What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-30 compared with 2025-03-17 · 441 added, 436 removed, 545 unchanged (62% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets as of December 28, 2025 and December 29, 2024 39

Consolidated Statements of Operations and Comprehensive (Loss) Income for each of the three fiscal years ended December 29, 2024 43

Consolidated Statements of Operations for each of the three fiscal years ended December 28, 2025 40

Consolidated Statements of Changes in Stockholders’ Equity for each of the three fiscal years ended December 28, 2025 41

5 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BGSF, Inc., and its subsidiaries (the “Company”) as of December 29, 2024 and December 31, 2023, and the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 29, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of BGSF, Inc., and its subsidiaries (the “Company”) as of December 28, 2025 and December 29, 2024, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 28, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of their operations and cash flows for each of the three years in the period ended December 28, 2025, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 29, 2024, based on criteria established in 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2025 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 28, 2025, based on criteria established in 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 30, 2026 expressed an adverse opinion.

Basis for Opinion

10 unchanged sentences

Critical Audit Matter

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Assessment of Realizability of Deferred Tax Assets

Critical Audit Matter Description

As disclosed in Note 2 and Note 10 to the consolidated financial statements, the Company recognizes deferred income taxes for tax attributes and for differences between the financial statement and tax carrying amounts of assets and liabilities at enacted statutory tax rates in effect for the years in which the deferred tax liability or asset are expected to be settled or realized.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies.

In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets.

Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance.

As of December 28, 2025, the Company has deferred tax assets of approximately $9.5 million.

Auditing management’s assessment of recoverability of deferred tax assets involved subjective estimation and complex auditor judgment in determining whether sufficient future taxable income, including projected pre-tax income, will be generated to support the realization of the existing deferred tax assets before expiration.

How We Addressed the Matter

We evaluated the assumptions used by the Company to develop projections of future taxable income, including the pre-tax income, by income tax jurisdiction and tested the completeness and accuracy of the underlying data used in the projections.

For example, we compared the projections of, and inputs used to calculate pre-tax income with the actual results of prior periods, as well as management’s consideration of current industry and economic trends.

We also compared the projections of future pre-tax income with other forecasted financial information prepared by the Company.

We also performed a sensitivity analysis on the significant assumption to evaluate how changes in those assumptions would impact the utilization of the deferred tax assets.

We evaluated the methodology and models used in management’s forecasting of the reversal of deferred income tax assets and liabilities in order to determine whether such methodologies were consistent with GAAP, including management’s consideration of definite-lived deferred income tax balances and indefinite-lived deferred income tax balances.

/s/ Whitley Penn LLP

8 unchanged sentences

Accounts receivable (net of allowance for credit losses of $1,156 and $910, respectively) 11,898 17,148

Escrow receivable 4,950 —

Prepaid expenses 1,126 1,600

Other current assets 1,458 2,213

Current assets of discontinued operations — 24,354

Total current assets 38,450 45,347

3 unchanged sentences

Deferred income taxes, net 9,496 7,849

Right-of-use asset - operating leases 4,973 5,435

Right-of-use asset - operating leases, net 630 1,083

Intangible assets, net 3,003 4,385

Goodwill 1,074 1,074

Noncurrent assets of discontinued operations — 83,694

Total other assets 19,143 104,156

4 unchanged sentences

Accrued payroll and expenses 4,441 4,868

Line of credit (net of debt issuance costs of $128) — 24,746

Transition services payable 3,064 —

Long-term debt, current portion (net of debt issuance costs of $0 and $24, respectively) — 3,801

1 unchanged sentence

Income taxes payable 76 212

Contingent consideration, current portion 2,662 4,208

Note payable 449 —

Convertible note — 4,368

Severance payable, current portion 392 —

Lease liabilities, current portion 409 544

Current liabilities of discontinued operations — 11,824

Total current liabilities 9,334 25,920

Line of credit (net of debt issuance costs of $770) 5,625 —

Long-term debt, less current portion (net of debt issuance costs of $198) 32,527 —

Contingent consideration, less current portion — 4,112

Line of credit (net of debt issuance costs of $0 and $770, respectively) — 5,625

Long-term debt, less current portion (net of debt issuance costs of $0 and $198, respectively) — 32,527

Severance payable, less current portion 100 —

Lease liabilities, less current portion 298 698

Noncurrent liabilities of discontinued operations — 3,072

Total liabilities 9,732 67,842

2 unchanged sentences

Common stock, $0.01 par value per share;

19,500,000 shares authorized, 11,038,623 and 10,887,509 shares issued and outstanding, respectively, net of treasury stock, at cost, of 3,930 shares 53 52

19,500,000 shares authorized, 11,227,197 and 11,038,623 shares issued and outstanding, respectively 112 110

Additional paid in capital 71,445 70,260

Retained earnings 11,956 16,933

(Accumulated deficit) retained earnings ( 21,874 ) 11,956

Treasury stock of 355,150 and 3,930 shares, respectively ( 1,578 ) ( 57 )

Total stockholders’ equity 48,105 82,269

2 unchanged sentences

and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share and dividend amounts)

Years ended December 29, 2024, December 31, 2023, and January 1, 2023

Years ended December 28, 2025, December 29, 2024, and December 31, 2023

2025 2024 2023

3 unchanged sentences

Selling, general, and administrative expenses 41,136 42,902 45,402

Gain on contingent consideration ( 1,452 ) — —

Impairment losses — 22,545 —

Contingent consideration adjustment ( 450 ) — —

Depreciation and amortization 1,550 1,334 1,313

Operating income (loss) 1,213 ( 7,185 ) 16,283

Operating (loss) income ( 8,903 ) ( 5,867 ) 3,070

Interest expense, net ( 4,511 ) ( 4,921 ) ( 5,976 )

(Loss) income before income taxes from continuing operations ( 3,708 ) ( 13,161 ) 14,920

Income tax benefit (expense) from continuing operations 370 2,938 ( 3,659 )

(Loss) income from continuing operations ( 3,338 ) ( 10,223 ) 11,261

Income from discontinued operations:

Income — — 1,235

Gain on sale — — 17,675

Income tax expense — — ( 4,810 )

Net (loss) income $ ( 3,338 ) $ ( 10,223 ) $ 25,361

Change in unrealized losses on cash flow hedges — — ( 58 )

Other comprehensive loss — — ( 58 )

Net comprehensive (loss) income $ ( 3,338 ) $ ( 10,223 ) $ 25,303

Net (loss) income per share - basic:

Net (loss) income from continuing operations $ ( 0.31 ) $ ( 0.95 ) $ 1.08

Net income from discontinued operations:

Income — — 0.12

Gain on sale — — 1.69

Income tax expense — — ( 0.46 )

Net (loss) income per share - basic $ ( 0.31 ) $ ( 0.95 ) $ 2.43

Net (loss) income per share - diluted:

Net (loss) income from continuing operations $ ( 0.31 ) $ (0.95) $ 1.07

Net income from discontinued operations:

Income — — 0.12

Gain on sale — — 1.69

Income tax expense — — ( 0.46 )

Net (loss) income per share - diluted $ ( 0.31 ) $ ( 0.95 ) $ 2.42

Loss before income taxes from continuing operations ( 13,414 ) ( 10,788 ) ( 2,906 )

Income tax benefit from continuing operations 1,881 2,084 831

Loss from continuing operations ( 11,533 ) ( 8,704 ) ( 2,075 )

Income (loss) from discontinued operations:

Income (loss) 4,423 7,080 ( 10,253 )

Loss on sale ( 3,723 ) — —

Income tax (expense) benefit ( 597 ) ( 1,714 ) 2,105

Net loss $ ( 11,430 ) $ ( 3,338 ) $ ( 10,223 )

Net (loss) income per share - basic and diluted:

Net loss from continuing operations $ ( 1.05 ) $ ( 0.80 ) $ ( 0.20 )

Net income (loss) from discontinued operations:

Income (loss) 0.40 0.65 ( 0.95 )

Loss on sale ( 0.34 ) — —

Income tax (expense) benefit ( 0.05 ) ( 0.16 ) 0.20

Net loss per share - basic and diluted $ ( 1.04 ) $ ( 0.31 ) $ ( 0.95 )

Weighted average shares outstanding:

Basic 10,896 10,766 10,427

Diluted 10,896 10,766 10,473

Basic and Diluted 11,025 10,896 10,766

Cash dividends declared per common share $ 2.00 $ 0.15 $ 0.60

3 unchanged sentences

(in thousands)

Years ended December 29, 2024, December 31, 2023, and January 1, 2023

Years ended December 28, 2025, December 29, 2024, and December 31, 2023

Stock Shares Par

Value Treasury Stock Amount Additional Paid in Capital Retained

Earnings Accumulated Other Comprehensive (Loss)/Income Total

Stockholders’ equity, December 26, 2021 — 10,425 $ 104 $ ( 38 ) $ 61,876 $ 14,592 $ 58 $ 76,592

Value Treasury Stock Amount Additional Paid in Capital (Accumulated Deficit) Retained

Earnings Total

Stockholders’ equity, January 01, 2023 — 10,772 $ 108 $ ( 38 ) $ 67,003 $ 33,663 $ 100,736

Share-based compensation from continuing operations — — — — 957 — 957

Share-based compensation from discontinued operations — — — — 72 — 72

Transaction fees related to sale of discontinued operations — — — — 35 — — 35

Issuance of shares — 254 3 — 3,338 — — 3,341

Issuance of restricted shares — 32 1 — ( 1 ) — — —

Issuance of restricted shares, net of 2,085 shares of treasury stock — 57 1 (19) ( 23 ) — ( 41 )

Issuance of ESPP shares — 54 — — 512 — 512

1 unchanged sentence

Cash dividends declared — — — — — ( 6,507 ) ( 6,507 )

Net income — — — — — 25,361 — 25,361

Other comprehensive loss — — — — — — ( 58 ) ( 58 )

Stockholders’ equity, January 01, 2023 — 10,772 108 ( 38 ) 67,003 33,663 — 100,736

Share-based compensation — — — — 1,029 — — 1,029

Issuance of restricted shares, net of 2,085 shares of treasury stock — 57 1 ( 19 ) ( 23 ) — — ( 41 )

Net loss from continuing operations — — — — — ( 10,223 ) ( 10,223 )

Stockholders’ equity, December 31, 2023 — 10,888 109 ( 57 ) 68,551 16,933 85,536

Share-based compensation from continuing operations — — — — 908 — 908

Share-based compensation from discontinued operations — — — — 81 — 81

Issuance (cancellation) of restricted shares — 51 1 — ( 1 ) — —

Issuance of ESPP shares — 61 — — 459 — 459

1 unchanged sentence

Cash dividends declared — — — — — ( 1,639 ) ( 1,639 )

Net loss — — — — — ( 10,223 ) — ( 10,223 )

