GEE Group Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview GEE Group Inc. and its wholly owned material operating subsidiaries, Access Data Consulting Corporation, Agile Resources, Inc., Hornet Staffing, Inc., Paladin Consulting, Inc., Scribe Solutions, Inc., SNI Companies, Inc., and Triad Personnel Services, Inc. are providers of permanent and temporary professional and industrial staffing and placement services in and near several major U.S. cities. We specialize in the placement of information technology, accounting, finance, office, and engineering professionals for direct hire and contract staffing for our clients, and data entry assistants (medical scribes) who specialize in electronic medical records (EMR) services for emergency departments, specialty physician practices and clinics. GEE Group Inc.’s former wholly owned subsidiaries, BMCH, Inc. and Triad Logistics, Inc., provided temporary staffing services for our industrial clients until their operations were discontinued and assets were sold on June 2, 2025. The acquisitions of Scribe Solutions, Inc., a Florida corporation (“Scribe”) in April 2015, Agile Resources, Inc., a Georgia corporation (“Agile”) in July 2015, Access Data Consulting Corporation, a Colorado corporation (“Access”) in October 2015, Paladin Consulting Inc. (“Paladin”) in January 2016, and SNI Companies, Inc., a Delaware corporation (“SNI”) in April 2017, expanded our geographical footprint within the professional placement and contract staffing verticals or end markets of information technology, accounting, finance, office, engineering professionals, and medical scribes. The acquisition of Hornet Staffing, Inc., a Georgia corporation, (“Hornet”) in January 2025 broadened our footprint in the professional contract staffing market with a specialty in working with managed service providers (“MSP”) and vendor management systems (“VMS”) which streamline outsourced labor for large clients. We market our services using the trade names General Employment Enterprises, Omni One, Ashley Ellis, Agile Resources, Scribe Solutions Inc., Access Data Consulting Corporation, Paladin Consulting Inc., SNI Companies (including Staffing Now, Accounting Now, and Certes), Triad Personnel Services, and Hornet Staffing. As of June 30, 2025, we operated from locations in ten (10) states, including nineteen (19) branch offices in downtown or suburban areas of major U.S. cities and four (4) additional U.S. locations utilizing local staff members working remotely. We have offices or serve markets remotely, as follows; (i) one office in each of Connecticut, Georgia, Illinois, and New Jersey, and one remote local market presence in each of Georgia and Virginia; (ii) two offices each in Massachusetts and Colorado; (iv) three offices and one additional local market presence in Texas; (v) six offices and one additional local market presence in Florida; and (vi) two offices in Ohio. Management has a long-term business strategy that includes organic and acquisition growth components. Management’s organic growth strategy includes seeking out and winning new client business, as well as expansion of existing client business and on-going cost reduction and productivity improvement efforts in operations. Management’s acquisition growth strategy includes identifying strategic, accretive acquisitions, financed primarily through a combination of cash and debt, including seller financing, the issuance of equity in appropriate circumstances, and the use of earn-outs where efficient to improve the overall profitability and our cash flows. Our contract and placement services are currently provided under our Professional Staffing Services operating division or segment. Our former Industrial Staffing Services segment was deemed a discontinued operation as of the quarter ended March 31, 2025 and is excluded from results of continuing operations reported in this MD&A, unless otherwise stated. 22 Table of Contents Results of Operations Summary and Outlook We have incurred a net loss of $(423) thousand for the fiscal third quarter ended June 30, 2025. The net loss is primarily attributable to continuation of adverse trends and conditions in the U.S. labor markets that began in 2023, continued throughout 2024, and have persisted so far in 2025. These conditions have negatively impacted the number of job orders received and the numbers of qualified candidates available to fill orders for placements across all of our lines of business. Likewise, the U.S. Staffing Industry, as a whole, has experienced material declines in overall volume and financial performance and the industry outlook remains mixed as to when these conditions may be expected to definitively subside. The net loss for the third quarter ended June 30, 2025, has lessened relative to the prior sequential quarters of fiscal 2025 due to the presence of a $22 million pre-tax non-cash impairment charge in the quarter ended March 31, 2025, and operating cost reductions and other productivity improvement measures. Artificial intelligence (“AI”) continues to gain momentum in the economy bringing with it the possibility of serving as a “disruptor” of traditional staffing and HR solutions markets or portions of them. We are responding by integrating AI into our operating business strategy, plans and systems; focusing on seeking, attracting and placing AI talent; and refocusing our other organic growth efforts towards verticals where we can leverage AI, or that