What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-05-17 · 184 added, 187 removed, 460 unchanged (45% of the section changed)

31 unchanged sentences

no par value;

authorized - 20,000 shares -

Preferred series A stock;

authorized -160 shares;

issued and outstanding - none

Preferred series B stock;

authorized - 5,950 shares;

issued and outstanding - none

Preferred series C stock;

authorized - 3,000 shares;

issued and outstanding - none

authorized - 20,000 shares, designated 160 shares of Series A, 5,950 shares of Series B, 3,000 shares of Series C, none issued

Total mezzanine equity

2 unchanged sentences

authorized - 200,000 shares;

issued and outstanding - 17,667 shares at March 31, 2021 and September 30, 2020

issued and outstanding - 114,100 shares at June 30, 2021 and 17,667 at September 30, 2020

Additional paid in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

NET REVENUES:

6 unchanged sentences

INCOME (LOSS) FROM OPERATIONS

Gain on extinguishment of debt

Net (loss) gain on extinguishment of debt

Interest expense

LOSS BEFORE INCOME TAX PROVISION

Provision for income tax expense (benefit)

NET LOSS ATTRIBUTABLE TO COMMON

BASIC AND DILUTED LOSS PER SHARE

WEIGHTED AVERAGE NUMBER OF

SHARES - BASIC AND DILUTED

(LOSS) INCOME BEFORE INCOME TAX PROVISION

Provision for income tax (benefit) expense

NET (LOSS) INCOME

Net gain on redeemed preferred stock

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

BASIC (LOSS) EARNINGS PER SHARE

DILUTED (LOSS) EARNINGS PER SHARE

WEIGHTED AVERAGE NUMBER OF SHARES:

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

8 unchanged sentences

Balance, March 31, 2021

Issuance of stock for restricted stock

Share-based compensation

Sale of common stock in public offering

Balance, June 30, 2021

Shareholders'

7 unchanged sentences

Balance, March 31, 2020

Share-based compensation

Issuance of stock for interest

Issuance of stock for debt conversion

Issuance of stock for preferred stock conversion

Gain on redemption of preferred stock

Balance, June 30, 2020

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

2 unchanged sentences

(In Thousands)

Six Months Ended

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Gain on extinguishment of debt

Loss (gain) on extinguishment of debt

Depreciation and amortization

13 unchanged sentences

Change in other assets, net of change in other liabilities

Cash provided by (used in) operating activities

Cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Payment on term loan

Net proceeds from revolving credit

Net cash provided by financing activities

Debt issue costs

Proceeds from the sale of common stock in public offering

Net payments on subordinated debt

Payment on preferred stock redemption

Net proceeds from CARES Act Paycheck Protection Program Loans

Net payments on revolving credit

Net cash provided by (used in) financing activities

Net change in cash

8 unchanged sentences

Acquisition of equipment with finance lease

Paycheck Protection Program loan forgiveness

Conversion of 8% subordinated notes to common stock by related parties

Conversion of 10% subordinated notes to common stock

Conversion of series C preferred stock to common by related parties

Redemption of series B preferred stock

Redemption of series C preferred stock

Accrued fees on term loan

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

G EE GROUP INC.

GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

12 unchanged sentences

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Operating results for the six-month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

Operating results for the nine-month period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2020 as filed on December 29, 2020.

The primary sources of liquidity for the Company are revenues earned and collected from its clients for the placement of contractors and permanent employment candidates and borrowings available under the Senior Credit Agreement.

Uses of liquidity include primarily the costs and expenses necessary to fund operations, including payment of compensation to the Company’s contract and permanent employees, payment of operating costs and expenses, payment of taxes, payment of interest and principal under its debt agreements, and capital expenditures.

The Company experienced net losses for the first six months of its current fiscal year, and for its most recent fiscal years ended September 30, 2020 and 2019, which also negatively impacted the Company’s ability to generate liquidity.

The Company experienced net losses for the first nine months of its current fiscal year, and for its most recent fiscal years ended September 30, 2020, and 2019, which also negatively impacted the Company’s ability to generate liquidity.

During much of this period, the Company significantly restructured its operations, made significant cost reductions, including closing and consolidating unprofitable locations and eliminating underperforming personnel, implemented strategic management changes, and intensified focus on stabilizing the business and restoring profitable growth.

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from the Coronavirus Pandemic (“COVID-19”).

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from COVID-19.

These have included abrupt reductions in demand for the Company’s primary sources of revenue, its temporary and direct hire placements, lost productivity due to business closings both by clients and at the Company’s own operating locations, and the significant disruptive impacts to many other aspects of normal operations.

10 unchanged sentences

ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.

On April 20, 2021, as the result of the completion of the public offering, the Company repaid $56,022 in aggregate outstanding indebtedness under its existing Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, including accrued interest, using the net proceeds of its recent underwritten public offering and available cash.

On April 20, 2021, as the result of the completion of the public offering, the Company repaid $ 56,022 in aggregate outstanding indebtedness under its former Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, including accrued interest, using the net proceeds of its recent underwritten public offering and available cash.

