Superior Group of Companies, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Consolidated Financial Statements in Part I, Item 1 (“Financial Statements”) of this report and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024.

The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods. See "Cautionary Note Regarding Forward-Looking Statements" below for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Business Outlook

Superior Group of Companies, Inc. (together with its subsidiaries, the “Company,” “Superior,” “we,” “our,” or “us”) is comprised of three reportable business segments: (1) Branded Products, (2) Healthcare Apparel and (3) Contact Centers.

Branded Products

In our Branded Products segment, we produce and sell customized merchandising solutions, promotional products and branded uniform programs to our customers. As a strategic branding partner, we offer our customers customized branding solutions and strategies that generate favorable brand impressions, bolster customer retention and enhance employee engagement. Our products are sold to customers in a wide range of industries, including retail chain, food service, entertainment, technology, transportation and other industries. Sales volumes in this segment are impacted by a number of factors, including marketing programs of our customers and turnover of our customers’ employees, often driven by the opening and closing of locations. From a long-term perspective, we believe that synergies within this segment will create opportunities to cross-sell products to new and existing customers.

Healthcare Apparel

In our Healthcare Apparel segment, we manufacture (through third parties or in our own facilities) and sell a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. We sell our brands of healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States. From a long-term perspective, we expect that demand for our portfolio of brands Wink®, Fashion Seal Healthcare®, its trade name CID Resources and our license of Carhartt Medical, will continue to provide opportunities for growth and increased market share.

Contact Centers

In our Contact Centers segment (also known as “The Office Gurus”), which operates in El Salvador, Belize, Dominican Republic, the United States and Jamaica until its closure on June 15, 2025, we provide outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers. These services are also provided internally to the Company’s other two operating segments. The Office Gurus has become an award-winning business process outsourcer offering inbound and outbound voice, email, text, chat and social media support. The nearshore call-center market has grown as businesses look to reduce operating costs while maintaining high-quality customer support. Nearshore operators can provide comparable service to their U.S. counterparts at a fraction of the price. With an environment and career path designed to attract and maintain top talent across all sites, we believe The Office Gurus is positioned well to continue growing this business.

Global Economic and Political Conditions

During 2025, higher tariffs and/or new tariffs impacting certain sources of the Company’s materials and production were imposed by the U.S. government. Additionally, the U.S.'s trade agreements and/or preferences with certain countries in Africa, through the African Growth and Opportunity Act ("AGOA"), and with Haiti, through the Haitian Hemispheric Opportunity through Partnership Encouragement Act ("HOPE") and the Haiti Economic Lift Program of 2010 ("HELP"), all expired on September 30, 2025. If not renewed and/or retroactively extended, the cost of continuing to do business in these countries likely will negatively impact our results of operations and financial position, or result in us moving sourcing and manufacturing from these countries to countries with more favorable cost structures. We are monitoring these imposed tariffs and duties, related ongoing negotiations and the status of the trade agreements and preferences involving the U.S. government and the countries in which we source and/or manufacture products. See Item 1, “NOTE 6 – Contingencies and Geographic Supply Concentrations,” and "Item 1A — Risk Factors — Recently imposed tariffs may have a material adverse impact on our business."

It is uncertain how inflation and interest rates will be impacted during the remainder of 2025 by the imposition of tariffs and other trade-related actions or inactions. World events, including the Russia-Ukraine War and the ongoing conflict in the Middle East continue to have negative effects on the global economy. Civil unrest in countries where we manufacture products, such as Haiti, may result in our facilities incurring damage or destruction and could interrupt our manufacturing processes and adversely affect our reputation and our relationships with our customers.

Prolonged or recurring disruptions or instability in the United States and global political and economic environment, and how the world reacts to those disruptions or instability, could have long-term impacts on our business. These business impacts could negatively affect us in a number of ways, including, but not limited to, reduced demand for our core products and services, declines in our revenue and profitability, costs associated with complying with new or amended laws and regulations and mitigating the increased cost of the new tariffs and duties affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, negative impacts on the valuation of our pension obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of indefinite-lived intangible assets.

Results of Operations

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

(1) Please refer to "Non-GAAP Financial Measure" below for a reconciliation of EBITDA to net (loss) income.

Net Income

The Company generated net income of $2.7 million and $5.4 million during the three months ended September 30, 2025 and 2024, respectively. The decrease in net income during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to a decrease in net sales and gross margins across all of our reportable segments, partially offset by a decrease in selling and administrative expenses.

