These lease agreements contain 60-month renewal options for each of the office leases and 12-month renewals for certain equipment. The Company also has an early termination option after a 36-month noncancellable term for its 2025 Chennai, India office lease. As of September 30, 2025, the exercise of the renewal options for these leases was not reasonably certain and, as a result, the payments associated with these renewals are not included in the measurement of the lease liability and ROU asset. The Company is reasonably certain to not exercise the early termination option for the 2025 Chennai, India lease. The Company’s leases do not contain residual value guarantees nor are there any restrictions or covenants imposed by the leases. The significant assumptions or judgments include the determination of whether a contract contains a lease. The Company’s leases do not provide a readily determinable implicit interest rate and the Company used its incremental borrowing rate to measure the lease liability and associated right-of- use asset at the lease commencement date. The incremental borrowing rate is a fully collateralized
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 22 rate that considers the Company’s credit rating, market conditions and the term of the lease at the lease commencement date. The Company adopted the following practical expedients in Topic 842 for all asset classes, which included (i) not being required to reassess whether any expired or existing contracts are or contain leases; (ii) not being required to reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases); (iii) not being required to reassess initial direct costs for any existing leases; and (iv) not recognizing ROU assets and lease liabilities that arise from short-term leases of twelve months or less for any class of underlying assets. The Company adopted the following practical expedient in Topic 842 for all asset classes, except office space leased assets: not allocating consideration in a contract between lease and nonlease (e.g., maintenance services) components. ROU assets, net of amortization (included in the Premises and equipment, net caption on the condensed consolidated balance sheet) and operating lease liabilities (included in the Operating lease liabilities and Noncurrent operating lease liabilities captions on the condensed consolidated balance sheet) were as follows as of September 30, 2025: ROU assets – operating 3,299,140$ Operating lease liabilities, current 2,282,470 Noncurrent operating lease liabilities 1,261,314 Lease cost and other information Operating lease cost (included in Selling, general and administration expense) 1,509,783 Other information Operating cash outflows from operating leases (1,197,030) ROU assets obtained in exchange for new operating lease liabilities 509,148 Weighted-average remaining lease term (years) – operating leases 2.07 Weighted-average discount rate – operating leases 5.70 %
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 23 The Company recognizes lease expense incurred or allocated in Selling, general and administration expense in the condensed consolidated statement of operations and comprehensive loss. Lease expense related to operating leases, including lease expense incurred or allocated to the Company, was $1,519,721 for the nine months ended September 30, 2025. Future minimum lease payments due under noncancelable leases as of September 30, 2025 are as follows: Operating Leases 2025 580,424$ 2026 2,269,267 2027 463,385 2028 293,385 2029 195,589 3,802,050 Less: Interest 258,266 3,543,784 Less: Current portion of operating lease liabilities 2,282,470 Noncurrent operating lease liabilities 1,261,314$ 12. Commitments and Contingencies As of September 30, 2025, the Company is not a party to any significant legal proceedings incidental to its business. 13. Member’s Interests The Company maintains a single class of member’s interest, which is not unitized and 100% of the equity interest is owned by the parent company. 14. Related Party Transactions Related party transactions were comprised of distributions totaling $989,987, which represented tax payments made on behalf of members. In addition, related parties transactions included management fees to a member totaling $750,000 for the nine months ended September 30, 2025 and is included in Selling, general and administration expense in the condensed consolidated statement of operations and comprehensive loss. 15. Employee Benefit Plan The Company has a defined contribution plan covering substantially all employees. Full-time employees of the Company who have completed 90 days of service and are age 21 or older are eligible to receive employer contributions, as defined. Contributions of $663,548 were made for the nine months ended September 30, 2025.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 24 16. Subsequent Events On October 23, 2025, the Company amended its August 25, 2023, 2023-A loan agreement. The amendment extended the revolving termination date from October 24, 2025 to November 4, 2025, while the maturity date remained unchanged as February 25, 2028. In exchange, the Company agreed to pay upfront fees to the Class A and Class B lenders for the extension period. The total borrowing commitment and Class A and Class B lenders remained unchanged. On October 28, 2025, the Company amended its August 29, 2024 amended and restated PPF I loan agreement. The amendment changed the revolving termination date from August 28, 2026 to November 30, 2025, while the maturity date remained unchanged as February 26, 2027. In exchange, the Company agreed to pay amendment fees of $25,000 to the Class B lenders. The total borrowing commitment and Class A and Class B lenders remained unchanged. On November 4, 2025, the Company amended its August 25, 2023 2023-A loan agreement. The amendment extended the revolving termination date from November 4, 2025, to November 6, 2025, while the maturity date remained unchanged as February 25, 2028. The total borrowing commitment and Class A and Class B lenders remained unchanged. On November 6, 2025, the Company amended its August 25, 2023 2023-A loan agreement, to extend the revolving termination date and the final maturity date to October 25, 2027, and April 25, 2030, respectively. The floating rate on the notes per annum for Class A is equal to 2.05% plus the greater of the CP Rate (as defined in the agreement) or the floor rate of 0% and Class B is equal to 8.25% plus the greater of the term SOFR plus 0.11448% or the floor rate of 3.0%. Fees for unused facility balances up to $173.3 million are assessed at 0.40% for the Class A loan (up to $137.6 million) and 0.50% for the Class B loan (up to $35.7 million) undrawn balances. Additional debt issuance costs related to the 2023-A loan amendments of $1,237,771 were capitalized as Other assets on the condensed consolidated balance sheet and are amortized over the remaining note payable period along with the original 2023-A unamortized loan debt issuance costs of $1,139,020. On January 2, 2026, PROG Beach LLC, a wholly owned subsidiary of PROG Holdings, Inc., a financial technology holding company that provides transparent and competitive payment options to consumers, acquired P-Squared LLC and its wholly owned subsidiaries (“Purchasing Power”) from Purchasing Power Parent, LLC for $420,000,000 in cash. Purchasing Power became a wholly owned subsidiary of PROG Holdings, Inc. on that date. On January 2, 2026, in conjunction with PROG Holdings, Inc.’s acquisition of Purchasing Power, the Company repaid the then remaining $193,840,000 balance of the Note payable 2024. In addition, restrictive covenants, among other matters, including maintenance of certain financial ratios, were removed from all Asset backed notes facility agreements, except for 2024-A.