Net loss from continuing operations — — — — — ( 3,338 ) ( 3,338 )

Stockholders’ equity, December 29, 2024 — 11,039 $ 110 $ ( 57 ) $ 70,260 $ 11,956 $ 82,269

3 unchanged sentences

(in thousands)

Years ended December 29, 2024, December 31, 2023, and January 1, 2023

Years ended December 28, 2025, December 29, 2024, and December 31, 2023

Stock Shares Par

Value Treasury Stock Amount Additional Paid in Capital Retained

Earnings Accumulated Other Comprehensive (Loss)/Income Total

Value Treasury Stock Amount Additional Paid in Capital (Accumulated Deficit) Retained

Earnings Total

Stockholders’ equity, December 29, 2024 — 11,039 $ 110 $ ( 57 ) $ 70,260 $ 11,956 $ 82,269

Share-based compensation — — — — 989 — — 989

Issuance of restricted shares — 51 1 — ( 1 ) — — —

Share-based compensation from continuing operations — — — — 1,006 — 1,006

Share-based compensation from discontinued operations — — — — 47 — 47

Issuance (cancellation) of restricted shares — 157 2 — ( 2 ) — —

Repurchase of common stock, 351,200 shares — — — ( 1,521 ) — — ( 1,521 )

Issuance of ESPP shares — 31 — — 134 — 134

Exercise of common stock options — 39 — — 262 — — 262

Cash dividends declared — — — — — ( 22,400 ) ( 22,400 )

5 unchanged sentences

(in thousands)

Years ended December 29, 2024, December 31, 2023, and January 1, 2023

Years ended December 28, 2025, December 29, 2024, and December 31, 2023

2025 2024 2023

Cash flows from operating activities

Net (loss) income $ ( 3,338 ) $ ( 10,223 ) $ 25,361

(Income) from discontinued operations — — ( 1,235 )

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Net loss $ ( 11,430 ) $ ( 3,338 ) $ ( 10,223 )

Net (income) loss from discontinued operations ( 3,826 ) ( 5,366 ) 8,148

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation 113 152 183

Amortization 1,437 1,182 1,130

Gain on sale of discontinued operations — — ( 17,675 )

Impairment losses — 22,545 —

Loss on sale of discontinued operations 3,723 — —

Loss on disposal of property and equipment 164 3 10

Gain on contingent consideration ( 1,452 ) — —

Contingent consideration adjustment ( 450 ) — —

Amortization of debt issuance costs 1,022 425 199

Interest expense on contingent consideration payable 44 740 128

Interest expense on note payable 136 — —

Provision for credit losses 1,857 1,859 798

Share-based compensation 1,006 908 957

Deferred income taxes, net of acquired deferred tax liability ( 1,185 ) ( 5,075 ) 2,353

Deferred income taxes ( 1,647 ) 378 ( 4,214 )

Net changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable 3,393 8,188 ( 815 )

Prepaid expenses and other current assets 5,164 ( 2,159 ) ( 866 )

Escrow receivable ( 4,950 ) — —

Prepaid expenses 563 928 ( 333 )

Other current assets ( 346 ) 794 2,944

Deposits 66 593 ( 27 )

2 unchanged sentences

Accrued payroll and expenses 618 ( 1,716 ) ( 1,000 )

Transition services payable 3,064 — —

Accrued interest ( 223 ) ( 215 ) 165

Income taxes receivable and payable 103 729 ( 1,202 )

Income taxes payable ( 80 ) 103 ( 478 )

Severance payable 492 — —

Other current liabilities — — ( 1,000 )

1 unchanged sentence

Other long-term liabilities 4,001 13,937 16,800

Net cash provided by (used in) continuing operating activities 24,379 20,386 ( 3,300 )

Net cash used in discontinued operating activities — — ( 3,822 )

Net cash provided by (used in) operating activities 24,379 20,386 ( 7,122 )

Net cash (used in) provided by continuing operating activities 117 19,385 12,922

Net cash provided by discontinued operating activities 25 4,994 7,464

Net cash (used in) provided by operating activities 142 24,379 20,386

Cash flows from investing activities

Businesses acquired, net of cash acquired — ( 6,917 ) ( 33,940 )

Businesses sold — — 30,722

Proceeds from business sold 91,528 — —

Capital expenditures ( 138 ) ( 1,217 ) ( 2,152 )

Net cash used in continuing investing activities ( 1,640 ) ( 9,514 ) ( 8,898 )

Net cash provided by (used in) continuing investing activities 91,390 ( 1,217 ) ( 2,152 )

Net cash used in discontinued investing activities ( 193 ) ( 423 ) ( 7,362 )

Net cash used in investing activities ( 1,640 ) ( 9,514 ) ( 8,924 )

Net cash provided by (used in) investing activities 91,197 ( 1,640 ) ( 9,514 )

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

2 unchanged sentences

(in thousands)

Years ended December 29, 2024, December 31, 2023, and January 1, 2023

Years ended December 28, 2025, December 29, 2024, and December 31, 2023

2025 2024 2023

Cash flows from financing activities

Net (payments) borrowing line of credit ( 18,479 ) 2,312 9,781

Net payments under line of credit ( 10,220 ) ( 18,479 ) 2,312

Proceeds from issuance of long-term debt — 4,250 —

Principal payments on long-term debt ( 32,725 ) ( 1,700 ) ( 7,008 )

Payments of convertible note ( 4,368 ) — —

Payments of dividends ( 22,400 ) ( 1,639 ) ( 6,507 )

1 unchanged sentence

Issuance of shares under the 2013 Long-Term Incentive Plan — 262 ( 10 )

Contingent consideration paid ( 4,250 ) ( 1,110 ) ( 1,110 )

Note payable paid ( 1,392 ) — —

Payments of debt issuance costs ( 29 ) ( 1,289 ) ( 69 )

Net cash (used in) provided by continuing financing activities ( 22,386 ) ( 10,872 ) 15,934

Net change in cash and cash equivalents 353 — ( 112 )

Cash and cash equivalents, beginning of year — — 112

Cash and cash equivalents, end of year $ 353 $ — $ —

Repurchase of common stock ( 1,521 ) — —

Net cash used in continuing financing activities ( 72,521 ) ( 18,136 ) ( 10,770 )

Net cash used in discontinued financing activities — ( 4,250 ) ( 102 )

Net cash used in financing activities ( 72,521 ) ( 22,386 ) ( 10,872 )

Net change in cash and cash equivalents, continuing operations 18,818 353 —

net change in cash and cash equivalents, discontinued operations ( 168 ) 321 —

Cash and cash equivalents, beginning of year, continuing operations 32 — —

Cash and cash equivalents, end of year, continuing operations $ 19,018 $ 32 $ —

Supplemental cash flow information:

Cash paid for interest, net $ 4,475 $ 4,668 $ 641

Cash paid for taxes, net of refunds $ 685 $ 1,378 $ 7,562

Cash paid for interest, net - continuing operations $ 3,266 $ 4,475 $ 4,668

Cash paid for taxes (federal), net of refunds - continuing operations $ — $ 4 $ 630

Cash paid for taxes (state), net of refunds

Continuing operations 335 469 518

Discontinued operations 170 212 230

Total cash paid for taxes (state), net of refunds $ 505 $ 685 $ 1,378

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

2 unchanged sentences

NOTE 1 - NATURE OF OPERATIONS

BGSF, Inc., provides consulting, managed services, and professional workforce solutions to a variety of industries through its various divisions in information technology (“IT”), Finance & Accounting, Managed Solutions, and Property Management (collectively, with its consolidated subsidiaries, the “Company”).

On March 21, 2022, the Company completed the sale of substantially all its Light Industrial segment (“InStaff”) assets to Jobandtalent (“J&T”), through the wholly-owned subsidiary, Sentech Engineering Services, Inc.

See “Note 4 - Discontinued Operations”.

In December 2022, the Company acquired substantially all of the assets and assumed certain liabilities of Horn Solutions.

See “Note 3 – Acquisitions.”

(the “Company”) provides workforce solutions through the Property Management segment that operates primarily within the United States of America (“U.S.”).

The Property Management segment provides office and maintenance talent in 44 states and D.C., to property management companies responsible for the apartment communities’ and commercial buildings’ day-to-day operations.

The Company normally experiences seasonal fluctuations.

The quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of client partners’ business.

Demand for the Property Management workforce solutions has typically increased in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session.

Overall first quarter demand can be affected by adverse weather conditions in the winter months.

On April 24, 2023, the Company acquired substantially all of the assets and assumed certain liabilities of Arroyo Consulting, LLC (“Arroyo Consulting”).

See “Note 3 - Acquisitions.”

The Company operates primarily within the United States of America (“U.S.”) through the Property Management and Professional segments.

The Property Management segment provides office and maintenance talent in 40 states and D.C., to property management companies responsible for the apartment communities’ and commercial buildings’ day-to-day operations.

The Professional segment provides specialized talent and business consultants for information technology (“IT”), managed services, finance, accounting, legal and human resource.

The segment operates across the U.S.

in three divisions, IT, Managed Solutions, and Finance & Accounting, with the IT division providing additional nearshore and offshore solutions in Colombia and India.

On May 8, 2024, the Company announced that our board of directors (“Board”) had initiated a process to evaluate potential strategic alternatives and engaged financial advisors in an endeavor to maximize shareholder value (“Strategic alternatives review”).

During December 2024, the Company announced a cost restructuring plan as part of the strategic review process.

On June 14, 2025, the Company entered into an Equity Purchase Agreement with INSPYR Solutions Intermediate, LLC, pursuant to which the Company sold substantially all of the outstanding equity and assets pertaining to the Professional segment (“BGSF Professional”) on September 8, 2025.

The BGSF Professional financial results for periods prior to the sale have been reflected as discontinued operations in the Consolidated Financial Statements, see “Note 4 - Discontinued Operations.”

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

The Company has a 52/53 week fiscal year.

Fiscal years for the consolidated financial statements included herein are for the 52 weeks ended December 29, 2024, and 52 weeks ended December 31, 2023, and the 53 weeks ended January 1, 2023, referred as Fiscal 2024, 2023, and 2022, respectively.

Fiscal years for the consolidated financial statements included herein are for the 52 weeks ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively, referred as Fiscal 2025, 2024, and 2023, respectively.

Reclassifications

1 unchanged sentence

Management Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates affecting the consolidated financial statements include allowances for credit losses, goodwill, intangible assets, lease liabilities, contingent consideration obligations related to acquisitions, and income taxes.

Significant estimates affecting the consolidated financial statements include the allowance for credit losses, goodwill, intangible assets, lease liabilities, and income taxes.

Additionally, the valuation of share-based compensation expense uses a model based upon interest rates, stock prices, maturity estimates, volatility and other factors.

