UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number1-05707

GEE GROUP INC.

(Exact name of registrant as specified in its charter)

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)

(630) 954-0400

(Registrant’s telephone number, including area code)

____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	JOB	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of May ~~11, 2020~~14, 2021 was ~~15,833,038.~~113,500,455.

GEE GROUP INC.

Form 10-Q

For the Quarter Ended March 31, ~~2020~~2021

INDEX

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2726
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	39

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

As a matter of policy, the Company does not provide forecasts of future financial performance. The statements made in this quarterly report on Form 10-Q which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements often contain or are prefaced by words such as "believe", "will" and "expect." These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. As a result of a number of factors, our actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause the Company's actual results to differ materially from those in the forward-looking statements include, without limitation, the negative effects of the Coronavirus Pandemic, including uncertainties regarding economic recovery and changed socioeconomic norms, general business conditions, the demand for the Company's services, competitive market pressures, the ability of the Company to attract and retain qualified personnel for regular full-time placement and contract assignments, the possibility of incurring liability for the Company's business activities, including the activities of its contract employees and events affecting its contract employees on client premises, and the ability to attract and retain qualified corporate and branch management, as well as those risks discussed in the Company's Annual Report on Form 10-K for the year ended September 30, ~~2019,~~2020, and in other documents which we file with the Securities and Exchange Commission. Any forward-looking statements speak only as of the date on which they are made, and the Company is under no obligation to (and expressly disclaims any such obligation to) and does not intend to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Table of Contents

~~PART~~Part I -FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)

~~ITEM 1.~~

~~FINANCIAL STATEMENTS (unaudited)~~

GEE GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In Thousands)

ASSETS

March 31,
2020

September 30,
2019

CURRENT ASSETS:

Cash

$ 2,379

$ 4,055

Accounts receivable, less allowances ($2,250 and $515, respectively)

17,262

20,826

Prepaid expenses and other current assets

1,583

2,221

Total current assets

21,224

27,102

Property and equipment, net

812

852

Goodwill

72,293

72,293

Intangible assets, net

21,086

23,881

Right-of-use assets

5,497

-

Other long-term assets

286

353

TOTAL ASSETS

$ 121,198

$ 124,481

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$ 2,459

$ 3,733

Acquisition deposit for working capital guarantee

183

783

Accrued compensation

5,820

5,212

Short-term portion of term loan, net of discount

-

4,668

Subordinated debt

-

1,000

Current operating lease liabilities

1,616

-

Other current liabilities

1,629

3,172

Total current liabilities

11,707

18,568

Deferred taxes

367

300

Revolving credit facility

15,015

14,215

Term loan, net of discount

40,772

36,029

Subordinated debt

1,000

-

Subordinated convertible debt

(includes $1,428 and $1,269, net of discount, respectively, due to related parties)

18,113

17,954

Noncurrent operating lease liabilities

4,396

-

Other long-term liabilities

159

595

Total long-term liabilities

79,822

69,093

Commitments and contingencies

MEZZANINE EQUITY

Preferred stock; no par value; authorized - 20,000 shares -

Preferred series A stock; authorized -160 shares; issued and outstanding - none

-

-

Preferred series B stock; authorized - 5,950 shares; issued and outstanding - 5,566 and 5,566 at March 31, 2020 and September 30, 2019, respectively; liquidation value of the preferred series B stock is approximately $27,050 and $27,050 at March 31, 2020 and September 30, 2019, respectively

27,551

27,551

Preferred series C stock; authorized - 3,000 shares; issued and outstanding - 144 and 60 at March 31, 2020 and September 30, 2019, respectively; liquidation value of the preferred series C stock is approximately $144 and $60 at March 31, 2020 and September 30, 2019, respectively

144

60

Total mezzanine equity

27,695

27,611

SHAREHOLDERS' EQUITY

Common stock, no-par value; authorized - 200,000 shares; issued and outstanding - 14,557 shares at March 31, 2020 and 12,538 shares at September 30, 2019, respectively

-

-

Additional paid in capital

51,746

49,990

Accumulated deficit

(49,772 )

(40,781 )
Total shareholders' equity

1,974

9,209

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 121,198

$ 124,481

	March 31, 2021			September 30, 2020
ASSETS
CURRENT ASSETS:
Cash	$	14,258		$	14,074
Accounts receivable, less allowances ($473 and $2,072, respectively)		19,014			16,047
Prepaid expenses and other current assets		1,421			1,393
Total current assets		34,693			31,514
Property and equipment, net		851			906
Goodwill		63,443			63,443
Intangible assets, net		16,784			18,843
Right-of-use assets		4,081			4,623
Other long-term assets		386			684
TOTAL ASSETS	$	120,238		$	120,013

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,715		$	2,051
Accrued compensation		5,720			5,506
Current Paycheck Protection Program Loans		8,848			2,243
Current operating lease liabilities		1,600			1,615
Other current liabilities		8,125			6,748
Total current liabilities		26,008			18,163
Deferred taxes		289			430
Paycheck Protection Program loans and accrued interest		10,983			17,779
Revolving credit facility		11,828			11,828
Term loan, net of discount		39,731			37,752
Noncurrent operating lease liabilities		3,246			3,927
Other long-term liabilities		2,221			2,756
Total long-term liabilities		68,298			74,472

Commitments and contingencies

MEZZANINE EQUITY
Preferred stock; no par value; authorized - 20,000 shares -
Preferred series A stock; authorized -160 shares; issued and outstanding - none		-			-
Preferred series B stock; authorized - 5,950 shares; issued and outstanding - none		-			-
Preferred series C stock; authorized - 3,000 shares; issued and outstanding - none		-			-
Total mezzanine equity		-			-
SHAREHOLDERS' EQUITY
Common stock, no-par value; authorized - 200,000 shares; issued and outstanding - 17,667 shares at March 31, 2021 and September 30, 2020		-			-
Additional paid in capital		58,635			58,031
Accumulated deficit		(32,703	)		(30,653	)
Total shareholders' equity		25,932			27,378
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	120,238		$	120,013

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

Table of Contents

GEE GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(In Thousands)

Three Months Ended

Six Months Ended

March 31,

March 31,

2020

2019

2020

2019

NET REVENUES:

Contract staffing services

$ 30,265

$ 31,827

$ 63,342

$ 65,840

Direct hire placement services

4,416

4,350

8,895

8,880

NET REVENUES

34,681

36,177

72,237

74,720

Cost of contract services

22,767

24,459

47,729

50,271

GROSS PROFIT

11,914

11,718

24,508

24,449

Selling, general and administrative expenses (including noncash stock-based compensation expense of $356 and $549, and $953 and $1,130 respectively)

12,800

11,041

24,091

22,279

Depreciation expense

69

101

148

180

Amortization of intangible assets

1,398

1,397

2,795

2,793

LOSS FROM OPERATIONS

(2,353 )

(821 )

(2,527 )

(803 )
Interest expense

(3,065 )

(3,085 )

(6,284 )

(6,033 )
LOSS BEFORE INCOME TAX PROVISION

(5,418 )

(3,906 )

(8,811 )

(6,836 )
Provision for income tax

(10 )

16

(181 )

(506 )
NET LOSS

$ (5,428 )

$ (3,890 )

$ (8,991 )

$ (7,342 )
NET LOSS ATTRIBUTABLE TO COMMON

STOCKHOLDERS

$ (5,428 )

$ (3,890 )

$ (8,992 )

$ (7,342 )

BASIC AND DILUTED LOSS PER SHARE

$ (0.38 )

$ (0.34 )

$ (0.66 )

$ (0.66 )
WEIGHTED AVERAGE NUMBER OF

SHARES - BASIC AND DILUTED

14,262

11,414

13,661

11,047

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2021			2020			2021			2020
NET REVENUES:
Contract staffing services	$	31,063		$	30,265		$	62,311		$	63,342
Direct hire placement services		3,655			4,416			7,050			8,895
NET REVENUES		34,718			34,681			69,361			72,237

Cost of contract services		23,810			22,767			45,873			47,729
GROSS PROFIT		10,908			11,914			23,488			24,508

Selling, general and administrative expenses (including noncash stock-based compensation expense of $293 and $356, and $604 and $953 respectively)		9,179			12,800			18,665			24,091
Depreciation expense		77			69			150			148
Amortization of intangible assets		1,015			1,398			2,059			2,795
INCOME (LOSS) FROM OPERATIONS		637			(2,353	)		2,614			(2,527	)
Gain on extinguishment of debt		279			-			279			-
Interest expense		(2,534	)		(3,065	)		(5,220	)		(6,284	)
LOSS BEFORE INCOME TAX PROVISION		(1,618	)		(5,418	)		(2,327	)		(8,811	)
Provision for income tax expense (benefit)		117			10			(277	)		181
NET LOSS		(1,735	)		(5,428	)		(2,050	)		(8,992	)
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS	$	(1,735	)	$	(5,428	)	$	(2,050	)	$	(8,992	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.10	)	$	(0.38	)	$	(0.12	)	$	(0.66	)
WEIGHTED AVERAGE NUMBER OF
SHARES - BASIC AND DILUTED		17,667			14,262			17,667			13,661

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

Table of Contents

GEE GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

(In Thousands)

Common

Additional

Total

Stock

Paid

Accumulated

Shareholders'

Shares

In Capital

Deficit

Equity

Balance, September 30, 2019

12,538

$ 49,990

$ (40,781 )

$ 9,209

Share-based compensation

-

597

-

597

Issuance of stock for interest

552

402

-

402

Net loss

-

-

(3,563 )

(3,563 )

Balance, December 31, 2019

13,090

$ 50,989

$ (44,344 )

$ 6,645

Share-based compensation

-

356

-

356

Issuance of stock for restricted stock

500

-

-

-

Issuance of stock for interest

967

401

-

401

Net loss

-

-

(5,428 )

(5,428 )

Balance, March 31, 2020

14,557

$ 51,746

$ (49,772 )

$ 1,974

	Common		Additional					Total
	Stock		Paid		Accumulated			Shareholders'
	Shares		In Capital		Deficit			Equity
Balance, September 30, 2020		17,667	$	58,031	$	(30,653	)	$	27,378
Share-based compensation		-		311		-			311
Net loss		-		-		(315	)		(315	)

Balance, December 31, 2020		17,667	$	58,342	$	(30,968	)	$	27,374
Share-based compensation		-		293		-			293
Net loss		-		-		(1,735	)		(1,735	)

Balance, March 31, 2021		17,667	$	58,635	$	(32,703	)	$	25,932

Common

Additional

Total

Stock

Paid

Accumulated

Shareholders'

Shares

In Capital

Deficit

Equity

Balance, September 30, 2018

10,783

$ 44,120

$ (23,018 )

$ 21,102

Share-based compensation

-

581

-

581

Issuance of stock for interest

171

401

-

401

Conversion of preferred Series B to common stock

250

1,238

-

1,238

Net loss

-

-

(3,452 )

(3,452 )

Balance, December 31, 2018

11,204

$ 46,340

$ (26,470 )

$ 19,870

Share-based compensation

-

549

-

549

Issuance of stock for interest

517

402

-

402

Net loss

-

-

(3,890 )

(3,890 )

Balance, March 31, 2019

11,721

$ 47,291

$ (30,360 )

$ 16,931

	Common		Additional					Total
	Stock		Paid		Accumulated			Shareholders'
	Shares		In Capital		Deficit			Equity
Balance, September 30, 2019		12,538	$	49,990	$	(40,781	)	$	9,209
Share-based compensation		-		597		-			597
Issuance of stock for interest		552		402		-			402
Net loss		-		-		(3,563	)		(3,563	)

Balance, December 31, 2019		13,090	$	50,989	$	(44,344	)	$	6,645
Share-based compensation		-		356		-			356
Issuance of stock for restricted stock		500		-		-			-
Issuance of stock for interest		967		401		-			401
Net loss		-		-		(5,428	)		(5,428	)

Balance, March 31, 2020		14,557	$	51,746	$	(49,772	)	$	1,974

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

Table of Contents

GEE GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In Thousands)

Six Months Ended

March 31,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$ (8,991 )

$ (7,342 )
Adjustments to reconcile net loss to cash (used in) provided by operating activities:

Depreciation and amortization

2,943

2,973

Non-cash lease expense

874

-

Stock Compensation expense

953

1,130

Provision for doubtful accounts

1,735

-

Deferred income taxes

67

502

Amortization of debt discount

561

398

Interest expense paid with common and preferred stock

886

803

Change in acquisition deposit for working capital guarantee

(600 )

-

Changes in operating assets and liabilities:

Accounts receivable

1,829

763

Accounts payable

(1,304 )

1,374

Accrued compensation

608

(376 )
Change in other assets, net of change in other liabilities

(1,627 )

2

Net cash (used in) provided by operating activities

(2,066 )

227

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property and equipment

(83 )

(83 )
Net cash used in investing activities

(83 )

(83 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments on term loan

(327 )

(1,687 )
Net proceeds from subordinated debt

-

(107 )
Payments on finance leases

-

(24 )
Net proceeds from revolving credit

800

1,222

Net cash provided by (used in) financing activities

473

(596 )

Net change in cash

(1,676 )

(452 )

Cash at beginning of period

4,055

3,213

Cash at end of period

$ 2,379

$ 2,761

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest

$ 4,836

$ 4,848

Cash paid for taxes

$ 29

$ 95

Non-cash investing and financing activities

Conversion of Series B Convertible Preferred Stock to common stock

$ -

$ 1,238

Right-of-use assets, net of deferred rent

$ 6,371

$ -

Operating lease liability

$ 6,813

$ -

Acquisition of equipment with finance lease

$ 37

$ 49

	Six Months Ended
	March 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,050	)	$	(8,992	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Gain on extinguishment of debt		(279	)		-
Depreciation and amortization		2,209			2,943
Non-cash lease expense		677			874
Stock Compensation expense		604			953
Increase/(decrease) in allowance for doubtful accounts		(359	)		1,735
Deferred income taxes		(141	)		67
Amortization of debt discount		890			561
Interest expense paid with common and preferred stock		-			886
Paid in kind interest on term loan		1,089			-
Change in acquisition deposit for working capital guarantee		-			(600	)
Changes in operating assets and liabilities:
Accounts receivable		(2,608	)		1,829
Accounts payable		(336	)		(1,304	)
Accrued compensation		215			608
Accrued Interest		88			-
Change in other assets, net of change in other liabilities		197			(1,627	)
Cash provided by (used in) operating activities		196			(2,067	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment		(12	)		(83	)
Net cash used in investing activities		(12	)		(83	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on term loan		-			(327	)
Net proceeds from revolving credit		-			800
Net cash provided by financing activities		-			473

Net change in cash		184			(1,677	)

Cash at beginning of period		14,074			4,055

Cash at end of period	$	14,258		$	2,379

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest	$	3,152		$	4,836
Cash paid for taxes		208			29
Non-cash investing and financing activities
Right-of-use assets		135			6,371
Operating lease liability		135			6,813
Acquisition of equipment with finance lease		98			37
Paycheck Protection Program loan forgiveness		279			-

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

Table of Contents

~~GEE~~GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

1. Description of Business

GEE Group Inc. was incorporated in the State of Illinois in 1962 and is the successor to employment offices doing business since 1893. 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. (collectively referred to as the “Company”, “us”, ~~“our’~~“our”, or “we”) 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, engineering, and medical professionals for direct hire and contract staffing for our clients and provide temporary staffing services for our commercial clients.

2. Significant Accounting Policies and Estimates

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six-month period ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending September 30, ~~2020.~~2021. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, ~~2019~~2020 as filed on December ~~23, 2019.~~29, 2020.

Liquidity

The primary sources of liquidity for the Company are revenues earned and collected from its clients for the placement of contractors and permanent employment candidates and borrowings available under the Senior Credit Agreement. Uses of liquidity include primarily the costs and expenses necessary to fund operations, including payment of compensation to the Company’s contract and permanent employees, payment of operating costs and expenses, payment of taxes, payment of interest and principal under its debt agreements, and capital expenditures.

The Company experienced ~~significant~~ net losses for the ~~six-month periods ended March 31, 2020 and 2019,~~first six months of its current fiscal year, and for its most recent fiscal years ended September 30, ~~2019~~2020 and ~~2018,~~2019, which also ~~have~~ negatively impacted the Company’s ability to generate liquidity. During much of this period, the Company significantly restructured its operations, made significant cost reductions, including closing and consolidating unprofitable locations and eliminating underperforming personnel, implemented strategic management changes, and intensified focus on stabilizing the business and restoring profitable growth. As a result, management believes the Company has begun to see its operations and business stabilize. Effective April 28, 2020, the Company successfully negotiated and entered into the Seventh Amendment to the Credit Agreement with its senior lenders. The Seventh Amendment (as defined below) is the most significant modification of the Company’s senior credit facilities since inception and provides several important concessions and features, including extending the maturity by two years to June 30, 2023, and adjusting (reducing) cash debt service and thereby improving the Company’s ability to generate liquidity. Effective May 5, 2020 the Company entered into the Eighth Amendment to the Credit Agreement with its senior lenders (the “Eighth Amendment”) which allowed the Company and its subsidiaries to obtain loans from BBVA USA (“BBVA”) pursuant to the Payroll Protection Plan (the “PPP”) which was established under the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) and administered by the U.S. Small Business Administration (“SBA”).

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from the Coronavirus Pandemic (“COVID-19”). These have included abrupt reductions in demand for the ~~Company~~Company’s primary sources of revenue, its temporary and direct hire placements, lost productivity due to business closings both by clients and at the Company’s own operating locations, and the significant disruptive impacts to many other aspects of normal operations. These effects ~~have and~~ continue to be felt, ~~across all businesses,~~ with the most severe impacts being felt in the ~~commercial (light industrial)~~industrial segment and the finance, accounting and office clerical (“~~FA&O)~~FAO”) end markets within the professional segment.

Between April 29 and May 4,7, 2020, the Company was able to obtain CARES Act relief financing under the Paycheck Protection Program (“PPP Loans”) for each of its operating subsidiaries, in the aggregate amount of ~~$19,926.~~$19,927. These funds ~~are~~were the only source of financing available to our companies and businesses and ~~are~~have been and continue to be absolutely critical to our ability to maintain operations, including the employment of our temporary and ~~full-time~~fulltime employees, in order to produce and meet our foreseeable liquidity requirements in the midst of this continuing worldwide ~~pandemic.~~Coronavirus Pandemic.

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~~GEE~~GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

On April 19, 2021, the Company concluded its public offering of 83,333 shares of common stock at a public offering price of $0.60 per share. Gross proceeds of the offering totaled $50,000, which after deducting the underwriting discount, legal fees, and offering expenses, resulted in net proceeds of $45,630. On April 27, 2021, the underwriters of the Company’s April 19, 2021 public offering exercised, in full, their 15% over–allotment option to purchase an additional 12,500 common shares (the “option shares”) of the Company at the public offering price of $0.60 per share. The Company closed the transaction on April 28, 2021 and received net proceeds from the sale of the option shares of approximately $6,937, after deducting the applicable underwriting discount. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.

On April 20, 2021, as the result of the completion of the public offering, the Company repaid $56,022 in aggregate outstanding indebtedness under its existing Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, including accrued interest, using the net proceeds of its recent underwritten public offering and available cash. The repaid debt was originally obtained from investors led by MGG Investment Group LP (“MGG”) on April 21, 2017 and had a maturity date of June 30, 2023. The MGG debt was comprised of a revolving credit facility with a principal balance on the date of repayment of approximately $11,828, which was subject to an annual interest rate comprised of the greater of the London Interbank Offering Rate ("LIBOR") or 1%, plus a 10% margin (approximately 11% per annum), and a term loan with a principal balance on the date of repayment of approximately $43,735, which was subject to an annual interest rate of the greater of LIBOR or 1% plus a 10% margin. The term loan also had an annual payment-in-kind ("PIK") interest rate of 5% in addition to its cash interest rate, which was being added to the term loan principal balance (cash and PIK interest rate combined of approximately 16% per annum). Accrued interest of approximately $459 was paid in connection with the principal repayments.

As of March 31, 2021, the Company had cash of $14,258, which was an increase of $184 from $14,074 at September 30, 2020. Working capital at March 31, 2021 was approximately $8,685, as compared to working capital of approximately $13,351 for September 30, 2020.

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

AsPaycheck Protection Program Loan

Between April 29 and May 7, 2020, the Company and eight of its operating subsidiaries obtained loans in the aggregate amount of $19,927 from BBVA USA (“BBVA”), as lender, pursuant to the Payroll Protection Plan (the “PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). These funds were the only source of financing available to our companies and businesses and have been and continue to be critical to our ability to maintain operations, including the employment of our temporary and full-time employees, in order to provide our services and meet our foreseeable liquidity requirements in the midst of this continuing worldwide Coronavirus Pandemic. The Company accounted for the PPP loans as a debt (See Note 8) in accordance with Accounting Standards Codification (“ASC”) Topic 470 Debt. Accordingly, the PPP loans are recognized as current and noncurrent debt in the Company’s accompanying unaudited condensed consolidated financial statements.

