Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 14, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | HireQuest, Inc. | |
Entity Central Index Key | 0001140102 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | DE | |
Entity File Number | 000-53088 | |
Entity Common Stock, Shares Outstanding | 13,610,074 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash | $ 1,976,054 | $ 13,667,434 |
Accounts receivable, net of allowance for doubtful accounts | 29,716,512 | 21,344,499 |
Notes receivable | 808,531 | 2,178,299 |
Prepaid expenses, deposits and other assets | 919,274 | 344,091 |
Prepaid workers' compensation | 1,002,633 | 1,434,583 |
Due from affiliates | 109,571 | 0 |
Total current assets | 34,532,575 | 38,968,906 |
Property and equipment, net | 3,431,951 | 3,193,379 |
Workers' compensation claim payment deposit | 705,224 | 623,452 |
Deferred tax asset | 0 | 79,379 |
Franchise agreements, net | 19,843,412 | 0 |
Other intangible assets, net | 516,401 | 342,697 |
Notes receivable, net of current portion | 3,250,371 | 5,887,229 |
Total assets | 62,279,934 | 49,095,042 |
Current liabilities | ||
Accounts payable | 959,161 | 457,490 |
Other current liabilities | 510,968 | 1,322,764 |
Accrued benefits and payroll taxes | 3,213,433 | 743,431 |
Due to affiliates | 79,579 | 67,398 |
Due to franchisees | 4,231,154 | 3,228,777 |
Risk management incentive program liability | 1,249,592 | 858,482 |
Workers' compensation claims liability | 7,615,787 | 2,777,734 |
Total current liabilities | 17,859,674 | 9,456,076 |
Workers' compensation claims liability, net of current portion | 2,001,018 | 1,806,334 |
Franchisee deposits | 1,748,979 | 1,468,359 |
Deferred tax liability | 976,113 | 0 |
Total liabilities | 22,585,784 | 12,730,769 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity | ||
Preferred stock - $0.001 par value, 1,000,000 shares authorized; none issued | 0 | 0 |
Common stock - $0.001 par value, 30,000,000 shares authorized; 13,638,041 and 13,628,675 shares issued, respectively | 13,638 | 13,629 |
Additional paid-in capital | 29,079,460 | 28,811,389 |
Treasury stock, at cost - 33,092 shares | (146,465) | (146,465) |
Retained earnings | 10,747,517 | 7,685,720 |
Total stockholders' equity | 39,694,150 | 36,364,273 |
Total liabilities and stockholders' equity | $ 62,279,934 | $ 49,095,042 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
Stockholders' equity | ||
Preferred stock par value | $ .001 | $ 0.001 |
Preferred stock shares authorized | 1,000,000 | 1,000,000 |
Preferred stock shares issued | 0 | 0 |
Common stock par value | $ .001 | $ 0.001 |
Common stock shares authorized | 30,000,000 | 30,000,000 |
Common stock shares issued | 13,638,041 | 13,628,675 |
Common stock shares outstanding | 13,638,041 | 13,628,675 |
Treasury stock shares | 33,092 | 33,092 |
Consolidated Statements of Inco
Consolidated Statements of Income (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue | $ 3,402,983 | $ 4,119,981 |
Selling, general, and administrative expenses | 3,841,772 | 3,253,372 |
Depreciation and amortization | 332,841 | 31,814 |
Income (loss) from operations | (771,630) | 834,795 |
Other miscellaneous income | 3,915,980 | 250,709 |
Interest and other financing expense | (4,600) | (11,289) |
Net income before income taxes | 3,139,750 | 1,074,215 |
Provision for income taxes | (602,294) | 199,037 |
Net income | $ 3,742,044 | $ 875,178 |
Earnings per share | ||
Basic | $ .28 | $ 0.06 |
Diluted | $ .27 | $ 0.06 |
Weighted average shares outstanding | ||
Basic | 13,602,764 | 13,533,247 |
Diluted | 13,799,203 | 13,535,000 |
Franchise Royalties | ||
Revenue | $ 3,259,036 | $ 3,705,242 |
Service Revenue | ||
Revenue | $ 143,947 | $ 414,739 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Total |
Beginning balance, shares at Dec. 31, 2019 | 13,518,036 | ||||
Beginning balance at Dec. 31, 2019 | $ 13,518 | $ 0 | $ 27,584,610 | $ 3,683,954 | $ 31,282,082 |
Stock-based compensation | 322,734 | 322,734 | |||
Restricted common stock granted for services, shares | 18,706 | ||||
Restricted common stock granted for services | $ 19 | 19 | |||
Net income | 875,178 | 875,178 | |||
Ending balance, shares at Mar. 31, 2020 | 13,536,742 | ||||
Ending balance at Mar. 31, 2020 | $ 13,537 | 0 | 27,907,344 | 4,559,132 | 32,480,013 |
Beginning balance, shares at Dec. 31, 2020 | 13,628,675 | ||||
Beginning balance at Dec. 31, 2020 | $ 13,629 | (146,465) | 28,811,389 | 7,685,720 | 36,364,273 |
Stock-based compensation | 268,071 | 268,071 | |||
Common stock dividends | (680,247) | (680,247) | |||
Restricted common stock granted for services, shares | 9,366 | ||||
Restricted common stock granted for services | $ 9 | 9 | |||
Net income | 3,742,044 | 3,742,044 | |||
Ending balance, shares at Mar. 31, 2021 | 13,638,041 | ||||
Ending balance at Mar. 31, 2021 | $ 13,638 | $ (146,465) | $ 29,079,460 | $ 10,747,517 | $ 39,694,150 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities | ||
Net income | $ 3,742,044 | $ 875,178 |
Adjustments to reconcile net income to net cash used in operations: | ||
Depreciation and amortization | 332,841 | 31,814 |
Allowance for losses on notes receivable | 0 | 1,447,340 |
Stock based compensation | 268,080 | 322,752 |
Deferred taxes | (570,037) | (681,485) |
Loss on disposition of intangible assets | 1,222,546 | 0 |
Bargain purchase gain | (4,959,169) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 4,010,020 | 3,774,946 |
Prepaid expenses, deposits and other assets | (575,183) | (954,054) |
Prepaid workers' compensation | 431,950 | (530,776) |
Due from affiliates | (109,571) | 0 |
Accounts payable | 259,147 | (10,873) |
Risk management incentive program liability | 391,110 | 311,200 |
Other current liabilities | (813,046) | 354,844 |
Accrued benefits and payroll taxes | 370,002 | 496,014 |
Due to franchisees | 582,721 | (291,489) |
Workers' compensation claim payment deposit | 7,138,799 | 0 |
Workers' compensation claims liability | 141,807 | 319,191 |
Net cash provided by operating activities - continuing operations | 11,864,061 | 5,464,602 |
Net cash provided by operating activities - discontinued operations | 0 | 37,815 |
Net cash provided by operating activities | 11,864,061 | 5,502,417 |
Cash flows from investing activities | ||
Purchase of acquisitions | (28,814,153) | 0 |
Purchase of property and equipment | (271,601) | (676,653) |
Proceeds from the sale of purchased locations | 997,367 | 0 |
Proceeds from the sale of notes receivable | 5,261,111 | 0 |
Proceeds from payments on notes receivable | 249,230 | 438,410 |
Cash issued for notes receivable | (19,942) | (81,155) |
Investment in intangible assets | (173,704) | 0 |
Net change in in franchisee deposits | (115,683) | 642,569 |
Net cash (used in) provided by investing activities | (22,887,375) | 323,171 |
Cash flows from financing activities: | ||
Proceeds from affiliates | 12,181 | 27,790 |
Payment of dividends | (680,247) | 0 |
Net cash (used in) provided by financing activities | (668,066) | 27,790 |
Net (decrease) increase in cash | (11,691,380) | 5,853,378 |
Cash, beginning of period | 13,667,434 | 4,187,450 |
Cash, end of period | 1,976,054 | 10,040,828 |
Supplemental disclosure of non-cash investing and financing activities | ||
Notes receivable issued for the sale of branches | 1,247,040 | 0 |
Supplemental disclosure of cash flow information | ||
Interest paid | 4,600 | 11,289 |
Income taxes paid | $ 2,280,288 | $ 2,464 |
1. Basis of Presentation and Su
1. Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Nature of Business HireQuest, On March 1, 2021, we completed our acquisition of Snelling Staffing and affiliates (“Snelling”). We acquired substantially all of the operating assets and assumed certain liabilities of Snelling for a purchase price of approximately $17.7 million subject to customary adjustments for net working capital. On March 22, 2021, we completed our asset acquisition of Link Staffing and affiliates (“Link”) where we acquired all of the franchise relationships and certain other assets of Link for a purchase price of approximately $11.2 million. For additional information related to these transactions, see Note 2 – Acquisitions As of March 31, 2021 we had 208 franchisee-owned offices in 35 states and the District of Columbia. We are the employer of record to approximately 80,000 employees annually, who in turn provide services for thousands of clients in various industries including construction, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, and retail. We provide staffing, marketing, funding, software, and administrative services to our franchisees. Basis of Presentation We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the periods presented. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report filed on Form 10-K for the year ended December 31, 2020. Results for the interim periods presented are not necessarily indicative of the results expected for the full year or for any other period. Consolidation The consolidated financial statements include the accounts of HQI and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. U.S. GAAP requires the primary beneficiary of a variable interest entity (“VIE”) to consolidate that entity. To be the primary beneficiary of a VIE, an entity must have both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that are significant to the beneficiary. We provide acquisition financing to some of our franchisees that could result in our having to absorb losses. This results in some franchisees being considered VIEs. We have reviewed our relationship with each of these franchisees and determined that we are not the primary beneficiary of any of these entities. Accordingly, we have not consolidated these entities. COVID-19 Pandemic In December 2019, a novel strain of coronavirus disease ("COVID-19") was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The extent of COVID-19's ultimate effect on our operational and financial performance and the collectability of our notes receivable will depend on future developments, including the duration, spread, and intensity of the pandemic, all of which are uncertain and difficult to predict. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business. However, the pandemic has so far had a material adverse effect on our business and results of operations. If the pandemic continues to be a severe worldwide health crisis, it could continue to have a material adverse effect on our future business, results of operations, financial condition, and cash flows. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. Significant estimates and assumptions underlie our workers’ compensation claim liabilities, our workers’ compensation risk management incentive program accrual, our deferred taxes, the reserve for losses on notes receivable, and the estimated fair value of assets acquired, and liabilities assumed. Property and Equipment We record property and equipment at cost. We compute depreciation using the straight-line method over the estimated useful lives. Land is not depreciated. Repairs and maintenance are expensed as incurred. When assets are sold or retired, we eliminate cost and accumulated depreciation from the consolidated balance sheet and reflect a gain or loss in the consolidated statement of income. The estimated useful lives of property and equipment are as follows: ● Buildings – 40 years ● Building improvements – 15 years ● Computers, furniture, and equipment – 5 to 7 years. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consist of amounts due for labor services from customers of franchisees and of accounts receivable originating at company-owned locations. At March 31, 2021, approximately 12% of our accounts receivable originated at locations which were previously corporately owned by Snelling, and at December 31, 2020, all of our accounts receivable were due from customers of franchisees. We own the accounts receivable from labor services provided by our franchisees until they age beyond a date agreed upon with each respective franchisee between 42 and 84 days. When accounts receivable age beyond the agreed-upon date, they are charged back to our franchisees. Accordingly, we do not record an allowance for doubtful accounts on these accounts receivable. For labor services originally provided by company-owned offices, we record accounts receivable at face value less an allowance for doubtful accounts. We determine the allowance for doubtful accounts based on historical write-off experience, the age of the receivable, other qualitative factors and extenuating circumstances, and current economic data which represents our best estimate of the amount of probable losses on these accounts receivable, if any. We review the allowance for doubtful accounts periodically and write off past due balances when it is probable that the receivable will not be collected. We record acquired accounts receivable net of any estimated allowance for doubtful accounts. Our allowance for doubtful accounts on accounts receivable generated by company-owned offices was approximately $-0- and $77,000 at March 31, 2021 and December 31, 2020, respectively. Revenue Recognition Our primary source of revenue comes from royalty fees based on the operation of our franchised offices. Royalty fees from our HireQuest Direct business model are based on a percentage of sales for services our franchisees provide to customers, which ranges from 6% to 8%. Royalty fees from our HireQuest business line, including HireQuest franchisees and Snelling and Link franchisees who executed a new franchise agreement upon closing, are 4.5% of the payroll we fund plus 18% of the gross margin for the territory. Royalty fees from the Snelling and Link franchise agreements assumed and not renegotiated at closing range from 5.0% to 9.0% of sales for services our franchisees provide to customers. In addition to royalty fees, we also charge a license fee to some locations that utilize our intellectual property but are not franchisees. License fees are 9% of the gross margin for the location. Our franchisees are responsible for taking customer orders, providing customers with services, establishing the prices charged for services, and control other aspects related to providing service to customers prior to the service being transferred to the customer, such as determining which temporary employees to dispatch to the customer and establishing pay rates for the temporary employees. Accordingly, we present revenue on a net basis as agent as opposed to a gross basis as principal. We recognize revenue when we satisfy our performance obligations. Our performance obligations take the form of a franchise license and promised services. Promised services consist primarily of paying temporary employees, completing all statutory payroll related obligations, and providing workers' compensation insurance on behalf of temporary employees. Because these performance obligations are interrelated, we do not consider them to be individually distinct and therefore account for them as a single performance obligation. Below are summaries of our franchise royalties disaggregated by business model: Three months ended March 31, 2021 March 31, 2020 HireQuest Direct $ 2,906,070 $ 3,561,403 HireQuest 212,921 143,839 Snelling 140,045 - Total $ 3,259,036 $ 3,705,242 Service revenue, which forms the other component of our total revenue, consists of interest we charge our franchisees on overdue customer accounts receivable, trademark license fees, and other fees for optional services we provide. We recognize interest income based on the effective interest rate applied to the outstanding principal balance of overdue accounts. We recognize revenue from trademark license fees as we earn them. We recognize revenue from optional services as we provide them. Workers’ Compensation Claims Liability We maintain reserves for workers’ compensation claims based on their estimated future cost. These reserves include claims that have been reported but not settled, as well as claims that have been incurred but not reported. Annually, we engage an independent actuary to estimate the future costs of these claims. Quarterly, we use development factors provided by an independent actuary to estimate the future costs of these claims. We make adjustments as necessary. If the actual costs of the claims exceed the amount estimated, we may incur additional charges. Workers’ Compensation Risk Management Incentive Program (“RMIP”) Our RMIP is designed to incentivize our franchises to keep our temporary employees safe and control exposure to large workers’ compensation claims. We accomplish this by providing our franchisees a royalty credit in an amount equivalent to a percentage of the amount they pay for workers’ compensation insurance if they keep their workers’ compensation loss ratios below specified thresholds. Notes Receivable Notes receivable consist primarily of amounts due to us related to the financing of franchised locations. We report notes receivable at the principal balance outstanding less an allowance for losses. We charge interest at a fixed rate and interest income is O ur allowance for losses on notes receivable was approximately $1.6 million at March 31, 2021 and December 31, 2020. Stock-Based Compensation Periodically, we issue restricted common shares or options to purchase our common shares to our officers, directors, or employees. We measure compensation costs for equity awards at their fair value on their grant date and expense these costs over the service period on a straight-line basis. The fair value of stock awards is based on the quoted price of our common stock on the grant date. We use the Black-Scholes valuation model to determine the value of option awards. Intangible Assets Intangible assets acquired or internally developed are measured at cost. The cost of acquired intangible assets consist of their purchase price. Subsequent costs are capitalized only if it is probable that they will increase the future economic benefits associated with the specific asset. All other costs are expensed as incurred. The cost of internally developed intangibles consists of fees paid to third parties for development services and payroll costs for employees' time spent on development incurred during the application development stage. Costs originating during the preliminary project stage and post-implementation state are expensed as incurred. Intangible assets are reviewed for impairment at least annually and/or whenever events and circumstances arise that indicate impairment may exist. Intangible assets are amortized using the straight-line method over their estimated useful lives. Note 2 – Acquisitions. March 31, 2021 December 31, 2020 Estimated useful life Gross Accumulated amortization Net Gross Accumulated amortization Net Finite-lived intangible assets: Franchise agreements 15 years $ 19,916,453 $ (73,041 ) $ 19,843,412 $ - $ - $ - Internally developed software 3 to 10 years 516,401 - 516,401 342,697 - 