Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2018 | Aug. 09, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | GEE Group Inc. | |
Entity Central Index Key | 40,570 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
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 | 10,783,457 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
CURRENT ASSETS: | ||
Cash | $ 2,637 | $ 2,785 |
Accounts receivable, less allowances (June - $897 and September - $1,712) | 21,166 | 23,178 |
Other current assets | 1,853 | 3,014 |
Total current assets | 25,656 | 28,977 |
Property and equipment, net | 850 | 914 |
Other long-term assets | 400 | 282 |
Goodwill | 76,593 | 76,593 |
Intangible assets, net | 30,862 | 35,049 |
TOTAL ASSETS | 134,361 | 141,815 |
CURRENT LIABILITIES: | ||
Revolving credit facility | 10,200 | 7,904 |
Acquisition deposit for working capital guarantee | 1,500 | 1,500 |
Accrued interest | 1,510 | 2,175 |
Accounts payable | 2,030 | 3,243 |
Accrued compensation | 5,188 | 7,394 |
Other current liabilities | 385 | 515 |
Short-term portion of subordinated debt | 419 | 1,225 |
Short-term portion of term-note, net of discount | 6,551 | 3,433 |
Total current liabilities | 27,783 | 27,389 |
Deferred rent | 400 | 334 |
Deferred taxes | 1,248 | 958 |
Term-loan, net of debt discounts | 37,364 | 42,018 |
Subordinated debt | 1,000 | 1,000 |
Subordinated convertible debt | 16,685 | 16,685 |
Other long-term liabilities | 18 | 35 |
Total long-term liabilities | 56,715 | 61,030 |
Commitments and contingencies | ||
SHAREHOLDERS' EQUITY | ||
Common stock, no-par value; authorized - 200,000 shares; issued and outstanding - 10,609 and 9,879 at June 30, 2018 and September 30, 2017, respectively | ||
Additional paid in capital | 43,085 | 39,517 |
Accumulated deficit | (22,010) | (15,454) |
Total shareholders' equity | 21,075 | 24,063 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 134,361 | 141,815 |
Series A Preferred Stock | ||
CURRENT LIABILITIES: | ||
Preferred stock | ||
Series B Preferred Stock | ||
CURRENT LIABILITIES: | ||
Preferred stock | $ 28,788 | $ 29,333 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
CURRENT ASSETS: | ||
Accounts receivable, allowances | $ 897 | $ 1,712 |
SHAREHOLDERS' EQUITY | ||
Preferred stock, par value | ||
Common stock, par value | ||
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 10,609,000 | 9,879,000 |
Common stock, shares outstanding | 10,609,000 | 9,879,000 |
Series A Preferred Stock | ||
SHAREHOLDERS' EQUITY | ||
Preferred stock, share authorized | 160,000 | 160,000 |
Preferred stock, share issued | ||
Preferred stock, outstanding | ||
Series B Preferred Stock | ||
SHAREHOLDERS' EQUITY | ||
Preferred stock, share authorized | 5,950,000 | 5,950,000 |
Preferred stock, share issued | 5,816,000 | 5,926,000 |
Preferred stock, outstanding | 5,816,000 | 5,926,000 |
Liquidation value | $ 28,265 | $ 28,800 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
NET REVENUES: | ||||
Contract staffing services | $ 33,879 | $ 40,100 | $ 107,860 | $ 80,046 |
Direct hire placement services | 6,388 | 5,969 | 17,496 | 8,578 |
NET REVENUES | 40,267 | 46,069 | 125,356 | 88,624 |
Cost of contract services | 25,546 | 29,015 | 81,235 | 60,472 |
GROSS PROFIT | 14,721 | 17,054 | 44,121 | 28,152 |
Selling, general and administrative expenses | 12,111 | 15,546 | 35,839 | 24,852 |
Acquisition, integration and restructuring expenses | 514 | 2,206 | 1,712 | 2,306 |
Depreciation expense | 92 | 178 | 287 | 328 |
Amortization of intangible assets | 1,409 | 1,570 | 4,199 | 2,308 |
INCOME (LOSS) FROM OPERATIONS | 595 | (2,446) | 2,084 | (1,642) |
Loss on extinguishment of debt | 994 | 994 | ||
Interest expense | 2,889 | 2,378 | 8,381 | 3,130 |
LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE | (2,294) | (5,818) | (6,297) | (5,766) |
Income tax benefit (expense) | 407 | (202) | (259) | (332) |
NET LOSS | (1,887) | (6,020) | (6,556) | (6,098) |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ (1,887) | $ (6,020) | $ (6,556) | $ (6,098) |
NET LOSS PER SHARE - BASIC AND DILUTED | $ (0.18) | $ (0.61) | $ (0.64) | $ (0.64) |
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC AND DILUTED | 10,526,000 | 9,879,000 | 10,177,000 | 9,546,000 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands | Common Stock Shares | Additional Paid In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Sep. 30, 2016 | $ 37,615 | $ (13,082) | $ 24,533 | |
Beginning Balance, Shares at Sep. 30, 2016 | 9,379,000 | |||
Amortization of stock option expense | 902 | 902 | ||
Exercise of stock warrants, Amount | 1,000 | 1,000 | ||
Exercise of stock warrants, Shares | 500,000 | |||
Net loss | (2,372) | (2,372) | ||
Ending Balance, Amount at Sep. 30, 2017 | 39,517 | (15,454) | 24,063 | |
Ending Balance, Shares at Sep. 30, 2017 | 9,879,000 | |||
Issuance of stock for interest, Shares | 620,000 | |||
Issuance of stock for interest, Amount | $ 1,995 | 1,995 | ||
Amortization of stock option expense | 1,028 | 1,028 | ||
Conversion of Preferred B stock to common stock, Shares | 110,000 | |||
Conversion of Preferred B stock to common stock, Amount | $ 545 | 545 | ||
Net loss | (6,556) | (6,556) | ||
Ending Balance, Amount at Jun. 30, 2018 | $ 43,085 | $ (22,010) | $ 21,075 | |
Ending Balance, Shares at Jun. 30, 2018 | 10,609,000 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (6,556) | $ (6,098) |
Adjustments to reconcile net loss to cash provided by (used in) operating activities: | ||
Depreciation and amortization | 4,486 | 2,636 |
Stock option expense | 1,028 | 640 |
Provision for doubtful accounts | (815) | 1,724 |
Deferred income taxes | 290 | |
Amortization of debt discount and non cash extinguishment of debt | 576 | 1,006 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,827 | (3,458) |
Acquisition deposit for working capital guarantee | 1,500 | |
Accrued interest | 1,332 | 1,700 |
Accounts payable | (1,213) | (1,006) |
Accrued compensation | (2,206) | 251 |
Other current items, net | 1,016 | 278 |
Long-term liabilities | (67) | (16) |
Net cash provided by (used in) operating activities | 698 | (843) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of property and equipment | (224) | (79) |
Acquisition payments, net of cash acquired | (25,256) | |
Net cash used in investing activities | (224) | (25,335) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on the debt related to acquisitions | (806) | (1,219) |
Payments on term loan | (2,112) | (19,951) |
Proceeds from exercise of stock warrants | 1,000 | |
Payments on capital lease | (17) | |
Net proceeds from short-term debt | 45,676 | |
Net proceeds from revolving credit | 2,296 | 1,015 |
Net cash provided by (used in) financing activities | (622) | 26,504 |
Net change in cash | (148) | 326 |
Cash at beginning of period | 2,785 | 2,528 |
Cash at end of period | 2,637 | 2,854 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 6,435 | 1,122 |
Non-cash financing activities | ||
Stock paid for interest on subordinated note | 1,610 | |
Stock paid for fees in connection with subordinated note | 385 | |
Conversion of preferred to common | 545 | |
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 | 9 Months Ended |
Jun. 30, 2018 | |
