bgsf-20231231

美國

證券交易委員會

華盛頓，DC 20549

_______________

表格 10-K

_______________

（標記一）


☑			根據1934年證券交易法第13或15（d）條提交的年度報告書

截至財政年度結束的2023年12月31日


☐			根據1934年證券交易法第13或15(d)條規定的過渡報告

在過渡期從到

委員會文件編號:001-36704

BGSF，公司。

（按其章程規定的確切註冊人名稱）

_______________

特拉華州

26-0656684

（擬定公司）

（聯邦納稅人識別號）

5850 Granite Parkway，730號套房

Plano,

得克薩斯州

75024

(主要領導機構的地址)

(郵政編碼)

註冊人的電話號碼，包括區號：

(972) 692-2400

_______________

每個交易所的名稱


每種類別的證券	交易標誌	註冊的交易所名字
普通股，每股面值0.01美元	BGSF	NYSE

根據《法案》第12（g）條註冊的證券：

無

_______________

若申報人符合《證券法》規則405定義的大宗發行人，請用勾號表示。是o 不 þ

如果註冊人根據《法案》第13或第15(d)部門不需要提交報告，請用複選標誌表示。是o 不 þ

請用複選標記表示註冊人是否：（1）在過去的12個月內或註冊人被要求提交此類報告的較短期間內已提交證券交易法案第13或第15(d)條規定的所有報告，並且（2）在過去的90天內一直受到此類報告要求的約束。是 þ沒有o

請用複選標誌指示是否申報並在其公司網站上發佈了在前述12個月內(或註冊商應提交和發佈此類文件的較短期間內)根據《S-t規定第405條的第232.405條》提交和發佈的每個互動數據文件。是 þ否o

請用複選標記指示註冊者是大型加速申報人、加速申報人、非加速申報人、或者是較小的報告公司或新興成長公司。請參閱《交易所法》第120億.2條中「大型加速申報人」、「加速申報人」、「較小的報告公司」和「新興成長公司」的定義。（選擇其中一項）：

大型加速文件申報人

加速文件提交人

非加速文件提交人

（如果是較小的報告公司，請勿選中）

更小的報告公司

☑

新興成長公司

☐

如果是新興成長型企業，請在註冊說明中勾選是否選擇不使用延長過渡期來符合根據《交易所法》第13(a)條規定提供的新的或修訂的財務會計準則。 ¨

請勾選標記，以指示註冊人是否已提交了《Sarbanes-Oxley法案》(15 U.S.C. 7262(b))下其內部控制的有效性的管理評估報告和證明報告，由準備或發佈其審計報告的註冊公共會計師事務所編制。☑

如果證券根據《證券法》第12(b)條登記，請勾選印記，以表示註冊人包括在文件中的財務報表反映了對之前發佈的財務報表的更正。¨

請在檢查標記中表示這些錯誤更正是否重述需要根據§240.10D-1(b)規定在相關恢復期間接受任何註冊人執行官員獲得獎勵的補救分析。¨

請用複選標記指示是否註冊申報公司是一家殼公司（如《交易所法》第120億.2條所定義）。是☐ 沒有þ

截至2023年6月30日（註冊人最近已完成的第二財季最後一個工作日），非關聯方持有的普通股的總市場價值爲$98,630,996 （基於2023年6月30日紐交所報告的註冊人普通股收盤價’）。

截至2024年3月14日， 10,928,763 公司的普通股股份總數爲。


		頁面沒有。
前瞻性陳述

第一部分
第 1 項	商業	5
第 1A 項	風險因素	12
第 1B 項	未解決的員工評論	20
物品 1C	網絡安全	21
第 2 項	屬性	21
第 3 項	法律訴訟	22
第 4 項	礦山安全披露	22
第二部分
第 5 項	註冊人普通股市場、相關股東事務和發行人購買股權證券	23
第 6 項	精選財務數據	25
項目 7	管理層對財務狀況和經營業績的討論和分析	29
項目 7A	關於市場風險的定量和定性披露	38
第 8 項	財務報表和補充數據	39
第 9 項	會計師在會計和財務披露方面的變化和分歧	72
項目 9A	控制和程序	72
項目 9B	其他信息	75
項目 9C	關於阻止檢查的外國司法管轄區的披露	75
第三部分
項目 10	董事、執行官和公司治理	75
項目 11	高管薪酬	81
項目 12	某些受益所有人的擔保所有權以及管理及相關股東事務	87
項目 13	某些關係和關聯交易，以及董事獨立性	88
項目 14	首席會計師費用和服務	89
第四部分
項目 15	附錄和財務報表附表	90
項目 16	10-K 表格摘要	90

前瞻性聲明

本10-k表格的這份年度報告包含前瞻性聲明。前瞻性聲明可能包括但不限於關於我們未來財務或經營業績、未來計劃和目標、競爭定位、對額外資本的需求、政府對業務運營的監管、訴訟和監管事項的時間和可能結果的聲明。本年度報告中包含或通過引用的除歷史事實陳述外的所有陳述，包括處理我們或我們的子公司預期或可能發生在未來的活動、事件或發展的陳述，都屬於前瞻性聲明。通常情況下，但並非總是，前瞻性聲明可以通過使用「目標」、「潛力」、「可能」、「能夠」、「可以」、「將」、「可能」、「將」、「期望」、「打算」、「計劃」、「預測」、「正在進行」、「項目」、「預算」、「計劃」、「預估」、「預期」、「相信」、「預測」、「承諾」、「未來」還是「繼續」或其否定形式或類似變體來識別。前瞻性聲明基於我們根據經驗和對歷史趨勢、當前條件和預期未來發展的認識進行的某些假設和分析，以及我們認爲適當的其他因素。雖然我們認爲這些前瞻性聲明所表達的預期是合理的，但我們不能保證這些預期會被證明是正確的。讀者被告知不應過分依賴這些前瞻性聲明，這些聲明並不是性能的保證，而且受到許多不確定性和已知和未知風險的影響，其中許多是我們無法控制的，可能導致實際結果與這些前瞻性聲明所述的表達或暗示結果大不相同。引起實際結果與這些前瞻性聲明所表達或暗示的因素包括但不限於一般商業、經濟、競爭、政治和社會不確定性、當前運營的實際結果、行業條件、知識產權和其他專有權利、我們行業固有的責任、新型冠狀病毒大流行或其他大流行病、事故、勞資糾紛、延遲獲得監管批准或融資以及一般市場因素，包括利率、股票市場、商業競爭、政府法規變化。額外的風險和不確定性包括但不限於在「項目1A. 風險因素」下列出的那些。

Although we have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors that cause results to differ from those anticipated. Forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of the Annual Report on Form 10-K and we disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, results or otherwise, except as required by applicable securities laws.

Part I

ITEM 1. BUSINESS.

Overview and History

BGSF, Inc. (“BGSF,” “we,” or the “Company”) is a leading national provider of consulting, managed services, and professional workforce solutions with continuing operations that, along with its wholly owned subsidiaries, operate primarily within the U.S. in two industry segments: Property Management and Professional. We provide field talent to a variety of client partners that are seeking to match their workforce requirements to their business needs. Our client partners operate across a diverse set of industries.

We employ a diverse operating model, both from a skill set and a geographic standpoint, which we believe mitigates downside revenue risk.

Our workforce services consist of on-demand or short-term assignments, consulting services, managed services and on-site management administration. Short-term workforce solutions assist employers in dealing with field talent demands caused by such factors as seasonality, fluctuations in client partner demand, vacations, illnesses, parental leave, and special projects without incurring the ongoing expense and administrative responsibilities associated with recruiting, hiring and retaining permanent field talent. As more and more companies focus on effectively managing variable costs and reducing fixed overhead, the use of short-term workforce solutions allows companies to utilize a contingent approach for their personnel needs, thereby converting a portion of their fixed personnel costs to a variable expense.

Our consulting workforce solutions place field talent with client partners for extended time-periods or for an indefinite time period. This type of arrangement may involve outsourcing an entire department in a large corporation or providing the workforce for a large project.

Managed Solutions are a combination of both workforce solutions and fixed fee arrangements. Field talent is placed with the client partner and services are performed over a given period of time as determined with the client partner. Generally services are provided under a contractual agreement.

In an on-site management arrangement, we place an experienced manager on-site at a client partner’s place of business. The manager is responsible for conducting all recruiting, candidate screening, interviewing, drug testing, hiring and placement for field talent at the client partner’s facility for a long-term or indefinite period.

Management believes that these solutions and the field talent performing these workforce solutions are, and will remain, an integral part of the labor market in local, regional and national economies in which we operate.

BGSF, Inc. is the successor by conversion to LTN Staffing, LLC, a Delaware limited liability company that was formed on August 27, 2007. In 2011, we began doing business as BG Staffing. LTN Staffing, LLC converted into a Delaware corporation, BG Staffing, Inc., following the merger of LTN Acquisition, LLC (the former parent of LTN Staffing, LLC) with and into LTN Staffing, LLC. The conversion was completed on November 3, 2013. In 2021, we changed our name to BGSF, Inc.

We commenced operations on October 17, 2007 and since 2009 have began an on-going growth and diversification initiative. Since 2010, we have acquired fourteen businesses:

•In June 2010, we purchased the interests of BG Personnel Services, LP and BG Personnel, LP, and purchased the common stock of B G Staff Services, Inc. Shortly after the purchase, we relocated our home office to Dallas, Texas.

•In December 2010, we purchased substantially all of the assets and assumed certain liabilities of JNA Staffing Inc., which specialized in providing light industrial workforce solutions within the State of Wisconsin. These operations were rolled into our existing operations in Milwaukee, Wisconsin.

•In December 2011, we purchased substantially all of the assets and assumed certain liabilities of Extrinsic, LLC, which specialized in providing information technology (“IT”) workforce solutions to client partners within the U.S. We continue to operate under the Extrinsic trade name.

•In December 2012, we acquired substantially all of the assets and assumed certain liabilities of American Partners, Inc., which specialized in providing IT workforce solutions to client partners within the U.S.

•In June 2013, we acquired substantially all of the assets and assumed certain liabilities of InStaff Holding Corporation and InStaff Personnel, LLC, a wholly owned subsidiary of InStaff Holding Corporation (collectively, “InStaff”).

•In March 2015, we acquired substantially all of the assets and assumed certain liabilities of D&W Talent, LLC (“D&W”), which specialized in providing part-time and full-time workforce solutions of accounting and finance personnel and secretarial and administrative personnel to client partners in Texas and Louisiana.

•In October 2015, we acquired substantially all of the assets and assumed certain liabilities of Vision Technology Services, Inc., Vision Technology Services, LLC, and VTS-VM, LLC (collectively, “VTS”), which provided IT workforce solutions and project management workforce solutions.

•In April 2017, we acquired substantially all of the assets and assumed certain liabilities of Zycron, Inc. (“Zycron”), which provided IT workforce solutions and project management workforce solutions.

•In September 2017, we acquired substantially all of the assets and assumed certain liabilities of Smart Resources Inc. and Accountable Search, LLC (collectively, “Smart”), which specialized in providing part-time and full-time workforce solutions of accounting and finance personnel and secretarial and administrative personnel to client partners in Chicago market.

•In December 2019, we acquired substantially all of the assets and assumed certain liabilities of L.J. Kushner & Associates, L.L.C. (“LJK”), which provided cybersecurity retained search workforce solutions specializing in recruiting high and mid-level IT security professionals.

•In February 2020, we acquired 100% of the equity of EdgeRock Technology Holdings, Inc. (“EdgeRock”), which provides specialized IT consultants and focuses on the sourcing and placement of technology professionals specialized in leading software and data ecosystems.

•In February 2021, we acquired substantially all of the assets and assumed certain liabilities of Momentum Solutionz LLC (the “Momentum Solutionz”), which provided IT consulting and managed workforce solutions for organizations utilizing ERP systems.

•In December 2022, we acquired substantially all of the assets and assumed certain liabilities of Horn Solutions, Inc. and Horn Solutions, Dallas, LLC (collectively, “Horn Solutions”). Horn Solutions provides services to clients in a variety of industries including, but not limited to energy, financial services, healthcare, real estate and construction, service, manufacturing, and software industries.

•In April 2023, we acquired substantially all of the assets and assumed certain liabilities, of Arroyo Consulting LLC (“Arroyo Consulting”), which provides nearshore and offshore workforce solutions specializing in IT and software development with operations in the United States, Colombia, and India.

On March 21, 2022, we completed the sale to Sentech Engineering Services, Inc. of substantially all of the assets pertaining to our Light Industrial segment providing field talent primarily to manufacturing, distribution, logistics, and call center client partners which operated under the “InStaff” trade name. Instaff’s financial results have been reflected in our Consolidated Statements of Operations and Comprehensive (Loss) Income and Consolidated Statements of Cash Flows as discontinued operations. See “Note 4 - Discontinued Operations” in our Consolidated Financial Statements included elsewhere in this report for additional information.

The Company currently operates primarily within the United States of America (“U.S.”) through the Property Management and Professional segments.

Our Industry

The workforce solution industry supplies field talent to client partners helping them minimize the cost and effort of workforce planning. These workforce solutions also enable the client partner to rapidly respond to changes in business conditions, and in some cases to convert fixed labor costs to variable costs. Workforce solution companies act as intermediaries in matching available field talent to client partner assignments.

The workforce solution market is subject to volatility based on overall economic conditions. Historically, in periods of economic growth, the number of companies providing workforce solutions has increased due to low barriers to entry. During recessionary periods, the number of companies has decreased through consolidation, bankruptcies, or other events.

The workforce solution industry is large and highly fragmented with approximately 25,000 competing companies, while only 251 firms exceeded $100 million in annual revenues during 2022 according to Staffing Industry Analysts (“SIA”). As of September 2023, SIA estimated the 2023 U.S. temporary service market will be an estimated $201.7 billion, which is down from an estimated $224.7 billion in 2022. Workforce solution providers compete both to recruit and retain a supply of field talent and to attract and retain client partners to use these workers. Client partner demand for workforce solutions is dependent on the overall strength of the labor market and trends toward greater workforce flexibility. The workforce solution industry includes a number of markets focusing on business needs that vary widely in duration of assignment and level of technical specialization.

Our Operations

We have diversified our operations to provide field talent within distinct segments of the industry. We refer to our continuing operations as the Property Management and Professional segments, and discontinuing operations as the Light Industrial segment.

We operate separate profit centers within each segment and provide managers considerable operational autonomy and financial incentives. Managers focus on business opportunities within their markets and are provided centralized support to achieve success in those markets. We believe this structure allows us to recruit and retain highly motivated managers who have demonstrated the ability to succeed in a competitive environment. This structure also allows managers and team members to focus on market development while relying on centralized services for support in back-office operations, such as risk management programs and unemployment insurance, credit, collections, accounting, advice on legal and regulatory matters, and quality standards.

Our Segments

Our continuing operations are organized into the Property Management and Professional segments, and our discontinued operations is the Light Industrial segment.

Property Management Segment

Our Property Management segment is a leading provider of office and maintenance talent. We currently operate in 38 states and D.C. The field talent we assign to our Property Management client partners are our employees, although our client partners generally provide on-the-job direction, control and supervision.

Professional Segment

Our Professional segment provides highly skilled IT professionals with expertise in SAP, Workday, Peoplesoft, Hyperion, Oracle, One Stream, cyber, project management, managed services, and other IT workforce solutions to client partners on a national basis. Additionally, we provide finance, accounting, legal, human resource and related support personnel. Our client partners include large Fortune 500 companies, medium and small companies, as well as consulting firms engaged in systems integration projects. We operate our professional segment remotely and from our offices in Florida, Illinois, Maryland, Massachusetts, New Jersey, North Carolina, Rhode Island, Tennessee, and Texas. The IT division provides additional nearshore/offshore field talent solutions in Colombia and India.

Light Industrial Segment

The Light Industrial segment is reported in our financial statements as discontinued operations. See “Note 4 - Discontinued Operations” in our Consolidated Financial Statements for additional information.

Financial Information about Segments

Refer to Note 19 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which is incorporated by reference.

Financial Information about Geographic Areas

Refer to Notes 1 and 2 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which is incorporated by reference.

Our Client Partners

We currently provide workforce solutions to small and medium-sized companies as well as divisions of Fortune 500 companies. As is common in the industry, our engagements to provide workforce solutions to our client partners are generally of a non-exclusive, short-term nature and subject to termination by the client partner with little or no notice. No client partner accounted for more than 10% of our revenues in fiscal 2023, 2022, or 2021.

Marketing and Recruiting

We believe a key component of our success is the ability to recruit and maintain a pool of qualified field talent and regularly place them into desirable and appropriate positions. We use comprehensive methods to identify, assess, select and, when appropriate, measure the skills of our field talent and permanent placement candidates to meet the needs of our client partners.

We market our workforce solutions to client partners and field talent candidates via both national and local advertising activities. A significant portion of our total marketing efforts comes from direct marketing via email and telephone solicitation. Promotions consists of pay per click advertising, search engine marketing, social media, trade publications, job boards and events. As well, reputation management is a promotional utility that serves as the first impression; interactions on reviews, comments, posts, direct messages, etc. give our followers a cursory notion of our values and business practices. We market our hiring and career management advice through all digital platforms (websites, social media, and blogs) and have expanded our use of job boards and aggregators in all aspects of sales and recruitment. Joint marketing arrangements have been entered into with major software partners. We actively seek endorsements and affiliations with professional organizations in the accounting and finance, technology, apartment community, commercial building, creative and marketing fields. To enhance public recognition of us and our workforce solutions, we conduct public relations activities and team members and field talent are encouraged to be active in civic organizations and industry trade groups in their local communities.

Growth Strategy

We are committed to growing our operations and have grown from $35 million of Light Industrial revenue in 2009 to $313 million of revenue from continuing operations in 2023, by using a growth strategy reliant upon both acquisitions and organic growth.

We will continue to evaluate acquisition opportunities utilizing our proven approach to the assessment, valuation, and integration of acquisitions. Additionally, we are committed to continue to grow our operations in our current markets, as well as expand into new markets within the segments and industries that we currently serve.

We are organized to handle many of the administrative functions at our home office location so that our segment operations can focus on business development and the effective recruiting and assignment of field talent.

We continue to invest in technology and process improvements, as necessary, to ensure that we are operating at optimal productivity and performance. In 2022, we completed the board of directors authorized three year plan to enhance our processes through the information technology improvement project. These workstreams included improvements to applications in front office, middle office, back office, modern workplace, IT infrastructure, and project management.

Competition

With about 25,000 staffing and recruiting companies, the workforce solutions market is highly competitive with limited barriers to entry. We compete in national, regional and local markets with full-service and specialized workforce solution companies. Some of our competitors have significantly more marketing and financial resources than we do. Price competition in the industry is intense. We expect that the level of competition will remain high, which could limit our ability to maintain or increase our market share or profitability.

The principal competitive factors in attracting qualified candidates for assignments are pay rates, availability of assignments, duration of assignments and responsiveness to requests for placement. We believe that many potential candidates seeking assignments through us may also be pursuing assignments through other means. Therefore, the speed at which we place prospective field talent and the availability of appropriate assignments are important factors in our ability to complete assignments of qualified field talent. In addition to having high quality field talent to assign in a timely manner, the principal competitive factors in obtaining and retaining client partners in the workforce solution industry are properly assessing the client partners’ specific job requirements, the appropriateness of the field talent assigned to the client partner, the price of services and the monitoring of client partner satisfaction. Although we believe we compete favorably with respect to these factors, we expect competition to continue to increase.

Seasonality and Other Fluctuations

Our business experiences seasonal fluctuations. Our quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of our client partners’ business. Demand for our Property Management workforce solutions typically increase 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, our cost of services typically increases in the first quarter primarily due to the reset of payroll taxes.

The industry has historically been cyclical, often acting as an indicator of both economic downturns and upswings. Client partners tend to use contingent workforce solutions to supplement their existing workforce and generally hire direct workers when long-term demand is expected to increase. As a consequence, our revenues tend to increase quickly when the economy begins to grow and, conversely, our revenues can also decrease quickly when the economy begins to weaken. Historically, demand for permanent placement workforce solutions is even more sensitive to economic and labor market conditions than demand for workforce and consultant solutions and this is expected to continue.

Human Capital

We are a workforce solutions company dedicated to connecting people to work in ways that enrich their lives. At BGSF, we define our purpose by championing the future of people, transforming lives, and positively impacting entire communities. We are more than a transactional business. Our focus is on the big picture. We believe we can be a powerful force for good by connecting people to opportunities that enrich their lives and support their personal and professional development. Embedded in our character is the positive energy we embrace that drives a happy work environment, that shapes a happy home, which cascades into happier communities. We believe small actions can turn into big impacts, creating a ripple that becomes a wave powerful enough to change the world around us. This is what we call The BG Ripple Effect. In order to compete and succeed in our highly competitive and rapidly evolving markets, it is crucial that we attract and retain experienced internal team members, as well as talent to work for our client partners. As part of these efforts, we strive to offer competitive total rewards programs, foster an inclusive and diverse environment, and give team members the opportunity to give back to their communities and make a social impact.

Team Members

As of February 7, 2024, we employed approximately 474 team members working remotely or in our various market locations in the United States.

Field Talent

In addition to our team members, BGSF matches talent with our client partners. In 2023, we placed approximately 13,900 individuals in positions with our client partners. In significantly all of these instances, we remain the employer of record for substantially all of our talent working at our client partner locations. This means that we retain responsibility for all assignments, wages, benefits, workers’ compensation insurance, and the employers’ share of applicable payroll taxes as well as the administration of the team members’ share of these taxes. Also, working with us gives our talent access to competitive health and benefit programs. Eligible talent can participate in a defined contribution plan and the 2020 Employee Stock Purchase Plan (“2020 ESPP”).

Compensation and Benefits

BGSF is committed to providing competitive, equitable and fiscally responsible total rewards programs to our team members. Our compensation programs are designed to attract, retain and reward talented individuals who possess the skills necessary to achieve our strategic goals and create long-term value for our shareholders. We provide team members with competitive compensation opportunities, with pay for performance opportunities that include a mix of base salary, commissions, short-term incentives and, in the case of our more senior team members, long-term equity awards. We believe that our programs provide fair and competitive opportunities that align team member and shareholder interests. In addition to cash and equity compensation, we also offer team members competitive benefits such as life and health (medical, dental and vision) insurance, paid time off including volunteer time off, wellness benefits, education/tuition reimbursement, a defined contribution retirement plan with BGSF matching contributions, and our 2020 ESPP.

Diversity, Equity, and Inclusion

We are committed to fostering an inclusive and diverse workforce. Our responsibility commitment is overseen by executive leadership, along with board-level oversight led by our Nominating and Governance Committee. In September 2020, we formed a diversity, equity and inclusion council called Voices Inspiring Inclusion, Belonging, and Equity (“VIIBE”), which represents broad perspectives across our organization. VIIBE is chaired by our Vice President of Diversity and Development. In August 2022, we launched our first two team member resource groups: African American/Black Employees & Allies and Working Parents and Allies. Later in 2023, we launched our third team member resource group, Pride and Allies. Our team member resource groups focus on creating a strong sense of belonging within our work culture, raising awareness about obstacles standing in the way of team member success, gaining collaborative support from allies, and driving equitable opportunities throughout the organization for all. The essential work of VIIBE has continued to align its work with the development of foundational pillars of excellence that promote this philosophy. We are focused on how we source, recruit, develop, appreciate, and leverage perspectives and experiences of underrepresented talent. This focus will extend to our collaboration with client partners, selection of vendor partners, engagement in our communities and prioritization of overall work-life harmony. Our commitment to diversity, equity and inclusion does not sit with a singular individual, but with every team member at BGSF. BGSF leaders will continue to be provided additional inclusive-leadership growth opportunities, understanding the importance of mitigating biases, as an ongoing effort to shape our future talent pool selections, onboard new talent, and support future career trajectories.

As of October 13, 2023, we employed approximately 3,523 people, of which 14% were internal team members and 86% were field talent supporting our client partners across the country.

•Women represented 37% of all team members, and underrepresented minorities (“URMs”, defined as those who identify as Black/African American, Hispanic/Latinx, Native American/Alaska Native, Asian, Native Hawaiian/Pacific Islander and/or two or more races) represented 72% of our all of our reporting team members (4% of team members in contingent roles chose not to disclose this information);

•Women represented 61% of our internal team members and 51% of internal team members in managerial and leadership roles; and

•URMs represent 39% of our internal team members and 23% of internal team members in managerial and leadership roles identified as URMs.

Our focus is to ensure BGSF is cultivating equality and equity, while recognizing and celebrating our differences at work, in our homes, and out in the communities.

Community Involvement

In 2023, we were committed to sustainability initiatives which guided our interactions with our workforce, vendor partners, and client partners. Through our volunteering time off program, we had 189 individuals volunteer over 2,200 hours and donated of over $40,000 for philanthropic purposes, which emphasized our ongoing dedication to community service. Focusing on impactful community events, we continued sponsorship of the State Fair of Texas’s Youth Agricultural Job Interview Contest, the Heart Walk with the American Heart Association and the Steps of Success 5K for the Transformation Life Center. We were involved with student development through the Junior Achievement organization and in 2023, we created the Darrell Freeman Fellowship program for graduated students in Information Technology. Our global investment in professional development initiatives delivered over 20,000 educational hours to 1,600 individuals, resulting in 1,000 certificates awarded and locally we supported the Blacks in Technology Foundation. Additionally, our Colombia team hosted The NASA International Space Apps Challenge, which engaged over 200 individuals to innovate with NASA’s open data program. During 2024, we will remain dedicated to sustainability, employee development, and community impact.

Team Engagement

As part of BGSF’s continued initiative to provide its team members with feedback opportunities, in 2023, we conducted several pulse surveys to understand team member needs and provide support. Survey results were analyzed and reviewed by our senior leadership, as well as shared with individual managers, who were then tasked with taking action based on their team members’ confidential feedback (both quantitative and qualitative). By paying close attention to the results, both at an aggregate enterprise level as well as at a department/business/workgroup level, we have been able to continue the enhancement of our culture of rewards and recognition, drive efforts to promote inclusion and diversity, increase communication in support of team member well-being and modernize our approach to foster a culture of continuous learning and feedback. In 2023, team members recognized our BGSF values through our “BIG Deal” platform by sending over 2,700 awards to their fellow team members.

Learning and Development

We emphasize team member development and learning as a priority for the organization. We believe learning and development are key elements to overall retention, engagement, and team member experience strategy. This direction is led by our Vice President of Diversity and Development. Our strategy is designed to empower team members to reach their full potential, and we provide a wide range of development programs, opportunities, and resources needed to be successful. As we continue to develop the BGSF University, our goal is to provide a variety of learning channels including instructor-led, facilitated custom workshops, leader-led, cohort and mentorships, self-paced, e-learning and a catalog of vendor-provided courses, videos, resources, and books. We are committed to the organization’s overall health and providing career progression by providing individual development, readiness, and transition plans as a part of our talent review and succession planning process. In 2023, we had over 20,000 hours spent in upskilling the workforce, with over 1,600 going through our training programs and 1,000 certification achieved.

Intellectual Property

We own or have rights to various copyrights, trademarks, service marks, trade names and domain names used in our business, including, but not limited to, BGSF, BG Staffing, BG Staffing Group, BG Personnel Services, Extrinsic, American Partners, InStaff, BG Temporary Staffing, BG Multifamily, BG Talent, Triance, Donovan & Watkins, D&W Talent, Vision Technology Services, Zycron, Smart Resources, Accountable Search, L.J. Kushner & Associates, EdgeRock, EdgeRock Technology Partners, EdgeRock Technology Partners & Design, Momentum Solutionz, Creative Data Solutions, Horn Solutions, Arroyo Consulting, Arroyo IT Solutions, AC, bgsf.com, bgstaffing.com, bgstaffinggroup.com, bgpersonnel.com, bgpersonnel.net, bgstaffing.net, bgcompanies.net, bgmail.com, ltnstaffing.com, milwaukeetemps.com, milwaukeetmepsinc.com, extrinsicllc.com, extrinsicgroup.com, extrinsicresources.com, jnastaffing.com, therightpeoplerightnow.com, rightpeoplerightnow.com, americanpartnersinc.com, instaff.com, donwat.com, vistechs.com, zycron.com, smartstaffing.com, accountablesearch.com, executiveassistantsearch.com, ljkushner.com, edgerock.com, edgerock.net, edgerockblue.com, edgerockcares.com, edgerockcares.net, edgerockconsultants.com, edgerockit.com, edgerockpartners.com, edgerockperm.com, edgerockred.com, edgerocksearch.com, edgerocksolutions.com, edgerockstaffing.com, edgerocktech.com, edgerocktech.net, edgerocktechnologies.com, etphome.com, joinedgerock.com, myedgerock.com, momentumsolutionz.com, hornsolutions.net, arroyoconsulting.net, and micro-talent.net. In 2023, the Board of Directors approved, and we completed, management’s plan to rebrand as BGSF, eliminating various current trade names.

Regulation

We are subject to regulation by numerous foreign, federal, state and local regulatory agencies, including but not limited to the U.S. Department of Labor, which sets employment practice standards for workers, and similar state and local agencies. We are subject to the laws and regulations of the jurisdictions within which we operate. While the specific laws and regulations vary among these jurisdictions, some require some form of licensing and often have statutory requirements for workplace safety and notice of change in obligation of workers’ compensation coverage in the event of contract termination. Although compliance with these requirements imposes some additional financial risk on us, particularly with respect to those client partners who breach their payment obligation to us, such compliance has not had a material adverse effect on our business to date. Increased government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could also materially harm our business.

Available Information

We file electronically with the SEC our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. Our website address is www.bgsf.com. The information included on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. We will make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we have filed or furnished such material to the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Furthermore, we will provide electronic or paper copies of filings free of charge upon written request to our Corporate Secretary.

ITEM 1A. RISK FACTORS.

There are numerous and varied risks that may prevent us from achieving our goals, including those described below. You should carefully consider the risks described below and the other information included in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. If any of the events or circumstances described below were to occur, our business, the financial condition and the results of operations could be materially adversely affected. As a result, the trading price of our common stock could decline, and investors could lose part or all of their investment. The risks below are not the only risks we face. Additional risks not currently known to us or that we currently deem to be immaterial may also adversely affect our business, financial condition or results of operations. Past financial performance should not be considered to be a reliable indicator of future financial performance, and investors or prospects should not use historical trends to anticipate results or trends in future periods.

Risks Related to Our Company and Our Business

We operate in a highly competitive industry with low barriers to entry, and may be unable to compete successfully against existing or new competitors.

The workforce solution market is highly competitive with limited barriers to entry. We compete in national, regional and local markets with approximately 25,000 full-service and specialized workforce solution companies. We expect that the level of competition will remain high, which could limit our ability to maintain or increase our market share or profitability.

Several of our existing or potential competitors have substantially greater financial, technical and marketing resources than we do, which may enable them to:

•Develop and expand their infrastructure and service offerings more quickly and achieve greater cost savings;

•Invest in new technologies;

•Expand operations into new markets more rapidly;

•Devote greater resources to marketing;

•Compete for acquisitions more effectively and complete acquisitions more easily; and

•Aggressively price products and services and increase benefits in ways that we may not be able to match.

In order to compete effectively in our markets, we must target our potential client partners carefully, continue to improve our efficiencies and the scope and quality of our workforce solutions, and rely on our service quality, innovation, education and program clarity. If our competitive advantages are not compelling or sustainable, then we are unlikely to increase or sustain profits and our stock price could significantly decline.

In addition, heightened competition among our existing competitors, especially on a price basis, or by new entrants into the market, could create additional competitive pressures that may reduce our margins and adversely affect our business. If we fail to successfully respond to these competitive pressures or to implement our strategies effectively, our revenues or gross margins could be significantly reduced.

Our business is subject to risks associated with geographic market concentration.

Geographic revenue in excess of 10% of our consolidated revenue from continuing operations in fiscal year 2023 and the related percentage for fiscal years 2022 and 2021 was generated in the following areas:


	2023		2022		2021
Tennessee	13	%	10	%	12	%
Texas	25	%	23	%	23	%

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

A downturn of the U.S. or global economy could result in our client partners using fewer workforce solutions or becoming unable to pay us for our services on a timely basis or at all, which would materially adversely affect our business.

Because demand for workforce solutions is sensitive to changes in the level of economic activity, our business may suffer during economic downturns. During periods of weak economic growth or economic contraction, the demand for such workforce solutions typically declines. When demand drops, our operating profit is typically impacted unfavorably as we experience a deleveraging of our selling and administrative expense base as expenses may not decline as quickly as revenues. In periods of decline, we can only reduce selling and administrative expenses to a certain level without negatively impacting the long-term potential of our brands. Additionally, during economic downturns companies may slow the rate at which they pay their vendors, or they may become unable to pay their obligations. If our client partners become unable to pay amounts owed to us, or pay us more slowly, then our cash flow and profitability may materially suffer.

Our business depends on a strong reputation and anything that harms our reputation will likely harm our results.

As a provider of workforce solutions, as well as consultant services, our reputation is dependent upon the performance of the field talent we place with our client partners and the services rendered by our consultants. We depend on our reputation and name recognition to secure engagements and to hire qualified field talent and consultants. If our client partners become dissatisfied with the performance of those field talent or consultants or if any of those field talent or consultants engage in or are believed to have engaged in conduct that is harmful to our client partners, our ability to maintain or expand our client base may be significantly harmed. Moreover, use of our copyrights, trademarks, service marks, trade names, domain names, or other intellectual property by third parties, including but not limited to unauthorized use by third parties for criminal purposes or otherwise, even if such use is outside our reasonable control, may significantly harm our reputation or the value of our copyrights, trademarks, service marks, trade names, domain names, or other intellectual property, or subject us to legal proceedings, and therefore have a material adverse effect on our business, results of operations, or financial condition.

We would be adversely affected by the loss of key personnel.

Our operations and financial success depend significantly on our leadership management team and team members. The loss of any key members of this group could have a material adverse effect on our business, financial condition and results of operations.

We depend on our ability to attract and retain qualified field talent.

We depend on our ability to attract qualified field talent who possess the skills and experience necessary to meet the workforce solution requirements of our client partners. We must continually evaluate our base of available qualified personnel to keep pace with changing client partner needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available. Our success is substantially dependent on our ability to recruit and retain qualified field talent.

Our workforce solution agreements may be terminated on short notice, leaving us vulnerable to loss of a significant amount of client partners in a short period of time.

Our workforce solution agreements with our client partners are generally cancellable by the client partners with little or no notice to us. As a result, a significant number of our client partners can terminate their agreements with us at any time, making us particularly vulnerable to a significant decrease in revenue within a short period of time that could be difficult to quickly replace.

If we are unable to retain existing client partners or attract new client partners, our results of operations could suffer.

Increasing the growth and profitability of our business is particularly dependent upon our ability to retain existing client partners and capture additional client partners. Our ability to do so is dependent upon our ability to provide high quality workforce solutions and offer competitive prices. If we are unable to execute these tasks effectively, we may not be able to attract a significant number of new client partners and our existing client partners base could decrease, either or both of which could have a materially adverse impact on our revenues.

Acquisitions and new business initiatives may not be successful.

We expect to continue making acquisitions and entering into new business initiatives, including, but not limited to, dispositions, joint ventures, and strategic investments, as part of our long-term business strategy. These acquisitions and new business initiatives involve significant challenges and risks, including that they may not advance our business strategy, that we may not realize a satisfactory return on our investment, that we may experience difficulty in integrating operations, or diversion of management’s attention from our other business. We may be unable to identify suitable acquisition candidates in the future. Moreover, acquisitions may require substantial capital needs and the incurrence of additional indebtedness which may change significantly our capitalization and results of operations. Further, these acquisitions could result in post-closing discovery of material undisclosed liabilities of the acquired business or assets, title or other defects with respect to acquired assets, discrepancies or errors in furnished financial statements or other information or breaches of representations made by the sellers, or the unexpected loss of key team members or client partners from acquired businesses. These events could cause material harm to our operating results or financial condition.

We have debt that could adversely affect our financial health and prevent us from fulfilling our obligations or put us at a competitive disadvantage.

While we believe our current debt level is reasonable, we have utilized, and expect to continue to utilize, debt for acquisitions. Our level of debt and the limitations imposed on us by our lenders could have a material impact on investors, including the requirement to use a portion of our cash flow from operations for debt service rather than for our operations and the need to comply with the various covenants associated with such debt. Additionally, we may not be able to obtain additional debt financing for future working capital, capital expenditures or other home office purposes or may have to pay more for such financing. We could also be less able to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions, or we may be disadvantaged compared to competitors with less leverage.

We have significant working capital needs and if we are unable to satisfy those needs from cash generated from our operations or borrowings under our revolving credit facility, we may not be able to meet payroll requirements.

We require significant amounts of working capital to operate our business. If we experience a significant and sustained drop in operating profits, or if there are unanticipated reductions in cash inflows or increases in cash outlays, we may be subject to cash shortfalls. If such a shortfall were to occur for even a brief period of time, it may have a significant adverse effect on our business. In particular, we use working capital to pay expenses relating to our team members and field talent and to satisfy our workers’ compensation and tax liabilities. Generally, we pay our field talent on a weekly basis while we receive payments from our client partners 30 to 90 days after billing. As a result, we must maintain sufficient cash availability to pay team members and field talent and fund related payroll liabilities prior to receiving payment from client partners.

We derive working capital for our operations through cash generated by our operating activities and borrowings under our revolving credit facility. We believe that our current sources of capital are adequate to meet our working capital needs. However, our available sources of capital are limited. If our working capital needs increase in the future, we may be forced to seek additional sources of capital, which may not be available on commercially reasonable terms, or at all.

At the end of fiscal 2023, the maximum amount we were entitled to borrow under our revolving credit facility was $41.0 million and the availability of unused funds was affected by financial, business, economic and other factors, as well as by the daily timing of cash collections and cash outflows.

We typically experience significant seasonal and other fluctuations in our borrowings and borrowing availability, and we aggressively manage our cash flow to ensure adequate funds to meet working capital needs. Such management steps include working to improve collections, adjusting the timing of cash expenditures and managing operating expenses. However, such steps may not always be successful.

Failure to comply with restrictive covenants under our credit agreement could trigger prepayment obligations or additional costs.

Our credit agreement includes various financial and other covenants with which we have to comply in order to maintain borrowing availability and avoid default interest, including minimum fixed charge coverage ratio and maximum leverage ratio.

Any future failure to comply with our covenants which may occur under our credit agreement could result in an event of default which, if not cured or waived, could trigger prepayment obligations. There can be no assurances that any lender will waive defaults that may occur in the future. If we are forced to refinance our credit agreement, 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 and financial condition. Even if such refinancing were available, the terms could be less favorable and our results of operations and financial condition could be materially adversely affected by increased costs and interest rates.

We could be required to write-off goodwill or intangible assets in future periods if our future operating results suffer.

In accordance with generally accepted accounting principles, we are required to review our goodwill and intangible assets for impairment at least annually. Our goodwill and intangibles assets were $59.6 million and $30.4 million, respectively, at the end of fiscal year 2023. An unfavorable evaluation could cause us to write-off these assets in future periods. Any future write-offs could have a material adverse impact on our results of operations. For example, in 2023, the Board of Director approved management’s plan to rebrand as BGSF, eliminating various current trade names. See “Note 2 - Summary of Significant Accounting Policies” in our Consolidated Financial Statements included elsewhere in this report for additional information.

The amount of collateral that we are required to maintain to support our workers’ compensation obligations could increase, reducing the amount of capital we have available to support and grow our field operations.

We are contractually obligated to collateralize our workers’ compensation obligations under our workers’ compensation program through irrevocable letters of credit, surety bonds or cash. Our workers’ compensation program renews annually on January 1 of each year, and as part of the renewal, collateral is adjusted to reflect current operating levels. These collateral requirements are significant and place pressure on our liquidity and working capital capacity. We believe that our current sources of liquidity are adequate to satisfy our immediate needs for these obligations; however, our available sources of capital are limited. Depending on future changes in collateral requirements, we could be required to seek additional sources of capital in the future, which may not be available on commercially reasonable terms, or at all.

We are dependent on workers’ compensation insurance coverage at commercially reasonable terms.

We provide workers’ compensation insurance for our team members and field talent. Our workers’ compensation insurance policies are renewed annually. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on commercially reasonable terms. The loss of our workers’ compensation insurance coverage would prevent us from doing business in the majority of our markets. Further, we cannot be certain that our current and former insurance carriers will be able to pay claims we make under such policies. The loss of workers’ compensation insurance could have a material adverse effect on our financial position and results of operations.

Because we assume the obligation to make wage, tax and regulatory payments in respect of our team members and field talent, we are exposed to client partner credit risks.

We generally assume responsibility for and manage the risks associated with our team members and field talent payroll obligations, including liability for payment of salaries and wages (including payroll taxes), as well as group health and retirement benefits. These obligations are fixed, whether or not the client partner makes payments required by our workforce solutions agreement, which exposes us to credit risks. We attempt to mitigate this risk by generally invoicing our client partners

weekly and having a high number of client partners who are geographically and industry diverse. We also carefully monitor the timeliness of our client partners’ payments and impose strict credit standards on our client partners. If we fail to successfully manage our credit risk, we may suffer significant losses which would decrease our profitability.

Our business is subject to foreign, federal, state and local labor and employment laws and a failure to comply could materially harm our business.

We are subject to regulation by numerous foreign, federal, state and local regulatory agencies, including but not limited to the U.S. Department of Labor, which sets employment practice standards for workers, and similar state and local agencies. We are subject to the laws and regulations of the jurisdictions within which we operate. While the specific laws and regulations vary among these jurisdictions, some require some form of licensing and often have statutory requirements for workplace safety and notice of change in obligation of workers’ compensation coverage in the event of contract termination. Compliance with these requirements imposes some additional financial risk on us, particularly with respect to those client partners who breach their payment obligation to us. Any inability or failure to comply with government regulation could materially harm our business. Increased government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could also materially harm our business.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Care Reform Laws”) include various health-related provisions that took effect during 2014 and established new regulations on health plans. Although the Health Care Reform Laws do not mandate that employers offer health insurance, beginning in 2015 tax penalties were assessed on employers who do not offer health insurance that meets certain affordability or benefit requirements. A portion of the 2017 Tax Cuts and Jobs Act became effective in 2019 reducing the penalty to zero that requires most individuals to have health insurance, which effectively repealed the Health Care Reform Laws requirement. However, some states have begun proceedings to keep these mandates intact through state legislation. Unless modified by regulations or subsequent legislation, the payment of tax penalties if such coverage is not adequate, may increase our costs. Without the individual mandate, more individuals might decline coverage, which could have an impact on employer premiums. If we are unable to raise the rates we charge our client partners to cover these costs, such increases in costs could materially harm our business.

In addition, certain of our client partners may require that we indemnify them against losses in the event that the client partner is determined to be non-compliant with the Health Care Reform Laws with respect to one or more of our field talent assigned to such client partner. While we have not received notice from any client partner that acts or omissions by us may have resulted in losses to the client partner relating to non-compliance with the Health Care Reform Laws, any future liabilities that may be incurred by us pursuant to any such indemnification provisions could materially and adversely affect our results of operations.

It is likely that the U.S. Congress will continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Health Care Reform Laws. It is unclear at this point what the scope of any future such legislation will be and when it will become effective. Because of the uncertainty surrounding this replacement health care reform legislation, we cannot predict with any certainty the likely impact of the Health Care Reform Laws’ repeal or the adoption of any other health care reform legislation on our financial condition or operating results. Whether or not there is alternative health care legislation enacted in the U.S., there is likely to be significant disruption to the health care market in the coming months and years and the costs of our health care expenditures may increase.

We may be exposed to employment-related claims and losses, including class action lawsuits, which could have a material adverse effect on our business.

Workforce solution providers typically assign personnel in the workplaces of other businesses. The risks of these activities include possible claims relating to:

•discrimination and harassment;

•wrongful termination or denial of employment;

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

•classification of field talent;

•assignment of illegal aliens;

•violations of wage and hour requirements;

•retroactive entitlement to field talent benefits;

•errors and omissions by our field talent;

•misuse of client partners proprietary information;

•misappropriation of funds;

•damage to client partners facilities due to negligence of field talent; and

•criminal activity.

We may incur fines and other losses or negative publicity with respect to these claims. In addition, these claims may give rise to litigation, which could be time-consuming and expensive. New employment and labor laws and regulations may be proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. There can be no assurance that the policies we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. There can also be no assurance that the insurance policies we have purchased to insure against certain risks will be adequate or that insurance coverage will remain available on commercially reasonable terms or be sufficient in amount or scope of coverage.

U.S. federal tax regulations and interpretations could adversely affect us.

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. Notwithstanding the reduction in the corporate income tax rate, the overall impact of these changes on our results of operations will likely evolve as new regulations and interpretations relating to the TCJA are implemented. In addition, various political figures have pledged their support to overturning or modifying key aspects of the TCJA which could further increase the uncertainty relating to the impact of this or any future tax legislation on our results of operations.

Natural disasters and unusual weather conditions, pandemic outbreaks, terrorist acts, global political events and other serious catastrophic events could disrupt business and otherwise materially adversely affect our business and financial condition.

With operations in many states, we are subject to numerous risks outside of our control, including risks arising from natural disasters, such as fires, earthquakes, hurricanes, floods, tornadoes, unusual weather conditions, pandemic outbreaks and other health emergencies, terrorist acts or disruptive political events, or similar disruptions that could materially adversely affect our business and financial performance. Our operations are often dependent on the ability of team members, field talent and consultants to travel from business to business and from location to location. Any public health emergencies, including a real or potential pandemic such as those caused by the avian flu, SARS, Ebola, COVID-19, or even a particularly virulent flu, could decrease demand for our workforce solutions and our ability to offer them. Uncharacteristic or significant weather conditions can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer our workforce solutions and materially adversely affect our short-term results of operations. Although we cannot predict such events or their consequences, these events could materially adversely affect our stock price, reputation, business and financial condition.

Risks Related to Our Information Technology, Cybersecurity and Data Protection

Our results of operations and ability to grow could be materially negatively affected if we cannot successfully keep pace with technological changes impacting the development and implementation of our workforce solutions and the evolving needs of our client partners.

Our success depends on our ability to keep pace with rapid technological changes affecting both the development and implementation of our workforce solutions and the needs of our client partners. Technological advances such as artificial intelligence, machine learning, and automation are impacting industries served by all our lines of business. In addition, our business relies on a variety of technologies, including those that support hiring and tracking, order management, billing, and client data analytics. If we do not sufficiently invest in new technology and industry developments, appropriately implement new technologies, or evolve our business at sufficient speed and scale in response to such developments, or if we do not make the right strategic investments to respond to these developments, our workforce solutions, results of operations, and ability to develop and maintain our business could be negatively affected.

We are dependent upon technology services, and if we experience damage, service interruptions or failures in our computer and telecommunications systems, or if our security measures are breached, our client partner and field talent relationships and our ability to attract new client partners may be adversely affected.

Our business could be interrupted by damage to or disruption of our computer, telecommunications equipment, or software systems, some of which are managed by third-party vendors, and we may lose data. Our client partners’ businesses may be adversely affected by any system or equipment failure we experience. As a result of any of the foregoing, our relationships with our client partners may be impaired, we may lose client partners, our ability to attract new client partners may be adversely affected and we could be exposed to contractual liability. Precautions in place to protect us from, or minimize the effect of, such

events may not be adequate. In addition, our business involves the storage and transmission of field talent or client partners’ proprietary information, and security breaches, computer viruses or cyber-attacks, including attacks motivated by grievances against the business industry in general or against us in particular, could expose us to a risk of loss of this information, litigation and possible liability. If our security measures are breached as a result of third-party action, field talent error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to client partner data, our reputation may be damaged, we may be subject to government sanctions, our business may suffer and we could incur significant liability. Techniques used to obtain unauthorized access or to sabotage systems change frequently and are growing increasingly sophisticated. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, we could be liable and the market perception of our workforce solutions could be harmed or result in increased costs or loss of revenue. The potential risk of security breaches and cyber-attacks may increase as we introduce new workforce solution offerings.

We maintain insurance with respect to many of such claims; however, there can be no assurance that we will continue to be able to obtain insurance at a cost that does not have a material adverse effect upon us or that such claims (whether by reason of us not having sufficient insurance or by reason of such claims being outside the scope of our insurance) will not have a material adverse effect upon us.

Changes in data privacy and protection laws and regulations in respect of control of personal information could increase our costs or otherwise adversely impact our operations.

In the ordinary course of business, we collect, use, and retain personal information from our team members, field talent candidates, and contractors, including, without limitation, full names, government-issued identification numbers, addresses, birth dates, and payroll-related information. The possession and use of personal information in conducting our business subjects us to a variety of complex and evolving laws and regulations regarding data privacy, protection and security, which, in many cases, apply not only to third-party transactions, but also to transfers of information among us and our subsidiaries. Complying with the enhanced obligations and future laws and regulations relating to data transfer, residency, privacy and protection has increased and may continue to increase our operating costs and require significant management time and attention, while any failure by us or our subsidiaries to comply with applicable laws could result in governmental enforcement actions, fines, and other penalties that could potentially have a material adverse effect on our operations and reputation.

Risks Related to the Ownership of Our Securities

An investment in our common stock should be considered high risk.

An investment in our common stock requires a long-term commitment, with no certainty of return. Investment banks may not agree to underwrite primary or secondary offerings on behalf of our company or its stockholders in the future. If all or any of the foregoing risks occur, it would have a material adverse effect on our company.

We cannot predict whether an active trading market for our common stock will continue. Even if an active trading market continues, the market price of our common stock may remain volatile.

In the absence of an active trading market:

•you may have difficulty buying and selling our common stock at all or at the price you consider reasonable;

•market visibility for shares of our common stock may be limited, which may have a depressive effect on the market price for shares of our common stock and on our ability to raise capital or make acquisitions by issuing our common stock.

Even if an active market for our common stock continues, of which no assurances can be given, the market price for our common stock may be volatile and subject to wide fluctuations in response to factors including the following:

•actual or anticipated fluctuations in our quarterly or annual operating results;

•changes in financial or operational estimates or projections;

•changes in the economic performance or market valuations of companies similar to ours;

•conditions in markets generally;

•sales of significant amounts of our common stock; and

•general economic or political conditions in the United States or elsewhere.

The securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of shares of our common stock.

We will likely issue additional common stock in the future, which would dilute the holdings of our existing stockholders.

In the future we may issue additional securities up to our total authorized and unissued amounts, including shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock, resulting in the dilution of the ownership interests of our stockholders. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel, option exercises, 2020 ESPP purchases, future acquisitions or future placements of our securities for capital-raising or other business purposes. Moreover, the exercise of our existing outstanding stock options, which are exercisable for or convertible into shares of our common stock, would dilute our existing common stockholders.

Our compliance with complicated regulations concerning corporate governance and public disclosure has resulted and may in the future result in additional expenses.

We are faced with expensive, complicated and evolving disclosure, governance and compliance laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, which we refer to as the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act. New or changing laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations and standards of a public company are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Our failure to comply with all laws, rules and regulations applicable to U.S. public companies could subject us or our management to regulatory scrutiny or sanction, which could harm our reputation and stock price.

