Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2017 | Dec. 27, 2017 | Mar. 31, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | GEE Group Inc. | ||
Entity Central Index Key | 40,570 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 10,012,847 | ||
Entity Public Float | $ 36,011,032 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Sep. 30, 2016 |
CURRENT ASSETS: | ||
Cash | $ 2,785 | $ 2,528 |
Accounts receivable, less allowances ($1,712 and $191, respectively) | 23,178 | 11,569 |
Other current assets | 3,014 | 1,500 |
Total current assets | 28,977 | 15,597 |
Property and equipment, net | 914 | 611 |
Other long-term assets | 282 | 34 |
Goodwill | 76,593 | 18,590 |
Intangible assets, net | 35,049 | 11,094 |
TOTAL ASSETS | 141,815 | 45,926 |
CURRENT LIABILITIES: | ||
Revolving credit facility | 7,904 | 7,073 |
Acquisition deposit for working capital guarantee | 1,500 | |
Accrued interest | 2,175 | 54 |
Accounts payable | 3,243 | 2,224 |
Accrued compensation | 7,394 | 3,116 |
Other current liabilities | 515 | 692 |
Short-term portion of subordinated debt | 1,225 | 1,285 |
Short-term portion of term-note, net of discount | 3,433 | |
Contingent consideration | 1,750 | |
Total current liabilities | 27,389 | 16,194 |
Deferred rent | 334 | 162 |
Deferred taxes | 958 | |
Term-loan, net of debt discounts | 42,018 | |
Subordinated debt | 1,000 | 4,981 |
Subordinated convertible debt | 16,685 | |
Other long-term liabilities | 35 | 56 |
Total long-term liabilities | 61,030 | 5,199 |
Commitments and contingencies | ||
SHAREHOLDERS' EQUITY | ||
Common stock, no-par value; authorized - 200,000 shares; issued and outstanding - 9,879 shares at September 30, 2017 and 9,379 shares at September 30, 2016, respectively | ||
Additional paid in capital | 39,517 | 37,615 |
Accumulated deficit | (15,454) | (13,082) |
Total shareholders' equity | 24,063 | 24,533 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 141,815 | 45,926 |
Series A Preferred Stock [Member] | ||
CURRENT LIABILITIES: | ||
Preferred stock | ||
Series B Convertible Preferred Stock [Member] | ||
CURRENT LIABILITIES: | ||
Preferred stock | $ 29,333 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Sep. 30, 2016 |
CURRENT ASSETS: | ||
Accounts receivable, allowances | $ 1,712 | $ 191 |
SHAREHOLDERS' EQUITY | ||
Preferred stock, par value | ||
Preferred stock, share authorized | 20,000 | 20,000 |
Preferred stock, share issued | 5,926 | 5,926 |
Preferred stock, outstanding | 5,926 | 5,926 |
Common stock, par value | ||
Common stock, shares authorized | 200,000 | 200,000 |
Common stock, shares issued | 9,879 | 9,379 |
Common stock, shares outstanding | 9,879 | 9,379 |
Series A Preferred Stock [Member] | ||
SHAREHOLDERS' EQUITY | ||
Preferred stock, share authorized | 160 | 160 |
Preferred stock, share issued | ||
Preferred stock, outstanding | ||
Series B Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' EQUITY | ||
Preferred stock, share authorized | 5,950 | 5,950 |
Preferred stock, share issued | 5,926 | 5,926 |
Preferred stock, outstanding | 5,926 | 5,926 |
Liquidation value | $ 28,800 | $ 28,800 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
NET REVENUES: | ||
Contract staffing services | $ 120,247 | $ 76,165 |
Direct hire placement services | 14,731 | 6,909 |
NET REVENUES | 134,978 | 83,074 |
Cost of contract services | 90,003 | 59,445 |
GROSS PROFIT | 44,975 | 23,629 |
Selling, general and administrative expenses | 39,498 | 19,863 |
Acquisition, integration and restructuring expenses | 2,925 | 702 |
Depreciation expense | 426 | 331 |
Amortization of intangible assets | 3,527 | 1,536 |
INCOME (LOSS) FROM OPERATIONS | (1,401) | 1,197 |
Change in contingent consideration | 1,581 | |
Loss on extinguishment of debt | (994) | |
Interest expense | (5,995) | (1,602) |
INCOME (LOSS) BEFORE INCOME TAX PROVISION | (8,390) | 1,176 |
(Provision) Benefit for income tax | 6,018 | (3) |
NET INCOME (LOSS) | (2,372) | 1,173 |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ (2,372) | $ 1,173 |
BASIC INCOME (LOSS) PER SHARE | $ (0.25) | $ 0.13 |
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC | 9,630 | 9,313 |
DILUTED INCOME (LOSS) PER SHARE | $ (0.25) | $ 0.12 |
WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED | 9,630 | 9,891 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock Shares | Additional Paid In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Sep. 30, 2015 | $ 33,492 | $ (14,255) | $ 19,237 | |
Beginning Balance, Shares at Sep. 30, 2015 | 8,833 | |||
Shares issued for JAX Legacy debt, Amount | 589 | 589 | ||
Shares issued for JAX Legacy debt, Shares | 95 | |||
Issuance of common stock for contingent consideration related to the acquisition of Access Data Consulting Corporation, Amount | 544 | 544 | ||
Issuance of common stock for contingent consideration related to the acquisition of Access Data Consulting Corporation, Shares | 123 | |||
Amortization of stock option expense | 793 | 793 | ||
Issuance of common stock for acquisition of Access Data Consulting Corporation, Amount | 2,197 | 2,197 | ||
Issuance of common stock for acquisition of Access Data Consulting Corporation, Shares | 328 | |||
Net income | 1,173 | 1,173 | ||
Ending Balance, Amount at Sep. 30, 2016 | 37,615 | (13,082) | 24,533 | |
Ending Balance, Shares at Sep. 30, 2016 | 9,379 | |||
Amortization of stock option expense | 902 | 902 | ||
Exercise of stock warrants, Amount | 1,000 | $ 1,000 | ||
Exercise of stock warrants, Shares | 500 | 408,000 | ||
Net income | (2,372) | $ (2,372) | ||
Ending Balance, Amount at Sep. 30, 2017 | $ 39,517 | $ (15,454) | $ 24,063 | |
Ending Balance, Shares at Sep. 30, 2017 | 9,879 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net (loss) income | $ (2,372) | $ 1,173 |
Adjustments to reconcile (net loss) net income to cash provided by operating activities: | ||
Depreciation and amortization | 3,953 | 1,867 |
Stock option expense | 902 | 793 |
Provision for doubtful accounts | 1,521 | (44) |
Tax provision benefit, non cash | (6,012) | |
Amortization of debt discount and non cash extinguishment of debt | 1,198 | 215 |
Change in contingent consideration | (1,581) | |
Changes in operating assets and liabilities - | ||
Accounts receivable | (2,393) | (100) |
Acquisition deposit | 1,500 | |
Accrued interest | 2,121 | |
Accounts payable | 446 | 343 |
Accrued compensation | 214 | (871) |
Other current items, net | (881) | (1,086) |
Long-term liabilities | 25 | 14 |
Net cash provided by operating activities | 222 | 723 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of property and equipment | (250) | (120) |
Acquisition payments, net of cash acquired | (25,356) | (9,395) |
Net cash used in investing activities | (25,606) | (9,515) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from subordinated debt | 4,107 | |
Payment on SNI debt | (19,951) | |
Payments on the debt related to acquisitions | (1,285) | (492) |
Payments on senior debt | (609) | |
Proceeds from exercise of stock warrants | 1,000 | |
Payments on capital lease | (21) | (66) |
Net proceeds from debt | 45,676 | |
Net proceeds from short-term debt | 831 | 1,839 |
Net cash provided by financing activities | 25,641 | 5,388 |
Net change in cash | 257 | (3,404) |
Cash at beginning of period | 2,528 | 5,932 |
Cash at end of period | 2,785 | 2,528 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 3,383 | 1,070 |
Cash paid for taxes | 247 | 3 |
Non-cash financing activities | ||
Stock paid for prepaid interest on subordinated note | 566 | |
Stock paid for fees in connection with subordinated note | 23 | |
Issuance of common stock for acquisition | 2,197 | |
Note issued in connection with acquisition | 3,000 | |
Earn-out liability, contingent consideration, and other liabilities incurred in connection with acquisition | 4,246 | |
Payment of contingent consideration with common shares | 544 | |
Issuance of preferred stock for acquisition | 29,333 | |
Issuance of note payable for acquisition | 12,500 | |
Issuance of stock for extinguishment of debt | $ 385 |
Description of Business
Description of Business | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
1. Description of Business | GEE Group Inc. (the Company, us, our or we) was incorporated in the State of Illinois in 1962 and is the successor to employment offices doing business since 1893. We are a provider of permanent and temporary professional, industrial and physician assistant staffing and placement services in and near several major U.S cities. We specialize in the placement of information technology, engineering, medical and accounting professionals for direct hire and contract staffing for our clients, and provide temporary staffing services for our commercial clients. |
Significant Accounting Policies
Significant Accounting Policies and Estimates | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
2. Significant Accounting Policies and Estimates | Basis of Presentation The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and the rules of the United States Securities and Exchange Commission. Liquidity The Company has experienced significant losses and negative cash flows from operations in the past. Management has implemented a strategy which included cost reduction efforts, consolidation of certain back office activities to gain efficiencies as well as identifying strategic acquisitions, financed primarily through the issuance of preferred and common stock and convertible debt, to improve the overall profitability and cash flows of the Company. After the close of business on March 31, 2017, the Company and its subsidiaries, as borrowers, entered into a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association (“PNC”), and certain investment funds managed by MGG Investment Group LP (“MGG”). All funds were distributed on April 3, 2017 (the “Closing Date”). Under the terms of the Credit Agreement, the Company may borrow up to $73,750,000 consisting of a four-year term loan in the principal amount of $48,750,000 and revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Company’s eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021. On October 2, 2017, the Company, the other borrower entities and guarantor entities named therein (collectively, the “Loan Parties”), PNC, and certain investment funds managed by MGG (collectively the (“Lenders”) entered into a First Amendment and Waiver (the “Amendment”) to the Revolving Credit, Term Loan and Security Agreement dated as of March 31, 2017 (the “Credit Agreement”) by and among the Loan Parties, and the Lenders. The Amendment, which was effective as of October 2, 2017, modified the required principal repayment schedule with respect to the Term Loans. The Amendment also modified the ability of the Loan Parties to repay or make other payments with respect to certain other loans that are subordinated in right of payment to the indebtedness under the Credit Agreement. Pursuant to the Amendment the Lenders also waived any Event of Default arising out of the Loan Parties’ failure to deliver, on or before October 3, 2017, the materials satisfying the requirements of clauses (i) and (ii) of Section 5 of the Waiver to Revolving Credit, Term Loan and Security Agreement, dated as of August 14, 2017, as amended. On November 14, 2017, the Company and its subsidiaries, as Borrowers, each subsidiary of the Company listed as a “Guarantor” on the signature pages thereto (together with each other Person joined thereto as a guarantor from time to time, collectively, the “Guarantors”, and each a “Guarantor”, and together with the Borrowers, collectively, the “Loan Parties” and each a “Loan Party”), certain lenders which now are or which thereafter become a party thereto that make Revolving Advances thereunder (together with their respective successors and assigns, collectively, the “Revolving Lenders” and each a “Revolving Lender”), the lenders which now are or which thereafter become a party thereto that made or acquire an interest in the Term Loans (together with their respective successors and assigns, collectively, the “Term Loan Lenders” and each a “Term Loan Lender”, and together with the Revolving Lenders, collectively, the “Lenders” and each a “Lender”), MGG, as administrative agent for the Lenders (together with its successors and assigns, in such capacity, the “Administrative Agent”), as collateral agent for the Lenders (together with its successors and assigns, in such capacity, the “Collateral Agent”), and as term loan agent (together with its successors and assigns, in such capacity, the “Term Loan Agent” and together with the Administrative Agent and the Collateral Agent, each an “Agent” and, collectively, the “Agents”), entered into a second amendment (the “Second Amendment”) to the Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017 (the “Credit Agreement”). Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement. Any prepayment to the term loan is contingent upon a future financing, non-operational cash flow or excess cash flow as defined in the agreement. The Borrowers also agreed to amend (i) the applicable minimum Fixed Charge Coverage Ratios required to be maintained by the Company as set forth in the Second Amendment, (ii) the minimum EBITDA required to be maintained by the Company, as set forth in the Second Amendment and (iii) the maximum senior leverage ratios required to be maintained by the Company, as set forth in the Second Amendment. The Borrowers agreed to pay to the Administrative Agent for the account of the Revolving Lenders, an amendment fee of $364,140, in connection with their execution and delivery of the Second Amendment. Such fee is payable on the earlier of (a) June 30, 2018 and (b) the first date on which all of the Obligations (as defined in the Credit Agreement) are paid in full in cash and the Total Commitment (as defined in the Credit Agreement) of the Lenders is terminated. The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans. For the period ended September 30, 2017 there were no financial covenants required under the new amendment. The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. At September 30, 2017, approximately $6,000,000 of the Revolving Credit facility was fixed for a three-month period at an interest of approximately 11.3%. Although the Company did not have financial covenants for the period ended September 30, 2017, the Company was in compliance with non-financial covenants of this loan and management expects to be in compliance with the newly amended financial covenants for December 31, 2017, the first measurement date under the Amendment. Management believes that the future cash flow from operations and the availability under the Revolving Credit Facility will have sufficient liquidity for the next 12 months. Principles of Consolidation The consolidated financial statements include the accounts and transactions of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation. Estimates and Assumptions Management makes estimates and assumptions that can affect the amounts of assets and liabilities reported as of the date of the condensed consolidated financial statements, as well as the amounts of reported revenues and expenses during the periods presented. Those estimates and assumptions typically involve expectations about events to occur subsequent to the balance sheet date, and it is possible that actual results could ultimately differ from the estimates. If differences were to occur in a subsequent period, the Company would recognize those differences when they became known. Significant matters requiring the use of estimates and assumptions include, but may not be limited to, deferred income tax valuation allowances, accounts receivable allowances, accounting for acquisitions, accounting for derivatives and evaluation of impairment. Management believes that its estimates and assumptions are reasonable, based on information that is available at the time they are made. Revenue Recognition Direct hire placement service revenues are recognized when applicants accept offers of employment, less a provision for estimated losses due to applicants not remaining employed for the Company’s guarantee period. Contract staffing service revenues are recognized when services are rendered. Falloffs and refunds during the period are reflected in the consolidated statements of operations as a reduction of placement service revenues and were approximately $1,495,000 in fiscal 2017 and $470,000 in fiscal 2016. Expected future falloffs and refunds are reflected in the consolidated balance sheet as a reduction of accounts receivable and were approximately $997,000 and $60,000 as of September 30, 2017 and September 30, 2016, respectively. Cost of Contract Staffing Services The cost of contract services includes the wages and the related payroll taxes and employee benefits of the Company’s employees while they work on contract assignments. Cash and Cash Equivalents Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. At September 30, 2017 and September 30, 2016, there were no cash equivalents. The Company maintains deposits in financial institutions in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. Accounts Receivable The Company extends credit to its various customers based on evaluation of the customer’s financial condition and ability to pay the Company in accordance with the payment terms. An allowance for placement fall-offs is recorded, as a reduction of revenues, for estimated losses due to applicants not remaining employed for the Company’s guarantee period. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is considered to be doubtful due to credit issues. These allowances together reflect management’s estimate of the potential losses inherent in the accounts receivable balances, based on historical loss statistics and known factors impacting its customers. The nature of the contract service business, where companies are dependent on employees for the production cycle allows for a small accounts receivable allowance. Based on management’s review of accounts receivable, an allowance for doubtful accounts of approximately $1,712,000 and $191,000 is considered necessary as of September 30, 2017, and September 30, 2016, respectively. The Company charges uncollectible accounts against the allowance once the invoices are deemed unlikely to be collectible. The reserve includes the $997,000 and $60,000 reserve for permanent placement falloffs considered necessary as of September 30, 2017 and September 30, 2016, respectively. Property and Equipment Property and equipment are recorded at cost. Depreciation expense is calculated on a straight-line basis over estimated useful lives of five years for computer equipment and two to ten years for office equipment, furniture and fixtures. The Company capitalizes computer software purchased or developed for internal use and amortizes it over an estimated useful life of five years. The carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that it may not be recoverable. If the carrying amount of an asset group is greater than its estimated future undiscounted cash flows, the carrying value is written down to the estimated fair value. There was no impairment of property and equipment for the years ended September 30, 2017 and 2016. Goodwill Goodwill represents the excess of cost over the fair value of the net assets acquired in the various acquisitions. The Company assesses goodwill for impairment at least annually. Testing goodwill for impairment allows the Company to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines that this threshold is not met, then performing the two-step impairment test is unnecessary. An impairment loss would be recognized to the extent the carrying value of goodwill exceeds its implied fair value. Fair Value Measurement The Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure. Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The fair value of the Company’s current assets and current liabilities approximate their carrying values due to their short-term nature. The carrying value of the Company’s long-term liabilities represents their fair value based on level 3 inputs. The Company’s goodwill and other intangible assets are measured at fair value on a non-recurring basis using level 3 inputs, as discussed in Note 5. Earnings and Loss per Share Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Common share equivalents of approximately 577,000 was included in the computation of diluted earnings per share for the year ended September 30, 2016. There were approximately 10,120,958 and 413,000 of common stock equivalents excluded for the year ended September 30, 2017 and September 30, 2016, respectively because their effect is anti-dilutive. Advertising Expenses Most of the Company’s advertising expense budget is used to support the Company’s business. Most of the advertisements are in print or internet media, with expenses recorded as they are incurred. For the years ended September 30, 2017 and 2016, included in selling, general and administrative expenses was advertising expense totaling approximately $1,710,000 and $834,000, respectively. Intangible Assets Customer lists, non-compete agreements, customer relationships and trade names were recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives ranging from two to ten years using both accelerated and straight-line methods. Impairment of Long-lived Assets The Company records an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not record any impairment during the years ended September 30, 2017 and 2016. Stock-Based Compensation The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, we recognize expense over the requisite service period on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility, expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with applicable accounting principles. Such options are valued using the Black-Scholes option pricing model. See Note 11 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation. Upon the exercise of options, it is the Company’s policy to issue new shares rather than utilizing treasury shares. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of September 30, 2017, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet. Reclassification Certain reclassifications have been made to the financial statements as of and for the years ended September 30, 2016 to conform to the current year presentation. There is no effect on assets, liabilities, equity or net income. Segment Data The Company provides the following distinctive services: (a) direct hire placement services, (b) temporary professional services staffing in the fields of information technology, engineering, medical, and accounting, and (c) temporary light industrial staffing. These distinct services can be divided into two reportable segments, Industrial Staffing Services and Professional Staffing Services. Selling, general and administrative expenses are not completely separately allocated among light industrial services and professional staffing services. Operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Other factors, including type of business, type of employee, length of employment and revenue recognition are considered in determining these operating segments. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
3. Recent Accounting Pronouncements | On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. This ASU permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on the Companys consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has the Company determined the effect of the standard on the Companys ongoing financial reporting. In November 2015, the FASB issued authoritative guidance which changes how deferred taxes are classified on a companys balance sheet. The new guidance eliminates the current requirement for companies to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, companies will be required to classify all deferred tax assets and liabilities as noncurrent. The new guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. Except for balance sheet classification requirements related to deferred tax assets and liabilities, the Company does not expect this guidance to have an effect on its financial statements. The Company is in the process of evaluating the impact of adoption of this guidance on its financial statements. In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-09 on its financial statements and related disclosures. In February 2016, the FASB issued authoritative guidance which changes financial reporting as it relates to leasing transactions. Under the new guidance, lessees will be required to recognize a lease liability, measured on a discounted basis; and a right-of-use asset, for the lease term. The new guidance is effective for annual and interim periods beginning after December 15, 2018. Early application is permitted for all entities upon issuance. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is in the process of evaluating the impact of adoption of this guidance on its financial statements. In August 2016, the FASB issued authoritative guidance designed to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including: i) contingent consideration payments made after a business combination; ii) proceeds from the settlement of insurance claims; and iii) proceeds from the settlement of corporate-owned life insurance policies. The new guidance is effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. The Company believes the adoption of this guidance will not have a material impact on its financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2019. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting units goodwill with the carrying amount. The new rules will be effective for the Company in the first quarter of 2021. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements. No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Companys present or future financial statements. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
4. Property and Equipment | Property and equipment consisted of the following as of September 30: (In thousands) Useful Lives 2017 2016 Computer software 5 years $ 1,447 $ 1,447 Office equipment, furniture and fixtures and leasehold improvements 2 to 10 years 3,243 2,514 Total property and equipment, at cost 4,690 3,961 Accumulated depreciation and amortization (3,776 ) (3,350 ) Property and equipment, net $ 914 $ 611 Leasehold improvements are amortized over the term of the lease. Depreciation expense for the year ended September 30, 2017 and 2016 was approximately $426,000 and $331,000, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
5. Goodwill and Intangible Assets | Goodwill The following table sets forth activity in goodwill from September 30, 2015 through September 30, 2017. See Note 13 for details of acquisitions that occurred during the year ended September 30, 2016 and 2017. (thousands) Goodwill as of September 30, 2015 $ 8,220 Acquisition of Access 8,316 Acquisition of Paladin 2,054 Goodwill as of September 30, 2016 $ 18,590 Acquisition of SNI Companies 58,003 Goodwill as of September 30, 2017 $ 76,593 During the year ended September 30, 2017 and the year ended September 30, 2016 the Company did not record any impairment of goodwill. Intangible Assets As of September 30, 2017 (In Thousands) Cost Accumulated Amortization Net Book Value Customer relationships $ 29,070 $ 4,601 $ 24,469 Trade name 8,329 1,115 7,214 Non-compete agreements 4,331 965 3,366 $ 41,730 $ 6,681 $ 35,049 As of September 30, 2016 (In Thousands) Cost Accumulated Amortization Net Book Value Customer relationships $ 10,758 $ 2,662 $ 8,096 Trade name 2,429 285 2,144 Non-compete agreements 1,061 207 854 $ 14,248 $ 3,154 $ 11,094 The amortization expense attributable to the amortization of identifiable intangible assets was approximately $3,527,000 and $1,536,000 for the years ended September 30, 2017 and 2016, respectively. The trade names are amortized on a straight line basis over the estimated useful life of between five and ten years. Customer relationships are amortized based on the future undiscounted cash flows or straight line basis over estimated remaining useful lives of five to ten years. Non-compete agreements are amortized based on a straight-line basis over the term of the non-compete agreement, typically five years. Over the next five years and thereafter, annual amortization expense for these finite life intangible assets will total approximately $35,049,000, as follows: fiscal 2018 - $5,582,000, fiscal 2019 - $5,586,000, fiscal 2020 - $5,005,000, fiscal 2021 $4,148,000, fiscal 2022 $3,469,000 and thereafter - $11,259,000. Long-lived assets, such as purchased intangibles subject to amortization, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company regularly evaluates whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows. The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. |
Revolving Credit Facility
Revolving Credit Facility | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
6. Revolving Credit Facility | On September 27, 2013, the Company (“Borrower”) entered into agreements with ACF FINCO I LP (successor-in-interest to Keltic Financial Partners II, LP) (“ACF”) (“Lender”), that provided the Company with long term financing through a six million dollar ($6,000,000) secured revolving note (the “Note”). The Note had a term of three years and has no amortization prior to maturity. The interest rate for the Note was a fluctuating rate that, when annualized, is equal to the greatest of (A) the Prime Rate plus three and one quarter percent (3.25%), (B) the LIBOR Rate plus six and one quarter percent (6.25%), and (C) six and one-half percent (6.50%), with the interest paid on a monthly basis. Loan advances pursuant to the Note are based on the accounts receivable balance and other assets. The Note was secured by all of the Company’s property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title or interests. On January 1, 2016, the Company entered into an eighth Amendment and Waiver to the Loan and Security Agreement with ACF to increase the maximum amount of revolving credit under the Amended Loan Agreement from $6,000,000 to $10,000,000. On September 27, 2016, the Company entered into a ninth Amendment and Waiver to the Loan and Security Agreement with ACF. Pursuant to the Amendment, the Lender agreed (i) to decrease the annual Facility Fee (as defined in the Credit Agreement) payable by Borrower on the total Revolving Credit Limit (as defined in the Loan Agreement) to 0.75% , (ii) to allow the Borrower to make certain prepayments of amounts owed under the Amended Loan Agreement and the other loan documents on or prior to September 27, 2018, (iii) to amend the provision regarding liquidated damages payable by Borrower in the event of any early termination of the revolving credit line under the Amended Credit Agreement such that Borrower shall pay liquidated damages to Lender in an amount equal to the Revolving Credit Limit multiplied by (X) two percent (2.00%) if such prepayment, repayment, demand or acceleration occurs prior to September 28, 2017, and (Y) one percent (1.00%) if such prepayment, repayment, demand or acceleration occurs on or after September 28, 2017, (iv) to change the minimum EBITDA (as defined in the Amended Credit Agreement) thresholds required to be maintained by the Company as outlined below (v) to extend the Revolving Credit Termination Date to the earliest to occur of (a) September 27, 2018, (b) the date Lender terminates the Revolving Credit pursuant to the terms of the Amended Credit Agreement, and (c) the date on which repayment of the Revolving Credit, or any portion thereof, becomes immediately due and payable pursuant to the terms of the Amended Loan Agreement, (vi) to amend the definition of EBITDA and (vii) to change the Revolving Credit Rate to a fluctuating rate that, when annualized, is equal to the greatest of (A) the Prime Rate plus one and one half percent (1.50%), (B) the LIBOR Rate plus four and one half percent (4.50%), and (C) four and three quarters percent (4.75%). There were several subsequent amendments to the loan. At September 30, 2016, the interest rate was 4.75%. This loan was repaid and closed as of April 3, 2017, with the proceeds from the PNC Revolving Credit Facility, as noted below. The Company paid approximately $288,000 in fees and are included in the loss on the extinguishment of debt. After the close of business on March 31, 2017, the Company and its subsidiaries, as borrowers, entered into a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with PNC, and certain investment funds managed by MGG. All funds were distributed on April 3, 2017 (the “Closing Date”). Under the terms of the Credit Agreement, the Company may borrow up to $73,750,000 consisting of a four-year term loan in the principal amount of $48,750,000 and revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Company’s eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021. On October 2, 2017, the Company, the other borrower entities and guarantor entities named therein (collectively, the “Loan Parties”), PNC, and certain investment funds managed by MGG (collectively the (“Lenders”) entered into a First Amendment and Waiver (the “Amendment”) to the Revolving Credit, Term Loan and Security Agreement dated as of March 31, 2017 (the “Credit Agreement”) by and among the Loan Parties, and the Lenders. The Amendment, which was effective as of October 2, 2017, modified the required principal repayment schedule with respect to the Term Loans. The Amendment also modified the ability of the Loan Parties to repay or make other payments with respect to certain other loans that are subordinated in right of payment to the indebtedness under the Credit Agreement. Pursuant to the Amendment the Lenders also waived any Event of Default arising out of the Loan Parties’ failure to deliver, on or before October 3, 2017, the materials satisfying the requirements of clauses (i) and (ii) of Section 5 of the Waiver to Revolving Credit, Term Loan and Security Agreement, dated as of August 14, 2017, as amended. Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement. Any prepayment to the term loan is contingent upon a future financing, non-operational cash flow or excess cash flow as defined in the agreement. The Borrowers also agreed to amend (i) the applicable minimum Fixed Charge Coverage Ratios required to be maintained by the Company as set forth in the Second Amendment, (ii) the minimum EBITA required to be maintained by the Company, as set forth in the Second Amendment and (iii) the maximum senior leverage ratios required to be maintained by the Company, as set forth in the Second Amendment. The Borrowers agreed to pay to the Administrative Agent for the account of the Revolving Lenders, an amendment fee of $364,140, in connection with their execution and delivery of the Second Amendment. Such fee is payable on the earlier of (a) June 30, 2018 and (b) the first date on which all of the Obligations (as defined in the Credit Agreement) are paid in full in cash and the Total Commitment (as defined in the Credit Agreement) of the Lenders is terminated. The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans. The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. At September 30, 2017, approximately $6,000,000 of the Revolving Credit facility was fixed for a three-month period at an interest of approximately 11.3%. The Revolving Credit Facility is secured by all of the Company’s property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title or interests. The Revolving Credit Facility has the same covenants as the Term-loan (See note 7). |