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 and industrial 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 | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
2. Significant Accounting Policies and Estimates | The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2017 as filed on December 28, 2017. Liquidity The Company experienced significant net losses for its most recent fiscal year ended September 30, 2017, and for the first nine-months of 2018. Management has implemented a strategy which includes cost reductions and 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. As explained more fully in Note 6, the Company and its subsidiaries, as borrowers, entered into a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) after the close of business on March 31, 2017. 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 April 3, 2017, 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, as more fully disclosed in Note 11. Amounts borrowed under the Credit Agreement also may be used by the Company to partially fund capital expenditures, provide for on-going working capital needs and general corporate needs, and to fund future acquisitions subject to certain customary conditions of the lenders. As of June 30, 2018, the Company had cash of approximately $2,637,000, which was a decrease of approximately $148,000 from approximately $2,785,000 at September 30, 2017. Negative working capital at June 30, 2018 was approximately $2,127,000, as compared to working capital of approximately $1,588,000 for September 30, 2017. The net loss for the nine months ended June 30, 2018, was approximately $6,556,000. Management believes that the future cash flow from operations and the availability under the Revolving Credit Facility will provide sufficient liquidity for the next 12 months. Principles of Consolidation The unaudited condensed 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 occur in a subsequent period, the Company will recognize those differences when they become 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 unaudited condensed consolidated statements of operations as a reduction of placement service revenues and were approximately $ 1,562,000 and $1,515,000 for the nine-month periods ended June 30, 2018 and 2017, respectively. Expected future falloffs and refunds are reflected in the unaudited condensed consolidated balance sheet as a reduction of accounts receivable and were approximately $342,000 as of June 30, 2018 and $997,000 as of September 30, 2017, 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 June 30, 2018 and September 30, 2017, there were no cash equivalents. In some cases, the Company maintains cash on deposit in financial institutions in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. The Company maintains its deposit accounts in a large, national, financial institution and has never experienced any losses related to these balances. Accounts Receivable The Company extends credit to customers based on evaluation of their financial condition and ability to pay the Company in accordance with established 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 services 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 $897,000 is considered necessary as of June 30, 2018 and $1,712,000 at September 30, 2017, respectively. The Company charges uncollectible accounts against the allowance once the invoices are deemed unlikely to be collectible. The reserve includes the $342,000 reserve for permanent placement falloffs considered necessary as of June 30, 2018 and $997,000 as of September 30, 2017, 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. Leasehold improvements are amortized over the shorter of the lease or useful life. 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 nine-months ended June 30, 2018 and 2017. 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 values of the Company’s long-term liabilities are believed to approximate their fair value based on level 3 inputs. The fair value of the Company’s long-lived assets, including goodwill and other intangible assets, are subject to measurement on a non-recurring basis using level 3 inputs. 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 or preferred stock 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. There were approximately 10,513,000 and 10,902,000 of common stock equivalents excluded for the three and nine months ended June 30, 2018, respectively, (which include common share equivalents of preferred stock, convertible debt, warrants and options) because their effect is anti-dilutive. There were approximately 10,111,000 and 3,743,000 of common stock equivalents excluded for the three and nine months ended June 30, 2017, respectively, (which include common share equivalents of preferred stock, convertible debt, warrants and options) because their effect is anti-dilutive. Advertising Expenses Most of the Company's advertising expense budget is used to support the Company's business consisting of print and internet media, with expenses recorded as they are incurred and are included in selling, general and administrative expenses in the unaudited condensed consolidated financial statements. Advertising expense was approximately $572,000 and $588,000, for the three months ended June 30, 2018 and 2017, respectively, and approximately $1,737,000 and $1,092,000, for the nine months ended June 30, 2018 and 2017, respectively. Intangible Assets Intangible assets include customer relationships, non-compete agreements and trade names and were recorded at their estimated fair value at the date of acquisition. The trade names are amortized on a straight-line basis over the estimated useful life of 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 of three and five years, which is the term of the non-compete agreement. Impairment of Long-lived Assets The Company records an impairment of long-lived assets used in operations 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 nine months ended June 30, 2018 and 2017. 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 and restricted stock, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options or restricted stock. 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. 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 bases 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 June 30, 2018 and September 30, 2017, no material 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 three and nine months ended June 30, 2017 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 entirely 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 | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
3. Recent Accounting Pronouncements | On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 new standard is effective for the Company beginning October 1, 2018. The Company is in the process of evaluating the impact of adoption of this guidance on its financial statements. 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 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 unit’s 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. In June 2018, the FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting (Topic 718)” that expands the scope to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Early adoption is permitted. The Company does not anticipate the adoption of ASU 2018-07 will have a material impact on the Company's financial condition or results of operations. No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future financial statements. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