are less likely to be significantly disrupted by AI. Our IT businesses, in particular, are focused on building AI expertise and on presenting themselves as thought leaders and knowledge resources in AI for our clients and potential new clients. On January 3, 2025, we acquired Hornet Staffing, Inc., an Atlanta-based provider of staff augmentation services with national service capability. Hornet provides staffing solutions to markets serving large scale, "blue chip" companies in the information technology, professional and customer service staffing verticals. The acquisition is expected to be accretive to earnings. Under the terms of the stock purchase agreement, we acquired 100% of the Hornet common stock for consideration including cash and seller financing. Larry Bruce, Hornet’s Managing Director and Founder, will continue in his current capacity at Hornet and join the GEE Group National Sales Team to work with our vertical leaders on new business development. We expect the Hornet acquisition to enhance our ability to compete more effectively and anticipate it helping us secure new business from Fortune 1000 and other large users of contingent and outsourced labor. Its workforce solutions include significant expertise in working with MSPs and VMSs. According to Staffing Industry Analysts’ (“SIA”) recent Workforce Solutions Buyer Survey, approximately 58% of companies with one thousand employees or more engage a third-party firm to manage their staffing providers. These large businesses spend for contingent labor is typically managed by MSP and VMS providers which are evolving rapidly, driven by the increasing complexity of workforce management and to achieve economies of scale in today's business environment. In 2023 according to SIA, the global MSP/VMS market accounted for approximately $222 billion of temporary staffing spend under management. In light of the forgoing trends and in order to compete more efficiently and effectively on these and other engagements, staffing agencies are turning to offshore recruiting models which continue to gain momentum as an increasing number of organizations turn to MSP and VMS for managing their contract labor providers. According to SIA, offshore recruiting teams located in cost-effective regions of the world provide significant cost savings and can help reduce operational expenses by up to approximately 70%, without compromising on quality. Hornet has adopted this method of recruiting which we believe provides for faster hiring cycles tapping a vast, global talent pool; and, coupled with round-the-clock recruitment efforts, offshore recruiting can reduce hiring timelines by up to 40%, allowing staffing firms to attract top talent ahead of competitors. We plan to continue our on-shore relationship-based recruitment for select customers and leverage Hornet's offshore recruiting capability and technology across all of our staffing verticals on MSP, VMS and other large enterprise engagements. This is expected to give us additional flexibility and scalability to adjust hiring volumes based on project needs, ensuring efficiency without sacrificing quality. 23 Table of Contents As of March 31, 2025, and continuing through June 30, 2025, we classified and reported our Industrial Segment as a discontinued operation. The decision to discontinue this division is in continuance with our long-term strategy and focus on the professional verticals within our business. The initiative to seek a buyer for the Industrial Segment was approved on April 18, 2024, as part of our plans and budgets comprehended in the M&A Committee’s strategic recommendations developed during a formal review of strategic alternatives last year. Other strategic recommendations stemming from the strategic alternatives review are on-going, including (1) proactive measures to streamline operations and enhance growth opportunities and cost-efficiency, including significant cost reductions, (2) building upon past acquisitions by taking advantage of current conditions and further integrating and consolidating operations and systems for further efficiencies and cost saving opportunities, and (3) capitalizing on acquisition opportunities arising from the economic downturn by identifying and with the objective of acquiring businesses at reduced multiples and favorable valuations. On June 2, 2025, we entered into an agreement for the sale of certain operating assets of the Industrial Segment, including those of BMCH, Inc., Triad Logistics, Inc., and our Triad Staffing brand. We received total cash consideration of $250 from the buyer at closing and are to receive an additional $788 payable during the first 90 days following closing. We have received $462 of the additional payments due as of June 30, 2025. A pre-tax net gain of $133, including transaction costs of $97, is included in discontinued operations for the three-month period ended June 30, 2025. The remaining assets of the Industrial Segment not sold were distributed to the Company. 