HireQuest, Inc.

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. Our franchisees provide various types of temporary personnel throughtwo primary business models operating under the trade names “HireQuest Direct”, “HireQuest”, “Snelling”, “DriverQuest”, “HireQuest Health”, "TradeCorp", "SearchPath", “Northbound Executive Search”, "Management Recruiters International", "Sales Consultants" and "MRI". HireQuest Direct focuses primarily on unskilled and semi-skilled industrial and construction personnel. HireQuest, Snelling and TradeCorp focus primarily on 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, MRI, SearchPath, and Sales Consultants focus on executive placement and consultant services.

On* December 1, 2025,HQ MRI Corporation (“HQ MRI”), a wholly-owned subsidiary of the Company, entered into a Contribution Agreement with MRINetwork Operations (“MRINO”), which closed on January 1, 2026.Under this agreement, HQ MRI contributed certain assets and liabilities associated with its permanent placement franchise base, including those necessary for day-to-day operations, in exchange for 40% of the ownership interest in MRINO. The contract-staffing assets of the MRINetwork were excluded from the transaction and retained by HQ MRI. Please refer toNote2 - Investment in MRINetwork Operations* for additional information.

As of* June 30, 2026*, we had 251 franchisee-owned offices and1 company-owned office in 39 states, the District of Columbia, and 1 country outside of the United States. We serve as the employer of record for approximately 75 thousand employees annually, who in turn provide services to thousands of clients in various industries including construction, healthcare, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, retail, and dental practices. We provide employment services, marketing, working capital funding, software, and other 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”), and with the instructions to Article8 of Regulation S-X. 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.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form10-K for the year ended* December 31, 2025*. Results for the interim periods presented arenot necessarily indicative of the results expected for the full year or for any other period.

Share Repurchase Plan

From time to time, we repurchase shares of our common stock pursuant to a share repurchase program approved by our Board of Directors. Repurchased shares are initially recorded as treasury stock and are periodically retired and canceled. The excess of the repurchase price over the par value of the shares is allocated to retained earnings in accordance with applicable accounting guidance. Direct costs associated with share repurchases are included as part of the cost of the shares acquired. Repurchased shares that are retired reduce the number of shares issued and outstanding.

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 (“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 the beneficiary. We provide acquisition financing to some of our franchisees that* mayexpose us to losses. This results in some franchisees being considered VIEs. We have evaluated our relationship with each of these franchisees and determined that we arenot* the primary beneficiary of any of these entities. Accordingly, we havenot consolidated these entities.

In addition, in connection with the formation of MRINO on* January 1, 2026,we evaluated our investment under U.S. GAAP, including considerationof MRINO’s capitalization and our involvement in providing initial funding. We determined that, while MRINO is a VIE, we donot* have the power to direct the activities that most significantly impact MRINO’s economic performance. Accordingly, we arenot the primary beneficiary, and the investment is accounted for under the equity method of accounting.

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 include workers' compensation claim liabilities, the workers' compensation Risk Management Incentive Program, the allowance for credit losses, deferred tax assets and liabilities (including the related income tax provision), the assessment of goodwill and other intangible assets for impairment, stock-based compensation, and the estimated fair value of assets and liabilities acquired in business combinations.

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Franchise Royalties

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

Service revenue, which forms the other component of our total revenue, consists primarily of interest we charge our franchisees on overdue customer accounts receivable, and other fees for optional services we provide our franchisees. We recognize interest income based on the effective interest rate applied to the outstanding principal balance of overdue accounts. We recognize revenue from optional services as we provide them.

Marketing and Advertising

We expense advertising and marketing costs as we incur them. These costs were approximately $290 thousand and $438 thousand during thethree months ended* June 30, 2026* and* June 30, 2025*, respectively, and approximately $658 thousand and $816 thousand during thesix months ended* June 30, 2026* and* June 30, 2025*, respectively. These costs are included in general and administrative expenses.

Recently Adopted Accounting Pronouncements

There wereno new accounting pronouncements adopted during the quarter that had a significant impact on our financial statements and related disclosures.

Recently Issued Accounting PronouncementsNot Yet Adopted**

In* November 2024,the Financial Accounting Standards Board ("FASB") issued ASU2024*-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses" which requires additional disaggregation of certain income statement expense captions and addresses investors' requests for more granular information about the composition of expenses included in commonly presented expense captions, such as selling, general and administrative expenses. This ASU is effective for fiscal years beginning after* December 15, 2026,and interim periods beginning after December 15, 2027.We are currently evaluating the impact this ASU may*have on our consolidated financial statements and related disclosures.

In* September 2025,the FASB issued ASU2025*-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic350-40): Targeted Improvements to the Accounting for Internal-Use Software.” ASU2025-06 eliminates references to project stages and instead requires an entity to start capitalizing software costs once both of the following criteria have been met: (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used for its intended function. ASU2025-06 is effective for fiscal years beginning after* December 15, 2027and interim reporting periods within those annual reporting periods. The guidance can be applied prospectively, on a modified basis for in-process projects, or retrospectively, and early adoption is permitted. We are currently evaluating the impact this ASU may*have on our consolidated financial statements and related disclosures.

In* December 2025,the FASB issued ASU2025*-11, “Interim Reporting (Topic270): Narrow-Scope Improvements.” ASU2025-11 clarifies the applicability of interim reporting guidance under ASC270 and reorganizes certain interim disclosure requirements to improve consistency and navigability within the Codification. The ASU also introduces a disclosure principle requiring entities to disclose events and changes that occur after the end of the most recent annual reporting period that have a material impact on the entity. ASU2025-11 is effective for interim reporting periods within annual reporting periods beginning after* December 15, 2027,and early adoption is permitted. We are currently evaluating the impact this ASU may*have on our consolidated financial statements and related disclosures.

Management doesnot believe that any other recently issued accounting standards that havenot yet been adopted are expected to have a material impact on our consolidated financial statements.

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Note2 - Investment in MRINetwork Operations

Transaction Overview

On* January 1, 2026,HQ MRI contributed certain assets associated with the permanent placement franchise base of MRI to MRINO, a newly formed entity, in exchange for a 40% ownership interest. We evaluated our interest under U.S. GAAP and determined that we donot* have a controlling financial interest in MRINO and we arenot the primary beneficiary of a VIE. Accordingly, the investment is accounted for under the equity method of accounting.

The assets transferred consisted primarily of franchise agreements. In connection with these franchise agreements, we had previously recorded deferred revenue related to nonrefundable upfront franchise fees and capitalized contract costs (broker fees).

Upon closing, we wereno longer the franchisor for the MRI permanent placement franchise base andno longer have continuing involvement as the franchisor or remaining performance obligations associated with the transferred franchise agreements.

Accounting for the Transaction

The transaction was accounted for as a transfer of nonfinancial assets to a noncustomer. Control of the transferred assets passed to MRINO on* January 1, 2026,and we derecognized the related assets and liabilities at that time. Deferred revenue associated with upfront franchise fees was derecognized upon transfer of the underlying contracts as weno* longer have performance obligations. Capitalized contract costs were derecognized concurrently with the related contracts. These amounts were included in the carrying value of net assets derecognized in determining the gain on the transaction. The equity interest received was measured at fair value on the date of the transaction and recorded as an equity method investment which is included in the line item "Investment in unconsolidated affiliate" on our Consolidated Balance Sheets.

Post-Formation Funding

At formation, MRINO had limited initial working capital, and it was expected that HQI would provide funding to support initial operations. During thethree months ended* March 31, 2026,we funded approximately $480 thousand of MRINO-related costs. We evaluated the nature of this funding and determined that the amount representing our proportionate ownership, or approximately $192 thousand, was considered in determining the overall transaction economics from a market participant perspective. Accordingly, this amount was reflected as an adjustment to the gain on divestiture. The remaining portion of the funding of approximately $286 thousand is expected to be reimbursed based on contractual arrangements by MRINO and was recorded as a note receivable as of March 31, 2026.*

Gain on Divestiture

We recognized a gain on divestiture of approximately $248 thousand during thesix months ended* June 30, 2026*, which is included in the line item "Gain on divestiture" on our Consolidated Statements of Income. The gain represents the difference between the fair value of the equity interest received, adjusted as described below, and the carrying value of the net assets derecognized.

The fair value of the equity interest received was determined based on a valuation of MRINO utilizing an income approach based on discounted cash flows, which incorporated Level3 inputs, including projected future cash flows, estimated profitability, terminal growth assumptions and discount rates reflecting the risks associated with the business and projected cash flows. Management, with the assistance of athird-party valuation specialist, evaluated the reasonableness of the significant assumptions utilized in the valuation.

The components of the gain calculation are summarized below (in thousands):

Equity Method Investment

HQI's investment in MRINO is accounted for under the equity method of accounting. The initial carrying value of the investment was based on the fair value of the equity interest received at the transaction date. As discussed under "Post-Formation Funding" above, the portion of the expected formation funding attributable to HQI's ownership interest was reflected as an adjustment to the gain on divestiture and therefore didnot increase the carrying value of the investment.

We report our share of MRINO's results of operations on athree-month lag, as MRINO's financial information isnot available on a sufficiently timely basis. Accordingly, during thesix months ended* June 30, 2026,we recognized our proportionate share of MRINO's results of operations for thethree* months ended* March 31, 2026,which resulted in our recognition of equity method income of approximately*$**0. In the future, this will be recorded on the line item "Equity in income of unconsolidated affiliate" on our Consolidated Statements of Income.

The carrying value of the investment is adjusted each reporting period for our proportionate share of MRINO's earnings or losses and distributions, if any. As of* June 30, 2026,*the carrying value of our investment in MRINO was approximately $635 thousand. The components of our investment in MRINO are summarized below (in thousands):

We evaluate events and transactions occurring between MRINO's reporting date and our reporting date for materiality and record adjustments, as necessary, to reflect the impact of any significant intervening events.

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Note3 - Related Party Transactions

Prior to entering into a new related party transaction that is disclosable pursuant to Item404 of Regulation S-K, 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 discretion,* mayapprove the related party transaction only if it determines, in good faith and under all circumstances, 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, directors of HQI, and immediate family members of certain 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 Chief Executive Officer, Chairman of our Board, and largest 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 broker property, casualty, general liability, and cybersecurity insurance for HQI. Jackson Insurance also brokers certain insurance policies on behalf of some of our franchisees, including the Worlds Franchisees (defined below).

During thethree months ended* June 30, 2026* and* June 30, 2025*, Jackson Insurance and Bass invoiced HQI approximately $156 thousand and $165 thousand, respectively, for premiums, taxes, and fees related to these insurance policies. During thesix months ended* June 30, 2026* and* June 30, 2025*, Jackson Insurance and Bass invoiced HQI approximately $1.6 million for premiums, taxes, and fees related to these insurance policies. Jackson Insurance and Bass retain a commission of approximately 9% -15% of premiums.

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 its existing information technology systems and to assist in developing future information technology systems within its HQ WebConnect software.

During thethree months ended* June 30, 2026* and* June 30, 2025*, Insurance Technologies invoiced HQI approximately $42 thousand and $55 thousand, respectively, for services provided pursuant to this agreement. During thesix months ended* June 30, 2026* and* June 30, 2025*, Insurance Technologies invoiced HQI approximately $88 thousand and $146 thousand, respectively, for services provided pursuant to this agreement.

The Worlds Franchisees

Mr. Jackson and immediate family members of Mr. Hermanns have significant ownership interests in certain of our franchisees (the “Worlds Franchisees”). There were 34 Worlds Franchisees at* June 30, 2026* that operated 54 of our 251 franchisee-owned offices.

