What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-11 compared with 2020-03-12 · 464 added, 213 removed, 510 unchanged (57% of the section changed)

Financial Statements and Supplementary Data.

Audited Consolidated Financial Statements of BG Staffing, Inc.

Audited Consolidated Financial Statements of BGSF, Inc.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 27, 2020 and December 29, 2019 46

Consolidated Statements of Operations for each of the three fiscal years ended December 29, 2019

Consolidated Statements of Operations and Comprehensive Income for each of the three fiscal years ended December 27, 2020 47

Consolidated Statements of Changes in Stockholders' Equity for the three fiscal years ended December 27, 2020 48

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To the Board of Directors and

Stockholders of BG Staffing, Inc.

Stockholders of BGSF, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BG Staffing, Inc.

(the “Company”) as of December 29, 2019 and December 30, 2018 , and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 29, 2019 , and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of BGSF, Inc.

(the “Company”) as of December 27, 2020 and December 29, 2019, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 27, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2020 and December 29, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 27, 2020, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of EdgeRock Technologies Holdings, Inc.

– Fair Value of Intangible Assets

Description of the Matter

As discussed in Note 3 to the financial statements, the Company acquired 100% of the equity of EdgeRock Technologies Holdings, Inc.

(EdgeRock) for a purchase price cash consideration of $21.7 million, which resulted in $10.3 million of intangible assets.

The $10.3 million of intangible assets is primarily comprised of a customer relationship intangible asset and a tradename intangible asset.

The determination of a fair value for the customer relationships 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.

Management estimated the fair value of the tradename using the relief from royalty method which is based on the costs saved by owning the tradename rather than licensing it.

This method also required management to estimate discounted cash flows with subjective assumptions of the appropriate discount rate, an appropriate royalty rate, and future revenues.

We identified the fair value of intangible assets acquired in the EdgeRock business combination to be a critical audit matter due to the significant judgments made by management to estimate the fair value of the intangible assets.

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 royalty 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, royalty rate, and forecasts of future revenue and cash flows used by management to estimate the fair value of intangible assets acquired in the EdgeRock business combination included the following, among others:

• We tested the effectiveness of controls over management’s EdgeRock 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, the royalty rate, and forecasts of future revenues and cash flows.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) discount rates, (3) the royalty rate, and (4) future revenue and growth rates, including testing the source information underlying the determination of the discount rates and the royalty rate, 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 EdgeRock and current economic factors.

Goodwill and Intangibles

Description of the Matter

The Company’s evaluation of goodwill and intangible assets for impairment involves the comparison of the estimated fair value of each reporting unit to its carrying value.

The annual impairment test of goodwill and intangible assets at a reporting unit level is performed annually during the fourth quarter, or more frequently if events or circumstances indicate the fair value of a reporting unit may be below its respective carrying value.

The Company uses the discounted cash flow model to estimate the fair value of goodwill, which requires management to make significant estimates and assumptions related to discount rates and forecasts of future revenues and reporting unit profit margins.

The Company uses a relief from royalty model and residual income model to estimate the fair value of intangibles which requires management to make significant estimates and assumptions related to discount

rates and forecasts of future revenues, reporting unit profit margins and customer turnover.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill or intangible assets impairment charge, or both.

During the second quarter of 2020, the company identified circumstances that caused it to evaluate the goodwill and intangibles associated with one of its reporting units, the finance and accounting group, within the Professional segment for potential impairment.

The Company updated their valuation models as of June 28, 2020 to reflect current market conditions and as a result of the test recorded a $7.2 million impairment of intangibles using the relief from royalty method for the indefinite-lived intangible assets and residual method for the definite-lived intangible assets.

As of December 27, 2020, the remaining goodwill and intangibles balance for the finance and accounting group was $2.4 million and $0.8 million, respectively.

Subsequent to the impairment charge recorded during the second quarter of 2020, the Company performed its annual impairment test of goodwill during the fourth quarter.

Because the estimated fair values of each of the Company’s reporting units exceeded their carrying values, no additional impairments were recorded.

Given that forecasted revenues and reporting unit profit margins for the Real Estate, Light Industrial and Professional reporting units are highly sensitive to changes in demand, sales and customer mix, and efficiency of operations, auditing management’s assumptions including the selection of discount rates involved especially subjective judgment.

As a result, we identified the Company’s evaluations of goodwill impairment for the Real Estate, Light Industrial and Professional reporting units as a critical audit matter due to the high degree of auditor judgment and the increased extent of effort that was required when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecasts of revenue and profit margins, as well as the selection of discount rates, including the need to involve our fair value specialists.

How We Addressed the Matter in Our Audit

Our audit procedures related to forecasts of future revenues and operating unit profit margins (“forecasts”), and the selection of discount rates for the Real Estate, Light Industrial and Professional reporting units included the following, among others:

• We tested the effectiveness of controls over goodwill and intangibles, including controls over the forecasts related to revenue and operating unit profit margin and selection of discount rates.

• We evaluated management’s ability to accurately forecast revenue and operating unit margins by performing a retrospective review of prior forecasts compared to actual results.

• We evaluated the reasonableness of management’s current revenue and operating unit margin forecasts by comparing the forecasts to historical results and internal communications to management and the Board of Directors.

/s/ Whitley Penn LLP

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March 11, 2021

BG Staffing, Inc.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 29, 2019

December 30, 2018

December 27, 2020 December 29, 2019

Current assets

Accounts receivable (net of allowance for doubtful accounts of $468,233 at 2019 and 2018)

Prepaid expenses

Accounts receivable (net of allowance for credit losses of $492,087 for 2020 and $468,233 for 2019) $ 41,493,800 $ 39,423,801

Prepaid expenses and other current assets 2,154,966 1,243,746

Income taxes receivable — 69,649

Other current assets

Total current assets 43,648,766 40,737,196

Property and equipment, net 3,723,582 3,545,049

Deposits and other assets 5,211,145 3,843,023

Deferred income taxes, net 5,827,673 4,071,847

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Intangible assets, net 33,781,168 33,807,973

Goodwill 32,076,880 25,194,639

Total other assets 82,905,920 71,303,799

Total assets $ 130,278,268 $ 115,586,044

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Long-term debt, current portion (net of deferred finance fees of $-0- and $44,920 for 2019 and 2018, respectively)

Long-term debt, current portion $ 2,625,000 $ 375,000

Accrued interest 78,134 73,027

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Accrued payroll and expenses 11,448,403 10,485,039

Accrued workers’ compensation

Contingent consideration, current portion

Lease liability, current portion 2,031,898 1,277,843

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Line of credit (net of deferred finance fees of $268,076 and $351,128 for 2020 and 2019, respectively) 5,709,266 19,993,829

Long-term debt, less current portion (net of deferred finance fees of $-0- and $65,850 for 2019 and 2018, respectively)

Long-term debt, less current portion 26,300,000 7,125,000

Contingent consideration, less current portion 2,287,926 2,174,378

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Retained earnings 5,049,748 8,763,428

Accumulated other comprehensive loss ( 122,874 ) —

Total stockholders’ equity 65,457,752 68,456,990

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

BG Staffing, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Years ended December 27, 2020, December 29, 2019 and December 30, 2018

2020 2019 2018

Revenues $ 277,890,880 $ 294,313,548 $ 286,862,926

Cost of services 201,670,876 213,632,283 210,267,734

Gross profit 76,220,004 80,681,265 76,595,192

Selling, general and administrative expenses 60,558,697 56,199,521 51,066,327

Gain on contingent consideration ( 76,102 ) — ( 3,775,307 )

