UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 26, 2021~~March 27, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-36704

BGSF, INC.

(exact name of registrant as specified in its charter)


Delaware			26-0656684
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5850 Granite Parkway, Suite 730

Plano, Texas 75024

(972) 692-2400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated Filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BGSF	NYSE

~~The number~~As of as of May 4, 2022 there were 10,468,267 shares ~~outstanding~~ of the registrant’s common stock ~~as of November 3, 2021 was 10,403,869.~~outstanding.

TABLE OF CONTENTS

Forward-Looking Statements

This Quarterly Report on Form-10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including, but not limited to, statements regarding:

•future financial performance and growth targets or expectations;

•market and industry trends and developments; and

•the benefits of our completed and future merger, acquisition and disposition transactions.

You can identify these and other forward-looking statements by the use of words such as “aim,” “potential,” “may,” “could,” “can,” “would,” “might,” “likely,” “will,” “expect,” “intend,” “plan,” ~~"predict", "ongoing", "project",“budget,~~“predict,” “ongoing,” “project,” “budget,” “scheduled,” “estimate,” “anticipate,” “believe,” “forecast,” “committed,” “future” or “continue” or the negative thereof or similar variations.

These forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and our current expectations, forecasts and assumptions and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include:

•the availability of field talents’ workers' compensation insurance coverage at commercially reasonable terms;

•the availability of qualified field talent;

•compliance with federal, state, local labor and ~~local~~foreign labor and employment laws and regulations and changes in such laws and regulations;

•the ability to compete with new competitors and competitors with superior marketing and financial resources;

•management team changes;

•the favorable resolution of current or future litigation;

•the impact of outstanding indebtedness on the ability to fund operations or obtain additional financing;

•the ability to leverage the benefits of recent acquisitions and successfully integrate newly acquired operations;

•the impact of, and the ability to mitigate or manage disruptions posed by, the novel coronavirus pandemic (“COVID-19”) or other pandemics;

•adverse changes in the economic conditions of the industries or markets that we serve;

•disturbances in world financial, credit, and stock markets;

•unanticipated changes in regulations affecting the company’s business;

•a decline in consumer confidence and discretionary spending;

•the general performance of the U.S. and global economies;

•continued or escalated conflict in the Middle East or elsewhere; and

•other risks referenced from time to time in our past and future filings with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~26, 2021.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we do not undertake any obligation to update or release any revisions to these forward-looking statements to reflect any events or circumstances, whether as a result of new information, future events, changes in assumptions or otherwise, after the date hereof.

Where You Can Find Other Information

Our website is www.bgsf.com. Information contained on our website is not part of this Quarterly Report on Form 10-Q. Information that we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. These reports and other information, including exhibits filed or furnished therewith, are also available at the SEC’s website at www.sec.gov.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED BALANCE SHEETS


			March 27, 2022		December 26, 2021
ASSETS
Current assets
	Cash and cash equivalents		$	—	$	112,104
	Accounts receivable (net of allowance for credit losses of $448,622 for 2022 and 2021, respectively)		47,677,430		48,132,896
	Prepaid expenses		2,673,068		2,345,948


	Other current assets		4,847,128		2,381,197
	Current assets of discontinued operations		—		7,198,104
		Total current assets	55,197,626		60,170,249

Property and equipment, net			6,223,457		4,331,052

Other assets
	Deposits		4,011,179		4,106,622
	Other assets		1,097,243		1,283,629
	Deferred income taxes, net		3,536,023		4,548,285
	Right-of-use asset - operating leases		3,501,592		3,914,060
	Intangible assets, net		32,807,369		33,584,910
	Goodwill		29,141,883		29,141,883
	Noncurrent assets of discontinued operations		—		7,213,276
		Total other assets	74,095,289		83,792,665
	Total assets		$	135,516,372	$	148,293,966
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Long-term debt, current portion		$	—	$	3,562,500
	Accrued interest		118,823		102,304
	Accounts payable		1,138,617		401,175
	Accrued payroll and expenses		15,491,877		16,153,920
	Contingent consideration, current portion		—		1,073,901
	Lease liability, current portion		1,859,893		1,896,253
	Other current liabilities		3,763,718		3,549,785
	Income taxes payable		4,548,605		381,806
	Current liabilities of discontinued operations		—		1,262,056
		Total current liabilities	26,921,533		28,383,700

Line of credit (net of deferred finance fees of $61,163 and $193,264 at 2022 and 2021, respectively)			14,124,318		12,587,591
Long-term debt, less current portion			—		23,300,000
Contingent consideration, less current portion			1,017,330		989,608
Lease liability, less current portion			2,245,524		2,685,270
Other long-term liabilities			15,307		3,565,218
Noncurrent liabilities of discontinued operations			—		190,395
	Total liabilities		44,324,012		71,701,782

September 26,
2021 December 27, 2020
ASSETS
Current assets
Accounts receivable (net of allowance for credit losses of $521,001 and $492,087 for 2021 and 2020, respectively) $ 54,051,208 $ 41,493,800
Prepaid expenses and other current assets 1,842,650 2,154,966
Other current assets 19,898 —
Total current assets 55,913,756 43,648,766
Property and equipment, net 3,046,081 3,723,582
Other assets
Deposits 4,142,234 4,016,002
Other assets 1,321,368 1,195,143
Deferred income taxes, net 4,887,702 5,827,673
Right-of-use asset - operating leases 4,674,345 6,009,054
Intangible assets, net 35,959,677 33,781,168
Goodwill 34,155,493 32,076,880
Total other assets 85,140,819 82,905,920
Total assets $ 144,100,656 $ 130,278,268
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Long-term debt, current portion $ 3,375,000 $ 2,625,000
Accrued interest 125,072 78,134
Accounts payable 362,785 219,693
Accrued payroll and expenses 15,515,677 11,448,403
Contingent consideration, current portion 1,052,750 —
Lease liability, current portion 2,060,525 2,031,898
Other current liabilities 3,549,785 —
Income taxes payable 592,188 1,861,116
Total current liabilities 26,633,782 18,264,244
Line of credit (net of deferred finance fees of $211,967 and $268,076 at 2021 and 2020, respectively) 13,430,982 5,709,266
Long-term debt, less current portion 24,050,000 26,300,000
Contingent consideration, less current portion 969,057 2,287,926
Lease liability, less current portion 3,366,279 4,903,539
Other long-term liabilities 3,619,830 7,355,541
Total liabilities 72,069,930 64,820,516
Commitments and contingencies 0 0
Preferred stock, $0.01 par value per share, 500,000 shares authorized, -0- shares issued and outstanding — —
Common stock, $0.01 par value per share; 19,500,000 shares authorized, 10,401,312 and 10,328,379 shares issued and outstanding for 2021 and 2020, respectively, net of treasury stock, at cost, 1,845 and 1,235 shares for 2021 and 2020, respectively. 66,121 73,834
Additional paid in capital 61,487,340 60,457,044
Retained earnings 10,531,878 5,049,748
Accumulated other comprehensive loss (54,613) (122,874)
Total stockholders’ equity 72,030,726 65,457,752
Total liabilities and stockholders’ equity $ 144,100,656 $ 130,278,268

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

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)


		March 27, 2022		December 26, 2021
Commitments and contingencies		0		0

Preferred stock, $0.01 par value per share, 500,000 shares authorized, -0- shares issued and outstanding		—		—
Common stock, $0.01 par value per share; 19,500,000 shares authorized, 10,445,208 and 10,425,210 shares issued and outstanding for 2022 and 2021, respectively, net of treasury stock, at cost, 1,845 shares for 2022 and 2021, respectively.		66,560		66,360
Additional paid in capital		62,298,581		61,875,406
Retained earnings		28,827,219		14,592,087
Accumulated other comprehensive gain		—		58,331
	Total stockholders’ equity	91,192,360		76,592,184
	Total liabilities and stockholders’ equity	$	135,516,372	$	148,293,966

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

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ~~(LOSS)~~

For the Thirteen ~~and Thirty-nine~~ Week Periods Ended ~~September 26,~~March 27, 2022 and March 28, 2021 ~~and September 27, 2020~~


			Thirteen Weeks Ended				Thirty-nine Weeks Ended						Thirteen Weeks Ended
			2021		2020		2021		2020					2022		2021
Revenues	Revenues		$	82,352,022	$	71,518,691	$	224,455,249	$	208,192,454	Revenues			$	68,542,277	$	49,750,192
Cost of services	Cost of services		57,685,150		51,806,765		159,190,832		151,299,654		Cost of services			45,111,478		33,535,483
		Gross profit	24,666,872		19,711,926		65,264,417		56,892,800			Gross profit		23,430,799		16,214,709
Selling, general and administrative expenses	Selling, general and administrative expenses		18,488,691		14,869,009		52,980,905		45,379,075		Selling, general and administrative expenses			19,716,312		15,302,424
Gain on contingent consideration			(1,208,269)		(76,102)		(2,402,844)		(76,102)
Impairment losses			—		—		—		7,239,514

Depreciation and amortization	Depreciation and amortization		1,190,710		1,270,951		2,940,967		4,129,615		Depreciation and amortization			898,973		836,242
		Operating income	6,195,740		3,648,068		11,745,389		220,698			Operating income		2,815,514		76,043

Interest expense, net	Interest expense, net		431,332		359,805		1,026,392		1,245,489		Interest expense, net			(273,379)		(376,527)
		Income (Loss) before income taxes	5,764,408		3,288,263		10,718,997		(1,024,791)			Income (loss) from continuing operations before income taxes		2,542,135		(300,484)
Income tax expense (benefit)			1,120,799		722,700		1,920,753		(259,951)
Income tax (expense) benefit from continuing operations											Income tax (expense) benefit from continuing operations			(534,366)		88,901
		Net income (loss)	$	4,643,609	$	2,565,563	$	8,798,244	$	(764,840)		Income (loss) from continuing operations		2,007,769		(211,583)

Change in unrealized (gains) losses on cash flow hedges			(6,232)		(17,241)		(68,261)		154,482
Income from discontinued operations:											Income from discontinued operations:
		Other comprehensive (income) loss	(6,232)		(17,241)		(68,261)		154,482			Income		1,234,996		1,155,670
		Net comprehensive income (loss)	$	4,649,841	$	2,582,804	$	8,866,505	$	(919,322)		Gain on sale		17,272,789		—
												Income tax expense		(4,715,771)		(232,290)
												Net income		$	15,799,783	$	711,797
Net income (loss) per share:

Change in unrealized (losses) gains on cash flow hedges, net											Change in unrealized (losses) gains on cash flow hedges, net			(58,331)		32,215
												Other comprehensive (loss) income		(58,331)		32,215
												Net comprehensive income		$	15,741,452	$	744,012

Net income per share - basic											Net income per share - basic
												Net income from continuing operations		$	0.19	$	(0.02)
												Net income from discontinued operations		1.33		0.09
												Net income per share - basic		$	1.52	$	0.07

Net income per share - diluted											Net income per share - diluted
												Net income from continuing operations		$	0.19	$	(0.02)
		Basic	$	0.45	$	0.25	$	0.85	$	(0.07)		Net income from discontinued operations		1.32		0.09
		Diluted	$	0.45	$	0.25	$	0.85	$	(0.07)		Net income per share - diluted		$	1.51	$	0.07

Weighted-average shares outstanding:	Weighted-average shares outstanding:										Weighted-average shares outstanding:
		Basic	10,380,900		10,312,939		10,351,319		10,309,457			Basic		10,428,897		10,332,815
		Diluted	10,427,112		10,326,493		10,404,900		10,309,457			Diluted		10,485,104		10,394,839

Cash dividends declared per common share	Cash dividends declared per common share		$	0.12	$	0.05	$	0.32	$	0.40	Cash dividends declared per common share			$	0.15	$	0.10

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

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the ~~Thirty-nine~~Thirteen Week Periods Ended ~~September 27, 2020~~March 28, 2021

Common Stock
Preferred
Stock Shares Par
Value Treasury Stock Amount Additional Paid in Capital Retained
Earnings Accumulated Other Comprehensive Loss Total
Stockholders’ equity, December 29, 2019 $ — 10,309,236 $ 103,093 $ (27,318) $ 59,617,787 $ 8,763,428 $ — $ 68,456,990
Share-based compensation — — — — 192,913 — — 192,913
Cancellation of restricted shares — (2,250) (23) — 23 — — —
Cash dividend declared — — — — — (3,092,771) — (3,092,771)
Net income — — — — — 1,498,860 — 1,498,860
Stockholders’ equity, March 29, 2020 — 10,306,986 103,070 (27,318) 59,810,723 7,169,517 — 67,055,992
Share-based compensation — — — — 193,077 — — 193,077
Share issuance cost — — — — (10,000) — — (10,000)
Cash dividend declared — — — — — (515,349) — (515,349)
Net loss — — — — — (4,829,263) — (4,829,263)
Unrealized losses on cash flow hedges (171,723) (171,723)
Stockholders’ equity, June 28, 2020 — 10,306,986 103,070 (27,318) 59,993,800 1,824,905 (171,723) 61,722,734
Share-based compensation — — — — 244,567 — — 244,567
Issuance of restricted shares — 10,032 100 — (100) — — —
Cash dividend declared — — — — — (515,349) — (515,349)
Net income — — — — — 2,565,563 — 2,565,563
Unrealized gains on cash flow hedges — — — — — 17,241 17,241
Stockholders’ equity, September 27, 2020 $ — 10,317,018 $ 103,170 $ (27,318) $ 60,238,267 $ 3,875,119 $ (154,482) $ 64,034,756