342,697 Total finite-lived intangible assets $ 20,432,854 $ (73,041 ) $ 20,359,813 $ 342,697 $ - $ 342,697 Savings Plan We have a savings plan that qualifies under Section 401(k) of the Internal Revenue Code. Under our 401(k) plan, eligible employees may contribute a portion of their pre-tax earnings, subject to certain limitations. As a benefit, we match 100% of each employee’s first 3% of contributions, then 50% of each employee’s contribution beyond 3%, up to a maximum match of 4% of the employee’s eligible earnings. Earnings per Share We calculate basic earnings (loss) per share by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding. We do not include the impact of any potentially dilutive common stock equivalents in our basic earnings (loss) per share calculations. Diluted earnings per share reflect the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock options and unvested restricted shares, except where their inclusion would be anti-dilutive. Outstanding common stock equivalents at March 31, 2021 and March 31, 2020 totaled approximately 293,000 and 29,000, respectively. We use the treasury stock method to calculate the diluted common shares outstanding which were as follows: Three months ended March 31, 2021 March 31, 2020 Weighted average number of common shares used in basic net income per common share 13,602,764 13,533,247 Dilutive effects of stock options 196,440 1,753 Weighted average number of common shares used in diluted net income per common share 13,799,203 13,535,000 Fair Value Measures Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. Our policy on fair value measures requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The policy establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The policy prioritizes the inputs into three levels that may be used to measure fair value: Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the net book value and balances are reviewed for impairment at least annually. The fair value of impaired notes receivable are determined based on estimated future payments discounted back to present value using the notes effective interest rate. Fair value Level March 31, 2021 December 31, 2020 Cash 1 $ 1,976,054 $ 13,667,434 Notes receivable 2 3,611,868 7,618,191 Notes receivable - impaired 3 447,034 447,034 Accounts receivable 2 29,716,512 21,344,499 Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today's “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This guidance is effective for annual periods beginning after December 15, 2022, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. We do not expect other accounting standards that the FASB or other standards-setting bodies have issued to have a material impact on our financial position, results of operations, or cash flows. |
2. Acquisitions
2. Acquisitions | 3 Months Ended |
Mar. 31, 2021 | |
Business Combinations [Abstract] | |
Acquisitions | Business Combinations Snelling Staffing On March 1, 2021, we completed our acquisition of certain assets of Snelling in accordance with the terms of the Asset Purchase Agreement dated January 29, 2021 (the “Snelling Agreement”). Snelling is a 67-year-old staffing company headquartered in Richardson, TX. Pursuant to the Snelling Agreement, HQ Snelling Corporation (“HQ Snelling”), our wholly-owned subsidiary, acquired substantially all of the operating assets and assumed certain liabilities of the sellers for a purchase price of approximately $17.7 million, subject to customary adjustments for net working capital. Also on March 1, 2021, HQ Snelling entered into the First Amendment to the Purchase Agreement, pursuant to which HireQuest, Inc. agreed to advance $2.1 million to the sellers at closing so the seller could facilitate payment on behalf of HQ Snelling to settle accrued payroll liabilities HQ Snelling assumed pursuant to the Snelling Agreement. Substantially all of the locations where we assumed franchisor status in this transaction have subsequently signed our HireQuest franchise agreement and will continue to operate under the Snelling tradename. The following table summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date. These estimates are preliminary, pending final evaluation of certain assets and liabilities, and therefore are subject to revisions that may result in adjustments to the values presented below: Total allocable purchase price paid in cash $ 17,691,242 Accounts receivable $ 12,292,830 Workers' compensation deposit 7,200,000 Franchise agreements 11,034,000 Customer lists 1,690,000 Other current assets 109,773 Workers' compensation claims liability (4,890,930 ) Accrued payroll and payroll liabilities (2,100,000 ) Current liabilities (663,430 ) Other liabilities (2,021,832 ) Bargain purchase (4,959,169 ) Purchase price allocation $ 17,691,242 The bargain purchase is attributable to the financial position of the seller and because there were few suitable potential buyers. The gain is included in the line item, “Other miscellaneous income,” in our consolidated statement of income. The following table presents unaudited pro forma information assuming the acquisition of Snelling had occurred on January 1, 2020. The unaudited pro forma information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on that date: Three months ended March 31, 2021 March 31, 2020 Royalty revenue $ 4,069,507 $ 4,874,260 Net (loss) income (593,067 ) 1,573,164 Basic (loss) earnings per share $ (0.04 ) $ 0.12 Basic weighted average shares outstanding 13,602,764 13,533,247 Diluted (loss) earnings per share $ (0.04 ) $ 0.12 Diluted weighted average shares outstanding 13,602,764 13,535,000 These calculations reflect increased amortization expense, increased payroll expense, the elimination of gains associated with the transaction, the elimination of transaction related costs, and the consequential tax effects that would have resulted had the acquisition closed on January 1, 2020. In connection with the acquisition, we sold the 10 locations that had been company-owned by Snelling. Two of these, we sold to franchisees. Four offices were sold to a third-party purchaser. Four offices were sold to a California purchaser (the “California Purchaser”) and operate as Snelling pursuant to a license agreement. The aggregate sale price for these locations consisted of (i) $1.0 million in the form of a promissory note that bears interest at 6.0%, (ii) the right to receive 1.5% of revenue generated at the Ontario location for the next 12 months, (iii) the right to receive 2.5% of revenue generated at the Tracy and Lathrop locations for the next 12 months, (iv) the right to receive 2.0% of revenue generated at the Princeton location for the next 36 months, and (v) approximately $1 million in cash. There are no remaining company-owned locations at March 31, 2021. One of the California locations operates pursuant to a license agreement whereby they license the Snelling trademark and pay us a royalty of 9% of their gross margin. The California Purchaser will convert the remaining three California locations to franchisees at which point these franchisees will begin to pay us 9% of their gross margin. Asset Acquisition Link Staffing On March 22, 2021, we completed our acquisition of the franchise relationships and certain other assets of Link in accordance with the terms of the Asset Purchase Agreement dated February 12, 2021 (the "Link Agreement"). Link is a family-owned staffing company headquartered in Houston, TX. Pursuant to the Link Agreement, HQ Link Corporation ("HQ Link"), our wholly-owned subsidiary, acquired franchise agreements for approximately 35 locations, and other assets of Link Staffing for a purchase price of $11.1 million. Substantially all of the locations where we assumed franchisor status in this transaction have subsequently signed our HireQuest franchise agreement and will operate under the Snelling tradename. The following table summarizes the estimated fair values of the identifiable assets acquired as of the acquisition date. Due to the proximity of the acquisition to quarter end, these estimates are preliminary, pending final evaluation, and therefore are subject to revisions that may result in adjustments to the values presented below: Cash $ 11,122,911 Franchise agreements $ 10,886,178 Notes receivable 236,733 Purchase price allocation $ 11,122,911 We determined the Link transaction was an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in the franchise agreements. Accordingly, no pro forma financial information is presented. We assigned six of the franchise agreements we purchased in the transaction, all located in California, to the California Purchaser. These six franchisees operate pursuant to a Link trademark sublicense agreement whereby they pay us 9% of the gross margin of their offices in exchange for a sublicense to utilize the Link tradename. |
3. Related Party Transactions
3. Related Party Transactions | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Some significant shareholders of HQI also own portions of Jackson Insurance Agency; Bass Underwriters, Inc; Insurance Technologies, Inc.; and a number of our franchisees. Jackson Insurance Agency ("Jackson Insurance") and Bass Underwriters, Inc. ("Bass") Mr. Jackson, a member of our Board and a significant stockholder, and an immediate family member own Jackson Insurance. Mr. Jackson, Mr. Hermanns, our CEO, Chairman of our Board, and most significant stockholder, and irrevocable trusts set up by each of them, collectively own a majority of Bass, a large managing general agent. Bass purchased approximately $5.3 million of 6.0% notes receivable at book value in March 2021. For additional information related to this transaction, see Note 10 – Notes Receivable Jackson Insurance and Bass brokered property, casualty, general liability, and cybersecurity insurance for a series of predecessor entities (“Legacy HQ”) prior to the merger with Command Center, Inc. (the “Merger”). Since July 15, 2019, they have continued to broker these same policies for HQI. Jackson Insurance also brokers certain insurance policies on behalf of some of our franchisees, including the Worlds Franchisees (defined below). Premiums, taxes, and fees invoiced by Jackson Insurance and Bass to HQI for these insurance policies during the three months ended March 31, 2021 and March 31, 2020 were approximately $584,000 and $561,000, respectively. Jackson Insurance and Bass do not retain the majority of the premiums invoiced to HQI, but they do retain a commission of approximately 9% - 15% of premiums. Insurance Technologies, Inc. ("Insurance Technologies") Mr. Jackson, Mr. Hermanns, and irrevocable trusts set up by each of them, collectively own a majority of Insurance Technologies, an IT development and security firm. On October 24, 2019, HQI entered into an agreement with Insurance Technologies to add certain cybersecurity protections to our existing information technology systems and to assist in developing future information technology systems within our HQ Webconnect software. In addition, Insurance Technologies assisted with the IT diligence and integration process with respect to the Snelling and Link acquisitions. This arrangement was reviewed and approved by the Audit Committee of our Board of Directors and is monitored by the Audit Committee twice annually. During the three months ended March 31, 2021 and March 31, 2020, Insurance Technologies invoiced HQI approximately $102,000 and $50,000, respectively, for services provided pursuant to this agreement. We expect spending pursuant to this agreement to become immaterial in the third quarter of 2021. The Worlds Franchisees Mr. Jackson and immediate family members of Mr. Hermanns have significant ownership interests in, and Mr. Hermanns serves as manager of, certain of our franchisees (the “Worlds Franchisees”). There were 21 Worlds Franchisees at March 31, 2021 that operated 57 of our 212 offices. Transactions regarding the Worlds Franchisees are summarized below: Three months ended March 31, 2021 March 31, 2020 Franchisee royalties $ 1,613,009 $ 1,373,876 Balances regarding the Worlds Franchisees are summarized below: March 31, 2021 December 31, 2020 Due to franchisee $ 632,335 $ 435,072 Risk management incentive program liability 858,868 499,199 |
4. Line of Credit
4. Line of Credit | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Line of Credit | In July 2019, we entered into an agreement with Truist, for a $30 million line of credit with a $15 million sublimit for letters of credit. At March 31, 2021, approximately $14.3 million was utilized by outstanding letters of credit that secure our obligations to our workers’ compensation insurance carrier and $500,000 was utilized by a letter of credit that secures our paycard funding account, leaving $15.2 million available under the agreement for potential additional borrowings, subject to availability under the terms of the line of credit. For additional information related to the letter of credit securing our workers’ compensation obligations see Note 5 – Workers’ Compensation Insurance and Reserves. This line of credit is scheduled to mature on May 31, 2024. The current agreement bears interest at a variable rate equal to the Daily One Month London Interbank Offering Rate, or LIBOR, plus a margin between 1.25% and 1.75%. The margin is determined based on the value of our net collateral, which is equal to our total collateral plus unrestricted cash less the outstanding balance, if any, under the loan agreement. At March 31, 2021 the effective interest rate was 1.4%. A non-use fee of between 0.125% and 0.250% accrues on the unused portion of the line of credit. As collateral for repayment of any and all obligations under this agreement, we granted Truist a security interest in substantially all of our operating assets and the operating assets of our subsidiaries. This agreement, and other loan documents, contain customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, transactions with affiliates, and sales of assets. This agreement requires us to comply with a fixed charge coverage ratio of at least 1.10:1.00, tested quarterly on a rolling four quarter basis. At March 31, 2021 we were in compliance with this covenant. Our obligations under this agreement are subject to acceleration upon the occurrence of an event of default as defined in the loan agreement. |
5. Workers' Compensation Insura
5. Workers' Compensation Insurance and Reserves | 3 Months Ended |
Mar. 31, 2021 | |
Insurance [Abstract] | |
Workers' Compensation Insurance and Reserves | Beginning in March 2014, Legacy HQ obtained its workers’ compensation insurance through Chubb Limited and ACE American Insurance Company (collectively, “ACE”), in all states in which it operated, other than monopolistic jurisdictions. The ACE policy was a high deductible policy pursuant to which Legacy HQ had primary responsibility for all claims with ACE providing insurance for covered losses and expenses in excess of $500,000 per incident. In addition to the ACE policy, Legacy HQ purchased a deductible reimbursement insurance policy from Hirequest Insurance Company (“HQ Ins.”), a captive insurer, to cover losses up to the $500,000 deductible with ACE. This resulted in Legacy HQ effectively being fully insured during this time period. Effective July 15, 2019, Legacy HQ terminated its deductible reimbursement policy with HQ Ins. We assumed the primary responsibility for all claims up to the deductible occurring on or after July 15, 2019. The primary responsibility of all claims occurring before July 15, 2019 remains with HQ Ins. Command Center, the predecessor entity that acquired Legacy HQ in 2019, also obtained its workers’ compensation insurance through ACE. Pursuant to Command Center’s most recent policy, which expired on March 1, 2020, ACE provided insurance for covered losses and expenses in excess of $500,000 per incident. Command Center’s ACE policy included a one-time obligation for the Company to pay any single claim filed under the Command Center policy within a policy year that exceeds $500,000 (if any), but only up to $750,000 for that claim. All other claims within the policy year were subject to the $500,000 deductible. Effective July 15, 2019, in connection with the Merger, we assumed all of the workers’ compensation claims of Command Center. We also assumed Command Center’s workers’ compensation policy with ACE. Under these high deductible programs, we are effectively self-insured. Per our contractual agreements with ACE, we must provide collateral deposits of approximately $14.3 million, which we accomplished by providing a letter of credit under our agreement with Truist. The amount of our current letter of credit includes an additional amount of $5.2 million that was issued in conjunction with the release of a $7.2 million cash deposit that was acquired in the Snelling transaction. For workers’ compensation claims originating in the monopolistic jurisdictions of North Dakota, Ohio, Washington, and Wyoming, we pay workers’ compensation insurance premiums and obtain full coverage under mandatory state administered programs. Our liability associated with claims in these jurisdictions is limited to premium payments based upon the amount of payroll paid within each jurisdiction. Accordingly, our consolidated financial statements reflect only the mandated workers’ compensation insurance premium liability for workers’ compensation claims in these jurisdictions. |
6. Stockholders' Equity
6. Stockholders' Equity | 3 Months Ended |
Mar. 31, 2021 | |
Stockholders' equity | |
Stockholders' Equity | Dividend In the third quarter of 2020, we declared and paid a $0.05 per common share dividend. We intend to continue to pay this dividend on a quarterly basis, based on our business results and financial position. The following common share dividends were paid during 2021 and 2020: Declaration date Dividend Total paid September 15, 2020 $ 0.05 $ 677,869 December 15, 2020 0.05 679,779 March 15, 2021 0.05 680,247 Treasury Stock Effective July 2020, our Board of Directors authorized a one-year repurchase plan for up to 1 million shares of our common stock at a cost not to exceed $100,000 per month. During the year ended December 31, 2020, we purchased 23,638 shares of our common stock at an aggregate cost of approximately $146,000 resulting in an average price of $6.20 per share. These shares are held in treasury. Additionally, there were 9,454 restricted shares that did not meet their vesting criteria, which are also held in treasury. We have not purchased any shares of our common stock during 2021. |
7. Stock Based Compensation
