What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-10 compared with 2021-03-11 · 324 added, 289 removed, 685 unchanged (47% of the section changed)

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Consolidated Statements of Operations and Comprehensive Income for each of the three fiscal years ended December 26, 2021 46

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

Consolidated Statements of Changes in Stockholders' Equity for each of the three fiscal years ended December 26, 2021 47

Consolidated Statements of Cash Flows for each of the three fiscal years ended December 26, 2021 49

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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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

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

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

Acquisition of Momentum Solutionz LLC – Fair Value of Intangible Assets and Contingent Consideration

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.

As discussed in Note 3 to the financial statements, the Company acquired substantially all of the assets and assumed certain liabilities of Momentum Solutionz LLC (“Momentum”) for a purchase price of $3.8 million in cash and contingent consideration of up to $2.2 million.

The acquisition of Momentum resulted in a total of $3.3 million of intangible assets which are comprised primarily of customer relationships and tradename intangibles.

The determination of 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.

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.

The contingent consideration of up to $2.2 million is based on the forecasted performance of the acquired business for the two years following the date of the acquisition.

We identified the fair value of both the intangible assets acquired and contingent consideration liability in the Momentum business combination to be a critical audit matter due to the significant judgments made by management to estimate their fair values.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of discount, customer attrition, 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 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.

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

• We tested the effectiveness of controls over management’s Momentum purchase price allocation, including those over the determination of the fair value of intangible assets and contingent consideration, such as controls related to management’s selection of discount rates, customer attrition rate, 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 (i) valuation methodology, (ii) discount rates, (iii) customer attrition rate, (iv) the royalty rate, and (v) 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 Momentum and current economic factors.

/s/ Whitley Penn LLP

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Current assets

Cash and cash equivalents $ 112,104 $ —

Accounts receivable (net of allowance for credit losses of $448,622 for 2021 and $492,087 for 2020) 48,132,896 32,831,016

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

Income taxes receivable — 69,649

Prepaid expenses 2,345,948 2,154,966

Other current assets 2,381,197 —

Current assets of discontinued operations 7,198,104 8,662,784

Total current assets 60,170,249 43,648,766

Property and equipment, net 4,331,052 3,463,876

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

Deposits 4,106,622 3,980,218

Other assets 1,283,629 1,195,143

Deferred income taxes, net 4,548,285 5,827,673

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Goodwill 29,141,883 27,052,060

Noncurrent assets of discontinued operations 7,213,276 7,426,978

Total other assets 83,792,665 83,165,626

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Accrued payroll and expenses 16,153,920 10,375,637

Contingent consideration, current portion 1,073,901 —

Lease liability, current portion 1,896,253 1,866,008

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Income taxes payable 381,806 1,861,116

Current liabilities of discontinued operations 1,262,056 1,238,656

Total current liabilities 28,383,700 18,264,244

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Other long-term liabilities 3,565,218 7,355,541

Noncurrent liabilities of discontinued operations 190,395 322,875

Total liabilities 71,701,782 64,820,516

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Retained earnings 14,592,087 5,049,748

Accumulated other comprehensive loss ( 122,874 ) —

Accumulated other comprehensive income (loss) 58,331 ( 122,874 )

Total stockholders’ equity 76,592,184 65,457,752

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Depreciation and amortization 3,698,329 4,860,788 4,718,367

Operating income 3,538,190 19,661,488 24,259,685

Operating income (loss) 14,530,195 ( 1,228,913 ) 14,885,118

Loss on extinguishment of debt — — 540,705

Interest expense, net 1,432,733 1,583,630 1,568,815

Income before income taxes 1,954,560 17,551,968 21,409,280

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

Income (loss) from continuing operations before income taxes 13,097,462 ( 2,812,543 ) 12,775,598

Income tax expense (benefit) from continuing operations 2,639,587 ( 740,656 ) 3,134,767

Income (loss) from continuing operations 10,457,875 ( 2,071,887 ) 9,640,831

Income from discontinued operations, net of tax 3,651,603 3,513,355 3,606,159

Net income $ 14,109,478 $ 1,441,468 $ 13,246,990

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

Other comprehensive loss 122,874 — —

Change in unrealized (gains) losses on cash flow hedges ( 181,205 ) 122,874 —

Other comprehensive (gain) loss ( 181,205 ) 122,874 —

Net comprehensive income $ 14,290,683 $ 1,318,594 $ 13,246,990

Net income per share:

Basic $ 0.14 $ 1.29 $ 1.83

Diluted $ 0.14 $ 1.28 $ 1.79

Net income per share - basic:

Continuing operations $ 1.01 $ ( 0.20 ) $ 0.94

Discontinued operations $ 0.35 $ 0.34 $ 0.35

Net income per share - basic 1.36 0.14 1.29

Net income per share - diluted:

Continuing operations 1.00 $ (0.20) 0.93

Discontinued operations 0.35 0.34 0.35

Net income per share - diluted 1.35 0.14 1.28

Weighted average shares outstanding:

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

Share-based compensation — — — — 1,069,482 — — 1,069,482

Issuance of shares, net of offering costs — 1,293,750 12,938 — 21,347,200 — — 21,360,138

