ContextLogic Q3 pro forma net loss widens to $13.4M
The pending gChem deal is valued at approximately $847.5 million, with closing currently expected in late 2026 or the first quarter of 2027.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
ContextLogic Holdings Inc. reported third-quarter 2026 net sales of $32.2 million and a net loss of $13.4 million. Pro forma net sales were $32.2 million in both third-quarter 2026 and 2025, while pro forma net loss was $13.4 million versus $6.2 million; the company cautions these figures are not necessarily indicative of actual or future results. The completed US Salt acquisition had total consideration of $922.3 million, including $597.1 million in cash and $325.2 million in equity.
An indirect, wholly owned subsidiary of Holdings agreed to acquire all outstanding gChem shares other than certain rollover shares for approximately $847.5 million: approximately $840.5 million in cash and $7.0 million in equity rollover, subject to customary adjustments and satisfaction or waiver of conditions. Holdings obtained commitments for $870.0 million of equity financing, a $250.0 million term loan, and a $25.0 million revolving facility. A proposed rights offering is expected to provide part of the equity financing and may offset those commitments; closing is currently expected in late 2026 or the first quarter of 2027. Net cash used in operating activities was $16.1 million for the Successor period from February 27 through September 30, 2026.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- None.
Negative
- Moderate pointPro forma third-quarter net loss rose to $13.4 million from $6.2 million.
Filing Explained
At September 30, 2026, the company reported cash and equivalents and term-loan principal.
This unaudited quarterly report records common-share issuance tied to two completed transactions: 15,480.4 thousand shares for the US Salt acquisition and 3,218.6 thousand shares through a backstopped rights offering. Issuing additional shares increases the total share count and reduces existing holders’ percentage ownership, absent offsetting changes.
The completed rights offering generated net common-stock proceeds; separately, the proposed gChem rights offering’s terms remain to be described in a registration statement, and any offer can be made only through an effective prospectus.
Key Figures
Key Terms
acquisition method of accounting technical
measurement period adjustment technical
hypothetical liquidation at book value financial
noncontrolling interest financial
variable consideration financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were LOGC's third-quarter 2026 results?
How much is LOGC's pending gChem acquisition?
What financing commitments support LOGC's gChem deal?
When does LOGC expect the gChem acquisition to close?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____ to ______
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
OTCQB |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of October 31, 2026, the number of shares of the registrant’s common stock outstanding was
Table of Contents
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Page |
PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Condensed Consolidated Financial Statements (Unaudited) |
1 |
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Condensed Consolidated Balance Sheets |
2 |
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Condensed Consolidated Statements of Operations |
3 |
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Condensed Consolidated Statements of Stockholders’ Equity |
4 |
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Condensed Consolidated Statements of Cash Flows |
7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
10 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
46 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
61 |
Item 4. |
Controls and Procedures |
62 |
PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
64 |
Item 1A. |
Risk Factors |
64 |
Item 6. |
Exhibits |
73 |
Signatures |
74 |
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i
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
CONTEXTLOGIC HOLDINGS INC.
1
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions, units and shares in thousands, except par value)
(Unaudited)
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Predecessor |
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As of September 30, |
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As of December 31, |
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2026 |
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2025 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangibles, net |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Other inventories |
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Total assets |
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$ |
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Liabilities, Members' Equity and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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Accrued liabilities |
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Current maturities of long- term debt |
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Current portion of operating lease liability |
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Current portion of finance lease liability |
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Total current liabilities |
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Long-term debt, net of current maturities |
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Long-term portion of operating lease liability |
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Long-term portion of finance lease liability |
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Asset retirement obligations |
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Other noncurrent liabilities |
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Total liabilities |
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Commitments and contingencies (Note 14) |
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Members' equity (Predecessor): |
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Members’ units, Class A: |
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Members’ units, Class B: |
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Subscription note receivable |
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Retained earnings |
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Noncontrolling parent interest |
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Total members' equity |
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Stockholders’ equity (Successor): |
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Preferred stock, $ |
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— |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Noncontrolling interest (Note 15) |
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Total members' equity and stockholders' equity |
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Total liabilities, members' equity and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CONTEXTLOGIC HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, units and shares in thousands, except per unit and share data)
(Unaudited)
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Successor |
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Predecessor |
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Three Months Ended September 30, 2026 |
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Period from February 27, 2026 to September 30, 2026 |
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Period from January 1, 2026 to February 26, 2026 |
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Three Months Ended September 30, 2025 |
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Nine Months Ended September 30, 2025 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Selling expense |
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General and administrative |
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Transaction expenses |
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Total operating expenses |
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(Loss) income from operations |
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Other income (expenses): |
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Interest and other income |
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Interest and other expense, net |
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( |
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( |
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( |
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( |
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( |
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(Loss) income before income tax expense (benefit) |
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( |
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( |
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Income tax expense (benefit) |
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( |
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Net (loss) income |
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Net income attributable to noncontrolling interest (Note 15) |
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Net income attributable to Parent Holdings Class A unitholders (Predecessor) |
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$ |
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$ |
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$ |
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Net loss attributable to common stockholders (Successor) |
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$ |
( |
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$ |
( |
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Net income per unit attributable to Class A units, basic and diluted (Predecessor) |
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$ |
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$ |
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$ |
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Basic and diluted weighted average Class A units outstanding (Predecessor) |
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Net loss per share attributable to common stockholders, basic (Successor) |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders, diluted (Successor) |
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( |
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$ |
( |
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Weighted-average shares used in computing net loss per share attributable to common stockholders, basic (Successor) |
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Weighted-average shares used in computing net loss per share attributable to common stockholders, diluted (Successor) |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CONTEXTLOGIC HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY AND STOCKHOLDERS’ EQUITY
($ in millions, units and shares in thousands)
(Unaudited)
|
Successor |
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Three Months Ended September 30, 2026 |
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Common Stock |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Loss |
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Accumulated |
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Noncontrolling Interest |
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Total Stockholders' Equity |
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Shares |
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Amount |
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Balances as of June 30, 2026 |
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$ |
— |
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$ |
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$ |
— |
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$ |
( |
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$ |
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$ |
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Issuance of common stock upon settlement of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balances as of September 30, 2026 |
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$ |
— |
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$ |
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$ |
— |
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$ |
( |
) |
$ |
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$ |
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||||
|
Predecessor |
|
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Three Months Ended September 30, 2025 |
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Class A Member Units |
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Class B Member Units |
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Subscription Note Receivable |
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Accumulated |
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Noncontrolling Parent Interest |
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Total Members' Equity |
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||||||||||||
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Units |
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Amount |
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Units |
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Amount |
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Balances as of June 30, 2025 |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
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$ |
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||||||
Unit-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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|||
Balances as of September 30, 2025 |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
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$ |
|
|||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CONTEXTLOGIC HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY AND STOCKHOLDERS’ EQUITY
($ in millions, units and shares in thousands)
(Unaudited)
|
Predecessor |
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Period from January 1, 2026 to February 26, 2026 |
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Class A Member Units |
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Class B Member Units |
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Subscription Note Receivable |
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Retained Earnings |
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Noncontrolling Parent Interest |
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Total Members' Equity |
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||||||||||||
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Units |
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Amount |
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Units |
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Amount |
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Balances as of January 1, 2026 |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
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$ |
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Collection of subscription note receivable |
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— |
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— |
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— |
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— |
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— |
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— |
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Unit-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balances as of February 26, 2026 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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|||||||
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Successor |
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|||||||||||||||||||
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Period from February 27, 2026 to September 30, 2026 |
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Common Stock |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Loss |
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Accumulated |
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Noncontrolling Interest |
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Total Stockholders' Equity |
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Shares |
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Amount |
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Balances as of February 27, 2026 |
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$ |
— |
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$ |
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$ |
— |
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$ |
( |
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$ |
— |
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$ |
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Issuance of common stock upon settlement of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Issuance of common stock - US Salt Acquisition |
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— |
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— |
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— |
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— |
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Issuance of Noncontrolling interest - US Salt Acquisition |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock - Rights Offering |
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— |
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— |
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— |
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— |
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Issuance of subsidiary membership units - Rights Offering backstop |
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— |
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— |
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— |
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— |
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— |
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Conversion of redeemable noncontrolling interest to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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Deferred taxes arising from changes in ownership |
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— |
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|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Balances as of September 30, 2026 |
|
|
$ |
— |
|
$ |
|
$ |
— |
|
$ |
( |
) |
$ |
|
$ |
|
||||
|
Predecessor |
|
||||||||||||||||||||||
|
Nine Months Ended September 30, 2025 |
|
||||||||||||||||||||||
|
Class A Member Units |
|
Class B Member Units |
|
Subscription Note Receivable |
|
Accumulated |
|
Noncontrolling Parent Interest |
|
Total Members' Equity |
|
||||||||||||
|
Units |
|
Amount |
|
Units |
|
Amount |
|
||||||||||||||||
Balances as of January 1, 2025 |
|
|
$ |
|
|
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||||
Members' distributions |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
Collection of subscription note receivable |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Unit-based compensation expense |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|||
Repurchase of units |
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|||
Balances as of September 30, 2025 |
|
|
$ |
|
|
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
6
CONTEXTLOGIC HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited)
7
|
Successor |
|
|
|
Predecessor |
|
||||||
|
|
|
|
|
|
|
|
|
|
|||
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net (loss) income |
$ |
( |
) |
|
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
|
|||
Deferred income tax |
|
( |
) |
|
|
|
|
|
|
|
||
Unit/Stock-based compensation |
|
|
|
|
|
|
|
|
|
|||
Long-term incentive plan expense |
|
|
|
|
|
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable, net |
|
( |
) |
|
|
|
( |
) |
|
|
|
|
Inventories |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other inventories |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Accounts payable |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
Operating lease liability |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
Accrued liabilities |
|
|
|
|
|
|
|
|
|
|||
Net cash (used in) provided by operating activities |
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Purchases of property, plant and equipment |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
Acquisition of businesses, net of cash acquired |
|
( |
) |
|
|
|
|
|
|
|
||
Net cash used in investing activities |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of common stock from the backstopped rights offering, net of cost |
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of subsidiary membership units from the backstopped rights offering |
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of subsidiary membership units, prior to conversion (Note 15) |
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
|
|
|
|||
Payment of debt issuance costs |
|
( |
) |
|
|
|
|
|
|
|
||
Repayment of principal on term loan |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Repayment of principal of finance lease obligations |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Members' distributions |
|
|
|
|
|
|
|
|
( |
) |
||
Proceeds from collection of unit subscription receivable |
|
|
|
|
|
|
|
|
|
|||
Repurchase of units |
|
|
|
|
|
|
|
|
( |
) |
||
Other |
|
( |
) |
|
|
|
|
|
|
|
||
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
|
( |
) |
||
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
|
|||
Cash, cash equivalents, and restricted cash at end of period |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Restricted cash included within prepaid expenses and other current assets in the consolidated balance sheets |
|
|
|
|
|
|
|
|
|
|||
Total cash, cash equivalents and restricted cash |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
|
|||
Cash paid for income taxes, net of refunds |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Cash paid for interest |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Supplemental noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|||
Property, plant and equipment in accounts payable |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Equity exchanged for ownership in US Salt (Note 3) |
$ |
|
|
|
$ |
|
|
$ |
|
|||
8
Conversion of redeemable noncontrolling interest to noncontrolling interest (Note 15) |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Right-of-use assets obtained in exchange for lease liabilities: |
|
|
|
|
|
|
|
|
|
|||
Operating leases |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Finance leases |
$ |
|
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
CONTEXTLOGIC HOLDINGS INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. DESCRIPTION OF BUSINESS
ContextLogic Holdings Inc. is a business ownership platform designed from first principles to combine the structural advantages of permanent public capital with the operating discipline, alignment, and long-term orientation typically associated with private ownership. ContextLogic's mission is to build a portfolio of high-quality, niche, and competitively advantaged businesses that generate sustainable, growing free cash flow that can be reinvested over long time horizons.
ContextLogic Holdings Inc. and its consolidated subsidiaries are referred to herein collectively as "ContextLogic," the "Company," "we," "our," or "us."
The US Salt Acquisition
On February 26, 2026, ContextLogic Holdings, LLC, a Delaware limited liability company and majority owned subsidiary (“Holdings”) acquired US Salt Parent Holdings, LLC, a New York based company ("US Salt"), pursuant to the terms of the Purchase Agreement ("Purchase Agreement", such acquisition the "US Salt Acquisition"). US Salt is a leading producer, packager, and distributor of evaporated and specialty salt products originally founded in 1893. The US Salt Acquisition is accounted for as a business combination under Accounting Standards Codification ("ASC") Topic 805, Business Combinations, using the acquisition method of accounting, and ContextLogic has been determined to be the accounting acquirer. Refer to Note 3, Business Combinations, for more information.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements and therefore should be read in conjunction with the Company’s December 31, 2025 Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. For consolidated subsidiaries in which our ownership is less than
As a result of the significance of the relative operations of US Salt acquired in the US Salt Acquisition, US Salt is reflected as the Predecessor to the combined entity for financial statement purposes. Accordingly, all periods presented through the closing date of the US Salt Acquisition, February 26, 2026, reflect the historical balances and results of US Salt and all its majority or wholly owned subsidiaries ("Predecessor"). Periods presented after the closing of the US Salt Acquisition reflect the accounts of the Company and its wholly owned subsidiary along with Holdings and Holdings' wholly owned subsidiaries, including US Salt ("Successor"). In accordance with the application of acquisition accounting, the assets and liabilities of US Salt acquired by the Company have been remeasured to fair value in the Successor periods.
Certain costs were contingent solely upon the consummation of the US Salt Acquisition and are therefore not reflected in either the Predecessor or Successor income statements. These costs, totaling $
For the period from January 1 to February 26, 2026, the public company and parent-level items of the Company, distinct and separate from the operating results of US Salt, ("CLHI Corporate") had general and administrative expenses of $
10
million, transaction expenses of $
The Condensed Consolidated Balance Sheet as of December 31, 2025 is derived from the audited consolidated financial statements, however, it does not include all of the information and footnotes required by GAAP for complete financial statements.
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates, assumptions, and judgements that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period in the condensed consolidated financial statements and accompanying notes. Management evaluates these estimates on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions will be reflected in the consolidated financial statements in future periods.
These estimates, assumptions, and judgements include, but are not limited to, revenue recognition, impairment analysis of goodwill, depletion of salt reserves, impairment of long-lived assets and finite-lived intangible assets, fair value of financial instruments, contingent liabilities, and uncertain tax positions.
Summary of Significant Accounting Policies
US Salt Long-Term Incentive Plan
The Company accounts for awards under the US Salt 2026 Long-Term Incentive Plan (the “LTIP”) in accordance with ASC 718, Compensation—Stock Compensation. Because the LTIP awards may be settled in cash, a variable number of shares, other equity instruments, or some combination of the three based on a monetary value determined by reference to EBITDA performance rather than the fair value of the Company’s common stock or other equity instruments, the awards are classified as liability awards. Liability-classified awards are remeasured at fair value at each reporting period until settlement, with changes in fair value recognized as stock-based compensation expense in the Condensed Consolidated Statement of Operations over the requisite service period, to the extent achievement of the applicable performance condition is considered probable.
The Company recognizes compensation cost for the LTIP awards over the requisite service period from the grant date through December 31, 2030, if and when achievement of the applicable performance condition is considered probable. The Company accounts for forfeitures as they occur.
The fair value of LTIP awards is estimated using an expected payout method based on the most likely performance scenario as of the applicable measurement date. The estimate incorporates the substantive terms of the awards, including the EBITDA-based performance condition and end-of-period true-up feature. Because the awards are liability-classified, the Company remeasures the LTIP liability at each reporting date until settlement, with changes in fair value recognized as stock-based compensation expense over the requisite service period to the extent achievement of the applicable performance condition is considered probable.
Revenue recognition
Revenue is recognized at the point in time when control is transferred to the customer. In general, control transfers to a customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all the remaining benefits from the product at this point in time. The Company’s revenue is reported as net sales and is measured as the determinable transaction price, net of any variable consideration such as discounts, sales incentives, rights to return product, and any taxes collected from customers and remitted to governmental authorities. Refer to Note 4, Revenue, for further information.
Cost of sales
11
Cost of sales reflects the costs to produce our products, which primarily consists of labor, employee benefits, materials, depreciation and depletion, shipping and handling, and overhead. Cost of sales is capitalized in inventory and expensed when control is transferred to the customer.
Accounts receivable, net and allowance for expected credit losses
Accounts receivable, net of allowance are uncollateralized customer obligations billed under contract terms. Accounts receivable are stated at their net realizable value. The Company estimates an allowance for credit losses based upon the evaluation of several factors including related ages of past due receivables, customer type, customer credit worthiness, knowledge of a customer’s financial conditions, historical collection experience, current economic factors, and other factors relevant to assessing the expected credit losses. The Company records uncollectible amounts against the allowance for credit losses once management determines the amount to be uncollectible.
Concentration of credit and customer risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist of cash and accounts receivable.
Cash balances at various times during the year may exceed the amount insured by the Federal Deposit Insurance Corporation. The Company monitors the credit ratings of financial institutions where its cash deposits are held, and has not incurred any losses related to such deposits.
The Company can, at times, be subject to a concentration of credit risk with respect to outstanding accounts receivable. The Company’s customers are located throughout the United States through various channels including national retail chains, pharmaceutical companies, food service operators, and independent distributors. Although the Company generally grants credit without collateral, management believes that its contract acceptance, billing and collection policies are adequate to minimize material credit risk. The Company has
Inventories and other inventories
Salt is reported as inventory at the point in time it is extracted from the brine well. Salt inventories, packaging, supplies, and maintenance materials are valued at the lower of cost or net realizable value, with cost determined on standard costing method. Substantially all costs associated with the production of finished goods, such as labor, supplies, equipment cost, inbound freight and overhead (including depletion of salt reserves), are captured as inventory costs.
Maintenance materials are expensed as consumed or capitalized into property, plant and equipment if it meets the criteria of a capital expenditure. Additionally, maintenance materials that are not expected to be used in the next twelve months from the balance sheet date are recorded as other inventories in the Condensed Consolidated Balance Sheets.
Management monitors inventory levels and adjusts valuation for slow-moving inventory, shrinkage, obsolescence, and markdowns. The Company accounts for slow-moving or obsolete inventory that is established based on management’s estimates of the net realizable value of the related products at the end of each reporting period.
