HireQuest, Inc.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

HireQuest, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of HireQuest, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, changes in stockholders’ equity, and cash flow for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The Company’s workers’ compensation claims liability balance was $6.3 million as of December 31, 2024. As further described in Notes 1 and 5 to the consolidated financial statements, the Company’s workers’ compensation claims liability is based on estimated future costs to be incurred by the Company. The liability includes claims that have been reported but not settled, as well as claims that have been incurred but not reported. Annually, the Company engages an independent actuary to estimate the future costs of these claims.

We identified the workers’ compensation claims liability as a critical audit matter. The principal considerations for our determination are the complexity and subjectivity of the judgments, estimates and assumptions that management utilized in determining their liability for workers’ compensation claims. This required a high degree of auditor effort and judgment in evaluating management’s estimates and assumptions as it relates to the workers’ compensation liability, including the use of an auditor’s specialist.

The primary procedures we performed to address this critical audit mater included:

We have served as the Company’s auditor since 2023.

/s/ Forvis Mazars LLP

Tampa, Florida

March 27, 2025

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statement of Changes in Stockholders’** Equity**

Consolidated Statement of Cash Flow

Notes to Consolidated Financial Statements

Note1 – Overview and Summary of Significant Accounting Policies

Nature of Business

HireQuest, Inc. (together with its subsidiaries, “HQI, the “Company,” “we,” us,” or “our”) is a nationwide franchisor of offices providing direct-dispatch, executive search, and commercial staffing solutions primarily in the light industrial and blue-collar segments of the staffing industry and traditional commercial staffing. Our franchisees provide various types of temporary personnel throughtwo business models operating under the trade names “HireQuest Direct,” “HireQuest,” “Snelling,” “DriverQuest,” “HireQuest Health,” “Northbound Executive Search,” and "MRI." HireQuest Direct specializes primarily in unskilled and semi-skilled industrial and construction personnel. HireQuest, and Snelling specialize primarily in skilled and semi-skilled industrial personnel, clerical and administrative personnel, and permanent placement services. DriverQuest specializes in both commercial and non-CDL drivers serving a variety of industries and applications. HireQuest Health specializes in skilled personnel in the medical and dental industries. Northbound Executive Search and MRI specialize in executive placement and consultant services.

On* December 30, 2024we completed our acquisition of Ready Temporary Staffing, LLC (“RTS”) for $1.4 million. RTS has been a premier provider of staffing services to the employers and workers in Colorado for over50* years.

On* December 4, 2023we completed our acquisition of customer relationships and certain other assets of TEC, The Employment Company (“TEC”) for $9.8 million. TEC has been a premier provider of staffing services to the employers and workers in Northwest and Central Arkansas for over40* years. For additional information related to these transactions, seeNote 2 - Acquisitions.

As of* December 31, 2024we had approximately 425 franchisee-owned offices and1* company-owned office in 44 states, the District of Columbia, and 13 countries outside of the United States. We are the employer of record to approximately 65 thousand employees annually, who in turn provide services to thousands of clients in various industries including construction, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, retail, and dental practices. We provide employment, marketing, working capital funding, software, and administrative services to our franchisees.

Basis of Presentation

We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the periods presented.

Consolidation

The consolidated financial statements include the accounts of HQI and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

U.S. GAAP requires the primary beneficiary of a variable interest entity (a “VIE”) to consolidate that entity. To be the primary beneficiary of a VIE, an entity must have both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. We provide acquisition financing to some of our franchisees that results in some of them being considered a VIE. We have reviewed these franchisees and determined that we arenot the primary beneficiary of any of these entities, and accordingly, these entities havenot been consolidated.

Foreign Currency Translation

The functional currency of the company and all of its' subsidiaries is the United States dollar. Certain franchises located outside the United States* maytransact business in their local currency. As a result, some accounts receivable maybe denominated in currencies other than United States dollar. Assets and liabilities are translated into United States dollars at the exchange rate in effect on the balance sheet date. Royalties received from and expenses charged to non-US franchises are always denominated in United States dollars, and the franchisee bears all foreign exchange risk. Foreign currency translation and re-measurement gains and losses are included in results of operations within other income (expense), net, which waszero for the years ended December 31, 2024and2023.*

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Cost of Staffing Revenue

Cost of staffing revenue is present when we have owned locations and consists of temporary employee wages, the related payroll taxes, workers’ compensation expenses, and other direct costs of services.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates.

Significant estimates and assumptions underlie our workers’ compensation claim liabilities, our workers’ compensation Risk Management Incentive Program, our deferred taxes, our allowance for credit losses, potential impairment of goodwill and other intangibles, stock-based compensation, and estimated fair value of assets and liabilities acquired.

Cash and Cash Equivalents

Cash and cash equivalents consists of demand deposits, including interest-bearing accounts with original maturities ofthree months or less, held in banking institutions and a trust account.

Revenue Recognition

Our primary source of revenue comes from royalty fees based on the operation of our franchised offices. Royalty fees from our HireQuest Direct business model are based on a percentage of sales for services our franchisees provide to customers, which ranges from 6.0% to 8.0%. Royalty fees from our HireQuest business line, including HireQuest franchisees, DriverQuest franchisees, the Northbound franchisee, the HireQuest Health franchisees, and Snelling and LINK franchisees who executed new franchise agreements upon closing, are 4.5% of the payroll we fund plus 18.0% of the gross margin for the territory. Royalty fees from our MRI permanent placement business model range from 1% to 9% of total cash received from customers with minimum annual royalties applying in many circumstances. The MRI franchisees with a lower royalty rate generally pay a flat annual fee in addition to the percentage-based royalty. For non-permanent contract staffing, MRI franchisees pay a royalty that ranges from 20% to 25% of payroll, depending on sales volume. Some customers that utilize qualified independent contractors cause the franchisee to pay a royalty that ranges from 4% to 10% of contractor payments, depending on sales volume. Royalty fees from the Snelling and SearchPath franchise agreements assumed andnot renegotiated at closing range from 5.0% to 8.0% of sales for services our franchisees provide to customers. Our franchisees are responsible for taking customer orders, providing customers with services, establishing the prices charged for services, and controlling other aspects related to providing service to customers prior to the service being transferred to the customer, such as determining which temporary employees to dispatch to the customer and establishing pay rates for the temporary employees. Accordingly, we present revenue from franchised locations on a net basis as agent as opposed to a gross basis as principal.