P-Squared, LLC Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2025 25 On February 6, 2026, the Company paid off the then remaining $24,015,203 balance of PPF I. On February 17, 2026, the Company paid off the then remaining $201,471,677 balance of 2024-A. On February 26, 2026, the Company entered into a loan agreement for asset backed fixed rate notes through a newly created, 100% wholly owned special purpose limited liability company, Purchasing Power Funding 2026-A, LLC (2026-A), whereby it issued $225,000,000 worth of Notes across five classes (A-E). The Class A, B, C, D and E Notes have fixed rates, through maturity, of 4.37%, 4.81%, 5.25%, 5.40% and 7.54%, respectively. The Company retained $5,000,000 of the Class E Notes. In connection with the closing of 2026-A, a Takeout Transaction occurred. The Takeout Transaction occurred on February 26, 2026. Receivables totaling $63,095,743 were taken out of 2023-A for a principal amount paid to those respective lenders of $50,000,000. 2023-A continues to be an active lending facility with an outstanding balance post-closing of 2026-A. No amendments or extinguishments were made to 2023-A related to this transaction.
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On January 2, 2026 (the “Closing Date”), PROG Holdings, Inc. (the “Company” or “PROG”) through its wholly owned subsidiary PROG Beach, LLC (the “Purchaser”), completed its previously announced acquisition (the “Acquisition”) of all of the issued and outstanding equity interests of P-Squared, LLC (the “Acquired Entity” or “Purchasing Power”) from Purchasing Power Parent, LLC (the “Seller”), pursuant to that certain Unit Purchase Agreement, dated as of December 1, 2025 (the “Purchase Agreement”). The Company completed the Acquisition for total consideration of approximately $432.9 million, subject to customary post-closing purchase price adjustments.
On January 2, 2026, to finance the Acquisition, the Company entered into a fourth amendment (the “Fourth Amendment”) by and among Progressive Finance Holdings, LLC, as borrower, the Company and certain subsidiaries of the Company, as guarantors, the several banks and other financial institutions from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, originally dated November 24, 2020 (as amended, the “Credit Agreement”). The Fourth Amendment provides for, among other things, the incurrence by the Company of a $125.0 million incremental term loan (the “Term Loan”), the proceeds of which, together with revolving borrowings of $135.0 million (the “Revolving Credit Facility”) and cash on hand, were used to finance the Acquisition and related costs (the “Debt Financing,” and together with the Acquisition, the “Transactions”).
Vive Financial (“Vive”), an omnichannel provider of second-look revolving credit products, had been an operating segment of the Company prior to October 20, 2025, when the Company sold Vive’s loans receivable portfolio pursuant to a Sale and Purchase Agreement (the “Agreement”) with Fortiva Funding LLC (“Fortiva”), an affiliate of Atlanticus Holdings Corporation. Under the Agreement, Fortiva acquired approximately $165.0 million in gross receivables related to credit card and retail loan accounts (the “Portfolio”) for total net consideration of approximately $143.9 million. The Portfolio represented substantially all of Vive’s receivables, which were Vive’s primary operating assets and revenue-generating activities. In conjunction with the sale, the Company determined that Vive would cease operations and began an orderly wind-down of its activities and obligations, which represents a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, Vive’s results are presented as discontinued operations in the Company's financial statements (the “Vive Discontinued Operations”).
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.
The unaudited pro forma condensed combined balance sheet as of September 30, 2025 gives effect to the Transactions as if those transactions had been completed on September 30, 2025 and combines the unaudited condensed consolidated balance sheet of the Company as of September 30, 2025, after giving effect to the Vive Discontinued Operations, with Purchasing Power’s unaudited condensed consolidated balance sheet as of September 30, 2025.
The unaudited pro forma condensed combined statement of earnings for the year ended December 31, 2024 and the nine months ended September 30, 2025 give effect to the Transactions as if those transactions had occurred on January 1, 2024, the first day of the Company’s fiscal year 2024 and combines the historical results of the Company and Purchasing Power. The unaudited pro forma condensed combined statement of earnings for the fiscal year ended December 31, 2024 combines the audited consolidated statement of earnings of the Company for the fiscal year ended December 31, 2024 and Purchasing Power’s audited consolidated statement of operations for the fiscal year ended December 31, 2024. The unaudited pro forma condensed combined statement of earnings for the nine months ended September 30, 2025 combines the unaudited consolidated statement of earnings of the Company, after giving effect to the Vive Discontinued Operations for the nine months ended September 30, 2025 with Purchasing Power’s unaudited consolidated statement of operations for the nine months ended September 30, 2025.
The historical financial statements of the Company and Purchasing Power have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are transaction accounting adjustments which are necessary to account for the Transactions, in accordance with U.S. GAAP. The unaudited pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The following unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any other business changes or synergies that may result from the Transactions.
The unaudited pro forma condensed combined financial information should be read in conjunction with:
•The accompanying notes to the unaudited pro forma condensed combined financial information;
•The historical unaudited financial statements of the Company as of and for the nine months ended September 30, 2025 and the related notes, included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2025, and are incorporated by reference herein;
•The historical unaudited financial statements of Purchasing Power as of and for the nine months ended September 30, 2025 and the related notes, as of and for the nine months ended September 30, 2025 within this Current Report on Form 8-K/A;
•The historical audited financial statements of the Company as of and for the fiscal year ended December 31, 2024 and the related notes, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and are incorporated by reference herein; and
•The historical audited financial statements of Purchasing Power as of and for the fiscal year ended December 31, 2024 and the related notes, as of and for the fiscal year ended December 31, 2024 within this Current Report on Form 8-K/A.
The unaudited pro forma condensed combined financial information presented is for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Transactions had been completed on the dates set forth above, nor is it indicative of the future results or financial position of the combined company.
