What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-12-17 compared with 2024-12-19 · 175 added, 143 removed, 152 unchanged (68% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future performance.

Management’s discussion and analysis (“MD&A”) contains forward-looking statements that are provided to assist in the understanding of anticipated future performance.

However, future performance involves risks and uncertainties which may cause actual results to differ materially from those expressed in the forward-looking statements.

3 unchanged sentences

GEE Group Inc.

and its wholly owned material operating subsidiaries, Access Data Consulting Corporation, Agile Resources, Inc., BMCH, Inc., Paladin Consulting, Inc., Scribe Solutions, Inc., SNI Companies, Inc., Triad Logistics, 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, data entry assistants (medical scribes) who specialize in electronic medical records (EMR) services for emergency departments, specialty physician practices and clinics, and provide temporary staffing services for our industrial clients.

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 staffing and placement services in and near several major U.S.

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 record 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 Company markets its 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 Triad Staffing.

As of September 30, 2024, we operated from locations in eleven (11) states, including twenty-three (23) branch offices in downtown or suburban areas of major U.S.

cities and three (3) additional U.S.

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 Access Data Consulting, Agile Resources, Ashley Ellis, GEE Group (Columbus), General Employment, Hornet Staffing, Omni One, Paladin Consulting, Scribe Solutions, SNI Companies, Accounting Now, Staffing Now®, SNI Banking, SNI Certes®, SNI Energy®, SNI Financial® and SNI Technology®.

As of September 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 Virginia;

(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) two offices and one additional local market presences in Texas;

(iv) three offices and one additional local market presence in Texas;

(v) six offices and one additional local market presence in Florida;

and (vi) seven offices in Ohio.

Management has an on-going business strategy, which includes organic and acquisition growth components.

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 cash flows of the Company.

The Company’s contract and placement services are principally provided under two operating divisions or segments:

Professional Staffing Services and Industrial Staffing Services.

We believe our current segments and array of businesses and brands within our segments complement one another and position us for future growth.

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 in fiscal 2025 and is excluded from results of continuing operations reported in this MD&A, unless otherwise stated.

Results of Operations

1 unchanged sentence

Summary and Outlook

We have incurred a net loss of $(24.1) million for the fiscal year ended September 30, 2024.

The net loss is primarily the result of non-cash impairment charges recognized in the fiscal third quarter ended June 30, 2024, in the aggregate pre-tax amount of $20.5 million, and related declines in business due mainly to negative economic and labor market conditions that began in 2023 and have continued into 2024.

We have incurred a net loss of $(34.7) million for fiscal 2025.

Included in the fiscal 2025 net loss are $22 million in goodwill impairment charges and a $9.6 million provision for income tax expense.

The provision for income tax expense includes $12.0 million in aggregate charges associated with changes in the valuation allowance associated with our deferred tax assets.

The remaining 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 is mixed as to when these conditions may be expected to definitively subside.

On April 18, 2024, we announced that the Mergers and Acquisitions (“M&A”) committee of our Board of Directors had completed its review of strategic alternatives with the assistance of an outside investment banking firm.

Management is now in the process of executing on the Company’s plans and budgets as comprehended in the M&A Committee’s strategic recommendations, which are contemplated to include making prudent investments in both organic and M&A growth.

To effectively navigate this downturn and return to profitability as soon as possible, we implemented a comprehensive three-part strategic initiative aimed at fortifying our market position and driving sustainable growth.

This included (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.

We estimate that the strategic actions we have taken so far will have the effect of reducing our future annualized selling, general and administrative (“SG&A”) expenses by approximately $3.0 million, pre-tax.

It should be noted, however, that due to other potential changes in our SG&A costs in the normal course of business, including the effects of inflation, changes in the volume of business, and others, these cost reductions alone will not necessarily translate into a corresponding equal net reduction in our total future year over year SG&A expenses.

Regarding the second initiative above, Management expects to spend between $500 thousand and $1.0 million on systems and software over the next 12 to 18 months.

Regarding the third initiative above, Management is moving forward with the Company’s M&A target list and is in talks with several entities at this stage.

In addition to these initiatives, the Company also acted timely and prudently in the face of the current downturn and reduced its intangible assets and goodwill through the corresponding recognition of non-cash pre-tax impairment charges of $20.5 million in its fiscal 2024 third quarter ended June 30, 2024.

Although these non-cash charges added significantly to our net loss and reduced the Company’s net book value, accordingly, they did not reduce the Company’s net cash position, tangible assets, or net tangible book value.