24 Table of Contents (Amounts in thousands except per share data, unless otherwise stated) Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 Net Revenues Consolidated net revenues are comprised of the following: Three Months Ended June 30, 2025 2024 Change Change Professional contract services $ 21,301 $ 23,761 $ (2,460 ) -10% Direct hire placement services 3,222 3,287 (65 ) -2% Consolidated net revenues $ 24,523 $ 27,048 $ (2,525 ) -9% Professional contract staffing services contributed $21,301 or approximately 87% of consolidated revenue and direct hire placement services contributed $3,222, or approximately 13%, of consolidated revenue for the three months ended June 30, 2025. This compares to professional contract staffing services revenue of $23,761, or approximately 88%, of consolidated revenue and direct hire placement revenue of $3,287, or approximately 12%, of consolidated revenue for the three months ended June 30, 2024. Economic uncertainties, including persistent inflation and the possibility of recession, continued to adversely affect trends and conditions in the U.S. labor markets, which in turn, have continued to negatively impact our results through the three months ended June 30, 2025. Professional contract staffing services revenues decreased $2,460, or 10%, as compared to the three months ended June 30, 2024. Professional contract staffing services for the three months ended June 30, 2025 includes $1,157 of revenues generated by Hornet, which was acquired by the Company effective January 3, 2025. The former light industrial segment revenues of $1,068 and $2,048 for the three months ended June 30, 2025 and 2024, respectively, have been reclassified as discontinued operations and are no longer included in professional contract staffing services. Direct hire placement revenue for the three months ended June 30, 2025 decreased $65, or approximately 2%, as compared to the three months ended June 30, 2024. Cost of Contract Services Cost of contract services includes wages and related payroll taxes and employee benefits of our contract services employees, and certain other contract employee-related costs, while working on contract assignments. Cost of contract services for the three months ended June 30, 2025 decreased by approximately 11% to $15,842 compared to $17,819 for the three months ended June 30, 2024. The $1,977 overall decrease in cost of contract services is consistent with the decrease in revenues as discussed above. Gross profit percentage by service: Three Months Ended June 30, 2025 2024 Professional contract services 25.6% 25.0% Direct hire placement services 100.0% 100.0% Combined gross profit margin (a) 35.4% 34.1% (a) Includes gross profit from direct hire placements, for which all associated costs are recorded as selling, general and administrative expenses. Unlike temporary contract staffing services, where we maintain primary responsibility for and control the staff members that we provide to perform services for our clients, direct hire placement revenues are only recognized for the net amount of fees we earned acting under an agency type of relationship. Accordingly, none of our costs associated with direct hire placement services are reportable as costs of services deducted from revenues to derive gross profit. 25 Table of Contents (Amounts in thousands except per share data, unless otherwise stated) Our combined gross profit margin, including direct hire placement services, for the three-month periods ended June 30, 2025 and 2024 were approximately 35.4% and 34.1%, respectively. Our professional contract staffing services gross margins for the three-month periods ended June 30, 2025 and 2024 were approximately 25.6% and 25.0%, respectively. The net increase in our combined gross margin is mainly attributable to an increase in the mix of direct hire placement revenues, which have a 100% gross margin. The increase in professional contract staffing services gross margin is attributable to net increases in prices and spreads on some of our professional contract services businesses. Selling, General and Administrative Expenses Selling, general and administrative expenses include the following categories: · Compensation and benefits in the operating divisions, which include salaries, wages and commissions earned by our employment consultants, recruiters and branch managers on permanent and temporary placements; · Administrative compensation, which includes salaries, wages, share-based compensation, payroll taxes, and employee benefits associated with general management and the operation of corporate functions, including principally, finance, human resources, information technology and administrative functions; · Occupancy costs, which includes office rent, and other office operating expenses; · Recruitment advertising, which includes the cost of identifying and tracking job applicants; and · Other selling, general and administrative expenses, which includes travel, bad debt expense, fees for outside professional services and other corporate-level expenses such as business insurance and taxes. Our SG&A for the three months ended June 30, 2025 decreased by $802 as compared to the three months ended June 30, 2024. SG&A for the three months ended June 30, 2025, as a percentage of revenues, were approximately 36.5% compared to approximately 36.1% for the three months ended June 30, 2024. The increase in SG&A expenses as a percentage of revenues during the three months ended June 30, 2025 was attributable to lower revenues in relation to fixed costs, including certain personnel, occupancy and costs associated with applicant tracking systems and job boards. In addition, higher incentive compensation on direct hire placement revenues, which remained relatively level quarter over quarter, as contrasted with lower professional contract revenues, contributed to the higher SG&A ratios. These two items were offset by certain cost