PROG HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2025
(In Thousands)
| PROG Historical | Vive Discontinued Operations (Note 1) | Purchasing Power Reclassified or Aligned (Note 2) | Transaction Accounting Adjustments – Acquisition (Note 4) | Note | Transaction Accounting Adjustments – Financing (Note 6) | Note | PROG Pro Forma Combined | |||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 292,610 | $ | (2,864) | $ | 8,249 | $ | (443,531) | (a) | $ | 257,713 | (a) | $ | 112,177 | ||||||||||||||||||||||||||||||
Restricted cash | - | - | 18,823 | - | - | 18,823 | ||||||||||||||||||||||||||||||||||||||
| Accounts receivables, net | 63,742 | (33) | 293,908 | (7,303) | (b) | - | 350,314 | |||||||||||||||||||||||||||||||||||||
| Lease merchandise, net | 501,152 | - | - | - | - | 501,152 | ||||||||||||||||||||||||||||||||||||||
| Other customer receivables, net | - | - | 34,747 | (941) | (b) | - | 33,806 | |||||||||||||||||||||||||||||||||||||
| Loans receivable, net | 160,350 | (118,590) | - | - | - | 41,760 | ||||||||||||||||||||||||||||||||||||||
| Property and equipment, net | 22,506 | (1,039) | 1,887 | - | - | 23,354 | ||||||||||||||||||||||||||||||||||||||
| Goodwill and other intangibles, net | 357,835 | - | 132,216 | 291,262 | (c) | - | 781,313 | |||||||||||||||||||||||||||||||||||||
| Income tax receivable | 48,660 | (1,293) | - | - | - | 47,367 | ||||||||||||||||||||||||||||||||||||||
| Deferred income tax assets | 24,442 | (2,406) | 3,856 | (3,096) | (d) | - | 22,796 | |||||||||||||||||||||||||||||||||||||
| Prepaid expenses and other assets | 75,304 | (4,938) | 10,293 | - | 1,056 | (a) | 81,715 | |||||||||||||||||||||||||||||||||||||
| Assets of discontinued operations | - | 131,163 | - | - | - | 131,163 | ||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 1,546,601 | $ | - | $ | 503,979 | $ | (163,609) | $ | 258,769 | $ | 2,145,740 | ||||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity | ||||||||||||||||||||||||||||||||||||||||||||
| Accounts payable and accrued expenses | $ | 101,314 | $ | (3,291) | $ | 56,460 | $ | (333) | (e) | $ | - | $ | 154,150 | |||||||||||||||||||||||||||||||
| Deferred income tax liabilities | 105,707 | (14,860) | - | 16,165 | (d) | - | 107,012 | |||||||||||||||||||||||||||||||||||||
| Other liabilities | 41,486 | (35) | 3,543 | 396 | (f) | - | 45,390 | |||||||||||||||||||||||||||||||||||||
| Debt, net | 594,537 | - | 482,643 | (207,857) | (g) | 258,769 | (a) | 1,128,092 | ||||||||||||||||||||||||||||||||||||
| Liabilities of discontinued operations | - | 18,186 | - | - | - | 18,186 | ||||||||||||||||||||||||||||||||||||||
| Total liabilities | 843,044 | - | 542,646 | (191,629) | 258,769 | 1,452,830 | ||||||||||||||||||||||||||||||||||||||
| Shareholders' equity | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock | 41,039 | - | - | - | - | 41,039 | ||||||||||||||||||||||||||||||||||||||
| Additional paid-in capital | 356,745 | - | - | - | - | 356,745 | ||||||||||||||||||||||||||||||||||||||
| Retained earnings | 1,559,554 | - | - | (10,647) | (a) | - | 1,548,907 | |||||||||||||||||||||||||||||||||||||
1,957,338 | - | - | (10,647) | - | 1,946,691 | |||||||||||||||||||||||||||||||||||||||
| Less: treasury shares | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock | (1,253,781) | - | - | - | - | (1,253,781) | ||||||||||||||||||||||||||||||||||||||
| Member’s deficit | - | - | (38,667) | 38,667 | (h) | - | - | |||||||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 703,557 | - | (38,667) | 28,020 | - | 692,910 | ||||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,546,601 | $ | - | $ | 503,979 | $ | (163,609) | $ | 258,769 | $ | 2,145,740 | ||||||||||||||||||||||||||||||||
See the accompanying notes to the unaudited pro forma condensed combined financial information.
PROG HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
For The Nine Months Ended September 30, 2025
(In Thousands, Except Per Share Data)
| PROG Historical | Vive Discontinued Operations (Note 1) | Purchasing Power Reclassified or Aligned (Note 2) | Transaction Accounting Adjustments – Acquisition (Note 5) | Note | Transaction Accounting Adjustments – Financing (Note 6) | Note | PROG Pro Forma Combined | |||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||||||||
| Lease revenues and fees | $ | 1,777,814 | $ | - | $ | - | $ | - | $ | - | $ | 1,777,814 | ||||||||||||||||||||||||||||||||
| Product sales | - | - | 344,080 | - | - | 344,080 | ||||||||||||||||||||||||||||||||||||||
| Other revenues | 106,045 | (49,221) | 6,764 | - | - | 63,588 | ||||||||||||||||||||||||||||||||||||||
| 1,883,859 | (49,221) | 350,844 | - | - | 2,185,482 | |||||||||||||||||||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||||||||||||||||||||
| Depreciation of lease merchandise | 1,224,049 | - | - | - | - | 1,224,049 | ||||||||||||||||||||||||||||||||||||||
| Cost of product sales | - | - | 204,265 | - | - | 204,265 | ||||||||||||||||||||||||||||||||||||||
| Provision for lease merchandise write-offs | 131,688 | - | - | - | - | 131,688 | ||||||||||||||||||||||||||||||||||||||
| Operating expenses | 305,126 | (18,004) | 101,624 | (1,721) | (a) | - | 387,025 | |||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 52,422 | (28,887) | 37,417 | - | - | 60,952 | ||||||||||||||||||||||||||||||||||||||
| 1,713,285 | (46,891) | 343,306 | (1,721) | - | 2,007,979 | |||||||||||||||||||||||||||||||||||||||
| Operating profit | 170,574 | (2,330) | 7,538 | 1,721 | - | 177,503 | ||||||||||||||||||||||||||||||||||||||
| Interest expense | (29,547) | - | (33,768) | 16,092 | (b) | (11,781) | (b) | (59,004) | ||||||||||||||||||||||||||||||||||||
| Interest income | 4,426 | (9) | - | - | - | 4,417 | ||||||||||||||||||||||||||||||||||||||
| Earnings (losses) from continuing operations before income tax expense | 145,453 | (2,339) | (26,230) | 17,813 | (11,781) | 122,916 | ||||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 39,131 | (455) | (2,285) | 304 | (c) | (2,929) | (c) | 33,766 | ||||||||||||||||||||||||||||||||||||
| Net earnings (losses) from continuing operations | 106,322 | (1,884) | (23,945) | 17,509 | (8,852) | 89,150 | ||||||||||||||||||||||||||||||||||||||
| Earnings (losses) from discontinued operations, net of income tax | - | 1,884 | - | - | - | 1,884 | ||||||||||||||||||||||||||||||||||||||
| Net earnings (losses) | $ | 106,322 | $ | - | $ | (23,945) | $ | 17,509 | $ | (8,852) | $ | 91,034 | ||||||||||||||||||||||||||||||||
| Earnings per share – continuing operations (See note 5 (d)) | ||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 2.64 | $ | 2.22 | ||||||||||||||||||||||||||||||||||||||||
| Diluted | $ | 2.60 | $ | 2.17 | ||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||||||||||||||
| Basic | 40,220 | 40,220 | ||||||||||||||||||||||||||||||||||||||||||
| Diluted | 40,960 | 41,018 | ||||||||||||||||||||||||||||||||||||||||||
See the accompanying notes to the unaudited pro forma condensed combined financial information.