The impairment charges associated with intangible assets other than goodwill essentially serve to accelerate future amortization thereby reducing non-cash amortization expense in future periods.

The impairment charges in total also have the effect of reducing the level of intangible assets and goodwill and their associated risks in the Company’s consolidated balance sheet going forward.

The Company paused share repurchases on December 31, 2023, having purchased 6.1 million shares of the Company’s common stock, or just over 5% of our outstanding shares at the beginning of the program.

For now, our Board and Management have determined that it is prudent to discontinue share repurchases at least until we are able to gain more clarity on when the market conditions for the staffing industry will improve.

If and when, we determine that a portion of our excess cash may be prudently utilized for share repurchases in the future, we will consider them once again, accordingly.

Share repurchases will continue to be considered among alternative uses of our excess capital.

However, in the context of our overall long-term growth strategy and goals it is not by itself a long-term growth strategy to achieve long-term growth goals of enterprise value, and therefore, shareholder value.

Evaluation of alternative uses of the Company's capital is an on-going priority and process and decisions always will be made with the objectives being optimizing growth in shareholder value and maximizing shareholder returns.

On August 13, 2024, the Company re-issued 641,666 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 641,666 new shares of our common stock, therefore, while the Company’s total number of outstanding shares of common stock increased by 641,666, its total number of issued shares of common stock did not increase as a result of the reissuance of treasury shares instead.

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 Company also learned at the end of fiscal 2025 that one of its larger accounts was acquired.

As a result, our services were terminated as of October 1, 2025, and replaced by comparable services provided by an affiliate of the acquirer.

This account produced revenues of $9.0 million and $10.0 million during fiscal 2025 and 2024, respectively.

This account contributed approximately $1.0 million and $1.7 million, net of direct expenses, to pre-tax income (loss) from operations during fiscal 2025 and 2024, respectively.

The Company believes other recent additions to our customer base will partially mitigate the loss of this account.

Notwithstanding our fiscal 2025 results, we were able to reduce selling, general, and administrative expenses (“SG&A”) and our operating loss, accordingly, and generate cash flow from operations during fiscal 2025.

Management reduced the Company’s annual SG&A by approximately $3.8 million during fiscal 2025 and remains committed and prepared to make additional cost cuts necessary to restore profitability.

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, and/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.

During fiscal 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 thousand from the buyer at closing and received an additional $788 thousand during the first 90 days following closing.

A pre-tax net gain of $133 thousand, including transaction costs of $97 thousand, is included in discontinued operations for fiscal 2025.

The remaining assets of the Industrial Segment not sold were distributed to the Company.

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

1 unchanged sentence

Professional contract services

Industrial contract services

Total contract services revenues

Direct hire placement services

Consolidated net revenues

Contract staffing services contributed $104,300, or approximately 90%, of consolidated revenue and direct hire placement services contributed $12,183, or approximately 10%, of consolidated revenue for fiscal 2024.

This compares to contract staffing services revenue of $133,051, or approximately 87%, of consolidated revenue and direct hire placement revenue of $19,392, or approximately 13%, of consolidated revenue for fiscal 2023.

Economic weakness and uncertainties, including persistent inflation and the possibility of recession, negatively impacted the Company’s results throughout fiscal 2024.

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.

Professional contract services revenue decreased by $25,293, or 21%.

Industrial staffing services revenues decreased by $3,458, or 27%, mainly due to decreases in orders from clients and competition for orders and temporary labor to fill orders, accordingly.

Direct hire placement revenue for fiscal 2024 decreased by $7,209, or 37%, over fiscal 2023.

Direct hire opportunities tend to be highly cyclical and demand dependent, and may be expected to rise during times of economic recovery and decline during downturns.

Demand for the Company’s direct hire services was higher in fiscal 2023, following record highs in fiscal 2022, driven by post-COVID employment recovery trends at that time, and is down for fiscal 2024 as a result of lingering negative economic conditions.

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

Professional contract staffing services contributed $84,686 or approximately 88% of consolidated revenue and direct hire placement services contributed $11,818, or approximately 12%, of consolidated revenue for fiscal 2025.

This compares to professional contract staffing services revenue of $94,753, or approximately 89%, of consolidated revenue and direct hire placement revenue of $12,183, or approximately 11%, of consolidated revenue for fiscal 2024.

