XML 27 R13.htm IDEA: XBRL DOCUMENT
v3.22.4

Note 6 - Acquisitions and Divestitures | 12 Months Ended
--- | ---
Dec. 31, 2022
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 6. ACQUISITIONS AND DIVESTITURES The purchase method of accounting in accordance with FASB ASC 805, “Business Combination,” was applied for all acquisitions. This requires the cost of an acquisition to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisitions is attributable to expected sales synergies from combining the operations of the acquired business with those of the Company. TalentHerder Acquisition Effective October 2, 2022, the Company acquired the business operations of TalentHerder, LLC, a California limited liability company. TalentHerder is a leading talent acquisition services company. TalentHerder’s business bridges the gap between in-house and external recruiting, specializing in high-growth companies. It works with clients to help identify and hire top-quality talent across all critical functions, enabling companies to scale teams quickly, efficiently, and cost-effectively. TalentHerder’s proven recruitment processes can help scale both in-person and remote working environments for companies across the globe. The acquisition will bolster the Company’s existing capabilities by expanding its recruitment process outsourcing ("RPO") service footprint, enhancing the Company's candidate sourcing reach, and enabling the Company's in-house recruiting team to respond more rapidly to client needs. The preliminary consideration and estimated fair value of assets acquired and liabilities assumed is as follows:
Cash |  | $ | 4,150 |
Common stock of the Company |  |  | 631 |
Contingent consideration, at fair value |  |  | 1,927 |
Total consideration |  | $ | 6,708 |
The seller of TalentHerder is eligible to receive post-closing contingent consideration upon the business exceeding certain base levels of operating income, potentially earned over five years. The amount recorded for the contingent consideration represents the acquisition date fair value of expected consideration to be paid based on TalentHerder’s forecasted operating income during the five year period. Expected consideration was valued based on different possible scenarios for projected operating income. Each case was assigned a probability which was used to calculate an estimate of the forecasted future payments. Then a discount rate was applied to these forecasted future payments to determine the acquisition date fair value to be recorded. The preliminary estimated purchase price has been allocated as follows:
Property and equipment, net |  | $ | 5 |
Customer relationships |  |  | 910 |
Goodwill(a) |  |  | 5,793 |
Total consideration |  | $ | 6,708 |
| (a) | The goodwill is expected to be fully deductible for tax purposes, except for the portion of contingent consideration which is deductible only when paid.
In the fourth quarter of 2021, the Company remeasured the value of its contingent consideration. The primary driver for remeasuring the contingent consideration was the performance by TKE. This remeasurement led to a $1.7 million reduction to the contingent consideration liability relating to the TKE acquisition. TKE had high yearly performance targets to achieve earn-out consideration. Two factors primarily contributed to TKE not hitting its performance targets. The first was the COVID-19 pandemic which overlapped earn-out years two and three. TKE had numerous projects in its pipeline that were delayed or eliminated by prospective clients. The second factor relates to a specific client in earn-out year three. This client was dissatisfied with the product output, and TKE agreed to fix the equipment. The additional cost caused TKE to miss its earn-out target. Based on these factors, the Company determined to amend its asset purchase agreement with TKE, whereby TKE could receive maximum contingent consideration of $0.4 million in 2022 and $0.3 million in 2023. TKE earned $0.3 million in 2022, so the Company recorded a remeasurement of contingent consideration for $0.1 million in 2022. Potential future contingent payments to be made to all active acquisitions after December 31, 2022 are capped at a cumulative maximum of $11.8 million. The Company paid contingent consideration of $0.1 million, $0.5 million and $0.3 million during the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021, respectively. The changes in the liability for contingent consideration from acquisitions for the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021 are as follows:
Balance as of December 28, 2019 |  | $ | 3,058 |
Contingent payments made |  |  | (345 | )
Changes in fair value of contingent payments |  |  | 145 |
Balance as of January 2, 2021 |  | $ | 2,858 |
Contingent payments made |  |  | (494 | )
Changes in fair value of contingent consideration |  |  | 52 |
Remeasurement of contingent consideration |  |  | (1,713 | )
Balance as of January 1, 2022 |  | $ | 703 |
Contingent payments made |  |  | (99 | )
Remeasurement of contingent consideration |  |  | (88 | )
Acquisition of TalentHerder |  |  | 1,926 |
Balance as of December 31, 2022 |  | $ | 2,442 |
Future Contingent Payments As of December 31, 2022, the Company had two active acquisition agreements whereby additional contingent consideration may be earned by the former sellers: 1) effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC (together, “TKE”), and 2) effective October 2, 2022, the Company acquired certain assets of TalentHerder LLC. The Company estimates future contingent payments at December 31, 2022 as follows:
Fiscal Years Ending |  | Total |
December 30, 2023 |  | $ | 472 |
Thereafter |  |  | 1,970 |
Estimated future contingent consideration payments |  | $ | 2,442 |
For acquisitions that involve contingent consideration, the Company records a liability equal to the fair value of the estimated contingent consideration obligation as of the acquisition date. The Company determines the acquisition date fair value of the contingent consideration based on the likelihood of paying the additional consideration. The fair value is estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the fair value of the contingent consideration liability is recognized in the consolidated statements of operations. During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations. Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates. The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of December 31, 2022. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net. Divestiture of Assets On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices, located in Ontario, Canada. These two offices were often referred to as Canada Power Systems and principally provided engineering services to two major nuclear power providers in Canada. The two Canada Power Systems offices were part of a reporting unit within the Company’s Engineering segment. The Company will continue to offer other engineering services in Canada and similar services in the United States. The Company evaluated this transaction under ASC 205-20, discontinued operations and determined it did not meet the requirements to be treated as such. For the fiscal years ended January 1, 2022 and January 2, 2021, these two offices generated revenue of $4.9 million and $11.8 million. The purchase agreement provided for a typical indemnity escrow held by an independent escrow agent, the proceeds of which will equal up to $0.7 million, net of contingent sale bonuses for former management. The Company received a portion of the escrow during the fiscal year ended December 31, 2022. The remaining escrow balance has not been recognized in the Company’s financial statements, as the Company does not control the escrow. Provided there are no asserted indemnity claims, the Company expects to receive up to $0.4 million net of bonuses during the first half of fiscal 2023.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration