GEE Group Inc 10-K for FY2023

GEE Group Inc. (JOB)

10-K 2023-12-18 For: 2023-09-30

Added on April 08, 2026

About this 10-K

GEE Group Inc filed this 10-K on December 18, 2023, covering the fiscal year ended September 30, 2023 (FY2023).

Headline figures

Fiscal year ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $152.44M; down 7.7% from $165.11M a year earlier
Net income: $9.42M; down 51.9% from net income of $19.6M a year earlier
Diluted EPS: $0.08; down 52.9% from $0.17 a year earlier

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☒	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the fiscal year ended September 30, 2023

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Illinois		36-6097429
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7751 Belfort Parkway, Suite 150, Jacksonville, FL		32256
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

PART I		Page

Item 1.	Business.	3

Item 1A.	Risk Factors.	11

Item 1B.	Unresolved Staff Comments.	27

Item 2.	Properties.	27

Item 3.	Legal Proceedings.	27

Item 4.	Mine Safety Disclosures.	27

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	28

Item 6.	[Reserved].	29

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	30

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	38

Item 8.	Financial Statements and Supplementary Data.	F-1

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	39

Item 9A.	Controls and Procedures.	39

Item 9B.	Other Information.	39

PART III

Item 10.	Directors, Executive Officers and Corporate Governance.	40

Item 11.	Executive Compensation.	55

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	62

Item 13.	Certain Relationships and Related Transactions, and Director Independence.	65

Item 14.	Principal Accountant Fees and Services.	65

PART IV

Item 15.	Exhibits and Financial Statement Schedules.	66

SIGNATURES		68

	·	Access Data Consulting provides hard-to-find IT talent to customers on a direct hire or contract basis and human resources consulting services and solutions in the higher-end IT vertical including project management support to businesses regionally (Western and Southwestern U.S.) and, to a lesser extent, throughout the rest of the U.S.

	·	Agile Resources delivers unique CIO advisory services, IT project support and human resources solutions regionally (Southeastern U.S.) and, to a lesser extent, nationally in the areas of application architecture and delivery, enterprise operations, digital, information lifecycle management and project management all with flexible delivery options including contract staffing and direct hire.

	·	Ashley Ellis works with C-suite and senior executives to offer full cycle engineering and IT contract staffing services, with a focus on business intelligence, application development and network infrastructure, to clients in the Southeastern U.S. region and, to a lesser extent, throughout the rest of the U.S.

	·	GEE Group (Columbus) primarily provides direct hire placement and contract staffing services in the accounting and engineering verticals, with an emphasis on placing personnel with specialized skills in the mechanical, manufacturing and equipment maintenance areas to clients throughout the Midwestern U.S.

	·	Omni One specializes in technical and professional direct-hire and contract staffing solutions in the manufacturing and engineering verticals for clients primarily located in the Midwestern U.S.

	·	Paladin Consulting primarily provides highly skilled IT professionals on a contract or direct hire basis directly to customers or through RPO, MSP and VMS arrangements and other non-IT staffing solutions to customers nationwide including government contractors who require that the provider of staffing services have required security clearance; such security certification is maintained by Paladin Consulting.

	·	Scribe Solutions provides hospital and free-standing emergency rooms and physician practices in the Southeastern U.S. with highly trained medical scribes for personal assistant work in connection with EMR.

	·	SNI Companies provides human resource solutions, including direct hire and contract staffing, project support and retained search services specializing primarily in the accounting, finance, banking, IT and office support verticals to customers located in major U.S. metropolitan markets, such as Dallas/Fort Worth, Chicago, Denver, Miami, Minneapolis, Princeton, Tampa, Jacksonville, Hartford, Andover and surrounding areas. SNI Companies’ brands include Accounting Now, Staffing Now®, SNI Banking, SNI Certes®, SNI Energy®, SNI Financial®, and SNI Technology®.

	Fiscal
	2023		2022
Professional direct hire placement services		12.7%		16.1%
Professional contract services		78.7%		74.2%
Industrial contract services		8.6%		9.7%

	·	Providing innovative solutions for clients delivered through an enhanced and expanded menu of professional services offerings while increasing the penetration of clients in our existing markets for our IT, finance and accounting, healthcare, engineering and office support verticals;

	·	Entering other fast-growing markets following existing customers who are expanding their operations and cross-selling services by leveraging strategic customer relationships capitalizing on the Company’s national managed services agreements MSA, MSP and VMS relationships;

	·	Expanding our geographic footprint of professional services offerings into new markets believed to possess high growth potential, particularly with regard to our IT brands;

	·	Adding recruiting and sales talent to our existing delivery network to obtain new customers and increase the number of placements made to increase revenue;

	·	Increasing scalability and expanding operating margins through the on-going process of streamlining back office operations, establishing and leveraging regional centers of excellence, improving upon per desk production averages, elimination of duplicative costs among our businesses, and continued realization of economies of scale; and

	·	Capitalizing on hiring opportunities created by volatility in the economic and labor markets by providing on-demand labor to fill the personnel voids of businesses following corporate America’s reactions and resulting on-going realignments since the on-set of the COVID-19 pandemic. As the economy recovers and companies have returned to sustained operations and growth, demand for our services has accelerated, with a particular focus on IT, E-Commerce and Logistics. We expect to continue to capitalize on these opportunities and to explore and innovate others, particularly in IT, including frontier areas such as digital content and information management disciplines.