Economic uncertainties, including persistent inflation and high interest rates, continued to adversely affect trends and conditions in the U.S.

labor markets, which in turn, have continued to negatively impact our results through fiscal 2025.

In addition, the proliferation of AI applications and tools across industries is disrupting portions of our economy and impacting hiring plans as business plans and HR needs are reconsidered.

As a result of these trends, professional contract staffing services revenues decreased $10,067, or 11%, as compared to fiscal 2024.

Professional contract staffing services for fiscal 2025 includes $3,375 of revenues generated by Hornet, which was acquired by the Company effective January 3, 2025.

The former Industrial Segment revenues of $4,609 and $9,547 for fiscal 2025 and 2024, respectively, have been reclassified as discontinued operations and are no longer included in continuing operations and contract staffing services revenues, accordingly.

Direct hire placement revenue for fiscal 2025 decreased $365, or approximately 3%, as compared to fiscal 2024.

Direct hire opportunities tend to be highly cyclical and demand dependent and may be expected to rise during times of economic recovery and decline during downturns and periods of uncertainty.

Staffing Industry Analysts (“SIA”), a leading industry trade organization, recently published in its September 2025 U.S.

Staffing Industry Forecast update, that the U.S.

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

Staffing Industry as a whole is expected to decline by 3% in 2025.

This follows a 12% decline already experienced in 2024.

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.

The SIA report cites that the forecasted 2025 decline is expected due to widespread client caution, a slow labor market, reduced employee churn and flat bill rates.

While our businesses service clients of all sizes, a substantial number of our clients are small and medium-sized enterprises (SMEs), which have less financial flexibility to absorb rising costs and higher borrowing expenses, making them more likely to reduce or postpone usage of our services and contract employees.

1 unchanged sentence

Cost of Contract Services

Cost of contract services includes wages and related payroll taxes, employee benefits of the Company's contract services employees, and certain other employee-related costs, while they work on contract assignments.

Cost of contract services includes wages and related payroll taxes, employee benefits of the Company's contract services employees, and certain other contract employee-related costs, while working on contract assignments.

Cost of contract services for fiscal 2025 decreased by approximately 11% to $63,132 compared to $70,794 for fiscal 2024.

The $7,662 decrease in cost of contract services is consistent with the decrease in revenues as discussed above.

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

Gross Profit percentage by service:

Professional contract services

Industrial contract services

Consolidated contract services

Direct hire placement services

1 unchanged sentence

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 the Company maintains primary responsibility for and controls the staff members that it provides to perform services for its clients, direct hire placement revenues are only recognized for the net amount of fees earned by the Company acting under an agency type of relationship.

Accordingly, none of the Company’s costs associated with direct hire placement services are reportable as costs of services deducted from revenues to derive gross profit.

The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for fiscal 2024 was approximately 32.3% versus approximately 34.7% for fiscal 2023.

The substantial portion of the decline in fiscal 2024 compared with fiscal 2023, is mainly due to the corresponding declines in the volume and mix of direct hire placement revenues in fiscal 2024, and lower numbers of job orders and tight labor market conditions on the contract services side, resulting in more competitive conditions and downward pressure on bill rates and spreads, accordingly .

In the professional contract staffing services segment, the gross margin excluding direct placement services was approximately 25.3% for fiscal 2024 compared to approximately 26.1% for fiscal 2023.

The decrease in professional contract staffing services gross margin is due, in part, to increases in contractor pay and other employment costs associated with the recent rise in inflation and competition for orders and candidates, accordingly, resulting in some spread compression.

The Company’s industrial staffing services gross margin for fiscal 2024 was approximately 15.8% as compared with approximately 16.5% for fiscal 2023.

The decrease is driven by competition in the labor market served by the Company’s Industrial segment, as discussed above, requiring the Company offer more competitive rates and contractor pay to win business.

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.

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

Our combined gross profit margin, including direct hire placement services, for fiscal 2025 and 2024 were approximately 34.6% and 33.8%, respectively.

Our professional contract staffing services gross margins for fiscal 2025 and 2024 were approximately 25.5% and 25.3%, 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 slight 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 includes salaries, wages and commissions earned by the Company’s employment consultants, recruiters and branch managers on permanent and temporary placements;

Selling, general and administrative expenses (“SG&A”) 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;

2 unchanged sentences

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.

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

The Company’s SG&A for fiscal 2024 decreased by $6,032 as compared to fiscal 2023.

SG&A for fiscal 2024 as a percentage of revenue was approximately 35.7% versus 31.2% for fiscal 2023.