The Company and its operating subsidiaries are in the process of submitting of applications for forgiveness of their respective outstanding PPP loans as their lender, BBVA USA, that provides access through its electronic portal allowing the Company to submit its applications and related documentation. Management believes that the Company qualifies and is eligible for forgiveness of its loans based on existing available guidance; however, some relatively complex questions and matters of interpretation remain to be determined or decided upon by the SBA or possibly other governmental or legislative actions that cannot be fully predicted or even fully anticipated at this stage. Therefore, there can be no assurance that the Company or its operating subsidiaries will ultimately achieve forgiveness in whole or in part of its outstanding PPP loans. Accordingly, the Company and its operating subsidiaries continue to account for their PPP loans as outstanding debt in the accompanying unaudited condensed consolidated financial statements. During February 2021, the Company’s subsidiary, Scribe Solutions, Inc., was notified by the SBA that its total outstanding PPP Loan and accrued interest in the amount of $279 were forgiven.

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, also was eligible to defer paying $3,692 of applicable payroll taxes as of March 31, ~~2020,~~2021, which is included in long and short-term liabilities in the ~~Company had cash~~accompanying unaudited condensed consolidated financial statements. The deferred deposits of ~~approximately $2,379, which was~~the employer’s share of Social Security tax must be paid to be considered timely (and avoid a ~~decrease~~failure to deposit penalty) by December 31, 2021, fifty (50) percent of ~~approximately $1,676 from approximately $4,055 at September 30, 2019. Working capital at March~~the eligible deferred amount, and the remaining amount by December 31, ~~2020 was approximately $9,517, as compared to working capital of approximately $8,534 for September 30, 2019.~~2022.

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GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts and transactions of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation.

Use of Estimates

~~Management makes~~The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X requires management to make estimates and assumptions that ~~can~~ affect the reported amounts of assets and liabilities ~~reported as~~and the disclosure of contingent assets and liabilities at the date of the ~~unaudited condensed consolidated~~ financial statements ~~as well as~~and the reported amounts of ~~reported~~ revenues and expenses during the ~~periods presented. Those estimates and assumptions typically involve expectations about events to occur subsequent to the balance sheet date, and it is possible that actual~~reporting period. Actual results could ~~ultimately~~ differ from ~~the~~those estimates.

In March 2020, the World Health Organization announced that a novel strain of coronavirus (“COVID-19”) had become pandemic. The COVID-19 had a significant impact on global economies as a result of Federal and Local orders and business closures designed to stop the spread of the virus. We are continuing to monitor developments related to COVID-19 pandemic and related risks including risks related to efforts to mitigate the disease’s spread. The rapid development and fluidity of recent events related to the pandemic creates uncertainty regarding to the ultimate impact on the Company’s results of operations, financial condition, and liquidity. Due to uncertainties related to duration and severity of COVID-19, we may make changes in the judgments and estimates needed to apply the Company’s significant accounting policies that could result in significant impacts on the Company’s financial statements in future periods. Actual results and outcomes may differ from management’s estimates and assumptions.

Revenue Recognition

Revenues from contracts with customers are generated ~~through the following services:~~from direct hire placement services, ~~temporary~~ professional contract services, ~~staffing,~~ and ~~temporary light~~ industrial ~~staffing.~~contract services. Revenues are recognized when promised services are performed for customers, and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Our revenues are recorded net of variable consideration such as sales adjustments or allowances.

Direct hire placement service revenues from contracts with customers are recognized when employment candidates accept offers of employment, less a provision for estimated credits or refunds to customers as the result of applicants not remaining employed for the entirety of the Company's guarantee period (referred to as “falloffs”). The Company’s guarantee periods for permanently placed employees generally range from 60 to 90 days from the date of hire. Fees associated with candidate placement are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates.

Temporary staffing service revenues from contracts with customers are recognized in amounts ~~for which~~ the Company has a right to invoice as the services are rendered by the Company’s temporary employees. The Company records temporary staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company controls the specified service before that service is performed for a customer. The Company has the risk of identifying and hiring qualified employees (as opposed to client employees), has the discretion to select the employees and establish their price, and bears the risk for services that are not fully paid for by customers.

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~~GEE GROUP INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

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

Falloffs and refunds during the period are reflected in the unaudited condensed consolidated statements of operations as a reduction of placement service revenues and were approximately $470 and $773, and $400 and $700 ~~and $600 and $1,300~~ for the three and six-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Expected future falloffs and refunds are reflected in the unaudited condensed consolidated balance sheet as a reduction of accounts receivable as described under Accounts Receivable, below.

See Note 1415 for disaggregated revenues by segment.

Payment terms in our contracts vary by the type and location of our customer and the services offered. The terms between invoicing and when payments are due are not significant.

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GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Cost of Contract Staffing Services

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

Cash and Cash Equivalents

Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. As of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, there were no cash equivalents. The Company maintains deposits in financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances.

Accounts Receivable

The Company extends credit to its various customers based on evaluation of the customer’s financial condition and ability to pay the Company in accordance with the payment terms. An allowance for placement ~~fall-offs~~falloffs is recorded as a reduction of revenues for estimated losses due to applicants not remaining employed for the Company’s guarantee period. An allowance for doubtful accounts is recorded as a charge to bad debt expense where collection is considered to be doubtful due to credit issues. These allowances taken together reflect management’s estimate of the potential losses inherent in the accounts receivable balances based on historical loss statistics and known factors impacting ~~its customers. The~~our clients. Management believes that the nature of the contract ~~service~~services business, ~~where~~wherein client companies are generally dependent on our contract employees in the same manner as permanent employees for their production cycles and the ~~production cycle allows for~~conduct of their respective businesses contributes to a relatively small accounts receivable allowance.

As of March 31, ~~2020,~~2021, and September 30, ~~2019,~~2020, the allowance for doubtful accounts was ~~$2,250~~$473 and ~~$515,~~$2,072, respectively. The Company charges off uncollectible accounts once the invoices are deemed unlikely to be collectible. The allowance also includes permanent placement falloffs of ~~$287~~$326 and ~~$197~~$287 as of March 31, ~~2020~~2021 and September 30, ~~2019.~~2020, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation expense is calculated on a straight-line basis over estimated useful lives of five years for computer equipment and two to ten years for office equipment, furniture and fixtures. The Company capitalizes computer software purchased or developed for internal use and amortizes it over an estimated useful life of five years. The carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that it may not be recoverable. If the carrying amount of an asset group is greater than its estimated future undiscounted cash flows, the carrying value is written down to the estimated fair value. There was no impairment of property and equipment for the six-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Leases

The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s unaudited condensed consolidated balance sheet. The Company evaluates and classifies leases as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All the Company’s real estate leases are classified as operating leases.

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~~GEE GROUP INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

~~(Amounts in thousands except per share data, unless otherwise stated)~~ Also, the Company elected the practical expedient which allows aggregation of non-lease components with the related lease components when evaluating accounting treatment.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The lease payments included in the present value are fixed lease payments. As most of the Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments. The Company applies the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments made before the commencement date. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not currently have subleases. The Company also does not currently have residual value guarantees or restrictive covenants in its leases.

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GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Goodwill

~~In 2019, the~~The Company ~~adopted~~evaluates its goodwill for possible impairment as prescribed by ASU 2017-04, Intangibles — Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment ~~which simplifies~~at least annually and when one or more triggering events or circumstances indicate that the ~~subsequent measurement of~~ goodwill ~~by eliminating the second step from the quantitative goodwill impairment test.~~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. In testing for impairments, management applies one or more valuation techniques to estimate the fair values of the reporting units, individual assets or groups of individual assets, as required under the circumstances. These valuation techniques rely on assumptions and other factors, such as the estimated future cash flows, the discount rates used to determine the present value of associated cash flows, and the market comparable assumptions.

~~Due~~The Company allocates its goodwill among two reporting units, its Professional segment and its Commercial segment for purposes of evaluation for impairments. In determining the fair value of our two reporting units, we use one or a combination of commonly accepted valuation methodologies: 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. In applying our methods, we also use averages or medians to select assumptions derived from comparable companies or market data, and in the ~~recent decline in global economic and labor market conditions caused by the global outbreak~~application of the ~~COVID-19 pandemic,~~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. Changes to input assumptions and other factors used or considered in the analysis could result in materially different evaluations of goodwill impairment.

The Company considered and reviewed the recoverability of its goodwill ~~and determined,~~ during the ~~three-month~~six-month period ended March 31, 2021 and 2020 and determined that no impairment charge was necessary. ~~There were~~In reaching its conclusion, management determined that no ~~other~~triggering events or other circumstances ~~that~~ have occurred or changed since the ~~last~~Company’s most recent annual ~~test~~evaluation as of September 30, 2020, that ~~could more likely than not reduce~~indicate the ~~fair value~~carrying values of the Company’s reporting segments ~~below~~are higher than their respective fair values. Management also considered the Company’s market capitalization as recently reported on the NYSE American exchange and determined that when adjusted for the assumption of a reasonable control premium over exchange pricing, exceeded its ~~carrying values.~~consolidated net book value (consolidated stockholders’ equity) as of March 31, 2021 and 2020.

Fair Value Measurement

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement”, which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure. Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the ~~circumstances.~~circumstances when observable inputs are not available. The hierarchy is described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

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GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

The fair value of the Company’s current assets and current liabilities approximate their carrying values due to their short-term nature. The fair value disclosures of the Company’s long-term liabilities ~~approximates the~~approximate their respective fair ~~value~~values based on current yield for debt instruments with similar terms. ~~The~~Fair value measurements utilized in evaluating the Company’s goodwill and other intangible assets for impairments are measured at fair value on a non-recurring basis using principally Level 3 ~~inputs, as discussed in Note 6.~~

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~~GEE GROUP INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

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

Earnings and Loss per Share

Basic earnings and loss per share isare computed by dividing net income or loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted ~~loss~~earnings per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the vesting of restricted shares granted but unissued, exercise of stock options and warrants and the conversion of notes payable and preferred stock to common stock. ~~In periods~~The dilutive effect of outstanding warrants and options is reflected in ~~which a net loss has been incurred, all potentially~~earnings per share by use of the treasury stock method. The dilutive ~~common shares are considered anti-dilutive and thus are excluded from~~effect of preferred stock is reflected in earnings per share by use of the ~~calculation.~~if-converted method.

Common stock equivalents ~~which are excluded because their effect is anti-dilutive, were~~representing approximately 2,745 and 2,768, and 13,263 and 13,632 ~~and 11,713 and 11,737~~shares are excluded from the Company’s loss per share calculations for the three and six-month periods ended March 31, 2021 and 2020, ~~and 2019, respectively.~~respectively, because their effects are anti-dilutive.

Advertising Expenses

The Company expenses the costs of print and internet media advertising and promotions as incurred and reports these costs in selling, general and administrative expenses. For the three and six-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, advertising expense totaled $458 and $882, and $553 and $1,037 ~~and $576 and $1,148~~ respectively.

Intangible Assets

Separately identifiable intangible assets held in the form of customer lists, non-compete agreements, customer relationships, management agreements 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 both accelerated and straight-line methods.

Impairment of Long-lived Assets (other than Goodwill)

The Company recognizes an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not recognize and record any impairments of long-lived assets used in operations during the six-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

~~Beneficial Conversion Feature~~

The Company evaluates embedded conversion features within a convertible instrument under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require treatment under ASC 815, the instrument is evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial feature.

The Company records a beneficial conversion feature (“BCF”) when the convertible instrument is issued with conversion features at fixed or adjustable rates that are below market value when issued. The BCF for convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.

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~~GEE GROUP INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

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

The BCF for the convertible instrument is recorded as a reduction, or discount, to the carrying amount of the convertible instrument equal to the fair value of the conversion feature. The discount is then amortized as interest or deemed dividends over the period from the date of the convertible instrument’s issuance to the earliest redemption date, provided that the convertible instrument is not currently redeemable but probable of becoming redeemable in the future.

Stock-Based Compensation

The Company accounts for stock-based awards to employees in accordance with FASB ASC 718, “Compensation-Stock Compensation”, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton ("Black-Scholes") pricing model. For all employee stock options, we recognize expense on an accelerated basis over the employee's requisite service period (generally the vesting period of the equity grant). The Company's option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility, expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact our stock-based compensation expense.

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GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with FASB ASC 718, “Compensation-Stock Compensation”. Such options are valued using the Black-Scholes option pricing model.

See Note 1011 for the assumptions used to calculate the fair value of stock-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.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50fifty (50) percent likely to be realized upon ultimate settlement with the related tax authority.

We recognize ~~and group~~ interest and penalties ~~if any, with~~related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statement of operations. As of March 31, ~~2020, and September 30, 2019,~~2021, no ~~material~~ accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.

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~~GEE GROUP INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

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

Segment Data

The Company provides ~~the following distinctive services: (a)~~ direct hire placement services and ~~(b)~~ temporary professional contract staffing services ~~staffing~~ in the fields of information technology, ~~engineering, medical, and~~finance, accounting and ~~(c) temporary~~office (“FA&O”), engineering, and medical within its Professional Services segment, and industrial contract ~~light industrial staffing.~~services within its Industrial Services segment. The Company’s revenues, cost of services and a substantial portion of its operating costs and expenses can be divided into these two reportable ~~segments, Industrial Staffing Services and Professional Staffing Services.~~segments. Selling, general and administrative (“SG&A”) expenses, including substantially all corporate expenses, are not entirely allocated among Industrial and Professional Staffing Services. Operating results are regularly reviewed by the chief operating decision ~~maker to~~makers at each segment who make decisions about resources to be allocated to the segment and to assess its performance. Other factors, including type of business, type of employee, length of employment and revenue recognition are considered in determining the Company’s operating segments.

~~Reclassifications~~

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~~Certain amounts~~GEE GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in ~~the prior period presentation have been reclassified to conform with the current presentation.~~thousands except per share data, unless otherwise stated)

3. New Accounting Pronouncements

Recently ~~Adopted Accounting Pronouncements~~

~~Lease Accounting~~. In February 2016, the FASB issued ASU 2016-02, Leases (“ASC 842”), which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous ASC 840 guidance. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. We adopted this guidance as of October 1, 2019 and elected the transition method provided under ASU 2018-11. This standard has a material effect on our consolidated balance sheets with the recognition of new right of use assets and lease liabilities for all operating leases, except for those leases where we elected the short-term lease recognition exemption, as these leases have a non-cancelable lease term of approximately one year or less. Adoption of the new standard did not have a material effect on the Company’s results of operations. As of the transition date, the ROU asset and total lease liability (current and long-term) were $5,900 and $6,341, respectively.

The Company elected the package of practical expedients available under the transition provisions of the new lease standard, including (i) not reassessing whether expired or existing contracts contain leases, (ii) lease classification, and (iii) not revaluing initial direct costs for existing leases. Also, the Company elected the practical expedient which allows aggregation of non-lease components with the related lease components when evaluating accounting treatment. Lastly, the Company applied the modified retrospective adoption method, utilizing the simplified transition option available in the ASC 842, which allows entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. See Note 5 for further discussion of leases.

~~Stock Compensation~~. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (“ASC 718”), which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted (but no sooner than the adoption of Topic 606). The Company adopted the new guidance as of October 1, 2019. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

~~Recently~~ Issued Accounting Pronouncements Not Yet Adopted

Current Expected Credit Losses Model. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-CreditLosses (“ASC 326”), 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 new guidance is effective for interim and annual reporting periods beginning after December 15, 2022. The Company has not yet determined the impact of the new guidance on its consolidated financial statements and related 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.

~~Table of Contents~~

~~GEE GROUP INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

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

4. Property and Equipment

Property and equipment, net consisted of the following:

March 31,
2020

September 30,
2019

Computer software

$ 1,497

$ 1,497

Office equipment, furniture, fixtures and leasehold improvements

3,687

3,599

Total property and equipment, at cost

5,184

5,096

Accumulated depreciation and amortization

(4,372 )

(4,244 )
Property and equipment, net

$ 812

$ 852

March 31,
2021

September 30,
2020

Computer software

$ 462

$ 1,535

Office equipment, furniture, fixtures and leasehold improvements

3,037

3,595

Total property and equipment, at cost

3,499

5,130

Accumulated depreciation and amortization

(2,648 )

(4,224 )
Property and equipment, net

$ 851

$ 906

Depreciation expense for ~~each~~ three and six-month periods ended March 31, 2021 and 2020 was $77 and ~~2019 was approximately~~$150, and $69 and $148 ~~and $101 and $180~~ respectively.

5. Leases

The Company leases space for all its branch offices, which are generally located either in downtown or suburban business centers, and for its corporate headquarters. Branch offices are generally leased over periods ranging from three to five years. The corporate office lease expires in ~~2020.~~2021. The Company’s leases generally provide for payment of basic rent plus a share of building real estate taxes, maintenance costs and utilities.

Operating lease expenses ~~was approximately~~were $562 and $1,123, and $611 and $1,270 ~~and $700 and $1,500~~ for the three and six-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

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

Three Months Ended
March 31,
2020

Cash paid for operating lease liabilities

$ 489

Right-of-use assets obtained in exchange for new operating lease liabilities

$ 471

Six Months Ended
March 31,

2021

2020

Cash paid for operating lease liabilities

$ 947

1,044

Right-of-use assets obtained in exchange for new operating lease liabilities

$ 135

471

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

March 31,
~~2020~~2021

Weighted average remaining lease term for operating leases

~~2.8 years~~
2.6

Weighted average discount rate for operating leases

6.0 %


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Table of Contents

~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, ~~2020,~~2021, including certain closed offices are as follows:

Remainder of Fiscal 2020

$ 1,029

Fiscal 2021

1,744

Fiscal 2022

1,620

Fiscal 2023

1,095

Fiscal 2024

831

Thereafter

449

Less: Imputed interest

(756 )
Present value of operating lease liabilities (a)

$ 6,012

Remainder of Fiscal 2021

$ 930

Fiscal 2022

1,735

Fiscal 2023

1,208

Fiscal 2024

918

Fiscal 2025

434

Thereafter

108

Less: Imputed interest

(487 )
Present value of operating lease liabilities (a)

$ 4,846

______________
(a)     Includes current portion of ~~$1,616~~$1,600 for operating leases.
6. Intangible Assets
The following tables set forth the costs, accumulated amortization and net book value of the Company’s separately identifiable intangible assets as of March 31, ~~2020~~2021 and September 30, ~~2019~~2020 and estimated future amortization expense.

March 31, 2020

September 30, 2019

March 31, 2021

September 30, 2020

Cost

Accumulated Amortization

Net Book Value

Cost

Accumulated Amortization

Net Book Value

Cost

Accumulated Amortization

Net Book Value

Cost

Accumulated Amortization

Net Book Value

Customer relationships

$ 29,070

$ 11,754

$ 17,316

$ 29,070

$ 10,321

$ 18,749

$ 29,070

$ 14,525

$ 14,545

$ 29,070

$ 13,188

$ 15,882

Trade names

8,329

4,669

3,660

8,329

3,958

4,371

8,329

6,090

2,239

8,329

5,379

2,950

Non-Compete agreements

4,331

4,221

110

4,331

3,570

761

4,331

4,331

-

4,331

4,320

11

Total

$ 41,730

$ 20,644

$ 21,086

$ 41,730

$ 17,849

$ 23,881

$ 41,730

$ 24,946

$ 16,784

$ 41,730

$ 22,887

$ 18,843

Estimated Amortization Expense

Estimated Amortization Expense

Remaining Fiscal 2020

$ 2,243

Fiscal 2021

4,088

Fiscal 2022

3,469

Fiscal 2023

2,879

Fiscal 2024

2,879

Thereafter

5,528

$ 21,086

Remaining Fiscal 2021

$ 2,029

Fiscal 2022

3,469

Fiscal 2023

2,879

Fiscal 2024

2,879

Fiscal 2025

2,741

Thereafter

2,787

$ 16,784

The trade names are amortized on a straight – line basis over ~~the~~their respective estimated useful ~~life~~lives of between five and ten years. Intangible assets that represent customer relationships are amortized on the basis of estimated future undiscounted cash flows or using the straight – line basis over estimated remaining useful lives of five to ten years. Non-compete agreements are amortized based on a straight-line basis over the term of the respective ~~noncompete~~non-compete agreements, which are typically five years in duration.

