EX-99.3 5 exh993proforma.htm ADDITIONAL EXHIBITS
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma financial information presents the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of income based upon the combined historical financial statements of HireQuest, Inc. (“HQI” or the “Company”) and Snelling Staffing, LLC (“Snelling”), after giving effect to the Asset Purchase Agreement (the “Snelling Agreement”) between Snelling and HQ Snelling Corporation (“HQ Snelling”), a wholly-owned subsidiary of the Company, and the adjustments described in the accompanying notes.
On March 1, 2021, the Company completed its acquisition of certain assets of Snelling in accordance with the terms of the Snelling Agreement dated January 29, 2021. Pursuant to the Snelling Agreement, HQ Snelling acquired substantially all of the operating assets and assumed certain liabilities of Snelling for a purchase price of $17.3 million, subject to customary adjustments for net working capital. The transaction will be financed with cash-on-hand and the Company’s credit facility with Truist Bank.
The unaudited pro forma condensed combined balance sheet as of September 30, 2020 reflects the transaction as if it occurred on September 30, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 and for the three and nine months ended September 30, 2020 reflect the transaction as if it occurred on January 1, 2019.
The unaudited pro forma condensed combined financial information is for informational purposes only and does not purport to present what our results would actually have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position for any future period. You should read the information set forth below together with the notes to the pro forma condensed combined financial statements, the Annual Report of the Company on Form 10-K for the year ended December 31, 2019 and the Quarterly Report of the Company on Form 10-Q for the nine months ended September 30, 2020, and the audited financial statements of Snelling for the fiscal years ended December 27, 2019 and December 28, 2018 and the unaudited financial statements for the fiscal quarters ended September 25, 2020 and September 27, 2019 included as Exhibit 99.1.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
September 30, 2020

| HireQuest, Inc. | Snelling Staffing, LLC | Pro forma adjustments | Pro forma condensed combined
ASSETS |  |  |  |  |
Current assets |  |  |  |  |
Cash | $10,297,147 | $781,378 | $(10,381,378) | A | $697,147
Accounts receivable, net of allowance for doubtful accounts | 24,024,564 | 12,781,033 | (256,343) | B | 36,549,254
Notes receivable | 2,144,118 | - | - |  | 2,144,118
Prepaid expenses, deposits, and other assets | 1,179,333 | 1,147,134 | (870,493) | C | 1,455,974
Prepaid workers' compensation | 1,978,509 | - | - |  | 1,978,509
Workers' compensation trust | - | 7,193,529 | (7,193,529) | D | -
Total current assets | 39,623,671 | 21,903,074 | (18,701,743) |  | 42,825,002
Property and equipment, net | 2,958,998 | 1,075,316 | (1,075,316) | D | 2,958,998
Intangible assets, net | 186,705 | 4,502,628 | 6,226,378 | E | 10,915,711
Notes receivable, net of current portion and reserve | 6,377,779 | - | - |  | 6,377,779
Other assets | - | 295,979 | (295,979) | D | -
Total assets | $49,147,153 | $27,776,997 | $(13,846,660) |  | $63,077,490
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Current liabilities |  |  |  |  |
Accounts payable | $5,499 | $2,527,630 | $(2,288,551) | F | $244,578
Other current liabilities | 1,664,854 | 8,156,281 | (8,156,281) | D | 1,664,854
Accrued benefits and payroll taxes | 2,088,119 | - | - |  | 2,088,119
Due to franchisees | 2,311,372 | 458,782 | - |  | 2,770,154
Risk management incentive program liability | 1,018,994 | - | - |  | 1,018,994
Revolving line of credit | - | - | 7,700,000 | G | 7,700,000
Current portion of debt | - | 47,663,416 | (47,663,416) | D | -
Workers' compensation claims liability | 3,165,056 | 2,218,409 | - |  | 5,383,465
Total current liabilities | 10,253,894 | 61,024,518 | (50,408,248) |  | 20,870,164
Workers' compensation claims liability, net of current portion | 1,743,128 | 3,314,067 | - |  | 5,057,195
Franchisee deposits | 1,459,335 | - | - |  | 1,459,335
Debt, net of current portion | - | 25,006 | (25,006) | D | -
Other long-term liabilities | - | 4,549,337 | (4,549,337) | D | -
Deferred tax liability | 273,185 | - | - |  | 273,185
Total liabilities | 13,729,542 | 68,912,928 | (54,982,591) |  | 27,659,879
Equity |  |  |  |  |
Total HireQuest, Inc. stockholders equity | 35,417,611 | - | - |  | 35,417,611
Total Snelling member equity | - | (41,135,931) | 41,135,931 | H | -
Total stockholders' equity | 35,417,611 | (41,135,931) | 41,135,931 |  | 35,417,611
Total liabilities and stockholders' equity | $49,147,153 | $27,776,997 | $(13,846,660) |  | $63,077,490