7. Stock Based Compensation | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Stock Based Compensation | Employee Stock Incentive Plan In December 2019, our Board approved the 2019 HireQuest, Inc. Equity Incentive Plan (the “2019 Plan”). Subject to adjustment in accordance with the terms of the 2019 Plan, no more than 1,500,000 shares of common stock are available in the aggregate for the grant of awards under the 2019 Plan. No more than 1,000,000 shares may be issued in the aggregate pursuant to the exercise of incentive stock options. In addition, no more than 250,000 shares may be issued in the aggregate to any employee or consultant, and no more than 50,000 shares may be issued in the aggregate to any non-employee director in any twelve-month period. In September 2019, our Board approved a share purchase match program to encourage ownership and further align the interests of key employees and directors with those of our shareholders. Under this program, we will match 20% of any shares of our common stock purchased on the open market by or granted in lieu of cash compensation to key employees and directors up to $25,000 in aggregate value per individual within any calendar year. These shares vest on the second anniversary of the date on which the matched shares were purchased if the individual is still employed by the Company and certain other vesting criteria are met. During the first quarter 2021, we issued approximately 4,000 shares valued at approximately $61,000 under this program. During the first quarter 2020, we issued approximately 22,000 shares valued at approximately $147,000 under this program. In the quarter ended March 31, 2021, we issued 8,166 shares of restricted common stock pursuant to the 2019 Plan valued at approximately $82,000 to members of our Board of Directors for their services in lieu of cash compensation. Of these, 6,805 shares vested equally over the following three months. The remaining 1,361 shares were issued pursuant to our share purchase match program. Also in the first quarter 2021, we issued 1,200 shares of restricted common stock to certain Board members and employees pursuant to our share purchase match program valued at approximately $12,000. In 2020, we issued 81,943 shares of restricted common stock pursuant to the 2019 Plan valued at approximately $539,000 to members of our Board of Directors for their services in lieu of cash compensation. Of these, 61,868 shares vested equally over the following three months. The remaining 20,075 shares were issued pursuant to our share purchase match program. Also in 2020, we issued 25,000 shares of restricted common stock to an employee pursuant to the 2019 Plan valued at approximately $179,000 for services, and to encourage retention. These shares vest over four years, with 50% vesting on September 11, 2021, and 6.25% vesting each quarter thereafter for the next eight quarters. Also in 2020, we issued 1,742 shares of restricted common stock to certain employees pursuant to our share purchase match program valued at approximately $12,000. The following table summarizes our restricted stock outstanding at December 31, 2020, and changes during the three months ended March 31, 2021. Shares Weighted average grant date price Non-vested, December 31, 2020 283,456 $ 7.18 Granted 9,366 10.03 Vested (6,805 ) 10.03 Non-vested, March 31, 2021 286,017 7.22 Stock options that were outstanding at Command Center were deemed to be issued on the date of the Merger. Outstanding awards continue to remain in effect according to the terms of the Command Center 2008 Plan, the Command Center 2016 Plan, and the corresponding award documents. There were approximately 15,000 stock options vested at March 31, 2021 and December 31, 2020. The following table summarizes our stock options outstanding at December 31, 2020, and changes during the three months ended March 31, 2021: Number of shares underlying options Weighted average exercise price per share Weighted average grant date fair value Outstanding, December 31, 2020 17,082 $ 6.10 $ 3.36 Granted - - - Outstanding, March 31, 2021 17,082 6.10 3.36 The following table summarizes our non-vested stock options outstanding at December 31, 2020, and changes during the three months ended March 31, 2021: Number of shares underlying options Weighted average exercise price per share Weighted average grant date fair value Non-vested, December 31, 2020 2,188 $ 5.50 $ 3.05 Vested - - - Non-vested, March 31, 2021 2,188 5.50 3.05 The following table summarizes information about our outstanding stock options, and reflects the intrinsic value recalculated based on the closing price of our common stock of $17.25 at March 31, 2021: Number of shares underlying options Weighted average exercise price per share Weighted average remaining contractual life (years) Aggregate intrinsic value Outstanding 17,082 $ 6.10 5.43 $ 202,582 Exercisable 14,894 6.18 5.16 164,839 At March 31, 2021, there was unrecognized stock-based compensation expense totaling approximately $659,000 relating to non-vested options and restricted stock grants that will be recognized over the next 2.4 years. |
8. Commitments and Contingencie
8. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Franchise Acquisition Indebtedness New franchisees financed the purchase of several offices with promissory notes. In some instances, this financing resulted in certain franchises being considered VIEs. We have determined that we are not required to consolidate these entities because we do not have the power to direct these entities’ daily operations. If these franchises default on these notes, we bear the risk of loss of the outstanding balance on these notes, less what we could recoup from the potential resale of the repossessed office. The balance due from the franchises determined to be VIEs on March 31, 2021 and December 31, 2020 was approximately $2.6 million and $2.1 million, respectively. Legal Proceedings From time to time, we are involved in various legal and administrative proceedings. Based on information currently available to us, we do not expect material uninsured losses to arise from any of these matters. We believe the outcome of these matters, even if determined adversely, will not have a material adverse effect on our business, financial condition or results of operations. There have been no material changes in our legal proceedings as of March 31, 2021. |
9. Income Tax
9. Income Tax | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Tax | Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year and changes in tax law and tax rates. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known, or the tax environment changes . Our effective tax rate for the three months ended March 31, 2021 and March 31, 2020 was (19.2)% and 18.5%, respectively. The bulk of the difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results from the bargain purchase gain, which is recorded net of deferred taxes and is treated as a permanent difference, and the federal Work Opportunity Tax Credit, which is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. Other differences result from state income taxes, certain non-deductible expenses, and tax effects of stock-based compensation. |
10. Notes Receivable
10. Notes Receivable | 3 Months Ended |
Mar. 31, 2021 | |
Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract] | |
Notes Receivable | Several franchisees, as well as the purchaser of our previously owned California locations, borrowed funds from us primarily to finance the initial purchase price of office assets. In March of 2021, we sold approximately $5.3 million of notes receivable to Bass, a related party. Virtually all of the notes sold to Bass originated from the sale of branch locations acquired in the Merger. These notes were sold at their current outstanding principal value. The proceeds from the sale of these notes were used to finance the Snelling and Link transactions. Notes outstanding, net of allowance for losses, were approximately $4.1 million and $8.1 million as of March 31, 2021 and December 31, 2020, respectively. Notes receivable generally bear interest at a fixed rate between 6.0% and 10.0%. Notes receivable are generally secured by the assets of each office and the ownership interests in the franchise. We report interest income on notes receivable as other miscellaneous income in our consolidated statements of operations. This interest income was approximately $135,000 and $198,000 during the three months ended March 31, 2021 and March 31, 2020, respectively. We estimate the allowance for losses for franchisees separately from the allowance for losses from non-franchisees because of the level of detailed sales information available to us with respect to the former. Based on our review of the financial condition of the borrowers, the underlying collateral value, and the potential future impact of COVID-19 on certain borrowers’ economic performance and estimated future cash flows, we have established an allowance of approximately $1.6 million as of March 31, 2021 and December 31, 2020 for potentially uncollectible notes receivable. The following table summarizes changes in our notes receivable balance to franchisees: March 31, 2021 December 31, 2020 Notes receivable $ 4,017,181 $ 8,023,807 Allowance for losses (405,313 ) (405,313 ) Notes receivable, net $ 3,611,868 $ 7,618,494 During 2020, one of our note holders experienced significant economic hardships due to the impacts of COVID-19. As a result, we restructured one note receivable in an effort to increase the probability of repayment. We granted near-term payment concessions to help the debtor attempt to improve its financial condition so it may eventually be able to repay the amount due. We recognized interest income of approximately $135,000 and $198,000 during the three months ended March 31, 2021 and March 31, 2020, respectively. The following table summarizes changes in our note receivable balance that has been deemed impaired: March 31, 2021 December 31, 2020 Note receivable $ 1,640,393 $ 1,640,393 Allowance for losses (1,193,359 ) (1,193,359 ) Notes receivable, net $ 447,034 $ 447,034 |