The increase in SG&A expenses as a percentage of revenues during the fiscal 2024 was primarily attributable to the declines in revenues in relation to the level of fixed SG&A expenses, including fixed personnel-related expenses, occupancy costs, job boards and applicant tracking systems, and to the presence of certain non-cash and/or non-operational and other expenses described below.

SG&A includes certain non-cash costs and expenses incurred related to acquisition, integration and 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.

Our SG&A for fiscal 2025 decreased by $4,185 as compared to fiscal 2024.

SG&A for fiscal 2025 as a percentage of revenues was approximately 36.9% versus 37.2% for fiscal 2024.

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 fiscal years, as contrasted with lower professional contract revenues, contributed to the higher SG&A ratios.

These items were offset by certain cost reductions and productivity improvements made during fiscal 2025.

SG&A includes certain non-cash costs 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 $474 and $1,120 for fiscal 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

Depreciation expense was $301 and $383 for fiscal 2024 and 2023, respectively.

Amortization expense was $857 and $2,363 for fiscal 2025 and 2024, respectively.

The decrease in amortization expense is mainly due to impairment charges recorded during fiscal 2024, which substantially reduced the remaining unamortized balances of our identifiable intangible assets and present amortization, accordingly.

Depreciation expense was $201 and $261 for fiscal 2025 and 2024, respectively.

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

Intangible Assets Impairment

The Company performed an evaluation of its intangible assets as of June 30, 2024, and determined that certain asset groups associated with the Company’s intangible assets including certain customer lists and tradenames are currently producing negative or sufficiently low gross cash flows and that their estimated future discounted cash flows indicate impairments of the remaining unamortized balances.

As a result, the Company recorded a non-cash impairment charge of $5,209 on intangible assets during fiscal 2024.

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 fiscal 2024.

Goodwill Impairment

The Company performs a goodwill impairment assessment at least annually but may perform interim assessments in the event of a triggering event that may indicate the fair value of a reporting unit decreased below its carrying value.

The Company completed its most recent annual assessment as of September 30, 2024, and determined that its goodwill was not impaired.

Prior to this, as of June 30, 2024, an interim assessment was performed due to the decline in operating results and market capitalization experienced in the nine-month period ended June 30, 2024, which in management’s view, represented one or more triggering events that could indicate an impairment in the Company’s goodwill.

The results of this interim assessment indicated the Company’s goodwill assigned to both its Professional and Industrial Services reporting units was impaired.

As a result, the Company reduced its goodwill associated with the Professional and Industrial Services reporting units by $14,202 and $1,083, respectively, with corresponding non-cash impairment charges recognized in its consolidated statements of operations for fiscal 2024.

Upon completion of the prior annual goodwill impairment assessment as of September 30, 2023, it was determined that the Company’s goodwill was not impaired.

For purposes of performing its annual goodwill impairment assessments as of September 30, 2024 and 2023, and the interim testing performed as of June 30, 2024 and March 31, 2024 the Company applied generally accepted valuation methods and techniques in order to estimate the fair value of its Professional and Industrial Services reporting units and considered discounted cash flows, guideline public company results, guideline transactions, revenues and earnings, recent trends in the Company’s stock price, implied control or acquisition premiums, and other possible factors and their effects on estimated fair value of the Company’s reporting units.

The estimated fair value of the Professional Services reporting unit resulting from the September 30, 2024 assessment exceeded the reporting unit’s adjusted carrying value, net of the impairment recorded during the June 30, 2024 interim assessment, by approximately 10%, or approximately $5.5 million.

Should industry conditions remain consistently negative, or worsen, or if assumptions such as control premiums, revenue growth projections, cost of capital or discount rates or business enterprise value multiples change such conditions could result in a deficit of the fair value of the Company’s Professional Services reporting unit as compared to its remaining carrying value, leading to an impairment in the future.

Income (Loss) from Operations

Income (loss) from operations was $(27,057) and $2,033 for fiscal 2024 and 2023, respectively.

This decrease is mainly attributable to the non-cash impairment charges, the decrease in revenues, especially in direct hire placements, and other related items as explained in the preceding paragraphs.

The Company completed its most recent annual assessment as of September 30, 2025 and determined that its goodwill was not further impaired.

Prior to this, as of March 31, 2025, an interim assessment was performed as the estimated fair value of the Professional Services reporting unit was determined to have decreased and indicated that the reporting unit’s carrying value exceeded its estimated fair value.