The amortization expense for intangible assets was ~~approximately~~$1,015 and $2,059, and $1,398 and $2,795 ~~and $1,397 and $2,793~~ for three and six-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

7. Revolving Credit Facility and Term Loan

Revolving Credit, Term Loan and Security Agreement
The Company and its subsidiaries, as borrowers, ~~are~~were parties to a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with certain investment funds managed by MGG Investment Group LP ("MGG"). The Revolving Credit Facility and Term Loan under the Credit Agreement, as amended, ~~mature~~had maturity date on June 30, ~~2023.~~2023 and its principal and remaining unpaid accrued interest balances were fully repaid on April 20, 2021.

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~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

Revolving Credit Facility

As of March 31, ~~2020,~~2021, the Company had ~~$15,015~~$11,828 in outstanding borrowings under the MGG Revolving Credit Facility, of which ~~approximately $14,958~~ was at an interest rate of approximately 11%~~, and approximately $57 was at an interest rate of approximately 17.25%~~.
~~As of March 31, 2020,~~ On April 20, 2021, the Company ~~had approximately $100 available on~~fully repaid all outstanding principal and accrued interest outstanding under the MGG Revolving Credit ~~facility.~~
The Revolving Credit Facility is secured by all the Company’s property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title or interests.Facility.

Term Loan

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

March 31,
2020

September 30,
2019

Term loan

$ 41,578

$ 41,905

Unamortized debt discount

(806 )

(1,208 )
Term loan, net of discount

40,772

40,697

Short term portion of term loan, net of discounts

-

4,668

Long term portion of term loan, net of discounts

$ 40,772

$ 36,029

The Term Loan is payable as follows, subject to acceleration upon the occurrence of an Event of Default under the Credit Agreement or termination of the Credit Agreement and provided that all unpaid principal, accrued and unpaid interest and all unpaid fees and expenses shall be due and payable in full on June 30, 2023. Principal payments are required as follows: fiscal 2020 – $0, fiscal 2021- $889, fiscal 2022 – $1,779, and fiscal 2023 - $38,910.
The Company also was required to prepay the outstanding amount of the Term Loan in an amount equal to the Specified Excess Cash Flow Amount (as defined in the agreement) for the immediately preceding fiscal year, commencing with the fiscal year ending September 30, 2019 (refer to ~~Seventh Amendment to Credit Agreement~~~~, below, and Note 15. Subsequent Events.). The Company does not owe any amount as of March 31, 2020.~~

March 31,
2021

September 30,
2020

Term loan

$ 43,735

$ 42,646

Unamortized debt discount

(4,004 )

(4,894 )
Term loan, net of discount

39,731

37,752

Short term portion of term loan, net of discounts

-

-

Long term portion of term loan, net of discounts

$ 39,731

$ 37,752

As of March 31, ~~2020,~~2021, the Company had ~~$41,578~~$43,735 in outstanding borrowings under the Term Loan Facility that ~~have~~was at an ~~annual cash~~ interest ~~rate~~ of approximately 11%, plus additional interest at an annual rate of 5% in the form of PIK (noncash, paid-in-kind), which accrues and is added to the balance of the Term Loan on a monthly basis. The Revolving Credit Facility and Term Loan cash interest were payable monthly. On April 20, 2021, the Company fully repaid all remaining Term Loan principal and accrued interest.

~~The Credit Agreement includes financial~~8. CARES Act Payroll Protection Program Loans
Between April 29 and ~~other restrictive covenants. Financial covenants include minimum fixed charge coverage ratios, minimum EBITDA, as defined~~May 7, 2020, the Company obtained for each of its operating subsidiaries a loan from BBVA USA (“BBVA”) pursuant to the Payroll Protection Plan (the “PPP”) which was established under the ~~Credit Agreement~~Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The PPP loans were necessary to ~~include certain adjustments,~~support ongoing operations due to current economic hardship, uncertainty, and ~~a maximum senior leverage ratios. The Company measures~~the significant negative effects on the business operations and ~~certifies these covenants quarterly. The financial covenants are measured on a trailing four quarter basis as~~activity levels of the ~~end~~applicants attributable to COVID-19 including the impact of ~~each quarter.~~“lock-downs”, “quarantines” and “shut-downs”. The ~~Company did not meet its financial covenants~~PPP loans were used primarily to restore employee pay-cuts, recall furloughed or laid-off employees, support the payroll costs for existing employees, hire new employees, and for other allowable purposes including interest costs on certain business mortgage obligations, rent and utilities. Each of the ~~trailing four quarters ended March 31, 2020. The Company received~~Company’s subsidiary executed a ~~waiver for missing the March 31, 2020 covenants and its future financial covenants have been reset~~separate promissory note evidencing unsecured loans under the ~~Seventh and Eighth Amendments of the Credit Agreement (refer to~~ ~~Seventh Amendment to Credit Agreement~~~~, below, and Note 15. Subsequent Events.).~~
PPP. The Credit Agreement also permits capital expenditures up to a certain level and contains customary default and acceleration provisions. The Credit Agreement also restricts, above certain levels, acquisitions, incurrence of additional indebtedness, and payment of dividends.
~~Seventh Amendment to Credit Agreement~~
~~On April 28, 2020,~~following promissory notes were executed by the Company and its ~~subsidiaries entered into Seventh Amendment, dated as of April 28, 2020~~subsidiaries: GEE Group, Inc., for $1,992 (the ~~"Seventh Amendment"~~“GEE Group Note”), ~~to the Revolving Credit, Term Loan~~Scribe Solutions, Inc. for $277 (the “Scribe Note”), Agile Resources, Inc. is for $1,206 (the “Agile Note”), Access Data Consulting Corporation for $1,456 (the “Access Note”), Paladin Consulting, Inc. for $1,925 (the “Paladin Note”), SNI Companies, Inc. for $10,000 (the “SNI Note”), Triad Personnel Services, Inc. for $404 (the “Triad Personnel Note”), Triad Logistics, Inc. for $78 (the “Triad Logistics Note”), and ~~Security Agreement, dated as of March 31, 2017 (as amended, amended and restated, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"~~BMCH, Inc. for $2,589 (the “BMCH Note”). The ~~Seventh Amendment represents~~GEE Group Note, the ~~most significant loan modification of~~Scribe Note, the ~~Company’s Credit Agreement since inception.~~ Agile Note, the Access Note, the Paladin Note, the SNI Note, the Triad Personnel Note, the Triad Logistics Note, and the BMCH Note are referred to together as the “PPP Notes” and each individually as a “PPP Note”. The loans evidenced by the PPP Notes (the “PPP Loans”) are being made through BBVA as the lender.
The Company and its ~~senior lenders previously entered into~~operating subsidiaries are in the ~~Sixth Amendment~~process of applying for forgiveness of their respective outstanding PPP loans with their lender, BBVA USA, and the SBA. Management believes that the Company qualifies and is eligible for forgiveness of its loans based on existing available guidance; however, some questions and matters of interpretation may remain to be determined or decided upon by the SBA or possibly other governmental or legislative actions that cannot be fully predicted or even fully anticipated at this stage. Therefore, there can be no assurance that the Company or its operating subsidiaries will ultimately achieve forgiveness in whole or in part of its outstanding PPP loans. Accordingly, the Company and its operating subsidiaries continue to account for their PPP loans as outstanding debt in the accompanying unaudited condensed consolidated financial statements. During February ~~12, 2020, while negotiating~~2021, the Company’s subsidiary, Scribe Solutions, Inc., was notified by the SBA that its total outstanding PPP Loan and accrued interest in ~~contemplation~~the amount of ~~the larger loan modification contained in Seventh Amendment. (See Note 15. Subsequent Events.)~~$279 were forgiven.

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Table of Contents

~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

~~Eighth Amendment to Credit Agreement~~The PPP Loans have two-year terms and ~~CARES Act Payroll Protection Program Loans~~
~~On May 5, 2020~~bear interest at a rate of 1.00% per annum. Scheduled principal and accrued interest payments are due and payable in monthly instalments, resulting in aggregate principal payments per annum for the ~~Company~~current and ~~its subsidiaries entered into nine (9) unsecured promissory notes payable under CARES Act Payroll Protection Program (“PPP”)~~future fiscal years as follows: fiscal 2021- $2,212, and ~~received net funds totaling $19,926 in order to obtain needed relief funds for allowable expenses~~fiscal 2022 – $17,619. Monthly principal and interest payments under the ~~CARES Act PPP. (See Note 15. Subsequent Events.). On May 5, 2020,~~PPP Loans are to be deferred to either (1) the ~~Company also entered into Eighth Amendment, dated as of May 5, 2020 (the "Eighth Amendment")~~date that SBA remits the borrower’s loan forgiveness amount to the ~~Credit Agreement.~~lender, or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period. Therefore, the scheduled principal and accrued interest payments presented here may be expected to change. The ~~Eighth Amendment served as the conforming amendment under the Credit Agreement~~PPP Loans may be prepaid at any time prior to ~~enable the Company and its subsidiaries to enter into the PPP loans and additional permitted indebtedness in compliance~~maturity with ~~the Credit Agreement. (See Note 15. Subsequent Events.)~~no prepayment penalties.

8.9. Accrued Compensation

Accrued Compensation is comprised of accrued wages, the related payroll taxes, employee benefits of the Company's employees, including those working on contract assignments, commissions earned and not yet paid and estimated commissions and bonuses payable.

9.10. Subordinated Debt – Convertible and Non-Convertible
The Company had outstanding balances under its Convertible and Non-Convertible Subordinated Debt agreements, as follows:

March 31,

September 30,

2020

2019

10% Convertible Subordinated Note

$ 4,185

$ 4,185

Subordinated Promissory Note

1,000

1,000

9.5% Convertible Subordinated Note

12,500

12,500

8% Convertible Subordinated Notes, net of discount, due to related parties

1,428

1,269

Total subordinated debt, convertible and non-convertible

19,113

18,954

Short term portion of subordinated debt, convertible and non-convertible

-

(1,000 )
Long term portion of subordinated debt, convertible and non-convertible

$ 19,113

$ 17,954

10% Convertible Subordinated Note
~~The Company had a Subordinated Note payable to JAX Legacy – Investment 1, LLC (“JAX Legacy”), pursuant to a Subscription Agreement dated October 2, 2015, in the amount of $4,185.~~

On ~~April 3, 2017,~~June 30, 2020, the Company and ~~JAX~~Jax Legacy, ~~amended and restated~~ the Subordinated Note in its entirety in the form of a 10% Convertible Subordinated Note (the “10% Note”) in the aggregate principal amount of $4,185. The 10% Note matures on October 3, 2021 (the “Maturity Date”). The 10% Note is convertible into sharessole holder of the Company’s ~~Common Stock at a conversion price equal to $5.83 per share. All or any portion of the~~ 10% Note ~~may be redeemed by~~entered into a Note Conversion Agreement (the “Note Conversion Agreement”) whereby Jax Legacy agreed to immediately convert the Company for cash at any time on or after April 3, 2018 that the average daily VWAP of the Company’s Common Stock reported on the principal trading market for the Common Stock exceeds the then applicable Conversion Price for a period of 20 trading days. The redemption price shall be an amount equal to 100% of the then outstanding$4,185 aggregate principal amount of the 10% Note ~~being redeemed, plus accrued~~to 718 shares of Common Stock at the $5.83 per share conversion rate stated in the 10% Notes. The conversion of the 10% Note was executed on June 30, 2020 and ~~unpaid interest thereon. The~~the Company issued 718 shares of Common Stock to Jax Legacy on that date.
Subordinated Promissory Note
On June 30, 2020, the Company and Enoch S. Timothy and Dorothy Timothy entered into a Note Settlement Agreement (the “Note Settlement Agreement”). Timothy agreed to ~~issue~~accept an aggregate amount of $89 in cash consideration for the purchase by the Company of the $1,000 aggregate principal amount of the Subordinated Note dated January 20, 2017. The Subordinated Note was settled at a conversion rate of $5.83 per share (the agreed conversion price at which the Subordinated Note would be convertible to Common Stock) and purchased at $0.52 per share (the closing price on the NYSE American for the Common Stock on June 16, 2020). The Timothy note settlement amount was paid to Timothy on June 30, 2020.
9.5% Convertible Subordinated Notes
On June 30, 2020, the holders of the 9.5% Notes agreed to accept an aggregate amount of $1,115 in cash in consideration for the purchase by the Company of the entire $12,500 aggregate principal amount of the 9.5% Notes. The 9.5% Notes were settled at a conversion rate of $5.83 (the price at which the 9.5% Notes were converted into shares of the Company’s common stock) and purchased by the Company at $0.52 (the closing price on the NYSE American for the Common Stock on June 16, 2020). The payment was made to the ~~investors~~note holders on June 30, 2020.
8% Convertible Subordinated Notes to Related Parties
Pursuant to the Repurchase Agreement, Mr. Ron Smith (a former member of the Company’s board of directors) agreed to accept an aggregate amount of $520 in ~~JAX Legacy approximately 77,775 shares~~cash (the “Smith Note Payment Amount”) in consideration for the purchase by the Company of ~~common stock, at a value~~the $1,000 aggregate principal amount of ~~approximately $400 which~~8% Notes (the “Smith Note Amount”) held by him. The Smith Note Payment Amount was ~~expensed as loss~~calculated based on the ~~extinguishment of debt during~~following formula: The Smith Note Amount, divided by $1.00 (the price at which the ~~year ended September~~Smith Notes are convertible to Common Stock), times $0.52 (the closing price on the NYSE American for the Common Stock on June 16, 2020). The Smith Note Payment Amount was paid to Mr. Smith on June 30, ~~2017.~~2020.

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Table of Contents

~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

~~Total discount recorded~~On June 30, 2020, the holders of the remaining $1,000 aggregate principal amount of the 8% Notes converted such 8% Notes to an aggregate of 1,000 shares of Series C 8% Cumulative Convertible Preferred Stock (“Series C Preferred Stock”) which were immediately and simultaneously converted into 1,000 shares of Common Stock at the $1.00 per share conversion price stated in the 8% Notes and in the Series C Preferred Stock. These holders also converted an aggregate of 93 additional shares of Series C Preferred Stock issued or issuable to them into a total of 93 shares of Common Stock at the $1.00 per share conversion price stated in the Series C Preferred Stock. The issuance of the ~~original JAX Legacy subordinated note payable~~1,093 shares of Common Stock to these former holders of 8% Notes and Series C Preferred Stock was ~~approximately $600. Total amortization~~completed on June 30, 2020. These shares, along with those of ~~debt discount for~~ the ~~year ended September 30, 2017 was approximately $100, and~~SNI Sellers that previously held the ~~remaining $300 was written off to loss on extinguishment of debt upon amendment and restatement resulting~~9.5% Notes, also were included in the registration statement on SEC Form S-3 filed by the Company on July 31, 2020.
11. Equity
On June 30, 2020, the Company issued 1,718 shares of common stock, in aggregate, for debt conversions of $1,000 aggregate principal amount of the 8% Notes, related shares of Series C Preferred Stock, and of $4,185 aggregate principal amount of the 10% Note. The Company also issued 93 shares of common stock for Series C Preferred Stock discussed above (Note 10).
Restricted Stock

The Company ~~issued shares of common~~did not grant restricted stock during the six-month periods ended March 31, 2021 and 2020. Stock-based compensation expense attributable to ~~JAX Legacy related to the conversion of the subordinated note~~restricted stock was $163 and ~~the interest of approximately 261~~$336, and ~~410 for~~$130 and $885 during the three and six-month periods ended March 31, 2021 and 2020, ~~and 149 and 189 for the three and six-month periods ended March 31, 2019,~~ respectively. ~~The stock was valued at approximately $105 and $210 for each three and six-month periods ended March 31, 2020 and March 31, 2019.~~
~~On April 3, 2020 the Company issued 345 shares of common stock to JAX Legacy related to interest of $105 on the 10% Note.~~
~~Subordinated Promissory Note~~
On January 20, 2017, the Company entered into Addendum No. 1 (the “Addendum”) to the Stock Purchase Agreement dated as of January 1, 2016 (the “Paladin Agreement”) by and among the Company and Enoch S. Timothy and Dorothy Timothy (collectively, the “Sellers”). Pursuant to the terms of the Addendum, the Company and the Sellers agreed (a) that the conditions to the “Earnouts” (as defined in the Paladin Agreement) had been satisfied or waived and (b) that the amounts payable to the Sellers in connection with the Earnouts shall be amended and restructured as follows: (i) the Company paid $250 in cash to the Sellers prior to January 31, 2017 (the “Earnout Cash Payment”) and (ii) the Company issued to the Sellers a subordinated promissory note in the principal amount of $1,000 (the “Subordinated Note”). The Subordinated Note originally bore interest at the rate of 5.5% per annum. Interest on the Subordinated Note is payable monthly and principal can only be paid in stock until the term loan and Revolving Credit Facility are repaid. The Subordinated Note may be prepaid without penalty. The principal of and interest on the Subordinated Note may be paid, at the option of the Company, either in cash or in shares of common stock of the Company or in any combination of cash and common stock. The Sellers have agreed that all payments and obligations under the Subordinated Note shall be subordinate and junior in right of payment to any “Senior Indebtedness” (as defined in the Paladin Agreement) now or hereafter existing to “Senior Lenders” (current or future) (as defined in the Paladin Agreement).
On February 8, 2020, the Company and its subsidiaries, as Borrowers, entered into a first amendment (the “First Amendment”) to the Subordinated Note, dated as of January 20, 2017 (the “Subordinated Note”). Under the First Amendment, the Company and its lender have negotiated and agreed to amend Subordinated Note to change maturity date to January 20, 2022.
~~9.5% Convertible Subordinated Notes~~
On April 3, 2017, the Company issued and paid to certain SNIH Stockholders as part of the acquisition of SNIH an aggregate of $12,500 in the form of 9.5% Convertible Subordinated Notes (the “9.5% Notes”). The 9.5% Notes mature on October 3, 2021 (the “Maturity Date”). The 9.5% Notes are convertible into shares of the Company’s Common Stock at a conversion price equal to $5.83 per share. Interest on the 9.5% Notes accrues at the rate of 9.5% per annum and is payable quarterly in arrears on June 30, September 30, December 31 and March 31, beginning on June 30, 2017, on each conversion date with respect to the 9.5% Notes (as to that principal amount then being converted), and on the Maturity Date (each such date, an “Interest Payment Date”). At the option of the Company, interest may be paid on an Interest Payment Date either in cash or in shares of Common Stock of the Company, which Common Stock shall be valued based on the terms of the agreement, subject to certain limitations defined in the loan agreement. Each of the 9.5% Notes is subordinated in payment to the obligations of the Company under its Credit Agreement (see Note 6) pursuant to Subordination and Inter-creditor Agreements dated asAs of March 31, ~~2017 by and among the Company, the Credit Agreement lenders, and each~~2021, there was approximately $482 of ~~the holders of the 9.5% Notes.~~unrecognized compensation expense related to restricted stock outstanding with vesting period 3 years.