reductions and productivity improvements during the three months ended June 30, 2025. SG&A includes certain non-cash and non-operational costs and expenses incurred related to acquisition, integration, restructuring and other non-recurring activities, such as certain corporate legal and general expenses associated with capital markets activities, that either are not directly associated with core business operations or have been eliminated on a going forward basis. These costs were $68 and $46 for the three-month periods ended June 30, 2025 and 2024, respectively, and include mainly expenses associated with advisory fees and legal expenses related to other than routine matters. Amortization and Depreciation Expense Amortization expense was $225 and $720 for the three-month periods ended June 30, 2025, and 2024, respectively. The significant decline in amortization expense is mainly due to impairment charges recorded during the fiscal year ended September 30, 2024, which substantially reduced the remaining unamortized balances of our identifiable intangible assets and present amortization, accordingly. Depreciation expense was $49 and $63 for the three-month periods ended June 30, 2025, and 2024, respectively. 26 Table of Contents (Amounts in thousands except per share data, unless otherwise stated) Intangible Assets Impairment We performed an evaluation of our intangible assets as of June 30, 2024, and determined that certain asset groups associated with our intangible assets including certain customer lists and tradenames were producing negative or sufficiently low gross cash flows that their estimated future discounted cash flows indicated impairments of the remaining unamortized balances. As a result, we recorded a non-cash impairment charge of $5,209 on intangible assets during the three months ended June 30, 2024. Goodwill Impairment We completed an interim goodwill impairment assessment as of June 30, 2024 and determined that our goodwill was impaired. The estimated fair value of the Professional Services reporting unit decreased as compared to those resulting from the September 30, 2023 annual assessment, indicating that the pre-assessment carrying value as of June 30, 2024 exceeded the estimated fair values. As a result, a non-cash goodwill impairment charge of $14,201 was taken during the three months ended June 30, 2024 so that the carrying value of the Professional Services reporting unit reflected its estimated fair value, as determined by the interim evaluations made of our goodwill. Loss from Operations Loss from operations was $(544) and $(20,717) for the three-month periods ended June 30, 2025 and 2024, respectively. This improvement in loss from operations is due to the inclusion of the non-cash impairment charges discussed in the preceding paragraphs in the three months ended June 30, 2024. In addition, we have made certain cost reductions and productivity improvements that have contributed to the improvement in the current quarter over prior sequential quarters of fiscal 2025. Interest Expense Interest expense was $112 and $113 for the three-month periods ended June 30, 2025 and 2024, respectively, and is mainly attributable to unused availability and administrative fees on our Facility. Interest Income Interest income earned was $140 and $179 for the three-month periods ended June 30, 2025 and 2024, respectively. Interest income is earned on cash balances held in our two brokerage accounts. Provision for Income Taxes We recognized income tax benefits of $115 and $2,546 for the three-month periods ended June 30, 2025 and 2024, respectively. Our effective tax rate for the three-month period ended June 30, 2025 is higher than the statutory rate primarily due to the change in the valuation allowance between quarters. The incremental change in valuation allowance has a greater impact because of the smaller change in pre-tax book loss. Our effective tax rate for the three-month period ended June 30, 2024 is lower than the statutory rate primarily due to the effect of the valuation allowance on our net DTA position. Other than the deferred tax liability relating to indefinite lived assets, we are maintaining a full valuation allowance against the remaining net DTA position. Loss from Discontinued Operations As a result of our Industrial Segment being deemed a discontinued operation, the results of that segment have been reclassified to loss from discontinued operations in the accompanying unaudited condensed consolidated statements of operations. On June 2, 2025, we entered into an agreement to sell certain operating assets of our Industrial Segment and recorded a gain on sale of $133 during the three-month period ended June 30, 2025. Loss from discontinued operations, including the gain recorded upon sale, was $(22) and $(1,181) for the three-month periods ended June 30, 2025 and 2024, respectively. Consolidated Net Loss Our consolidated net loss was $(423) and $(19,286) for the three-month periods ended June 30, 2025 and 2024, respectively. The improvement in consolidated net loss is primarily the result of the non-cash impairment charges recorded in the three months ended June 30, 2024, and other relevant items, as explained in the preceding paragraphs. 