4. Property and Equipment | Property and equipment, net consisted of the following: (in thousands) June 30, 2018 September 30, 2017 Computer software $ 1,447 $ 1,447 Office equipment, furniture and fixtures and leasehold improvements 3,241 3,243 Total property and equipment, at cost 4,688 4,690 Accumulated depreciation and amortization (3,838 ) (3,776 ) Property and equipment, net $ 850 $ 914 Depreciation expense for three months ended June 30, 2018 and 2017 was approximately $92,000 and $178,000, respectively, and for the nine months ended June 30, 2018 and 2017 was approximately $287,000 and $328,000, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
5. Goodwill and Intangible Assets | Goodwill The following table sets forth activity in goodwill from September 2016 through June 30, 2018. See Note 11 for details of acquisitions that occurred during the year ended September 30, 2017. (in thousands) Goodwill as of September 30, 2016 $ 18,590 Acquisition of SNI Companies 58,003 Goodwill as of September 30, 2017 $ 76,593 Goodwill as of June 30, 2018 $ 76,593 During the nine months ended June 30, 2018 and the year ended September 30, 2017 the Company did not record any impairment of goodwill. Intangible Assets June 30,2018 September 30,2017 (in thousands) Cost Accumulated Amortization Net Book Value Cost Accumulated Amortization Net Book Value Customer relationships $ 29,070 $ 6,744 $ 22,326 $ 29,070 $ 4,601 $ 24,469 Trade name 8,329 2,182 6,147 8,329 1,115 7,214 Non-Compete agreements 4,331 1,942 2,389 4,331 965 3,366 Total $ 41,730 $ 10,868 $ 30,862 $ 41,730 $ 6,681 $ 35,049 Estimated Amortization Expense Fiscal 2018 $ 1,396 Fiscal 2019 5,586 Fiscal 2020 5,038 Fiscal 2021 4,088 Fiscal 2022 3,469 Thereafter 11,285 $ 30,862 The amortization expense attributable to the amortization of identifiable intangible assets was approximately $1,409,000 and $1,570,000 for the three months ended June 30, 2018 and 2017, respectively, and was approximately $4,199,000 and $2,308,000 for the nine months ended June 30, 2018 and 2017, respectively. |
Revolving Credit Facility and T
Revolving Credit Facility and Term Loan | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
6. Revolving Credit Facility and Term Loan | Revolving Credit, Term Loan and Security Agreement 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. Initial funds were distributed on April 3, 2017 (the “Closing Date”) to repay existing indebtedness, pay fees and expenses relating to the Credit Agreement, and to pay a portion of the purchase price for the acquisition of the SNI Companies. 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 August 31, 2017, the Company entered into a Consent to Extension of Waiver to the Credit Agreement (the “Waiver”). Under the terms of the Waiver, the Lenders and the Agents agreed to extend to October 3, 2017 the deadline by which the Company must deliver updated financial information satisfactory to the lenders in order to amend the financial covenant levels, execute a fully executed amendment to the Credit Agreement, and any other terms and conditions required by the lenders in their sole discretion. Additionally, the Company paid a $73,500 consent fee to the Agents for the pro rata benefit of the lenders, in connection with the Waiver. On August 31, 2017, an additional waiver to the Credit Agreement (“Additional Waiver”), pursuant to which the due date for the Company to deliver the subordination agreement and an amended subordinated note, executed by one of the Company’s subordinated lenders was extended from August 31, 2017 to October 3, 2017, was also obtained. 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 “First 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 First 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 First 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, 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 Company also agreed to certain amendments to the loan covenants required to be maintained. The Credit Agreement contains certain financial covenants applicable to both the Revolving Credit Facility and Term Loan. 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. The Company did not meet its financial loan covenants at June 30, 2018 or at March 31, 2018, previously. On May 15, 2018, the Company obtained a temporary waiver from its lenders for the missed financial covenants at March 31, 2018. On August 10, 2018, the Company and its subsidiaries, as Borrowers, entered into a third amendment and third waiver (the “Third Amendment and Waiver”) to the Credit Agreement. Pursuant to the Third Amendment and Waiver, the Lenders have agreed to modify the definition of EBITDA in the Credit Agreement to allow for the recognition and exclusion of certain additional acquisition, integration and restructuring expenses not previously specified and to provide a temporary waiver for any Defaults and Events of Default under the Credit Agreement that have solely arisen by reason of the Company failing to comply with the financial covenants of the Credit Agreement for the period ending June 30, 2018. Although there can be no absolute assurance, management believes that the conditions that led to the inability to achieve compliance with the financial covenants of the Credit Agreement at June 30, 2018 and March 31, 2018 are improving and continues to forecast results that indicate that the Company will return to compliance with applicable future financial covenants. Revolving Credit Facility At June 30, 2018, the Company had $10,200,000 in outstanding borrowings under the Revolving Credit Facility, of which approximately $8,000,000 was at an interest of approximately LIBOR plus 15% and the remainder was at an interest of approximately prime plus 14%. At June 30, 2018, the Company had $10,200,000 in outstanding borrowings under the Revolving Credit Facility, of which As of June 30, 2018, the Company had approximately $2,900,000 available on the Revolving Credit facility. The Revolving Credit Facility is secured by all 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. Term Loan At June 30, 2018 and September 30, 2017, the Company had outstanding balances under its Term Loan, as follows: June 30, 2018 September 30, 2017 (in thousands) Term loan $ 46,029 $ 48,141 Unamortized debt discount (2,114 ) (2,690 ) 43,915 45,451 Short term portion of term loan (6,551 ) (3,433 ) Long term portion of term loan $ 37,364 $ 42,018 The Term Loan is 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 – $1,523,438, Fiscal year 2019 – $7,727,776, Fiscal year 2020 – $8,337,152 and Fiscal year 2021 - $28,439,759. The Company also is required to prepay the outstanding amount of the Term Loan 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. Interest The loans under the Credit Agreement for the period commencing on the Second Amendment 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 prime plus 9.75% for Advances consisting of Domestic Rate Loans and LIBOR plus 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 prime plus 9.