There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm our company.

Proper systems of internal controls over financial reporting and disclosure are critical to the operation of a public company. Should such systems fail to detect or prevent error or fraud, it would leave us without the ability to reliably compile financial information about our company and significantly impair our ability to prevent or detect errors and fraud, all of which would have a negative impact on our company from many perspectives.

Moreover, we do not expect that disclosure controls or internal control over financial reporting, even if established, will prevent all errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent and detect errors or fraud could materially adversely impact us.

We cannot be sure we will pay dividends in the future, and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

While we have declared and paid dividends for the prior thirty-seven quarterly periods, we are limited in our ability to pay dividends by our credit agreement, and therefore, we cannot be certain if we will pay any cash dividends to holders of our common stock in the future. Any future determination with respect to the payment of dividends will be at the discretion of our board of directors and will be dependent upon, among other things, our financial condition, results of operations, capital requirements, the terms of our then existing indebtedness, contractual restrictions, future prospects, general economic conditions and other factors considered relevant by our board of directors. Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

Upon dissolution of our company, you may not recoup all or any portion of your investment.

In the event of a liquidation, dissolution or winding-up of our company, whether voluntary or involuntary, the proceeds and/or assets of our company remaining after giving effect to such transaction, and the payment of all of our debts and liabilities will be distributed to the stockholders of common stock on a pro rata basis. There can be no assurance that we will have available assets to pay to the holders of common stock, or any amounts, upon such a liquidation, dissolution or winding-up of our company. In this event, you could lose some or all of your investment.

Certain provisions of our organizational documents may make it difficult for stockholders to change the composition of our board of directors and may discourage hostile takeover attempts that some of our stockholders may consider to be beneficial.

Certain provisions of our certificate of incorporation and bylaws may have the effect of delaying or preventing changes in control if our board of directors determines that such changes in control are not in the best interests of us and our stockholders. The provisions in such certificate of incorporation and bylaws include, among other things, the following:

•a classified board of directors with three-year staggered terms;

•the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;

•stockholder action can only be taken at a special or regular meeting and not by written consent except in limited circumstances;

•advance notice procedures for nominating candidates to our board of directors or presenting matters at stockholder meetings;

•removal of directors only for cause;

•allowing only our board of directors to fill vacancies on our board of directors or increase the size of our board of directors; and

•super-majority voting requirements to amend certain provisions of our certificate of incorporation.

We have elected in our certificate of incorporation not to be subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), a statutory provision that may have the effect of delaying, hindering or preventing some takeovers of our company. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an “interested stockholder,” unless (with certain exceptions) the business combination or the transaction in which the person became an “interested stockholder” is approved in a prescribed manner. Accordingly, we will not be subject to any anti-takeover effects of Section 203. Our certificate of incorporation contains provisions that have the same effect as Section 203, except that they generally provide that Taglich Private Equity LLC, Taglich Brothers, Inc. or any of their respective affiliates or associates, including any investment funds or portfolio companies managed by any of the foregoing, or any other person with whom any of the foregoing act as a group for the purpose of acquiring, voting or disposing of our shares, or any person that becomes an interested stockholder as a result of a transfer of 5% or more of our voting stock by the forgoing persons to such person, will be excluded from the “interested stockholder” definition in our certificate of incorporation and will therefore not be subject to the restrictions set forth therein that have the same effect as Section 203.

While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our board of directors, they could enable the board of directors to hinder or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 1C. CYBERSECURITY.

Our broader information security program aims to secure our systems, keep our business running, and protect our client partners, field talent, team members, and shareholders from vulnerabilities and threats by protecting against, detecting, and recovering from cybersecurity incidents. With oversight from our Board, the Audit Committee, and management, we have put proactive measures and systems in place in an effort to protect our information assets from unauthorized use or access. Our cybersecurity framework is based on the National Institute of Standards and Technology (“NIST”).

Management Oversight

Our CIO and key members of senior management are accountable for our cybersecurity and data privacy programs and is supported by the Board of the Directors (the “Board”). Our CIO has extensive information technology and program management experience and has served many years in our corporate information security organization. Under the guidance of the Board, the CIO manages day-to-day operations of the security and data privacy functions and proposes changes to our cybersecurity strategy, which is part of our overall information technology strategy. The CIO and the Board meet frequently to discuss cyber and data operations, privacy programs and risks.

Our IT department monitors and manages system infrastructure in an effort to protect us against threats. Our cybersecurity process considers risks from many sources including, but not limited to, alerts, threat intelligence sources, risk assessments, and vulnerability management. Our cybersecurity process includes a risk assessment procedure, a risk evaluation procedure, and a third-party partner to strengthen our cybersecurity controls. These controls are designed to block and/or provide alerts on suspicious activities. Our security team responds as appropriate to risks identified.

Board Oversight

The Board is actively engaged in the oversight of cybersecurity and data privacy. On a quarterly basis, the Board receives updates on (a) our progress on security improvement objectives, (b) relevant reported cybersecurity internal incidents and the global evolving risks, and (c) results of work performed by our third-party information security partner. We engage subject matter experts in conducting independent assessments of our cybersecurity program maturity, penetration tests, and other tests and assessments.

Third-Party Vendor Management

Many of our information technology systems and networks are cloud-based or managed by third parties, whose future performance and reliability we cannot control. The risk of a cyberattack or security breach on a third party carries the same risks to us as those associated with our internal systems. We seek to reduce these risks by performing significant vendor due diligence procedures prior to engaging with any third-party vendor who will have access to sensitive data. Additionally, we require annual audits of certain third parties’ information technology processes.

We face risks from cybersecurity threats that could have a material adverse effect on our business strategy. See “Risks Related to Our Information Technology, Cybersecurity and Data Protection” in Part 1, Item 1A. Risk Factors of this report for a discussion of these risks. With respect to our cybersecurity process, we are not aware of any material breach to date.

ITEM 2. PROPERTIES.

Our home office is located at 5850 Granite Parkway, Suite 730, Plano, Texas 75024, and our telephone number is 972-692-2400. We lease our home office, which is approximately 6,200 square feet of space. In the U.S., we operate across 46 states and D.C. We lease all of our offices, which are primarily located throughout in the U.S., through operating leases with terms that range from six months to five years. We also have month to month leases. We believe that our facilities are adequate for our current needs.

ITEM 3. LEGAL PROCEEDINGS.

From time to time we have been threatened with, or named as a defendant in, litigation, administrative claims and lawsuits. We carry insurance to mitigate potential liabilities associated therewith. The principal risks that we insure against, subject to and upon the terms and conditions of our various insurance policies, are workers’ compensation, general liability, automobile liability, property damage, professional liability, employment practices, crime and cyber risk, directors and officer liability, umbrella and excess, fiduciary liability, and fidelity losses. As of the date of this Annual Report on Form 10-K, management believes that the resolution of these matters will not have a material adverse effect on our consolidated financial statements.

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable.

PART II

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

Stock Performance Graph

The following graph compares, through December 31, 2023, the cumulative total return of the Company’s common stock, a peer group index of certain publicly traded workforce solutions companies, and the Russell 3000. The graph assumes the investment of $100 at the beginning of the period depicted in the chart and reinvestment of all dividends. Note that historic stock price performance is not necessarily indicative of future stock price performance. The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

Periodically, we review companies within our peer group and decide if we need to make any changes. The peer group index represents the cumulative total return of BGSF and similar corporations providing field talent or permanent employment workforce solutions. Our peer group includes: GEE Group, Mastech Digital, Resources Connection, Inc., and Staffing 360 Solutions.

Market Information and Holders

Our common stock commenced listing on the NYSE on November 14, 2019 under the symbol “BGSF,” was listed on the NYSE American from October 27, 2014 to November 13, 2019 under the symbol “BGSF” and was quoted on the OTC Bulletin Board, or OTCBB, under the symbol “BGSF” from April 30, 2014 to October 27, 2014. Prior to the quotation of our common stock on the OTCBB, there was no public market for our common stock. The table below contains the market range of high and low prices for our common stock.


Quarter Ended:	High		Low
December 31, 2023	$	9.49	$	9.37
October 1, 2023	$	9.62	$	9.45
July 2, 2023	$	9.59	$	9.50
April 2, 2023	$	11.06	$	10.44
January 1, 2023	$	15.49	$	10.30
September 25, 2022	$	13.33	$	11.88
June 26, 2022	$	13.62	$	11.65
March 27, 2022	$	15.10	$	12.80

As of February 7, 2024, our common stock closing price was $10.24 per share.

As of February 7, 2024, there were approximately 2,522 holders of record of our common stock.

Dividends

The board of directors has declared and we have paid the following cash dividends during the fiscal years ended 2023, 2022, and 2021:


Declared Date	Record Date	Distribution Date	Dividend per Share	Amount Paid
February 8, 2021	February 18, 2021	February 26, 2021	$0.10	$	1,033,597
May 6, 2021	May 17, 2021	May 24, 2021	$0.10	1,034,334
August 5, 2021	August 16, 2021	August 23, 2021	$0.12	1,248,183
November 3, 2021	November 15, 2021	November 22, 2021	$0.12	1,251,025
Total				$	4,567,139

February 3, 2022	February 14, 2022	February 22, 2022	$0.15	$	1,564,649
April 27, 2022	May 17, 2022	May 24, 2022	$0.15	1,572,332
August 3, 2022	August 15, 2022	August 22, 2022	$0.15	1,574,992
November 2, 2022	November 14, 2022	November 21, 2022	$0.15	1,577,709
Total				$	6,289,682

February 13, 2023	February 23, 2023	March 2, 2023	$0.15	$	1,618,485
May 4, 2023	May 15, 2023	May 22, 2023	$0.15	1,625,816
August 9, 2023	August 21, 2023	August 28, 2023	$0.15	1,629,676
November 8, 2023	November 20, 2023	November 28, 2023	$0.15	1,633,272
Total				$	6,507,249

On February 7, 2024, the Company’s board of directors declared a cash dividend in the amount of $0.15 per share of common stock to be paid on February 27, 2024 to all shareholders of record as of the close of business on February 20, 2024.

Our ability to pay dividends is restricted under the terms of our credit agreement and may be restricted under other agreements governing our outstanding indebtedness from time to time. Any future determination with respect to the payment of dividends, including whether to declare a dividend, and, if so, the amount thereof, will be at the discretion of our board of directors and will be dependent upon, among other things, our financial condition, results of operations, capital requirements, the terms of our then existing indebtedness, contractual restrictions, future prospects, general economic conditions and other factors considered relevant by our board of directors.

Equity Compensation Plans

The following equity compensation plan information is provided as of December 31, 2023:


Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity Compensation Plans Approved by Security Holders
2013 Long-Term Incentive Plan	998,034	$15.03	218,953
2020 Employee Stock Purchase Plan	—	$0.00	93,245
Total	998,034	$15.03	312,198

A description of the equity compensation plan is incorporated by reference to Note 16 in the Notes to Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Recent Sales of Unregistered Securities

In December 2022, we issued 254,455 shares of common stock in a private placement for a value of $3.3 million, and a convertible two-year promissory note of $4.4 million with an annual interest rate of 6% that is convertible into common shares at any time after one year at a conversion price of $17.12 per share at the closing of the Horn Solutions acquisition.

The foregoing issuance of securities was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Share Repurchases

During 2023, we repurchased 2,085 shares of the Company’s common stock at a cost of $19,019 and a weighted average price of $9.69 upon the vesting of restricted stock to satisfy statutory minimum tax withholding requirements. During 2022, there were no stock repurchases.

Item 6. Selected Financial Data

The following tables set forth our summary consolidated historical financial data from continuing operations. You should read the information set forth below in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated historical financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the fiscal years ended 2023, 2022, and 2021 and the balance sheet data as of December 31, 2023 and January 1, 2023 set forth below are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the fiscal years ended 2020 and 2019 and the balance sheet data as of December 26, 2021, December 27, 2020, and December 29, 2019 set forth below were derived from our audited financial statements not included in this Annual Report on Form 10-K.


	Fiscal Years Ended
	December 31, 2023		January 1, 2023		December 26, 2021		December 27, 2020		December 29, 2019
	(dollars in thousands, except per share data)
Statement of Operations Data:
Revenues	$	313,167	$	298,422	$	239,027	$	207,125	$	219,764
Gross profit	$	111,784	$	103,548	$	80,941	$	66,040	$	69,826
Selling, general and administrative expenses	$	88,650	$	83,211	$	65,116	$	55,244	$	50,222
Gain on contingent consideration	$	—	$	—	$	(2,403)	$	(76)	$	—
Impairment losses	$	22,545	$	—	$	—	$	7,240	$	—
Depreciation and amortization	$	7,774	$	4,054	$	3,698	$	4,861	$	4,718
Operating (loss) income	$	(7,185)	$	16,283	$	14,530	$	(1,229)	$	14,886
Loss on extinguishment of debt	$	—	$	—	$	—	$	—	$	541
Interest expense, net	$	(5,976)	$	(1,363)	$	(1,433)	$	1,584	$	1,569
(Loss) income from continuing operations before income taxes	$	(13,161)	$	14,920	$	13,097	$	(2,813)	$	12,776
Income tax benefit (expense) from continuing operations	$	2,938	$	(3,659)	$	(2,639)	$	741	$	3,135
(Loss) income from continuing operations	$	(10,223)	$	11,261	$	10,458	$	(2,072)	$	9,641
Income from discontinued operations, net of tax	$	—	$	14,100	$	3,651	$	3,513	$	3,606
Net (loss) income	$	(10,223)	$	25,361	$	14,109	$	1,441	$	13,247

Net (loss) income per share - basic:
Continuing operations	$	(0.95)	$	1.08	$	1.01	$	(0.20)	$	0.94
Income from discontinued operations:
Income	—		0.12		0.44		0.46		0.46
Gain on Sale	—		1.69		—		—		—
Income tax expense	—		(0.46)		(0.09)		(0.12)		(0.11)
Net (loss) income per share – basic	$	(0.95)	$	2.43	$	1.36	$	0.14	$	1.29

Net (loss) income per share - diluted:
Continuing operations	$	(0.95)	$	1.07	$	1.00	$	(0.20)	$	0.93
Income from discontinued operations:
Income	—		0.12		0.44		0.46		0.46
Gain on Sale	—		1.69		—		—		—
Income tax expense	—		(0.46)		(0.09)		(0.12)		(0.11)
Net (loss) income per share – diluted	$	(0.95)	$	2.42	$	1.35	$	0.14	$	1.28

Weighted average shares outstanding – basic	10,766		10,427		10,367		10,312		10,239
Weighted average shares outstanding – diluted	10,766		10,473		10,417		10,338		10,351


	Fiscal Years Ended
	December 31, 2023		January 1, 2023		December 26, 2021		December 27, 2020		December 29, 2019
	(dollars in thousands, except per share data)
Other Financial Data:
Adjusted EBITDA from continuing operations(1)	$	25,137	$	21,693	$	14,969	$	12,197	$	21,609
Same Day EBITDA from continuing operations(1)	$	25,137	$	21,283	$	14,969	$	12,197	$	21,609
Cash dividends declared per common share	$	0.60	$	0.60	$	0.44	$	0.50	$	1.20

Balance Sheet Data from Continuing Operations:
Working capital(2)	$	(18,144)	$	47,955	$	25,851	$	17,960	$	20,532
Total assets	$	178,517	$	194,673	$	148,294	$	130,278	$	100,378
Total outstanding borrowings, net	$	63,114	$	66,671	$	39,450	$	34,634	$	27,494
Total other long-term liabilities	$	7,926	$	3,059	$	7,240	$	14,224	$	6,068
Stockholders’ equity	$	85,536	$	100,736	$	76,592	$	65,458	$	68,457

(1)We present Adjusted EBITDA and Same Day EBITDA (defined below), measure that are not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”), in this Annual Report on Form 10-K to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA and Same Day EBITDA are useful performance measures and are used by us to facilitate comparisons of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under accounting principles generally accepted in the United States of America (“GAAP”) can provide alone. Our board and management also use Adjusted EBITDA and Same Day EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for our management. In addition, the financial covenants in our credit agreement are based on EBITDA as defined in the credit agreement.

(2)The 2023 working capital amount includes the movement of the balances from long-term to current liabilities related to the amended credit agreement with BMO Harris Bank, N.A. (“BMO”), which had a maturity date of July 16, 2024.

We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, impairment losses, transaction fees, and certain non-cash expenses such as share-based compensation expense. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of property and intangible assets. We also believe that investors, analysts, and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net income for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

We define “Same Day EBITDA” as Adjusted EBITDA on a fifty-two week fiscal year basis. Omitting the additional revenue days in a fifty-three week fiscal year ended provides a financial measure that facilitates comparisons of our results of operations with those of our fifty-two week fiscal year and comparisons of our results with those companies having same number of days. Same Day EBITDA should not be considered as an alternative to net income for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA or Same Day EBITDA differently than we do, limiting their usefulness as comparative measures.

The use of Adjusted EBITDA and Same Day EBITDA have limitations as analytical tools, and you should not consider these performance measure in isolation from, or as an alternative to, GAAP measures such as net income. Adjusted EBITDA and Same Day EBITDA are not measures of liquidity under GAAP or otherwise, and are not alternatives to cash flow from continuing operating activities. Our presentation of Adjusted EBITDA and Same Day EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA and Same Day EBITDA include: (i) they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) they do not reflect changes in, or cash requirements for, our working capital needs; (iii) they do not reflect income tax payments we may be required to make;

and (iv) they do not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness.

To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in this Annual Report on Form 10-K and the reconciliation to Adjusted EBITDA and Same Day EBITDA from net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net income to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect ongoing operating performance.


		Fiscal Years Ended
		December 31, 2023		January 1, 2023		December 26, 2021		December 27, 2020		December 29, 2019
		(dollars in thousands)
(Loss) income from continuing operations		$	(10,223)	$	11,261	$	10,458	$	(2,072)	$	9,641
Income tax (benefit) expense from continuing operations(1)		(2,938)		3,659		2,639		(741)		3,135
Interest expense, net		5,976		1,363		1,433		1,584		1,569
Loss on extinguishment of debt		—		—		—		—		541
	Operating (loss) income	(7,185)		16,283		14,530		(1,229)		14,886
Depreciation and amortization		7,774		4,054		3,698		4,861		4,718
Gain on contingent consideration		—		—		(2,403)		(76)		—
Impairment losses(2)		22,545		—		—		7,240		—
CARES Act credit		—		—		(2,084)		—		—
Share-based compensation		1,029		1,085		1,058		786		850
Transaction fees		974		271		170		615		434
	Adjusted EBITDA from continuing operations	25,137		21,693		14,969		12,197		20,888
Same day adjustment		—		(410)		—		—		—
	Same day EBITDA from continuing operations	$	25,137	$	21,283	$	14,969	$	12,197	$	20,888

(1)2020 Included a $3.3 million re-measurement of the net deferred tax assets as a result of the TCJA.

(2)In the Professional segment, we recognized a $3.7 million trade name impairment loss and a $3.5 million client partner list impairment loss during the thirteen week period ended June 28, 2020. We recognized a $22.5 million trade name impairment loss during the thirteen week period ended April 2, 2023.

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

The following discussion and analysis of our financial condition and results of operations from continuing operations, our expectations regarding the future performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. See “Forward-Looking Statements” in this Annual Report on Form 10-K. These forward-looking statements are subject to risks, uncertainties and other factors including those described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Our actual results of operations may differ materially from those contained in any forward-looking statements. You should read the following discussion together with our audited consolidated financial statements and related notes thereto and other financial information included in this Annual Report on Form 10-K. Financial information provided is based on the results of our continuing operations. Please refer to “Note 4 — Discontinued Operations” of our audited consolidated financial statements for information regarding our discontinued operations.

Our historical financial information may not be indicative of our future performance.

Company Overview

We provide workforce solutions to our client partners in a variety of industries through our various divisions in IT, Finance & Accounting, Managed Solutions, and Property Management (apartment communities and commercial buildings) and have completed a series of acquisitions including the acquisition of BG Personnel, LP and B G Staff Services Inc. in June 2010, substantially all of the assets of JNA Staffing, Inc. in December 2010, Extrinsic, LLC in December 2011, American Partners, Inc. in December 2012, InStaff in June 2013, D&W in March 2015, VTS in October 2015, Zycron in April 2017, Smart in September 2017, and LJK in December 2019, 100% of the equity of EdgeRock in February 2020, Momentum Solutionz in February 2021, Horn Solutions in 2022, and Arroyo Consulting in 2023. We have continuing operations in two industry segments Property Management and Professional, and had discontinued operations in the Light Industrial segment. We primarily operate within the United States of America.

On March 21, 2022, we sold substantially all of the assets and certain liabilities of InStaff to Sentech Engineering Services, Inc. The Light Industrial segment provided field talent primarily to manufacturing, distribution, logistics, and call center client partners needing a flexible workforce. The InStaff financial results for periods prior to the sale have been reflected in our Consolidated Statements of Operations and Comprehensive (Loss) Income and Consolidated Statements of Cash Flows as discontinued operations. See “Note 4 — Discontinued Operations” of our audited consolidated financial statements for information regarding our discontinued operations.

The Property Management segment provides office and maintenance talent in 38 states and D.C., to property management companies responsible for the apartment communities’ and commercial buildings’ day-to-day operations.

The Professional segment provides specialized talent and business consultants for information technology (“IT”), managed services, finance, accounting, legal and human resource. The segment operates across the U.S. in three divisions, IT, Managed Solutions, and Finance & Accounting, with the IT division providing additional nearshore and offshore solutions in Colombia and India.

Results of Operations

The following tables summarize key components of our results from continuing operations for the periods indicated, both in dollars and as a percentage of revenues, and have been derived from our consolidated financial statements.


		Fiscal Year Ended
		December 31, 2023			January 1, 2023			December 26, 2021
		(dollars in thousands)
Revenues		$	313,167		$	298,422		$	239,027
Cost of services		201,383			194,874			158,086
	Gross Profit	111,784			103,548			80,941
Selling, general and administrative expenses		88,650			83,211			65,116
Gain on contingent consideration		—			—			(2,403)
Impairment losses		22,545			—			—
Depreciation and amortization		7,774			4,054			3,698
	Operating (loss) income	(7,185)			16,283			14,530

Interest expense, net		5,976			1,363			1,433
	(Loss) income from continuing operations before income taxes	(13,161)			14,920			13,097
Income tax benefit (expense) from continuing operations		2,938			(3,659)			(2,639)
	(Loss) income from continuing operations	(10,223)			11,261			10,458
Income from discontinued operations:
	Income	—			1,235			4,570
	Gain on sale	—			17,675			—
	Income tax expense	—			(4,810)			(919)
	Net (loss) income	$	(10,223)		$	25,361		$	14,109

		Fiscal Year Ended
		December 31, 2023			January 1, 2023			December 26, 2021
Revenues		100.0		%	100.0		%	100.0		%
Cost of services		64.3			65.3			66.1
	Gross Profit	35.7			34.7			33.9
Selling, general and administrative expenses		28.3			27.8			27.2
Gain on contingent consideration		—			—			(1.0)
Impairment losses		7.2			—			—
Depreciation and amortization		2.5			1.4			1.5
	Operating (loss) income	(2.3)			5.5			6.1

Interest expense, net		1.9			0.5			0.6
	(Loss) income from continuing operations before income taxes	(4.2)			5.0			5.5
Income tax benefit (expense) from continuing operations		0.9			(1.2)			(1.1)
	(Loss) income from continuing operations	(3.3)		%	3.8		%	4.4		%

Fifty-two Week Fiscal Year Ended December 31, 2023 (Fiscal 2023) Compared with Fifty-three Week Fiscal Year Ended January 1, 2023 (Fiscal 2022)

Revenues:


	Fiscal Year Ended
	December 31, 2023				January 1, 2023
	(dollars in thousands)
Revenues by Segment:
Property Management	$	125,077	39.9	%	$	121,093	40.6	%
Professional	188,090		60.1	%	177,329		59.4	%
Total Revenues	$	313,167	100.0	%	$	298,422	100.0	%

Property Management Revenues: Property Management revenues increased approximately $4.0 million (3.3%), primarily due to an 8.5% increase in average bill rate.

Professional Revenues: Professional revenues increased approximately $10.8 million (6.1%). The 2023 Arroyo Consulting acquisition contributed $14.8 million of new revenues. The Horn Solutions acquisition, which was integrated with the organic business, added revenue that was not enough to offset the decline in the existing professional business. Horn Solutions and the existing professional business declined $4.1 million (2.3%), primarily due to fewer hours billed and lower permanent placement revenue.

Gross Profit:

Gross profit represents revenues from workforce solutions less cost of services expenses, which consist of payroll, payroll taxes, payroll-related insurance, field talent costs, and reimbursable costs.


	Fiscal Year Ended
	December 31, 2023				January 1, 2023
	(dollars in thousands)
Gross Profit by Segment:
Property Management	$	49,785	44.5	%	$	47,695	46.1	%
Professional	61,999		55.5	%	55,853		53.9	%
Total Gross Profit	$	111,784	100.0	%	$	103,548	100.0	%


	Fiscal Year Ended
	December 31, 2023		January 1, 2023
Gross Profit Percentage by Segment:
Property Management	39.8	%	39.4	%
Professional	33.0	%	31.5	%
Company Gross Profit Percentage	35.7	%	34.7	%

Total gross profit increased approximately $8.2 million (8.0%). As a percentage of revenue, gross profit has increased to 35.7% from 34.7%, with both segments contributing to the increase.

Property Management Gross Profit: Property Management gross profit increased approximately $2.1 million (4.4%), consistent with a 3.3% increase in revenues, partially offset by lower permanent placement revenue, which has no cost of services.