Impairment losses 7,239,514 — —

Depreciation and amortization 4,959,705 4,820,256 5,044,487

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Income tax expense 513,092 4,304,978 3,859,739

Net income $ 1,441,468 $ 13,246,990 $ 17,549,541

Change in unrealized losses on cash flow hedges 122,874 — —

Other comprehensive loss 122,874 — —

Net comprehensive income $ 1,318,594 $ 13,246,990 $ 17,549,541

Net income per share:

Basic $ 0.14 $ 1.29 $ 1.83

Diluted $ 0.14 $ 1.28 $ 1.79

Weighted average shares outstanding:

Basic 10,311,606 10,238,565 9,577,498

Diluted 10,338,029 10,350,775 9,808,080

Cash dividends declared per common share $ 0.50 $ 1.20 $ 1.15

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

BG Staffing, Inc.

and Subsidiaries

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Years ended December 27, 2020, December 29, 2019 and December 30, 2018

Treasury Stock Amount

Additional Paid in Capital

Stockholders’ equity, December 25, 2016

Share-based compensation

Issuance of shares, net of offering costs

Exercise of common stock options and warrants

Cash dividends declared

Stock Shares Par

Value Treasury Stock Amount Additional Paid in Capital Retained

Earnings Accumulated Other Comprehensive (Loss)/Income Total

Stockholders’ equity, December 31, 2017 — 8,759,376 $ 87,594 $ — $ 37,675,329 $ 1,371,756 $ — $ 39,134,679

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Cash dividends declared — — — — — ( 10,921,909 ) — ( 10,921,909 )

Net income — — — — — 17,549,541 — 17,549,541

Stockholders’ equity, December 30, 2018 — 10,227,247 102,273 ( 24,027 ) 57,624,379 7,999,388 — 65,702,013

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Issuance of shares — 47,403 474 — 999,526 — — 1,000,000

Exercise of common stock options and warrants

Exercise of common stock options and warrants, net of 176 shares of treasury stock — 36,836 369 ( 3,291 ) 41,121 — — 38,199

Change in accounting principal - operating leases — — — — — ( 200,608 ) — ( 200,608 )

Cash dividends declared — — — — — ( 12,282,342 ) — ( 12,282,342 )

Net income — — — — — 13,246,990 — 13,246,990

Stockholders’ equity, December 29, 2019 — 10,309,236 103,093 ( 27,318 ) 59,617,787 8,763,428 — 68,456,990

Share-based compensation — — — — 849,448 — — 849,448

Issuance of restricted shares, net of 231 shares of treasury stock — 19,143 191 ( 2,132 ) ( 191 ) — — ( 2,132 )

Share issuance costs — — — — ( 10,000 ) — — ( 10,000 )

Cash dividends declared — — — — — ( 5,155,148 ) — ( 5,155,148 )

Net income — — — — — 1,441,468 — 1,441,468

Other comprehensive loss — — — — — — ( 122,874 ) ( 122,874 )

Stockholders’ equity, December 27, 2020 — 10,328,379 $ 103,284 $ ( 29,450 ) $ 60,457,044 $ 5,049,748 $ ( 122,874 ) $ 65,457,752

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

BG Staffing, Inc.

and Subsidiaries

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Years ended December 27, 2020, December 29, 2019 and December 30, 2018

2020 2019 2018

Cash flows from operating activities

Net income $ 1,441,468 $ 13,246,990 $ 17,549,541

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation 855,955 830,299 746,443

Amortization 4,103,750 3,989,957 4,298,044

Impairment losses 7,239,514 — —

Loss on disposal of property and equipment — 30,767 17,765

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Interest expense on contingent consideration payable 189,650 123,761 624,145

Provision for doubtful accounts

Provision for credit losses 349,362 128,260 40,618

Share-based compensation 849,448 952,738 1,069,482

Deferred income taxes

Deferred income taxes, net of acquired deferred tax liability ( 2,413,019 ) 799,150 1,531,516

Net changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable 4,308,900 ( 1,758,340 ) ( 939,454 )

Prepaid expenses

Other current assets

Prepaid expenses and other current assets ( 855,112 ) ( 222,794 ) 84,253

Deposits and other assets ( 1,089,102 ) ( 633,603 ) ( 302,315 )

Accrued interest 5,107 ( 235,520 ) ( 22,083 )

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Accrued payroll and expenses ( 1,528,873 ) ( 208,203 ) ( 1,190,572 )

Accrued workers’ compensation

Other current liabilities ( 16,565 ) 16,565 ( 87,553 )

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

BG Staffing, Inc.

and Subsidiaries

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Years ended December 27, 2020, December 29, 2019 and December 30, 2018

2020 2019 2018

Cash flows from financing activities

Net borrowings (payments) under line of credit

Net (payments) borrowings under line of credit ( 14,367,615 ) 9,694,667 ( 10,717,778 )

Proceeds from issuance of long-term debt 22,500,000 7,500,000 —

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Deferred financing costs — ( 382,300 ) ( 3,518 )

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities 1,890,105 ( 8,224,775 ) ( 17,502,481 )

Net change in cash and cash equivalents — — —

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

BG Staffing, Inc.

and Subsidiaries

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NOTE 1 - NATURE OF OPERATIONS

BG Staffing, Inc.

is a national provider of workforce solutions that operates, along with its wholly owned subsidiaries BG Staffing, LLC, B G Staff Services Inc., BG Personnel, LP and BG Finance and Accounting, Inc.

(“BGFA”) (collectively, the “Company”), primarily within the United States of America in three industry segments:

is a national provider of workforce solutions that operates, along with its wholly owned subsidiaries BG Staffing, LLC, B G Staff Services Inc., BG Personnel, LP and BG Finance and Accounting, Inc., BG California IT Staffing, Inc., BG California Multifamily Staffing, Inc., BG California Finance & Accounting Staffing, Inc., EdgeRock Technology Holdings, Inc.

and EdgeRock Technologies, LLC (collectively, the “Company”), primarily within the United States of America in three industry segments:

Real Estate, Professional, and Light Industrial.

The Real Estate segment provides office and maintenance field talent to various apartment communities and commercial buildings in 29 states, via property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

The Professional segment provides skilled field talent on a nationwide basis for information technology (“IT”) and finance, accounting, legal and human resource client partner projects.

The Real Estate segment provides office and maintenance field talent to various apartment communities and commercial buildings in 36 states and D.C., via property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

Our Real Estate segment operates through two divisions, BG Multifamily and BG Talent.

The Professional segment provides skilled field talent on a nationwide basis for information technology (“IT”) and finance, accounting, legal and human resource client partner projects on a national basis.

Our Professional segment operates through various divisions including Extrinsic, American Partners, Donovan & Watkins, Vision Technology Services, Zycron, Smart Resources, L.J.

Kushner & Associates, EdgeRock Technology Partners, and beginning in 2021, Momentum Solutionz.

The Light Industrial segment provides field talent primarily to manufacturing, distribution, logistics, and call center client partners needing a flexible workforce in 7 states.

Our Light Industrial segment operates through our InStaff division.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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 29, 2019 , the 52 weeks ended December 30, 2018 , and the 53 weeks ended December 31, 2017 , referred to herein as Fiscal 2019 , 2018 and 2017 , respectively.

Fiscal years for the consolidated financial statements included herein are for the 52 weeks ended December 27, 2020, December 29, 2019, and December 30, 2018, referred to herein as Fiscal 2020, 2019 and 2018, respectively.

Reclassifications

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Management Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the 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.

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 uncollectible accounts receivable, goodwill, intangible assets, lease liability, contingent consideration obligations related to acquisitions, and income taxes.

Additionally, the valuation of share-based compensation option expense uses a model based upon interest rates, stock prices, maturity estimates, volatility and other factors.

Significant estimates affecting the financial statements include allowances for credit losses, goodwill, intangible assets, lease liability, 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 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.

The COVID-19 pandemic continues to have a significant impact on our economy as a result of measures designed to stop the spread of the virus.

In light of the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply the Company’s significant accounting policies.

As COVID-19 continues to develop, management may make changes to these estimates and judgments over time, which could result in meaningful impacts to the Company’s financial statements in future periods.

Actual results and outcomes may differ from management’s estimates and assumptions.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments

The Company uses fair value measurements in areas that include, but are not limited to, the allocation of purchase price consideration to tangible and identifiable intangible assets and contingent consideration.

The Company uses fair value measurements in areas that include, but are not limited to, interest rate swap agreements used to mitigate interest rate risk, and the allocation of purchase price consideration to tangible and identifiable intangible assets and contingent consideration.

The carrying values of cash and cash equivalents, accounts receivables, prepaid expenses, accounts payable, accrued liabilities, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

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(“BMO”) that provides for a revolving credit facility and term loan and current rates available to the Company for debt with similar terms and risk.

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value on the interest rate swap is based on quoted prices from BMO.

Cash and Cash Equivalents

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Geographic revenue in excess of 10% of the Company's consolidated revenue in Fiscal 2020 and the related percentage for Fiscal 2019 and 2018 was generated in the following areas:

2020 2019 2018

Maryland 11 % 11 % 11 %

Massachusetts 14 % 1 % 2 %

Tennessee 14 % 15 % 14 %

Texas 23 % 28 % 29 %

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.

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Accounts receivable represents unpaid balances due from client partners.

The Company maintains an allowance for doubtful accounts for expected losses resulting from client partners’ non-payment of balances due to the Company.

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

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Recoveries of receivables previously written off are recorded when received.

Changes in the allowance for doubtful accounts for the fiscal years are as follows:

The Company will continue to actively monitor the impact of COVID-19 on expected credit losses.

Changes in the allowance for credit losses for the fiscal years are as follows:

Beginning balance $ 468,233 $ 468,233

Provision for doubtful accounts

Provision for credit losses - EdgeRock Technology Holdings, Inc.

(“EdgeRock”) acquisition 47,498 —

Provision for credit losses, net 349,362 128,260

Amounts written off, net ( 373,006 ) ( 128,260 )

Ending balance $ 492,087 $ 468,233

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

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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.

The Company maintains guaranteed costs policies for workers' compensation coverage in the Texas, Washington, and Ohio and minimal loss retention coverage for team members and field talent in the Light Industrial segment and its other non-Texas workforce.

Under these policies, the Company is required to maintain refundable deposits of $ 3.6 million and $ 2.9 million , which are included in Deposits the accompanying consolidated balance sheets, as of December 29, 2019 and December 30, 2018 , respectively.

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 3.8 million and $ 3.6 million, which are included in Deposits and other other assets in the accompanying consolidated balance sheets, as of December 27, 2020 and December 29, 2019, respectively.

Long-Lived Assets

The Company reviews its long-lived assets of fixed assets and right of use lease assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered.

The Company capitalizes direct costs incurred in the development of internal-use software.

Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets.

All other internal-use software development costs are capitalized and reported as a component of computer software within intangible assets.

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 during Fiscal 2019 , 2018 and 2017 .

There were no impairments with respect to long-lived assets during Fiscal 2020, 2019 or 2018.

The Company leases all their office space through operating leases, which expire at various dates through 2025.

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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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company capitalizes purchased software and internal payroll costs directly incurred in the modification of software for internal use.

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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.

The Company determined that there were no impairment indicators for these assets in Fiscal 2019 , 2018 and 2017 .

The Company considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units.

Further, during second quarter 2020, the Company assessed the current market capitalization, forecasts and the current carrying value in the 2020 impairment test.

As a result of the certain business developments and changes in the Company's long-term projections, the Company concluded a triggering event had occurred that required an interim impairment assessment to be performed.

The qualitative assessment thresholds were met on all reporting units except the finance and accounting group, within the Professional segment.

The Company calculated the quantitative impairment test of the finance and accounting group using the relief from royalty method for the indefinite-lived intangible assets and residual method for the definite-lived intangible assets by asset group (see Note 6).

In the professional segment, the Company 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.

The Company determined that there were no impairment indicators for these assets in Fiscal 2019 or 2018.

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.

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.

The Company considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units.

As a result of the certain business developments and changes in the Company's long-term projections, during second quarter 2020, the Company concluded a triggering event had occurred that required an interim impairment assessment to be performed.

The qualitative assessment thresholds were met on all reporting units except the finance and accounting group.

The Company calculated the quantitative impairment test of the finance and accounting group using the discounted cash flow method and concluded there was no goodwill impairment loss.

Based on annual testing, the Company has determined that there was no goodwill impairment in Fiscal 2020, 2019 or 2018.

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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.

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Financing Fees

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The Company provides workforce solutions and placement 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 as presented on the consolidated statements of operations represent services rendered to client partners less sales adjustments and allowances.

Revenues are recognized when promised workforce solutions 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 as presented on the consolidated statements of operations represent workforce solutions 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.

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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.

Temporary staffing 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 staffing revenues - Any revenues associated with services 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.

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.

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.

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Fees to client partners are generally calculated as a percentage of the new worker’s annual compensation.

No fees for placement services are charged to employment candidates.

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 17 for disaggregated revenues by segment.

Payment terms in the Company's contracts vary by the type and location of its client partner and the services offered.

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 27, 2020.

There were no revenues recognized during Fiscal 2019 related to performance obligations satisfied or partially

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

satisfied in previous periods.

There were no revenues recognized during Fiscal 2020 related to performance obligations satisfied or partially satisfied in previous periods.

There are no contract costs capitalized.

2 unchanged sentences

Total advertising expense for Fiscal 2020, 2019 and 2018 was $ 1.7 million, $ 1.9 million, and $ 1.9 million, respectively.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

5 unchanged sentences

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:

2020 December 29,

2019 December 30,

Weighted-average number of common shares outstanding:

10,311,606 10,238,565 9,577,498

Effect of dilutive securities:

Stock options and restricted stock 26,423 90,681 186,995

Warrants — 21,529 43,587

Weighted-average number of diluted common shares outstanding 10,338,029 10,350,775 9,808,080

Stock options and restricted stock 423,350 238,750 175,000

Anti-dilutive shares

Warrants 25,862 — —

Antidilutive shares 449,212 238,750 175,000

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.

Goodwill is deductible for tax purposes.

As of December 27, 2020, goodwill of $ 31.6 million, which is limited annually, 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 net as noncurrent in the consolidated balance sheets.

2 unchanged sentences

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.

The Company does not have any net operating loss carry forwards.

As of December 27, 2020, the Company has a $ 6.5 million net operating loss carry forward from the 2020 EdgeRock acquisition with no expiration date.

When appropriate, the Company will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized.

1 unchanged sentence

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 27, 2020 or December 29, 2019.

BG Staffing, Inc.

The Company follows the guidance of Accounting Standards Codification (“ASC”) Topic 740, Accounting for Uncertainty in Income Taxes.

ASC Topic 740 prescribes a more-likely-than-not measurement methodology to reflect the financial statement impact of uncertain tax positions taken or expected to be taken in a tax return.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses, which amends how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, which applies to trade accounts receivable and the calculation of the allowance for uncollectible accounts receivable.