4 unchanged sentences

Financial Instruments

The Company uses fair value measurements in areas that include, but are not limited to, the allocation of purchase price consideration to tangible and identifiable intangible assets, convertible debt, contingent consideration, and interest rate swap agreements.

The carrying values of cash, accounts receivables, accounts payable, accrued payroll and expenses, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

The carrying value of bank debt approximates fair value due to the variable nature of the interest rates under the credit agreement with BMO Harris Bank, N.A.

(“BMO”) that provides for a revolving credit facility, term loan and current rates available to the Company for debt with similar terms and risk.

In Fiscal 2022, Management determined the fair value on the interest rate swap based on quoted prices from BMO.

The carrying values of accounts receivable, accounts payable, accrued payroll and expenses, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

The carrying value of bank debt approximates fair value due to the variable nature of the interest rates under the credit agreement with BMO Bank, N.A.

(“BMO”) that provided for a revolving credit facility and term loan and current rates available to the Company for debt with similar terms and risk.

On September 8, 2025, the Company paid the balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional.

See “Note 11 - Debt.”

Cash and Cash Equivalents

2 unchanged sentences

Concentration of credit risk is limited due to the Company’s diverse client partner base and their dispersion across many different industries and geographic locations nationwide.

No single client partner accounted for more than 10% of the Company’s accounts receivable as of December 29, 2024 and December 31, 2023 or revenue from continuing operations in Fiscal 2024, 2023, and 2022.

Geographic revenue from continuing operations in excess of 10% of the Company’s consolidated revenue in Fiscal 2024 and the related percentage for Fiscal 2023 and 2022 was generated in the following areas at:

No single client partner accounted for more than 10% of the Company’s accounts receivable as of December 28, 2025 and December 29, 2024 or revenue from continuing operations in fiscal years 2025, 2024, and 2023.

Geographic revenue from continuing operations in excess of 10% of the Company’s consolidated revenue in fiscal year 2025 and the related percentage for fiscal years 2024 and 2023 was generated in the following area:

2025 December 29,

2023 January 1,

Tennessee 17 % 13 % 10 %

2024 December 31,

Texas 28 % 25 % 26 %

5 unchanged sentences

The Company’s determination of the allowance for uncollectible amounts is based on management’s judgments and assumptions, including general economic conditions, portfolio composition, historical credit losses, evaluation of credit risk related to certain individual client partners and the Company’s ongoing examination process.

During Fiscal 2024, the Company identified an additional risk pool related to the Property Management segment, which increased the estimate of expected credit losses.

During Fiscal 2025 and Fiscal 2024, the Company identified additional risk pools related to the Property Management segment, which increased the estimate of expected credit losses.

The additional risk pool and increased expected credit losses that were identified during 2024 have been resolved.

Receivables are written off after they are deemed to be uncollectible after all reasonable means of collection have been exhausted.

16 unchanged sentences

The Company maintains guaranteed costs policies for workers’ compensation coverage in monopolistic states and minimal loss retention coverage in all other states.

Under these policies, the Company is required to maintain refundable deposits of $ 1.8 million and $ 2.4 million, which are included in Deposits in the accompanying consolidated balance sheets, as of December 29, 2024 and December 31, 2023, respectively.

Under these policies, the Company is required to maintain refundable deposits of $ 1.8 million, which are included in Deposits in the accompanying consolidated balance sheets, as of December 28, 2025 and December 29, 2024, respectively.

Software as a Service

1 unchanged sentence

All other internal-use software development costs are capitalized and reported as a component of computer software within Intangible assets.

Capitalized costs are amortized on a straight-line basis over the estimated useful life of the related software and the amortization is recorded within operating expenses in the accompanying consolidated statements of operations.

The Company reviews its long-lived assets, primarily Property and equipment and Software as a service, for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered.

3 unchanged sentences

Many of the lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs, which are accounted for separately.

Certain of the Company’s lease arrangements contain renewal provisions from 1 to 10 years, exercisable at the Company’s option.

Certain of the Company’s lease arrangements contain renewal provisions for 5 years, exercisable at the Company’s option.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

9 unchanged sentences

Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years , based on a pattern in which the economic benefit of the respective Intangible asset is realized.

Identifiable Intangible assets recognized in conjunction with acquisitions are recorded at fair value.

Significant unobservable inputs are used to determine the fair value of the identifiable Intangible assets based on the income approach valuation model whereby the present worth and anticipated future benefits of the identifiable Intangible assets are discounted back to their net present value.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company develops and implements software to enhance the performance and capabilities of the IT infrastructure.

Identifiable Intangible assets recognized in conjunction with acquisitions are recorded at fair value.

The Company develops and implements software to enhance the performance and capabilities of the information technology infrastructure.

Direct internal payroll costs and external costs for the development of software are capitalized from the time internal-use software is considered probable until the software is deployed.

5 unchanged sentences

In Fiscal 2023, management decided to eliminate the use of various trade names and go to market under the BGSF brand.

Management’s rebranding created an impairment charge of $ 22.5 million.

Management’s rebranding created an impairment charge of $ 22.5 million included in discontinued operations .

There were no impairment indicators identified during Fiscal 2025 or 2024.

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Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contingent Consideration

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The resulting discount is amortized as interest expense over the outstanding period using the effective interest method.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The Company derives its revenues from continuing operations in Property Management and Professional segments by providing workforce solutions, placement services, and managed services.

The Company derives its revenues from continuing operations by providing workforce solutions and placement services through the Property Management segment.

Revenues are recognized when promised services are delivered to client partners, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

Revenues from continuing operations as presented on the consolidated statements of operations and comprehensive (loss) income represent services rendered to client partners less sales adjustments and allowances.

Revenues from continuing operations as presented on the consolidated statements of operations represent services rendered to client partners less sales adjustments and allowances.

Reimbursements, including those related to out-of-pocket expenses, are also included in revenues, and the related amounts of reimbursable expenses are included in cost of services.

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The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified field talent, (ii) has the discretion to select the field talent and establish their price and duties and (iii) bears the risk for services that are not fully paid for by client partners.

Workforce solution revenues - Field talent revenues from contracts with client partners are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s field talent.

Contingent placement revenues - Any revenues associated with workforce solutions that are provided on a contingent basis are recognized once the contingency is resolved, as this is when control is transferred to the client partner, usually when employment candidates start their employment.

Managed services revenues - include workforce solution revenues, fixed fee revenues, and input method revenues for one partner contract.

Workforce solution services performed represent the transfer of control to the client partner over a given period of time.

Fixed fee revenues are recognized in equal amounts at fixed intervals as promised services are delivered.

Input method revenues accounts for less than 8% of total revenue and are recognized based on the Company's efforts or inputs to the satisfaction of a performance obligation, relative to the total expected inputs required for completion.

The Company believes this method best reflects its progress in transferring the performance obligation to the customer

Contract field talent revenues - Field talent revenues from contracts with client partners are recognized over time in the amount to which the Company has a right to invoice, as the services are rendered by the Company’s field talent.

Contingent placement revenues - Any revenues associated with workforce solutions that are provided on a contingent basis are recognized at a point in time once the contingency is resolved, as this is when control is transferred to the client partner, usually when employment candidates start their employment.

The Company estimates the effect of placement candidates who do not remain with its client partners through the guarantee period (generally 90 days) based on historical experience.

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The Company did not recognize any contract impairments during Fiscal 2025, 2024, and 2023.

The opening balance of accounts receivable at January 1, 2023, was $ 66.3 million.

The opening balance of accounts receivable at December 31, 2023, was $ 29.6 million.

The Company recognizes advertising expense in selling, general, and administrative expenses as the services are incurred.

Total advertising expense from continuing operations for Fiscal 2024, 2023, and 2022 was $ 2.1 million, $ 2.1 million, and $ 2.0 million, respectively.

Total advertising expense from continuing operations was $ 0.7 million for Fiscal 2025 and Fiscal 2024, respectively, and $ 0.8 million for Fiscal 2023.

Share-Based Compensation

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2025 December 29,

2023 January 1,

2024 December 31,

Weighted-average number of common shares outstanding:

11,025 10,896 10,766

Effect of dilutive securities:

Stock options and restricted stock — — 46

Weighted-average number of diluted common shares outstanding 11,025 10,896 10,766

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As a matter of operation, the Company first calculated the effective tax on continuing operations, and then allocated the remaining taxes to our discontinued operations, in accordance with Accounting Standards Codification (“ASC”) Topic 740.

As of December 29, 2024 and December 31, 2023, goodwill of $ 46.6 million and $ 45.9 million, respectively, which is limited annually and is expected to be deductible for tax purposes.

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts are classified as noncurrent in the consolidated balance sheets.

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Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment.

As of December 29, 2024, the Company has a $ 2.6 million net operating loss carry forward from the 2020 EdgeRock acquisition with no expiration date.

These net operating losses are subject to an annual Internal Revenue Code Section 382 limitation of $ 1.3 million.

Additionally, there was an increase of $ 1.2 million to the deferred tax assets as of December 29, 2024.

As of December 28, 2025, the Company's deferred tax assets are primarily composed of $ 6.8 million relating to net operating loss carryforwards and $2.2 million relating to interest expense carryovers.

To the extent there is an ownership change in the Company of 50 percent or greater, as defined by Section 392 of the Internal Revenue Code, the ability to utilize these tax attributes, as well as others, against taxable income may be limited.

The Company does not anticipate this limitation to apply.

When appropriate, the Company will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized.

In determining whether a valuation allowance is appropriate, the Company considers whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results.

The Company believes that it is more likely than not that all deferred tax assets will be realized and thus, believes that a valuation allowance is not required as of December 29, 2024 or December 31, 2023.

During Fiscal 2025, the Company recorded a $ 1.5 million valuation allowance recorded against the certain net deferred tax assets related specifically to the sale of BGSF Professional to offset future tax benefits that may not be realized.

The valuation allowances recorded relate to capital losses and stock-based compensation.

If these items are ultimately utilized, the Company will recognize a tax benefit up to the full amount of the valuation allowance.

The Company follows the guidance of ASC Topic 740, Accounting for Uncertainty in Income Taxes.

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Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting:

Improvements to Reportable Segment Disclosures.

The new standard provides guidance to improve reportable segment disclosure with enhanced reporting of significant segment expenses.

The new guidance is effective after December 15, 2023, and interim periods beginning after December 15, 2024, and early adoption is permitted.

The Company adopted this ASU in Fiscal 2024, which did not have a material impact on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic ASC 740) Income Taxes.

The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early adoption permitted.

As of December 28, 2025, we adopted this standard and it has been applied prospectively.

This change did not have a significant impact on the Company’s financial statements and disclosures.

The Company’s income tax disclosures have been updated to comply with the new requirements, including enhanced disaggregation in the rate reconciliation and additional information regarding income taxes paid by jurisdiction.