~~The Company issued shares~~A summary of ~~common~~restricted stock to the SNI Sellers related to interest of $300 on the 9.5% Notes of approximately 706 and 1,108 for the three and six-month periods ended March 31, 2020 and 367 and 498 for the three and six-month periods ended March 31, 2019, respectively. The stock was valued at approximately $300 and $600 for each three and six-month periods ended March 31, 2020 and March 31, 2019.activity is presented as follows:

~~On April 3, 2020 the Company issued approximately 931 shares of common stock to the SNI Sellers related to interest of $300 on the 9.5% Notes.~~

Number of
Shares

Weighted Average Fair Value
($)

Non-vested restricted stock outstanding as of September 30, 2020

1,450

1.32

Granted

-

-

Issued

-

-

Non-vested restricted stock outstanding as of December 31, 2020

1,450

1.32

Granted

-

-

Issued

-

-

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

1,450

1.32



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Table of Contents

~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

~~8% Convertible Subordinated Notes to Related Parties~~
On May 15, 2019, the Company issued and sold to members of its executive management and Board of Directors (the “Investors”) $2,000 in aggregate principal amount of its 8% Notes. The 8% Notes mature on October 3, 2021 (the “Maturity Date”). The 8% Notes are convertible into shares of the Company’s Series C 8% Cumulative Convertible Preferred Stock (“Series C Preferred Stock”) at a conversion price equal to $1.00 per share (subject to adjustment as provided in the 8% Notes upon any stock dividend, stock combination or stock split or upon the consummation of certain fundamental transactions) (the “Conversion Price”). Interest on the 8% Notes accrues at the rate of 8% per annum and shall be paid quarterly in non-cash payments-in-kind (“PIK”) in arrears on June 30, September 30, December 31 and March 31, beginning on June 30, 2019, on each conversion date with respect to the 8% Notes (as to that principal amount then being converted), and on the Maturity Date (each such date, an “Interest Payment Date”). Interest shall be paid on an Interest Payment Date in shares of Series C Preferred Stock of the Company, which Series C Preferred Stock shall be valued at its liquidation value. All or any portion of the 8% Notes may be redeemed by the Company for cash at any time. The redemption price shall be an amount equal to 100% of the then outstanding principal amount of the 8% Notes being redeemed, plus accrued and unpaid PIK interest thereon. The Company may, at its option, prepay any portion of the principal amount of the 8% Notes without the prior consent of the holders thereof; provided, however, that any prepayments of the 8% Notes shall be made on a pro rata basis to all holders of 8% Notes based on the aggregate principal amount of 8% Notes held by such holders. The Company shall be required to prepay the 8% Notes together with accrued and unpaid PIK interest thereon upon the consummation by the Company of any Change of Control.
For purposes of the 8% Notes, a Change of Control of the Company shall mean any of the following: (A) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions or (B) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any person or entity together with their affiliates, becomes the beneficial owner, directly or indirectly, of more than 50% of the Common Stock of the Company. Each of the 8% Notes is subordinated in payment to the obligations of the Company to the lenders parties to that certain Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, as amended, by and among the Company, the Company’s subsidiaries named as borrowers therein (collectively with the Company, the “Borrowers”), the senior lenders named therein and MGG Investment Group LP, as administrative agent and collateral agent (the “Agent”) for the senior lenders (the “Senior Credit Agreement”), pursuant to those certain Subordination and Intercreditor Agreements, each dated as of May 15, 2019 by and among the Company, the Borrowers, the Agent and each of the holders of the 8% Notes.
The Company issued approximately 42 shares and 83 shares of Series C Preferred Stock to Investors related to interest of $42 and $83 on the 8% Notes for the three and six-month periods ended March 31, 2020, respectively. There were no shares issued for the three and six-month periods ended March 31, 2019.
The BCF for the 8% Notes is recorded as a discount to their carrying value and is equal to the fair value of the conversion feature. The discount will be amortized as interest over the period from the date of issuance to maturity. The total BCF recorded was approximately $841. For the three and six-month periods ended March 31, 2020, the Company amortized approximately $80 and $160, and of debt discount, respectively.
~~Future minimum payments of all subordinated debt will total approximately as follows: fiscal 2020 - $0, fiscal 2021- $0 and fiscal 2022 - $19,700.~~
~~Seventh Amendment to Credit Agreement~~
On April 28, 2020, the Company and its subsidiaries entered into Seventh Amendment to the Credit Agreement. Under the Seventh Amendment, the Company has agreed to the condition that it will pursue, negotiate and execute conversions of all of the Company’s outstanding subordinated debt and preferred stock into shares of the Company’s common stock. The Company has up to 60 days after the effective date of the Seventh Amendment (until June 27, 2020) to enter into definitive agreements with all parties to effect the conversions and up to 90 days thereafter (until September 25, 2020) to obtain required shareholder approvals and execute the conversions, with the provision that the Company may be granted another 30 days by Lenders at their discretion. In the event the Company is unable to satisfactorily meet the conversion condition within the specified time frames, an Event of Default under the Credit Agreement will be deemed to have occurred. (See Note 15. Subsequent Events.)
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~~Table of Contents~~
~~GEE GROUP INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~
~~(Amounts in thousands except per share data, unless otherwise stated)~~
~~10. Equity~~
During six-month period ended March 31, 2019, the Company issued 250 shares of common stock for the conversion of approximately 250 shares of Series B Convertible Preferred Stock, respectively (See Note 11).
~~Restricted Stock~~
The Company did not grant restricted stock during six-month periods ended March 31, 2020 and 2019. Stock-based compensation expense attributable to restricted stock was $130 and $885, and $200 and $400 during the three and six-month periods ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was approximately $700 of unrecognized compensation expense related to restricted stock outstanding. On November 23, 2019, 500 shares of restricted common stock held by the Company’s former president became fully vested upon his passing. These shares were issued during six-month period ended March 31, 2020. No shares were issued during the six-month period ended March 31, 2019.
~~A summary of restricted stock activity is presented as follows:~~

Number of
Shares

Weighted Average Fair Value ($)

Non-vested restricted stock outstanding as of September 30, 2019

1,500

1.76

Issued

(500 )

2.21

Non-vested restricted stock outstanding as of March 31, 2020

1,000

1.53

Warrants

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

Number of
Shares

Weighted Average Exercise Price Per Share ($)

Weighted Average Remaining Contractual Life

Total Intrinsic Value of Warrants ($)

Warrants outstanding as of September 30, 2019

439

4.09

1.39

-

Granted

-

-

Expired

-

-

Warrants outstanding as of December 31, 2019

439

4.09

1.14

-

Granted

-

-

Expired

(237 )

2.50

Warrants outstanding as of March 31, 2020

202

5.95

2.11

-

Warrants exercisable as of September 30, 2019

439

4.09

1.39

-

Warrants exercisable as of March 31, 2020

202

5.95

2.11

-

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~~Table of Contents~~
~~GEE GROUP INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~
~~(Amounts in thousands except per share data, unless otherwise stated)~~

Number of
Shares

Weighted Average Exercise Price
Per Share
($)

Weighted Average Remaining Contractual Life

Total Intrinsic
Value of Warrants
($)

Warrants outstanding as of September 30, 2020

77

2.00

4.50

-

Granted

-

-

-

-

Expired

-

-

-

-

Warrants outstanding as of December 31, 2020

77

2.00

4.25

-

Granted

-

-

-

-

Expired

-

-

-

-

Warrants outstanding as of March 31, 2021

77

2.00

4.01

-

Warrants exercisable as of September 30, 2020

77

2.00

4.50

-

Warrants exercisable as of March 31, 2021

77

2.00

4.01

-

Stock Options
As of March 31, ~~2020,~~2021, there were stock options outstanding under ~~the Company’s Second Amended and Restated 1997 Stock Option Plan and~~ the Company’s Amended and Restated 2013 Incentive Stock Plan. ~~Both plans were approved~~During fiscal 2020, 2013 Incentive Stock Plan was amended to increase available balance by ~~the shareholders. The plans granted specified numbers of options to non-employee directors, and they authorized the~~1,000 stock options. Compensation Committee of the Board of Directors authorized to grant either incentive or non-statutory stock options to employees. Vesting periods are established by the Compensation Committee at the time of grant. All stock options outstanding as of March 31, ~~2020~~2021 and September 30, ~~2019~~2020 were non-statutory stock options, had exercise prices equal to the market price on the date of grant, and had expiration dates ten years from the date of grant.

Stock-based compensation expense attributable to stock options and warrants was $130 and $268, $226 and $68 ~~and $300 and $700~~ for the three and six-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. As of March 31, ~~2020,~~2021, there was approximately ~~$960~~$400 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was ~~3.96~~3.95 years.

A summary of stock option activity is as follows:

Number of
Shares

Weighted Average Exercise Price per share ($)

Weighted Average Remaining Contractual Life (Years)

Total Intrinsic Value of Options ($)

Options outstanding as of September 30, 2019

1,734

3.22

7.84

-

Granted

-

-

Forfeited/Expired

(202 )

2.79

Options outstanding as of December 31, 2019

1,532

3.27

7.80

-

Granted

-

-

Forfeited/Expired

(42 )

6.70

Options outstanding as of March 31, 2020

1,490

3.17

7.61

-

Exercisable as of September 30, 2019

720

4.24

6.50

-

Exercisable as of March 31, 2020

757

3.85

7.01

-

Number of
Shares

Weighted Average Exercise Price
per share
($)

Weighted Average Remaining Contractual Life (Years)

Total Intrinsic Value of Options
($)

Options outstanding as of September 30, 2020

1,254

2.85

7.34

-

Granted

30

1.10

4.00

-

Forfeited

(20 )

1.26

-

-

Options outstanding as of December 31, 2020

1,264

2.83

7.14

-

Granted

-

-

Forfeited

(46 )

3.75

-

-

Options outstanding as of March 31, 2021

1,218

2.80

6.91

-

Exercisable as of September 30, 2020

749

3.43

6.78

-

Exercisable as of March 31, 2021

819

3.24

6.44

-

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Table of Contents
GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

~~11.~~12. Mezzanine Equity

Series A Convertible Preferred Stock
On April 3, 2017, the Company filed a Statement of Resolution Establishing its Series A Preferred Stock with the State of ~~Illinois. (the~~Illinois (“the Resolution Establishing Series”). Pursuant to the Resolution Establishing Series, the Company designated 160 shares of its authorized preferred stock as Series A Preferred Stock. There are no shares issued and outstanding under this designation.
Series B Convertible Preferred Stock

On April 3, 2017, the Company issued an aggregate of approximately 5,900 shares of no-par value, Series B Convertible Preferred Stock to certain of the SNIH Stockholders as part of the SNIH acquisition. The no par value, Series B Convertible Preferred Stock ~~has~~had a liquidation preference equal to $4.86 per share and ~~ranks~~ranked senior to all "Junior Securities" (including the Company's Common Stock) with respect to any distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

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~~Table of Contents~~
~~GEE GROUP INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~
~~(Amounts in thousands except per share data, unless otherwise stated)~~
In the event that the Company declares or pays a dividend or distribution on its Common Stock, whether such dividend or distribution is payable in cash, securities or other property, including the purchase or redemption by the Company or any of its subsidiaries of shares of Common Stock for cash, securities or property, the Company is required to simultaneously declareOn June 30, 2020, and pay a dividend on the no par value, Series B Convertible Preferred Stock on a pro rata basis with the Common Stock determined on an as-converted basis assuming all shares had been converted as of immediately priorpursuant to the ~~record date of the applicable dividend or distribution.~~
~~Except as set forth in the Resolution Establishing Series or as may be required by Illinois law,~~Repurchase Agreement, the holders of the no par value, Series B Convertible Preferred Stock have no voting rights. Pursuant to the Resolution Establishing Series, without the prior written consent of holders of not less than a majority of the then total outstanding Shares of no par value, Series B Convertible Preferred Stock, voting separately as a single class, the Company shall not create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company) that ranks ~~pari passu~~ ~~with or superior to the no par value, Series B Convertible Preferred Stock in relative rights, preferences or privileges (including with respect to dividends, liquidation or voting).~~
Each share of Series B Convertible Preferred Stock is convertible at the option of the holder thereof into one share of Common Stock at an initial conversion price equal to $4.86 per share, which is subject to adjustment in the event of stock splits, stock combinations, capital reorganizations, reclassifications, consolidations, mergers or sales, as set forth in the Resolution Establishing Series.
~~None of the shares of no par value,~~ Series B Preferred Stock ~~issued~~agreed to accept an aggregate amount of $2,894 in cash (the “Series B Preferred Stock Purchase Price”) in consideration for the ~~SNIH Stockholders are registered under~~purchase by the ~~Securities Act. Each~~Company of ~~the SNIH Stockholders who received~~all 5,566 then outstanding shares of Series B Preferred Stock ~~is an accredited investor.~~(the “Series B Preferred Stock Amount”) held by them. The ~~issuance of the shares of no par value,~~ Series B Preferred Stock Purchase Price was paid to ~~such SNIH Stockholders is exempt from~~ the ~~registration requirements~~SNI Group Members on June 30, 2020. A net gain attributable to common stockholders of ~~the Act in reliance on an exemption from registration provided by Section 4(2) of the Act.~~
~~Based~~$24,475 was recognized on the ~~terms of the Series B Convertible Preferred Stock, if certain fundamental transactions were to occur, the Series B Convertible Preferred Stock would require~~ redemption ~~which precludes permanent equity classification on the accompanying consolidated Balance Sheet.~~
~~During six-month period ended March 31, 2019, the Company issued 250 shares of common stock for the conversion of approximately 250 shares~~ of Series B ~~Convertible~~ Preferred ~~Stock.~~Stock and Smith Series C Preferred Stock, discussed below, for the three-month period ended June 30, 2020.

Series C Convertible Preferred Stock

On May 17, 2019, the Company filed a Statement of Resolution Establishing its Series C Preferred Stock with the State of ~~Illinois. (the~~Illinois (“the Resolution Establishing Series”). Pursuant to the Resolution Establishing Series, the Company designated 3,000 shares of its authorized preferred stock as “Series C 8% Cumulative Convertible Preferred Stock”, without par value. The Series C Preferred Stock ~~has~~had a Liquidation Value equal to $1.00 per share and ~~ranks~~ ranked pari passu with the Company’s Series B Convertible Preferred Stock (“Series B Preferred Stock”) and senior to all “Junior Securities” (including the Company’s Common Stock) with respect to any distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. Holders of shares of Series C Preferred Stock ~~are~~were entitled to receive an annual non-cash (“PIK”) dividend of 8% of the Liquidation Value per share. Such ~~dividend shall be~~dividends were payable quarterly ~~on June 30, September 30, December 31 and March 31~~in the form of ~~each year commencing on June 30, 2019, in preference to any dividend paid on or declared and set aside for the Series B Preferred Stock or any Junior Securities and shall be paid-in-kind in~~ additional shares of Series C Preferred Stock. ~~Except as set forth in the Resolution Establishing Series or as may be required by Illinois law, the holders of the Series C Preferred Stock have no voting rights.~~
Pursuant to the Resolution Establishing Series, without the prior written consent of holders of not less than a majority of the then total outstanding Shares of Series C Preferred Stock, voting separately as a single class, the Company shall not create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company) that ranks superior to the Series C Preferred Stock in relative rights, preferences or privileges (including with respect to dividends, liquidation or voting). Each share of Series C Preferred Stock ~~shall be~~was convertible at the option of the holder thereof into one share of Common Stock at an initial conversion price equal to $1.00 per share, each as subject to adjustment in the event of stock splits, stock combinations, capital reorganizations, reclassifications, consolidations, mergers or sales, as set forth in the Resolution Establishing Series.
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~~Table of Contents~~
~~GEE GROUP INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~
~~(Amounts~~ Except as set forth in ~~thousands except per share data, unless otherwise stated)~~the Resolution Establishing Series or as may be required by Illinois law, the holders of the Series C Preferred Stock had no voting rights.

The Company issued approximately 42 shares and 83 shares of Series C Preferred Stock to Investors related to interest of $42 and $83 on the 8% Notes during three and six-month periods ending March 31, 2020, respectively. ~~There were no shares issued~~
Pursuant to the Repurchase Agreement, Mr. Smith also agreed to accept an aggregate amount equal to $37 in cash (the “Smith Series C Preferred Stock Purchase Price”) in consideration for the ~~three and six-month periods ended March 31, 2019.~~
~~Seventh Amendment to Credit Agreement~~
~~On April 28, 2020,~~purchase by the Company and its subsidiaries entered into Seventh Amendment to the Credit Agreement. Under the Seventh Amendment, the Company has agreed to the condition that it will pursue, negotiate and execute conversions of all of the ~~Company’s outstanding subordinated debt and preferred stock into~~72 shares of Series C Preferred Stock (the “Series C Preferred Stock Amount”) held by him. The Smith Preferred Stock Purchase Price was calculated based on the ~~Company’s common stock. The Company has up to 60 days after~~following formula: the ~~effective date of~~Smith Series C Preferred Stock Amount, divided by $1.00, times $0.52 (the closing price on the Seventh Amendment (until June 27, 2020) to enter into definitive agreements with all parties to effect the conversions and up to 90 days thereafter (until September 25, 2020) to obtain required shareholder approvals and execute the conversions, with the provision that the Company may be granted another 30 days by Lenders at their discretion. In the event the Company is unable to satisfactorily meet the conversion condition within the specified time frames, an Event of Default under the Credit Agreement will be deemed to have occurred. (See Note 15. Subsequent Events.)
~~12. Income Tax~~
~~The following table presents the provision for income taxes and our effective tax rate~~NYSE American for the ~~three-month periods ended March 31, 2020 and 2019:~~

Three Months Ended,
March 31,

2020

2019

Provision for Income Taxes

10

(16 )
Effective Tax Rate

0 %

1 %
~~Our effective tax rate for the three-month period ended March 31, 2020, is lower than the statutory tax rate primarily due~~Common Stock on June 16, 2020). The Smith Series C Preferred Stock Purchase Price was paid to an increase in the deferred tax liability related to indefinite lived assets. Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a full valuation allowance against the remaining net DTA position.
Our effective tax rate for the three-month period ended March 31, 2019 is lower than the statutory tax rate primarily due to a decrease in the deferred tax liability related to indefinite lived assets. Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a full valuation allowance against the remaining net DTA position.Mr. Smith on June 30, 2020.

The ~~following table presents~~remaining holders of Series C Preferred Stock converted an aggregate of 93 shares of Series C Preferred Stock into a total of 93 shares of Common Stock at the ~~provision for income taxes and our effective tax rate for the six-month periods ended March 31, 2020 and 2019:~~

Six Months Ended,
March 31,

2020

2019

Provision for Income Taxes

181

506

Effective Tax Rate

-2 %

-7 %
~~Our effective tax rate for the six-month period ended March 31, 2020 and 2019, is lower than the statutory tax rate primarily due to an increase~~$1.00 per share conversion price stated in the deferred tax liability related to indefinite lived assets. Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a full valuation allowance against the remaining net DTA position.Series C Preferred Stock. The conversion was completed on June 30, 2020.

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~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

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

Three Months Ended,
March 31,

Six Months Ended,
March 31,

2021

2020

2021

2020

Provision for Income Taxes

117

10

(277 )

181

Effective Tax Rate

-7 %

0 %

12 %

-2 %
The effective income tax rate on operations is based upon the estimated income for the year and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies.
Our effective tax rate for the three and six-month period ended March 31, 2021 and 2020, is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets. In the three-month period ended December 31, 2020, the statutory changes regarding the deductibility of PPP loan expenses resulted in the recognition of a $352 discrete item. Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a valuation allowance against the remaining net DTA position.
14. Commitments and Contingencies
Litigation and Claims
The Company and its subsidiaries are involved in various litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company’s financial position.

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Table of Contents
~~14.~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)
15. Segment Data

The Company provides ~~the following distinctive services: (a)~~ direct hire placement services ~~(b)~~and temporary professional contract staffing services ~~staffing~~ in the fields of information technology, finance, accounting ~~finance,~~and office (“FA&O”), engineering, and medical within its Professional Services segment, and ~~(c) temporary light~~ industrial ~~staffing. These~~contract services within its Industrial Services segment. The Company’s revenues, cost of services and a substantial portion of its operating costs and expenses can be divided into these two reportable ~~segments,~~segments.
Selling, general and administrative (“SG&A”) expenses, including substantially all corporate expenses, are not entirely allocated among Industrial ~~Staffing Services~~ and Professional Staffing Services. ~~Some selling, general and administrative expenses are not fully allocated among light industrial services and professional staffing services.~~
Unallocated corporate expenses primarily include, certain executive compensation expenses and salaries, certain administrative salaries, corporate legal expenses, stock compensation expenses, consulting expenses, audit fees, corporate rent and facility costs, board fees, acquisition, integration and restructuring expenses, and interest expense.

Three Months Ended

Six Months Ended

March 31,

March 31,

2020

2019

2020

2019

2021

2020

2021

2020

Industrial Staffing Services

��

Industrial services revenue

$ 4,471

$ 5,095

$ 10,126

$ 10,715

$ 4,023

$ 4,471

$ 9,134

$ 10,126

Industrial services gross margin

14.1 %

13.6 %

15.0 %

13.7 %
Operating (loss) income

$ (1,616 )

$ 82

$ (1,335 )

$ 337

Industrial services gross margin (1)

8.8 %

14.1 %

29.3 %

15.0

Operating income (loss)

$ (289 )

$ (1,616 )

$ 1,918

$ (1,335 )
Depreciation & amortization

$ 70

$ 66

$ 139

$ 130

$ 15

$ 70

$ 44

$ 139

Professional Staffing Services

Permanent placement revenue

$ 4,416

$ 4,350

$ 8,895

$ 8,880

$ 3,655

$ 4,416

$ 7,050

$ 8,895

Placement services gross margin

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100

Professional services revenue

$ 25,794

$ 26,732

$ 53,216

$ 55,125

$ 27,040

$ 25,794

$ 53,177

$ 53,216

Professional services gross margin

26.6 %

25.0 %

26.5 %

25.6 %

25.5 %

26.6 %

25.9 %

26.5

Operating income

$ 2,126

$ 1,413

$ 3,688

$ 3,632

$ 2,644

$ 2,126

$ 4,024

$ 3,688

Depreciation and amortization

$ 1,397

$ 1,432

$ 2,804

$ 2,843

$ 1,077

$ 1,397

$ 2,165

$ 2,804

Unallocated Expenses

Corporate administrative expenses

$ 2,415

$ 1,695

$ 3,744

$ 3,464

$ 1,232

$ 2,415

$ 2,449

$ 3,744

Corporate facility expenses

92

72

182

178

91

92

173

182

Stock Compensation expense

356

549

953

1,130

293

356

604

953

Board related expenses

102

-

102

Total unallocated expenses

$ 2,863

$ 2,316

$ 4,879

$ 4,772

$ 1,718

$ 2,863

$ 3,328

$ 4,879

Consolidated

Total revenue

$ 34,681

$ 36,177

$ 72,237

$ 74,720

$ 34,718

$ 34,681

$ 69,361

$ 72,237

Operating loss

(2,353 )

(821 )

(2,526 )

(803 )
Operating income (loss)

637

(2,353 )

2,614

(2,527 )
Depreciation and amortization

$
1,467

$
1,498

$
2,943

$
2,973

$ 1,092

$ 1,467

$ 2,209

$ 2,943

_____________
1)
Includes ($219) and $0 of annual premium refund adjustment from the Ohio Bureau of Workers Compensation for the three months ended March 31, 2021 and 2020, respectively; and $1,318 and $50 for the six months ended March 31, 2021 and 2020, respectively. The Industrial Services gross margins normalized for the effects of these items were approximately 14.2% and 14.1% for the three months ended March 31, 2021 and 2020, respectively; and approximately 14.9% and 14.5% for the six months ended March 31, 2021 and 2020, respectively.