Term-loan
Term-loan | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
7. Term-loan | After the close of business on March 31, 2017, the Company and its subsidiaries, as borrowers, entered into a Revolving Credit, Term Loan and Security Agreement (the Credit Agreement) with PNC, and certain investment funds managed by MGG. All funds were distributed on April 3, 2017 (the Closing Date). Under the terms of the Credit Agreement, the Company may borrow up to $73,750,000 consisting of a four-year term loan in the principal amount of $48,750,000 and revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Companys eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021. Amounts borrowed under the Credit Agreement may be used by the Company to repay existing indebtedness, to partially fund capital expenditures, to fund a portion of the purchase price for the acquisition of all of the issued and outstanding stock of SNI Holdco Inc. pursuant to that certain Agreement and Plan of Merger dated March 31, 2017 (the Merger Agreement) (see note 10), to provide for on-going working capital needs and general corporate needs, and to fund future acquisitions subject to certain customary conditions of the lenders. On the closing date of the Credit Agreement, the Company borrowed $48,750,000 from term-loans and borrowed approximately $7,476,316 from the Revolving Credit Facility for a total of $56,226,316 which was used by the Company to repay existing indebtedness, to pay fees and expenses relating to the Credit Agreement, and to pay a portion of the purchase price for the acquisition of all of the outstanding stock of SNI Holdco Inc. pursuant to the Merger Agreement. On November 14, 2017, the Company and its subsidiaries, as Borrowers, each subsidiary of the Company listed as a Guarantor on the signature pages thereto (together with each other Person joined thereto as a guarantor from time to time, collectively, the Guarantors, and each a Guarantor, and together with the Borrowers, collectively, the Loan Parties and each a Loan Party), certain lenders which now are or which thereafter become a party thereto that make Revolving Advances thereunder (together with their respective successors and assigns, collectively, the Revolving Lenders and each a Revolving Lender), the lenders which now are or which thereafter become a party thereto that made or acquire an interest in the Term Loans (together with their respective successors and assigns, collectively, the Term Loan Lenders and each a Term Loan Lender, and together with the Revolving Lenders, collectively, the Lenders and each a Lender), MGG, as administrative agent for the Lenders (together with its successors and assigns, in such capacity, the Administrative Agent), as collateral agent for the Lenders (together with its successors and assigns, in such capacity, the Collateral Agent), and as term loan agent (together with its successors and assigns, in such capacity, the Term Loan Agent and together with the Administrative Agent and the Collateral Agent, each an Agent and, collectively, the Agents), entered into a second amendment (the Second Amendment) to the Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017 (the Credit Agreement). Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement. Any prepayment to the term loan is contingent upon a future financing, non-operational cash flow or excess cash flow as defined in the agreement. The Borrowers also agreed to amend (i) the applicable minimum Fixed Charge Coverage Ratios required to be maintained by the Company as set forth in the Second Amendment, (ii) the minimum EBITA required to be maintained by the Company, as set forth in the Second Amendment and (iii) the maximum senior leverage ratios required to be maintained by the Company, as set forth in the Second Amendment. The Borrowers agreed to pay to the Administrative Agent for the account of the Revolving Lenders, an amendment fee of $364,140, in connection with their execution and delivery of the Second Amendment. Such fee is payable on the earlier of (a) June 30, 2018 and (b) the first date on which all of the Obligations (as defined in the Credit Agreement) are paid in full in cash and the Total Commitment (as defined in the Credit Agreement) of the Lenders is terminated. The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans. The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. The Credit Agreement is secured by all of the Companys property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title or interests. The Term Loans were advanced on the Closing Date and are, with respect to principal, payable as follows, subject to acceleration upon the occurrence of an Event of Default under the Credit Agreement or termination of the Credit Agreement and provided that all unpaid principal, accrued and unpaid interest and all unpaid fees and expenses shall be due and payable in full on March 31, 2021. Principal payments are required as follows: Fiscal year 2018 $3,636,000, Fiscal year 2019 $7,728,000, Fiscal year 2020 $8,337,000 and Fiscal year 2021 - $28,440,000. The Company shall prepay the outstanding amount of the Term-loans in an amount equal to the Specified Excess Cash Flow Amount (as defined in the agreement) for the immediately preceding fiscal year, commencing with the fiscal year ending September 30, 2018, payable following the delivery to the Agents of the financial statements referred to in the Agreement for such fiscal year but in any event not later than one hundred five (105) days after the end of each such fiscal year (the Excess Cash Flow Prepayment Date provided Borrowing Base Reference Date The amended Credit Agreement contains certain covenants including the following: Fixed Charge Coverage Ratio Minimum EBITDA Senior Leverage Ratio In addition to these financial covenants, the Credit Agreement includes other restrictive covenants. The Credit Agreement permits capital expenditures up to a certain level, and contains customary default and acceleration provisions. The Credit Agreement also restricts, above certain levels, acquisitions, incurrence of additional indebtedness, and payment of dividends. At September 30, 2017, based on the new amendment, there was no financial covenants. The Company was in compliance with other non-financial covenants. Balance of: September 30, 2017 Term loan $ 48,141,000 Unamortized debt discount (2,690,000 ) 45,451,000 Short term portion of term loan (3,433,000 ) Term loan $ 42,018,000 In connection with this both the Credit Agreement (the Revolving Credit Facility and the Term-loan), the Company agreed to pay an original discount fee of approximately $901,300, a closing fee for the term loan of approximately $75,000, a finders fee of approximately $1,597,000 and a closing fee for the revolving credit facility of approximately $500,000. The total of the loan fees paid is approximately $3,073,300. The Company has recorded this as a reduction of the term-loan and amortized as interest expense of the term of the loans. During the year ended, September 30, 2017, the Company amortized approximately $492,000 of the debt discount. |
Accrued Compensation
Accrued Compensation | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
8. Accrued Compensation | Accrued Compensation includes accrued wages, the related payroll taxes, employee benefits of the Companys employees while they work on contract assignments, commissions earned and not yet paid and estimated commission payable. |
Subordinated Debt - Convertible
Subordinated Debt - Convertible and Non - Convertible | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
9. Subordinated Debt - Convertible and Non - Convertible | On October 2, 2015, the Company issued and sold the Subordinated Note to JAX Legacy Investment 1, LLC (the Jax, Investor) pursuant to a Subscription Agreement dated October 2, 2015 between the Company and the Investor (the Subscription Agreement) in the amount of $4,185,000. The Subordinated Note was due on October 2, 2018. The Company paid fees of approximately $25,000 and 3,000 shares of common stock to the Investor, valued at approximately $23,000. In addition, the Company had approximately $33,000 of legal fees related to the transaction. Total discount recorded at issuance was approximately $647,000. Total amortization of debt discount for the year ended September 30, 2017 was approximately $107,000, and the remaining $322,000 was written off to loss on extinguishment of debt. On April 3, 2017, the Company and Jax amended and restated the Subordinated Note in its entirety in the form of a 10% Convertible Subordinated Note (the 10% Note) in the aggregate principal amount of $4,185,000. The 10% Note matures on October 3, 2021 (the Maturity Date). The 10% Note is convertible into shares of the Companys Common Stock at a conversion price equal to $5.83 per share. All or any portion of the 10% Note may be redeemed by the Company for cash at any time on or after April 3, 2018 that the average daily VWAP of the Companys Common Stock reported on the principal trading market for the Common Stock exceeds the then applicable Conversion Price for a period of 20 trading days. The redemption price shall be an amount equal to 100% of the then outstanding principal amount of the 10% Note being redeemed, plus accrued and unpaid interest thereon. The Company agreed to issue to the investors in Jax approximately 77,775 shares of common stock, at a value of approximately $385,000 which was expensed as loss on the extinguishment of debt during the year ended September 30, 2017. On December 13, 2017 the Company issued 133,655 shares of common stock for both the conversion and paid in kind interest through September 30, 2017. On October 4, 2015, the Company issued to the sellers of Access Data Consulting Corporation (see note 13) a Promissory Note. Interest on the outstanding principal balance of the Promissory Note is payable at the rate of 5.5% per annum. The principal and interest amount of the Promissory Note is payable as follows: (i) for the first twelve months commencing on November 4, 2015 and ending on October 4, 2016, a monthly payment of approximately $57,000 in principal and interest, (ii) on October 4, 2016 a balloon payment of principal of $1,000,000, (iii) for the next twelve months commencing on November 4, 2016 and ending on October 4, 2017, a monthly payment of approximately $28,000 in principal and interest, (iv) on October 4, 2017 a balloon payment of principal of $1,202,000 and (v) on October 4, 2017 any and all amounts of previously unpaid principal and accrued interest. The Credit Agreement requires this loan to be subordinated to PNC and MGG, however the sellers of Access Data Consulting Corporation have not agreed to the subordination. On October 4, 2017, the Company executed an Amended and Restated Non-Negotiable Promissory Note in favor of William Daniel Dampier and Carol Lee Dampier in the amount of $1,202,405 (the Note). This Note amends and, as so amended, restates in its entirety and replaces that certain Subordinated Nonnegotiable Promissory Note dated October 4, 2015, issued by the Company to William Daniel Dampier and Carol Lee Dampier in the original principal amount of $3,000,000. The Company agreed to pay William Daniel Dampier and Carol Lee Dampier 12 equal installments of $107,675, commencing on November 4, 2017 and ending on October 4, 2018. The entire loan is classified as current and subordinate to the senior debt. On January 20, 2017, the Company entered into Addendum No. 1 (the Addendum) to the Stock Purchase Agreement dated as of January 1, 2016 (the Paladin Agreement) by and among the Company and Enoch S. Timothy and Dorothy Timothy (collectively, the Sellers). Pursuant to the terms of the Addendum, the Company and the Sellers agreed (a) that the conditions to the Earnouts (as defined in the Paladin Agreement) had been satisfied or waived and (b) that the amounts payable to the Sellers in connection with the Earnouts shall be amended and restructured as follows: (i) the Company paid $250,000 in cash to the Sellers prior to January 31, 2017 (the Earnout Cash Payment) and (ii) the Company shall issue to the Sellers a subordinated promissory note in the principal amount of $1,000,000 (the Subordinated Note), The Subordinated Note shall bear interest at the rate of 5.5% per annum. Interest on the Subordinated Note shall be payable monthly, principle can only be paid in stock until the term-loan and Revolving Credit Facility are repaid. The Subordinated Note shall have a term of three years and may be prepaid without penalty. The principal of and interest on the Subordinated Note may be paid, at the option of the Company, either in cash or in shares of common stock of the Company or in any combination of cash and common stock. The Sellers have agreed that all payments and obligations under the Subordinated Note shall be subordinate and junior in right of payment to any Senior Indebtedness (as defined in the Paladin Agreement) now or hereafter existing to Senior Lenders (current or future) (as defined in the Paladin Agreement). On April 3, 2017, the Company issued and paid to certain SNIH Stockholders as part of the Merger Consideration (see note 10) an aggregate of $12.5 million in aggregate principal amount of its 9.5% Notes. The 9.5% Notes mature on October 3, 2021 (the Maturity Date). The 9.5% Notes are convertible into shares of the Companys Common Stock at a conversion price equal to $5.83 per share. Interest on the 9.5% Notes accrues at the rate of 9.5% per annum and shall be paid quarterly in arrears on June 30, September 30, December 31 and March 31, beginning on June 30, 2017, on each conversion date with respect to the 9.5% Notes (as to that principal amount then being converted), and on the Maturity Date (each such date, an Interest Payment Date). At the option of the Company, interest may be paid on an Interest Payment Date either in cash or in shares of Common Stock of the Company, which Common Stock shall be valued based on the terms of the agreement, subject to certain limitations defined in the loan agreement. Each of the 9.5% Notes is subordinated in payment to the obligations of the Company to the lenders parties to that certain Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017 by and among the Company, the Companys subsidiaries named as borrowers therein (collectively with the Company, the Borrowers), the senior lenders named therein and PNC Bank, National Association, as administrative agent and collateral agent (the Agent) for the senior lenders (the Senior Credit Agreement), pursuant to those certain Subordination and Intercreditor Agreements, each dated as of March 31, 2017 by and among the Company, the Borrowers, the Agent and each of the holders of the 9.5% Notes. None of the 9.5% Notes issued to the SNIH Stockholders are registered under the Securities Act of 1933, as amended (the Securities Act). Each of the SNIH Stockholders who received 9.5% Notes is an accredited investor. The issuance of the 9.5% Notes to such SNIH Stockholders is exempt from the registration requirements of the Act in reliance on an exemption from registration provided by Section 4(2) of the Act. Balance as of: September 30, 2017 September 30, 2016 JAX Legacy debt $ 4,185 $ 4,185 Access Data debt 1,225 2,510 Paladin debt 1,000 - 9.5% convertible debt 12,500 - JAX Legacy debt discount - (429 ) Total subordinated debt, convertible and non-convertible 18,910 6,266 Short-term portion of subordinated debt, convertible and non-convertible (1,225 ) (1,285 ) Long-term portion of subordinated debt, convertible and non-convertible $ 17,685 $ 4,981 Future minimum payments of subordinated debt will total approximately $18,910,000 as follows: fiscal 2018 - $1,225,000, fiscal 2019 - $0, fiscal 2020 - $1,000,000, fiscal 2021- $0 and fiscal 2022 - $16,685,000. |
Equity
Equity | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
10. Equity | On October 2, 2015, the Company issued approximately 95,000 shares of common stock to JAX Legacy related to the subordinated note. The stock was valued at approximately $589,000. On October 4, 2015, the Company issued approximately 328,000 shares of common stock to the sellers of Access Data Consulting Corporation. The Company also agreed if the closing price of the Companys common stock on the trading day immediately preceding the day on which the Issued Shares are first freely salable under Rule 144 (the Rule 144 Date) is less than 90% of the Issue Price, then the Company shall make a one-time adjustment and shall promptly pay to the Sellers, in stock in the form of additional shares of common stock of the Company at the market value on the Rule 144 Date, the difference between the aggregate value of the Issued Shares at the Issue Price and the aggregate value of the Issued Shares at the closing price on the Rule 144 Date. On April 4, 2016, the Company issued approximately 123,000 shares of common stock to the sellers of Access Data Consulting Corporation related to the guarantee, discussed above. This was based on market value of the stock on April 4, 2016 being approximately $544,000 less than the $2,000,000 six-month guarantee provided in the Access Data Agreement and based on the closing stock price of $4.44 per common share. On March 31, 2017, the Company issued approximately 500,000 shares of common stock upon exercise of warrants by two officers and received cash of $1,000,000. Stock Options The Company has recognized compensation expense in the amount of approximately $902,000 and $793,000 during the years ended September 30, 2017 and 2016, respectively, related to the issuance of stock options. During the year ended September 30, 2017, there were options granted to purchase 382,000 shares of common stock with a weighted average price of between $4.02 and $5.94 per common share. This estimated value was made using the Black-Scholes option pricing model and approximated $1,864,000. The stock options vest over a three to five-year period. The average expected life (years) of the options were 10, the estimated stock price volatility was 104% and the risk-free interest rate was 2.2%. At September 30, 2017, there was approximately $2,178,000 of unamortized compensation. At September 30, 2017, there were exercisable options granted to purchase approximately 408,000 shares of common stock and exercisable warrants to purchase approximately 497,000 shares of common stock. Warrants (Number of Warrants in Thousands) Number of Shares Exercise Price Expiration Outstanding at September 30, 2016 997 $ 2.92 Warrants exercised (500 ) 2.00 Warrants granted - - Outstanding at September 30, 2017 497 $ 3.84 The weighted average exercise price of outstanding warrants was $3.84 at September 30, 2017 and 2.92 at September 30, 2016, with expiration dates ranging from February 7, 2020 to April 1, 2025. |
Stock Option Plans
Stock Option Plans | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
11. Stock Option Plans | As of September 30, 2017, there were stock options outstanding under the Companys 1995 Stock Option Plan, Second Amended and Restated 1997 Stock Option Plan, 1999 Stock Option Plan and the 2011 Company Incentive Plan. All four plans were approved by the shareholders. The 1995 Stock Option Plan and the 1999 Stock Option Plan have expired, and no further options may be granted under those plans. During fiscal 2009, the Second Amended and Restated 1997 Stock Option Plan was amended to make an additional 592,000 options available for granting and as of September 30, 2013 there were no shares available for issuance under the Amended and Restated 1997 Stock Option Plan. As of September 30, 2017, there were no shares available for issuance under the 2011 Company Incentive Plan. The plans granted specified numbers of options to non-employee directors, and they authorized the Compensation Committee of the Board of Directors to grant either incentive or non-statutory stock options to employees. Vesting periods are established by the Compensation Committee at the time of grant. All stock options outstanding as of September 30, 2017 and September 30, 2016 were non-statutory stock options, had exercise prices equal to the market price on the date of grant, and had expiration dates ten years from the date of grant. On July 23, 2013, the Board of Directors approved the Companys 2013 Incentive Stock Plan (the 2013 Plan), and resolved to cease issuing securities under all prior Company equity compensation plans. The 2013 Plan was approved by the Companys shareholders at the Annual Meeting of Stockholders on September 9, 2013. The purpose of the 2013 Plan is to provide additional incentives to select persons who can make, are making, and continue to make substantial contributions to the growth and success of the Company, to attract and retain the employment and services of such persons, and to encourage and reward such contributions, by providing these individuals with an opportunity to acquire or increase stock ownership in the Company through either the grant of options or restricted stock. The 2013 Plan is administered by the Compensation Committee or such other committee as is appointed by the Board of Directors pursuant to the 2013 Plan (the Committee). The Committee has full authority to administer and interpret the provisions of the 2013 Plan including, but not limited to, the authority to make all determinations with regard to the terms and conditions of an award made under the 2013 Plan. The maximum number of shares that may be granted under the 2013 Plan is 1,000,000. This number is subject to adjustment to reflect changes in the capital structure or organization of the Company. On August 16, 2017 the Stockholders approved an amendment to the Companys 2013 Incentive Stock Plan to increase the number of shares available for issuance pursuant to awards granted under the Plan from 1,000,000 shares to 4,000,000 shares. A summary of stock option activity is as follows: Year Ended September 30, (Number of Options in Thousands) 2017 2016 Number of options outstanding: Beginning of year 568 414 Granted 382 163 Exercised - - Terminated (42 ) (9 ) End of year 908 568 Number of options exercisable at end of year 408 230 Number of options available for grant at end of year 3,075 470 Weighted average option prices per share: Granted during the year $ 5.15 $ 5.17 Exercised during the year - - Terminated during the year 4.38 5.99 Outstanding at end of year 5.11 5.09 Exercisable at end of year 4.79 4.39 Stock options outstanding as of September 30, 2017 were as follows (number of options in thousands): Range of Exercise Prices Number Outstanding Weighted Average Price Number Exercisable Weighted Average Price Average Remaining Life (Years) Under $5.00 476 $ 4.00 214 $ 3.31 8.1 5.01 to 10.00 432 $ 6.37 154 $ 6.77 8.0 As of September 30, 2017, the aggregate intrinsic value of outstanding stock options and exercisable stock options was approximately $461,000 and $303,000, respectively. The average fair value of stock options granted was estimated to be $4.63 per share in fiscal 2017 and $7.00 per share in fiscal 2017 and 2016, respectively. This estimate was made using the Black-Scholes option pricing model and the following weighted average assumptions: 2017 2016 Expected option life (years) 10 10 Expected stock price volatility 104 % 125 % Expected dividend yield % % Risk-free interest rate 2.20 % 2.20 % Stock-based compensation expense attributable to stock options was $902,000 and $793,000 in 2017 and 2016, respectively. As of September 30, 2017, there was approximately $2,178,000 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 3.5 years. |
Income Taxes
Income Taxes | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
12. Income Taxes | The components of the provision for income taxes are as follows: Year Ended September 30, (In Thousands) 2017 2016 Current expense (benefit): Federal $ - $ - State 126 3 Total current expense (benefit): $ 126 $ 3 Deferred expense (benefit): Federal $ (5,549 ) $ - State (595 ) - Total deferred expense (benefit): $ (6,144 ) $ - Total income tax expense (benefit): $ (6,018 ) $ 3 A reconciliation of the Companys statutory income tax rate to the Companys effective income tax rate is as follows: Year Ended September 30, (In Thousands) 2017 2016 Income at US Statutory Rate $ (2,853 ) $ 400 State Taxes, net of Federal benefit (633 ) 56 Tax Credits (99 ) Acquisition Related Costs 476 Statutory Rate Changes (571 ) Valuation Allowance (2,370 ) (456 ) Other 32 $ (6,018 ) $ - The net deferred income tax asset balance related to the following: Year Ended September 30, (In Thousands) 2017 2016 Net Operating Losses $ 8,177 $ 5,272 Stock Options 881 512 Allowance for Doubtful Accounts 958 67 Accrued & Prepaid Expenses 911 48 TaxCredit Carryforwards 171 Other - 61 Total Deferred tax assets $ 11,098 $ 5,960 Intangibles $ (10,308 ) $ (1,952 ) Depreciation (110 ) - Total deferred tax liability $ (10,418 ) $ (1,952 ) Deferred tax asset (liability) $ 680 $ 4,008 Valuation allowance (1,638 ) (4,008 ) Net deferred tax asset (liability) $ (958 ) $ - As of September 30, 2017, the Company had federal and state net operating loss carryforwards of approximately $21,633,000 and $22,949,000, respectively, which begin to expire in 2028 for federal and 2022 for state purposes. Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of September 30, 2017, and 2016, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company also considered whether there was any currently available information about future years. Because long-term contracts are not a significant part of the Companys business, future results cannot be reliably predicted by considering past trends or by extrapolating past results. Moreover, the Companys earnings are strongly influenced by national economic conditions and have been volatile in the past. Considering these factors, the Company determined that it was not possible to reasonably quantify future taxable income. The Company determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of September 30, 2017 and 2016. With the passage of time, the Company will continue to generate additional deferred tax assets and liabilities related to amortization of acquired intangible assets for tax purposes. As goodwill, an indefinite-lived intangible asset, will not be amortized for financial reporting purposes under current accounting standards, any tax amortization related goodwill claimed by the Company in future years will give rise to an increasing deferred tax liability, which will only reverse at the time of a future impairment under current accounting rules or ultimate sale of the underlying intangible assets. Due to the uncertain timing of this reversal, the temporary difference cannot be considered as a source of future taxable income for purposes of determining a valuation allowance against the Companys other net deferred tax assets. As a result, the Companys net deferred tax position at September 30, 2016 and 2017, represents the tax impact of the cumulative tax amortization of goodwill, which is primarily attributable to historical tax deductible goodwill from SNI. Under Internal Revenue Code 382, if a corporation undergoes an ownership change, the corporations ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since we became a loss corporation as defined in Section 382. Future changes in our stock ownership, which may be outside of our control, may trigger an ownership change. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an ownership change. If an ownership change has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which we operate or do business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We record tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of September 30, 2016, and 2017 we have not recorded any uncertain tax positions in our financial statements. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of September 30, 2016, and 2017, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Companys tax years are still open under statute from September 30, 2014, to the present. Earlier years may be examined to the extent that the net operating loss carryforwards form those earlier years are used in future periods. The resolution of tax matters is not expected to have a material effect on the Companys consolidated financial statements. |
Acquisitions
Acquisitions | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
13. Acquisitions | Access On October 4, 2015, the Company entered into a Stock Purchase Agreement (the Access Data Agreement) with William Daniel Dampier and Carol Lee Dampier (collectively, the Sellers). Pursuant to the terms of the Access Data Agreement the Company acquired on October 4, 2015, 100% of the outstanding stock of Access Data Consulting Corporation., a Colorado corporation (Access Data), for a purchase price (the Purchase Price) equal to approximately $16,168,000, which includes $600,000 related to a mutual tax election of which $350,000 was paid during the year ended September 30, 2017 and the remaining $150,000 is included in current liabilities. Paladin The Company entered into a Stock Purchase Agreement dated as of January 1, 2016 (the Paladin Agreement) with Enoch S. Timothy and Dorothy Timothy (collectively, the Sellers). Pursuant to the terms of the Paladin Agreement the Company acquired on January 1, 2016, 100% of the outstanding stock of Paladin Consulting Inc., a Texas corporation (Paladin), for a purchase price (the Purchase Price) equal to approximately $2,625,000. SNI The Company entered into an Agreement and Plan of Merger dated as of March 31, 2017 (the Merger Agreement) by and among the Company, GEE Group Portfolio, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, (GEE Portfolio), SNI Holdco Inc., a Delaware corporation (SNIH), Smith Holdings, LLC a Delaware limited liability company, Thrivent Financial for Lutherans, a Wisconsin corporation, organized as a fraternal benefits society (Thrivent), Madison Capital Funding, LLC, a Delaware limited liability company (Madison) and Ronald R. Smith, in his capacity as a stockholder (Mr. Smith and collectively with Smith Holdings, LLC, Thrivent and Madison, the Principal Stockholders) and Ronald R. Smith in his capacity as the representative of the SNIH Stockholders (Stockholders Representative). The Merger Agreement provided for the merger subject to the terms and conditions set forth in the Merger Agreement of SNI Holdco with and into GEE Portfolio pursuant to which GEE Portfolio would be the surviving corporation (the Merger). The Merger was consummated on April 3, 2017 (the Closing) and did not require stockholder approval in order to be completed. As a result of the merger, GEE Portfolio became the owner of 100% of the outstanding capital stock of SNI Companies, Inc., a Delaware corporation and a wholly-owned subsidiary of SNI Holdco (SNI Companies and collectively with SNI Holdco, the Acquired Companies). SNI Companies, led by co-founder and then current Chairman and CEO Ron Smith, is a premier provider of recruitment and staffing services specializing in administrative, finance, accounting, banking, technology, and legal professions. Through its Staffing Now ®, Accounting Now ®, SNI Technology ®, SNI Financial ®, Legal Now ®, SNI Energy ® and SNI Certes ® divisions, SNI Companies delivers staffing solutions on a temporary/contract, temp/contract-to hire, full time and direct hire basis, across a wide range of disciplines and industries including finance, accounting, banking, technical, software, tax, human resources, legal, engineering, construction, manufacturing, natural resources, energy and