The new standard will become effective for the Company for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this accounting guidance will have on the consolidated financial statements.

Since the Company currently uses an expected losses from client partners method, the Company does not anticipate the adoption of ASU 2016-13 will have a material impact on the Company's financial condition or results of operations.

In January 2017, the FASB issued ASU No.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2017-04 Intangibles-Goodwill and Other Simplifying the Test for Goodwill Impairment, which provides guidance to simplify the subsequent measurement of goodwill by eliminating the Step 2 procedure from the goodwill impairment test.

The new standard is effective for the Company beginning with the fourth quarter of 2020.

The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on the Company's financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

The new standard is part of the disclosure framework project and eliminates certain disclosure requirements for fair value measurements, requires entities to disclose new information, and modifies existing disclosure requirements.

The new guidance is effective after December 15, 2019.

Early adoption is permitted.

The Company does not anticipate the adoption of ASU 2018-13 will have a material impact on the Company's financial condition or results of operations.

The new standard was effective for the Company beginning with the fourth quarter of 2020.

The Company early adopted this ASU in the second quarter of fiscal 2020, which did not have a material impact on the consolidated financial statements.

In March 2020 and January 2021, the FASB issued ASU No.

2020-04, Reference Rate Reform:

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and ASU No.

2021-01, Reference Rate Reform:

Scope (“ASU 2021-01”), respectively.

Together, ASU 2020-04 and ASU 2021-01 provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) contract modifications, hedging relationships, and other arrangements that are expected to be impacted by the global transition away from certain reference rates, such as the London Interbank Offered Rate, towards new reference rates.

The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022.

The Company is evaluating the impact that the guidance will have on its consolidated financial statements and related disclosures, if adopted, and currently does not expect that it would be material.

NOTE 3 - ACQUISITIONS

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(“LJK”) for cash consideration of $ 8.5 million and issued $ 1.0 million ( 47,403 shares privately placed) of the Company's common stock at closing.

$ 1.0 million was held back as partial security for certain post-closing liabilities.

$ 1.0 million was held back as partial security for certain post-closing liabilities, which was paid on June 11, 2020.

The purchase agreement further provides for contingent consideration of up to $ 2.5 million based on the performance of the acquired business for the two years following the date of acquisition.

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The net assets acquired were assigned to the Professional segment.

The acquisition of LJK allows the Company to strengthen and expand its IT operations through cybersecurity retained search services specializing in recruiting high and mid-level security professionals.

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Fiscal 2019 consolidated statement of operations includes two weeks of LJK operations and there are no revenues and minimal operating expenses.

The acquisition of LJK allows the Company to strengthen and expand its IT operations through cybersecurity retained search workforce solutions specializing in recruiting high and mid-level security professionals.

The Fiscal 2019 consolidated statement of operations and comprehensive income includes two weeks of LJK operations and there are no revenues and minimal operating expenses.

The purchase price has been allocated to the assets acquired and liabilities assumed as of the date of acquisition.

All amounts recorded to goodwill are expected to be deductible for tax purposes.

The preliminary allocation is as follows:

The allocation is as follows:

Accounts receivable $ 187,000

1 unchanged sentence

Intangible assets 4,249,430

Goodwill 7,211,090

Total net assets acquired $ 11,661,520

Hold back (included in Other current liabilities)

Cash $ 8,500,000

Common stock 1,000,000

Fair value of contingent consideration 2,161,520

Total fair value of consideration transferred for acquired business $ 11,661,520

The preliminary allocation of the intangible assets is as follows:

The allocation of the intangible assets is as follows:

Estimated Fair

Covenants not to compete

Client partner list

Value Estimated

Covenants not to compete $ 500,000 5 years

Trade name 3,000,000 Indefinite

Client partner list 749,430 10 years

Total $ 4,249,430

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company incurred costs of $ 0.1 million related to the LJK acquisition.

These costs were expensed as incurred in selling, general and administrative expenses in 2019.

EdgeRock Technology Holding, Inc.

On February 3, 2020, the Company acquired 100% of the equity of EdgeRock for a net purchase price cash consideration of $ 21.0 million, subject to customary purchase price adjustments as specified in the purchase agreement.

The purchase price at closing was paid out of available funds under the Company’s credit agreement led by BMO.

The acquired business was assigned to the Professional segment.

The acquisition of EdgeRock allows the Company to strengthen its operations in specialized IT consultants and technology professionals specialized in leading software and data ecosystems, as well as expand its IT geographic operations with offices in Arizona, Florida and Massachusetts.

The 2019 consolidated statement of income does not include any operating results of EdgeRock.

The Fiscal 2020 consolidated statement of operations and comprehensive income includes forty-seven weeks of EdgeRock operations, which is approximately $ 34.7 million of revenue and $ 1.6 million of operating income.

The acquisition has been allocated to the assets acquired and liabilities assumed as of the date of acquisition as follows:

Accounts receivable $ 6,728,261

Prepaid expenses and other assets 56,108

Property and equipment 296,309

Right-of-use asset - operating leases 1,714,984

Intangible assets 10,264,000

Goodwill (non-deductible for tax purposes) 6,882,241

Current liabilities assumed ( 2,567,617 )

Deferred income taxes ( 657,193 )

Lease liability - operating leases ( 1,714,984 )

Total net assets acquired $ 21,002,109

Cash $ 21,600,000

Working capital adjustment ( 597,891 )

Total fair value of consideration transferred for acquired business $ 21,002,109

The allocation of the intangible assets is as follows:

Estimated Fair

Value Estimated

Covenants not to compete $ 171,000 5 years

Trade name 6,000,000 Indefinite

Client partner list 4,093,000 6 years

Total $ 10,264,000

The Company incurred costs of $ 0.7 million related to the EdgeRock acquisition.

These costs were expensed as incurred in selling, general and administrative expenses.

Supplemental Unaudited Pro Forma Information

The Company estimates that the revenues and net income for the period below that would have been reported if the LJK acquisition had taken place on the first day of Fiscal 2018 would be as follows (dollars in thousands, except per share amounts):

Net income per share:

Pro forma net income includes amortization of identifiable intangible assets, interest expense on additional borrowings on the Term Loan at a rate of 4.0 % and tax expense of the pro forma adjustments at an effective tax rate of 24.5 % for Fiscal 2019 and 18.0 % for Fiscal 2018.

The pro forma information presented includes adjustments that will have a continuing impact on the operations that management considers non-recurring in assessing LJK's historical performances.

Amounts set forth above are not necessarily indicative of the results that would have been attained had the LJK acquisition taken place on the first day of Fiscal 2018 or of the results that may be achieved by the combined enterprise in the future.

BG Staffing, Inc.

The Company estimates the revenues and net income for the periods below that would have been reported if the LJK and EdgeRock acquisitions had taken place on the first day of the Company's Fiscal 2019 would be as follows (dollars in thousands, except per share amounts):

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues $ 280,999 $ 337,971

Gross profit $ 77,128 $ 96,229

Net income $ 1,253 $ 15,100

Net income per share:

Basic $ 0.12 $ 1.47

Diluted $ 0.12 $ 1.46

Pro forma net income includes amortization of identifiable intangible assets, interest expense on additional borrowings on the Revolving Facility (as defined below) at a rate of 2.3 % and tax expense of the pro forma adjustments at an effective tax rate of 26.2 % for Fiscal 2020 and 24.5 % for Fiscal 2019.

The pro forma operating results include adjustments to LJK and EdgeRock 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.