Professional Gross Profit: Professional gross profit increased approximately $6.1 million (11.0%). The Arroyo Consulting acquisition contributed $5.1 million in gross profit. The Horn Solutions acquisition, which was integrated with the organic business, added growth to offset the decline experienced in the existing professional business.

Selling, General and Administrative Expenses: Selling, general and administrative (“SGA”) expenses increased $5.4 million (6.5%) versus prior year. The overall increase slightly outpaced revenue growth adding 40 bps to total SGA expense as a percent of revenue. Acquisition transaction fees increased $0.7 million over the prior year.


	Fiscal Year Ended
	December 31, 2023				January 1, 2023
	Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change
	(dollars in thousands)
Compensation and related	$	68,536	21.9	%	$	64,782	21.7	%	$	3,754	5.8	%
Advertising and recruitment	2,111		0.7	%	1,987		0.7	%	124		6.2	%
Occupancy and office operations	3,310		1.1	%	2,773		0.9	%	537		19.4	%
Travel, meals and entertainment	1,349		0.4	%	1,044		0.3	%	305		29.2	%
Software	5,339		1.7	%	5,751		1.9	%	(412)		(7.2)	%
Liability insurance	1,140		0.4	%	991		0.3	%	149		15.0	%
Professional fees	1,413		0.5	%	1,647		0.6	%	(234)		(14.2)	%
Public company related costs	851		0.3	%	734		0.2	%	117		15.9	%
Bad debt	798		0.3	%	315		0.1	%	483		153.3	%
Share-based compensation	1,029		0.3	%	1,085		0.4	%	(56)		(5.2)	%
Transaction fees	974		0.3	%	271		0.1	%	703		259.4	%
Workers’ compensation loss retention return	(491)		(0.2)	%	(117)		—	%	(374)		319.7	%

Other	2,291		0.7	%	1,948		0.7	%	343		17.6	%
Total	$	88,650	28.3	%	$	83,211	27.9	%	$	5,439	6.5	%

Impairment losses: In Fiscal 2023, managements’s plan to eliminate the use of various trade names was approved by the Board of Directors. The decision to rebrand as BGSF created a $22.5 million write-off in trade names.

Depreciation and Amortization: Depreciation and amortization charges increased $3.7 million (91.8%). The increase in deprecation and amortization is primarily due to the amortization of intangible assets related to the 2022 Horn Solutions acquisition and the 2023 Arroyo Consulting acquisition.

Interest Expense, net: Interest expense, net increased $4.6 million primarily due to the increased debt balances related to the 2022 Horn Solutions acquisition, the 2023 Arroyo Consulting acquisition, and higher interest rates.

Income Taxes: We recorded a tax benefit of approximately $2.9 million primarily due impairment losses on the trade names in the first quarter versus a tax expense of $3.7 million in 2022.

Non-GAAP Same Day Revenues: Same Day Revenues are defined as a fifty-three week fiscal year ended January 1, 2023 (Fiscal 2022) revenues less five revenue days. The Fiscal 2022 revenues of $298.4 million would be less $5.9 million for five revenue days resulting in Same Day Revenues of $292.5 million. Same Day Revenues increased $20.7 million (7.1%) to $313.2 million in Fiscal 2023. Same Day Revenues and GAAP revenues were equal for Fiscal 2023.

Non-GAAP Same Day Gross Profit: Same Day Gross Profit is defined as a fifty-three week fiscal year ended January 1, 2023 (Fiscal 2022) gross profit less five gross profit days. The Fiscal 2022 gross profit of $103.5 million would be less $2.1 million for five gross profit days resulting in Same Day Gross Profit of $101.5 million. Same Day Gross Profit increased $10.3 million (10.2%) to $111.8 million in Fiscal 2023. Same Day Gross Profit and GAAP gross profit were equal for Fiscal 2023.

Fifty-three Week Fiscal Year Ended January 1, 2023 (Fiscal 2022) Compared with Fifty-two Week Fiscal Year Ended December 26, 2021 (Fiscal 2021)

Revenues:


	Fiscal Year Ended
	January 1, 2023				December 26, 2021
	(dollars in thousands)
Revenues by Segment:
Property Management	$	121,093	40.6	%	$	92,018	38.5	%
Professional	177,329		59.4	%	147,009		61.5	%
Total Revenues	$	298,422	100.0	%	$	239,027	100.0	%

Property Management Revenues: Property Management revenues increased approximately $29.1 million (31.6%). The increase was primarily due to an 11.0% increase in average bill rate.

Professional Revenues: Professional revenues increased approximately $30.3 million (20.6%), primarily due to growth in the IT division of $27.6 million, the 2022 Horn Solutions acquisition which contributed $1.4 million of new revenues, and an increase of 11.8% in the average bill rate.

Gross Profit:


	Fiscal Year Ended
	January 1, 2023				December 26, 2021
	(dollars in thousands)
Gross Profit by Segment:
Property Management	$	47,695	46.1	%	$	34,969	43.2	%
Professional	55,853		53.9	%	45,972		56.8	%
Total Gross Profit	$	103,548	100.0	%	$	80,941	100.0	%


	Fiscal Year Ended
	January 1, 2023		December 26, 2021
Gross Profit Percentage by Segment:
Property Management	39.4	%	38.0	%
Professional	31.5	%	31.3	%
Company Gross Profit Percentage	34.7	%	33.9	%

Overall, our gross profit increased approximately $22.6 million (27.9%). As a percentage of revenue, gross profit has increased to 34.7% from 33.9%, primarily due to higher gross profits across all our segments.

Property Management Gross Profit: Property Management gross profit increased approximately $12.7 million (36.4%) consistent with the increase in revenue.

Professional Gross Profit: Professional gross profit increased approximately $9.9 million (21.5%) consistent with an increase in revenue, and an increase of $0.6 million from the 2022 Horn Solutions acquisition.

Selling, General and Administrative Expenses: Selling, General and Administrative expenses increased $18.1 million (27.8%). Expenses in 2021 benefited from the CARES Act credit. Adjusting for the impact of the credit, total SGA expenses as a percentage of revenue improved by 20 basis points.


	Fiscal Year Ended
	January 1, 2023				December 26, 2021
	Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change
	(dollars in thousands)
Compensation and related	$	64,782	21.7	%	$	53,332	22.5	%	$	11,450	21.5	%
Advertising and recruitment	1,987		0.7	%	1,379		0.6	%	608		44.1	%
Occupancy and office operations	2,773		0.9	%	3,128		1.3	%	(355)		(11.3)	%
Travel, meals and entertainment	1,044		0.3	%	389		0.2	%	655		168.4	%
Software	5,751		1.9	%	2,538		1.2	%	3,213		126.6	%
Liability insurance	991		0.3	%	740		0.3	%	251		33.9	%
Professional fees	1,647		0.6	%	1,111		0.8	%	536		48.2	%
Public company related costs	734		0.2	%	727		0.3	%	7		1.0	%
Bad debt	315		0.1	%	145		0.1	%	170		117.2	%
Share-based compensation	1,085		0.4	%	1,058		0.4	%	27		2.6	%
Transaction fees	271		0.1	%	170		0.1	%	101		59.4	%
Workers’ compensation loss retention return	(117)		—	%	(348)		(0.1)	%	231		(66.4)	%
CARES Act credit	—		—	%	(2,083)		(0.9)	%	2,083		—	%
Other	1,948		0.7	%	2,830		0.5	%	(882)		(31.2)	%
Total	$	83,211	27.9	%	$	65,116	27.2	%	$	18,095	27.8	%

Gain on contingent consideration: There were no contingent gains in Fiscal 2022. As a result of the certain business developments in Fiscal 2021, the Company recognized a $2.4 million gain on contingent consideration related to the 2019 LJK acquisition.

Depreciation and Amortization: Depreciation and amortization charges increased $0.4 million (9.6%) primarily due to increases from the information technology improvement project and the Horn Solutions acquisition, which were offset by lower amortization related to the 2020 Edgerock and the 2019 LJK acquisitions.

Interest Expense, net: Interest expense, net decreased $0.1 million (4.9%) primarily due to the pay down of the balance on the Term Loan in March 2022, which was partially offset by the New Term Loan starting in December 2022 and the higher average balance on the Revolving Facility.

Income Taxes: Income tax expense increased $1.0 million primarily due to higher pre-tax 2022 income and a higher effective tax rate in Fiscal 2022, offset by a higher Work Opportunity Tax Credit in 2021.

Liquidity and Capital Resources

Our working capital requirements are primarily driven by field talent payments, tax payments and client partner accounts receivable receipts. Since receipts from client partners lag payments to field talent, working capital requirements increase substantially in periods of growth.

Our primary sources of liquidity are cash generated from operations and borrowings under our amended credit agreement with BMO, that provides for a revolving credit facility maturing March 12, 2028 (the “Revolving Facility”). Our primary uses of cash are payments to field talent, team members, related payroll liabilities, operating expenses, capital expenditures, cash interest, cash taxes, dividends and contingent consideration and debt payments. We believe that the cash generated from operations, together with the borrowing availability under our Revolving Facility, will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new markets throughout the next year. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and

other capital resources are insufficient to fund our liquidity needs, we may be forced to obtain additional debt or equity capital or refinance all or a portion of our debt.

While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional growth opportunities within the next year that could require additional debt or equity financing. If we are unable to secure additional financing at favorable terms in order to pursue such additional growth opportunities, our ability to pursue such opportunities could be materially adversely affected.

A summary of our working capital, operating, investing and financing activities are shown in the following table:


		Fiscal Year Ended
		December 31, 2023		January 1, 2023		December 26, 2021
		(dollars in thousands)
Working capital from continuing operations(1)		$	(18,144)	$	47,955	$	25,851

Net cash provided by (used in) continuing operations:
	Operating activities	$	20,386	$	(3,300)	$	1,358
	Investing activities	(9,514)		(8,898)		(6,990)
	Financing activities	(10,872)		15,934		473
Net change in cash and cash equivalents discontinued operations		—		(3,848)		5,271
Net change in cash and cash equivalents		$	—	$	(112)	$	112

(1)The 2023 working capital amount includes the movement of the balances from long-term to current liabilities related to the amended credit agreement with BMO Harris Bank, N.A. (“BMO”) maturing July 16, 2024.

Operating Activities

Cash provided by operating activities consists of net (loss) income adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, interest expense, impairment losses, and the effect of working capital changes. The primary drivers of cash inflows and outflows are accounts receivable, accrued payroll and expenses, and other current liabilities.

During Fiscal 2023, net cash provided by continuing operating activities was $20.4 million, an increase of $23.7 million compared with $3.3 million net cash used in continuing operating activities for Fiscal 2022. This increase is primarily attributable to payments on accounts receivable, payments on accrued payroll and expenses, and payments of deferred employer FICA for the CARES Act in other current liabilities in Fiscal 2022.

During Fiscal 2022, net cash used in continuing operating activities was $3.3 million, a decrease of $4.7 million compared with $1.4 million net cash provided by continuing operating activities for Fiscal 2021. This decrease is primarily attributable to field talent and team member compensation disbursements including bonuses, commissions, and related taxes for services rendered in accrued payroll and expenses, an increase in accounts receivable, and payments of deferred employer FICA for the CARES Act in other current liabilities.

During Fiscal 2021, net cash provided by continuing operating activities was $1.4 million, a decrease of $18.3 million compared with $19.7 million for Fiscal 2020. This decrease is primarily attributable to increased accounts receivable and payments on accrued payroll and expenses, which were partially offset by an increase in the accrual in other long-term liabilities from deferred employer FICA for the CARES Act in Fiscal 2020.

Investing Activities

Cash used in investing activities consists primarily of cash paid for businesses acquired, cash received for businesses sold, and capital expenditures.

In Fiscal 2023, we paid $6.8 million in connection with the Arroyo Consulting acquisition, funded a working capital payment of $0.1 million in connection with the Horn Solutions acquisition, and made capital expenditures of $2.6 million mainly related to continued information technology improvements and for software and computer equipment purchased in the ordinary course of business.

In Fiscal 2022, we received $30.7 million in connection with the sale of InStaff, we paid $33.9 million in connection with the Horn Solutions acquisition, and we made capital expenditures of $5.7 million mainly related to the the information technology improvement project and for software and computer equipment purchased in the ordinary course of business.

In Fiscal 2021, we paid $3.8 million in connection with the Momentum acquisition and we made capital expenditures of $3.2 million mainly related to the information technology improvement project and for software and computer equipment purchased in the ordinary course of business.

Financing Activities

Cash flows from financing activities consisted principally of borrowings and payments under our credit agreement, payment of dividends, and contingent consideration paid.

For Fiscal 2023, we disbursed $6.5 million in cash dividends on our common stock, we paid down $6.0 million on the Term Loan, we paid $1.1 million of contingent consideration related to the Momentum acquisition, and borrowed $2.3 million on our Revolving Facility for increased working capital needs.

For Fiscal 2022, we received $40.0 million on the issuance of the New Term Loan, we paid down $26.9 million on the Term Loan, as discussed below, we disbursed $6.3 million in cash dividends on our common stock, we paid $1.1 million of contingent consideration related to the Momentum acquisition, and borrowed $9.8 million on our Revolving Facility for increased working capital needs.

For Fiscal 2021, we borrowed $6.8 million on our Revolving Facility for increased working capital needs and to fund the Momentum acquisition, disbursed $4.6 million in cash dividends on our common stock, and paid down $2.1 million on the Term Loan, as defined below.

Credit Agreements

On July 16, 2019, we entered into a Credit Agreement, as amended (the “Credit Agreement”), maturing July 16, 2024, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender. The Credit Agreement provides for the Revolving Facility permitting us to borrow funds from time to time in an aggregate amount up to $35.0 million. The Credit Agreement also provided for a term loan commitment (the “Term Loan”) permitting us to borrow funds from time to time in an aggregate amount not to exceed $30.0 million with principal payable quarterly, based on an annual percentage of the original principal amount as defined in the Credit Agreement, all of which has been funded and repaid. We also had the option to request an increase in the aggregate Term Loan by $40 million, which was done in connection with the Horn Solutions acquisition. Our obligations under the Second Credit Amendment are secured by a first priority security interest in substantially all our tangible and intangible property. The Credit Agreement bore interest either at the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin through August 17, 2022 (as such terms are defined in the Credit Agreement). We pay an unused commitment fee on the daily average unused amount of Revolving Facility.

On February 8, 2021, the Company borrowed $3.8 million on the Revolving Facility in conjunction with the closing of the Momentum acquisition.

On March 21, 2022, the Company paid down the balance on the existing Term Loan and a portion of the Revolving Facility using the proceeds from the sale of InStaff (See “Note 4 - Discontinued Operations”).

On August 18, 2022, we entered into an amendment to the Credit Agreement with BMO, which changed the interest rate component from LIBOR to the Secured Overnight Financing Rate (“SOFR”), plus the Applicable Margin (as such terms are defined in the amended credit agreement).

In connection with the Horn Solutions acquisition on December 12, 2022 (See “Note 3 - Acquisitions”), we exercised the option to borrow $40 million, as noted above, pursuant to a second amendment to the Credit Agreement (“Second Credit Amendment”). The Second Credit Amendment requires 2.5% of the original principal balance of the New Term Loan payable on the last business day of each quarter, beginning on March 31, 2023. We are subject to a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio (as such terms are defined in the amended Second Credit Amendment).

On April 24, 2023, in connection with the acquisition of Arroyo Consulting, we entered into a Third Amendment to the Credit Agreement (“Third Credit Amendment”) with BMO. The Third Credit Amendment revised language to permit an acquisition of a foreign entity under certain circumstances and modified the terms of permitted distributions and guarantors

On May 19, 2023, we entered into a Fourth Amendment to the Credit Agreement (“Fourth Credit Amendment”) and increased the Revolving Facility by $6.0 million to an aggregate amount up to $41.0 million. We were in compliance with the customary affirmative and negative covenants as of December 31, 2023.

The indebtedness under the Credit Agreement had a maturity date of July 16, 2024 and has therefore been classified within current liabilities on the Company's consolidated balance sheets as of December 31, 2023. On March 12, 2024, the Credit Agreement was amended and restated through the Company’s entry into an Amended and Restated Credit Agreement with certain lenders, BMO Bank, N.A., as administrative agent, letter of credit Issuer, and swing line lender, and BMO Capital Markets Corp., as sole lead arranger and sole book runner. The Amended and Restated Credit Agreement has a maturity date of March 12, 2028. The Amended and Restated Credit Agreement provides for a revolving credit facility permitting us to borrow funds from time to time in an aggregate amount up to $40 million. Term loans with an outstanding principal balance of $34 million were outstanding under the Credit Agreement remain outstanding under the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement further provides for a delayed draw term loan commitment of $4.3 million. The Company is required to repay the term loans in quarterly principal installments in an amount equal to 2.5% of the aggregate principal balance thereof. The Amended and Restated Credit Agreement provides for interest either at the Base Rate plus the Applicable Margin, or the Adjusted Term SOFR plus the Applicable Margin (in each case, as such terms are defined in the Amended and Restated Credit Agreement). The Amended and Restated Credit Agreement also provides for letter of credit fees and commitment fees as further described therein. The Company’s obligations under the Amended and Restated Credit Amendment are secured by a first priority security interest in substantially all of the Company’s and its subsidiaries’ tangible and intangible property. The Amended and Restated Credit Agreement provides for a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio (as such terms are defined in the Amended and Restated Credit Amendment), and also provides for, among other items, representations and warranties, affirmative and negative covenants, as described therein.

Contractual Obligations

The following table summarizes our cash contractual obligations as of December 31, 2023.


	Payments due by period
	Total		Less than 1 year		1–3 years		3–5 years		More than 5 years
	(dollars in thousands)
Long-term debt obligations	$	58,874	$	58,874	$	—	$	—	$	—
Contingent consideration	8,500		4,250		4,250		—		—
Convertible note	4,368		4,368		—		—		—
Operating lease obligations	6,546		2,306		2,802		1,364		74
Contractual cash obligations	$	78,288	$	69,798	$	7,052	$	1,364	$	74

Off-Balance Sheet Arrangements

Letter of Credit

In March 2020, in conjunction with the 2020 EdgeRock acquisition, we entered into a standby letter of credit arrangement, which expires December 31, 2024, for purposes of protecting a lessor against default on lease payments. As of December 31, 2023, we had a maximum financial exposure from this standby letter of credit totaling $0.1 million, all of which is considered usage against our Revolving Facility.

Critical Accounting Policies and Estimates

We have identified the policies listed below as critical to our business and the understanding of our results of operations. For a detailed discussion of the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.

Revenue Recognition

We derive our revenues from continuing operations in our Property Management and Professional segments. We provide workforce solutions, placement services, and managed services. Revenues are recognized when promised workforce solutions are delivered to client partners, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We recognize revenue through the following types of services: workforce solutions, contingent placements, retained search placements, and managed services.

Intangible Assets

We hold intangible assets with indefinite and finite lives. Intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized. We capitalize purchased software and internal payroll costs directly incurred in the modification of software for internal use. Software maintenance and training costs are expensed in the period incurred.

Goodwill

Goodwill represents the difference between the enterprise value/cash paid less the fair value of all recognized net asset fair values including identifiable intangible asset values in a business combination. We review goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

Income Taxes

The current provision for income taxes represents estimated amounts payable or refundable on tax returns filed or to be filed for the year. We recognizes any penalties when necessary as part of selling, general and administrative expenses. 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 net as noncurrent in the consolidated balance sheets. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. When appropriate, we will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized. We follow the guidance of Accounting Standards Codification (“ASC”) Topic 740, Accounting for Uncertainty in Income Taxes.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements and their potential effect on our results of operations and financial condition, refer to Note 2 in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to certain market risks from transactions we enter into in the normal course of business. Our primary market risk exposure relates to interest rate risk.

Interest Rates

A portion of our Revolving Facility and New Term Loan are priced at variable interest rates. Accordingly, future interest rate increases could potentially put us at risk for an adverse impact on future earnings and cash flows.

Item 8. Financial Statements and Supplementary Data.


			Page

Audited Consolidated Financial Statements of BGSF, Inc.

Report of Independent Registered Public Accounting Firm - Whitley Penn LLP (PCAOB ID 726)			40

Consolidated Balance Sheets as of December 31, 2023 and January 1, 2023			42

Consolidated Statements of Operations and Comprehensive (Loss) Income for each of the three fiscal years ended December 31, 2023			43

Consolidated Statements of Changes in Stockholders’ Equity for each of the three fiscal years ended December 31, 2023			44

Consolidated Statements of Cash Flows for each of the three fiscal years ended December 31, 2023			46

Notes to Consolidated Financial Statements			48

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of BGSF, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BGSF, Inc., and its subsidiaries (the “Company”) as of December 31, 2023 and January 1, 2023, and the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and January 1, 2023, and the results of their operations and cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2024 expressed an unqualified opinion.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the 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. 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 included 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 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.

Acquisition of Arroyo Consulting, LLC – Fair Value of Intangible Assets

Description of the Matter

As discussed in Note 3 to the consolidated financial statements, the Company acquired substantially all of the assets and assumed certain liabilities of Arroyo Consulting, LLC (“Arroyo”) for a purchase price of up to $8.7 million in cash and contingent consideration of up to $8.5 million. The acquisition of Arroyo resulted in a total of $13.9 million of intangible assets, which are comprised primarily of client partner lists. The determination of fair value for the client partner lists required management to make estimates of discounted future cash flows and included their subjective assumptions of the appropriate discount rate, the growth of revenue, and rate of attrition for the related customers. The contingent consideration of up to $8.5 million is based on the forecasted performance of the acquired business for the two years following the date of the acquisition.

We identified the fair value of the intangible assets acquired and contingent consideration liability in the Arroyo business combination to be a critical audit matter due to the significant judgments made by management to estimate their fair values. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of discount and customer attrition rates, as well as forecasts of future revenues and cash flows.

How We Addressed the Matter in Our Audit

Our audit procedures related to the discount rates, and forecasts of future revenues and cash flows used by management to estimate the fair value of both the intangible assets acquired and contingent consideration liability in the Arroyo business combination included the following, among others:

•We tested the effectiveness of controls over management’s Arroyo purchase price allocation, including those over the determination of the fair value of intangible assets, such as controls related to management’s selection of discount rates, client attrition rate, and forecasts of future revenues and cash flows.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (i) valuation methodology, (ii) discount rates, (iii) client attrition rate, and (iv) future revenue and growth rates, including testing the source information underlying the determination of the discount rates, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

•We evaluated management’s ability to accurately forecast future revenues and cash flows by considering the past financial performance of Arroyo and current economic factors.

/s/ Whitley Penn LLP

We have served as the Company’s auditor since 2013.

Plano, Texas

March 14, 2024

BGSF, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


			December 31, 2023		January 1, 2023
ASSETS
Current assets

	Accounts receivable (net of allowance for credit losses of $554 and $558, respectively)		$	56,776	$	66,285
	Prepaid expenses		2,963		2,418
	Other current assets		7,172		7,459

		Total current assets	66,911		76,162

Property and equipment, net			1,217		2,081
Other assets
	Deposits		2,699		2,616
	Software as a service, net		5,026		4,411
	Deferred income taxes, net		7,271		2,196
	Right-of-use asset - operating leases		5,435		4,462
	Intangible assets, net		30,370		47,552
	Goodwill		59,588		55,193
		Total other assets	110,389		116,430
	Total assets		$	178,517	$	194,673

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable		$	95	$	587
	Accrued payroll and expenses		14,902		19,171
	Line of credit (net of debt issuance costs of $128)		24,746		—
	Long-term debt, current portion		34,000		4,000
	Accrued interest		438		273
	Income taxes payable		282		253
	Contingent consideration, current portion		4,208		1,081
	Convertible note		4,368		—
	Other current liabilities		—		1,000
	Lease liabilities, current portion		2,016		1,842
		Total current liabilities	85,055		28,207

Line of credit (net of debt issuance costs of $259)			—		22,303
Long-term debt, less current portion			—		36,000
Contingent consideration, less current portion			4,112		—
Convertible note			—		4,368
Lease liabilities, less current portion			3,814		3,049
Other long-term liabilities			—		10
		Total liabilities	92,981		93,937

Commitments and contingencies
Preferred stock, $0.01 par value per share, 500,000 shares authorized, -0- shares issued and outstanding			—		—
Common stock, $0.01 par value per share; 19,500,000 shares authorized, 10,887,509 and 10,772,515 shares issued and outstanding, respectively, net of treasury stock, at cost, of 3,930 and 1,845 shares, respectively			52		70
Additional paid in capital			68,551		67,003
Retained earnings			16,933		33,663

		Total stockholders’ equity	85,536		100,736
		Total liabilities and stockholders’ equity	$	178,517	$	194,673

The accompanying notes are an integral part of these consolidated financial statements.