As a result, a non-cash goodwill impairment charge of $22,000 was recognized during fiscal 2025, as determined by the interim evaluations made of our goodwill as of March 31, 2025.

Our prior annual goodwill impairment assessment as of September 30, 2024 determined that the Company’s goodwill was not further impaired.

However, an interim assessment was also performed due to the decline in operating results and market capitalization experienced during the year which, in management’s view, represented one or more triggering events that could indicate an impairment in the Company’s goodwill.

The interim assessment was performed as of June 30, 2024 and indicated the goodwill assigned to the Professional Services reporting unit was impaired.

A non-cash goodwill impairment charge of $14,201 was recognized during fiscal 2024, as determined by the interim evaluation made of our goodwill as of June 30, 2024.

For purposes of performing our annual goodwill impairment assessments as of September 30, 2025 and 2024, and the interim testing performed as of March 31, 2025 and June 30, 2024, we applied generally accepted valuation methods and techniques in order to estimate the fair value of our Professional Services reporting unit and considered discounted cash flows, guideline public company results, guideline transactions, revenues and earnings, recent trends in our stock price, implied control or acquisition premiums, and other possible factors and their effects on estimated fair value of our reporting unit.

The estimated fair value of the Professional Services reporting unit resulting from the September 30, 2025 assessment exceeded the reporting unit’s adjusted carrying value, net of the impairment recorded during the March 31, 2025 interim assessment, by approximately 39%, or approximately $12.7 million.

Should industry conditions remain consistently negative, or worsen, or if assumptions such as control premiums, revenue growth projections, cost reduction projections, cost of capital or discount rates or business enterprise value multiples change such conditions could result in a deficit of the fair value of our Professional Services reporting unit as compared to its remaining carrying value, leading to an impairment in the future.

Loss from Operations

Loss from operations was $(25,310) and $(25,701) for fiscal 2025 and 2024, respectively.

These losses are primarily the result of the non-cash impairment charges included in loss from operations for fiscal 2025 and 2024.

Excluding these, the $2,981 improvement in fiscal 2025 was attributable to certain cost reductions made by the Company as well as the other matters discussed in the preceding paragraphs.

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

Interest Expense

Interest expense was $322 and $336 for fiscal 2024 and 2023, respectively, and was comprised mainly of fees associated with the Company’s asset-backed credit facility including unused capacity fees, facility administrative charges, and the amortization of related debt issuance costs.

No advances were taken on the Company’s Facility during the fiscal years ended September 30, 2024 and 2023.

Interest expense was $333 and $315 for fiscal 2025 and 2024, respectively, and was comprised mainly of fees associated with our Facility including unused capacity fees, administrative charges, and the amortization of related debt issuance costs.

No advances were taken on our Facility during fiscal 2025 and 2024.

Interest Income

The Company holds a significant portion of its excess cash in interest bearing accounts on which interest income earned was $722 and $472 in aggregate in fiscal 2024 and 2023, respectively.

Interest income earned was $577 and $722 for fiscal 2025 and 2024, respectively.

Interest income is earned on cash balances held in our two brokerage accounts.

Provision for Income Taxes

The Company recognized income tax benefits of $2,555 and $7,249 for fiscal 2024 and 2023, respectively.

The effective tax rate for fiscal 2024 is lower than the statutory rate primarily due to the effect of permanent differences related to the goodwill impairment charge recorded in the third quarter of fiscal 2024 and the change in valuation allowance on the net deferred tax asset (“DTA”) position.

The effective tax rate for 2023 is lower than the statutory rate primarily due to the effect of the change in valuation allowance on the net DTA position.

As of each reporting date, management considers all available evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

As of September 30, 2024, management determined the results of operations for the current and preceding years, and the outlook for future years, may indicate that not all deferred taxes are realizable.

As a result, the Company recorded a partial valuation allowance of $920 during fiscal 2024.

Prior to this, during fiscal 2023, the Company’s previous valuation allowance was fully released in the amount of $7,581 as management determined that there was sufficient positive evidence at that time to conclude that the deferred tax assets were more likely than not to be realized.

Net Income (Loss)

The Company’s net income (loss) was $(24,102) and $9,418 for fiscal 2024 and 2023, respectively.

The decrease of $33,520 is primarily the result of the non-cash impairment charges during fiscal 2024, a substantial increase in net income during the fiscal 2023 as the result of the reduction of the deferred tax assets valuation allowance previously recognized, and decreases in revenues and related net results for fiscal 2024, compared with fiscal 2023, and other related items as explained in the preceding paragraphs.