Issuance of restricted shares, net of 828 shares of treasury stock — 41,172 412 ( 24,027 ) ( 412 ) — — ( 24,027 )

Exercise of common stock options and warrants — 132,949 1,329 — 867,949 — — 869,278

Option cancellation agreement — — — — ( 3,335,169 ) — — ( 3,335,169 )

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

Share-based compensation — — — — 952,738 — — 952,738

Share-based compensation from continuing operations — — — — 849,665 — — 849,665

Share-based compensation from discontinued operations — — — — 103,073 — — 103,073

Cancellation of restricted shares — ( 2,250 ) ( 23 ) — 23 — — —

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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 )

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

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

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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

Share-based compensation from continuing operations — — — — 785,723 — — 785,723

Share-based compensation from discontinued operations — — — — 63,725 — — 63,725

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

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and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years ended December 26, 2021, December 27, 2020 and December 29, 2019

Stock Shares Par

Value Treasury Stock Amount Additional Paid in Capital Retained

Earnings Accumulated Other Comprehensive (Loss)/Income Total

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

Share-based compensation from continuing operations — — — — 1,058,096 — — 1,058,096

Share-based compensation from discontinued operations — — — — 53,550 — — 53,550

Issuance of shares, net of offering costs — — — — ( 40,058 ) — — ( 40,058 )

Issuance of restricted shares, net of 610 shares of treasury stock — 64,092 640 ( 8,442 ) ( 640 ) — — ( 8,442 )

Issuance of ESSP shares — 31,776 318 — 340,133 — — 340,451

Exercise of common stock shares — 963 10 — 7,281 — — 7,291

Cash dividends declared — — — — ( 4,567,139 ) — ( 4,567,139 )

Net income — — — — — 14,109,478 — 14,109,478

Other comprehensive gain — — — — — — 181,205 181,205

Stockholders’ equity, December 26, 2021 — 10,425,210 $ 104,252 $ ( 37,892 ) $ 61,875,406 $ 14,592,087 $ 58,331 $ 76,592,184

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

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Net income $ 14,109,478 $ 1,441,468 $ 13,246,990

(Income) from discontinued operations, net of tax ( 3,651,603 ) ( 3,513,355 ) ( 3,606,159 )

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

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Impairment losses — 7,239,514 —

CARES Act credit ( 2,368,049 ) — —

Loss on disposal of property and equipment 8,347 — 30,767

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Prepaid expenses and other current assets ( 200,504 ) ( 855,112 ) ( 222,794 )

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

Deposits ( 126,404 ) ( 208,979 ) ( 633,603 )

Other assets 319,178 ( 916,123 ) —

Accrued interest 24,170 5,107 ( 235,520 )

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Other long-term liabilities ( 78,311 ) 7,232,667 —

Net cash provided by continuing operating activities 1,357,882 19,679,593 13,243,719

Net cash provided by discontinued operating activities 5,305,572 2,577,357 4,710,125

Net cash provided by operating activities 6,663,454 22,256,950 17,953,844

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Proceeds from sale of property and equipment 5,158 — 440

Net cash used in continuing investing activities ( 6,989,961 ) ( 24,078,325 ) ( 9,576,437 )

Net cash used in discontinued investing activities ( 34,505 ) ( 68,730 ) ( 152,632 )

Net cash used in investing activities ( 7,024,466 ) ( 24,147,055 ) ( 9,729,069 )

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Cash flows from financing activities

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

Net borrowings (payments) under line of credit 6,803,513 ( 14,367,615 ) 9,694,667

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

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Payments of dividends ( 4,567,139 ) ( 5,155,148 ) ( 12,282,342 )

ESPP shares 340,451 — —

Issuance of shares under the 2013 Long-Term Incentive Plan and Form S-3 registration statement, net of exercises ( 41,209 ) ( 12,132 ) 38,200

Option cancellation agreement — — ( 3,335,169 )

Contingent consideration paid — — ( 2,672,000 )

Deferred financing costs — — ( 382,300 )

Net cash provided by (used in) continuing financing activities 473,116 1,890,105 ( 8,224,775 )

Net cash provided by discontinued financing activities — — —

Net cash provided by (used in) financing activities 473,116 1,890,105 ( 8,224,775 )

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Cash paid for taxes, net of refunds $ 3,675,842 $ 995,361 $ 3,563,703

Non-cash transactions:

Leasehold improvements funded by landlord incentives $ — $ — $ 366,202

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

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NOTE 1 - NATURE OF OPERATIONS

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.

BGSF, Inc., along with its wholly owned subsidiaries BGSF Professional, LLC (formally BG Staffing, LLC), B G Staff Services Inc., BG Personnel, LP, 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., EdgeRock Technologies, LLC, and BG Personnel of Texas, LLC (collectively, the “Company”), is a national provider of workforce solutions.

On February 28, 2022, we signed a definitive agreement to sell substantially all our Light Industrial segment (“InStaff”) assets to Jobandtalent (“J&T”), through their wholly-owned subsidiary, Sentech Engineering Services, Inc.

The Company anticipates that the transaction will close during the first fiscal quarter of 2022.