	·	A focus on IT specialties and other verticals, including cyber security, government and targets in the professional services sectors;

	·	A well-managed business with experienced operators and with high gross profit and EBITDA margins, as well as consistent revenue growth;

	·	Limited enterprise risk and successful due diligence; and

	·	Pricing commensurate with profitability and growth, must be accretive to earnings and consideration generally consisting of a combination of cash, seller and/or bank financing and stock.

	·	Deep experience and vertical specialization and expertise in niche markets;

	·	Invested in robust sales programs and marketing tools and technology and CRM software to successfully target and reach out to potential new customers;

	·	Long-tenured division leaders, business development managers and vertical specialists (e.g., certified public accountants for accounting, tax and financial placements) with deep and relevant staffing industry experience;

	·	Strong and proven capability to deliver outstanding results for our clients under significant time constraints on large-scale projects leveraging our wide office network and experienced project team leaders, including experience with MSP and VMS programs;

	·	Well established strategies and procedures for both temporary and permanent virtual working supported by technology to facilitate communication, recruiting, onboarding and management of the business virtually;

	·	Specialized state-of-the-art databases, applicant tracking systems (“ATS”) and other technology tools that facilitate swift, expert matching of candidates to job requirements providing highly-qualified multiple choices to clients;

	·	Localized decision-making and a lack of a multi-layered bureaucracy which provides for more rapid responses to customized client requests and a streamlined approval process in place for speedy recruitment of personnel; and

	·	Hands-on training with specialized modules for newly hired recruiters and account management personnel.

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

	·	our customers cancel or defer a significant number of staffing requests; or our existing customer agreements expire or lapse and we cannot renew or replace them with similar agreements.

	·	difficulty in integrating the operations, technologies, products and personnel of an acquired business, including consolidating redundant facilities and infrastructure;

	·	potential disruption of our ongoing business and the distraction of management from our day-to-day operations;

	·	difficulty entering markets in which we have limited or no prior experience and in which competitors have a stronger market position;

	·	difficulty maintaining the quality of services that such acquired companies have historically provided;

	·	impact of liabilities of the acquired businesses undiscovered or underestimated as part of the acquisition due diligence;

	·	failure to realize anticipated growth opportunities from a combined business, because existing and potential clients may be unwilling to consolidate business with a single supplier or to stay with the acquirer post acquisition;

	·	impacts of cash on hand and debt incurred to finance acquisitions, thus increasing debt leverage and reducing liquidity for other significant strategic objectives;

	·	internal controls, disclosure controls, corruption prevention policies, human resources and other key policies and practices of the acquired companies may be inadequate or ineffective;

	·	overpayment for the acquired company or assets or failure to achieve anticipated benefits, such as cost savings (“synergies”) and revenue enhancements;

	·	increased expenses associated with completing an acquisition and amortizing any acquired intangible assets;

	·	challenges in implementing uniform standards, accounting policies, customs, controls, procedures and policies throughout an acquired business;

	·	failure to retain, motivate and integrate key management and other employees of the acquired business; and

	·	loss of customers and a failure to integrate and retain customer bases.

	·	discrimination and harassment;

	·	wrongful termination or denial of employment;

	·	violations of employment rights related to employment screening or privacy issues;

	·	classification of temporary workers;

	·	assignment of illegal aliens;

	·	violations of wage and hour requirements;

	·	retroactive entitlement to temporary worker benefits;

	·	errors and omissions by our temporary workers;

	·	release, misuse or appropriation of client intellectual property, or other confidential or other property or proprietary information;

	·	misappropriation of funds;

	·	cybersecurity breaches affecting our clients and/or us;

	·	damage to customer facilities due to negligence of temporary workers; and

	·	criminal misconduct or illegal activity by our temporary workers.

	·	our quarterly or annual operating results and financial position;

	·	adverse market reaction to changes in our indebtedness, if any;

	·	the perceived impact of the present uncertainties in the economy and labor markets on our industry and our own results;

	·	announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, or capital commitments;

	·	litigation and government investigations;

	·	pending acquisitions, if any;

	·	investment recommendations by securities analysts following our business or our industry;

	·	additions or departures of key personnel;

	·	changes in the business, earnings estimates or market perceptions of our competitors;

	·	our failure to achieve operating results consistent with securities analysts’ projections;

	·	future changes in industry, general market or economic conditions; and

	·	changes or proposed changes in laws or regulations or differing interpretations or enforcement of laws or regulations affecting our business.

