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Item 7. Management’s Discussion and Analysis

2026-04-15 compared with 2025-03-28 · 202 added, 118 removed, 225 unchanged (59% of the section changed)

1 unchanged sentence

The following discussion relates to Atlantic International Corp.

(Atlantic or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Part IV, Item 8.— Financial Statements and Supplementary Data.

(Atlantic or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Item 8.— Financial Statements and Supplementary Data.

Atlantic, through its subsidiaries, is a national strategic staffing firm servicing the commercial, professional, finance, direct placement, and managed service provider verticals.

30 unchanged sentences

Selling, general and administrative 91,289,682 64,021,052 27,268,630 42.6 %

Change in fair value of contingent consideration liabilities — (150,093) 150,093 (100.0) %

Depreciation and amortization 4,928,514 4,991,863 (63,349) (1.3) %

4 unchanged sentences

Other expense — 52,047,957 (52,047,957) (100.0) %

Net loss before (provision for)/benefit from income taxes (130,100,788) (21,180,291) (108,920,497) +

Income tax (expense)/benefit (5,379,102) 5,928,271 (11,307,373) +

Net loss before provision for income taxes (59,396,928) (130,100,788) 70,703,860 (54.3) %

Income tax expense (33,991) (5,379,102) 5,345,111 (99.4) %

Net loss $ (59,430,919) $ (135,479,890) $ 76,048,971 (56.1) %

14 unchanged sentences

$ 435,878,730 $ 442,609,814

Service revenue, net was $442,609,814 and $401,374,701 for the years ended December 31, 2024 and 2023, respectively, an increase of $41,235,113, or 10.3%.

This increase was predominately due to the higher revenues from Lyneer’s temporary placement services business, which increased $42,081,342 or 10.6% in the year ended December 31, 2024 as compared to the same period in 2023 due primarily to a strong sales initiative by the Company.

Permanent placement and other services decreased $846,229 or 18.3% due to lower permanent job demand as companies cut back on hiring permanent positions.

Service revenue, net was $435,878,730 and $442,609,814 for the years ended December 31, 2025 and 2024, respectively, a decrease of $6,731,084, or 1.5%.

This decrease was predominately due to lower revenues from Lyneer’s temporary placement services business, which decreased $7,419,564 or 1.7% in the year ended December 31, 2025 as compared to the same period in 2024 due primarily to a decrease in the revenues associated with our largest client.

Permanent placement and other services increased $688,480 or 18.2% due to higher permanent job demand.

Cost of Revenue and Gross Profit

Gross profit reflects the difference between realized service revenue, net and cost of revenues for providing temporary and permanent placement solutions.

Cost of revenue consists primarily of fixed and variable directs costs, including

payroll, payroll taxes and employee benefit costs.

Cost of revenue consists primarily of fixed and variable direct costs, including payroll,

payroll taxes and employee benefit costs.

Cost of revenue and gross profit for the years ended December 31, 2025 and 2024 consisted of the following:

5 unchanged sentences

$ 45,985,763 $ 47,178,323

Cost of revenue for the years ended December 31, 2024 and 2023 was $395,431,491 and $354,496,441, respectively, an increase of $40,935,050 or 11.5%.

The increase in cost of revenue was due primarily to higher service revenue, net driven primarily by higher temporary placement services revenue, net which increased $42,081,342 or 10.6%.

Gross profit for the years ended December 31, 2024 and 2023 was $47,178,323 and $46,878,260, respectively, an increase of $300,063 or 0.6%.

As a percentage of service revenue, net, gross profit was 10.7% and 11.7% for the years ended December 31, 2024 and 2023, respectively, which decreased due to increasing labor costs and reduced permanent placements.

Cost of revenue for the years ended December 31, 2025 and 2024 was $389,892,967 and $395,431,491, respectively, a decrease of $5,538,524 or 1.4%.

The decrease in cost of revenue was due primarily to lower service revenue, net driven primarily by lower temporary placement services revenue due primarily to a decrease in the revenues associated with our largest client., net which decreased $7,419,564 or 1.7%.

Gross profit for the years ended December 31, 2025 and 2024 was $45,985,763 and $47,178,323, respectively, a decrease of $1,192,560 or 2.5%.

As a percentage of service revenue, net, gross profit was 10.6% and 10.7% for the years ended December 31, 2025 and 2024, respectively, a slight decrease.

Total Operating Expenses

3 unchanged sentences

$ 91,289,682 $ 64,021,052

Change in fair value of contingent consideration liabilities

Depreciation and amortization

4 unchanged sentences

Selling, General and Administrative Costs

Selling, general and administrative expenses for the years ended December 31, 2024 and 2023 were $64,021,052 and $45,441,659, respectively, an increase of $18,579,393, or 40.9%, due primarily to higher transaction costs related to the Merger, stock compensation expense and bad debt expense of $957,031 and $1,526,985 during the years ended December 31, 2024 and 2023, respectively, partially offset by cost cutting measures.

Selling, general and administrative expenses for the years ended December 31, 2025 and 2024 were $91,289,682 and $64,021,052, respectively, an increase of $27,268,630, or 42.6%, due primarily to higher stock compensation expense and a full year of expenses as a result of the Merger compared to five and one-half months during the years ended December 31, 2025 and 2024, respectively, partially offset by cost cutting measures and lower transactional expenses related to the Merger.

As a percentage of service revenue, net, selling, general and administrative costs were 20.9% in the year ended December 31, 2025 as compared to 14.5% in the year ended December 31, 2024.

The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to higher transactions costs related to the Merger in the year ended December 31, 2024 compared to the year ended December 31, 2023.

Changes in Fair Value of Contingent Consideration Liabilities

Changes in the fair value of contingent consideration liabilities for the years ended December 31, 2024 and 2023 were $0 and $(150,093), respectively.

The change of $150,093 reflects the change in fair value of the liability balance.

The measurement period for the contingent consideration arrangements expired on August 31, 2023, at which time amounts owed Lyneer to its former owners were computed and represent fixed amounts.

The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to higher stock compensation expense and lower transactions costs related to the Merger in the year ended December 31, 2025 compared to the year ended December 31, 2024.