BGSF, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share and dividend amounts)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021


		2023		2022		2021
Revenues		$	313,167	$	298,422	$	239,027
Cost of services		201,383		194,874		158,086
	Gross profit	111,784		103,548		80,941
Selling, general and administrative expenses		88,650		83,211		65,116
Gain on contingent consideration		—		—		(2,403)
Impairment losses		22,545		—		—
Depreciation and amortization		7,774		4,054		3,698
	Operating (loss) income	(7,185)		16,283		14,530

Interest expense, net		(5,976)		(1,363)		(1,433)
	(Loss) income from continuing operations before income taxes	(13,161)		14,920		13,097
Income tax benefit (expense) from continuing operations		2,938		(3,659)		(2,639)
	(Loss) income from continuing operations	(10,223)		11,261		10,458
Income from discontinued operations:
	Income	—		1,235		4,570
	Gain on sale	—		17,675		—
	Income tax expense	—		(4,810)		(919)
	Net (loss) income	$	(10,223)	$	25,361	$	14,109

Change in unrealized (losses) gains on cash flow hedges		—		(58)		181
	Other comprehensive (loss) gain	—		(58)		181
	Net comprehensive (loss) income	$	(10,223)	$	25,303	$	14,290

Net (loss) income per share - basic:
	Net (loss) income from continuing operations	$	(0.95)	$	1.08	$	1.01
	Net income from discontinued operations:
	Income	—		0.12		0.44
	Gain on sale	—		1.69		—
	Income tax expense	—		(0.46)		(0.09)
	Net (loss) income per share - basic	$	(0.95)	$	2.43	$	1.36

Net (loss) income per share - diluted:
	Net (loss) income from continuing operations	$	(0.95)	$	1.07	$	1.00
	Net income from discontinued operations:
	Income	—		0.12		0.44
	Gain on sale	—		1.69		—
	Income tax expense	—		(0.46)		(0.09)
	Net (loss) income per share - diluted	$	(0.95)	$	2.42	$	1.35

Weighted average shares outstanding:
	Basic	10,766		10,427		10,367
	Diluted	10,766		10,473		10,417

Cash dividends declared per common share		$	0.60	$	0.60	$	0.44

The accompanying notes are an integral part of these consolidated financial statements.

BGSF, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021


		Common Stock
	Preferred Stock	Shares	Par Value		Treasury Stock Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Total
Stockholders’ equity, December 27, 2020	—	10,328	$	103	$	(29)	$	60,457	$	5,050	$	(123)	$	65,458
Share-based compensation from continuing operations	—	—	—		—		1,058		—		—		1,058
Share-based compensation from discontinued operations	—	—	—		—		54		—		—		54
Issuance of shares, net of offering costs	—	—	—		—		(40)		—		—		(40)
Issuance of restricted shares, net of 610 shares of treasury stock	—	64	1		(9)		(1)		—		—		(9)
Issuance of ESPP shares	—	32	—		—		340		—		—		340
Exercise of common stock shares	—	1	—		—		8		—		—		8
Cash dividends declared	—	—	—		—		—		(4,567)		—		(4,567)
Net income	—	—	—		—		—		14,109		—		14,109
Other comprehensive gain	—	—	—		—		—		—		181		181
Stockholders’ equity, December 26, 2021	—	10,425	104		(38)		61,876		14,592		58		76,592
Share-based compensation from continuing operations	—	—	—		—		1,085		—		—		1,085
Share-based compensation from discontinued operations	—	—	—		—		7		—		—		7
Transaction fees related to sale of discontinued operations	—	—	—		—		35		—		—		35
Issuance of shares	—	254	3		—		3,338		—		—		3,341
Issuance of restricted shares	—	32	1		—		(1)		—		—		—
Issuance of ESPP shares	—	60	—		—		653		—		—		653
Exercise of common stock options	—	1	—		—		10		—		—		10
Cash dividends declared	—	—	—		—		—		(6,290)		—		(6,290)
Net income	—	—	—		—		—		25,361		—		25,361
Other comprehensive loss	—	—	—		—		—		—		(58)		(58)
Stockholders’ equity, January 01, 2023	—	10,772	$	108	$	(38)	$	67,003	$	33,663	$	—	$	100,736

The accompanying notes are an integral part of these consolidated financial statements.

BGSF, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(in thousands)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021


		Common Stock
	Preferred Stock	Shares	Par Value		Treasury Stock Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Total
Stockholders’ equity, January 01, 2023	—	10,772	$	108	$	(38)	$	67,003	$	33,663	$	—	$	100,736
Share-based compensation	—	—	—		—		1,029		—		—		1,029



Issuance of restricted shares, net of 2,085 shares of treasury stock	—	57	1		(19)		(23)		—		—		(41)
Issuance of ESPP shares	—	54	—		—		512		—		—		512
Exercise of common stock options	—	5	—		—		30		—		—		30
Cash dividends declared	—	—	—		—		—		(6,507)		—		(6,507)
Net loss	—	—	—		—		—		(10,223)		—		(10,223)

Stockholders’ equity, December 31, 2023	—	10,888	$	109	$	(57)	$	68,551	$	16,933	$	—	$	85,536

The accompanying notes are an integral part of these consolidated financial statements.

BGSF, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021


				2023		2022		2021
Cash flows from operating activities
	Net (loss) income			$	(10,223)	$	25,361	$	14,109
		(Income) from discontinued operations		—		(1,235)		(4,570)
		Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
		Depreciation		446		597		685
		Amortization		7,328		3,457		3,013
		Gain on sale of discontinued operations		—		(17,675)		—
		Impairment losses		22,545		—		—
		CARES Act credit		—		—		(2,368)
		Loss on disposal of property and equipment		17		6		8

		Contingent consideration adjustment		—		—		(2,403)
		Amortization of debt issuance costs		199		172		75
		Interest expense on contingent consideration payable		740		128		252
		Provision for credit losses		798		315		221
		Share-based compensation		1,029		1,085		1,058
		Deferred income taxes, net of acquired deferred tax liability		(5,075)		2,353		1,279
		Net changes in operating assets and liabilities, net of effects of acquisitions:
			Accounts receivable	12,163		(14,793)		(15,178)
			Prepaid expenses and other current assets	(2,159)		(866)		(200)
			Deposits	(83)		1,503		(126)
			Software as a service	720		660		319
			Accounts payable	(492)		(228)		156
			Accrued payroll and expenses	(7,426)		1,633		5,730
			Accrued interest	165		171		24
			Income taxes receivable and payable	729		(1,202)		(560)
			Other current liabilities	(1,000)		(4,551)		19
			Operating leases	(35)		(127)		(107)
			Other long-term liabilities	—		(64)		(78)
		Net cash provided by (used in) continuing operating activities		20,386		(3,300)		1,358
		Net cash (used in) provided by discontinued operating activities		—		(3,822)		5,305
		Net cash provided by (used in) operating activities		20,386		(7,122)		6,663

Cash flows from investing activities
	Businesses acquired, net of cash acquired			(6,917)		(33,940)		(3,791)
	Businesses sold			—		30,722		—

	Capital expenditures			(2,597)		(5,680)		(3,204)
	Proceeds from sale of property and equipment			—		—		5
		Net cash used in continuing investing activities		(9,514)		(8,898)		(6,990)
		Net cash used in discontinued investing activities		—		(26)		(34)
		Net cash used in investing activities		(9,514)		(8,924)		(7,024)

The accompanying notes are an integral part of these consolidated financial statements.

BGSF, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021


			2023		2022		2021
Cash flows from financing activities
	Net borrowings under line of credit		2,312		9,781		6,804
	Proceeds from issuance of long-term debt		—		40,000		—
	Principal payments on long-term debt		(6,000)		(26,863)		(2,063)

	Payments of dividends		(6,507)		(6,290)		(4,567)
	Issuance of ESPP shares		512		653		340
	Issuance of shares under the 2013 Long-Term Incentive Plan and Form S-3 registration statement costs, net of exercises		(10)		(1)		(41)
	Contingent consideration paid		(1,110)		(1,110)		—
	Debt issuance costs		(69)		(236)		—
		Net cash (used in) provided by continuing financing activities	(10,872)		15,934		473


Net change in cash and cash equivalents			—		(112)		112
Cash and cash equivalents, beginning of year			—		112		—
Cash and cash equivalents, end of year			$	—	$	—	$	112

Supplemental cash flow information:
	Cash paid for interest, net		$	4,668	$	641	$	879
	Cash paid for taxes, net of refunds		$	1,378	$	7,562	$	3,676

The accompanying notes are an integral part of these consolidated financial statements.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

BGSF, Inc., provides consulting, managed services, and professional workforce solutions to a variety of industries through its various divisions in information technology (“IT”), Finance & Accounting, Managed Solutions, and Property Management (formally known as Real Estate which includes apartment communities and commercial buildings) (collectively, with its consolidated subsidiaries, the “Company”).

On March 21, 2022, the Company completed the sale of substantially all its Light Industrial segment (“InStaff”) assets to Jobandtalent (“J&T”), through the wholly-owned subsidiary, Sentech Engineering Services, Inc. Instaff’s financial results for reported periods have been reflected in our Consolidated Statements of Operations and Comprehensive (Loss) Income and Consolidated Statements of Cash Flows as discontinued operations. See “Note 4 - Discontinued Operations” in the Consolidated Financial Statements included elsewhere in this report for additional information.

On December 12, 2022, the Company acquired substantially all of the assets, and assumed certain of the liabilities of Horn Solutions, Inc. and Horn Solutions Dallas, LLC (collectively “Horn Solutions”). See “Note 3- Acquisitions.”

On April 24, 2023, the Company acquired substantially all of the assets and assumed certain of the liabilities of Arroyo Consulting, LLC (“Arroyo Consulting”), which is a nearshore and offshore workforce solutions company that specializes in IT and software development with operations in the United States, Colombia, and India. See “Note 3- Acquisitions.”

The Company operates primarily within the United States of America (“U.S.”) through the Property Management and Professional segments.

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 Year

The Company has a 52/53 week fiscal year. Fiscal years for the consolidated financial statements included herein are for the 52 weeks ended December 31, 2023, and 53 weeks ended January 1, 2023, and the 52 weeks ended December 26, 2021, referred as Fiscal 2023, 2022, and 2021, respectively.

Reclassifications

Certain reclassifications have been made to the 2022 and 2021 financial statements to conform with the 2023 presentation.

Management Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in United States of America (“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 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 financial statements include allowances for credit losses, goodwill, intangible assets, lease liabilities, contingent consideration obligations related to acquisitions, 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

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, convertible debt, contingent consideration, and interest rate swap agreements. The carrying values of cash, accounts receivables, 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 Harris 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. In Fiscal 2022 and 2021, Management determined the fair value on the interest rate swap based on quoted prices from BMO.

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 as of December 31, 2023 and January 1, 2023 or revenue from continuing operations in Fiscal 2023, 2022 and 2021. Geographic revenue from continuing operations in excess of 10% of the Company’s consolidated revenue in Fiscal 2023 and the related percentage for Fiscal 2022 and 2021 was generated in the following areas at:


	December 31, 2023		January 1, 2023		December 26, 2021


Tennessee	13	%	10	%	12	%
Texas	25	%	23	%	23	%

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, credit loss, evaluation of credit risk related to certain individual client partners and the Company’s ongoing examination process. 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 when received.

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


	December 31, 2023		January 1, 2023
Beginning balance	$	558	$	449
Acquired allowance for credit losses - Horn Solutions	—		109
Provision for credit losses, net	798		315
Amounts written off, net	(802)		(315)
Ending balance	$	554	$	558

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

The Company depreciates the cost of property and equipment over the estimated useful lives of the assets using the straight-line method ranging from five to seven years. The costs of leasehold improvements are amortized over the shorter of the estimated useful life or lease term. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures that increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of properties sold, or otherwise disposed of, and the related accumulated depreciation or amortization, are removed from the accounts, and any gains or losses are reflected in current operations.

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 $2.4 million, which are included in Deposits in the accompanying consolidated balance sheets, as of December 31, 2023 and January 1, 2023.

Software as a service

The Company capitalizes direct costs incurred in cloud computing implementation costs from hosting arrangements, and are reported as a component of Software as a service. All other internal-use software development costs are capitalized and reported as a component of computer software within Intangible assets. In Fiscal 2023, the Company added software assets of $0.6 million and reclassified $0.7 million from property and equipment related to the information technology improvement project.

The Company reviews its long-lived assets, primarily fixed assets, 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 were no impairments with respect to long-lived assets during Fiscal 2023, 2022 or 2021.

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 from 1 to 10 years, exercisable at the Company’s option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases 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 to ten 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.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company capitalizes purchased software and internal payroll costs directly incurred in the modification of internal use software. Software maintenance and training costs are expensed in the period incurred.

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. In the first quarter of Fiscal 2023, management decided to eliminate the use of various trade names and go to market under the BGSF brand. Management’s rebranding created an impairment charge of $22.5 million. The Company determined that there were no impairment indicators for these assets in Fiscal 2022.

Goodwill

Goodwill represents the difference between the total consideration paid less the fair value of all recognized net asset fair values including identifiable intangible asset values in a business combination. The Company reviews goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Based on annual testing, the Company has determined that there was no goodwill impairment in Fiscal 2023, 2022 or 2021.

The Company first evaluates qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit is less than its carrying amount, including goodwill. If after qualitatively assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then further testing is unnecessary. If after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company then estimates the fair value of the reporting unit and compares the fair value of the reporting unit with its carrying amount, including goodwill, as discussed below.

In assessing whether it is more likely than not that an indefinite-lived intangible asset is impaired, the Company assesses relevant events and circumstances that could affect the significant inputs used to determine the fair value.

The quantitative impairment test for an indefinite-lived intangible asset consists of a comparison of the fair value of the asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, a reporting unit shall recognize an impairment loss in an amount equal to that excess.

The quantitative goodwill impairment test involves a two-step process. In the first step, the Company compares the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, the Company must perform the second step of the impairment test to measure the amount of impairment loss. In the second step, the reporting unit’s fair value is allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of the reporting unit's goodwill is less than the carrying value, the difference is recorded as an impairment loss.

Cash Flow Hedge

The unrealized gains or losses associated with the change in the fair value of the effective portion of the hedging instrument was recorded in accumulated other comprehensive income or loss. The Company reclassified the interest rate swap from accumulated other comprehensive gain or loss against interest expense in the same period in which the hedge transaction affected earnings. There were no outstanding cash flow hedges at December 31, 2023 or January 1, 2023.

Debt Issuance Costs

Debt issuance costs are amortized 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.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 in Property Management and Professional segments by providing workforce solutions, placement services, and managed services. 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 and comprehensive (loss) income 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.

Retained search placement revenues - Any revenues from these workforce solutions are recognized based on the contractual amount for services completed to date which best depicts the transfer of control of services, which is less than 1% of consolidated revenues.

Managed services revenues - include both workforce solution revenues and fixed fee revenues from client partner contracts. Services performed represent the transfer of control to the client partner over a given period of time. Fixed fee revenues are recognized in equal amounts at fixed intervals as promised services are delivered.

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 19 for disaggregated revenues by 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 were no unsatisfied performance obligations as of December 31, 2023 or January 1, 2023. There were no revenues recognized during Fiscal 2023 related to performance obligations satisfied or partially satisfied in previous periods. There are no contract costs capitalized. The Company did not recognize any contract impairments during Fiscal 2023, 2022, and 2021. The opening balance of accounts receivable at December 26, 2021, was $48.1 million.

Advertising

The Company recognizes advertising expense in selling, general and administrative expenses as the services are incurred. Total advertising expense from continuing operations for Fiscal 2023, 2022, and 2021 was $2.1 million, $2.0 million, and $2.0 million, respectively.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

The Company recognizes compensation expense in selling, general and administrative expenses over the service period for 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 income 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):


		December 31, 2023	January 1, 2023	December 26, 2021
Weighted-average number of common shares outstanding:		10,766	10,427	10,367
Effect of dilutive securities:
	Stock options and restricted stock	—	46	50

Weighted-average number of diluted common shares outstanding		10,766	10,473	10,417


	Stock options and restricted stock	812	360	402

	Convertible note	255	255	—
Antidilutive shares		1,067	615	402

Income Taxes

The current provision for income taxes represents estimated amounts payable or refundable on tax returns filed or to be filed for the year. The Company recognizes any penalties when necessary as part of selling, general and administrative expenses. As a matter of operation, we first calculated 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. As of December 31, 2023 and January 1, 2023, goodwill of $45.9 million and $50.4 million, respectively, which is limited annually and is expected to be deductible for tax purposes.

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. As of December 31, 2023, the Company has a $2.6 million net operating loss carry forward from the 2020 EdgeRock acquisition with no expiration date. These net operating losses are subject to an annual Internal Revenue Code Section 382 limitation of $1.3 million. Additionally, there was an increase of $5.2 million to the deferred tax assets related to the $22.5 million in impairment losses as of December 31, 2023.

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. The Company believes that it is more likely than not that all deferred tax assets will be realized and thus, believes that a valuation allowance is not required as of December 31, 2023 or January 1, 2023.

The Company follows the guidance of 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.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. The new standard provides guidance to improve reportable segment disclosure with enhanced reporting of significant segment expenses. The new guidance is effective after December 15, 2023, and interim periods beginning after December 15, 2024, early adoption is permitted. The Company is evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

In December 2023, FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures. The new standard requires annual disclosure of the specific categories in the rate reconciliation, and additional information for reconciling items that meet a quantitative threshold. Additional information may be required on reconciling items. The new guidance is effective after December 15, 2024, early adoption is permitted. The Company is evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

NOTE 3 - ACQUISITIONS

Horn Solutions

On December 12, 2022, the Company acquired substantially all of the assets, and assumed certain of the liabilities, of Horn Solutions. The purchase price of $42.7 million was paid at closing with $33.9 million in cash and $3.4 million of the Company common stock (254,455 shares of the Company common stock privately placed under Section 4(a)(2) of the Securities Act of 1933, as amended), as well as a two-year convertible promissory note of $4.4 million with an annual interest rate of 6%, with interest paid quarterly. The promissory note is convertible into shares of the Company common stock at any time after the one-year anniversary of the promissory note at a conversion price equal to $17.12 per share. The promissory note is subordinate to the Company’s senior debt. An additional portion of the purchase price, $1.0 million in cash, was held back as partial security for a post-closing purchase price adjustment. The asset purchase agreement contained a provision for a “true up” of acquired working capital within 120 days after the closing date. In May 2023, the hold back and true-up were paid, adjusting businesses acquired by $0.1 million in goodwill. The purchase price at closing was paid out of funds under the Company’s credit agreement led by BMO, see “Note 12 - Debt”.

The acquired business was assigned to the Professional segment. The acquisition of Horn Solutions allowed the Company to strengthen and expand its finance and accounting operations by providing consulting, project loan staff, interim staff, direct hire, and managed services through three complementary business units: strategic accounting and finance, information technology, and transactional accounting and office staffing. Horn Solutions provides services to clients in a variety of industries including, but not limited to energy, financial services, healthcare, real estate and construction, service, manufacturing, and software industries.

Shortly after closing, Horn Solutions was fully integrated into the Company's organizational structure and does not operate as a discrete entity. Consequently, the amount of revenue and earnings of Horn Solutions included in the Consolidated Statement of Comprehensive (Loss) Income since the acquisition date is impracticable to provide.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The purchase price has been allocated to the assets acquired and liabilities assumed as of the date of acquisition as follows (in thousands):


Accounts receivable	$	3,734
Prepaid expenses and other assets	118
Property and equipment, net	83
Right-of-use asset - operating leases	1,528
Intangible assets	13,484
Goodwill (deductible tax basis of $26.1 million)	26,610
Current liabilities assumed	(1,787)

Lease liability - operating leases	(1,528)
Total net assets acquired	$	42,242

Cash	$	33,940
Hold back	1,000
Convertible Note	4,368
Common stock	3,351
Working capital adjustment	(417)
Total fair value of consideration transferred for acquired business	$	42,242

The allocation of the intangible assets is as follows (in thousands):


	Estimated Fair Value		Estimated Useful Lives
Covenants not to compete	$	50	5 years

Client partner list	13,434		10 years
Total	$	13,484

The Company incurred costs of $0.4 million in Fiscal 2023 and Fiscal 2022 related to the Horn Solutions acquisition. These costs were expensed as incurred in selling, general and administrative expenses.

Arroyo Consulting

On April 24, 2023, the Company acquired substantially all of the assets, and assumed certain of the liabilities, of Arroyo Consulting for cash consideration of $6.8 million. Certain post-closing liabilities were held back of $0.4 million and a partial security for any indemnification obligation was held back for one year of $0.9 million. The purchase agreement further provides for contingent consideration of up to $8.5 million based on the performance of the acquired business for the two years following the date of acquisition. The purchase price at closing was paid out of funds under the Company’s credit agreement led by BMO, see “Note 12 - Debt”. The purchase agreement contained a provision for a “true up” of acquired working capital within 120 days after the closing date, which has not yet been finalized with the seller.

The acquired business was assigned to the Professional segment. The acquisition of Arroyo Consulting allows the Company to strengthen the go-to-market cross-selling efforts providing clients a cost effective alternative offering nearshore and offshore IT resources. Arroyo Consulting provides nearshore and offshore professional workforce solutions specializing in IT and software development with operations in the United States, Colombia, and India.

The 2022 and 2021 consolidated statements of operations do not include any operating results of Arroyo Consulting. The Fiscal 2023 consolidated statement of operation and comprehensive (loss) income included thirty-six weeks for approximately $14.8 million of revenue and $4.0 million of operating income, which included $0.7 million in amortization expense on acquisition intangibles.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The preliminary purchase price has been allocated to the assets acquired and liabilities assumed as of the date of acquisition as follows (in thousands):


Accounts receivable	$	3,452


Right-of-use asset - operating leases	141
Intangible assets	11,468
Goodwill (no deductible tax basis)	3,836
Current liabilities assumed	(2,471)
Lease liability - operating leases	(140)

Total net assets acquired	$	16,286

Cash	$	6,800
Hold back, working capital*	350
Hold back, indemnities*	850
Working capital adjustment*	677
Fair value of contingent consideration	7,609
Total fair value of consideration transferred for acquired business	$	16,286

*Included in Other current liabilities

The allocation of the intangible assets is as follows (in thousands):


	Estimated Fair Value		Estimated Useful Lives
Covenants not to compete	$	352	5 years

Client partner list	10,946		10 years
Computer software	170		3 years
Total	$	11,468

The Company incurred costs of $0.6 million in Fiscal 2023 related to the Arroyo Consulting acquisition. These costs were expensed as incurred in selling, general and administrative expenses.

Supplemental Unaudited Pro Forma Information

The Company estimates what would have been reported if the revenues and net income from continuing operations of the Horn Solutions and Arroyo Consulting acquisitions had taken place on the first day of the Company’s Fiscal 2022 (in thousands, except income per share):


	December 31, 2023		January 1, 2023
Revenues	$	320	$	346
Gross profit	$	114	$	123
Net (loss) income from continuing operations	$	(10)	$	13
Net (loss) income per share from continuing operations:
Basic	$	(0.89)	$	1.29
Diluted	$	(0.89)	$	1.29

Pro forma net (loss) income includes amortization of primarily client partner lists, interest expense on additional borrowings on the New Term Loan and the revolving facility (the “Revolving Facility”)(see “Note 12 - Debt”) at a rate of 2.5%. The tax benefit of the pro forma adjustments at an effective tax rate of 22.3% for Fiscal 2023 and 24.5% for Fiscal 2022. The pro forma operating results include adjustments to Horn Solutions and Arroyo Consulting related to synergy adjustments for expenses that would be duplicative and other non-recurring, non-operating and out of period expense items once integrated with the Company. There were no material nonrecurring adjustments.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts set forth above are not necessarily indicative of the results that would have been attained had the Horn Solutions and Arroyo Consulting acquisitions taken place on the first day of Fiscal 2022 or of the results that may be achieved by the combined enterprise in the future.

NOTE 4 – DISCONTINUED OPERATIONS

On March 21, 2022, the Company sold substantially all of the assets and certain liabilities of InStaff to Sentech Engineering Services, Inc. (“Sentech”) for a sale price of approximately $30.3 million cash, subject to customary sales price and working capital adjustments specified in the purchase agreement. The purchase agreement provided for deferred consideration of $2.0 million, which was received April 3, 2023. The sale resulted in an original pre-tax gain on sale of discontinued operations of $17.3 million, with an additional pre-tax gain of $0.4 million recognized as part of the net working capital adjustment in October 2022.

The InStaff financial results for periods prior to the sale have been reflected in our Consolidated Statements of Operations and Comprehensive (Loss) Income and Consolidated Statements of Cash Flows as discontinued operations.

The financial results of InStaff are as follows at (in thousands):



		January 1, 2023		December 26, 2021
Revenue		$	16,465	$	71,292
Cost of services		14,144		60,948
	Gross profit	2,321		10,344
Selling expenses		1,062		5,684
Depreciation		24		90
	Income from discontinued operations before gain on sale and income taxes	$	1,235	$	4,570

NOTE 5 - OTHER CURRENT ASSETS

Other current assets consist of the following at (in thousands):


	December 31, 2023		January 1, 2023
CARES Act receivable	$	2,188	$	2,368
Deferred consideration	—		2,000
Income tax receivable	685		1,667
Horn Solutions working capital adjustment	—		534
Workers’ compensation deposit refund receivable	—		448
Due from Arroyo and Sentech, respectively	3,843		411
Other	456		31
	$	7,172	$	7,459

CARES Act Receivable

The Employee Retention Credit (“ERC”) was established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act allows relief to businesses affected by the coronavirus pandemic, by providing payment to employers for qualified wages and health insurance benefits for team members. The CARES Act applies to taxes incurred from March 27, 2020, through the second quarter of 2021.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at (in thousands):


	December 31, 2023		January 1, 2023
Leasehold improvements	$	665	$	1,397
Furniture and fixtures	1,152		1,506
Computer systems	3,476		4,077

	5,293		6,980
Accumulated depreciation	(4,076)		(4,899)
Property and equipment, net	$	1,217	$	2,081

Total depreciation expense from continuing operations in Fiscal 2023, 2022 and 2021 was $0.4 million, $0.6 million, and $0.7 million, respectively. In Fiscal 2023, the Company completed software assets and reclassed $0.7 million to Software as a service and $0.2 million to Intangible assets related to the information technology improvement project.