The repaid debt was originally obtained from investors led by MGG Investment Group LP (“MGG”) on April 21, 2017, and had a maturity date of June 30, 2023 .

2 unchanged sentences

Accrued interest of approximately $ 459 was paid in connection with the principal repayments.

As of March 31, 2021, the Company had cash of $14,258, which was an increase of $184 from $14,074 at September 30, 2020.

Working capital at March 31, 2021 was approximately $8,685, as compared to working capital of approximately $13,351 for September 30, 2020.

As of June 30, 2021, the Company had cash of $ 7,359 , which was a decrease of $6,715 from $ 14,074 at September 30, 2020.

Working capital at June 30, 2021, was approximately $ 5,110 , as compared to working capital of approximately $ 13,351 for September 30, 2020.

Management believes that the Company can generate adequate liquidity to meet its obligations for the foreseeable future and for at least the next twelve months assuming the negative economic effects of COVID-19 do not worsen, and that economic recovery continues.

5 unchanged sentences

Accordingly, the PPP loans are recognized as current and noncurrent debt in the Company’s accompanying unaudited condensed consolidated financial statements.

The Company and its operating subsidiaries are in the process of submitting of applications for forgiveness of their respective outstanding PPP loans as their lender, BBVA USA, that provides access through its electronic portal allowing the Company to submit its applications and related documentation.

Management believes that the Company qualifies and is eligible for forgiveness of its loans based on existing available guidance;

however, some relatively complex questions and matters of interpretation remain to be determined or decided upon by the SBA or possibly other governmental or legislative actions that cannot be fully predicted or even fully anticipated at this stage.

Therefore, there can be no assurance that the Company or its operating subsidiaries will ultimately achieve forgiveness in whole or in part of its outstanding PPP loans.

Accordingly, the Company and its operating subsidiaries continue to account for their PPP loans as outstanding debt in the accompanying unaudited condensed consolidated financial statements.

During February 2021, the Company’s subsidiary, Scribe Solutions, Inc., was notified by the SBA that its total outstanding PPP Loan and accrued interest in the amount of $279 were forgiven.

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, also was eligible to defer paying $3,692 of applicable payroll taxes as of March 31, 2021, which is included in long and short-term liabilities in the accompanying unaudited condensed consolidated financial statements.

The deferred deposits of the employer’s share of Social Security tax must be paid to be considered timely (and avoid a failure to deposit penalty) by December 31, 2021, fifty (50) percent of the eligible deferred amount, and the remaining amount by December 31, 2022.

The Company and its operating subsidiaries have submitted applications for forgiveness of their respective outstanding PPP loans.

During three-month period ended June 30, 2021, the Company’s subsidiaries, Triad Personnel Services, Inc., Triad Logistics, Inc., and Access Data Consulting Corporation were each notified by the SBA that their total outstanding PPP Loans and accrued interest were forgiven in the amounts of $ 408 , $ 79 , and $ 1,470 , respectively.

The SBA previously notified Scribe Solutions, Inc.

during the three-month period ended March 31, 2021, that its PPP loan and accrued interest in the amount of $ 279 was fully forgiven.

Management believes that the Company and its subsidiaries whose loans have not yet been forgiven also qualify and are eligible for forgiveness based on existing available guidance;

however, there can be no assurance that these remaining outstanding PPP loans and accrued interest will ultimately achieve forgiveness in whole or in part.

Accordingly, the Company and its operating subsidiaries with outstanding PPP loans and accrued interest that have not been forgiven continue to account for them as outstanding debt in the accompanying unaudited condensed consolidated financial statements.

(See Note 16.

Subsequent Event).

G EE GROUP INC.

1 unchanged sentence

(Amounts in thousands except per share data, unless otherwise stated)

The Company, under the CARES Act, also was eligible to defer paying $ 3,692 of applicable payroll taxes as of June 30, 2021, which is included in long and short-term liabilities in the accompanying unaudited condensed consolidated financial statements.

Principles of Consolidation

16 unchanged sentences

The Company has the risk of identifying and hiring qualified employees (as opposed to client employees), has the discretion to select the employees and establish their price, and bears the risk for services that are not fully paid for by customers.

Falloffs and refunds during the period are reflected in the unaudited condensed consolidated statements of operations as a reduction of placement service revenues and were approximately $470 and $773, and $400 and $700 for the three and six-month periods ended March 31, 2021 and 2020, respectively.

Falloffs and refunds during the period are reflected in the unaudited condensed consolidated statements of operations as a reduction of placement service revenues and were approximately $ 271 and $ 1,044 , and $ 338 and $ 1,130 for the three and nine-month periods ended June 30, 2021, and 2020, respectively.

Expected future falloffs and refunds are reflected in the unaudited condensed consolidated balance sheet as a reduction of accounts receivable as described under Accounts Receivable, below.

9 unchanged sentences

Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

As of March 31, 2021 and September 30, 2020, there were no cash equivalents.

As of June 30, 2021 and September 30, 2020, there were no cash equivalents.

The Company maintains deposits in financial institutions and, at times, balances may exceed federally insured limits.

2 unchanged sentences

The Company extends credit to its various customers based on evaluation of the customer’s financial condition and ability to pay the Company in accordance with the payment terms.

An allowance for placement falloffs is recorded as a reduction of revenues for estimated losses due to applicants not remaining employed for the Company’s guarantee period.

An allowance for placement falloffs is recorded as a reduction of revenues for estimated losses due to applicants not remaining employed during the Company’s guarantee period.

An allowance for doubtful accounts is recorded as a charge to bad debt expense where collection is considered to be doubtful due to credit issues.

1 unchanged sentence

Management believes that the nature of the contract services business, wherein client companies are generally dependent on our contract employees in the same manner as permanent employees for their production cycles and the conduct of their respective businesses contributes to a relatively small accounts receivable allowance.

As of March 31, 2021, and September 30, 2020, the allowance for doubtful accounts was $473 and $2,072, respectively.

As of June 30, 2021, and September 30, 2020, the allowance for doubtful accounts was $ 310 and $ 2,072 , respectively.

The Company charges off uncollectible accounts once the invoices are deemed unlikely to be collectible.

The allowance also includes permanent placement falloffs of $326 and $287 as of March 31, 2021 and September 30, 2020, respectively.

The allowance also includes permanent placement falloffs of $ 131 and $ 287 as of June 30, 2021 and September 30, 2020, respectively.

Property and Equipment

4 unchanged sentences

If the carrying amount of an asset group is greater than its estimated future undiscounted cash flows, the carrying value is written down to the estimated fair value.

There was no impairment of property and equipment for the six-month periods ended March 31, 2021 and 2020.

There was no impairment of property and equipment for the nine-month periods ended June 30, 2021 and 2020.

The Company determines if a contractual arrangement is a lease at inception.

4 unchanged sentences

Also, the Company elected the practical expedient which allows aggregation of non-lease components with the related lease components when evaluating accounting treatment.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

7 unchanged sentences

The Company also does not currently have residual value guarantees or restrictive covenants in its leases.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The Company evaluates its goodwill for possible impairment as prescribed by ASU 2017-04, Intangibles — Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment at least annually and when one or more triggering events or circumstances indicate that the goodwill might be impaired.

3 unchanged sentences

These valuation techniques rely on assumptions and other factors, such as the estimated future cash flows, the discount rates used to determine the present value of associated cash flows, and the market comparable assumptions.

The Company allocates its goodwill among two reporting units, its Professional segment and its Commercial segment for purposes of evaluation for impairments.

The Company allocates its goodwill among two reporting units, its Professional segment and its Industrial segment for purposes of evaluation for impairments.

In determining the fair value of our two reporting units, we use one or a combination of commonly accepted valuation methodologies:

2 unchanged sentences

Changes to input assumptions and other factors used or considered in the analysis could result in materially different evaluations of goodwill impairment.

The Company considered and reviewed the recoverability of its goodwill during the six-month period ended March 31, 2021 and 2020 and determined that no impairment charge was necessary.

The Company considered and reviewed the recoverability of its goodwill during the nine-month period ended June 30, 2021 and 2020 and determined that no impairment charge was necessary.

In reaching its conclusion, management determined that no triggering events or other circumstances have occurred or changed since the Company’s most recent annual evaluation as of September 30, 2020, that indicate the carrying values of the Company’s reporting segments are higher than their respective fair values.

Management also considered the Company’s market capitalization as recently reported on the NYSE American exchange and determined that when adjusted for the assumption of a reasonable control premium over exchange pricing, exceeded its consolidated net book value (consolidated stockholders’ equity) as of March 31, 2021 and 2020.

Fair Value Measurement

1 unchanged sentence

Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

7 unchanged sentences

The fair value hierarchy gives the lowest priority to Level 3 inputs.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The fair value of the Company’s current assets and current liabilities approximate their carrying values due to their short-term nature.

7 unchanged sentences

The dilutive effect of preferred stock is reflected in earnings per share by use of the if-converted method.

Common stock equivalents representing approximately 2,745 and 2,768, and 13,263 and 13,632 shares are excluded from the Company’s loss per share calculations for the three and six-month periods ended March 31, 2021 and 2020, respectively, because their effects are anti-dilutive.

Common stock equivalents representing approximately 3,110 and 2,882 , and 1,761 and 9,675 shares are excluded from the Company’s loss per share calculations for the three and nine-month periods ended June 30, 2021, and 2020, respectively, because their effects are anti-dilutive.

For the three and nine-month periods ended June 30, 2020, the weighted average dilutive incremental shares, or common stock equivalents, included in the calculations of dilutive shares were 1,013 and 1,005 , respectively.

Advertising Expenses

The Company expenses the costs of print and internet media advertising and promotions as incurred and reports these costs in selling, general and administrative expenses.

For the three and six-month periods ended March 31, 2021 and 2020, advertising expense totaled $458 and $882, and $553 and $1,037 respectively.

For the three and nine-month periods ended June 30, 2021, and 2020, advertising expense totaled $ 442 and $ 1,324 , and $ 837 and $ 1,874 respectively.

Intangible Assets

3 unchanged sentences

The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method.

The Company did not recognize and record any impairments of long-lived assets used in operations during the six-month periods ended March 31, 2021 and 2020.

The Company did not recognize and record any impairments of long-lived assets used in operations during the nine-month periods ended June 30, 2021, and 2020.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Stock-Based Compensation

4 unchanged sentences

Any changes in these highly subjective assumptions significantly impact our stock-based compensation expense.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with FASB ASC 718, “Compensation-Stock Compensation”.

10 unchanged sentences

We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statement of operations.

As of March 31, 2021, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.

As of June 30, 2021 and September 30, 2020, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The Company provides direct hire placement services and temporary professional contract staffing services in the fields of information technology, finance, accounting and office (“FA&O”), engineering, and medical within its Professional Services segment, and industrial contract services within its Industrial Services segment.

3 unchanged sentences

Other factors, including type of business, type of employee, length of employment and revenue recognition are considered in determining the Company’s operating segments.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

New Accounting Pronouncements

14 unchanged sentences

Property and equipment, net

Depreciation expense for three and six-month periods ended March 31, 2021 and 2020 was $77 and $150, and $69 and $148 respectively.

Depreciation expense for three and nine-month periods ended June 30, 2021, and 2020 was $ 78 and $ 228 , and $ 33 and $ 181 respectively.

The Company leases space for all its branch offices, which are generally located either in downtown or suburban business centers, and for its corporate headquarters.

Branch offices are generally leased over periods ranging from three to five years.

The corporate office lease expires in 2021.

The Company’s leases generally provide for payment of basic rent plus a share of building real estate taxes, maintenance costs and utilities.

Operating lease expenses were $562 and $1,123, and $611 and $1,270 for the three and six-month periods ended March 31, 2021 and 2020, respectively.

Operating lease expenses were $ 551 and $ 1,674 , and $ 575 and $ 1,844 for the three and nine-month periods ended June 30, 2021, and 2020, respectively.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Supplemental cash flow information related to leases consisted of the following:

Six Months Ended

Cash paid for operating lease liabilities

1 unchanged sentence

Supplemental balance sheet information related to leases consisted of the following:

June 30, 2021

Weighted average remaining lease term for operating leases

Weighted average discount rate for operating leases

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2021, including certain closed offices are as follows:

The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of June 30, 2021, including certain closed offices are as follows:

Remainder of Fiscal 2021

1 unchanged sentence

Present value of operating lease liabilities (a)

______________

(a) Includes current portion of $1,580 for operating leases.

Intangible Assets

The following tables set forth the costs, accumulated amortization and net book value of the Company’s separately identifiable intangible assets as of March 31, 2021 and September 30, 2020 and estimated future amortization expense.

March 31, 2021

The following tables set forth the costs, accumulated amortization and net book value of the Company’s separately identifiable intangible assets as of June 30, 2021, and September 30, 2020, and estimated future amortization expense.

June 30, 2021

September 30, 2020

10 unchanged sentences

Non-compete agreements are amortized based on a straight-line basis over the term of the respective non-compete agreements, which are typically five years in duration.

The amortization expense for intangible assets was $1,015 and $2,059, and $1,398 and $2,795 for three and six-month periods ended March 31, 2021 and 2020, respectively.

Revolving Credit Facility and Term Loan

Revolving Credit, Term Loan and Security Agreement

The Company and its subsidiaries, as borrowers, were parties to a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with certain investment funds managed by MGG Investment Group LP ("MGG").

The Revolving Credit Facility and Term Loan under the Credit Agreement, as amended, had maturity date on June 30, 2023 and its principal and remaining unpaid accrued interest balances were fully repaid on April 20, 2021.

The amortization expense for intangible assets was $ 1,015 and $ 3,074 , and $ 1,125 and $ 3,921 for three and nine-month periods ended June 30, 2021 and 2020, respectively.

G EE GROUP INC.

1 unchanged sentence

(Amounts in thousands except per share data, unless otherwise stated)

Revolving Credit Facility

As of March 31, 2021, the Company had $11,828 in outstanding borrowings under the MGG Revolving Credit Facility, which was at an interest rate of approximately 11%.

On April 20, 2021, the Company fully repaid all outstanding principal and accrued interest outstanding under the MGG Revolving Credit Facility.

Revolving Credit Facility and Term Loan

Revolving Credit, Term Loan and Security Agreement

The Revolving Credit Facility and Term Loan under the Credit Agreement, as amended, had maturity date on June 30, 2023.

The principal and remaining unpaid accrued interest balances were fully repaid on April 20, 2021.

The Company had outstanding balances under its Term Loan, as follows:

4 unchanged sentences

Long term portion of term loan, net of discounts

As of March 31, 2021, the Company had $43,735 in outstanding borrowings under the Term Loan Facility that was at an interest of approximately 11%, plus additional interest at an annual rate 5% in the form of PIK (noncash, paid-in-kind), which accrues and is added to the balance of the Term Loan on a monthly basis.

The Revolving Credit Facility and Term Loan cash interest were payable monthly.

On April 20, 2021, the Company fully repaid all remaining Term Loan principal and accrued interest.

On April 20, 2021, as the result of the completion of the public offering, the Company repaid $ 56,022 in aggregate outstanding indebtedness under its existing Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, including accrued interest, using the net proceeds of its recent underwritten public offering and available cash.