See “Note 10 - Income Taxes,” for further discussion.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2023, FASB issued ASU 2023-09, Income Taxes:

Improvements to Income Tax Disclosures.

The new standard requires annual disclosure of the specific categories in the rate reconciliation, and additional information for reconciling items that meet a quantitative threshold.

Additional information may be required on reconciling items.

The new guidance is effective for fiscal years beginning after December 15, 2024, early adoption is permitted.

The Company's management believes that this pronouncement will not have material effect on the Company's consolidated financial statements.

In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which will require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, included in certain expense captions in the Consolidated Statements of Operations The new guidance is effective for fiscal years beginning after December 15, 2026, early adoption is permitted.

The Company is evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses:

Measurements of Credit Losses for Accounts Receivable and Contract Assets.

Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets.

The new guidance is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years.

Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively.

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software, which amends the guidance in ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software.

The amendments modernize the recognition and disclosure framework for internal-use software costs, removing the previous “development stage” model and introducing a more judgment-based approach.

The new guidance is effective for fiscal years beginning after December 15, 2027 and for interim periods within those annual reporting periods, with early adoption permitted.

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting.

The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.

ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2025-11.

NOTE 3 - ACQUISITIONS

Horn Solutions

On December 12, 2022, the Company acquired substantially all of the assets, and assumed certain of the liabilities, of Horn Solutions.

The purchase price of $ 42.7 million was paid at closing with $ 33.9 million in cash and $ 3.4 million of the Company common stock ( 254,455 shares of the Company common stock privately placed under Section 4(a)(2) of the Securities Act of 1933, as amended), as well as a two-year convertible promissory note of $ 4.4 million with an annual interest rate of 6 %, with interest paid quarterly.

The promissory note is convertible into shares of the Company common stock at any time after the one-year anniversary of the promissory note at a conversion price equal to $ 17.12 per share.

The promissory note is subordinate to the Company’s senior debt.

An additional portion of the purchase price, $ 1.0 million in cash, was held back as partial security for a post-closing purchase price adjustment.

The asset purchase agreement contained a provision for a “true up” of acquired working capital within 120 days after the closing date.

In May 2023, the hold back and true-up were paid, adjusting businesses acquired by $ 0.1 million in goodwill.

The purchase price at closing was paid out of funds under the Company’s credit agreement led by BMO, see “Note 12 - Debt”.

The acquired business was assigned to the Professional segment.

The acquisition of Horn Solutions allowed the Company to strengthen and expand its finance and accounting operations by providing consulting, project loan staff, interim staff, direct hire, and managed services through three complementary business units:

strategic accounting and finance, information technology, and transactional accounting and office staffing.

Horn Solutions provides services to clients in a variety of industries including, but not limited to energy, financial services, healthcare, real estate and construction, service, manufacturing, and software industries.

Shortly after closing, Horn Solutions was fully integrated into the Company's organizational structure and does not operate as a discrete entity.

Consequently, the amount of revenue and earnings of Horn Solutions included in the consolidated statement of operations and comprehensive (loss) income since the acquisition date is impracticable to provide.

The purchase price has been allocated to the assets acquired and liabilities assumed as of the date of acquisition as follows (in thousands):

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable $ 3,734

Prepaid expenses and other assets 118

Property and equipment, net 83

Right-of-use asset - operating leases 1,528

Intangible assets 13,484

Goodwill (deductible tax basis of $26.1 million) 26,610

Current liabilities assumed ( 1,787 )

Lease liability - operating leases ( 1,528 )

Total net assets acquired $ 42,242

Cash $ 33,940

Hold back 1,000

Convertible Note 4,368

Common stock 3,351

Working capital adjustment ( 417 )

Total fair value of consideration transferred for acquired business $ 42,242

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The allocation of the intangible assets is as follows (in thousands):

Estimated Fair

Value Estimated

Covenants not to compete $ 50 5 years

Client partner list 13,434 10 years

Total $ 13,484

The Company incurred costs of $ 0.4 million in Fiscal 2023 and Fiscal 2022 related to the Horn Solutions acquisition.

These costs were expensed as incurred in selling, general, and administrative expenses.

Arroyo Consulting

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Certain post-closing liabilities were held back of $ 0.4 million and a partial security for any indemnification obligation was held back for one year of $ 0.9 million.

The purchase agreement further provides for contingent consideration of up to $ 8.5 million based on the performance of the acquired business for the two years following the date of acquisition.

The purchase agreement further provided for contingent consideration of up to $ 8.5 million based on the performance of the acquired business for the two years following the date of acquisition.

The purchase price at closing was paid out of funds under the Company’s credit agreement led by BMO, see “Note 11 - Debt”.

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The acquired business was assigned to the Professional segment.

The acquisition of Arroyo Consulting allows the Company to strengthen the go-to-market cross-selling efforts providing clients a cost effective alternative offering nearshore and offshore IT resources.

Arroyo Consulting provides nearshore and offshore professional workforce solutions specializing in IT and software development with operations in the United States, Colombia, and India.

The 2022 consolidated statements of operations and comprehensive (loss) income do not include any operating results of Arroyo Consulting.

The Fiscal 2023 consolidated statement of operations and comprehensive (loss) income included thirty-six weeks for approximately $ 14.8 million of revenue and $ 4.0 million of operating income, which included $ 0.7 million in amortization expense on acquisition intangibles.

The final purchase price has been allocated to the assets acquired and liabilities as follows (in thousands):

The acquisition of Arroyo Consulting allowed the Company to provide clients a cost effective alternative offering nearshore and offshore IT resources specializing in IT and software development with operations in the United States, Colombia, and India.

The Fiscal 2023 consolidated statement of operations included thirty-six weeks for approximately $ 14.8 million of revenue and $ 4.0 million of discontinued operations income, which included $ 0.7 million in discontinued amortization expense on acquisition intangibles.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The final purchase price was allocated to the discontinued assets acquired and discontinued liabilities as follows (in thousands):

Preliminary Adjustments Final

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*Included in Other current liabilities

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The allocation of the intangible assets is as follows (in thousands):

The allocation of the discontinued intangible assets was as follows (in thousands):

Estimated Fair

5 unchanged sentences

The Company incurred costs of $ 0.6 million in Fiscal 2024 and 2023 related to the Arroyo Consulting acquisition.

These costs were expensed as incurred in selling, general, and administrative expenses.

These costs were expensed as incurred in discontinued selling, general, and administrative expenses.

Supplemental Unaudited Pro Forma Information

The Company estimates what would have been reported if the revenues and net loss from continuing operations of the Horn Solutions and Arroyo Consulting acquisition had taken place on the first day of the Company’s Fiscal 2023 (in thousands, except income per share):

2023 January 1,

The Company estimates what would have been reported if the revenues and net loss from discontinued operations had taken place on the first day of the Company’s Fiscal 2023 (in thousands, except income per share):

Revenues $ 195

Gross profit $ 64

Net loss from continuing operations $ ( 10 ) $ 13

Net loss per share from continuing operations:

Basic $ ( 0.88 ) $ 1.29

Diluted $ ( 0.88 ) $ 1.29

Pro forma net loss includes amortization of primarily client partner lists, interest expense on additional borrowings on the new term loan and the revolving facility (the “Revolving Facility”)(see “Note 12 - Debt”) at a rate of 7.1 %.

The tax benefit of the pro forma adjustments at an effective tax rate of 22.3 % for Fiscal 2023 and 24.5 % for Fiscal 2022.

Net loss $ 11

Net loss per share - basic and diluted $ 1.01

Pro forma discontinued net loss includes amortization of primarily client partner lists, interest expense on additional borrowings on the new term loan and the revolving facility (the “Revolving Facility”) (see “Note 11 - Debt”) at a rate of 7.1 %.

The tax benefit of the pro forma adjustments at an effective tax rate of 22.3 %.

The pro forma operating results include adjustments to Arroyo Consulting related to synergy adjustments for expenses that would be duplicative and other non-recurring, non-operating and out of period expense items once integrated with the Company.

There were no material nonrecurring adjustments.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts set forth above are not necessarily indicative of the results that would have been attained had the Arroyo Consulting acquisition taken place on the first day of Fiscal 2023 or of the results that may be achieved by the combined enterprise in the future.

NOTE 4 – DISCONTINUED OPERATIONS

On March 21, 2022, the Company sold substantially all of the assets and certain liabilities of InStaff to Sentech Engineering Services, Inc.

(“Sentech”) for a sale price of approximately $ 30.3 million cash, subject to customary sales price and working capital adjustments specified in the purchase agreement.

The purchase agreement provided for deferred consideration of $ 2.0 million, which was received April 3, 2023.

The sale resulted in an original pre-tax gain on sale of discontinued operations of $ 17.3 million, with an additional pre-tax gain of $ 0.4 million recognized as part of the net working capital adjustment in October 2022.

On June 14, 2025, the Company entered into an Equity Purchase Agreement (“EPA”) with INSPYR Solutions Intermediate, LLC (“INSPYR”), pursuant to which the Company sold to INSPYR substantially all of the outstanding equity and assets pertaining to BGSF Professional.

The sale closed on September 8, 2025, for cash proceeds of $ 91.5 million (which includes a $ 2.3 million working capital adjustment as provided in the EPA) plus $ 5.2 million in holdback escrow accounts.

Under the terms of the EPA, INSPYR acquired certain assets and equity interests, and assumed certain liabilities and obligations of the Company pertaining to BGSF Professional.

In March 2026, the Company received one holdback escrow payment and the working capital adjustment totaling approximately $4.4 million.

The EPA contained customary representations and warranties, covenants (including certain non-competition and non-solicitation covenants restricting the Company with respect to the professional staffing business), closing conditions, and indemnification provisions.

The EPA also included a payment obligation related to the June 10, 2025 letter agreement with Arroyo Consulting, LLC related to the payout of $ 2.5 million in contingent consideration where by the Company assumed a portion of this obligation and paid $ 1.2 million at closing and the remaining $ 0.6 million in monthly installments (“Note payable”).

After the close of the transaction, the Company began providing certain back-office services to INSPYR for a limited period of time.

The BGSF Professional financial results for periods prior to the sale have been reflected in our Consolidated Balance Sheet, Consolidated Statements of Operations, Consolidated Statement of Changes in Stockholders’ Equity and Consolidated Statements of Cash Flows as discontinued operations.

The financial results of BGSF Professional are as follows (in thousands):

December 28, 2025 December 29, 2024 December 31, 2023

$ 112,856 $ 168,098 $ 188,090

Cost of services

77,340 113,603 126,091

35,516 54,495 61,999

Selling, general, and administrative expenses 27,516 42,433 43,246

Gain on contingent consideration — ( 1,452 ) —

Depreciation and amortization

3,577 6,434 6,461

Impairment loss — — 22,545

Income (loss) from discontinued operations before taxes

$ 4,423 $ 7,080 $ ( 10,253 )

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The InStaff financial results for periods prior to the sale have been reflected in the consolidated statements of operations and comprehensive (loss) income and the consolidated statements of cash flows as discontinued operations.