	·	restrictions on the ability of shareholders to call special meetings of shareholders. Special meetings of our shareholders may be called only by the chairman of the board of directors, our president, a majority of the members of the board of directors, or by one or more shareholders holding shares in the aggregate entitled to cast not less than 20% of the votes at the special meeting;

	·	establishing a staggered board of directors. Our board is divided into three classes, each of which shall serve for a term of three years, with only one class of directors being elected in each year. As a result, successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election;

	·	requiring advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for nominations of candidates for election to our board of directors;

	·	the ability of our board of directors to designate the terms of and issue new series of preferred stock without shareholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors; and

	·	restrictions pursuant to the Illinois Business Corporation Act (the “IBCA”) that prohibit a publicly held Illinois corporation from engaging in a “business combination” with an “interested shareholder” for a period of three years following the time the person became an interested shareholder, unless the business combination or the acquisition of shares that resulted in a shareholder becoming an interested shareholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested shareholder. Generally, an “interested shareholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested shareholder status did own) 15% or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging attempts that might result in a premium over the market price for our stock.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Dollar Value of Shares that May Yet Be Purchased Under the Program (a)
July 1, 2023 - July 31, 2023		584,098	$	0.51		584,098	$	19,245,696
August 1, 2023 - August 31, 2023		809,371		0.60		809,371		18,762,928
September 1, 2023 - September 30, 2023		1,147,615		0.59		1,147,615		18,084,617
		2,541,084				2,541,084

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
Equity compensation plans approved by security holders		5,317,644	$	1.03		7,782,356
Total		5,317,644	$	1.03		7,782,356

Gross Profit percentage by service:
	Fiscal
	2023		2022
Professional contract services		26.1%		26.6%

Industrial contract services		16.5%		15.4%

Consolidated contract services		25.2%		25.3%

Direct hire placement services (1)		100.0%		100.0%

Combined gross profit margin (1)		34.7%		37.4%

	·	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;

	·	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.

		Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of September 30, 2023 and 2022		F-4

Consolidated Statements of Operations for the years ended September 30, 2023 and 2022		F-5

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2023 and 2022		F-6

Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022		F-7

Notes to Consolidated Financial Statements		F-8

	·	Obtained an understanding of management’s process for developing fair value estimates.

	·	Tested the completeness, accuracy, and relevance of underlying data used in the Company’s analysis.

	·	Evaluated the significant management assumptions utilized in the estimated future cash flows by comparing revenues and performance in management’s forecast to periods incurred to-date subsequent to September 30, 2023, and assessed the forecasts of revenues and expenses and the gross margin impact in future periods.

	·	Utilized personnel with specialized knowledge and skills in valuation to assist in: (i) assessing the appropriateness of the fair value methodology and estimation process, (ii) evaluating the reasonableness of certain assumptions used including assessing the appropriateness of the discount rate, industry multiples, and the market comparable assumptions, and (iii) testing the mathematical accuracy and completeness of the discounted cash flow models and the impairment assessment analyses.

	September 30,
ASSETS	2023			2022
CURRENT ASSETS:
Cash	$	22,471		$	18,848
Accounts receivable, less allowances ($680 and $738, respectively)		18,333			22,770
Prepaid expenses and other current assets		847			604
Total current assets		41,651			42,222
Property and equipment, net		846			1,140
Goodwill		61,293			61,293
Intangible assets, net		8,406			11,285
Deferred tax assets, net		7,064			-
Right-of-use assets		3,637			2,830
Other long-term assets		596			784
TOTAL ASSETS	$	123,493		$	119,554

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,762		$	2,958
Accrued compensation		5,464			5,750
Current operating lease liabilities		1,475			1,333
Other current liabilities		1,660			5,538
Total current liabilities		11,361			15,579
Deferred tax liabilities, net		-			528
Noncurrent operating lease liabilities		2,470			1,889
Other long-term liabilities		361			555
Total liabilities		14,192			18,551

Commitments and contingencies (Note 12)

SHAREHOLDERS' EQUITY:
Common stock, no-par value; authorized - 200,000 shares; 114,900 shares issued and 111,489 shares outstanding at September 30, 2023 and 114,450 shares issued and outstanding at September 30, 2022		112,915			112,051
Accumulated deficit		(1,630	)		(11,048	)
Treasury stock; at cost - 3,411 shares at September 30, 2023		(1,984	)		-
Total shareholders' equity		109,301			101,003
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	123,493		$	119,554

	Year Ended September 30,
	2023			2022
NET REVENUES:
Contract staffing services	$	133,051		$	138,507
Direct hire placement services		19,392			26,605
NET REVENUES		152,443			165,112