		Common Stock
	Preferred Stock	Shares	Par Value		Treasury Stock Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Total
Stockholders’ equity, December 26, 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	—	—	—		—		220,611		—		—		220,611
Share-based compensation from discontinued operations	—	—	—		—		15,396		—		—		15,396
Share issuance cost	—	—	—		—		(10,000)		—		—		(10,000)
Issuance of restricted shares	—	7,518	75		—		(75)		—		—		—
Exercise of common stock options	—	213	2		—		(2)		—		—		—
Cash dividend declared	—	—	—		—		—		(1,033,597)		—		(1,033,597)
Net income	—	—	—		—		—		711,797		—		711,797
Other comprehensive gain	—	—	—		—		—		—		32,215		32,215
Stockholders’ equity, March 28, 2021	—	10,336,110	$	103,361	$	(29,450)	$	60,682,974	$	4,727,948	$	(90,659)	$	65,394,174

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

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the ~~Thirty-nine~~Thirteen Week Periods Ended ~~September 26, 2021~~March 27, 2022

Common Stock
Preferred
Stock Shares Par
Value Treasury Stock Amount Additional Paid in Capital Retained
Earnings Accumulated Other Comprehensive Loss 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 — — — — 236,007 — — 236,007
Share issuance cost — — — — (10,000) — — (10,000)
Issuance of restricted shares — 7,518 75 — (75) — — —
Exercise of common stock options — 213 2 — (2) — — —
Cash dividend declared — — — — — (1,033,597) — (1,033,597)
Net income — — — — — 711,797 — 711,797
Unrealized gains on cash flow hedges — — — — — — 32,215 32,215
Stockholders’ equity, March 28, 2021 — 10,336,110 103,361 (29,450) 60,682,974 4,727,948 (90,659) 65,394,174
Share-based compensation — — — — 225,380 — — 225,380
Issuance of restricted shares — 7,230 72 — (72) — — —
Cash dividend declared — — — — — (1,034,334) — (1,034,334)
Net income — — — — — 3,442,838 — 3,442,838
Unrealized gains on cash flow hedges — — — — — — 29,814 29,814
Stockholders’ equity, June 27, 2021 — 10,343,340 103,433 (29,450) 60,908,282 7,136,452 (60,845) 68,057,872
Share-based compensation — — — — 424,328 — — 424,328
Share issuance cost — — — — (3,500) — — (3,500)
Issuance (cancellation) of restricted shares — 42,814 428 (8,442) (428) — — (8,442)
Issuance of ESPP Shares — 14,758 148 — 154,774 — — 154,922
Exercise of common stock options — 400 4 — 3,884 — — 3,888
Cash dividend declared — — — — — (1,248,183) — (1,248,183)
Net income — — — — — 4,643,609 — 4,643,609
Unrealized gains on cash flow hedges — — — — — — 6,232 6,232
Stockholders’ equity, September 26, 2021 $ — 10,401,312 $ 104,013 $ (37,892) $ 61,487,340 $ 10,531,878 $ (54,613) $ 72,030,726


		Common Stock
	Preferred Stock	Shares	Par Value		Treasury Stock Amount		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
Stockholders’ equity, December 26, 2021	—	10,425,210	$	104,252	$	(37,892)	$	61,875,406	$	14,592,087	$	58,331	$	76,592,184
Share-based compensation from continuing operations	—	—	—		—		211,449		—		—		211,449
Share-based compensation from discontinued operations	—	—	—		—		7,697		—		—		7,697
Fully vested shares related to the sale of discontinued operations	—	—	—		—		35,093		—		—		35,093
Issuance of restricted shares	—	5,795	58		—		(58)		—		—		—
Issuance of ESPP shares	—	14,203	142		—		168,994		—		—		169,136
Cash dividend declared	—	—	—		—		—		(1,564,651)		—		(1,564,651)
Net income	—	—	—		—		—		15,799,783		—		15,799,783
Other comprehensive gain	—	—	—		—		—		—		(58,331)		(58,331)
Stockholders’ equity, March 27, 2022	—	10,445,208	$	104,452	$	(37,892)	$	62,298,581	$	28,827,219	$	—	$	91,192,360

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

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~Thirty-nine~~Thirteen Week Periods Ended ~~September 26,~~March 27, 2022 and March 28, 2021 ~~and September 27, 2020~~

2021 2020
Cash flows from operating activities
Net income (loss) $ 8,798,244 $ (764,840)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 589,465 653,199
Amortization 2,351,502 3,476,416
Impairment losses — 7,239,514
Loss on disposal of property and equipment 8,197 —
Contingent consideration adjustment (2,402,844) (76,102)
Amortization of deferred financing fees 56,109 56,109
Interest expense on contingent consideration payable 210,002 144,911
Provision for credit losses 322,144 153,805
Share-based compensation 885,715 630,557
Deferred income taxes, net of acquired deferred tax liability 939,971 (1,352,702)
Net changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (12,534,431) 4,231,482
Prepaid expenses and other current assets 315,942 244,699
Other current assets (19,898) 508,986
Deposits (126,232) (128,805)
Other assets 281,439 (849,454)
Accrued interest 46,938 21,295
Accounts payable 117,664 (66,069)
Accrued payroll and expenses 4,018,994 (21,446)
Other current liabilities 18,977 (1,016,565)
Income taxes receivable and payable (1,268,928) 197,426
Operating leases (117,458) (16,649)
Other long-term liabilities (136,642) 5,022,287
Net cash provided by operating activities 2,354,870 18,288,054
Cash flows from investing activities
Business acquired, net of cash received (3,780,000) (21,657,689)
Capital expenditures (1,566,389) (1,960,179)
Proceeds from the sale of property and equipment 5,158 —
Net cash used in investing activities (5,341,231) (23,617,868)

Cash flows from financing activities
Net borrowings (payments) under line of credit 7,665,607 (12,336,717)
Proceeds from issuance of long-term debt — 22,500,000
Principal payments on long-term debt (1,500,000) (700,000)
Payments of dividends (3,316,114) (4,123,469)
Issuance of ESSP Shares 154,922 —
Issuance of shares, net of offering costs (18,054) (10,000)
Net cash provided by financing activities 2,986,361 5,329,814
Net change in cash and cash equivalents — —
Cash and cash equivalents, beginning of period — —
Cash and cash equivalents, end of period $ — $ —
Supplemental cash flow information:
Cash paid for interest $ 563,280 $ 890,918
Cash paid for taxes, net of refunds $ 2,187,334 $ 855,101


				2022		2021
Cash flows from operating activities
	Net income			$	15,799,783	$	711,797
	(Income) from discontinued operations			(1,234,996)		(1,155,670)
		Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation		160,253		177,835
		Amortization		738,720		658,407

		Gain on sale of discontinued operations		(17,272,789)		—




		Amortization of deferred financing fees		132,100		18,703

		Interest expense on contingent consideration payable		63,819		58,477
		Provision for credit losses		51,237		33,998
		Share-based compensation		211,449		220,611
		Deferred income taxes, net of acquired deferred tax liability		1,012,262		(46,776)
		Net changes in operating assets and liabilities, net of effects of acquisitions:
			Accounts receivable	(1,432,492)		(2,976,993)
			Prepaid expenses	(327,120)		(520,474)
			Other current assets	(202,518)		(1,152)
			Deposits	108,194		45,021
			Other assets	171,203		—
			Accrued interest	16,519		27,544
			Accounts payable	737,442		16,297
			Accrued payroll and expenses	(850,898)		1,494,704
			Other current liabilities	(3,335,978)		18,977
			Income taxes receivable and payable	4,479,253		256,607
			Operating leases	(27,546)		(75,308)
			Other long-term liabilities	(58,331)		(146,881)
		Net cash used in continuing operating activities		(1,060,434)		(1,184,276)
		Net cash provided by discontinued operating activities		674,947		3,095,409
		Net cash (used in) provided by operating activities		(385,487)		1,911,133

Cash flows from investing activities
	Business acquired, net of cash received			—		(3,780,000)
	Business sold			30,312,751		—
	Capital expenditures			(2,050,225)		(540,311)

		Net cash provided by (used in) continuing investing activities		28,262,526		(4,320,311)
		Net cash used in discontinued investing activities		(25,755)		(7,326)
		Net cash provided by (used in) investing activities		28,236,771		(4,327,637)

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

BGSF, Inc. and Subsidiaries

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Thirteen Week Periods Ended March 27, 2022 and March 28, 2021



			2022		2021
Cash flows from financing activities
	Net borrowings under line of credit		1,404,627		3,835,101

	Principal payments on long-term debt		(26,862,500)		(375,000)

	Payments of dividends		(1,564,651)		(1,033,597)
	Issuance of ESSP Shares		169,136		—
	Issuance of shares, net of offering costs		—		(10,000)

	Contingent consideration paid		(1,110,000)		—

		Net cash (used in) provided by continuing financing activities	(27,963,388)		2,416,504
		Net cash provided by discontinued financing activities	—		—
		Net cash (used in) provided by financing activities	(27,963,388)		2,416,504
Net change in cash and cash equivalents			(112,104)		—
Cash and cash equivalents, beginning of period			112,104		—
Cash and cash equivalents, end of period			$	—	$	—

Supplemental cash flow information:
	Cash paid for interest		$	299,690	$	223,804
	Cash paid for taxes, net of refunds		$	58,812	$	147,953

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

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

BGSF, Inc., along with its wholly owned subsidiaries BGSF Professional, LLC (formally BG Staffing, ~~LLC,~~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 March 21, 2022, we completed the sale of substantially all our Light Industrial segment (“InStaff”) assets to Jobandtalent (“J&T”), through their wholly-owned subsidiary, Sentech Engineering Services, Inc.

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 operates primarily within the United States of America in ~~3 industry segments:~~ Real Estate and Professional industry segments, and prior to March 21, 2022, discontinued operations in Light ~~Industrial.~~Industrial (see Note 4).

The Real Estate segment provides office and maintenance field talent to various apartment communities and commercial buildings currently in 34 states and D.C., via property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations. The 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. 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.

The 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 11 on-sites in 7 states. The Light Industrial segment operates through one division under the InStaff trade name.

~~The~~ Company normally experiences seasonal fluctuations. The quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of client partners’ businesses. Demand for the Real Estate workforce solutions ~~increase~~has historically increased in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session. ~~Demand for the Light Industrial workforce solutions increases during the third quarter of the year and peaks in the fourth quarter due to increases in the demand for holiday help.~~ Overall first quarter demand can be affected by adverse weather conditions in the winter months. In addition, the cost of services typically increases in the first quarter primarily due to the reset of payroll taxes. ~~Normal seasonal demand has been significantly affected by COVID-19.~~

The Company has adjusted, and continues to monitor and change, its operations in response to COVID-19 in all of ~~its segment,~~it's segments, client partner, and home office locations. The ~~outbreak continues~~pandemic may continue to impact both operational and financial performance. The ~~duration of the pandemic, as well as the continued spread of the outbreak, impacts~~impact on the Company's client partners, and the ongoing government and community reactions to the pandemic remain unpredictable.

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“GAAP”), pursuant to the applicable rules and regulations of the SEC. The information furnished herein reflects all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to present a fair statement of the financial position and operating results of the Company as of and for the respective periods. However, these operating results are not necessarily indicative of the results expected for a full fiscal year or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, management of the Company believes, to the best of its knowledge, that the disclosures herein are adequate to make the information presented not misleading. The Company has determined that there were no subsequent events that would require disclosure or adjustments to the accompanying consolidated financial statements through the date the financial statements were ~~issued.~~issued, except for disclosure in Note 15. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended December ~~27, 2020,~~26, 2021, included in its Annual Report on Form 10-K.

911

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation.

Fiscal Periods

The Company has a 52/53 week fiscal year. Fiscal periods for the consolidated financial statements included herein are as of ~~September~~March 27, 2022 and December 26, 2021, ~~and December 27, 2020,~~ and include the thirteen ~~and thirty-nine~~ week periods ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020,~~ referred to herein as Fiscal ~~2021~~2022 and ~~2020,~~2021, respectively.

Reclassifications

Certain reclassifications have been made to the ~~2020~~2021 financial statements to conform with the ~~2021~~2022 presentation.

Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the financial statements include allowances for credit losses, goodwill, intangible assets, lease liability, contingent consideration obligations related to acquisitions, and income taxes. Additionally, the valuation of share-based compensation expense uses a model based upon interest rates, stock prices, maturity estimates, volatility and other factors. The Company believes these estimates and assumptions are reliable. 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~~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.

Financial Instruments

The Company uses fair value measurements in areas that include, but are not limited to, interest rate swap agreements used to mitigate interest rate risk, and the allocation of purchase price consideration to tangible and identifiable intangible assets and contingent consideration. The carrying values of cash and cash equivalents, accounts receivables, prepaid expenses, accounts payable, accrued liabilities, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The carrying value of bank debt approximates fair value due to the variable nature of the interest rates under the credit agreement ~~led by~~with BMO Harris Bank, N.A. (“BMO”) that provides for a revolving credit facility and term loan and current rates available to the Company for debt with similar terms and risk. The fair value on the interest rate swap is based on quoted prices from BMO.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.

1012

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

Concentration of credit risk is limited due to the ~~Company's~~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 from continuing operations as of ~~September~~March 27, 2022 and December 26, 2021 ~~and December 27, 2020~~ or revenue from continuing operations for the ~~thirty-nine~~thirteen week periods ended ~~September 26, 2021~~March 27, 2022 and ~~September 27, 2020.~~March 28, 2021. Geographic revenue from continuing operations in excess of 10% of the Company's consolidated revenue in Fiscal ~~2021~~2022 and the related percentage for Fiscal ~~2020~~2021 was generated in the following areas:


		Thirty-nine Weeks Ended					Thirteen Weeks Ended
		September 26, 2021		September 27, 2020			March 27, 2022		March 28, 2021

Tennessee	Tennessee	11	%	14	%	Tennessee	12	%	14	%
Texas	Texas	28	%	23	%	Texas	23	%	22��	%

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.

Accounts Receivable

The Company extends credit to its client partners in the normal course of business. Accounts receivable represents unpaid balances due from client partners. The Company maintains an allowance for credit losses for expected losses resulting from client partners’ non-payment of balances due to the Company. 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 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 from continuing operations are as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Beginning balance	Beginning balance	$	521,001	$	467,200	$	492,087	$	468,233	Beginning balance		$	448,622	$	492,087
EdgeRock Technology Holdings, Inc. (“EdgeRock”) acquisition		—		—		—		47,498
Provision for credit losses, net	Provision for credit losses, net	88,862		53,896		322,144		153,805		Provision for credit losses, net		51,237		33,998
Amounts written off, net	Amounts written off, net	(88,862)		(44,109)		(293,230)		(192,549)		Amounts written off, net		(51,237)		(33,998)
Ending balance	Ending balance	$	521,001	$	476,987	$	521,001	$	476,987	Ending balance		$	448,622	$	492,087

CARES Act Receivable

Other current assets from continuing operations includes $2.6 million of the Employee Retention Credit ("ERC") at March 27, 2022. 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

Property and equipment are stated net of accumulated depreciation and amortization of ~~$4.7~~$4.5 million and $4.3 million at ~~September~~March 27, 2022 and December 26, 2021, ~~and December 27, 2020,~~ respectively.

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Deposits

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 ~~$3.9~~$3.8 million and ~~$3.8~~$3.9 million, ~~as of September 26, 2021 and December 27, 2020, respectively,~~ which are included in ~~Deposits~~deposits in the accompanying consolidated balance ~~sheets.~~

~~BGSF, Inc.~~sheets, as of March 27, 2022 and ~~Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

December 26, 2021, respectively.

Long-Lived Assets

The Company capitalizes direct costs incurred in the development of internal-use software. Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets. All other internal-use software development costs are capitalized and reported as a component of computer software within intangible assets.

The Company reviews its long-lived assets, primarily fixed assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. There were no impairments with respect to long-lived assets during Fiscal ~~2021~~2022 or Fiscal ~~2020.~~2021.

Leases

The Company leases all their office space through operating leases, which expire at various dates through 2025. Many of the lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs, which are accounted for separately. Certain of the Company’s lease arrangements contain renewal provisions from 3 to 10 years, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet as right-of-use assets and lease liabilities for the lease term.

Right of use lease assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses.

Intangible Assets

The Company holds intangible assets with indefinite and finite lives. Intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized.

Identifiable intangible assets recognized in conjunction with acquisitions are recorded at fair value. 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.

The Company capitalizes purchased software and internal payroll costs directly incurred in the modification of software for internal use. Software maintenance and training costs are expensed in the period incurred.

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 considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units. 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. The Company~~ determined there were no impairment indicators for these assets during Fiscal 2022 or Fiscal 2021.

1214

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Goodwill

Goodwill is not amortized, but instead is evaluated at the reporting unit level for impairment annually at the end of each fiscal year, or more frequently, if conditions indicate an earlier review is necessary. The Company considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units. If the Company has determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value, the Company may use a qualitative assessment for the annual impairment test. The Company ~~considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units. The Company~~ determined there were no impairment indicators for goodwill assets during Fiscal ~~2021~~2022 or Fiscal ~~2020.~~2021.

Deferred Financing Fees

Deferred financing fees are amortized using the effective interest method over the term of the respective loans. Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability.

Contingent Consideration

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. The fair value calculation of the expected future payments uses a discount rate commensurate with the risks of the expected cash flow. The resulting discount is amortized as interest expense over the outstanding period using the effective interest method.

Revenue Recognition

The Company derives its revenues from ~~3 segments:~~continuing operations in Real Estate and Professional ~~and Light Industrial.~~segments. The Company provides workforce solutions and placement services. 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.

The Company records revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified field talent, (ii) has the discretion to select the field talent and establish their price and duties and (iii) bears the risk for services that are not fully paid for by client partners.

Workforce ~~solutions~~solution revenues - Field talent revenues from contracts with client partners are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s field talent.

Contingent placement revenues - Any revenues associated with workforce solutions that are provided on a contingent basis are recognized once the contingency is resolved, as this is when control is transferred to the client partner, usually when employment candidates start their employment.

Retained search placement revenues - ~~any~~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.

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. Allowances, recorded as a liability, are established to estimate these losses. Fees to client partners are generally calculated as a percentage of the new worker’s annual compensation. No fees for placement workforce solutions are charged to employment candidates. These assumptions determine the timing of revenue recognition for the reported period.

Refer to Note 1314 for disaggregated revenues by segment.

1315

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Payment terms in the Company's contracts vary by the type and location of its client partner and the workforce solutions offered. The term between invoicing and when payment is due is not significant. There were no unsatisfied performance obligations as of ~~September 26, 2021.~~March 27, 2022. There were no revenues recognized during the ~~thirty-nine~~thirteen week period ended ~~September 26, 2021~~March 27, 2022 related to performance obligations satisfied or partially satisfied in previous periods. There are no contract costs capitalized. The Company did not recognize any contract impairments during the ~~thirty-nine~~thirteen week period ended ~~September 26, 2021.~~March 27, 2022.

Share-Based Compensation

The Company recognizes compensation expense in selling, general and administrative expenses over the service period for options or restricted stock that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates.

Earnings Per Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period adjusted to reflect potentially dilutive securities. Antidilutive shares are excluded from the calculation of earnings per share.

The following is a reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the respective periods:


			Thirteen Weeks Ended		Thirty-nine Weeks Ended				Thirteen Weeks Ended
			September 26, 2021	September 27, 2020	September 26, 2021	September 27, 2020				March 27, 2022	March 28, 2021
Weighted-average number of common shares outstanding:	Weighted-average number of common shares outstanding:		10,380,900	10,312,939	10,351,319	10,309,457	Weighted-average number of common shares outstanding:			10,428,897	10,332,815
Effect of dilutive securities:	Effect of dilutive securities:						Effect of dilutive securities:
		Stock options and restricted stock	46,212	13,554	53,581	—		Stock options and restricted stock		56,207	62,024

Weighted-average number of diluted common shares outstanding	Weighted-average number of diluted common shares outstanding		10,427,112	10,326,493	10,404,900	10,309,457	Weighted-average number of diluted common shares outstanding			10,485,104	10,394,839

		Stock options and restricted stock	408,050	606,557	408,050	419,850		Stock options and restricted stock		387,350	423,350
		Warrants	—	25,862	—	25,862		Warrants		—	25,862
Antidilutive shares	Antidilutive shares		408,050	632,419	408,050	445,712	Antidilutive shares			387,350	449,212

Income Taxes

The consolidated effective tax rates of ~~19.4%~~24.9% and ~~17.9%~~16.8% for the thirteen ~~and thirty-nine~~ week periods ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~respectively, and 22.0% and 25.4% for thirteen and thirty-nine week periods ended September 27, 2020,~~ respectively, were primarily due to higher state taxes, offset by ~~the~~higher Work Opportunity Tax Credit in Fiscal ~~2021 and Fiscal 2020 and the non-deductibility of transaction costs related to the EdgeRock acquisition in Fiscal 2020.~~2022.

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 as noncurrent in the consolidated balance sheets. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. 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 ~~September 26, 2021,~~March 27, 2022, the Company has a ~~$5.5~~$4.9 million net operating loss carry forward from the 2020 EdgeRock acquisition with no expiration date. These net operating losses are subject to an annual Internal Revenue Code Section 382 limitation of $1.3 million.

~~BGSF, Inc. and Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

When appropriate, the Company will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized. In determining whether a valuation allowance is appropriate, the Company considers whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results.

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes any penalties when necessary as part of selling, general and administrative expenses. As of ~~September 26, 2021,~~March 27, 2022, goodwill with an adjusted tax basis of ~~$30.9~~$26.4 million is remaining to be amortized for tax purposes. As a matter of operation, we first calculate the effective tax on continuing operations, and then allocated the remaining taxes to our discontinued operations, in accordance with Accounting Standards Codification (“ASC”) Topic 740.

The Company follows the guidance ~~of Accounting Standards Codification (“ASC”)~~ASC Topic 740, Accounting for Uncertainty in Income Taxes. 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.

Recent Accounting Pronouncements

In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and ASU No. 2021-01, Reference Rate Reform: Scope (“ASU 2021-01”), respectively. Together, ASU 2020-04 and ASU 2021-01 provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) contract modifications, hedging relationships, and other arrangements that are expected to be impacted by the global transition away from certain reference rates, such as the London Interbank Offered Rate, towards new reference rates. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. 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.

NOTE 3 - ACQUISITIONS

~~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 $21.7 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.

For the thirteen week period ended September 27, 2020, EdgeRock operations included approximately $9.2 million of revenue and $0.5 million of operating income. For the thirty-nine week period ended September 27, 2020, EdgeRock operations included thirty-four weeks for approximately $25.4 million of revenue and $1.1 million of operating income. 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 non-deductible for tax purposes.

For the thirty-nine week period ended September 27, 2020, the Company incurred costs of $0.5 million related to the EdgeRock acquisition. These costs were expensed as incurred in selling, general and administrative expenses.

Momentum Solutionz LLC

On February 8, 2021, the Company acquired substantially all of the assets and assumed certain liabilities of Momentum Solutionz (“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.

~~BGSF, Inc. and Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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 income does not include any operating results of Momentum. For the thirteen week period ended September 26,~~Fiscal 2021 Momentum operations included eight weeks for approximately ~~$1.1~~$0.2 million of revenue and ~~$0.3 million of operating income. For the thirty-nine week period ended September 26, 2021, Momentum operations included thirty-four weeks for approximately $2.3 million of revenue and $0.5~~$0.1 million of operating income. All amounts recorded to goodwill are expected to be deductible for tax purposes. The ~~preliminary~~ 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 and equipment, net	5,101
Intangible assets	3,347,970
Goodwill	~~2,078,613~~2,089,823
Liabilities assumed	(73,708)
Total net assets acquired	$	~~5,706,723~~5,717,933

Cash	$	3,780,000


Working capital adjustment	11,210
Fair value of contingent consideration	1,926,723
Total fair value of consideration transferred for acquired business	$	~~5,706,723~~5,717,933

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The ~~preliminary~~ 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

For the thirty-nine week period ended September 26, 2021, the Company incurred costs of $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~~acquisition had taken place on the first day of ~~the Company's 2020 fiscal year~~Fiscal 2021 would be as follows (dollars in thousands, except per share amounts):

Thirteen Weeks Ended Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020 September 26,
2021 September 27,
2020
Revenues $ 82,352 $ 72,028 $ 224,691 $ 213,475
Gross profit $ 24,667 $ 20,004 $ 65,430 $ 59,106
Net income (loss) $ 4,646 $ 2,584 $ 8,842 $ (601)
Income (Loss) per share:
Basic $ 0.45 $ 0.25 $ 0.85 $ (0.06)
Diluted $ 0.45 $ 0.25 $ 0.85 $ (0.06)

~~BGSF, Inc. and Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~


	Thirteen Weeks Ended
	March 28, 2021
Revenues	$	49,986
Gross profit	$	16,380
Net loss	$	(175)
Loss per share:
Basic	$	(0.02)
Diluted	$	(0.02)

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 ~~2.4%~~2.5% and tax ~~(benefit) expense~~benefit of the pro forma adjustments at a consolidated effective tax ~~rates~~rate of ~~and 17.9% and 25.4%~~16.8% for ~~thirteen and thirty-nine week periods ended~~ Fiscal 2021, ~~and Fiscal 2020,~~ respectively. The pro forma operating results include adjustments to ~~EdgeRock and~~ Momentum 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 the Company’s ~~2020~~2021 fiscal year or of the results that may be achieved by the combined enterprise in the future.

NOTE 4 - DISCONTINUED OPERATIONS

On March 21, 2022, the Company sold substantially all of the assets and certain liabilities of the Light Industrial segment (“InStaff”) to Sentech Engineering Services, Inc. (“Sentech”) for a sale price of approximately $30.3 million cash, subject to customary sale price and working capital adjustments specified in the purchase agreement. The purchase agreement further provides for deferred consideration of $2.0 million one year following the date of the acquisition. The sale resulted in a gain on sale of discontinued operations of $17.3 million. The Company will provide certain back-office services to Sentech for a limited period of time.

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.

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The financial results of InStaff are as follows (dollars in thousands):


	Thirteen Weeks Ended
	March 27, 2022		March 28, 2021
Revenue	$	16,465,067	$	17,961,498
Cost of services	14,143,775		15,361,476
Gross profit	2,321,292		2,600,022
Selling expenses	1,062,044		1,420,920
Depreciation	24,252		23,432
Income from operations of discontinued operations before taxes	1,234,996		1,155,670


	December 26, 2021
Carrying amount of assets included as part of discontinued operations:
Accounts receivable	$	7,198,104
Property and equipment, net	201,012
Deposits	35,784
Right-of-use assets - operating leases	303,660
Intangible assets, net	1,648,000
Goodwill	5,024,820
Total assets classified as discontinued operations	$	14,411,380

Carrying amount of liabilities included as part of discontinued operations:
Accrued payroll and expenses	$	1,129,448
Lease liability, current portion	132,608
Lease liability, less current portion	190,395
Total liabilities classified as discontinued operations	$	1,452,451

NOTE 5 - LEASES

For operating leases, the weighted average remaining lease term was ~~2.9~~2.5 years and ~~3.5~~2.7 years at ~~September~~March 27, 2022 and December 26, 2021, ~~and December 27, 2020,~~ respectively. The weighted average discount rate was ~~4.9%~~5.0% at ~~September 26, 2021~~March 27, 2022 and December ~~27, 2020.~~26, 2021. The Company's future operating lease obligations that have not yet commenced are immaterial.