Property, plant and equipment, net
Property and equipment is stated at cost less accumulated depreciation and depletion. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense. When depreciable properties are retired or sold, the cost and related accumulated depreciation is eliminated from the accounts and any resulting gain or loss is reflected in the Company’s Condensed Consolidated Statements of Operations. Depreciation is provided using the straight-line method, based on the useful lives of assets which range from three to
Property, plant and equipment also includes salt reserves, which consist of brine fields and underground salt bed owned by the Company. Salt reserves are depleted on a units-of-production basis based on the estimated annual consumption as extraction of reserves takes place.
The following table summarizes the estimated useful lives of the Company’s different classes of property, plant and
12
equipment:
|
Years |
Buildings and improvements |
|
Machinery and equipment |
Construction in Process ("CIP") represents the accumulated costs of construction and development for assets that are not yet completed and ready for their intended use. CIP is recorded as property, plant and equipment in the condensed consolidated financial statements and is not depreciated until the asset is placed into service. Borrowing costs are recognized, as an expense, in the period in which they are incurred, except to the extent that they are capitalized. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset when it is probable that they will result in future economic benefits to the entity and that the costs can be measured reliably. The Company did
Leases
The Company determines if an arrangement is a lease at its inception. In certain of the Company’s lease arrangements, judgment is required in determining if a contract contains a lease. For these arrangements, there is judgment in evaluating if the arrangement involves an identified asset that is physically distinct or whether the Company has the right to substantially all of the capacity of an identified asset that is not physically distinct. In arrangements that involve an identified asset, there is also judgment in evaluating if the Company has the right to direct the use of that asset.
The Company determines whether an arrangement is or contains a lease, its classification, and its term at the lease commencement date. The Company leases office space, warehouses, and equipment under non‑cancelable operating and finance leases. A lease is classified as a finance lease if it transfers ownership, includes a purchase option reasonably certain to be exercised, covers a major portion of the asset’s economic life, has payments that approximate substantially all of the asset’s fair value, or involves an asset of specialized nature. Leases with a term greater than one year will be recognized on the Condensed Consolidated Balance Sheets as right-of-use ("ROU") assets, current lease liabilities, and if applicable, long-term lease liabilities. The Company includes renewal options to extend the lease term where it is reasonably certain that it will exercise these options. Lease liabilities and the corresponding ROU assets are recorded based on the present values of lease payments over the lease term. The interest rate implicit in the Company’s leases are not readily determinable. As such, the Company uses its incremental borrowing rate as the discount rate, which approximates the interest rate at which the Company could borrow on a collateralized basis with similar terms and payments and in similar economic environments. The Company’s leases have remaining terms ranging from
Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company accounts for lease and non-lease components, principally common area maintenance for its facilities leases, as a single lease component for its facilities leases. Variable lease costs represent additional expenses incurred by the Company that are not included in the lease payment. Variable lease costs include maintenance charges, taxes, insurance, and other similar costs, and are recorded within cost of sales and general and administrative expense on the Condensed Consolidated Statements of Operations.
Debt issuance costs
Debt issuance costs are amortized using the effective interest method over the term of the related borrowing agreement and the amortization is included in interest expense within the Condensed Consolidated Statements of Operations. The unamortized portion of deferred financing fees associated with long-term borrowings are shown netted against the Company's outstanding long-term debt.
Environmental cost
Environmental costs, other than those of a capital nature, are accrued at the time when exposure becomes known, and
13
costs can be reasonably estimated. Costs are accrued based upon management’s estimates of all direct costs. Amounts accrued for environmental matters were not material as of September 30, 2026 (Successor) and December 31, 2025 (Predecessor).
Asset retirement obligations
Legal obligations associated with the retirement of long-lived assets are reflected at their estimated fair value, with a corresponding charge to cost of goods sold, at the time they are incurred. Asset retirement obligations ("ARO") primarily consist of spending estimates related to capping brine wells and support facilities in accordance with federal and state reclamation laws as defined by each mining permit. The Company estimates and records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period and the capitalized cost is amortized using the units-of-production method over estimated recoverable reserves upon commencement of salt extraction. The amortized cost is included in the cost of sales in the Condensed Consolidated Statements of Operations.
Finite-lived intangible assets and long-lived assets
Finite-lived intangible assets acquired by the Company are initially recorded at fair value and amortized using the straight-line method to distribute the initial value of the assets over the estimated useful lives, which management has determined to be between ten and
The Company reviews long-lived assets including right-of-use assets and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the use and eventual disposition of the asset. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.
There were
Goodwill
Goodwill consists of the excess cost of an acquired business over the fair market value of the underlying net assets. We review goodwill annually for impairment, or more frequently if impairment indicators arise. We do not amortize such assets.
The Company performs an annual impairment test as of October 1 of each year or more frequently if events or changes in circumstances indicate that the asset may be impaired. As the Company's business is highly integrated and its components have similar economic characteristics, management has concluded the Company operates as one reporting unit at the entity level. The Company evaluates goodwill for potential impairment on an annual basis or when indicators of impairment exist during the year. When the Company evaluates goodwill for potential impairment, generally, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. A qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, financial performance and other entity or reporting unit specific events. If the Company determines qualitatively that it is more likely than not that the fair value of a reporting unit is less than its carrying value, or if the Company decides to bypass the qualitative assessment, the Company performs a quantitative analysis. The quantitative analysis is used to identify both the existence of impairment and the amount of impairment loss by comparing the estimated fair value of a reporting unit to its carrying value. The estimated fair value is based on forward-looking estimates of performance and cash flows of the reporting unit, which are based on historical operating results, adjusted for current and expected future market conditions, as well as various internal projections and external sources. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss would be recognized in our Condensed Consolidated Statements of Operations in an amount equal to the excess of the carrying value over the estimated fair value, limited to the total amount of goodwill allocated to that reporting unit.
Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency (USD) using exchange rates prevailing at the dates of the transactions. Gains and losses on foreign currency transactions are recognized in Condensed Consolidated Statements of Operations.
Segment
14
The Company operates in
Income taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and deferred tax liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and deferred tax liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. If the Company determines that it would be able to realize the deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Noncontrolling interest
Noncontrolling interest includes the share of Holdings' issued Class A Convertible Preferred Units ("Preferred Units"). These Preferred Units have a preference right upon a liquidation or distribution event to have their capital contribution returned first. Only after all Class A Capital Contribution (total cash or property contributed to Holdings from the Class A Members) has been returned can Class B or Class P Members earn any returns. The Company thus allocates its net income or loss using a balance sheet approach referred to as the hypothetical liquidation at book value ("HLBV") method. Under the HLBV method, the amounts reported as noncontrolling interest represent the amounts Holdings' members would hypothetically receive at each balance sheet date under the liquidation provisions of the Second Amended and Restated Limited Liability Company Agreement (the "Second A&R LLC Agreement"), assuming the net assets of the funding structures were liquidated at their recorded amounts determined in accordance with GAAP. The members' interests in Holdings' results of operations are determined as the difference in noncontrolling interest at the start and end of each reporting period, after taking into account any capital transactions between Holdings and its members.
Comprehensive income
The Company had no other comprehensive income or loss for the periods presented. Accordingly, net income equals comprehensive income.
Unit-based compensation (Predecessor only)
US Salt accounted for unit-based compensation by recording expenses using the fair value of Class B unit ("USPH Class B unit") awards at the time of grant. In estimating the fair value of the USPH Class B units granted, US Salt utilized the option pricing model ("OPM"), in the form of a single stochastic valuation process applying the Black-Scholes Pricing Model ("BSPM"), along with the Monte-Carlo simulation model ("MCSM"). The BSPM and MCSM provided the ability to analyze financial instruments within a complex capital structure and whose values derived from variable significant inputs and assumptions along with future financial outcomes upon future events such as change of control or capital raise (such as an IPO). The application of the valuation method involved inputs and assumptions that were judgmental and highly sensitive.
US Salt recognized expenses associated with such USPH Class B unit awards over the service period when the grant was service based. The unit-based compensation expense for performance-based USPH Class B units was recognized when management determined that it was probable that the performance criteria is met and if and only if participant had been
15
continuously employed by or continuously providing services to US Salt from the vesting start date through the date of which the performance criteria is met. US Salt's accounting policy was to recognize forfeitures as they occurred. US Salt may have made cash payments to repurchase vested USPH Class B units and forfeited the unvested USPH Class B units due to termination or departure of an employee or member of the Board of Directors. Upon the repurchase, US Salt recorded the repurchase price (which under the terms of the grant agreements will be at fair value) as a reduction of equity, and the previously recognized compensation expenses for unvested USPH Class B units were reversed.
Subscription note receivable (Predecessor only)
US Salt was able to issue Class A units ("USPH Class A units") to employees and receive subscription notes receivable. The subscription notes receivable was repaid through cash upon receipt of annual bonus. The notes were able to be voluntarily prepaid at any time without penalty. In addition, the notes required mandatory prepayment, without premium or penalty, upon the purchaser’s receipt of any cash proceeds related to the securities, including cash distributions (other than tax distributions) or transfers of such securities, in an amount equal to the proceeds received. Subscription notes receivable were classified as a deduction from Members' equity within the Condensed Statement of Changes in Members’ Equity.
Noncontrolling parent interest (Predecessor only)
Emerald Lake Capital LP together with Emerald Fund, Blocker Seller, and Emerald Lake Pearl Holding LLC owned approximately
Net income per unit (Predecessor only)
As of December 31, 2025 (Predecessor), US Salt had outstanding subscription notes receivable from members when certain USPH Class A units were issued. US Salt concluded that it 1) could cancel the USPH Class A units if the member defaulted on the subscription notes receivable and (2) intended to exercise this cancellation right. For net income per unit calculation purposes, US Salt treated the unpaid USPH Class A units that were issued and legally outstanding in the same manner as an option. The unpaid USPH Class A units were issued and legally outstanding and had the same distribution and participation rights as the paid USPH Class A units. Net income per unit for the three and nine months ended September 30, 2025 (Predecessor) was calculated using the two-class method. The two-class method required an allocation of earnings to all securities (USPH Class A units and USPH Class B units) that participated in net income to the extent that each such security was able to share in US Salt's earnings. Basic net income per unit was calculated by dividing net income attributable to Parent Holdings Class A members by the weighted average number of USPH Class A units.
Diluted net income per unit for the three and nine months ended September 30, 2025 (Predecessor) was calculated by applying the two-class method for participating securities and then incorporating the dilutive effects of other potential USPH Class A units, determined using the treasury stock method, to arrive at the most dilutive net income per unit. The two-class method used net income available to Class A members and assumed conversion of all potential units other than the participating securities. There were
Besides the above, there have been no changes to the Company’s significant accounting policies described in its 2025 Form 10-K that have had a material impact on its condensed consolidated financial statements.
Recently Adopted Accounting Pronouncements
In July 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends the guidance in ASC 326 to simplify the estimation of credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The amendments allow all entities to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. Entities are required to disclose their practical expedient and accounting policy elections. The Company has
Accounting Pronouncements
The Company has reviewed recent accounting pronouncements and concluded as follows:
16
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of specified information about certain costs and expenses including the amounts of purchase of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities, and the total amount of selling expenses and an entity's definition of selling expenses. The amendments in this ASU are effective to all public business entities for fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is evaluating the impact this guidance may have on the consolidated financial statements.
In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU No. 2024-03 to be annual reporting periods beginning after December 15, 2026 and interim periods within the annual reporting periods beginning after December 15, 2027. The amendments in this ASU are effective to all public business entities. Early adoption is permitted. The Company is evaluating the impact this guidance may have on the footnotes to the condensed consolidated financial statements together with ASU No. 2024-03.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which was intended to provide clarity without changing, expanding, or reducing current interim reporting or disclosure requirements. The amendments in this ASU are effective to all entities that provide interim financial statements and notes in accordance with GAAP for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities and for interim reporting periods within annual reporting periods beginning after December 15, 2028 for entities other than public entities. Early adoption is permitted. The Company is evaluating the impact this amended guidance may have on the footnotes to the condensed consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and concluded they are either not applicable to the business or no material impact is expected on the condensed consolidated financial statements or notes as a result of future adoption.
NOTE 3. Business Combinations
US Salt Acquisition
The Company, together with Holdings, completed the
As a result of the US Salt Acquisition, the Company’s financial statement presentation distinguishes US Salt as the "Predecessor" through February 26, 2026 (the "Closing Date"). The Company, which consolidated US Salt subsequent to the Business Combination, is the "Successor" for periods after the Closing Date. As a result of the application of the acquisition method of accounting in the Successor period, the financial statements for the Successor period present US Salt on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor period that are not presented on the same full step-up basis.
During the period from February 27, 2026 to September 30, 2026 (Successor) and the period from January 1, 2026 to February 26, 2026 (Predecessor), the Company incurred $
During the three months ended September 30, 2026, the Company paid $
The fair value of the total consideration transferred, including the additional consideration paid during the three months ended September 30, 2026, was determined as follows:
17
|
Fair Value Consideration Transferred |
|
|
|
(in millions) |
|
|
Payments made to the Seller Parties |
|
|
|
Cash consideration |
$ |
|
|
Repayment of US Salt debt |
|
|
|
Total cash consideration |
|
|
|
Rollover equity |
|
|
|
Total equity consideration |
|
|
|
Total consideration |
$ |
|
|
The equity consideration was calculated based on the number of shares issued at $
|
Fair Value Equity Consideration |
|
|
|
($ in millions, shares in thousands) |
|
|
ContextLogic common shares issued to consummate the US Salt Acquisition |
|
|
|
Holdings preferred units issued to consummate the US Salt Acquisition |
|
|
|
Total shares issued |
|
|
|
Price per share issued |
$ |
|
|
Fair value of the equity consideration |
$ |
|
|
The Company has applied the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, and recognized assets acquired and liabilities assumed at their fair values as of the Closing Date, with the excess consideration transferred recorded to goodwill. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities. Preliminary estimates have been recorded and additional adjustments may be recorded to the fair value of intangible assets, property, plant and equipment, goodwill and deferred income taxes among other items during the measurement period, a period not to exceed 12 months from the Closing Date. During the three months ended September 30, 2026, the Company recorded a measurement period adjustment to increase the fair value of acquired property, plant and equipment by $
The following table summarizes the preliminary acquisition date fair value of tangible and intangible assets acquired, net of liabilities assumed as part of the US Salt Acquisition:
|
Fair Value |
|
|
|
(in millions) |
|
|
Cash and cash equivalents |
$ |
|
|
Prepaid expenses and other current assets |
|
|
|
Accounts receivable |
|
|
|
Inventory |
|
|
|
Property, plant and equipment |
|
|
|
Intangible assets |
|
|
|
Right-of-use asset |
|
|
|
Other noncurrent assets |
|
|
|
Total assets |
|
|
|
Accrued liabilities |
|
|
|
Accounts payable |
|
|
|
Current portion of lease liability |
|
|
|
Current maturities of long-term debt |
|
|
|
Deferred tax liability |
|
|
|
Lease liabilities, non-current |
|
|
|
Net assets acquired |
|
|
|
Goodwill |
|
|
|
Total net assets acquired |
$ |
|
|
18
The details on the methodology and significant inputs used for fair value of valuation are outlined below.
Goodwill
Preliminary allocation of consideration transferred resulted in $
Inventory
The fair value of inventory was determined by the market selling price of the inventory, less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts. The fair value of inventory has been stepped up by $
Property, Plant and Equipment
The fair value of property, plant and equipment of $
Intangible Assets
The fair value of acquired intangible assets was $
|
Estimated Useful Life |
Estimated Asset Fair Value |
|
|
|
(in years) |
(in millions) |
|
|
Trade names and trademark |
$ |
|
||
Permits |
|
|
||
Customer relationships |
|
|
||
Identifiable intangible assets, net |
|
$ |
|
|
Debt
ContextLogic paid off the outstanding debt and related fees and balances of US Salt on the Closing Date amounting to $
Pro Forma Financial Information
The following unaudited pro forma information presents the net sales and earnings as if the US Salt Acquisition occurred on January 1, 2025. As a result, the unaudited pro forma financial information does not require predecessor and successor periods because the transaction, the related combination of the Company and US Salt, and the new basis applied in accordance with acquisition accounting is reflected for the entirety of the two periods presented.
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||
|
2025 |
|
2026 |
|
|
2025 |
|
2026 |
|
||||
|
(in millions) |
|
(in millions) |
|
|
(in millions) |
|
(in millions) |
|
||||
Pro forma net sales |
$ |
|
$ |
|
|
$ |
|
$ |
|
||||
Pro forma net loss |
|
|
|
|
|
|
|
|
|
||||
Pro forma net loss attributable to controlling interest |
|
|
|
|
|
|
|
|
|
||||
Pro forma net loss attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
||||
19
The unaudited pro forma financial information for the three and nine months ended September 30, 2025 and 2026 include adjustments to reflect the increased tangible asset depreciation, intangible asset amortization, and interest expense related to the new debt assumed. There were no recurring direct transaction costs incurred in connection with the US Salt Acquisition.
The unaudited pro forma financial information does not assume any impacts from net sales, cost or other operating synergies that could be generated as a result of the US Salt Acquisition. The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved had the US Salt Acquisition been consummated on January 1, 2025. The unaudited pro forma results may not necessarily reflect the actual results of operations that would have been achieved nor are they necessarily indicative of future results of operations.
Pending gChem Acquisition
On August 4, 2026, GCH Buyer, Inc., a Delaware corporation (the "Buyer") and an indirect, wholly owned subsidiary of Holdings, EagleTree-Gaylord Management Investment, L.P., a Delaware limited partnership, EagleTree-Gaylord Holdings Corp., a Delaware corporation, and its subsidiaries ("gChem") and, solely for limited purposes, Holdings, entered into a Stock Purchase Agreement, as amended on October 22, 2026 (the "gChem Purchase Agreement"), pursuant to which the Buyer will acquire all of the outstanding shares of gChem, other than certain rollover shares, following satisfaction or waiver of certain conditions, for approximately $
20
NOTE 4. REVENUE
Revenue recognition
Nature of Revenue Source - The Company manufactures and sells a range of branded and private label evaporated salt products to nationwide retailers, pharmaceutical companies, foodservice operators, and independent distributors. When the Company enters into a sale arrangement with a customer, it believes it is probable that it will collect substantially all the consideration to which it will be entitled in exchange for the goods that will be transferred to the customer. The Company’s customer contracts identify the product, quantity, price, payment terms, and final delivery terms. Payment terms sometimes include early-pay discounts. Although some payment terms may be extended, no terms beyond one year are granted at contract inception.
The Company determines revenue recognition through the following steps:
Performance Obligations - A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in FASB ASC 606, Revenue from Contracts with Customers. The contract's transaction price is allocated to the performance obligations and recognized as revenue when the performance obligations are satisfied. Substantially all our contracts are of a short-term nature and contain a single performance obligation. Because the Company’s agreements have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.
