BGSF, INC.

NOTE 1 -NATURE OF OPERATIONS

BGSF, Inc. (the “Company”) provides workforce solutions through the Property Management segment that currently operates primarily within the United States of America (“U.S.”). The Property Management segment provides office and maintenance field talent in 39 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

The Company normally experiences seasonal fluctuations. The quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of client partners’ business in its Property Management business. Demand for the Property Management workforce solutions has typically increased in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session. Overall first quarter demand can be affected by adverse weather conditions in the winter months. In addition, the Company's cost of services typically increases in the first quarter primarily due to the reset of payroll taxes.

On May 8, 2024, the Company announced that our Board of Directors had initiated a process to evaluate potential strategic alternatives and engaged financial advisors in an endeavor to maximize shareholder value (“Strategic alternatives review”). During December 2024, the Company announced a cost restructuring plan as part of the strategic review process. On June 14, 2025, the Company entered into an Equity Purchase Agreement with INSPYR Solutions Intermediate, LLC, pursuant to which the Company will sell substantially all of the outstanding equity interest pertaining to the Professional segment (“BGSF Professional”). The BGSF Professional financial results for periods prior to the sale have been reflected as discontinued operations in the Unaudited Consolidated Financial Statements, see “Note 3 - Discontinued Operations.”

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“GAAP”), pursuant to the applicable rules and regulations of the SEC. The information furnished herein reflects all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to present a fair statement of the financial position and operating results of the Company as of and for the respective periods. However, these operating results are not necessarily indicative of the results expected for a full fiscal year or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, management of the Company believes, to the best of its knowledge, that the disclosures herein are adequate to make the information presented not misleading. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended December 29, 2024, included in its Annual Report on Form 10-K.

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation.

Fiscal Periods

The Company has a 52/53 week fiscal year. Fiscal periods for the consolidated financial statements included herein are as of June 29, 2025 and December 29, 2024, and include the thirteen and twenty-six week periods ended June 29, 2025 and June 30, 2024, referred to herein as Fiscal 2025 and 2024, respectively.

Reclassifications

Certain reclassifications have been made to the 2024 financial statements to conform with the 2025 presentation.

Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the consolidated financial statements include allowances for credit losses, goodwill, intangible assets, lease liabilities, and income taxes. Additionally, the valuation of share-based compensation expense uses a model based upon interest rates, stock prices, maturity estimates, volatility and other factors. The Company believes these estimates and assumptions are reliable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

Financial Instruments

The Company uses fair value measurements in areas that include, but are not limited to, the allocation of purchase price consideration to tangible and identifiable intangible assets and convertible debt. The carrying values of accounts receivable, accounts payable, accrued payroll and expenses, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The carrying value of bank debt approximates fair value due to the variable nature of the interest rates under the credit agreement with BMO Bank, N.A. (“BMO”) that provides for a revolving credit facility, term loan and current rates available to the Company for debt with similar terms and risk.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.

Concentration of Credit Risk

Concentration of credit risk is limited due to the Company’s diverse client partner base and their dispersion across many different industries and geographic locations nationwide. No single client partner accounted for more than 10% of the Company’s accounts receivable from continuing operations as of June 29, 2025 and December 29, 2024 or revenue from continuing operations for the twenty-six week periods ended June 29, 2025 and June 30, 2024. Geographic revenue from continuing operations in excess of 10% of the Company's consolidated revenue in Fiscal 2025 and the related percentage for Fiscal 2024 was generated in the following areas at:

Consequently, weakness in economic conditions in these regions could have a material adverse effect on the Company’s financial position and results of future operations.

Accounts Receivable

The Company extends credit to its client partners in the normal course of business. Accounts receivable represents unpaid balances due from client partners. The Company maintains an allowance for credit losses for expected losses resulting from client partners’ non-payment of balances due to the Company. The Company’s determination of the allowance for uncollectible amounts is based on management’s judgments and assumptions, including general economic conditions, portfolio composition, historical credit loss, evaluation of credit risk related to certain individual client partners and the Company’s ongoing examination process. The additional risk pool and increased expected credit losses that were identified during 2024 have been resolved. During Fiscal 2025, the Company identified an additional risk pool related to Property Management, which increased the estimate of expected credit losses. Receivables are written off after they are deemed to be uncollectible after all reasonable means of collection have been exhausted. Recoveries of receivables previously written off are recorded as income when received.

Changes in the allowance for credit losses from continuing operations are as follows (in thousands):

Property and Equipment

Property and equipment from continuing operations are stated net of accumulated depreciation and amortization of $1.3 million at June 29, 2025 and December 29, 2024.

Deposits

The Company maintains guaranteed costs policies for workers' compensation coverage in monopolistic states and minimal loss retention coverage in all other states. Under these policies, the Company is required to maintain refundable deposits of $1.8 million, which are included in Deposits in the accompanying consolidated balance sheets, as of June 29, 2025 and December 29, 2024.

Software as a Service

The Company capitalizes direct costs incurred in cloud computing implementation costs from hosting arrangements, which are categorized as long-lived assets, and are reported as Software as a service in the accompanying consolidated balance sheets. All other internal-use software development costs are capitalized and reported as a component of computer software within Intangible assets. Software as a service from continuing operations is stated net of accumulated amortization of $2.9 million and $2.5 million at June 29, 2025 and December 29, 2024, respectively.

The Company reviews its long-lived assets, primarily Property and equipment and Software as a service, for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. There wereno impairment triggering events identified with respect to long-lived assets during Fiscal 2025 or Fiscal 2024.

Leases

The Company leases all their office space through operating leases, which expire at various dates through 2030. Many of the lease agreements obligate the Company to pay real estate taxes, insurance, and certain maintenance costs, which are accounted for separately. Certain of the Company’s lease arrangements contain renewal provisions of 5 years, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Contracts with lease and non-lease components are accounted for on a combined basis.

The Company determines if an arrangement is an operating lease at inception. Leases and subleases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases and subleases are recorded on the balance sheet as right-of-use assets and lease liabilities for the lease term.

Right-of-use lease assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined using the incremental borrowing rate based on the information available at lease commencement date, unless the implicit rate in the lease is readily determinable. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, general, and administrative expenses.

Intangible Assets

The Company holds Intangible assets with finite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three toten years, based on a pattern in which the economic benefit of the respective Intangible asset is realized.

Identifiable Intangible assets recognized in conjunction with acquisitions are recorded at fair value. Significant unobservable inputs are used to determine the fair value of the identifiable Intangible assets based on the income approach valuation model whereby the present worth and anticipated future benefits of the identifiable Intangible assets are discounted back to their net present value.

The Company develops and implements software to enhance the performance and capabilities of the information technology infrastructure. Direct internal payroll costs and external costs for the development of software are capitalized from the time internal-use software is considered probable until the software is deployed. All other preliminary and planning stage costs are expensed as incurred. Minor upgrades and enhancements to software systems are expensed in the period incurred as software maintenance and training costs.

The Company evaluates the recoverability of Intangible assets whenever events or changes in circumstances indicate that an Intangible asset’s carrying amount may not be recoverable. The Company considered the current and expected future economic and market conditions and its impact on each of the reporting units. The Company annually evaluates the remaining useful lives of all Intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. There were no impairment indicators identified during Fiscal 2025. See “Note 6 - Intangible Assets.”

Goodwill

Goodwill is not amortized, but instead is evaluated at the reporting unit level for impairment annually at the end of each fiscal year, or more frequently, if conditions indicate an earlier review is necessary. The Company considered the current and expected future economic and market conditions and its impact on each of the reporting units. If the Company has determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value, the Company may use a qualitative assessment for the annual impairment test. The Company determined there were no impairment indicators for goodwill assets during Fiscal 2025 or Fiscal 2024.

Debt Issuance Costs

Debt issuance costs are amortized into interest expense using the effective interest method over the term of the respective loans. Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability.

Contingent Consideration

The Company has obligations, to be paid in cash, related to its acquisitions if certain operating and financial goals are met. The fair value of this contingent consideration is determined using expected cash flows and present value technique. The fair value calculation of the expected future payments uses a discount rate commensurate with the risks of the expected cash flow. The resulting discount is amortized as interest expense over the outstanding period using the effective interest method.

Revenue Recognition

The Company derives its revenues from continuing operations by providing workforce solution and placement services through the Property Management segment. Revenues are recognized when promised services are delivered to client partners, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues from continuing operations as presented on the consolidated statements of operations represent services rendered to client partners less sales adjustments and allowances. Reimbursements, including those related to out-of-pocket expenses, are also included in revenues, and the related amounts of reimbursable expenses are included in cost of services.

The Company records revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified field talent, (ii) has the discretion to select the field talent and establish their price and duties and (iii) bears the risk for services that are not fully paid for by client partners.

Workforce solution revenues - Field talent revenues from contracts with client partners are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s field talent.

Contingent placement revenues - Any revenues associated with workforce solutions that are provided on a contingent basis are recognized once the contingency is resolved, as this is when control is transferred to the client partner, usually when employment candidates start their employment.

The Company estimates the effect of placement candidates who do not remain with its client partners through the guarantee period (generally 90 days) based on historical experience. Allowances, recorded as a liability, are established to estimate these losses. Fees to client partners are generally calculated as a percentage of the new worker’s annual compensation. No fees for placement workforce solutions are charged to employment candidates. These assumptions determine the timing of revenue recognition for the reported period.

Refer to Note 14 for disaggregated revenues by functional specialization and segment.

Payment terms in the Company's contracts vary by the type and location of its client partner and the workforce solutions offered. The term between invoicing and when payment is due is not significant. There wereno unsatisfied performance obligations as of June 29, 2025. There wereno revenues recognized during the twenty-six week period ended June 29, 2025 related to performance obligations satisfied or partially satisfied in previous periods. There areno contract costs capitalized. The Company did not recognize any contract impairments during the twenty-six week period ended June 29, 2025. The opening balance of accounts receivable at December 31, 2023 was $29.6 million.

Share-Based Compensation

The Company recognizes compensation expense in selling, general, and administrative expenses over the service period for common stock options or restricted stock that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates.

Earnings Per Share

Basic earnings per common share are computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period adjusted to reflect potentially dilutive securities. Antidilutive shares are excluded from the calculation of earnings per share.

The following is a reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the respective periods (in thousands):

Income Taxes

The effective tax rate from continuing operations was 22.3% and 19.3% for the thirteen and twenty-six week period ended June 29, 2025 and June 30, 2024, respectively. Effective tax rates for all periods consist of federal statutory rate plus state income taxes. The higher effective tax rate for Fiscal 2025 is primarily due to greater state taxes.

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts are classified as noncurrent in the consolidated balance sheets. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment.

When appropriate, the Company will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized. In determining whether a valuation allowance is appropriate, the Company considers whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results. As a matter of operation, the Company first calculates the effective tax on continuing operations, and then allocated the remaining taxes to our discontinued operations, in accordance with Accounting Standards Codification (“ASC”) Topic 740.

The Company follows the guidance Accounting Standards Codification (“ASC”) Topic 740, Accounting for Uncertainty in Income Taxes. ASC Topic 740 prescribes a more-likely-than-not measurement methodology to reflect the financial statement impact of uncertain tax positions taken or expected to be taken in a tax return.

Recent Accounting Pronouncements

In November 2024, Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which will require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, included in certain expense captions in the Consolidated Statements of Operations. The new guidance is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027, early adoption is permitted. The Company is evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

NOTE 3 -DISCONTINUED OPERATIONS

On June 14, 2025, the Company entered into an Equity Purchase Agreement (“EPA”) with INSPYR Solutions Intermediate, LLC, (“INSPYR”), pursuant to which the Company will sell to INSPYR substantially all of the outstanding equity interest pertaining to BGSF Professional. Under the EPA, INSPYR will pay $99.0 million in cash at the closing of the transaction and assume certain assets, equity interests, liabilities, and obligations of the Company pertaining to BGSF Professional. The EPA further provides for customary purchase price adjustments, including a net working capital adjustment.

The EPA contains customary representations and warranties, covenants (including certain non-competition and non-solicitation covenants restricting the Company with respect to the professional staffing business), closing conditions, and indemnification provisions. The EPA also includes a payment obligation related to the June 10, 2025 letter agreement with Arroyo Consulting, LLC related to the payout of $2.5 million in contingent consideration where by the Company will assume a portion of this obligation to be paid by $1.2 million at closing and $0.6 million in monthly installments. After the closing of the transaction, the Company will provide certain back-office services to INSPYR for a limited period of time.

The BGSF Professional financial results for periods prior to the sale have been reflected in our Unaudited Consolidated Balance Sheet, Unaudited Consolidated Statements of Operations, Unaudited Consolidated Statement of Changes in Stockholders’ Equity and Unaudited Consolidated Statements of Cash Flows as discontinued operations.

The financial results of BGSF Professional are as follows (in thousands):

Carrying amount of assets, liabilities, and equity included as part of discontinued operations (in thousands):

NOTE 4 -OTHER CURRENT ASSETS

Other current assets from continuing operations as of June 29, 2025 and December 29, 2024 consist of the following (in thousands):

NOTE 5 -LEASES

The Company's future operating lease obligations that have not yet commenced are immaterial. Short-term leases and subleases were immaterial. The supplemental balance sheet information related to the Company's operating leases were as follows at (dollars in thousands):

The supplemental cash flow information from continuing operations related to the Company's operating leases were as follows (dollars in thousands):

The undiscounted annual future minimum lease payments from continuing operations consist of the following at (in thousands):

NOTE 6 -INTANGIBLE ASSETS

Intangible assets from continuing operations are stated net of accumulated amortization of $5.6 million and $5.1 million at June 29, 2025 and December 29, 2024, respectively. Amortization expense from continuing operations for Fiscal 2025 and Fiscal 2024 are comprised of following (in thousands):

NOTE 7 -ACCRUED PAYROLL AND EXPENSES

Accrued payroll and expenses from continuing operations consist of the following at (in thousands):

NOTE 8 -DEBT

On July 16, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”), which would have matured on July 16, 2024, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender. The Company entered into four amendments from August 18, 2022 through May 19, 2023, which changed the interest rate component from LIBOR to the Secured Overnight Financing Rate (“SOFR”), exercised the option to borrow $40.0 million, required 2.5% of the original principal balance of the new term loan, permitted a foreign entity acquisition, modified the distributions terms, and increased a revolving credit facility (the "Revolving Facility") by $6.0 million.

On March 12, 2024, the Credit Agreement was amended and restated through the Company’s entry into an Amended and Restated Credit Agreement, which would have matured on March 12, 2028, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “Restated Agreement”). The Restated Agreement provided for a Revolving Facility which permitted the Company to borrow funds in an aggregate amount up to $40 million. The Restated Agreement also provided for a term loan commitment, which permitted the Company to borrow funds from time to time (the “Term Loan”). In July 2024, the Company exercised the option to borrow on a delayed draw term loan of $4.3 million related to payments on the Arroyo Consulting Acquisition's working capital “true up”, hold backs, and year one contingent consideration.

On November 6, 2024, the Company entered into the First Amendment to Restated Agreement, maturing December 31, 2026, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “First Credit Amendment”). The availability on the Revolving Facility, which permits the Company to borrow funds from time to time, was reduced in an aggregate amount up to $20 million. The Company is required to repay the Term Loan in quarterly principal installments equal to 2.5% of the aggregate principal balance. The First Credit Amendment provides for interest either at the Base Rate plus the Applicable Margin, or the Adjusted Term SOFR plus the Applicable Margin (as defined in the First Credit Amendment). The Company’s obligations are secured by a first priority security interest in substantially all tangible and intangible property of the Company’s and its subsidiaries. The First Credit Amendment provides for an amended financial covenants with a maximum Leverage Ratio, a minimum Fixed Charge Coverage Ratio, and a minimum earnings before interest, income taxes, depreciation, and amortization (“EBITDA”) (as such terms are defined in the First Credit Amendment). The Company will pay an unused commitment fee on the daily average unused amount of Revolving Facility.

The Company was not in compliance with the foregoing financial covenants and certain affirmative covenants as of the quarter ended December 29, 2024, March 30, 2025, and June 29, 2025. On March 13, 2025, the Company entered into a Waiver and Second Amendment to Restated Agreement (the “Second Amendment”) pursuant to which, among other things, the lenders unanimously waived noncompliance with the foregoing covenants as of December 29, 2024 and March 30, 2025, and certain amendments were made to the Restated Agreement including, but not limited to, a new definition of Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $8.0 million. The amendments described in the Second Amendment are effective as of March 13, 2025 and the Company incurred nominal fees in debt issuance costs. Additionally, per the terms of the Second Amendment, the Company is subject to the satisfaction or waiver of certain conditions described therein relating to, among other things, debt financing and refinancing and our previously announced strategic alternatives review.

On May 7, 2025, the Company entered into a Waiver and Amendment (the “Waiver and Amendment”) pursuant to which, among other things, the lenders unanimously waived noncompliance with the requirement under the Second Amendment that the Company receive at least $2.0 million in cash equity contributions for working capital purposes by April 25, 2025. The Waiver and Amendment amended the foregoing requirement provided that, by May 30, 2025, the Company receive at least $2.0 million of cash equity contributions or proceeds of subordinated debt. During thirteen week periods ended June 29, 2025, the Company recognized into interest expense approximately $0.4 million related to the Waiver and Amendment on the unamortized debt issuances costs.