Cost of contract services		99,571			103,434
GROSS PROFIT		52,872			61,678

Selling, general and administrative expenses		47,577			51,913
Depreciation expense		383			371
Amortization of intangible assets		2,879			3,469
Goodwill impairment charge		-			2,150
INCOME FROM OPERATIONS		2,033			3,775
Gain on extinguishment of debt		-			16,773
Interest expense		(336	)		(377	)
Interest income		472			16
INCOME BEFORE INCOME TAX PROVISION		2,169			20,187
Provision for income tax benefit (expense)		7,249			(588	)
NET INCOME	$	9,418		$	19,599

BASIC EARNINGS PER SHARE	$	0.08		$	0.17
DILUTED EARNINGS PER SHARE	$	0.08		$	0.17

WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC		114,021			114,139
DILUTED		114,715			114,890

	Common										Total
	Stock		Common		Accumulated			Treasury			Shareholders'
	Shares		Stock		Deficit			Stock			Equity
Balance, September 30, 2021		114,100	$	111,416	$	(30,647	)	$	-		$	80,769
Share-based compensation		-		635		-			-			635
Issuance of stock for restricted stock		350		-		-			-			-
Net income		-		-		19,599			-			19,599

Balance, September 30, 2022		114,450	$	112,051	$	(11,048	)	$	-		$	101,003
Purchase of treasury stock		-		-		-			(1,984	)		(1,984	)
Share-based compensation		-		864		-			-			864
Issuance of stock for restricted stock		450		-		-			-			-
Net income		-		-		9,418			-			9,418

Balance, September 30, 2023		114,900	$	112,915	$	(1,630	)	$	(1,984	)	$	109,301

	September 30, 2023			September 30, 2022

Computer software	$	481		$	481
Office equipment, furniture, fixtures and leasehold improvements		3,828			3,739
Total property and equipment, at cost		4,309			4,220
Accumulated depreciation and amortization		(3,463	)		(3,080	)
Property and equipment, net	$	846		$	1,140

	Fiscal 2023		Fiscal 2022
Cash paid for finance lease liabilities	$	194	$	168
Acquisition of equipment with finance lease		-		420

	Fiscal 2023		Fiscal 2022
Weighted average remaining lease term for finance leases	2.8 years		3.3 years
Weighted average discount rate for finance leases		6.6%		7.3%

Fiscal 2024	$	166
Fiscal 2025		108
Fiscal 2026		105
Fiscal 2027		21
Less: Imputed interest		(35	)
Present value of finance lease liabilities (a)	$	365

	Fiscal 2023		Fiscal 2022
Cash paid for operating lease liabilities	$	1,764	$	1,994
Right-of-use assets obtained in exchange for new operating lease liabilities		2,206		294

Fiscal 2024	$	1,669
Fiscal 2025		1,111
Fiscal 2026		699
Fiscal 2027		544
Fiscal 2028		302
Less: Imputed interest		(380	)
Present value of operating lease liabilities (a)	$	3,945

	September 30, 2023							September 30, 2022
	Cost		Accumulated Amortization			Net Book Value		Cost		Accumulated Amortization			Net Book Value
Customer relationships	$	29,070	$	(21,120	)	$	7,950	$	29,070	$	(18,482	)	$	10,588
Trade names		8,329		(7,873	)		456		8,329		(7,632	)		697
Total	$	37,399	$	(28,993	)	$	8,406	$	37,399	$	(26,114	)	$	11,285

	Number of Shares			Weighted Average Fair Value ($)
Non-vested restricted stock outstanding as of September 30, 2021		1,442			0.60
Granted		100			0.53
Vested		(350	)		0.52
Non-vested restricted stock outstanding as of September 30, 2022		1,192			0.61
Granted		742			0.79
Forfeited		(100	)		0.53
Vested		(450	)		0.85
Non-vested restricted stock outstanding as of September 30, 2023		1,384			0.62

	Number of Shares			Weighted Average Exercise Price per share ($)		Weighted Average Fair Value per share ($)		Weighted Average Remaining Contractual Life (Years)		Total Intrinsic Value of Options ($)
Options outstanding as of September 30, 2021		1,672			2.14		1.73		7.35		4
Granted		940			0.59		0.55		-		3
Forfeited		(185	)		1.05		1.91		-		2
Options outstanding as of September 30, 2022		2,427			1.54		1.26		7.65		30
Granted		1,720			0.64		0.52		-		-
Forfeited		(214	)		0.94		0.86		-		3
Options outstanding as of September 30, 2023		3,933			1.18		0.96		7.96		27

Exercisable as of September 30, 2022		1,111			2.58		2.02		5.82		13
Exercisable as of September 30, 2023		2,190			1.64		1.31		6.80		23