Shipping and handling costs associated with outbound freight, including shipping and handling costs after control over a product is transferred to a customer are accounted for as a fulfillment cost as incurred and are not considered to be a separate performance obligation. Shipping and handling costs recorded as a component of cost of sales were approximately $
Contract Estimates - Most contracts include some form of variable consideration. The most common forms of variable consideration include discounts, rebates, and sales returns and allowances. Variable consideration is treated as a reduction in revenue when product revenue is recognized. The Company uses the most likely amount method to determine the variable consideration. The Company believes there will not be significant changes to estimates of variable consideration when any related uncertainties are resolved with customers. The Company reviews and updates its estimates and related accruals of variable consideration each reporting period based on the terms of the agreements, historical experience, and any recent changes in the market. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe therefore not requiring any additional constraint on the variable consideration.
Approximately
21
Revenue disaggregation
The Company has vertically integrated operations under which the Company solution mines, manufactures, processes, packages, markets, distributes and sells salt either as packaged products prepared on-site at the Watkins Glen, New York facility or as non-packaged products which are shipped in bulk or packaged at a third party facility.
|
|
Successor |
|
|
|
Predecessor |
|
||||||||||||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
|||||
|
|
(in millions) |
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|||||
Packaged |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Non-packaged |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total net sales |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
22
NOTE 5. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT
GAAP establishes a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:
Level 1 - Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs for which there is little or no market data, and which require us to develop our own estimates and assumptions reflecting those that a market participant would use.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. There were
The valuation techniques that may be used to measure fair value are as follows:
The Company’s financial instruments consist of cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities. Cash equivalents’ carrying value approximates fair value at the balance sheet dates, due to the short period of time to maturity. Restricted cash is comprised of cash deposited in an interest-bearing escrow account. Accounts receivable, accounts payable and accrued liabilities have carrying values that approximate fair value due to the short time to the expected receipt or payment date.
As of September 30, 2026 (Successor), the Company’s "cash and cash equivalents" line item was comprised of cash deposited with banks and money market funds. The Company classifies cash equivalents within Level 1 of the fair value hierarchy because they were valued using quoted prices in active markets.
A breakdown of cash and cash equivalents is as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||||||||||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
|
Carrying Value |
|
|
Fair Value |
|
||||
|
|
(in millions) |
|
|
|
(in millions) |
|
||||||||||
Cash |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash and cash equivalents |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Disclosure of Fair Values
The carrying amounts of accounts receivable, accounts payable and accrued liabilities approximate their fair value as of September 30, 2026 (Successor) and December 31, 2025 (Predecessor) due to the relatively short duration of these instruments. Additionally, the carrying value of debt associated with the term loan facility approximates fair value because the interest rates are variable and reset on relatively short durations to then-market rates.
23
NOTE 6: ACCOUNTS RECEIVABLE
Accounts receivable, net of allowance for expected credit losses, is as follows:
|
|
|
|
|
|
|
|
||
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||
|
|
(in millions) |
|
|
|
(in millions) |
|
||
Accounts receivable |
|
$ |
|
|
|
$ |
|
||
Less: allowance for expected credit losses |
|
|
( |
) |
|
|
|
( |
) |
Total |
|
$ |
|
|
|
$ |
|
||
A roll forward of the allowance for expected credit losses is presented below:
|
|
Predecessor |
|
|
|
|
Nine Months Ended September 30, 2025 |
|
|
|
|
(in millions) |
|
|
Balance as of December 31, 2024 (Predecessor) |
|
$ |
|
|
Add: bad debt expenses |
|
|
|
|
Less: write-offs |
|
|
|
|
Balance as of September 30, 2025 (Predecessor) |
|
$ |
|
|
|
|
Predecessor |
|
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
|
|
(in millions) |
|
|
Balance as of December 31, 2025 (Predecessor) |
|
$ |
|
|
Add: bad debt expenses |
|
|
|
|
Less: write-offs |
|
|
|
|
Balance as of February 26, 2026 (Predecessor) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
Balance as of February 27, 2026 (Successor) |
|
$ |
|
|
Add: bad debt expenses |
|
|
|
|
Less: write-offs |
|
|
|
|
Balance as of September 30, 2026 (Successor) |
|
$ |
|
|
NOTE 7: INVENTORIES
Inventories are as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||
|
|
(in millions) |
|
|
|
(in millions) |
|
||
Finished Goods |
|
$ |
|
|
|
$ |
|
||
Packaging and supplies |
|
|
|
|
|
|
|
||
Maintenance materials |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
$ |
|
||
Maintenance materials exclude certain materials of $
24
shown at net realizable amount which includes write downs for obsolescence of $
NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net are as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||
|
|
(in millions) |
|
|
|
(in millions) |
|
||
Land |
|
$ |
|
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
|
||
Salt reserves |
|
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Accumulated depreciation and depletion |
|
|
( |
) |
|
|
|
( |
) |
Total |
|
$ |
|
|
|
$ |
|
||
Depreciation and depletion expense are included in the following financial statement line items in the Condensed Consolidated Statements of Operations:
|
|
Successor |
|
|
|
Predecessor |
|
||||||||||||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
|||||
|
|
(in millions) |
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|||||
Cost of sales |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Selling expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The Company did
NOTE 9: GOODWILL AND INTANGIBLE ASSETS
Goodwill
The carrying amount of goodwill was $
Intangible Assets
Intangible assets and related accumulated amortization which are included in intangible assets, net in the Condensed Consolidated Balance Sheets are as follows:
25
|
|
Successor |
|
|||||||||
|
|
September 30, 2026 |
|
|||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Amount |
|
|||
|
|
(in millions) |
|
|||||||||
Tradename |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Customer relationships |
|
|
|
|
|
( |
) |
|
|
|
||
Permits |
|
|
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
Predecessor |
|
|||||||||
|
|
December 31, 2025 |
|
|||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Amount |
|
|||
|
|
(in millions) |
|
|||||||||
Tradename |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Customer relationships |
|
|
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Amortization expense of the finite-lived intangible assets for the three months ended September 30, 2026 (Successor) and September 30, 2025 (Predecessor) was $
26
NOTE 10. BALANCE SHEET COMPONENTS
Prepaid expenses and other current assets consist of the following:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||
|
|
(in millions) |
|
|
|
(in millions) |
|
||
Prepaid insurance |
|
$ |
|
|
|
$ |
|
||
Other prepaid expenses |
|
|
|
|
|
|
|
||
Other current assets(1) |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
$ |
|
||
Accrued liabilities consist of the following:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||
|
|
(in millions) |
|
|
|
(in millions) |
|
||
Accrued payroll, bonus, and employee benefits |
|
$ |
|
|
|
$ |
|
||
Contingent loss accrual(1) |
|
|
|
|
|
|
|
||
Accrued services(2) |
|
|
|
|
|
|
|
||
Rail car repair accrual(3) |
|
|
|
|
|
|
|
||
Well capping accrual |
|
|
|
|
|
|
|
||
Accrued insurance services |
|
|
|
|
|
|
|
||
Other accruals |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
$ |
|
||
NOTE 11: LEASES
The Company enters into leases for warehouses, rail cars, forklifts, office equipment, office space and certain other types of property and equipment. The leases consist of operating and financing leases expiring in various years through
The elements of the lease costs were as follows:
|
|
Successor |
|
|
Successor |
|
|
|
Predecessor |
|
|||||||||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
|||||
|
|
(in millions) |
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|||||
Operating lease expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating lease expense |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Short term lease expense |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Variable lease expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total lease expense |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
27
Total finance lease expense for the three months ended September 30, 2026 (Successor) and September 30, 2025 (Predecessor) was insignificant. Total finance lease expense for the period from February 27, 2026 to September 30, 2026 (Successor), the period from January 1, 2026 to February 26, 2026 (Predecessor), and for the nine months ended September 30, 2025 (Predecessor) was $
Lease term and discount rate information related to leases were as follows:
|
|
Successor |
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
|
|
|
|
||
Operating leases |
|
|
% |
|
|
% |
||
Finance leases |
|
|
% |
|
|
% |
||
Supplemental cash flow information related to leases was as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
|
|
|||
Operating cash flows from finance lease (interest payments) |
|
$ |
|
|
|
$ |
|
|
$ |
|
|||
Operating cash flows from operating leases |
|
|
|
|
|
|
|
|
|
|
|||
Financing cash flows from finance lease |
|
|
|
|
|
|
|
|
|
|
|||
Right-of-use assets obtained in exchange for lease liabilities |
|
|
|
|
|
|
|
|
|
|
|||
Operating leases |
|
$ |
|
|
|
$ |
|
|
$ |
|
|||
Finance leases |
|
|
|
|
|
|
|
|
|
|
|||
Future maturities of lease liabilities are as follows:
|
|
Successor |
|
|||||
|
|
September 30, 2026 |
|
|||||
|
|
Operating Leases |
|
|
Finance Leases |
|
||
Year ending December 31, |
|
(in millions) |
|
|||||
2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total future undiscounted lease payments |
|
|
|
|
|
|
||
Imputed interest |
|
|
( |
) |
|
|
( |
) |
Present value of lease payments |
|
|
|
|
|
|
||
Current portion |
|
|
( |
) |
|
|
( |
) |
Long-term portion of lease payments |
|
$ |
|
|
$ |
|
||
NOTE 12: LONG TERM DEBT
28
Long-term debt consists of the following:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
September 30, 2026 |
|
|
|
December 31, 2025 |
|
||
|
|
(in millions) |
|
|
|
(in millions) |
|
||
Term loan |
|
$ |
|
|
|
$ |
|
||
Unamortized debt discount and issuance |
|
|
( |
) |
|
|
|
( |
) |
Current portion |
|
|
( |
) |
|
|
|
( |
) |
Long-term portion |
|
$ |
|
|
|
$ |
|
||
Ares Capital Credit Agreement (Predecessor)
In July 2021, US Salt entered into a credit agreement with Ares Capital Corporation, as the administrative agent, and other parties thereto. The credit agreement consisted of a $
Interest rate for the term loan and revolving line of credit as of December 31, 2025 (Predecessor) was
The term loan required quarterly principal payments of $
The term loan and the revolving line of credit were secured by substantially all of the assets of the Company and subject to certain financial covenants. The Company was in compliance with all financial covenants as of December 31, 2025 (Predecessor).
In relation to the credit agreement, the Company paid debt issuance costs of $
In February 2026, the Company paid off the $
Wilmington Trust Credit Agreement (Successor)
In February 2026, Holdings entered into the Credit Agreement with Wilmington Trust, National Association, as administrative agent, and the Lenders thereto (the "Wilmington Trust Credit Facility"), which consists of a $
Interest rate for the Initial Term Loans and Revolving Loans as of September 30, 2026 was
The term loan requires quarterly principal payments of $
29
within ten business days after delivery of both the annual audited financial statements and the related Compliance Certificate (as defined in the Credit Agreement).
The revolving line of credit expires on
The term loan and revolving line of credit are secured by substantially all of the assets of US Salt and subject to certain financial covenants which are not due until
In relation to the Wilmington Trust Credit Agreement, aggregate debt discount and debt issuance costs totaled $
The Credit Agreement contains customary affirmative and negative covenants, conditions to borrowing and events of default. The Company was in compliance with all financial covenants as of September 30, 2026 (Successor).
The following table summarizes the annual maturities of the principal amount of total debt due:
|
|
Successor |
|
|
|
|
September 30, 2026 |
|
|
Year ending December 31, |
|
(in millions) |
|
|
Remaining 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total maturities |
|
$ |
|
|
NOTE 13: ASSET RETIREMENT OBLIGATIONS
The following summarizes the changes in the asset retirement obligation during the period:
Balance as of December 31, 2024 (Predecessor) |
|
$ |
|
|
Liabilities incurred |
|
|
|
|
Changes in estimated obligations |
|
|
|
|
Accretion of expense |
|
|
|
|
Balance as of September 30, 2025 (Predecessor) |
|
$ |
|
|
|
|
|
|
|
Balance as of December 31, 2025 (Predecessor) |
|
$ |
|
|
Liabilities incurred |
|
|
|
|
Changes in estimated obligations |
|
|
|
|
Accretion of expense |
|
|
|
|
Balance as of February 26, 2026 (Predecessor) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 27, 2026 (Successor) |
|
$ |
|
|
Liabilities incurred |
|
|
|
|
Changes in estimated obligations |
|
|
|
|
Accretion of expense |
|
|
|
|
Balance as of September 30, 2026 (Successor) |
|
$ |
|
|
30
In connection with certain contracts, the Company is required to hold surety bonds. These bonds are supported by a general agreement of indemnity in favor of the sureties. As of September 30, 2026 (Successor) and December 31, 2025 (Predecessor), the Company had surety bonds outstanding with an aggregate stated amount of $
The Company’s estimated abandonment costs related to plugging and abandonment of injection wells under these surety bonds are reported as part of asset retirement obligation in the Condensed Consolidated Balance Sheets. As of September 30, 2026 (Successor) and December 31, 2025 (Predecessor), management has not identified any defaults, and no accrual related to these bonds has been recorded. Bond premiums paid are recorded as prepaid expenses and amortized over the period of benefit.
31
NOTE 14. COMMITMENTS AND CONTINGENCIES
IPO Securities Class Action Settlement
As previously disclosed, the Company, its directors, certain of its officers and the underwriters named in its initial public offering (“IPO”) registration statement were named as defendants in a consolidated class action complaint pursuant to Sections 11 and 15 of the Securities Act first filed in May 2021.
In May 2026, the Company entered into an agreement to settle these matters for $
Legal Contingencies and Proceedings
In August 2021, a shareholder derivative action purportedly brought on behalf of the Company, Patel v. Szulczewski, was filed in the U.S. District Court for the Northern District of California alleging that the Company’s directors and officers made or caused the Company to make false and/or misleading statements about the Company’s business operations and financial prospects in various public filings. Plaintiff asserts claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of Section 14(a) of the Exchange Act, and for contribution under Sections 10(b) and 21D of the Exchange Act and is seeking monetary damages. This matter is currently stayed. The Company believes this lawsuit is without merit and it intends to vigorously defend it. Based on the preliminary nature of the proceedings in this case, the Company cannot estimate a range of potential losses at this point in time.
As of September 30, 2026 (Successor), in the opinion of management, there were no other legal contingency matters that arose in the ordinary course of business, either individually or in aggregate, that would have a material adverse effect on the financial position, results of operations, or cash flows of the Company. Given the unpredictable nature of legal proceedings, the Company bases its estimate on the information available at the time of the assessment. As additional information becomes available, the Company will reassess the potential liability and may revise the estimate.
NOTE 15. EQUITY AND NONCONTROLLING INTEREST
Members' Equity (Predecessor)
Members' units
US Salt was authorized to issue USPH Class A units and USPH Class B units. There was no set number for authorized units and no par value was assigned to USPH Class A and USPH Class B units. US Salt was able to issue additional units, including USPH Class B units as management incentive units as approved by its Board of Directors. USPH Class A units represented capital interests and were entitled to priority distributions and liquidation proceeds until invested capital had been returned. USPH Class B units were generally issued as management incentive (profit) interests and participated in US Salt's residual economics only after applicable participation thresholds and vesting conditions were satisfied.
Voting rights
The authority to manage the business, make decisions, and act on behalf of US Salt resided exclusively with its Board of Directors, except for certain limited matters specifically designated as board of governance exceptions. Holders of USPH Class A units or USPH Class B units did not possess voting, consent, or approval rights with respect to the management or governance of US Salt, other than with respect to these limited exceptions.
The composition of US Salt's Board of Directors included both Emerald Lake‑designated Managers ("ELCM Managers") and Additional Managers. For any meeting of its Board of Directors or its committees, at least one ELCM Manager had to be present to constitute a quorum. Actions of its Board of Directors was able to be approved by a majority of votes cast at a meeting where a quorum is present. The ELCM Managers collectively held a number of votes equal to the greater of (i) the number of ELCM Managers present at the meeting or (ii) one plus the number of non‑ELCM Managers present. Each ELCM Manager was entitled to cast a proportionate share of these collective ELCM votes. Each Additional Manager held one vote. If no ELCM Manager remained present during a meeting, the quorum was lost and no further business was able to be conducted until a quorum was re‑established. The authorized number of Managers on US Salt's Board of Directors
32
was six members or such other number as determined from time to time by the Board.
Distribution and participation rights
Distributions were made at the discretion of the Board of Directors, subject to the applicable law and US Salt's operating agreement. Distributions, other than tax distributions, were subject to contractual priority waterfall. Amounts were distributed first to holders of USPH Class A units until the unreturned capital associated with USPH Class A units had been reduced to zero. Thereafter, remaining distributions were made to holders of USPH Class A units and participating USPH Class B units on a pro rata basis based on the number of such units outstanding. Certain USPH Class B units were subject to participation thresholds (as discussed below) and vesting conditions and were not entitled to participate in distributions until such thresholds had been satisfied and vesting has occurred. As of December 31, 2025 (Predecessor), the total unreturned capital of Class A unitholders before distributions was $
Liquidation rights
Upon liquidation, dissolution, or winding up of US Salt, its assets remaining after the settlement of liabilities were distributed in accordance with the same priority framework applicable to non‑liquidating distributions. Liquidation proceeds were distributed first to USPH Class A units until the return of unreturned capital, and thereafter to USPH Class A units and participating USPH Class B units on a pro rata basis. USPH Class B units that had not satisfied applicable participation thresholds or vesting requirements did not participate in liquidation proceeds. Neither class had liquidation preference beyond the contractual priority described above.
Repurchase rights
US Salt held the right, at its discretion, to repurchase outstanding units held by unitholders in accordance with the operating or related grant agreements. US Salt was able to settle the repurchase or redemption price either in cash or through the transfer of equity interests issued by one of its subsidiaries. If the subsidiary repurchased or redeemed those securities subsequently, the repurchase redemption price would have been equal to the amount of cash or notes, if applicable, equal to the aggregate repurchase or redemption price of the Units that were redeemed or repurchased.