Depreciation and Amortization

5 unchanged sentences

$ — $ 1,213,379

Loss on debt extinguishment during the year ended December 31, 2024 relates to the Seventh Amendment and Forbearance Agreement to the Revolver being treated as a debt extinguishment after the Company’s analysis of Accounting Standards Codification (“ASC”) Topic 470 – Debt .

Loss on debt extinguishment during the year ended December 31, 2023 relates to the Fourth Amendment and Forbearance Agreement to the Revolver being treated as a debt extinguishment after the Company’s analysis of ASC Topic 470 – Debt .

Advisory Fees Paid in the Merger

11 unchanged sentences

Interest expense for years December 31, 2025 and 2024 was $9,164,495 and $12,004,860, respectively.

The decrease of $5,533,956, or 31.6%, in year ended December 31, 2024 compared to year ended December 31, 2023 was attributed to the Company deconsolidating the joint and several debt obligations as of the Merger date, partially offset by higher interest rates on the revolving credit facility on a year-over-year basis, an increase in the rates on the term, seller and earnout notes due to amendments in May 2023 and August 2023, and, new earnout notes issued in January 2024.

The decrease of $2,840,365, or 23.7%, in year ended December 31, 2025 compared to year ended December 31, 2024 was the Company deconsolidating the joint and several debt obligations as of the Merger date and a lower interest rate from the previous Revolver as compared to the new Revolver entered into on April 29, 2025, partially offset by the Company incurring $3,588,223 of interest expense related to an agreement with a professional employer organization (“PEO”) which processes the payroll for the Company, related to the unpaid balance.

Other Expense

4 unchanged sentences

Other expense for the year ended December 31, 2024 related to accrued amounts pertaining to a potential settlement for legacy stockholders and stock compensation expense for third parties as advisors to the Company for RSUs.

Income Tax (Expense) Benefit

Income Tax Expense

Provision for income taxes for the years ended December 31, 2025 and 2024 were as follows:

Year Ended December 31,

Income tax (expense)/benefit

Income tax expense

$ (33,991) $ (5,379,102)

Income tax expense was $5,379,102 for the year ended December 31, 2024 and an income tax benefit of $5,928,271 for the year ended December 31, 2023, an increase of $11,307,373, was primarily due to the establishment of a valuation allowance on the Company’s deferred tax assets.

Income tax expense was $33,991 and $5,379,102 for the years ended December 31, 2025 and 2024, respectively, a decrease of $5,345,111, was primarily due to the establishment of a valuation allowance on the Company’s deferred tax assets in 2024.

Liquidity & Capital Resources

1 unchanged sentence

As receipts from client partners lag behind payments to personnel, working capital requirements increase substantially in periods of growth.

Atlantic’s primary sources of liquidity have historically been cash generated from operations and borrowings under its revolving credit agreement (the “Revolver”).

Atlantic’s primary uses of cash are payments to engagement personnel, corporate personnel, related payroll costs and liabilities, operating expenses, capital expenditures, cash interest, cash taxes, and contingent consideration and debt payments.

If Atlantic is able to refinance its existing indebtedness as described below, Atlantic believes that the cash generated from operations, together with the borrowing availability under its portion of the Revolver or under any revolving credit facility that Lyneer may enter into to replace the Revolver, would be sufficient to meet its normal working capital needs for at least the 12-month period following the issue date of its financial statements, including investments made, and expenses incurred, in connection with opening new markets throughout the next year.

Atlantic’s ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of Atlantic’s control.

If Atlantic’s future cash flow from operations and other capital resources are insufficient to fund its liquidity needs, Atlantic may be forced to obtain additional debt or equity capital or refinance all or a portion of its debt.

Prior to its acquisition of Circle8, Atlantic’s primary sources of liquidity have historically been cash generated from operations supported through borrowings under its previous Revolver.

The Company entered into a new revolving credit facility (the “New Revolving Credit Facility”) on April 29, 2025.

The Company is still in process of compiling and filing consolidated financial statements of Circle8, which is a significant subsidiary of Atlantic following closing of the acquisition on January 23, 2026.

Atlantic is the accounting acquirer in this business combination.

As this consolidated financial information, including combined pro forma financial statements, has not yet been finalized, the Company has considered the completeness and reliability of available information in making its going concern determination in this Form 10-K.

In accordance with ASC Topic 205-40 — Going Concern , Atlantic evaluates whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for one year from the date the financials are issued.

This evaluation includes considerations related to financial and other covenants contained in Atlantic’s credit facilities, as well as Atlantic’s forecasted liquidity.

Atlantic has concluded that there is no substantial doubt about its ability to continue as a going concern for at least one year from the date of issuance of its consolidated financial statements.

The Company has received conditional approval and a preliminary term sheet by a new ABL lender and expects to close on the new credit facility by the end of April 2025.

IDC, Lyneer and Prateek Gattani, IDC’s Chief Executive Officer and our Chairman of the Board following the Merger, have entered into an Allocation Agreement dated as of December 31, 2023, pursuant to which IDC agreed that, subject to subordination to the taxes as between IDC and Lyneer, in connection with the Merger, the Term Note and the Seller Notes, will either be paid in full or assumed by IDC, and all but $35 million of the Revolver will be paid in full or assumed by IDC, and Lyneer will have no further liability or responsibility for such indebtedness.

However, as IDC and Lyneer were unable to obtain the release of Lyneer from the holders of such indebtedness for accounting purposes, with respect to any of such indebtedness that was not repaid by IDC with the Allocation Agreement not being given effect for accounting purposes and Lyneer will remain jointly and severally liable with IDC to such lenders until such time as such joint and several indebtedness is restructured, at which time IDC will be obligated to repay in full all remaining amounts payable under the Term Note and the Seller Notes and will repay or assume all but approximately $35 million under Revolver.

This evaluation includes considerations related to covenants contained in Atlantic’s credit facilities, as well as Atlantic’s forecasted liquidity for the new combined company including Circle8.

Atlantic has concluded that there is substantial doubt about its ability to continue as a going concern for at least one year from the date of issuance of its consolidated financial statements.