See notes to pro forma condensed combined financial statements.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations for the
Three Months Ended September 30, 2020

| HireQuest, Inc. | Snelling Staffing, LLC | Pro forma adjustments | Pro forma condensed combined
Franchise royalties/Revenue | $3,218,606 | $21,378,487 | $- |  | $24,597,093
Cost of sales | - | 16,322,627 | - |  | 16,322,627
Service revenue | 164,074 | - | - |  | 164,074
Total revenue | 3,382,680 | 5,055,860 | - |  | 8,438,540
Selling, general and administrative expenses | 1,357,725 | 4,836,389 | - |  | 6,194,114
Depreciation and amortization | 32,438 | 123,826 | 178,817 | A | 335,081
Income (loss) from operations | 1,992,517 | 95,645 | (178,817) |  | 1,909,345
Other miscellaneous income | 392,709 | - | - |  | 392,709
Interest and other financing expense | (10,035) | (1,214,405) | - |  | (1,224,440)
Net income (loss) before income taxes | 2,375,191 | (1,118,760) | (178,817) |  | 1,077,614
Provision for income taxes | 404,058 | 22,500 | 43,989 | B | 470,547
Net income (loss) | $1,971,133 | $(1,141,260) | $(222,806) |  | $607,067
Earnings per share |  |  |  |  |
Basic | $0.15 |  |  |  | $0.04
Diluted | $0.15 |  |  |  | $0.04
Weighted average shares outstanding |  |  |  |  |
Basic | 13,573,086 |  |  |  | 13,573,086
Diluted | 13,574,863 |  |  |  | 13,574,863

See notes to pro forma condensed combined financial statements.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations for the
Nine Months Ended September 30, 2020

| HireQuest, Inc. | Snelling Staffing, LLC | Pro forma adjustments | Pro forma condensed combined
Franchise royalties | $9,563,135 | $64,768,429 | $- |  | $74,331,564
Cost of sales | - | 49,894,333 | - |  | 49,894,333
Service revenue | 840,515 | - | - |  | 840,515
Total revenue | 10,403,650 | 14,874,096 | - |  | 25,277,746
Selling, general and administrative expenses | 6,542,171 | 15,004,723 | - |  | 21,546,894
Depreciation and amortization | 96,654 | 407,521 | 536,450 | A | 1,040,625
Income (loss) from operations | 3,764,825 | (538,148) | (536,450) |  | 2,690,227
Other miscellaneous income | 932,254 | - | - |  | 932,254
Interest and other financing expense | (39,174) | (3,625,810) | - |  | (3,664,984)
Net income before income taxes | 4,657,905 | (4,163,958) | (536,450) |  | (42,503)
Provision for income taxes | 654,592 | 67,500 | 131,967 | B | 854,059
Net income (loss) | $4,003,313 | $(4,231,458) | $(668,417) |  | $(896,562)
Earnings (loss) per share |  |  |  |  |
Basic | $0.30 |  |  |  | $(0.07)
Diluted | $0.30 |  |  |  | $(0.07)
Weighted average shares outstanding |  |  |  |  |
Basic | 13,551,507 |  |  |  | 13,551,507
Diluted | 13,553,619 |  |  |  | 13,553,619

See notes to pro forma condensed combined financial statements.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations for the
Year Ended December 31, 2019

