ATLANTIC INTERNATIONAL CORP. (ATLN)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion relates to Atlantic International Corp (Atlantic or the Company) and its consolidated subsidiaries and should be read together with the Company’s Unaudited Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1.—Financial Statements of this Quarterly Report on Form 10-Q.

Overview

Atlantic, through its subsidiaries, is a worldwide strategic staffing firm. The Company was formed under the principles of honesty and integrity, and with the view of becoming the preferred outside employer of choice. Since its formation, the Company has grown from a regional operation to a worldwide staffing firm with offices and geographic reach across the United States and Europe. The Company’s domestic operations primarily places individuals in accounting and finance, administrative and clerical, information technology, legal, light industrial, and medical roles. The Company is also a leading provider of productivity consulting and workforce management solutions. With the addition of Circle8 Group (“Circle8”) on January 23, 2026, Atlantic extended its capabilities into specialized high-growth IT and technology staffing capabilities across Europe, complementing Atlantic’s domestic industrial staffing operations. Circle8 is a European IT-technology talent and consulting enablement platform that provides specialized workforce solutions to enterprises, technology companies, financial institutions, and public-sector organizations. Circle8 focuses on sourcing, deploying, and managing highly skilled professionals in information technology and related digital disciplines. Circle8 is one of the fastest-growing IT and technology staffing companies, operating across Europe through a portfolio of specialized brands. Circle8 manages over 8,500 technology professionals and specializes in software development, data analytics, cybersecurity, project management, and emerging technologies. Circle8 is founder-led and will continue to be led by Mr. Guus Franke who joined Atlantic’s Board of Directors as Executive Chairman.

Atlantic is headquartered in Englewood Cliffs, New Jersey and has more than 100 locations in the USA. Circle8 is headquartered in Amsterdam, Netherlands.

Atlantic is a high-growth outsourced services and workforce solutions company with management who have more than a 28-year operating record. Based on their knowledge of the industry, and through its mergers and acquisitions strategy, Atlantic is building a global staffing organization that redefines the way companies grow professional teams. Our mission is to leverage new technologies and business partnerships to create streamlined hiring processes that resolve the challenges of modern-day employment economics.

Atlantic’s corporate acquisition strategy is designed to assist its client companies in the transformation of stagnation into growth to achieve sustainable results through their most important asset: people. Atlantic’s goal is to create a business designed to deliver to its clients targeted industry talent at speed and scale while also growing the pool of in-demand talent for this same constituency. Atlantic’s recruiters will provide specific and data-driven guidance, development, training, and access to jobs. It believes this approach is particularly applicable in several growth sectors, including legal and financial services, technology, and healthcare. The current climate of industry fragmentation and overall economic uncertainty create a moment that Atlantic believes is ripe for strategic consolidation. Atlantic plans to integrate companies and maximize synergies and economics to improve sales and lower operating costs, while, at the same time, continuing to focus and expand on its acquisition strategy of high-margin profitable outsourced services and workforce solution providers.

Atlantic’s acquisition of Circle8 demonstrated its strategic rationale, as follows:

•Diversification of revenue and end markets, balancing industrial staffing with higher-margin, higher-growth IT and technology talent solutions;

•Expanded multinational customer coverage, enabling cross-regional workforce support for global enterprises;

•Enhanced scale and operating leverage, supporting long-term margin expansion and cash flow generation;

•Increased revenue visibility, driven by long-term government contracts and blue-chip enterprise customers; and

•Platform for disciplined future growth, leveraging Circle8's completed acquisition phase and transition to operational excellence.

At Atlantic, management understands that finding the perfect candidate starts before the job requisition even comes in. Domestically, the Company employs the strategy of proactive recruitment to build a pipeline of pre-vetted candidates for order fulfillment. Atlantic’s client mix consists of both small- and medium-size businesses, and large national and multinational client relationships. Client relationships with small- and medium-size businesses are based on a local or regional relationship, and tend to rely less on longer-term contracts, and the competitors for this business are primarily

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locally owned businesses. The large national and multinational clients, on the other hand, will frequently enter into non-exclusive arrangements with several firms, with the ultimate choice among them being left to local managers. As a result, employment services firms with a large network of offices compete most effectively for this business, which generally has agreed-upon pricing or mark-up on services performed.

Internationally, the Company’s specialized workplace solutions support organizations that require specialized technology capabilities to design, build, operate, and secure digital systems and digital infrastructure. Circle8 operates through a portfolio of operating companies and brands that provide staffing, recruitment, and consulting-related services focused primarily on technology professionals. Circle8 delivers services through a range of workforce solutions, including temporary staffing, contract staffing, and payrolling services. Circle8’s clients include both private-sector enterprises and public-sector institutions that rely on specialized technology talent to support digital transformation initiatives and the ongoing operation of mission-critical IT systems. Circle8 generates the substantial majority of its revenue from the placement of technology professionals on temporary and contract assignments, where it bills clients based on hourly or daily rates for services performed.