Amounts set forth above are not necessarily indicative of the results that would have been attained had the LJK and EdgeRock acquisitions taken place on the first day of Fiscal 2019 or of the results that may be achieved by the combined enterprise in the future.

NOTE 4 - PROPERTY AND EQUIPMENT, NET

3 unchanged sentences

Computer systems 4,606,644 3,746,156

Vehicles 161,429 161,429

7,986,606 6,382,175

Accumulated depreciation ( 4,263,024 ) ( 2,837,126 )

2 unchanged sentences

NOTE 5 - LEASES

The Company adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) ASU 2016-02, Leases on the first day of Fiscal 2019 on a modified retrospective basis.

The initial adoption of the standard recognized right-of-use assets of $ 4.1 million and lease liabilities of $ 4.3 million on the Company’s statement of financial position with no impact on the Company's results of operations.

The Company did elect the hindsight practical expedient and did elect the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases.

The Company also implemented a lease accounting system, but had no significant changes to processes or controls.

At December 27, 2020, the weighted average remaining lease term and weighted average discount rate for operating leases was 3.5 years and 4.9 %, respectively.

3 unchanged sentences

December 27, 2020

2021 $ 2,318,837

2022 2,215,659

2023 1,660,916

2024 1,038,580

Total lease payment 7,545,367

Interest ( 609,930 )

Present value of lease liabilities $ 6,935,437

BG Staffing, Inc.

and Subsidiaries

3 unchanged sentences

December 27, 2020

Gross Value Accumulated

Amortization Net

Finite lives:

2 unchanged sentences

Computer software 2,355,805 1,147,778 1,208,027

58,062,868 47,054,266 11,008,602

Indefinite lives:

Trade names 24,205,000 1,432,434 22,772,566

Total $ 82,267,868 $ 48,486,700 $ 33,781,168

December 29, 2019

Gross Value Accumulated

Amortization Net

Finite lives:

2 unchanged sentences

Computer software 1,228,057 750,457 477,600

56,202,633 42,875,226 13,327,407

Indefinite lives:

Trade names 21,913,000 1,432,434 20,480,566

Total $ 78,115,633 $ 44,307,660 $ 33,807,973

Estimated future amortization expense for the next five years and thereafter is as follows:

Fiscal Years Ending:

2021 $ 2,396,218

2022 1,999,966

2023 1,837,442

2024 1,657,319

2025 1,223,626

Thereafter 1,894,031

Total $ 11,008,602

Total amortization expense for Fiscal 2020, 2019 and 2018 was $ 4.1 million, $ 4.0 million and $ 4.3 million, respectively.

BG Staffing, Inc.

and Subsidiaries

2 unchanged sentences

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

Light Industrial

Real Estate Professional Light Industrial Total

December 30, 2018 $ 1,073,755 $ 11,884,974 $ 5,024,820 $ 17,983,549

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Accrued payroll and expenses consist of the following at:

2020 December 29,

Field talent payroll $ 5,574,442 $ 4,505,264

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Accrued bonuses and commissions 1,884,876 1,585,681

Other 2,952,950 2,997,122

Accrued payroll and expenses $ 11,448,403 $ 10,485,039

Other long-term liabilities includes $ 7.2 million of deferred employer FICA and $ 0.1 million of interest rate swap (see Note 10) at December 27, 2020.

The deferred employer FICA is under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allows relief to employers affected by the coronavirus pandemic.

The CARES Act only applies to taxes incurred from March 27, 2020 through December 31, 2020.

Half of the delayed payments are due by December 31, 2021, and the other half by December 31, 2022.

The Company has elected to delay the payment of these taxes.

The following is a schedule of future estimated contingent consideration payments to various parties as of December 27, 2020:

Estimated Cash Payment

Estimated Cash Payment Discount Net

One to two years $ 2,500,000 $ ( 212,074 ) $ 2,287,926

Two to three years

Contingent consideration $ 2,500,000 $ ( 212,074 ) $ 2,287,926

Other long-term liabilities consisted primarily of deferred rent at December 30, 2018 .

NOTE 9 - INCOME TAXES

The Company's income tax expense for the fiscal years are comprised of the following:

2020 2019 2018

Current federal income tax $ 2,006,145 $ 2,380,289 $ 1,568,308

Current state income tax 919,966 1,125,539 759,915

Deferred income tax

Deferred income tax (credit) ( 2,413,019 ) 799,150 1,531,516

Income tax expense $ 513,092 $ 4,304,978 $ 3,859,739

(1) Fiscal 2017 includes the impact of TCJA.

BG Staffing, Inc.

and Subsidiaries

1 unchanged sentence

Significant components of the Company’s deferred income taxes are as follows at:

2020 December 29,

Deferred tax assets:

Allowance for doubtful accounts

Allowance for credit losses $ 110,998 $ 105,015

Goodwill and intangible assets 2,082,214 3,764,556

Workers’ compensation

Accrued payroll and expenses 90,510 97,003

Contingent consideration 573,812 560,001

Other long-term liabilities (deferred employer FICA) 1,812,682 —

Share-based compensation 353,442 278,095

Net operating loss carry forward 1,632,187 —

Deferred tax liabilities:

Prepaid expenses

Prepaid expenses and other current assets ( 517,271 ) ( 427,166 )

Fixed assets ( 310,901 ) ( 305,657 )

Deferred income taxes, net $ 5,827,673 $ 4,071,847

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

2020 2019 2018

Tax expense at federal statutory rate $ 410,466 21.0 % $ 3,685,913 21.0 % $ 4,495,949 21.0 %

State income taxes, net of federal benefit 348,917 17.9 % 1,038,380 5.9 % 776,984 3.6 %

Re-measurement of deferred assets

Equity, permanent differences and other 239,020 12.2 % 218,025 1.2 % ( 714,845 ) ( 3.3 ) %

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NOTE 10 - DEBT

On July 16, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”), maturing July 16, 2024, with BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender.

The Credit Agreement provides for a revolving credit facility (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 provides 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.

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 provides 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.

The Company may from time to time, with a maximum of two , request an increase in the aggregate Term Loan by $ 40 million, with minimum increases of $ 10 million.

The Company’s obligations under the Credit Agreement are secured by a first priority security interest in substantially all tangible and intangible property of the Company and its subsidiaries.

The Credit Agreement bears interest either at the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin (as such terms are defined in the Credit Agreement).

The Credit Agreement bears interest either at the Base Rate plus the Applicable Margin plus the Applicable Margin or LIBOR (as such terms are defined in the Credit Agreement).

The Company also pays an unused commitment fee on the daily average unused amount of Revolving Facility and Term Loan.

The Credit Agreement contains customary affirmative covenants and negative covenants.

The Credit Agreement contains customary affirmative and negative covenants.

The Company is subject to a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio as defined in the Credit Agreement.

1 unchanged sentence

On December 13, 2019, the Company borrowed $ 7.5 million on the Term Loan in conjunction with the closing of the LJK acquisition.

On February 3, 2020, the Company borrowed $ 18.5 million on the Term Loan in conjunction with the closing of the EdgeRock acquisition, as described in Note 19 below.

The Company borrowed $ 20 million under the Revolving Facility to pay off existing indebtedness of the Company under the Amended Credit Agreement (as defined below) and such agreement (and related ancillary documentation) was terminated on July 16, 2019 in connection with such repayment.

On February 3, 2020, the Company borrowed $ 18.5 million on the Term Loan in conjunction with the closing of the EdgeRock acquisition.

On April 6, 2020, the Company borrowed the remaining $ 4.0 million on the Term Loan and the proceeds were used to pay down the Revolving Facility.

The Company borrowed $ 20 million under the Revolving Facility to pay off existing indebtedness of the Company under an Amended and Restated Credit Agreement with Texas Capital Bank, National Association (“TCB”) and such agreement (and related ancillary documentation) was terminated on July 16, 2019 in connection with such repayment.

The Company recognized a loss on extinguishment of debt of approximately $ 0.5 million related to the unamortized deferred finance fees.

BG Staffing, Inc.

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

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In April 2017, the Company entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with Texas Capital Bank, National Association (“TCB”) with an aggregate commitment of $ 55.0 million .

The Amended Credit Agreement provided for a revolving credit facility (the “Revolving Facility with TCB”), permitting the Company to borrow funds from time to time in an aggregate amount equal to the lesser of the borrowing base amount, which was 85 % of eligible accounts receivable, and $ 35.0 million and also provided for a term loan (the “Term Loan with TCB”) in the amount of $ 20.0 million with principal payable quarterly, based on an annual percentage of the original principal amount as defined in the Amended Credit Agreement.

The Revolving Facility with TCB and Term Loan with TCB bore interest either at the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin (as such terms were defined in the Amended Credit Agreement).

All interest and commitment fees were paid quarterly.

Additionally, the Company paid an unused commitment fee on the unfunded portion of the Revolving Facility.

The Company’s obligations under the Amended Credit Agreement were secured by a first priority security interest in substantially all tangible and intangible property of the Company and its subsidiaries.

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 27, 2020, 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 27, 2020.

Line of Credit

2 unchanged sentences

Borrowings under the revolving facilities consisted of and bore interest at:

2020 December 29,

Base Rate $ 1,977,342 4.25 % $ 2,844,957 5.25 %

LIBOR 4,000,000 2.15 % 17,500,000 3.26 %

Total $ 5,977,342 $ 20,344,957

Long Term Debt

Long-term debt consisted of and bore interest at:

2020 December 29,

Base Rate $ 4,300,000 2.15 % $ 7,500,000 5.25 %

Fixed rate 24,625,000 2.39 % — — %

Long-term debt $ 28,925,000 $ 7,500,000

(1) On January 21, 2020 the rate was changed to 3.16%

Maturities on the Revolving Facility with BMO and long-term debt as of December 27, 2020, are as follows:

2021 $ 2,625,000

2022 3,000,000

2023 3,750,000

2024 25,527,342

Less deferred finance fees ( 268,076 )

BG Staffing, Inc.

Total $ 34,634,266

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 effective on June 3, 2020 and designed as a cash flow hedge on the underlying variable rate interest payments against a fixed interest rate that terminates on June 1, 2023.

In accordance with cash flow hedge accounting treatment, the Company has determined that the hedge is perfectly effective using the change-in-variable-cash-flow method.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The unrealized gains or losses associated with the change in the fair value of the effective portion of the hedging instrument is recorded in accumulated other comprehensive loss.

The Company reclassifies the interest rate swap from accumulated other comprehensive gain or loss against interest expense in the same period in which the hedge transaction affects earnings.

Hedge effectiveness is tested quarterly.

As of December 27, 2020, the instrument was perfectly effective and no additional amounts were reclassed from accumulated other comprehensive loss into income for Fiscal 2020.

See Note 11 for location on the balance sheet.

NOTE 11 - FAIR VALUE MEASUREMENTS

6 unchanged sentences

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:

Amounts Recorded at Fair Value

Financial Statement Classification

Fair Value Hierarchy

Contingent consideration, net

Contingent consideration, net - current and long-term

The changes in the Level 3 fair value measurements from December 30, 2018 to December 29, 2019 relate to $ 2.2 million attributable to the LJK acquisition, $ 0.1 million in accretion, $ 2.7 million in payments on contingent consideration, and an adjustment to covenants not to compete assets.

The changes in the Level 3 fair value measurements from December 31, 2017 to December 30, 2018 relate to $ 0.6 million in accretion, $ 1.0 million in payments on contingent consideration, and the remaining in gains included in earnings.

Key inputs in determining the fair value of the contingent consideration as of December 29, 2019 and December 30, 2018 included discount rates ranging from 7.5 % to 9.3 % as well as management's estimates of future sales volumes and EBITDA.

Amounts Recorded at Fair Value Financial Statement Classification Fair Value Hierarchy December 27,

2020 December 29,

Interest rate swap Other long-term liabilities Level 2 $ 122,874 $ —

Contingent consideration, net Contingent consideration, net - current and long-term Level 3 $ 2,287,926 $ 2,174,378

The changes in the Level 2 fair value measurements from December 29, 2019 to December 27, 2020 relates to entering into an interest rate swap agreement.

Key inputs in determining the fair value of the interest rate swap as of December 27, 2020 are quoted prices from BMO (See Note 10).

The changes in the Level 3 fair value measurements from December 29, 2019 to December 27, 2020 relate to $ 0.2 million in accretion and gains included in earnings.

Key inputs in determining the fair value of the contingent consideration as of December 27, 2020 and December 29, 2019 included the discount rate of 7.5 % as well as management's estimates of future sales volumes and earning before interest, income taxes, depreciation, and amortization.

NOTE 12 - CONTINGENCIES

2 unchanged sentences

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 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.

1 unchanged sentence

The Company has also entered into indemnification agreements with its directors and certain officers.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impact of COVID-19

Our business, results of operations, and financial condition have been, and may continue to be, adversely impacted in material respects by COVID-19 and by related government actions, non-governmental organization recommendations, and public perceptions, all of which have led and may continue to lead to disruption in global economic and labor markets.

These effects have had a significant impact on our business, including reduced demand for our workforce solutions, early terminations or reductions in projects, and hiring freezes, and a shift of a majority of our workforce to remote operations, all of which have contributed to a decline in revenues and other significant adverse impacts on our financial results.

Other potential impacts of COVID-19 may include continued or expanded closures or reductions of operations with respect to our client partners’ operations or facilities, the possibility our client partners will not be able to pay for our workforce solutions, or that they will attempt to defer payments owed to us, either of which could materially impact our liquidity, the possibility that the uncertain nature of the pandemic may not yield the increase in certain of our workforce solutions that we have historically observed during periods of economic downturn, and the possibility that various government-sponsored programs to provide economic relief may be inadequate.

Further, we may continue to experience adverse financial impacts, some of which may be material, if we cannot offset revenue declines with cost savings through expense-related initiatives, human capital management initiatives, or otherwise.

As a result of these observed and potential developments, we expect our business, results of operations, and financial condition to continue to be negatively affected.

Employment Agreements

2 unchanged sentences

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 2013 Plan or similar plan.

Additionally, she will become 100% vested in any awards outstanding under the 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.

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The CFO’s employment agreement was effective as of October 1, 2018 and shall continue through September 30, 2021.

5 unchanged sentences

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.

On December 13, 2019, the Company issued 47,403 shares of common stock, $ 0.01 par value per share, in a private placement for a value of $ 1,000,000 at the closing of the LJK acquisition.

In August 2018, the Company issued a net of 41,172 shares of restricted common stock, $ 0.01 par value per share, to various team members and directors under the 2013 Long-Term Incentive Plan, as amended (the “2013 Plan”).

The restricted shares 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.

The Company repurchased 176 and 828 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 2019 and 2018, respectively.

Treasury stock is accounted for under the cost method whereby the entire cost of the acquired stock is recorded.

On December 13, 2019, the Company issued 47,403 shares of common stock, $ 0.01 par value per share, in a private placement for a value of $ 1.0 million at the closing of the LJK acquisition, with related issuance costs recorded in Fiscal 2020.