The supplement cash flow information related to the Company's operating leases were as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Cash paid for operating leases	Cash paid for operating leases	$	579,844	$	601,248	$	1,739,688	$	1,612,201	Cash paid for operating leases		$	558,314	$	579,316
Operating lease costs	Operating lease costs	$	519,496	$	525,679	$	1,565,289	$	1,536,718	Operating lease costs		$	502,194	$	523,296
Short-term lease costs	Short-term lease costs	$	75,406	$	108,359	$	108,514	$	308,543	Short-term lease costs		$	75,230	$	48,101

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


	September 26, 2021
~~Less than one year~~	$	~~585,149~~
~~One to two years~~	~~2,215,659~~
~~Two to three years~~	~~1,660,916~~
~~Three to four years~~	~~1,038,580~~
~~Four to five years~~	~~311,375~~

~~Total lease payments~~	~~5,811,679~~
~~Interest~~	~~(384,875)~~
~~Present value of lease liabilities~~	$	~~5,426,804~~

1719

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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


	March 27, 2022
2022	$	1,719,327
2023	1,561,952
2024	973,510
2025	277,095


Total lease payments	4,531,884
Interest	(426,467)
Present value of lease liabilities	$	4,105,417

NOTE 56 - INTANGIBLE ASSETS

Intangible assets from continuing operations are stated net of accumulated amortization of ~~$50.9~~$41.8 million and ~~$48.5~~$41.1 million at ~~September~~March 27, 2022 and December 26, 2021, ~~and December 27, 2020,~~ respectively. During the thirty-nine week periods ended September 26, 2021, the Company added software assets of $0.1 million and reclassified $1.1 million from property and equipment related to the information technology improvement project. Amortization expense from continuing operations for ~~the fiscal years are~~Fiscal 2022 and Fiscal 2021are comprised of following:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Client partner lists	Client partner lists	$	554,962	$	918,349	$	1,655,250	$	3,009,370	Client partner lists		$	502,265	$	545,327
Covenant not to compete	Covenant not to compete	55,246		66,395		165,105		202,479		Covenant not to compete		55,245		54,615
Acquisition intangibles	Acquisition intangibles	610,208		984,744		1,820,355		3,211,849		Acquisition intangibles		557,510		599,942
Computer software - amortization expense	Computer software - amortization expense	389,797		79,486		531,147		264,567		Computer software - amortization expense		181,210		58,465
Amortization expense	Amortization expense	1,000,005		1,064,230		2,351,502		3,476,416		Amortization expense		738,720		658,407
Computer software - selling, general and administrative expense	Computer software - selling, general and administrative expense	18,822		18,823		56,467		56,466		Computer software - selling, general and administrative expense		38,821		18,822
Total expense	Total expense	$	1,018,827	$	1,083,053	$	2,407,969	$	3,532,882	Total expense		$	777,541	$	677,229

NOTE 67 - ACCRUED PAYROLL AND EXPENSES, OTHER LONG-TERM LIABILITIES, AND CONTINGENT CONSIDERATION

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


		September 26, 2021		December 27, 2020			March 27, 2022		December 26, 2021
Field talent payroll	Field talent payroll	$	6,844,894	$	5,574,442	Field talent payroll	$	6,662,593	$	6,042,341
Field talent payroll related	Field talent payroll related	1,645,870		1,036,135		Field talent payroll related	2,111,031		1,310,918
Accrued bonuses and commissions	Accrued bonuses and commissions	2,984,227		1,884,876		Accrued bonuses and commissions	3,547,705		4,522,723
Other	Other	4,040,686		2,952,950		Other	3,170,548		4,277,938
Accrued payroll and expenses	Accrued payroll and expenses	$	15,515,677	$	11,448,403	Accrued payroll and expenses	$	15,491,877	$	16,153,920

~~As of September 26, 2021, other~~Other current liabilities of continuing operations includes ~~$3.5~~$3.8 million of deferred employer FICA ~~and other long-term liabilities includes $3.5 million~~at of ~~deferred employer FICA and $0.1 million of interest rate swap (see Note 7). The deferred employer FICA is under the Coronavirus Aid, Relief, and Economic Security (CARES)~~March 27, 2022. Under CARES Act, ~~which allows relief to~~ employers affected by the coronavirus ~~pandemic.~~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~~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 due as of September 26, 2021:~~

Estimated Cash Payment Discount Net
Due in:
Less than one year $ 1,110,000 $ (57,250) $ 1,052,750
One to two years 1,110,000 (140,943) 969,057
Contingent consideration $ 2,220,000 $ (198,193) $ 2,021,807

1820

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is a schedule of future estimated contingent consideration payments from continuing operations to various parties as of March 27, 2022:


	Estimated Cash Payment		Discount		Net
Due in:

One to two years	$	1,110,000	$	(92,670)	$	1,017,330




Contingent consideration	$	1,110,000	$	(92,670)	$	1,017,330

NOTE 78 - 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 a revolving credit 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. The Company may from time to time, with a maximum of 2, request an increase in the aggregate Term Loan ~~up to~~by $40 million, with minimum increases of $10 million. 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 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.

The Credit Agreement contains customary affirmative and negative covenants. The Company is subject to a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio as defined in the Credit Agreement. The Company was in compliance with these covenants as of ~~September 26, 2021.~~March 27, 2022.

On February 8, 2021, the Company borrowed $3.8 million on the Revolving Facility in conjunction with the closing of the Momentum acquisition. On March 21, 2022, the Company paid down the balance on the existing Term Loan and a portion of the Revolving Facility using the proceeds from the sale of the Light industrial segment (See Note 4).

Letter of Credit

In March 2020, in conjunction with the 2020 EdgeRock acquisition, the Company entered into a standby letter of credit arrangement, which expires December 31, 2024, for purposes of protecting a lessor against default on lease payments. As of ~~September 26, 2021,~~March 27, 2022, the Company had a maximum financial exposure from this standby letter of credit totaling $0.1 million, all of which is considered usage against the Revolving Facility. The Company has no history of default, nor is it aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any disputes thereunder that might arise in the future would not materially affect the ~~Company's~~Company’s consolidated financial statements. Accordingly, no liability has been recorded in respect to these arrangements as of ~~September 26, 2021.~~March 27, 2022.

Line of Credit

At ~~September~~March 27, 2022 and December 26, 2021, ~~and December 27, 2020, $13.6~~$14.2 million and ~~$6.0~~$12.8 million, respectively, was outstanding on the revolving facilities. Average daily balance for the thirteen week periods ended ~~September 26,~~March 27, 2022 and March 28, 2021 ~~and September 27, 2020~~ was ~~$12.3~~$15.3 million and ~~$9.2 million, respectively. Average daily balance for the thirty-nine week periods ended September 26, 2021 and September 27, 2020 was $9.2 million and $13.8~~$6.3 million, respectively.

Borrowings under the revolving facilities consisted of and bore interest at:


		September 26, 2021				December 27, 2020					March 27, 2022				December 26, 2021
Base Rate	Base Rate	$	4,642,949	4.25	%	$	1,977,342	4.25	%	Base Rate	$	14,185,481	4.25	%	$	2,780,854	4.50	%
LIBOR	LIBOR	9,000,000		2.35	%	4,000,000		2.15	%	LIBOR	—		—	%	10,000,000		2.35	%

Total	Total	$	13,642,949			$	5,977,342			Total	$	14,185,481			$	12,780,854

~~Long-Term Debt~~

~~Long-term debt consists of and bore interest at:~~

September 26,
2021 December 27,
2020
Base Rate $ 2,800,000 2.34 % $ 4,300,000 2.15 %
Fixed rate 24,625,000 2.39 % 24,625,000 2.39 %
Long-term debt $ 27,425,000 $ 28,925,000

1921

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

Long-term debt consisted of and bore interest at:


	March 27, 2022				December 26, 2021
Base Rate	$	—	—	%	$	2,237,500	2.35	%
Fixed rate	—		—	%	24,625,000		2.39	%



Long-term debt	$	—			$	26,862,500

Cash Flow Hedge

In April 2020, the Company entered into a pay-fixed/receive-floating interest rate swap agreement with our bank syndicate ~~lead~~led by BMO that reduces the floating interest rate component on the Term Loan obligation. The $25.0 million notional amount was effective on June 3, 2020 and designed as a cash flow hedge on the underlying variable rate interest payments against a fixed interest ~~rate that terminates on June 1, 2023. In accordance with cash flow hedge accounting treatment,~~rate. On March 21, 2022, the Company ~~has determined that~~paid down the ~~hedge is perfectly effective using~~balance on the ~~change-in-variable-cash-flow method.~~existing Term Loan and a portion of the Revolving Facility, and cancelled the interest rate swap arrangement.

The unrealized gains or losses associated with the change in the fair value of the effective portion of the hedging instrument iswas recorded in accumulated other comprehensive income or loss. The Company ~~reclassifies~~reclassified the interest rate swap from accumulated other comprehensive gain or loss against interest expense in the same period in which the hedge transaction ~~affects~~affected earnings. Hedge effectiveness is tested quarterly. As of September 26, 2021, the instrument was perfectly effective and no additional amounts were reclassed from accumulated other comprehensive loss into income in the thirteen and thirty-nine week periods ended September 26, 2021 or September 27, 2020. See Note 89 for location on the balance sheet.

NOTE 89 - FAIR VALUE MEASUREMENTS

The accounting standard for fair value measurements defines fair value and establishes a market-based framework or hierarchy for measuring fair value. The standard is applicable whenever assets and liabilities are measured at fair value. The fair value hierarchy established prioritizes the inputs used in valuation techniques into three levels as follows:

Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities - includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets, for substantially the full term of the financial instrument; and

Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions.

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis and the level they fall within the fair value hierarchy:

Amounts Recorded at Fair Value

Financial Statement Classification

Fair Value
Hierarchy

September 26,
2021

December 27,
2020

Amounts Recorded at Fair Value

Financial Statement Classification

Fair Value
Hierarchy

March 27,
2022

December 26,
2021

Interest rate swap

Other long-term liabilities

Level 2

54,613

122,874

Interest rate swap

Other long-term assets

Level 2

—

58,331

Contingent consideration, net

Contingent consideration, net - current and long-term

Level 3

2,021,807

2,287,926

Contingent consideration, net

Contingent consideration, net - current and long-term

Level 3

1,017,330

2,063,509

The changes in the Level 2 fair value measurements from December ~~27, 2020 to September~~ 26, 2021 ~~change in~~to March 27, 2022 relate to the ~~fair market value~~cancellation of the interest rate swap ~~agreement.~~arrangement. Key inputs in determining the fair value of the interest rate swap as of ~~September~~December 26, 2021 ~~and December 27, 2020 are~~were quoted prices from BMO (See Note 7)8).

The changes in the Level 3 fair value measurements from December ~~27, 2020 to September~~ 26, 2021 to March 27, 2022 relates primarily to ~~$1.9~~payments of $1.1 million ~~attributable to~~on the Momentum acquisition, ~~$0.2~~partially offset by $0.1 million in ~~accretion, and the remaining in gains included in earnings.~~accretion. Key inputs in determining the fair value of the contingent consideration as of ~~September~~March 27, 2022 and December 26, 2021 ~~and December 27, 2020~~ included discount rates ~~ranging from 8.9% to 9.2%~~of approximately 9% as well as management's estimates of future sales volumes and earnings before interest, income taxes, depreciation, and amortization ~~"EBITDA."~~(“EBITDA”).

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 910 - CONTINGENCIES

The Company is engaged from time to time in legal matters and proceedings arising out of its normal course of business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of the loss can be made.

~~BGSF, Inc. and Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

The Company insures against, subject to and upon the terms and conditions of various insurance policies, claims or losses from workers’ compensation, general liability, automobile liability, property damage, professional liability, employment practices, fiduciary liability, fidelity losses, crime and cyber risk, and director and officer liability. Under the Company's bylaws, the Company’s directors and officers are indemnified against certain liabilities arising out of the performance of their duties to the Company. The Company also has an insurance policy for our directors and officers to insure them against liabilities arising from the performance of their positions with the Company or its subsidiaries. The Company has also entered into indemnification agreements with its directors and certain officers.

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 economic and labor markets.

NOTE 1011 – EQUITY

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.

Restricted Stock

The Company issued net restricted common stock of ~~23,172~~5,795 shares to non-team member (non-employee) directors in Fiscal ~~2021.~~2022. The restricted shares of $0.01 par value per share were issued under the 2013 Long-Term Incentive Plan and contain a three-year service condition. The restricted stock constitutes issued and outstanding shares of the Company’s common stock, except for the right of disposal, for all purposes during the period of restriction including voting rights and dividend distributions.

NOTE 1112 – SHARE-BASED COMPENSATION

Stock Options

For the thirteen week periods ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020,~~ the Company recognized ~~$0.2~~$0.1 million of compensation expense related to stock options. For the thirty-nine week periods ended September 26, 2021 and September 27, 2020, the Company recognized $0.5 million and $0.4 million, respectively, of compensation expensefrom continuing operations related to stock options. Unamortized share-based compensation expense from continuing operations as of ~~September 26, 2021~~March 27, 2022 amounted to ~~$0.9~~$0.7 million which is expected to be recognized over the next ~~2.7~~2.2 years.

A summary of stock option activity is presented as follows:


	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Total Intrinsic Value of Awards (in thousands)
Options outstanding at December 26, 2021	695,329	$	16.91	6.7	$	665



Options outstanding at March 27, 2022	695,329	$	16.91	6.5	$	822

Options exercisable at December 26, 2021	475,765	$	17.62	5.9	$	452
Options exercisable at March 27, 2022	496,415	$	17.75	5.7	$	595

2123

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~A summary of stock option activity is presented as follows:~~

Number of
Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Total Intrinsic Value of Awards
(in thousands)
Options outstanding at December 27, 2020 652,655 $ 17.63 7.1 $ 665
Granted 116,374 $ 11.57
Exercised (1,000) $ 9.72
Forfeited / Canceled (20,150) $ 17.56
Options outstanding at September 26, 2021 747,879 $ 16.70 6.9 $ 871
Options exercisable at December 27, 2020 416,717 $ 16.96 6.3 $ 463
Options exercisable at September 26, 2021 528,315 $ 17.26 6.1 $ 592

Number of
Shares Weighted Average Grant Date Fair Value
Nonvested outstanding at December 27, 2020 235,938 $ 18.83
Nonvested outstanding at September 26, 2021 219,564 $ 15.36


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested outstanding at December 26, 2021	219,564	$	12.73
Nonvested outstanding at March 27, 2022	198,914	$	12.73

For the ~~thirty-nine~~thirteen week period ended ~~September 26,~~March 27, 2022, the Company did not issue shares under a cashless exercise. For the thirteen week period ended March 28, 2021, the Company issued 213 shares of common stock upon the cashless exercise of 600 stock options.