27 Table of Contents Nine Months Ended June 30, 2025 Compared to the Nine Months Ended June 30, 2024 Net Revenues Consolidated net revenues are comprised of the following: Nine Months Ended June 30, 2025 2024 Change Change Professional contract services $ 64,310 $ 71,977 $ (7,667 ) -11% Direct hire placement services 8,733 8,797 (64 ) -1% Consolidated net revenues $ 73,043 $ 80,774 $ (7,731 ) -10% Professional contract staffing services contributed $64,310 or approximately 88% of consolidated revenue and direct hire placement services contributed $8,733, or approximately 12%, of consolidated revenue for the nine months ended June 30, 2025. This compares to professional contract staffing services revenue of $71,977, or approximately 89%, of consolidated revenue and direct hire placement revenue of $8,797, or approximately 11%, of consolidated revenue for the nine months ended June 30, 2024. Economic uncertainties, including persistent inflation and the possibility of recession, continued to adversely affect trends and conditions in the U.S. labor markets, which in turn, have continued to negatively impact our results through the nine months ended June 30, 2025. Professional contract staffing services revenues decreased $7,677, or 11%, as compared to the nine months ended June 30, 2024. Professional contract staffing services for the nine months ended June 30, 2025 includes $2,112 of revenues generated by Hornet, which was acquired by the Company effective January 3, 2025. The former light industrial segment revenues of $4,614 and $7,363 for the nine months ended June 30, 2025 and 2024, respectively, have been reclassified as discontinued operations and are no longer included in professional contract staffing services. Direct hire placement revenues for the nine-month periods ended June 30, 2025 decreased $64, or approximately 1%, as compared to the three months ended June 30, 2024. Cost of Contract Services Cost of contract services includes wages and related payroll taxes and employee benefits of our contract services employees, and certain other contract employee-related costs, while working on contract assignments. Cost of contract services for the nine months ended June 30, 2025 decreased by approximately 11% to $48,076 compared to $53,816 for the nine months ended June 30, 2024. The $5,740 overall decrease in cost of contract services is consistent with the decrease in revenues as discussed above. Gross profit percentage by service: Nine Months Ended June 30, 2025 2024 Professional contract services 25.2% 25.2% Direct hire placement services 100.0% 100.0% Combined gross profit margin (a) 34.2% 33.4% (a) Includes gross profit from direct hire placements, for which all associated costs are recorded as selling, general and administrative expenses. Unlike temporary contract staffing services, where we maintain primary responsibility for and control the staff members that we provide to perform services for our clients, direct hire placement revenues are only recognized for the net amount of fees we earned acting under an agency type of relationship. Accordingly, none of our costs associated with direct hire placement services are reportable as costs of services deducted from revenues to derive gross profit. Our combined gross profit margin, including direct hire placement services, for the nine-month periods ended June 30, 2025 and 2024 were approximately 34.2% and 33.4%, respectively. Our professional contract staffing services gross margins were 25.2% for both nine-month periods ended June 30, 2025 and 2024. The net increase in our combined gross margin is mainly attributable to an increase in the mix of direct hire placement revenues, which have a 100% gross margin. 28 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses include the following categories: · Compensation and benefits in the operating divisions, which include salaries, wages and commissions earned by our employment consultants, recruiters and branch managers on permanent and temporary placements; · Administrative compensation, which includes salaries, wages, share-based compensation, payroll taxes, and employee benefits associated with general management and the operation of corporate functions, including principally, finance, human resources, information technology and administrative functions; · Occupancy costs, which includes office rent, and other office operating expenses; · Recruitment advertising, which includes the cost of identifying and tracking job applicants; and · Other selling, general and administrative expenses, which includes travel, bad debt expense, fees for outside professional services and other corporate-level expenses such as business insurance and taxes. Our SG&A for the nine months ended June 30, 2025 decreased by $2,796 as compared to the nine months ended June 30, 2024. SG&A for the nine-month periods ended June 30, 2025 and 2024, as a percentage of revenues, each were approximately 36.5%. The higher percentages of SG&A expenses to revenues , as compared with historical SG&A ratios in the low-to-mid 30% range is mainly attributable to lower revenues in relation to fixed costs, including certain personnel, occupancy and costs associated with applicant tracking systems and job boards. In addition, higher incentive compensation on direct hire placement revenues, which remained relatively level over the current and prior nine-month periods, as contrasted with lower professional contract revenues, contributed to the higher SG&A ratios. These two items were offset by certain cost reductions and productivity improvements made during the nine months ended June 30, 2025. SG&A includes certain non-cash and non-operational costs and expenses