Other transactions regarding the Worlds Franchisees are summarized below:

Balances regarding the Worlds Franchisees are summarized below:

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 (the "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* June 30, 2026* this 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* June 30, 2026* 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 Term SOFR Daily Floating Rate (as defined in the Credit Agreement) 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* June 30, 2026* the effective interest rate was approximately 4.7%. The Senior Credit Facility will mature on* February 28, 2028.*

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At* June 30, 2026*, approximately $8.5 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 pay-card funding account. For additional information related to the letter of credit securing our workers’ compensation obligations seeNote6* - Workers’ Compensation Insurance and Reserves*.

The Credit Agreement and other loan documents contain customary representations and warranties, affirmative, and negative covenants, including without limitation, those covenants governing indebtedness, liens, fundamental changes, restricting certain payments including dividends unless certain conditions are met, transactions with affiliates, investments, engaging in business other than the current business of the Company and all of its subsidiaries and business reasonably related thereto, and sale/leaseback transactions. The Credit Agreement and other loan documents also contain customary events of default including, without limitation, payment default, material breaches of representations and warranties, breach of covenants, cross-default on material indebtedness, certain bankruptcies, certain ERISA violations, material judgments, change in control, termination or invalidity of any guaranty or security documents, and defaults under other loan documents. The obligations under the Credit Agreement and other loan documents are secured by substantially all of the assets of the Company and all of its subsidiaries as collateral including, without limitation, their accounts and notes receivable, intellectual property and the real estate owned by HQ Real Property Corporation.

Note5 - Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, and other current assets and current liabilities approximate fair value due to their short-term nature. The carrying amount of notes receivable, net of the allowance for credit losses, approximates fair value because the stated interest rates are intended to reflect current market rates for loans with similar collateral and credit risk characteristics, taking into consideration the limited availability ofthird-party financing for franchise acquisitions. We maintain company-owned life insurance policies related to our nonqualified deferred compensation plan that are carried at their cash surrender value, which approximates their fair value.

The following table summarizes the carrying amounts of our financial assets and the corresponding fair value hierarchy used in estimating their fair values:

Note6 - Workers’** Compensation Insurance and Reserves**

We obtain our workers’ compensation insurance through Chubb Limited and ACE American Insurance Company (collectively, “ACE”) in all states in which we operate other than monopolistic jurisdictions. The ACE policies are large deductible policies under which we retain primary responsibility for workers' compensation claims up to a deductible of $500 thousand per incident. ACE provides insurance for covered losses and expenses in excess of $500 thousand per incident. As such, we are effectively self-insured for claims within the deductible layer. Pursuant to our contractual agreements with ACE we must provide a collateral deposit of $9.2 million, which we satisfy through a letter of credit issued under our credit facility with Bank of America. For workers’ compensation claims originating in the monopolistic jurisdictions of North Dakota, Ohio, Washington, and Wyoming, we pay workers’ compensation insurance premiums and obtain full coverage under mandatory state administered programs.

The liability for workers' compensation claims under the large deductible programs includes estimates of reported claims and claims incurred butnot reported and is based on information provided by ourthird-party administrator, historical claim development, including periodic actuarial analyses, and management's estimates. Because the ultimate cost of workers' compensation claims is dependent on future events, our actual losses* may*differ from the amounts recorded. Our liability is limited to the required insurance premiums based on payroll or hours worked within each jurisdiction. Accordingly, our consolidated financial statements reflect only the mandated workers’ compensation insurance premium liability for workers’ compensation claims in these jurisdictions.

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Note7 - Stockholders’** Equity**

Stock Repurchase Plan

In* December 2025,our Board of Directors authorized aone*-year repurchase plan pursuant to which we can repurchase up to $20 million of our outstanding common stock. All shares repurchased during thesix months ended* June 30, 2026* were purchased pursuant to our publicly announced stock repurchase plan. Repurchases* maybe made from time to time in open market or privately negotiated transactions, subject to market conditions and other factors. The program may*be modified, suspended or terminated at any time.