We recognized income tax (expense) benefit of $(9,588) and $2,619 for fiscal 2025 and 2024, respectively.

Our effective tax rates for fiscal 2025 and 2024 are lower than the statutory rate primarily due to the effect of the valuation allowance on our net deferred tax asset (“DTA”) position and the differences in the U.S.

GAAP and tax basis effects associated with goodwill impairments.

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 September 30, 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 $11,964 valuation allowance during fiscal 2025, resulting in a total valuation allowance of $12,757 as of September 30, 2025, accordingly.

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 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 fiscal 2025.

Loss from discontinued operations, including the net gain recorded upon sale, was $(93) and $(1,427) for fiscal 2025 and 2024, respectively.

Consolidated Net Loss

Our consolidated net loss was $(34,747) and $(24,102) for fiscal 2025 and 2024, respectively.

The increase in consolidated net loss is primarily the result of the provision for income tax expense for fiscal 2025 including the valuation allowance recorded related to our net deferred tax assets, as explained in the preceding paragraphs.

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

Liquidity and Capital Resources

The primary sources of liquidity for the Company are revenues earned and collected from its clients and borrowings available under its 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 the Company’s contract and permanent employees, employment-related expenses, operating costs and expenses, taxes and capital expenditures.

The following table sets forth certain consolidated statements of cash flows data:

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 statement of cash flows data, including cash flows from discontinued operations:

Cash flows provided by operating activities

Cash flows used in investing activities

Cash flows provided by (used in) investing activities

Cash flows used in financing activities

As of September 30, 2024, the Company had $20,828 of cash which was a decrease of $1,643 from $22,471 as of September 30, 2023.

The Company reported $202 and $5,890 in cash flow from operations for the fiscal years ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the Company had working capital of $26,079 compared to $30,290 as of September 30, 2023.

The decrease in working capital is mainly attributable to the use of cash to purchase treasury stock and the effects of lower business volume on other components of working capital during fiscal 2024.

Cash flows provided by operating activities during fiscal 2023 also included the second and final installment payment of deferred payroll taxes under the CARES Act from fiscal 2020 of $1,847.

The primary uses of cash for investing activities were for the acquisition of property and equipment, principally information technology equipment, during fiscal 2024 and 2023.

Investing activities represent capital expenditures and did not include any major or non-routine capital expenditures or capital improvements during either fiscal 2024 or 2023.

The cash flows used in financing activities were for purchases of treasury stock and payments made on finance leases during fiscal 2024 and 2023.

The Company had approximately $8,139 in availability for borrowings under its Facility as of September 30, 2024.

As of September 30, 2025, we had $21,364 of cash, an increase of $536 from $20,828 as of September 30, 2024.

As of September 30, 2025, we had working capital of $23,993 compared to $26,079 as of September 30, 2024.

The decrease in working capital is mainly attributable to the effects of lower overall business volume during fiscal 2025.

The primary source of cash from investing activities during fiscal 2025 was $1,038 in cash received from the buyer of the Industrial Segment’s assets.

The primary use of cash for investing activities during fiscal 2025 was for the acquisition of Hornet.

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 fiscal 2024, and payments made on finance leases during fiscal 2025 and 2024.

We had $4,828 in availability for borrowings under our Facility as of September 30, 2025.

There were no outstanding borrowings on the Facility as of September 30, 2025, or September 30, 2024, except for certain accrued carrying fees and costs, which are included in other current liabilities in the accompanying consolidated balance sheets.

No borrowings have been taken from the Facility during the years ended September 30, 2025 and 2024.

On April 27, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $20 million of the Company’s currently outstanding shares of common stock.

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 the Company to repurchase any number of shares of common stock.

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 the Company deemed appropriate, based on factors such as market conditions, legal requirements, and other business considerations.

During fiscal 2024, the Company repurchased 2,717 shares of its common stock at a total cost of $1,575.

Upon conclusion of the share repurchase program, as of December 31, 2023, the Company had repurchased 6,129 shares in aggregate (accounting for approximately 5.4% of our issued and outstanding shares of common stock immediately prior to the program).

On August 13, 2024, the Company 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.

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 fiscal 2024, we repurchased 2,717 shares of 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 then issued and outstanding shares of common stock immediately prior to the program).

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 the Company’s 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.