1. Basis of Presentation and _2
1. Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Nature of Business | HireQuest, On March 1, 2021, we completed our acquisition of Snelling Staffing and affiliates (“Snelling”). We acquired substantially all of the operating assets and assumed certain liabilities of Snelling for a purchase price of approximately $17.7 million subject to customary adjustments for net working capital. On March 22, 2021, we completed our asset acquisition of Link Staffing and affiliates (“Link”) where we acquired all of the franchise relationships and certain other assets of Link for a purchase price of approximately $11.2 million. For additional information related to these transactions, see Note 2 – Acquisitions As of March 31, 2021 we had 208 franchisee-owned offices in 35 states and the District of Columbia. We are the employer of record to approximately 80,000 employees annually, who in turn provide services for thousands of clients in various industries including construction, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, and retail. We provide staffing, marketing, funding, software, and administrative services to our franchisees. |
Basis of Presentation | We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the periods presented. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report filed on Form 10-K for the year ended December 31, 2020. Results for the interim periods presented are not necessarily indicative of the results expected for the full year or for any other period. |
Consolidation | The consolidated financial statements include the accounts of HQI and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. U.S. GAAP requires the primary beneficiary of a variable interest entity (“VIE”) to consolidate that entity. To be the primary beneficiary of a VIE, an entity must have both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that are significant to the beneficiary. We provide acquisition financing to some of our franchisees that could result in our having to absorb losses. This results in some franchisees being considered VIEs. We have reviewed our relationship with each of these franchisees and determined that we are not the primary beneficiary of any of these entities. Accordingly, we have not consolidated these entities. |
COVID-19 Pandemic | In December 2019, a novel strain of coronavirus disease ("COVID-19") was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The extent of COVID-19's ultimate effect on our operational and financial performance and the collectability of our notes receivable will depend on future developments, including the duration, spread, and intensity of the pandemic, all of which are uncertain and difficult to predict. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business. However, the pandemic has so far had a material adverse effect on our business and results of operations. If the pandemic continues to be a severe worldwide health crisis, it could continue to have a material adverse effect on our future business, results of operations, financial condition, and cash flows. |
Use of Estimates | The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. Significant estimates and assumptions underlie our workers’ compensation claim liabilities, our workers’ compensation risk management incentive program accrual, our deferred taxes, the reserve for losses on notes receivable, and the estimated fair value of assets acquired, and liabilities assumed. |
Property and Equipment | We record property and equipment at cost. We compute depreciation using the straight-line method over the estimated useful lives. Land is not depreciated. Repairs and maintenance are expensed as incurred. When assets are sold or retired, we eliminate cost and accumulated depreciation from the consolidated balance sheet and reflect a gain or loss in the consolidated statement of income. The estimated useful lives of property and equipment are as follows: ● Buildings – 40 years ● Building improvements – 15 years ● Computers, furniture, and equipment – 5 to 7 years. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable consist of amounts due for labor services from customers of franchisees and of accounts receivable originating at company-owned locations. At March 31, 2021, approximately 12% of our accounts receivable originated at company-owned locations, and at December 31, 2020, all of our accounts receivable were due from customers of franchisees. We own the accounts receivable from labor services provided by our franchisees until they age beyond a date agreed upon with each respective franchisee between 42 and 84 days. When accounts receivable age beyond the agreed-upon date, they are charged back to our franchisees. Accordingly, we do not record an allowance for doubtful accounts on these accounts receivable. For labor services originally provided by company-owned offices, we record accounts receivable at face value less an allowance for doubtful accounts. We determine the allowance for doubtful accounts based on historical write-off experience, the age of the receivable, other qualitative factors and extenuating circumstances, and current economic data which represents our best estimate of the amount of probable losses on these accounts receivable, if any. We review the allowance for doubtful accounts periodically and write off past due balances when it is probable that the receivable will not be collected. We record acquired accounts receivable net of any estimated allowance for doubtful accounts. Our allowance for doubtful accounts on accounts receivable generated by company-owned offices was approximately $-0- and $77,000 at March 31, 2021 and December 31, 2020, respectively. |
Revenue Recognition | Our primary source of revenue comes from royalty fees based on the operation of our franchised offices. Royalty fees from our HireQuest Direct business model are based on a percentage of sales for services our franchisees provide to customers, which ranges from 6% to 8%. Royalty fees from our HireQuest business line, including HireQuest franchisees and Snelling and Link franchisees who executed a new franchise agreement upon closing, are 4.5% of the payroll we fund plus 18% of the gross margin for the territory. Royalty fees from the Snelling and Link franchise agreements assumed and not renegotiated at closing range from 5.0% to 9.0% of sales for services our franchisees provide to customers. In addition to royalty fees, we also charge a license fee to some locations that utilize our intellectual property but are not franchisees. License fees are 9% of the gross margin for the location. Our franchisees are responsible for taking customer orders, providing customers with services, establishing the prices charged for services, and control other aspects related to providing service to customers prior to the service being transferred to the customer, such as determining which temporary employees to dispatch to the customer and establishing pay rates for the temporary employees. Accordingly, we present revenue on a net basis as agent as opposed to a gross basis as principal. We recognize revenue when we satisfy our performance obligations. Our performance obligations take the form of a franchise license and promised services. Promised services consist primarily of paying temporary employees, completing all statutory payroll related obligations, and providing workers' compensation insurance on behalf of temporary employees. Because these performance obligations are interrelated, we do not consider them to be individually distinct and therefore account for them as a single performance obligation. Below are summaries of our franchise royalties disaggregated by business model: Three months ended March 31, 2021 March 31, 2020 HireQuest Direct $ 2,906,070 $ 3,561,403 HireQuest 212,921 143,839 Snelling 140,045 - Total $ 3,259,036 $ 3,705,242 Service revenue, which forms the other component of our total revenue, consists of interest we charge our franchisees on overdue customer accounts receivable, trademark license fees, and other fees for optional services we provide. We recognize interest income based on the effective interest rate applied to the outstanding principal balance of overdue accounts. We recognize revenue from trademark license fees as we earn them. We recognize revenue from optional services as we provide them. |
Workers' Compensation Claims Liability | We maintain reserves for workers’ compensation claims based on their estimated future cost. These reserves include claims that have been reported but not settled, as well as claims that have been incurred but not reported. Annually, we engage an independent actuary to estimate the future costs of these claims. Quarterly, we use development factors provided by an independent actuary to estimate the future costs of these claims. We make adjustments as necessary. If the actual costs of the claims exceed the amount estimated, we may incur additional charges. |