Instaff's financial results for reported periods have been reflected in our Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows as discontinued operations.

Additionally, the related assets and liabilities associated with the discontinued operations are classified as discontinued operations in our Consolidated Balance Sheets.

See “Note 4 - Discontinued Operations” in our Consolidated Financial Statements included elsewhere in this report for additional information.

The Company continues to operate primarily within the United States of America in the Real Estate and Professional industry segments, and discontinued operations in Light Industrial (see Note 4).

The Real Estate segment provides office and maintenance field talent to various apartment communities and commercial buildings in 35 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.

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 Professional segment operates through three divisions, IT Consulting, IT Infrastructure & Development, and Finance and Accounting under various trade names including Extrinsic, American Partners, Donovan & Watkins, Vision Technology Services, Zycron, Smart Resources, L.J.

Kushner & Associates, EdgeRock Technology Partners, and Momentum Solutionz.

Light Industrial segment provides field talent primarily to manufacturing, distribution, logistics, and call center client partners needing a flexible workforce currently out of 11 locations and 13 on-sites in 11 states.

Light Industrial segment operates through one division under the InStaff trade name.

The Company has adjusted, and continues to monitor and change, its operations in response to COVID-19 in all of its segment, client partner, and home office locations.

The outbreak continues to impact both operational and financial performance.

The duration of the pandemic, as well as the continued spread of the outbreak, impacts the Company's client partners, and the ongoing government and community reactions to the pandemic remain unpredictable.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Fiscal years for the consolidated financial statements included herein are for the 52 weeks ended December 26, 2021, December 27, 2020, and December 29, 2019, referred to herein as Fiscal 2021, 2020 and 2019, respectively.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

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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.

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

In light of the 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.

While the ongoing COVID-19 response continues to evolve, management may continue to 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

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Concentration of credit risk is limited due to the Company’s diverse client partner base and their dispersion across many different industries and geographic locations nationwide.

No single client partner accounted for more than 10% of the Company’s accounts receivable as of December 27, 2020 and December 29, 2019 or revenue in Fiscal 2020, 2019 and 2018.

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:

No single client partner accounted for more than 10% of the Company’s accounts receivable from continuing operations as of December 26, 2021 and December 27, 2020 or revenue from continuing operations in Fiscal 2021, 2020 and 2019.

Geographic revenue from continuing operations in excess of 10% of the Company's consolidated revenue in Fiscal 2021 and the related percentage for Fiscal 2020 and 2019 was generated in the following areas:

2021 2020 2019

Maryland 11 % 11 % 11 %

Massachusetts 14 % 1 % 2 %

Tennessee 12 % 16 % 18 %

1 unchanged sentence

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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

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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.

Receivables are written off after they are deemed to be uncollectible after all means of collection have been exhausted.

Receivables are written off after they are deemed to be uncollectible after all reasonable means of collection have been exhausted.

Recoveries of receivables previously written off are recorded when received.

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:

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

Beginning balance $ 492,087 $ 468,233

4 unchanged sentences

Ending balance $ 448,622 $ 492,087

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CARES Act Receivable

Other current assets from continuing operations includes $ 2.4 million of the Employee Retention Credit ("ERC") at December 26, 2021.

The ERC was established by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

The CARES Act allows relief to businesses affected by the coronavirus pandemic, by providing payment to employers for qualified wages and health insurance benefits for team members.

The CARES Act applies to taxes incurred from March 27, 2020, through the second quarter of 2021.

Property and Equipment

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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.

Under these policies, the Company is required to maintain refundable deposits of $ 3.9 million and $ 3.8 million, which are included in Deposits and other assets from continuing operations in the accompanying consolidated balance sheets, as of December 26, 2021 and December 27, 2020, respectively.

Long-Lived Assets

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There were no impairments with respect to long-lived assets during Fiscal 2021, 2020 or 2019.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

The Company evaluates the recoverability of intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

The Company 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 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 annually evaluates the remaining useful lives of all intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization.

In the Professional segment, the Company recognized a $ 3.7 million trade name impairment loss and a $ 3.5 million client partner list impairment loss in Fiscal 2020 (see Note 7).

The Company determined that there were no impairment indicators for these assets in Fiscal 2021 or 2019.

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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 2021, 2020 or 2019.

2 unchanged sentences

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.

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.

7 unchanged sentences

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

2 unchanged sentences

Contingent Consideration

The Company has obligations, to be paid in cash, related to its acquisitions if certain future operating and financial goals are met.

The Company has obligations, to be paid in cash, related to its acquisitions if certain operating and financial goals are met.

The fair value of this contingent consideration is determined using expected cash flows and present value technique.

2 unchanged sentences

Revenue Recognition

The Company derives its revenues from three segments:

Real Estate, Professional, and Light Industrial.

The Company derives its revenues from continuing operations in Real Estate and Professional segments.

The Company provides workforce solutions and placement services.

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.

Revenues are recognized when promised services are delivered to client partners, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

Revenues from continuing operations as presented on the consolidated statements of operations and comprehensive income represent services rendered to client partners less sales adjustments and allowances.

Reimbursements, including those related to out-of-pocket expenses, are also included in revenues, and the related amounts of reimbursable expenses are included in cost of services.

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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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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The Company recognizes advertising expense in selling, general and administrative expenses as the services are incurred.

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

Total advertising expense from continuing operations for Fiscal 2021, 2020 and 2019 was $ 1.3 million, $ 1.6 million, and $ 1.8 million, respectively.

Share-Based Compensation

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As of December 26, 2021, goodwill of $29.7 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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets are also recognized for net operating loss and tax credit carryovers.

1 unchanged sentence

Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment.

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

As of December 26, 2021, the Company has a $5.2 million net operating loss carry forward from the 2020 EdgeRock acquisition (see Note 3) with no expiration date.

These net operating losses are subject to an annual Internal Revenue Code Section 382 limitation of $1.3 million.

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

3 unchanged sentences

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

Recent Accounting Pronouncements

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 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.

6 unchanged sentences

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.

In November 2021, ASU No.

2021-10, Government Assistance:

Disclosures by Business Entities about Government Assistance.

The ASU provides for additional reporting details for entities that receive Government funds.

Additional disclose will include, the type of assistance, the method for accounting used, and the effect of the assistance on the company's financials statements.

The guidance was effective December 15, 2021, and once adopted, may be applied prospectively to Government funds received through December 31, 2022.

NOTE 3 - ACQUISITIONS

Kushner & Associates, L.L.C.

On December 13, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of L.J.

Kushner & Associates, L.L.C.

(“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, 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.

The purchase agreement contained a provision for a “true up” of acquired working capital 90 days after the closing date.

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 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 allocation is as follows:

Accounts receivable $ 187,000

Prepaid expenses and other assets 14,000

Intangible assets 4,249,430

Goodwill 7,211,090

Total net assets acquired $ 11,661,520

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 allocation of the intangible assets is as follows:

Estimated Fair

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.

On February 3, 2020, the Company acquired 100 % of the equity of EdgeRock for a net purchase price cash consideration of $ 21.0 million.

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

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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 2019 consolidated statement of operations 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:

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable $ 6,728,261

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

Supplemental Unaudited Pro Forma Information

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):

Momentum Solutionz

On February 8, 2021, the Company acquired substantially all of the assets and assumed certain liabilities of Momentum Solutionz LLC (“Momentum”) 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 purchase agreement

contained a provision for a “true up” of acquired working capital 60 days after the closing date.

The acquired business was assigned to the Professional segment.

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

Momentum 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 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.

The 2020 consolidated statement of operations does not include any operating results of Momentum.

The Fiscal 2021 Momentum operations included forty-seven weeks for approximately $ 3.5 million of revenue and of $ 0.7 million operating income.

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

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

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable $ 345,121

Prepaid expenses and other assets 3,626

Property plant and equipment, net 5,101

Intangible assets 3,347,970

Goodwill 2,089,823

Liabilities Assumed $ ( 73,708 )

Total net assets acquired $ 5,717,933

Cash 3,791,210

Fair value of contingent consideration 1,926,723

Total fair value of consideration transferred for acquired business $ 5,717,933

The allocation of the intangible assets is as follows:

Estimated Fair

Value Estimated

Covenants not to compete $ 37,800 5 years

Trade name 1,420,000 Indefinite

Client partner list 1,890,170 10 years

Total $ 3,347,970

The Company incurred costs of approximately $ 0.2 million related to the Momentum acquisition.

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

Supplemental Unaudited Pro Forma Information

The Company estimates the revenues and net income from continuing operations for the periods below that would have been reported if the EdgeRock and Momentum acquisitions had taken place on the first day of the Company's Fiscal 2020 would be as follows (dollars in thousands, except per share amounts):

Revenues $ 239,263 $ 212,934

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Diluted $ 1.01 $ ( 0.18 )

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.

Pro forma net income from continuing operations includes amortization of identifiable intangible assets, interest expense on additional borrowings on the Revolving Facility (see Note 11) at a rate of 2.3 % and tax expense of the pro forma adjustments at an effective tax rate of 20.1 % for Fiscal 2021 and 26.3 % for Fiscal 2020.

The pro forma operating results include adjustments to EdgeRock and Momemtum 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 EdgeRock and Momentum acquisitions taken place on the first day of Fiscal 2020 or of the results that may be achieved by the combined enterprise in the future.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – DISCONTINUED OPERATIONS

On February 28, 2022, the Company entered into an Asset Purchase Agreement (“APA”) with Sentech Engineering Services, Inc., (“Sentech”), and Job and Talent Holding Limited, the indirect parent of Sentech, solely as guarantor of certain obligations of Sentech, pursuant to which the Company would sell to Sentech substantially all of the assets pertaining to the Company’s Light Industrial segment (“InStaff”).

Under the APA, Sentech will (i) pay to the Company approximately $ 30.3 million at the closing of the transaction, (ii) subject to the terms and conditions of the APA, pay to the Company an additional $ 2 million on the first anniversary of the closing of the transaction, and (iii) assume certain liabilities and obligations of the Company pertaining to the Light Industrial segment.

The APA further provides for customary purchase price adjustments, including a net working capital adjustment.