The following table summarizes information related to purchases of our common stock during thesix months ended* June 30, 2026*:

Dividend

The following common share dividends were paid during2026 and2025:

Treasury Stock Retirement

During thesix months ended* June 30, 2026*, we retired 48,849 shares of treasury stock that had been repurchased in prior periods. These shares were formally cancelled and areno longer classified as treasury stock.

Note8 - Stock Based Compensation

Employee Stock Incentive Plan

In* December 2019,our Board approved the2019* HireQuest, Inc. Equity Incentive Plan (the*"2019* Plan"), which was subsequently approved by shareholders in* June 2020.Subject to the terms of the2019* Plan, equity awards, including restricted stock and stock options,* may*be granted to employees, directors and consultants.

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 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 an aggregate value of $25 thousand 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.

Restricted Stock Activity

During thefirst six months of2026, we granted 4,902 shares of restricted common stock pursuant to the2019 Plan to members of our Board of Directors for their services in lieu of cash retainers. The awards had a grant-date fair value of approximately $58 thousand and vest over3 months. Also during thefirst six months of2026, we granted 75,000 shares of restricted common stock to key employees for services in lieu of cash compensation. The awards had a grant-date fair value of approximately $893 thousand and vest over 4 years.

Share Purchase Match Program Activity

During thefirst six months of2026, we granted 980 shares of restricted common stock pursuant to our stock purchase match program valued at approximately $12 thousand to members of our Board of Directors.

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The following table summarizes our restricted stock outstanding at* December 31, 2025*, and changes during thesix months ended* June 30, 2026*.

Stock Options

Stock options assumed in the merger with Command Center remain outstanding under the terms of the Command Center2008 Plan, the Command Center2016 Plan, and the related award documents. There were approximately 9 thousand and 13 thousand vested stock options outstanding at* June 30, 2026* and* December 31, 2025*, respectively.

The following table summarizes our stock options outstanding at* December 31, 2025*, and changes during thesix months ended* June 30, 2026*.

There wereno nonvested stock options outstanding at* June 30, 2026* or at* December 31, 2025*.

The following table summarizes information about our outstanding stock options, and reflects the intrinsic value recalculated based on the closing price of our common stock of $12.56 at* June 30, 2026*.

At* June 30, 2026*, there was unrecognized stock-based compensation expense totaling approximately $865 thousand relating to nonvested restricted stock grants that will be recognized over the next 3.7 years.

Note9 - Earnings per Share

We calculate basic earnings per share by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. We donot include the impact of any potentially dilutive common stock equivalents in our basic earnings per share calculations. Diluted earnings per share reflects the potential dilution from nonvested restricted stock and outstanding stock options using the treasury stock method when the effect is dilutive. Potential dilutive common shares outstanding at* June 30, 2026* and* June 30, 2025* totaled approximately 107 thousand and 133 thousand, respectively.

We use the treasury stock method to calculate the weighted-average diluted common shares outstanding as follows:

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Note10 - Goodwill and Intangible Assets

Goodwill

The following table summarizes our goodwill and changes in the carrying value:

Indefinite-lived intangible assets

The following table summarizes our indefinite-lived intangible assets:

Finite-lived intangible assets

The following table summarizes our finite-lived intangible assets:

Amortization expense related to intangible assets totaled approximately $724 thousand and $696 thousand for thethree months ended* June 30, 2026* and* June 30, 2025*, respectively, and approximately $1.4 million for thesix months ended* June 30, 2026* and* June 30, 2025*.

Note11 - Commitments and Contingencies

Franchise Acquisition Indebtedness

Several franchisees have in the past financed the purchase of several offices with promissory notes. In some instances, this financing resulted in certain franchises being considered VIEs. We have determined that we arenot required to consolidate these entities because we arenot the primary beneficiary of these entities as we donot have the power to direct the activities that most significantly impact their economic performance. If these franchises default on these notes, our maximum exposure to loss primarily consists of the outstanding balances of these notes, net of amounts that* maybe recovered through the resale of repossessed offices. The outstanding balance of notes receivable from franchisees determined to be VIEs was approximately $5.7 million and $6.4 million at June 30, 2026* and at* December 31, 2025*, respectively.