In May 2018, the Company issued and sold 1,293,750 shares of common stock, $ 0.01 par value per share, to various investors in a registered offering for an aggregate purchase price (before deducting underwriting discounts and commissions and other estimated offering expenses) of $ 23.3 million in cash.

2 unchanged sentences

In connection with the closing, the Company incurred $ 1.9 million in offering costs, which included $ 0.8 million fees paid to Taglich Brothers, a related party, as described in Note 15 below.

Proceeds were used to pay off existing indebtedness of the Company under the Amended Credit Agreement and cancel outstanding in-the-money stock options held by L.

Allen Baker, Jr., BG Staffing's former President and Chief Executive Officer, as described in Note 14 below.

On April 3, 2017, the Company issued 70,670 shares of common stock, $ 0.01 par value per share, in a private placement for a value of $ 992,500 at the closing of the Zycron acquisition.

The Company incurred $ 7,500 in offering costs.

Proceeds were used to pay off existing indebtedness of the Company under the credit agreement with TCB and cancel outstanding in-the-money stock options held by L.

Allen Baker, Jr., BGSF's former President and Chief Executive Officer, as described in Note 14 below.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock

The Company issued net restricted common stock of 19,143 shares to non-team member directors, in Fiscal 2020, and 41,172 shares to various team members and directors, in Fiscal 2018.

The restricted shares of $ 0.01 par value per share were issued under the 2013 Plan and contain a three-year service condition.

In connection with the vesting portions of the restricted stock, the Company repurchased 231 , 176 and 828 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 2020, 2019, and 2018, respectively.

Treasury stock is accounted for under the cost method whereby the entire cost of the acquired stock is recorded.

NOTE 14 - SHARE-BASED COMPENSATION

Stock Options and Restricted Stock

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.

A total of 900,000 shares of common stock of BG Staffing, Inc.

A total of 900,000 shares of common stock of BGSF, Inc.

were initially reserved for issuance pursuant to the original 2013 Plan.

On May 16, 2017, stockholders of the Company approved and made effective an amendment to the 2013 Plan to add an additional 250,000 shares of common stock reserved for issuance.

On November 3, 2020 and May 16, 2017, stockholders of the Company approved and made effective amendments to the 2013 Plan, which each added an additional 250,000 shares of common stock reserved for issuance.

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 27, 2020, a total of 1,088,739 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.

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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.

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

14 unchanged sentences

Unamortized share-based compensation expense as of December 27, 2020 amounted to $ 0.9 million which is expected to be recognized over the next 2.5 years.

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

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2020 2019 2018

Weighted-average fair value of awards $ 4.60 $ 5.08 $ 4.68

2 unchanged sentences

Weighted-average volatility factor 53.6 % 42.6 % 42.1 %

Weighted-average expected life

A summary of stock option and restricted stock activity is presented as follows:

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life

Total Intrinsic Value of Options

Weighted-average expected life 10.0 yrs 10.0 yrs 10.0 yrs

A summary of stock option activity is presented as follows:

Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Total Intrinsic Value of Options

(in thousands)

Awards outstanding at December 31, 2017 765,411 $ 10.27 7.3 $ 4,521

Granted 175,000 $ 25.71

Exercised ( 152,838 ) $ 11.19

Forfeited / Canceled ( 292,088 ) $ 6.71

Awards outstanding at December 30, 2018 495,485 $ 17.53 8.0 $ 2,295

Granted 138,750 $ 21.49

Exercised ( 39,190 ) $ 12.60

Forfeited / Canceled ( 30,200 ) $ 16.53

Awards outstanding at December 29, 2019 564,845 $ 18.90 7.7 $ 2,412

Granted 93,610 $ 10.28

Forfeited / Canceled ( 5,800 ) $ 22.22

2 unchanged sentences

Awards exercisable at December 27, 2020 416,717 $ 16.96 6.3 $ 463

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Weighted Average Grant Date Fair Value

Shares Weighted Average Grant Date Fair Value

Non-vested outstanding at December 29, 2019 251,200 $ 22.46

Non-vested outstanding at December 27, 2020 235,938 $ 18.83

For Fiscal 2019 , 2018 and 2017 , the Company issued 16,777 ;

49,541 , and 5,221 shares of common stock upon the cashless exercise of 39,014 ;

86,053 , and 13,800 stock options, respectively.

Included in awards outstanding are 18,000 and 31,500 shares of restricted stock, at a grant date price per share of $ 28.61 , issued under the 2013 Plan as of December 29, 2019 and December 30, 2018 , respectively.

There were no exercises of stock options in Fiscal 2020.

During Fiscal 2019 and 2018, the Company issued 16,777 , and 49,541 shares of common stock upon the cashless exercise of 39,014 , and 86,053 stock options, respectively.

Restricted Stock

For Fiscal 2020, 2019 and 2018, the Company recognized $0.3 million, $0.2 million, and $0.4 million of compensation expense related to restricted stock, respectively.

As of December 29, 2019 , a total of 838,739 shares remain available for issuance under the 2013 Plan.

Unamortized share-based compensation expense as of September 27, 2020 amounted to $ 0.3 million which is expected to be recognized over the next 2.2 years.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of restricted stock activity is presented as follows:

Shares Weighted Average Grant Date Fair Value

Restricted outstanding at December 31, 2017 — $ —

Issued 42,000 $ 28.61

Vested ( 10,500 ) $ 28.61

Restricted outstanding at December 30, 2018 31,500 $ 28.61

Vested ( 9,000 ) $ 28.61

Forfeited / Canceled ( 4,500 ) $ 28.61

Restricted outstanding at December 29, 2019 18,000 $ 28.61

Issued 21,624 $ 9.02

Vested ( 14,406 ) $ 21.26

Restricted outstanding at December 27, 2020 25,218 $ 16.01

Nonvested outstanding at December 29, 2019 18,000 $ 28.61

Nonvested outstanding at December 27, 2020 25,218 $ 16.01

Warrant Activity

2 unchanged sentences

A summary of warrant activity is presented as follows:

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life

Total Intrinsic Value of Warrants

Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Total Intrinsic Value of Warrants

(in thousands)

Warrants outstanding at December 25, 2016 and December 31, 2017

Warrants outstanding at December 31, 2017 123,984 $ 11.51 2.2 $ 577

Exercised ( 30,768 ) $ 11.27

Warrants exercisable at December 30, 2018 93,216 $ 11.59 1.3 $ 805

Exercised ( 28,734 ) $ 6.55

Warrants outstanding at December 29, 2019 64,482 $ 13.84 0.8 $ 473

Expired ( 38,620 ) $ 11.85

Warrants outstanding at December 27, 2020 25,862 $ 16.80 0.4 $ —

Warrants exercisable at December 29, 2019 64,482 $ 13.84 0.8 $ 473

1 unchanged sentence

There were no non-vested warrants outstanding at December 27, 2020 and December 29, 2019.

For Fiscal 2019 , 2018 and 2017 , the Company issued 20,059 ;

16,623 and - 0 - shares of common stock upon the cashless exercise of 28,734 ;

30,768 and - 0 - warrants, respectively.

There were no exercises of warrants in Fiscal 2020.

During, Fiscal 2019 and 2018, the Company issued 20,059 and 16,623 shares of common stock upon the cashless exercise of 28,734 and 30,768 warrants, respectively.

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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020 Employee Stock Purchase Plan (“2020 ESPP”)

In November 2020, the board of directors 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.

All shares remain available for issuance as of December 27, 2020 and the Company plans to begin the initial offering period during second quarter 2021.