This conclusion was reached primarily because the consolidated financial information as of the acquisition date is still being prepared and compiled, including an analysis of liabilities extinguished pursuant to the terms of the Acquisition Agreement.

The Company will continue to evaluate the provisions in Topic 205-40 in future filings upon completion of all acquisition accounting activities and filing of Circle8’s audited consolidated financial statements and combined pro forma financial statements.

The Company expects that the combination with Circle8 will enhance scale, liquidity, and access to capital, positioning the combined entity for potential premium valuation multiples and expanded international reach with established global clients.

Management further anticipates that the transaction will drive operating efficiencies, improve profitability, and strengthen revenue stability through a diversified customer base and balanced geographic exposure across the United States and Europe.

On December 31, 2023, IDC, Lyneer and Prateek Gattani, IDC’s Chief Executive Officer and our then Chairman of the Board until April 2025, entered into an Allocation Agreement (“Allocation Agreement”).

Pursuant to the terms of the Allocation Agreement, IDC agreed that, subject to subordination to the taxes as between IDC and Lyneer, in connection with the Merger, the Term Note and the Seller Notes, will either be paid in full or assumed by IDC, and Lyneer will have no further liability or responsibility for such indebtedness.

However, as IDC and Lyneer were unable to obtain the release of Lyneer from the holders of such indebtedness, Lyneer will remain jointly and severally liable with IDC to such lenders until such time as such joint and several indebtedness is restructured.

At that time IDC will be obligated to repay in full all remaining amounts payable under the Term Note ($36,062,862), the Seller Notes ($7,875,000), the Earnout Notes ($20,435,654), along with the term note for the shortfall from the restructuring of the previous revolving credit facility ($6,000,000).

In the event IDC does not repay any of this debt and the Company is required to make payments, IDC will be obligated to repay the Company for the amounts paid on IDC’s behalf.

Upon the consummation of the Merger, the Company determined that it was no longer probable that IDC would default on its portion of the joint and several obligations and deconsolidated the joint and several debt obligations in the accompanying financial statements.

Upon the consummation of the Merger on June 18, 2024, the Company determined that it was no longer probable that IDC would default on its portion of the joint and several obligations and deconsolidated the joint and several debt obligations in the accompanying financial statements.

The Term Note, Seller Notes and Earnout Notes are currently in default, but the Seller and Earnout note holders can take no action pursuant to the inter-creditor agreement with SLR.

Subsequent Events for further discussion related to the SPP Term Note purported default.

In the Allocation Agreement, IDC and Mr.

Gattani have agreed to implement a plan to refinance or otherwise satisfy the joint and several indebtedness.

Gattani are currently exploring refinancing opportunities with several lenders to address the assumed debt, as well as the IDC portion of the Revolver.

However, it is expected that the Company will not be legally released from its joint and several obligations with respect to the indebtedness to be assumed by IDC until payment in full of the Merger Note, which originally matured on September 30, 2024.

The maturity date of the

Merger Note has been extended to March 31, 2026.

The Company has received conditional approval by a new ABL lender and expects to close on a new credit facility by the end of April 2025.

Gattani agreed to implement a plan to refinance or otherwise satisfy the joint and several indebtedness.

It is expected that the Company will not be legally released from its joint and several obligations with respect to the indebtedness to be assumed by IDC until payment in full of the Merger Note, which originally matured on September 30, 2024.

On April 29, 2025, the Company and IDC entered into an Amended and Restated Convertible Promissory Note for the Merger Note which extended the maturity date to March 31, 2027 On April 29, 2025, the Company closed on a new ABL revolver, replacing the previous Revolver, with a maturity date of April 29, 2028.

On April 29, 2025, the previous BMO Revolver lender funded the shortfall of $6,000,000, the IDC portion owed, and IDC entered into a term note for this amount, plus a $1,000,000 exit fee.

The certain junior lenders assumed portions of IDC’s publicly owned stock of Atlantic International Corp as collateral.

Debt for further information.

Cash flows for the years ended December 31, 2025 and 2024 consisted of the following:

4 unchanged sentences

Net decrease in cash and cash equivalents $ (597,542) $ (674,251)

Cash flows used in operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was higher due to an increase in accounts receivable and accrued expenses.

Cash flows used in operating activities for the year ended December 31, 2025 compared to the year ended December 31, 2024 was lower due to an increase in and accrued expenses and other current liabilities.

Investing Activities

1 unchanged sentence

Financing Activities

Cash provided by financing activities decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 and consisted of borrowings and payments under the Company’s debt arrangements of the Revolver and Seller Notes (as described below).

Additionally, during the year ended December 31, 2024, the Company issued shares, entered into additional debt obligations, and had a deemed contribution as a result of the Merger.

The Company currently maintains the Revolver as a co-borrower with IDC with an available borrowing capacity of up to $60,000,000.

Cash provided by financing activities decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024 and consisted of borrowings and payments under the Company’s debt arrangements of the Revolver, and the New Revolving Credit Facility and entered into additional debt obligations.

Debt Allocation Agreement

Lyneer and IDC entered into a debt allocation agreement (the “Allocation Agreement”) dated as of December 31, 2023, which specifies and allocates responsibility for repaying (or refinancing) the joint-and-several debts between Lyneer and IDC.

The Company reassessed its accounting for joint-and-several liabilities under ASC 405-40 as of the Merger date and concluded it is reasonably probable that IDC can repay their portion of the debt allocated per the Allocation Agreement.

As a result, the Company deconsolidated its joint and several debt obligations.

See Revolver (discussing the previous BMO Revolver), Term Note, Seller Notes and Earnout Notes below for those joint-and-several debts that are applicable to the Allocation Agreement.

Until April 29, 2025 as described below, the Company maintained the Revolver as a co-borrower its former parent, IDC, with an available borrowing capacity of up to $60,000,000.

The facility was partially used to finance the acquisition of Lyneer by IDC in August 2021, with additional borrowing capacity available under the Revolver to finance Lyneer’s working capital.

All of Lyneer’s cash collections and disbursements are currently linked with bank accounts associated with the lender and funded using the Revolver.

These borrowings are determined by Lyneer’s availability based on a formula of billed and unbilled accounts receivable as defined in the loan agreement.