Legal Proceedings

We are subject to various legal and administrative proceedings arising from time to time in the ordinary course of business. 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, results of operations, or liquidity and capital resources. There have beenno material developments in our legal proceedings as of* June 30, 2026*.

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Note12 - Income Tax

Our income tax provision during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, adjusted for discrete tax items recognized during the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, butnot limited to, the expected operating income for the year and changes in tax law and tax rates. The estimates used in computing the provision for income taxes* maychange as new events occur, more experience is obtained, additional information becomes known, or the tax environment changes.*

Our effective tax rate for continuing operations was 19.9 % and 5.0% for thethree months ended* June 30, 2026* and* June 30, 2025*, respectively, and 18.0 % and 8.2% for thesix months ended* June 30, 2026* and* June 30, 2025*, respectively. The primary difference between the statutory federal income tax rate of 21.0% and our effective tax rate relates to federal hiring tax credits. Other differences result from state income taxes, certain non-deductible expenses, and tax effects of stock-based compensation. We use an intra-period tax allocation to allocate total income tax expense or benefit between continuing operations and discontinued operations. This allocation uses a with and without methodology to determine income tax expense for discontinued operations. Income tax benefits allocated to discontinued operations were approximately $19 thousand and $4 thousand for thethree months ended* June 30, 2026* and* June 30, 2025*, respectively, and approximately $22 thousand and $27 thousand for thesix months ended* June 30, 2026* and* June 30, 2025*, respectively.

Note13 - Segment Information

Management determined that the Company operates as asingle reporting segment. The following table presents significant expenses regularly reviewed by our chief operating decision maker when allocating resources and assessing segment performance:

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

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Note14 - Discontinued Operations

In connection with the Dubin acquisition, certain acquired assets remain classified as held for sale. When we acquired Dubin, there weretwo business lines. Dubin Workforce Solutions specialized in temporary labor assignments and 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. Accordingly, we began marketing the franchise and classified it as held for sale immediately upon acquisition. During2025, we actively solicited but didnot receive any reasonable offers to purchase the assets and, in response, adjusted the asking price and increased efforts to grow the customer base. Management remains committed to the plan to sell the business. Although the sale has taken longer than originally anticipated due to market conditions and the absence of acceptable offers, the business continues to be actively marketed at a price management believes is reasonable based on its results of operations, and management expects to complete the sale within the next12 months.

The intangible asset associated with discontinued operations consists of a customer list with a net carrying value of approximately $672 thousand at* June 30, 2026* and* December 31, 2025*.

The net loss from discontinued operations as reported in our Consolidated Statements of Income was comprised of the following amounts:

Note15 - Notes Receivable

Several franchisees have borrowed funds from us primarily to finance the initial purchase price of office assets, including intangible assets. Notes receivable, net of allowance for credit losses, were approximately $6.1 million and $6.7 million as of* June 30, 2026* and* December 31, 2025*, respectively. The notes generally bear interest at fixed rates ranging from 6.0% to 10.0%. Notes receivable are generally secured by the assets of each office and the ownership interests in the franchise. Interest income on notes receivable is reported as "Interest income" in our Consolidated Statements of Income. Interest income was approximately $118 thousand and $129 thousand during thethree months ended* June 30, 2026* and* June 30, 2025*, respectively, and approximately $218 thousand and $262 thousand during thesix months ended* June 30, 2026* and* June 30, 2025*, 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 available collateral, historical loss information, current conditions, and reasonable and supportable forecasts, we maintained an allowance for credit losses of approximately $736 thousand and $1.2 million as of* June 30, 2026* and* December 31, 2025*, respectively. During thethree months ended* June 30, 2026*, we wrote off approximately $640 thousand of notes receivable against the related allowance for credit losses after determining the amounts were uncollectible.

The following table summarizes our notes receivable from franchisees:

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