For franchised locations, we recognize revenue when we satisfy our performance obligations. Our performance obligations primarily take the form of a franchise license and promised services. Promised services consist primarily of paying temporary employees, completing all statutory payroll related obligations, and providing workers' compensation insurance on behalf of temporary employees. Because these performance obligations are interrelated, we donot consider them to be individually distinct and therefore account for them as a single performance obligation. Because our franchisees receive and consume the benefits of our services simultaneously, our performance obligations are satisfied when our services are provided. Franchise royalties are billed on a weekly basis other than with MRI franchise royalties, which are billed on a monthly basis. We also offer various incentive programs for franchisees including royalty incentives, royalty credits, and other support initiatives. These incentives and credits are provided to encourage new office development and organic growth, and to limit workers' compensation exposure. We present franchise royalty fees net of these incentives and credits.

Advertising fund revenue includes contributions to our National Advertising Fund by franchisees. Revenue related to these contributions is based on a percentage of sales of certain franchised locations and is recognized as earned.

For owned locations, we account for revenue when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Revenue derived from owned locations is recognized at the time we satisfy our performance obligation. Our contracts have a single performance obligation, which is the transfer of services. Because our customers receive and consume the benefits of our services simultaneously, our performance obligations are satisfied when our services are provided. Revenue from owned locations is reported net of customer credits, discounts, and taxes collected from customers that are remitted to taxing authorities. Our customers are invoiced every week and we rarely require payment prior to the delivery of service. Substantially all of our contracts include payment terms of30 days or less and are short-term in nature. Because of our payment terms with our customers, there areno significant contract assets or liabilities. We donot extend payment terms beyondone year.

Below are summaries of our franchise royalties disaggregated by business model:

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We maintain reserves for workers’ compensation claims based on their estimated future cost. These reserves include claims that have been reported butnot settled, as well as claims that have been incurred butnot reported. Annually, we engage an independent actuary to estimate the future costs of these claims. Quarterly, we use development factors provided by an independent actuary to estimate the future costs of these claims. We make adjustments as necessary. If the actual costs of the claims exceed the amount estimated, we* may*incur additional charges.

Workers’*** compensation Risk Management Incentive Program (“RMIP”)***

Our RMIP is designed to incentivize our franchises to keep our temporary employees safe and control exposure to large workers’ compensation claims. We accomplish this by paying our franchisees an amount equivalent to a percentage of the amount they pay for workers’ compensation insurance if they keep their workers’ compensation loss ratios below specified thresholds.

Notes Receivable and Allowance for Credit Losses

Notes receivable from franchisees consist primarily of amounts due to us related to the financing of franchised locations. We report notes receivable from franchisees at the principal balance outstanding less an allowance for credit losses. We charge interest at a fixed rate and interest income is calculated by applying the effective rate to the outstanding principal balance. Notes receivable are generally secured by the assets of each location and the ownership interests in the franchise. We monitor the financial condition of our debtors and record provisions for estimated losses when we believe it is probable that our debtors will be unable to make their required payments. We evaluate the potential impairment of notes receivable based on various analyses, including estimated discounted future cash flow, at least annually and whenever events or changes in circumstances indicate that the carrying amount of the assets* may**not* be recoverable. When a note receivable is deemed impaired, we discontinue accruing interest and only recognize interest income when payment is received.

Some of our notes receivable have contingent consideration based on a percentage of specified system-wide sales that exceed certain thresholds. Notes with contingent consideration are recorded at fair value when originated. Probability of payment is reflected in the fair value, as is the time value of money. Subsequent changes in the recorded amount of contingent consideration are recognized during period in which the change was recognized.

Stock-Based Compensation

Periodically, we issue restricted common shares to our officers, directors, or employees. Command Center, an entity we merged with in2019, previously issued options to purchase common shares and several of those remain in effect. We measure compensation costs for equity awards at their fair value on their grant date and expense these costs over the service period on a straight-line basis for each separately vesting portion of the award as if the award was, in substance, multiple awards. The grant date fair value of stock awards is based on the quoted price of our common stock on the grant date. The grant date fair value of option awards is determined using the Black-Scholes valuation model.

Debt Issuance Costs

Debt issuance costs associated with our revolving line of credit is capitalized and presented as prepaid expenses, deposits, and other assets. Because debt issuance costs are related to a line of credit, they are presented as an asset, rather than a decrease to debt. Debt issuance costs are amortized using the straight-line method over the term of the related agreement. Capitalized debt issuance costs were approximately $83 thousand and $109 thousand at* December 31, 2024and December 31, 2023,*respectively.

Intangible Assets

Our indefinite-lived intangible assets includes an acquired domain name and acquired trade names. We test our indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the carrying value of the assets* may**not* be recoverable (see "Impairment" below). If the carrying value exceeds the fair value, we recognize an impairment in an amount equal to the excess,not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.

Our finite-lived intangible assets include acquired franchise agreements, acquired customer relationships, acquired customer lists, internally developed software, and purchased software. We test our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets* may**not* be recoverable. Finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives, which ranges from 5 to 15 years.

Intangible assets internally developed are measured at cost. We capitalize costs to develop or purchase computer software for internal use which are incurred during the application development stage. These costs include fees paid tothird parties for development services and payroll costs for employees' time spent developing the software. We expense costs incurred during the preliminary project stage and the post-implementation stage. Capitalized development costs are amortized on a straight-line basis over the estimated useful life of the software. The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, butnot limited to, technological and economic feasibility, and estimated economic life.

For additional information related to significant additions to intangible assets, seeNote 2 - Acquisitions.

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Impairment - Intangible Assets

Indefinite-lived intangible assets are tested annually for impairment during thethird quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate the indefinite-lived intangible asset is more likely thannot impaired. Such indicators* may*include a deterioration in macroeconomic conditions; a significant increase in cost factors; negative overall financial performance (including a decline in our expected future cash flows); entity-specific changes in key personnel, strategy or customers; and industry considerations including competition, legal, regulatory, contractual or asset-specific factors, among others. The occurrence of these indicators could have a significant impact on the recoverability of the indefinite-lived intangible assets and could have a material impact on our consolidated financial statements. For purposes of our impairment test, the assessment of indefinite-lived intangibles is performed at the asset level.