EBITDA

EBITDA was $7.5 million and $11.7 million during the three months ended September 30, 2025 and 2024, respectively. The EBITDA decrease was primarily due to the decrease in net sales and gross margins across all of our reportable segments, partially offset by a decrease in selling and administrative expenses. For a reconciliation of EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Non-GAAP Financial Measure” below.

Net Sales

Net sales for the Company decreased 7.5%, or $11.2 million, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was attributable to decreases in net sales across all of our reportable segments.

Branded Products net sales decreased 8.1%, or $7.5 million, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily due to $8.0 million in timing of orders delivered in the prior quarter and lower sales volume and pricing from existing customers. These were partially offset by a $2.9 million increase resulting from revenue generated by 3Point following the acquisition in December 2024.

Healthcare Apparel net sales decreased 4.6%, or $1.5 million, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily due to volume decreases within existing customer accounts.

Contact Centers net sales decreased 9.5% or $2.4 million, before intersegment eliminations for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The 9.5% decrease versus the year-ago quarter reflects continued macroeconomic headwinds, which continue to contribute to client downsizing and client attrition outpacing new customer acquisitions.

Gross Margin

Gross margin rate for the Company was 38.3% for the three months ended September 30, 2025 and 40.4% for the three months ended September 30, 2024.

Gross margin rate for our Branded Products segment was 34.8% for the three months ended September 30, 2025 and 36.2% for the three months ended September 30, 2024. The decrease in the gross margin rate was attributable to customer sales mix for the three months ended September 30, 2025.

Gross margin rate for our Healthcare Apparel segment was 38.5% for the three months ended September 30, 2025 and 41.8% for the three months ended September 30, 2024. The gross margin rate decreased as compared to the prior year period due to product cost reductions in the prior year.

Gross margin rate for our Contact Centers segment was 52.9% for the three months ended September 30, 2025 and 54.9% for the three months ended September 30, 2024. The decrease in the gross margin rate was attributable to higher agent costs and unfavorable margin mix associated with the closure of our Jamaica contact center.

Selling and Administrative Expenses

As a percentage of net sales, total selling and administrative expenses was 35.0% for the three months ended September 30, 2025 and for the three months ended September 30, 2024.

As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 27.6% for the three months ended September 30, 2025 and 26.2% for the three months ended September 30, 2024. The rate increase was primarily related to expense deleverage from the net sales decrease for the three months ended September 30, 2025. The decrease in selling and administrative expenses of $0.7 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was due to lower employee related costs driven by headcount reductions.

As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 31.0% for the three months ended September 30, 2025 and 34.0% for the three months ended September 30, 2024. The rate decrease was primarily due to lower employee related costs.

As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 45.4% for the three months ended September 30, 2025 which improved slightly from 45.9% for the three months ended September 30, 2024. The rate decreased as compared to the prior year period driven by a prior year increase in credit loss reserve and lower employee related costs in the current period.

Selling and administrative expenses for Other, which represents Corporate costs, decreased primarily due to lower employee related costs.

Interest Expense, Net

Interest expense, net decreased to $1.4 million for the three months ended September 30, 2025 from $1.6 million for three months ended September 30, 2024. This decrease was due to a lower weighted average interest rate on those borrowings from 6.3% for the three months ended September 30, 2024 to 5.4% for the three months ended September 30, 2025.

Income Taxes

Income tax expense decreased to $0.4 million for the three months ended September 30, 2025 from $1.2 million for the three months ended September 30, 2024. The effective tax rate was 13.9% and 17.8% for the three months ended September 30, 2025 and 2024, respectively. Income tax expense and the effective tax rate for the three months ended September 30, 2025 and September 30, 2024 were primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations, subject to various statutory tax rates in those jurisdictions. The tax rates were further favorably impacted by the performance of the Company’s compensation plans during the three months ended September 30, 2025 and 2024. The effective tax rate may vary from quarter to quarter due to discrete, unusual or non-recurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, or other items.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

(1) Please refer to "Non-GAAP Financial Measure" below for a reconciliation of EBITDA to net (loss) income.

Net Income

The Company generated net income of $3.5 million and $9.9 million during the nine months ended September 30, 2025 and 2024, respectively. The decrease in net income during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to lower gross margins at all three of our reportable segments, partially offset by a decrease in interest expense.

EBITDA

EBITDA was $17.1 million and $26.8 million during the nine months ended September 30, 2025 and 2024, respectively. The EBITDA decrease was primarily due to lower gross margins at all three of our reportable segments. For a reconciliation of EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Non-GAAP Financial Measure” below.