Results of Operations

The following discussion summarizes the key factors Atlantic’s management team believes are necessary for an understanding of Atlantic’s financial statements.

Comparison of the Three Months Ended March 31, 2026 and 2025:

Certain related party and non-related party financial statement line-item amounts have been aggregated for purposes of analysis below, which is consistent with management’s evaluation of its business results.

The following table summarizes our results of operations for the periods presented:

+ -     change greater than ± 100%

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Service Revenue, Net

Service revenue, net of discounts, for the three months ended March 31, 2026 and 2025 consisted of the following:

Service revenue, net was $249,886,893 and $102,808,807 for the three months ended March 31, 2026 and 2025, respectively, an increase of $147,078,086, or 143.1%. The Circle8 Acquisition accounted for $145,248,041 of the increase. The remaining $1,830,045 increase is primarily a result of the historical Company’s temporary placement services business, increasing $1,755,516 in the three months ended March 31, 2026 as compared to the same period in 2025 due to a strong sales initiative which resulted in new customers.

Cost of Revenue and Gross Profit

Gross profit reflects the difference between realized service revenue, net and cost of revenues. Cost of revenue consists primarily of fixed and variable directs costs, including payroll, payroll taxes and employee benefit costs. Cost of revenue and gross profit for the three months ended March 31, 2026 and 2025 consisted of the following:

Cost of revenue for the three months ended March 31, 2026 and 2025 was $228,460,840 and $91,622,685, respectively, an increase of $136,838,155 or 149.3%. The Circle8 Acquisition accounted for 134,938,646 of the increase. The remaining $1,830,045 increase due to the historical Company’s higher service revenues. Gross profit for the three months ended March 31, 2026 and 2025 was $21,426,053 and $11,186,122, respectively, an increase of $10,239,931 or 91.5%. The Circle8 Acquisition accounted for $10,309,395 of the increase. The historical Company was essentially flat. As a percentage of service revenue, net, gross profit was 8.6% and 10.9% for the three months ended March 31, 2026 and 2025, respectively. The reduction in margin primarily attributed to international operations including certain European jurisdictions which have lower margins compared to the Company’s domestic business. As a percentage of service revenue, net, the gross profit was 10.6% and 10.9% for the three months ended March 31, 2026 and 2025, respectively, for the historical Company, which was a slight decrease.

Total Operating Expenses

Total operating expenses for the three months ended March 31, 2026 and 2025 consisted of the following:

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

The following discussion relates to Atlantic International Corp. (Atlantic or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Item 8.— Financial Statements and Supplementary Data.

Overview

Atlantic, through its subsidiaries, is a national strategic staffing firm servicing the commercial, professional, finance, direct placement, and managed service provider verticals. Lyneer was formed under the principles of honesty and integrity, and with the view of becoming the preferred outside employer of choice. Since its formation, the Company has grown from a regional operation to a national staffing firm with offices and geographic reach across the United States. The Company primarily places individuals in accounting and finance, administrative and clerical, information technology, legal, light industrial, and medical roles. The Company is also a leading provider of productivity consulting and workforce management solutions. Atlantic is headquartered in Englewood Cliffs, New Jersey and has more than 100 locations in the USA.

The Company’s management believes, based on their knowledge of the industry, that it is one of the prominent and leading staffing firms in the ever-evolving staffing industry. Its management also believes that it is an industry leader in permanent, temporary and temp-to-perm placement services in a wide variety of areas, including, but not limited to, accounting & finance, administrative & clerical, hospitality, IT, legal, light industrial and medical fields. Its deep expertise and extensive experience have helped world class companies revolutionize their operations, resulting in greater efficiency and streamlined processes. Its comprehensive suite of solutions covers all aspects of workforce management, from recruitment and hiring to time and attendance tracking, scheduling, performance management, and predictive analytics. Atlantic takes a personalized approach to each client, working closely with them to understand their unique needs and develop a tailored roadmap for success. In addition, Atlantic offers a comprehensive range of recruiting services, including temporary and permanent staffing, within the light industrial, administrative, and financial sectors. Its services are designed to meet each client’s needs, including payroll services and vendor management services/managed service provider solutions. Its extensive network of offices and onsite operations provide local support for its clients, while its national presence gives Atlantic the resources to tackle even the most complex staffing needs. With a focus on integrity, transparency and customer service and a commitment to results over a 25-year period, management believes it has earned a reputation as one of the premier workforce solutions partners in the United States.

At Atlantic, management understands that finding the perfect candidate starts before the job requisition even comes in. The Company employs the strategy of proactive recruitment to build a pipeline of pre-vetted candidates for order fulfillment. Atlantic’s client mix consists of both small- and medium-size businesses, and large national and multinational client relationships. Client relationships with small- and medium-size businesses are based on a local or regional relationship, and tend to rely less on longer-term contracts, and the competitors for this business are primarily locally owned businesses. Comprising over 60% of the Company’s revenue base, the large national and multinational clients, on the other hand, will frequently enter into non-exclusive arrangements with several firms, with the ultimate choice among them being left to local managers. As a result, employment services firms with a large network of offices compete most effectively for this business, which generally has agreed-upon pricing or mark-up on services performed.

Results of Operations

The following discussion summarizes the key factors Atlantic’s management team believes are necessary for an understanding of Atlantic’s financial statements.

Comparison of the Years Ended December 31, 2025 and 2024:

Certain related party and non-related party financial statement line-item amounts have been aggregated for purposes of analysis below, which is consistent with management’s evaluation of its business results.

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The following table summarizes our results of operations for the periods presented:

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+ -    change greater than ± 100%

Service Revenue, Net

Service revenue, net of discounts, for years ended December 31, 2025 and 2024 consisted of the following:

Service revenue, net was $435,878,730 and $442,609,814 for the years ended December 31, 2025 and 2024, respectively, a decrease of $6,731,084, or 1.5%. This decrease was predominately due to lower revenues from Lyneer’s temporary placement services business, which decreased $7,419,564 or 1.7% in the year ended December 31, 2025 as compared to the same period in 2024 due primarily to a decrease in the revenues associated with our largest client. Permanent placement and other services increased $688,480 or 18.2% due to higher permanent job demand.

Cost of Revenue and Gross Profit

Gross profit reflects the difference between realized service revenue, net and cost of revenues for providing temporary and permanent placement solutions. Cost of revenue consists primarily of fixed and variable direct costs, including payroll,

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payroll taxes and employee benefit costs. Cost of revenue and gross profit for the years ended December 31, 2025 and 2024 consisted of the following:

Cost of revenue for the years ended December 31, 2025 and 2024 was $389,892,967 and $395,431,491, respectively, a decrease of $5,538,524 or 1.4%. The decrease in cost of revenue was due primarily to lower service revenue, net driven primarily by lower temporary placement services revenue due primarily to a decrease in the revenues associated with our largest client., net which decreased $7,419,564 or 1.7%.

Gross profit for the years ended December 31, 2025 and 2024 was $45,985,763 and $47,178,323, respectively, a decrease of $1,192,560 or 2.5%. As a percentage of service revenue, net, gross profit was 10.6% and 10.7% for the years ended December 31, 2025 and 2024, respectively, a slight decrease.

Total Operating Expenses

Total operating expenses for the years ended December 31, 2025 and 2024 consisted of the following:

The changes in each financial statement line item for the respective periods are described below.

Selling, General and Administrative Costs

Selling, general and administrative expenses for the years ended December 31, 2025 and 2024 were $91,289,682 and $64,021,052, respectively, an increase of $27,268,630, or 42.6%, due primarily to higher stock compensation expense and a full year of expenses as a result of the Merger compared to five and one-half months during the years ended December 31, 2025 and 2024, respectively, partially offset by cost cutting measures and lower transactional expenses related to the Merger.

As a percentage of service revenue, net, selling, general and administrative costs were 20.9% in the year ended December 31, 2025 as compared to 14.5% in the year ended December 31, 2024. The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to higher stock compensation expense and lower transactions costs related to the Merger in the year ended December 31, 2025 compared to the year ended December 31, 2024.

Depreciation and Amortization

Depreciation and amortization expense for the years ended December 31, 2025 and 2024 was $4,928,514 and $4,991,863, respectively, a decrease of $63,349 or 1.3%, a slight decrease on a year-over-year basis.

Loss on Debt Extinguishment

Loss on debt extinguishment, for the years ended December 31, 2025 and 2024 were as follows:

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Loss on debt extinguishment during the year ended December 31, 2024 relates to the Seventh Amendment and Forbearance Agreement to the Revolver being treated as a debt extinguishment after the Company’s analysis of ASC Topic 470 — Debt (“ASC 470”).

Advisory Fees Paid in the Merger

Advisory fees paid in the Merger for the years ended December 31, 2025 and 2024 were as follows:

The stockholders of Atlantic Acquisition Corp. were issued an aggregate of 18,220,338 shares of Company’s common stock at a market value of $2.36 per share, or $43,000,000 in the aggregate, on the date of the Merger.

Interest Expense

Interest expense for the years ended December 31, 2025 and 2024 were as follows:

Interest expense for years December 31, 2025 and 2024 was $9,164,495 and $12,004,860, respectively. The decrease of $2,840,365, or 23.7%, in year ended December 31, 2

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