Job and Talent Holding Limited has guaranteed certain of Sentech’s obligations under the APA.

The APA contains customary representations and warranties, covenants (including certain non-competition and non-solicitation covenants restricting the Company with respect to the light industrial staffing business), closing conditions, and indemnification provisions.

After the closing of the transaction, the Company will provide certain back-office services to Sentech for a limited period of time.

Discontinued operations – InStaff Operations

In accordance with ASC 205-10-05-3, the Light Industrial financial results for periods prior to the sale have been reflected in our Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows as discontinued operations.

Additionally, the related assets and liabilities associated with the discontinued operations in the periods presented are classified as discontinued operations in our Consolidated Balance Sheets.

The following table presents the financial results of InStaff for the fiscal years presented (dollars in thousands):

2021 2020 2019

Revenue $ 71,292 $ 70,765 $ 74,549

Cost of services 60,948 60,585 63,694

Gross profit 10,344 10,180 10,855

Selling expenses 5,684 5,315 5,977

Depreciation 90 99 102

Income from operations of discontinued operations before taxes 4,570 4,766 4,776

Income taxes ( 918 ) ( 1,253 ) ( 1,170 )

Income from discontinued operations, net of income taxes $ 3,652 $ 3,513 $ 3,606

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the aggregate carrying amounts of assets to be sold and liabilities to be assumed of discontinued operations for InStaff in the Consolidated Balance Sheet (dollars in thousands):

2021 December 27,

Carrying amount of assets included as part of discontinued operations:

Accounts receivable $ 7,198 $ 8,663

Property and equipment, net 201 260

Deposits 36 36

Right-of-use assets - operating leases 303 459

Intangible assets, net 1,648 1,648

Goodwill 5,025 5,025

Total assets classified as discontinued operations $ 14,411 $ 16,091

Carrying amount of liabilities included as part of discontinued operations:

Accrued payroll and expenses $ 1,129 $ 1,073

Lease liability, current portion 133 166

Lease liability, less current portion 190 323

Total liabilities classified as discontinued operations $ 1,452 $ 1,562

NOTE 5 - PROPERTY AND EQUIPMENT, NET

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Computer systems 5,839,675 4,289,870

Vehicles 161,429 161,429

8,624,699 7,153,022

1 unchanged sentence

Property and equipment, net $ 4,331,052 $ 3,463,876

Total depreciation expense in Fiscal 2020, 2019 and 2018 was $ 855,955 , $ 830,299 , and $ 746,443 , respectively.

Total depreciation expense from continuing operations in Fiscal 2021, 2020 and 2019 was $ 0.7 million, $ 0.8 million, and $ 0.7 million, respectively.

NOTE 6 - LEASES

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.

The Company's future operating lease obligations that have not yet commenced are immaterial.

For Fiscal 2020, the Company's cash paid for operating leases was $ 2,175,733 , and operating lease and short-term lease costs were $ 2,078,089 and $ 374,261 , respectively.

The undiscounted annual future minimum lease payments consist of the following at:

At December 26, 2021, the weighted average remaining lease term and weighted average discount rate for continuing operating leases was 2.7 years and 5.0 %, respectively.

The Company's future continuing operating lease obligations that have not yet commenced are immaterial.

For Fiscal 2021, the Company's cash paid for continuing operating leases was $ 2.1 million, and continuing operating lease and short-term lease costs were $ 1.9 million and $ 0.1 million, respectively.

The undiscounted annual future minimum lease payments of continuing operations consist of the following at:

December 26, 2021

1 unchanged sentence

2023 1,561,952

2023 1,660,916

2024 1,038,580

Total lease payment 4,885,615

4 unchanged sentences

NOTE 7 - INTANGIBLE ASSETS

Finite and indefinite lived intangible assets consist of the following at:

Finite and indefinite lived intangible assets from continuing operations consist of the following at:

December 26, 2021

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Total $ 70,059,058 $ 37,925,890 $ 32,133,168

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

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

Fiscal Years Ending:

6 unchanged sentences

Total $ 11,040,344

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

Total amortization expense from continuing operations for Fiscal 2021, 2020 and 2019 was $ 3.0 million, $ 4.1 million and $ 4.0 million, respectively.

and Subsidiaries

1 unchanged sentence

NOTE 8 - GOODWILL

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

Real Estate Professional Light Industrial Total

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

Real Estate Professional Total

December 29, 2019 $ 1,073,755 $ 19,096,064 $ 20,169,819

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NOTE 9 - ACCRUED PAYROLL AND EXPENSES, CONTINGENT CONSIDERATION, AND OTHER LONG-TERM LIABILITIES

Accrued payroll and expenses consist of the following at:

Accrued payroll and expenses from continuing operations consist of the following at:

2021 December 27,

4 unchanged sentences

Accrued payroll and expenses $ 16,153,920 $ 10,375,637

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.

Other current liabilities of continuing operations includes $ 3.5 million of deferred employer FICA and other long-term liabilities includes $ 3.5 million of deferred employer FICA at December 26, 2021.

Under the CARES Act, employers affected by the coronavirus epidemic were allowed relief from the payment of employer FICA taxes.

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:

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

The Company elected to delay the payment of these taxes.