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

All the Company’s office facilities are leased.

Minimum lease payments under all the Company’s lease agreements for the twelve-month period commencing after the close of business on September 30, 2024, are approximately $1,329.

All of 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 September 30, 2025, are approximately $1,048.

There are no minimum debt service principal payments due during the twelve-month period commencing after the close of business on September 30, 2025.

Management believes that the Company can generate adequate liquidity to meet its obligations for the foreseeable future and at least for the next twelve months after the date this Annual Report on Form 10-K is filed.

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

Management believes that we can generate adequate liquidity to meet our obligations for the foreseeable future and at least for the next twelve months after the date this Annual Report on Form 10-K is filed.

Off-Balance Sheet Arrangements

13 unchanged sentences

The amendments in ASU 2016-13 replace the probable incurred loss impairment methodology underlying our previous allowance for doubtful accounts with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

During fiscal 2025, the Company elected to use the practical expedient introduced by ASU 2025-05 which simplifies the calculation of these estimates by assuming that current conditions will continue through the forecast period.

Under ASU 2016-13, an allowance is recorded with a corresponding charge to bad debt expense for expected credit losses in our accounts receivable including consideration of the effects of past, present and future conditions that may reasonably be expected to impact credit losses.

12 unchanged sentences

Charges for expected future falloffs are recorded as reductions of revenues for estimated losses due to applicants not remaining employed for the Company’s guarantee period.

In connection with the adoption of ASU 2016-13, the Company reclassified its allowance for falloffs from being combined with the former allowance for doubtful accounts, a contra-asset, to other current liabilities.

This allowance for falloffs is included in other current liabilities.

Estimated future falloffs are determined by analyzing recent historical trends of actual falloffs and applying a formula comprised of average numbers of falloffs, average falloff amounts, and average cycle times between billing and fall off dates to derive an allowance for falloffs.

26 unchanged sentences

As of September 30, 2025 and 2024, no accrued interest or penalties are included on the related tax liability line in the accompanying consolidated balance sheets.

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

The Company evaluates its goodwill for possible impairment as prescribed by FASB ASC 350 , Intangibles — Goodwill and Other:

Goodwill, at least annually and on an interim basis when one or more triggering events or circumstances indicate that the goodwill might be impaired.

Under this guidance, annual or interim goodwill impairment testing is performed by comparing the estimated fair value of a reporting unit with its carrying amount.

An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill.

The Company performed annual goodwill impairment testing effective as of September 30, 2024, as of which time all of its goodwill is allocable to its Professional Services reporting unit for purposes of evaluation for impairment.

As a result of interim goodwill testing as of June 30, 2024, the entire goodwill formerly allocated to the Industrial Services reporting unit was impaired and written off as of that date.

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

The Company performed annual goodwill impairment testing effective as of September 30, 2025 and determined that its goodwill was not further impaired.

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

(1) the income approach, which is based on the present value of discounted cash flows projected for the reporting unit or, in certain instances, capitalization of earnings, and (2) the market approach, which estimates a fair value based on an appropriate revenue and/or earnings multiple(s) derived from comparable companies.

These valuation techniques rely upon assumptions and other factors, such as the estimated future cash flows of our reporting units, the discount rate used to determine the present value of future cash flows, and the market multiples of comparable companies utilized.

In applying our methods, we consider and use averages and medians in the selection of assumptions derived from comparable companies or market data, where applicable, and in the application of the income and/or market approaches if we determine that this will provide a more appropriate estimated fair value or range of fair value estimates of the reporting units.

These valuation techniques rely upon assumptions and other factors, such as the estimated future cash flows of our reporting unit, the discount rate used to determine the present value of future cash flows, and the market multiples of comparable companies utilized.

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

For purposes of performing this goodwill impairment assessment, management applied the valuation techniques and assumptions to its professional and industrial segments as reporting units discussed above;

and also considered recent trends in the Company’s stock price, implied control or acquisition premiums, earnings, and other possible factors and their effects on estimated fair value of the Company’s reporting units.

The estimated fair values of the Company’s reporting units are directly determined by, therefore sensitive to, the underlying assumptions and methods used in deriving them, which are largely subjective in nature.

For purposes of performing this goodwill impairment assessment, management applied the valuation techniques and assumptions to its Professional Services segment as a reporting unit discussed above;

The estimated fair value of the reporting unit is directly determined by, and therefore sensitive to, the underlying assumptions and methods used in deriving them, which are largely subjective in nature.