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 10.00% for Advances consisting of LIBOR Rate Loans. 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, interest on the loans is payable in an amount equal to prime plus 14.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 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, interest is payable in an amount equal to prime plus 9.75% for Advances consisting of Domestic Rate Loans and LIBOR plus 10.75% for Advances consisting of LIBOR Rate Loans. 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, interest on the loans is payable in an amount equal to prime plus 14.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 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, interest is payable in an amount equal to prime plus 9.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 10.00% for Advances consisting of LIBOR Rate Loans. Loan Fees and Amortization In connection with the Credit Agreement, 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 finder’s 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 over the term of the loans. During the period ended, June 30, 2018, the Company amortized approximately $576,000 of the debt discount. |
Accrued Compensation
Accrued Compensation | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
7. Accrued Compensation | Accrued Compensation includes accrued wages, the related payroll taxes, employee benefits of the Company's 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 | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
8. Subordinated Debt - Convertible and Non - Convertible | At June 30, 2018 and September 30, 2017, the Company had outstanding balances under its Convertible and Non-Convertible Subordinated Debt agreements, as follows: June 30, 2018 September 30, 2017 (in thousands) 10% Convertible Subordinated Note $ 4,185 $ 4,185 Amended and Restaetd Non-negotiable promissory note 419 1,225 Subordinated Promissary Note 1,000 1,000 9.5% Convertible Subordinated Note 12,500 12,500 Total subordinated debt, convertible and non-convertible 18,104 18,910 Short term portion of subordinated debt, convertible and non-convertible (419 ) (1,225 ) Long term portion of subordinated debt, convertible and non-convertible $ 17,685 $ 17,685 10% Convertible Subordinated Note The Company had a Subordinated Note payable to Jax Legacy – Investment 1, LLC (“JAX Legacy”), pursuant to a Subscription Agreement dated October 2, 2015, in the amount of $4,185,000, and which was scheduled to become due on October 2, 2018. On April 3, 2017, the Company and JAX Legacy 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 Company’s 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 Company’s 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 Legacy 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 135,655 shares of common stock for both the conversion and paid in kind interest through September 30, 2017. On January 4, 2018, the Company issued approximately 41,000 shares of common stock to JAX Legacy related to the interest on the subordinated note through January 4, 2018. The stock was valued at approximately $105,000. On April 4, 2018, the Company issued approximately 42,500 shares of common stock to JAX Legacy related to the interest on the subordinated note through April 4, 2018. The stock was valued at approximately $105,000. On July 25, 2018, the Company issued 46,061 shares of common stock to JAX Legacy related to the interest on the subordinated note through July 4, 2018. The stock was valued at approximately $105,000. Total discount recorded at issuance of the original Jax subordinated note payable 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 upon amendment and restatement resulting in the 10% Note. Amended and Restated Non-Negotiable Promissory Note 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 (sellers of Access Data Consulting Corporation) 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. Subordinated Promissory Note 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). 9.5% Convertible Subordinated Notes On April 3, 2017, the Company issued and paid to certain SNIH Stockholders as part of the Merger Consideration (see note 11) an aggregate of $12.5 million in aggregate principal amount of its 9.5% Convertible Subordinated Notes (the “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 Company’s 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 Company’s 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 Inter-creditor 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. Future minimum payments of subordinated debt will total approximately as follows: fiscal 2018 - $313,000, fiscal 2019 - $106,000, fiscal 2020 - $1,000,000, fiscal 2021- $0 and fiscal 2022 - $16,685,000. On January 4, 2018, the Company issued approximately 280,602 shares of common stock to the SNI Sellers related to the accrued interest of approximately $894,000 on the subordinated note through January 4, 2018. On January 25, 2018, the Company issued approximately 110,083 shares of common stock to a SNI Sellers for the conversion of approximately 110,083 shares of series B preferred shares. On April 4, 2018, the Company issued approximately 120,654 shares of common stock to the SNI Sellers related to the accrued interest of approximately $298,000 on the subordinated note through April 4, 2018. On July 25, 2018, the Company issued approximately 128,815 shares of common stock to the SNI Sellers related to the accrued interest of approximately $297,000 on the subordinated note through July 4, 2018. |
Equity
Equity | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
9. Equity | 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. On November 27, 2017, the Company issued approximately 135,655 shares of common stock to JAX Legacy related to the conversion of the subordinated note and the interest through October 4, 2017. The stock was valued at approximately $595,000. On January 4, 2018, the Company issued approximately 41,000 shares of common stock to JAX Legacy related to the interest on the subordinated note through January 4, 2018. The stock was valued at approximately $105,000. On January 4, 2018, the Company issued approximately 280,602 shares of common stock to the SNI Sellers related to the accrued interest of approximately $894,000 on the subordinated note through January 4, 2018. On January 25, 2018, the Company issued approximately 110,083 shares of common stock to a SNI Sellers for the conversion of approximately 110,083 shares of series B preferred shares. On April 4, 2018, the Company issued approximately 120,654 shares of common stock to the SNI Sellers related to the accrued interest of approximately $297,000 on the subordinated note through April 4, 2018. On April 4, 2018, the Company issued approximately 42,529 shares of common stock to JAX Legacy related to the interest on the subordinated note through April 4, 2018. The stock was valued at approximately $105,000. On July 25, 2018, the Company issued approximately 128,815 shares of common stock to the SNI Sellers related to the accrued interest of approximately $297,000 on the subordinated note through July 4, 2018. On July 25, 2018, the Company issued approximately 46,061 shares of common stock to JAX Legacy related to the interest on the subordinated note through July 4, 2018. The stock was valued at approximately $105,000. Restricted Stock, Stock Options and Warrants The Company has recognized compensation expense in the amount of approximately $400,000 and $255,000 during the three months ended June 30, 2018 and 2017, respectively, related to the issuance of stock options. The Company has recognized compensation expense in the amount of approximately $1,028,000 and $641,000 during the nine months ended June 30, 2018 and 2017, respectively, related to the issuance of stock options. During the nine-month period ended June 30, 2018, there were options granted to purchase 780,000 shares of common stock with a weighted average price of approximately $2.45 per common share. This estimated value was made using the Black-Scholes Merton option pricing model and approximated $1,747,000. The stock options vest over a period between a one to a four-year period. The average expected life (years) of the options were 10 years, the estimated stock price volatility was 105% and the risk-free interest rate was between 2.2% and 2.9%. At June 30, 2018, there was approximately $2,802,000 of unamortized compensation. At June 30, 2018, there were exercisable options to purchase approximately 590,000 shares of common stock and exercisable warrants to purchase approximately 497,000 shares of common stock. Effective June 15, 2018, the Company granted 600,000 restricted shares of common stock to its Chairman and Chief Executive Officer. The restricted shares are to be earned over a three-year period and cliff vest at the end of the third year from the date of grant. The total fair value was approximately $1,326,000. |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
10. Income Taxes | The following table presents the provision for income taxes and our effective tax rate for the three and nine months ended June 30, 2018 and 2017: Three Months Ended Nine Months Ended (in thousands) June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Income tax benefit (expense) $ 407 $ (202 ) $ (259 ) $ (332 ) Effective tax rate 18 % 3 % -4 % 6 % The effective income tax rate on operations is based upon the estimated income for the year, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. The effective tax rate for the three months ended June 30, 2018 is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets. The effective tax rate for the nine months ended June 30, 2018 is lower than the statutory tax rate primarily due to an increase in the deferred tax liability related to indefinite lived assets being offset by a discrete tax benefit recorded for the impact from the US Tax Reform. The tax provision for the nine months ended June 30, 2018 includes discrete tax benefit totaling $0.4 million relating to the US Tax Reform that was recorded in the period ending December 31, 2017. The effective tax rate for the three and nine months ended June 30, 2017 was higher than the statutory rate primarily due to a change in the valuation allowance. On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” ("US Tax Reform"). The US Tax Reform provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. Certain provisions of the US Tax Reform will become effective during our fiscal year ending September 30, 2018 with all provisions of the US Tax Reform effective as of the beginning of our fiscal year ending September 30, 2019. As the US Tax Reform was enacted after our year end of September 30, 2017, it had no impact on our fiscal 2017 financial results. The US Tax Reform contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. Beginning on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond. We estimate that the revaluation of our US deferred tax assets and liabilities to the 21% corporate tax rate will reduce our net deferred tax liability by approximately $0.4 million and is reflected as a tax benefit in our results for the quarter ending December 31, 2017. Although we believe we have accounted for the parts of the US Tax Reform that will have the most significant impact on our financials, the ultimate impact of the US Tax Reform on our reported results in 2018 may differ from the estimates provided herein, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the US Tax Reform different from that presently contemplated. |
Acquisitions
Acquisitions | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
11. Acquisitions | SNI The Company entered into an Agreement and Plan of Merger dated as of March 31, 2017 (the “Merger Agreement”) whereby it has acquired 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”). The aggregate consideration paid for the shares of SNI Holdco (the “Merger Consideration”) was approximately $66,300,000. Consolidated pro-forma unaudited financial statements The following unaudited pro forma combined financial information is based on the historical financial statements of the Company and SNI Companies, Inc., after giving effect to the Company’s acquisition as if the acquisition occurred on October 1, 2016. The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on October 1, 2016, 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 nine months ended June 30, 2017, as if the acquisition occurred on October 1, 2016. The pro forma results of operations for the nine months ended June 30, 2017 only include SNI Companies, as all other acquisitions either occurred prior to October 1, 2016 or had an immaterial effect on pro forma balances. Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of approximately $2,009,000 for the nine months ended June 30, 2017 for the SNI acquisition. Nine Months Ended (in thousands, except per share data) June 30, 2017 Net sales $ 142,795 Cost of sales $ 90,286 Operating expenses $ 50,203 Net loss $ (4,387 ) Basic and dilutive income per common share (0.47 ) The Company's consolidated financial statements for the three and nine months ended June 30, 2018 include the actual results of all acquisitions. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
12. Commitments and Contingencies | Leases The Company leases space for all 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 ranging from three to five years. The corporate office lease expires in 2020. 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 $892,000 and $345,000 for the three month period ended June 30, 2018 and 2017, respectively, and approximately $2,447,000 and $1,029,000 nine month periods ended June 30, 2018 and 2017, respectively. As of June 30, 2018, future minimum lease payments due under non-cancelable lease agreements having initial terms in excess of one year, including certain closed offices are as follows: (in thousands) Fiscal 2018 $ 605 Fiscal 2019 2,283 Fiscal 2020 1,294 Fiscal 2021 668 Fiscal 2022 622 Thereafter 988 Total $ 6,460 Working Capital Deposit The Company retained approximately $1,500,000 of the purchase price, in cash, as a guarantee from the sellers of the SNI Companies that SNI would provide a minimum of $9,200,000 of working capital, as defined in the purchase agreement. As of June 30, 2018, the Company and the sellers of the SNI Companies have not agreed to the provided working capital and the cash continues to be retained by the Company with a corresponding liability reported in its consolidated balance sheet, pending final determination and resolution among the parties. |