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~~GEE~~GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)

~~15.~~16. Subsequent Events and Unaudited Pro Forma Financial Information
~~Seventh Amendment to Credit Agreement~~

On April ~~28, 2020,~~19, 2021, the Company concluded its public offering of 83,333 shares of common stock at a public offering price of $0.60 per share. Gross proceeds of the offering totaled $50,000, which after deducting the underwriting discount, legal fees, and offering expenses, resulted in net proceeds of $45,630. GEE has granted the underwriters a 45-day option to purchase up to an additional 12,500 shares of the Company's common stock to cover over-allotments, if any, at the public offering price, less the underwriting discount. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.
On April 20, 2021, as the result of the completion of the public offering, the Company repaid $56,022 in aggregate outstanding indebtedness under its ~~subsidiaries entered into Seventh Amendment, dated as of April 28, 2020 (the "Seventh Amendment"), to the~~existing Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, ~~(as amended, amended~~including accrued interest, using the net proceeds of its recent underwritten public offering and ~~restated, restated, supplemented~~available cash. The repaid debt was originally obtained from investors led by MGG Investment Group LP on April 21, 2017, and had a maturity date of June 30, 2023. The MGG debt was comprised of a revolving credit facility with a principal balance on the date of repayment of approximately $11,828, which was subject to an annual interest rate comprised of the greater of the London Interbank Offering Rate ("LIBOR") or ~~otherwise modified from time~~1%, plus a 10% margin (approximately 11% per annum), and a term loan with a principal balance on the date of repayment of approximately $43,735, which was subject to ~~time,~~an annual interest rate of the ~~"Credit Agreement"~~greater of LIBOR or 1% plus a 10% margin. The term loan also had an annual payment-in-kind ("PIK") interest rate of 5% in addition to its cash interest rate, which was being added to the term loan principal balance (cash and PIK interest rate combined of approximately 16% per annum). ~~The Seventh Amendment represents~~Accrued interest of approximately $459, in the ~~most significant loan modification~~aggregate, was paid in connection with the principal repayments.
On April 27, 2021, the underwriters of the Company’s ~~Credit Agreement since inception. The Company and its senior lenders previously entered into the Sixth Amendment on February 12, 2020, while negotiating and~~April 19, 2021 public offering exercised in ~~contemplation of the larger loan modification contained in Seventh Amendment.~~
The Seventh Amendment extends the maturity of the Credit Agreement from June 30, 2021 to June 30, 2023, lowered cash interest approximately 500 basis points (5%) per annum, postponed quarterly principal payments to recommence beginning June 30, 2021, and reduced the amounts of quarterly principal payments from the current $500,000 per quarter to $445,525. The Company has agreed to pay 5% PIK (non-cash, paid-in-kind) interest on the Term Loan only, which is accrued and added to the balance of the Term Loan and to pay a restructuring fee of $3,478 and an exit fee of $1,500, which became fully earned upon the effective date, but are payable upon the occurrence of a triggering event. The triggering events include a change in control, refinancing, maturity or other termination of the senior loans, and in the case of the restructuring fee, an acquisition by the Company also is considered a triggering event. In addition, the Company has agreed that for each six month period commencing with the period ending on March 31, 2021 and for each fiscal year commencing with the fiscal year ending on September 30, 2021, it shall utilize its “Specified Excess Cash Flow Amount” (as defined in the Credit Agreement) to repay amounts outstanding under the Credit Agreement.
Under the Seventh Amendment, the Company also has agreed to the condition that it will pursue, negotiate and execute conversions of all of the Company’s outstanding subordinated debt and preferred stock into shares of the Company’s common stock. The Company has up to 60 days after the effective date of the Seventh Amendment (until June 27, 2020) to enter into definitive agreements with all parties to effect the conversions and up to 90 days thereafter (until September 25, 2020) to obtain required shareholder approvals and execute the conversions, with the provision that the Company may be granted another 30 days by Lenders atfull their ~~discretion.~~
~~In the event the Company meets the conversion condition of the agreement, it will then have the~~15% over–allotment option to ~~settle the restructuring fee, exit fee, and accumulated PIK balance, each when due, in cash or in~~purchase an additional 12,500 common shares of the Company’s common stock. In the case of the latter, the amount or number of shares distributable to the Senior Lenders are to be determined using the most favorable conversion rate at which the holders of the Company’s subordinated indebtedness or preferred stock have converted their securities to shares of common stock(the “option shares”) of the Company ~~in their conversion transactions. In~~at the ~~event~~public offering price of $0.60 per share. The Company closed the ~~Company is unable to satisfactorily meet~~transaction on April 28, 2021 and received net proceeds from the ~~conversion condition within~~sale of the ~~specified time frames, an Event~~option shares of ~~Default under~~approximately $6,937, after deducting the ~~Credit Agreement will be deemed to have occurred.~~
~~Eighth Amendment to Credit Agreement and CARES Act Payroll Protection Program Loans~~applicable underwriting discount.

On May ~~5, 2020~~14, 2021, GEE Group, Inc. and its subsidiaries, Agile Resources, Inc., Access Data Consulting Corporation, BMCH, Inc., GEE Group Portfolio, Inc., Paladin Consulting, Inc., Scribe Solutions, Inc., SNI Companies, Inc., Triad Personnel Services, Inc., and Triad Logistics, Inc. entered a Loan, Security and Guaranty Agreement for a $20 million asset-based senior secured revolving credit facility with CIT Bank, N.A. (the “CIT Facility”). The CIT Facility is collateralized by 100% of the assets of the Company and its subsidiaries entered into nine (9) unsecured promissory notes payable under CARES Act Payroll Protection Program (“PPP”) and received net funds totaling $19,926 in order to obtain needed relief funds for allowable expenses underwho are co-borrowers and/or guarantors. The CIT Facility matures on the ~~CARES Act PPP. (See Note 15. Subsequent Events.)~~fifth anniversary of the closing date (May 14, 2026). OnConcurrent with the May ~~5, 2020,~~14, 2021 closing of the CIT Facility, the Company ~~also entered into Eighth Amendment, dated as~~borrowed $5,326 and utilized these funds to pay all remaining unpaid Exit and Restructuring Fees due to its former senior lenders in the amount of ~~May 5, 2020 (the "Eighth Amendment")~~$4,978, with the remainder going to direct fees and costs associated with the ~~Credit Agreement.~~CIT Facility. The ~~Eighth Amendment~~Company will take one time charge of $4,004 which represents unamortized debt issue costs associated with its former senior debt.
Under the CIT Facility, advances will be subject to ~~the Credit Agreement serves as the conforming amendment under the Credit Agreement to enable~~a borrowing base formula that will be computed based on 85% of eligible accounts receivable of the Company and ~~its~~ subsidiaries as defined in the CIT Facility, and subject to ~~enter into~~certain other criteria, conditions, and applicable reserves, including any additional eligibility requirements as determined by the ~~PPP loans~~administrative agent. The CIT Facility is subject to usual and ~~additional permitted indebtedness in compliance with~~customary covenants and events of default for credit facilities of this type. The interest rate, at the ~~Credit Agreement.~~Company’s election, will be based on either the Base Rate, as defined, plus the applicable margin; or the London Interbank Offering Rate (“LIBOR” or any successor thereto) for the applicable interest period, subject to a 1% floor, plus the applicable margin. In addition to interest costs on advances outstanding, the CIT Facility will provide for an unused line fee ranging from 0.375% to 0.50% depending on the amount of undrawn credit, original issue discount and certain fees for diligence, implementation, and administration.

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Table of Contents
GEE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Amounts in thousands except per share data, unless otherwise stated)
The following selected consolidated pro forma financial information reflects the effects of the above-referenced subsequent events.
Unaudited pro forma net income per share

Three Months
Ended
March 31,
2021

Six Months
Ended
March 31,
2021

Pro forma net income (1)

$
696

$
2,955

Pro forma net income per share:

Basic

$
0.01

$
0.03

Diluted

$
0.01

$
0.03

Weighted average number of shares (2):

Basic

113,500

113,500

Diluted

114,950

114,950

As of March 31,
2021

Actual

Pro Forma (2)

Unaudited Consolidated Balance Sheet Data:

Cash (3)

$ 14,258

$ 11,284

Total current assets (3)

$ 34,693

$ 31,719

Total assets (3)

$ 120,238

$ 117,264

Total current liabilities (4)

$ 26,008

$ 21,030

Total long-term liabilities (5)

$ 68,298

$ 21,739

Total liabilities (4) (5)

$ 94,306

$ 42,769

Total shareholders equity (6)

$ 25,932

$ 74,495

______________
(1)
The unaudited pro forma net income gives effect to the reduction in interest expense due to the pay-off of all amounts due under the Senior Credit Agreement, offset by the interest expense on assumed borrowings under a new collateralized senior bank asset-based revolving credit facility (net decrease in interest expense is $2,430 and $5,005 for the three and six months ended March 31, 2021, respectively). Amortization of debt discount (loss on extinguishment) of $4,004 is not included in pro forma net income due to not having a continuing effect on the operating results of the Company.
(2)
The share amounts used to calculate unaudited pro forma net income per share reflect issuance and sale of 83,333 shares of our common stock in the offering completed on April 19, 2021 and 12,500 shares issued from exercise in full by underwriters 15% over–allotment on April 27, 2021.
(3)
Pro forma cash, total current assets and total assets as of March 31, 2021, give effect to the net cash decrease after the transactions described above of ($2,974).
(4)
Pro forma current liabilities as of March 31, 2021, give effect to the settlement of the $4,978 in Exit and Restructuring Fees completed May 14, 2021.
(5)
Pro forma long-term liabilities as of March 31, 2021, give effect to (i) the pay-off of all amounts due under the Senior Credit Agreement in the aggregate amount of approximately $55,563 using a combination of the net cash proceeds of this offering in the amount of $52,567 and available cash, (ii) write off of debt discount $4,004, and (iii) assumed borrowings under a new collateralized senior bank asset-based revolving credit facility of $5,000.
(6)
The pro forma total shareholders’ equity gives effect to (i) the net proceeds of this offering in the aggregate amount of $52,567 described above and (ii) a charge to eliminate unamortized debt costs in the amount of $4,004 as of March 31, 2021.

25
~~Item 2.~~
~~Management’s Discussion and Analysis~~Table of ~~Financial Condition and Results of Operations.~~
Contents
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview

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 light industrial clients. The acquisitions of Agile Resources, Inc., a Georgia corporation (“Agile”), Access Data Consulting Corporation, a Colorado corporation (“Access”), Paladin Consulting Inc. (“Paladin”) and SNI Companies, Inc., a Delaware corporation (“SNI”) significantly expanded our geographical footprint within the placement and contract staffing of information technology, accounting, finance, office and engineering professionals.

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, Inc., (including Staffing Now, Accounting Now, and Certes), Triad Personnel Services and Triad Staffing. As of March 31, ~~2020,~~2021, we operated ~~thirty-three~~thirty-one branch offices in downtown or suburban areas of major U.S. cities in ~~fourteen~~eleven states. We have one office located in each of ~~Arizona, Washington D.C., Iowa,~~ Connecticut, Georgia, Minnesota, New Jersey, and Virginia, three offices in Colorado, ~~and Massachusetts,~~ two offices in Illinois ~~four~~and Massachusetts, five offices in Texas, seven offices each in Ohio and ~~six offices in~~ Florida.

Management has implemented a strategy which includes ~~cost reduction efforts~~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 acquisitions, financed primarily through the issuance of equity and debt 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.

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from the Coronavirus Pandemic (“COVID-19”). These have included abrupt reductions in demand for the Company’s primary sources of revenue, its temporary and direct hire placements, lost productivity due to business closings both by clients and at the Company’s own operating locations. These effects have been and continue to be felt across all businesses, with the most severe impacts being felt in the commercial (industrial) and finance, accounting, and office clerical (“FA&O) end markets within the professional segment. In response to the crisis, in April 2020 we took a series of proactive actions including a 10% pay cut for full-time salaried employees, temporary furloughing and redeployment of some employees, reduction of discretionary expenses and projects, and obtaining funds under CARES Act Payroll Protection Program (“PPP”). These actions allowed us to generate cost savings and time with which to mitigate the impacts of the COVID-19 pandemic on our businesses and brands. Our businesses have continued recover to a significant extent during six-month period ended March 31, 2021, as compared with prior sequential quarters since the quarter ended June 30, 2020. While we remain optimistic about our prospects for continuing recovery to pre-COVID-19 levels of results and performance, the rate of such recovery is still somewhat uncertain and could be delayed, for example, by potential resurgences and negative impacts of COVID-19 on the U.S. economy and the specific markets and clients we serve in the future.
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Table of Contents
Results of Operations
Three Months Ended March 31, ~~2020~~2021 Compared to the Three Months Ended March 31, ~~2019~~2020

Net Revenues

Consolidated net revenues are comprised of the following:

Three Months

Ended March 31,

(in thousands)

2020

2019

Change

Change

Professional contract services

$ 25,794

$ 26,732

$ (938 )

-4 %
Industrial contract services

4,471

5,095

(624 )

-12 %
Total professional and industrial contract services

30,265

31,827

(1,562 )

-5 %

Direct hire placement services

4,416

4,350

66

2 %
Consolidated net revenues

$ 34,681

$ 36,177

$ (1,496 )

-4 %

Three Months

Ended March 31,

(in thousands)

2021

2020

Change

Change

Professional contract services

$ 27,040

$ 25,794

$ 1,246

5 %
Industrial contract services

4,023

4,471

(448 )

-10 %
Total professional and industrial contract services

31,063

30,265

798

3 %

Direct hire placement services

3,655

4,416

(761 )

-17 %
Consolidated net revenues

$ 34,718

$ 34,681

$ 37

0 %

Contract staffing services contributed $31,063, or approximately 89%, of consolidated revenue and were up by $798, or approximately 3%, for the three-month period ended March 31, 2021, as compared with the comparable period ended March 31, 2020. Direct hire placement services contributed $3,655, or approximately 11%, of consolidated revenue for the three-month period ended March 31, 2021, and were down $761, or approximately 17%, as compared with the comparable three-month period ended March 31, 2020. Contract staffing services revenue was $30,265, or approximately 87%, of consolidated revenue and direct hire placement ~~services contributed~~revenue was $4,416, or approximately 13%, of consolidated revenue for the three-month period ended March 31, 2020. ~~This compares to~~
The overall increase in contract staffing services revenues of $798, or 3%, for the three-month period ended March 31, 2021 compared to the three-month period ended March 31, 2020 was primarily attributable to recovery and improvement in professional contract services markets from the negative effects of the COVID-19 pandemic beginning in approximately June 2020. The onset of COVID-19 resulted in a near immediate decline in demand for our staffing services due to client closures, postponements in projects and related needs for our services at some clients, significant travel restrictions, and corresponding decreases in the volume of contract services billable hours. The Company experienced the majority, but not all, of these contract staffing services reductions in its finance, accounting, and office professional end markets and in its industrial contract services. Professional contract services has experienced consistent recovery since May 2020 through this quarter resulting in the revenue increase of ~~$31,827, or approximately 88%,~~$1,246 for the three-month period ended March 31, 2021, as compared with the three-month period ended March 31, 2020. Management believes this trend is the result of ~~consolidated revenue~~U.S. economic recovery, as well as actions taken by the Company to adapt to COVID-19 and ~~direct~~position the Company for recovery. The decline in industrial contract services is driven by a continuation of negative impacts related to COVID-19, including most recently, a workforce shortage being felt across the U.S. and widely believed to be attributable to recent and plentiful economic stimulus and unemployment benefits, as well as school and other shutdowns.
Direct hire placement ~~revenue of $4,350, or approximately 12%, of consolidated~~ revenue for the three-month period ended March 31, ~~2019.~~2021 decreased by $761, or approximately 17%, over the three-month period ended March 31, 2020, driven primarily by a decrease in number of placements. Demand for the Company’s direct hire services also have declined due to the continuing presence and negative impacts related to the COVID-19 pandemic. Direct hire services demand has historically been observed to be more sensitive to economic and labor market conditions than demand for contract staffing, which means it may be expected to recover more slowly than contract staffing services in the aftermath of the COVID-19 pandemic, as well.
Management believes that the underlying trends toward recovery since May 2020 are generally consistent with the recovery experienced in the overall U.S. economy so far and, therefore, may be expected to continue, accordingly. The Company continues to observe, analyze and make modifications and changes to its business model and practices on a routine basis in response to the on-going COVID-19 pandemic and related health and safety concerns. These include, but are not limited to, implementation of policies and procedures in observance of Federal, state and/or local guidelines regarding the coronavirus, including matters such as working from home, use of personal protective equipment (principally, protective masks), social distancing, personal hygiene and sanitary practices, and other preventative and responsive measures, impacting both our core human resources, as well as our contract laborers serving clients.

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Table of Contents
The overall decrease in contract staffing services revenues of $1,562, or 5%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily attributable to coronavirus outbreak that resulted in client closures, postponements in recruiting activities at some clients, and layoffs. Reduction in temporary workforce requirements and reorganization of a few key customers in the quarter ended March 31, 2020 contributed to the net reduction in revenues. Additionally, jobseekers are more hesitant to enter the process due to uncertain times and concerns over the face-to-face nature of the recruiting process. We are striving to leverage our digital capabilities to ensure we continue to recruit top talent for our clients. In addition to the Coronavirus Pandemic-related weakness in demand for our services beginning in approximately the last half of the month of March 2020, our professional contract services segment finance, accounting and office end markets and our industrial contract services segment experienced some contraction in customer orders in the March 2020 quarter as compared with the March 2019 quarter, which we estimate accounted for approximately $2,218 and $624, respectively, of the decline. Offsetting these declines were increases in the Company’s IT professional services end markets; the largest component of our professional contract services segment, which increased $1,279 in the March 2020 quarter as compared with March 2019.
~~Direct hire placement revenue for the three months ended March 31, 2020 increased by $66, or approximately 2%, over the three months ended March 31, 2019.~~
Despite the relative performance of the contract and direct hire revenues in the March quarters year over year, since the Coronavirus Pandemic outbreak in approximately mid-March 2020, the Company has seen demand for its direct hire services drop significantly.
Cost of Contract Services

Cost of contract services includes wages and related payroll taxes and 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 the ~~three months~~three-month period ended March 31, ~~2020 decreased~~2021 increased by approximately 7%5% to $23,810 compared to $22,767 ~~compared to $24,459~~ for the ~~three months~~three-month period ended March 31, ~~2019.~~2020. The ~~$1,692~~$1,043 overall ~~decrease~~increase in cost of contract services for the ~~three months~~three-month period ended March 31, 2021 compared to the three-month period ended March 31, 2020 ~~compared to the three months ended March 31, 2019~~ was primarily attributable to ~~and consistent with~~ the corresponding ~~decline~~increase in ~~revenues, which is discussed further below.~~professional contract service revenues.

Gross Profit percentage by service:

Three Months

Ended March 31,

2020

2019

Professional contract services

26.6 %

25.0 %
Industrial contract services

14.1 %

13.6 %
Professional and industrial services combined

24.8 %

23.2 %

Direct hire placement services

100.0 %

100.0 %
Combined gross profit margin % (1)

34.4 %

32.4 %
Gross Profit percentage by service:
~~________~~

Three Months

Ended March 31,

2021

2020

Professional contract services

25.5 %

26.6 %
Industrial contract services

8.8 %

14.1 %
Professional and industrial services combined

23.3 %

24.8 %

Direct hire placement services

100.0 %

100.0 %
Combined gross profit margin % (1)

31.4 %

34.4 %
________________
(1)
Includes gross profit from direct hire placements, for which all associated costs are recorded as selling, general and administrative expenses.

The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for the three-month period ended March 31, ~~2020~~2021 was approximately ~~34.4%~~31.4% as compared with approximately ~~32.4%~~34.4% for the three-month period ended March 31, ~~2019.~~2020.