Impairment of indefinite-lived intangibles is determined using atwo-step process. Thefirst step involves assessing qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if we determine, based on the qualitative assessment, that it is more likely thannot that an indefinite-lived intangible asset's fair value is less than its carrying amount. Otherwise,no further impairment testing is required. The qualitative assessment* maybe performed onnone,* some, or all of our indefinite-lived intangible assets. Alternatively, we can bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to the quantitative impairment test.

For additional information related to our annual impairment test, see Note 11 - Goodwill and Intangible Assets.

Goodwill

Goodwill represents the excess purchase price over the fair value of identifiable assets received attributable to business combinations. Goodwill is measured for impairment at least annually, or whenever events and circumstances arise that indicate an impairment* may*exist (see "Impairment" below). These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. We test for goodwill impairment at the reporting unit level. In assessing the value of goodwill, assets and liabilities are assigned to a reporting unit and the appropriate valuation methodologies are used to determine fair value at the reporting unit level.

Impairment - Goodwill

Goodwill is tested annually for impairment during thethird quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely thannot impaired. Such indicators* may*include a sustained, significant decline in our stock price; a decline in our expected future cash flows; significant disposition activity; a significant adverse change in the economic or business environment; and the testing for recoverability of a significant asset group, among others. The occurrence of these indicators could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements.

For purposes of our impairment test, we operate astwo reporting units, MRI and all other operations based on the availability of discrete financial information. Determining the fair value of a reporting unit when performing a quantitative impairment test involves the use of significant estimates and assumptions by management. Different judgments relating to the determination of reporting units could significantly affect the testing of goodwill for impairment and the amount of any impairment recognized.

When evaluating goodwill for impairment, we have the option tofirst assess qualitative factors to determine whether it is more likely thannot the fair value of a reporting unit is less than its carrying value. Qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance. If, after assessing these events and circumstances, we determine that it is more likely thannot the fair value of the reporting unit is greater than its carrying amount, a quantitative impairment test isnot necessary. We also have the option to bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. If completed, the quantitative impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds the carrying value,no impairment of goodwill is deemed necessary. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, up to the carrying value of the goodwill.

For additional information related to our annual impairment test, see Note 11 - Goodwill and Intangible Assets.

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Provision for Income Taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. We measure deferred tax assets and liabilities using currently enacted tax rates. We record valuation allowances for deferred tax assets that more likely thannot willnot be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We analyze our filing positions in all jurisdictions where we are required to file returns and identify any positions that would require a liability for unrecognized income tax positions to be recognized. If we are assessed penalties and/or interest, penalties will be charged to selling, general, and administrative expense and interest will be charged to interest expense.

The federal Work Opportunity Tax Credit (“WOTC”) is a source of fluctuation in our effective income tax rate. The WOTC is designed to encourage the hiring of workers from certain disadvantaged targeted categories and is generally calculated as a percentage of wages over atwelve-month period up to worker maximum by targeted category. We estimate the amount of WOTC we expect to receive based on wages certified in the current period and exclude all credits pending certification. WOTC is authorized until* December 31, 2025.*

Business Combinations

We account for business acquisitions under the acquisition method of accounting by recognizing identifiable tangible and intangible assets acquired, liabilities assumed, and non-controlling interests in the acquired business at their fair values. We record the portion of the purchase price that exceeds the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed, if any, as goodwill. Any gain on a bargain purchase is recognized immediately. We recognize identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized by the acquiree prior to the acquisition. We expense acquisition related costs as we incur them. Our acquisitions* may*include contingent consideration. Any contingent consideration is measured at fair value at the date of acquisition. Contingent consideration is remeasured at fair value each reporting period with subsequent changes in the fair value of the contingent consideration recognized during the period.

Asset Acquisitions

When we purchase a group of assets in a transaction that isnot accounted for as a business combination, either because the group of assets doesnot meet the definition of a business or because substantially all of the fair value of the gross assets acquired are concentrated in a single asset or group of similar assets, we account for the transaction using a cost accumulation model with the cost of the acquisition allocated to the acquired assets based on their relative fair values. Goodwill isnot recognized. In an asset acquisition, direct transaction costs are treated as consideration transferred to acquire the group of assets and are capitalized as a component of the cost of the assets acquired. Our acquisitions* may*include contingent consideration. Any contingent consideration is measured at fair value at the date of acquisition. Contingent consideration is remeasured at fair value each reporting period with subsequent changes in the fair value of the contingent consideration recognized during the period.

Earnings per Share

We calculate basic earnings (loss) per share by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding. We donot include the impact of any potentially dilutive common stock equivalents in our basic earnings (loss) per share calculations. Diluted earnings per share reflect the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock options and unvested restricted shares, except where their inclusion would be anti-dilutive.

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Property and Equipment

We record property and equipment at cost. We compute depreciation using the straight-line method over the estimated useful lives. Land isnot depreciated. Repairs and maintenance are expensed as incurred. When assets are sold or retired, we eliminate cost and accumulated depreciation from the consolidated balance sheet and reflect a gain or loss in the consolidated statement of income. The estimated useful lives of property and equipment are as follows:

Accounts Receivable and Allowance for Credit Losses

Accounts receivable consist of amounts due for staffing services from customers of franchisees and of accounts receivable originating at our company-owned location. At* December 31, 2024and at December 31, 2023,substantially all of our net accounts receivable were due from customers of franchisees. We own the accounts receivable from staffing services provided by our employees on behalf of the franchisees until they age beyond a date agreed upon with each respective franchisee between 42 and 84 days. When accounts receivable age beyond the agreed-upon date, they are charged back to our franchisees. Accordingly, we donot* record an allowance for doubtful accounts on these accounts receivable.

