Summary of GENERAL EMPLOYMENT ENTERPRISES INC

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

Overview

The Company provides contract and placement staffing services for business and industry, specializing in the placement of information technology, engineering and accounting professionals. As of March 31, 2009, the Company operated 16 offices located in nine states.

The Company's business is highly dependent on national employment trends in general and on the demand for professional staff in particular. As an indicator of employment conditions, the national unemployment rate was 8.5% in March 2009 and 5.1% in March 2008. The change indicates a trend toward a lower level of employment in the United States during the last twelve months.

During the six months ended March 31, 2009, the U.S. economy experienced a period of uncertainty stemming from problems in the housing and credit markets. According to the U.S. Department of Labor, the national employment level declined by approximately 4.0 million jobs during the period. Management believes that employers became extremely cautious about hiring during the period. As a result, the Company experienced sharp declines in both the number of billable contract hours and the number of placements.

Consolidated net revenues for the six months ended March 31, 2009 decreased 32% compared with the prior year. Contract service revenues were down 24%, and placement service revenues were down 39%. The effects of lower consolidated net revenues resulted in a $1,780,000 loss from operations this year, compared with an $800,000 loss from operations for the same period last year.

The Company's current strategy is to improve performance by developing new marketing programs, enhancing staff training, closing unprofitable operations and maintaining control over operating expenses. In December 2008, the Company engaged a consultant to assist in the development of its contract business, with the goal of growing the business on a long-term basis. The Company reduced executive compensation by 22% as of January 1, 2009, and during the quarter ended March 31, 2009, we reduced the size of our sales and recruiting staff by 24%.

As a result of the losses during the first six months of fiscal 2009, the Company's cash position was reduced to $2,464,000 as of March 31, 2009. The Company announced on March 30, 2009 that it has signed a definitive securities purchase and tender offer agreement under which PSQ will acquire a controlling interest in the Company. See "Proposed Transactions" in the notes to consolidated financial statements. Under the terms of the agreement, PSQ has agreed, among other things, to purchase from the Company 7,700,000 newly issued shares of common stock of the Company at a purchase price of $0.25 per share for a total purchase price of $1,925,000. The share purchase is subject to the approval of shareholders, and the share purchase and tender offer are subject to other customary closing conditions.

If the sale of common stock to PSQ is approved by the shareholders, the proceeds would provide the Company with additional liquidity to continue operations. If the sale of common stock is not approved, and if business conditions do not improve, the Company would need to significantly reduce or cease operations. Absent the cash that would be received from the sale of stock to PSQ, the Company's management estimates that the Company would exhaust its cash resources by the end of the fourth calendar quarter of 2009, and, in light of the condition of the current financial markets, the Company may not otherwise be able to obtain financing needed to continue its operations, or if able to obtain it, such financing may not be available on market terms or terms attractive to the Company.

Results of Operations - Six Months

Net Revenues

Consolidated net revenues for the six months ended March 31, 2009 were down $2,494,000 (32%) from the prior year. Contract service revenues decreased $917,000 (24%) and placement service revenues decreased $1,577,000 (39%). As a result of the weaker economic conditions that prevailed during the six months ended March 31, 2009, the Company experienced less demand for its services. The decline in consolidated net revenues was the result of a 13% decrease in the number of billable contract hours and 49% fewer placements.

Cost of Contract Services

The cost of contract services includes wages and the related payroll taxes and employee benefits of the Company's employees while they work on contract assignments. There are no direct costs associated with placement service revenues. The cost of contract services for the six months ended March 31, 2009 was down $556,000 (21%) as a result of the lower volume of contract business. The gross profit margin on contract business was 30.2%, which was 2.2 points less than 32.4% for the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include the following categories:

• Compensation in the operating divisions, which includes commissions earned by the Company's employment consultants and branch managers on permanent and temporary placements. It also includes salaries, wages, unrecovered advances against commissions, payroll taxes and employee benefits associated with the management and operation of the Company's staffing offices.

• Administrative compensation, which includes salaries, wages, payroll taxes and employee benefits associated with general management and the operation of its finance, legal, human resources and information technology functions.

• Occupancy costs, which includes office rent, depreciation and amortization, and other office operating expenses.

• Recruitment advertising, which includes the cost of identifying job applicants.

• Other selling, general and administrative expenses, which includes travel, bad debt expense, fees for outside professional services and other corporate-level expenses such as business insurance and taxes.

The Company's largest selling, general and administrative expense is for compensation in the operating divisions. Most of the Company's employment consultants are paid on a commission basis and receive advances against future commissions. Advances are expensed when paid. When commissions are earned, prior advances are applied against them and the consultant is paid the net amount. At that time, the Company recognizes the full amount as commission expense, and advance expense is reduced by the amount recovered. Thus, the Company's advance expense represents the net amount of advances paid, less amounts applied against commissions.

Selling, general and administrative expenses for the six months ended March 31, 2009 decreased $958,000 (16%). Compensation in the operating divisions was down 25%, reflecting lower commission expense on the lower volume of business. Administrative compensation was down 23%, due to executive pay reductions, staff reductions and lower deferred compensation expense. Occupancy costs were down 13% because of operating fewer branch offices than last year. Partially offsetting these reductions was a 36% increase in recruitment advertising, which was due to higher utilization of job board posting services and higher costs per posting.

Other

Investment income for the six months ended March 31, 2009 was down $134,000 from the same period last year, due to a combination of lower funds available for investment and a lower average rate of return on investments. Returns in fiscal 2009 were adversely affected by a downturn in the credit markets and reflect losses on trading securities.