Segment Data
Segment Data | 9 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
13. 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. Some selling, general and administrative expenses are not fully 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. Three Months Ended Nine Months Ended (in thousands) June 30 June 30 2018 2017 2018 2017 Industrial Staffing Services Industrial services revenue $ 5,166 $ 6,718 $ 16,165 $ 18,824 Industrial services gross margin 13.06 % 14.08 14.15 % 14.69 % Operating income $ 31 $ 365 $ 315 $ 954 Depreciation & amortization 65 43 197 184 Accounts receivable – net 3,386 3,967 3,386 3,967 Intangible assets 526 745 526 745 Goodwill 1,084 1,084 1,084 1,084 Total assets $ 5,555 $ 8,484 $ 5,555 $ 8,484 Professional Staffing Services Permanent placement revenue $ 6,388 $ 5,969 $ 17,496 $ 8,578 Placement services gross margin 100 % 100 % 100 % 100 % Professional services revenue $ 28,713 $ 33,382 $ 91,695 $ 61,222 Professional services gross margin 26.67 % 29.29 % 26.54 % 26.87 % Operating income $ 2,301 $ 535 $ 5,861 $ 2,659 Depreciation and amortization 1,436 1,705 4,289 2,452 Accounts receivable – net 17,780 20,073 17,780 20,073 Intangible assets 30,336 36,541 30,336 36,541 Goodwill 75,509 71,967 75,509 71,967 Total assets $ 128,806 $ 132,478 $ 128,806 $ 132,478 Unallocated Expenses Corporate administrative expenses $ 686 $ 900 $ 1,065 $ 2,135 Corporate facility expenses 139 80 287 223 Stock option amortization expense 399 255 1,028 640 Board related expenses - - - 38 Acquisition, integration and restructuring expenses 514 2,206 1,712 2,306 Total unallocated expenses $ 1,738 $ 3,441 $ 4,092 $ 5,342 Consolidated Total revenue $ 40,267 $ 46,069 $ 125,356 $ 88,624 Operating income 595 (2,446 ) 2,084 (1,642 ) Depreciation and amortization 1,501 1,748 4,486 2,636 Total accounts receivables – net 21,166 24,040 21,166 24,040 Intangible assets 30,862 37,286 30,862 37,286 Goodwill 76,593 73,051 76,593 73,051 Total assets $ 134,361 $ 140,962 $ 134,361 $ 140,962 |
Significant Accounting Polici20
Significant Accounting Policies and Estimates (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Significant Accounting Policies And Estimates Policies | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2017 as filed on December 28, 2017. |
Liquidity | The Company experienced significant net losses for its most recent fiscal year ended September 30, 2017, and for the first nine-months of 2018. Management has implemented a strategy which includes cost reductions and 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. As explained more fully in Note 6, the Company and its subsidiaries, as borrowers, entered into a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) after the close of business on March 31, 2017. 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 April 3, 2017, 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, as more fully disclosed in Note 11. Amounts borrowed under the Credit Agreement also may be used by the Company to partially fund capital expenditures, provide for on-going working capital needs and general corporate needs, and to fund future acquisitions subject to certain customary conditions of the lenders. As of June 30, 2018, the Company had cash of approximately $2,637,000, which was a decrease of approximately $148,000 from approximately $2,785,000 at September 30, 2017. Negative working capital at June 30, 2018 was approximately $2,127,000, as compared to working capital of approximately $1,588,000 for September 30, 2017. The net loss for the nine months ended June 30, 2018, was approximately $6,556,000. Management believes that the future cash flow from operations and the availability under the Revolving Credit Facility will provide sufficient liquidity for the next 12 months. |
Principles of Consolidation | The unaudited condensed 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 occur in a subsequent period, the Company will recognize those differences when they become 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 unaudited condensed consolidated statements of operations as a reduction of placement service revenues and were approximately $ 1,562,000 and $1,515,000 for the nine-month periods ended June 30, 2018 and 2017, respectively. Expected future falloffs and refunds are reflected in the unaudited condensed consolidated balance sheet as a reduction of accounts receivable and were approximately $342,000 as of June 30, 2018 and $997,000 as of September 30, 2017, 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 June 30, 2018 and September 30, 2017, there were no cash equivalents. In some cases, the Company maintains cash on deposit in financial institutions in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. The Company maintains its deposit accounts in a large, national, financial institution and has never experienced any losses related to these balances. |
Accounts Receivable | The Company extends credit to customers based on evaluation of their financial condition and ability to pay the Company in accordance with established 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 services 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 $897,000 is considered necessary as of June 30, 2018 and $1,712,000 at September 30, 2017, respectively. The Company charges uncollectible accounts against the allowance once the invoices are deemed unlikely to be collectible. The reserve includes the $342,000 reserve for permanent placement falloffs considered necessary as of June 30, 2018 and $997,000 as of September 30, 2017, 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. Leasehold improvements are amortized over the shorter of the lease or useful life. 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 nine-months ended June 30, 2018 and 2017. |
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 values of the Company’s long-term liabilities are believed to approximate their fair value based on level 3 inputs. The fair value of the Company’s long-lived assets, including goodwill and other intangible assets, are subject to measurement on a non-recurring basis using level 3 inputs. |
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 or preferred stock 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. There were approximately 10,513,000 and 10,902,000 of common stock equivalents excluded for the three and nine months ended June 30, 2018, respectively, (which include common share equivalents of preferred stock, convertible debt, warrants and options) because their effect is anti-dilutive. There were approximately 10,111,000 and 3,743,000 of common stock equivalents excluded for the three and nine months ended June 30, 2017, respectively, (which include common share equivalents of preferred stock, convertible debt, warrants and options) because their effect is anti-dilutive. |