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

As a result of the evaluation performed, the estimated fair value exceeded the carrying value of its net assets of the Company’s Professional Services reporting unit as of September 30, 2024.

Prior to this, as of June 30, 2024, an interim assessment was performed and indicated the Company’s goodwill assigned to both its Professional and Industrial Services reporting units was impaired.

As a result, the Company reduced its goodwill associated with its Professional and Industrial Services reporting units by $14,202 and $1,083, respectively, with corresponding non-cash impairment charges recognized in its consolidated statements of operations for fiscal 2024.

As a result of the evaluation performed, the estimated fair value of the Professional Services reporting unit exceeded the carrying value of its net assets as of September 30, 2025.

Prior to this, as of March 31, 2025, an interim assessment was performed and indicated the Company’s goodwill assigned to its Professional Services reporting unit was impaired.

An interim assessment performed during fiscal 2024, as of June 30, 2024, also indicated an impairment of the Company’s Professional Services reporting unit.

As a result of these interim assessments, the Company reduced its goodwill by $22,000 and $14,201, with corresponding non-cash impairment charges being recognized in its consolidated statements of operations for fiscal 2025 and 2024, respectively.

Intangible Assets

Separately identifiable intangible assets held in the form of customer relationships and trade names were recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives ranging from five to ten years using the straight-line method.

Separately identifiable intangible assets held in the form of customer relationships, non-competes and trade names were recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives ranging from two to ten years using the straight-line method.

Impairment of Long-lived Assets (other than Goodwill)

1 unchanged sentence

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

For purposes of testing the long-lived assets other than goodwill, long-lived assets are grouped and considered with other assets and liabilities within the Professional and Industrial Services reporting units.

For purposes of testing the long-lived assets other than goodwill, long-lived assets are grouped and considered with other assets and liabilities within the Professional Services reporting unit.

An evaluation as of June 30, 2024 determined that certain asset groups associated with the Company’s intangible assets were producing negative or sufficiently low gross cash flows and that their estimated future discounted cash flows indicated impairments.

6 unchanged sentences

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

See Note 9 for the assumptions used to calculate the fair value of share-based employee and non-employee compensation.

Upon the exercise of options, it is the Company's policy to issue new shares rather than utilizing treasury shares.

Upon the exercise of options, the Company may elect to utilize treasury shares instead of issuing new shares.

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

2 unchanged sentences

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) , which contains authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses.

The guidance requires the application of a current expected credit loss (“CECL”) model, which is a new impairment model based on expected losses.

The new guidance was effective for fiscal years beginning after December 15, 2022.

1 unchanged sentence

The new guidance was implemented during the quarter ended December 31, 2023, is applicable to the Company’s trade (accounts) receivable and did not have a material impact on its consolidated financial statements taken as a whole.

Not Yet Adopte d

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) , which enhances prior reportable segment disclosure requirements in part by requiring entities to disclose significant expenses related to their reportable segments.

1 unchanged sentence

The new guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods during fiscal years beginning after December 15, 2024.

The Company has not yet determined the effects of the implementation of the new guidance on its consolidated financial statements and disclosures.

The new guidance was implemented during the quarter ended September 30, 2025 and did not have a material effect on the Company’s consolidated financial statements and disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326) , which introduces a practical expedient for estimating credit losses under CECL for current accounts receivable and contract assets arising from revenue transactions under ASC 606.

If elected, this expedient allows entities to assume that current conditions at the balance sheet date will persist through the forecast period, simplifying the estimation process.

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

The Company elected to early adopt the expedient during the quarter ended September 30, 2025, which did not have a material impact on the Company’s consolidated financial statements.

Not Yet Adopte d

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) , which expands income tax disclosure requirements in part by requiring entities to disclose a reconciliation of their effective tax rates to statutory rates and provide disaggregation of taxes paid.

1 unchanged sentence

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

The Company does not expect implementation of the new guidance to have a material impact on its consolidated financial statements and disclosures.

The Company has not yet determined the effects of the new guidance on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40) , which expands expense disclosure requirements in part by requiring entities to provide tabular disclosure of the nature of expenses making up relevant captions on the face of the income statement.

2 unchanged sentences

The new guidance is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027.

The Company does not expect implementation of the new guidance to have a material impact on its consolidated financial statements and disclosures.

The Company has not yet determined the effects of the new guidance on its consolidated financial statements and disclosures.

No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis