What changed in this filing

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Item 1A. Risk Factors

2024-12-19 compared with 2023-12-18 · 66 added, 69 removed, 373 unchanged (27% of the section changed)

Risk Factors.

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations.

The risks described below highlight some of the factors that have affected, and in the future could affect our operations and financial condition.

Additional risks we do not yet know of or that we currently think are immaterial may also affect our business operations.

If any of the events or circumstances described in the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected.

ECONOMY CURRENTLY IS BEING NEGATIVELY IMPACTED BY HISTORICALLY SIGNIFICANT INFLATION, A LOOMING RESCESSION, AND DISRUPTIONS IN SUPPLY AND THE WORKFORCE;

RECENT GLOBAL SOCIOECONOMIC TRENDS, INCLUDING THE WAR IN UKRAINE AND U.S.

RECENT GLOBAL SOCIOECONOMIC TRENDS, INCLUDING THE WARS IN UKRAINE AND THE MIDDLE EAST AND U.S.

RELATIONS WITH CERTAIN FOREIGN POWERS MAY HAVE A FURTHER ADVERSE EFFECT ON THE U.S.

ECONOMY AND OUR BUSINESS.

and larger global economies experienced historically high inflation during 2022, which continued into 2023.

and larger global economies experienced historically high inflation during 2022, which has continued into 2024.

The Federal Reserve and other Central Banks already have raised interest rates more aggressively and to their highest levels in decades.

As a result, the prospect for a recession is considered by many to be likely.

Although inflation and interest rates have begun to subside, the prospect for a recession is considered by many to be possible.

Some sources have declared that the U.S.

already has experienced a recession.

Consumer prices, including basic costs of food, fuel, utilities, healthcare, mortgage and personal loan rates, and other non-discretionary and discretionary consumer items have risen significantly.

Consumer prices, including basic costs of food, fuel, utilities, healthcare, mortgage and personal loan rates, and other non-discretionary and discretionary consumer items have risen significantly and remain high.

Wages are up, however, increases in wages have lagged price inflation resulting in a net decline in real personal incomes relative to consumer spending.

Volatility continues to exist in the workforce making it more difficult and costly for employers to recruit, hire and/or retain workers.

Volatility continues to exists in the workforce making it more difficult and costly for employers to recruit, hire and/or retain workers.

unemployment remains relatively low, however the labor utilization rate and ratio of workers to the total population also remain low.

Shortages in the workforce are a significant factor in supply shortages relative to demand and also help fuel inflation.

Shortages in the workforce have been a significant factor in supply shortages relative to demand and also help fuel inflation.

On the global stage, two wars are now being waged, the first led by the invasion of Ukraine by Russia, and the second, following the recent invasion of Israel by Hamas terrorists.

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and global economies make it difficult to predict the extent to which a recession has occurred or will occur or worsen in the near future, and we and other members of the U.S.

Staffing Industry already have seen significant declines in business in 2023.

Staffing Industry already have seen significant declines in business in 2023 and 2024.

In the event of recurring or worsening conditions, in which the U.S.

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however, should economic conditions remain uncertain or worsen in the future, one may expect either scenario to continue to have an adverse effect on the business of the Company and its subsidiaries.

THE NEGATIVE EFFECTS OF THE CORONAVIRUS PANDEMIC AND ITS SUBSEQUENT VARIANTS, CARES ACT REQUIREMENTS, AND TRENDS IN THE FINANCIAL MARKETS COULD ADVERSELY AFFECT OUR BUSINESS, LIQUIDITY AND FINANCIAL RESULTS.

Recent global socioeconomic conditions, including the negative effects of the Coronavirus Pandemic (“COVID-19”), and disruption of financial markets, severely affected our business and results of operations during fiscal 2020 and, although to a lesser extent, fiscal 2021.

The negative effects initially limited our access to credit or equity capital, our ability to refinance debt and disrupted ours and our clients’ businesses.

In fiscal 2021 and 2022, we were able to regain reasonable access to credit and equity capital markets, but also have continued to experience some lingering negative effects on our business operations in certain markets.

The operations and liquidity of our operating subsidiaries were severely impacted by COVID-19.

As a result and out of necessity, in fiscal 2020, we applied for and obtained financial relief in the form of funds received in exchange for promissory notes issued by the U.S.

Small Business Administration (“SBA”) and U.S.

Treasury under the Payroll Protection Program of the CARES Act (“PPP loans”).

The Company and eight of its operating subsidiaries received PPP loans, totaling $19,927 thousand, and have since applied for and received forgiveness of their respective PPP loans from the SBA.

The forgiveness of these loans, including their respective accrued and unpaid interest amounts, have been recognized by eliminating them from the Company’s consolidated balance sheets with corresponding gains in consolidated net income in fiscal 2021 and 2022.

The former PPP loans obtained by GEE Group Inc., and its operating subsidiaries together as an affiliated group, exceeded the $2 million audit threshold established by the SBA, and therefore, will be subject to audit by the SBA in the future.

If any of the nine forgiven PPP loans are reinstated in whole or in part as the result of a future audit, a charge or charges would be incurred, accordingly, and they would need to be repaid.

If the companies are unable to repay the portions of their PPP loans that ultimately may be reinstated from available liquidity or operating cash flow, we may be required to raise additional equity or debt capital to repay the PPP loans.

THE TERMS OF OUR SENIOR BANK ASSET BACKED LOAN AGREEMENT MAY PLACE SOME RESTRICTIONS ON OUR OPERATING AND FINANCIAL FLEXIBILITY, AND FAILURE TO COMPLY WITH COVENANTS OR TO SATISFY CERTAIN CONDITIONS OF THE AGREEMENT MAY RESULT IN ACCELERATION OF OUR REPAYMENT OBLIGATIONS, WHICH COULD HARM OUR LIQUIDITY, FINANCIAL CONDITION, OPERATING RESULTS, BUSINESS AND PROSPECTS AND CAUSE THE PRICE OF OUR SECURITIES TO DECLINE.

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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.

are co-borrowers under 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).

The CIT Facility contains some restrictions and limitations that might inhibit our ability to engage in certain activities and transactions that may otherwise be in our long-term best interests.

The affirmative and negative covenants contained in the Credit Agreement that may adversely affect our ability to operate our business include covenants that limit and restrict, among other things, our ability to incur additional indebtedness, transfer or sell certain assets, issue stock of subsidiaries, pay dividends on, repurchase or make distributions with respect to our capital stock or make other restricted payments, incur or permit liens or other encumbrances on assets, make certain investments, loans and advances, acquire other businesses, merge, consolidate, sell or otherwise dispose of all or substantially all of our assets, enter into certain transactions with our affiliates and amend certain agreements, without amendment of the CIT facility or the express approval of CIT Bank.

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

Although the stated face amount of the CIT Facility is $20 million, the borrowing base formula significantly limits amounts available for us to borrow.

The CIT Facility also contains customary events of default, including, among others, payment default, bankruptcy events, cross-default, breaches of covenants and representations and warranties, change of control and judgment defaults.

are co-borrowers under a Loan, Security and Guaranty Agreement for a $20 million asset-based senior secured revolving credit facility (the “Facility”) with First Citizens Bank (“FCB”) (formerly CIT Bank, N.A.).

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

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

The Facility contains some restrictions and limitations that might inhibit our ability to engage in certain activities and transactions that may otherwise be in our long-term best interests.

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

Although the stated face amount of the Facility is $20 million, the borrowing base formula significantly limits amounts available for us to borrow.

The Facility also contains customary events of default, including, among others, payment default, bankruptcy events, cross-default, breaches of covenants and representations and warranties, change of control and judgment defaults.

A breach of any of these covenants could result in default under our Credit Agreement, which could prompt the lenders to declare all amounts outstanding under the Credit Agreement to be immediately due and payable and terminate all commitments to extend further credit.

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Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

THE COMPANY HAS MATERIAL INTANGIBLE ASSETS, INCLUDING GOODWILL, CUSTOMER LISTS, TRADEMARKS AND TRADENAMES.

THESE ASSETS ARE SUBJECT TO IMPAIRMENT RISKS, WHICH COULD RESULT IN FUTURE MATERIAL IMPAIRMENT CHARGES TO INCOME AND NEGATIVELY IMPACTING THE FUTURE OPERATING RESULTS AND FINANCIAL POSITION OF THE COMPANY.

THE COMPANY HAS MATERIAL INTANGIBLE ASSETS, INCLUDING GOODWILL, CUSTOMER LISTS, AND TRADENAMES.

THESE ASSETS ARE SUBJECT TO IMPAIRMENT RISKS, WHICH COULD RESULT IN FUTURE MATERIAL IMPAIRMENT CHARGES TO INCOME AND NEGATIVELY IMPACTING THE FUTURE OPERATING RESULTS AND THE FINANCIAL POSITION OF THE COMPANY.

The Company is required to evaluate its goodwill annually or when one or more triggering events or circumstances indicate that assets might be impaired.

The other long-lived assets, including definite-lived intangible assets, have to be tested for impairment only when triggering events occur or circumstances indicate that these assets might be impaired.

The Company has recognized impairments of its goodwill, including most recently during the first quarter of its fiscal year ended September 30, 2022.

The Company has recognized impairments of its goodwill and its other long-lived assets, including most recently during the third quarter of its fiscal year ended September 30, 2024.

In testing for impairments, management applies one or more valuation techniques to estimate the fair values of the reporting units, individual assets or groups of individual assets, as required under the circumstances.

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In particular, we use working capital to fund expenses relating to our temporary workers and our other operating expenses and liabilities.

As a result, we must maintain sufficient cash availability to pay temporary workers and fund related tax liabilities prior to receiving payment from customers.

As a result, we must maintain sufficient cash availability to pay temporary workers and fund payroll taxes and other payroll-related expenses prior to receiving payment from customers.

In addition, our operating results tend to be unpredictable from quarter to quarter.

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The aggregate value of our eligible accounts receivable may not be adequate to allow for borrowings for other corporate purposes, such as capital expenditures or growth opportunities, which could reduce our ability to react to changes in the market or industry conditions.

THE LINGERING EFFECTS OF THE CORONAVIRUS PANDEMIC AND ITS SUBSEQUENT VARIANTS AND CARES ACT REQUIREMENTS COULD ADVERSELY AFFECT OUR BUSINESS, LIQUIDITY AND FINANCIAL RESULTS.

The negative effects initially limited our access to credit or equity capital, our ability to refinance debt and disrupted ours and our clients’ businesses.

The operations and liquidity of our operating subsidiaries were severely impacted by COVID-19.

As a result and out of necessity, in fiscal 2020, we applied for and obtained financial relief in the form of funds received in exchange for promissory notes issued by the U.S.

Small Business Administration (“SBA”) and U.S.

Treasury under the Payroll Protection Program of the CARES Act (“PPP loans”).

The Company and eight of its operating subsidiaries received PPP loans, totaling $20 million, and have since applied for and received forgiveness of their respective PPP loans from the SBA.

If any of the nine forgiven PPP loans are reinstated in whole or in part as the result of a future audit, or other Federal mandate or initiative, a charge or charges would be incurred, accordingly, and they would need to be repaid.

OUR REVENUE CAN VARY BECAUSE OUR CUSTOMERS CAN TERMINATE THEIR RELATIONSHIP WITH US AT ANY TIME WITH LIMITED OR NO PENALTY.

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MOST OF OUR CONTRACTS DO NOT OBLIGATE OUR CUSTOMERS TO UTILIZE A SIGNIFICANT AMOUNT OF OUR STAFFING SERVICES AND MAY BE CANCELLED ON LIMITED NOTICE, SO OUR REVENUE STREAM MAY BE INCONSISTENT AND IS NOT GUARANTEED.

Substantially all of our revenue is derived from multi-year contracts that are terminable for convenience of the customer.

Under our multi-year agreements, we contract to provide customers with staffing services through work or service orders at the customers’ request.

Substantially all of our revenue is derived from contracts or master service agreements that are renewable or perpetual and that are terminable by our customers for their convenience and at their discretion.

Under our renewable or perpetual agreements, we contract to provide staffing services through work or service orders at the customers’ request.

Under these agreements, our customers often have little or no obligation to request our staffing services.

In addition, most of our contracts are cancellable on limited notice, even if we are not in default under the contract.

In addition, most of our contracts are cancellable on limited notice and without material penalties, even if we are not in default under the contract.

We may hire employees permanently to meet anticipated demand for services under these agreements that may ultimately be delayed or cancelled.

We could face a significant decline in revenues and our business, financial condition or results of operations could be materially adversely affected if:

we see a significant decline in the staffing services requested from us under our service agreements;

our customers cancel or defer a significant number of staffing requests;

We could face a significant decline in revenues and our business, financial condition or results of operations could be materially adversely affected if we see a significant decline in the staffing services requested from us under our service agreements;

or our customers cancel or defer a significant number of staffing requests;

or our existing customer agreements expire or lapse and we cannot renew or replace them with similar agreements.

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To execute our growth plan, we must attract and retain highly qualified personnel.

Competition for these personnel is intense, especially for experienced software engineers and senior sales executives.

Competition for outstanding personnel is intense, especially for experienced software engineers and senior sales executives.

If we are unable to attract such personnel in cities where we are located, we may need to hire in other locations, which may add to the complexity and costs of our business operations.

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Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future.

Staffing Industry Analysts, a leading industry trade organization, recently published in its September 2023 Industry Forecast update, that the U.S.

Staffing Industry Analysts, a leading industry trade organization, recently published in its September 2024 U.S.

Staffing Industry Forecast update, that the U.S.

Staffing Industry is expected to decline by 10% in 2024.

The identified causes vary within different market verticals and scenarios, with the overall level of uncertainties that persist in the U.S.

and global economies and labor markets receiving significant mention.

Other cited causes of the decline particularly in light industrial and administrative and clerical markets are the rise of new B2C trends, such as Uber and DoorDash, and, in other markets, “side gigs” that offer alternative opportunities to potential employment candidates and increased competition amongst recruiters.

This follows a 10% decline already experienced in 2023.

The SIA report cites that the forecasted 2024 decline is expected due to widespread client caution and project delays, a depressed manufacturing sector, falling bill rates in sectors such as healthcare, and employer and worker heightened preferences for permanent positions over temporary positions.

WE OPERATE IN AN INTENSELY COMPETITIVE AND RAPIDLY CHANGING BUSINESS ENVIRONMENT, AND THERE IS A SUBSTANTIAL RISK THAT OUR SERVICES COULD BECOME OBSOLETE OR UNCOMPETITIVE.

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Personnel agencies often work as intermediaries, helping employers accurately describe job openings and screen candidates.

Increasing the use of sophisticated, automated job description and candidate screening tools could make many traditional functions of staffing companies obsolete.

Increasing the use of sophisticated, automated job description and candidate screening tools, especially those that now utilize Artificial Intelligence, or “AI”, could make many traditional functions of staffing companies obsolete.

Specifically, the increased use of the internet may attract technology-oriented companies to the professional staffing industry.

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Current or future competitors could develop alternative capabilities and technologies that are more effective, easier to use or more economical than our services.

In addition, we believe that, with continuing development and increased availability of IT, the industries in which we compete may attract new competitors.

In addition, we believe that, with continuing development and increased availability of IT aided by AI, the industries in which we compete may attract new competitors.

If our capabilities and technologies become obsolete or uncompetitive, our related sales and revenue would decrease.

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Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment to our reputation in the marketplace.

WE RECENTLY EXPERIENCED A NETWORK SECURITY INCIDENT AFFECTING OUR IT NETWORK, INFORMATION SYSTEMS AND STORED INFORMATION.

NETWORK SECURITY INCIDENTS AFFECTING OUR SYSTEMS AND INFORMATION TECHNOLOGY SUCH AS THIS ONE OR OTHERS COULD ADVERSELY IMPACT OUR ABILITY TO OPERATE AND HAVE WIDER-REACHING MATERIAL ADVERSE EFFECTS ON OUR BUSINESS AND FINANCIAL POSITION AND RESULTS.

On February 1, 2022, the Company detected and stopped a network security incident.

An unauthorized third party gained access into our network, encrypted various systems, and demanded money to decrypt the affected systems and to delete and not publicly release stolen information.

The Company’s IT professionals immediately disconnected and isolated the affected systems to prevent any further compromise.

The senior executive management team was immediately notified who in turn reported the network security incident to the Company’s Audit Committee chairman who has board oversight authority for these types of matters.

The Company’s audit committee and board of directors were fully briefed and a special committee of the board of directors was appointed to assist and oversee management in the investigations, response and full remediation of the incident.

The Company engaged third party cyber security experts to assist its internal IT professionals and conducted a comprehensive investigation to determine the extent of the unauthorized activity.

The Company also notified law enforcement and its cyber liability insurance carrier about the incident.

The Company’s investigation determined that the unauthorized third party acquired a relatively small amount of data maintained on the encrypted servers, to include in some cases, individual personal information such as names, social security numbers, passport and driver license information.

Our forensic investigation has been concluded and we believe we have reasonably determined the scope of the incident.

Individuals affected by this incident were sent formal notification in accordance with applicable state and federal laws.

The cost of investigating and resolving the incident has been immaterial.

Based on what management and the Company’s third-party cyber security experts have determined in their investigation, the Company also does not foresee this incident having any future material detrimental effect on our business or financial position.

The Company has in place cyber liability insurance coverage, subject to certain policy limitations and deductibles.

The Company had also immediately notified the cyber insurance carrier of the network security incident, who worked with management and the Company’s third-party cyber security experts on this matter.

The Company’s network environment is fully operational and additional security measures have been added and/or are being evaluated to prevent further intrusions.

The Company has not observed any additional malicious activity on the network to date.

The Company’s operations were only minimally impacted by the incident, and we were able to serve our clients and other stakeholders without issue throughout.

OUR STRATEGY OF GROWING THROUGH ACQUISITIONS MAY BE IMPEDED BY A LACK OF FINANCIAL RESOURCES AND IMPACT OUR BUSINESS IN UNEXPECTED WAYS.

OUR STRATEGY OF GROWING THROUGH ACQUISIIONS MAY BE IMPEDED BY A LACK OF FINANCIAL RESOURCES AND IMPACT OUR BUSINESS IN UNEXPECTED WAYS.

WE COULD BE ADVERSELY AFFECTED BY RISKS ASSOCIATED WITH ACQUISITIONS.

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Such claims may result in negative publicity, injunctive relief, criminal investigations and/or charges, civil litigation, payment by us of monetary damages or fines, or other material adverse effects on our business.

CYBERSECURITY BREACHES OF OUR SYSTEMS AND INFORMATION TECHNOLOGY COULD ADVERSELY IMPACT OUR ABILITY TO OPERATE.

We need to protect our own and other business confidential information from disclosure.

We face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions, including possible unauthorized access to our and our clients' proprietary or classified information.

As a result of the developing conflict between Russia and the Ukraine, in February 2022 the U.S.

Cybersecurity and Infrastructure Security Agency issued a "Shields Up" alert for American organizations noting the potential for Russia’s cyber-attacks on Ukrainian government and critical infrastructure organizations to impact organizations both within and beyond the U.S., particularly in the wake of sanctions imposed by the United States and its allies.

We rely on industry-accepted security measures and technology to securely maintain all confidential and proprietary information on our information systems.

We have devoted and will continue to devote significant resources to the security of our computer systems, but they may still be vulnerable to these threats.

A user who circumvents security measures could misappropriate confidential or proprietary information, including information regarding us, our personnel and/or our clients, or cause interruptions or malfunctions in operations.

As a result, we may be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches.

Any of these events could damage our reputation and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Although the aggregate impact on our operations and financial condition has not been material to date, we have been the target of events of this nature and expect them to continue as cybersecurity threats have been rapidly evolving in sophistication and becoming more prevalent in the industry.

OUR ABILITY TO UTILIZE OUR NET OPERATING CARRYFORWARDS AND CERTAIN OTHER TAX ATTRIBUTES MAY BE LIMITED.

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market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market.

As a result of these factors, if our common stock is delisted from Nasdaq, the price of our common stock is likely to decline.

As a result of these factors, if our common stock is delisted from NYSE American, the price of our common stock is likely to decline.

A delisting of our common stock from the NYSE American could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, or employees.

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Such events could decrease demand for our services.

GROWING CONCERNS REGARDING CLIMATE CHANGE MAY RESULT IN THE IMPOSITION OF ADDITIONAL REGULATION, WHICH IN TURN MAY INDIRECTLY HAVE A NEGATIVE IMPACT ON OUR OPERATION.

We are currently not aware of any climate change related risks that could adversely affect the result of our operation.

However, the growing concerns about climate change may result in the imposition of additional laws and regulations, international protocols or other restrictions or a relaxation or repeal of existing laws and regulations, or changes in governmental policies regarding the funding, implementation, or enforcement of these programs, which could affect our customers and as a result indirectly reduce in demand for our services, which could in turn negatively impact our revenue.

OUR COMPLIANCE WITH COMPLICATED REGULATIONS CONCERNING CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE HAS RESULTED IN ADDITIONAL EXPENSES.

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Among these, during fiscal 2023, the Company established, and initially deposited $13 million of its excess cash, under a brokerage arrangement with a major financial advisory institution that manages and deposits these funds under a specialized program whereby the funds are allocated among FDIC insured banks in amounts that individually do not exceed the established FDIC insured limit of $250 thousand.

The Company also holds funds in various other bank accounts that may exceed FDIC insured limits.

These uninsured amounts, in aggregate, were $5.2 million as of September 30, 2024.

To date, the Company has not experienced any material loss as a result of the failure of any financial institution in which it has funds or other assets on deposit.

Unresolved Staff Comments.

Not applicable.

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 1A. Risk Factors