PROG HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
For the Year Ended December 31, 2024
(In Thousands, Except Per Share Data)
| PROG Historical | Purchasing Power Reclassified or Aligned (Note 2) | Transaction Accounting Adjustments – Acquisition (Note 5) | Note | Transaction Accounting Adjustments – Financing (Note 6) | Note | PROG Pro Forma Combined | |||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||
| Lease revenues and fees | $ | 2,366,489 | $ | - | $ | - | $ | - | $ | 2,366,489 | |||||||||||||||||||||||||||||||
Product sales | - | 536,222 | - | - | 536,222 | ||||||||||||||||||||||||||||||||||||
Other revenues | 32,592 | 7,658 | - | - | 40,250 | ||||||||||||||||||||||||||||||||||||
| 2,399,081 | 543,880 | - | - | 2,942,961 | |||||||||||||||||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||||||||||||||||||||
| Depreciation of lease merchandise | 1,621,101 | - | - | - | 1,621,101 | ||||||||||||||||||||||||||||||||||||
Cost of product sales | - | 323,614 | - | - | 323,614 | ||||||||||||||||||||||||||||||||||||
| Provision for lease merchandise write-offs | 178,338 | - | - | - | 178,338 | ||||||||||||||||||||||||||||||||||||
| Operating expenses | 386,278 | 135,954 | 9,402 | (a) | - | 531,634 | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 18,639 | 61,043 | - | - | 79,682 | ||||||||||||||||||||||||||||||||||||
| 2,204,356 | 520,611 | 9,402 | - | 2,734,369 | |||||||||||||||||||||||||||||||||||||
| Operating profit | 194,725 | 23,269 | (9,402) | - | 209,142 | ||||||||||||||||||||||||||||||||||||
| Interest expense | (38,816) | (38,547) | 15,854 | (b) | (15,706) | (b) | (77,215) | ||||||||||||||||||||||||||||||||||
| Interest income | 7,527 | - | - | - | 7,527 | ||||||||||||||||||||||||||||||||||||
| Earnings (losses) from continuing operations before income tax expense | 163,436 | (15,278) | 6,452 | (15,706) | 138,904 | ||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | (33,875) | (126) | (1,910) | (c) | (3,904) | (c) | (39,815) | ||||||||||||||||||||||||||||||||||
| Net earnings (losses) from continuing operations | 197,311 | (15,152) | 8,362 | (11,802) | 178,719 | ||||||||||||||||||||||||||||||||||||
Earnings (losses) from discontinued operations, net of income tax | (62) | - | - | - | (62) | ||||||||||||||||||||||||||||||||||||
| Net earnings (losses) | $ | 197,249 | $ | (15,152) | $ | 8,362 | $ | (11,802) | $ | 178,657 | |||||||||||||||||||||||||||||||
| Earnings per share – continuing operations (See note 5 (d)) | |||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 4.63 | $ | 4.20 | |||||||||||||||||||||||||||||||||||||
| Diluted | $ | 4.53 | $ | 4.10 | |||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||||||||||||||||||||
| Basic | 42,584 | 42,584 | |||||||||||||||||||||||||||||||||||||||
| Diluted | 43,549 | 43,607 | |||||||||||||||||||||||||||||||||||||||
See the accompanying notes to the unaudited pro forma condensed combined financial information.
PROG HOLDINGS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 - Basis of Presentation
The unaudited pro forma condensed combined financial information and related notes are prepared in accordance with Article 11 of Regulation S-X.
The Company’s and Purchasing Power’s historical financial statements were prepared in accordance with U.S. GAAP. As discussed in Note 2, certain reclassifications were made to align the Company and Purchasing Power’s financial statement presentation and adjusted for Vive Discontinued Operations. The Company is currently in the process of evaluating Purchasing Power’s accounting policies and as a result of that review, additional differences could be identified between the accounting policies of the two companies. With the information currently available, the Company has determined that no material adjustments are necessary to conform Purchasing Power’s financial statements to the accounting policies used by the Company.
The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, the Company is using the fair value concepts defined in ASC Topic 820, Fair Value Measurement, and based on the historical financial statements of the Company and Purchasing Power. Under ASC 805, all assets acquired and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value, while transaction costs associated with the business combination are expensed as incurred. The excess of consideration over the estimated fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.
The unaudited pro forma condensed combined balance sheet, as of September 30, 2025, the unaudited pro forma condensed combined statement of earnings for the nine months ended September 30, 2025 and the unaudited pro forma condensed combined statement of earnings for the year ended December 31, 2024, presented herein, are based on the historical financial statements of the Company and Purchasing Power.