Net Sales

Net sales for the Company decreased 0.2% or $0.7 million, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was attributable to decreases in net sales in our Healthcare Apparel and Contact Centers reportable segments.

Branded Products net sales increased 1.3%, or $3.3 million, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was due to a $9.1 million increase resulting from revenue generated by 3 Point following the acquisition in December 2024, offset by a decrease within existing large enterprise accounts.

Healthcare Apparel net sales decreased 2.0% or $1.8 million, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily due to volume decreases within existing customer accounts.

Contact Centers net sales decreased 3.5% or $2.6 million, before intersegment eliminations for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The 3.5% decrease versus the year-ago period reflects continued macroeconomic headwinds, which continue to contribute to client downsizing and client attrition outpacing new customer acquisitions.

Gross Margin

Gross margin rate for the Company was 37.9% for the nine months ended September 30, 2025 and 39.6% for the nine months ended September 30, 2024. The gross margin rate decrease was driven by gross margin rate decreases in all three of our reportable segments.

Gross margin rate for our Branded Products segment was 34.2% for the nine months ended September 30, 2025 and 35.8% for the nine months ended September 30, 2024. The gross margin rate decreased as compared to the prior year period due to sourcing mix resulting in higher product costs and lower pricing to existing customers.

Gross margin rate for our Healthcare Apparel segment was 37.1% for the nine months ended September 30, 2025 and 40.0% for the nine months ended September 30, 2024. The gross margin rate decreased as compared to the prior year period due to product cost reductions in the prior year and during the current year $0.6 million higher tariff costs in advance of price increases to our customers.

Gross margin rate for our Contact Centers segment was 53.0% for the nine months ended September 30, 2025, down slightly from 53.6% for the nine months ended September 30, 2024.

Selling and Administrative Expenses

As a percentage of net sales, total selling and administrative expenses was 36.0% for the nine months ended September 30, 2025 and 35.7% for the nine months ended September 30, 2024.

As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 27.4% for the nine months ended September 30, 2025 and 27.0% for the nine months ended September 30, 2024. The increase in selling and administrative expenses of $1.9 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was driven by increased sales resulting in higher sales commission expense, an adjustment to credit loss reserves of $0.5 million and increased costs from 3Point acquired in December 2024, offset by lower employee related costs driven by headcount reductions.

As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 33.8% for the nine months ended September 30, 2025 and 34.8% for the nine months ended September 30, 2024. The rate decrease as compared to the prior year period was primarily driven by a decrease in depreciation expense and lower employee related costs.

As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 46.3% for the nine months ended September 30, 2025 and 44.2% for the nine months ended September 30, 2024. The rate increase as compared to the prior year period was primarily driven by an increase in credit loss expense.

Selling and administrative expenses for Other, which represents Corporate costs, are consistent with the prior year period.

Interest Expense, Net

Interest expense, net decreased to $3.9 million for the nine months ended September 30, 2025 from $4.9 million for nine months ended September 30, 2024. This decrease was due to a lower weighted average interest rate on those borrowings from 6.5% for the nine months ended September 30, 2024 to 5.4% for the nine months ended September 30, 2025.

Income Taxes

Income tax expense decreased to $0.6 million for the nine months ended September 30, 2025 from $1.9 million for the nine months ended September 30, 2024. The effective tax rate was 14.1% and 16.1% for the nine months ended September 30, 2025 and 2024, respectively. Income tax expense and the effective tax rate for the nine months ended September 30, 2025 and September 30, 2024 were primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations, subject to various statutory tax rates in those jurisdictions. The tax rates were further favorably impacted by the performance of the Company’s compensation plans during the nine months ended September 30, 2025 and 2024 totaling $1.0 million and $0.5 million respectively. The effective tax rate may vary from quarter to quarter due to discrete, unusual or non-recurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, or other items.

Liquidity and Capital Resources

Liquidity Analysis

Short-Term Liquidity

For the next twelve months, our primary capital requirements are for capital to maintain our operations, meet contractual obligations, primarily consisting of our revolving credit facility, term loan, operating leases and acquisition-related contingent liabilities, and fund capital expenditures, dividends, stock repurchases, any potential merger and acquisition activity and other general corporate purposes. Management currently believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the above requirements for the next twelve months.

Long-Term Liquidity

Beyond the next twelve months, our principal demand for funds will be for maintenance of our core business, to satisfy long-term contractual obligations, stock repurchases, any potential merger and acquisition activity and the Company’s ongoing capital expenditure program designed to improve the effectiveness and capabilities of its facilities and technology. The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions. The Company's material contractual obligations include outstanding debt, operating leases, long-term pension liability and non-qualified deferred compensation plan liabilities in Other Liabilities. Management currently believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the above requirements.

Cash Requirements

Working Capital Needs

The Company carries inventories of both raw materials and finished products, the practice of which requires substantial working capital, which we believe to be common in the industry. The Company also requires working capital to invest in new product lines and technologies.

Capital expenditures

Capital expenditures were $3.4 million and $2.9 million for the nine months ended September 30, 2025 and 2024, respectively.

Sources of Capital and Liquidity

Cash Flows from Operations

Net cash provided by operating activities primarily results from cash collected from our segments' customers, offset by cash payments made for raw materials, finished goods, salaries and payroll-related benefits, leases and other general corporate expenditures.

For the nine months ended September 30, 2025, net cash provided by operating activities was $1.3 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors and employees. These cash collections were offset by cash payments including $10.5 million of cash outflows for inventory purchases. The inventory balance is up from the prior year primarily due to the sales decrease in Healthcare Apparel, as well as, the timing of purchases.

For the nine months ended September 30, 2024, net cash provided by operating activities was $24.5 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders primarily driven by the Company’s collection of receivable balances and increases in cash inflows for inventory.

Credit Facilities and Debt Activity

The Company’s primary source of liquidity has been its net income and the use of credit facilities and term loans. The Company has access to a Revolving Credit Facility with a maximum principal amount of $125.0 million and a term loan in the original aggregate principal amount of $75.0 million and the ability to request incremental revolving credit or term loan facilities in an aggregate amount of up to an additional $75.0 million, subject to obtaining additional lender commitments and satisfying certain other conditions.

For the nine months ended September 30, 2025, the Company had $76.0 million in borrowings and $58.0 million in payments on the revolving credit facility. For the nine months ended September 30, 2025, the Company had $4.2 million in payments on the term loan.

For the nine months ended September 30, 2024, the Company had $31.0 million in borrowings and $37.0 million in payments on the revolving credit facility. For the nine months ended September 30, 2024, the Company had $3.3 million in payments on the term loan.

In the future, the Company may continue to use credit facilities and other secured and unsecured borrowings as a source of liquidity. Additionally, the cost of the Company’s future sources of liquidity may differ from the costs of the Company’s sources of liquidity to date.

Please refer to Note 5 to our Condensed Notes to the Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details on our outstanding long-term debt.

Dividends and Share Repurchase Program

During the nine months ended September 30, 2025 and 2024, the Company paid cash dividends of $6.7 million and $7.0 million, respectively. The Company anticipates that it will continue to pay dividends in the future as financial conditions permit.

On September 19, 2025, the “Company entered into a 10b5-1 trading plan (the “Plan”) for the purpose of repurchasing up to a specified number of shares of the Company’s outstanding common stock (the “Repurchase Limit”) in accordance with the $17.5 million share repurchase program previously authorized by the Company’s Board of Directors, which was announced by the Company on March 11, 2025. The Plan is intended to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The Plan allows the Company to repurchase shares up to the Repurchase Limit commencing September 20, 2025 and ending on the earlier of the date on which the Repurchase Limit is reached or other events specified in the Plan. Repurchases of common stock under the Plan will be administered through an independent broker and are subject to certain price, market, volume and timing constraints specified in the Plan.

Critical Accounting Estimates

See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2024.

The preparation of our financial statements in conformity with GAAP requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. There have been no material changes to the critical accounting estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024, except that the critical accounting estimate set forth under, “Annual Impairment Tests” is updated as follows:

Annual Impairment Tests:

The Company performs its goodwill and indefinite-lived intangible impairment tests annually or more frequently as events or changes in circumstances warrant. The timing of the annual impairment tests was changed to August 31st, and historically was performed during the fourth quarter.

Indefinite-lived Intangible Assets:

As of August 31, 2025, the Company performed its annual impairment test for its indefinite-lived trade name intangible assets which did not result in an impairment. We conducted a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates.

In determining the fair value of our trade name indefinite lived intangible assets as of August 31, 2025, we used the following key assumptions:

• Royalty rates of 0.75% - 3.0%;
• A tax rate of 27.0%;
• A long-term growth rate of 3.0%; and
• Assumed discount rates of 14.5% - 16.5%

Goodwill:

The discounted cash flow approach that we use for valuing goodwill as part of our impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value. Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our forecasts, business plans, economic projections, anticipated future cash flows and marketplace data.