For contract staffing services provided by MRI offices and for our company-owned office which arenot subject to the chargeback process, we record accounts receivable at face value less an allowance for credit losses. We determine the allowance for credit losses based on historical write-off experience, the age of the receivable, customer risk profiles, other qualitative factors and extenuating circumstances, and current economic data which represents our best estimate of the amount of probable losses on these accounts receivable, if any. We review the allowance for credit losses periodically and write off past due balances when it is probable that the receivable willnot be collected.

Advertising and Marketing

We expense advertising and marketing costs as we incur them. These costs were approximately $1.4 million and $1.2 million during the year ended* December 31, 2024and December 31, 2023,*respectively. These costs are included in general and administrative expenses.

Some of our MRI franchisees are required to pay an advertising fee equal to 0.5% -1.0% of total net sales, which supports national advertising designed to build brand awareness and drive traffic for both potential customers and potential candidates. The national advertising effort is administered by us, with franchisees providing input. Some examples include subscriptions to various job boards, the creation of digital content for social media, supporting investments in marketing-related software, and purchasing video and print media.

Fair Value Measures

Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. Our policy on fair value measures requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The policy establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The policy prioritizes the inputs intothree levels that* may*be used to measure fair value:

Level1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

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Segments

We currently operate as a single reporting segment based on our organization structure and the information regularly reviewed by our chief operating decision-maker ("CODM"), our Chief Executive Officer ("CEO"). We selected our CEO as the CODM because he is responsible for overall resource allocation and performance assessment. Our reportable segment derives its revenue primarily from royalties received from franchisees. We have identified consolidated net income as the appropriate measure for segment performance. Our CODM reviews operating results on a monthly basis relative to recent prior periods and the same prior year period in order to make decisions about how to best allocate company resources. In addition, management identified significant expenses that are reviewed by the CODM, considering both quantitative and qualitative factors. Consolidated net income is also a metric used in determining our CODM's annual bonus. For additional information related to our segment reporting, see Note 15 - Segment Information.

Discontinued Operations

Company-owned offices that have been disposed of by sale, disposed of other than by sale, or are classified as held-for-sale are reported separately as discontinued operations. In addition, a newly acquired business that on acquisition meets the held-for-sale criteria will be reported as discontinued operations. Accordingly, the assets and liabilities, operating results, and cash flows for these businesses are presented separate from our continuing operations, for all periods presented in our consolidated financial statements and footnotes, unless indicated otherwise. The assets and liabilities of a discontinued operation held-for-sale are measured at the lower of the carrying value or fair value less cost to sell.

Savings Plan

We have a savings plan that qualifies under Section401(k) of the Internal Revenue Code. Under our401(k) plan, eligible employees* maycontribute a portion of their pre-tax earnings, subject to certain limitations. As a benefit, we match 100% of each employee’sfirst* 3% of contributions, then 50% of each employee’s contribution beyond3%, up to a maximum match of 4% of the employee’s eligible earnings. Matching expense related to our savings plan totaled approximately $100 thousand and $70 thousand during the years ended* December 31, 2024and December 31, 2023,*respectively

Recently Adopted Accounting Pronouncements

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2023-07, “Segment Reporting (Topic280*):Improvements to Reportable Segment Disclosures,” which requires disclosure of incremental segment information on an interim and annual basis, primarily regarding significant segment expenses and information used to assess segment performance. This ASU is effective for fiscal years beginning after* December 15, 2023,and interim periods beginning after December 15, 2024.Retrospective application is required for all periods presented. We adopted this guidance for2024,* with retrospective application for2023. The adoption of the new standard didnot have a material impact on our financial statements.

Recently Issued Accounting PronouncementsNot Yet Adopted**

In* November 2024,the FASB issued ASU2024*-03, “Income Statement (Subtopic220-40): Disaggregation of Income Statement Expenses,” and in* January 2025,the FASB issued ASU2025*-01, “Income Statement (Subtopic220-40): Clarifying the Effective Date.” ASU2024-03 requires disclosures about specific types of expenses included in the expense captions presented in the income statement as well as disclosure about selling expenses. ASU2024-03, as clarified by ASU2025-01, is effective for fiscal years beginning after* December 15, 2026and interim periods beginning after December 15, 2027.*We are currently evaluating the impact of this ASU on our required disclosures.

In* December 2023,the FASB issued ASU2023*-09, “Income Taxes (Topic740) - Improvements to Income Tax Disclosures,” which requires enhancements and further transparency to certain income tax disclosures, primarily to the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after* December 15, 2024,*on a prospective basis with retrospective application permitted. We are currently evaluating the impact of this ASU on our required disclosures.

There areno other new accounting pronouncements, issued or effective during the fiscal year, that are expected to have a significant impact on our financial statements and related disclosures

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Note2 – Acquisitions

Business Combinations

Ready Temporary Staffing

On* December 30, 2024,we completed our acquisition of certain assets of RTS with the terms of an Asset Purchase Agreement dated December 13, 2024,*includingtwo locations in Colorado, for $1.4 million. The acquisition of RTS expanded our presence in Colorado and grew our franchise base.

The fair values of the assets acquired and liabilities assumed were determined based on information available to us. The following table summarizes the values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands).

Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new customers, and future cash flows after the acquisition of RTS. Goodwill is deductible for income tax purposes.

The following table presents unaudited pro forma information (in thousands, except per share data) assuming (a) the acquisition of RTS had occurred on* January 1, 2023, (b) all of RTS’ operations had been converted to franchises on such date, and (c)none of the other acquisitions discussed in this Note2* had occurred. The unaudited pro forma information isnot necessarily indicative of the results of operations that would have been achieved if the acquisition had in fact taken place on that date. Franchise royalties attributable to the acquiree of approximately $-0- is included in our consolidated statement of income for the year ended* December 31, 2024.*

These calculations reflect increased amortization expense, increased SG&A expense, the elimination of losses associated with the transaction, and the consequential tax effects that would have resulted had the acquisition closed on* January 1, 2023.*

In connection with the acquisition, we sold certain assets related to the operations of the acquired locations to a related party. In connection with the purchase, the buyer executed a franchise agreements with us related to the RTS locations. The aggregate sale price for the operating assets was approximately $617 thousand. In conjunction with the sale of assets acquired in this transaction, we recognized a gain of approximately $139 thousand which is reflected on the line item, "Other miscellaneous income (expense)," in our consolidated statement of income. For more information seeNote3* - Related Party Transactions* regarding the Worlds Franchisees.