•The unaudited pro forma condensed combined balance sheet as of September 30, 2025 is presented as if the Company’s acquisition of Purchasing Power had occurred on September 30, 2025 and combines the historical balance sheet of the Company as of September 30, 2025 with the historical balance sheet of Purchasing Power as of September 30, 2025.
•The unaudited pro forma condensed combined statement of earnings for the nine months ended September 30, 2025 has been prepared as if the Transactions had occurred on January 1, 2024 and combines the Company’s historical statement of earnings for the nine months ended September 30, 2025, after giving effect to the Vive Discontinued Operations, with Purchasing Power’s historical statement of operations for the nine months ended September 30, 2025.
•The unaudited pro forma condensed combined statement of earnings for the year ended December 31, 2024 has been prepared as if the Transactions had occurred on January 1, 2024 and combines the Company’s historical statement of earnings for the fiscal year ended December 31, 2024 with Purchasing Power’s historical statement of operations for the fiscal year ended December 31, 2024.
The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any other business changes or synergies that may result from the Transactions.
The pro forma adjustments represent management’s estimates based on information available as of the date of this filing and are subject to change as additional information becomes available and additional analyses are performed. For purposes of the unaudited pro forma condensed combined balance sheet, the estimated consideration has been allocated to the assets acquired and liabilities assumed of Purchasing Power based upon management’s preliminary estimate of their fair values. The Company has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair value of the assets to be acquired or liabilities assumed. Accordingly, the purchase price allocation and related adjustments reflected in the unaudited pro forma condensed combined financial information is preliminary and subject to revision based on a final determination of fair value as additional information becomes available and as additional analyses are performed.
Note 2 - Purchasing Power Reclassification Adjustments
During the preparation of the unaudited pro forma condensed combined financial information, management performed a preliminary analysis of Purchasing Power’s financial information to identify differences in accounting policies as compared to those of the Company and differences in financial statement presentation as compared to the presentation of the Company. With the information currently available, the Company has determined that no material adjustments are necessary to conform Purchasing Power’s financial statements to the accounting policies used by the Company. However, certain reclassification adjustments have been made to conform Purchasing Power’s historical financial statement presentation to the Company’s financial statement presentation. Management of the combined company is currently in the process of conducting a more detailed review of accounting policies and reclassifications, which could be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information presented herein.
Refer to the table below for a summary of reclassification adjustments made to present Purchasing Power’s historical condensed consolidated balance sheet as of September 30, 2025 to conform with that of the Company’s:
Purchasing Power Historical Condensed Consolidated Balance Sheet Line Items | PROG Historical Condensed Consolidated Balance Sheet Line Items | Purchasing Power As of September 30, 2025 (In Thousands) | Reclassification or Alignment (In Thousands) | Note | Purchasing Power Reclassified or Aligned As of September 30, 2025 (In Thousands) | |||||||||||||||||||||
Cash and cash equivalents | Cash and cash equivalents | $ | 8,249 | $ | - | $ | 8,249 | |||||||||||||||||||
Current portion of restricted cash | NEW: Restricted cash | 15,955 | - | (a) | 15,955 | |||||||||||||||||||||
Current portion of receivables, net | Accounts receivables, net | 266,765 | - | (b) | 266,765 | |||||||||||||||||||||
| Current portion of other customer receivables, net | NEW: Other customer receivables, net | 34,397 | - | (c) | 34,397 | |||||||||||||||||||||
Prepaid expenses | Prepaid expenses and other assets | 4,380 | - | 4,380 | ||||||||||||||||||||||
Other accounts receivable | Accounts receivables, net | 25,164 | - | (b) | 25,164 | |||||||||||||||||||||
| Inventories | Prepaid expenses and other assets | 250 | - | (d) | 250 | |||||||||||||||||||||
| Restricted cash | NEW: Restricted cash | 2,868 | - | (a) | 2,868 | |||||||||||||||||||||
Receivables, net | Accounts receivables, net | 1,979 | - | (b) | 1,979 | |||||||||||||||||||||
| Other customer receivables, net | NEW: Other customer receivables, net | 350 | - | (c) | 350 | |||||||||||||||||||||
Premises and equipment, net | Property and equipment, net | 32,181 | (30,294) | (e) | 1,887 | |||||||||||||||||||||
| Prepaid expenses and other assets | - | 3,294 | (e) | 3,294 | ||||||||||||||||||||||
| Deferred tax assets | Deferred income tax assets | 3,856 | - | 3,856 | ||||||||||||||||||||||
| Goodwill | Goodwill and other intangibles, net | 83,294 | - | 83,294 | ||||||||||||||||||||||
Intangible assets, Net | Goodwill and other intangibles, net | 21,922 | 27,000 | (e) | 48,922 | |||||||||||||||||||||
Other assets | Prepaid expenses and other assets | 2,369 | - | 2,369 | ||||||||||||||||||||||
Accounts payable | Accounts payable and accrued expenses | 24,214 | - | 24,214 | ||||||||||||||||||||||
Accrued expenses | Accounts payable and accrued expenses | 29,381 | - | 29,381 | ||||||||||||||||||||||
Sales tax payable | Accounts payable and accrued expenses | 2,865 | - | (f) | 2,865 | |||||||||||||||||||||
Current portion of long-term debt | Debt, net | 4,680 | - | (h) | 4,680 | |||||||||||||||||||||
Operating lease liabilities | Other liabilities | 2,282 | - | (g) | 2,282 | |||||||||||||||||||||
Noncurrent operating lease liabilities | Other liabilities | 1,261 | - | (g) | 1,261 | |||||||||||||||||||||
Long-term debt, net | Debt, net | 477,963 | - | (h) | 477,963 | |||||||||||||||||||||
| Member’s deficit | (38,667) | - | (38,667) | |||||||||||||||||||||||
a)Addition of a new financial statement line item to present Purchasing Power’s historical Current portion of restricted cash and Restricted cash;
b)Reclassification of Purchasing Power's historical Current portion of receivables, net, Other accounts receivables, and Receivables, net to Accounts receivables, net;
c)Addition of a new financial statement line item to present Purchasing Power's historical Current portion of other customer receivables, net, and Other customer receivables, net;
d)Reclassification of Purchasing Power’s historical Inventories, net to Prepaid expenses and other assets;
e)Reclassification of $27.0 million of internally developed technology included within Purchasing Power’s historical Premises and equipment, net to Goodwill and other intangibles, net, and $3.3 million to Prepaid expenses and other assets;
f)Reclassification of Purchasing Power’s historical Sales tax payables to Accounts payable and accrued expenses;
g)Reclassification of Purchasing Power’s historical Operating lease liabilities and Noncurrent operating lease liabilities to Other liabilities; and
h)Reclassification of Purchasing Power’s historical Current portion of long-term debt and Long-term debt, net to Debt, net.