Restricted Stock

For the thirteen week periods ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020,~~ the Company recognized ~~$0.2 million and~~ $0.1 million of compensation expense related to restricted stock awards. For the thirty-nine week periods ended September 26, 2021 and September 27, 2020, the Company recognized $0.4 million and $0.2 million, respectively, of compensation expense related to restricted stock awards. Unamortized share-based compensation expense as of ~~September 26, 2021~~March 27, 2022 amounted to $0.6 million which is expected to be recognized over the next ~~2.6~~2.2 years.

A summary of restricted stock activity is presented as follows:

Number of
Shares Weighted Average Grant Date Fair Value
Restricted stock outstanding at December 27, 2020 25,218 $ 16.01
Issued 58,172 $ 11.99
Vested (26,048) $ 17.51
Restricted stock outstanding at September 26, 2021 57,342 $ 11.25
Nonvested outstanding at December 27, 2020 25,218 $ 16.01
Nonvested outstanding at September 26, 2021 57,342 $ 11.25

~~Warrant Activity~~

For the thirteen and thirty-nine week periods ended September 26, 2021 and September 27, 2020, the Company did not recognize compensation cost related to warrants. There was no unamortized stock compensation expense to be recognized as of September 26, 2021.

~~BGSF, Inc. and Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~A summary of warrant activity is presented as follows:~~

Number of
Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Total Intrinsic Value of Options
(in thousands)
Warrants outstanding at December 27, 2020 25,862 $ 16.80 0.4 $ —
Forfeited (25,862) $ 16.80
Warrants outstanding at September 26, 2021 — $ — 0.0 $ —
Warrants exercisable at December 27, 2020 25,862 $ 16.80 0.4 $ —
Warrants exercisable at September 26, 2021 — $ — 0.0 $ —

~~There were no nonvested warrants outstanding at September 26, 2021 or December 27, 2020.~~


	Number of Shares	Weighted Average Grant Date Fair Value
Restricted stock outstanding at December 26, 2021	60,844	$	11.91
Issued	5,795	$	11.99
Vested	(4,828)	$	17.51

Restricted stock outstanding at March 27, 2022	61,811	$	11.62

Nonvested outstanding at December 26, 2021	60,844	$	11.91
Nonvested outstanding at March 27, 2022	61,811	$	11.62

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.

2020 Employee Stock Purchase Plan (“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. A total of 250,000 shares of common stock of BGSF, Inc. were initially reserved for issuance pursuant to the 2020 ESPP. For the ~~thirty-nine~~thirteen week period ended ~~September 26, 2021,~~March 27, 2022, the Company issued ~~14,758~~14,203 shares of common stock under the ESPP.

NOTE 1213 - TEAM MEMBER BENEFIT PLAN

Defined Contribution Plan

The Company provides a defined contribution plan (the “401(k) Plan”) for the benefit of its eligible team members and field talent. The 401(k) Plan allows participants to make contributions subject to applicable statutory limitations. The Company matches participants contributions 100% up to the first 3% and 50% of the next 2% of a team member's or field talent’s compensation. The Company contributed $0.5 million and $0.4 million ~~and $0.3 million~~from continuing operations to the 401(k) Plan for the thirteen week periods ended ~~September 26, 2021~~March 27, 2022 and ~~September 27, 2020. The Company contributed $1.2 million and $1.0 million to the 401(k) Plan for the thirty-nine week periods ended September 26, 2021 and September 27, 2020.~~March 28, 2021.

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1314 - BUSINESS SEGMENTS

The Company operates within 32 industry segments: Real Estate ~~Professional,~~ and ~~Light Industrial.~~

Professional. Segment ~~operating~~ 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 ~~operating~~ income from continuing operations by reportable segment to consolidated results for the periods indicated:


	Thirteen Weeks Ended
		March 27, 2022		March 28, 2021
Revenue:
Real Estate		$	25,916,088	$	18,612,744
Professional		42,626,189		31,137,448
Total		$	68,542,277	$	49,750,192

Depreciation:
Real Estate		$	47,282	$	54,990
Professional		96,227		98,809
Home office		16,744		24,036
Total		$	160,253	$	177,835




Amortization:

Professional	$	557,576	$	600,008

Home office	181,144		58,399
Total	$	738,720	$	658,407

Operating income:
Real Estate	$	4,034,881	$	2,452,873
Professional	3,469,799		1,493,276
Home office	(4,689,166)		(3,870,106)
Total	$	2,815,514	$	76,043





Capital expenditures:
Real Estate	$	8,723	$	40,979
Professional	24,140		60,019
Home office	2,017,362		439,313
Total	$	2,050,225	$	540,311


	March 27, 2022		December 26, 2021
Total Assets:
Real Estate	$	19,163,937	$	20,753,085
Professional	92,710,217		92,782,442
Home office	23,642,218		20,347,059
Discontinued operations	—		14,411,380
Total	$	135,516,372	$	148,293,966

2325

BGSF, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Thirteen Weeks Ended Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020 September 26,
2021 September 27,
2020
Revenue:
Real Estate $ 24,788,784 $ 19,156,486 $ 64,613,631 $ 50,964,763
Professional 39,396,028 34,041,737 106,719,095 107,035,087
Light Industrial 18,167,210 18,320,468 53,122,523 50,192,604
Total $ 82,352,022 $ 71,518,691 $ 224,455,249 $ 208,192,454
Depreciation:
Real Estate $ 51,696 $ 54,549 $ 160,482 $ 163,685
Professional 97,141 100,727 294,174 309,467
Light Industrial 21,307 22,733 69,483 74,887
Home office 20,561 28,712 65,326 105,160
Total $ 190,705 $ 206,721 $ 589,465 $ 653,199

Amortization:
Professional $ 610,273 $ 1,004,964 $ 1,820,554 $ 3,353,128
Home office 389,732 59,266 530,948 123,288
Total $ 1,000,005 $ 1,064,230 $ 2,351,502 $ 3,476,416
Operating income:
Real Estate $ 4,369,878 $ 3,346,316 $ 9,795,540 $ 7,159,432
Professional - without impairment losses 3,399,330 1,793,937 7,476,688 5,232,301
Professional - impairment losses — — — (7,239,514)
Light Industrial 1,164,117 1,272,796 3,330,564 3,240,347
Home office - selling (222,361) (186,549) (660,330) (426,359)
Home office - general and administrative (3,723,494) (2,654,534) (10,599,917) (7,821,611)
Home office - gain on contingent consideration 1,208,270 76,102 2,402,844 76,102
Total $ 6,195,740 $ 3,648,068 $ 11,745,389 $ 220,698

Capital expenditures:
Real Estate $ 29,733 $ 25,000 $ 94,674 $ 68,273
Professional 16,229 28,693 96,124 102,591
Light Industrial 7,390 9,519 34,505 12,720
Home office 409,537 — 1,341,086 1,776,595
Total $ 462,889 $ 63,212 $ 1,566,389 $ 1,960,179

~~BGSF, Inc. and Subsidiaries~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

September 26,
2021 December 27,
2020
Total Assets:
Real Estate $ 20,016,373 $ 15,598,575
Professional 93,544,514 81,671,193
Light Industrial 14,510,863 16,122,052
Home office 16,028,906 16,886,448
Total $ 144,100,656 $ 130,278,268

NOTE 1415 - SUBSEQUENT EVENTS

Dividend

On ~~November 3, 2021,~~April 27, 2022, the Company's board of directors declared a cash dividend in the amount of ~~$0.12~~$0.15 per share of common stock to be paid on ~~November 22, 2021~~May 24, 2022 to all shareholders of record as of the close of business on ~~November 15, 2021.~~May 17, 2022.

2526

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our accompanying Unaudited Consolidated Financial Statements and related notes thereto and our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~26, 2021. Comparative segment revenues and related financial information are discussed herein and are presented in Note 1314 to our Unaudited Consolidated Financial Statements. See “Forward Looking Statements” on page 3 of this report and “Risk Factors” included in our filings with the SEC, including our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020,~~26, 2021, for a description of important factors that could cause actual results to differ from expected results. Please also refer to Note 4- Discontinued Operation, and to our unaudited consolidated financial statements.

Our historical financial information may not be indicative of our future performance.

Overview

We are a leading national provider of professional workforce solutions and have completed a series of acquisitions including the acquisition of BG Personnel, LP and B G Staff Services Inc. in June 2010, substantially all of the assets of JNA Staffing, Inc. in December 2010, Extrinsic, LLC in December 2011, American Partners, Inc. in December 2012, InStaff ~~Holding Corporation and InStaff Personnel, LLC~~ in June 2013, D&W ~~Talent, LLC~~ in March 2015, ~~Vision Technology Services, Inc., Vision Technology Services, LLC, and VTS-VM, LLC in~~VTS October 2015, Zycron, ~~Inc.~~ in April 2017, Smart ~~Resources, Inc. and Accountable Search, LLC~~ in September 2017, and LJK in December 2019, 100% of the equity of EdgeRock in February 2020, and substantially all of the assets of Momentum Solutionz in February 2021. We ~~operate within three~~have continuing operations in two industry segments: Real Estate and Professional, and discontinued operations in the Light ~~Industrial.~~Industrial segment (see Note 4, and our unaudited consolidated financial statements). We provide workforce solutions to client partners primarily within the United States of America. We currently operate across 4246 states and D.C.

On March 21, 2022, we completed the sale of substantially all our Light Industrial segment, (“InStaff”) assets to Jobandtalent (“J&T”), through their wholly-owned subsidiary, Sentech Engineering Services, Inc. We received approximately $30.3 million at the closing of the sale, and, subject to the terms of the Asset Purchase Agreement, will receive an additional $2 million on the first anniversary of the closing of the transaction.

We have classified the related assets and liabilities associated with our Light Industrial segment, InStaff, as ~~well~~discontinued operations in our Consolidated Balance Sheets. The results of InStaff business have been presented as ~~11 on-site locations.~~discontinued operations in our Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows for all periods presented. The sale represents a strategic shift in our business that will have a major effect on our operations and financial results. See “Note 4 — Discontinued Operations” of our unaudited consolidated financial statements for information regarding our discontinued operations.

Our Real Estate segment provides office and maintenance field talent to various apartment communities and commercial buildings currently in 34 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.

Our Professional segment provides skilled field talent on a nationwide basis for IT and finance, accounting, legal and human resource client partner projects. Our 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.

Our 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 11 on-sites in 7 states. Our Light Industrial segment operates through one division under the InStaff trade name.

Our business normally experiences seasonal fluctuations. Our quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of our client partners’ businesses. Demand for our Real Estate workforce solutions increase in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session. Demand for our Light Industrial workforce solutions increases during the third quarter of the year and peaks in the fourth quarter due to increases in the demand for holiday help. Overall first quarter demand can be affected by adverse weather conditions in the winter months. In addition, our cost of services typically increases in the first quarter primarily due to the reset of payroll taxes. ~~Normal seasonal demand has been significantly affected by COVID-19.~~

Impact of COVID-19

We continue to observe the impact of the COVID-19 ~~outbreak~~ on our consolidated operating results, our candidate and field talent supply chain, and our client partners demand in all segments. We ~~expect that the social distancing measures, the changing operational status of our client partners, production levels at client partners facilities, and general business uncertainty~~ will continue to ~~effect demand in all our segments.~~

~~During this uncertain time, our critical priorities are the health and safety of our team members, field talent, candidates and client partners.~~

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.