NOTE 7 - LEASES

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



	December 31, 2023			January 1, 2023			December 26, 2021
Weighted average remaining lease term of operation leases	3.5 years			3.3 years			2.7 years
Weighted average discount rate for continuing operating leases	6.5		%	5.2		%	5.0		%
Cash paid for continuing operating leases	$	2,185		$	2,115		$	2,136
Continuing operating lease expense	$	2,155		$	1,887		$	1,907
Right-of -use assets obtained in exchange for new operating lease liabilities	$	2,837		$	2,248		$	6

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


	December 31, 2023
2024	$	2,306
2025	1,591
2026	1,211
2027	852
2028	512
Thereafter	74
Total lease payment	6,546
Interest	(716)
Present value of lease liabilities	$	5,830

NOTE 8 - INTANGIBLE ASSETS

In the first quarter of Fiscal 2023, management decided to eliminate the use of various trade names and go to market under the BGSF brand. Management’s rebranding created an impairment charge of $22.5 million. The Company determined that there were no impairment indicators for these assets in Fiscal 2022.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Finite and indefinite lived intangible assets consist of the following at (in thousands):


	December 31, 2023
	Gross Value		Accumulated Amortization		Net Carrying Value
Finite lives:
Client partner lists	$	69,114	$	44,150	$	24,964
Covenants not to compete	2,743		2,153		590
Computer software	7,825		3,009		4,816
Total	$	79,682	$	49,312	$	30,370


	January 1, 2023
	Gross Value		Accumulated Amortization		Net Carrying Value
Finite lives:
Client partner lists	$	58,609	$	38,227	$	20,382
Covenants not to compete	2,391		1,886		505
Computer software	7,208		3,087		4,121
	68,208		43,200		25,008
Indefinite lives:
Trade names	23,977		1,433		22,544
Total	$	92,185	$	44,633	$	47,552

Estimated future amortization expense for the next five years and thereafter is as follows (in thousands):


Fiscal Years Ending:
2024	$	7,185
2025	5,593
2026	4,332
2027	3,125
2028	2,469
Thereafter	7,666
Total	$	30,370

Total amortization expense from continuing operations for Fiscal 2023, 2022 and 2021 was $7.3 million, $3.5 million and $3.0 million, respectively. In Fiscal 2023, the Company added software assets of $1.5 million and reclassified $0.2 million from property and equipment related to the information technology improvement project.

NOTE 9 - GOODWILL

The changes in the carrying amount of goodwill as of and during the years ended were as follows at (in thousands):


	Property Management		Professional		Total
December 26, 2021	$	1,074	$	28,068	$	29,142
Additions from acquisitions	—		26,051		26,051
January 1, 2023	1,074		54,119		55,193
Additions from acquisitions	—		4,395		4,395
December 31, 2023	$	1,074	$	58,514	$	59,588

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - ACCRUED PAYROLL AND EXPENSES AND CONTINGENT CONSIDERATION

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


	December 31, 2023		January 1, 2023
Field talent payroll	$	5,014	$	6,923
Field talent payroll related	1,039		941
Accrued bonuses and commissions	2,931		5,740
Other	5,918		5,567
Accrued payroll and expenses	$	14,902	$	19,171

The following is a schedule of future estimated contingent consideration payments at (in thousands):


	December 31, 2023
	Estimated Cash Payment		Discount		Net
Due in:
Less than one year	$	4,250	$	(42)	$	4,208
One to two years	4,250		(138)		4,112




Contingent consideration	$	8,500	$	(180)	$	8,320

NOTE 11 - INCOME TAXES

At December 31, 2023, federal income tax receivable of $0.7 million is included in Other current assets and state income tax payable of $0.3 million is included in Income taxes payable. At January 1, 2023, federal income tax receivable of $1.7 million is included in Other current assets and state income tax payable of $0.3 million is included in Income taxes payable.

The Company’s income tax expense for the fiscal years are comprised of the following at (in thousands):


	December 31, 2023		January 1, 2023		December 26, 2021
Current federal income tax	$	(1,312)	$	(589)	$	(594)
Current state income tax	(825)		(717)		(766)
Deferred tax benefit (income)	5,075		(2,353)		(1,279)
Income tax benefit (expense) from continuing operations	2,938		(3,659)		(2,639)
Income tax (expense) from discontinued operations	—		(4,810)		(919)
Income tax benefit (expense)	$	2,938	$	(8,469)	$	(3,558)

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant components of the Company’s deferred income taxes are as follows at (in thousands):


		December 31, 2023		January 1, 2023
Deferred tax assets:
	Allowance for credit losses	$	120	$	127
	Goodwill and intangible assets	5,242		787
	Accrued payroll and expenses	681		404
	Contingent consideration	2,087		271

	Share-based compensation	602		504
	Net operating loss carry forward	662		985
Deferred tax liabilities:
	Prepaid expenses and other current assets	(735)		(579)
	Property and equipment	(1,388)		(303)

Deferred income taxes, net		$	7,271	$	2,196

The income tax provision, reconciled to the tax computed at the statutory federal rate, is as follows at (in thousands):


	December 31, 2023				January 1, 2023				December 26, 2021
Tax benefit (expense) at federal statutory rate	$	2,764	(21.0)	%	$	(3,133)	(21.0)	%	$	(2,750)	(21.0)	%
State income tax benefit (expense), net of federal benefit	194		(1.5)	%	(795)		(5.3)	%	(1,100)		(8.4)	%

Equity, permanent differences and other	(319)		2.3	%	(178)		(1.2)	%	503		3.7	%
Work Opportunity Tax Credit, net	299		(2.3)	%	447		3.0	%	708		5.4	%
Income tax benefit (expense) from continuing operations	2,938		(22.5)	%	(3,659)		(24.5)	%	(2,639)		(20.3)	%
Income tax (expense) from discontinued operations	—		—	%	(4,810)		(24.5)	%	(919)		(20.3)	%
Income tax benefit (expense)	$	2,938	(22.5)	%	$	(8,469)	(24.5)	%	$	(3,558)	(20.3)	%

NOTE 12 - DEBT

On July 16, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”), maturing July 16, 2024, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender. The Credit Agreement provided for the Revolving Facility permitting the Company to borrow funds from time to time in an aggregate amount up to $35 million. The Credit Agreement also provided for a term loan commitment (the “Term Loan”) permitting the Company to borrow funds from time to time in an aggregate amount not to exceed $30 million with principal payable quarterly, based on an annual percentage of the original principal amount as defined in the Credit Agreement, all of which has been funded and repaid. The Company also had the option to request an increase in in the aggregate Term Loan by $40 million, which was done in connection with the Horn Solutions acquisition. The Company’s obligations under the Credit Amendment are secured by a first priority security interest in substantially all tangible and intangible property of the Company and its subsidiaries. The Credit Agreement bore interest either at the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin through August 17, 2022 (as such terms are defined in the Credit Agreement). The Company pays an unused commitment fee on the daily average unused amount of the Revolving Facility.

On August 18, 2022, the Company entered into an amendment to the Credit Agreement with BMO, which changed the interest rate component from LIBOR to the Secured Overnight Financing Rate (“SOFR”), plus the Applicable Margin (as such terms are defined in the amended credit agreement). In connection with the Horn Solutions acquisition on December 12, 2022 (See “Note 3 - Acquisitions”), the Company exercised the option to borrow $40.0 million, as noted above, pursuant to a second amendment to the Credit Agreement (“Second Credit Amendment”). The Second Credit Amendment requires 2.5% of the original principal balance of the New Term Loan payable on the last business day of each quarter, beginning on March 31, 2023.

On April 24, 2023, in connection with the acquisition of Arroyo Consulting, the Company entered into a Third Amendment to the Credit Agreement (“Third Credit Amendment”) with BMO. The Third Credit Amendment revised language to permit an acquisition of a foreign entity under certain circumstances and modified the terms of permitted distributions and guarantors.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 19, 2023, the Company entered into a Fourth Amendment to the Credit Agreement (“Fourth Credit Amendment”) increasing the Revolving Facility by $6.0 million to an aggregate amount up to $41.0 million.

The Company is subject to a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio (as such terms are defined in the amended Second Credit Amendment). The Company was in compliance with the customary affirmative and negative covenants as of December 31, 2023.

The indebtedness under the Credit Agreement had a maturity date of July 16, 2024, which has been classified within current liabilities as of December 31, 2023. The Credit Agreement was amended and restated on March 12, 2024. See Note 21 - Subsequent Events.

Letter of Credit

In March 2020, in conjunction with the 2020 EdgeRock acquisition, the Company entered into a standby letter of credit arrangement, which expires December 31, 2024, for purposes of protecting a lessor against default on lease payments. As of December 31, 2023, the Company had a maximum financial exposure from this standby letter of credit totaling $0.1 million, all of which is 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 December 31, 2023 or January 1, 2023.

Line of Credit

At December 31, 2023 and January 1, 2023, $24.9 million and $22.6 million, respectively, was outstanding on the revolving facilities. Average daily balance for Fiscal 2023, 2022 and 2021 was $23.1 million, $18.4 million, and $9.9 million, respectively.

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


	December 31, 2023				January 1, 2023
Base Rate	$	4,874	9.75	%	$	2,562	8.25	%
SOFR	3,000		7.69	%	20,000		6.45	%
SOFR	2,000		7.71	%	—		—	%
SOFR	15,000		7.77	%	—		—	%

Total	$	24,874			$	22,562

Long-Term Debt

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


	December 31, 2023				January 1, 2023


SOFR	$	34,000	7.79	%	$	40,000	6.72	%
Long-term debt	$	34,000			$	40,000

Maturities on the Revolving Facility with BMO and long-term debt as of , are as follows at (in thousands):


Fiscal:	December 31, 2023
2024	$	58,874






Less debt issuance costs	(128)
Total, net	$	58,746

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedge

In April 2020, the Company entered into a pay-fixed/receive-floating interest rate swap agreement with our bank syndicate led by BMO that reduces the floating interest rate component on the Term Loan obligation. The $25.0 million notional amount was designed as a cash flow hedge on the underlying variable rate interest payments against a fixed interest rate. In accordance with cash flow hedge accounting treatment, the Company had determined that the hedge was perfectly effective using the change-in-variable-cash-flow method.

On March 21, 2022, the Company paid down the balance, which cancelled the agreement. The unrealized gains or losses associated with the change in the fair value of the effective portion of the hedging instrument was recorded in accumulated other comprehensive income or loss. The Company reclassified the interest rate swap from accumulated other comprehensive gain or loss against interest expense in the same period in which the hedge transaction affected earnings.

Convertible Note

At December 31, 2023 and January 1, 2023, the Company had a two-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 Horn Solutions acquisition on December 12, 2022 (See “Note 3 - Acquisitions”). 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. The promissory note is subordinate to the Company’s senior debt.

NOTE 13 - 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 require us to develop relevant assumptions.

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis and the level they fall within the fair value hierarchy (in thousands):


Amounts Recorded at Fair Value	Financial Statement Classification	Fair Value Hierarchy	December 31, 2023		January 1, 2023
Convertible note	Convertible note	Level 2	$	4,368	$	4,368
Contingent consideration, net	Contingent consideration, net - current and long-term	Level 3	$	8,320	$	1,081

The changes in the Level 3 fair value measurements from January 1, 2023 to December 31, 2023 relates primarily to an increase from Arroyo Consulting acquisition, including $0.7 million in accretion, offset by a $1.1 million payment for the 2021 Momentum Solutionz acquisition. Key inputs in determining the fair value of the contingent consideration as of December 31, 2023 and January 1, 2023 included discount rates of approximately 7% and 9%, respectively, as well as management’s estimates of future sales volumes and earnings before interest, income taxes, depreciation, and amortization (“EBITDA”).

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - 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.

Employment Agreements

The CEO’s employment agreement was effective as of October 1, 2018 and the agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms. In the event that her employment is terminated by the Company without cause or by her for good reason, she will be entitled to (i) twelve months of base salary, (ii) accrued bonus, and (iii) eighteen months of COBRA premiums for her and her dependents, grossed-up for federal income taxes. Additionally, she will become 100% vested in any awards outstanding under the Company’s 2013 Long-Term Incentive Plan, as amended, (“2013 Plan”) or similar plan. Should there be a sale of the Company that results in the termination of her employment or a material adverse change in her duties and responsibilities, she will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

The CFO’s employment agreement was effective as of March 20, 2023 and remains in effect through December 31, 2025 with successive one-year extensions unless terminated pursuant to its terms. In the event that his employment is terminated by the Company without cause or by him for good reason, he will be entitled to (i) twelve months of base salary, (ii) accrued bonus, and (iii) eighteen months of COBRA premiums for him and his dependents, grossed-up for federal income taxes. Additionally, he will become 100% vested in any awards outstanding under the 2013 Plan or similar plan. Should there be a sale of the Company that results in the termination of his employment, he will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

NOTE 15 - 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 56,889 and 32,344 shares to team members and non-team member (non-employee) directors in Fiscal 2023 and Fiscal 2022, respectively. The restricted shares of $0.01 par value per share were issued under the 2013 Plan and contain a three-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.

In connection with the vesting portions of the restricted stock, the Company repurchased 2,085, -0-, and 610 shares of company stock, or treasury stock, to satisfy the withholding obligation in connection with the vesting of a portion of the restricted stock for Fiscal 2023, 2022, and 2021, respectively. Treasury stock is accounted for under the cost method whereby the entire cost of the acquired stock is recorded.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - SHARE-BASED COMPENSATION

Stock Options

In December 2013, the board of directors adopted the original 2013 Plan. Under the original 2013 Plan team members, directors and consultants of the Company may receive incentive stock options and other awards. To the extent any option or award expires unexercised or is canceled, terminated or forfeited in any manner without the issuance of common stock thereunder, such shares shall again be available for issuance under the original 2013 Plan. As of December 31, 2023, a total of 1,215,987 shares remain available for issuance under the 2013 Plan.

The term of each option is determined by the board of directors but cannot exceed 10 years. Unless otherwise specified in an option agreement, options vest and become exercisable on the following schedule: 20% immediately and 20% on each anniversary date of the grant date. Each option shall be designated as an incentive stock option (“ISO”) or a non-qualified option (“NQO”). The exercise price of an ISO shall not be less than the fair market value of the stock covered by the ISO at the grant date; provided, however, the exercise price of an ISO granted to any person who owns, directly or indirectly, stock of the Company constituting more than 10% of the total combined voting power of all classes of outstanding stock of the Company or of any affiliate of the Company, shall not be less than 110% of such fair market value.

The fair value of each option award was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions in the following table. Because this option valuation model incorporates ranges of assumptions for inputs, those ranges are disclosed below. The Company bases the estimate of expected volatility on the historical volatilities of the Company for a period equal to the expected life of the option.

The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company expects to use historical data to estimate team member termination within the valuation model; separate groups of team members that have similar historical termination behavior are considered separately for valuation purposes. The Company believes these estimates and assumptions are reasonable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

For Fiscal 2023, 2022 and 2021, the Company recognized $0.4 million, $0.7 million and $0.6 million of compensation expense from continuing operations related to stock awards, respectively. Unamortized share-based compensation expense from continuing operations as of December 31, 2023 amounted to $0.9 million which is expected to be recognized over the next 2.6 years.

The following assumptions were used to estimate the fair value of stock options for the years ended:


	December 31, 2023			January 1, 2023			December 26, 2021
Weighted-average fair value of awards	$	3.00		$	5.17		$	4.91
Weighted-average risk-free interest rate	4.2		%	2.7		%	0.8		%
Weighted-average dividend yield	$	0.60		$	0.54		$	0.35
Weighted-average volatility factor	52.8		%	54.6		%	53.3		%
Weighted-average expected life	10.0		yrs	10.0		yrs	10.0		yrs

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of stock option activity is presented as follows:


	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Options (in thousands)
Awards outstanding at December 27, 2020	652,655	$	17.63	7.1	$	665
Granted	116,374	$	11.57
Exercised	(1,350)	$	9.72
Forfeited / Canceled	(72,350)	$	15.01
Awards outstanding at December 26, 2021	695,329	$	16.91	6.7	$	665
Granted	164,000	$	12.87
Exercised	(1,000)	$	9.75
Forfeited / Canceled	(36,650)	$	17.65
Awards outstanding at January 1, 2023	821,679	$	16.08	6.4	$	1,907
Granted	126,470	$	10.02
Exercised	(4,800)	$	6.25
Forfeited / Canceled	(21,039)	$	17.38
Awards outstanding at December 31, 2023	922,310	$	15.30	6.0	$	104

Awards exercisable at January 1, 2023	573,863	$	17.50	5.4	$	1,164
Awards exercisable at December 31, 2023	663,740	$	16.84	5.0	$	103


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested outstanding at January 1, 2023	247,816	$	7.64
Non-vested outstanding at December 31, 2023	258,570	$	7.84

During Fiscal 2023 and 2022, there were no cashless stock option exercises. During Fiscal 2021 the Company issued 213 shares of common stock upon the cashless exercise of 600 stock options.

Restricted Stock

For Fiscal 2023, 2022 and 2021, the Company recognized $0.6 million, $0.4 million, and $0.5 million, respectively, of compensation expense related to restricted stock. Unamortized share-based compensation expense as of December 31, 2023 amounted to $0.6 million which is expected to be recognized over the next 1.8 years.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of restricted stock activity is presented as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Restricted outstanding at December 27, 2020	25,218	$	16.01
Issued	64,702	$	12.04
Vested	(29,076)	$	15.75

Restricted outstanding at December 26, 2021	60,844	$	11.91
Issued	32,344	$	13.14
Vested	(31,168)	$	11.79

Restricted outstanding at January 1, 2023	62,020	$	12.21
Issued	57,974	$	11.22
Vested	(43,303)	$	11.71
Forfeited / Canceled	(967)	$	12.62
Restricted outstanding at December 31, 2023	75,724	$	11.73

Nonvested outstanding at January 1, 2023	62,020	$	12.21
Nonvested outstanding at December 31, 2023	75,724	$	11.73

Warrant Activity

For Fiscal 2023, 2022 and 2021, the Company did not recognize compensation cost related to warrants. There was no unamortized stock compensation expense remaining to be recognized as of December 31, 2023.

A summary of warrant activity is presented as follows:


	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Warrants (in thousands)
Warrants outstanding at December 27, 2020	25,862	$	16.80	0.4	$	—


Expired	(25,862)	$	16.80








Warrants outstanding at December 26,2021, January 1, 2023, and December 31, 2023	—	$	—	0.0	$	—


Warrants exercisable January 1, 2023 and December 31, 2023	—	$	—	0.0	$	—

There were no non-vested warrants outstanding at December 31, 2023, January 1, 2023, and December 26, 2021. There were no exercises of warrants in Fiscal 2023, 2022, and 2021.

The intrinsic value in the tables above is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options or warrants, before applicable income taxes and represents the amount holders would have realized if all in-the-money options or warrants had been exercised on the last business day of the period indicated.

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020 Employee Stock Purchase Plan (“2020 ESPP”)

In November 2020, the Company’s shareholders approved the 2020 ESPP. Under the 2020 ESPP, eligible team members of the Company may elect for payroll deductions to purchase shares on each purchase date during an offering period. A total of 250,000 shares of common stock of BGSF, Inc. were initially reserved for issuance pursuant to the 2020 ESPP. For Fiscal 2023, and 2022, the Company issued 54,305 and 59,506 shares of common stock under the 2020 ESPP, respectively.

NOTE 17 - RELATED PARTY TRANSACTIONS

There were no related party transactions in Fiscal 2023, 2022, or 2021.

NOTE 18 - 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 or field talent’s compensation. The Company contributed $2.0 million, $1.5 million and $1.5 million from continuing operations to the 401(k) Plan for Fiscal 2023, 2022 and 2021, respectively.

NOTE 19 - BUSINESS SEGMENTS

The Company has continuing operations through the Property Management and Professional segments.

Segment (loss) income from continuing operations includes all revenue and cost of services, direct selling expenses, depreciation and amortization expense and excludes all general and administrative (home office) expenses. Assets of home office include cash, unallocated prepaid expenses, property and equipment, deferred tax assets, and other assets. The following table provides a reconciliation of revenue and (loss) income from continuing operations by reportable segment to consolidated results for the periods indicated at (in thousands):


	December 31, 2023		January 1, 2023		December 26, 2021
Revenue:
Property Management	$	125,077	$	121,093	$	92,018
Professional	188,090		177,329		147,009

Total	$	313,167	$	298,422	$	239,027



Depreciation:
Property Management	$	133	$	179	$	210
Professional	263		355		390

Home office	50		63		85
Total	$	446	$	597	$	685

Amortization:

Professional	$	6,198	$	2,338	$	2,431

Home office	1,130		1,119		582
Total	$	7,328	$	3,457	$	3,013

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2023		January 1, 2023		December 26, 2021
Operating (loss) income:
Property Management	$	23,155	$	19,803	$	14,663
Professional - without CARES Act credit and impairment loss	12,292		15,604		10,340
Professional - CARES Act credit	—		—		921
Professional - impairment loss	(22,545)		—		—

Home office - general and administrative	(20,087)		(19,124)		(14,948)
Home office - CARES Act credit	—		—		1,150
Home office - gain on contingent consideration	—		—		2,404
Total	$	(7,185)	$	16,283	$	14,530

Capital Expenditures:
Property Management	$	70	$	135	$	106
Professional	444		90		107

Home office	2,083		5,455		2,991
Total	$	2,597	$	5,680	$	3,204

Total Assets:
Property Management	$	29,884	$	29,302
Professional	122,751		141,018

Home office	25,882		24,353

Total	$	178,517	$	194,673

NOTE 20 - QUARTERLY FINANCIAL DATA (UNAUDITED)


		December 31, 2023
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Fiscal Year
Revenues		$	75,316	$	80,800	$	83,484	$	73,567	$	313,167
Gross profit		$	26,784	$	29,574	$	29,979	$	25,447	$	111,784



Net (loss) income		$	(16,466)	$	2,604	$	2,640	$	999	$	(10,223)

Net (loss) income per share:
	Basic	$	(1.54)	$	0.24	$	0.24	$	0.11	$	(0.95)
	Diluted	$	(1.54)	$	0.24	$	0.24	$	0.11	$	(0.95)

Weighted-average shares outstanding:
	Basic	10,712		10,759		10,791		10,812		10,766
	Diluted	10,712		10,770		10,803		10,823		10,766

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


		January 1, 2023
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Fiscal Year
Revenues		$	68,542	$	74,089	$	78,508	$	77,283	$	298,422
Gross Profit		$	23,431	$	25,059	$	28,000	$	27,058	$	103,548

Income from continuing operations		$	2,008	$	3,184	$	4,652	$	1,417	$	11,261
Income (loss) from discontinued operations, net of tax		$	13,792	$	(7)	$	—	$	315	$	14,100
Net income		$	15,800	$	3,177	$	4,652	$	1,732	$	25,361

Net income per share - basic:
	Income from continuing operations	$	0.19	$	0.31	$	0.44	$	0.14	$	1.08
	Income from discontinued operations	0.12		—		—		—		0.12
	Gain on sale	1.65		—		—		0.04		1.69
	Income tax expense	(0.45)		—		—		(0.01)		(0.46)
	Net income per share - basic	$	1.51	$	0.31	$	0.44	$	0.17	$	2.43

Net income per share - diluted:
	Income from continuing operations	$	0.19	$	0.30	$	0.44	$	0.14	$	1.07
	Income from discontinued operations	0.12		—		—		—		0.12
	Gain on sale	1.66		—		—		0.03		1.69
	Income tax expense	(0.45)		—		—		(0.01)		(0.46)
	Net income per share - diluted	$	1.52	$	0.30	$	0.44	$	0.16	$	2.42

Weighted-average shares outstanding:
	Basic	10,429		10,472		10,492		10,501		10,427
	Diluted	10,485		10,514		10,533		10,544		10,473

BGSF, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21 - SUBSEQUENT EVENTS

Dividend

Credit Agreement

On March 12, 2024, the Credit Agreement was amended and restated through the Company’s entry into an Amended and Restated Credit Agreement with certain lenders, BMO Bank, N.A., as administrative agent, letter of credit Issuer, and swing line lender, and BMO Capital Markets Corp., as sole lead arranger and sole book runner. The Amended and Restated Credit Agreement has a maturity date of March 12, 2028. The Amended and Restated Credit Agreement provides for a revolving credit facility permitting us to borrow funds from time to time in an aggregate amount up to $40 million. Term loans with an outstanding principal balance of $34 million were outstanding under the Credit Agreement remain outstanding under the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement further provides for a delayed draw term loan commitment of $4.3 million. The Company is required to repay the term loans in quarterly principal installments in an amount equal to 2.5% of the aggregate principal balance thereof. The Amended and Restated Credit Agreement provides for interest either at the Base Rate plus the Applicable Margin, or the Adjusted Term SOFR plus the Applicable Margin (in each case, as such terms are defined in the Amended and Restated Credit Agreement). The Amended and Restated Credit Agreement also provides for letter of credit fees and commitment fees as further described therein. The Company’s obligations under the Amended and Restated Credit Amendment are secured by a first priority security interest in substantially all of the Company’s and its Subsidiaries’ tangible and intangible property. The Amended and Restated Credit Agreement provides for a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio (as such terms are defined in the Amended and Restated Credit Amendment), and also provides for, among other items, representations and warranties and affirmative and negative covenants, as described therein.