The following is a schedule of future estimated contingent consideration payments from continuing operations to various parties as of December 26, 2021:

Estimated Cash Payment Discount Net

Less than one year $ 1,110,000 $ ( 36,099 ) $ 1,073,901

One to two years 1,110,000 ( 120,392 ) 989,608

5 unchanged sentences

Current state income tax 765,716 919,966 1,125,539

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

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

Deferred income tax (benefit) 1,279,388 ( 2,413,019 ) 799,150

Income tax expense (benefit) from continuing operations 2,639,587 ( 740,656 ) 3,134,767

Income tax expense (benefit) from discontinued operations 918,613 1,253,748 1,170,211

Income tax expense (benefit) $ 3,558,200 $ 513,092 $ 4,304,978

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

2021 December 27,

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2021 2020 2019

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

Tax expense (benefit) at federal statutory rate $ 2,750,467 21.0 % $ ( 590,634 ) 21.0 % $ 2,682,876 21.0 %

State income taxes, net of federal benefit 1,100,072 8.4 % 96,269 ( 3.4 ) % 871,206 6.8 %

1 unchanged sentence

Work Opportunity Tax Credit, net ( 707,829 ) ( 5.4 ) % ( 485,311 ) 17.3 % ( 637,340 ) ( 5.0 ) %

Income tax expense $ 513,092 26.3 % $ 4,304,978 24.5 % $ 3,859,739 18.1 %

Income tax expense (benefit) from continuing operations 2,639,587 20.1 % ( 740,656 ) 26.4 % 3,134,767 24.5 %

Income tax expense (benefit) from discontinued operations 918,613 20.1 % 1,253,748 26.4 % 1,170,211 24.5 %

Income tax expense (benefit) $ 3,558,200 20.1 % $ 513,092 26.4 % $ 4,304,978 24.5 %

NOTE 11 - DEBT

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

The Credit Agreement 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 provides for a revolving 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 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.

1 unchanged sentence

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 plus the Applicable Margin or LIBOR (as such terms are defined in the Credit Agreement).

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

2 unchanged sentences

The Company was in compliance with these covenants as of December 26, 2021.

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.

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.

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Letter of Credit

17 unchanged sentences

Long-term debt $ 26,862,500 $ 28,925,000

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

2021 $ 2,625,000

Maturities on the Revolving Facility with BMO and long-term debt from continuing operations as of December 26, 2021, are as follows:

2022 $ 3,562,500

2 unchanged sentences

Less deferred finance fees ( 193,264 )

Total $ 34,634,266

Total, net $ 39,450,091

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedge

2 unchanged sentences

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 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 income or 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.

As of December 26, 2021, the instrument was perfectly effective and no additional amounts were reclassed from accumulated other comprehensive income or loss into income for Fiscal 2021.

See Note 12 for location on the balance sheet.

9 unchanged sentences

2021 December 27,

Interest rate swap Other long-term assets Level 2 $ 58,331 $ —

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

Contingent consideration, net Contingent consideration, net - current and long-term Level 3 $ 2,063,509 $ 2,287,926

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.

The changes in the Level 2 fair value measurements from December 27, 2020 to December 26, 2021 relates to changes in the fair value of the interest rate swap agreement.

Key inputs in determining the fair value of the interest rate swap as of December 26, 2021 are quoted prices from BMO (See Note 11).

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.

The changes in the Level 3 fair value measurements from December 27, 2020 to December 26, 2021 relates to $ 1.9 million for the addition of the Momentum acquisition, partially offset by $ 0.3 million in accretion, and gains included in earnings.

Key inputs in determining the fair value of the contingent consideration as of December 26, 2021 and December 27, 2020 included discount rates of approximately 9 % as well as management's estimates of future sales volumes and earnings before interest, income taxes, depreciation, and amortization "EBITDA."

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - CONTINGENCIES

6 unchanged sentences

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.

Our business, results of operations, and financial condition have been, and may continue to be, 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 economic and labor markets.

Employment Agreements

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

The agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms.

The CEO’s employment agreement was effective as of October 1, 2018 and the agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms.

In the event that her employment is terminated by the Company without cause or by her for good reason, she will be entitled to (i) twelve months of base salary, (ii) accrued bonus, and (iii) eighteen months of COBRA premiums for her and her dependents, grossed-up for federal income taxes.

Additionally, she will become 100% vested in any awards outstanding under the the Company's 2013 Long-Term Incentive Plan, as amended, (“2013 Plan”) or similar plan.

Additionally, she will become 100% vested in any awards outstanding under the Company's 2013 Long-Term Incentive Plan, as amended, (“2013 Plan”) or similar plan.

Should there be a sale of the Company that results in the termination of her employment or a material adverse change in her duties and responsibilities, she will be entitled to all of the amounts listed above, however, base salary shall equal eighteen months.

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

The agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms.

The CFO’s employment agreement was effective as of October 1, 2018 and the agreement remains in effect under successive one-year extensions unless terminated pursuant to its terms.

In the event that his employment is terminated by the Company without cause or by him for good reason, he will be entitled to (i) twelve months of base salary, (ii) accrued bonus, and (iii) eighteen months of COBRA premiums for him and his dependents, grossed-up for federal income taxes.