Workers' Compensation Risk Management Incentive Program | Our RMIP is designed to incentivize our franchises to keep our temporary employees safe and control exposure to large workers’ compensation claims. We accomplish this by paying our franchisees an amount equivalent to a percentage of the amount they pay for workers’ compensation insurance if they keep their workers’ compensation loss ratios below specified thresholds. |
Notes Receivable | Notes receivable consist primarily of amounts due to us related to the financing of franchised locations. We report notes receivable at the principal balance outstanding less an allowance for losses. We charge interest at a fixed rate and interest income is O ur allowance for losses on notes receivable was approximately $1.6 million at March 31, 2021 and December 31, 2020. |
Stock-Based Compensation | Periodically, we issue restricted common shares or options to purchase our common shares to our officers, directors, or employees. We measure compensation costs for equity awards at their fair value on their grant date and expense these costs over the service period on a straight-line basis. We use the Black-Scholes valuation model to determine the value of option awards. |
Intangible Assets | Intangible assets acquired or internally developed are measured at cost. The cost of acquired intangible assets consist of their purchase price. Subsequent costs are capitalized only if it is probable that they will increase the future economic benefits associated with the specific asset. All other costs are expensed as incurred. The cost of internally developed intangibles consists of fees paid to third parties for development services and payroll costs for employees' time spent on development incurred during the application development stage. Costs originating during the preliminary project stage and post-implementation state are expensed as incurred. Intangible assets are reviewed for impairment at least annually and/or whenever events and circumstances arise that indicate impairment may exist. Intangible assets are amortized using the straight-line method over their estimated useful lives. Note 2 – Acquisitions. March 31, 2021 December 31, 2020 Estimated useful life Gross Accumulated amortization Net Gross Accumulated amortization Net Finite-lived intangible assets: Franchise agreements 15 years $ 19,916,453 $ (73,041 ) $ 19,843,412 $ - $ - $ - Internally developed software 3 to 10 years 516,401 - 516,401 342,697 - 342,697 Total finite-lived intangible assets $ 20,432,854 $ (73,041 ) $ 20,359,813 $ 342,697 $ - $ 342,697 |
Savings Plan | We have a savings plan that qualifies under Section 401(k) of the Internal Revenue Code. Under our 401(k) plan, eligible employees may contribute a portion of their pre-tax earnings, subject to certain limitations. As a benefit, we match 100% of each employee’s first 3% of contributions, then 50% of each employee’s contribution beyond 3%, up to a maximum match of 4% of the employee’s eligible earnings. |
Earnings per Share | We calculate basic earnings (loss) per share by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding. We do not include the impact of any potentially dilutive common stock equivalents in our basic earnings (loss) per share calculations. Diluted earnings per share reflect the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock options and unvested restricted shares, except where their inclusion would be anti-dilutive. Outstanding common stock equivalents at March 31, 2021 and March 31, 2020 totaled approximately 293,000 and 29,000, respectively. We use the treasury stock method to calculate the diluted common shares outstanding which were as follows: Three months ended March 31, 2021 March 31, 2020 Weighted average number of common shares used in basic net income per common share 13,602,764 13,533,247 Dilutive effects of stock options 196,440 1,753 Weighted average number of common shares used in diluted net income per common share 13,799,203 13,535,000 |
Fair Value Measures | Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. Our policy on fair value measures requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The policy establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The policy prioritizes the inputs into three levels that may be used to measure fair value: Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the net book value and balances are reviewed for impairment at least annually. The fair value of impaired notes receivable are determined based on estimated future payments discounted back to present value using the notes effective interest rate. Fair value Level March 31, 2021 December 31, 2020 Cash 1 $ 1,976,054 $ 13,667,434 Notes receivable 2 3,611,868 7,618,191 Notes receivable - impaired 3 447,034 447,034 Accounts receivable 2 29,716,512 21,344,499 |
Recently Issued Accounting Pronouncements | In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today's “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This guidance is effective for annual periods beginning after December 15, 2022, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. We do not expect other accounting standards that the FASB or other standards-setting bodies have issued to have a material impact on our financial position, results of operations, or cash flows. |
1. Basis of Presentation and _3
1. Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Three months ended March 31, 2021 March 31, 2020 HireQuest Direct $ 2,906,070 $ 3,561,403 HireQuest 212,921 143,839 Snelling 140,045 - Total $ 3,259,036 $ 3,705,242 |
Intangible assets | March 31, 2021 December 31, 2020 Estimated useful life Gross Accumulated amortization Net Gross Accumulated amortization Net Finite-lived intangible assets: Franchise agreements 15 years $ 19,916,453 $ (73,041 ) $ 19,843,412 $ - $ - $ - Internally developed software 3 to 10 years 516,401 - 516,401 342,697 - 342,697 Total finite-lived intangible assets $ 20,432,854 $ (73,041 ) $ 20,359,813 $ 342,697 $ - $ 342,697 |
Diluted common shares outstanding | Three months ended March 31, 2021 March 31, 2020 Weighted average number of common shares used in basic net income per common share 13,602,764 13,533,247 Dilutive effects of stock options 196,440 1,753 Weighted average number of common shares used in diluted net income per common share 13,799,203 13,535,000 |
Fair value of cash, notes receivable and accounts receivable | Fair value Level March 31, 2021 December 31, 2020 Cash 1 $ 1,976,054 $ 13,667,434 Notes receivable 2 3,611,868 7,618,191 Notes receivable - impaired 3 447,034 447,034 Accounts receivable 2 29,716,512 21,344,499 |
2. Acquisitions (Tables)
2. Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Business Combinations [Abstract] | |
Identifiable assets acquired and liabilities assumed | Snelling Staffing Total allocable purchase price paid in cash $ 17,691,242 Accounts receivable $ 12,292,830 Workers' compensation deposit 7,200,000 Franchise agreements 11,034,000 Customer lists 1,690,000 Other current assets 109,773 Workers' compensation claims liability (4,890,930 ) Accrued payroll and payroll liabilities (2,100,000 ) Current liabilities (663,430 ) Other liabilities (2,021,832 ) Bargain purchase (4,959,169 ) Purchase price allocation $ 17,691,242 Link Staffing Cash $ 11,122,911 Franchise agreements $ 10,886,178 Notes receivable 236,733 Purchase price allocation $ 11,122,911 |
Proforma information | Snelling Staffing Three months ended March 31, 2021 March 31, 2020 Royalty revenue $ 4,069,507 $ 4,874,260 Net (loss) income (593,067 ) 1,573,164 Basic (loss) earnings per share $ (0.04 ) $ 0.12 Basic weighted average shares outstanding 13,602,764 13,533,247 Diluted (loss) earnings per share $ (0.04 ) $ 0.12 Diluted weighted average shares outstanding 13,602,764 13,535,000 |
3. Related Party Transactions (
3. Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related party balances | Transactions regarding the Worlds Franchisees are summarized below: Three months ended March 31, 2021 March 31, 2020 Franchisee royalties $ 1,613,009 $ 1,373,876 Balances regarding the Worlds Franchisees are summarized below: March 31, 2021 December 31, 2020 Due to franchisee $ 632,335 $ 435,072 Risk management incentive program liability 858,868 499,199 |
6. Stockholders' Equity (Tables
6. Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Stockholders' equity | |
Dividends | Declaration date Dividend Total paid September 15, 2020 $ 0.05 $ 677,869 December 15, 2020 0.05 679,779 March 15, 2021 0.05 680,247 |
7. Stock Based Compensation (Ta
7. Stock Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Restricted stock outstanding | Shares Weighted average grant date price Non-vested, December 31, 2020 283,456 $ 7.18 Granted 9,366 10.03 Vested (6,805 ) 10.03 Non-vested, March 31, 2021 286,017 7.22 |
Stock options outstanding | Number of shares underlying options Weighted average exercise price per share Weighted average grant date fair value Outstanding, December 31, 2020 17,082 $ 6.10 $ 3.36 Granted - - - Outstanding, March 31, 2021 17,082 6.10 3.36 |
Nonvested stock options outstanding | Number of shares underlying options Weighted average exercise price per share Weighted average grant date fair value Non-vested, December 31, 2020 2,188 $ 5.50 $ 3.05 Vested - - - Non-vested, March 31, 2021 2,188 5.50 3.05 |
Intrinsic value | Number of shares underlying options Weighted average exercise price per share Weighted average remaining contractual life (years) Aggregate intrinsic value Outstanding 17,082 $ 6.10 5.43 $ 202,582 Exercisable 14,894 6.18 5.16 164,839 |
10. Notes Receivable (Tables)
10. Notes Receivable (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract] | |