incurred related to acquisition, integration, restructuring and other non-recurring activities, such as certain corporate legal and general expenses associated with capital markets activities, that either are not directly associated with core business operations or have been eliminated on a going forward basis. These costs were $385 and $1,041 for the nine-month periods ended June 30, 2025 and 2024, respectively, and include mainly expenses associated with former closed and consolidated locations, legal expenses related to other than routine matters, and personnel costs associated with eliminated positions. Amortization and Depreciation Expense Amortization expense was $655 and $2,159 for the nine-month periods ended June 30, 2025, and 2024, respectively. The significant decline in amortization expense is mainly due to impairment charges recorded during the fiscal year ended September 30, 2024, which substantially reduced the remaining unamortized balances of our identifiable intangible assets and present amortization, accordingly. Depreciation expense was $154 and $201 for the nine-month periods ended June 30, 2025, and 2024, respectively. 29 Table of Contents Intangible Assets Impairment We performed an evaluation of our intangible assets as of June 30, 2024, and determined that certain asset groups associated with our intangible assets including certain customer lists and tradenames were producing negative or sufficiently low gross cash flows that their estimated future discounted cash flows indicated impairments of the remaining unamortized balances. As a result, we recorded a non-cash impairment charge of $5,209 on intangible assets during the nine months ended June 30, 2024. Goodwill Impairment We completed an interim goodwill impairment assessment as of March 31, 2025 and determined that our goodwill was impaired. The estimated fair value of our Professional Services reporting unit decreased as compared to those resulting from the September 30, 2024 annual assessment, indicating that the pre-assessment carrying value as of March 31, 2025 exceeded its estimated fair value. We also completed an interim goodwill assessment as of June 30, 2024 which determined our goodwill was impaired. As a result, non-cash goodwill impairment charges of $22,000 and $14,201 were recognized during the nine-month periods ended June 30, 2025 and 2024, respectively, so that the carrying values of the Professional Services reporting unit reflected its estimated fair value, as determined by the interim evaluations made of our goodwill. Loss from Operations Loss from operations was $(24,537) and $(24,303) for the nine-month periods ended June 30, 2025 and 2024, respectively. This slight increase is due to the increase in non-cash impairment charges included in loss from operations for the nine-month period ended June 30, 2025, as compared with the nine-month period ended June 30, 2024, as well as the other matters discussed in the preceding paragraphs. Interest Expense Interest expense was $267 and $247 for the nine-month periods ended June 30, 2025 and 2024, respectively, and is mainly attributable to unused availability and administrative fees on our Facility. Interest Income Interest income earned was $434 and $548 for the nine-month periods ended June 30, 2025 and 2024, respectively. Interest income is earned on cash balances held in our two brokerage accounts. Provision for Income Taxes We recognized income tax benefit (expense) of $(9,671) and $3,461 for the nine-month periods ended June 30, 2025 and 2024, respectively. Our effective tax rates for the nine-month periods ended June 30, 2025 and 2024 are lower than the statutory rate primarily due to the effect of the valuation allowance on our net DTA position. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. In view of the significance of our recent pre-tax book losses and the likelihood of continuing uncertainty in the industry and economy as a whole, management excluded projections of future income from its forecast of the reversal of our DTAs as of March 31, 2025. As a result, it was determined that our net DTAs would not be realized as there is not sufficient positive evidence to conclude that it is more likely than not that the deferred taxes are realizable. We recorded an additional $12,426 valuation allowance, accordingly, during the nine months ended June 30, 2025. Loss from Discontinued Operations As a result of our Industrial Segment being deemed a discontinued operation, the results of that segment have been reclassified to loss from discontinued operations in the accompanying unaudited condensed consolidated statements of operations. On June 2, 2025, we entered into an agreement to sell certain operating assets of our Industrial Segment and recorded a net gain on sale of $133 during the nine-month period ended June 30, 2025. Loss from discontinued operations, including the net gain recorded upon sale, was $(193) and $(1,308) for the nine-month periods ended June 30, 2025 and 2024, respectively. Consolidated Net Loss Our consolidated net loss was $(34,234) and $(21,849) for the nine-month periods ended June 30, 2025 and 2024, respectively. The increase in consolidated net loss is primarily the result of the increase in non-cash impairment charges, and valuation allowance related to our net deferred tax assets recognized during the nine-month period ended June 30, 2025, as explained in the preceding paragraphs. 