The MGG debt was comprised of a revolving credit facility with a principal balance on the date of repayment of approximately $ 11,828 , which was subject to an annual interest rate comprised of the greater of the London Interbank Offering Rate (“LIBOR”) or 1%, plus a 10% margin (approximately 11 % per annum), and a term loan with a principal balance on the date of repayment of approximately $43,735, which was subject to an annual interest rate of the greater of LIBOR or 1% plus a 10% margin.

The term loan also had an annual payment-in-kind (“PIK”) interest rate of 5 % in addition to its cash interest rate, which was being added to the term loan principal balance (cash and PIK interest rate combined of approximately 16% per annum).

Accrued interest of approximately $ 459 , in the aggregate, was paid in connection with the principal repayments.

The Company took one time charge of $ 4,004 which represents unamortized debt issue costs associated with its former senior debt.

Loan, Security and Guarantee Agreement

On May 14, 2021, GEE Group, Inc.

and its subsidiaries, Agile Resources, Inc., Access Data Consulting Corporation, BMCH, Inc., GEE Group Portfolio, Inc., Paladin Consulting, Inc., Scribe Solutions, Inc., SNI Companies, Inc., Triad Personnel Services, Inc., and Triad Logistics, Inc.

entered a Loan, Security and Guaranty Agreement for a $ 20 million asset-based senior secured revolving credit facility with CIT Bank, N.A.

(the “CIT Facility”).

The CIT Facility is collateralized by 100% of the assets of the Company and its subsidiaries who are co-borrowers and/or guarantors.

The CIT Facility matures on the fifth anniversary of the closing date (May 14, 2026).

Concurrent with the May 14, 2021 closing of the CIT Facility, the Company borrowed $ 5,326 and utilized these funds to pay all remaining unpaid Exit and Restructuring Fees due to its former senior lenders in the amount of $ 4,978 , with the remainder going to direct fees and costs associated with the CIT Facility.

As of June 30, 2021, the Company had $ 16 in outstanding borrowings and $ 13,102 available for borrowing under the terms of the CIT Facility.

Under the CIT Facility, advances will be subject to a borrowing base formula that will be computed based on 85% of eligible accounts receivable of the Company and subsidiaries as defined in the CIT Facility, and subject to certain other criteria, conditions, and applicable reserves, including any additional eligibility requirements as determined by the administrative agent.

The CIT Facility is subject to usual and customary covenants and events of default for credit facilities of this type.

The interest rate, at the Company’s election, will be based on either the Base Rate, as defined, plus the applicable margin;

or the London Interbank Offering Rate (“LIBOR” or any successor thereto) for the applicable interest period, subject to a 1% floor, plus the applicable margin.

In addition to interest costs on advances outstanding, the CIT Facility will provide for an unused line fee ranging from 0.375% to 0.50% depending on the amount of undrawn credit, original issue discount and certain fees for diligence, implementation, and administration.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

CARES Act Payroll Protection Program Loans

15 unchanged sentences

The loans evidenced by the PPP Notes (the “PPP Loans”) are being made through BBVA as the lender.

The Company and its operating subsidiaries are in the process of applying for forgiveness of their respective outstanding PPP loans with their lender, BBVA USA, and the SBA.

Management believes that the Company qualifies and is eligible for forgiveness of its loans based on existing available guidance;

however, some questions and matters of interpretation may remain to be determined or decided upon by the SBA or possibly other governmental or legislative actions that cannot be fully predicted or even fully anticipated at this stage.

Therefore, there can be no assurance that the Company or its operating subsidiaries will ultimately achieve forgiveness in whole or in part of its outstanding PPP loans.

Accordingly, the Company and its operating subsidiaries continue to account for their PPP loans as outstanding debt in the accompanying unaudited condensed consolidated financial statements.

During February 2021, the Company’s subsidiary, Scribe Solutions, Inc., was notified by the SBA that its total outstanding PPP Loan and accrued interest in the amount of $279 were forgiven.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The Company and its operating subsidiaries submitted applications for forgiveness of their respective outstanding PPP loans as their lender, BBVA USA, that provided access through its electronic portal allowing the Company to submit its applications and related documentation.

During nine-month period ended June 30, 2021, the Company’s subsidiaries, Scribe Solutions, Inc., Triad Personnel Services, Inc., Triad Logistics, Inc., and Access Data Consulting Corporation were notified by the SBA that its total outstanding PPP Loans and accrued interest were forgiven in the amount of $ 279 , $ 408 , $ 79 , and $ 1,470 , respectively.

The Company and its operating subsidiaries have submitted applications for forgiveness of their respective outstanding PPP loans.

The SBA previously notified Scribe Solutions, Inc.

during the three-month period ended March 31, 2021, that its PPP loan and accrued interest in the amount of $ 279 was fully forgiven.

Management believes that the Company and its subsidiaries whose loans have not yet been forgiven also qualify and are eligible for forgiveness based on existing available guidance;

however, there can be no assurance that these remaining outstanding PPP loans and accrued interest will ultimately achieve forgiveness in whole or in part.