| HireQuest, Inc. | Snelling Staffing, LLC | Pro forma adjustments | Pro forma condensed combined
Franchise royalties | $14,673,636 | $123,344,233 | $- |  | $138,017,869
Cost of sales | - | 91,571,809 | - |  | 91,571,809
Service revenue | 1,202,824 | - | - |  | 1,202,824
Total revenue | 15,876,460 | 31,772,424 | - |  | 47,648,884
Selling, general and administrative expenses | 12,692,297 | 27,803,694 | - |  | 40,495,991
Depreciation and amortization | 400,132 | 607,706 | 715,267 | A | 1,723,105
Income (loss) from operations | 2,784,031 | 3,361,024 | (715,267) |  | 5,429,788
Other miscellaneous income | 751,077 | - | - |  | 751,077
Interest and other financing expense | (559,585) | (4,519,991) | - |  | (5,079,576)
Net income before income taxes | 2,975,523 | (1,158,967) | (715,267) |  | 1,101,289
Provision for income taxes | 3,480,996 | 78,825 | 175,956 | B | 3,735,777
Net loss from continuing operations | $(505,473) | $(1,237,792) | $(891,223) |  | $(2,634,488)
Basic and diluted loss per share |  |  |  |  |
Continuing operations | $(0.05) |  |  |  | $(0.21)
Basic and diluted weighted average shares outstanding | 11,588,776 |  |  |  | 11,588,776

See notes to pro forma condensed combined financial statements.
HireQuest, Inc.
Notes to Pro Forma Condensed Combined Financial Statements.
Note 1 – Basis of Presentation
The historical financial information has been adjusted to give pro forma effect to events that are directly attributable to the Snelling Agreement and expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on estimates. They have been prepared to illustrate the estimated effect of the Link Agreement and certain other adjustments.
Note 2 – Preliminary Purchase Price Allocation
Under the purchase method of accounting, the total purchase price of $17.3 million allocated to the tangible and intangible assets acquired and liabilities assumed by the Company based on their preliminary estimated fair values. The fair value assessments are preliminary and are based upon available information and certain assumptions which the Company believes are reasonable. Actual results may differ materially from the unaudited pro forma condensed combined financial statements.

Description | Amount
Fair value of franchise agreements assumed | $10,729,006
Accounts receivable | 12,524,690
Other current assets | 276,641
Current portion of workers' compensation claims liability | (2,218,409)
Other current liabilities | (697,861)
Workers' compensation claims liability, net of current portion | (3,314,067)
Total allocated purchase price | $17,300,000

The preliminary purchase price as shown in the table above is allocated to the tangible and intangible assets acquired and liabilities assumed by the Company based on their preliminary estimated fair values. The fair value assessments are preliminary and are based upon available information and certain assumptions which the Company believes are reasonable. Actual results may differ materially from the unaudited pro forma condensed combined financial statements.
Note 3 – Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet
(A) -Adjustments to cash:

Description | Amount
Borrowing on line of credit | $7,700,000
Cash consideration paid for Snelling Staffing, LLC | (17,300,000)
Snelling cash balance not acquired | (781,378)
Pro forma adjustment to cash | $(10,381,378)

(B) - Accounts receivable not acquired.
(C) - Adjustments to prepaid expenses, deposits and other assets:

Description | Amount
Snelling prepaid expenses, deposits and other assets | $(1,147,134)
Prepaid rents and rent deposits assumed | 276,641
Pro forma adjustment to accounts receivable | $(870,493)

(D) - Assets not acquired and liabilities not assumed pursuant to the Snelling Agreement.
(E) - Adjustments to intangible assets:

Description | Amount
Fair value of franchisee agreements assumed | $10,729,006
Snelling intangible assets not acquired | (4,502,628)
Pro forma adjusted intangible assets | $6,226,378

(F) - Adjustments to accounts payable:

Description | Amount
Snelling accounts payable | $(2,527,630)
Accounts payable assumed in Snelling Agreement | 239,079
Pro forma adjustment to accounts payable | $(2,288,551)

(G) - Borrowing to facilitate Snelling transaction.
(H) - Adjustment to Snelling’s historical equity.
Note 4 – Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Income
(A) -The newly acquired intangible assets consisting of franchise agreements will be amortized on a straight-line basis over their estimated useful lives. The fair value assessment is preliminary and any changes to the preliminary values will have a direct impact on future earnings via amortization expense.

Description | Estimated fair value | Estimated useful life | Three months ended September 30, 2020 | Nine months ended September 30, 2020 | Year ended December 31, 2019
Franchise agreements | $10,729,006 | 15 Years | $178,817 | $536,450 | $715,267
Pro forma adjustment to amortization expense |  |  | $178,817 | $536,450 | $715,267

(B) - To record the income tax impact of the pro forma adjustments (A) above.

Description | Three months ended September 30, 2020 | Nine months ended September 30, 2020 | Year ended December 31, 2019
Pro forma change in income before income tax | $178,817 | $536,450 | $715,267
Combined Federal and State statutory rate | 24.6% | 24.6% | 24.6%
Sub-total | $43,989 | $131,967 | $175,956