~~Real Estate was strongly affected by COVID-19 in both 2020 and early 2021, due to many factors including the eviction moratoriums.~~

~~We will continue to actively~~ monitor the situation and may find it necessary, in the future, to take further actions that alter our business operations as may be required by federal, state, local authorities, or that we determine are in the best interests of our team members, field talent, client partners, and stockholders. ~~The potential effects are not clear for any such alterations or modifications on our business, our client partners, candidates, vendors, or on our financial results.~~

Results of Operations

The following tables summarize key components of our results offrom continuing operations for the periods indicated, both in dollars and as a percentage of revenues, and have been derived from our unaudited consolidated financial statements. The Fiscal 2021 (as defined below) consolidated statement of operations and comprehensive income includes ~~thirty-four~~eight weeks of Momentum operations. ~~The Fiscal 2020 (as defined below) consolidated statement of operations and comprehensive income includes thirty-four weeks of EdgeRock operations.~~


			Thirteen Weeks Ended				Thirty-nine Weeks Ended						Thirteen Weeks Ended
			September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020					March 27, 2022		March 28, 2021
			(dollars in thousands)											(dollars in thousands)
Revenues	Revenues		$	82,352	$	71,519	$	224,455	$	208,192	Revenues			$	68,542	$	49,750
Cost of services	Cost of services		57,685		51,807		159,191		151,299		Cost of services			45,111		33,535
		Gross profit	24,667		19,712		65,264		56,893			Gross profit		23,431		16,215
Selling, general and administrative expenses	Selling, general and administrative expenses		18,489		14,869		52,981		45,379		Selling, general and administrative expenses			19,716		15,302
Gain on contingent consideration			(1,208)		(76)		(2,403)		(76)
Impairment losses			—		—		—		7,240

Depreciation and amortization	Depreciation and amortization		1,191		1,271		2,941		4,130		Depreciation and amortization			899		836
		Operating income	6,195		3,648		11,745		220			Operating income		2,816		77

Interest expense, net	Interest expense, net		431		360		1,026		1,245		Interest expense, net			(273)		(377)
		Income (Loss) before income tax	5,764		3,288		10,719		(1,025)			Income (loss) from continuing operations before income taxes		2,542		(300)
Income tax expense (benefit)			1,121		723		1,921		(260)
Income tax (expense) benefit from continuing operations											Income tax (expense) benefit from continuing operations			(534)		89
		Net income (loss)	$	4,644	$	2,566	$	8,798	$	(765)		Income (loss) from continuing operations		2,008		(212)
Income from discontinued operations:											Income from discontinued operations:
												Income		1,235		1,156
												Gain on sale		17,273		—
												Income tax expense		(4,716)		(232)
												Net income		$	15,800	$	712

Thirteen Weeks Ended Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020 September 26,
2021 September 27,
2020
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of services 70.0 % 72.4 % 70.9 % 72.7 %
Gross profit 30.0 % 27.6 % 29.1 % 27.3 %
Selling, general and administrative expenses 22.5 % 20.8 % 23.6 % 21.8 %
Gain on contingent consideration (1.5) % (0.1) % (1.1) % — %
Impairment losses — % — % — % 3.5 %
Depreciation and amortization 1.4 % 1.8 % 1.3 % 2.0 %
Operating income 7.5 % 5.1 % 5.2 % 0.1 %
Interest expense, net 0.5 % 0.5 % 0.5 % 0.6 %
Income (Loss) before income tax 7.0 % 4.6 % 4.8 % (0.5) %
Income tax expense (benefit) 1.4 % 1.0 % 0.9 % (0.1) %
Net income (loss) 5.6 % 3.6 % 3.9 % (0.4) %


		Thirteen Weeks Ended
			March 27, 2022		March 28, 2021
Revenues			100.0	%	100.0	%
Cost of services			65.8	%	67.4	%
	Gross profit		34.2	%	32.6	%
Selling, general and administrative expenses			28.8	%	30.8	%


Depreciation and amortization			1.3	%	1.7	%
	Operating income		4.1	%	0.2	%

Interest expense, net			(0.4)	%	(0.8)	%
	Income (loss) from continuing operations before income taxes		3.7	%	(0.6)	%
Income tax (expense) benefit from continuing operations			(0.8)	%	0.2	%
	Income (loss) from continuing operations		2.9	%	(0.4)	%

Thirteen Week Fiscal Period Ended ~~September 26, 2021~~March 27, 2022 (“Fiscal ~~2021”~~2022”) Compared with Thirteen Week Fiscal Period Ended ~~September 27, 2020~~March 28, 2021 (“Fiscal ~~2020”~~2021”)


Revenues:	Revenues:		Thirteen Weeks Ended								Revenues:		Thirteen Weeks Ended
			September 26, 2021				September 27, 2020						March 27, 2022				March 28, 2021
			(dollars in thousands)										(dollars in thousands)
Revenues by segment:	Revenues by segment:										Revenues by segment:
		Real Estate	$	24,789	30.1	%	$	19,156	26.8	%		Real Estate	$	25,916	37.8	%	$	18,613	37.4	%
		Professional	39,396		47.8	%	34,042		47.6	%		Professional	42,626		62.2	%	31,137		62.6	%
		Light Industrial	18,167		22.1	%	18,321		25.6	%		Total Revenues	$	68,542	100.0	%	$	49,750	100.0	%
		Total Revenues	$	82,352	100.0	%	$	71,519	100.0	%

Real Estate Revenues: Real Estate revenues increased approximately ~~$5.6~~$7.3 million ~~(29.4%~~(39.2%). The increase was due to a ~~16.0%~~25.6% increase in billed hours and a ~~10.7%~~9.6% increase in average bill rate.

Professional Revenues: Professional revenues increased approximately ~~$5.4~~$11.4 million ~~(15.7%~~(36.9%), primarily due to the IT Consulting division of approximately $8.9 million, the 2021 Momentum acquisition incrementally added $1.2 million from thirteen weeks of revenue in Fiscal 2022 vs. eight weeks in Fiscal 2021, a ~~21.2%~~37% increase in billed hours, $0.5 million of an increase in permanent placements, and the 2021 Momentum acquisition that provided new revenues of $1.1 million. These increases were partially offset by a 6.3% decrease in average bill rate and a ~~decline in the IT Infrastructure & Development division.~~

~~Light Industrial Revenues~~: ~~Light Industrial revenues decreased approximately $0.1 million (0.8%). The decrease was due to an 11.1% decrease in billed hours, which was partially offset by a 11.5%~~slight increase in average bill rate.

Gross Profit:

Gross profit represents revenues from workforce solutions less cost of services expenses, which consist of payroll, payroll taxes, payroll-related insurance, field talent costs, and reimbursable costs.

Thirteen Weeks Ended
September 26,
2021 September 27,
2020
(dollars in thousands)
Gross Profit by segment:
Real Estate $ 9,515 38.7 % $ 7,145 36.2 %
Professional 12,532 50.8 % 9,978 50.6 %
Light Industrial 2,620 10.5 % 2,589 13.2 %
Total Gross Profit $ 24,667 100.0 % $ 19,712 100.0 %


		Thirteen Weeks Ended
		March 27, 2022				March 28, 2021
		(dollars in thousands)
Gross Profit by segment:
	Real Estate	$	9,971	42.6	%	$	6,866	42.3	%
	Professional	13,460		57.4	%	9,349		57.7	%
	Total Gross Profit	$	23,431	100.0	%	$	16,215	100.0	%

Thirteen Weeks Ended
September 26,
2021 September 27,
2020
Gross Profit Percentage by segment:
Real Estate 38.4 % 37.3 %
Professional 31.8 % 29.3 %
Light Industrial 14.4 % 14.1 %
Company Gross Profit 30.0 % 27.6 %


		Thirteen Weeks Ended
		March 27, 2022		March 28, 2021
Gross Profit Percentage by segment:
	Real Estate	38.5	%	36.9	%
	Professional	31.6	%	30.0	%
	Company Gross Profit	34.2	%	32.6	%

Overall, our gross profit increased approximately ~~$5.0~~$7.2 million ~~(25.1%~~(44.5%). As a percentage of revenue, gross profit has increased to ~~30.0%~~34.2% from ~~27.6%~~32.6%, primarily due to higher gross profits from ~~our Professional segment and increased Real Estate contributions~~.across all segments.

We determine spread as the difference between ~~average~~ bill rate and ~~average~~ pay rate.

Real Estate Gross Profit: Real Estate gross profit increased approximately ~~$2.5~~$3.1 million ~~(33.2%~~(45.2%) in line with ~~increased~~the increase in revenue and ~~a 12.2%~~an 11.5% increase in average spread.

Professional Gross Profit: Professional gross profit increased approximately ~~$2.5~~$4.1 million ~~(25.6%~~(44.0%) ~~overall revenue growth from~~primarily due to the ~~increase in permanent placements that provided an additional $0.5~~IT Consulting division of approximately $3.0 million, ~~of gross profit and~~ the 2021 Momentum acquisition ~~which contributed an additional $0.5 million. The~~incrementally added $0.6 million from thirteen weeks of revenue in Fiscal 2022 vs. eight weeks in Fiscal 2021, and overall increase in gross profit was affected by a ~~3.3% decrease~~3.1% increase in average spread.

~~Light Industrial Gross Profit:~~ ~~Light Industrial gross profit was up slightly effected by an 14.3% increase in average spread.~~

Selling, General and Administrative Expenses: Selling, general and administrative expenses increased approximately ~~$3.6~~$4.4 million ~~(24.3%~~(28.8%), primarily due to additional compensation generated from increased overall gross ~~profit. The 2021~~profit and from the Momentum acquisition ~~contributed an additional $0.1 million.~~with thirteen weeks of operations in Fiscal 2022 vs. eight weeks in Fiscal 2021. The components of selling, general and administrative expense are detailed in the following table:

Thirteen Weeks Ended
September 26,
2021 September 27,
2020
Amount % of Revenue Amount % of Revenue $
Change %
Change
(dollars in thousands)
Compensation and related $ 14,490 18 % $ 11,313 16 % $ 3,177 28 %
Advertising and recruitment 357 — % 377 1 % (20) (5) %
Occupancy and office operations 908 1 % 939 1 % (31) (3) %
Client engagement 152 — % 28 — % 124 443 %
Software 744 1 % 665 1 % 78 12 %
Professional fees 238 — % 208 — % 30 14 %
Public company related costs 182 — % 180 — % 2 1 %
Bad debt 89 — % 54 — % 35 65 %
Share-based compensation 424 1 % 245 — % 179 73 %
Transaction fees 1 — % 15 — % (14) (93) %
IT roadmap 375 — % 401 1 % (25) (6) %
Other 528 1 % 445 1 % 83 19 %
Total $ 18,489 22 % $ 14,869 21 % $ 3,618 24 %

~~Gain on contingent consideration:~~ ~~As a result of the certain business developments in Fiscal 2021, the Company recognized a $1.2 million gain on contingent consideration related to the 2019 LJK acquisition.~~


	Thirteen Weeks Ended
	March 27, 2022				March 28, 2021
	Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change
	(dollars in thousands)
Compensation and related	$	15,236	22	%	$	11,659	23	%	$	3,577	31	%
Advertising and recruitment	483		1	%	358		1	%	125		35	%
Occupancy and office operations	797		1	%	812		2	%	(15)		(2)	%
Client engagement	189		—	%	29		—	%	160		552	%
Software	1,115		2	%	603		1	%	512		85	%
Professional fees	421		1	%	436		1	%	(15)		(3)	%
Public company related costs	173		—	%	192		—	%	(19)		(10)	%
Bad debt	51		—	%	34		—	%	17		50	%
Share-based compensation	211		—	%	221		—	%	(10)		(5)	%
Transaction fees	—		—	%	136		—	%	(136)		(100)	%
IT roadmap	365		1	%	422		1	%	(58)		(14)	%

Other	674		1	%	401		1	%	274		68	%
Total	$	19,716	29	%	$	15,302	31	%	$	4,412	29	%

Depreciation and Amortization: Depreciation and amortization charges ~~decreased~~increased approximately $0.1 million ~~(6.3%~~(7.5%). The ~~decrease~~increase in depreciation and amortization is primarily due ~~to the Professional segment with a decrease related to the 2015 Vision Technology Services acquisition, which was partially offset by an increase related~~ to the information technology improvement project.

Interest Expense, net: Interest expense, net ~~was higher~~decreased primarily due to the gain from the cancellation of the interest rate swap arrangement that was partially offset by increases to amortization on the deferred finance costs from the pay down of the balance on the exiting Term Loan and a portion of the Revolving Facility, and a higher average balance on the Revolving Facility.

Income Tax ~~Expense (Benefit):~~(Expense) Benefit: Income tax ~~expense~~(expense) benefit increased ~~approximately $0.4 million (55.0%)~~ primarily due to higher ~~pre-tax 2021 income,~~state taxes, offset by ~~a lower effective rate in 2021 and~~ a higher Work Opportunity Tax Credit in ~~2021.~~

~~Thirty-nine Week~~ Fiscal ~~Period Ended September 26, 2021 (“Fiscal 2021”) Compared with Thirty-nine Week Fiscal Period Ended September 27, 2020 (“Fiscal 2020”)~~

Revenues: Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020
(dollars in thousands)
Revenues by segment:
Real Estate $ 64,614 28.8 % $ 50,965 24.5 %
Professional 106,719 47.5 % 107,035 51.4 %
Light Industrial 53,122 23.7 % 50,192 24.1 %
Total Revenues $ 224,455 100.0 % $ 208,192 100.0 %

~~Real Estate Revenues~~: ~~Real Estate revenues increased approximately $13.6 million (26.8%). The increase was due to a 15.0% increase in billed hours and a 10.1% increase in average bill rate.~~

~~Professional Revenues~~: Professional revenues decreased approximately $0.3 million (0.3%), primarily due to a 0.4% decrease in billed hours primarily in the IT Infrastructure & Development division and a decrease of 1.1% in average bill rate. These decreases were partially offset by the 2020 EdgeRock acquisition which contributed thirty-nine weeks of revenue in Fiscal 2021 vs. thirty-four weeks in Fiscal 2020 for an additional $8.3 million, an increase in permanent placements of $1.3 million, and the 2021 Momentum acquisition provided new revenues of $2.3 million.

~~Light Industrial Revenues~~: ~~Light Industrial revenues increased approximately $2.9 million (5.8%), primarily due to a 9.2% increase in average bill rate. These increases were offset by a 3.1% decrease in billed hours.~~

~~Gross Profit:~~

Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020
(dollars in thousands)
Gross Profit by segment:
Real Estate $ 24,235 37.1 % $ 19,220 33.8 %
Professional 33,274 51.0 % 30,506 53.6 %
Light Industrial 7,755 11.9 % 7,167 12.6 %
Total Gross Profit $ 65,264 100.0 % $ 56,893 100.0 %

Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020
Gross Profit Percentage by segment:
Real Estate 37.5 % 37.7 %
Professional 31.2 % 28.5 %
Light Industrial 14.6 % 14.3 %
Company Gross Profit 29.1 % 27.3 %

Overall, our gross profit increased approximately $8.4 million (14.7%). As a percentage of revenue, gross profit has increased to 29.1% from 27.3%, primarily due to higher gross profits from our Professional segment and increased Real Estate contributions.