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Asset Acquisitions

EPIC Labor

On* September 30, 2024we completed our acquisition of the customer relationships of EPIC Labor ("EPIC") in accordance with the terms of the Asset Purchase Agreement dated September 30, 2024.EPIC was a premier provider of healthcare and life science staffing services to the employers in Arkansas for over25* years.

The following table summarizes the estimated fair values of the identifiable assets acquired as of the acquisition date (in thousands):

We determined the EPIC transaction was an asset acquisition for accounting purposes as substantially all of the fair value of the gross assets acquired was concentrated in the customer relationships. Accordingly,no pro forma financial information is presented.

Franchise royalties attributable to the acquiree of approximately $34 thousand are included in our consolidated statement of income for the year ended* December 31, 2024.*

Immediately after the acquisition, we sold all of the assets acquired. In connection with their purchase, the buyers executed franchise agreements with us and became franchisees. The aggregate sale price for the assets was approximately $200 thousand. In conjunction with the sale of assets acquired in this transaction, we recognized a loss of approximately $100 thousand which is reflected on the line item, "Other miscellaneous expense," in our consolidated statement of income.

TEC, The Employment Company

On* December 4, 2023we completed our acquisition of the customer relationships of TEC, The Employment Company in accordance with the terms of the Asset Purchase Agreement dated October 23, 2023.TEC was a premier provider of industrial staffing services to the employers in Northwest and Central Arkansas for over40* years.

The following table summarizes the estimated fair values of the identifiable assets acquired as of the acquisition date (in thousands):

We determined the TEC transaction was an asset acquisition for accounting purposes as substantially all of the fair value of the gross assets acquired was concentrated in the customer relationships. Accordingly,no pro forma financial information is presented.

Franchise royalties attributable to the acquiree of approximately $1.4 million and $107 thousand are included in our consolidated statement of income for the year ended* December 31, 2024and December 31, 2023,*respectively.

Immediately after the acquisition, we sold all of the assets acquired. In connection with their purchase, the buyers executed franchise agreements with us and became franchisees. The aggregate sale price for the assets was approximately $7.6 million. In conjunction with the sale of assets acquired in this transaction, we recognized a loss of approximately $2.1 million which is reflected on the line item, "Other miscellaneous expense," in our consolidated statement of income.

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Note3 – Related Party Transactions

Prior to entering into a new related party transaction which exceeds certain thresholds, the Audit Committee reviews and monitors all relevant information available. In addition, the Audit Committee reviews a summary of related parties and related party transactions on a quarterly basis. The Audit Committee, in its sole and absolute discretion,** may** approve the related party transaction only if it determines, in good faith, that the transaction is in the best interests of the Company and its shareholders. The Audit Committee, in its sole discretion,** may** also impose conditions as it deems appropriate on the Company or the related party in connection with the approval of the related party transaction.

Several significant shareholders and directors of HQI own portions of Jackson Insurance Agency, Bass Underwriters, Inc., Insurance Technologies, Inc., and a number of our franchisees (in whole or in part).

Jackson Insurance Agency ("Jackson Insurance") and Bass Underwriters, Inc. ("Bass")

Edward Jackson, a member of our Board and significant stockholder, and a member of Mr. Jackson’s immediate family own Jackson Insurance. Mr. Jackson, Richard Hermanns, our CEO, Chairman of our Board, and most significant stockholder, and irrevocable trusts set up by each of them, collectively own a majority of Bass, a large managing general agent.

Jackson Insurance and Bass brokered property, casualty, general liability, and cybersecurity insurance for a series of predecessor entities (“Legacy HQ”) prior to the merger with Command Center in2019 (the "Merger"). Since* July 15, 2019,*they have continued to broker these same policies for HQI. Jackson Insurance also brokers certain insurance policies on behalf of some of our franchisees, including the Worlds Franchisees (defined below).

During the year ended* December 31, 2024and December 31, 2023,Jackson Insurance and Bass invoiced HQI approximately$1.7 million in both years for premiums, taxes, and fees related to these insurance policies. Jackson Insurance and Bass retain a commission of approximately 9% -15% of premiums. As of December**31,* 2024 and* December 31, 2023,*Jackson Insurance and Bass were owed $-0-.

Insurance Technologies, Inc. ("Insurance Technologies")

Mr. Jackson, Mr. Hermanns, and irrevocable trusts set up by each of them, collectively own a majority of Insurance Technologies, an IT development and security firm. On* October 24, 2019,*HQI entered into an agreement with Insurance Technologies to add certain cybersecurity protections to our existing information technology systems and to assist in developing future information technology systems within our HQ WebConnect software.

During the year ended* December 31, 2024and December 31, 2023,Insurance Technologies invoiced HQI approximately $565 thousand and $443 thousand, respectively, for services provided pursuant to this agreement. As of December**31,* 2024 and* December 31, 2023,*Insurance Technologies was owed $-0-.

The Worlds Franchisees

Mr. Hermanns' children and Mr. Jackson have direct or indirect ownership interests in certain of our franchisees (the “Worlds Franchisees”). There were 35 Worlds Franchisees at* December 31, 2024that operated 69 of our 425 offices. There were 34 Worlds Franchisees that operated 70 of our 427 offices at December 31, 2023.*

Balances regarding the Worlds Franchisees are summarized below:

Transactions regarding the Worlds Franchisees are summarized below:

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Note4 – Line of Credit and Term Loans

Revolving Credit Agreement with Bank of America, N.A.

On* February 28, 2023the Company and all of its subsidiaries as borrowers entered into a Revolving Credit Agreement with Bank of America, N.A. for a $50,000,000 revolving facility (the “Senior Credit Facility”), which includes a $20,000,000 sublimit for the issuance of standby letters of credit. The Company also has aone*-time right, upon at leastten Business Days’ prior written notice to the Bank to increase the maximum amount of the Senior Credit Facility to $60 million. As of* December 31, 2024this hasnot* been exercised. The Senior Credit Facility provides for certain financial covenants including maintaining an Asset Coverage Ratio of at least 1.0:1.0 at all times; maintaining a Total Funded Debt to Adjusted EBITDA Rationot exceeding 3.0:1.0; and maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least 1.25:1.0. As of* December 31, 2024*we were in compliance with all financial covenants.