Refer to the table below for a summary of adjustments made to present Purchasing Power’s historical unaudited condensed consolidated statement of operations for the nine months ended September 30, 2025 to conform with that of the Company's:
| Purchasing Power Historical Condensed Consolidated Statements of Operations Line Items | PROG Historical Condensed Consolidated Statement of Earnings Line Items | Purchasing Power Nine Months Ended September 30, 2025 (In Thousands) | Reclassification or Alignment (In Thousands) | Note | Purchasing Power Reclassified or Aligned Nine Months Ended September 30, 2025 (In Thousands) | |||||||||||||||||||||
| Product sales | NEW: Product sales | $ | 344,080 | $ | - | (a) | $ | 344,080 | ||||||||||||||||||
| Finance income | Other revenue | 6,764 | - | (b) | 6,764 | |||||||||||||||||||||
| Cost of sales | NEW: Cost of product sales | 204,265 | - | (c) | 204,265 | |||||||||||||||||||||
| Selling, general, and administration expense | Operating expenses | 83,102 | - | (d) | 83,102 | |||||||||||||||||||||
| Depreciation and amortization expense | Operating expenses | 18,466 | - | (d) | 18,466 | |||||||||||||||||||||
| Bad debt expense | Provision for credit losses | 37,417 | - | (e) | 37,417 | |||||||||||||||||||||
| Interest expense | Interest expense | 33,768 | - | 33,768 | ||||||||||||||||||||||
| Other, net | Operating expenses | 56 | - | (d) | 56 | |||||||||||||||||||||
| Income tax benefit | Income tax expense (benefit) | (2,285) | - | (2,285) | ||||||||||||||||||||||
a)Addition of a new financial statement line item for the Company classifying Purchasing Power’s historical Product sales as a separate disclosure line item under Product sales;
b)Reclassification of Purchasing Power’s historical Financing income to Other revenue;
c)Addition of a new financial statement line item for the Company classifying Purchasing Power’s historical Cost of sales as a separate disclosure line item under Cost of product sales;
d)Reclassification of Purchasing Power’s historical Selling, general, and administration expense, Depreciation and amortization expense, and Other, net to Operating expenses; and
e) Reclassification of Purchasing Power’s historical Bad debt expense to Provision for credit losses.
Refer to the table below for a summary of adjustments made to present Purchasing Power’s historical consolidated statement of operations for the year ended December 31, 2024 to conform with that of the Company's:
| Purchasing Power Historical Consolidated Condensed Statements of Operations Line Items | PROG Historical Condensed Consolidated Statement of Earnings Line Items | Purchasing Power for the Year Ended December 31, 2024 (In Thousands) | Reclassification or Alignment (In Thousands) | Note | Purchasing Power Reclassified or Aligned for the Year Ended December 31, 2024 (In Thousands) | ||||||||||||||||||||||||||||||
| Product sales | NEW: Product sales | $ | 536,222 | $ | - | (a) | $ | 536,222 | |||||||||||||||||||||||||||
| Finance income | Other revenue | 7,658 | - | (b) | 7,658 | ||||||||||||||||||||||||||||||
| Cost of sales | NEW: Cost of product sales | 323,614 | - | (c) | 323,614 | ||||||||||||||||||||||||||||||
| Selling, general and administration expense | Operating expenses | 112,337 | - | (d) | 112,337 | ||||||||||||||||||||||||||||||
| Depreciation and amortization expense | Operating expenses | 23,427 | - | (d) | 23,427 | ||||||||||||||||||||||||||||||
| Bad debt expense | Provision for credit losses | 61,043 | - | (e) | 61,043 | ||||||||||||||||||||||||||||||
| Loss on impairment of premises and equipment | Operating expenses | 179 | - | (d) | 179 | ||||||||||||||||||||||||||||||
| Interest expense | Interest expense | 37,862 | - | 37,862 | |||||||||||||||||||||||||||||||
| Loss on debt extinguishment | Interest expense | 685 | - | (f) | 685 | ||||||||||||||||||||||||||||||
| Other, net | Operating expenses | 11 | - | (d) | 11 | ||||||||||||||||||||||||||||||
| Income tax benefit | Income tax expense (benefit) | (126) | - | (126) | |||||||||||||||||||||||||||||||
a)Addition of a new financial statement line item for the Company classifying Purchasing Power’s historical Product Sales as a separate disclosure line item under Product sales;
b)Reclassification of Purchasing Power’s historical Financing income to Other revenue;
c)Addition of a new financial statement line item for the Company classifying Purchasing Power’s historical Cost of Sales as a separate disclosure line item under Cost of product sales;
d)Reclassification of Purchasing Power’s historical Selling, general, and administration expense, Depreciation and amortization expense, Loss on impairment of premises and equipment, Loss on debt extinguishment, and Other, net to Operating expenses;
e)Reclassification of Purchasing Power’s historical Bad debt expense to Provision for credit losses; and
f)Reclassification of Purchasing Power’s historical Loss on debt extinguishment to Interest expense.
Note 3 – Preliminary purchase consideration and purchase price allocation
The following table summarizes the preliminary estimated purchase consideration for the Acquisition, as if the Acquisition had been completed on September 30, 2025:
| In Thousands | Amount | |||||||
Cash paid to Sellers (i) | $ | 222,944 | ||||||
| Cash repayment of Purchasing Power debt | 207,940 | |||||||
| Escrow payment | 2,000 | |||||||
| Preliminary estimated consideration | $ | 432,884 | ||||||
i)Cash paid to Sellers includes the initial purchase consideration of $216.2 million and Seller transaction costs paid by the Company of $6.7 million.