The financial results of InStaff are as follows at (in thousands):

Revenue $ 16,465

Cost of services 14,144

Gross profit 2,321

Selling expenses 1,062

Depreciation 24

Income from discontinued operations before gain on sale and income taxes $ 1,235

The preliminary carrying amount of assets, liabilities, and equity included as part of discontinued operations (in thousands):

December 29, 2024

Cash and cash equivalents $ 321

Accounts receivable (net of allowance for credit losses of $223) 23,046

Prepaid expenses 885

Other current assets 102

Total current assets 24,354

Property and equipment, net 529

Software as a service, net 370

Deferred income taxes, net 607

Right of-use-assets-operating leases, net 3,891

Intangible assets, net 20,131

Goodwill 58,078

Total other assets 83,694

Total assets classified as discontinued operations

Accrued payroll and expenses $ 8,133

Contingent consideration, current portion 2,662

Lease liabilities, current portions 1,029

Total current liabilities 11,824

Lease liabilities, less current portion 3,072

Total noncurrent liabilities 3,072

Other long-term liabilities (intercompany) 32,195

Total liabilities classified as discontinued operations

Retained earnings 60,957

Total liabilities and equity classified as discontinued operations $ 108,048

NOTE 5 - OTHER CURRENT ASSETS

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Income tax receivable 457 513

Due from Arroyo — 3,843

Other 141 456

State payroll tax receivable 322 —

Federal payroll tax receivable 399 —

$ 1,458 $ 2,213

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The CARES Act applies to taxes incurred from March 27, 2020, through the second quarter of 2021.

In Fiscal 2024, the Company received $ 0.8 million and filed additional amendments for $ 0.3 million.

ERC claims are subject to examination by the Internal Revenue Service (“IRS”).

The Company’s claims may be audited by the IRS until the expiration of the applicable statute of limitations, which may extend for several years from the date the original or amended payroll tax returns were filed.

As of Fiscal 2025, the Company has not received notice of examination related to its ERC claims and received $ 1.4 million.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - PROPERTY AND EQUIPMENT, NET

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Total depreciation expense from continuing operations in Fiscal 2025, 2024, and 2023 was $ 0.1 million, $ 0.2 million, and $ 0.2 million, respectively.

In Fiscal 2024, the Company completed software assets and reclassified $ 0.2 million to Intangible assets related to new features on the IT infrastructure.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LEASES

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2025 December 29,

2023 January 1,

Weighted average remaining lease term of operation leases 3.7 years 3.5 years 3.3 years

2024 December 31,

Weighted average remaining lease term of continuing operating leases 2.6 years 2.8 years 2.8 years

Weighted average discount rate for continuing operating leases 8.3 % 7.8 % 7.5 %

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December 28, 2025

Thereafter 119

Total lease payment 786

Interest ( 822 )

Imputed interest ( 79 )

Present value of lease liabilities $ 707

NOTE 8 - INTANGIBLE ASSETS

Finite and indefinite lived intangible assets consist of the following at (in thousands):

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets consisted of the following (in thousands):

December 28, 2025

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Amortization Net

Indefinite lives:

Goodwill $ 1,074 $ — $ 1,074

Finite lives:

Client partner lists $ 905 $ 905 $ —

Covenants not to compete 2,747 2,459 288

Computer software 7,746 4,743 3,003

Total $ 8,651 $ 5,648 $ 3,003

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 29, 2024

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Amortization Net

Indefinite lives:

Goodwill $ 1,074 $ — $ 1,074

Finite lives:

Client partner lists $ 905 $ 905 $ —

Covenants not to compete 2,743 2,153 590

Computer software 8,570 4,185 4,385

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Total amortization expense from continuing operations for Fiscal 2025, 2024, and 2023 was $ 1.4 million, $ 1.2 million and $ 1.1 million, respectively.

In Fiscal 2024, the Company added software assets of $ 1.1 million and reclassified $ 0.2 million from property and equipment related to the new features on the IT infrastructure.

NOTE 9 - GOODWILL

The changes in the carrying amount of goodwill as of and during the years ended were as follows at (in thousands):

Property Management Professional Total

January 1, 2023 $ 1,074 $ 54,119 $ 55,193

Additions from acquisitions — 4,395 4,395

December 31, 2023 1,074 58,514 59,588

Acquisition adjustment — ( 437 ) ( 437 )

December 29, 2024 $ 1,074 $ 58,077 $ 59,151

NOTE 10 - ACCRUED PAYROLL AND EXPENSES AND CONTINGENT CONSIDERATION

In Fiscal 2025, the Company reclassified $ 0.1 million from property and equipment related to the new features on the IT infrastructure.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - ACCRUED PAYROLL AND EXPENSES AND TRANSITION SERVICES PAYABLE

Accrued payroll and expenses consist of the following at (in thousands):

2025 December 29,

Field talent payroll $ 4,506 $ 5,014

Field talent payroll related 1,034 1,039

Accrued bonuses and commissions 1,891 2,931

Payroll $ 1,047 $ 1,339

Payroll related 1,218 991

Bonuses and commissions 664 375

Vendor services 763 569

Other 749 1,594

Accrued payroll and expenses $ 4,441 $ 4,868

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a schedule of future estimated contingent consideration payment at (in thousands):

Estimated Cash Payment Discount Net

Less than one year $ 2,750 $ ( 88 ) $ 2,662

Contingent consideration $ 2,750 $ ( 88 ) $ 2,662

During Fiscal 2024, a performance adjustment was made to the estimated fair value of the contingent consideration payment, resulting in a gain of $ 1.5 million included in earnings.

Transition services payable consists of the following:

Subsequent to the closing of the sale of BGSF Professional (See “Note 4 - Discontinued Operations”), the Company provided certain transitional back-office services to INSPYR for a limited period.

These services included processing and paying accounts payable and payroll, and collecting trade accounts receivable through the Company's bank accounts.

The transition service payable account balance represents the amount either due to or due from INSPYR.

Due to changing cash inflows and outflows, the balance swings between a receivable and a payable.

As of December 28, 2025, the account balance of $ 3.1 million represented a payable to INSPYR.

The account will only be settled when both parties agreed the expected cash flows were representative of a long term trend.

NOTE 10 - INCOME TAXES

At December 29, 2024, federal income tax receivable of $ 0.5 million is included in Other current assets and state income tax payable of $ 0.2 million is included in Income taxes payable in the consolidated balance sheets.

At December 31, 2023, federal income tax receivable of $ 0.7 million is included in Other current assets and state income tax payable of $ 0.3 million is included in Income taxes payable in the consolidated balance sheets.

The Company’s income tax expense for the fiscal years are comprised of the following at (in thousands):

The Company derives its revenue from operations in the United States and any foreign activity from discontinued operations is immaterial.

For the fiscal years ended, December 28, 2025, December 29, 2024, and December 31, 2023, the Company incurred a loss before income tax provision from continuing operations of $ 13.4 million, $ 10.8 million, and $ 2.9 million, respectively.

The Company’s income tax benefit (expense) for the fiscal years are comprised of the following at (in thousands):

December 28, 2025 December 29,

2023 January 1, 2023

Current Federal income tax benefit (expense) $ 523 $ ( 1,312 ) $ ( 589 )

Current state income tax ( 1,338 ) ( 825 ) ( 717 )

Deferred tax benefit (expense) 1,185 5,075 ( 2,353 )

Income tax benefit (expense) from continuing operations 370 2,938 ( 3,659 )

2024 December 31, 2023

Federal $ 219 $ 766 $ 776

State ( 6 ) 2 ( 76 )

Total current provision for taxes 213 768 700

Federal 1,319 1,045 97

State 349 271 34

Total deferred provision for taxes 1,668 1,316 131

Federal from discontinued operations ( 494 ) ( 895 ) 1,857

State from discontinued operations ( 103 ) ( 819 ) 248

Income tax benefit $ 1,284 $ 370 $ 2,936

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the provision for income taxes to the tax computed at statutory federal rate after the adoption of ASU 2023-09 is as follows (in thousands):

federal statutory tax rate $ 2,817 21 %

State and local income taxes, net of federal 388 3

Work Opportunity Tax Credit, net 396 3

Changes in valuation allowance

Unrealized capital loss carryforward ( 1,029 ) ( 8 )

Unrealized share based compensation ( 491 ) ( 3 )

Nontaxable and nondeductible items ( 200 ) ( 1 )

Income tax benefit from continuing operations 1,881 15

Income tax expense from discontinued operations ( 597 ) ( 5 )

Income tax benefit (expense) $ 370 $ 2,938 $ ( 8,469 )

Income tax benefit $ 1,284 10 %

A reconciliation of the provision for income taxes to the tax computed at statutory federal rate before the adoption of ASU 2023-09 is as follows (in thousands):

2024 December 31,

federal statutory tax rate $ 2,265 21 % $ 610 21 %

State and local income taxes, net of federal 216 2 ( 29 ) ( 1 )

Work Opportunity Tax Credit, net — — 299 10

Nontaxable or nondeductible items ( 397 ) ( 3 ) ( 49 ) ( 2 )

Income tax benefit from continuing operations 2,084 20 831 28

Income tax (expense) benefit from discontinued operations ( 1,714 ) ( 10 ) 2,105 ( 5 )

Income tax benefit $ 370 10 % $ 2,936 23 %

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant components of the Company’s deferred income taxes are as follows at (in thousands):

2025 December 29,

Deferred tax assets:

Deferred tax assets from continuing operations:

Allowance for credit losses $ 290 $ 239

1 unchanged sentence

Accrued payroll and expenses 714 564

Contingent consideration 664 2,087

Operating lease liabilities 132 160

Business interest expense carryforward 2,215 1,385

Share-based compensation 581 514

Net operating loss carry forward 6,768 767

Deferred tax liabilities:

Deferred tax liabilities from continuing operations:

Prepaid expenses and other current assets ( 282 ) ( 610 )

Property and equipment ( 527 ) ( 2,119 )

Deferred income taxes, net $ 8,456 $ 7,271

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax provision, reconciled to the tax computed at the statutory federal rate, is as follows at (in thousands):

December 29, 2024 December 31, 2023 January 1, 2023

Tax benefit (expense) at federal statutory rate $ 784 ( 21 ) % $ 2,764 ( 21 ) % $ ( 3,133 ) ( 21 ) %

State income tax (expense) benefit, net of federal benefit ( 366 ) 10 % 194 ( 2 ) % ( 795 ) ( 6 ) %

Equity, permanent differences and other ( 48 ) 1 % ( 319 ) 2 % ( 178 ) ( 1 ) %

Work Opportunity Tax Credit, net — — % 299 ( 2 ) % 447 3 %

Income tax benefit (expense) from continuing operations 370 ( 10 ) % 2,938 ( 23 ) % ( 3,659 ) ( 25 ) %

Income tax expense from discontinued operations — — % — — % ( 4,810 ) ( 25 ) %

Income tax benefit (expense) $ 370 ( 10 ) % $ 2,938 ( 23 ) % $ ( 8,469 ) ( 25 ) %

Operating lease assets ( 153 ) ( 181 )

Valuation allowance ( 491 ) —

Net deferred income taxes from continuing operations 9,496 7,849

Net deferred income taxes from discontinued operations — 606

Net deferred income taxes $ 9,496 $ 8,455

NOTE 11 - DEBT

On July 16, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”), which would have matured on July 16, 2024, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender.