Interest will accrue on the outstanding balance of the Line of Credit at a variable rate equal to (a) the BSBY Daily Floating Rate plus a margin between 1.00% and 1.75% per annum. In each case, the applicable margin is determined by the Company's Total Funded Debt to Adjusted EBITDA, as defined in the Credit Agreement. At* December 31, 2024the effective interest rate was approximately 5.8%. The Senior Credit Facility will mature on February 28, 2028.As part of this refinancing we recorded a loss on debt extinguishment of approximately $310 thousand, which is reflected on the line item, "Interest and other financing expense," in our consolidated statement of income for the year ended December 31, 2023.*

The obligations under the Credit Agreement and other loan documents are secured by substantially all of the assets of the Company as collateral including, without limitation, their accounts and notes receivable, intellectual property and the real estate owned by HQ Real Property Corporation.

At* December 31, 2024,approximately $9.2 million of availability under the Senior Credit Facility was utilized by outstanding letters of credit that secure our obligations to our workers’ compensation insurance carrier, and $500 thousand was utilized by a letter of credit that secures our paycard funding account. For additional information related to the letter of credit securing our workers’ compensation obligations seeNote5 - Workers’ Compensation Insurance and Reserves*.

Revolving Credit and Term Loan Agreement with Truist Bank

On* June 29, 2021the Company and all of its subsidiaries as borrowers (collectively, the "Borrowers") entered into a Revolving Credit and Term Loan Agreement with Truist Bank, as Administrative Agent, and the lenders from time to time made a party thereto (the "Truist Credit Agreement"), pursuant to which the lenders extended the Borrowers (i) a $60 million revolving line of credit with a $20 million sublimit for letters of credit (the "Line of Credit") and (ii) a $3,153,500 term loan (the "Term Loan"). Truist Bank mayalso make Swingline Loans available in its discretion. Interest accrued on the outstanding balance of the Line of Credit at a variable rate equal to (a) the LIBOR Index Rate plus a margin between 1.25% and 1.75% per annum or (b) the then applicable Base Rate, as that term is defined in the Credit Agreement plus a margin between 0.25% and 0.75% per annum. In each case, the applicable margin was determined by the Company's Average Excess Availability on the Line of Credit, as defined in the Credit Agreement. Interest accrued on the Term Loan at a variable rate equal to (a) the LIBOR Index Rate plus 2.0% per annum or (b) the then applicable Base Rate plus 1.0% per annum. In addition to interest on outstanding principal under the Truist Credit Agreement, the Borrowers paid a commitment fee on the unused portion of the Line of Credit in an amount equal to 0.25% per annum. All loans made pursuant to the Line of Credit were to mature on June 29, 2026.The Term Loan was based upon a15*-year amortization of the original principal amount of the Term Loan with the remaining principal balance due and payable in full on the earlier of the date of termination of the commitments on the Line of Credit and* June 29, 2036.*

The Truist Credit Agreement was terminated in conjunction with the Company entering into the Senior Credit Facility.

Term Loan

In connection with the Northbound acquisition, we entered into an amortizing term loan from the seller for $1.5 million scheduled to mature on* March 1, 2025that bears interest at 4.0%. The Northbound term loan is unsecured and subordinated to the Senior Credit Facility. The Northbound term loan is payable in 36 monthly installments beginning on April 1, 2022until March 1, 2025.We may*prepay the Northbound term loan in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment.

The following table provides the estimated future maturities of term loans as of* December 31, 2024 (*in thousands):

Note5 – Workers’** Compensation Insurance and Reserves**

Beginning in* March 2014,Legacy HQ obtained its workers’ compensation insurance through Chubb Limited and ACE American Insurance Company (collectively, “ACE”) in all states in which it operated, other than monopolistic jurisdictions. The ACE policy was a high deductible policy pursuant to which Legacy HQ had primary responsibility for all claims with ACE providing insurance for covered losses and expenses in excess of $500 thousand per incident. In addition to the ACE policy, Legacy HQ purchased a deductible reimbursement insurance policy from Hirequest Insurance Company ("HQ Ins."), a North Carolina protected cell captive insurance company, to cover losses up to the $500 thousand deductible with ACE. This resulted in Legacy HQ effectively being fully insured during this time period. Effective July 15, 2019,we terminated our deductible reimbursement policy with HQ Ins. and have assumed the primary responsibility for all claims up to the deductible occurring on or after July 15, 2019.The primary responsibility of all claims occurring before July 15, 2019*remains with HQ Ins. We assumed the Legacy HQ policy with ACE.

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Command Center also obtained its workers’ compensation insurance through ACE. Pursuant to Command Center’s policy, ACE provides insurance for covered losses and expenses in excess of*$500* thousand per incident. Command Center’s ACE policy in effect as of the date of the Merger includes aone-time obligation for the Company to pay any single claim filed under the Command Center policy within a policy year that exceeds*$500* thousand (if any), but only up to*$750* thousand for that claim. All other claims within the policy year are subject to the*$500* thousand deductible. Effective* July 15, 2019,*in connection with the Merger, we assumed all of the workers’ compensation claims of Command Center. We also assumed Command Center’s workers’ compensation policy with ACE.

Under these high deductible programs, HQI is effectively self-insured. Per our contractual agreements with ACE, we must provide collateral deposits of approximately $9.2 million, which we accomplished by providing letters of credit under our agreement with Bank of America. For workers’ compensation claims originating in the monopolistic jurisdictions of Washington, North Dakota, Ohio, and Wyoming, we pay workers’ compensation insurance premiums and obtain full coverage under mandatory state administered programs. Our liability associated with claims in these jurisdictions is limited to premium payments based upon the amount of payroll paid within each jurisdiction. Accordingly, our consolidated financial statements reflect only the mandated workers’ compensation insurance premium liability for workers’ compensation claims in these jurisdictions.