As of December 31, 2024 and December 31, 2023, the total balance on the Revolver was $53,983,962 and $90,906,217, respectively.

As of December 31, 2024 and December 31, 2023, the Company recorded a liability of $42,508,379 and $85,092,695, respectively, and IDC owed the remaining $11,475,583 and $5,813,522, respectively.

Total available borrowing capacity on the Revolver as of December 31, 2024 was over-advanced by $1,299,463, net of a $5,000,000 reserve required on the Revolver.

The borrowing base calculation is based on Lyneer’s eligible assets.

On August 12, 2024 the Company entered into the Ninth Amendment and with its lender, under which the lender, waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Revolver through September 30, 2024.

The maximum aggregate principal amount of $60,000,000 will be reduced by $500,000 on each Thursday starting August 15, 2024 and continuing through and including September 26, 2024.

The Initial Capital Raise milestone was extended to September 15, 2024 with additional milestones including an uplisting milestone date of September 15, 2024.

The Company has received conditional approval to extend the current milestone for the Company’s Initial Capital Raise to a future date that has not been determined.

The Company has received conditional approval and a preliminary term sheet by a new ABL lender and expects to close on a new credit facility by the end of April 2025.

The Company will continue to borrow under the existing facility in its normal course of business.

IDC is expected to use a portion of the cash proceeds it receives in the Merger to pay down the Revolver following the closing of the Merger.

All of Lyneer’s cash collections and disbursements were linked with bank accounts associated with the lender and funded using the Revolver.

These borrowings were determined by Lyneer’s availability based on a formula of billed and unbilled accounts receivable as defined in the loan agreement.

On April 29, 2025, the Company’s subsidiary, Lyneer Staffing Solutions, LLC (“Lyneer”) entered into a Loan and Security Agreement (the “Loan Agreement”) with North Mill Capital, LLC (d/b/ SLR Business Credit (“SLR”)), providing for a $70 million (“Advance Limit”) senior secured revolving credit facility (the “New Revolving Credit Facility”).

The Loan Agreement replaced Lyneer’s prior senior secured revolving credit facility provided by BMO.

Lyneer’s previous lender entered into a term loan of $6,000,000 with IDC and Lyneer for IDC’s shortfall owed to BMO, plus a $1,000,000 exit fee.

The $6,000,000 term loan and $1,000,000 exit fee are joint-and-several with IDC and is subject to IDC’s obligation under the Allocation Agreement with IDC discussed above.

BMO also assumed 3,439,803 shares of Atlantic International Corp.

previously owned by IDC as collateral for the new term loan.

The Company incurred $188,351 in issuance costs and, according to ASC 470 – Debt, is deferring these costs and will amortize as an adjustment to interest expense over the remaining term using the effective interest method.

As of December 31, 2025, and December 31, 2024, the Company has recognized liability balances on the Revolver of $49,308,253, including $146,148 of unamortized deferred issuance costs and $42,508,379, including $0 of unamortized deferred issuance costs, respectively.

Total available borrowing capacity on the Revolver as of December 31, 2025 was over-advanced by $422,756.

The borrowing base calculation is based on Lyneer’s gross accounts receivable less the balance of ineligible balances (defined in the Loan Agreement).

On August 31, 2021, Lyneer and IDC as co-borrowers entered into a Term Note in the amount of $30,300,000.

2 unchanged sentences

There are no scheduled principal payments on the Term Note prior to its maturity date.

The Term Note is subordinated to the Revolver and initially bore interest at the stated interest rate of 14% per annum.

As of December 31, 2024 and December 31, 2023, Lyneer had recognized liability balances on the Term Note of $0, and $34,223,489, respectively.

The Term Note is subordinated to the Revolver and initially bore interest at the stated interest rate of 14% per annum, and currently has a default interest rate of 19%.

On August 12, 2024, the Company entered into the Tenth Amendment and with its lender, under which the lender, waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Term Note through September 30, 2024.

The Initial Capital Raise milestone was extended to September 15, 2024 with additional milestones including an uplisting milestone date of September 15, 2024.

The Company has received conditional approval to extend the current milestone for the Company’s Initial Capital Raise to a future date that has not been determined.

Additionally, the Term Note is covered by the Allocation Agreement discussed above.

Additionally, the Tenth Amendment revised the Initial Capital Raise milestone and the uplisting milestone dates were subsequently extended to September 30, 2025, or as agreed between the parties.

The Tenth Amendment was superseded by the terms of the new Revolving Credit Facility.

On April 28, 2025, the Term Note lender foreclosed on certain amounts of IDC’s stock of Atlantic International Corp.

Debt for further information.

The Term Note obligation is joint-and-several with IDC and is subject to IDC’s obligation under the Allocation Agreement discussed above;

and as such, the Company deconsolidated its joint and several debt obligations as of the Merger date.

Debt for further information.

Lyneer had recognized liability balances on the Term Note of $0 as of both December 31, 2025 and December 31, 2024.

The Term Note is allegedly in default and the Company has sued the Term Note Lender.

Subsequent Events for further discussion related to the SPP Term Note purported default.

As part of the purchase price consideration for the Transaction, Lyneer and IDC as co-borrowers issued various Seller Notes to former owners in the aggregate principal amount of $15,750,000.

2 unchanged sentences

The Seller Notes represent unsecured borrowings and are subordinated to the Revolver and to the Term Note.

Lyneer had recognized Seller Note liability balances of $0 and $7,875,000 as of December 31, 2024 and December 31, 2023, respectively.

Lyneer and IDC did not make the principal and interest payments due July 31, 2023 and October 31, 2023 on the Seller Notes as payments to any other debt holders was prohibited by the administrative agent of the lender under the Revolver.

Lyneer and IDC did not make the principal and interest payments due July 31, 2023 and October 31, 2023 and any subsequent dates on the Seller Notes as payments to any other debt holders were prohibited by the administrative agent of the lender under the previous lender and also the current Revolver.

As provided in the inter-creditor agreement between SLR and the Seller Note holders, Lyneer is prevented from making payments and the Seller Note holders are prevented from accepting payments form Lyneer.

The Seller Note obligation is joint-and-several with IDC and is subject to IDC’s obligation under the Allocation Agreement discussed above;

and as such, the Company deconsolidated its joint and several debt obligations as of the Merger date.

Debt for further information.

Lyneer had recognized Seller Note liability balances of $0 for both December 31, 2025 and December 31, 2024.

The Seller Notes are currently in default, but the note holders can take no action pursuant to the inter-creditor agreement with SLR.

Earnout Notes

As contingent consideration milestones are met in connection with the Transaction Agreement, Lyneer and IDC can elect to pay the milestone payments in cash or to issue notes payable.

During 2022, Lyneer and IDC as co-borrowers have issued nine promissory notes in the aggregate principal amount of $13,494,133.

During 2022, Lyneer and IDC as co-borrowers issued nine promissory notes in the aggregate principal amount of $13,494,133.

Payments on each of the Earnout Notes are due in quarterly installments through their amended maturity date of January 31, 2025 and each note bears an amended stated interest rate of 11.25% per annum.

On January 16, 2024, Lyneer and IDC as co-borrowers issued six notes payable with an aggregate value of $6,941,521.

Payments on each of the Earnout Notes are due in quarterly installments through their maturity date of January 16, 2026 and each note bears interest at a rate of 6.25% per annum.

The Company missed the March 31, 2024 principal and interest payment and the interest rate increased to the default rate of 11.25%.

The Earnout Notes are subordinated to the Revolver and the Term Note and represent unsecured borrowings.

The Earnout Note liability was $0 and $13,494,133 at the periods ended December 31, 2024 and December 31, 2023, respectively.

Payments on each of the Earnout Notes were due in quarterly installments through their maturity date of January 16, 2026 and each note bears interest at a rate of 6.25% per annum.

The Company missed the March 31, 2024 principal and interest payment and all subsequent payments and the interest rate increased to the default rate of 11.25%.

Payments to any other debt holders was prohibited by the administrative agent of the previous lender under the Revolver and the New Revolving Credit Facility.

As provided in the inter-creditor agreement between SLR and the Earnout

Note holders, Lyneer is prevented from making payments and the Earnout Note holder are prevented from accepting payments from Lyneer.

The Earnout Notes obligation are joint-and-several with IDC and are subject to IDC’s obligation under the Allocation Agreement discussed above;

and as such, the Company deconsolidated the Earnout Notes obligations as of the Merger date.

Debt for further information.

The Earnout Note liability was $0 for both December 31, 2025 and December 31, 2024.

The Earnout Notes are currently in default, but the note holders can take no action pursuant to the inter-creditor agreement with SLR.

2023 Amendment to Seller and Earnout Notes

3 unchanged sentences

On January 16, 2024, Lyneer and IDC signed an amendment to the Omnibus Agreement with the holders of the Seller Notes and the Earnout Notes to defer the missed July 31, 2023 and October 31, 2023 principal and interest payments, each in the amount of $1,575,000 plus accrued interest, together with the principal payment in the amount of $1,575,000 plus accrued interest that is payable on January 31, 2024, all of which were payable on February 28, 2024.

Lyneer has not refinanced or restricted the credit facility and missed all payments of the Seller Notes and the Earnout Notes during 2024 and is in default of the Seller Notes and Earnout Notes.

The Seller Notes and Earnout Notes are covered by the Allocation Agreement discussed above.

Lyneer had not refinanced or restructured the credit facility and missed all payments of the Seller Notes and the Earnout Notes during 2024 and is currently in default of the Seller Notes and Earnout Notes, but the note holders can take no action pursuant to the inter-creditor agreement with SLR.

The Seller Notes and the Earnout Notes are covered by the Allocation Agreement discussed above;

and as such, the Company deconsolidated the Earnout Notes obligations as of the Merger date.

Debt for further information.

Credit Agreement

The Lenders’ consent to IDC’s transfer of ownership of the equity of Lyneer was conditioned upon substantially the same terms stated above under the Revolver, as well as issuance of a secured bridge loan (“Credit Agreement”), which was entered into on June 18, 2024, the Company entered into a secured bridge loan (“Credit Agreement”) in the principal amount of $1,950,000 at an interest rate of 5% per annum.

The maturity date of the Credit Agreement was originally September 30, 2024.

As part of the Merger on June 18, 2024, the Company entered into a secured bridge loan (“Credit Agreement”), which was entered into on the same day, in the principal amount of $1,950,000 at an interest rate of 5% per annum.

The Company has accrued interest of $152,208 included in “accrued expenses and other current liabilities” on the accompanying consolidated balance sheets as of December 31, 2025.The maturity date of the Credit Agreement was originally September 30, 2024.

However, mandatory prepayments shall be made from the Initial Capital Raise, on the issuance of new debt or new equity interests, or upon a change of control.

Conditions have not been met to make mandatory prepayments.

On July 22, 2024, the Company entered into an amendment to extend the maturity date of the Credit Agreement to June 18, 2026.

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From April 29, 2019 to April 29, 2020, the Company entered into a series of non-convertible promissory notes (the “Promissory Notes”) with St.

Laurent Investments LLC amounting to $1,375,000.

Laurent Investments LLC (“St.

Laurent”) amounting to $1,375,000.

The Promissory Notes had a one-year term, most recently extended through July 31, 2025 or a later date to be mutually agreed upon.

The Promissory Notes bear interest accruing at the rate of 5% per annum, and increased to 10% for the period from August 1, 2024 through July 31, 2025.

In connection with the closing of the Merger, we issued to IDC the Merger Note in the principal amount of $35,000,000 that originally matured on September 30, 2024.

The Company has accrued interest of $220,161 included in “accrued expenses and other current liabilities” on the accompanying consolidated balance sheets as of December 31, 2025.

On January 23, 2026, the Company and St.

Laurent entered into a Confidential Settlement Agreement which satisfied the Promissory Notes in total.

Subsequent Events for further information.

In connection with the closing of the Merger on June 18, 2024, we issued to IDC the Merger Note in the principal amount of $35,000,000 that originally matured on September 30, 2024.

The Merger Note does not bear interest and is not convertible prior to an event of default under the Merger Note.

If an event of default should occur under the Merger Note, the Merger Note will bear interest at the rate of 7% per annum commencing upon the date of such event of default and will be convertible into shares of our common stock at a price per share that equals the lowest daily volume weighted average price per share (VWAP) during the five trading days immediately preceding the date on which the applicable conversion notice is delivered to us, but not less than 80% of the price per share in our Initial Capital Raise, provided, however, that the number of shares of our common stock issuable upon conversion of the Merger Note will not exceed 19.99% of the number of our outstanding shares of common stock without shareholder approval.

As we do not believe we will have sufficient liquidity and capital resources to pay the Merger Note in full when due, as well as to restructure our joint and several debt obligations, we believe we will have to sell additional equity or debt securities prior to the maturity date of the Merger Note to pay or refinance the Merger Note when due.

However, as Prateek Gattani, our Chairman of the Board following the Merger, is also the Chief Executive Officer and controlling stockholder of IDC, we also believe we will be able to negotiate an extension of the Merger Note if we are unable to pay it in full at maturity.

notice is delivered to us, but not less than 80% of the price per share in our Initial Capital Raise, provided, however, that the number of shares of our common stock issuable upon conversion of the Merger Note will not exceed 19.99% of the number of our outstanding shares of common stock without shareholder approval.

As we do not currently believe we will have sufficient liquidity and capital resources to pay the Merger Note in full when due, as well as to restructure our joint and several debt obligations, we believe we will have to sell additional equity or debt securities prior to the maturity date of the Merger Note to pay or refinance the Merger Note when due.

An event of default under the Merger Note may result in an additional event of default under the Revolver and our other indebtedness for borrowed funds.

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Amendment 1 to the Merger Note was treated as a modification after the Company’s analysis according to ASC 470 and as such, the Company is deferring the $300,000 amendment fee and will amortize as an adjustment to interest expense over the remaining term using the effective interest method.

On April 29, 2025, the Company and IDC entered into an Amended and Restated Convertible Promissory Note which further extended the maturity date to the earlier of March 31, 2027 or the completion of at least a $40 million capital raise.

Pursuant to the Amended and Restated Convertible Promissory Note, any amounts paid to BMO will be in satisfaction of this Note.

The Company is offsetting the balance related to IDC that was remaining on the previous Revolver and rolled into the New Revolving Credit Facility.

Related Party Transactions for IDC’s gross and net offsetting receivables amounts.

Below is presented the calculation of the net liability of the Merger Note, excluding unamortized deferred issuance costs.

Amount Offset

Net Amount on Consolidating Balance Sheet

$ 34,882,666 $ (6,056,385) $ 28,826,281

As of December 31, 2025, and December 31, 2024, the Company has recognized liability balances on the Merger Note of $28,826,281, including $117,334 of unamortized deferred issuance costs and $34,755,435, including $244,565 of unamortized deferred issuance costs, respectively.

Factoring Agreements

During 2025, the Company entered into two agreements to sell future receivables which allows for the factoring of receivables.

• On October 1, 2025, the Company sold $3,150,000 of receivables and received cash proceeds of $2,500,000 less $50,000 in origination fees.

The weekly payments are $62,500 and the imputed interest rate is 48.58%.

• On October 21, 2025, the Company sold $1,905,000 of receivables and received cash proceeds of $1,500,000 less $30,000 in origination fees.

The weekly payments are $37,798 and the imputed interest rate is 50.61%.

These agreements also allow for a discounted repurchase price if the Company pays the cash proceeds back early.

As of December 31, 2025, and December 31, 2024, the Company has recognized liability balances on the factoring agreements of $3,205,506, including $60,939 of unamortized deferred issuance costs and $0, including $0 of unamortized deferred issuance costs, respectively.

Professional Employer Organization

Lyneer entered into an agreement with Employer’s HR, LLC, on February 19, 2018, to process the Company’s payroll.

The initial term of the agreement was 3 years.

The Fifth Amendment with the PEO, effective March 21, 2025, extended the term of the agreement through December 10, 2027.

The Sixth Amendment with the PEO (“PEO Sixth Amendment”), effective September 29, 2025, prevented the Company from terminating the agreement until October 1, 2026, excepting any provisions related to default or breach.

The PEO Sixth Amendment reduced the claims administration fee to $5,000 from $10,000 per workers’ compensation claim.

The PEO charges a late payment charge of 1.5% per statement.

Any unpaid balance is subject to a 1.5% per calendar month charge until paid in full.

The Company is required to prepay collateral in the amount of one or up to two weeks estimated weekly payroll at the discretion of the PEO, which is fully refundable to the Company within 1 year of the date of the final statement.

Total amount due to the PEO of $32,894,331 is included in “PEO liability and accrued interest” on the accompanying consolidated balance sheets as of December 31, 2025.

Interest Expense

Total interest expense is comprised of a cash and non-cash component as described in the debt arrangements described above.

Total interest expense is comprised of a cash and non-cash component as described in the debt arrangements above.

The Company also incurred interest expense related to an agreement with the PEO as described above.

Additionally, the Company entered into an agreement with Citibank, N.A.

(“Citibank”) on March 5, 2019, whereby Citibank purchases specific receivables and pays the invoices at the discounted amount and the Company incurs a discount charge equal to the Secured Overnight Financing Rate plus 0.75% to process the payments.

The discount charged ranged from 4.76% to 5.43% during 2025.

For the years ended December 31, 2025 and December 31, 2024 total interest expense totaled $9,164,495 and $12,004,860, respectively.

Total cash paid for interest for the years ended December 31, 2024 and December 31, 2023

totaled $6,926,853 and $9,150,636, respectively, with the remaining portion of the interest expense as non-cash due to the PIK interest and change in values of the accrued interest liability and amortization of deferred financing costs.

Interest expense related to the PEO was $3,588,223 and $0 for the years ended December 31, 2025 and December 31, 2024, respectively.

Total cash paid for interest for the years ended December 31, 2025 and December 31, 2024 totaled $4,776,722 and $6,926,853, respectively.

Interest expense related to the discount charge was $646,634 and $1,093,680 for the years ended December 31, 2025 and December 31, 2024, respectively.

The remaining portion of the interest expense was non-cash due to PIK interest, the change in values of the accrued interest liability and amortization of deferred financing costs.

Assessment of Liquidity Position

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Cash and Cash Equivalents $ 81,134 $ 678,676

Committed Liquidity Resources Available:

Short-term Revolving Credit Facility (1,299,463) (22,518,585)

Total Committed Resources Available $ (620,787) $ (21,165,658)

As noted above , pursuant to the Forbearance Agreement, following the payment of the Merger Note, Lyneer intends to replace its obligations under the Revolver with a new revolving credit facility with a borrowing capacity of up to $60,000,000.

Lyneer believes the borrowing capacity under such new credit facility, its cash flow from operations and the available net proceeds from the Merger will provide sufficient liquidity and capital resources to conduct its planned operations for at least one year.

Committed Liquidity Resources Over-advanced (422,756) (1,299,463)

Total Committed Resources Over-advanced $ (341,622) $ (620,787)

The Company closed on a new ABL lender facility on April 29, 2025, replacing its obligations under the previous Revolver, with an increased borrowing capacity of up to $70,000,000.

Refer To Note 3:

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Transactions with Lyneer Management Holdings LLC (“LMH”)

LMH was a non-controlling member of the Company with a 10% ownership interest at December 31, 2023, prior to the Merger.

The remaining 90% was owned by Lyneer’s Chief Financial Officer, James Radvany, and its Chief Executive Officer, Todd McNulty, each of whom owned 44.5% of LMH.

On November 15, 2022, Lyneer and IDC as co-borrowers issued Year 1 Earnout Notes to LMH with total balances of November 15, 2022.

The balance of the Year 1 Earnout Notes payable to LMH was $0 and $5,127,218 as of December 31, 2024 and December 31, 2023, respectively.

On January 16, 2024, Lyneer and IDC as co-borrowers issued Year 2 Earnout Notes to LMH with total balances of $2,013,041.

LMH was a non-controlling member of the Company with a 10% ownership interest at December 31, 2023.

LMH was 90% owned by Lyneer’s Chief Financial Officer, James Radvany, and its Chief Executive Officer, Todd McNulty, each of whom owned 44.5% of LMH.

Earnout Notes

On November 15, 2022, Lyneer and IDC as co-borrowers issued Year 1 Earnout Notes to LMH with total balances of $5,127,218.

The balance of the Year 1 Earnout Notes payable to LMH was $0 for both December 31, 2025 and December 31, 2024.

On January 16, 2024, Lyneer and IDC as co-borrowers issued Year 2 Earnout Notes to LMH with a total balance of $2,013,041.

The balance of the Year 2 Earnout Notes payable to LMH was $0 for both December 31, 2025 and December 31, 2024.

On the date of the Merger, the Company deconsolidated this debt.

Refer to Note 8:

Debt for additional information.

The principal balance of the combined Earnout Notes payable to LMH was $0 for both December 31, 2025 and December 31, 2024.

Interest expense incurred on the Earnout Notes to LMH totaled $0 and $292,996 for the years ended December 31, 2025 and 2024, respectively.

LMH had the right, but not the obligation to require IDC to purchase LMH’s 10% interest in the Company (the “LMH Put”).

On February 28, 2024, LMH exercised its right to put the LMH Units to IDC and entered into a Put-Call Option Note on April 17, 2024, in the amount of $10,796,912.

On February 28, 2024, LMH exercised its right to put the LMH Units to IDC and entered into a Put-Call Option

Note on April 17, 2024, in the amount of $10,796,912.

While not formalized until April 17, 2024, the terms of the Put-Call Option Note were agreed to by all parties prior to March 31, 2024 and as such, the Company gave effect to the transaction as of March 31, 2024.

The Put-Call Option Note provides that IDC owned one hundred percent (100%) of all the membership interests in Lyneer Investments and requires IDC to pay 50% of outstanding principal six months after issuance with the remaining 50% payable in six equal quarterly payments beginning on December 31, 2024 and continuing until the maturity date of June 30, 2026.

The Put-Call Option Note provides that IDC would own one hundred percent (100%) of all the membership interests in Lyneer Investments and requires IDC to pay 50% of outstanding principal six months after issuance with the remaining 50% payable in six equal quarterly payments beginning on December 31, 2024 and continuing until the maturity date of June 30, 2026.

The Put-Call Option Note provides for the acceleration of payment principal under certain conditions, including upon a change of control, as defined.

The Put-Call Option Note bears interest at a stated annual interest rate of 5.25% which is payable quarterly in arrears commending December 31, 2024.

The Put-Call Option Note bears interest at a stated annual interest rate of 5.25% which is payable quarterly in arrears commencing December 31, 2024.

IDC may prepay the Put-Call Option Note at any time without premium or penalty.

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As part of the consummation of the Merger on June 18, 2024, IDC paid $2,000,000 to LMH as a partial payment on the Put-Call Option Note.

The principal balance of the combined Earnout Notes payable to LMH was $0 and $5,127,218 as of December 31, 2024 and December 31, 2023, respectively, and is included in “notes payable, current” on the accompanying consolidated balance sheets.

Interest expense incurred on the Earnout Notes to LMH totaled $292,996 and $526,156 for the years ended December 31, 2024 and 2023, respectively.

IDC is in default to LMH.

On June 18, 2024 as part of the Merger, LMH entered into a $6,000,000 guarantee agreement with the PEO, replacing and cancelling the $6,000,000 letter of credit previously held by the lenders of the previous Revolver.

This obligation was terminated on December 31, 2024.

Transactions with IDC

Lyneer and IDC are co-borrowers and are jointly and severally liable for principal and interest payments under the Revolver, the Term Note, the Seller Notes and the Earnout Notes.

In the case of certain of those obligations, IDC generally

makes certain interest and principal payments to the lenders and collects reimbursement from Lyneer.

Lyneer and IDC are co-borrowers and are jointly and severally liable for principal and interest payments under the previous Revolver, the Term Note, the Seller Notes and the Earnout Notes.

In the case of certain of those obligations, IDC generally makes certain interest and principal payments to the lenders and collects reimbursement from Lyneer.

When interest or principal payments of that nature are made by IDC, Lyneer recognizes interest expense and a payable to IDC, which is removed from Lyneer’s balance sheet upon remittance of the funds to IDC.

As a result of the Merger, the Company is required to file short-term income tax returns for the periods of January 1, 2024 to June 18, 2024 and June 19, 2024 to December 31, 2024.

For the first short-period, Lyneer and IDC will file consolidated income tax returns in certain states.

In connection with this arrangement the Lyneer has recorded a liability payable to IDC for taxes payable by IDC which represent taxes attributable to Lyneer’s operations included on consolidated state and local income tax returns filed by IDC.

These amounts are calculated by determining Lyneer’s taxable income multiplied by the applicable tax rate.

Amounts payable to IDC of this nature amounted to $548,432 and $522,472 as of December 31, 2024 and December 31, 2023, respectively, and are included in “accrued expenses and other current liabilities” and “due to related parties” on the accompanying consolidated balance sheets as of December 31, 2024, and December 31, 2023, respectively.

For the second short-period ended December 31, 2024, Lyneer will file consolidated income tax returns with Atlantic International Corp.

Total amounts payable to IDC, including the above taxes payable to IDC, amounted to $2,091,035 and $4,384,178 as of December 31, 2024, and December 31, 2023, respectively and are included in “accrued expenses and other current liabilities” and “due to related parties” on the accompanying consolidated balance sheets as of December 31, 2024, and December 31, 2023, respectively.

There are no formalized repayment terms.

Advance to Officer

The Company advanced $400,000 to Lyneer’s Chief Executive Officer in 2022.

The advance was settled from a portion of the recapitalization proceeds at the closing of the Merger.

This advance is recorded in “other assets” on the accompanying consolidated balance sheets as of December 31, 2023.

As a result of the Merger, the Company was required to file short-term income tax returns for the periods of January 1, 2024 to June 18, 2024 and June 19, 2024 to December 31, 2024.

For the first short-period, Lyneer and IDC filed consolidated income tax returns in certain states.

In connection with this arrangement the Company recorded a liability payable to IDC for taxes payable by IDC which represented taxes attributable to the Company’s operations included on consolidated state and local income tax returns filed by IDC.

These amounts were determined by calculating the Company’s taxable income multiplied by the applicable tax rate.

Amounts payable to IDC of this nature amounted to $548,432 for both December 31, 2025 and December 31, 2024, and are included in “other receivables” and “due to related parties” on the accompanying consolidated balance sheets as of December 31, 2025, and December 31, 2024, respectively.

For the second short-period ended December 31, 2024, Lyneer filed consolidated income tax returns with Atlantic International Corp.

Total amounts receivable from IDC, amounted to $1,369,833 as of December 31, 2025 and is included in “other assets” on the accompanying consolidated balance sheets.

This consists of $500,000 related to the expenses paid by Lyneer for the balance remaining on the previous Revolver rolled into the New Revolving Credit Facility, $1,418,265 related to expenses incurred by IDC and paid by Lyneer and $548,432 payable to IDC for taxes payable.

The total amounts payable to IDC amounted to $2,091,035 as of December 31, 2024 and is included in “due to related parties” on the accompanying consolidated balance sheets.

This consists of $1,542,603 related to a payable to IDC for expenses they paid for Lyneer and $548,432 payable to IDC for taxes payable.

Pursuant to the Amended and Restated Convertible Promissory Note, any amounts paid to BMO will be in satisfaction of this Note.

The Company is offsetting the balance related to IDC that was remaining on the previous Revolver and rolled into the New Revolving Credit Facility.

Debt for the Company’s gross and net offsetting liability amounts.

Below is presented the calculation of the net amount of the receivable from IDC included in “other assets” on the accompanying consolidated balance sheets.

Gross Amount Amount Offset Net Receivable from IDC included in “Other assets” on Consolidating Balance Sheet

Receivable from IDC included in “Other assets” $ 7,426,218 $ (6,056,385) $ 1,369,833

On June 18, 2024, the Company entered into a $35,000,000 Merger Note with IDC.

Debt for further discussion.

Additionally, IDC was issued 25,423,729 shares of the Company’s common stock at a market value of $2.36 per share, or $60,000,000 in the aggregate.

On April 28, 2025, IDC was no longer considered a related party according to ASC Topic 850 — Related-party Disclosures .

Transactions with SPP Credit Advisors, LLC (“SPP”)

On June 18, 2024, the Company entered into a secured bridge loan (“Credit Agreement”) in the principal amount of $1,950,000 at an interest rate of 5% per annum.

The maturity date of the Credit Agreement was originally September 30, 2024.

However, mandatory prepayments shall be made from the Initial Capital Raise, on the issuance of new debt or new equity interests, or upon a change of control.

Conditions have not been met to make mandatory prepayments.

On July 22, 2024, the Company entered into an amendment to extend the maturity date of the Credit Agreement to June 18, 2026.

Off Balance Sheet Arrangements

The Company has not entered into any off-balance sheet arrangements and does not have any holdings in variable interest entities.

The Company did not have any off-balance sheet arrangements or any holdings in variable interest entities as of December 31, 2025.

Any off-balance sheet arrangement of Circle8, which was acquired by Atlantic on January 23, 2026 will be reflected in the audited financial statements of Circle8 to be filed with the SEC on Form 8-K/A after the date of this report.

Critical Accounting Policies and Estimates

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Temporary placement services revenue from contracts with customers are recognized in the amount which the Company has a right to invoice when the services are rendered by its engagement professionals.

The Company invoices its

customers for temporary placement services concurrently with each periodic payroll which coincides with the services provided.

The Company invoices its customers for temporary placement services concurrently with each periodic payroll which coincides with the services provided.

While all customers are invoiced weekly and payment terms vary, the majority of our customers have payments terms of 30 days;

5 unchanged sentences

Most engagement professionals placed on assignment by the Company are legally our employees while they are working on assignments.

The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security, and certain fringe benefits.

The Company pays all related costs of employment, including workers’ compensation insurance,

state and federal unemployment taxes, social security, and certain fringe benefits.

The Company assumes the risk of acceptability of its employees to its customers.

27 unchanged sentences

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 7. Management’s Discussion and Analysis