On September 8, 2025, the Company paid the balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional.

See “Note 4 - Discontinued Operations.”

On July 16, 2019, the Company entered into a credit agreement (the “Credit Agreement”), which would have matured on July 16, 2024 and subsequently canceled, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender.

The Company entered into four amendments from August 18, 2022 through May 19, 2023, which changed the interest rate component from LIBOR to the Secured Overnight Financing Rate (“SOFR”), exercised the option to borrow $ 40 million, required 2.5 % of the original principal balance of the new term loan, permitted a foreign entity acquisition, modified the distributions terms, and increased a revolving credit facility (the "Revolving Facility") by $ 6.0 million.

On March 13, 2024, the Credit Agreement was amended and restated through the Company’s entry into an Amended and Restated Credit Agreement, which would have matured on March 13, 2028, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “Restated Agreement”).

The Restated Agreement provided for a Revolving Facility which permitted the Company to borrow funds in an aggregate amount up to $ 40 million.

On March 12, 2024, the Credit Agreement was amended and restated (the “Restated Agreement”) with a maturity, which provided for a Revolving Facility which permitted the Company to borrow funds in an aggregate amount up to $ 40 million.

The Restated Agreement also provided for a term loan commitment, which permitted the Company to borrow funds from time to time (the “Term Loan”).

In July 2024, the Company exercised the option to borrow on a delayed draw term loan of $ 4.3 million related to payments on the Arroyo Consulting Acquisition's working capital “true up”, hold backs, and year one contingent consideration.

On November 6, 2024, the Company entered into the First Amendment to Amended and Restated Credit Agreement, maturing December 31, 2026, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “First Credit Amendment”).

The availability on the Revolving Facility, which permits the Company to borrow funds from time to time, was reduced in an aggregate amount up to $ 20 million.

The Company is required to repay the Term Loan in quarterly principal installments equal to 2.5 % of the aggregate principal balance.

The First Credit Amendment provides for interest either at the Base Rate plus the Applicable Margin, or the Adjusted Term SOFR plus the Applicable Margin (as defined in the First Credit Amendment).

The Company’s obligations are secured by a first priority security interest in substantially all tangible and intangible property of the Company’s and its subsidiaries.

The First Credit Amendment provides for amended financial covenants with a maximum Leverage Ratio, a minimum Fixed Charge Coverage Ratio, and a minimum earnings before interest, income taxes, depreciation, and amortization (“EBITDA”) (as such terms are defined in the First Credit Amendment).

The Company will pay an unused commitment fee on the daily average unused amount of Revolving Facility.

The Company was not in compliance with the foregoing financial covenants as of the fiscal quarter ended December 29, 2024.

the Company was also not in compliance with certain affirmative covenants, and the Company anticipated that they would not be in compliance with the foregoing financial covenants as of the fiscal quarter ended March 31, 2025.

On March 12, 2025, the Comapny entered into a Waiver and Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”) pursuant to which, among other things, the lenders unanimously waived noncompliance with the foregoing covenants as of December 29, 2024 and March 31, 2025, and certain amendments were made to the Amended and Restated Credit Agreement including, but not limited to, a new definition of Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $ 8.0 million.

The amendments described in the Second Amendment are effective as of March 13, 2025, subject to the satisfaction or waiver of certain conditions described therein relating to, among other things, debt financing and refinancing and our previously announced strategic alternatives review.

Letter of Credit

In conjunction with the EdgeRock acquisition, the Company entered into a standby letter of credit arrangement, which expires December 31, 2024, for purposes of protecting a lessor against default on lease payments.

As of December 29, 2024, the Company had a maximum financial exposure from this standby letter of credit totaling $ 0.1 million, all of which is

On November 6, 2024, the Company entered into the First Amendment to Restated Agreement, which reduced the availability on the Revolving Facility an aggregate amount up to $ 20 million.

On March 13, 2025, the Company entered into a Waiver and Second Amendment to Restated Agreement in which the lenders unanimously waived noncompliance with the covenants as of December 29, 2024 and March 30, 2025 and established a new definition of Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $ 8.0 million.

On May 7, 2025, the Company entered into a Waiver and Amendment which provided that the lenders unanimously waived noncompliance on the requirement of at least $ 2.0 million in cash equity contributions by extending the deadline and adding the option of issuing subordinated debt in the amount of $ 2.0 million.

On August 4, 2025, the Company entered into a Waiver and Amendment in which the lenders unanimously waived noncompliance with the foregoing covenants as of June 29, 2025 and the Company would finalize and close the sale BGSF Professional no later than September 30, 2025.

During Fiscal 2025, the Company recognized into interest expense approximately $ 0.8 million related to the amendments on unamortized debt issuances costs.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

considered usage against the Revolving Facility.

The Company has no history of default, nor is it aware of circumstances that would require it to perform under, any of these arrangements and believes that the resolution of any disputes thereunder that might arise in the future would not materially affect the Company’s consolidated financial statements.

Accordingly, no liability has been recorded in respect to these arrangements as of December 29, 2024 or December 31, 2023.

The Company was required to repay the Term Loan in quarterly principal installments equal to 2.5 % of the aggregate principal balance.

The Company paid an unused commitment fee on the daily average unused amount of Revolving Facility.

The Company’s obligations were secured by a first priority security interest in substantially all tangible and intangible property of the Company’s and its subsidiaries.

The Company obtained the waivers described above for the non compliance with the foregoing financial covenants and certain affirmative covenants as of the quarters ended December 29, 2024, March 30, 2025, and June 29, 2025.

Letter of Credit

In conjunction with a previous acquisition, the Company entered into a standby letter of credit arrangement, which expired, for purposes of protecting a lessor against default on lease payments.

As of December 29, 2024, the Company had a maximum financial exposure from this standby letter of credit totaling $ 0.1 million and no liability had been recorded, all of which was considered usage against the Revolving Facility.

On September 8, 2025, the Company assigned the related lease in the sale of BGSF Professional.

Line of Credit

At December 29, 2024 and December 31, 2023, $ 6.4 million and $ 24.9 million, respectively, was outstanding on the revolving facilities.

Average daily balance for Fiscal 2024, 2023, and 2022 was $ 12.4 million, $ 23.1 million, and $ 18.4 million, respectively.

On September 8, 2025, the Company paid the balance on the facility using the proceeds from the sale of BGSF Professional and subsequently cancelled the facility.

At December 29, 2024, $ 6.4 million was outstanding on the revolving facilities.

The average daily balance while the debt was outstanding for Fiscal 2025, 2024, and 2023 was $ 7.2 million, $ 12.4 million, and $ 23.1 million, respectively.

Borrowings under the revolving facilities consisted of and bore interest at (in thousands):

2024 December 31,

Base Rate $ 2,395 10.25 %

SOFR 4,000 8.23 %

SOFR — — % 2,000 7.71 %

SOFR — — % 15,000 7.77 %

Total $ 6,395 8.99 %

1 unchanged sentence

Long-term debt consisted of and bore interest at (in thousands):

2024 December 31,

SOFR $ 36,550 8.23 %

Long-term debt $ 36,550

Maturities on the Revolving Facility with BMO and long-term debt as of , are as follows at (in thousands):

Less debt issuance costs ( 992 )

Total, net $ 41,953

Convertible Note

At December 29, 2024 and December 31, 2023, the Company had a two-year convertible unsecured promissory note (“Convertible Note”) of $ 4.4 million due to the seller with an annual interest rate of 6 %, with interest paid quarterly related to the Horn Solutions acquisition on December 12, 2022.

The promissory note is convertible into shares of the Company's common stock at any time after the one-year anniversary of the promissory note at a conversion price equal to $ 17.12 per share, prior to the maturity date of December 12, 2024.

The promissory note is subordinate to the Company’s senior debt.

On January 30, 2025, the Convertible Note was amended to increase the interest rate to 7 % and extend the maturity date to December 12, 2025.

At December 29, 2024, the Company had a two-year convertible unsecured promissory note of $4.4 million due to the seller with an annual interest rate of 6 %, with interest paid quarterly related to the 2022 Horn Solutions acquisition.

The promissory note was convertible into shares of our common stock at any time after the one-year anniversary of the promissory note at a conversion price equal to $ 17.12 per share, prior to the maturity date of December 12, 2024.

On January 30, 2025, the Company amended the promissory note which increased the interest rate to 7 % and extended the maturity date to December 12, 2025.

The Company incurred interest expense related to the convertible note of approximately $0.2 million and $0.3 million for Fiscal 2025 and 2024, respectively.

On September 8, 2025, the Company paid the balance on the promissory note using the proceeds from the sale of BGSF Professional.

NOTE 12 - FAIR VALUE MEASUREMENTS

2 unchanged sentences

The fair value hierarchy established prioritizes the inputs used in valuation techniques into three levels as follows:

Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities - includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets, for substantially the full term of the financial instrument;

Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions.

Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and requires the Company to develop relevant assumptions.

There were no transfers between the respective Levels during Fiscal 2025.

In connection with the sale of BGSF professional, see “Note 4 - Discontinued Operations”, the Level 3 contingent consideration obligation was converted into a Level 1 note payable.

The following table summarizes the financial liabilities measured at fair value on a recurring basis and the level they fall within the fair value hierarchy (in thousands):

Financial Statement Classification Fair Value Hierarchy Fair Value

Convertible note

December 31, 2023 and December 29, 2024 Level 2 $ 4,368

Contingent consideration, net - current and long-term

December 31, 2023 Level 3 $ 8,320

Interest expense 44

Gain on contingent consideration ( 1,452 )

Contingent consideration paid ( 4,250 )

December 29, 2024 Level 3 $ 2,662

Key inputs in determining the fair value of the convertible note as of December 29, 2024 and December 31, 2023 included the current stock price, the conversion price, and the maturity date.

Key inputs in determining the fair value of the contingent consideration as of December 29, 2024 and December 31, 2023 included discount rates of approximately 7 % as well as management’s estimates of future sales volumes and EBITDA.