(See Note 16.

Subsequent Event).

The PPP Loans have two-year terms and bear interest at a rate of 1.00 % per annum.

Scheduled principal and accrued interest payments are due and payable in monthly instalments, resulting in aggregate principal payments per annum for the current and future fiscal years as follows:

fiscal 2021- $2,212, and fiscal 2022 – $17,619.

remaining fiscal 2021- $ 1,994 , and fiscal 2022 – $ 15,925 .

Monthly principal and interest payments under the PPP Loans are to be deferred to either (1) the date that SBA remits the borrower’s loan forgiveness amount to the lender, or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period.

1 unchanged sentence

The PPP Loans may be prepaid at any time prior to maturity with no prepayment penalties.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Accrued Compensation

11 unchanged sentences

The Timothy note settlement amount was paid to Timothy on June 30, 2020.

9.5% Convertible Subordinated Notes

9.5% Convertible Subordinated Notes Payable to SNI Sellers

On June 30, 2020, the holders of the 9.5 % Notes agreed to accept an aggregate amount of $ 1,115 in cash in consideration for the purchase by the Company of the entire $ 12,500 aggregate principal amount of the 9.5% Notes.

3 unchanged sentences

Pursuant to the Repurchase Agreement, Mr.

Ron Smith (a former member of the Company’s board of directors) agreed to accept an aggregate amount of $520 in cash (the “Smith Note Payment Amount”) in consideration for the purchase by the Company of the $1,000 aggregate principal amount of 8% Notes (the “Smith Note Amount”) held by him.

Ron Smith (SNI Sellers’ representative and a former member of the Company’s board of directors) agreed to accept an aggregate amount of $ 520 in cash (the “Smith Note Payment Amount”) in consideration for the purchase by the Company of the $ 1,000 aggregate principal amount of 8 % Notes (the “Smith Note Amount”) held by him.

The Smith Note Payment Amount was calculated based on the following formula:

2 unchanged sentences

Smith on June 30, 2020.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

On June 30, 2020, the holders of the remaining $ 1,000 aggregate principal amount of the 8% Notes converted such 8% Notes to an aggregate of 1,000 shares of Series C 8% Cumulative Convertible Preferred Stock (“Series C Preferred Stock”) which were immediately and simultaneously converted into 1,000 shares of Common Stock at the $1.00 per share conversion price stated in the 8% Notes and in the Series C Preferred Stock.

2 unchanged sentences

These shares, along with those of the SNI Sellers that previously held the 9.5% Notes, also were included in the registration statement on SEC Form S-3 filed by the Company on July 31, 2020.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

On April 19, 2021, the Company concluded its public offering of 83,333 shares of common stock at a public offering price of $ 0.60 per share.

Gross proceeds of the offering totaled $ 50,000 , which after deducting the underwriting discount, legal fees, and offering expenses, resulted in net proceeds of $ 45,478 .

GEE has granted the underwriters a 45-day option to purchase up to an additional 12,500 shares of the Company's common stock to cover over-allotments, if any, at the public offering price, less the underwriting discount.

ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.

On April 27, 2021, the underwriters of the Company’s April 19, 2021, public offering exercised in full their 15% over–allotment option to purchase an additional 12,500 common shares (the “option shares”) of the Company at the public offering price of $ 0.60 per share.

The Company closed the transaction on April 28, 2021 and received net proceeds from the sale of the option shares of approximately $ 6,937 , after deducting the applicable underwriting discount.

On June 30, 2020, the Company issued 1,718 shares of common stock, in aggregate, for debt conversions of $ 1,000 aggregate principal amount of the 8 % Notes, related shares of Series C Preferred Stock, and of $ 4,185 aggregate principal amount of the 10% Note.

1 unchanged sentence

Restricted Stock

The Company did not grant restricted stock during the six-month periods ended March 31, 2021 and 2020.

Stock-based compensation expense attributable to restricted stock was $163 and $336, and $130 and $885 during the three and six-month periods ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was approximately $482 of unrecognized compensation expense related to restricted stock outstanding with vesting period 3 years.

The Company did not grant restricted stock during the nine-month periods ended June 30, 2021.

The Company granted 150 restricted shares of common stock during nine-month period ended June 30, 2020.

Stock-based compensation expense attributable to restricted stock was $ 138 and $ 475 , and $ 130 and $ 1,015 during the three and nine-month periods ended June 30, 2021, and 2020, respectively.

As of June 30, 2021, there was approximately $ 340 of unrecognized compensation expense related to restricted stock outstanding with vesting period 3 years.

On June 15, 2021, 600 shares of restricted common stock held by the Company’s Chief Executive Officer became fully vested.

A summary of restricted stock activity is presented as follows:

3 unchanged sentences

Non-vested restricted stock outstanding as of March 31, 2021

Non-vested restricted stock outstanding as of June 30, 2021

G EE GROUP INC.

1 unchanged sentence

(Amounts in thousands except per share data, unless otherwise stated)

No warrants were granted or exercised during the six-month periods ended March 31, 2021 and 2020.

Weighted Average Exercise Price

No warrants were granted or exercised during the nine-month periods ended June 30, 2021, and 2020.