There were no credits for income taxes as a result of the pretax losses during the periods, because there was not sufficient assurance that future tax benefits would be realized.

Results of Operations - Three Months

Net Revenues

Consolidated net revenues for the three months ended March 31, 2009 were down $1,417,000 (36%) from the prior year. Contract service revenues decreased $660,000 (32%) and placement service revenues decreased $757,000 (41%). As a result of the weaker economic conditions that prevailed during the three months ended March 31, 2009, the Company experienced less demand for its services. The decline in consolidated net revenues was the result of an 18% decrease in the number of billable contract hours and 46% fewer placements.

Cost of Contract Services

The cost of contract services for the three months ended March 31, 2009 was down $357,000 (26%) as a result of the lower volume of contract business. The gross profit margin on contract business was 27.3%, which was 5.9 points less than 33.2% for the prior year due to competitive pricing pressures during the period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2009 decreased $508,000 (17%). Compensation in the operating divisions was down 28%, reflecting lower commission expense on the lower volume of business. Administrative compensation was down 16%, due to executive pay reductions. Occupancy costs were down 12% because of operating fewer branch offices than last year. Partially offsetting these reductions was a 19% increase in recruitment advertising, which was due to higher utilization of job board posting services.

Other

Investment income for the three months ended March 31, 2009 was down $13,000 from the same period last year, due to a combination of lower funds available for investment and a lower average rate of return on investments. Returns in fiscal 2009 were adversely affected by a downturn in the credit markets and reflect losses on trading securities.

There were no credits for income taxes as a result of the pretax losses during the periods, because there was not sufficient assurance that future tax benefits would be realized.

Financial Condition

As of March 31, 2009, the Company had cash and cash equivalents of $2,464,000, which was a decrease of $1,701,000 from September 30, 2008. Net working capital at March 31, 2009 was $2,375,000, which was a decrease of $1,910,000 from September 30, 2008, and the current ratio was 2.7 to 1. Shareholders' equity as of March 31, 2009 was $3,240,000 which represented 70% of total assets.

During the six months ended March 31, 2009, the net cash used by operating activities was $1,507,000. The net loss for the period, adjusted for depreciation and other non-cash charges, used $1,716,000. A reduction of accounts receivable provided $584,000, and all other working capital items used $375,000.

Consistent with the Company's intentions to conserve cash, there were no capital expenditures during the six months ended March 31, 2009. In connection with the proposed transactions with PSQ, the Company incurred $194,000 of deferred stock issuance costs as of March 31, 2009.

Information about future minimum lease payments, purchase commitments and severance arrangements is presented in the notes to consolidated financial statements contained in the Company's annual report on Form 10-KSB for the fiscal year ended September 30, 2008.

Due to the effects of the U.S. economic downturn, the Company incurred losses during the first six months of fiscal 2009, and as a result the Company's cash position was reduced to $2,464,000 as of March 31, 2009. The Company announced on March 30, 2009 that it has signed a definitive securities purchase and tender offer agreement under which PSQ will acquire a controlling interest in the Company. See "Proposed Transactions" in the notes to consolidated financial statements. Under the terms of the agreement, PSQ has agreed, among other things, to purchase from the Company 7,700,000 newly issued shares of common stock of the Company at a purchase price of $0.25 per share for a total purchase price of $1,925,000. The share purchase is subject to the approval of shareholders, and the share purchase and tender offer are subject to other customary closing conditions.

Off-Balance Sheet Arrangements

As of March 31, 2009, and during the six months then ended, there were no transactions, agreements or other contractual arrangements to which an unconsolidated entity was a party, under which the Company (a) had any direct or contingent obligation under a guarantee contract, derivative instrument or variable interest in the unconsolidated entity, or (b) had a retained or contingent interest in assets transferred to the unconsolidated entity.

Forward-Looking Statements

As a matter of policy, the Company does not provide forecasts of future financial performance. The statements made in this Form 10-Q Quarterly Report which are not historical facts are forward-looking statements and, other than with respect to statements relating to the tender offer commenced by PSQ, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements regarding the acquisition of shares pursuant to the tender offer, the consummation of the share purchase, the filing of documents and information with the SEC, other future or anticipated matters regarding the transactions discussed in this report and the timing of such matters. Such forward-looking statements often contain or are prefaced by words such as "will" and "expect." As a result of a number of factors, our actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause our actual results to differ materially from those in the forward-looking statements include, without limitation: (1) general business conditions, the demand for the Company's services, competitive market pressures, the ability of the Company to attract and retain qualified personnel for regular full-time placement and contract assignments, the possibility of incurring liability for the Company's business activities, including the activities of its contract employees and events affecting its contract employees on client premises, and the ability to attract and retain qualified corporate and branch management, (2) the risk that the conditions to the closing of the tender offer or the share purchase set forth in the securities purchase and tender offer agreement will not be satisfied, (3) changes in the Company's business during the period between the date of the Purchase Agreement and the closing, (4) obtaining regulatory approvals (if required) for the transaction, (4) the risk that the transactions will not be consummated on the terms or timeline first announced, and (6) those factors set forth under the heading "Forward-Looking Statements" in our annual report on Form 10-KSB for the fiscal year ended September 30, 2008, and in our other filings with the SEC. The Company is under no obligation to (and expressly disclaims any such obligation to) and does not intend to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.