On August 4, 2025, the Company entered into a Waiver and Second Amendment pursuant to which, among other things, the lenders unanimously waived noncompliance with the foregoing covenants as of June 29, 2025 and with the requirements under the Second Amendment so long as the Company will finalize and close the sale of both BG Finance and Accounting, Inc. and BGSF Professional, LLC by BGSF, Inc. for a purchase price that will result in the receipt of net cash proceeds sufficient to pay all obligations, indebtedness, and liabilities related to the Credit Agreement no later than September 30, 2025.

The failure to comply with such covenants would result in an event of default which, if not cured or waived, would trigger prepayment obligations. There can be no assurances that any lender will waive any defaults. If we refinance our indebtedness, there can be no assurance that such refinancing would be available or that such refinancing would not have a material adverse effect on our business, financial condition, or results of operations. The terms of any such refinancing could be less favorable and our business, financial condition, and results of operations could be materially adversely affected by increased costs and interest rates. The Company is actively engaging in the previously announced strategic alternatives review process and actively evaluating equity and debt financing opportunities that may be available.

Letter of Credit

In conjunction with the EdgeRock acquisition, the Company entered into a standby letter of credit arrangement, which expired, for purposes of protecting a lessor against default on lease payments. As of December 29, 2024, the Company had a maximum financial exposure from this standby letter of credit totaling $0.1 million that ended in 2025, all of which was considered usage against the Revolving Facility. The Company has no history of default, nor is it aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any disputes thereunder that might arise in the future would not materially affect the Company’s consolidated financial statements. Accordingly, no liability has been recorded in respect to these arrangements as of June 29, 2025.

Line of Credit

At June 29, 2025 and December 29, 2024,$8.0 million and $6.4 million, respectively, was outstanding on the revolving facilities. Average daily balance for the thirteen week periods ended June 29, 2025 and June 30, 2024 was$8.0 million and $14.9 million, respectively. Average daily balance for the twenty-six week periods ended June 29, 2025 and June 30, 2024 was$7.7 million and $17.9 million, respectively.

Borrowings under the revolving facilities consisted of and bore interest at (in thousands):

Long-Term Debt

Long-term debt consisted of and bore interest at (in thousands):

Convertible Note

At December 29, 2024, the Company had atwo-year convertible unsecured promissory note of $4.4 million due to the seller with an annual interest rate of 6%, with interest paid quarterly related to the 2022 Horn Solutions acquisition. The promissory note is convertible into shares of our common stock at any time after the one-year anniversary of the promissory note at a conversion price equal to $17.12 per share, prior to the maturity date of December 12, 2024. On January 30, 2025, the Company amended the promissory note which increased the interest rate to 7% and extended the maturity date to December 12, 2025. The promissory note is subordinate to the Company’s senior debt.

NOTE 9 -FAIR VALUE MEASUREMENTS

The accounting standard for fair value measurements defines fair value and establishes a market-based framework or hierarchy for measuring fair value. The standard is applicable whenever assets and liabilities are measured at fair value. The fair value hierarchy established prioritizes the inputs used in valuation techniques into three levels as follows:

Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities - includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets, for substantially the full term of the financial instrument; and

Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and requires the Company to develop relevant assumptions.

There were no transfers between the respective Levels during Fiscal 2025. The following table summarizes the financial liabilities measured at fair value on a recurring basis and the level they fall within the fair value hierarchy (in thousands):

Key inputs in determining the fair value of the convertible note as of June 29, 2025 and December 29, 2024 included current stock price, the conversion price, and the maturity date. Key inputs in determining the fair value of the contingent consideration which is included in discontinued operations, as of June 29, 2025 and December 29, 2024 included discount rates of approximately 7% as well as management's estimates of future sales volumes and EBITDA.

NOTE 10 -CONTINGENCIES

The Company is engaged from time to time in legal matters and proceedings arising out of its normal course of business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of the loss can be made.

The Company insures against, subject to and upon the terms and conditions of various insurance policies, claims or losses from workers’ compensation, general liability, automobile liability, property damage, professional liability, employment practices, fiduciary liability, fidelity losses, crime and cyber risk, and director and officer liability. Under the Company's bylaws, the Company’s directors and officers are indemnified against certain liabilities arising out of the performance of their duties to the Company. The Company also has an insurance policy for our directors and officers to insure them against liabilities arising from the performance of their positions with the Company or its subsidiaries. The Company has also entered into indemnification agreements with its directors and certain officers.

NOTE 11 –EQUITY

Authorized capital stock consists of 19,500,000 shares of common stock, par value $0.01 per share and 500,000 shares of undesignated preferred stock, par value $0.01 per share.

Restricted Stock

The Company issued net restricted common stock of 88,518 and 23,310 shares to team members and non-team member (non-employee) directors in Fiscal 2025 and Fiscal 2024, respectively. The restricted shares of $0.01 par value per share were issued under the 2013 Long-Term Incentive Plan (“2013 Plan”) and contain athree-year service condition. The restricted stock constitutes issued and outstanding shares of the Company’s common stock, except for the right of disposal, for all purposes during the period of restriction including voting rights and dividend distributions.

NOTE 12 –SHARE-BASED COMPENSATION

Stock Options

For the thirteen week periods ended June 29, 2025 and June 30, 2024, the Company recognized $0.1 million of compensation expense from continuing operations related to stock options. For the twenty-six week periods ended June 29, 2025 and June 30, 2024, the Company recognized $0.1 million and $0.2 million, respectively, of compensation expense from continuing operations related to stock options. Unamortized share-based compensation expense from continuing operations as of June 29, 2025 amounted to $0.5 million which is expected to be recognized over the next 1.6 years. As of June 29, 2025, a total of 1.1 million shares remain available for issuance under 2013 Plan.

A summary of stock option activity is presented as follows:

Restricted Stock

For the thirteen week periods ended June 29, 2025 and June 30, 2024, the Company recognized $0.1 million of compensation expense related to restricted stock awards. For the twenty-six week periods ended June 29, 2025 and June 30, 2024, the Company recognized $0.2 million and $0.3 million, respectively, of compensation expense related to restricted stock awards. Unamortized share-based compensation expense as of June 29, 2025 amounted to $0.6 million which is expected to be recognized over the next 1.8 years.

A summary of restricted stock activity is presented as follows:

NOTE 13 -TEAM MEMBER BENEFIT PLAN

Defined Contribution Plan

The Company provides a defined contribution plan (the “401(k) Plan”) for the benefit of its eligible team members and field talent. The 401(k) Plan allows participants to make contributions subject to applicable statutory limitations. The Company matches participants contributions 100% up to the first 3% and 50% of the next 2% of a team member's or field talent’s compensation. The Company contributed $0.1 million from continuing operations to the 401(k) Plan for the thirteen week periods ended June 29, 2025 and June 30, 2024. The Company contributed $0.2 million and $0.3 million from continuing operations, respectively, to the 401(k) Plan for the twenty-six week periods ended June 29, 2025 and June 30, 2024.

NOTE 14 -BUSINESS SEGMENT

The Company has continuing operations throughone segment of Property Management, which includes centralized support services through executive, marketing, human resources, information technology, accounting, treasury, and billing operations. The chief operating decision-maker (the “CODM”), the President and Chief Executive Officer, establishes the strategic direction of the Company, priorities, and long-term financial objectives. The CODM is ultimately responsible for evaluating segment performance and making decisions regarding resource allocation. The Property Management segment provides office and maintenance field talent to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations. The CODM considers variances between actual results and expectations as well as historical trends for segment income when making decisions about allocating capital and personnel resources to each segment.

Segment loss from continuing operations includes all revenue and cost of services, direct selling expenses, depreciation and amortization expense and excludes all general and administrative expenses. The following table provides a reconciliation of revenue and loss from continuing operations by reportable segment to consolidated results for the periods indicated (in thousands):

NOTE 15 - SUBSEQUENT EVENT

On August 4, 2025, the Company entered into a Waiver and Second Amendment pursuant to which, among other things, the lenders unanimously waived noncompliance with the requirement under the Second Amendment so long as the Company will finalize and close the sale of each of BG Finance and Accounting, Inc. and BGSF Professional, LLC by BGSF, Inc. for a purchase price that will result in the receipt of net cash proceeds sufficient to pay the in full in cash, and that will result in the payment of the all obligations, indebtedness, and liabilities related to the Credit Agreement, in each case by no later than September 30, 2025.

The failure to comply with such covenants would result in an event of default which, if not cured or waived, would trigger prepayment obligations. There can be no assurances that any lender will waive any defaults. If we refinance our indebtedness, there can be no assurance that such refinancing would be available or that such refinancing would not have a material adverse effect on our business, financial condition, or results of operations. The terms of any such refinancing could be less favorable and our business, financial condition, and results of operations could be materially adversely affected by increased costs and interest rates. The Company is actively engaging in the previously announced strategic alternatives review process and actively evaluating equity and debt financing opportunities that may be available.