Weighted Average Exercise Price Per Share ($)

Weighted Average Remaining Contractual Life

Total Intrinsic

Value of Warrants

Total Intrinsic Value of Warrants ($)

Warrants outstanding as of September 30, 2020

1 unchanged sentence

Warrants outstanding as of March 31, 2021

Warrants outstanding as of June 30, 2021

Warrants exercisable as of September 30, 2020

Warrants exercisable as of March 31, 2021

Warrants exercisable as of June 30, 2021

Stock Options

As of March 31, 2021, there were stock options outstanding under the Company’s Amended and Restated 2013 Incentive Stock Plan.

As of June 30, 2021, there were stock options outstanding under the Company’s Amended and Restated 2013 Incentive Stock Plan.

During fiscal 2020, 2013 Incentive Stock Plan was amended to increase available balance by 1,000 stock options.

1 unchanged sentence

Vesting periods are established by the Compensation Committee at the time of grant.

All stock options outstanding as of March 31, 2021 and September 30, 2020 were non-statutory stock options, had exercise prices equal to the market price on the date of grant, and had expiration dates ten years from the date of grant.

Stock-based compensation expense attributable to stock options and warrants was $130 and $268, $226 and $68 for the three and six-month periods ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was approximately $400 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 3.95 years.

Weighted Average Exercise Price

All stock options outstanding as of June 30, 2021 and September 30, 2020 were non-statutory stock options, had exercise prices equal to the market price on the date of grant, and had expiration dates ten years from the date of grant.

Stock-based compensation expense attributable to stock options and warrants was $ 93 and $ 360 , $ 207 and $ 274 for the three and nine-month periods ended June 30, 2021, and 2020, respectively.

As of June 30, 2021, there was approximately $ 543 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 3.61 years.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

A summary of stock option activity is as follows:

Weighted Average Exercise Price per share ($)

Weighted Average Remaining Contractual Life (Years)

3 unchanged sentences

Options outstanding as of March 31, 2021

Options outstanding as of June 30, 2021

Exercisable as of September 30, 2020

Exercisable as of March 31, 2021

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Exercisable as of June 30, 2021

Mezzanine Equity

9 unchanged sentences

A net gain attributable to common stockholders of $ 24,475 was recognized on the redemption of Series B Preferred Stock and Smith Series C Preferred Stock, discussed below, for the three-month period ended June 30, 2020.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Series C Convertible Preferred Stock

6 unchanged sentences

Except as set forth in the Resolution Establishing Series or as may be required by Illinois law, the holders of the Series C Preferred Stock had no voting rights.

The Company issued approximately 42 shares and 83 shares of Series C Preferred Stock to Investors related to interest of $42 and $83 on the 8% Notes during three and six-month periods ending March 31, 2020, respectively.

The Company issued approximately 21 shares and 104 shares of Series C Preferred Stock to Investors related to interest of $ 21 and $ 104 on the 8 % Notes during three and nine-month periods ending June 30, 2020, respectively.

Pursuant to the Repurchase Agreement, Mr.

6 unchanged sentences

The conversion was completed on June 30, 2020.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The following table presents the provision for income taxes and our effective tax rate for the three and six-month periods ended March 31, 2021 and 2020:

The following table presents the provision for income taxes and our effective tax rate for the three and nine-month periods ended June 30, 2021, and 2020:

Three Months Ended,

Six Months Ended,

Nine Months Ended,

Provision for Income Taxes

1 unchanged sentence

The effective income tax rate on operations is based upon the estimated income for the year and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies.

Our effective tax rate for the three and six-month period ended March 31, 2021 and 2020, is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets.

Our effective tax rate for the three and nine-month period ended June 30, 2021, and 2020, is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets.

In the three-month period ended December 31, 2020, the statutory changes regarding the deductibility of PPP loan expenses resulted in the recognition of a $ 352 discrete item.

Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a valuation allowance against the remaining net DTA position.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Commitments and Contingencies

2 unchanged sentences

There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company’s financial position.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Industrial Staffing Services

19 unchanged sentences

Depreciation and amortization

_____________

Includes ($219) and $0 of annual premium refund adjustment from the Ohio Bureau of Workers Compensation for the three months ended March 31, 2021 and 2020, respectively; and $1,318 and $50 for the six months ended March 31, 2021 and 2020, respectively.

The Industrial Services gross margins normalized for the effects of these items were approximately 14.2% and 14.1% for the three months ended March 31, 2021 and 2020, respectively; and approximately 14.9% and 14.5% for the six months ended March 31, 2021 and 2020, respectively.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

Subsequent Events and Unaudited Pro Forma Financial Information

On April 19, 2021, the Company concluded its public offering of 83,333 shares of common stock at a public offering price of $0.60 per share.

Gross proceeds of the offering totaled $50,000, which after deducting the underwriting discount, legal fees, and offering expenses, resulted in net proceeds of $45,630.

ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.

The repaid debt was originally obtained from investors led by MGG Investment Group LP on April 21, 2017, and had a maturity date of June 30, 2023.

The MGG debt was comprised of a revolving credit facility with a principal balance on the date of repayment of approximately $11,828, which was subject to an annual interest rate comprised of the greater of the London Interbank Offering Rate ("LIBOR") or 1%, plus a 10% margin (approximately 11% per annum), and a term loan with a principal balance on the date of repayment of approximately $43,735, which was subject to an annual interest rate of the greater of LIBOR or 1% plus a 10% margin.

The term loan also had an annual payment-in-kind ("PIK") interest rate of 5% in addition to its cash interest rate, which was being added to the term loan principal balance (cash and PIK interest rate combined of approximately 16% per annum).

Accrued interest of approximately $459, in the aggregate, was paid in connection with the principal repayments.

On April 27, 2021, the underwriters of the Company’s April 19, 2021 public offering exercised in full their 15% over–allotment option to purchase an additional 12,500 common shares (the “option shares”) of the Company at the public offering price of $0.60 per share.

The Company closed the transaction on April 28, 2021 and received net proceeds from the sale of the option shares of approximately $6,937, after deducting the applicable underwriting discount.

On May 14, 2021, GEE Group, Inc.

entered a Loan, Security and Guaranty Agreement for a $20 million asset-based senior secured revolving credit facility with CIT Bank, N.A.

(the “CIT Facility”).

The CIT Facility is collateralized by 100% of the assets of the Company and its subsidiaries who are co-borrowers and/or guarantors.

The CIT Facility matures on the fifth anniversary of the closing date (May 14, 2026).

Concurrent with the May 14, 2021 closing of the CIT Facility, the Company borrowed $5,326 and utilized these funds to pay all remaining unpaid Exit and Restructuring Fees due to its former senior lenders in the amount of $4,978, with the remainder going to direct fees and costs associated with the CIT Facility.

The Company will take one time charge of $4,004 which represents unamortized debt issue costs associated with its former senior debt.

The CIT Facility is subject to usual and customary covenants and events of default for credit facilities of this type.

The interest rate, at the Company’s election, will be based on either the Base Rate, as defined, plus the applicable margin;

or the London Interbank Offering Rate (“LIBOR” or any successor thereto) for the applicable interest period, subject to a 1% floor, plus the applicable margin.

G EE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands except per share data, unless otherwise stated)

The following selected consolidated pro forma financial information reflects the effects of the above-referenced subsequent events.

Unaudited pro forma net income per share

Pro forma net income (1)

Pro forma net income per share:

Weighted average number of shares (2):

As of March 31,

Pro Forma (2)

Unaudited Consolidated Balance Sheet Data:

Total current assets (3)

Total assets (3)

Total current liabilities (4)

Total long-term liabilities (5)

Total liabilities (4) (5)

Total shareholders equity (6)

______________

The unaudited pro forma net income gives effect to the reduction in interest expense due to the pay-off of all amounts due under the Senior Credit Agreement, offset by the interest expense on assumed borrowings under a new collateralized senior bank asset-based revolving credit facility (net decrease in interest expense is $2,430 and $5,005 for the three and six months ended March 31, 2021, respectively).

Amortization of debt discount (loss on extinguishment) of $4,004 is not included in pro forma net income due to not having a continuing effect on the operating results of the Company.

The share amounts used to calculate unaudited pro forma net income per share reflect issuance and sale of 83,333 shares of our common stock in the offering completed on April 19, 2021 and 12,500 shares issued from exercise in full by underwriters 15% over–allotment on April 27, 2021.

Pro forma cash, total current assets and total assets as of March 31, 2021, give effect to the net cash decrease after the transactions described above of ($2,974).

Pro forma current liabilities as of March 31, 2021, give effect to the settlement of the $4,978 in Exit and Restructuring Fees completed May 14, 2021.

Pro forma long-term liabilities as of March 31, 2021, give effect to (i) the pay-off of all amounts due under the Senior Credit Agreement in the aggregate amount of approximately $55,563 using a combination of the net cash proceeds of this offering in the amount of $52,567 and available cash, (ii) write off of debt discount $4,004, and (iii) assumed borrowings under a new collateralized senior bank asset-based revolving credit facility of $5,000.

The pro forma total shareholders’ equity gives effect to (i) the net proceeds of this offering in the aggregate amount of $52,567 described above and (ii) a charge to eliminate unamortized debt costs in the amount of $4,004 as of March 31, 2021.

Includes $( 19 ) and $( 697 ) of premium refund adjustments (credit to expense) from the Ohio Bureau of Workers Compensation for the three months ended June 30, 2021 and 2020, respectively; and $( 1,337 ) and $( 747 ) for the nine months ended June 30, 2021 and 2020, respectively.

The Industrial Services gross margins normalized by excluding direct effects of these items were approximately 15 % and 13 % for the three months ended June 30, 2021 and 2020, respectively; and approximately 15 % and 14 % for the nine months ended June 30, 2021 and 2020, respectively.

Subsequent Events

On July 9, 2021, the Company’s subsidiary Agile Resources, Inc.

was notified by the SBA that its total outstanding PPP Loans and accrued interest in the amount of $ 1,220 was forgiven.

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-Q

Item 1. Financial Statements