USPH Class B units
Based on the terms of Class B unit grant agreements, USPH Class B units were issued to certain employees and members of the Board of Directors of US Salt. In each of the grant agreements,
Time-vesting incentive units
Time-vesting incentive units vested over the requisite service period of
Performance-based incentive units
The performance-based incentive units were able to vest upon the consummation of a sale of US Salt, provided the participants had remained continuously employed or provided services from the vesting start date through the sale date. Vesting occurred in three tranches as follows:
Vested USPH Class B units were subject to a "Participation Threshold" before distribution of profit or distribution of sales proceeds from the sale of US Salt. Unless otherwise determined by the Board of Directors of US Salt, on the date of each grant of USPH Class B units, pursuant to a grant made under a Class B unit grant agreement or similar agreement, the Board of Directors of US Salt would establish an initial "Participation Threshold" amount in respect of each Class B unit granted on such date. The initial Participation Threshold in respect of an USPH Class B unit would be equal to or greater
33
than (i) the amount that would be distributed with respect to a USPH Class A unit ratably among Class A unitholders until the aggregate unreturned capital of Class A incentive units had been reduced to zero in a hypothetical transaction in which US Salt sold all of its assets for Fair Market Value and distributed the proceeds therefrom in liquidation of US Salt (as determined immediately prior to the issuance of such USPH Class B unit, but taking into account all Capital Contributions, if any, with respect to any Unit issued as part of the issuance of such USPH Class B unit) minus (ii) the total Capital Contributions (if any) made by the holder receiving such USPH Class B unit with respect to all USPH Class B unit received by such holder as part of the same issuance. US Salt was able to periodically update the initial Participation Threshold from time to time as necessary to reflect any adjustments to the Participation Thresholds of outstanding USPH Class B unit required.
Acceleration of vesting of incentive units
Upon the occurrence of the sale of US Salt, all then outstanding time-vesting incentive units and performance-vesting incentive units which had not yet become vested became vested as of the consummation of such sale and were included in the shares acquired as part of the US Salt Acquisition. The Company elected an accounting policy to treat compensation costs due to acceleration as a result of the change in control provision included in the original terms of the awards as acquisition-related consideration transferred. Accordingly, the fair value of the accelerated portion of the awards represented by the cash or Holdings units transferred in exchange for the units subject to accelerated vesting was included in the total consideration transferred for the acquisition and no share‑based compensation expense related to such acceleration was recognized in either the Predecessor or Successor periods. Refer to Note 2, Summary of Significant Accounting Policies, for further information.
Noncontrolling parent interests
US Salt owns
The noncontrolling parent interest represented Aggregator’s
Stockholders' equity (Successor)
ContextLogic Equity
On February 25, 2026, the Company completed the Rights Offering and issued
On February 26, 2026, the Company issued
Noncontrolling Interest - ContextLogic Holdings LLC Units
On February 26, 2026, the Second A&R LLC Agreement became effective for ContextLogic Holdings LLC, establishing and governing the rights, preferences and obligations of each class of units of Holdings. Holdings' membership interests are represented by three classes of units: Preferred Units, Class B Common Units (comprising Class B-1 and Class B-2 series), and Class P Units. The Preferred Units are held by the Company's investors and rank senior to all other units with respect to distributions and liquidation proceeds. The Class B Common Units ("Common Units") are held by the Company and represent the primary common equity interest in Holdings. The Class P Units are profits interests and are subordinate to both the Preferred Units and Common Units. Each class of units was issued in exchange for cash or other property contributions made to Holdings by its members (the "Capital Contributions").
Class A Convertible Preferred Units
The Preferred Units were issued at $
34
invested capital. Each Preferred Unit is convertible at the holder's option at any time into one Class B-2 Common Unit (subject to adjustment for stock splits, combinations, recapitalizations or similar transactions), provided that any conversion notice must cover at least the greater of (i) one-third of the converting member's then-outstanding Preferred Units or (ii)
With respect to distributions and upon liquidation or dissolution, the Preferred Units rank senior to the Common Units and Class P Units and are entitled to receive distributions pro rata based on each Class A member's relative ownership of outstanding Preferred Units until each Class A member has received a full return of its Capital Contributions in respect of its Preferred Units. Prior to any such distribution, Holdings must provide Class A members at least five (5) business days' prior written notice (a "Class A Distribution Notice") detailing the distribution amount and the comparative amount that would be distributed upon conversion into Class B-2 Common Units, giving holders the opportunity to convert prior to the distribution. Class A members that are accredited investors also hold preemptive rights to purchase their pro rata share of any new units or other equity interests issued by Holdings to Abrams Capital, BCP Special Opportunities Fund III Originations LP ("BCP") or their respective affiliates.
Class B Common Units
The Class B Common Units consist of two series: Class B-1 Common Units, which carry voting rights, and Class B-2 Common Units, which are non-voting and are issuable solely upon conversion of Class A Convertible Preferred Units. Class B-1 Common Units are held by ContextLogic directly and through its wholly-owned subsidiary Emerald Lake Pearl Acquisition Blocker, LLC. ContextLogic effectively holds all outstanding Class B-1 Common Units and, as the sole holder of voting units in Holdings, holds all voting power of Holdings. No Class B-2 Common Units are currently outstanding.
Class B members receive distributions pro rata based on each Class B member's relative ownership of outstanding Common Units, after Class A members have received a full return of their Capital Contributions, and until each Class B member has received a full return of its Capital Contributions in respect of Common Units. Thereafter, all remaining distributions are made pro rata to all members based on aggregate Common Units and, subject to any Retained Distributions (as defined below), Class P Units outstanding.
Class P Units
The Class P Units are intended to qualify as "profits interests" for U.S. federal income tax purposes. They are subordinate to both Preferred Units and Common Units in the distribution waterfall. Distributions on unvested Class P Units are retained by Holdings ("Retained Distributions") and released to Class P Unit holders only upon vesting. Any Retained Distributions attributable to forfeited units are redistributed to remaining members in accordance with the standard distribution waterfall. Refer to Note 16, Equity Award Activity, Unit-Based Compensation (Predecessor), and Stock-Based Compensation (Successor), for more information about Class P Units granted.
Noncontrolling Interest Activity
On February 26, 2026, immediately prior to the US Salt Acquisition, BCP acquired additional Preferred Units for gross proceeds of $
On February 26, 2026, pursuant to the BCP Backstop Agreement, BCP acquired an additional
On February 26, 2026, Holdings issued
Because the noncontrolling interest activity described above occurred in conjunction with the US Salt Acquisition, all activity is reflected as Successor equity activity in the Condensed Consolidated Statements of Stockholders’ Equity.
Net Income or Loss Allocation under HLBV
Given the preferred distribution structure described above, the Company allocates its net income or loss using the HLBV method. Under the HLBV method, the amounts reported as noncontrolling interest represent the amounts Holdings' members would hypothetically receive at each balance sheet date under the liquidation provisions of the Second A&R LLC Agreement, assuming the net assets of the funding structures were liquidated at their recorded amounts determined in
35
accordance with GAAP. The members' interests in Holdings' results of operations are determined as the difference in noncontrolling interest at the start and end of each reporting period, after taking into account any capital transactions between Holdings and its members.
At a high level, if Holdings is in a net loss position, all net losses would be
If Holdings is in a net income position, it would be allocated first to any Business Needs (as defined in the Second A&R LLC Agreement, to the extent not already reflected in LLC’s net assets); second to restore Class A's Capital Contributions to full; third to restore Class B's Capital Contributions to full; fourth to Class P to the extent described in the Second A&R LLC Agreement; and fifth to Class B (B-1 and any converted B-2) and Class P Members on a pro-rata basis.
36
NOTE 16. EQUITY Award activity, UNIT-BASED COMPENSATION (PREDECESSOR), AND STOCK-based compensation (SUCCESSOR)
Unit-Based Compensation (Predecessor)
US Salt recognized compensation expense in its condensed consolidated financial statements because its employees and members of the Board of Directors provided services to US Salt and benefited from the USPH Class B units issued to them. The USPH Class B units are issued for no consideration. Refer to Note 15, Equity and Noncontrolling Interest, for more information about the USPH Class B units.
There were no USPH Class B units granted during the period from January 1, 2026 to February 26, 2026 (Predecessor) or the nine months ended September 30, 2025 (Predecessor).
The following table summarizes USPH Class B units activity for the period from January 1, 2026 to February 26, 2026 (Predecessor) and the nine months ended September 30, 2025 (Predecessor):
|
Predecessor |
|
|||||||||
|
Period from January 1, 2026 to February 26, 2026 |
|
|||||||||
|
Number of Units |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Term |
|
|||
|
(in thousands) |
|
|
|
|
|
(In Years) |
|
|||
Balance as of December 31, 2025 |
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|||
Repurchased |
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
|
|
|
|
|
|
|||
Balance as of February 26, 2026 |
|
|
|
$ |
|
|
|
|
|||
|
Predecessor |
|
|||||||||
|
Nine Months Ended September 30, 2025 |
|
|||||||||
|
Number of Units |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Term |
|
|||
|
(in thousands) |
|
|
|
|
|
(In Years) |
|
|||
Balance as of December 31, 2024 |
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
|
— |
|
|
|
|
||
Repurchased |
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
( |
) |
|
|
|
|
|
|
||
Balance as of September 30, 2025 |
|
|
|
$ |
|
|
|
|
|||
Under the valuation methodology theory underlying the option pricing model, the fair value of the USPH Class B units was comprised of intrinsic and extrinsic values. Considering the specific features and attributes of the USPH Class B units, the entire fair value of the units was comprised of the underlying extrinsic value (i.e., the present value of the potential future benefits as of the respective measurement dates) while no value was assigned to the intrinsic value for the period from January 1, 2026 to February 26, 2026 (Predecessor) and the nine months ended September 30, 2025 (Predecessor).
Upon consummation of the sale of US Salt, there is no remaining unrecognized compensation expense for the time-vesting and performance-vesting USPH Class B units other than what was included as part of the consideration transferred. Refer to Note 3, Business Combinations, for further information.
37
Equity Award Activity (Successor)
A summary of activity under the equity plans and related information was as follows:
|
|
Successor |
|
|||||||||||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|||||||||||||
|
|
Options Outstanding |
|
|
RSUs Outstanding |
|
||||||||||
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Number of |
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|
(in thousands) |
|
||||
Balance as of February 27, 2026 (Successor) |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
||
Forfeited or cancelled |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
— |
|
||
Balance as of September 30, 2026 (Successor) |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
As of September 30, 2026,
Equity-Based Compensation Expense
Total equity-based compensation expense included in the Condensed Consolidated Statements of Operations was as follows:
|
|
Successor |
|
|
Successor |
|
|
|
Predecessor |
|
|
Predecessor |
|
|
Predecessor |
|
|||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27, 2026 to September 30, 2026(1) |
|
|
|
Period from January 1, 2026 to February 26, 2026(2) |
|
|
Three Months Ended September 30, 2025(2) |
|
|
Nine Months Ended September 30, 2025(2) |
|
|||||
|
|
(in millions) |
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|||||
Cost of sales |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Selling expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Transaction expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total equity-based compensation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The Company will recognize the remaining $
US Salt Long-Term Incentive Plan (Successor)
On April 8, 2026, US Salt adopted the LTIP, which is a performance-based incentive plan designed to attract, retain, and incentivize key employees of US Salt and its subsidiaries by providing participants with the opportunity to share in long-term EBITDA growth above a specified baseline. Awards granted under the LTIP may be settled, at the discretion of the plan administrator, in cash, shares of the Company’s common stock, Preferred Units, or any combination thereof. The performance period under the LTIP began on January 1, 2026 and ends on December 31, 2030, and payment of LTIP awards, if earned, is expected to occur within 60 days following December 31, 2030. LTIP awards outstanding as of September 30, 2026 were granted on April 8, 2026 and are subject to continued service through the performance period, subject to certain forfeiture provisions, and achievement of performance conditions based on EBITDA growth above a
38
baseline EBITDA amount. The aggregate participation rate allocated to participants as of September 30, 2026 was less than
The awards are subject to additional provisions, including forfeiture upon certain terminations of employment or breaches of restrictive covenants and a clawback provision requiring repayment to US Salt upon certain post-payment breaches of restrictive covenants.
Determining the fair value of the LTIP liability requires judgment, including management’s estimate of the most likely EBITDA performance scenario and assessment of whether achievement of the performance condition is probable. As of September 30, 2026, management determined that achievement of the applicable performance condition was probable.
For the three months ended September 30, 2026, the Company recognized stock-based compensation expense related to the LTIP of $
As of September 30, 2026, unrecognized compensation cost related to LTIP awards was $
Class P Unit Grants (Successor)
On March 6, 2025, the Board approved, and the Company entered into, an employment agreement for Mr. Rishi Bajaj to serve as the Chief Executive Officer ("CEO"), including a revised compensation package (the "Employment Agreement"), effective March 6, 2025 (the "Effective Date"). On the Effective Date, Mr. Bajaj was awarded
In December 2025, the Company and Mr. Bajaj entered into a Separation Agreement and Release (the "Separation Agreement"), under which the Company granted
The Transaction Grant is equity-classified under ASC 718 and was measured at fair value as of the grant date, which the Company determined to be December 7, 2025 as it was the date on which all key terms were approved and mutually understood ("Transaction Grant Date").
The Transaction Grant contains both a performance condition and a market condition, but no substantive service condition:
A Monte Carlo simulation model under the option pricing method was used to estimate the fair value of the Transaction Grant as of the grant date. The fair value incorporated a discount for lack of marketability because the Class P Units represent non‑marketable, minority interests in Holdings that lack control rights, have no active trading market, and are subject to transfer restrictions. In addition, the priority distribution rights afforded to the Class A and Class B Units subordinate the Class P Units economically, resulting in greater volatility in their expected returns relative to the controlling equity interests. The total fair value granted for the Transaction Grant was $
39
The valuation assumptions utilized for the Transaction Grant as of the December 7, 2025 grant date were as follows:
Expected time to a liquidity event (1) |
|
|
||
Expected volatility (2) |
|
|
% |
|
Risk-free interest rate (3) |
|
|
% |
|
Equity value (4) |
|
$ |
|
|
Discount for lack of marketability |
|
|
% |
|
Because the Transaction Grant contains no substantive service condition, compensation cost is recognized in full when achievement of the performance condition (closing of the US Salt Acquisition) is probable. On February 27, 2026, upon the consummation of the US Salt Acquisition, the performance condition was achieved and thus the Company recognized an expense of $
Similarly, because the Company's Board terminated Mr. Bajaj without Cause, the Initial Grant remains outstanding and will continue to vest in accordance with the terms of the Employment Agreement. However, all stock-based compensation expense related to the Initial Grant was accelerated and expensed on Mr. Bajaj's termination date in December 2025.
Changes in the Initial Grant and the Transaction Grant for the period from February 27, 2026 to September 30, 2026 (Successor), were as follows (in thousands, except per share amounts):
|
|
Initial Grant |
|
|
Transaction Grant |
|
||||||||||
|
|
Number of Units |
|
|
Weighted Average Grant Date Fair Value |
|
|
Number of Units |
|
|
Weighted Average Grant Date Fair Value |
|
||||
Nonvested at February 27, 2026 (Successor) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nonvested at September 30, 2026 (Successor) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
40
NOTE 17. INCOME TAXES
The Company holds an economic interest in Holdings and consolidates its financial position and results. The remaining ownership of Holdings not held by the Company is considered a noncontrolling interest. Holdings is treated as a partnership for income tax reporting and its members, including the Company, are liable for federal, and state income taxes based on their share of Holdings' taxable income. Prior to the acquisition, US Salt was treated as a partnership for federal and state income tax purposes, in which the partnership’s taxable income or loss was passed through to its unitholders.
The Company’s tax provision for the interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company assesses its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in the period of change.
The Company’s quarterly tax provision and the estimate of the annual effective tax rate is subject to fluctuation due to several factors, including variability in pre-tax earnings, the geographic distribution of the pre-tax earnings, tax law changes, non-deductible expenses, such as stock-based compensation, and changes in the estimate of the valuation allowance.
The provision for income taxes was $
The Company continues to maintain a valuation allowance on its domestic net deferred tax assets which is excluded from the annual effective tax rate estimate.
The Company had
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. During the three months ended September 30, 2026, the Company was notified of a federal income tax audit for the tax year 2024. As of the filing date of this Quarterly Report on Form 10-Q, no substantive communications have been received from the taxing authority regarding the examination. The Company is not currently under examination by income tax authorities in state or other jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and
41
NOTE 18. Net INCOME per share (Successor) and per unit (predecessor)
The following table sets forth the computation of basic and diluted net loss per share:
|
|
Successor |
|
|
|
Predecessor |
|
||||||||||||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
|||||
|
|
($ in millions, shares in thousands, except per share data) |
|
|
|
($ in millions, shares in thousands, except per share data) |
|
||||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to Parent Holdings Class A unitholders (Predecessor) |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Net (loss) income attributable to common stockholders (Successor) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic and diluted weighted average USPH Class A units outstanding (Predecessor) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic (Successor) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted-average shares used in computing net loss per share attributable to common stockholders, diluted (Successor) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income per unit attributable to USPH Class A unit, basic and diluted (Predecessor) |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Net (loss) income per share attributable to common stockholders, basic (Successor) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Net (loss) income per share attributable to common stockholders, diluted (Successor) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share because including them would have had an anti-dilutive effect:
|
|
Successor |
|
|||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27, 2026 to September 30, 2026 |
|
||
|
|
(in thousands) |
|
|
(in thousands) |
|
||
Restricted stock units outstanding |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Calculation of Net Income per Share (Successor)
Awards under the LTIP may be settled, at the discretion of the plan administrator, in cash, shares of the Company’s common stock, Preferred Units, or any combination thereof. The Company considers the potential dilutive effect of awards that may be settled in shares of the Company’s common stock in calculating diluted net income per share. No potential shares related to the LTIP were included in diluted net income per share for the three months ended September 30, 2026 (Successor) and
42
the period from February 27, 2026 to September 30, 2026 (Successor) because no shares were contingently issuable under ASC 260 as of September 30, 2026.
Calculation of Net Income per Unit (Predecessor)
US Salt used the two-class method in its computation of net income per unit. US Salt's paid and unpaid USPH Class A units issued through subscription notes receivable were entitled to receive distributions at the same rate. Under the two-class method, US Salt's net income available to Class A unitholders was allocated between the paid and unpaid USPH Class A units on a fully-distributed basis and reflected residual net income after amounts attributed to noncontrolling interests. In the event of a net loss, US Salt determined that both paid and unpaid USPH Class A units share in the Company’s losses, and they shared in the losses using the same mechanism as the distributions. US Salt also had USPH Class B units whereby vested USPH Class B units were subject to the hurdle of unreturned capital of Class A and a "Participation Threshold" before Class B unitholders received distribution of profit or distribution of sales proceeds from the sale of US Salt. For the period from January 1, 2026 to February 26, 2026 (Predecessor), the three months ended September 30, 2025 (Predecessor), and the nine months ended September 30, 2025 (Predecessor), USPH Class B units were participating securities for net income per unit calculation purposes because they were able to participate in undistributed earnings with USPH Class A units. However, because the Class B unit participation was contingent on overcoming the hurdle as described above that was not objectively determinable and/or subject to management discretion, US Salt did not allocate undistributed earnings to Class B unless and until the contingency occurs. USPH Class B units were non-dilutive securities as the hurdle of unreturned capital of USPH Class A unitholders was not met as of September 30, 2025 (Predecessor).
Basic and dilutive net income or loss per unit was calculated by dividing undistributed earnings allocated to paid and unpaid USPH Class A unitholders by the weighted average member units outstanding for the respective period.
NOTE 19. RELATED PARTY TRANSACTION (pREDECESSOR)
Management Fees
On July 19, 2021, US Salt Holdings entered into a Professional Services Agreement with Emerald Lake, who would provide financial and management consulting services. Emerald Lake agreed to consult with the US Salt’s Board of Directors and the oversight of management on business and financial matters including company strategy, budgeting of future investments, acquisition and divestiture strategies, and debt and equity financings. In consideration of Emerald Lake’s services, US Salt Holdings paid Emerald Lake an annual management fee (the "Management Fee") the greater of $
Upon the consummation of the US Salt Acquisition, the Professional Services Agreement was terminated and no further Management Fees will be incurred.
USPH Class A and Unit Subscription Receivable
The activities of USPH Class A units and subscription notes receivable from employees and Board of Directors of US Salt are summarized as follows:
|
|
Predecessor |
|
|||||||
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|||||||
|
|
USPH Class A Units |
|
Amount |
|
Subscription Receivable |
|
|||
|
|
(in thousands) |
|
(in millions) |
|
(in millions) |
|
|||
Outstanding, December 31, 2025 (Predecessor) |
|
|
|
$ |
|
$ |
|
|||
Repayment |
|
|
— |
|
|
— |
|
|
( |
) |
Balance as of February 26, 2026 (Predecessor) |
|
|
|
$ |
|
$ |
|
|||
43
|
|
Predecessor |
|
|||||||
|
|
Three Months Ended September 30, 2025 |
|
|||||||
|
|
USPH Class A Units |
|
Amount |
|
Subscription Receivable |
|
|||
|
|
(in thousands) |
|
(in millions) |
|
(in millions) |
|
|||
Balance as of June 30,2025 (Predecessor) |
|
|
|
$ |
|
$ |
|
|||
Repayment |
|
|
— |
|
|
— |
|
|
|
|
Balance as of September 30,2025 (Predecessor) |
|
|
|
$ |
|
$ |
|
|||
|
|
Predecessor |
|
|||||||
|
|
Nine Months Ended September 30, 2025 |
|
|||||||
|
|
USPH Class A Units |
|
Amount |
|
Subscription Receivable |
|
|||
|
|
(in thousands) |
|
(in millions) |
|
(in millions) |
|
|||
Outstanding, December 31, 2024 (Predecessor) |
|
|
|
$ |
|
$ |
|
|||
Repayment |
|
|
— |
|
|
— |
|
|
( |
) |
Balance as of September 30,2025 (Predecessor) |
|
|
|
$ |
|
$ |
|
|||
44
NOTE 20. SEGMENT INFORMATION
The Company operates as a single segment, which is the consolidated entity. Our Chief Operating Decision Maker ("CODM") is our President.
One customer accounted for $
The following tables provide the operating financial results of the Company:
|
|
Successor |
|
|
|
Predecessor |
|
||||||||||||||
|
|
Three Months Ended September 30, 2026 |
|
|
Period from February 27 - September 30, 2026 |
|
|
|
Period from January 1 - February 26, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
|||||
|
|
(in millions) |
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Depreciation, amortization and depletion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Transaction expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other segment items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Benefit from income taxes |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Capital expenditures - purchases of property, plant and equipment |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other segment items include foreign currency gain/(loss), loss due to disposal of fixed assets, stock-based/unit-based compensation expenses, and management fees paid to Emerald Lake (Predecessor).
The measure of segment assets is reported on the Company’s Condensed Consolidated Balance Sheets.
45
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2025 included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K").
This Quarterly Report on Form 10-Q contains forward-looking statements which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or future financial or operating performance and include all statements that are not historical facts such as information concerning executive management transitions and integrations, the financial outlook of ContextLogic Holdings Inc. (the "Company," "ContextLogic," "we," "our" or "us"), information concerning the acquisition of US Salt Parent Holdings, LLC and subsidiaries (such entities taken together, comprising the salt production, manufacturing and distribution business of US Salt and its subsidiaries ("US Salt"), such acquisition, the "US Salt Acquisition"), information concerning the integration of US Salt into the Company’s operations, potential growth strategies and opportunities, our remediation efforts for a material weakness identified as part of the US Salt Acquisition, potential resolutions to ongoing litigation and planned capital expenditures. In some cases, forward-looking statements can be identified by terms such as "anticipates," "assumption," "believes," "continue," "could," "estimates," "expects," "foresees," "forecasts," "guidance," "intends," "goals," "judgment," "may," "might," "outlook," "plans," "potential," "predicts," "projects," "seeks," "should," "targets," "will," "would" or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A. "Risk Factors" in this Quarterly Report on Form 10-Q, as well as in our condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, filed with the SEC on August 13, 2026, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed with the SEC on May 15, 2026, our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 5, 2026 and our other filings with the SEC. The inclusion of forward-looking information should not be regarded as a representation by us, our management or any other person that the future plans, estimates, or expectations contemplated by us will be achieved. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this Quarterly Report on Form 10-Q.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject, including, but not limited to, statements regarding the acquisition of US Salt, the strategic alternatives considered by the Company’s Board of Directors (the "Board"), including the decisions taken thereto; future financial performance; future liquidity and operating expenditures; financial condition and results of operations; competitive changes in the marketplace and other characterizations of future events or circumstances. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
Overview of the Company
We are a business ownership platform designed from first principles to combine the structural advantages of permanent public capital with the operating discipline, alignment, and long-term orientation typically associated with private ownership.
46
Our mission is to build a portfolio of high-quality, niche, and competitively advantaged businesses that generate sustainable, growing free cash flow that can be reinvested over long time horizons. We currently own one operating subsidiary, US Salt.
Origins and Evolution of the Platform
Prior to the divestiture of the former Wish.com business, the Company preserved approximately $2.9 billion of federal net operating losses ("NOLs") and other tax attributes.
Through our subsidiary Holdings, we operate a platform based on aligned ownership, decentralized operations, and disciplined capital deployment.
On February 26, 2026, we closed a series of transactions that resulted in the acquisition of US Salt, pursuant to a purchase agreement dated December 8, 2025. US Salt is a leading producer, packager, and distributor of evaporated and specialty salt products originally founded in 1893. The acquisition of US Salt represented our anchor acquisition and launched our new strategy as a business ownership platform.
Our Business Model
Our decentralized structure means each operating subsidiary is independently managed by its leadership team with responsibility for day-to-day operations, commercial strategy, and long-term planning. Our platform functions will be intentionally limited in scope. Platform leadership supports public company reporting, capital allocation, and mergers and acquisitions execution. Our operating businesses will each have chief executive officers with primary authority and accountability for their businesses.
Under this model, each operating subsidiary will be overseen by a dedicated business oversight committee consisting of directors who work directly with management, review budgets, assess performance, and make compensation decisions. Capital allocation across the platform will be overseen by a separate investment committee composed primarily of representatives from the Company’s largest equity holders. We believe this governance structure will keep decision-making close to owners, enhance accountability, and ensure capital is deployed with discipline.
Acquisition Strategy
Our acquisition approach focuses on identifying and acquiring businesses that meet three core criteria:
We intend to add new businesses gradually over time, emphasizing quality, resilience, and attractive cash flow characteristics rather than volume or pace of deployment. In addition to strategic acquisitions, we may also pursue value-enhancing opportunities such as share repurchases, capital or structured investments when we believe such opportunities are attractive to shareholders.
Recent Developments
On August 4, 2026, GCH Buyer, Inc. (“Buyer”), a Delaware corporation and indirect, wholly owned subsidiary of Holdings entered into a Stock Purchase Agreement, as amended on October 22, 2026 (the “Purchase Agreement”), with EagleTree-Gaylord Management Investment, L.P., a Delaware limited partnership, EagleTree-Gaylord Holdings Corp., a Delaware corporation, and its subsidiaries (“gChem” and such transaction, the “gChem Acquisition”) and, solely for limited purposes, Holdings, to acquire all of the issued and outstanding capital stock of gChem (other than certain rollover shares) for $847.5 million in cash and net $2.5 million in assumed liabilities to be paid post close, following satisfaction or waiver of certain conditions and subject to customary purchase price adjustments. We anticipate the gChem Acquisition will close in late 2026 or the first quarter of 2027.
In connection with its entry into the Purchase Agreement, (i) Holdings obtained equity financing commitments from certain investors for an aggregate of $870.0 million and (ii) Buyer obtained a debt financing commitment arranged by Blackstone and Wells Fargo Securities, LLC, comprising a $250.0 million term loan and a $25.0 million revolving credit facility, which
47
will be used to finance the consideration due under the Purchase Agreement and related fees and expenses, subject to the terms and conditions set forth in the respective equity and debt commitment letters.
As a result of the borrowings described above, Buyer expects to incur approximately $22.0 million of additional interest expense on an annual basis.
Known Trends and Uncertainties
We monitor several trends and uncertainties that could materially affect our future results of operations, liquidity, and cash flows.
Transportation Availability and Costs
Our business operations depend on trucking and transportation services to move products and materials, and we have experienced, and may continue to experience, volatility in freight and fuel costs, driver availability, and carrier capacity. These trucking and transportation cost pressures and uncertainties could materially affect our operating expenses, supply chain reliability, and results of operations.
Natural Gas and Energy Inputs
Our operations are energy intensive, and natural gas is a meaningful variable input cost. While future market pricing cannot be predicted with certainty, natural-gas cost variability may affect our production costs in the future if market rates materially differ from the terms of the existing contract. We consider hedging strategies and operational efficiency initiatives to mitigate potential price volatility.
Labor Costs and Workforce Availability
Wage inflation and a tight regional labor market have contributed to higher labor and benefit costs in recent periods. We expect continued upward pressure on wages, which may increase our cost of sales, selling expense, and general and administrative expenses. Productivity initiatives, cross-training, and automation are expected to partially offset inflationary impacts; however, labor availability and cost trends remain an uncertainty.
Product Mix and Customer Demand.
A meaningful portion of our margin is influenced by our product mix of the categories we serve. Our strategy to increase exposure to higher-value categories is expected to support margin stability; however, the timing of large customer orders, competitive dynamics in private label programs, and broader economic conditions may contribute to period-to-period variability.
Maintenance and Production Reliability.
We operate a single, vertically integrated facility. While its multi-year reliability program has improved uptime and operating efficiency, unplanned outages, major equipment failures, or extended maintenance projects could temporarily affect production volumes or increase costs. We plan maintenance activities carefully to minimize operational disruptions, but variability in maintenance requirements is an ongoing uncertainty.
Inflationary Pressures and Supply Chain Costs
Increases in the cost of packaging materials, freight, spare parts and external maintenance services have affected cost trends in recent years. Although we have generally been able to offset inflation through price increases and cost efficiency initiatives, sustained or accelerated inflation could impact our margins and working capital needs.
Seasonality
Pool salt and ice melt are the only products that exhibit consistent seasonal demand patterns—pool salt shipments typically increase in late spring and summer, while ice melt demand occurs in winter months. These products represent a limited portion of its overall sales, and seasonality has not had a material impact on our consolidated results.
Results of Operations
Results after the date of the US Salt Acquisition, the period from February 27, 2026 through September 30, 2026 (Successor), include the Company’s consolidation of US Salt into ContextLogic, reflecting US Salt on a new basis in accordance with application of acquisition accounting. The Company is presenting US Salt as the predecessor to the
48
post-acquisition consolidated ContextLogic entity and as a result has presented activity of stand-alone US Salt in periods prior to February 26, 2026 (Predecessor Periods). To provide meaningful and comparable information, the Company is also presenting Combined results—a non-GAAP measure that adds the period from January 1, 2026 through February 26, 2026 (Predecessor) and the period from February 27, 2026 through September 30, 2026 (Successor)—to compare against the nine months ended September 30, 2025 (Predecessor).
The following table shows our results of operations for the periods presented.
49
Results of Operations for the Three Months Ended September 30, 2026 (Successor) and 2025 (Predecessor)
|
Successor |
|
|
Predecessor |
|
|
|
|||||||||
|
Three Months Ended September 30, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
$ Change |
|
|||||||||
|
(in millions) |
|
|
|
|
(in millions) |
|
|
|
|
|
|||||
Net sales |
$ |
32.2 |
|
|
100 |
% |
|
$ |
32.2 |
|
|
100 |
% |
$ |
— |
|
Cost of sales |
|
20.6 |
|
|
64 |
% |
|
|
20.6 |
|
|
64 |
% |
|
— |
|
Gross profit |
|
11.6 |
|
|
|
|
|
11.6 |
|
|
|
|
— |
|
||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling expense |
|
1.0 |
|
|
3 |
% |
|
|
0.9 |
|
|
3 |
% |
|
0.1 |
|
General and administrative |
|
12.6 |
|
|
39 |
% |
|
|
2.3 |
|
|
7 |
% |
|
10.3 |
|
Transaction expenses |
|
6.8 |
|
|
21 |
% |
|
|
0.1 |
|
|
0 |
% |
|
6.7 |
|
Total operating expenses |
|
20.4 |
|
|
|
|
|
3.3 |
|
|
|
|
17.1 |
|
||
(Loss) income from operations |
|
(8.8 |
) |
|
|
|
|
8.3 |
|
|
|
|
(17.1 |
) |
||
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other income |
|
0.1 |
|
|
0 |
% |
|
|
— |
|
|
0 |
% |
|
0.1 |
|
Interest and other expense, net |
|
(4.6 |
) |
|
-14 |
% |
|
|
(5.3 |
) |
|
-16 |
% |
|
0.7 |
|
(Loss) income before income taxes |
|
(13.3 |
) |
|
|
|
|
3.0 |
|
|
|
|
(16.3 |
) |
||
Income tax expense |
|
0.1 |
|
|
0 |
% |
|
|
— |
|
|
0 |
% |
|
0.1 |
|
Net (loss) income |
|
(13.4 |
) |
|
-42 |
% |
|
|
3.0 |
|
|
9 |
% |
|
(16.4 |
) |
Net (loss) income attributable to noncontrolling interest |
|
— |
|
|
0 |
% |
|
|
0.1 |
|
|
0 |
% |
|
(0.1 |
) |
Net (loss) income attributable to Parent Holdings Class A unitholders (Predecessor) or common stockholders (Successor) |
$ |
(13.4 |
) |
|
-42 |
% |
|
$ |
2.9 |
|
|
9 |
% |
$ |
(16.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other Financial and Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross Profit %(1) |
|
36.0 |
% |
|
|
|
|
36.0 |
% |
|
|
|
|
|||
EBITDA(2) |
|
1.4 |
|
|
|
|
|
12.3 |
|
|
|
|
|
|||
Adjusted EBITDA(2) |
|
10.1 |
|
|
|
|
|
15.6 |
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Supplemental Disclosure Items: |
|
|
|
|
|
|
|
|
|
|
|
|||||
CLHI Corporate G&A |
2.1 |
|
|
|
|
— |
|
|
|
|
|
|||||
CLHI Corporate transaction expenses |
6.8 |
|
|
|
|
— |
|
|
|
|
|
|||||
CLHI Corporate tax expense |
|
0.1 |
|
|
|
|
— |
|
|
|
|
|
||||
CLHI Corporate adjusting expense items for Adjusted EBITDA(3) |
|
7.1 |
|
|
|
|
— |
|
|
|
|
|
||||
50
Results of Operations for the Period from February 27, 2026 to September 30, 2026 (Successor), Period from January 1, 2026 to February 26, 2026 (Predecessor) and the Nine Months Ended September 30, 2025 (Predecessor)
|
Successor |
|
|
|
Predecessor |
|
|
Non-GAAP |
|
|
Predecessor |
|
||||||||||
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Combined Nine Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
||||||||||
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
|
|
(in millions) |
|
|
|
||||||
Net sales |
$ |
77.9 |
|
|
|
$ |
20.3 |
|
|
$ |
98.2 |
|
|
100 |
% |
|
$ |
98.3 |
|
|
100 |
% |
Cost of sales |
|
50.0 |
|
|
|
|
13.2 |
|
|
|
63.2 |
|
|
64 |
% |
|
|
61.1 |
|
|
62 |
% |
Gross profit |
|
27.9 |
|
|
|
|
7.1 |
|
|
|
35.0 |
|
|
|
|
|
37.2 |
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling expense |
|
2.4 |
|
|
|
|
0.7 |
|
|
|
3.1 |
|
|
3 |
% |
|
|
2.9 |
|
|
3 |
% |
General and administrative |
|
31.8 |
|
|
|
|
1.6 |
|
|
|
33.4 |
|
|
34 |
% |
|
|
7.3 |
|
|
7 |
% |
Transaction expenses |
|
29.3 |
|
|
|
|
0.1 |
|
|
|
29.4 |
|
|
30 |
% |
|
|
0.3 |
|
|
0 |
% |
Total operating expenses |
|
63.5 |
|
|
|
|
2.4 |
|
|
|
65.9 |
|
|
|
|
|
10.5 |
|
|
|
||
(Loss) income from operations |
|
(35.6 |
) |
|
|
|
4.7 |
|
|
|
(30.9 |
) |
|
|
|
|
26.7 |
|
|
|
||
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest and other income |
|
0.2 |
|
|
|
|
— |
|
|
|
0.2 |
|
|
0 |
% |
|
|
— |
|
|
0 |
% |
Interest and other expense, net |
|
(10.8 |
) |
|
|
|
(3.0 |
) |
|
|
(13.8 |
) |
|
-14 |
% |
|
|
(16.1 |
) |
|
-16 |
% |
(Loss) income before income taxes |
|
(46.2 |
) |
|
|
|
1.7 |
|
|
|
(44.5 |
) |
|
|
|
|
10.6 |
|
|
|
||
Income tax benefit |
|
41.8 |
|
|
|
|
— |
|
|
|
41.8 |
|
|
43 |
% |
|
|
— |
|
|
0 |
% |
Net (loss) income |
|
(4.4 |
) |
|
|
|
1.7 |
|
|
|
(2.7 |
) |
|
-3 |
% |
|
|
10.6 |
|
|
11 |
% |
Net (loss) income attributable to noncontrolling interest |
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
0 |
% |
|
|
0.1 |
|
|
0 |
% |
Net (loss) income attributable to Parent Holdings Class A unitholders (Predecessor) or common stockholders (Successor) |
$ |
(4.4 |
) |
|
|
$ |
1.7 |
|
|
$ |
(2.7 |
) |
|
-3 |
% |
|
$ |
10.5 |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other Financial and Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross Profit %(1) |
|
35.8 |
% |
|
|
|
35.0 |
% |
|
|
35.6 |
% |
|
|
|
|
37.8 |
% |
|
|
||
EBITDA(2) |
|
(12.1 |
) |
|
|
|
7.4 |
|
|
|
(4.7 |
) |
|
|
|
|
38.0 |
|
|
|
||
Adjusted EBITDA(2) |
|
24.8 |
|
|
|
|
7.7 |
|
|
|
32.5 |
|
|
|
|
|
42.2 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Supplemental Disclosure Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CLHI Corporate G&A |
$ |
9.2 |
|
|
|
|
— |
|
|
9.2 |
|
|
|
|
— |
|
|
|
||||
CLHI Corporate transaction expenses |
|
28.6 |
|
|
|
|
— |
|
|
28.6 |
|
|
|
|
— |
|
|
|
||||
CLHI Corporate tax benefit |
|
41.8 |
|
|
|
|
— |
|
|
|
41.8 |
|
|
|
|
— |
|
|
|
|||
CLHI Corporate adjusting expense items for Adjusted EBITDA(3) |
|
32.6 |
|
|
|
|
— |
|
|
32.6 |
|
|
|
|
— |
|
|
|
||||
51
Comparison of the Three Months Ended September 30, 2026 (Successor) and 2025 (Predecessor)
Net Sales, Cost of Sales, and Gross Profit
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|||
|
|
Three Months Ended September 30, 2026 |
|
|
|
Three Months Ended September 30, 2025 |
|
|
Three Months' Change |
|
|||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
% |
|
|||
Net sales |
|
$ |
32.2 |
|
|
|
$ |
32.2 |
|
|
|
— |
|
Cost of sales |
|
|
20.6 |
|
|
|
|
20.6 |
|
|
|
— |
|
Gross profit |
|
|
11.6 |
|
|
|
|
11.6 |
|
|
|
— |
|
Gross margin |
|
|
36.0 |
% |
|
|
|
36.0 |
% |
|
|
|
|
Net sales for the third quarter of 2026 (Successor) was $32.2 million, flat compared to $32.2 million in the third quarter of 2025 (Predecessor). We experienced lower sales volume in the quarter and a slightly unfavorable product mix, offset by higher average sales prices. The average sales price in the third quarter of 2026 (Successor) was 6.1% higher than that of the prior year quarter (Predecessor), which generated approximately $1.9 million of additional revenue. Overall volume during the third quarter of 2026 (Successor) decreased 5.7%, compared with the third quarter of 2025 (Predecessor), resulting in an approximately $1.8 million reduction in revenue. The decrease in volume was primarily attributable to transportation constraints related to limited trucking availability that limited shipments during the quarter.