Advertising Expenses | Most of the Company's advertising expense budget is used to support the Company's business consisting of print and internet media, with expenses recorded as they are incurred and are included in selling, general and administrative expenses in the unaudited condensed consolidated financial statements. Advertising expense was approximately $572,000 and $588,000, for the three months ended June 30, 2018 and 2017, respectively, and approximately $1,737,000 and $1,092,000, for the nine months ended June 30, 2018 and 2017, respectively. |
Intangible Assets | Intangible assets include customer relationships, non-compete agreements and trade names and were recorded at their estimated fair value at the date of acquisition. The trade names are amortized on a straight-line basis over the estimated useful life of 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 of three and five years, which is the term of the non-compete agreement. |
Impairment of Long-lived Assets | The Company records an impairment of long-lived assets used in operations 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 nine months ended June 30, 2018 and 2017. |
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 and restricted stock, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options or restricted stock. 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. 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 bases 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 June 30, 2018 and September 30, 2017, no material 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 three and nine months ended June 30, 2017 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 entirely 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) | 9 Months Ended |
Jun. 30, 2018 | |
Property And Equipment Tables | |
Schedule of Property and Equipment | (in thousands) June 30, 2018 September 30, 2017 Computer software $ 1,447 $ 1,447 Office equipment, furniture and fixtures and leasehold improvements 3,241 3,243 Total property and equipment, at cost 4,688 4,690 Accumulated depreciation and amortization (3,838 ) (3,776 ) Property and equipment, net $ 850 $ 914 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Goodwill And Intangible Assets | |
Schedule of Finite-Lived Intangible Assets | The following table sets forth activity in goodwill from September 2016 through June 30, 2018. See Note 11 for details of acquisitions that occurred during the year ended September 30, 2017. (in thousands) Goodwill as of September 30, 2016 $ 18,590 Acquisition of SNI Companies 58,003 Goodwill as of September 30, 2017 $ 76,593 Goodwill as of June 30, 2018 $ 76,593 During the nine months ended June 30, 2018 and the year ended September 30, 2017 the Company did not record any impairment of goodwill. Intangible Assets June 30,2018 September 30,2017 (in thousands) Cost Accumulated Amortization Net Book Value Cost Accumulated Amortization Net Book Value Customer relationships $ 29,070 $ 6,744 $ 22,326 $ 29,070 $ 4,601 $ 24,469 Trade name 8,329 2,182 6,147 8,329 1,115 7,214 Non-Compete agreements 4,331 1,942 2,389 4,331 965 3,366 Total $ 41,730 $ 10,868 $ 30,862 $ 41,730 $ 6,681 $ 35,049 |
Finite-lived Intangible Assets Amortization Expense | Estimated Amortization Expense Fiscal 2018 $ 1,396 Fiscal 2019 5,586 Fiscal 2020 5,038 Fiscal 2021 4,088 Fiscal 2022 3,469 Thereafter 11,285 $ 30,862 |
Revolving Credit Facility and23
Revolving Credit Facility and Term Loan (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Revolving Credit Facility And Term Loan | |
Revolving Credit Facility and Term Loan | June 30, 2018 September 30, 2017 (in thousands) Term loan $ 46,029 $ 48,141 Unamortized debt discount (2,114 ) (2,690 ) 43,915 45,451 Short term portion of term loan (6,551 ) (3,433 ) Long term portion of term loan $ 37,364 $ 42,018 |
Subordinated Debt - Convertib24
Subordinated Debt - Convertible and Non - Convertible (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Subordinated Debt - Convertible And Non - Convertible | |
Schedule of subordindated debt | June 30, 2018 September 30, 2017 (in thousands) 10% Convertible Subordinated Note $ 4,185 $ 4,185 Amended and Restaetd Non-negotiable promissory note 419 1,225 Subordinated Promissary Note 1,000 1,000 9.5% Convertible Subordinated Note 12,500 12,500 Total subordinated debt, convertible and non-convertible 18,104 18,910 Short term portion of subordinated debt, convertible and non-convertible (419 ) (1,225 ) Long term portion of subordinated debt, convertible and non-convertible $ 17,685 $ 17,685 |
Income Tax (Tables)
Income Tax (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Income Tax | |
Schedule of provision for income taxes and our effective tax rate | Three Months Ended Nine Months Ended (in thousands) June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Income tax benefit (expense) $ 407 $ (202 ) $ (259 ) $ (332 ) Effective tax rate 18 % 3 % -4 % 6 % |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Paladin [Member] | |
Schedule of consolidated pro-forma unaudited financial statements | Nine Months Ended (in thousands, except per share data) June 30, 2017 Net sales $ 142,795 Cost of sales $ 90,286 Operating expenses $ 50,203 Net loss $ (4,387 ) Basic and dilutive income per common share (0.47 ) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Commitments And Contingencies | |
Schedule of Future Minimum Lease Payments | (in thousands) Fiscal 2018 $ 605 Fiscal 2019 2,283 Fiscal 2020 1,294 Fiscal 2021 668 Fiscal 2022 622 Thereafter 988 Total $ 6,460 |
Segment Data (Tables)
Segment Data (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Segment Data Tables | |
Schedule of Segment Reporting Information | Three Months Ended Nine Months Ended (in thousands) June 30 June 30 2018 2017 2018 2017 Industrial Staffing Services Industrial services revenue $ 5,166 $ 6,718 $ 16,165 $ 18,824 Industrial services gross margin 13.06 % 14.08 14.15 % 14.69 % Operating income $ 31 $ 365 $ 315 $ 954 Depreciation & amortization 65 43 197 184 Accounts receivable – net 3,386 3,967 3,386 3,967 Intangible assets 526 745 526 745 Goodwill 1,084 1,084 1,084 1,084 Total assets $ 5,555 $ 8,484 $ 5,555 $ 8,484 Professional Staffing Services Permanent placement revenue $ 6,388 $ 5,969 $ 17,496 $ 8,578 Placement services gross margin 100 % 100 % 100 % 100 % Professional services revenue $ 28,713 $ 33,382 $ 91,695 $ 61,222 Professional services gross margin 26.67 % 29.29 % 26.54 % 26.87 % Operating income $ 2,301 $ 535 $ 5,861 $ 2,659 Depreciation and amortization 1,436 1,705 4,289 2,452 Accounts receivable – net 17,780 20,073 17,780 20,073 Intangible assets 30,336 36,541 30,336 36,541 Goodwill 75,509 71,967 75,509 71,967 Total assets $ 128,806 $ 132,478 $ 128,806 $ 132,478 Unallocated Expenses Corporate administrative expenses $ 686 $ 900 $ 1,065 $ 2,135 Corporate facility expenses 139 80 287 223 Stock option amortization expense 399 255 1,028 640 Board related expenses - - - 38 Acquisition, integration and restructuring expenses 514 2,206 1,712 2,306 Total unallocated expenses $ 1,738 $ 3,441 $ 4,092 $ 5,342 Consolidated Total revenue $ 40,267 $ 46,069 $ 125,356 $ 88,624 Operating income 595 (2,446 ) 2,084 (1,642 ) Depreciation and amortization 1,501 1,748 4,486 2,636 Total accounts receivables – net 21,166 24,040 21,166 24,040 Intangible assets 30,862 37,286 30,862 37,286 Goodwill 76,593 73,051 76,593 73,051 Total assets $ 134,361 $ 140,962 $ 134,361 $ 140,962 |