~~We determine spread as the difference between average bill rate and average pay rate.~~

~~Real Estate Gross Profit:~~ ~~Real Estate gross profit increased approximately $5.0 million (26.1%) consistent with the increase in revenue and an 9.8% increase in average spread.~~

~~Professional Gross Profit:~~ Professional gross profit increased approximately $2.8 million (9.1%) from the 2020 EdgeRock acquisition which contributed thirty-nine weeks of gross profit in Fiscal 2021 vs. thirty-four weeks in Fiscal 2020 for aan additional $2.7 million, the 2021 Momentum acquisition which provided gross profit of $1.1 million, and an overall 0.7% increase in average spread.

~~Light Industrial Gross Profit:~~ ~~Light Industrial gross profit increased approximately $0.6 million (8.2%) primarily from the increase in revenue and a 11.6% increase in average spread.~~

~~Selling, General and Administrative Expenses:~~ Selling, general and administrative expenses increased approximately $7.6 million (16.8%), primarily due to additional compensation generated from increased overall gross profit, from EdgeRock acquisition with thirty-nine weeks of gross profit in Fiscal 2021 vs. thirty-four weeks in Fiscal 2020 for an additional $1.5 million, and the 2021 Momentum acquisition that provided $0.4 million of new expense. The components of selling, general and administrative expense are detailed in the following table:

Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020
Amount % of Revenue Amount % of Revenue $
Change %
Change
(dollars in thousands)
Compensation and related $ 41,253 18 % $ 34,184 16 % $ 7,069 21 %
Advertising and recruitment 1,115 — % 1,214 1 % (99) (8) %
Occupancy and office operations 2,750 1 % 3,051 1 % (301) (10) %
Client engagement 265 — % 328 — % (63) (19) %
Software 2,165 1 % 1,705 1 % 461 27 %
Professional fees 1,046 — % 881 — % 165 19 %
Public company related costs 558 — % 443 — % 116 26 %
Bad debt 322 — % 154 — % 168 109 %
Share-based compensation 886 — % 631 — % 255 40 %
Transaction fees 155 — % 605 — % (450) (74) %
IT roadmap 1,306 1 % 1,292 1 % 14 1 %
Workers' compensation loss retention return (348) — % (464) — % 116 (25) %
Other 1,507 1 % 1,358 1 % 149 11 %
Total $ 52,981 24 % $ 45,379 22 % $ 7,599 17 %

~~Gain on contingent consideration:~~ ~~As a result of the certain business developments in Fiscal 2021, the Company recognized a $2.4 million gain on contingent consideration related to the 2019 LJK acquisition.~~

~~Depreciation and Amortization:~~ Depreciation and amortization charges decreased approximately $1.2 million (28.8%). The decrease in depreciation and amortization is primarily due to the Professional segment with a decrease related to the 2015 Vision Technology Services acquisition and a decrease related to the 2020 impairment losses, which was partially offset by an increase related to the information technology improvement project.

~~Impairment loss:~~ As a result of the certain business developments in Fiscal 2020 and changes in the Company's long-term projections, 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. 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.

~~Interest Expense, net:~~ Interest expense, net decreased approximately $0.2 million (17.6%) primarily due to the lower average balance on the Revolving Facility, lower rates, and an increase in interest income from our workers compensation loss retention program.

~~Income Tax Expense:~~ Income tax expense increased approximately $2.2 million (838.8%) primarily due to higher pre-tax 2021 income, intangible impairment losses in 2020, non-deductible transaction fees in 2020 related to the EdgeRock acquisition, offset by a lower effective rate in 2021 and a higher Work Opportunity Tax Credit in 2021.2022.

Use of Non-GAAP Financial Measures

We present Adjusted EBITDA (defined below), a measure that is not in accordance with accounting principles generally accepted in the United States of America (“GAAP”), in this Quarterly Report to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone. Our board and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for our management. In addition, the financial covenants in our credit agreement are based on EBITDA as defined in the credit agreement.

We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, intangible impairment losses, transaction fees, and the non-capital information technology project (“IT roadmap”) and certain non-cash expenses such as the gain on contingent consideration and share-based compensation expense. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of property and intangible assets. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an

important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net income or income (loss) from continuing operations for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

The use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net ~~income (loss).~~income. Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from continuing operating activities. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; and (iv) it does not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness.

To properly and prudently evaluate our business, we encourage you to review our unaudited consolidated financial statements included elsewhere in this report and the reconciliation to Adjusted EBITDA from net income or income (loss), from continuing operations the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net income ~~(loss)~~ to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect ongoing operating performance.


		Thirteen Weeks Ended				Thirty-nine Weeks Ended				Trailing Twelve Months Ended			Thirteen Weeks Ended			Trailing Twelve Months Ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020		September 26, 2021				March 27, 2022		March 28, 2021		March 27, 2022
		(dollars in thousands)												(dollars in thousands)
Net income (loss)		$	4,644	$	2,566	$	8,798	$	(765)	$	11,004
Income (loss) from continuing operations												Income (loss) from continuing operations		$	2,008	$	(212)	$	12,677
Income tax expense (benefit) from continuing operations												Income tax expense (benefit) from continuing operations		534		(89)		3,262
Interest expense, net	Interest expense, net	431		360		1,026		1,245		1,364		Interest expense, net		274		377		1,330
Income tax expense (benefit)		1,121		723		1,921		(260)		2,694

Operating income	Operating income	6,196		3,649		11,745		220		15,062		Operating income		2,816		76		17,269
CARES Act credit												CARES Act credit		—		—		(2,084)
Depreciation and amortization	Depreciation and amortization	1,191		1,271		2,941		4,130		3,771		Depreciation and amortization		899		836		3,761
Impairment losses		—		—		—		7,240		—

Gain on contingent consideration	Gain on contingent consideration	(1,208)		(76)		(2,403)		(76)		(2,403)		Gain on contingent consideration		—		—		(2,403)
Share-based compensation	Share-based compensation	424		245		886		631		1,105		Share-based compensation		211		221		1,049
Transaction fees	Transaction fees	1		15		155		605		164		Transaction fees		—		136		35
IT roadmap		375		401		1,306		1,292		1,578
Adjusted EBITDA		$	6,979	$	5,505	$	14,630	$	14,042	$	19,277
Adjusted EBITDA from continuing operations												Adjusted EBITDA from continuing operations		3,926		1,269		17,627
Adjusted EBITDA from discontinued operations, net of gain												Adjusted EBITDA from discontinued operations, net of gain		985		1,194		4,504
Adjusted EBITDA, net of gain												Adjusted EBITDA, net of gain		$	4,911	$	2,463	$	22,131

Liquidity and Capital Resources

Our working capital requirements are primarily driven by field talent payments, tax payments and client partner accounts receivable receipts. Since receipts from client partners lag payments to field talent, working capital requirements increase substantially in periods of growth.

Our primary sources of liquidity are cash generated from operations and borrowings under our credit agreement with BMO Harris Bank, N.A. (“BMO”), that provides for a revolving credit facility maturing July 16, 2024 (the “Revolving Facility”). Our primary uses of cash are payments to field talent, team members, related payroll liabilities, operating expenses, capital

expenditures, cash interest, cash taxes, dividends, and contingent consideration and debt payments. We believe that the cash generated from operations, together with the borrowing availability under our Revolving Facility, will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new ~~branches~~markets throughout the next year. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to obtain additional debt or equity capital or refinance all or a portion of our debt.

While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional growth opportunities within the next year that could require additional debt or equity financing. If we are unable to secure additional financing at favorable terms in order to pursue such additional growth opportunities, our ability to pursue such opportunities could be materially adversely affected.

The Company has an effective Form S-3 shelf registration statement allowing for the offer and sale of up to approximately $100 million of common stock. There is no guarantee that we will be able to consummate any offering on terms we consider acceptable or at all.

During this period of uncertainty of volatility related to COVID-19, we will continue to monitor our liquidity, particularly payments from our client partners.

A summary of our working capital, operating, investing and financing activities are shown in the following table:

September 26,
2021 December 27,
2020
(dollars in thousands)
Working capital $ 29,280 $ 25,385
Thirty-nine Weeks Ended
September 26,
2021 September 27,
2020
(dollars in thousands)
Net cash provided by operating activities $ 2,355 $ 18,288
Net cash used in investing activities (5,341) (23,618)
Net cash provided by financing activities 2,986 5,330
Net change in cash and cash equivalents $ — $ —


		March 27, 2022		December 26, 2021
		(dollars in thousands)
Working capital from continuing operations		$	28,276	$	25,851

		Thirteen Weeks Ended
		March 27, 2022		March 28, 2021
		(dollars in thousands)
Net cash provided by (used in) continuing operations:
	Operating activities	$	(1,060)	$	(1,184)
	Investing activities	28,263		(4,320)
	Financing activities	(27,963)		2,417
Net change in cash and cash equivalents discontinued operations		648		3,087
Net change in cash and cash equivalents		$	(112)	$	—

Operating Activities

Cash provided by operating activities consists of net income ~~(loss)~~ adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, ~~intangible impairment losses,~~ interest expense on contingent consideration payable, ~~gain on contingent consideration,~~ and the effect of working capital changes. The primary drivers of cash inflows and outflows are accounts receivable and accrued payroll and expenses.

During Fiscal ~~2021,~~2022, net cash ~~provided by operating~~used in continuing operations activities was ~~$2.4~~$1.1 million, a decrease of ~~$15.9~~$0.1 million compared with ~~$18.3~~$1.2 million for Fiscal ~~2020.~~2021. This ~~decrease~~increase is primarily attributable to ~~increased accounts receivable~~payments of deferred employer FICA for the CARES Act in other current liabilities and payments on accrued payroll and expenses, which were partially offset by ~~an increase in the accrual in other long-term liabilities from deferred employer FICA for the CARES Act in 2020.~~additional income taxes payable.

Investing Activities

Cash used in investing activities consists primarily of cash paid for businesses acquired and capital expenditures.

In Fiscal 2022, we received $30.3 million in connection to the sale of InStaff and we made capital expenditures of $2.1 million mainly related to the IT roadmap and for software and computer equipment purchased in the ordinary course of business. In Fiscal 2021, we paid $3.8 million in connection with the Momentum acquisition and we made capital expenditures

of $1.6 million mainly related to software and computer equipment purchased in the ordinary course of business and for the IT roadmap. In Fiscal 2020, we paid $21.7 million in connection with the EdgeRock acquisition and we made capital expenditures of $2.0$0.5 million mainly related to software and computer equipment purchased in the ordinary course of business and for the IT roadmap.

Financing Activities

Cash flows from financing activities consisted principally of borrowings and payments under our credit agreement and payment of dividends.

For Fiscal ~~2021,~~2022, we paid down $26.9 million on the Term Loan, as discussed below, we paid $1.6 million in cash dividends on our common stock, we paid $1.1 million of contingent consideration related to the Momentum acquisition, and borrowed ~~$7.7~~$1.4 million on our Revolving Facility for increased working capital ~~needs~~needs. For Fiscal 2021, we borrowed $3.8 million on our Revolving Facility, and ~~to fund the Momentum acquisition,~~ paid ~~$3.3~~$1.0 million in cash dividends on our common stock, and paid down ~~$1.5~~$0.4 million on the Term Loan, as defined below. For Fiscal 2020, we borrowed $22.5 million on our Term Loan, described below, to fund the EdgeRock acquisition, we reduced $12.3 million on our Revolving Facility, and paid $4.1 million in cash dividends on our common stock, and paid down $0.7 million on long-term debt.Loan.

Credit Agreements

On July 16, 2019, we entered into a Credit Agreement (the “Credit Agreement”), maturing July 16, 2024, with BMO, as led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender. The Credit Agreement provides for a Revolving Facility permitting us 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 us to borrow funds from time to time in an aggregate amount not to exceed $30 million with principal ~~paid~~payable quarterly, based on an annual percentage of the original principal amount as defined in the Credit Agreement, all of which has been funded. We may from time to time, with a maximum of two, request an increase in the aggregate Term Loan ~~up to~~commitment by $40 million, with minimum increases of $10 million. Our obligations under the Credit Agreement are secured by a first priority security interest in substantially all our tangible and intangible property. 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). We also pay an unused commitment fee on the daily average unused amount of Revolving Facility and Term Loan.

The Credit Agreement contains customary affirmative covenants and negative ~~covenants, including certain limitations on our ability to pay cash dividends.~~covenants. We are subject to a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio as defined in the Credit Agreement.

~~In April 2020, we entered into a pay-fixed/receive-floating interest rate swap agreement~~ The Company was in compliance with ~~BMO that reduces the floating interest rate component on the Term Loan obligation. The $25.0 million notional amount was effective on June 3, 2020 and designed~~these covenants as a cash flow hedge on the underlying variable rate interest payments against a fixed interest rate that terminates on June 1, 2023. In accordance with cash flow hedge accounting treatment, we have determined that the hedge is perfectly effective using the change-in-variable-cash-flow method.of March 27, 2022.

On February 8, 2021, the Company borrowed $3.8 million on the Revolving Facility in conjunction with the closing of the Momentum ~~acquisition, as described in~~acquisition. On March 21, 2022, the Company paid down the balance on the existing Term Loan and a portion of the Revolving Facility using the proceeds from the sale of the Light industrial segment (See Note ~~3 in the Notes to Consolidated Financial Statements.~~4).

Off-Balance Sheet Arrangements

Letter of Credit

In March 2020, in conjunction with the 2020 EdgeRock acquisition, we entered into a standby letter of credit arrangement, which expires December 31, 2024, for purposes of protecting a lessor against default on lease payments. As of ~~September 26, 2021,~~March 27, 2022, we had a maximum financial exposure from this standby letter of credit totaling $0.1 million, all of which is considered usage against our Revolving Facility.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, estimates, assumptions and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, of the Notes to Unaudited Consolidated Financial Statements included in “Item 1. Financial Statements.” Please also refer to our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020~~26, 2021 for a more detailed discussion of our critical accounting policies.