In the professional contract ~~staffing~~ services, ~~segment,~~ the gross margin (excluding direct hire placement services) was approximately ~~26.6%~~25.5% for three-month period ended March 31, ~~2020~~2021 compared to approximately ~~25.0%~~26.6% for the ~~three-months~~three-month period ended March 31, ~~2019.~~2020. This ~~increase~~decrease is ~~primarily the result of increases~~generally due to shifts in the amounts and mix of business between end markets and higher and lower billing rates and margins. Contributing to this 1.1% (1,100 basis points) decrease is a disproportionate increase in the mix of lower margin office and clerical temporary staffing services within the overall COVID-19 pandemic business recovery taking place.
The Company’s industrial contract services ~~business in IT end markets, including growth in several of~~gross margin for the ~~Company’s higher end IT brands during the fiscal quarter~~three-month period ended March 31, 2021 was approximately 8.8% versus approximately 14.1% for the three-month period ended March 31, 2020. The decrease in industrial contract services gross margin is due to a charge taken in the three-month period ended March 31, 2021, for a decrease in the amount of premium refunds the Company’s industrial business is eligible to receive under the Ohio Bureau of Workers’ Compensation retrospectively-rated insurance program. The industrial contract services gross margins normalized for the effects of these items were approximately 14.2% and 14.1% for the three months ended March 31, 2021 and 2020, ~~as compared with~~respectively. The increase after adjustment to remove the ~~same quarter~~effect of the ~~prior fiscal year.~~workers compensation premium refunds is generally within a reasonable performance range for our industrial business.

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Table of Contents
The Company’s industrial staffing services gross margin for the three-month period ended March 31, 2020 was approximately 14.1% versus approximately 13.6% for the three-month period ended March 31, 2019. The increase in industrial staffing services gross margin is due to an increase in the estimated amounts of return premiums the Company’s light industrial business is eligible to receive under the Ohio Bureau of Workers’ Compensation retrospectively-rated insurance program.

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 and branch managers on permanent and temporary placements.

•
·
Administrative compensation, which includes salaries, wages, payroll taxes, and employee benefits associated with general management and the operation of the finance, legal, human resources and information technology functions.

•
·
Occupancy costs, which includes office rent, depreciation and amortization, and other office operating expenses.

•
·
Recruitment advertising, which includes the cost of identifying job applicants.

•
·
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.

The Company’s SG&A for the three-month period ended March 31, ~~2020 increased~~2021, decreased by ~~approximately $1,759~~$3,621 as compared to the three-month period ended March 31, ~~2019.~~2020. SG&A for the three-month period ended March 31, ~~2020,~~2021, as a percentage of revenues, was approximately ~~37%~~26% compared to approximately ~~31%~~37% for the three-month period ended March 31, ~~2019.~~2020. The ~~increase~~decrease in SG&A expenses is primarily attributable to ~~increases made in our allowance~~the Company’s mitigating efforts to reduce and manage costs to adopt to COVID-19 and position the Company for recovery. In addition, a provision for doubtful ~~accounts. A significant portion of the increase is attributable~~accounts related to a ~~single~~key customer ~~of our industrial services segment~~ who filed for a bankruptcy protection of approximately $1.7 million, was taken in the form of a charge to income during March 2020. Approximately $537 of the Company’s SG&A incurred in the quarter ended March 31, 2020, represents personnel-related costs associated with former employees laid off, effective March 25, 2020, in response to the downturn associated with the coronavirus outbreak.

SG&A also includes certain non-cash costs and expenses incurred related to acquisition, integration and restructuring, and other non-recurring activities, ~~including~~such as certain corporate legal and general expenses associated with capital markets activities ~~and~~that either are not directly associated with core business ~~operations.~~operations or have been eliminated on a going forward basis. These costs were ~~$776~~estimated to be $39 and ~~$592~~$776 for the three-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and include mainly expenses associated with former closed and consolidated locations, and personnel costs associated with eliminated positions, costs incurred related to acquisitions and associated legal and professional costs. The net increase in these costs for the three-month period ended March 31, 2020 compared to the three-month period ended March 31, 2019 is primarily attributable to costs incurred to align operational needs related to coronavirus outbreak.positions.

Depreciation Expense

Depreciation expense was $77 and $69 for the three-month period ended March 31, 2021, and 2020, ~~which remained approximately level~~respectively. The increase is due to the fixed assets additions.
Amortization Expense
Amortization expense was $1,015 and $1,398 for the three-month period ended March 31, 2021 and 2020, respectively. The decrease is due to certain SNI intangible assets related to non-compete agreements that have become fully amortized since the three-month period ended March 31, 2020.
Income from Operations
The income from operations increased by $2,990 for the three-month period ended March 31, 2021 compared to the three-month period ended March 31, ~~2019.~~2020. The increase is due to the factors described above including a decrease in amortization and interest expense, recognition of provision for doubtful accounts related to a key customer who filed for a bankruptcy protection during March 2020, and the Company’s mitigating efforts beginning in approximately mid-March 2020 to restore revenues and to reduce and manage costs to adapt to the COVID-19 pandemic and position the Company for recovery.
Interest Expense
Interest expense was $2,534 for the three-month period ended March 31, 2021, which decreased by $531 compared to the three-month period ended March 31, 2020. The decrease in interest expense for the three-month period ended March 31, 2021 is mainly attributable to the interest expense related to the former 9.5% Notes and 10% Notes that was included in the three-month period ended March 31, 2020. In addition, of the $2,534 of net interest expense, $2,040 represents interest on the Company’s Senior Credit Agreement, and $445 represents amortization of capitalized and other debt related costs. On April 20, 2021, the Company repaid its remaining principal and accrued interest balances under its former Senior Credit Agreement, after which time interest expense ceased to accrue.

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Table of Contents
~~Amortization Expense~~
~~Amortization expense was $1,398 for the three-month period ended March 31, 2020, which remained approximately level compared to the three-month period ended March 31, 2019.~~
~~Loss from Operations~~
As the net result of the matters discussed regarding revenues and operating expenses above, loss from operations increased by approximately $1,533 for the three-month period ended March 31, 2020 compared to the three-month period ended March 31, 2019. The increase is a function of a combination of factors discussed above, including the increase in costs incurred to align operational needs related to coronavirus outbreak, and recognition of provision for doubtful accounts related to a key customer who filed for a bankruptcy.
~~Interest Expense~~
~~Interest expense was approximately $3,065 for the three-month period ended March 31, 2020, which remained approximately level compared to the three-month period ended March 31, 2019.~~

Provision for Income Taxes

The Company recognized a tax expense of ~~approximately $10~~$117 for the three-month period ended March 31, ~~2020.~~2021. Our effective tax rate for the three-month ~~periods~~period ended March 31, ~~2020~~2021 and ~~2019,~~2020, is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets. Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a valuation allowance against the remaining net DTA position.

Net Loss

~~As the~~The Company’s net ~~result of the matters discussed regarding revenues~~loss was $1,735 and ~~expenses above, the Company incurred net losses~~$5,428 for the three-month periods ended March 31, 2021 and 2020, respectively. The increase is due to the factors described above including decrease in amortization and interest expense, a recognition of provision for doubtful accounts related to a key customer who filed for a bankruptcy protection during March 2020, and ~~2019 of $5,428~~the Company’s mitigating efforts beginning in approximately mid-March 2020 to restore revenues and ~~$3,890, respectively. In addition~~to reduce and manage costs to adapt to the ~~items discussed above, other significant drivers of the Company’s net loss have been the interest costs associated with debt~~COVID-19 pandemic and ~~the amortization expenses associated with~~position the Company ~~identifiable intangible assets.~~for recovery.
On April 19, 2021, the Company was able to raise common equity capital and on April 20, 2021, repaid all its remaining outstanding principal and accrued interest balances under its former Senior Credit Agreement. The Company incurred $2,485 in interest expense in the accompanying consolidated statement of operations for the three-month period ended March 31, 2021, which obligations have now ceased effective April 21, 2021.

The Company continues to closely manage costs and to pursue opportunities to selectively increase revenue producing headcount in key markets and industry verticals. The Company also seeks to organically grow its professional contract services revenue and direct hire placement revenue, including business from staff augmentation, permanent placement, statement of work (SOW) and other human resource solutions in the information technology, engineering, healthcare and finance and accounting higher margin staffing specialties. The Company’s strategic plans to achieve this goal involve setting aggressive new business growth targets, including initiatives to increase services to existing customers, increasing its numbers of revenue producing core professionals, including primarily, business development managers and recruiters, changes to compensation, commission and bonus plans to better incentivize producers, and frequent interaction with the field to monitor and motivate growth. The Company’s strategy entails both internal and acquisition growth objectives to increase revenue in the aforementioned higher margin and more profitable professional services sectors of staffing.

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from the Coronavirus Pandemic (“COVID-19”). These have included abrupt reductions in demand for the Company primary sources of revenue, its temporary and direct hire placements, lost productivity due to business closings both by clients and at the Company’s own operating locations, and the significant disruptive impacts to many other aspects of normal operations. These effects have and continue to be felt across all businesses, with the most severe impacts being felt in the commercial (light industrial) and finance, accounting and office clerical (“FA&O) end markets within the professional segment.
On April 28, 2020, the Company and its subsidiaries entered into Seventh Amendment, dated as of April 28, 2020 (the "Seventh Amendment"), to the Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017 (as amended, amended and restated, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). The Seventh Amendment represents the most significant loan modification of the Company’s Credit Agreement since inception.
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On May 5, 2020 the Company and its subsidiaries entered into nine (9) unsecured promissory notes payable under CARES Act Payroll Protection Program (“PPP”) and received net funds totaling $19,926 in order to obtain needed relief funds for allowable expenses under the CARES Act PPP. On May 5, 2020, the Company also entered into Eighth Amendment, dated as of May 5, 2020 (the "Eighth Amendment") to the Credit Agreement. The Eighth Amendment served as the conforming amendment under the Credit Agreement to enable the Company and its subsidiaries to enter into the PPP loans and additional permitted indebtedness in compliance with the Credit Agreement. The CARES Act PPP relief funds are the only source of financing available to our companies and businesses to help withstand the significant downturn and disruptions we are now undergoing and are absolutely critical to our ability to maintain operations, including the employment of our temporary and full-time employees, in order to produce and meet our foreseeable liquidity requirements in the midst of this continuing worldwide pandemic.
Management believes that the execution of the amendments to its senior Credit Agreement and the CARES Act PPP loans and related funding will provide significant needed relief to the otherwise negative effects of the present Coronavirus Pandemic.
Six Months Ended March 31, ~~2020~~2021 Compared to the Six Months Ended March 31, ~~2019~~2020

Net Revenues

Consolidated net revenues are comprised of the following:

Six Months

Six Months

Ended March 31,

Ended March 31,

(in thousands)

2020

2019

$ Change

Change

2021

2020

Change

Change

Professional contract services

$ 53,216

$ 55,125

(1,909 )

-3 %

$ 53,177

$ 53,216

$ (39 )

0 %
Industrial contract services

10,126

10,715

(589 )

-5 %

9,134

10,126

(992 )

-10 %
Total professional and industrial contract services

63,342

65,840

(2,498 )

-4 %

62,311

63,342

(1,031 )

-2 %

Direct hire placement services

8,895

8,880

15

0 %

7,050

8,895

(1,845 )

-21 %
Consolidated net revenues

$ 72,237

$ 74,720

(2,483 )

-3 %

$ 69,361

$ 72,237

$ (2,876 )

-4 %
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Contract staffing services contributed $62,311 or approximately 90% of consolidated revenue and were lower by ($1,031) for the six-month period ended March 31, 2021, as compared with the comparable period ended March 31, 2020. Direct hire placement services contributed $7,050, or approximately 10%, of consolidated revenue for the six-month period ended March 31, 2021, and were down ($1,845), or approximately 21%, as compared with the comparable period ended March 31, 2020. Contract staffing services revenue was $63,342, or approximately 88%, of consolidated revenue and direct hire placement ~~services contributed~~revenue was $8,895, or approximately 12%, of consolidated revenue for the six-month period ended March 31, 2020. This compares to contract staffing services revenue of $65,840, or approximately 88%, of consolidated revenue and direct hire placement revenue of $8,880, or approximately 12%, of consolidated revenue for the six-month period ended March 31, 2019.

The overall decrease in contract staffing services revenues of ~~$2,498,~~$1,031, or 4%2%, for the six-month period ended March 31, ~~2020~~2021 compared to the six-month period ended March 31, ~~2019~~2020 was primarily attributable to ~~coronavirus outbreak that~~negative effects of the COVID-19 pandemic primarily for our industrial services. The onset of COVID-19 resulted in a near immediate decline in demand for our staffing services due to client closures, postponements in ~~recruiting activities~~projects and related needs for our services at some clients, and ~~layoffs. Reduction in temporary workforce requirements and reorganization of a few key customers~~corresponding decreases in the quarter ended March 31, 2020 contributed to the net reduction in revenues. Additionally, jobseekers are more hesitant to enter the process due to uncertain times and concerns over the face-to-face naturevolume of the recruiting process. We are striving to leverage our digital capabilities to ensure we continue to recruit top talent for our clients. In addition to the Coronavirus Pandemic-related weakness in demand for our services beginning in approximately the last half of the month of March 2020, our professional contract services ~~segment~~billable hours. The Company experienced the majority, but not all, of these contract staffing services reductions in its finance, accounting, and office professional end markets and ~~our~~in its industrial business. Professional contract services have experienced consistent recovery since May 2020 through the first six months ended March 31, 2021, resulting in the near full return of professional contract services revenue (to within $39) with revenue reported for the comparable first six months ended March 31, 2020. Management believes this trend is the result of U.S. economic recovery, as well as actions taken by the Company to adapt to COVID-19 and position the Company for recovery. The decline in industrial contract services ~~segment experienced some contraction in customer orders in~~is driven by a continuation of negative impacts related to the ~~first half of our 2020 fiscal year through March 31, 2020,~~COVID-19 pandemic, including most recently, a workforce shortage being felt across the U.S. and widely believed to be attributable to recent and plentiful economic stimulus and unemployment benefits, as ~~compared with the first half of our 2019 fiscal year through March 31, 2019, which we estimate accounted for approximately $4,658~~well as school closings and $589 respectively, of the decline. Offsetting these declines were increases in the Company’s IT professional services end markets; the largest component of our professional contract services segment, which increased $2,748 in the first half of our 2020 fiscal year through March 31, 2020, as compared with the first half of our 2019 fiscal year through March 31, 2019.
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other shutdowns.

Direct hire placement revenue for the six-month period ended March 31, ~~2020 remained consistent with~~2021 decreased by $1,845, or approximately 21%, over the six-month period ended March 31, ~~2019. Despite~~2020. Demand for the ~~consistent performance of the direct hire revenues in the March quarters year over year, since the Coronavirus Pandemic outbreak in approximately mid-March 2020, the Company has seen demand for its~~Company’s direct hire services ~~drop significantly.~~also have sharply dropped due to the continuing presence and negative impacts related to the COVID-19 pandemic. Direct hire services demand has historically been observed to be more sensitive to economic and labor market conditions than demand for contract staffing, which means it may be expected to recover more slowly than contract staffing services in the aftermath of the COVID-19 pandemic, as well.
Management believes that the underlying trends toward recovery since May 2020 are generally consistent with the recovery experienced in the overall U.S. economy so far and, therefore, may be expected to continue, accordingly. The Company continues to observe, analyze and make modifications and changes to its business model and practices on a routine basis in response to the on-going COVID-19 pandemic and related health and safety concerns. These include, but are not limited to, implementation of policies and procedures in observance of Federal, state and/or local guidelines regarding the coronavirus, including matters ranging working from home, use of personal protective equipment (principally, protective masks), social distancing, personal hygiene and sanitary practices, and other preventative and responsive measures, impacting both our core human resources, as well as our contract laborers serving clients.
Cost of Contract Services

Cost of contract services includes wages and related payroll taxes and 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 the six-month period ended March 31, ~~2020~~2021 decreased by approximately 5%4% to ~~$47,729~~$45,873 compared to ~~$50,271~~$47,729 for the six-month period ended March 31, ~~2019.~~2020. The ~~$2,542~~$1,856 overall decrease in cost of contract services for the six-month period ended March 31, ~~2020~~2021 compared to the six-month period ended March 31, ~~2019~~2020 was primarily attributable to ~~and consistent with~~ the corresponding decline in revenues, ~~which is discussed further below.~~and an increase in additional premium refunds in the form of policyholder dividends from the Ohio Bureau of Workers’ Compensation related to the Company’s industrial business.

Gross Profit percentage by service:

Six Months

Ended March 31,

2020

2019

Professional contract services

26.5 %

25.6 %
Industrial contract services

15.0 %

13.7 %
Professional and industrial services combined

24.7 %

23.6 %

Direct hire placement services

100.0 %

100.0 %
Combined gross profit margin % (1)

33.9 %

32.7 %
Gross Profit percentage by service:
~~________~~

Six Months

Ended March 31,

2021

2020

Professional contract services

25.9 %

26.5 %
Industrial contract services

29.3 %

15.0 %
Professional and industrial services combined

26.4 %

24.7 %

Direct hire placement services

100.0 %

100.0 %
Combined gross profit margin % (1)

33.9 %

33.9 %
_______________
~~(1)~~
(2)
Includes gross profit from direct hire placements, for which all associated costs are recorded as selling, general and administrative expenses.
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The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for the six-month period ended March 31, 2021 and 2020 was approximately 33.9% ~~as compared with approximately 32.7% for the six-month period ended March 31, 2019.~~each.

In the professional contract staffing services segment, the gross margin (excluding direct placement services) was approximately ~~26.5%~~25.9% for six-month period ended March 31, 2021 compared to approximately 26.5% for the six-month period ended March 31, 2020. ~~The increase~~This decrease is ~~primarily the result of increases~~generally due to shifts in the amounts and mix of ~~higher margin contract services~~ business ~~in IT~~between end markets ~~including growth~~and higher and lower billing rates and margins. Contributing to this 0.6% (600 basis points) decrease is a disproportionate increase in ~~several~~the mix of lower margin office and clerical temporary staffing services within the ~~Company’s higher end IT brands during six-month period ended March 31, 2020, as compared with the same period of the prior fiscal year.~~overall COVID-19 business recovery taking place.

The Company’s industrial ~~staffing~~contract services gross margin for the six-month period ended March 31, ~~2020~~2021 was approximately ~~15.0%~~29.3% versus approximately ~~13.7%~~15.0% for the six-month period ended March 31, ~~2019.~~2020. The increase in industrial ~~staffing~~contract services gross margin is due to ~~an increase~~the amount of additional premium refunds in the ~~estimated amounts~~form of ~~return premiums~~policyholder dividends the Company’s ~~light~~ industrial business iswas eligible to receive under the Ohio Bureau of Workers’ Compensation retrospectively-rated insurance program.
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Results for the six months ended March 31, 2021 includes $1,318 of such premium refunds. The industrial contract services gross margins excluding the effects of these items were approximately 14.9% and 14.5% for the six months ended March 31, 2021 and 2020, respectively. The increase, adjusted to remove the effects of workers compensation premium refunds, is generally within a reasonable performance range for our Light Industrial segment.

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 and branch managers on permanent and temporary placements.

•
·
Administrative compensation, which includes salaries, wages, payroll taxes, and employee benefits associated with general management and the operation of the finance, legal, human resources and information technology functions.

•
·
Occupancy costs, which includes office rent, depreciation and amortization, and other office operating expenses.

•
·
Recruitment advertising, which includes the cost of identifying job applicants.

•
·
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.

The Company’s SG&A for the six-month period ended March 31, ~~2020 increased~~2021 decreased by ~~approximately $1,813~~$5,426 as compared to the six-month period ended March 31, ~~2019.~~2020. SG&A for the six-month period ended March 31, ~~2020,~~2021, as a percentage of revenues, was approximately ~~33%~~27% compared to approximately ~~30%~~33% for the six-month period ended March 31, ~~2019.~~2020. The ~~increase~~decrease in SG&A expenses is primarily attributable to the Company’s mitigating efforts to reduce and manage costs to adopt to COVID-19 and position the Company for recovery. In addition, a provision for doubtful accounts related to a key customer who filed for a bankruptcy protection of approximately $1,700, was taken in the form of a charge to income during March 2020.
SG&A also 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. These costs were estimated to be $181 and $633 for the six-month periods ended March 31, 2021 and 2020, respectively, and include mainly expenses associated with former closed and consolidated locations, and personnel costs associated with eliminated positions.
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Table of Contents
Depreciation Expense
Depreciation expense was $150 and $148 for the six-month period ended March 31, 2021, and 2020, respectively. The increase is attributable to net fixed assets additions.
Amortization Expense
Amortization expense was $2,059 and $2,795 for the six-month period ended March 31, 2021 and 2020, respectively. The decrease is due to certain SNI intangible assets related to non-compete agreements that have become fully amortized since the six-month period ended March 31, 2020.
Income from Operations
The income from operations increased by $5,141 for the six-month period ended March 31, 2021 compared to the six-month period ended March 31, 2020. The increase is due to the factors described above including a decrease in amortization and interest expense, recognition of provision for doubtful accounts related to a key customer who filed for a bankruptcy protection during March ~~2020. Approximately $1,057 of~~2020, and the Company’s ~~SG&A incurred~~mitigating efforts beginning in ~~the six months ended March 31,~~approximately mid-March 2020 ~~represents personnel-related~~to restore revenues and to reduce and manage costs ~~associated with former employees laid off, effective March 25, 2020, in response~~to adapt to the ~~downturn associated with~~COVID-19 pandemic and position the ~~coronavirus outbreak.~~
SG&A also includes certain costs and expenses incurred related to acquisition, integration and restructuring activities, including corporate legal and general expenses associated with capital markets activities and not directly associated with core business operations. These costs were $633 and $1,751Company for the six-month periods ended March 31, 2020 and 2019, respectively, and include mainly expenses associated with former closed and consolidated locations, personnel costs associated with eliminated positions, costs incurred related to acquisitions and associated legal and professional costs. The decline of approximately $1,118 of these costs, is primarily the result of lessening acquisition, integration and restructuring activities in the first half of our 2020 fiscal year as compared with the first half of our 2019 fiscal year.
~~Depreciation Expense~~
~~Depreciation expense was $148 for the six-month period ended March 31, 2020, which remained approximately level compared to the six-month period ended March 31, 2019.~~
~~Amortization Expense~~
~~Amortization expense was $2,795 for the six-month period ended March 31, 2020, which remained approximately level compared to the six-month period ended March 31, 2019.~~
~~Loss from Operations~~
As the net result of the matters discussed regarding revenues and operating expenses above, income from operations decreased by approximately $1,723 for the six-month period ended March 31, 2020 compared to the six-month period ended March 31, 2019. The decrease is a function of a combination of factors discussed above, mainly due to recognition of provision for doubtful accounts related to a key customer who filed for a bankruptcy.
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~~Table of Contents~~
recovery.

Interest Expense

Interest expense was $5,220 for the six-month period ended March 31, ~~2020, increased~~2021, which decreased by ~~approximately $251~~$1,064 compared to the six-month period ended March 31, ~~2019.~~2020. The ~~increase~~decrease in interest expense ~~is attributable to an increase in the loan balances under the Credit Agreement~~ for the six-month period ended March 31, ~~2019.~~2021 is mainly attributable to the interest expense related to the former 9.5% Notes and 10% Notes that was included in the six-month period ended March 31, 2020. In addition, of the $5,220 of net interest expense, $4,225 represents interest on the Company’s Senior Credit Agreement, and $890 represents amortization of capitalized and other debt related costs. On April 20, 2021, the Company repaid its remaining principal and accrued interest balances under its former Senior Credit Agreement, after which time interest expense ceased to accrue.

Provision for Income Taxes

The Company recognized a tax ~~expense~~benefit of ~~approximately $181~~$277 for the six-month period ended March 31, ~~2020.~~2021. Our effective tax rate for the six-month ~~periods~~period ended March 31, ~~2020~~2021 and ~~2019,~~2020, is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets. In six-month period ended March 31, 2021, the statutory changes regarding the deductibility of PPP loan expenses resulted in the recognition of a $352 discrete item. Other than the deferred tax liability relating to indefinite lived asset, the Company is maintaining a valuation allowance against the remaining net DTA position.
Net Loss

~~As the~~The Company’s net ~~result of the matters discussed regarding revenues~~loss was $2,050 and ~~expenses above, the Company incurred net losses~~$8,992 for the six-month periods ended March 31, 2021 and 2020, ~~and 2019 of $8,991 and $7,342,~~ respectively. ~~In addition~~The increase in net income for the six-month periods ended March 31, 2021 is mainly attributable to the ~~items discussed~~factors described above ~~other significant drivers~~including $1,318 of annual premium refunds from the Ohio Bureau of Workers Compensation during the six months ended March 31, 2021, a decrease in interest expense and amortization expense. Also, the Company’s ~~net loss have been~~mitigating efforts beginning in approximately mid-March 2020 to restore revenues, to reduce and manage costs to adapt to the ~~interest costs associated with debt and~~COVID-19 pandemic contributed to the ~~amortization expenses associated with~~Company’s recovery.
On April 19, 2021, the Company ~~identifiable intangible assets.~~was able to raise common equity capital and on April 20, 2021, repaid all of its remaining outstanding principal and accrued interest balances under its former Senior Credit Agreement.   The Company incurred $5,115 in interest expense in the accompanying unaudited condensed consolidated statement of operations for the six-month period ended March 31, 2021, which obligations have now ceased effective April 21, 2021.
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Table of Contents

The Company continues to closely manage costs and to pursue opportunities to selectively increase revenue producing headcount in key markets and industry verticals. The Company also seeks to organically grow its professional contract services revenue and direct hire placement revenue, including business from staff augmentation, permanent placement, statement of work (SOW) and other human resource solutions in the information technology, engineering, healthcare and finance and accounting higher margin staffing specialties. The Company’s strategic plans to achieve this goal involve setting aggressive new business growth targets, including initiatives to increase services to existing customers, increasing its numbers of revenue producing core professionals, including primarily, business development managers and recruiters, changes to compensation, commission and bonus plans to better incentivize producers, and frequent interaction with the field to monitor and motivate growth. The Company’s ~~strategic plan contains~~strategy entails both internal and acquisition growth objectives to increase revenue in the aforementioned higher margin and more profitable professional services sectors of staffing.

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from the Coronavirus Pandemic (“COVID-19”). These have included abrupt reductions in demand for the Company primary sources of revenue, its temporary and direct hire placements, lost productivity due to business closings both by clients and at the Company’s own operating locations, and the significant disruptive impacts to many other aspects of normal operations. These effects have and continue to be felt across all businesses, with the most severe impacts being felt in the commercial (light industrial) and finance, accounting and office clerical (“FA&O) end markets within the professional segment.
On April 28, 2020, the Company and its subsidiaries entered into Seventh Amendment, dated as of April 28, 2020 (the "Seventh Amendment"), to the Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017 (as amended, amended and restated, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). The Seventh Amendment represents the most significant loan modification of the Company’s Credit Agreement since inception.
On May 5, 2020 the Company and its subsidiaries entered into nine (9) unsecured promissory notes payable under CARES Act Payroll Protection Program (“PPP”) and received net funds totaling $19,926 in order to obtain needed relief funds for allowable expenses under the CARES Act PPP. On May 5, 2020, the Company also entered into Eighth Amendment, dated as of May 5, 2020 (the "Eighth Amendment") to the Credit Agreement. The Eighth Amendment served as the conforming amendment under the Credit Agreement to enable the Company and its subsidiaries to enter into the PPP loans and additional permitted indebtedness in compliance with the Credit Agreement. The CARES Act PPP relief funds are the only source of financing available to our companies and businesses to help withstand the significant downturn and disruptions we are now undergoing and are absolutely critical to our ability to maintain operations, including the employment of our temporary and full-time employees, in order to produce and meet our foreseeable liquidity requirements in the midst of this continuing worldwide pandemic.
Management believes that the execution of the amendments to its senior Credit Agreement and the CARES Act PPP loans and related funding will provide significant needed relief to the otherwise negative effects of the present Coronavirus Pandemic.
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~~Table of Contents~~
Liquidity and Capital Resources
The primary sources of liquidity for the Company are revenues earned and collected from its clients for the placement of contractors and permanent employment candidates and borrowings available under the Credit Agreement. Uses of liquidity include primarily the costs and expenses necessary to fund operations, including payment of compensation to the Company’s contract and permanent employees, operating costs and expenses, payment of taxes, payment of interest and principal under its debit agreements, and capital expenditures.

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

Six Months

Ended March 31,

(in thousands)

2020

2019

Cash flows (used in) provided by operating activities

$ (2,066 )

$ 227

Cash flows used in investing activities

$ (83 )

$ (83 )
Cash flows provided by (used in) financing activities

$ 473

$ (596 )

Six Months

Ended March 31,

(in thousands)

2021

2020

Cash flows provided by (used in) operating activities

$ 196

$ (2,067 )
Cash flows used in investing activities

$ (12 )

$ (83 )
Cash flows provided by financing activities

$ -

$ 473


As of March 31, ~~2020,~~2021, the Company had ~~$2,379~~$14,258 of cash, which was ~~a decrease~~an increase of ~~approximately $1,676~~$184 from ~~approximately $4,055~~$14,074 as of September 30, ~~2019.~~2020. As of March 31, ~~2020,~~2021, the Company had working capital of ~~approximately $9,517~~$8,685 compared to ~~approximately $8,534~~$13,351 of working capital as of September 30, ~~2019.~~2020.

Net cash provided by (used in) ~~provided by~~ operating activities for the six-month periods ended March 31, 2021 and 2020 was $196 and ~~2019 was approximately $(2,066) and $227,~~($2,067), respectively. The ~~negative~~positive operating cash flow in the six-month period ended March 31, ~~2020 is attributable to negative~~2021 corresponds with positive income ~~(lower operating income excluding depreciation and amortization)~~ from operations and other net changes in working capital.

The primary uses of cash for investing activities were for the acquisition of property and equipment in the six-month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Cash flow provided by ~~(used in)~~ financing activities for the six-month ~~periods~~period ended March 31, 2020 ~~and 2019~~ was primarily ~~for payments on our term loan offset by~~attributable to proceeds from advances taken on the revolving credit facility.

Minimum debt service payments (principal) for the twelve-month period commencing after the close of business on March 31, ~~2020,~~2021, are approximately ~~$0.~~$15,604. 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 March 31, ~~2020,~~2021, are approximately ~~$1,921.~~$1,822.
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Table of Contents

The Company experienced ~~significant~~ net losses for the ~~six-month periods ended March 31, 2020 and 2019,~~first six months of its current fiscal year, and for its most recent fiscal years ended September 30, ~~2019~~2020 and ~~2018,~~2019, which also ~~have~~ negatively impacted the Company’s ability to generate liquidity. During much of this period, the Company significantly restructured its operations, made significant cost reductions, including closing and consolidating unprofitable locations and eliminating underperforming personnel, implemented strategic management changes, and intensified focus on stabilizing the business and restoring profitable growth. As a result, management believes the Company ~~has~~had begun to see its operations and business stabilize. Effective April 28, 2020, the Company successfully negotiated and entered into the Seventh Amendment to the Credit Agreement with its senior lenders. The Seventh Amendment (as defined below) is the most significant modification of the Company’s senior credit facilities since inception and provides several important concessions and features, including extending the maturity by two years to June 30, 2023, and adjusting (reducing) cash debt service and thereby improving the Company’s ability to generate liquidity.
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~~Table of Contents~~

In approximately mid-March 2020, the Company began to experience the severe negative effects of the economic disruptions resulting from the Coronavirus Pandemic (“COVID-19”). These have included abrupt reductions in demand for the Company primary sources of revenue, its temporary and direct hire placements, lost productivity due to business closings both by clients and at the Company’s own operating locations, and the significant disruptive impacts to many other aspects of normal operations. These effects have ~~and continue~~continued to be felt across all businesses, with the most severe impacts being felt in the commercial ~~(light industrial)~~(industrial) and finance, accounting and office clerical ~~(“FA&O)~~(FAO) end markets within the professional segment.

OnBetween April 29 and May 5,7, 2020, the Company ~~and its subsidiaries entered into nine (9) unsecured promissory notes payable under~~was able to obtain CARES Act ~~Payroll~~relief financing under the Paycheck Protection Program (“~~PPP”~~PPP Loans”) ~~and received net~~for each of its operating subsidiaries, in the aggregate amount of $19,927. These funds totaling $19,926 in order to obtain needed relief funds for allowable expenses under the CARES Act PPP. On May 5, 2020, the Company also entered into Eighth Amendment, dated as of May 5, 2020 (the "Eighth Amendment") to the Credit Agreement. The Eighth Amendment served as the conforming amendment under the Credit Agreement to enable the Company and its subsidiaries to enter into the PPP loans and additional permitted indebtedness in compliance with the Credit Agreement. The CARES Act PPP relief funds arewere the only source of financing available to our companies and businesses and have been and continue to ~~help withstand the significant downturn and disruptions we are now undergoing and are~~be absolutely critical to our ability to maintain operations, including the employment of our temporary and ~~full-time~~fulltime employees, in order to produce and meet our foreseeable liquidity requirements in the midst of this continuing worldwide ~~pandemic.~~Coronavirus Pandemic.
On April 19, 2021, the Company concluded its public offering of 83,333 shares of common stock at a public offering price of $0.60 per share. Gross proceeds of the offering totaled $50,000, which after deducting the underwriting discount, legal fees, and offering expenses, resulted in net proceeds of $45,630. On April 27, 2021, the underwriters of the Company’s April 19, 2021 public offering exercised in full their 15% over–allotment option to purchase an additional 12,500 common shares (the “option shares”) of the Company at the public offering price of $0.60 per share. The Company closed the transaction on April 28, 2021 and received net proceeds from the sale of the option shares of approximately $6,937, after deducting the applicable underwriting discount. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.
On April 20, 2021, as the result of the completion of the public offering, the Company repaid $56,022 in aggregate outstanding indebtedness under its existing Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017, including accrued interest, using the net proceeds of its recent underwritten public offering and available cash. The repaid debt was originally obtained from investors led by MGG Investment Group LP (“MGG”) on April 21, 2017 and had a maturity date of June 30, 2023. The MGG debt was comprised of a revolving credit facility with a principal balance on the date of repayment of approximately $11,828, which was subject to an annual interest rate comprised of the greater of the London Interbank Offering Rate ("LIBOR") or 1%, plus a 10% margin (approximately 11% per annum), and a term loan with a principal balance on the date of repayment of approximately $43,735, which was subject to an annual interest rate of the greater of LIBOR or 1% plus a 10% margin. The term loan also had an annual payment-in-kind ("PIK") interest rate of 5% in addition to its cash interest rate, which was being added to the term loan principal balance (cash and PIK interest rate combined of approximately 16% per annum). Accrued interest of approximately $459 was paid in connection with the principal repayments.
On May 14, 2021, GEE Group, Inc. and its subsidiaries, Agile Resources, Inc., Access Data Consulting Corporation, BMCH, Inc., GEE Group Portfolio, Inc., Paladin Consulting, Inc., Scribe Solutions, Inc., SNI Companies, Inc., Triad Personnel Services, Inc., and Triad Logistics, Inc. entered a Loan, Security and Guaranty Agreement for a $20 million asset-based senior secured revolving credit facility with CIT Bank, N.A. (the “CIT Facility”). The CIT Facility is collateralized by 100% of the assets of the Company and its subsidiaries who are co-borrowers and/or guarantors. The CIT Facility matures on the fifth anniversary of the closing date (May 14, 2026). Concurrent with the May 14, 2021 closing of the CIT Facility, the Company borrowed $5,326 and utilized these funds to pay all remaining unpaid Exit and Restructuring Fees due to its former senior lenders in the amount of $4,978, with the remainder going to direct fees and costs associated with the CIT Facility. The Company will take one time charge of $4,004 which represents unamortized debt issue costs associated with its former senior debt.
Under the CIT Facility, advances will be subject to a borrowing base formula that will be computed based on 85% of eligible accounts receivable of the Company and subsidiaries as defined in the CIT Facility, and subject to certain other criteria, conditions, and applicable reserves, including any additional eligibility requirements as determined by the administrative agent. The CIT Facility is subject to usual and customary covenants and events of default for credit facilities of this type. The interest rate, at the Company’s election, will be based on either the Base Rate, as defined, plus the applicable margin; or the London Interbank Offering Rate (“LIBOR” or any successor thereto) for the applicable interest period, subject to a 1% floor, plus the applicable margin. In addition to interest costs on advances outstanding, the CIT Facility will provide for an unused line fee ranging from 0.375% to 0.50% depending on the amount of undrawn credit, original issue discount and certain fees for diligence, implementation, and administration.

Management believes that the Company can generate adequate liquidity to meet its obligations for the foreseeable future or at least for the following twelve months assuming the negative economic effects of COVID-19 do not worsen, and that economic recovery occurs.
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Off-Balance Sheet Arrangements

As of March 31, ~~2020,~~2021, there were no transactions, agreements or other contractual arrangements to which an unconsolidated entity was a party, under which the Company (a) had any direct or contingent obligation under a guarantee contract, derivative instrument or variable interest in the unconsolidated entity, or (b) had a retained or contingent interest in assets transferred to the unconsolidated entity.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.
~~Quantitative and Qualitative Disclosures About Market Risk~~.

Not applicable.

Item 4.Controls and Procedures.
~~Controls and Procedures.~~

Disclosure Controls and Procedures

As of March 31, ~~2020,~~2021, the Company's management evaluated, with the participation of its principal executive officer and its principal financial officer, the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act"). Based on that evaluation, the Company's principal executive officer and its principal financial officer concluded that the Company's disclosure controls and procedures were effective as of March 31, ~~2020.~~2021.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting or in any other factors that could significantly affect these controls, during the Company's ~~six-month~~three-month period ended March 31, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

36
Table of Contents

PART II – OTHER INFORMATION.

Item 1.Legal Proceedings.
~~Legal Proceedings~~.

None.

Item 1A.Risk Factors.
~~Risk Factors~~.

The full extent of the impact of COVID-19 on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. In evaluating us and our common stock, in addition to the risk factor below, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019~~2020 (“~~2019~~2020 Form 10-K”), and filed with the SEC on December ~~23, 2019.~~29, 2020. Any of the risks discussed in this Quarterly Report on Form 10-Q or any of the risks disclosed in Item 1A. of Part I of our ~~2019~~2020 Form 10-K, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

Our business, results of operations, and financial condition have been and may continue to be adversely impacted in material respects by the coronavirus pandemic, and future adverse impacts could be material and difficult to predict.

Our business, results of operations, and financial condition have been, and may continue to be, adversely impacted in material respects by COVID-19 and by related government actions (including declared states of emergency and quarantine, “shelter in place” orders, or similar orders), non-governmental organization recommendations, and public perceptions, all of which have led and may continue to lead to disruption in global economic and labor markets. These effects have had a significant impact on our business, including reduced demand for our services and workforce solutions, early terminations or reductions in projects, and hiring freezes, and a shift of a majority of our workforce to remote operations, all of which have contributed to a decline in revenues and other significant adverse impacts on our financial results. Other potential impacts of COVID-19 may include continued or expanded closures or reductions of operations with respect to our client partners’ operations or facilities, the possibility our client partners will not be able to pay for our services or workforce solutions, or that they will attempt to defer payments owed to us, either of which could materially impact our liquidity, the possibility that the uncertain nature of the pandemic may not yield the increase in certain of our workforce solutions that we have historically observed during periods of economic downturn, and the possibility that various government-sponsored programs to provide economic relief may be inadequate. Further, we may continue to experience adverse financial impacts, some of which may be material, if we cannot offset revenue declines with cost savings through expense-related initiatives, human capital management initiatives, or otherwise. As a result of these observed and potential developments, we expect our business, results of operations, and financial condition to continue to be negatively affected.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
~~Unregistered Sales of Equity Securities and Use of Proceeds~~.

Not required.

Item 3.Defaults Upon Senior Securities.
~~Defaults Upon Senior Securities~~.

None.

Item 4.Mine Safety Disclosures.
~~Mine Safety Disclosures~~.

Not Applicable.

Item 5.Other Information.
~~Other Information~~.

None.