We performed our annual impairment test as of August 31, 2025, which did not result in any goodwill impairment. In determining the fair value of our reporting unit, we used the following assumptions:

• Expected cash flows underlying our business plans for the initial five-year period were based on a detailed, multi-year forecast performed by our BAMKO reporting unit;
• Long-term growth rate of 3.0%; and
• Discount rate of 14.0%

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Non-GAAP Financial Measure

EBITDA, which is a non-GAAP financial measure, is defined as net income excluding interest expense, net, income tax expense, depreciation and amortization expense and impairment charges. The Company believes EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the Company’s core operating results from period to period by removing (i) the impact of the Company’s capital structure (interest expense from outstanding debt), (ii) tax consequences and (iii) asset base (depreciation and amortization). The Company uses EBITDA internally to monitor operating results and to evaluate the performance of its business. In addition, the compensation committee has used EBITDA in evaluating certain components of executive compensation, including performance-based annual incentive programs.

EBITDA is not a measure of financial performance under GAAP. EBITDA should not be considered in isolation or as an alternative to net income, cash flows from operating activities or any other measure determined in accordance with GAAP. The items excluded to calculate EBITDA are significant components in understanding and assessing the Company’s results of operations. The Company’s EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner.

The following table reconciles net income to EBITDA (in thousands):

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Cautionary Note Regarding Forward Looking Statements

Certain matters discussed in this Form 10-Q are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified by use of the words “may,” “will,” “should,” “could,” “expect,” "anticipate,” “estimate,” “believe,” “intend,” “project,” “potential,” or “plan” or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements in this Quarterly Report on Form 10-Q may include, without limitation: (1) projections of revenue, income, and other items relating to our financial position and results of operations, including short term and long term plans for cash, (2) statements of our plans, objectives, strategies, goals and intentions, (3) statements regarding the capabilities, capacities, market position and expected development of our business operations and (4) statements of expected industry and general economic trends.

Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited to, the following: the impact of competition; uncertainties related to tariffs, duties, trade wars and related matters, supply disruptions, inflationary environments (including with respect to shipping costs and the cost of finished goods and raw materials and shipping costs), employment levels (including labor shortages), and general economic and political conditions in the areas of the world in which the Company operates or from which it sources its supplies or the areas of the United States of America (“U.S.” or “United States”) in which the Company’s customers are located; changes in the healthcare, retail chain, food service, transportation and other industries where uniforms and service apparel are worn; our ability to identify suitable acquisition targets, discover liabilities associated with such businesses during the diligence process, successfully integrate any acquired businesses, or successfully manage our expanding operations; the price and availability of raw materials; attracting and retaining senior management and key personnel; the Company’s ability to maintain effective internal control over financial reporting; and other factors described in the Company’s filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.

Disclosure Controls and Procedures

The Company conducted an evaluation, under supervision and with the participation of the Company’s principal executive officer, Michael Benstock, and the Company’s principal financial officer, Michael Koempel, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information the Company is required to disclose in its filings with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure 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 officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We are exposed to certain risks and uncertainties that could have a material adverse impact on our business, financial condition and operating results. Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recently imposed tariffs and upcoming tariff-related decisions may have a material adverse impact on our business

Beginning in our second quarter of 2025, significant new and expanded tariffs, reciprocal tariffs and other trade restrictions have been imposed with selective tariff exemptions impacting global trade. We purchase or manufacture our products largely in Haiti, China, Madagascar, Vietnam, Pakistan and Bangladesh. Demand for our products may be adversely impacted if we are unable to share the cost increases with our suppliers and third-party manufacturers or pass along the remaining cost increases to our customers. The continuation, expansion, or introduction of U.S. tariffs on countries from which we source and/or manufacture products, such as China and Vietnam, could have a material adverse impact on our revenue, operations, financial position and cash flows.

Additionally, the U.S. had trade agreements and/or preferences with certain countries in Africa, through the African Growth and Opportunity Act ("AGOA"), and with Haiti, through the Haitian Hemispheric Opportunity through Partnership Encouragement Act ("HOPE") and the Haiti Economic Lift Program of 2010 ("HELP"), all of which expired on September 30, 2025. If not renewed and/or retroactively extended, the cost of continuing to do business in these countries could negatively impact our results of operations and financial position or result in us moving sourcing and manufacturing from these countries to countries with more favorable cost structures. We are monitoring these imposed tariffs and duties, related ongoing negotiations and the status of the trade agreements and preferences involving the U.S. government and the countries in which we source and/or manufacture products. Other trade agreements and/or preferences may expire or be terminated as well. The outcome of these trade agreements and/or preferences could have a material adverse impact on our revenue, operations, financial position and cash flows.