Financial Statement Classification Fair Value Hierarchy December 29,

Convertible note Level 2 $ 4,368

On September 8, 2025, the Company paid the balance on the convertible note using the proceeds from the sale of BGSF Professional.

Key inputs in determining the fair value of the convertible note as of December 29, 2024 included current stock price, the conversion price, and the maturity date.

Key inputs in determining the fair value of the contingent consideration, which is included in discontinued operations, as of December 29, 2024 included discount rates of approximately 7 % as well as management's estimates of future sales volumes and EBITDA.

Before the sale of BGSF Professional, we recognized a gain of $ 0.5 million on contingent consideration in Fiscal 2025.

NOTE 13 - CONTINGENCIES

2 unchanged sentences

If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of the loss can be made.

No provision has been recorded for any claims as of December 28, 2025 or December 29, 2024.

The Company insures against, subject to and upon the terms and conditions of various insurance policies, claims or losses from workers’ compensation, general liability, automobile liability, property damage, professional liability, employment practices, fiduciary liability, fidelity losses, crime and cyber risk, and director and officer liability.

3 unchanged sentences

Employment Agreements

The CEO’s employment agreement was effective as of October 1, 2018 and the agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms.

In the event that her employment is terminated by the Company without cause or by her for good reason, she will be entitled to (i) twelve months of base salary, (ii) accrued bonus, and (iii) eighteen months of COBRA premiums for her and her dependents, grossed-up for federal income taxes.

Additionally, she will become 100% vested in any awards outstanding under the Company’s 2013 Long-Term Incentive Plan, as amended, (“2013 Plan”) or similar plan.

Should there be a sale of the Company that results in the termination of her employment or a material adverse change in her duties and responsibilities, she will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

The employment agreement for CFO and Co-CEO's, Keith Schroeder was effective as of February 24, 2025 and the agreement remains in effect through December 31, 2027 with successive one-year extensions unless terminated pursuant to its terms.

In the event that his employment is terminated by the Company without cause or by him for good reason, he will be entitled to (i) twelve months of base salary, (ii) accrued bonus, and (iii) eighteen months of COBRA premiums for him and his dependents.

Additionally, he will become 100% vested in any awards outstanding under the Company’s 2013 Long-Term Incentive Plan, as amended, (“2013 Plan”) or similar plan.

Should there be a sale of the Company that results in the termination of his employment, he will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

The employment agreement for Co-CEO's, Kelly Brown was effective as of February 24, 2026 and the agreement remains in effect through December 31, 2027 with successive one-year extensions unless terminated pursuant to its terms.

Additionally, she will become 100% vested in any awards outstanding under the 2013 Plan or similar plan.

Should there be a sale of the Company that results in the termination of her employment, she will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The CFO’s employment agreement was effective as of March 20, 2023 and remains in effect through December 31, 2025 with successive one-year extensions unless terminated pursuant to its terms.

Additionally, he will become 100% vested in any awards outstanding under the 2013 Plan or similar plan.

Should there be a sale of the Company that results in the termination of his employment, he will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

NOTE 14 - EQUITY

Authorized capital stock consists of 19,500,000 shares of common stock, par value $ 0.01 per share and 500,000 shares of undesignated preferred stock, par value $ 0.01 per share.

Repurchase of Common Stock

On November 5, 2025, the Company's Board approved a stock repurchase program under which the Company may repurchase up to $ 5.0 million of its common stock.

The repurchase program does not have an expiration date and may be suspended, terminated, or modified at any time for any reason.

During Fiscal 2025, the Company repurchased 351,200 shares at a weighted average price of $ 4.33 per share.

The repurchased shares are recorded as part of treasury stock and are account for under the cost method.

The repurchase program has been used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards.

As of December 28, 2025, the Company has approximately $ 3.5 million available for repurchases under this program.

Restricted Stock

The Company issued net restricted common stock of 50,790 and 56,889 shares to team members and non-team member (non-employee) directors in Fiscal 2024 and Fiscal 2023, respectively.

The Company issued net restricted common stock of 157 thousand, 51 thousand, and 57 thousand shares to team members and non-team member (non-employee) directors in Fiscal 2025, Fiscal 2024, and Fiscal 2023, respectively.

The restricted shares of $ 0.01 par value per share were issued under the 2013 Plan and contain a three-year service condition.

The restricted stock constitutes issued and outstanding shares of the Company’s common stock, except for the right of disposal, for all purposes during the period of restriction including voting rights and dividend distributions.

In connection with the vesting portions of the restricted stock, the Company repurchased - 0 -, 2,085 , and - 0 - shares of company stock, or treasury stock, to satisfy the withholding obligation in connection with the vesting of a portion of the restricted stock for Fiscal 2024, 2023, and 2022, respectively.

Treasury stock is accounted for under the cost method whereby the entire cost of the acquired stock is recorded.

In connection with the vesting portions of the restricted stock, - 0 -, - 0 -, and 2,085 shares of company stock, or treasury stock were withheld, to satisfy the withholding obligation in connection with the vesting of a portion of the restricted stock for Fiscal 2025, 2024, and 2023, respectively.

For Fiscal 2025, the Company's Board declared a special cash dividend of $ 2.00 per share of common stock.

The dividend was paid on September 30, 2025 to all stockholders of record as of the close of business on September 23, 2025.

The Company paid a $ 22.4 million in the aggregate with respect to this special cash dividend.

For Fiscal 2024, the Company’s Board declared a cash dividend in the amount of $ 0.15 per share of common stock and disbursed $1.6 million in cash dividend on our common stock.

For Fiscal 2023, the Company's Board declared quarterly cash dividends in the amount aggregate amount of $0.60 per share of common stock and disbursed $6.5 million in cash dividends on our common stock.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - SHARE-BASED COMPENSATION

Stock Options

In December 2013, the board of directors adopted the original 2013 Plan.

In December 2013, the Board adopted the original 2013 Plan.

Under the original 2013 Plan team members, directors and consultants of the Company may receive incentive stock options and other awards.

To the extent any option or award expires unexercised or is canceled, terminated or forfeited in any manner without the issuance of common stock thereunder, such shares shall again be available for issuance under the original 2013 Plan.

As of December 29, 2024, a total of 1,125,490 shares remain available for issuance under the 2013 Plan.

The term of each option is determined by the board of directors but cannot exceed 10 years.

As of December 28, 2025, a total of approximately 1.3 million shares remain available for issuance under the 2013 Plan.

The term of each option is determined by the Board but cannot exceed 10 years.

Unless otherwise specified in an option agreement, options vest and become exercisable on the following schedule:

12 unchanged sentences

However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

For Fiscal 2024, 2023, and 2022, the Company recognized $ 0.4 million, $ 0.4 million and $ 0.7 million of compensation expense from continuing operations related to stock awards, respectively.

Unamortized share-based compensation expense from

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

continuing operations as of December 29, 2024 amounted to $ 0.6 million, which is expected to be recognized over the next 2.1 years.

For Fiscal 2025, 2024, and 2023, the Company recognized $ 0.4 million of compensation expense from continuing operations related to stock awards, respectively.

Unamortized share-based compensation expense from continuing operations as of December 28, 2025 amounted to $ 0.3 million, which is expected to be recognized over the next 2.2 years.

The following assumptions were used to estimate the fair value of stock options for the years ended:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Weighted-average fair value of awards $ 3.58 $ 5.95 $ 3.00

Weighted-average risk-free interest rate 4.2 % 4.0 % 4.2 %

Weighted-average dividend yield $ 0.45 $ 0.60 $ 0.54

Dividend yield $ 2.00 $ 0.45 $ 0.60

Weighted-average volatility factor 56.1 % 52.2 % 52.8 %

Weighted-average expected life 10.0 yrs 10.0 yrs 10.0 yrs

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of stock option activity is presented as follows:

1 unchanged sentence

(in thousands)

Awards outstanding at December 26, 2021 695,329 $ 16.91 6.7 $ 665

Awards outstanding at January 1, 2023 821,679 $ 16.08 6.4 $ 1,907

Granted 126,470 $ 10.02

1 unchanged sentence

Forfeited / Canceled ( 21,039 ) $ 17.38

Awards outstanding at January 1, 2023 821,679 $ 16.08 6.4 $ 1,907

Awards outstanding at December 31, 2023 922,310 $ 15.30 6.0 $ 104

Granted 40,000 $ 8.80

3 unchanged sentences

Granted 101,821 $ 5.34

Exercised ( 38,798 ) $ 6.74

Forfeited / Canceled ( 334,934 ) $ 12.73

2 unchanged sentences

Awards exercisable at December 28, 2025 590,294 $ 14.36 4.7 $ 52

The intrinsic value in the tables above is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options, before applicable income taxes and represents the amount holders would have realized if all in-the-money options had been exercised on the last business day of the period indicated.

Shares Weighted Average Grant Date Fair Value

2 unchanged sentences

During Fiscal 2025, 2024, and 2023, there were no cashless stock option exercises.

Restricted Stock

For Fiscal 2024, 2023, and 2022, the Company recognized $ 0.6 million, $ 0.6 million, and $ 0.4 million, respectively, of compensation expense related to restricted stock.

Unamortized share-based compensation expense as of December 29, 2024 amounted to $ 0.5 million, which is expected to be recognized over the next 1.9 years.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock

For Fiscal 2025, 2024, and 2023, the Company recognized $ 0.6 million of compensation expense related to restricted stock.

Unamortized share-based compensation expense as of December 28, 2025 amounted to $ 0.6 million, which is expected to be recognized over the next 2.0 years.

A summary of restricted stock activity is presented as follows:

Shares Weighted Average Grant Date Fair Value

Restricted outstanding at December 26, 2021 60,844 $ 11.91

Issued 32,344 $ 13.14

Vested ( 31,168 ) $ 11.79

Restricted outstanding at January 1, 2023 62,020 $ 12.21

6 unchanged sentences

Restricted outstanding at December 29, 2024 74,820 $ 10.02

Issued 179,162 $ 4.70

Vested ( 124,750 ) $ 6.59

Restricted outstanding at December 28, 2025 129,232 $ 5.96

Nonvested outstanding at December 29, 2024 74,820 $ 10.02

Nonvested outstanding at December 28, 2025 129,232 $ 5.96

The total fair value of shares vested were $0.6 million, $0.5 million, and $0.8 million for Fiscal 2025, 2024 and 2023, respectively.

2020 Employee Stock Purchase Plan (“2020 ESPP”)

1 unchanged sentence

Under the 2020 ESPP, eligible team members of the Company may elect for payroll deductions to purchase shares on each purchase date during an offering period.

A total of 250 thousand shares of common stock of BGSF, Inc.

A total of 250,000 shares of common stock of BGSF, Inc.

were initially reserved for issuance pursuant to the 2020 ESPP.