administrative professional. SNI Companies has offices in Colorado, Connecticut, Washington DC, Georgia, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, New Jersey, Pennsylvania, Texas and Virginia. Merger Consideration and Closing Payments The aggregate consideration paid for the shares of SNI Holdco (the Merger Consideration) was approximately $66,300,000, plus or minus On the date of the Closing the Company made the following payments: · Cash Payment to Stockholders of SNIH (the SNIH Stockholders) or as directed by SNIH Stockholders. · Issuance of 9.5% Convertible Subordinated Notes. · Issuance of Series B Convertible Preferred Stock. · Working Capital Reserve Fund . The intangibles were recorded, based on the Companys estimate of fair value, which consist primarily of customer lists with an estimated life of five to ten years and goodwill. The Company has not finalized the purchase price allocation at September 30, 2017 and subject to change based on the working capital contingency. (in Thousands) $ 12,989 Assets Purchased 32,174 Liabilities Assumed 19,185 Net Liabilities Assumed 66,300 Purchase Price $ 85,485 Intangible Asset from Purchase Intangible asset detail $ 18,312 Intangible asset customer list 5,900 Intangible asset trade name 3,270 Intangible asset non-compete agreement 58,003 Goodwill $ 85,485 Intangible Asset from Purchase All goodwill and intangibles related to the acquisition of SNI companies will not be deductible for tax purposes. Consolidated pro-forma unaudited financial statements The following unaudited pro forma combined financial information is based on the historical financial statements of the Company, SNI Companies, Inc. and Paladin Consulting, Inc., after giving effect to the Companys acquisition as if the acquisitions occurred on October 1, 2015. The following unaudited pro forma information does not purport to present what the Companys actual results would have been had the acquisitions occurred on October 1, 2015, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the years ended September 30, 2017 and September 30, 2016 as if the acquisition occurred on October 1, 2015. The pro forma results of operations for the years ended September 30, 2016 only include three months of Paladin and twelve months of SNI Companies, as all other acquisitions either occurred prior to October 1, 2015 or had an immaterial effect on pro forma balances. Operating expenses have been increased for the amortization expense associated with the estimated fair value adjustment as of each acquisition during the respective period for the expected definite lived intangible assets. Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of approximately $4,100,000 and $107,000 for the years ended September 30, 2016 for the Paladin and SNI acquisitions, respectively. Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of approximately $2,100,000 for the year ended September 30, 2017 for the SNI acquisition. (in Thousands, except per share data) Pro Forma, unaudited Year Ended September 30, 2017 Year Ended September 30, 2016 Net sales $ 189,149 $ 201,433 Cost of sales $ 119,817 $ 126,708 Operating expenses $ 68,794 $ 66,390 Net income $ (2,670 ) $ 2,679 Basic income per common share $ (0.28 ) $ 0.29 Dilutive income per common share $ (0.28 ) $ 0.28 The proforma results of operations for the years ended September 30, 2017 and September 30, 2016, included approximately $54,170,000 and $113,460,000 of sales, respectively, and approximately $2,606,000 and $1,227,000 of net income, respectively of SNI Companies. The year ended September 30, 2016 included approximately $4,785,000 of sales and approximately $842,000 of a net income of Paladin. The Companys consolidated financial statements for the year ended September 30, 2017 include the actual results of SNI Companies since the date of acquisition and include sales of approximately $49,710,000 and net income of approximately $741,000 for the year ended September 30, 2017. The consolidated financial statements for the years ended September 30, 2017 and September 30, 2016 included sale of approximately $17,572,000 of $14,697,000 of sales and approximately $403,000 and $842,000 of net income. |
Commitment and Contingencies
Commitment and Contingencies | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
14. Commitment and Contingencies | Lease The Company leases space for all of its branch offices, which are located either in downtown or suburban business centers, and for its corporate headquarters. Branch offices are generally leased over periods from three to five years. The corporate office lease expires in 2018. The leases generally provide for payment of basic rent plus a share of building real estate taxes, maintenance costs and utilities. Rent expense was approximately $2,600,000 and $1,114,000 for the years ended September 30, 2017 and 2016, respectively. As of September 30, 2017, future minimum lease payments due under non-cancelable lease agreements having initial terms in excess of one year, including certain closed offices, totaled approximately $7,079,000 as follows: fiscal 2018 - $2,950,000, fiscal 2019 - $2,313,000, fiscal 2020 - $1,219,000, fiscal 2021 - $341,000 fiscal 2022 - $203,000 and thereafter - $53,000. Working Capital Deposit The Company retained approximately $1,500,000 of the purchase price, in cash, as a guarantee from the sellers that the SNI Companies would provide a minimum of $9,200,000 of working capital, as defined in the purchase agreement. As of September 30, 2017, the Company and the sellers of the SNI Companies have not agreed to the provided working capital and the amount continues to be retained by the Company. |
Mezzanine Equity
Mezzanine Equity | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
15. Mezzanine Equity | On April 3, 2017, the Company agreed to issue to certain SNIH Stockholders upon receipt of duly executed letters of transmittal as part of the Merger Consideration, an aggregate of approximately 5,926,000 shares of its no par value, Series B Convertible Preferred Stock to certain of the SNIH Stockholders as part of the Merger Consideration. The no par value, Series B Convertible Preferred Stock has a liquidation preference equal to $4.86 per share and ranks senior to all Junior Securities (including the Companys Common Stock) with respect to any distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. In the event that the Company declares or pays a dividend or distribution on its Common Stock, whether such dividend or distribution is payable in cash, securities or other property, including the purchase or redemption by the Company or any of its subsidiaries of shares of Common Stock for cash, securities or property, the Company is required to simultaneously declare and pay a dividend on the no par value, Series B Convertible Preferred Stock on a pro rata basis with the Common Stock determined on an as-converted basis assuming all shares had been converted as of immediately prior to the record date of the applicable dividend or distribution. Except as set forth in the Resolution Establishing Series (as defined below) as may be required by Illinois law, the holders of the no par value, Series B Convertible Preferred Stock have no voting rights. Pursuant to the Resolution Establishing Series, without the prior written consent of holders of not less than a majority of the then total outstanding Shares of no par value, Series B Convertible Preferred Stock, voting separately as a single class, the Company shall not create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company) that ranks pari passu with or superior to the no par value, Series B Convertible Preferred Stock in relative rights, preferences or privileges (including with respect to dividends, liquidation or voting). Each share of Series B Convertible Preferred Stock shall be convertible at the option of the holder thereof into one share of Common Stock at an initial conversion price equal to $4.86 per share, each as subject to adjustment in the event of stock splits, stock combinations, capital reorganizations, reclassifications, consolidations, mergers or sales, as set forth in the Resolution Establishing Series. None of the shares of no par value, Series B Preferred Stock issued to the SNIH Stockholders are registered under the Securities Act. Each of the SNIH Stockholders who received shares of Series B Preferred Stock is an accredited investor. The issuance of the shares of no par value, Series B Preferred Stock to such SNIH Stockholders is exempt from the registration requirements of the Act in reliance on an exemption from registration provided by Section 4(2) of the Act. Based on the terms of the Series B Convertible Preferred Stock, if certain fundamental transactions were to occur, the Series B Convertible Preferred Stock would require redemption, which precludes permanent equity classification on the accompanying consolidated Balance Sheet. |
Segment Data
Segment Data | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
16. Segment Data | The Company provides the following distinctive services: (a) direct hire placement services, (b) temporary professional services staffing in the fields of information technology, engineering, medical, and accounting, and (c) temporary light industrial staffing. These distinct services can be divided into two reportable segments, Industrial Staffing Services and Professional Staffing Services. Selling, general and administrative expenses are not completely separately allocated among light industrial services and professional staffing services. Unallocated Corporate expenses primarily include, certain executive compensation expenses and salaries, certain administrative salaries, corporate legal expenses, stock amortization expenses, consulting expenses, audit fees, corporate rent and facility costs, board fees, acquisition, integration and restructuring expenses and interest expense. Fiscal Year Ended September 30, (In Thousands) 2017 2016 Industrial Staffing Services Industrial services revenue $ 24,851 $ 21,916 Industrial services gross margin 16.5 % 13.1 % Operating income $ 1,625 $ 539 Depreciation & amortization 268 280 Accounts receivable net 3,959 3,145 Intangible assets 691 908 Goodwill 1,084 1,083 Total assets $ 9,271 $ 7,448 Professional Staffing Services Permanent placement revenue $ 14,731 $ 6,909 Placement services gross margin 100 % 100 % Professional services revenue $ 95,396 $ 54,249 Professional services gross margin 27.4 % 25.5 % Operating income $ 4,275 $ 4,407 Depreciation and amortization 3,685 1,587 Accounts receivable net 19,219 8,424 Intangible assets 34,358 10,186 Goodwill 75,509 17,507 Total assets $ 132,544 $ 38,478 Unallocated Expenses Corporate administrative expenses $ 3,285 $ 1,997 Corporate facility expenses 301 239 Stock option amortization expense 902 792 Board related expenses 38 19 Acquisition, integration and restructuring expenses 2,775 702 Total unallocated expenses $ 7,301 $ 3,749 Consolidated Total revenue $ 134,978 $ 83,074 Operating (loss) income (1,401 ) 1,197 Depreciation and amortization 3,953 1,867 Total accounts receivables net 23,178 11,569 Intangible assets 35,049 11,094 Goodwill 76,593 18,590 Total assets $ 141,815 $ 45,926 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
17. Subsequent Events | On December 12, 2017, the Company issued 135,655 shares of common stock, valued at approximately $595,000 as an inducement to change the loan agreement with Jax legacy (Jax) note and the accrued interest through September 30, 2017. These shares issued to Jax were not registered under the Securities Act. Jax is an accredited investor. The issuance of these shares to Jax is exempt from the registration requirements of the Act in reliance on an exemption from registration provided by Section 4(2) of the Act. On December 26, 2017, The Company and Mr. Bajalia entered into a written employment agreement with respect to Mr. Bajalias service as President of the Company. The Company and Mr. Bajalia have agreed to an initial term of five years and that Mr. Bajalia shall receive a base salary of $270,000 per year, subject to increase, but not decrease, at the discretion of the Board. In addition, the Company and Mr. Bajalia have agreed that (i) Mr. Bajalia shall be eligible to receive an annual bonus of up to 100% of his base salary based on his meeting certain performance based targets and (ii) Mr. Bajalia shall also receive a total of 500,000 shares of restricted stock under the Companys 2013 Stock Incentive Plan. These shares shall cliff vest 20% per year of service. Mr. Bajalia shall also be eligible to participate in the Companys employee benefit plans as in effect from time to time on the same basis as generally made available to other senior executives of the Company and have other benefits provided to executives of the Company. |
Significant Accounting Polici24
Significant Accounting Policies and Estimates (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Significant Accounting Policies And Estimates Policies | |
Basis of Presentation | The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and the rules of the United States Securities and Exchange Commission. |
Liquidity | The Company has experienced significant losses and negative cash flows from operations in the past. Management has implemented a strategy which included cost reduction efforts, consolidation of certain back office activities to gain efficiencies as well as identifying strategic acquisitions, financed primarily through the issuance of preferred and common stock and convertible debt, to improve the overall profitability and cash flows of the Company. After the close of business on March 31, 2017, the Company and its subsidiaries, as borrowers, entered into a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association (“PNC”), and certain investment funds managed by MGG Investment Group LP (“MGG”). All funds were distributed on April 3, 2017 (the “Closing Date”). Under the terms of the Credit Agreement, the Company may borrow up to $73,750,000 consisting of a four-year term loan in the principal amount of $48,750,000 and revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Company’s eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021. On October 2, 2017, the Company, the other borrower entities and guarantor entities named therein (collectively, the “Loan Parties”), PNC, and certain investment funds managed by MGG (collectively the (“Lenders”) entered into a First Amendment and Waiver (the “Amendment”) to the Revolving Credit, Term Loan and Security Agreement dated as of March 31, 2017 (the “Credit Agreement”) by and among the Loan Parties, and the Lenders. The Amendment, which was effective as of October 2, 2017, modified the required principal repayment schedule with respect to the Term Loans. The Amendment also modified the ability of the Loan Parties to repay or make other payments with respect to certain other loans that are subordinated in right of payment to the indebtedness under the Credit Agreement. Pursuant to the Amendment the Lenders also waived any Event of Default arising out of the Loan Parties’ failure to deliver, on or before October 3, 2017, the materials satisfying the requirements of clauses (i) and (ii) of Section 5 of the Waiver to Revolving Credit, Term Loan and Security Agreement, dated as of August 14, 2017, as amended. On November 14, 2017, the Company and its subsidiaries, as Borrowers, each subsidiary of the Company listed as a “Guarantor” on the signature pages thereto (together with each other Person joined thereto as a guarantor from time to time, collectively, the “Guarantors”, and each a “Guarantor”, and together with the Borrowers, collectively, the “Loan Parties” and each a “Loan Party”), certain lenders which now are or which thereafter become a party thereto that make Revolving Advances thereunder (together with their respective successors and assigns, collectively, the “Revolving Lenders” and each a “Revolving Lender”), the lenders which now are or which thereafter become a party thereto that made or acquire an interest in the Term Loans (together with their respective successors and assigns, collectively, the “Term Loan Lenders” and each a “Term Loan Lender”, and together with the Revolving Lenders, collectively, the “Lenders” and each a “Lender”), MGG, as administrative agent for the Lenders (together with its successors and assigns, in such capacity, the “Administrative Agent”), as collateral agent for the Lenders (together with its successors and assigns, in such capacity, the “Collateral Agent”), and as term loan agent (together with its successors and assigns, in such capacity, the “Term Loan Agent” and together with the Administrative Agent and the Collateral Agent, each an “Agent” and, collectively, the “Agents”), entered into a second amendment (the “Second Amendment”) to the Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 2017 (the “Credit Agreement”). Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement. Any prepayment to the term loan is contingent upon a future financing, non-operational cash flow or excess cash flow as defined in the agreement. The Borrowers also agreed to amend (i) the applicable minimum Fixed Charge Coverage Ratios required to be maintained by the Company as set forth in the Second Amendment, (ii) the minimum EBITDA required to be maintained by the Company, as set forth in the Second Amendment and (iii) the maximum senior leverage ratios required to be maintained by the Company, as set forth in the Second Amendment. The Borrowers agreed to pay to the Administrative Agent for the account of the Revolving Lenders, an amendment fee of $364,140, in connection with their execution and delivery of the Second Amendment. Such fee is payable on the earlier of (a) June 30, 2018 and (b) the first date on which all of the Obligations (as defined in the Credit Agreement) are paid in full in cash and the Total Commitment (as defined in the Credit Agreement) of the Lenders is terminated. The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans. For the period ended September 30, 2017 there were no financial covenants required under the new amendment. The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans. At September 30, 2017, approximately $6,000,000 of the Revolving Credit facility was fixed for a three-month period at an interest of approximately 11.3%. Although the Company did not have financial covenants for the period ended September 30, 2017, the Company was in compliance with non-financial covenants of this loan and management expects to be in compliance with the newly amended financial covenants for December 31, 2017, the first measurement date under the Amendment. Management believes that the future cash flow from operations and the availability under the Revolving Credit Facility will have sufficient liquidity for the next 12 months. |
Principles of Consolidation | The consolidated financial statements include the accounts and transactions of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation. |
Estimates and Assumptions | Management makes estimates and assumptions that can affect the amounts of assets and liabilities reported as of the date of the condensed consolidated financial statements, as well as the amounts of reported revenues and expenses during the periods presented. Those estimates and assumptions typically involve expectations about events to occur subsequent to the balance sheet date, and it is possible that actual results could ultimately differ from the estimates. If differences were to occur in a subsequent period, the Company would recognize those differences when they became known. Significant matters requiring the use of estimates and assumptions include, but may not be limited to, deferred income tax valuation allowances, accounts receivable allowances, accounting for acquisitions, accounting for derivatives and evaluation of impairment. Management believes that its estimates and assumptions are reasonable, based on information that is available at the time they are made. |
Revenue Recognition | Direct hire placement service revenues are recognized when applicants accept offers of employment, less a provision for estimated losses due to applicants not remaining employed for the Companys guarantee period. Contract staffing service revenues are recognized when services are rendered. Falloffs and refunds during the period are reflected in the consolidated statements of operations as a reduction of placement service revenues and were approximately $1,495,000 in fiscal 2017 and $470,000 in fiscal 2016. Expected future falloffs and refunds are reflected in the consolidated balance sheet as a reduction of accounts receivable and were approximately $997,000 and $60,000 as of September 30, 2017 and September 30, 2016, respectively. |
Cost of Contract Staffing Services | The cost of contract services includes the wages and the related payroll taxes and employee benefits of the Companys employees while they work on contract assignments. |
Cash and Cash Equivalents | Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. At September 30, 2017 and September 30, 2016, there were no cash equivalents. The Company maintains deposits in financial institutions in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. |
Accounts Receivable | The Company extends credit to its various customers based on evaluation of the customers financial condition and ability to pay the Company in accordance with the payment terms. An allowance for placement fall-offs is recorded, as a reduction of revenues, for estimated losses due to applicants not remaining employed for the Companys guarantee period. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is considered to be doubtful due to credit issues. These allowances together reflect managements estimate of the potential losses inherent in the accounts receivable balances, based on historical loss statistics and known factors impacting its customers. The nature of the contract service business, where companies are dependent on employees for the production cycle allows for a small accounts receivable allowance. Based on managements review of accounts receivable, an allowance for doubtful accounts of approximately $1,712,000 and $191,000 is considered necessary as of September 30, 2017, and September 30, 2016, respectively. The Company charges uncollectible accounts against the allowance once the invoices are deemed unlikely to be collectible. The reserve includes the $997,000 and $60,000 reserve for permanent placement falloffs considered necessary as of September 30, 2017 and September 30, 2016, respectively. |
Property and Equipment | Property and equipment are recorded at cost. Depreciation expense is calculated on a straight-line basis over estimated useful lives of five years for computer equipment and two to ten years for office equipment, furniture and fixtures. The Company capitalizes computer software purchased or developed for internal use and amortizes it over an estimated useful life of five years. The carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that it may not be recoverable. If the carrying amount of an asset group is greater than its estimated future undiscounted cash flows, the carrying value is written down to the estimated fair value. There was no impairment of property and equipment for the years ended September 30, 2017 and 2016. |
Goodwill | Goodwill represents the excess of cost over the fair value of the net assets acquired in the various acquisitions. The Company assesses goodwill for impairment at least annually. Testing goodwill for impairment allows the Company to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines that this threshold is not met, then performing the two-step impairment test is unnecessary. An impairment loss would be recognized to the extent the carrying value of goodwill exceeds its implied fair value. |
Fair Value Measurement | The Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure. Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Companys assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The fair value of the Companys current assets and current liabilities approximate their carrying values due to their short-term nature. The carrying value of the Companys long-term liabilities represents their fair value based on level 3 inputs. The Companys goodwill and other intangible assets are measured at fair value on a non-recurring basis using level 3 inputs, as discussed in Note 5. |
Earnings and Loss per Share | Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Common share equivalents of approximately 577,000 was included in the computation of diluted earnings per share for the year ended September 30, 2016. There were approximately 10,120,958 and 413,000 of common stock equivalents excluded for the year ended September 30, 2017 and September 30, 2016, respectively because their effect is anti-dilutive. |
Advertising Expenses | Most of the Companys advertising expense budget is used to support the Companys business. Most of the advertisements are in print or internet media, with expenses recorded as they are incurred. For the years ended September 30, 2017 and 2016, included in selling, general and administrative expenses was advertising expense totaling approximately $1,710,000 and $834,000, respectively. |
Intangible Assets | Customer lists, non-compete agreements, customer relationships and trade names were recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives ranging from two to ten years using both accelerated and straight-line methods. |
Impairment of Long-lived Assets | The Company records an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not record any impairment during the years ended September 30, 2017 and 2016. |
Stock-Based Compensation | The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (Black-Scholes) pricing model. For all employee stock options, we recognize expense over the requisite service period on an accelerated basis over the employees requisite service period (generally the vesting period of the equity grant). The Companys option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility, expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with applicable accounting principles. Such options are valued using the Black-Scholes option pricing model. See Note 11 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation. Upon the exercise of options, it is the Companys policy to issue new shares rather than utilizing treasury shares. |
Income Taxes | We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of September 30, 2017, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet. |
Reclassification | Certain reclassifications have been made to the financial statements as of and for the years ended September 30, 2016 to conform to the current year presentation. There is no effect on assets, liabilities, equity or net income. |
Segment Data | The Company provides the following distinctive services: (a) direct hire placement services, (b) temporary professional services staffing in the fields of information technology, engineering, medical, and accounting, and (c) temporary light industrial staffing. These distinct services can be divided into two reportable segments, Industrial Staffing Services and Professional Staffing Services. Selling, general and administrative expenses are not completely separately allocated among light industrial services and professional staffing services. Operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Other factors, including type of business, type of employee, length of employment and revenue recognition are considered in determining these operating segments. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Property And Equipment Tables | |
Schedule of Property and Equipment | (In thousands) Useful Lives 2017 2016 Computer software 5 years $ 1,447 $ 1,447 Office equipment, furniture and fixtures and leasehold improvements 2 to 10 years 3,243 2,514 Total property and equipment, at cost 4,690 3,961 Accumulated depreciation and amortization (3,776 ) (3,350 ) Property and equipment, net $ 914 $ 611 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Goodwill And Intangible Assets Tables | |
Schedule of Finite-Lived Intangible Assets | Goodwill as of September 30, 2015 $ 8,220 Acquisition of Access 8,316 Acquisition of Paladin 2,054 Goodwill as of September 30, 2016 $ 18,590 Acquisition of SNI Companies 58,003 Goodwill as of September 30, 2017 $ 76,593 As of September 30, 2017 (In Thousands) Cost Accumulated Amortization Net Book Value Customer relationships $ 29,070 $ 4,601 $ 24,469 Trade name 8,329 1,115 7,214 Non-compete agreements 4,331 965 3,366 $ 41,730 $ 6,681 $ 35,049 As of September 30, 2016 (In Thousands) Cost Accumulated Amortization Net Book Value Customer relationships $ 10,758 $ 2,662 $ 8,096 Trade name 2,429 285 2,144 Non-compete agreements 1,061 207 854 $ 14,248 $ 3,154 $ 11,094 |
Term-loan (Tables)
Term-loan (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Term-loan Tables | |
Term loan | Balance of: September 30, 2017 Term loan $ 48,141,000 Unamortized debt discount (2,690,000 ) 45,451,000 Short term portion of term loan (3,433,000 ) Term loan $ 42,018,000 |
Subordinated Debt - Convertib28
Subordinated Debt - Convertible and Non - Convertible (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Subordinated Debt - Convertible And Non - Convertible Tables | |
Schedule of subordindated debt | Balance as of: September 30, 2017 September 30, 2016 JAX Legacy debt $ 4,185 $ 4,185 Access Data debt 1,225 2,510 Paladin debt 1,000 - 9.5% convertible debt 12,500 - JAX Legacy debt discount - (429 ) Total subordinated debt, convertible and non-convertible 18,910 6,266 Short-term portion of subordinated debt, convertible and non-convertible (1,225 ) (1,285 ) Long-term portion of subordinated debt, convertible and non-convertible $ 17,685 $ 4,981 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Equity Tables | |
Schedule of Warrants Table | Warrants (Number of Warrants in Thousands) Number of Shares Exercise Price Expiration Outstanding at September 30, 2016 997 $ 2.92 Warrants exercised (500 ) 2.00 Warrants granted - - Outstanding at September 30, 2017 497 $ 3.84 |
Stock Option Plans (Tables)
Stock Option Plans (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Stock Option Plans Tables | |
Summary of stock option activity | Year Ended September 30, (Number of Options in Thousands) 2017 2016 Number of options outstanding: Beginning of year 568 414 Granted 382 163 Exercised - - Terminated (42 ) (9 ) End of year 908 568 Number of options exercisable at end of year 408 230 Number of options available for grant at end of year 3,075 470 Weighted average option prices per share: Granted during the year $ 5.15 $ 5.17 Exercised during the year - - Terminated during the year 4.38 5.99 Outstanding at end of year 5.11 5.09 Exercisable at end of year 4.79 4.39 |
Stock option plan by exercise price range | Range of Exercise Prices Number Outstanding Weighted Average Price Number Exercisable Weighted Average Price Average Remaining Life (Years) Under $5.00 476 $ 4.00 214 $ 3.31 8.1 5.01 to 10.00 432 $ 6.37 154 $ 6.77 8.0 |
Estimated fair value of stock options granted | 2017 2016 Expected option life (years) 10 10 Expected stock price volatility 104 % 125 % Expected dividend yield % % Risk-free interest rate 2.20 % 2.20 % |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Income Taxes Tables | |
Components of provision for income taxes | Year Ended September 30, (In Thousands) 2017 2016 Current expense (benefit): Federal $ - $ - State 126 3 Total current expense (benefit): $ 126 $ 3 Deferred expense (benefit): Federal $ (5,549 ) $ - State (595 ) - Total deferred expense (benefit): $ (6,144 ) $ - Total income tax expense (benefit): $ (6,018 ) $ 3 |
Schedule of effective income tax rate | Year Ended September 30, (In Thousands) 2017 2016 Income at US Statutory Rate $ (2,853 ) $ 400 State Taxes, net of Federal benefit (633 ) 56 Tax Credits (99 ) Acquisition Related Costs 476 Statutory Rate Changes (571 ) Valuation Allowance (2,370 ) (456 ) Other 32 $ (6,018 ) $ - |
Summary of tax carryforwards | Year Ended September 30, (In Thousands) 2017 2016 Net Operating Losses $ 8,177 $ 5,272 Stock Options 881 512 Allowance for Doubtful Accounts 958 67 Accrued & Prepaid Expenses 911 48 TaxCredit Carryforwards 171 Other - 61 Total Deferred tax assets $ 11,098 $ 5,960 Intangibles $ (10,308 ) $ (1,952 ) Depreciation (110 ) - Total deferred tax liability $ (10,418 ) $ (1,952 ) Deferred tax asset (liability) $ 680 $ 4,008 Valuation allowance (1,638 ) (4,008 ) Net deferred tax asset (liability) $ (958 ) $ - |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Acquisitions Tables | |
Allocation of intangible assets | (in Thousands) $ 12,989 Assets Purchased 32,174 Liabilities Assumed 19,185 Net Liabilities Assumed 66,300 Purchase Price $ 85,485 Intangible Asset from Purchase Intangible asset detail $ 18,312 Intangible asset customer list 5,900 Intangible asset trade name 3,270 Intangible asset non-compete agreement 58,003 Goodwill $ 85,485 Intangible Asset from Purchase |
Schedule of consolidated pro-forma unaudited financial statements | Pro Forma, unaudited Year Ended September 30, 2017 Year Ended September 30, 2016 Net sales $ 189,149 $ 201,433 Cost of sales $ 119,817 $ 126,708 Operating expenses $ 68,794 $ 66,390 Net income $ (2,670 ) $ 2,679 Basic income per common share $ (0.28 ) $ 0.29 Dilutive income per common share $ (0.28 ) $ 0.28 |
Segment Data (Tables)
Segment Data (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Segment Data Tables | |