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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 $ 1.0 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.

The public offering price was $ 18.00 per share.

The newly issued shares constituted approximately 14.7 % of the total of issued and outstanding shares of common stock immediately before the initial execution of the Underwriting Agreement.

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 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 Company issued net restricted common stock of 64,092 shares to non-team member (non-employee) directors in Fiscal 2021, and 19,143 shares to various team members and directors in Fiscal 2020.

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

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

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - SHARE-BASED COMPENSATION

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

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.

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However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

On May 31, 2018, the Company entered into a stock option cancellation agreement (the “Option Cancellation Agreement”) with L.

Allen Baker, Jr., the Company's former President and Chief Executive Officer, pursuant to which the Company agreed to pay Mr.

Baker $ 18.00 per share of common stock underlying his vested in-the-money stock options granted under the Company’s 2013 Plan, less the exercise price per share thereof, in exchange for the cancellation and termination of such stock options.

Pursuant to the terms of the Option Cancellation Agreement, the Company paid $ 3.3 million to Mr.

Baker in exchange for the cancellation of 284,888 stock options granted to him under the 2013 Plan.

For Fiscal 2020, 2019 and 2018, the Company recognized $ 0.5 million, $ 0.7 million and $ 0.6 million of compensation expense related to stock awards, respectively.

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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For Fiscal 2021, 2020 and 2019, the Company recognized $ 0.6 million, $ 0.5 million and $ 0.6 million of compensation expense from continuing operations related to stock awards, respectively.

Unamortized share-based compensation expense from continuing operations as of December 26, 2021 amounted to $ 0.9 million which is expected to be recognized over the next 2.4 years.

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

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Weighted-average expected life 10.0 yrs 10.0 yrs 10.0 yrs

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of stock option activity is presented as follows:

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Granted 93,610 $ 10.28

Exercised ( 39,190 ) $ 12.60

Forfeited / Canceled ( 5,800 ) $ 22.22

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Non-vested outstanding at December 26, 2021 219,564 $ 12.73

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.

During Fiscal 2021 the Company issued 213 shares of common stock upon the cashless exercise of 600 shares, during Fiscal 2020 there were no issuances of stock options, and during Fiscal 2019, the Company issued 16,777 shares of common stock upon the cashless exercise of 39,014 stock options.

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.

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.

For Fiscal 2021, 2020 and 2019, the Company recognized $ 0.5 million, $ 0.3 million, and $ 0.2 million, respectively, of compensation expense related to restricted stock.

Unamortized share-based compensation expense as of December 26, 2021 amounted to $ 0.6 million which is expected to be recognized over the next 2.4 years.

and Subsidiaries

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

Issued 42,000 $ 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

Forfeited / Canceled ( 4,500 ) $ 28.61

Restricted outstanding at December 27, 2020 25,218 16.01

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Warrant Activity

For Fiscal 2020, 2019 and 2018, the Company did not recognize of compensation cost related to warrants.

For Fiscal 2021, 2020 and 2019, the Company did not recognize compensation cost related to warrants.

There was no unamortized stock compensation expense remaining to be recognized as of December 26, 2021.

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

Exercised ( 28,734 ) $ 6.55

Expired ( 38,620 ) $ 11.85

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

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There were no non-vested warrants outstanding at December 26, 2021 and December 27, 2020.

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.

There were no exercises of warrants in Fiscal 2021 and 2020.

During Fiscal 2019, the Company issued 20,059 shares of common stock upon the cashless exercise of 28,734 warrants.

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.

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2020 Employee Stock Purchase Plan (“2020 ESPP”)

In November 2020, the board of directors adopted and the shareholders approved the 2020 ESPP.

In November 2020, the Company's shareholders approved the 2020 ESPP.

Under the 2020 ESPP, eligible team members of the Company may elect for payroll deductions to purchase shares on each purchase date during an offering period.

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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.

For the year-ended December 26, 2021, the Company issued 31,776 shares of common stock under the 2020 ESPP.

NOTE 16 - RELATED PARTY TRANSACTIONS

Some of our equity owners are also principals of Taglich Brothers.

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

There were no related party transactions in Fiscal 2021, 2020, or 2019.

NOTE 17 - TEAM MEMBER BENEFIT PLAN

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The Company matches participants contributions 100 % up to the first 3 % and 50 % of the next 2 % of a team member or field talent's compensation.

The Company contributed $ 1.3 million, $ 1.1 million and $ 1.1 million to the 401(k) Plan for Fiscal 2020, 2019 and 2018, respectively.

The Company contributed $ 1.5 million, $ 1.3 million and $ 1.1 million from continuing operations to the 401(k) Plan for Fiscal 2021, 2020 and 2019, respectively.

NOTE 18 - BUSINESS SEGMENTS

The Company operates within 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 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 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.

Assets of home office include cash, unallocated prepaid expenses, deferred tax assets, and other assets.

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

The Company has continuing operations within two industry segments:

Real Estate and Professional.

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

Assets of home office include cash, unallocated prepaid expenses, property and equipment, deferred tax assets, and other assets.