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

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms specified by the Securities and Exchange Commission and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

We note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company, including the President and Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) for the Company. The Company’s internal control system was designed to provide reasonable assurance to management and the Company’s Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Consistent with guidance issued by the Securities and Exchange Commission on recently acquired businesses, management’s assessment of the effectiveness of internal controls over financial reporting, with respect thereto may be omitted. As of December 31, 2023, management has excluded Arroyo Consulting from the assessment of internal controls over financial reporting. Arroyo Consulting was acquired by the Company in a purchase business combination during Fiscal 2023 whose total assets and revenues excluded from management's assessment and our audit of Internal Control Over Financial Reporting represent 10.9% and 4.7%, respectively, of the related consolidated financial statements as of and for the year ended December 31, 2023.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, using criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by Whitley Penn LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during the fourth quarter of Fiscal 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of BGSF, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited BGSF, Inc.’s and its subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in 2013 Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company, as of December 31, 2023 and January 1, 2023, and the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”), and our report dated March 14, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the entity’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the Arroyo Consulting, LLC business from its assessment of internal control over financial reporting as of December 31, 2023 because it was acquired by the Company in a purchase business combination during fiscal 2023. We have also excluded the Arroyo Consulting, LLC business from our audit of internal control over financial reporting. The Arroyo Consulting, LLC business is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 10.9% and 4.7%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.

/s/ Whitley Penn LLP

Plano, Texas

March 14, 2024

Item 9B. Other Information.

Trading Plans

During the three months ended December 31, 2023, no director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Board Composition

Our Board consists of seven directors. Our Board has determined that the following directors are “independent” as defined under the rules of the NYSE: C. David Allen, Jr., Richard L. Baum, Donna Carroll, Jr., Douglas E. Hailey, Cynthia Marshall, and Paul A. Seid. The authorized number of directors may be changed by resolution of our Board. Vacancies on our Board can be filled by resolution of our Board. Our Board is divided into three classes, each serving staggered, three-year terms:

•Our Class I directors are Beth Garvey and Donna Carroll. The terms of each director will expire at the 2024 annual meeting of stockholders;

•Our Class II directors are Richard L. Baum, Jr., Cynthia Marshall,, and Paul A. Seid. The terms of each director will expire at the 2025 annual meeting of stockholders; and

•Our Class III directors are C. David Allen, Jr. and Douglas E. Hailey.The terms of each director will expire at the 2026 annual meeting of stockholders.

As a result, only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective terms.

Board Leadership and Role in Risk Oversight

Meetings of our Board (including executive sessions other than executive sessions consisting only of independent directors) are presided over by our Chair of the Board, Beth Garvey. Our Board does not have a formal policy addressing whether or not the roles of chair and chief executive officer should be separate or combined. The directors serving on the Board possess considerable professional and industry experience, significant experience as directors of both public and private companies and a unique knowledge of the challenges and opportunities that the Company faces. As such, the Board believes that it is in the best position to evaluate the needs of the Company and to determine how best to organize the Company’s leadership structure to meet those needs. While the Board believes it is important to retain the flexibility to determine whether the roles of chair and chief executive officer should be separated or combined in one individual, the Board believes that our structure represents the appropriate allocation of roles and responsibilities at this time. Our Board believes that Ms. Garvey is currently best situated to preside over meetings of our Board because of her familiarity with our business and ability to effectively identify strategic priorities and lead the discussion and execution of strategy. Ms. Garvey works closely with senior management and various Board members to identify appropriate topics of consideration for the Board and to plan effective and informative Board meetings.

Our Board oversees the risk management activities designed and implemented by our management and executes its oversight responsibility for risk management both directly and through its committees. The full Board also considers specific risk topics, including risks associated with our strategic plan, our whistle blower program, business operations and capital structure, and ESG matters. In addition, our Board receives detailed regular reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures involved with their respective areas of responsibility.

Our Board delegates to the Audit Committee oversight of our risk management process. Our other Board committees also consider and address risk as they perform their respective committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.

Committees of the Board

The standing committees of our Board consist of an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each of the committees reports to our Board as they deem appropriate and as our Board may request. The composition, duties and responsibilities of these committees are set forth below.

Audit Committee

The Audit Committee is responsible for, among other matters: (1) appointing, retaining and evaluating our independent registered public accounting firm and approving all services to be performed by them; (2) overseeing our independent registered public accounting firm’s qualifications, independence and performance; (3) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; (4) reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (5) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; (6) reviewing and approving related person transactions; and (7) overseeing the risk management process.

Our Audit Committee consists of C. David Allen, Jr., Richard L. Baum, Jr., Donna Carroll and Douglas E. Hailey. We believe that each qualifies as independent directors according to the rules and regulations of the SEC and NYSE with respect to audit committee membership. We also believe that Mr. Hailey and Mr. Allen qualify as our “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. Our Board has adopted a written charter for the Audit Committee, which is available on our home office website under the investor relations tab at www.bgsf.com. The information on our website is not part of this Annual Report on Form 10-K.

Compensation Committee

The Compensation Committee is responsible for, among other matters: (1) reviewing key team member (i.e., employee) compensation goals, policies, plans and programs; (2) reviewing and approving the compensation of our directors, president and executive officer and other executive officers; (3) reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and (4) administering our stock plans and other incentive compensation plans, including our 2013 Long-Term Incentive Plan and our 2020 Employee Stock Purchase Plan. The Committee shall have the authority to delegate any of its responsibilities, along with the authority to take action in relation to such responsibilities, to one or more subcommittees as the committee may deem appropriate in its sole discretion. The Compensation Committee may invite such members of management to its meetings as it deems appropriate. However, the Compensation Committee meets regularly without such members present, and in all cases no officer may be present at meetings at which such officer’s compensation or performance is discussed or determined. The Committee has the authority, in its sole discretion, to select, retain and obtain the advice of a compensation consultant as necessary to assist with the execution of its duties and responsibilities. Neither the Compensation Committee nor management engaged a compensation consultant with respect to Fiscal 2023.

Our Compensation Committee consists of C. David Allen, Jr., Richard L. Baum, Jr., Cynthia Marshall, Donna Carroll and Paul A. Seid. Our Board has adopted a written charter for the Compensation Committee, which is available on our home office website under the investor relations tab at www.bgsf.com. The information on our website is not part of this Annual Report on Form 10-K.

Nominating and Corporate Governance Committee

We have a Nominating and Corporate Governance Committee, which identifies, evaluates and recommends qualified nominees to serve on our Board, develops and oversees our internal corporate governance processes and maintains a management succession plan. Our Nominating and Corporate Governance Committee charter defines the committee’s primary duties. The Nominating and Corporate Governance Committee will evaluate nominees for director, including nominees recommended by stockholders, using all relevant criteria, including diversity of experience and background. The Nominating and Corporate Governance Committee will consider any director candidates recommended by the Company’s stockholders provided that the notice and information requirements specified by Section 2.06(b)–(c) of the Bylaws (relating to direct stockholder nominations) are complied with. Our Nominating and Corporate Governance Committee consists of Richard L.

Baum, Jr., Douglas E. Hailey, Cynthia Marshall, and Paul A. Seid. A copy of the Nominating and Corporate Governance Committee’s charter is available on our home office website, under the investor relations tab at www.bgsf.com. The information on our website is not part of this Annual Report on Form 10-K.

Other Committees

Our Board may establish other committees as it deems necessary or appropriate from time to time.

Family Relationships

There are no family relationships among any of our executive officers or any of our directors.

Directors

C. David Allen, Jr.

Independent Director
Age: 60
Director Since: 2014
Committees Served: Audit Committee, Compensation Committee

Starting in 2022, Mr. Allen has served as Chief Financial Officer of Life Sciences Logistics, a Blackstone portfolio company. From 2016 to 2022, Mr. Allen has served as Chief Financial Officer of Smart Start, LLC, a provider of automotive technology products. Prior to Smart Start, from 2015 to 2016, Mr. Allen has served as Chief Financial Officer of Graebel Vanlines Holdings, LLC, a provider of commercial and residential logistics, moving and storage services. Prior to Graebel, from 2009 to 2015, Mr. Allen served as an officer of Snelling Services, LLC, a workforce solutions provider. From 2010 to 2015, Mr. Allen served as President and Chief Executive Officer. From 2009 to 2010 he served as Chief Financial Officer. Prior to Snelling, Mr. Allen served for three years as Chief Operating Officer and six years as Chief Financial Officer for Telvista Inc., a business process outsourcer providing customer relationship management solutions. He earned a Master of Business Administration degree from the Tuck School at Dartmouth College in 1993 and received a Bachelor of Business Administration from Stephen F. Austin State University with honors in 1986. Our Board benefits from Mr. Allen’s extensive experience in the workforce solutions industry as well as his financial expertise.

Richard L. Baum, Jr.

Independent Director
Age: 63
Director Since: 2013
Committees Served: Audit Committee, Compensation Committee (Chair), Nominating and Corporate Governance Committee (Chair)

Richard L. Baum, Jr. served on the board of managers of LTN Acquisition, LLC (the former parent of the predecessor to BGSF, Inc.) since its inception and was appointed to serve on our Board in November 2013. Mr. Baum joined Taglich Private Equity LLC in 2005 and currently is an active director with a number of private companies where Taglich has an investment. Prior to joining Taglich, Mr. Baum led a group that purchased a private equity portfolio from Transamerica Business Credit. From 1998 to 2003, Mr. Baum was a Managing Director in the small business merger and acquisition practices of Wachovia Securities and its predecessor, First Union Securities. From 1988 through 1998, Mr. Baum was a Principal with the Mid-Atlantic Companies, Ltd., a financial services firm acquired by First Union in 1998. Mr. Baum received a Bachelor of Science from Drexel University and a Master of Business Administration from the Wharton School of the University of Pennsylvania. Our Board benefits from Mr. Baum's perspective and experience with our ongoing operations and strategy that he has obtained through his prolonged service to the company and due to his ability to assist with the evaluation of potential acquisitions.

Donna Carroll

Independent Director
Age: 59
Director Since: 2023
Committees Served: Audit Committee, Compensation Committee

Ms. Carroll has served as the Founder and President of Human Factor, LLC, a provider of advisory, consulting, and leadership development services to public sector and non-profit organizations since July 2020. From January 2017 to July 2020, Ms. Carroll served, among other roles, as Chief Sales Officer of Supplemental Health Care, a private healthcare staffing and professional services company. Ms. Carroll is also member of the Board of Directors of Champions Community Foundation, Inc., on the Leadership Advisory Council of the Women Business Collaborative, and a former advisory Board member of Phaidon International. She attended Kalamazoo Valley Community College and holds a Certificate in Leading Change and Organizational Leadership from the University of Georgia – Terry College of Business, and a Certificate in the Future of Work: Leading Modern Workplaces through the Wharton School of the University of Pennsylvania. Additionally, she is a Certified Professional Coach and COR.E Dynamics | Leadership Dynamics Specialist. Our Board benefits from Ms. Carroll’s substantial experience in the professional services and staffing industry.

Beth Garvey

Chair, President and Chief Executive Officer

Age: 58

Director Since: 2020

Beth Garvey assumed the role of President and Chief Executive Officer of the Company in October 2018, having previously served as Chief Operating Officer since August 2016. She joined the Company through the acquisition of substantially all of the assets of InStaff Holding Corporation and InStaff Personnel, LLC (“InStaff”) in 2013, where she began her career in 1998 as Director of Human Resources and later became CEO. Ms. Garvey has been consistently recognized by the Staffing Industry Analysts as a top figure in North America Staffing 100 list for five years and has been included in the Global Power 150 – Women in Staffing list for the past six years. Additionally, D CEO has lauded her as one of the top Dallas 500 Business Leaders on seven occasions, while the Dallas Business Journal honored her with the ‘Women in Business’ award for her significant industry and community impact. Ms. Garvey achievements were further underscored when she emerged as a finalist in the EY Entrepreneur of the Year® 2020 Award for the Southwest region. Currently, she serves on the Board of Directors of the National Association of Corporate Directors in North Texas and holds the Chair position at Junior Achievement of Dallas. As a Board Member of the Dallas Regional Chamber, she currently serves as a member of the DEI Diversity Leadership Sub-Council and has previously co-chaired the Talent Attraction committee. Ms. Garvey has held leadership roles in various organizations, including chairing the Executive Women’s Roundtable and participating in the International Women’s Forum. Additionally, she contributes as a board member of Business Council for the Arts and is actively involved in the Leadership Committee for the Dallas 50/50 Women on Boards initiative. Ms. Garvey’s extensive experience in the workforce solutions industry combined with her steadfast commitment to community impact positions her as a catalyst for positive change within the Company. Our Board benefits from Ms. Garvey’s extensive experience in the workforce solutions industry.

Douglas E. Hailey

Independent Director
Age: 62

Director Since: 2013
Committees Served: Audit Committee (Chair), Nominating and Corporate Governance Committee

Douglas E. Hailey served on the board of managers of LTN Acquisition, LLC (the former parent of the predecessor to BGSF, Inc.) since its inception and was appointed to our Board in November 2013. Mr. Hailey is the managing director of Taglich Private Equity LLC. Mr. Hailey joined Taglich Brothers, Inc. in 1994 as Head of Investment Banking and is an employee, not a partner, director, shareholder or executive officer. Taglich Brothers, Inc. is not an affiliate of Taglich Private Equity LLC. He co-led the private equity initiative in 2001 and currently participates in evaluating and executing new investments. Prior to joining Taglich Brothers, Inc., Mr. Hailey spent five years with Weatherly Financial Group, assisting in sponsoring leveraged buyouts and five years in structured finance lending at Heller Financial and the Bank of New York. He received a Bachelor of Business Administration from Eastern New Mexico University and a Master of Business Administration in Finance from the University of Texas. Our Board benefits from Mr. Hailey’s perspective and experience with our ongoing operations and strategy that he has obtained through his prolonged service to the company and due to his ability to assist with the evaluation of potential acquisitions.

Cynthia Marshall

Independent Director
Age: 64
Director Since: 2020
Committees Served: Compensation Committee, Nominating and Corporate Governance Committee

Ms. Marshall is currently the CEO of the Dallas Mavericks, is Founder, President and CEO of the consulting firm Marshalling Resources. The Marshalling Resources consulting firm specializes in leadership, diversity and inclusion, culture transformation and overall optimization of people resources. Ms. Marshall worked with The Dow Chemical Company in 2017 and 2018 to develop and implement a strategy for institutionalizing an inclusive culture. Prior to this position, Ms. Marshall retired from a 36-year career at AT&T, where she had ultimately served as SVP - Human Resources and Chief Diversity Officer. She was responsible for identifying and developing leaders, aligning employees with the company’s vision and priorities, overseeing major business unit HR support, performance development, employee engagement, skills transformation initiatives, EEO and Affirmative Action. She led the team that created a world class Diversity and Inclusion culture, earning AT&T a top 3 ranking on Diversity Inc’s 2017 Top 50 list of companies. Ms. Marshall also spearheaded the work that for the first-time placed AT&T on Fortune’s 100 Best Companies to Work For list in 2017 (one of only two Fortune 50 companies). Before her SVP-Human Resources and Chief Diversity Officer roles, Ms. Marshall served as President - AT&T North Carolina where she became the first African-American chair of the North Carolina State Chamber of Commerce. Marshall graduated from the University of California-Berkeley with degrees in Business Administration and Human Resources Management and holds four honorary Doctorate degrees. Ms. Marshall has chaired a variety of non-profit boards and is currently on the board of Dallas CASA, Dallas Regional Chamber, Texas Women’s Foundation, Texas 2036 and a member of the Executive Leadership Council. Our Board benefits from Ms. Marshall’s extensive leadership and business experience and her expertise with respect to human resources and culture.

Paul A. Seid

Independent Director
Age: 75
Director Since: 2014
Committees Served: Compensation Committee, Nominating and Corporate Governance Committee

Since 2010, Mr. Seid has served on the board of directors of BioVentrix, a medical device company. Starting in 2013, he has served as Chief Executive Officer of RST Automation, a maker of hospital robotic devices which was established 2004. For the past eighteen years he has been President of Strategic Data Marketing, a research and data collection company. He has also founded, bought and/ or sold over twenty companies in Asia, Europe, North, and South America. Mr. Seid graduated from Queen’s College, a division of the City University of New York, in 1968 with a Bachelor’s degree in Political Science. Mr. Seid has held numerous other board of directors and consulting positions. Our Board benefits from Mr. Seid’s extensive experience growing diverse businesses.

Information about our Executive Officers

Our Board appoints our executive officers and updates the executive officer positions as needed throughout the fiscal year. Each executive officer serves at the behest of our Board and until their successors are appointed, or until the earlier of their death, resignation or removal.

The following table sets forth certain information with respect to our executive officers as of the date of this Annual Report on Form 10-K:


Name	Age	Position

Beth Garvey	58	Chair, President and Chief Executive Officer
John Barnett	57	Chief Financial Officer and Secretary

John Barnett joined as Chief Financial Officer and Secretary in March 2023. Prior to joining the Company, Mr. Barnett served as Chief Financial Officer of Protective Insurance (NASDAQ: PTVC) from October 2019 to February 2022 and as Chief Financial Officer of First Acceptance (NYSE: FAC) from November 2018 to September 2019. He also served in senior leadership roles for both Broadcast Music, Inc. and Anheuser-Busch. Mr. Barnett earned a Bachelor of Science degree from the U.S. Military Academy at West Point, a Master of Science in Engineering Management from Missouri University of Science and Technology, and an MBA from the University of Illinois Urbana-Champaign. Early in his career, Barnett served in the U.S. Army advancing to the rank of Captain.

Code of Ethics

We have adopted a Code of Ethics that applies to all of our team members, including our chief executive officer and our chief financial officer (who is our principal accounting officer). Our Code of Ethics is available on our home office website, under the investor relations tab at www.bgsf.com. If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Item 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive, financial and accounting officers by posting the required information on our home office website at the above address. Our website is not part of this Annual Report on Form 10-K.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines on a number of significant matters, including director qualifications, director responsibilities, board committees, director access to officers, employees, and advisors, director compensation, related party transactions, annual performance evaluations, and chief executive officer and director succession. A copy of the Corporate Governance Guidelines is posted on our home office website, under the investor relations tab at www.bgsf.com. The information on our website is not part of this Annual Report on Form 10-K.

Clawback Policy

The Board has adopted a Clawback Policy providing for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the U.S. federal securities laws. The Clawback Policy is available on our home office website under the investor relations tab at www.bgsf.com. The information on our website is not a part of this Annual Report on Form 10-K.

Delinquent Section 16(a) Reports

Based on a review of reports filed by our directors, executive officers, and beneficial owners of more than 10% of our shares of common stock pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and other information available to us, we believe that all such ownership reports required to be filed by those reporting persons during and with respect to Fiscal 2023 were timely made, except for a Form 3 (filed on May 12, 2023) and a Form 4 (filed on November 13, 2023) in respect of Donna Carroll, which were not timely filed.

Item 11. Executive Compensation.

Named Executive Officers

Our named executive officers for Fiscal 2023 are:

•Beth Garvey, our Chair, President and Chief Executive Officer; and

•John R. Barnett, our Chief Financial Officer and Secretary since March 2023.

•Dan Hollenbach, who served as our Chief Financial Officer and Secretary until March 2023.

Throughout this section, the term “named executive officer” is intended to refer to the individuals identified above. During

Fiscal 2023, we had only three executive officers, each of whom is set forth above.

Summary Compensation Table

The following table presents compensation information for our named executive officers with respect to Fiscal 2023 and 2022.


Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($) (*)	Option Awards ($) (*)	Non-equity incentive plan compensation ($)	Non-qualified deferred compensation earnings ($)	All Other Compensation ($)		Total ($)

Beth Garvey Chair, President and Chief Executive Officer	2023	$450,500	$45,543	$70,067	$109,317	$—	$—	$17,188	(1)	$692,615
	2022	$425,000	$297,500	$79,598	$203,268	$—	$—	$15,521	(1)	$1,020,887

Dan Hollenbach Chief Financial Officer and Secretary (through March 2023)	2023	$339,200	$45,543	$55,661	$19,859	$—	$—	$12,084	(1)	$472,347
	2022	$320,000	$224,000	$64,898	$109,525	$—	$—	$10,800	(1)	$729,223

John Barnett Chief Financial Officer and Secretary	2023	$282,692	$—	$17,114	$12,382	$—	$—	$2,692	(1)	$314,880
	2022	$—	$—	$—	$—	$—	$—	$—		$—

(*)The amounts reflect the dollar amounts recognized for financial statement reporting purposes in accordance with FASB ASC Topic 718. The assumptions used in the calculation of these amounts are included in Note 16 Share-based Compensation to the audited consolidated financial statements included in this Annual Report on Form 10-K.

(1)Represents the matching 401(k) contributions made by us.

Agreements with Executive Officers

Chair, President and Chief Executive Officer

On October 1, 2018, we amended a 2016 employment agreement with Beth Garvey pursuant to which Ms. Garvey serves as our President and Chief Executive Officer through September 30, 2021. The agreement remains in effect under successive one-year extensions unless terminated pursuant its terms. Ms. Garvey’s annual compensation is evaluated annually, but may not be less than $350,000 per year. Effective February 3, 2023, Ms. Garvey’s annual salary was raised to $450,500.

Ms. Garvey is eligible to receive an annual cash bonus based on achieving certain adjusted EBITDA levels (as defined by the Compensation Committee) and, except as stated in her employment agreement, provided that Ms. Garvey is in our employment on the last day of the fiscal year. Moreover, if certain acquisitions occur during her employment period, Ms. Garvey will receive a bonus equal to 1% of the acquired company’s adjusted EBITDA, as determined by the Board, for the first 12 months after the acquisition’s closing date. The Compensation Committee may also grant discretionary bonuses.

In the event that Ms. Garvey’s employment is terminated by us without cause or by Ms. Garvey for good reason, Ms. Garvey will receive as severance installments equal to twelve months of base salary plus COBRA premiums for eighteen months for Ms. Garvey and her dependents. In the event that Ms. Garvey’s employment is terminated without cause or for good reason within one year of a change in control, Ms. Garvey will receive her base salary and COBRA premiums for eighteen months for her and her dependents. Ms. Garvey will also generally be entitled to receive any bonus payable but unpaid, payment for unused vacation days, and unpaid reimbursements. The severance is contingent upon Ms. Garvey’s execution of a separation agreement including a general release. In the event that Ms. Garvey’s employment is terminated by us for cause, or by Ms. Garvey other than for good reason, we will pay to Ms. Garvey any monthly salary, bonus, unused vacation, and expense reimbursements, earned or due to Ms. Garvey but unpaid.

We and Ms. Garvey have also entered into a confidentiality, non-solicitation, non-interference and non-competition agreement. Pursuant to the agreement, Ms. Garvey generally agrees not to disclose our confidential information (as defined in the agreement) and, for a period of eighteen months following her termination, not to solicit our client partners, interfere with our client partner and supplier relationships, or solicit our team members. Ms. Garvey also agrees not to compete with us for a period of twelve months after termination.

Ms. Garvey was granted stock options and restricted stock in Fiscal 2023 as further described under “Outstanding Equity Awards” below.

Chief Financial Officer

We executed an employment agreement, effective March 20, 2023, with John R. Barnett pursuant to which Mr. Barnett serves as our Chief Financial Officer and Secretary through December 31, 2025. The agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms. Mr. Barnett’s annual compensation is evaluated annually, but the then effective base salary. Effective March 25, 2024, Mr. Barnett’s annual salary will be raised to $375,000 and effective March 24, 2025, raised to $400,000.

Mr. Barnett is eligible to receive an annual cash bonus based on achieving certain adjusted EBITDA levels (as defined by the Compensation Committee) and, except as stated in his employment agreement, provided that Mr. Barnett is in our employment on the last day of the fiscal year. Moreover, if certain acquisitions occur during his employment period, and Mr. Barnett will receive a bonus equal to 1% of the acquired company’s adjusted EBITDA, as determined by the Board, for the first 12 months after the acquisition’s closing date. The Compensation Committee may also grant discretionary bonuses.

In the event that Mr. Barnett’s employment is terminated by us without cause or by Mr. Barnett for good reason, Mr. Barnett will receive as severance installments equal to twelve months of base salary plus COBRA premiums for eighteen months for Mr. Barnett and his dependents. In the event that Mr. Barnett’s employment is terminated without cause or by Mr. Barnett within one year of a change in control, Mr. Barnett will receive his base salary and COBRA premiums for eighteen months for him and his dependents. Mr. Barnett will also generally be entitled to receive any bonus payable but unpaid, payment for unused vacation days, and unpaid reimbursements. The severance is contingent upon Mr. Barnett’s execution of a separation agreement including a general release. In the event that Mr. Barnett’s employment is terminated by us for cause, or by Mr. Barnett other than for good reason, we will pay to Mr. Barnett any monthly salary, bonus, unused vacation, and expense reimbursements, earned or due to Mr. Barnett but unpaid.

We and Mr. Barnett have also entered into a confidentiality, non-solicitation, noninterference and non-competition agreement. Pursuant to the agreement, Mr. Barnett generally agrees not to disclose our confidential information (as defined in the agreement) and, for a period of eighteen months following his termination, not to solicit our client partners, interfere with our client partner and supplier relationships, or solicit our team members. Mr. Barnett also agrees not to compete with us for a period of twelve months after termination.

Mr. Barnett was granted stock options and restricted stock in Fiscal 2023 as further described under “Outstanding Equity Awards” below.

Dan Hollenbach resigned as Chief Financial Officer and Secretary effective March 20, 2023, and will then act as a senior advisor with BGSF through April 30, 2024. Mr. Hollenbach’s resignation was part of the Company’s leadership succession plan and Mr. Hollenbach’s planned retirement. Effective February 3, 2023, Mr. Hollenbach’s annual salary was raised to $339,000.

2013 Long-Term Incentive Plan

In December 2013, the Board adopted the original 2013 Plan. Under the original 2013 Plan team members, directors and consultants of the Company may receive incentive stock options and other awards. To the extent any option or award expires unexercised or is canceled, terminated or forfeited in any manner without the issuance of common stock thereunder, such shares shall again be available for issuance under the original 2013 Plan, of which 1,215,987 shares remain available for issuance as of December 31, 2023.