30 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity are revenues earned and collected from our clients for the placement of contract employees and independent contractors on a temporary basis and permanent employment candidates and borrowings available under our asset-based senior secured revolving credit facility. Uses of liquidity include primarily the costs and expenses necessary to fund operations, including payment of compensation to our contract and permanent employees, and employment-related expenses, operating costs and expenses, taxes and capital expenditures. The following table sets forth certain consolidated statements of cash flows data, including cash flows from discontinued operations: Nine Months Ended June 30, 2025 2024 Cash flows used in operating activities $ (1,884 ) $ (1,117 ) Cash flows used in investing activities (272 ) (58 ) Cash flows used in financing activities (50 ) (1,701 ) As of June 30, 2025, we had $18,622 of cash, a decrease of $2,206 from $20,828 as of September 30, 2024. As of June 30, 2025, we had working capital of $24,112 compared to $26,079 as of September 30, 2024. The decreases in cash and working capital are mainly attributable to the effects of lower overall business volume during the nine months ended June 30, 2025. In addition, we disbursed $1,100 in cash to the sellers of Hornet and paid related legal and professional fees of $111. We received $712 in cash from the buyer of the Industrial Segment’s assets during the nine-month period ended June 30, 2025. The primary use of cash for investing activities was for the acquisition of Hornet during the nine months ended June 30, 2025. As described under Note 2, on January 3, 2025, we completed the acquisition of 100% of the outstanding common stock of Hornet Staffing, Inc., which is now our wholly owned subsidiary. We paid $1,100 of cash consideration at closing on January 3, 2025, and entered into two 5% uncollateralized subordinated promissory notes with the sellers in the aggregate amount of $400, each payable in two equal annual installments due at the end of the two subsequent years following closing. The purchase price and our obligations under the subordinated promissory notes are subject to reduction in the event Hornet Staffing does not achieve agreed upon profit metrics during the two years subsequent to closing on a dollar-for-dollar basis. The cash flows used in financing activities were primarily for purchases of treasury stock during the nine months ended June 30, 2024, and payments made on finance leases during the nine-month periods ended June 30, 2025 and 2024. We had $6,566 in availability for borrowings under our facility as of June 30, 2025. There were no outstanding borrowings on the Facility as of June 30, 2025, or September 30, 2024, except for certain accrued incidental carrying fees and costs, which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheets. On April 27, 2023, our Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $20 million of our currently outstanding shares of common stock. The share repurchase program continued through December 31, 2023. The repurchase program did not obligate us to repurchase any number of shares of common stock. The share repurchase program was conducted in accordance with Rules 10b-5 and 10b-18 of the Securities Exchange Act of 1934, as amended. Subject to applicable rules and regulations, shares of common stock were purchased from time to time in the open market transactions and in amounts we deemed appropriate, based on factors such as market conditions, legal requirements, and other business considerations. During the nine months ended June 30, 2024, we repurchased 2,717 shares of our common stock at a total cost of $1,575. Upon conclusion of the share repurchase program, as of December 31, 2023, we repurchased 6,129 shares in aggregate (accounting for approximately 5.4% of our issued and outstanding common shares immediately prior to the program). 31 Table of Contents On August 13, 2024, we re-issued 642 of its treasury shares to fulfill commitments for the issuance of previously granted restricted share awards that became fully vested and unrestricted. The treasury shares were reissued in lieu of issuing 642 new shares of our common stock, therefore, while our total number of outstanding shares of common stock increased by 642, its total number of issued shares of common stock did not increase as a result of the reissuance of treasury shares instead. All our office facilities are leased. Minimum lease payments under all our lease agreements for the twelve-month period commencing after the close of business on June 30, 2025, are approximately $1,128. There are no minimum debt service principal payments due during the twelve-month period commencing after the close of business on June 30, 2025. Management believes that we can generate adequate liquidity to meet our obligations for the foreseeable future and at least for the next twelve months. Off-Balance Sheet Arrangements As of June 30, 2025, there were no transactions, agreements or other contractual arrangements to which an unconsolidated entity was a party, under which the Company (a) had any direct or contingent obligation under a guarantee contract, derivative instrument or variable interest in the unconsolidated entity, or (b) had a retained or contingent interest in assets transferred to the unconsolidated entity. Item 3. Quantitative and Qualitative Disclosures About Market Risk . Not applicable.