The following table reflects the changes in our workers' compensation claims liability:

Note6 – Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, accounts payable, the line of credit and all other current assets and liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the amortized cost basis as adjusted by an allowance for credit losses as we believe the stated interest rates reflects the prevailing market rates given our unique collateral position and the scarce capital resources willing to finance a franchise. The fair value of the term loan payable approximates its carrying value because current rates for similar borrowings donot have a material impact.

Note7 – Analysis of Franchised and Company-Owned Offices

Below is a summary of changes in the number of franchised offices:

We purchased a small number of offices in2024 which are discussed elsewhere but arenot reflected in this table because they were combined into the operations of existing offices. At* December 31, 2024and December 31, 2023*HQI hadone company-owned office, which is the Philadelphia location acquired in the Dubin acquisition. Activity from this location is classified as held-for-sale and reported as discontinued operations.

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Note8 – Stockholders’** Equity**

Dividend

In thethird quarter of2020, we initiated the payment of a quarterly dividend. The following common share dividends were paid during2024 and2023 (total paid in thousands):

Note9 – Stock Based Compensation

Employee Stock Incentive Plan

In* December 2019,our Board approved the2019* HireQuest, Inc. Equity Incentive Plan (the*“2019* Plan”). Subject to adjustment in accordance with the terms of the2019 Plan,no more than 1.5 million shares of common stock are available in the aggregate for the grant of awards under the2019 Plan.No more than 1 million shares* maybe issued in the aggregate pursuant to the exercise of incentive stock options. In addition,no more than 250 thousand shares maybe issued in the aggregate to any employee or consultant, andno* more than 50 thousand shares* maybe issued in the aggregate to any non-employee director in anytwelve*-month period. Shares of common stock available for distribution under the Plan* mayconsist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. The2019* Plan was approved by our shareholders in* June 2020*and became effective as of that date.

In* September 2019,our Board approved a share purchase match program to encourage ownership and further align the interests of key employees and directors with those of our shareholders. Under this program, we will match 20% of any shares of our common stock purchased on the open market by or granted in lieu of cash compensation to key employees and directors up to $25 thousand in aggregate value per individual within any calendar year. These shares vest on thesecond* anniversary of the date on which the matched shares were purchased if the individual is still employed by the Company or still serves as a director and certain other vesting criteria are met. During2024, we issued 10,761 shares valued at approximately $155 thousand under this program. During2023, we issued 9,375 shares valued at approximately $158 thousand under this program.

In2024, we issued 60,731 shares of restricted common stock pursuant to the2019 Plan valued at approximately $758 thousand to members of our Board of Directors for their services in lieu of cash compensation. Of these,57,277 shares vested equally over thethree months post grant and 3,454 shares vesttwo years after their grant date pursuant to our share match program for director compensation. Also in2024, we issued 5,270 shares pursuant to our share purchase match program valued at approximately $80 thousand to match 20% of open market purchases made by members of our Board of Directors. Also in2024, we issued 2,037 shares pursuant to our share purchase match program to key employees valued at approximately $29 thousand.

We also issued 7,500 shares of restricted common stock in2024 pursuant to the2019 Plan that vest over 4 years and were valued at approximately $101 thousand to a key employee for services in lieu of cash compensation.

In2023, we issued 12,498 shares of restricted common stock pursuant to the2019 Plan valued at approximately $231 thousand to members of our Board of Directors for their services in lieu of cash compensation. Of these,10,413 shares vested equally over thethree months post grant. The remaining 2,085 shares were issued pursuant to our share purchase match program. Also in2023, we issued 6,131 shares pursuant to our share purchase match program related to open market purchases by members of our Board of Directors.

Also in2023, we issued 65,431 shares of restricted common stock pursuant to the2019 Plan valued at approximately $1.3 million to key employees for their services in lieu of cash compensation. Of these,9,272 shares were issued to our CEO and vest equally over thethree months post grant. Of the remaining shares,55,000 vest over 4 years and 1,159 shares were issued pursuant to our share purchase match program and vest thesecond anniversary of the date of grant.

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The following table summarizes our restricted stock outstanding at* December 31, 2022,and changes during the years ended December 31, 2023and December 31, 2024:*

At* December 31, 2024,*there was unrecognized stock-based compensation expense totaling approximately $746 thousand relating to non-vested restricted stock grants that will be recognized over the next 3.7 years.

Stock options that were outstanding at Command Center were deemed to be issued on the date of the Merger. Outstanding awards continue to remain in effect according to the terms of the2008 Plan, the2016 Plan, and the corresponding award documents. There were approximately 13 thousand stock options vested at* December 31, 2024and December 31, 2023.All outstanding stock options were vested at December 31, 2024and December 31, 2023.There wereno options issued in2024* or2023.

The following table summarizes our stock options outstanding at* December 31, 2022,and changes during the years ended December 31, 2023and December 31, 2024:*

The following table summarizes additional information about our outstanding stock options, and reflects the intrinsic value recalculated based on the closing price of our common stock of $14.16 on* December 31, 2024:*

Note10 – Property and Equipment

The following table summarizes the book value of our assets and accumulated depreciation:

We own our corporate headquarters in Goose Creek, SC. Excess capacity is leased to an unrelatedthird party. Gross rental income was approximately $104 thousand and $186 thousand during the years ended* December 31, 2024and December 31, 2023,*respectively, and is reflected on the line item, "Other miscellaneous income," in our consolidated statement of income.

Depreciation expense related to property and equipment totaled approximately $163 thousand and $172 thousand during the years ended* December 31, 2024and December 31, 2023,*respectively.

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Note11 – Goodwill and Intangible Assets

Annual Impairment Test

During thethird quarter of2024, we completed our annual review of goodwill for potential impairment using a quantitative assessment for all of our reporting units. The fair value of each reporting unit was estimated using a weighting of a discounted cash flow model and prices of comparable businesses. As a result of this review, we concluded that the carrying value of our MRI reporting unit exceeded its estimated fair value resulting in an impairment charge of approximately $4.8 million. The goodwill impairment was primarily attributable to industry and market conditions effecting the overall financial performance of the reporting unit. These industry and market conditions were deemed a triggering event that led us to also review the fair value of certain indefinite-lived intangible assets related to the MRI reporting unit. As a result of this review we concluded the carrying value of the trade name related to MRI exceeded its estimated fair value resulting in animpairment charge of approximately $1.2 million. The related impairment was primarily attributable to industry and market conditions effecting the overall financial performance of the reporting unit. The balance for the trade name related to MRI was approximately $940 thousand and $2.2 million at* December 31, 2024and December 31, 2023,*respectively.