The term of each option is determined by the Board but cannot exceed 10 years. Unless otherwise specified in an option agreement, options vest and become exercisable on the following schedule: 20% immediately and 20% on each anniversary date of the grant date. Each option shall be designated as an incentive stock option (“ISO”) or a non-qualified option (“NQO”). The exercise price of an ISO shall not be less than the fair market value of the stock covered by the ISO at the grant date; provided, however, the exercise price of an ISO granted to any person who owns, directly or indirectly, stock of the Company constituting more than 10% of the total combined voting power of all classes of outstanding stock of the Company or of any affiliate of the Company, shall not be less than 110% of such fair market value.

For more details on our 2013 Plan, see our registration statement on Form S-8 (File No. 333-193014) filed on December 20, 2013, Form S-8 (File No. 333-218869) filed on June 20, 2017, Form S-8 (File No. 333-251192) filed on December 8, 2020, Form S-8 (File No. 333-274809) filed on October 2, 2023, and Note 16 in the Notes to Consolidated Financial Statements.

2020 Employee Stock Purchase Plan (“2020 ESPP”)

In November 2020, the Board adopted and the shareholders approved the 2020 ESPP. Under the 2020 ESPP, eligible team members of the Company may elect for payroll deductions to purchase shares on each purchase date during an offering period. A total of 250,000 shares of common stock of BGSF, Inc. were initially reserved for issuance pursuant to the 2020 ESPP. As of December 31, 2023, 93,245 shares remain available for issuance.

For more details on our 2020 Plan, see our registration statement on Form S-8 (File No. 333-251193) filed on December 8, 2020, and Note 16 in the Notes to Consolidated Financial Statements.

Outstanding Equity Awards

The following table presents outstanding equity awards as of December 31, 2023.


Name	Option Awards								Stock Awards
	Grant date	Number of securities underlying unexercised options (#) exercisable	Number of securities underlying unexercised options (#) unexercisable		Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)	Option exercise price ($)		Option expiration date	Number of Shares or Units of Stock that Have Not Vested (#)		Market Value of Shares or Units of Stock that Have Not Vested ($)
(a)		(b)	(c)		(d)	(e)		(f)	(g)		(h)

Beth Garvey	09/01/2023	10,000	31,007	(1)	—	$	9.66	09/01/2033	—		—
	09/01/2023	—	8,993	(2)	—	$	9.66	09/01/2033	—		—
	02/17/2023	—	—		—	$	—	—	3,832	(15)	$	58,323
	02/17/2023	871	2,613	(3)	—	$	15.07	2/17/2033	—		—
	02/17/2023	—	871	(4)	—	$	15.07	2/17/2033	—		—
	08/03/2022	5,065	18,807	(5)	—	$	12.87	08/03/2032	—		—
	08/03/2022	14,935	11,193	(6)	—	$	12.87	08/03/2032	—		—
	05/04/2022	—	—		—	$	—	—	1,880	(16)	$	18,236
	08/04/2021	3,600	2,400	(7)	—	$	11.57	08/04/2031	—		—
	08/04/2021	4,000	—		—	$	11.57	08/04/2031	—		—
	08/04/2021	—	—		—	$	—	—	5,000	(17)	$	49,250
	08/04/2020	3,600	—		—	$	9.72	08/04/2030	—		—
	08/04/2020	1,200	1,200	(8)	—	$	9.72	08/04/2030	—		—
	09/24/2018	6,148	—		—	$	25.71	09/24/2028	—		—
	09/24/2018	93,852	—		—	$	25.71	09/24/2028	—		—
	06/07/2017	2,500	—		—	$	16.76	06/07/2027	—		—
	06/07/2017	10,000	—		—	$	16.76	06/07/2027	—		—
	08/16/2016	13,185	—		—	$	17.46	08/16/2026	—		—
	08/16/2016	36,815	—		—	$	17.46	08/16/2026	—		—
	06/09/2015	20,000	—		—	$	11.00	06/09/2025	—		—

John Barnett	03/20/2023	—	—		—	$	10.25	03/20/2026	6,375	(18)	$	65,344
	03/20/2023	—	9,756	(9)	—	$	10.25	03/20/2026	—		—
	03/20/2023	—	5,644	(10)	—	$	10.25	03/20/2026	—		—

Dan Hollenbach	02/17/2023	—	—			$	—	02/17/2033	1,766	(19)	$	26,879
	02/17/2023	394	1,573	(11)	—	$	15.07	02/17/2033
	08/03/2022	2,000	—		—	$	12.87	08/03/2032	—		—
	08/03/2022	2,000	6,000	(12)	—	$	12.87	08/03/2032	—		—
	05/04/2022	—	—		—	$	—	—	1,880	(16)	$	18,236
	08/04/2021	1,000	2,000	(13)	—	$	11.57	08/04/2031	—		—
	08/04/2021	2,000	—		—	$	11.57	08/04/2031	—		—
	08/04/2021	—	—		—	$	—	—	3,750	(20)	$	36,938
	08/04/2020	2,700	—		—	$	9.72	08/04/2030	—		—
	08/04/2020	900	900	(14)	—	$	9.72	08/04/2030	—		—
	09/24/2018	8,408	—		—	$	25.71	09/24/2028	—		—
	09/24/2018	66,592	—		—	$	25.71	09/24/2028	—		—
	06/07/2017	5,000	—		—	$	16.76	06/07/2027	—		—
	06/07/2017	7,500	—		—	$	16.76	06/07/2027	—		—
	10/27/2015	17,012	—		—	$	11.07	10/27/2025	—		—
	10/27/2015	19,835	—		—	$	11.07	10/27/2025	—		—

(1)Non-qualified stock options will vest 10,000 on September 1, 2024, 10,000 on September 1, 2025, 10,000 on September 1, 2026, and 1,007 on September 1, 2027.

(2)Incentive stock options will vest 8,993 on September 1, 2027.

(3)Non-qualified stock options will vest 871 on February 17, 2024, 871 on February 17, 2025, and 871 on February 17, 2026.

(4)Incentive stock options will vest 871 on February 17, 2027.

(5)Incentive stock options will vest 5,065 on August 3, 2024, 5,972 on August 3, 2025, and 7,770 on August 2026.

(6)Non-qualified stock options will vest 4,935 on August 3, 2024, 4,028 on August 3, 2025, and 2,230 on August 2, 2026.

(7)Incentive stock options will vest 2,000 on August 4, 2024, and 2,000 on August 4, 2025.

(8)Non-qualified stock options will vest 1,200 on August 4, 2024.

(9)Incentive stock options will vest 9,756 on March 16, 2026.

(10)Non-qualified stock options will vest 5,644 on March 16, 2026.

(11)Incentive stock options will vest 394 on February 17, 2024, 393 on February 17, 2025, 393 on February 17, 2026 and 393 on February 17, 2027.

(12)Incentive stock options will vest 2,000 on August 3, 2024, 2,000 on August 3, 2025, and 2,000 August 3, 2026.

(13)Incentive stock options will vest 1,000 on August 4, 2024, and 1,000 on August 4, 2025.

(14)Non-qualified stock options will vest 900 on August 4, 2024.

(15)Shares will vest 1,916 on February 17, 2024 and 1,916 on February 17, 2025.

(16)Shares will vest 940 on May 4, 2024, and 940 on May 4, 2025.

(17)Shares will vest 5,000 on August 10, 2024.

(18)Shares will vest 6,375 on March 16, 2026.

(19)Shares will vest 883 on February 17, 2024 and 883 on February 17, 2025.

(20)Shares will vest 3,750 on August 10, 2024.

Each option and stock award is subject to the condition that the optionee will have remained employed by the Company, or any one or more of its subsidiaries, through such vesting dates, and each option is further subject to the terms and conditions set forth in the 2013 Plan and in the applicable Stock Option Agreement.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee is a current or former officer or team member of BGSF, Inc. or its subsidiaries. No executive officer of BGSF, Inc. served as a director or member of the compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

Director Compensation

Set forth below is a summary of the components of compensation payable to our non-management directors.

Cash Compensation

We reimburse each member of our Board for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of our Board and any committees thereof, including, without limitation, reasonable travel, lodging and meal expenses. Each director who is not a team member or officer of the Company is entitled to (i) an annual retainer of $45,000 for their service on our Board, and (ii) an annual retainer of $5,000 for audit committee service.


Name	Board Member ($)		Audit Committee ($)		Compensation Committee ($)		Nominating & Governance Committee ($)		Chairperson of the Board ($)		Total ($)

C. David Allen, Jr.	$	45,000	$	5,000	$	—	$	—	$	—	$	50,000
Richard L. Baum, Jr.	$	45,000	$	5,000	$	—	$	—	$	—	$	50,000
Donna Carroll	$	36,250	$	5,000	$	—	$	—	$	—	$	41,250
Douglas E. Hailey	$	45,000	$	5,000	$	—	$	—	$	—	$	50,000
Cynthia Marshall	$	45,000	$	—	$	—	$	—	$	—	$	45,000
Paul A. Seid	$	45,000	$	—	$	—	$	—	$	—	$	45,000

Director Compensation for Fiscal 2023

The table below sets forth the compensation payable to our non-management directors for service during Fiscal 2023.


Name	Fees earned or paid in cash ($)		Stock awards ($) (*)		Option awards ($) (*)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)

C. David Allen, Jr.	$	50,000	$	66,788	$	8,831	$	—	$	—	$	—	$	125,619

Richard L. Baum, Jr.	$	50,000	$	66,788	$	8,831	$	—	$	—	$	—	$	125,619
Donna Carroll	$	41,250	$	19,684	$	1,958	$	—	$	—	$	—	$	62,892
Douglas E. Hailey	$	50,000	$	66,788	$	8,831	$	—	$	—	$	—	$	125,619
Cynthia Marshall	$	45,000	$	66,788	$	7,051	$	—	$	—	$	—	$	118,839
Paul A. Seid	$	45,000	$	66,788	$	8,831	$	—	$	—	$	—	$	120,619

*The amounts reflect the dollar amounts recognized for financial statement reporting purposes in accordance with FASB ASC Topic 718. The assumptions used in the calculation of these amounts are included in Note 16 - Share-based Compensation to the audited consolidated financial statements included in this Annual Report on Form 10-K.

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

The following table sets forth information regarding the beneficial ownership of our common stock as of February 7, 2024 by:

•each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

•each of our named executive officers and directors; and

•all our executive officers and directors as a group.

Each stockholder’s percentage ownership is based on 10,917,265 shares of common stock outstanding as of February 7, 2024.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Except as otherwise indicated, each person or entity named in the table has sole voting and investment power with respect to all shares of our capital shown as beneficially owned, subject to applicable community property laws.

The number and percentage of shares beneficially owned by a person includes shares that may be acquired by such person within 60 days of February 7, 2024 through the exercise of vested options, while these shares are not counted as outstanding for computing the percentage ownership of any other person.

Except as otherwise set forth below, the address of the persons below is c/o BGSF, Inc., 5850 Granite Parkway, Suite 730, Plano, Texas 75024.


Name of Beneficial Owner	Shares of Common Beneficially Stock Owned		Percent of Common Stock Beneficially Owned

C. David Allen, Jr.	52,397	(1)	*
John Barnett	6,375	(2)	*
Richard L. Baum, Jr.	111,299	(3)	*
Donna Carroll	6,381	(4)	*
Beth Garvey	283,452	(5)	2.5	%
Douglas E. Hailey	202,264	(6)	1.8	%
Cynthia Marshall	25,047	(7)	*
Paul A. Seid	114,354	(8)	*
All executive officers and directors as a group (8 total)	801,569		7.0	%
Dan Hollenbach	161,971	(9)	1.5	%
North Star Investment Management Corporation (10)	725,573	(11)	6.6	%


*			Less than 1%.
(1)			Includes 8,185 shares of common stock issuable upon exercise of stock options and 9,118 shares of unvested restricted common stock.
(2)			Includes 6,375 of unvested restricted common stock
(3)			Includes 19,435 shares of common stock issuable upon exercise of stock options, 35,891 shares of common stock held by a private investment company controlled by Mr. Baum, 5,388 shares of common stock held by a family trust and 9,118 shares of unvested restricted common stock.
(4)			Includes 500 shares of common stock issuable upon exercise of stock options and 4,411 shares of unvested restricted common stock.
(5)			Includes 226,642 shares of common stock issuable upon exercise of stock options and 10,712 shares of unvested restricted common stock.
(6)			Includes 31,933 shares of common stock issuable upon exercise of stock options and 9,118 shares of unvested restricted common stock.


(7)			Includes 4,185 shares of common stock issuable upon exercise of stock options and 9,118 shares of unvested restricted common stock.
(8)			Includes 20,435 shares of common stock issuable upon exercise of stock options and 9,118 shares of unvested restricted common stock.
(9)			Includes 135,736 shares of common stock issuable upon exercise of stock options and 7,396 shares of unvested restricted common stock.
(10)			The address of North Star Investment Management Corporation is 20 N. Wacker Drive, Suite 1416, Chicago, Illinois 60606.
(11)			Based on schedule 13G filed with the SEC, includes 602,000 shares over which North Star Investment Management Corporation or its subsidiaries have sole voting power, 602,000 shares over which such entities have sole dispositive power, and 123,573 over which such entities have shared dispositive power.

Equity Compensation Plans

See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Equity Compensation Plans in this Annual Report on Form 10-K.

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

Policy on Review and Approval of Transactions with Related Persons

Our Board is currently primarily responsible for developing and implementing processes and controls to obtain information from our directors, executive officers and significant stockholders regarding related-person transactions and then determining, based on the facts and circumstances, whether we or a related person has a direct or indirect material interest in these transactions. Our Audit Committee is responsible for the review, approval and ratification of “related-person transactions” between us and any related person. Under SEC rules, a related person is a director, executive officer, nominee for director or beneficial holder of more than of 5% of any class of our voting securities or an immediate family member of any of the foregoing. In the course of its review and approval or ratification of a related-person transaction, the Audit Committee will consider:

•the nature of the related person’s interest in the transaction;

•the material terms of the transaction, including the amount involved and type of transaction;

•the importance of the transaction to the related person and to the Company;

•whether the transaction would impair the judgment of a director or executive officer to act in our best interest and the best interest of our stockholders; and

•any other matters the Audit Committee deems appropriate.

Any member of the Audit Committee who is a related person with respect to a transaction under review will not be able to participate in the deliberations or vote on the approval or ratification of the transaction. However, such a director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.

See Item 10, Directors, Executive Officers and Corporate Governance, with respect to the independence of our directors.

Item 14. Principal Accountant Fees and Services.

The Audit Committee reviews and pre-approves both audit and all permissible non-audit services provided by our independent registered public accounting firm, and accordingly, all services and fees in Fiscal 2023, 2022, and 2021 provided by Whitley Penn LLP were pre-approved by the Audit Committee. The Audit Committee has considered whether the provision of services, other than services rendered in connection with the audit of our annual financial statements, is compatible with maintaining Whitley Penn LLP’s independence. The Audit Committee has determined that the rendering of non-audit services by Whitley Penn LLP during Fiscal 2023, 2022, and 2021 was compatible with maintaining the firm’s independence.

Aggregate fees billed or incurred related to the following years for professional services rendered by Whitley Penn LLP for Fiscal 2023 and 2022 are set forth below.


	2023		2022

Audit Fees (1)	$	307,317	$	290,424
Audit-Related Fees (2)	185,185		203,061


Total	$	492,502	$	493,485


(1)			Audit fees consist principally of fees for the audit of our consolidated financial statements and Sarbanes-Oxley audit over internal controls and review of our interim consolidated financial statements.
(2)			These fees consist principally of fees related to the preparation of SEC registration statements, acquisition due diligence, audit services related to our acquisitions, and U.S. Department of Labor filings.

Selection

The Audit Committee appointed Whitley Penn LLP as our independent registered public accounting firm for the 2023 fiscal year and Whitley Penn LLP has served in this capacity since 2013. Our Board has further directed that we submit the selection of our independent registered public accounting firm for ratification by our shareholders at the 2024 annual meeting.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(1) Financial Statements

The following consolidated financial statements of the Company and the report of the Independent Registered Public Accounting Firm are contained in Item 8 of Part II of this Annual Report on Form 10-K as indicated:


			Page

Audited Consolidated Financial Statements of BGSF, Inc.

As of and for the Fiscal Years Ended December 31, 2023, January 1, 2023, and December 26, 2021.

Report of Independent Registered Public Accounting Firm (Whitley Penn PCAOB ID 726)			40

Consolidated Balance Sheets			42

Consolidated Statements of Operations and Comprehensive (L oss) Income			43

Consolidated Statements of Changes in Stockholders’ Equity			44

Consolidated Statements of Cash Flows			46

Notes to Consolidated Financial Statements			48

(2)Financial Statement Schedules

Financial statement schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.

(3)Exhibits

See the list of exhibits in the Index to Exhibits to this Annual Report on Form 10-K, which is incorporated herein by reference.

Item 16. Form 10-K Summary.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 14, 2024.


			BGSF, INC.

			By:			/s/ Beth Garvey
			Name: Beth Garvey
			Title: Chair, President, and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 14, 2024.


/s/ Beth Garvey			Chair, President, and Chief Executive Officer
Beth Garvey			(Principal Executive Officer)

/s/ John Barnett			Chief Financial Officer and Secretary
John Barnett			(Principal Financial and Accounting Officer)

/s/ C. David Allen, Jr.			Director
C. David Allen, Jr.

/s/ Richard L. Baum, Jr.			Director
Richard L. Baum, Jr.

/s/ Donna Carroll			Director
Donna Carroll

/s/ Douglas E. Hailey			Director
Douglas E. Hailey

/s/ Cynthia Marshall			Director
Cynthia Marshall

/s/ Paul A. Seid			Director
Paul A. Seid

EXHIBIT INDEX


Exhibit No.						Description
2.1††						Asset Purchase Agreement, dated as of December 13, 2019, between BG Staffing, Inc., BG Staffing, LLC, L.J.Kushner & Associates, L.L.C., and Lee J. Kushner (incorporated by reference from the registrant’s Current Report on Form 8-K filed on December 16, 2019)
2.2††						Securities Purchase Agreement, dated as of February 3, 2020, by and between BG Staffing, LLC, EdgeRock Technology Holdings, Inc., and CDI Holding Company LLC (incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 6, 2020)
2.3††						Asset Purchase Agreement, dated as of February 8, 2021, between BG Staffing, LLC, Momentum Solutionz LLC, Lorne Kaufman, and Jeff Servidio (incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 11, 2021)
2.4††						Asset Purchase Agreement, dated as of February 28, 2022, between BGSF, Inc., Sentech Engineering Services, Inc., and Jobandtalent Holding Limited (incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 1, 2022)
2.5††						Asset Purchase Agreement, dated as of December 12, 2022, by and between BG Professional LLC, Horn Solutions, Inc., Horn Solutions Dallas, LLC, and Gary Horn (incorporated by reference from the registrant’s Current Report on Form 8-K filed on December 14, 2022)
2.6††						Asset Purchase Agreement, dated April 24, 2023, by and between BGSF Professional, LLC, Arroyo Consulting LLC, Luis Fernando Sanchez, and Maureen E. Herrera (incorporated by reference from the registrant’s Current Report on Form 8-K filed on April 26, 2023)
3.1						Certificate of Incorporation of BG Staffing, Inc. (incorporated by reference from Amendment No. 2 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed on November 4, 2013)
3.2						Certificate of Amendment to Certificate of Incorporation of BGSF, Inc. (incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 12, 2021)
3.3						Bylaws of BG Staffing, Inc. (incorporated by reference from Amendment No. 2 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed on November 4, 2013)
4.1						Form of Common Stock Certificate (incorporated by reference from Amendment No. 1 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed on October 28, 2013)
4.2						Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference from the registrant’s Form 10-K filed on March 12, 2020)
10.1**						BG Staffing, Inc. 2013 Long-Term Incentive Plan (incorporated by reference from the registrant’s definitive proxy statement on Schedule 14A filed on June 20, 2023)
10.2**						Form of Nonqualified Stock Option Agreement (Vested Options) (incorporated by reference from the registrant’s Form 8-K filed on February 12, 2014)
10.3**						Form of Incentive Stock Option Agreement (incorporated by reference from the registrant’s Form 8-K filed on February 12, 2014)
10.4**						Form of Nonqualified Stock Option Agreement (incorporated by reference from the registrant’s Form 8-K filed on February 12, 2014)
10.5**						Form of Indemnification Agreement for Directors and Executive Officers (incorporated by reference from the registrant’s Form 8-K filed on February 4, 2014)
10.6						Amended and Restated Securities Purchase Agreement, dated as of May 28, 2013, among LTN Acquisition, LLC, LTN Staffing, LLC, BG Staffing, LLC, BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc., and Legg Mason SBIC Mezzanine, L.P., Brookside Pecks Capital Partners, L.P. and Brookside Mezzanine Fund II, L.P. (incorporated by reference from the registrant’s registration statement on Form S-1 (File No. 333-191683) filed on October 10, 2013)
10.7						First Amendment to Amended and Restated Securities Purchase Agreement and Other Documents, dated as of November 1, 2013, by and among LTN Acquisition, LLC, LTN Staffing, LLC, BG Staffing, LLC, BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc., and Legg Mason SBIC Mezzanine, L.P., Brookside Pecks Capital Partners, L.P. and Brookside Mezzanine Fund II, L.P. (incorporated by reference from Amendment No. 2 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed on November 4, 2013)


10.8						Second Amendment to Amended and Restated Securities Purchase Agreement and Other Documents, dated as of January 29, 2014, by and among BG Staffing, Inc., BG Staffing, LLC, BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc., and Legg Mason SBIC Mezzanine, L.P., Brookside Pecks Capital Partners, L.P. and Brookside Mezzanine Fund II, L.P. (incorporated by reference from the registrant’s Form 8-K filed on February 4, 2014)
10.10**						Executive Employment Agreement, entered into January 26, 2016 to be effective as of December 28, 2015, between B G Staff Services, Inc. and L. Allen Baker, Jr. (incorporated by reference from registrant’s Form 8-K filed February 1, 2016)
10.12						Stock Option Cancellation Agreement, dated May 31, 2018 (incorporated by reference from the registrant's Form 8-K filed June 5, 2018)
10.13**						Executive Employment Agreement, entered into February 6, 2019 to be effective as of October 1, 2018, between B G Staff Services, Inc. and Beth Garvey (incorporated by reference from the registrant's Annual Report on Form 10-K filed on March 12, 2019)
10.14**						Executive Employment Agreement, entered into February 6, 2019 to be effective as of October 1, 2018, between B G Staff Services, Inc. and Dan Hollenbach (incorporated by reference from the registrant's Annual Report on Form 10-K filed on March 12, 2019)
10.15**						Form of Restricted Stock Agreement (incorporated by reference from the registrant's Quarterly Report on Form 10-Q filed on October 30, 2018
10.16						Credit Agreement, dated as of July 16, 2019, among BG Staffing, Inc., as borrower, the lenders from time to time party there to, and BMO Harris Bank, National Association, as administrative agent, letters of credit issuer, swing line lender, sole lead arranger, and sole book runner (incorporated by reference from the registrant’s Current Report on Form 8-K filed on July 22, 2019)
10.17**						BG Staffing, Inc. 2020 Employee Stock Purchase Plan (incorporated by reference from the registrant’s definitive proxy statement on Schedule 14A filed on September 15, 2020)
10.18						First Amendment to the Credit Agreement, dated as of August 18, 2022, among BGSF, Inc., as borrower, the lenders party thereto, and BMO Harris Bank, National Association, as administrative agent and lender (incorporated by reference from the registrant’s Quarterly Report on Form 10-Q filed on November 3, 2022)
10.19						Second Amendment to Credit Agreement, by and among BGSF, Inc., the Guarantors party hereto and BMO Harris Bank N.A. , as administrative agent for the Lenders and as a lender (incorporated by reference from the registrant’s Current Report on Form 8-K filed on December 14, 2022)
10.20**						Executive Employment Agreement, dated as of March 3, 2023, between BG Staff Services, Inc. and John Barnett (incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 9, 2023)
10.21**						Amended Executive Employment Agreement, dated as of March 3, 2023, between BGSF, Inc., BG Staff Services, Inc. and Dan Hollenbach (incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 9, 2023)
10.22						Third Amendment to Credit Agreement dated as of April 24,2023, by and among BGSF, Inc., the Guarantors party hereto, and BMO Harris Bank N.A.,as administrative agent for the Lenders and as a lender(incorporated by reference from the registrant's Quarterly Report on Form 10-Q filed on May 11, 2023)
10.23						Fourth Amendment to Credit Agreement dated as of May 19, 2023, by and among BGSF, Inc., the Guarantors party hereto, and BMO Harris Bank N.A., as administrative agent for the Lenders and as a lender (incorporated by reference from the registrant's Current Report on Form 8-K filed on May 25, 2023)
10.24*††						Amended and Restated Credit Agreement, dated as of March 12, 2024, among BGSF, Inc., as Borrower, the Lenders from time to time party thereto, BMO Bank, N.A., as Administrative Agent, L/C Issuer, and Swing Line Lender, and BMO Capital Markets Corp., as Sole Lead Arranger and Sole Book Runner
21.1*						List of Subsidiaries of the Registrant
23.1*						Consent of Independent Registered Public Accounting Firm (Whitley Penn LLP)
31.1*						Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
31.2*						Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
32.1†						Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


97.1*						BGSF, Inc. Clawback Policy
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101document)


*			Filed herewith.
**			Management contract or compensatory plan or arrangement.
†			This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
††			Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and similar attachments have been omitted. The Company hereby agrees to furnish a copy of any omitted schedule or attachment to the Securities and Exchange Commission upon request.