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ACQUISITIONS | 6 Months Ended
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Jun. 28, 2020
Business Combinations [Abstract] |
ACQUISITIONS | NOTE 3 - ACQUISITIONS L.J. 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 net assets acquired were assigned to the Professional segment. The acquisition of LJK allows the Company to strengthen and expand its IT operations through cybersecurity retained search services specializing in recruiting high and mid-level security professionals. EdgeRock Technology Holding, Inc. On February 3, 2020, the Company acquired 100% of the equity of EdgeRock for a purchase price cash consideration of $21.7 million, subject to customary purchase price adjustments as specified in the purchase agreement. The purchase price at closing was paid out of available funds under the Company’s credit agreement led by BMO. The acquired business was assigned to the Professional segment. The acquisition of EdgeRock allows the Company to strengthen its operations in specialized IT consultants and technology professionals specialized in leading software and data ecosystems, as well as expand its IT geographic operations with offices in Arizona, Florida and Massachusetts. The 2019 consolidated statement of income does not include any operating results of EdgeRock. Thirteen weeks of EdgeRock operations are included in the thirteen week period ended June 28, 2020, which is approximately $9.8 million of revenue and $0.3 million of operating income. Twenty-one weeks of EdgeRock operations are included in the twenty-six week period ended June 28, 2020, which is approximately $16.3 million of revenue and $0.6 million of operating income. The preliminary acquisition has been allocated to the assets acquired and liabilities assumed as of the date of acquisition as follows:
Accounts receivable |  | $ | 6,731,260 |
Prepaid expenses and other assets |  | 520,587 |
Property and equipment, net |  | 296,309 |
Right-of-use asset - operating leases |  | 1,714,984 |
Intangible assets |  | 11,274,000 |
Goodwill (non-deductible for tax purposes) |  | 6,178,351 |
Current liabilities assumed |  | (2,409,551) |
Deferred income taxes, net |  | (910,501) |
Lease liability - operating leases |  | (1,714,984) |
Total net assets acquired |  | $ | 21,680,455 |
Cash |  | $ | 21,680,455 |
Total fair value of consideration transferred for acquired business |  | $ | 21,680,455 |
The preliminary allocation of the intangible assets is as follows:
|  | Estimated Fair Value |  | Estimated Useful Lives
Covenants not to compete |  | $ | 302,000 |  |  | 5 years
Trade name |  | 7,000,000 |  |  | Indefinite
Client partner list |  | 3,972,000 |  |  | 5 years
Total |  | $ | 11,274,000 |  |  |
For the twenty-six week period ended June 28, 2020, the Company's incurred costs of $0.6 million related to the LJK and EdgeRock acquisitions. 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 2019 fiscal year would be as follows (dollars in thousands, except per share amounts):
|  | Thirteen Weeks Ended |  |  |  | Twenty-six Weeks Ended |  |
|  | June 28, 2020 |  | June 30, 2019 |  | June 28, 2020 |  | June 30, 2019
Revenues |  | $ | 62,606 |  |  | $ | 84,653 |  |  | $ | 139,782 |  |  | $ | 164,543 |
Gross profit |  | $ | 16,905 |  |  | $ | 24,733 |  |  | $ | 38,089 |  |  | $ | 47,323 |
Net (loss) income |  | $ | (4,829) |  |  | $ | 4,297 |  |  | $ | (3,544) |  |  | $ | 7,334 |
(Loss) Income per share: |  |  |  |  |  |  |  |
Basic |  | $ | (0.47) |  |  | $ | 0.42 |  |  | $ | (0.34) |  |  | $ | 0.72 |
Diluted |  | $ | (0.47) |  |  | $ | 0.41 |  |  | $ | (0.34) |  |  | $ | 0.71 |
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 3.7% and tax (benefit) expense of the pro forma adjustments at effective tax rates of 25.9% and 22.8% for thirteen and twenty-six week periods ended Fiscal 2020, respectively, and 22.8% for thirteen and twenty-six week periods ended and 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 the Company’s 2019 fiscal year or of the results that may be achieved by the combined enterprise in the future.

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- 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 http://asc.fasb.org/topic&trid=2303972 + Details
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- References No definition available. + Details
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