For Fiscal 2024, 2023,and 2022, the Company issued 61 thousand, 54 thousand, 60 thousand shares of common stock under the 2020 ESPP, respectively.

For Fiscal 2025, 2024, and 2023, the Company issued approximately 31 thousand, 61 thousand, and 54 thousand shares of common stock under the 2020 ESPP, respectively.

During the first quarter of Fiscal 2025, the 2020 ESPP was paused for contributions and purchases because the number of shares allocated had been consumed.

At the 2025 Annual Shareholders meeting, additional 250,000 shares of common stock were approved to be allocated to the plan.

The Company is currently evaluating the re-start of the 2020 ESPP.

The total shares available for issuance at December 28, 2025 is approximately 250 thousand shares.

NOTE 16 - RELATED PARTY TRANSACTIONS

There were no related party transactions in Fiscal 2024, 2023, or 2022.

There were no related party transactions in fiscal years 2025, 2024, or 2023.

NOTE 17 - TEAM MEMBER BENEFIT PLAN

3 unchanged sentences

The Company matches participants contributions 100 % up to the first 3 % and 50 % of the next 2 % of a team member or field talent’s compensation.

The Company contributed $ 1.9 million, $ 2.0 million, and $ 1.5 million from continuing operations to the 401(k) Plan for Fiscal 2024, 2023, and 2022, respectively.

The Company contributed $ 0.5 million from continuing operations to the 401(k) Plan for Fiscal 2025, 2024, and 2023, respectively.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 - BUSINESS SEGMENTS

The Company has continuing operations through the Property Management and Professional segments (see “Note 1 - Nature of Operations”).

The Home Office provides centralized support services through executive, marketing, human resources, IT, accounting, treasury, and billing operations.

The chief operating decision-maker (the “CODM”), the President and Chief Executive Officer, establishes the strategic direction of the Company, priorities, and long-term financial objectives.

NOTE 18 - BUSINESS SEGMENT

The Company has continuing operations through one segment of Property Management, which includes centralized support services through executive, marketing, human resources, information technology, accounting, treasury, and billing operations.

The chief operating decision-maker (the “CODM”), the President of Property Management and Co-Chief Executive Officers, establish the strategic direction of the Company, priorities, and long-term financial objectives.

The CODM is ultimately responsible for evaluating segment performance and making decisions regarding resource allocation.

The Property Management segment provides office and maintenance field talent to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

The CODM considers variances between actual results and expectations as well as historical trends for segment income when making decisions about allocating capital and personnel resources to each segment.

Segment (loss) income from continuing operations includes all revenue and cost of services, direct selling expenses, depreciation and amortization expense and excludes all general and administrative (home office) expenses.

Assets of home office include cash, unallocated prepaid expenses, property and equipment, deferred tax assets, and other assets.

The following table provides a reconciliation of revenue and (loss) income from continuing operations by reportable segment to consolidated results for the periods indicated at (in thousands):

Segment loss from continuing operations includes all revenue and cost of services, direct selling expenses, depreciation and amortization expense and all general and administrative expenses.

The following table provides a reconciliation of revenue and loss from continuing operations by reportable segment to consolidated results for the periods indicated (in thousands):

Fiscal Years Ended

2025 December 29,

Property Mgmt Professional Home Office Total

2024 December 31,

Contract field talent $ 91,051 $ 102,618 $ 121,827

8 unchanged sentences

Other 2,767 2,583 1,395

Gain on contingent consideration

— ( 1,452 ) — ( 1,452 )

Depreciation and amortization 112 6,434 1,223 7,769

Operating income (loss) 13,564 7,080 ( 19,431 ) 1,213

Interest expense, net — — ( 4,921 ) ( 4,921 )

Income tax benefit from continuing operations — — 370 370

Income (loss) from continuing operations $ 13,564 $ 7,080 $ ( 23,982 ) $ ( 3,338 )

Capital expenditures $ 57 $ 423 $ 1,160 $ 1,640

Total assets $ 19,782 $ 106,766 $ 23,563 $ 150,111

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

Property Mgmt Professional Home Office Total

Contract field talent $ 121,827 $ 182,120 $ — $ 303,947

Contingent placements 3,250 5,970 — 9,220

Revenue 125,077 188,090 — 313,167

Compensation and related 75,132 125,737 — 200,869

Other 160 354 — 514

Gross profit 49,785 61,999 — 111,784

Contributions to overhead 22,961 24,631 26,497

General and administrative:

Compensation 8,290 9,394 10,215

Advertising, occupancy, and travel 2,087 3,959 724 6,770

Software, insurance, and professional fees 1,278 1,697 4,916 7,891

Software 2,875 2,862 2,720

Professional fees 3,087 2,898 3,046

Strategic alternatives review 2,519 962 —

Other 1,404 2,155 2,924

Impairment loss — 22,545 — 22,545

Contingent consideration adjustment ( 450 ) — —

Depreciation and amortization 1,550 1,334 1,313

Operating income (loss) 23,155 ( 10,252 ) ( 20,088 ) ( 7,185 )

Operating loss ( 8,903 ) ( 5,867 ) 3,070

Interest expense, net ( 4,511 ) ( 4,921 ) ( 5,976 )

Income tax benefit from continuing operations 1,881 2,084 831

Income (loss) from continuing operations $ 23,155 $ ( 10,252 ) $ ( 23,126 ) $ ( 10,223 )

Net loss from continuing operations $ ( 11,533 ) $ ( 8,704 ) $ ( 2,075 )

Capital expenditures $ 138 $ 1,217 $ 2,153

Total assets $ 57,837 $ 42,063 $ 55,091

January 1, 2023

Property Mgmt Professional Home Office Total

Contract field talent $ 117,086 $ 172,769 $ — $ 289,855

Contingent placements 4,007 4,560 — 8,567

Revenue 121,093 177,329 — 298,422

Compensation and related 73,358 121,474 — 194,832

Other 40 2 — 42

Gross profit 47,695 55,853 — 103,548

Compensation 23,312 32,607 8,862 64,781

Advertising, occupancy, and travel 2,222 2,836 747 5,805

Software, insurance, and professional fees 1,153 1,461 5,776 8,390

Other 1,026 652 2,557 4,235

Depreciation and amortization 179 2,693 1,182 4,054

Operating income (loss) 19,803 15,604 ( 19,124 ) 16,283

Interest expense, net — — ( 1,363 ) ( 1,363 )

Income tax expense from continuing operations — — ( 3,659 ) ( 3,659 )

Income (loss) from continuing operations $ 19,803 $ 15,604 $ ( 24,146 ) $ 11,261

Capital expenditures $ 135 $ 90 $ 5,455 $ 5,680

and Subsidiaries

1 unchanged sentence

NOTE 19 - QUARTERLY FINANCIAL DATA (UNAUDITED)

December 29, 2024

Fiscal Year Ended December 28, 2025

Quarter Second

4 unchanged sentences

Gross profit 7,560 8,410 9,660 7,703 33,333

Loss from continuing operations, net of tax ( 2,329 ) ( 4,862 ) ( 3,078 ) ( 1,264 ) ( 11,533 )

Income from discontinued operations, net of tax 1,607 1,126 158 935 3,826

Loss on sale — — ( 2,892 ) ( 831 ) ( 3,723 )

Net loss $ ( 722 ) $ ( 3,736 ) $ ( 5,812 ) $ ( 1,160 ) $ ( 11,430 )

Net loss per share:

Basic $ ( 0.07 ) $ ( 0.07 ) $ ( 0.07 ) $ ( 0.10 ) $ ( 0.31 )

Diluted $ ( 0.07 ) $ ( 0.07 ) $ ( 0.07 ) $ ( 0.10 ) $ ( 0.31 )

Net (loss) income per share:

basic and diluted

Loss from continuing operations, net of tax $ ( 0.21 ) $ ( 0.44 ) $ ( 0.27 ) $ ( 0.11 ) $ ( 1.05 )

Income from discontinued operations, net of tax 0.15 0.10 0.01 0.08 0.35

Loss on sale — — ( 0.26 ) ( 0.07 ) ( 0.34 )

Net loss per share - basic and diluted $ ( 0.06 ) $ ( 0.34 ) $ ( 0.52 ) $ ( 0.10 ) $ ( 1.04 )

Weighted-average shares outstanding:

Basic 10,831 10,880 10,919 10,943 10,896

Diluted 10,831 10,880 10,919 10,943 10,896

December 31, 2023

Basic and diluted 10,954 11,019 11,079 11,087 11,025

Fiscal Year Ended December 29, 2024

Quarter Second

4 unchanged sentences

Gross Profit 9,343 9,596 10,696 8,734 38,369

Net (loss) income $ ( 16,466 ) $ 2,604 $ 2,640 $ 999 $ ( 10,223 )

Loss from continuing operations, net of tax ( 1,869 ) ( 2,082 ) ( 1,812 ) ( 2,941 ) ( 8,704 )

Income from discontinued operations, net of tax 1,077 1,321 1,008 1,960 5,366

Net loss $ ( 792 ) $ ( 761 ) $ ( 804 ) $ ( 981 ) $ ( 3,338 )

Net (loss) income per share:

Basic $ ( 1.54 ) $ 0.24 $ 0.24 $ 0.11 $ ( 0.95 )

Diluted $ ( 1.54 ) $ 0.24 $ 0.24 $ 0.11 $ ( 0.95 )

basic and diluted

Loss from continuing operations, net of tax $ ( 0.18 ) $ ( 0.19 ) $ ( 0.16 ) $ ( 0.27 ) $ ( 0.80 )

Income from discontinued operations, net of tax 0.10 0.12 0.09 0.17 0.49

Net loss per share - basic and diluted $ ( 0.08 ) $ ( 0.07 ) $ ( 0.07 ) $ ( 0.10 ) $ ( 0.31 )

Weighted-average shares outstanding:

Basic 10,712 10,759 10,791 10,812 10,766

Diluted 10,712 10,770 10,803 10,823 10,766

NOTE 21 - SUBSEQUENT EVENTS

Convertible Note

On January 30, 2025, the Company amended the Convertible Note of $ 4.4 million due to the seller of the Horn Solutions acquisition which increased the interest rate to 7 % and extended the maturity date to December 12, 2025 (see “Note 12 - Debt”).

The Company was not in compliance with the foregoing financial covenants as of the fiscal quarter ended December 29, 2024.

On March 13, 2025, the Comapny entered into a Waiver and Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”) pursuant to which, among other things, the lenders unanimously waived noncompliance with the foregoing covenants as of December 29, 2024 and March 31, 2025, and certain amendments were made to the Amended and Restated Credit Agreement including, but not limited to, a new definition of Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $ 8.0 million.

Basic and diluted 10,831 10,880 10,919 10,943 10,896

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data