The combined impairment charge of approximately $6.0 million is reflected in the line item, "Goodwill and intangible asset impairment charge," in our Consolidated Statements of Income for thetwelve months ended* December 31, 2024.*

The table below reflects our goodwill and changes in the carrying value (in thousands):

Intangible Assets

The following table reflects our intangible assets:

Amortization expense related to intangible assets totaled approximately $2.6 million during the years ended* December 31, 2024and December 31, 2023.*

The following table provides the estimated future amortization of finite-lived intangible assets as of* December 31, 2024 (*in thousands):

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Note12 – Commitments and Contingencies

Franchise Acquisition Indebtedness

We financed the sale of several acquired offices to new franchises with notes receivable. In some instances, this financing resulted in certain franchises being considered VIE’s. We have determined that we arenot required to consolidate these entities because we donot have the power to direct these entities’ daily operations. If these franchises default on these notes, we bear the risk of loss of the outstanding balance on these notes, less what we could recoup from the potential resale of the repossessed office. The balance due from the franchises determined to be VIE’s on* December 31, 2024and December 31, 2023*was approximately $6.9 million and $8.2 million, respectively.

Legal Proceedings

From time to time, we are involved in various legal and administrative proceedings. Based on information currently available to us, we donot expect material uninsured losses to arise from any of these matters. We believe the outcome of these matters, even if determined adversely, willnot have a material adverse effect on our business, financial condition or results of operations. There have beenno material changes in our legal proceedings as of* December 31, 2024.*

Note13 – Income Tax

The provision for income taxes is comprised of the following:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred taxes are as follows:

At* December 31, 2023,the Company has a federal net operating loss carry-forward of approximately $209 thousand that was utilized in2024.*

Our effective tax rates were approximately 5.3% and 17.3% for2024 and2023, respectively. The items accounting for the difference between income taxes computed at the statutory federal income tax rate and the income taxes reported on the statements of income are as follows:

U.S. federal income tax returns after 2021 remain open to examination. Generally, state income tax returns after 2020 remain open to examination.No income tax returns are currently under examination. As of* December 31, 2024,and December 31, 2023,*the Company doesnot have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes.

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Note14 – Notes Receivable

Several franchisees borrowed funds from us primarily to finance the initial purchase price of office assets, including intangible assets.

Notes outstanding, net of allowance for losses, were approximately $7.8 million and $9.6 million as of* December 31, 2024and December 31, 2023,respectively. Notes receivable generally bear interest at a fixed rate between 6.0% and 10.0%. Notes receivable are generally secured by the assets of each office and the ownership interests in the franchise. We report interest income on notes receivable as interest income in our consolidated statements of income. Interest income was approximately $556 thousand and $263 thousand during the year ended December 31, 2024and December 31, 2023,*respectively.

We estimate the allowance for credit losses for franchisees separately from the allowance for credit losses from non-franchisees because of the level of detailed sales information available to us with respect to our franchisees. Based on our review of the financial condition of the borrowers, the underlying collateral value, and the potential future impact of the economy on certain borrowers’ economic performance and estimated future cash flows, we have established an allowance of approximately $773 thousand and $623 thousand as of* December 31, 2024and December 31, 2023,*respectively, for potentially uncollectible notes receivable from franchisees.

The following table summarizes our notes receivable balance to franchisees:

The following table summarizes our allowance for credit losses at* December 31, 2022,and changes during the years ended December 31, 2023and December 31, 2024 (*in thousands):

Note15 – Segment Information

Management determined HQI is asingle reporting segment. The following table presents significant expenses regularly reviewed by our CODM when determining resource allocation and assessing performance:

Other costs consist primarily of selling, general, and administrative costs and includes marketing and advertising, computer expenses, and legal and professional fees.

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Note16 – Earnings per Share

The following table summarizes the calculation of diluted common shares and earnings per share:

Outstanding common stock equivalents at* December 31, 2024and December 31, 2023*totaled approximately 106 thousand and 155 thousand, respectively.

Note17 – Discontinued Operations

In connection with the Dubin acquisition, certain assets acquired are still owned by us and classified as held-for-sale. When we acquired Dubin, there weretwo business lines. Dubin Workforce Solutions specialized in temporary labor assignments. The Dubin Group focused on permanent recruiting. We immediately sold the assets of Dubin Workforce Solutions to a new franchisee. There wasnot a franchisee identified for the Dubin Group portion of the business, however, we began marketing the franchise and classified it as held-for-sale immediately upon acquisition. We entered into an employment agreement with the seller to continue managing the business as a Company-owned location while it was held-for-sale. During2023, we actively solicited but didnot receive any reasonable offers to purchase the assets and, in response, have adjusted the price. The franchise continues to be actively marketed at a price that is reasonable given its results of operation. We expect to complete a sale of these assets within the next12 months.

When we acquired Dental Power in2021, we used the platform to build a customer base in the dental-oriented sector of the staffing industry to increase revenue opportunities under the HireQuest Health brand. Once we acquired MRI in* December 2022,there were a number of natural buyers within the MRI Network. At that time we reclassified Dental Power to held-for-sale. On March 1, 2023,we agreed to sell the Dental Power assets to an MRI franchisee, who will continue to operate the business as part of their franchise. The sale agreement calls for proceeds of $2 million payable over 5 years with a market rate of interest. We recognized a gain of approximately $340 thousand in thefirst* quarter of2023 upon completion of the transaction.

Intangible assets associated with discontinued operations consist of customer lists with a net carrying value of approximately $891 thousand at* December 31, 2024and December 31, 2023.In conjunction with our annual impairment test of intangible assets in Decemberof2023,* we recognized a loss of approximately $514 thousand related to a write down of the Dubin customer list.

The income from discontinued operations amounts as reported on our consolidated statements of operations was comprised of the following amounts:

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