We have classified the related assets and liabilities associated with our Light Industrial segment, InStaff, as discontinued operations in our Consolidated Balance Sheets. The results of InStaff business have been presented as discontinued operations in our Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows for all periods presented. The sale represents a strategic shift in our business that will have a major effect on our operations and financial results. See “Note 4 — Discontinued Operations” for additional information.

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 our 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 our financial statements in future periods. Actual results and outcomes may differ from management’s estimates and assumptions.

Revenue Recognition

We derive our revenues from continuing operations in Real Estate and Professional segments. We provide workforce solutions and placement services. Revenues are recognized when promised workforce solutions are delivered to client partners, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Revenues as presented on the consolidated statements of operations and comprehensive income represent workforce solutions 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.

We record revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. We have concluded that gross reporting is appropriate because we (i) have the risk of identifying and hiring qualified field talent, (ii) have the discretion to select the field talent and establish their price and duties and (iii) we bear the risk for services that are not fully paid for by client partners.

Workforce solution revenues - Field talent revenues from contracts with client partners are recognized in the amount to which we have a right to invoice, when the services are rendered by our field talent.

Contingent placement revenues - Any revenues associated with workforce solutions that are provided on a contingent basis are recognized once the contingency is resolved, as this is when control transferred to the client partner, usually when employment candidates start their employment.

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.

We estimate the effect of placement candidates who do not remain with our client partners through the guarantee period (generally 90 days) based on historical experience. Allowances, recorded as a liability, are established to estimate these losses. Fees to client partners are generally calculated as a percentage of the new worker’s annual compensation. No fees for placement workforce solutions are charged to employment candidates. These assumptions determine the timing of revenue recognition for the reported period.

Payment terms in the Company's contracts vary by the type and location of its client partner and the workforce solutions offered. The term between invoicing and when payment is due is not significant. There were no unsatisfied performance obligations as of March 27, 2022. There were no revenues recognized during the thirteen week period ended March 27, 2022 related to performance obligations satisfied or partially satisfied in previous periods. There are no contract costs capitalized. The Company did not recognize any contract impairments during the thirteen week period ended March 27, 2022.

Intangible Assets

We hold intangible assets with indefinite and finite lives. Intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized.

We capitalize purchased software and internal payroll costs directly incurred in the modification of software for internal use. Software maintenance and training costs are expensed in the period incurred.

We evaluate the recoverability of intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. We considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units. We annually evaluate the remaining useful lives of all intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Goodwill

Goodwill is not amortized, but instead is evaluated at the reporting unit level for impairment annually at the end of each fiscal year, or more frequently, if conditions indicate an earlier review is necessary. We considered the current and expected future economic and market conditions surrounding COVID-19 and its impact on each of the reporting units. If we have determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value, we may use a qualitative assessment for the annual impairment test. We determined there were no impairment indicators for goodwill assets during Fiscal 2022 or Fiscal 2021

Contingent Consideration

We have obligations, to be paid in cash, related to our acquisitions if certain future operating and financial goals are met. The fair value of this contingent consideration is determined using expected cash flows and present value technique. The fair value calculation of the expected future payments uses a discount rate commensurate with the risks of the expected cash flow. The resulting discount is amortized as interest expense over the outstanding period using the effective interest method.

Leases

We lease all their office space through operating leases, which expire at various dates through 2025. Many of the lease agreements obligate us to pay real estate taxes, insurance and certain maintenance costs, which are accounted for separately. Certain of our lease arrangements contain renewal provisions from 3 to 10 years, exercisable at our option. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We determine if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet as right-of-use assets and lease liabilities for the lease term.

Right of use lease assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Our operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses.

Financial Instruments

We use fair value measurements in areas that include, but are not limited to, interest rate swap agreements used to mitigate interest rate risk, and the allocation of purchase price consideration to tangible and identifiable intangible assets and contingent

consideration. The carrying values of cash and cash equivalents, accounts receivables, prepaid expenses, accounts payable, accrued liabilities, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The carrying value of bank debt approximates fair value due to the variable nature of the interest rates under the credit agreement with BMO Harris Bank, N.A. ("BMO") that provides for the revolving credit facility and term loan and current rates available to us for debt with similar terms and risk. The fair value on the interest rate swap is based on quoted prices from BMO.

Share-Based Compensation

We recognize compensation expense in selling, general and administrative expenses over the service period for options or restricted stock that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates.

Income Taxes

The current provision for income taxes represents estimated amounts payable or refundable on tax returns filed or to be filed for the year. We recognizes any penalties when necessary as part of selling, general and administrative expenses. As of March 27, 2022, goodwill of $26.4 million, which is limited annually, is expected to be deductible for tax purposes. As a matter of operation, we first calculate the effective tax on continuing operations, and then allocated the remaining taxes to our discontinued operations, in accordance with Accounting Standards Codification (“ASC”) Topic 740.

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. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. 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 March 27, 2022, we have a $4.9 million net operating loss carry forward from the 2020 EdgeRock acquisition 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, we will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized. In determining whether a valuation allowance is appropriate, we consider whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results.

We follow the guidance of ASC Topic 740, Accounting for Uncertainty in Income Taxes. 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.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements and their potential effect on our results of operations and financial condition, refer to Note 2 in the Notes to the Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q and Note 2 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~26, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks from transactions we enter into in the normal course of business. Our primary market risk exposure relates to interest rate risk.

Interest Rates

A portion of our Revolving Facility and Term Loan are priced at variable interest rates. Accordingly, future interest rate increases could potentially put us at risk for an adverse impact on future earnings and cash flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures are effective, at a reasonable assurance level, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

For the fiscal quarter ended ~~September 26, 2021,~~March 27, 2022, there have been no changes in our internal control over financial reporting identified in connection with the evaluations required by Rule 13a-15(d) or Rule 15d-15(d) under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our team members are working remotely due to COVID-19. We are continually monitoring and assessing the impact of the ongoing COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Inherent Limitations on Effectiveness of Controls

Our management, including our CEO and our CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No change from the information provided in ITEM 3. LEGAL PROCEEDINGS included in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~26, 2021.

ITEM 1A. RISK FACTORS

In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020~~26, 2021 (our ~~“2020~~“2021 Form 10-K”), and filed with the SEC on March ~~11,~~10, 2021. Any of the risks discussed in this Quarterly Report on Form 10-Q or any of the risks disclosed in Item 1A. of Part I of our ~~2020~~2021 Form 10-K, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3738

Item 6. Exhibits

The following exhibits are filed or furnished with this Quarterly Report on Form 10-Q.


Exhibit Number						Description

2.1						Securities Purchase Agreement, dated as of February 3, 2020, by and between BG Staffing, LLC, EdgeRock Technology Holdings, Inc., and CDI Holding Company LLC (incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 6, 2020)
~~2.2~~						Asset Purchase Agreement, dated as of February 8, 2021, between BG Staffing, LLC, Momentum Solutionz LLC, Lorne Kaufman, and Jeff Servidio (incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 11, 2021)
2.2						As set Purchase Agreement, dated as of February 28, 2022, between BGSF, Inc., Sentech Engineering Services, Inc., and Jobandtalent Holding Limited (incorporated by reference from the registrant's Current Report on Form 8-K filed on March 1, 2022)
3.1						Certificate of Incorporation of BG Staffing, Inc. (incorporated by reference from Amendment No. 2 to the Company’s registration statement on Form S-1 (File No. 333-191683) filed on November 4, 2013).
3.2						Certificate of Amendment to Certificate of Incorporation of BGSF, Inc. (incorporated by reference from the registrant's Current Report on Form 8-K filed on February 12, 2021).
3.3						Bylaws of BG Staffing, Inc. (incorporated by reference from Amendment No. 2 to the Company’s registration statement on Form S-1 (File No. 333-191683) filed on November 4, 2013).
4.1						Form of Common Stock Certificate (incorporated by reference from Amendment No. 1 to the Company’s registration statement on Form S-1 (File No. 333-191683) filed on October 28, 2013).
31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†						Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to to Section 906 of the Sarbanes-Oxley Act of 2002.
101*						The following financial information from BGSF's Quarterly Report on Form 10-Q for the quarter ended ~~September 26, 2021~~March 27, 2022 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Unaudited Statements of Changes in Stockholders' Equity, (iv) the Unaudited Consolidated Statements of Cash Flows, and (vi) Notes to the Unaudited Consolidated Financial Statements.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


			*			Filed herewith.
			†			This certification is deemed not filed for purposes of ~~section~~Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

3839

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			BGSF, INC.

						/s/ Beth Garvey
			Name:			Beth Garvey
			Title:			President and Chief Executive Officer
						(Principal Executive Officer)

						/s/ Dan Hollenbach
			Name:			Dan Hollenbach
			Title:			Chief Financial Officer and Secretary
						(Principal Financial Officer)

Date: ~~November 3, 2021~~May 5, 2022

3940


PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Unaudited Consolidated Balance Sheets	4
	Unaudited Consolidated Statements of Operations and Comprehensive Income	56
	Unaudited Consolidated Statement of Changes in Stockholders' Equity	67
	Unaudited Consolidated Statements of Cash Flows	89
	Notes to Unaudited Consolidated Financial Statements	911
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II	OTHER INFORMATION	3637
Item 1.	Legal Proceedings	3637
Item 1A.	Risk Factors	3637
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	3738
Item 4.	Mine Safety Disclosures	3738
Item 5.	Other Information	3738
Item 6.	Exhibits	3839


			September 26, 2021		December 27, 2020
ASSETS
Current assets
	Accounts receivable (net of allowance for credit losses of $521,001 and $492,087 for 2021 and 2020, respectively)		$	54,051,208	$	41,493,800
	Prepaid expenses and other current assets		1,842,650		2,154,966

	Other current assets		19,898		—
		Total current assets	55,913,756		43,648,766

Property and equipment, net			3,046,081		3,723,582
Other assets
	Deposits		4,142,234		4,016,002
	Other assets		1,321,368		1,195,143
	Deferred income taxes, net		4,887,702		5,827,673
	Right-of-use asset - operating leases		4,674,345		6,009,054
	Intangible assets, net		35,959,677		33,781,168
	Goodwill		34,155,493		32,076,880
		Total other assets	85,140,819		82,905,920
	Total assets		$	144,100,656	$	130,278,268
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Long-term debt, current portion		$	3,375,000	$	2,625,000
	Accrued interest		125,072		78,134
	Accounts payable		362,785		219,693
	Accrued payroll and expenses		15,515,677		11,448,403
	Contingent consideration, current portion		1,052,750		—
	Lease liability, current portion		2,060,525		2,031,898
	Other current liabilities		3,549,785		—
	Income taxes payable		592,188		1,861,116
		Total current liabilities	26,633,782		18,264,244

Line of credit (net of deferred finance fees of $211,967 and $268,076 at 2021 and 2020, respectively)			13,430,982		5,709,266
Long-term debt, less current portion			24,050,000		26,300,000
Contingent consideration, less current portion			969,057		2,287,926
Lease liability, less current portion			3,366,279		4,903,539
Other long-term liabilities			3,619,830		7,355,541
	Total liabilities		72,069,930		64,820,516

Commitments and contingencies			0		0
Preferred stock, $0.01 par value per share, 500,000 shares authorized, -0- shares issued and outstanding			—		—
Common stock, $0.01 par value per share; 19,500,000 shares authorized, 10,401,312 and 10,328,379 shares issued and outstanding for 2021 and 2020, respectively, net of treasury stock, at cost, 1,845 and 1,235 shares for 2021 and 2020, respectively.			66,121		73,834
Additional paid in capital			61,487,340		60,457,044
Retained earnings			10,531,878		5,049,748
Accumulated other comprehensive loss			(54,613)		(122,874)
	Total stockholders’ equity		72,030,726		65,457,752
	Total liabilities and stockholders’ equity		$	144,100,656	$	130,278,268




Cash flows from financing activities
	Net borrowings (payments) under line of credit		7,665,607		(12,336,717)
	Proceeds from issuance of long-term debt		—		22,500,000
	Principal payments on long-term debt		(1,500,000)		(700,000)

	Payments of dividends		(3,316,114)		(4,123,469)
	Issuance of ESSP Shares		154,922		—
	Issuance of shares, net of offering costs		(18,054)		(10,000)



		Net cash provided by financing activities	2,986,361		5,329,814
Net change in cash and cash equivalents			—		—
Cash and cash equivalents, beginning of period			—		—
Cash and cash equivalents, end of period			$	—	$	—

Supplemental cash flow information:
	Cash paid for interest		$	563,280	$	890,918
	Cash paid for taxes, net of refunds		$	2,187,334	$	855,101


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested outstanding at December 27, 2020	235,938	$	18.83
Nonvested outstanding at September 26, 2021	219,564	$	15.36





Amortization:

Professional	$	610,273	$	1,004,964	$	1,820,554	$	3,353,128

Home office	389,732		59,266		530,948		123,288
Total	$	1,000,005	$	1,064,230	$	2,351,502	$	3,476,416

Operating income:
Real Estate	$	4,369,878	$	3,346,316	$	9,795,540	$	7,159,432
Professional - without impairment losses	3,399,330		1,793,937		7,476,688		5,232,301
Professional - impairment losses	—		—		—		(7,239,514)
Light Industrial	1,164,117		1,272,796		3,330,564		3,240,347
Home office - selling	(222,361)		(186,549)		(660,330)		(426,359)
Home office - general and administrative	(3,723,494)		(2,654,534)		(10,599,917)		(7,821,611)
Home office - gain on contingent consideration	1,208,270		76,102		2,402,844		76,102
Total	$	6,195,740	$	3,648,068	$	11,745,389	$	220,698





Capital expenditures:
Real Estate	$	29,733	$	25,000	$	94,674	$	68,273
Professional	16,229		28,693		96,124		102,591
Light Industrial	7,390		9,519		34,505		12,720
Home office	409,537		—		1,341,086		1,776,595
Total	$	462,889	$	63,212	$	1,566,389	$	1,960,179