Changes in notes receivable | The following table summarizes changes in our notes receivable balance to franchisees: March 31, 2021 December 31, 2020 Notes receivable $ 4,017,181 $ 8,023,807 Allowance for losses (405,313 ) (405,313 ) Notes receivable, net $ 3,611,868 $ 7,618,494 The following table summarizes changes in our note receivable balance that has been deemed impaired: March 31, 2021 December 31, 2020 Note receivable $ 1,640,393 $ 1,640,393 Allowance for losses (1,193,359 ) (1,193,359 ) Notes receivable, net $ 447,034 $ 447,034 |
1. Basis of Presentation and _4
1. Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue | $ 3,259,036 | $ 3,705,242 |
HireQuest Direct | ||
Revenue | 2,906,070 | 3,561,403 |
HireQuest | ||
Revenue | 212,921 | 143,839 |
Snelling | ||
Revenue | $ 140,045 | $ 0 |
1. Basis of Presentation and _5
1. Basis of Presentation and Summary of Significant Accounting Policies (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Finite-lived intangible assets, gross | $ 20,432,854 | $ 342,697 |
Accumulated amortization | (73,041) | 0 |
Finite-lived intangible assets, net | 20,359,813 | 342,697 |
Franchise Agreements | ||
Finite-lived intangible assets, gross | 19,916,453 | 0 |
Accumulated amortization | (73,041) | 0 |
Finite-lived intangible assets, net | $ 19,843,412 | 0 |
Estimated useful life | 15 years | |
Internally Developed Software | ||
Finite-lived intangible assets, gross | $ 516,401 | 342,697 |
Accumulated amortization | 0 | 0 |
Finite-lived intangible assets, net | $ 516,401 | $ 342,697 |
Internally Developed Software | Minimum | ||
Estimated useful life | 3 years | |
Internally Developed Software | Maximum | ||
Estimated useful life | 10 years |
1. Basis of Presentation and _6
1. Basis of Presentation and Summary of Significant Accounting Policies (Details 2) - shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Accounting Policies [Abstract] | ||
Weighted average number of common shares used in basic net income per common share | 13,602,764 | 13,533,247 |
Dilutive effects of stock options | 196,440 | 1,753 |
Weighted average number of common shares used in diluted net income per common share | 13,799,203 | 13,535,000 |
1. Basis of Presentation and _7
1. Basis of Presentation and Summary of Significant Accounting Policies (Details 3) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Cash | $ 1,976,054 | $ 13,667,434 | $ 10,040,828 | $ 4,187,450 |
Notes receivable | 3,611,868 | 7,618,494 | ||
Level 1 | ||||
Cash | 1,976,054 | 13,667,434 | ||
Level 2 | ||||
Notes receivable | 3,611,858 | 7,618,191 | ||
Accounts receivable | 29,716,512 | 21,344,499 | ||
Level 3 | ||||
Notes receivable - impaired | $ 447,034 | $ 447,034 |
1. Basis of Presentation and _8
1. Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Allowance for doubtful accounts on accounts receivables | $ 0 | $ 77,000 | |
Allowance for losses on notes receivable | $ 0 | $ 1,447,340 | |
Anti-dilutive securities | 293,000 | 29,000 | |
Buildings | |||
Estimated useful lives of property and equipment | 40 years | ||
Building Improvements | |||
Estimated useful lives of property and equipment | 15 years | ||
Computers, Furniture, and Equipment | |||
Estimated useful lives of property and equipment | 5 to 7 years |
2. Acquisitions (Details)
2. Acquisitions (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Bargain purchase | $ (4,959,169) | $ 0 |
Snelling Staffing | ||
Total allocable purchase price paid in cash | 17,691,242 | |
Accounts receivable | 12,292,830 | |
Workers' compensation deposit | 7,200,000 | |
Franchise agreements | 11,034,000 | |
Customer lists | 1,690,000 | |
Other current assets | 109,773 | |
Workers' compensation claims liability | (4,890,930) | |
Accrued payroll and payroll liabilities | (2,100,000) | |
Current liabilities | (663,430) | |
Other liabilities | (2,021,832) | |
Bargain purchase | (4,959,169) | |
Purchase price allocation | 17,691,242 | |
Link Staffing | ||
Total allocable purchase price paid in cash | 11,122,911 | |
Purchase price allocation | $ 11,122,911 |
2. Acquisitions (Details 1)
2. Acquisitions (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Basic weighted average shares outstanding | 13,602,764 | 13,533,247 |
Diluted weighted average shares outstanding | 13,799,203 | 13,535,000 |
Snelling Staffing | ||
Royalty revenue | $ 4,069,507 | $ 4,874,260 |
Net (loss) income | $ (593,067) | $ 1,573,164 |
Basic (loss) earnings per share | $ (.04) | $ .12 |
Basic weighted average shares outstanding | 13,602,764 | 13,533,247 |
Diluted (loss) earnings per share | $ (.04) | $ .12 |
Diluted weighted average shares outstanding | 13,602,764 | 13,535,000 |
3. Related Party Transactions_2
3. Related Party Transactions (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |||
Franchise royalties | $ 1,613,009 | $ 1,373,876 | |
Due to franchisees | 632,335 | $ 435,072 | |
Risk management incentive program liability | $ 858,868 | $ 499,199 |
3. Related Party Transactions_3
3. Related Party Transactions (Details Narrative) | 3 Months Ended | |
Mar. 31, 2021USD ($)Locations | Mar. 31, 2020USD ($) | |
Franchised and owned branch locations | Locations | 212 | |
Jackson Insurance | ||
Related party transaction expenses | $ | $ 584,000 | $ 561,000 |
Insurance Technologies, Inc. | ||
Related party transaction expenses | $ | $ 102,000 | $ 50,000 |
Worlds Franchisees | ||
Franchised and owned branch locations | Locations | 57 |
4. Line of Credit (Details Narr
4. Line of Credit (Details Narrative) | Mar. 31, 2021USD ($) |
Debt Disclosure [Abstract] | |
Letter of credit | $ 14,300,000 |
6. Stockholders' Equity (Detail
6. Stockholders' Equity (Details) | 3 Months Ended |
Mar. 31, 2021USD ($)$ / shares | |
September 15, 2020 | |
Dividend | $ / shares | $ .05 |
Total paid | $ | $ 677,869 |
December 15, 2020 | |
Dividend | $ / shares | $ .05 |
Total paid | $ | $ 679,779 |
March 15, 2021 | |
Dividend | $ / shares | $ .05 |
Total paid | $ | $ 680,247 |
7. Stock Based Compensation (De
7. Stock Based Compensation (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Non-vested, beginning | shares | 283,456 |
Granted | shares | 9,366 |
Vested | shares | (6,805) |
Non-vested, ending | shares | 286,017 |
Weighted average grant date price, beginning | $ / shares | $ 7.18 |
Granted | $ / shares | 10.03 |
Vested | $ / shares | 10.03 |
Weighted average grant date price, ending | $ / shares | $ 7.22 |
7. Stock Based Compensation (_2
7. Stock Based Compensation (Details 1) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Number of options outstanding, beginning | shares | 17,082 |
Granted | shares | 0 |
Number of options outstanding, ending | shares | 17,082 |
Weighted Average Exercise Price Per Share | |
Outstanding, beginning | $ 6.10 |
Granted | .00 |
Outstanding, ending | 6.10 |
Weighted Average Grant Date Fair Value Per Share | |
Outstanding, beginning | 3.36 |
Granted | .00 |
Outstanding, ending | $ 3.36 |
7. Stock Based Compensation (_3
7. Stock Based Compensation (Details 2) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Number of nonvested options outstanding, beginning | shares | 2,188 |
Vested | shares | 0 |
Number of nonvested options outstanding, ending | shares | 2,188 |
Weighted Average Exercise Price Per share | |
Outstanding, beginning | $ 5.50 |
Vested | .00 |
Outstanding, ending | 5.50 |
Outstanding, beginning | 3.05 |
Vested | .00 |
Outstanding, ending | $ 3.05 |
7. Stock Based Compensation (_4
7. Stock Based Compensation (Details 3) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | ||
Number of options, outstanding | 17,082 | 17,082 |
Weighted average exercise price per share, outstanding | $ 6.10 | $ 6.10 |
Weighted average remaining contractual life (years), outstanding | 5 years 5 months 5 days | |
Aggregate intrinsic value, outstanding | $ 202,582 | |
Number of options, exercisable | 14,894 | |
Weighted average exercise price per share, exercisable | $ 6.18 | |
Weighted average remaining contractual life (years), exercisable | 5 years 1 month 28 days | |
Aggregate intrinsic value, exercisable | $ 164,839 |
7. Stock Based Compensation (_5
7. Stock Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Options vested | 0 | |
Closing price of common stock | $ 17.25 | |
Unrecognized share-based compensation expense | $ 659,000 | |
Unrecognized share-based compensation expense period of recogntion | 2 years 4 months 24 days | |
2016 Stock Incentive Plan | ||
Options vested | 15,000 | 15,000 |
8. Commitments and Contingenc_2
8. Commitments and Contingencies (Details Narrative) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Commitments and Contingencies Disclosure [Abstract] | ||
Due from franchises | $ 2,600,000 | $ 2,100,000 |
9. Income Tax (Details Narrativ
9. Income Tax (Details Narrative) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | (19.20%) | 18.50% |
10. Notes Receivable (Details)
10. Notes Receivable (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Note receivable | $ 4,017,181 | $ 8,023,807 | |
Allowance for losses | (405,313) | (405,313) | |
Notes receivable, net | 3,611,868 | $ 7,618,494 | |
Impaired | |||
Note receivable | 1,640,393 | $ 1,640,393 | |
Allowance for losses | (1,193,359) | (1,193,359) | |
Notes receivable, net | $ 447,034 | $ 447,034 |
10. Notes Receivable (Details N
10. Notes Receivable (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract] | |||
Notes receivable | $ 3,611,868 | $ 7,618,494 | |
Interest income on franchisee notes | $ 135,000 | $ 198,000 |