Cost of sales for the third quarter of 2026 (Successor) was $20.6 million, flat compared to $20.6 million for the third quarter of 2025 (Predecessor). We experienced inflationary pressures on inputs such as natural gas and labor, partially offset by lower sales volumes.
Gross profit stayed flat for the third quarter of 2026 (Successor) compared to the third quarter of 2025 (Predecessor). We experienced increased price of inputs such as natural gas and labor offset by higher average selling prices.
Operating Expenses
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|||
|
|
Three Months Ended September 30, 2026 |
|
|
|
Three Months Ended September 30, 2025 |
|
|
Three Months' Change |
|
|||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
% |
|
|||
General and administrative |
|
$ |
12.6 |
|
|
|
$ |
2.3 |
|
|
|
447.8 |
% |
Selling expense |
|
|
1.0 |
|
|
|
|
0.9 |
|
|
|
11.1 |
% |
Transaction expenses |
|
|
6.8 |
|
|
|
|
0.1 |
|
|
|
6700.0 |
% |
Operating expenses |
|
|
20.4 |
|
|
|
|
3.3 |
|
|
|
518.2 |
% |
Operating expenses increased $17.1 million for the third quarter of 2026 (Successor) compared to the third quarter of 2025 (Predecessor). This increase was primarily driven by $6.9 million of higher intangible asset amortization related to US Salt acquisition accounting and $8.9 million of expenses attributable to ContextLogic, impacted by professional services, employee costs, and expenses related to the pending gChem Acquisition and pursuing and executing potential acquisitions.
Other Income (Expenses)
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|||
|
|
Three Months Ended September 30, 2026 |
|
|
|
Three Months Ended September 30, 2025 |
|
|
Three Months' Change |
|
|||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
% |
|
|||
Interest and other income |
|
$ |
0.1 |
|
|
|
$ |
— |
|
|
|
100.0 |
% |
Interest and other expense, net |
|
|
(4.6 |
) |
|
|
|
(5.3 |
) |
|
|
(13.2 |
)% |
Other income (expenses) |
|
|
(4.5 |
) |
|
|
|
(5.3 |
) |
|
|
(15.1 |
)% |
Other income (expenses) decreased $0.8 million for the third quarter of 2026 (Successor) compared to the third quarter of 2025 (Predecessor). The decrease was driven by $0.9 million of lower interest expense, reflecting the lower interest rate on the Wilmington Trust term loan entered into in February 2026 in connection with the US Salt Acquisition, as compared to the Ares Capital term loan it replaced.
52
Comparison of the Period from February 27, 2026 to September 30, 2026 (Successor) and Period from January 1, 2026 to February 26, 2026 (Predecessor) Compared with the Nine Months Ended September 30, 2025 (Predecessor)
Net Sales, Cost of Sales, and Gross Profit
|
|
Successor |
|
|
|
Predecessor |
|
|
Non-GAAP |
|
|
Predecessor |
|
|
Non-GAAP |
|
|||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Combined Nine Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|
Nine Months' Change |
|
|||||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|
% |
|
|||||
Net sales |
|
$ |
77.9 |
|
|
|
$ |
20.3 |
|
|
$ |
98.2 |
|
|
$ |
98.3 |
|
|
|
(0.1 |
)% |
Cost of sales |
|
|
50.0 |
|
|
|
|
13.2 |
|
|
|
63.2 |
|
|
|
61.1 |
|
|
|
3.4 |
% |
Gross profit |
|
|
27.9 |
|
|
|
|
7.1 |
|
|
|
35.0 |
|
|
|
37.2 |
|
|
|
(5.9 |
)% |
Gross margin |
|
|
35.8 |
% |
|
|
|
35.0 |
% |
|
|
35.6 |
% |
|
|
37.8 |
% |
|
|
|
|
Net sales for the Combined nine months ending September 30, 2026 was $98.2 million, a decrease of $0.1 million, or 0.1%, from $98.3 million for the nine months ending September 30, 2025 (Predecessor). The decrease was primarily attributable to lower sales volumes, partially offset by higher average sales prices and slightly favorable product mix. Average sales price in the Combined nine months ending September 30, 2026 increased 7.3% compared to the same period in the prior year, which generated approximately $6.7 million of additional revenue. US Salt volumes decreased 6.9% for the Combined nine months ended September 30, 2026, compared to prior year, resulting in an approximately $6.7 million reduction in revenue. The decrease in volume was primarily attributable to a planned maintenance shutdown in the second quarter of 2026 (Successor) that was not performed in the prior year and transportation constraints related to limited trucking availability that limited shipments during the period.
Cost of sales for the Combined nine months ending September 30, 2026, was $63.2 million, an increase of $2.1 million, or 3.4%, from $61.1 million for the nine months ending September 30, 2025 (Predecessor). The increase was primarily attributable to $1.1 million of acquisition related inventory step-up amortization. The remaining increase was due to inflationary pressures on inputs such as natural gas and labor, and costs associated with a planned periodic maintenance shutdown conducted approximately every two to three years to perform major maintenance activities related to equipment reliability and operating efficiency.
Gross profit decreased $2.2 million for the Combined nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 (Predecessor). This decrease was primarily driven by the $2.1 million increase in cost of sales.
Operating Expenses
|
|
Successor |
|
|
|
Predecessor |
|
|
Non-GAAP |
|
|
Predecessor |
|
|
Non-GAAP |
|
|||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Combined Nine Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|
Nine Months' Change |
|
|||||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|
% |
|
|||||
General and administrative |
|
$ |
31.8 |
|
|
|
$ |
1.6 |
|
|
$ |
33.4 |
|
|
$ |
7.3 |
|
|
|
357.5 |
% |
Selling expense |
|
|
2.4 |
|
|
|
|
0.7 |
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
6.9 |
% |
Transaction expenses |
|
|
29.3 |
|
|
|
|
0.1 |
|
|
|
29.4 |
|
|
|
0.3 |
|
|
|
9700.0 |
% |
Operating expenses |
|
|
63.5 |
|
|
|
|
2.4 |
|
|
|
65.9 |
|
|
|
10.5 |
|
|
|
527.6 |
% |
Operating expenses increased $55.4 million for the Combined nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 (Predecessor). This increase was primarily driven by $28.6 million of expenses incurred by ContextLogic attributable to its acquisition of US Salt, its pending acquisition of gChem, and expenses incurred pursuing and executing potential acquisitions, $16.1 million of higher intangible asset amortization related to US Salt acquisition accounting, $9.2 million of expenses attributable to ContextLogic corporate costs, impacted by a $3.5 million contingent loss accrual, professional services, and employee costs.
Other Income (Expenses)
53
|
|
Successor |
|
|
|
Predecessor |
|
|
Non-GAAP |
|
|
Predecessor |
|
|
Non-GAAP |
|
|||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Combined Nine Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|
Nine Months' Change |
|
|||||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|
% |
|
|||||
Interest and other income |
|
$ |
0.2 |
|
|
|
$ |
— |
|
|
$ |
0.2 |
|
|
$ |
— |
|
|
|
100.0 |
% |
Interest and other expense, net |
|
|
(10.8 |
) |
|
|
|
(3.0 |
) |
|
|
(13.8 |
) |
|
|
(16.1 |
) |
|
|
(14.3 |
)% |
Other income (expenses) |
|
|
(10.6 |
) |
|
|
|
(3.0 |
) |
|
|
(13.6 |
) |
|
|
(16.1 |
) |
|
|
(15.5 |
)% |
Other income (expenses) decreased $2.5 million for the Combined nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 (Predecessor). The decrease was driven by $2.5 million of lower interest expense, reflecting the lower interest rate on the Wilmington Trust term loan entered into in February 2026 in connection with the US Salt Acquisition, as compared to the Ares Capital term loan it replaced.
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization, or EBITDA, and Adjusted EBITDA are supplemental non-GAAP financial measures used by management. The Company defines EBITDA as net income before (i) interest expense, (ii) depreciation, amortization and depletion, and (iii) taxes. The Company defines Adjusted EBITDA as EBITDA before (i) transaction and integration costs, (ii) stock and unit-based compensation, (iii) restructuring and severance costs, (iv) asset impairments and write-offs, (v) legal contingency accrual, (vi) foreign currency (gain) loss, and (vii) other adjustments. The most directly comparable GAAP financial measure to EBITDA and Adjusted EBITDA is net income.
The Company believes EBITDA and Adjusted EBITDA offer useful views of the overall operation of the business because they allow comparison of its results of operations from period to period without regard to its financing methods or capital structure or other items that impact comparability of financial results from period to period such as fluctuations in interest expense or effective tax rates, levels of depreciation, amortization, and depletion, or items whose timing and amount vary significantly from period to period. Because the Company’s strategy includes the acquisition of businesses, the Company has incurred, and expects to continue to incur, transaction and integration costs. The amount and timing of these costs vary significantly depending on the number, size and complexity of transactions pursued in a given period, including transactions that are not completed, and management does not consider them indicative of the ongoing operating performance of the Company’s businesses.
Users should consider the limitations of EBITDA and Adjusted EBITDA, including that (i) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest payments on the Company’s indebtedness, (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and the cash requirements for such replacements are not reflected in EBITDA and Adjusted EBITDA, (iii) Adjusted EBITDA excludes transaction and integration costs, which are cash expenses the Company has incurred and expects to continue to incur as part of its acquisition strategy and which are a necessary element of certain of its acquisitions, (iv) the omission of the substantial amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA and (v) EBITDA and Adjusted EBITDA do not include the payment of taxes, which is a necessary element of the Company’s operations. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. The Company's computations of EBITDA and Adjusted EBITDA may not be comparable to EBITDA or Adjusted EBITDA of other companies. The Company presents EBITDA and Adjusted EBITDA because it believes they provide useful information to investors regarding the factors and trends affecting its business.
The following table presents a reconciliation of the Company's EBITDA and Adjusted EBITDA to the GAAP financial measure of net income for each of the periods indicated:
Net Income to EBITDA and Adjusted EBITDA Reconciliation for the Three Months Ended September 30, 2026 (Successor) and 2025 (Predecessor)
54
|
|
Successor |
|
|
Predecessor |
|
|
|
|
|||
|
|
Three Months Ended September 30, 2026 |
|
|
Three Months Ended September 30, 2025 |
|
|
$ Change |
|
|||
|
|
(in millions) |
|
|
(in millions) |
|
|
|
|
|||
Net (loss) income |
|
$ |
(13.4 |
) |
|
$ |
3.0 |
|
|
$ |
(16.4 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|||
Interest and other expense, net |
|
|
4.6 |
|
|
|
5.3 |
|
|
|
(0.7 |
) |
Interest and other income |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
Income tax provision |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Depreciation and depletion |
|
|
2.9 |
|
|
|
3.6 |
|
|
|
(0.7 |
) |
Amortization |
|
|
7.3 |
|
|
|
0.4 |
|
|
|
6.9 |
|
EBITDA |
|
|
1.4 |
|
|
|
12.3 |
|
|
|
(10.9 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|||
Transaction and integration costs(1) |
|
|
6.8 |
|
|
|
0.1 |
|
|
|
6.7 |
|
Stock-based and unit-based compensation(2) |
|
|
1.2 |
|
|
|
0.3 |
|
|
|
0.9 |
|
Restructuring and severance(3) |
|
|
— |
|
|
|
0.1 |
|
|
|
(0.1 |
) |
Other(4) |
|
|
0.7 |
|
|
|
2.8 |
|
|
|
(2.1 |
) |
Adjusted EBITDA |
|
$ |
10.1 |
|
|
$ |
15.6 |
|
|
$ |
(5.5 |
) |
55
Net Income to EBITDA and Adjusted EBITDA Reconciliation for the Period from February 27, 2026 to September 30, 2026 (Successor), Period from January 1, 2026 to February 26, 2026 (Predecessor) and the Nine Months Ended September 30, 2025 (Predecessor)
|
|
Successor |
|
|
|
Predecessor |
|
|
Non-GAAP |
|
|
Predecessor |
|
|
|
|
|||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Combined Nine Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|
$ Change |
|
|||||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|
|
|
|||||
Net (loss) income |
|
$ |
(4.4 |
) |
|
|
$ |
1.7 |
|
|
$ |
(2.7 |
) |
|
$ |
10.6 |
|
|
$ |
(13.3 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other expense, net |
|
|
10.8 |
|
|
|
|
3.0 |
|
|
|
13.8 |
|
|
|
16.1 |
|
|
|
(2.3 |
) |
Interest and other income |
|
|
(0.2 |
) |
|
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
(0.2 |
) |
Income tax (benefit) provision |
|
|
(41.8 |
) |
|
|
|
— |
|
|
|
(41.8 |
) |
|
|
— |
|
|
|
(41.8 |
) |
Depreciation and depletion |
|
|
6.5 |
|
|
|
|
2.4 |
|
|
|
8.9 |
|
|
|
10.1 |
|
|
|
(1.2 |
) |
Amortization |
|
|
17.0 |
|
|
|
|
0.3 |
|
|
|
17.3 |
|
|
|
1.2 |
|
|
|
16.1 |
|
EBITDA |
|
|
(12.1 |
) |
|
|
|
7.4 |
|
|
|
(4.7 |
) |
|
|
38.0 |
|
|
|
(42.7 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Recognition of inventory step-ups(1) |
|
|
1.1 |
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
|
1.1 |
|
Transaction and integration costs(2) |
|
|
29.3 |
|
|
|
|
0.1 |
|
|
|
29.4 |
|
|
|
0.3 |
|
|
|
29.1 |
|
Stock-based and unit-based compensation(3) |
|
|
2.2 |
|
|
|
|
0.1 |
|
|
|
2.3 |
|
|
|
0.4 |
|
|
|
1.9 |
|
Write off of property, plant, and equipment(4) |
|
|
0.1 |
|
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Restructuring and severance(5) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
(0.4 |
) |
Contingent loss accrual(6) |
|
|
3.5 |
|
|
|
|
— |
|
|
|
3.5 |
|
|
|
— |
|
|
|
3.5 |
|
Other(7) |
|
|
0.7 |
|
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
3.1 |
|
|
|
(2.3 |
) |
Adjusted EBITDA |
|
$ |
24.8 |
|
|
|
$ |
7.7 |
|
|
$ |
32.5 |
|
|
$ |
42.2 |
|
|
$ |
(9.7 |
) |
Free Cash Flow
Free Cash Flows are driven primarily by increasing operating income and efficiently managing accounts receivable, inventory, accounts payable, and capital expenditures. Increases in operating income primarily result from increases in revenue and efficiently managing cost of sales, selling expenses, and general and administrative expenses, partially offset by investing in property, plant and equipment. We make longer-term strategic capital investment, including capital expenditures focused on expansion of production capacity and efficiency of production. We provide multiple measures of Free Cash Flow because we believe these measures provide additional perspective to investors on the impact of acquiring property, plant and equipment with cash and through finance leases and financing obligations. The Company believes Free Cash Flow offers useful views of the overall operation of the business because it allows comparison of its results of operations from period to period without regard to its financing methods or capital structure or other items that impact
56
comparability of financial results from period to period such as fluctuations in interest expense or effective tax rates, levels of depreciation, amortization, and depletion, or items whose timing and amount vary significantly from period to period.
Users should consider the limitations of Free Cash Flow, including that (i) Free Cash Flow does not reflect the significant interest expense, or the cash requirements necessary to service interest payments on our indebtedness and (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and the cash requirements for such replacements are not reflected in Free Cash Flow.