The assumed accounting for the Acquisition, including the preliminary estimated consideration and the allocation of the purchase price to the acquired assets and assumed liabilities, is based on provisional amounts, and the associated purchase accounting is not final. For the preliminary estimate of fair values of assets acquired and liabilities assumed of Purchasing Power, the Company used publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. The unaudited pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable under the circumstances. The purchase price allocation set forth herein will be revised as additional information becomes available during the measurement period, which could be up to twelve months from the Closing Date. Any such revisions or changes may be material.
The following table summarizes the preliminary estimated consideration allocation, as if the Acquisition had been completed on September 30, 2025:
| In Thousands | Amount | |||||||
Preliminary estimated consideration | $ | 432,884 | ||||||
Assets acquired: | ||||||||
Cash and cash equivalents | 8,249 | |||||||
Restricted cash | 18,823 | |||||||
Accounts receivables, net | 286,605 | |||||||
Other customer receivables, net | 33,806 | |||||||
Property and equipment, net | 1,887 | |||||||
Other intangibles (i) | 318,000 | |||||||
Deferred income tax assets (ii) | 760 | |||||||
Prepaid expenses and other assets | 10,293 | |||||||
Total assets acquired: | 678,423 | |||||||
Liabilities: | ||||||||
Accounts payable and accrued expenses | 56,127 | |||||||
Deferred income tax liabilities (ii) | 16,165 | |||||||
Other liabilities (iii) | 3,939 | |||||||
Debt, net | 274,786 | |||||||
Total liabilities assumed: | 351,017 | |||||||
Net assets acquired | 327,406 | |||||||
Goodwill | $ | 105,478 | ||||||
i)Preliminary identifiable intangible assets in the unaudited pro forma condensed combined financial information consists of the following:
| In Thousands | Preliminary Fair Value | Estimated Useful Life | |||||||||
| Preliminary fair value of intangible assets acquired: | |||||||||||
| Client Relationships | $ | 257,000 | 20 | ||||||||
| Trade Name | 29,000 | 20 | |||||||||
| Broker Network | 24,000 | 20 | |||||||||
| Developed Technology | 8,000 | 5 | |||||||||
| Intangible assets acquired | $ | 318,000 | |||||||||
A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the amortization expense of approximately $1.3 million for the nine months ended September 30, 2025, and $1.7 million for the year ended December 31, 2024. Pro forma amortization is preliminary and based on the use of straight-line amortization. The amount of amortization following the Acquisition may differ significantly between periods based upon the final value assigned and amortization methodology used for each identifiable intangible asset.
Client Relationships and Broker Network: The fair values of the Client Relationships and Broker Network were estimated using the multi-period excess earnings method (“MPEEM”), an income approach that measures the present value of the projected after-tax cash flows attributable solely to these intangible assets over their remaining useful lives. Projected cash flows were reduced by contributory asset charges for the use of other assets, including working capital, fixed assets, and other identifiable intangible assets (excluding goodwill), to determine the excess earnings attributable to the subject assets. The identification and valuation of these intangible assets are preliminary and subject to measurement period adjustments.
Trade Name: The fair value of the trade name was estimated using the relief-from-royalty method, which measures value based on the present value of hypothetical royalty payments avoided by owning the asset. This method assumes that, absent ownership, a market participant would license the trade name from a third party and pay a royalty. The valuation is based on an estimated market-derived royalty rate applied to projected revenues.
Developed Technology: The fair value of developed technology was estimated using the replacement cost method, a cost approach that estimates the current cost to replace or reproduce the asset with one of similar utility. This approach is based on the principle of substitution, which assumes that a market participant would not pay more for the asset than the cost to create a comparable asset with equivalent functionality.
ii)Deferred income tax assets and liabilities were derived based on incremental differences in the book and tax basis created from the preliminary purchase price allocation.
iii)An uncertain tax position was estimated based on the preliminary purchase price allocation.
Note 4 – Transaction Accounting Adjustments – Acquisition to the Unaudited Pro Forma Condensed Combined Balance Sheet
Adjustments included in the Transaction Accounting Adjustments – Acquisition column in the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2025, are as follows:
(a) Reflects adjustment to cash and cash equivalents:
| In Thousands | Amount | |||||||
| Pro forma transaction accounting adjustments - acquisition: | ||||||||
| Uses: | ||||||||
| Estimated purchase consideration | $ | (432,884) | ||||||
| Estimated payment of transaction costs (i) | (10,647) | |||||||
| Net pro forma transaction accounting adjustments – acquisition to cash and cash equivalents | $ | (443,531) | ||||||
i)The Company’s transaction costs consist of legal advisory, financial advisory, accounting, and consulting costs.
(b) Reflects the preliminary purchase accounting adjustment for estimated accounts receivable and other customer receivables based on the acquisition method of accounting.
| In Thousands | Accounts receivables | Other customer receivables | ||||||||||||
| Pro forma transaction accounting adjustments - acquisition: | ||||||||||||||
| Elimination of Purchasing Power’s historical net book value of accounts receivables and other customer receivables | $ | (293,908) | $ | (34,747) | ||||||||||
| Preliminary fair value of acquired accounts receivables and other customer receivables | 286,605 | 33,806 | ||||||||||||
| Net pro forma transaction accounting adjustment – acquisition to accounts receivables and other customer receivables | $ | (7,303) | $ | (941) | ||||||||||
(c) Reflects the preliminary goodwill adjustment which represents the elimination of historical goodwill and excess of the estimated consideration over the preliminary fair value of the underlying assets acquired and liabilities assumed.
| In Thousands | Amount | |||||||
| Pro forma transaction accounting adjustments - acquisition: | ||||||||
| Elimination of Purchasing Power’s historical goodwill | $ | (83,294) | ||||||
| Goodwill per purchase price allocation (Note 3) | 105,478 | |||||||
| Net pro forma transaction accounting adjustment – acquisition to goodwill | 22,184 | |||||||
| Elimination of Purchasing Power’s historical intangibles | (48,922) | |||||||
| Preliminary fair value of acquired intangibles | 318,000 | |||||||
| Net pro forma transaction accounting adjustment – acquisition to other intangibles | 269,078 | |||||||
| Net pro forma transaction accounting adjustment – acquisition to goodwill and other intangibles | $ | 291,262 | ||||||
(d) Represents the adjustment to deferred income tax asset of $3.1 million and deferred tax liability of $16.2 million associated with the incremental differences in the book and tax basis created from the preliminary purchase price allocation, primarily resulting from the preliminary fair value of intangible assets. These adjustments were based on the applicable statutory tax rate with the respective estimated purchase price allocation. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-Acquisition activities, including cash needs, and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.