Schedule of Segment Reporting Information | Fiscal Year Ended September 30, (In Thousands) 2017 2016 Industrial Staffing Services Industrial services revenue $ 24,851 $ 21,916 Industrial services gross margin 16.5 % 13.1 % Operating income $ 1,625 $ 539 Depreciation & amortization 268 280 Accounts receivable net 3,959 3,145 Intangible assets 691 908 Goodwill 1,084 1,083 Total assets $ 9,271 $ 7,448 Professional Staffing Services Permanent placement revenue $ 14,731 $ 6,909 Placement services gross margin 100 % 100 % Professional services revenue $ 95,396 $ 54,249 Professional services gross margin 27.4 % 25.5 % Operating income $ 4,275 $ 4,407 Depreciation and amortization 3,685 1,587 Accounts receivable net 19,219 8,424 Intangible assets 34,358 10,186 Goodwill 75,509 17,507 Total assets $ 132,544 $ 38,478 Unallocated Expenses Corporate administrative expenses $ 3,285 $ 1,997 Corporate facility expenses 301 239 Stock option amortization expense 902 792 Board related expenses 38 19 Acquisition, integration and restructuring expenses 2,775 702 Total unallocated expenses $ 7,301 $ 3,749 Consolidated Total revenue $ 134,978 $ 83,074 Operating (loss) income (1,401 ) 1,197 Depreciation and amortization 3,953 1,867 Total accounts receivables net 23,178 11,569 Intangible assets 35,049 11,094 Goodwill 76,593 18,590 Total assets $ 141,815 $ 45,926 |
Description of Business (Detail
Description of Business (Details Narrative) | 12 Months Ended |
Sep. 30, 2017 | |
Description Of Business Details Narrative | |
State or Country of Incorporation | Illinois |
Year of incorporation | 1,962 |
Significant Accounting Polici35
Significant Accounting Policies and Estimates (Details Narrative) - USD ($) $ in Thousands | Nov. 14, 2017 | Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 |
Reduction of placement service revenues | $ 1,495 | $ 470 | ||
Reduction of accounts receivable | $ 997 | 997 | 60 | |
Allowance for doubtful accounts | 1,712 | 1,712 | 191 | |
Reserve for permanent placement falloffs | 997 | $ 997 | $ 60 | |
Common stock equivalents excluded from the computation of diluted earnings per share | 10,120,958 | 413,000 | ||
Common stock equivalents | 577,000 | |||
Advertising expense | $ 1,710 | $ 834 | ||
Borrowing amount | $ 56,226 | $ 56,226 | ||
Computer software [Member] | ||||
Property and equipment, useful life | 5 years | |||
Office equipment, furniture and fixtures and leasehold improvements [Member] | Minimum [Member] | ||||
Property and equipment, useful life | 2 years | |||
Office equipment, furniture and fixtures and leasehold improvements [Member] | Maximum [Member] | ||||
Property and equipment, useful life | 10 years | |||
Revolving Credit Facility [Member] | ||||
Interest rate credit agreement | 11.30% | |||
Revolving Credit Facility | $ 6,000 | |||
Credit agreement [Member] | Revolving Credit Facility [Member] | ||||
Borrowing amount | 7,476 | $ 7,476 | ||
Credit agreement [Member] | Short-term Debt [Member] | ||||
Borrowing amount | $ 73,750 | 73,750 | ||
Principal amount | $ 48,750 | |||
Revolving loans, Description | revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Companys eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021 | |||
Borrowing loan term | 4 years | |||
Terms of prepayment of term loan under agreement | Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement | |||
Amendment fees payable | $ 364 | |||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018 [Member] | ||||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans | |||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on June 1, 2018 up to and including August 31, 2018 [Member] | ||||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans | |||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on September 1, 2018 through the remainder of the Term [Member] | ||||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Total property and equipment, at cost | $ 4,690 | $ 3,961 |
Accumulated depreciation and amortization | (3,776) | (3,350) |
Property and equipment, net | $ 914 | 611 |
Computer software [Member] | ||
Useful life of property and equipment | 5 years | |
Office equipment, furniture and fixtures and leasehold improvements [Member] | ||
Total property and equipment, at cost | $ 3,243 | 2,514 |
Office equipment, furniture and fixtures and leasehold improvements [Member] | Minimum [Member] | ||
Useful life of property and equipment | 2 years | |
Office equipment, furniture and fixtures and leasehold improvements [Member] | Maximum [Member] | ||
Useful life of property and equipment | 10 years | |
Computer software [Member] | ||
Total property and equipment, at cost | $ 1,447 | $ 1,447 |
Property and Equipment (Detai37
Property and Equipment (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 426 | $ 331 |
Goodwill and Intangible Asset38
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Goodwill And Intangible Assets Details | ||
Goodwill beginning | $ 18,590 | $ 8,220 |
Acquisition of Access | 8,316 | |
Acquisition of Paladin | 2,054 | |
Acquisition of SNI Companies | 58,003 | |
Goodwill ending | $ 76,593 | $ 18,590 |
Goodwill and Intangible Asset39
Goodwill and Intangible Assets (Details 1) - USD ($) $ in Thousands | Sep. 30, 2017 | Sep. 30, 2016 |
Finite-Lived Intangible Assets [Line Items] | ||
Cost | $ 41,730 | $ 14,248 |
Accumulated Amortization | 6,681 | 3,154 |
Net Book Value | 35,049 | 11,094 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 29,070 | 10,758 |
Accumulated Amortization | 4,601 | 2,662 |
Net Book Value | 24,469 | 8,096 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 8,329 | 2,429 |
Accumulated Amortization | 1,115 | 285 |
Net Book Value | 7,214 | 2,144 |
Non-compete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 4,331 | 1,061 |
Accumulated Amortization | 965 | 207 |
Net Book Value | $ 3,366 | $ 854 |
Goodwill and Intangible Asset40
Goodwill and Intangible Assets (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Goodwill And Intangible Assets Details Narrative | ||
Amortization expense | $ 3,527 | $ 1,536 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
2,018 | 5,582 | |
2,019 | 5,586 | |
2,020 | 5,005 | |
2,021 | 4,148 | |
2,022 | 3,469 | |
Thereafter | 11,259 | |
Total | $ 35,049 | $ 11,094 |
Revolving Credit Facility (Deta
Revolving Credit Facility (Details Narrative) - USD ($) $ in Thousands | Nov. 14, 2017 | Sep. 30, 2016 | Sep. 27, 2016 | Sep. 27, 2013 | Sep. 30, 2017 | Sep. 30, 2017 | Jan. 02, 2016 |
Interest rate | 4.75% | ||||||
Borrowing amount | $ 56,226 | $ 56,226 | |||||
Fee on loan | $ 288,000 | ||||||
Revolving Credit Facility [Member] | |||||||
Interest rate credit agreement | 11.30% | ||||||
Revolving Credit Facility | $ 6,000 | ||||||
ACF FINCO I LP [Member] | |||||||
Borrower agreement | ACF FINCO I LP | ||||||
Secured revolving note | $ 6,000 | ||||||
Secured revolving note validity term | 3 years | ||||||
Secured revolving note interest rate description | The interest rate for the Note is a fluctuating rate that, when annualized, is equal to the greatest of (A) the Prime Rate plus three and one quarter percent (3.25%), (B) the LIBOR Rate plus six and one quarter percent (6.25%), and (C) six and one half percent (6.50%), with the interest paid on a monthly basis. | ||||||
ACF FINCO I LP [Member] | Short-term Debt [Member] | |||||||
Secured revolving note interest rate description | Pursuant to the Amendment, the Lender agreed (i) to decrease the annual Facility Fee (as defined in the Credit Agreement) payable by Borrower on the total Revolving Credit Limit (as defined in the Loan Agreement) to 0.75% , (ii) to allow the Borrower to make certain prepayments of amounts owed under the Amended Loan Agreement and the other loan documents on or prior to September 27, 2018, (iii) to amend the provision regarding liquidated damages payable by Borrower in the event of any early termination of the revolving credit line under the Amended Credit Agreement such that Borrower shall pay liquidated damages to Lender in an amount equal to the Revolving Credit Limit multiplied by (X) two percent (2.00%) if such prepayment, repayment, demand or acceleration occurs prior to September 28, 2017, and (Y) one percent (1.00%) if such prepayment, repayment, demand or acceleration occurs on or after September 28, 2017, (iv) to change the minimum EBITDA (as defined in the Amended Credit Agreement) thresholds required to be maintained by the Company as outlined below (v) to extend the Revolving Credit Termination Date to the earliest to occur of (a) September 27, 2018, (b) the date Lender terminates the Revolving Credit pursuant to the terms of the Amended Credit Agreement, and (c) the date on which repayment of the Revolving Credit, or any portion thereof, becomes immediately due and payable pursuant to the terms of the Amended Loan Agreement, (vi) to amend the definition of EBITDA and (vii) to change the Revolving Credit Rate to a fluctuating rate that, when annualized, is equal to the greatest of (A) the Prime Rate plus one and one half percent (1.50%), (B) the LIBOR Rate plus four and one half percent (4.50%), and (C) four and three quarters percent (4.75%). | ||||||
ACF FINCO I LP [Member] | Short-term Debt [Member] | Minimum [Member] | |||||||
Amended credit agreement range | $ 6,000 | ||||||
ACF FINCO I LP [Member] | Short-term Debt [Member] | Maximum [Member] | |||||||
Amended credit agreement range | $ 10,000 | ||||||
Credit agreement [Member] | Revolving Credit Facility [Member] | |||||||
Borrowing amount | 7,476 | 7,476 | |||||
Credit agreement [Member] | Short-term Debt [Member] | |||||||
Borrowing amount | $ 73,750 | 73,750 | |||||
Principal amount | $ 48,750 | ||||||
Revolving loans, Description | revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Companys eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021 | ||||||
Borrowing loan term | 4 years | ||||||
Terms of prepayment of term loan under agreement | Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement | ||||||
Amendment fees payable | $ 364 | ||||||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018 [Member] | |||||||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans | ||||||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on June 1, 2018 up to and including August 31, 2018 [Member] | |||||||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans | ||||||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on September 1, 2018 through the remainder of the Term [Member] | |||||||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans |
Term-loan (Details)
Term-loan (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Term-loan Details | |
Term loan | $ 48,141 |
Unamortized debt discount | (2,690) |
Total | 45,451 |
Short term portion of term loan | (3,433) |
Term loan | $ 42,018 |
Term-loan (Details Narrative)
Term-loan (Details Narrative) - USD ($) $ in Thousands | Nov. 14, 2017 | Sep. 30, 2017 | Sep. 30, 2017 |
Borrowing amount | $ 56,226 | $ 56,226 | |
2,018 | 1,225 | 1,225 | |
2,019 | 0 | 0 | |
2,020 | 1,000 | 1,000 | |
2,021 | 0 | 0 | |
Discount fee Payable | 901 | 901 | |
Finder’s fee | 1,597 | 1,597 | |
Loan fees paid | 3,073 | 3,073 | |
Debt discount | $ 492 | 492 | |
Revolving Credit Facility [Member] | |||
Interest rate credit agreement | 11.30% | ||
Credit agreement [Member] | Revolving Credit Facility [Member] | |||
Borrowing amount | $ 7,476 | 7,476 | |
Closing fee | 500 | 500 | |
Credit agreement [Member] | term-loans [Member] | |||
Borrowing amount | 48,750 | 48,750 | |
2,018 | 3,636 | 3,636 | |
2,019 | 7,728 | 7,728 | |
2,020 | 8,337 | 8,337 | |
2,021 | 28,440 | 28,440 | |
Closing fee | 75 | 75 | |
Credit agreement [Member] | Short-term Debt [Member] | |||
Borrowing amount | $ 73,750 | 73,750 | |
Principal amount | $ 48,750 | ||
Revolving loans, Description | revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Companys eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021 | ||
Borrowing loan term | 4 years | ||
Terms of prepayment of term loan under agreement | Pursuant to the Second Amendment the Borrowers agreed, among other things, to use commercially reasonable efforts to prepay, or cause to be prepaid, $10,000,000 in principal amount of Advances (as defined in the Credit Agreement) outstanding, which amount shall be applied to prepay the Term Loans in accordance with the applicable terms of the Credit Agreement | ||
Amendment fees payable | $ 364 | ||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018 [Member] | |||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on the Amendment No. 2 Effective Date up to and including May 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.75 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.75 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans | ||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on June 1, 2018 up to and including August 31, 2018 [Member] | |||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on June 1, 2018 up to and including August 31, 2018, (i) so long as the Senior Leverage Ratio is equal to or greater than 4.00 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 4.00 to 1.00, an amount equal to 9.75% for Advances consisting of Domestic Rate Loans and 10.75% for Advances consisting of LIBOR Rate Loans | ||
Credit agreement [Member] | Short-term Debt [Member] | Period commencing on September 1, 2018 through the remainder of the Term [Member] | |||
Description for terms of loans under agreement | The loans under the credit agreement for the period commencing on September 1, 2018 through the remainder of the Term, (i) so long as the Senior Leverage Ratio is equal to or greater than 3.50 to 1.00, an amount equal to 14.00% for Advances consisting of Domestic Rate Loans and 15.00% for Advances consisting of LIBOR Rate Loans and (ii) so long as the Senior Leverage Ratio is less than 3.50 to 1.00, an amount equal to 9.00% for Advances consisting of Domestic Rate Loans and 10.00% for Advances consisting of LIBOR Rate Loans | ||
Credit agreement [Member] | Fixed Charge Coverage Ratio [Member] | |||
Covenant ratio description | The Company shall cause to be maintained as of the last day of each fiscal quarter, a Fixed Charge Coverage Ratio for itself and its subsidiaries on a Consolidated Basis of not less the amount set forth in the Credit Agreement of 1.25 to 1.0 | ||
Credit agreement [Member] | Senior Leverage Ratio [Member] | |||
Covenant ratio description | The Company shall cause to be maintained as of the last day of each fiscal quarter, a Senior Leverage Ratio for itself and its subsidiaries on a Consolidated Basis of not greater than the amount set forth in the Credit Agreement for each fiscal quarter, in each case, measured on a trailing four (4) quarter basis as set in the agreement, which ranges from 5.25 to 1.0 to 2.5 to 1.0 over the term of the Credit Agreement | ||
Credit agreement [Member] | Minimum [Member] | |||
EBITDA | $ 11,000 | ||
Credit agreement [Member] | Maximum [Member] | |||
EBITDA | $ 14,000 |
Subordinated Debt (Details)
Subordinated Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Sep. 30, 2016 |
Total subordinated debt, convertible and non-convertible | $ 18,910 | $ 6,266 |
Short-term portion of subordinated debt, convertible and non-convertible | (1,225) | (1,285) |
Long-term portion of subordinated debt, convertible and non-convertible | 1,000 | 4,981 |
JAX Legacy debt [Member] | ||
Total subordinated debt, convertible and non-convertible | 4,185 | |
Access Data debt [Member] | ||
Total subordinated debt, convertible and non-convertible | 1,225 | |
Paladin debt [Member] | ||
Total subordinated debt, convertible and non-convertible | 1,000 | |
9.5% convertible debt [Member] | ||
Total subordinated debt, convertible and non-convertible | 12,500 | |
JAX Legacy debt discount [Member] | ||
Total subordinated debt, convertible and non-convertible | (429) | |
JAX Legacy debt [Member] | ||
Total subordinated debt, convertible and non-convertible | 4,185 | |
Access Data debt [Member] | ||
Total subordinated debt, convertible and non-convertible | 2,510 | |
Paladin debt [Member] | ||
Total subordinated debt, convertible and non-convertible |
Subordinated Debt (Details Narr
Subordinated Debt (Details Narrative) $ / shares in Units, $ in Thousands | Oct. 04, 2017USD ($) | Apr. 03, 2017USD ($)$ / sharesshares | Oct. 04, 2015USD ($)Integer | Oct. 02, 2015USD ($)shares | Jan. 20, 2017USD ($) | Sep. 30, 2017USD ($)shares | Sep. 30, 2016USD ($)shares | Oct. 04, 2016USD ($) |
Balloon payment of principal | $ 45,451 | |||||||
Amortization of debt discount | 107 | |||||||
Loss on extinguishment of debt | 322 | |||||||
Repayments of debt | ||||||||
2,018 | 1,225 | |||||||
2,019 | 0 | |||||||
2,020 | 1,000 | |||||||
2,021 | 0 | |||||||
2,022 | 16,685 | |||||||
Total | $ 18,910 | |||||||
Common stock, shares issued | shares | 9,879 | 9,379 | ||||||
Issuance of stock for extinguishment of debt | $ 385 | |||||||
Addendum [Member] | ||||||||
Cash paid to Sellers | $ 250 | |||||||
Stock Purchase Agreement [Member] | ||||||||
Note issued | $ 1,000 | |||||||
Note payable interest rate | 5.50% | |||||||
Data Consulting Corporation [Member] | ||||||||
Note payable interest rate | 5.50% | |||||||
Monthly payment principal and interest | $ 28 | $ 57 | ||||||
Payment of principal | 1,202 | $ 1,000 | ||||||
Subscription Agreement [Member] | ||||||||
Note issued | $ 4,185 | |||||||
Maturity date of note | Oct. 2, 2018 | |||||||
Fees paid in shares | shares | 3,000 | |||||||
Fees paid in cash | $ 25 | |||||||
Value of fees paid shares | 23 | |||||||
Legal fees | 33 | |||||||
Balloon payment of principal | $ 647 | |||||||
10% Convertible Subordinated Note [Member] | ||||||||
Note issued | $ 4,185 | |||||||
Maturity date of note | Oct. 3, 2021 | |||||||
Repayments of debt | ||||||||
Common stock conversion price | $ / shares | $ 5.83 | |||||||
Convertible consecutive trading days | 20 days | |||||||
Redemption price | 100.00% | |||||||
Redeemed principal amount | 10.00% | |||||||
Common stock, shares issued | shares | 77,775 | |||||||
10% Convertible Subordinated Note [Member] | On December 13, 2017 [Member] | ||||||||
Repayments of debt | ||||||||
Common stock, shares issued | shares | 133,655 | |||||||
9.5% Convertible Subordinated Note [Member] | ||||||||
Note issued | $ 12,500 | |||||||
Maturity date of note | Oct. 3, 2021 | |||||||
Note interest description | Interest on the 9.5% Notes accrues at the rate of 9.5% per annum and shall be paid quarterly in arrears on June 30, September 30, December 31 and March 31, beginning on June 30, 2017, on each conversion date with respect to the 9.5% Notes (as to that principal amount then being converted), and on the Maturity Date (each such date, an "Interest Payment Date"). | |||||||
Note payable interest rate | 9.50% | |||||||
Repayments of debt | ||||||||
Common stock conversion price | $ / shares | $ 5.83 | |||||||
William Daniel Dampier and Carol Lee Dampier [Member] | ||||||||
Repayments of debt | ||||||||
Amended and restated non-negotiable promissory note | $ 1,202,405 | |||||||
Original principal amount | $ 3,000 | |||||||
Number of installments | Integer | 12 | |||||||
Repayable amount per installments | $ 107,675 |
Equity (Details)
Equity (Details) - $ / shares | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Number of Shares Outstanding | ||
Outstanding, Beginning | 568,000 | 414,000 |
Warrants exercised | ||
Outstanding, Ending | 908,000 | 568,000 |
Expiration Exercise Price Outstanding | ||
Outstanding, Beginning | $ 5.09 | |
Warrants exercised | ||
Warrants granted | 5.15 | 5.17 |
Outstanding, Ending | $ 5.11 | $ 5.09 |
Warrant [Member] | ||
Number of Shares Outstanding | ||
Outstanding, Beginning | 997,000 | |
Warrants exercised | (500,000) | |
Warrants granted | ||
Outstanding, Ending | 497,000 | 997,000 |
Expiration Exercise Price Outstanding | ||
Outstanding, Beginning | $ 2.92 | |
Warrants exercised | 2 | |
Warrants granted | ||
Outstanding, Ending | $ 3.84 | $ 2.92 |
Equity (Details Narrative)
Equity (Details Narrative) $ / shares in Units, $ in Thousands | Apr. 04, 2016USD ($)$ / sharesshares | Oct. 04, 2015shares | Oct. 02, 2015USD ($)shares | Mar. 31, 2017USD ($)Integershares | Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2016USD ($)$ / sharesshares |
Share based compensation expense | $ 902 | $ 793 | ||||
Issuance of common stock for contingent consideration, Amount | $ 544 | |||||
Exercise of stock warrants, Amount | $ 1,000 | |||||
Exercise of stock warrants, Shares | shares | 408,000 | |||||
Options granted | shares | 382,000 | |||||
Stock option weighted average price | $ / shares | $ 4.79 | $ 4.39 | ||||
Stock option average expected life | 10 years | |||||
Stock option risk-free interest | 2.20% | 2.20% | ||||
Stock granted value share-based compensation | $ 1,864 | |||||
Unrecognized compensation expense | $ 2,178 | |||||
Stock price volatility | 104.00% | |||||
Risk-free interest rate | 2.20% | |||||
Exercisable warrants | shares | 497,000 | |||||
Outstanding, Ending | $ / shares | $ 5.11 | $ 5.09 | ||||
Expiration dates | ranging from February 7, 2020 to April 1, 2025 | |||||
Weighted average exercise price | $ / shares | $ 3.84 | $ 2.92 | ||||
Minimum [Member] | ||||||
Stock option weighted average price | $ / shares | 4.02 | |||||
Maximum [Member] | ||||||
Stock option weighted average price | $ / shares | $ 5.94 | |||||
Common Stock Shares | ||||||
Issuance of common stock for acquisition, Shares | shares | 328 | |||||
Issuance of common stock for contingent consideration related to the acquisition of Access Data Consulting Corporation, Shares | shares | 123,000 | 123 | ||||
Exercise of stock warrants, Shares | shares | 500,000 | 500 | ||||
JAX Legacy [Member] | ||||||
Shares issued for debt, Shares | shares | 95,000 | |||||
Shares issued for debt, Amount | $ 589 | |||||
Access Data Consulting Corporation [Member] | ||||||
Issuance of common stock for acquisition, Shares | shares | 328,000 | |||||
Issuance of common stock for contingent consideration, Amount | $ 544 | |||||
Closing stock price per share | $ / shares | $ 4.44 | |||||
Guarantee price | $ 2,000 | |||||
Related Party [Member] | ||||||
Exercise of stock warrants, Amount | $ 1,000 | |||||
Number of related party | Integer | 2 |
Stock Option Plans (Details)
Stock Option Plans (Details) - $ / shares | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Number of options outstanding: | ||
Outstanding, Beginning | 568,000 | 414,000 |
Granted | 382,000 | 163,000 |
Exercised | ||
Terminated | (42,000) | (9,000) |
Outstanding, Ending | 908,000 | 568,000 |
Number of options exercisable at end of year | 408,000 | 230,000 |
Number of options available for grant at end of year | 3,075,000 | 470,000 |
Weighted average option prices per share: | ||
Granted during the year | $ 5.15 | $ 5.17 |
Exercised during the year | ||
Terminated during the year | 4.38 | 5.99 |
Outstanding, Ending | 5.11 | 5.09 |
Exercisable at end of year | $ 4.79 | $ 4.39 |
Stock Option Plans (Details 1)
Stock Option Plans (Details 1) | 12 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Average Remaining Life (Years) | 10 years |
Under $5.00 [Member] | |
Number Outstanding | shares | 476,000 |
Weighted Average Price | $ / shares | $ 4 |
Number Exercisable | shares | 214,000 |
Weighted Average Price | $ / shares | $ 3.31 |
Average Remaining Life (Years) | 8 years 1 month 6 days |
5.01 to 10.00 [Member] | |
Number Outstanding | shares | 432,000 |
Weighted Average Price | $ / shares | $ 6.37 |
Number Exercisable | shares | 154,000 |
Weighted Average Price | $ / shares | $ 6.77 |
Average Remaining Life (Years) | 8 years |
Stock Option Plans (Details 2)
Stock Option Plans (Details 2) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Stock Option Plans Detail 2 | ||
Expected option life (years) | 10 years | 10 years |
Expected stock price volatility | 104.00% | 125.00% |
Expected dividend yield | 0.00% | 0.00% |
Risk-free interest rate | 2.20% | 2.20% |
Stock Option Plans (Details Nar
Stock Option Plans (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Aug. 16, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2009 | |
Aggregate intrinsic value of stock options exercised and outstanding | $ 461 | $ 303 | ||
Estimated average fair value of stock options grant | $ 4.63 | $ 7 | ||
Unrecognized compensation expense related to unvested stock options outstanding | $ 2,178 | |||
Weighted average vesting period of unvested stock options | 3 years 6 months | |||
Share based compensation expense | $ 902 | $ 793 | ||
Options available for grant | 3,075,000 | 470,000 | ||
Restated 1997 Stock Option Plan [Member] | ||||
Options available for grant | 592,000 | |||
Employee Stock Option [Member] | ||||
Expiration period of stock option from the date of grant | 10 years | |||
2013 Incentive Stock Plan [Member] | ||||
Shares reserved for future issuance description | increase the number of shares available for issuance pursuant to awards granted under the Plan from 1,000,000 shares to 4,000,000 shares |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Current expense (benefit): | ||
Federal | ||
State | 126 | 3 |
Total current expense (benefit): | 126 | 3 |
Deferred expense (benefit): | ||
Federal | (5,549) | |
State | (595) | |
Total deferred expense (benefit): | (6,144) | |
Total income tax expense (benefit): | $ (6,018) | $ 3 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Income Taxes Details 1 | ||
Income at US Statutory Rate | $ (2,853) | $ 400 |
State Taxes, net of Federal benefit | (633) | 56 |
Tax Credits | (99) | |
Acquisition Related Costs | 476 | |
Statutory Rate Changes | (571) | |
Valuation allowance | (2,370) | (456) |
Other | 32 | |
Provision for income taxes | $ (6,018) | $ 0 |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) $ in Thousands | Sep. 30, 2017 | Sep. 30, 2016 |
Income Taxes Details 2 | ||
Net Operating Losses | $ 8,177 | $ 5,272 |
Stock Options | 881 | 512 |
Allowance for Doubtful Accounts | 958 | 67 |
Accrued & Prepaid Expenses | 911 | 48 |
TaxCredit Carryforwards | 171 | |
Other | 61 | |
Total Deferred tax assets | 11,098 | 5,960 |
Intangibles | (10,308) | (1,952) |
Depreciation | (110) | |
Total deferred tax liability | (10,418) | (1,952) |
Deferred tax asset (liability) | 680 | 4,008 |
Valuation allowance | (1,638) | (4,008) |
Net deferred tax asset (liability) | $ (958) |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) $ in Thousands | 12 Months Ended |
Sep. 30, 2017USD ($) | |
Federal [Member] | |
Operating loss carryforwards | $ 21,633 |
Operating loss carryforwards expiration period | 2,028 |
State [Member] | |
Operating loss carryforwards | $ 22,949 |
Operating loss carryforwards expiration period | 2,022 |
Acquisitions (Details)
Acquisitions (Details) - SNI [Member] $ in Thousands | Sep. 30, 2017USD ($) |
Assets Purchased | $ 12,989 |
Liabilities Assumed | 32,174 |
Net Liabilities Assumed | 19,185 |
Purchase Price | 66,300 |
Intangible Asset from Purchase | $ 85,485 |
Acquisitions (Details 1)
Acquisitions (Details 1) - SNI [Member] $ in Thousands | Sep. 30, 2017USD ($) |
Intangible asset customer list | $ 18,312 |
Intangible asset trade name | 5,900 |
Intangible asset non-compete agreement | 3,270 |
Goodwill | 58,003 |
Intangible Asset from Purchase | $ 85,485 |
Acquisitions (Details 2)
Acquisitions (Details 2) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Net sales | $ 134,978 | $ 83,074 |
Net income | $ (2,372) | $ 1,173 |
Dilutive income per common share | $ (0.25) | $ 0.12 |
Pro Forma [Member] | ||
Net sales | $ 189,149 | $ 201,433 |
Cost of sales | 119,817 | 126,708 |
Operating expenses | 68,794 | 66,390 |
Net income | $ (2,670) | $ 2,679 |
Basic income per common share | $ (0.28) | $ 0.29 |
Dilutive income per common share | $ (0.28) | $ 0.28 |
Acquisitions (Details Narrative
Acquisitions (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Oct. 04, 2015 | Dec. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Current liabilities remaining amount | $ 25 | $ 14 | ||
Net sales | 134,978 | 83,074 | ||
Net income (loss) | $ (2,372) | 1,173 | ||
Goodwill [Member] | Minimum [Member] | ||||
Intangible asset useful life | 5 years | |||
Goodwill [Member] | Maximum [Member] | ||||
Intangible asset useful life | 10 years | |||
SNI [Member] | ||||
Outstanding stock percent | 100.00% | |||
Fair value adjustment of definite lived intangible assets | $ 2,000 | 107 | ||
Business acquisition date of agreement | Mar. 31, 2017 | |||
Business merger consideration | $ 66,300 | |||
Net working capital | 9,200 | |||
Cash Payment to Stockholders | $ 23,000 | |||
Convertible Subordinated Notes issued, Percent | 9.50% | |||
Convertible Subordinated Notes, Amount | $ 12,500 | |||
Working Capital Reserve Fund | 1,500 | |||
Additional deferred tax liability | 11,000 | |||
Net sales | 54,170 | 113,460 | ||
Net income (loss) | 2,606 | 1,227 | ||
Access [Member] | ||||
Mutual tax election paid | 350 | |||
Current liabilities remaining amount | $ 150 | |||
Paladin [Member] | ||||
Outstanding stock percent | 100.00% | |||
Purchase price | $ 2,625 | |||
Stock Purchase agreement date | Jan. 1, 2016 | |||
SNIH Stockholders [Member] | Series B Convertible Preferred Stock [Member] | ||||
Preferred stock shares reserved for future issuance | 5,926,000 | |||
Preferred stock share reserved for future issuance value | $ 29,300 | |||
Share price | $ 4.95 | |||
Pro Forma [Member] | ||||
Net sales | $ 189,149 | 201,433 | ||
Net income (loss) | (2,670) | 2,679 | ||
Pro Forma [Member] | SNI [Member] | ||||
Fair value adjustment of definite lived intangible assets | 2,100 | |||
Net sales | 17,572 | 14,697 | ||
Net income (loss) | 403 | 842 | ||
Pro Forma [Member] | SNI [Member] | Acquisition [Member] | ||||
Net sales | 49,710 | |||
Net income (loss) | $ 741 | |||
Access [Member] | ||||
Outstanding stock percent | 100.00% | |||
Purchase price | $ 16,168 | |||
Stock Purchase agreement date | Oct. 4, 2015 | |||
Mutual tax election expenses | $ 600 | |||
Paladin [Member] | ||||
Fair value adjustment of definite lived intangible assets | 4,100 | |||
Net sales | 4,785 | |||
Net income (loss) | $ 842 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Commitments And Contingencies Details Narrative | ||
Rent expense | $ 2,600 | $ 1,114 |
2,018 | 2,950 | |
2,019 | 2,313 | |
2,020 | 1,219 | |
2,021 | 341 | |
2,022 | 203 | |
thereafter | 53 | |
Total | $ 7,079 | |
Purchase Commitment, Description | The Company retained approximately $1,500,000 of the purchase price, in cash, as a guarantee from the sellers that the SNI Companies would provide a minimum of $9,200,000 of working capital, as defined in the purchase agreement. As of June 30, 2017, the Company and the sellers of the SNI Companies have not agreed to the provided working capital and the amount continues to be retained by the Company. |
Mezzanine Equity (Details Narra
Mezzanine Equity (Details Narrative) - $ / shares | Sep. 30, 2017 | Apr. 03, 2017 | Sep. 30, 2016 |
Preferred stock, shares issued | 5,926 | 5,926 | |
Preferred stock, value per shares | |||
Series B Convertible Preferred Stock [Member] | SNI [Member] | |||
Preferred stock, shares issued | 5,926,000 | ||
Preferred stock, value per shares | $ 4.86 |
Segment Data (Details)
Segment Data (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating income | $ (1,401) | $ 1,197 |
Depreciation and amortization | 3,953 | 1,867 |
Accounts receivable - net | 2,393 | 100 |
Intangible asset | 35,049 | 11,094 |
Total assets | 141,815 | 45,926 |
Industrial Staffing Services [Member] | ||
Industrial services revenue | $ 24,851 | $ 21,916 |
Industrial services gross margin | 16.50% | 13.10% |
Operating income | $ 1,625 | $ 539 |
Depreciation and amortization | 268 | 280 |
Accounts receivable - net | 3,959 | 3,145 |
Intangible asset | 691 | 908 |
Goodwill | 1,084 | 1,083 |
Total assets | 9,271 | 7,448 |
Professional Staffing Services [Member] | ||
Operating income | 4,275 | 4,407 |
Depreciation and amortization | 3,685 | 1,587 |
Accounts receivable - net | 19,219 | 8,424 |
Intangible asset | 34,358 | 10,186 |
Goodwill | 75,509 | 17,507 |
Total assets | 132,544 | 38,478 |
Permanent placement revenue | $ 14,731 | $ 6,909 |
Placement services gross margin | 100.00% | 100.00% |
Professional services revenue | $ 95,396 | $ 54,249 |
Professional services gross margin | 27.40% | 25.50% |
Unallocated Expenses [Member] | ||
Corporate administrative expenses | $ 3,285 | $ 1,997 |
Corporate facility expenses | 301 | 239 |
Stock option amortization expense | 902 | 792 |
Board related expenses | 38 | 19 |
Acquisition, integration and restructuring expenses | 2,775 | 702 |
Total unallocated expenses | 7,301 | 3,749 |
Consolidated [Member] | ||
Operating income | (1,401) | 1,197 |
Depreciation and amortization | 3,953 | 1,867 |
Accounts receivable - net | 23,178 | 11,569 |
Intangible asset | 35,049 | 11,094 |
Goodwill | 76,593 | 18,590 |
Total assets | 141,815 | 45,926 |
Total revenue | $ 134,978 | $ 83,074 |
Segment Data (Details Narrative
Segment Data (Details Narrative) | 12 Months Ended |
Sep. 30, 2017Integer | |
Segment Data Details Narrative | |
Number of reportable segments | 2 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) $ in Thousands | Dec. 12, 2017 | Dec. 26, 2017 |
Jax Legacy Note [Member] | ||
Debt conversion converted instrument, shares issued | 135,655 | |
Debt conversion converted instrument, amount | $ 595 | |
Mr. Bajalia [Member] | ||
Base salary | $ 270 | |
Mr. Bajalia [Member] | Maximum [Member] | ||
Annual bonus percent | 100.00% | |
Mr. Bajalia [Member] | 2013 Stock Incentive Plan [Member] | ||
Common stock restricted shares | 500,000 | |
Description of cliff vest | These shares shall cliff vest 20% per year of service |