Free Cash Flow is cash flow from operations reduced by "Purchases of property, plant and equipment" ("Free Cash Flow"). The following is a reconciliation of Free Cash Flow to the most comparable GAAP cash flow measure, "Net cash provided by (used in) operating activities" for each of the periods indicated:
|
|
Successor |
|
|
|
Predecessor |
|
|
Non-GAAP |
|
|
Predecessor |
|
||||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Combined Nine Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
||||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
||||
Net cash (used in) provided by operating activities |
|
$ |
(16.1 |
) |
|
|
$ |
1.8 |
|
|
$ |
(14.3 |
) |
|
$ |
21.2 |
|
Purchases of property, plant and equipment |
|
$ |
(4.3 |
) |
|
|
$ |
(1.3 |
) |
|
$ |
(5.6 |
) |
|
$ |
(6.1 |
) |
Free Cash Flow |
|
$ |
(20.4 |
) |
|
|
$ |
0.5 |
|
|
$ |
(19.9 |
) |
|
$ |
15.1 |
|
Net cash (used in) provided by investing activities |
|
$ |
(590.1 |
) |
|
|
$ |
(1.3 |
) |
|
$ |
(591.4 |
) |
|
$ |
(6.1 |
) |
Net cash provided by (used in) financing activities |
|
$ |
400.4 |
|
|
|
$ |
— |
|
|
$ |
400.4 |
|
|
$ |
(16.4 |
) |
Liquidity and Capital Resources
Sources of Liquidity
Liquidity is provided through cash flow from operations and availability under the revolving credit facility. As of September 30, 2026 and 2025, we remained in full compliance with our financial covenants, with sufficient headroom under the maximum leverage and fixed-charge coverage ratios. We had cash and cash equivalents of $9.7 million as of September 30, 2026, which were entirely held in cash deposits and money market funds and were held for working capital purposes. We believe that our existing cash, cash equivalents, and cash generation from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.
Capital Expenditures
Capital expenditures totaled approximately $3.8 million, $2.1 million, and $6.0 million for the period from February 27, 2026 to September 30, 2026 (Successor), the period from January 1, 2026 to February 26, 2026 (Predecessor), and the nine months ended September 30, 2025 (Predecessor), respectively (including one-time investments of $0.4 million, $0.7 million, and $2.4 million, respectively). These amounts include expenditures related to several large, non-recurring maintenance and growth projects, including generator rebuilds, flood-mitigation initiatives, installation of a black-start backup generator to enhance power redundancy, and the new pool salt line project. As discussed elsewhere in this 10-Q filing, we also present capital expenditures excluding certain one-time investments in order to provide a more meaningful view of our ongoing maintenance and recurring capital requirements.
Material Cash Requirements
We expect to continue to fund its operations, working capital needs, and capital investments primarily through cash generated from operations and available capacity under its revolving credit facility.
Capital Expenditures
We expect capital expenditures of approximately $10.8 million in 2026 (Successor) due to the addition of two new wells with an estimated cost of $4.4 million. The Company expects average annual capital expenditures of approximately $6–$8 million over the next several years after 2026, consisting primarily of maintenance, reliability projects, and select growth initiatives.
57
Debt Service Obligations
As of September 30, 2026 (Successor), we are obligated to make quarterly principal payments of $0.5 million on our term loan through its February 2033 maturity, with the remaining principal due at maturity. Interest payments will vary based on SOFR-linked rates applicable to our credit facility. We do not anticipate material excess-cash-flow payments under our credit agreement based on current forecasts.
Lease Commitments
We have non-cancelable operating lease commitments for warehouses, offices, equipment, railcars, and finance leases for equipment. As of September 30, 2026 (Successor), remaining contractual lease payments were approximately $1.7 million, with approximately $0.7 million due within 12 months.
Environmental and Maintenance Requirements
We incur ongoing maintenance and periodic refurbishment costs associated with its production assets. These expenditures vary by year based on reliability requirements, but we expect them to remain within the anticipated annual capital-expenditure range described above.
Management believes that cash flows from operations, together with availability under its revolving credit facility, will be sufficient to meet our material cash requirements for at least the next 12 months.
Cash Flows
|
|
Successor |
|
|
|
Predecessor |
|
|
Predecessor |
|
|||
|
|
Period from February 27, 2026 to September 30, 2026 |
|
|
|
Period from January 1, 2026 to February 26, 2026 |
|
|
Nine Months Ended September 30, 2025 |
|
|||
|
|
(in millions) |
|
|
|
(in millions) |
|
|
(in millions) |
|
|||
Net cash (used in) provided by: |
|
|
|
|
|
|
|
|
|
|
|||
Operating activities |
|
$ |
(16.1 |
) |
|
|
$ |
1.8 |
|
|
$ |
21.2 |
|
Investing activities |
|
$ |
(590.1 |
) |
|
|
$ |
(1.3 |
) |
|
$ |
(6.1 |
) |
Financing activities |
|
$ |
400.4 |
|
|
|
$ |
— |
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Net Cash (Used in) Provided by Operating Activities
Net cash used in our operating activities for the period from February 27, 2026 to September 30, 2026 (Successor) was $16.1 million. This cash use for the period was primarily driven by cash expenses related to our acquisition of US Salt and pending acquisition of gChem, reflected as transaction expenses on our Condensed Consolidated Statements of Operations.
Net cash provided by our operating activities for the period from January 1, 2026 to February 26, 2026 (Predecessor) was $1.8 million, driven by our net income of $1.7 million.
Net cash provided by our operating activities for the nine months ended September 30, 2025 (Predecessor) was $21.2 million. This was driven by our net income of $10.6 million and depreciation, depletion and amortization of $11.3 million, which was partially offset by a $2.3 million of outflow related to operating assets and liabilities.
Net Cash Used in Investing Activities
Net cash used in our investing activities for the period from February 27, 2026 to September 30, 2026 (Successor) was $590.1 million. This was driven by $585.8 million spent acquiring US Salt, net of cash acquired, and $4.3 million spent on purchases of plant, property, and equipment.
Net cash used in our investing activities for the period from January 1, 2026 to February 26, 2026 (Predecessor) was $1.3 million. This was primarily due to $1.3 million in purchases of property, plant, and equipment.
Net cash used in our investing activities for the nine months ended September 30, 2025 (Predecessor) was $6.1 million. This was primarily due to $6.1 million spent on purchases of plant, property, and equipment.
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Net Cash Provided By (Used in) Financing Activities
Net cash provided by our financing activities for the period from February 27, 2026 to September 30, 2026 (Successor) was $400.4 million primarily due to $215.0 million proceeds from issuance of debt, $114.8 million from the rights offering and related backstops associated with the US Salt Acquisition, and $75 million from issuance of noncontrolling interests.
Net cash used in our financing activities for the period from January 1, 2026 to February 26, 2026 (Predecessor) was immaterial due to the period only having immaterial payments of the finance leases' principal amounts.
Net cash used in our financing activities for the nine months ended September 30, 2025 (Predecessor) was $16.4 million primarily due to $12.7 million repayment of principal on term loans and $3.5 million of members' distributions.
Contractual and Other Obligations
Debt obligations
Under the Wilmington Trust Credit Agreement, our debt obligations consist of $214.5 million outstanding on our term loan and an up to $25.0 million revolving line of credit, of which there were no borrowings outstanding at September 30, 2026.
Leases
We lease warehouses, office space, and equipment under long-term lease agreements. The leases consist of operating leases expiring in various years through 2031, as well as standard operating leases for railcars, vehicles, and office space. As of September 30, 2026 (Successor), the future minimum lease payments required under these leases totaled $1.7 million, with $0.7 million payable within 12 months.
Off Balance Sheet Arrangements
We do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
In addition to our current critical accounting policies as described in our 2025 Form 10-K, filed with the SEC on March 5, 2026, with the acquisition of US Salt, we have the following additional critical accounting policies for revenue and inventories. These policies require significant judgment or estimate by management.
Revenue Recognition
Our revenue is primarily generated from the sale of salt products to customers including nationwide retailers, pharmaceutical companies, food service operators, and independent distributors. Those sales predominantly contain a single performance obligation and revenue is recognized at a point in time when ownership, risks and rewards transfer, which can be on the date when the product is shipped or delivered to the customer based upon applicable shipping terms. Revenue is reported as net revenue and is measured as the determinable transaction price, net of any variable consideration such as discounts, rebates, sales incentives, rights to return product and any taxes collected from customers and remitted to government authorities. We use the most likely amount method to determine the variable consideration including discounts, rebates, and sales returns and allowances, which is treated as a reduction in revenue when product revenue is recognized. We review and update the estimates and related accruals of variable consideration at the end of each reporting period based on the terms of the agreements, historical experience, and any recent changes in the market. The actual amounts paid may be different from such estimates. These differences, which have historically not been significant, are recognized as a change in management estimate in a subsequent period.
Inventories
Our inventories include salt inventories, packaging, supplies, and maintenance materials, which are valued at the lower of cost or net realizable value, with cost determined on standard costing method. We monitor inventory levels and adjust valuation for slow-moving, shrinkage, obsolescence, and markdowns. We account for slow-moving or obsolete inventory with a reserve that is established based on management’s estimates of the net realizable value of the related products at the end of each reporting period.
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Recent Accounting Pronouncements
See Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a "smaller reporting company," as defined by Item 10 of Regulation S-K, we are not required to provide this information.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding required disclosure.
Our President and Chief Financial Officer, with assistance from other members of management, have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2026. Based on that evaluation, and as a result of the material weakness in internal control over financial reporting described below, our President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2026.
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
In connection with our acquisition of US Salt on February 26, 2026, we, together with management of US Salt, identified a material weakness in US Salt’s internal control over financial reporting as of the acquisition date. The material weakness resulted from US Salt’s lack of a formalized internal control framework based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Specifically, the deficiencies that aggregate to this material weakness include the following:
We have concluded that this material weakness is due to the fact that US Salt was a private company with limited resources and did not have the necessary business processes and related internal controls formally designed and implemented, coupled with the lack of appropriate resources with the appropriate level of experience and technical expertise to oversee its business processes and controls.
Notwithstanding the material weakness described above, our management, including our President and Chief Financial Officer, has concluded that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with GAAP.
This material weakness did not result in a material misstatement to our unaudited condensed consolidated financial statements for the periods presented. However, this material weakness could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Management’s Plan to Remediate the Material Weakness
With oversight from our Audit Committee, management has begun, and will continue to undertake, measures designed to remediate the material weakness described above. As part of our integration of US Salt, our remediation efforts include extending our existing internal control framework, policies, and procedures to US Salt’s operations. The actions implemented or planned to be implemented include:
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The material weakness will not be considered remediated until management completes the design and implementation of the measures described above, such measures are tested by management, and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. We expect remediation activities to continue throughout fiscal year 2026 and into subsequent periods. We believe we are making progress toward achieving the effectiveness of our internal controls and disclosure controls; however, we cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.
Changes in Internal Control Over Financial Reporting
Other than the integration of US Salt and the related ongoing changes in internal control over financial reporting being implemented as part of the remediation measures described above, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II—
Item 1. Legal Proceedings.
The information set forth under Note 14, Commitments and Contingencies, in the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, is incorporated herein by reference.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties set forth below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes, and in our Annual Report on Form 10-K for the year ended December 31, 2025, before making a decision to invest in our common stock. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. These risk factors could materially and adversely affect our business, financial condition and results of operations, and the market price of our common stock could decline. These risk factors do not identify all risks that we face – our financial condition and/or operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our financial condition and/or operations. Other than as described below, there have been no additional material changes from the risk factors previously disclosed under the heading "Risk Factors" in Part I, Item 1A of our 2025 Form 10-K and the risk factors previously disclosed under the heading "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, filed with the SEC on August 13, 2026.
Risks Related to the gChem Acquisition, Backstop Agreements, and Financing Arrangements
Beyond the purchase price and the cost of our diligence and preparation associated with the gChem Acquisition, we will incur significant transaction and integration costs in connection with the gChem Acquisition and significant fees in connection with any delays in closing.
In addition to the purchase price, we will incur significant transaction costs in connection with the gChem Acquisition and in connection with the Purchase Agreement,(i) Holdings entered into equity financing commitments with certain investors for an aggregate of $870 million (the “Backstop Agreements”) and (ii) Buyer obtained a debt financing commitment arranged by Blackstone Alternative Credit Advisors LP and Blackstone Holdings Finance Co. L.L.C. (together with Blackstone Alternative Credit Advisors LP, “Blackstone”) and Wells Fargo Securities, LLC, comprising a $250 million term loan (the “Term Facility”) and a $25 million revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Facilities” or “Financing”). Among these costs are fees or reimbursement of expenses under the Financing, including, notably, commitment, funding, duration, agency, and administration fees to the parties providing the Financing. Significant costs have been incurred and are expected to be incurred prior to the closing of the gChem Acquisition, including related to legal, accounting, diligence and other transaction fees and expenses.
There can be no assurance that the conditions to closing set forth in the Purchase Agreement or the Financing will be met or waived on the applicable timelines, or at all. As a result, we or our affiliates may incur significant costs or interest associated with any delays. Further, any delay in the closing of the gChem Acquisition will increase the related transaction costs. The substantial majority of these costs will be nonrecurring expenses related to the gChem Acquisition.
Our acquisition of gChem may expose us to unknown or contingent liabilities for which we may not be adequately indemnified.
The entities that we will acquire in the gChem Acquisition may have unknown or contingent liabilities, including liabilities for failure to comply with environmental and other laws and regulations, and for litigation or other claims. Buyer’s sole recourse for any breach of Seller’s or gChem’s representations and warranties generally will be to a buyer-side representation and warranties policy, and Seller and gChem will not be obligated to indemnify us other than in limited circumstances specifically provided for in the Purchase Agreement. As a result, we may incur material liabilities for the past activities of gChem. Such liabilities and related legal or other costs and/or resulting reputational damage could negatively impact our business, financial condition and results of operations.
The proposed Financing in connection with the gChem Acquisition and future debt financing arrangements that we or our subsidiaries may enter into otherwise, may contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests. Failure to comply with these limits or requirements could have a material adverse effect on our operations, business and financial results.
The proposed Financing is intended to finance a portion of the gChem Acquisition. Interest costs related to this indebtedness will be substantial. The facilities pursuant to the Financing and the instruments governing our other future indebtedness contain, or will contain, certain customary restrictions, covenants, provisions for mandatory repayment upon
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the occurrence of certain events, and provisions for events of default that will require us or gChem to satisfy certain financial tests and maintain certain financial ratios, restrict our or gChem’s ability to engage in specified types of transactions, and otherwise limit the distributions of funds from gChem to us. This overall leverage and the terms of our financing arrangements could:
In addition, the restrictive covenants pertaining to the Facilities and certain other indebtedness would or could require us to maintain specified financial ratios and satisfy other financial conditions and tests. Our ability to meet those financial ratios, conditions and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market, and competitive factors, many of which are beyond our control. A breach of any of these covenants could result in a default under the instruments governing our indebtedness.
With respect to the gChem Acquisition, if consummated, challenges with integration, the industry, operations and other business, market and acquisition-related risks, as well as various uncertainties and events beyond our control, could affect our ability to comply with such restrictions and covenants. Failure to comply with any of the restrictions and covenants in our existing or future financing arrangements could result in a default under those arrangements and under other arrangements containing cross-default provisions.
Upon the occurrence of an event of default under any such financing arrangement, the relevant lenders could assess increased interest rates, accelerate the maturity of the debt or foreclose upon any collateral securing the debt. In this event, we may lack sufficient funds or other resources to satisfy all of our obligations. In addition, any limitations imposed by financing agreements on our ability to incur additional debt or to take other actions could significantly impair our ability to obtain other financing.
The Financing associated with the gChem Acquisition will increase Holdings’ consolidated leverage, and debt service obligations could limit gChem’s and the Company’s financial flexibility.
The gChem Acquisition is expected to be funded in part with new first-lien debt, in addition to debt already outstanding at US Salt, a subsidiary of Holdings. This increased leverage will require the combined business to dedicate a portion of its cash flow to debt service, which could limit the Company’s and gChem’s financial flexibility, and could make them more vulnerable to adverse economic conditions or a shortfall in projected EBITDA.
We do not currently control gChem, and Holdings and the Company will not control gChem until the completion of the gChem Acquisition.
The Company, as the managing member of Holdings, will not control gChem unless and until the gChem Acquisition is completed. The Purchase Agreement imposes certain customary limitations on how gChem may be managed while the gChem Acquisition is pending, but there can be no assurance that gChem will be operated in the same way as it would be under our control.
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Our ownership interest in Holdings may be diluted depending on the extent to which the subscription rights in the contemplated rights offering are not fully exercised as well as through additional issuances of Class A Units of Holdings.
The Company currently directly and indirectly holds approximately 44% of the fully-diluted outstanding equity of Holdings. In connection with its entry into the Purchase Agreement, Holdings entered into equity financing commitments with certain investors for an aggregate of $870 million. The Backstop Agreements will be reduced by both (i) the proceeds from the Term Facility and (ii) amounts raised in the Rights Offering used to finance all or a portion of the consideration due under the Purchase Agreement and related fees and expenses, subject to complying with the Backstop Agreements’ guaranteed minimum issuance amounts. In addition to issuances pursuant to the Backstop Agreements, Holdings may issue Class A Units to certain other of Holdings’ existing holders or their affiliates for cash at a price of $9.00 per Class A Unit. If both the Rights Offering is subscribed in full and Holdings makes all contemplated guaranteed minimum issuances under the Backstop Agreements and to other existing investors, it could result in a total equity raise by Holdings of up to $850 million for use in both the gChem transaction and other corporate purposes. As a result, our ownership interest in Holdings may be reduced. There can be no assurance that we will continue to own the same percentage of Holdings.
Impairment of intangible assets acquired as a result of the gChem Acquisition could result in significant charges that could adversely impact our future operating results.
In connection with the completion of the gChem Acquisition, the Company expects to acquire significant intangible assets, including goodwill, which are susceptible to impairment charges as a result of changes in various factors or conditions. As has been our past practice with our other operating subsidiaries, we will assess the potential impairment of goodwill and indefinite-lived intangible assets on an annual basis, as well as whenever events or changes in circumstances indicate that the carrying value may exceed fair value. We will assess finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may exceed fair value. Adverse changes in the operations of our businesses or other unforeseeable factors could result in an impairment charge in future periods that could adversely impact our results of operations and financial position in that period.
Risks Related to Our Business
We have been, and may in the future be, involved in litigation matters or other legal proceedings that are expensive and time consuming.
We have been, and may in the future be, involved in litigation matters, including class action lawsuits. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, loss of rights, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.
Additionally, the market price of ContextLogic common stock has been and may continue to be volatile. As a result, we have been named in lawsuits, and may be subject to both ongoing litigation and other requests related to our stock price/performance and/or performance and independence of our Board.
The Company, its directors, certain of its officers and the underwriters named in its initial public offering (“IPO”) registration statement were named as defendants in a consolidated class action complaint pursuant to Sections 11 and 15 of the Securities Act first filed in May 2021. In May 2026, the Company entered into an agreement to settle these matters for $3.5 million in cash, without admission of liability or wrongdoing. Under the agreement, an initial $1.8 million of the settlement was placed in an interest-bearing escrow account in July 2026. A hearing for the preliminary approval of the class action settlement has been set for March 18, 2027. The Company expects to use these escrowed funds and existing cash on hand to fund the settlement payment when it becomes due. Upon acceptance by the Court and payout of the settlement amount, this matter will be fully resolved.
In addition, in August 2021, a shareholder derivative action purportedly brought on behalf of the Company, Patel v. Szulczewski, was filed in the U.S. federal court alleging that the Company’s directors and officers made or caused the Company to make false and/or misleading statements about the Company’s business operations and financial prospects in various public filings. This matter is stayed pending certain motion practice in the IPO case.
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We cannot predict the outcome of these cases at this time and we may continue to be the target of securities litigations, and/or may receive other civil and regulator inquiries and requests, in the future. Securities litigation or inquiries or investigations against us could result in substantial costs and divert our management’s attention from other business concerns, which could adversely affect our business, results of operation, and/or reputation.
The holders of the Class A Convertible Preferred Units of Holdings (the “Preferred Units”) have rights, preferences and privileges in Holdings that are not held by, and are preferential to, the rights of the Company. These rights include priority in distributions and on liquidation, and the requirement that distributions on the Preferred Units be paid in cash. Such rights could adversely affect the amount of cash available to the Company and our liquidity and financial condition.
Certain holders of the Preferred Units have approval rights over, among other things, the operation of Holdings, acquisitions and dispositions of assets, distributions and repurchases of equity, affiliate transactions, the incurrence of indebtedness and the issuance of securities or other instruments. These approval rights could limit Holdings' ability to implement future strategic objectives. The preferential rights could also result in divergent interests between us, as a holder of common units in Holdings, and the holders of the Preferred Units.
Risks Related to US Salt
Limited availability or increased cost of trucking and other transportation services could adversely affect US Salt’s ability to deliver products to customers and its results of operations.
US Salt depends on third-party carriers to deliver products from its facility in Watkins Glen, New York to customers across the country. A significant portion of US Salt’s products are shipped by truck. US Salt does not own or operate a material transportation fleet and relies on a limited number of carriers and freight brokers serving its facility. Salt is a high-volume, relatively low-value product, so transportation costs are a significant part of the delivered cost to customers. As a result, US Salt’s competitiveness depends on timely, cost-effective freight.
The trucking industry has periodically faced driver shortages, high driver turnover, equipment constraints, and capacity tightness. These conditions may be made worse by regulatory requirements. Carrier capacity may also be redirected to higher-margin freight or other regions during periods of strong demand. US Salt’s location in rural upstate New York may limit the number of carriers willing to serve its facility at commercially reasonable rates. Severe winter weather in the region may also disrupt shipments, often during periods of elevated seasonal demand for certain of US Salt’s products.
If US Salt is unable to obtain enough transportation capacity on acceptable terms, it may be unable to fulfill customer orders on time or at all. This could result in lost sales, contractual penalties or other remedies under customer agreements, damage to customer relationships, and loss of market share to competitors with more favorable logistics. In addition, increases in freight rates, fuel prices, fuel surcharges, insurance costs, or carrier compliance costs could raise US Salt’s operating expenses or reduce the competitiveness of its delivered pricing. US Salt may not be able to pass these increases on to customers in full or on a timely basis. Constrained shipments could also cause inventory to build up at the facility, which could limit storage capacity and require US Salt to curtail production. Any of these factors could have a material adverse effect on US Salt’s business, financial condition, and results of operations.
US Salt’s operations are concentrated at a single, integrated facility, and US Salt is also dependent on critical equipment.
US Salt conducts all production at a single, integrated solution-mining and mechanical-evaporation facility in Watkins Glen, New York, supplemented by third-party co-packers and warehouses. A disruption at US Salt’s Watkins Glen facility could significantly affect production of US Salt’s products or distribution of US Salt’s products, which could damage US Salt’s customer relationships. Because US Salt does not operate additional plants, US Salt’s ability to replace lost production is limited. Insurance may not cover all resulting losses, and prolonged or repeated disruptions could lead to penalties, loss of customer awards, or non-renewals.
US Salt’s operations depend upon critical equipment, such as brine wells, brine conveyance, vacuum pans, crystallizers, boilers, steam distribution, dryers, conveyors, and packaging lines. Certain components and repairs require specialized contractors or long-lead equipment; shortages or delays could extend an outage and increase costs. Although US Salt employs preventive maintenance programs, holds select critical spare parts, stages inventory at third-party warehouse locations, and maintains disaster-recovery, contingent business-interruption insurance and business-interruption insurance, these measures may not fully offset or prevent the effects of a disruption. If US Salt is unable to maintain operations at Watkins Glen or promptly restore production following a disruption, US Salt’s business, financial condition, and results of operations could be adversely affected.
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US Salt and its owners may be subject to tax liabilities which could adversely impact their profitability, cash flow and liquidity.
Because US Salt is pass-through for U.S. federal income tax purposes, its income and loss is generally recognized by its owners (including ContextLogic) for U.S. federal income tax purposes. US Salt’s (and its owners’, including ContextLogic’s) effective tax rate, tax expense and cash flows could be adversely affected by changes in tax laws. US Salt may be subject to audits in various jurisdictions and US Salt and its owners (including ContextLogic) may be assessed additional taxes as a consequence of an audit. In the ordinary course of US Salt’s business, there are many transactions and calculations that could be challenged by taxing authorities. The final determination of any tax audits and litigation may take several years and, if additional taxes are assessed as a result of an audit, assessment or litigation, there could be a material adverse effect on US Salt’s (or its owners’, including ContextLogic’s) financial condition, income tax provision and net income in the affected periods as well as future profitability, cash flows and ability to make distributions and service debt.
Legal, Regulatory and Compliance Risks
US Salt relies solely on its own on-site power generation to power its manufacturing operations and any disruption or failure in its power system could adversely impact its business, results of operations and financial condition.
US Salt’s plant is not connected to the electricity grid. Instead, US Salt operates its own proprietary on-site power generation through combined heat and power systems that generate the electricity required for US Salt’s operations and captures waste heat for use in the evaporation process. US Salt relies exclusively on two 5 MW and 3 MW on-site gas-fired generators for its manufacturing operations, which primarily run on byproducts from US Salt’s facility, for the majority of its electricity needs. While this off-grid configuration provides certain cost stability and reduced exposure to regional power-market volatility. It also concentrates US Salt’s operational risk in US Salt’s own energy infrastructure.
Historically, US Salt has experienced occasional power disruptions, primarily due to isolated boiler shutdowns and generator failures. Any boiler or generator failure caused by mechanical malfunction, extreme weather, or other unforeseen events could negatively affect US Salt’s business, results of operations and financial condition. Because US Salt’s plant is not interconnected with the local power grid, resuming full operations depends on US Salt’s ability to repair the affected equipment or secure substitute electricity, such as through rented backup generators, either of which could involve significant expense and delay. In 2025, US Salt installed a 2.5 MW backup black-start generator to help mitigate these risks and support the restoration of power; however, it may not prevent extended outages or fully maintain production. Extended outages or other issues with US Salt’s energy infrastructure could result in lost production, particularly during the drying stage of the salt production process, as well as damage to customer relationships and to US Salt’s reputation. Any such events could have a material adverse effect on US Salt’s business, financial condition, and results of operations.
In July 2019, New York enacted the Climate Leadership and Community Protection Act ("CLPCA"). The CLPCA sets statewide goals for reducing greenhouse gas emissions and requires the New York State Department of Environmental Conservation (“NYSDEC”) to promulgate regulations which will achieve these goals. NYSDEC currently is required to issue regulations implementing the CLPCA no later than December 31, 2028. Any regulation NYSDEC passes to comply with the CLPCA could impact how US Salt’s energy system operates, and US Salt may be required to reduce greenhouse gas emissions in accordance with CLPCA limits, which could have a material adverse effect on US Salt’s business, results of operations and financial condition.
US Salt’s operations heavily rely on natural gas and are therefore exposed to changes in the price and availability of natural gas.
US Salt’s operations are energy intensive, and production processes rely on the consumption of natural gas. Natural gas is a primary energy source used in the mechanically evaporated salt production process. A significant interruption in the supply or an increase in the price of natural gas could adversely affect US Salt’s business, results of operations and financial condition. Energy costs represent a substantial part of US Salt’s total production costs and natural gas is its largest variable input cost. US Salt’s profitability is impacted by the price and availability of natural gas that US Salt purchases from third parties. Generally, US Salt will enter into fixed-price supply contracts that limit pricing volatility during the period of the contract. While future market pricing cannot be predicted with certainty, natural-gas cost variability may affect its production costs if market rates materially differ from the terms of any expiring contract.
A significant increase in the price of natural gas that is not recovered through an increase in the price of US Salt’s products or covered through US Salt’s contract arrangements, or an extended interruption in the supply of natural gas to US Salt’s production facilities, could have a material adverse effect on US Salt’s business, financial condition and results of operations.
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Risks Related to our NOLs and Other Tax Attributes
We may not be able to make use of the existing tax attributes of the NOLs because we may not generate taxable income of ContextLogic, which may not include taxable income incurred by its subsidiaries, including gChem.
The use of the NOLs is subject to uncertainty because it is dependent upon the amount of taxable income and capital gains generated by us and our consolidated subsidiaries. There can be no assurance that we will have sufficient taxable income or capital gains in future years to use the NOLs.
The IRS could challenge the amount of the NOLs or claim that we experienced an ownership change including in connection with the US Salt Acquisition or the gChem Acquisition, which could reduce the amount of NOLs that we can use.
The amount of the NOLs has not been audited or otherwise validated by the IRS. The IRS could challenge the amount of the NOLs, which could result in an increase in our income tax liability (including potentially interest and penalties). In addition, calculating whether an ownership change has occurred is subject to uncertainty, both because of the complexity and ambiguity of Section 382 and because of limitations on a publicly traded company’s knowledge as to the ownership of, and transactions in, its securities. Therefore, we cannot assure our investors that a governmental authority will not claim that we experienced an ownership change and attempt to reduce or eliminate the benefit of the NOLs even though ContextLogic common stock is subject to the transfer restrictions. The Company has received from Ernst & Young U.S. LLP (“EY”), an opinion concluding that during the period between January 1, 2018 and ended September 30, 2025, the Company should not have undergone an “ownership change” within the meaning of Section 382(g) of the Tax Code. EY performed another opinion in connection with the close of the US Salt Acquisition concluding that the Company should not have experienced an “ownership change” upon consummating such transaction. Although the Company expects to receive an opinion that the Company should not undergo an “ownership change” in connection with this Rights Offering, no assurances can be provided that such opinion will be delivered or that the IRS or a court will agree.
We may not be able to utilize a significant portion of our NOLs, and other tax attributes, which could adversely affect the value of our common stock.
As of December 31, 2025, we had federal NOLs available to reduce future taxable income, if any, of $886 million that begin to expire in 2030 and continue to expire through 2037 and $2.1 billion that have an unlimited carryover period. As of December 31, 2025, we had state NOLs available to reduce future taxable income, if any, of $4.0 billion that begin to expire in 2026 and continue to expire through 2045 and $4.1 billion that have an unlimited carryover period. Under legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), unused U.S. federal NOLs generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income. Additionally, portions of these NOLs could expire unused and be unavailable to offset future income tax liabilities. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited. As a result, even if we acquire income producing assets and attain profitability in the future, we may be unable to use a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows and the value of our common stock.
An “ownership change” could limit the use of our NOLs and our potential to derive a benefit from our NOLs.
The utilization of NOLs and other tax attributes to offset future taxable income or taxes may be subject to limitations under Sections 382 and 383 of the Tax Code, and similar state statutes as a result of ownership changes that could occur in the future. While the Certificate of Incorporation includes a transfer restrictions on ContextLogic common stock, there is no guarantee that we have not undergone an ownership change in the past or that such transfer restrictions will be enforceable and thus prevent us from experiencing an ownership change in the future which would limit our ability to use our NOLs.
In general, an “ownership change” would occur if there is a cumulative change in the ownership of our common stock of more than 50% by one or more “5% stockholders” during a three-year test period.
Risks Related to the Asset Purchase Agreement
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We have counterparty risk with the Asset Buyer (as defined below) and its affiliates for certain ongoing obligations under the Asset Purchase Agreement (as defined below) and the failure of the Asset Buyer (as defined below) and its affiliates to perform their obligations could cause us to suffer losses.
On February 10, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Qoo10 Inc., a Delaware corporation (“Qoo10 Delaware”), and, for certain specified purposes, Qoo10 Pte. Ltd., a Singapore private limited company and Qoo10 Delaware’s parent company (“Qoo10”), pursuant to which (i) the Company agreed to sell substantially all of the Company’s assets to Qoo10 Delaware or an affiliate designated by Qoo10 Delaware (such designated affiliate, the “Asset Buyer”), other than (A) the Company's NOLs and certain other tax attributes, (B) the Company's marketable securities and (C) certain of the Company's cash and cash equivalents, and (ii) Qoo10 agreed to acquire those assets and assume substantially all of the Company's liabilities as specified in the Asset Purchase Agreement (the “Asset Sale”).
In connection with the Asset Sale, under the Asset Purchase Agreement, the Asset Buyer agreed to assume any and all third party claims, liabilities, and obligations disclosed by the Seller except for certain agreed upon excluded claims and liabilities including, but not limited to, state and federal tax obligations, liabilities and claims related to international subsidiaries, vendor disputes, etc. However, although the Asset Buyer would be responsible for such liabilities, claims, and obligations under the terms of the Asset Purchase Agreement, we can provide no assurance that we would be successful in obtaining payment or reimbursement from the Asset Buyer or Qoo10 for such losses.
Risks Related to Our Internal Controls
We have previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. In connection with the US Salt Acquisition, in fiscal year 2023, we identified a material weakness in our internal control over financial reporting resulting from our lack of a formalized internal control framework in accordance with the Committee of Sponsoring Organizations of the Treadway Commission, which relates to (a) an insufficient complement of personnel with an appropriate degree of internal controls knowledge, which caused management to be unable to appropriately define responsibilities to create an effective control environment; (b) the lack of a formalized risk assessment process; and (c) selection and development of control activities, including over information technology. In fiscal year 2021, we identified material weaknesses in connection with the former Wish.com business. Following the identification of the fiscal year 2021 material weaknesses, we designed a new control environment with new IT systems, processes, and controls commensurate with our current business operations. Following the effective implementation of the new controls, management concluded that the material weaknesses identified in fiscal year 2021 were remediated as of December 31, 2024. Remediation efforts are ongoing for the material weakness identified in fiscal year 2023. We cannot guarantee that additional material weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence and cause a decline in the price of our common stock.
Risks Related to Our Common Stock
We transferred the trading of our common stock from The Nasdaq Stock Market to the OTCQB. Because ContextLogic common stock is traded on the OTC Markets, our stockholders' ability to sell their shares in the secondary trading market may be limited.
On May 30, 2025, we notified Nasdaq of our decision to voluntarily withdraw from the Nasdaq hearings process, which resulted in our common stock being delisted from The Nasdaq Global Market. We filed a Form 25 with the SEC relating to the delisting of our common stock on June 9, 2025, and the delisting of our common stock from Nasdaq became effective on June 19, 2025. On June 3, 2025, our common stock was quoted for trading with the OTCQB. The decision to move our common stock from trading on Nasdaq to the OTC Markets was influenced by several factors, including our evaluation of our ability to continue maximizing the value of our assets while also considering the advantages of remaining traded on
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Nasdaq versus the regulatory requirements, the time management dedicated to compliance and reporting, and the costs involved in maintaining the listing.
As a result of the transfer of our common stock from Nasdaq to the OTCQB, our stockholders could experience negative consequences related to our securities, including but not limited to: limited availability of market quotations for our securities; a reduced level of trading activity in the secondary trading market for shares of our common stock; a limited amount of analyst coverage; and decreased ability to issue additional securities or obtain additional financing in the future.
Because ContextLogic common stock is traded on the OTCQB market, our stockholders' ability to sell their shares in the secondary trading market may be limited. Since June 3, 2025, the OTCQB is the only liquidity platform for our common stock. We cannot assure our stockholders that ContextLogic common stock will continue to trade on this liquidity platform, whether broker-dealers will continue to provide public quotes of ContextLogic common stock on this liquidity platform, whether the trading volume of ContextLogic common stock will be sufficient to provide for respective efficient liquidity platforms or whether quotes for our common stock will continue on this liquidity platform in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our common stock. As a result, prices for shares of ContextLogic common stock may be lower than might otherwise prevail if ContextLogic common stock were listed on a national securities exchange.
We are a smaller reporting company, and any decision on our part to comply only with reduced reporting and disclosure requirements applicable to such companies could make our common stock less attractive to investors.
As of September 30, 2026, we qualified as a “smaller reporting company,” as defined in the Exchange Act, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a “smaller reporting company,” and the market value of shares of ContextLogic common stock held by non-affiliates, or our public float, is less than $250 million. As a “smaller reporting company,” we may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies. This includes reduced disclosure obligations in our SEC filings such as simplified executive compensation disclosures, exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting and only being required to provide two years of audited consolidated financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our operating results and financial prospects and investors may find shares of ContextLogic common stock less attractive, which may result in a less active trading market for ContextLogic common stock and greater stock price volatility.
The price of ContextLogic common stock has been and continues to be volatile. Declines in the price of ContextLogic common stock have resulted in, and could subject us in the future to, litigation.
The market price of ContextLogic common stock has in the past fluctuated and declined and may in the future fluctuate or decline substantially. The price of ContextLogic common stock could continue to be subject to wide fluctuations for many reasons, many of which are beyond our control, including those described in this “Risk Factors” section and others such as:
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Many of these factors are beyond our control and may decrease the market price of ContextLogic common stock, regardless of whether we choose to pursue and consummate an asset or business acquisition and of our current or subsequent operating performance and financial condition. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.
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Item 6. Exhibits.
Exhibit Number |
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Description |
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2.1 |
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Amendment to Stock Purchase Agreement, dated October 22, 2026, by and among ContextLogic Holdings, LLC, EagleTree-Gaylord Management Investment, L.P., EagleTree-Gaylord Holdings Corp. and GCH Buyer, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 22, 2026). |
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3.1 |
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Second Amended and Restated Certificate of Incorporation of Easter Parent, Inc., a Delaware corporation, effective July 14, 2026 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 13, 2026). |
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3.2 |
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Amended and Restated Bylaws of ContextLogic Holdings Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K12G3 filed with the Securities and Exchange Commission on August 7, 2025). |
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31.1* |
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Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
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Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1** |
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2** |
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS* |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104* |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
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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 thereunto duly authorized.
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ContextLogic Holdings Inc. |
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Date: November 9, 2026 |
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By: |
/s/ Mark Ward |
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Mark Ward |
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President |
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(Principal Executive Officer)
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By: |
/s/ Scott Stewart |
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Scott Stewart |
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Chief Financial Officer and Chief Operating Officer |
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(Principal Financial Officer) |
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