37
Table of Contents
Item 6.

~~Item 6.~~
Exhibits

The following exhibits are filed as a part of Part I of this report:

No.
Description of Exhibit
~~10.01~~1.1

~~Seventh Amendment,~~Underwriting Agreement between the Company and ThinkEquity, a division of Fordham Financial Management, Inc., as representative of the underwriters, dated ~~as of~~ April ~~28, 2020,~~14, 2021. Incorporated by reference to Exhibit 1.1 to the ~~Revolving Credit, Term Loan and Security Agreement,~~Company’s Form 8-K filed with the Commission on April 19, 2021.
10.1
Commitment Letter, dated ~~as of~~ March ~~31, 2017, as amended,~~22, 2021, by and among GEE Group, Inc., and CIT together with Exhibit A, Transaction Description, and Exhibit B, the ~~other borrower entities and guarantor entities named therein, and certain investment funds managed~~Terms Sheet. Incorporated by ~~MGG Investment Group LP. Filed as~~reference to Exhibit 10.1 to the ~~current report on~~Company’s Form 8-K filed with the ~~Securities and Exchange~~ Commission on ~~May 4, 2020 and incorporated herein by reference.~~March 26, 2021.
~~10.02~~10.2

~~Registration Rights Agreement,~~Fee Letter, dated ~~as of April 28, 2020,~~March 22, 2021, by and among GEE Group, Inc., ~~an Illinois corporation, with headquarters located at 7751 Belfort Parkway, Suite 150, Jacksonville, FL 32256,~~ and ~~CM Finance SPV, Ltd. Filed as~~CIT. Incorporated by reference to Exhibit 10.2 to the ~~current report on~~Company’s Form 8-K filed with the ~~Securities and Exchange~~ Commission on ~~May 4, 2020 and incorporated herein by reference.~~March 26, 2021.
~~10.03~~10.3

~~Registration Rights~~Loan and Security and Guarantee Agreement, dated as of ~~April 28, 2020, by and~~May 14, 2021, among GEE Group Inc., ~~an Illinois corporation, with headquarters located at 7751 Belfort Parkway, Suite 150, Jacksonville, FL 32256, and MGG Investment~~certain Subsidiaries of GEE Group ~~LP. Filed~~ as ~~Exhibit 10.3~~Borrowers, the Guarantors, the financial institutions party to the ~~current report on Form 8-K filed with the Securities~~agreement from time to time as Lenders, and ~~Exchange Commission on May 4, 2020 and incorporated herein by reference.~~CIT BANK, N.A., as agent.*
~~10.04~~10.4

~~Eighth Amendment~~Pledge Agreement, dated as of May ~~5, 2020 to Revolving Credit, Term Loan and Security Agreement dated as of March 31, 2017~~14, 2021 by and among ~~GEE Group, Inc.~~the Pledgors signatory to the agreement and CIT BANK, N.A., ~~the other Borrowers and Guarantors named therein, the lenders named therein and MGG Investment Group LP,~~ as ~~administrative agent, term loan agent and collateral~~ agent for the ~~lenders named therein. Filed as Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.~~Lenders.*
~~10.05~~
Promissory Note dated April 30, 2020 by GEE Group, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.2 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.06~~
Promissory Note dated May 1, 2020 by Scribe Solutions, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.3 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.07~~
Promissory Note dated April 29, 2020 by Agile Resources, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.4 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.08~~
Promissory Note dated May 1, 2020 by Access Data Consulting Corporation. in favor of BBVA USA, as lender. Filed as Exhibit 10.5 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.09~~
Promissory Note dated April 30, 2020 by Paladin Consulting, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.6 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.10~~
Promissory Note dated May 4, 2020 by SNI Companies, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.7 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.11~~
Promissory Note dated May 1, 2020 by Triad Personnel Services, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.8 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.12~~
Promissory Note dated May 7, 2020 by Triad Logistics, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.9 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.13~~
Promissory Note dated May 4, 2020 by BMCH, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.10 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
31.01*

Certifications of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.02*

Certifications of the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.01**

Certifications of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Title 18 of the United States Code.
32.02**

Certifications of the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Title 18 of the United States Code.
101.INS

Instance Document
101.SCH

XBRL Taxonomy Extension Schema Document
101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document
101.LAB

XBRL Taxonomy Extension Label Linkbase Document
101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document
~~_________~~
*
~~Filed herewith.~~

*
Filed herewith
**
Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

38
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GEE GROUP INC.

(Registrant)

Date: May ~~15, 2020~~17, 2021
By:
/s/ Derek Dewan

Derek Dewan

Chief Executive Officer

(Principal Executive Officer)

By:
/s/ Kim Thorpe

Kim Thorpe

Chief Financial Officer
(Principal Financial and Accounting Officer)

39

ASSETS	March 31, 2020			September 30, 2019
CURRENT ASSETS:
Cash	$	2,379		$	4,055
Accounts receivable, less allowances ($2,250 and $515, respectively)		17,262			20,826
Prepaid expenses and other current assets		1,583			2,221
Total current assets		21,224			27,102
Property and equipment, net		812			852
Goodwill		72,293			72,293
Intangible assets, net		21,086			23,881
Right-of-use assets		5,497			-
Other long-term assets		286			353
TOTAL ASSETS	$	121,198		$	124,481
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,459		$	3,733
Acquisition deposit for working capital guarantee		183			783
Accrued compensation		5,820			5,212
Short-term portion of term loan, net of discount		-			4,668
Subordinated debt		-			1,000
Current operating lease liabilities		1,616			-
Other current liabilities		1,629			3,172
Total current liabilities		11,707			18,568
Deferred taxes		367			300
Revolving credit facility		15,015			14,215
Term loan, net of discount		40,772			36,029
Subordinated debt		1,000			-
Subordinated convertible debt
(includes $1,428 and $1,269, net of discount, respectively, due to related parties)		18,113			17,954
Noncurrent operating lease liabilities		4,396			-
Other long-term liabilities		159			595
Total long-term liabilities		79,822			69,093

Commitments and contingencies

MEZZANINE EQUITY
Preferred stock; no par value; authorized - 20,000 shares -
Preferred series A stock; authorized -160 shares; issued and outstanding - none		-			-
Preferred series B stock; authorized - 5,950 shares; issued and outstanding - 5,566 and 5,566 at March 31, 2020 and September 30, 2019, respectively; liquidation value of the preferred series B stock is approximately $27,050 and $27,050 at March 31, 2020 and September 30, 2019, respectively		27,551			27,551
Preferred series C stock; authorized - 3,000 shares; issued and outstanding - 144 and 60 at March 31, 2020 and September 30, 2019, respectively; liquidation value of the preferred series C stock is approximately $144 and $60 at March 31, 2020 and September 30, 2019, respectively		144			60
Total mezzanine equity		27,695			27,611
SHAREHOLDERS' EQUITY
Common stock, no-par value; authorized - 200,000 shares; issued and outstanding - 14,557 shares at March 31, 2020 and 12,538 shares at September 30, 2019, respectively		-			-
Additional paid in capital		51,746			49,990
Accumulated deficit		(49,772	)		(40,781	)
Total shareholders' equity		1,974			9,209
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	121,198		$	124,481

	March 31, 2020			September 30, 2019

Computer software	$	1,497		$	1,497
Office equipment, furniture, fixtures and leasehold improvements		3,687			3,599
Total property and equipment, at cost		5,184			5,096
Accumulated depreciation and amortization		(4,372	)		(4,244	)
Property and equipment, net	$	812		$	852

	Six Months Ended March 31,
	2021		2020
Cash paid for operating lease liabilities	$	947		1,044
Right-of-use assets obtained in exchange for new operating lease liabilities	$	135		471

Remainder of Fiscal 2020	$	1,029
Fiscal 2021		1,744
Fiscal 2022		1,620
Fiscal 2023		1,095
Fiscal 2024		831
Thereafter		449
Less: Imputed interest		(756	)
Present value of operating lease liabilities (a)	$	6,012

Remainder of Fiscal 2021	$	930
Fiscal 2022		1,735
Fiscal 2023		1,208
Fiscal 2024		918
Fiscal 2025		434
Thereafter		108
Less: Imputed interest		(487	)
Present value of operating lease liabilities (a)	$	4,846

	March 31, 2020						September 30, 2019						March 31, 2021						September 30, 2020
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Customer relationships	$	29,070	$	11,754	$	17,316	$	29,070	$	10,321	$	18,749	$	29,070	$	14,525	$	14,545	$	29,070	$	13,188	$	15,882
Trade names		8,329		4,669		3,660		8,329		3,958		4,371		8,329		6,090		2,239		8,329		5,379		2,950
Non-Compete agreements		4,331		4,221		110		4,331		3,570		761		4,331		4,331		-		4,331		4,320		11
Total	$	41,730	$	20,644	$	21,086	$	41,730	$	17,849	$	23,881	$	41,730	$	24,946	$	16,784	$	41,730	$	22,887	$	18,843

Estimated Amortization Expense
Remaining Fiscal 2020	$	2,243
Fiscal 2021		4,088
Fiscal 2022		3,469
Fiscal 2023		2,879
Fiscal 2024		2,879
Thereafter		5,528
	$	21,086

Remaining Fiscal 2021	$	2,029
Fiscal 2022		3,469
Fiscal 2023		2,879
Fiscal 2024		2,879
Fiscal 2025		2,741
Thereafter		2,787
	$	16,784

	March 31, 2020			September 30, 2019

Term loan	$	41,578		$	41,905
Unamortized debt discount		(806	)		(1,208	)
Term loan, net of discount		40,772			40,697
Short term portion of term loan, net of discounts		-			4,668
Long term portion of term loan, net of discounts	$	40,772		$	36,029

	March 31,		September 30,
	2020		2019

10% Convertible Subordinated Note	$	4,185	$	4,185
Subordinated Promissory Note		1,000		1,000
9.5% Convertible Subordinated Note		12,500		12,500
8% Convertible Subordinated Notes, net of discount, due to related parties		1,428		1,269
Total subordinated debt, convertible and non-convertible		19,113		18,954
Short term portion of subordinated debt, convertible and non-convertible		-		(1,000	)
Long term portion of subordinated debt, convertible and non-convertible	$	19,113	$	17,954

	Number of Shares		Weighted Average Fair Value ($)
Non-vested restricted stock outstanding as of September 30, 2020		1,450		1.32
Granted		-		-
Issued		-		-
Non-vested restricted stock outstanding as of December 31, 2020		1,450		1.32
Granted		-		-
Issued		-		-
Non-vested restricted stock outstanding as of March 31, 2021		1,450		1.32

	Number of Shares			Weighted Average Fair Value ($)
Non-vested restricted stock outstanding as of September 30, 2019		1,500			1.76
Issued		(500	)		2.21
Non-vested restricted stock outstanding as of March 31, 2020		1,000			1.53

	Number of Shares			Weighted Average Exercise Price Per Share ($)		Weighted Average Remaining Contractual Life		Total Intrinsic Value of Warrants ($)
Warrants outstanding as of September 30, 2019		439			4.09		1.39		-
Granted		-			-
Expired		-			-
Warrants outstanding as of December 31, 2019		439			4.09		1.14		-
Granted		-			-
Expired		(237	)		2.50
Warrants outstanding as of March 31, 2020		202			5.95		2.11		-

Warrants exercisable as of September 30, 2019		439			4.09		1.39		-
Warrants exercisable as of March 31, 2020		202			5.95		2.11		-

	Number of Shares		Weighted Average Exercise Price Per Share ($)		Weighted Average Remaining Contractual Life		Total Intrinsic Value of Warrants ($)
Warrants outstanding as of September 30, 2020		77		2.00		4.50		-
Granted		-		-		-		-
Expired		-		-		-		-
Warrants outstanding as of December 31, 2020		77		2.00		4.25		-
Granted		-		-		-		-
Expired		-		-		-		-
Warrants outstanding as of March 31, 2021		77		2.00		4.01		-

Warrants exercisable as of September 30, 2020		77		2.00		4.50		-
Warrants exercisable as of March 31, 2021		77		2.00		4.01		-

A summary of stock option activity is as follows:
	Number of Shares			Weighted Average Exercise Price per share ($)		Weighted Average Remaining Contractual Life (Years)		Total Intrinsic Value of Options ($)

Options outstanding as of September 30, 2019		1,734			3.22		7.84		-
Granted		-			-
Forfeited/Expired		(202	)		2.79
Options outstanding as of December 31, 2019		1,532			3.27		7.80		-
Granted		-			-
Forfeited/Expired		(42	)		6.70
Options outstanding as of March 31, 2020		1,490			3.17		7.61		-

Exercisable as of September 30, 2019		720			4.24		6.50		-
Exercisable as of March 31, 2020		757			3.85		7.01		-

	Three Months Ended, March 31,
	2020			2019
Provision for Income Taxes		10			(16	)
Effective Tax Rate		0	%		1	%

	Six Months Ended, March 31,
	2020			2019
Provision for Income Taxes		181			506
Effective Tax Rate		-2	%		-7	%

Unaudited pro forma net income per share	Three Months Ended March 31, 2021		Six Months Ended March 31, 2021
Pro forma net income (1)	$	696	$	2,955
Pro forma net income per share:
Basic	$	0.01	$	0.03
Diluted	$	0.01	$	0.03
Weighted average number of shares (2):
Basic		113,500		113,500
Diluted		114,950		114,950

	As of March 31, 2021
	Actual		Pro Forma (2)
Unaudited Consolidated Balance Sheet Data:
Cash (3)	$	14,258	$	11,284
Total current assets (3)	$	34,693	$	31,719
Total assets (3)	$	120,238	$	117,264
Total current liabilities (4)	$	26,008	$	21,030
Total long-term liabilities (5)	$	68,298	$	21,739
Total liabilities (4) (5)	$	94,306	$	42,769
Total shareholders equity (6)	$	25,932	$	74,495

	(1)	The unaudited pro forma net income gives effect to the reduction in interest expense due to the pay-off of all amounts due under the Senior Credit Agreement, offset by the interest expense on assumed borrowings under a new collateralized senior bank asset-based revolving credit facility (net decrease in interest expense is $2,430 and $5,005 for the three and six months ended March 31, 2021, respectively). Amortization of debt discount (loss on extinguishment) of $4,004 is not included in pro forma net income due to not having a continuing effect on the operating results of the Company.
	(2)	The share amounts used to calculate unaudited pro forma net income per share reflect issuance and sale of 83,333 shares of our common stock in the offering completed on April 19, 2021 and 12,500 shares issued from exercise in full by underwriters 15% over–allotment on April 27, 2021.
	(3)	Pro forma cash, total current assets and total assets as of March 31, 2021, give effect to the net cash decrease after the transactions described above of ($2,974).
	(4)	Pro forma current liabilities as of March 31, 2021, give effect to the settlement of the $4,978 in Exit and Restructuring Fees completed May 14, 2021.
	(5)	Pro forma long-term liabilities as of March 31, 2021, give effect to (i) the pay-off of all amounts due under the Senior Credit Agreement in the aggregate amount of approximately $55,563 using a combination of the net cash proceeds of this offering in the amount of $52,567 and available cash, (ii) write off of debt discount $4,004, and (iii) assumed borrowings under a new collateralized senior bank asset-based revolving credit facility of $5,000.
	(6)	The pro forma total shareholders’ equity gives effect to (i) the net proceeds of this offering in the aggregate amount of $52,567 described above and (ii) a charge to eliminate unamortized debt costs in the amount of $4,004 as of March 31, 2021.

	Three Months
	Ended March 31,
(in thousands)	2020		2019		Change			Change
Professional contract services	$	25,794	$	26,732	$	(938	)		-4	%
Industrial contract services		4,471		5,095		(624	)		-12	%
Total professional and industrial contract services		30,265		31,827		(1,562	)		-5	%

Direct hire placement services		4,416		4,350		66			2	%
Consolidated net revenues	$	34,681	$	36,177	$	(1,496	)		-4	%

Gross Profit percentage by service:
	Three Months
	Ended March 31,
	2020			2019
Professional contract services		26.6	%		25.0	%
Industrial contract services		14.1	%		13.6	%
Professional and industrial services combined		24.8	%		23.2	%

Direct hire placement services		100.0	%		100.0	%
Combined gross profit margin % (1)		34.4	%		32.4	%

	• ·	Compensation and benefits in the operating divisions, which includes salaries, wages, and commissions earned by the Company’s employment consultants and branch managers on permanent and temporary placements.

	• ·	Administrative compensation, which includes salaries, wages, payroll taxes, and employee benefits associated with general management and the operation of the finance, legal, human resources and information technology functions.

	• ·	Occupancy costs, which includes office rent, depreciation and amortization, and other office operating expenses.

	• ·	Recruitment advertising, which includes the cost of identifying job applicants.

	• ·	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.

	Six Months										Six Months
	Ended March 31,										Ended March 31,
(in thousands)	2020		2019		$ Change			Change			2021		2020		Change			Change
Professional contract services	$	53,216	$	55,125		(1,909	)		-3	%	$	53,177	$	53,216	$	(39	)		0	%
Industrial contract services		10,126		10,715		(589	)		-5	%		9,134		10,126		(992	)		-10	%
Total professional and industrial contract services		63,342		65,840		(2,498	)		-4	%		62,311		63,342		(1,031	)		-2	%

Direct hire placement services		8,895		8,880		15			0	%		7,050		8,895		(1,845	)		-21	%
Consolidated net revenues	$	72,237	$	74,720		(2,483	)		-3	%	$	69,361	$	72,237	$	(2,876	)		-4	%

No.		Description of Exhibit

~~10.01~~1.1		~~Seventh Amendment,~~Underwriting Agreement between the Company and ThinkEquity, a division of Fordham Financial Management, Inc., as representative of the underwriters, dated ~~as of~~ April ~~28, 2020,~~14, 2021. Incorporated by reference to Exhibit 1.1 to the ~~Revolving Credit, Term Loan and Security Agreement,~~Company’s Form 8-K filed with the Commission on April 19, 2021.
10.1		Commitment Letter, dated ~~as of~~ March ~~31, 2017, as amended,~~22, 2021, by and among GEE Group, Inc., and CIT together with Exhibit A, Transaction Description, and Exhibit B, the ~~other borrower entities and guarantor entities named therein, and certain investment funds managed~~Terms Sheet. Incorporated by ~~MGG Investment Group LP. Filed as~~reference to Exhibit 10.1 to the ~~current report on~~Company’s Form 8-K filed with the ~~Securities and Exchange~~ Commission on ~~May 4, 2020 and incorporated herein by reference.~~March 26, 2021.
~~10.02~~10.2		~~Registration Rights Agreement,~~Fee Letter, dated ~~as of April 28, 2020,~~March 22, 2021, by and among GEE Group, Inc., ~~an Illinois corporation, with headquarters located at 7751 Belfort Parkway, Suite 150, Jacksonville, FL 32256,~~ and ~~CM Finance SPV, Ltd. Filed as~~CIT. Incorporated by reference to Exhibit 10.2 to the ~~current report on~~Company’s Form 8-K filed with the ~~Securities and Exchange~~ Commission on ~~May 4, 2020 and incorporated herein by reference.~~March 26, 2021.
~~10.03~~10.3		~~Registration Rights~~Loan and Security and Guarantee Agreement, dated as of ~~April 28, 2020, by and~~May 14, 2021, among GEE Group Inc., ~~an Illinois corporation, with headquarters located at 7751 Belfort Parkway, Suite 150, Jacksonville, FL 32256, and MGG Investment~~certain Subsidiaries of GEE Group ~~LP. Filed~~ as ~~Exhibit 10.3~~Borrowers, the Guarantors, the financial institutions party to the ~~current report on Form 8-K filed with the Securities~~agreement from time to time as Lenders, and ~~Exchange Commission on May 4, 2020 and incorporated herein by reference.~~CIT BANK, N.A., as agent.*
~~10.04~~10.4		~~Eighth Amendment~~Pledge Agreement, dated as of May ~~5, 2020 to Revolving Credit, Term Loan and Security Agreement dated as of March 31, 2017~~14, 2021 by and among ~~GEE Group, Inc.~~the Pledgors signatory to the agreement and CIT BANK, N.A., ~~the other Borrowers and Guarantors named therein, the lenders named therein and MGG Investment Group LP,~~ as ~~administrative agent, term loan agent and collateral~~ agent for the ~~lenders named therein. Filed as Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.~~Lenders.*
~~10.05~~		Promissory Note dated April 30, 2020 by GEE Group, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.2 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.06~~		Promissory Note dated May 1, 2020 by Scribe Solutions, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.3 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.07~~		Promissory Note dated April 29, 2020 by Agile Resources, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.4 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.08~~		Promissory Note dated May 1, 2020 by Access Data Consulting Corporation. in favor of BBVA USA, as lender. Filed as Exhibit 10.5 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.09~~		Promissory Note dated April 30, 2020 by Paladin Consulting, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.6 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.10~~		Promissory Note dated May 4, 2020 by SNI Companies, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.7 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.11~~		Promissory Note dated May 1, 2020 by Triad Personnel Services, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.8 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.12~~		Promissory Note dated May 7, 2020 by Triad Logistics, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.9 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
~~10.13~~		Promissory Note dated May 4, 2020 by BMCH, Inc. in favor of BBVA USA, as lender. Filed as Exhibit 10.10 to the current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2020 and incorporated herein by reference.
31.01*		Certifications of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.02*		Certifications of the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.01**		Certifications of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Title 18 of the United States Code.
32.02**		Certifications of the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Title 18 of the United States Code.
101.INS		Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	~~Filed herewith.~~

*		Filed herewith
**		Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

	GEE GROUP INC.
	(Registrant)

Date: May ~~15, 2020~~17, 2021	By:	/s/ Derek Dewan
		Derek Dewan
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Kim Thorpe
		Kim Thorpe
		Chief Financial Officer (Principal Financial and Accounting Officer)