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

2021 2020 2019

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Professional 147,009,202 138,369,505 123,342,648

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

Total $ 239,027,177 $ 207,125,480 $ 219,764,324

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020 2019 2018

Depreciation:

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Professional 389,995 404,590 341,529

Light Industrial 98,917 101,889 101,124

Home office 85,371 134,023 189,852

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Professional $ 2,430,827 $ 3,923,063 $ 3,964,878

Light Industrial — — 110,251

Home office 581,956 180,687 25,079

Total $ 3,012,783 $ 4,103,750 $ 3,989,957

Operating income:

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 2020 2019

Operating income (loss):

Real Estate $ 14,663,443 $ 9,671,504 $ 16,381,823

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

Professional - without CARES Act credit and impairment loss 10,340,171 7,514,924 7,702,174

Professional - CARES Act credit, net 921,093 — —

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

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

Home office - selling ( 931,974 ) ( 663,110 ) ( 516,190 )

Home office - general and administrative ( 14,015,822 ) ( 10,588,819 ) ( 8,682,689 )

Home office - CARES Act credit, net 1,150,440 — —

Home office - gain on contingent consideration 2,402,844 76,102 —

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Professional 107,476 184,611 582,573

Light Industrial 68,730 152,632 119,886

Home office 2,990,886 1,809,687 1,242,843

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Professional 92,782,442 81,671,193

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

Home office 20,347,059 16,918,737

Discontinued operations 14,411,380 16,089,763

Total $ 148,293,966 $ 130,278,268

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Gross profit $ 16,214,709 $ 19,247,481 $ 22,046,888 $ 23,431,825 $ 80,940,903

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

(Loss) income from continuing operations $ ( 211,583 ) $ 2,635,226 $ 3,713,480 $ 4,320,752 $ 10,457,875

Income from discontinued operations, net of tax $ 923,380 $ 807,612 $ 930,129 $ 990,482 $ 3,651,603

Net income $ 711,797 $ 3,442,838 $ 4,643,609 $ 5,311,234 $ 14,109,478

Net (loss) income per share - basic:

Continuing operations $ ( 0.02 ) $ 0.25 $ 0.36 $ 0.42 $ 1.01

Discontinued operations $ 0.09 $ 0.08 $ 0.09 $ 0.09 $ 0.35

Net income per share - basic $ 0.07 $ 0.33 $ 0.45 $ 0.51 $ 1.36

Net (loss) income per share - diluted:

Continuing operations $ ( 0.02 ) $ 0.25 $ 0.36 $ 0.41 $ 1.00

Discontinued operations $ 0.09 $ 0.08 $ 0.09 $ 0.09 $ 0.35

Net income per share - diluted $ 0.07 $ 0.33 $ 0.45 $ 0.50 $ 1.35

Weighted-average shares outstanding:

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Gross Profit $ 17,736,770 $ 14,866,591 $ 17,122,340 $ 16,313,733 $ 66,039,434

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

Income (loss) from continuing operations $ 690,298 $ ( 5,470,787 ) $ 1,627,513 $ 1,081,089 $ ( 2,071,887 )

Income from discontinued operations, net of tax $ 808,561 $ 641,525 $ 938,050 $ 1,125,219 $ 3,513,355

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

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

Net income (loss) per share - basic:

Continuing operations $ 0.07 $ ( 0.53 ) $ 0.16 $ 0.10 $ ( 0.20 )

Discontinued operations $ 0.08 $ 0.06 $ 0.09 $ 0.11 $ 0.34

Net income (loss) per share - basic $ 0.15 $ ( 0.47 ) $ 0.25 $ 0.21 $ 0.14

Net income (loss) per share - diluted:

Continuing operations $ 0.07 $ ( 0.53 ) $ 0.16 $ 0.10 $ ( 0.20 )

Discontinued operations 0.08 0.06 0.09 0.11 0.34

Net income (loss) per share - diluted $ 0.15 $ ( 0.47 ) $ 0.25 $ 0.21 $ 0.14

Weighted-average shares outstanding:

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

NOTE 19 - SUBSEQUENT EVENTS

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 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.

NOTE 20 - SUBSEQUENT EVENTS

Light Industrial Segment

On February 28, 2022, the Company signed a definitive agreement to sell substantially all our Light Industrial segment (“InStaff”) assets to Jobandtalent (“J&T”), through their wholly-owned subsidiary, Sentech Engineering Services, Inc.

Under the terms of the agreement, the Company will receive approximately $ 30.3 million at the closing of the transaction, and subject to the terms of the agreement, an additional $ 2 million on the first anniversary of the closing.

The Company anticipates that the transaction will close during the first fiscal quarter of 2022, and anticipates using the proceeds from the transaction to, among other things, deploy additional capital into managed services and high-end consulting solutions, drive geographic expansion in the Company’s Real Estate segment, pursue potential acquisition opportunities, reduce outstanding indebtedness, and for general corporate purposes.

See Note 4 for additional information.

On February 2, 2022 , the Company's board of directors declared a cash dividend in the amount of $ 0.15 per share of common stock to be paid on February 22, 2022 to all shareholders of record as of the close of business on February 14, 2022 .

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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