(e) Reflects the adjustment to eliminate the $0.2 million management fee accrual charged by the former advisor and the $0.1 million of accrued interest related to the extinguishment of Purchasing Power’s historical debt.
(f) Reflects the recognition of an estimated uncertain tax position based on the preliminary purchase price allocation.
(g) Reflects the extinguishment of Purchasing Power’s historical debt, net of $207.8 million.
(h) Reflects the elimination of historical member’s equity of Purchasing Power.
Note 5 – Transaction Accounting Adjustments - Acquisition to the Unaudited Pro Forma Condensed Combined Statement of Earnings
Adjustments included in the Transaction Accounting Adjustment – Acquisition column in the accompanying unaudited pro forma condensed combined statement of earnings for the nine months ended September 30, 2025 and for the year ended December 31, 2024, are as follows:
(a) Reflects the adjustments to operating expenses including the amortization of the estimated fair value of intangibles, elimination of the management fee charged by the former advisor, the incremental stock-based compensation expense for the Company’s restricted stock unit awards, and the estimated related transaction costs.
| In Thousands | For the Nine Months Ended September 30, 2025 | For the Year Ended December 31, 2024 | ||||||||||||
| Pro forma transaction accounting adjustments - acquisition: | ||||||||||||||
| Removal of historical Purchasing Power amortization of intangible assets | $ | (14,093) | $ | (18,790) | ||||||||||
| Addition of purchase accounting amortization of newly recognized intangible assets | 12,825 | 17,100 | ||||||||||||
Removal of historical Purchasing Power management fee | (750) | (1,000) | ||||||||||||
| Addition of new stock-based compensation expense from restricted stock unit awards | 297 | 1,445 | ||||||||||||
| Estimated related transaction costs (i) | - | 10,647 | ||||||||||||
Net pro forma transaction accounting adjustment – acquisition to operating expense | $ | (1,721) | $ | 9,402 | ||||||||||
i)These costs will not affect the Company’s unaudited pro forma condensed combined statement of earnings beyond twelve months after the acquisition date.
(b) Reflects the elimination of historical interest expense of $16.1 million and $15.9 million for the nine months ended September 30, 2025 and for the year ended December 31, 2024, respectively, associated with the paydown of Purchasing Power’s existing term loan indebtedness.
(c) To record the income tax impact of the pro forma adjustments utilizing a statutory income tax rate in effect of 24.9% for the nine months ended September 30, 2025 and for the year ended December 31, 2024, respectively. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-Acquisition activities, including cash needs and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.
(d) Reflects the adjustment to the Company’s weighted average diluted shares outstanding to give effect to the dilutive impact of restricted stock units granted in connection with the Acquisition.
Note 6 – Transaction Accounting Adjustments - Financing to the Unaudited Pro Forma Condensed Combined Financial Statements
Adjustments included in the Transaction Accounting Adjustments – Financing column in the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2025, unaudited pro forma condensed combined statement of earnings for the nine months ended September 30, 2025 and for the year ended December 31, 2024, are as follows:
(a) Reflects adjustment to cash and cash equivalents and debt for cash received from new debt financing, net of debt issuance costs, and draw on existing revolver to fund a portion of the Acquisition:
| In Thousands | Amount | |||||||||||||
| Pro forma transaction accounting adjustments - financing: | ||||||||||||||
Revolving Credit Facility | $ | 135,000 | ||||||||||||
| Term Loan | 125,000 | |||||||||||||
| Debt issuance costs related to Revolving Credit Facility and Term Loan (i) | (2,287) | |||||||||||||
| Net pro forma transaction accounting adjustments - financing to cash and cash equivalent and debt | $ | 257,713 | ||||||||||||
i)$1.1 million of fees related to the revolving credit facility pursuant to the debt commitment letter are capitalized to prepaid expenses and other assets.
(b) Reflects the interest expense and amortization of issuance costs related to the Debt Financing as if the Debt Financing occurred as of January 1, 2024:
| In Thousands | For the Nine Months Ended September 30, 2025 | For the Year Ended December 31, 2024 | ||||||||||||
Pro forma transaction accounting adjustments - financing: | ||||||||||||||
| New interest expense on Transaction financing: | ||||||||||||||
| Term Loan (i) | $ | 5,404 | $ | 7,204 | ||||||||||
Revolving Credit Facility (i) | 5,893 | 7,857 | ||||||||||||
| Commitment fee | 484 | 645 | ||||||||||||
| Net pro forma transaction accounting adjustments - financing to interest expense | $ | 11,781 | $ | 15,706 | ||||||||||
i)The new interest expense on Transaction financing adjustments included in the unaudited pro forma condensed combined statement of earnings reflects the interest expense and amortization of debt issuance costs associated with new debt from the commitment parties. Interest was recognized for the revolving facility and 2026 Incremental Term Loan at the Company’s option of SOFR plus a margin within the range of 1.50% to 2.75% for revolving loans, based on total leverage. The costs incurred to secure the revolving credit facility are amortized on a straight-line basis over the four year term of the commitment.
A sensitivity analysis on interest expense for the nine months ended September 30, 2025 and for the year ended December 31, 2024 has been performed to assess the effect of a 12.5 basis point change of the hypothetical interest on the debt financing. The following table shows the change in the interest expense for the debt financing transaction described above:
| In Thousands | For the Nine Months Ended September 30, 2025 | For the Year Ended December 31, 2024 | ||||||||||||
| Interest expense assuming: | ||||||||||||||
| Increase of 0.125% | $ | 244 | $ | 325 | ||||||||||
| Decrease of 0.125% | $ | (244) | $ | (325) | ||||||||||
(c) To record the income tax impact of the pro forma adjustments utilizing a statutory income tax rate in effect of 24.9% for the nine months ended September 30, 2025 and for the year ended December 31, 2024, respectively. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-Acquisition activities, including cash needs and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.