ACQUISITIONS

12 Months Ended

Dec. 26, 2021

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. 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 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:


Accounts receivable	$	6,728,261
Prepaid expenses and other assets	56,108
Property and equipment	296,309
Right-of-use asset - operating leases	1,714,984
Intangible assets	10,264,000
Goodwill (non-deductible for tax purposes)	6,882,241
Current liabilities assumed	(2,567,617)
Deferred income taxes	(657,193)
Lease liability - operating leases	(1,714,984)
Total net assets acquired	$	21,002,109

Cash	$	21,600,000
Working capital adjustment	(597,891)
Total fair value of consideration transferred for acquired business	$	21,002,109

The allocation of the intangible assets is as follows:


	Estimated Fair Value		Estimated Useful Lives
Covenants not to compete	$	171,000	5 years
Trade name	6,000,000		Indefinite
Client partner list	4,093,000		6 years
Total	$	10,264,000

The Company incurred costs of $0.7 million related to the EdgeRock acquisition. These costs were expensed as incurred in selling, general and administrative expenses.

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:


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 Useful Lives
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):


	2021		2020
Revenues	$	239,263	$	212,934
Gross profit	$	81,106	$	68,580
Net income	$	10,500	$	(1,884)
Net income per share:
Basic	$	1.01	$	(0.18)
Diluted	$	1.01	$	(0.18)

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.