NOTE 15 - RELATED PARTY TRANSACTIONS

1 unchanged sentence

The Company paid fees to Taglich Brothers related to one equity transaction in 2018 (see Note 13).

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - 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.

5 unchanged sentences

Real Estate, Professional, and Light Industrial.

The Professional segment provides skilled field talent on a nationwide basis for IT and finance, accounting, legal and human resource client partner projects.

Our Real Estate segment operates through two divisions, BG Multifamily and BG Talent.

The Professional segment provides skilled field talent on a nationwide basis for IT and finance, accounting, legal and human resource client partner projects on a national basis.

Our Professional segment operates through various divisions including Extrinsic, American Partners, Donovan & Watkins, Vision Technology Services, Zycron, Smart Resources, L.J.

Kushner & Associates, EdgeRock Technology Partners, and beginning in 2021, Momentum Solutionz.

The Light Industrial segment provides field talent primarily to manufacturing, distribution, logistics, and call center client partners needing a flexible workforce in 7 states.

Our Light Industrial segment operates through our InStaff division.

Segment operating income includes all revenue and cost of services, direct selling expenses, depreciation and amortization expense and excludes all general and administrative (home office) expenses.

1 unchanged sentence

The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results for the periods indicated:

2020 2019 2018

Real Estate $ 68,755,975 $ 96,421,676 $ 86,874,241

Professional 138,369,505 123,342,647 119,299,424

Light Industrial 70,765,400 74,549,225 80,689,261

Total $ 277,890,880 $ 294,313,548 $ 286,862,926

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020 2019 2018

Depreciation:

Real Estate $ 218,425 $ 197,029 $ 169,682

Professional 404,590 341,529 273,691

Light Industrial 98,917 101,889 101,124

Home office 134,023 189,852 201,946

Total $ 855,955 $ 830,299 $ 746,443

Amortization:

Professional $ 3,923,063 $ 3,964,878 $ 4,168,463

Light Industrial — — 110,251

Home office 180,687 25,079 19,330

Total $ 4,103,750 $ 3,989,957 $ 4,298,044

Operating income:

Real Estate $ 9,671,504 $ 16,381,823 $ 14,775,846

Professional - without impairment loss 7,514,924 7,702,175 7,967,368

Professional - impairment loss ( 7,239,514 ) — —

Light Industrial 4,767,103 4,776,369 5,583,999

2 unchanged sentences

Home office - gain on contingent consideration 76,102 — 3,775,307

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total $ 3,538,190 $ 19,661,488 $ 24,259,685

Capital Expenditures:

Real Estate $ 81,918 $ 251,461 $ 124,643

Professional 184,611 582,573 474,670

Light Industrial 68,730 152,632 119,886

Home office 1,809,687 1,242,843 204,795

Total $ 2,144,946 $ 2,229,509 $ 923,994

Total Assets:

Real Estate $ 15,598,575 $ 16,785,163

Professional 81,671,193 72,623,242

Light Industrial 16,122,052 15,223,581

Home office 16,886,448 10,954,058

Total $ 130,278,268 $ 115,586,044

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)

Income before income taxes

Net income per share:

Quarter Second

Quarter Third

Quarter Fourth

Quarter Fiscal

Revenues $ 74,067,429 $ 62,606,334 $ 71,518,691 $ 69,698,426 $ 277,890,880

Gross Profit $ 20,275,732 $ 16,905,143 $ 19,711,926 $ 19,327,203 $ 76,220,004

Income (Loss) before income taxes $ 2,201,368 $ ( 6,514,422 ) $ 3,288,263 $ 2,979,351 $ 1,954,560

Net income (loss) $ 1,498,859 $ ( 4,829,262 ) $ 2,565,563 $ 2,206,308 $ 1,441,468

Net income (loss) per share:

Basic $ 0.15 $ ( 0.47 ) $ 0.25 $ 0.21 $ 0.14

Diluted $ 0.14 $ ( 0.47 ) $ 0.25 $ 0.21 $ 0.14

Weighted-average shares outstanding:

Basic 10,308,445 10,306,986 10,312,939 10,318,053 10,311,606

Diluted 10,382,999 10,306,986 10,326,493 10,334,478 10,338,029

Quarter Second

Quarter Third

Quarter Fourth

Quarter Fiscal

Revenues $ 68,776,067 $ 73,857,890 $ 79,364,306 $ 72,315,285 $ 294,313,548

Gross Profit $ 18,438,640 $ 20,862,834 $ 22,176,622 $ 19,203,169 $ 80,681,265

Income before income taxes $ 3,233,471 $ 4,924,649 $ 5,540,959 $ 3,852,889 $ 17,551,968

Net income $ 2,496,024 $ 3,801,829 $ 4,207,170 $ 2,741,967 $ 13,246,990

Net income per share:

Basic $ 0.24 $ 0.37 $ 0.41 $ 0.27 $ 1.29

Diluted $ 0.24 $ 0.37 $ 0.41 $ 0.26 $ 1.28

Weighted-average shares outstanding:

BG Staffing, Inc.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basic 10,229,462 10,232,588 10,239,126 10,253,085 10,238,565

Diluted 10,404,355 10,362,038 10,343,673 10,370,996 10,350,775

NOTE 19 - SUBSEQUENT EVENTS

EdgeRock Technology Holdings, Inc.

On February 3, 2020, the Company acquired 100 % of the equity of EdgeRock for a purchase price of $ 21.6 million cash, subject to customary purchase price adjustments as specified in the purchase agreement.

The purchase price at closing was paid out of currently available funds under the Company’s credit agreement led by BMO.

Momentum Solutionz LLC

On February 8, 2021, the Company acquired substantially all of the assets and assumed certain liabilities of Momentum Solutionz for a purchase price of $ 3.8 million cash, subject to customary purchase price adjustments as specified in the purchase agreement.

The purchase agreement further provides for contingent consideration of up to $ 2.2 million based on the performance of the acquired business for the two years following the date of acquisition.

At closing, the purchase price was paid out of currently available funds under the Company’s credit agreement led by BMO.

The acquired business was assigned to the Professional segment.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquisition of Momentum Solutionz allows the Company to strengthen its operations in IT consultants and technology professionals.

Momentum Solutionz provides IT consulting and managed workforce solutions for organizations utilizing ERP systems.

The IT consulting workforce solutions include strategic planning, software selection, road mapping, cloud migration, and implementation of ERP systems.

The IT managed workforce solutions include optimization and maintenance of ERP systems.

Momentum Solutionz provides workforce solutions to clients throughout the United States in a variety of industries, including but not limited to hospitals, retail, universities and mid-size businesses.

As the transaction was recently completed, the initial accounting for the acquisition, including estimating the fair values of assets and liabilities acquired, has not been completed.

In connection with the acquisition of the assets of EdgeRock described above, on February 3, 2020, the Company borrowed $ 18.5 million on the Term Loan under the Company's credit agreement led by BMO, as described in Note 10 above.

On January 30, 2020 , the Company's board of directors declared a cash dividend in the amount of $ 0.30 per share of common stock to be paid on February 18, 2020 to all shareholders of record as of the close of business on February 10, 2020 .

In connection with the acquisition of the assets of Momentum Solutionz described above, on February 8, 2021, the Company borrowed $ 3.8 million on the Revolving Facility under the Company's credit agreement led by BMO, as described in Note 10 above.

On February 3, 2021 , the Company's board of directors declared a cash dividend in the amount of $ 0.10 per share of common stock to be paid on February 26, 2021 to all shareholders of record as of the close of business on February 18, 2021 .

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data