Description of Business (Detail
Description of Business (Details Narrative) | 9 Months Ended |
Jun. 30, 2018 | |
PaymentsOnDebtIssuedRelatedToAcquisitions | |
State of Incorporation | Illinois |
Year of incorporation | 1,962 |
Significant Accounting Polici30
Significant Accounting Policies and Estimates (Details Narrative) - USD ($) $ in Thousands | Apr. 03, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 |
Reduction of placement service revenues | $ 1,562 | $ 1,515 | |||||
Reduction of accounts receivable | $ 342 | $ 342 | 342 | $ 997 | |||
Allowance for doubtful accounts | 897 | 897 | 897 | 1,712 | |||
Reserve for permanent placement falloffs | $ 342 | 342 | $ 342 | 997 | |||
Common stock equivalents excluded from the computation of diluted earnings per share | 10,111,000 | 3,743,000 | 10,513,000 | 10,902,000 | |||
Advertising expense | $ 572 | $ 588 | $ 1,737 | $ 1,092 | |||
Income taxes description | 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. | ||||||
Revolving Credit Facility | $ 2,900 | ||||||
Cash | 2,637 | 2,637 | 2,637 | 2,785 | |||
Increase Decrease in cash | 148 | ||||||
Working capital deficit | (2,127) | (2,127) | (2,127) | (1,588) | |||
Net loss | (1,887) | $ (6,020) | (6,556) | $ (6,098) | $ (2,372) | ||
Revolving Credit Facility [Member] | |||||||
Borrowing amount | $ 7,476,316 | ||||||
Revolving loans, description | liquidity for the next 12 months. | ||||||
Revolving Credit Facility | $ 56,226,316 | 8,000 | |||||
Term-loans | $ 48,750 | ||||||
Credit agreement [Member] | Short-term Debt [Member] | |||||||
Borrowing amount | $ 73,750 | $ 73,750 | 73,750 | ||||
Principal amount | $ 48,750 | ||||||
Revolving loans, description | revolving loans in a maximum amount up to the lesser of (i) $25,000,000 or (ii) an amount determined pursuant to a borrowing base that is calculated based on the outstanding amount of the Companys eligible accounts receivable, as described in the Credit Agreement. The loans under the Credit Agreement mature on March 31, 2021 | ||||||
Borrowing loan term | 4 years |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
Property and equipment, at cost | $ 4,688 | $ 4,690 |
Accumulated depreciation and amortization | (3,838) | (3,776) |
Property and equipment, net | 850 | 914 |
Computer software [Member] | ||
Property and equipment, at cost | 1,447 | 1,447 |
Office equipment, furniture and fixtures and leasehold improvements [Member] | ||
Property and equipment, at cost | $ 3,241 | $ 3,243 |
Property and Equipment (Detai32
Property and Equipment (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Property And Equipment Details Narrative | ||||
Depreciation expense | $ 92 | $ 178 | $ 287 | $ 328 |
Goodwill and Intangible Asset33
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Sep. 30, 2017 | |
Intangible Assets Details Abstract | ||
Goodwill beginning | $ 76,593 | $ 18,590 |
Acquisition of SNI Companies | 58,003 | |
Goodwill ending | $ 76,593 | $ 76,593 |
Goodwill and Intangible Asset34
Goodwill and Intangible Assets (Details 1) - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Cost | $ 41,730 | $ 41,730 |
Accumulated Amortization | 10,868 | 6,681 |
Net Book Value | 30,862 | 35,049 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 29,070 | 29,070 |
Accumulated Amortization | 6,744 | 4,601 |
Net Book Value | 22,326 | 24,469 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 8,329 | 8,329 |
Accumulated Amortization | 2,182 | 1,115 |
Net Book Value | 6,147 | 7,214 |
Non-compete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 4,331 | 4,331 |
Accumulated Amortization | 1,942 | 965 |
Net Book Value | $ 2,389 | $ 3,366 |
Goodwill and Intangible Asset35
Goodwill and Intangible Assets (Details 2) - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
Fiscal 2,018 | $ 1,396 | |
Fiscal 2,019 | 5,586 | |
Fiscal 2,020 | 5,038 | |
Fiscal 2,021 | 4,088 | |
Fiscal 2,022 | 3,469 | |
Thereafter | 11,285 | |
Total | $ 30,862 | $ 35,049 |
Goodwill and Intangible Asset36
Goodwill and Intangible Assets (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Goodwill And Intangible Assets Details Narrative Abstract | ||||
Amortization expense | $ 1,409 | $ 1,570 | $ 4,199 | $ 2,308 |
Revolving Credit Facility and37
Revolving Credit Facility and Term Loan (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
Revolving Credit Facility And Term Loan Tetails Abstract | ||
Term loan | $ 46,029 | $ 48,141 |
Unamortized debt discount | (2,114) | (2,690) |
Total | 43,915 | 45,451 |
Short term portion of term loan | (6,551) | (3,433) |
Term loan | $ 37,364 | $ 42,018 |
Revolving Credit Facility and38
Revolving Credit Facility and Term Loan (Details Narrative) - USD ($) $ in Thousands | Apr. 03, 2017 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Nov. 14, 2017 |
Consent fee paid | $ 73,500 | ||||
Revolving Credit Facility | 2,900 | ||||
2,018 | $ 313 | 313 | |||
2,019 | 106 | 106 | |||
2,020 | 1,000 | 1,000 | |||
2,021 | $ 0 | 0 | |||
Amortized of debt discount | 576 | $ 1,006 | |||
Revolving Credit Facility [Member] | |||||
Borrowing amount | $ 7,476,316 | ||||
Revolving loans, description | liquidity for the next 12 months. | ||||
Interest rate credit agreement | 15.00% | ||||
Outstanding borrowing amount | $ 10,200 | ||||
Revolving Credit Facility | $ 56,226,316 | 8,000 | |||
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 | ||||
Prepay, or cause to be prepaid | $ 10,000 | ||||
Borrowing loan term | 4 years | ||||
Amendment fees payable | $ 364 | ||||
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 | 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, interest on the loans is payable in an amount equal to prime plus 14.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 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, interest is payable in an amount equal to prime plus 9.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 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 | 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, interest on the loans is payable in an amount equal to prime plus 14.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 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, interest is payable in an amount equal to prime plus 9.75% for Advances consisting of Domestic Rate Loans and LIBOR plus 10.75% for Advances consisting of LIBOR Rate Loans. | ||||
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 Second Amendment 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 prime plus 9.75% for Advances consisting of Domestic Rate Loans and LIBOR plus 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 prime plus 9.00% for Advances consisting of Domestic Rate Loans and LIBOR plus 10.00% for Advances consisting of LIBOR Rate Loans. | ||||
Credit agreement [Member] | Term Loans [Member] | |||||
2,018 | 1,523,438 | $ 1,523,438 | |||
2,019 | 7,727,776 | 7,727,776 | |||
2,020 | 8,337,152 | 8,337,152 | |||
2,021 | $ 28,439,759 | 28,439,759 | |||
Loan Fees and Amortization [Member] | Credit agreement [Member] | |||||
Payment of original discount fee | 901,300 | ||||
Closing fee for term loan | 75 | ||||
Finders fees | 1,597 | ||||
Line credit facility revolving closing fee | 500 | ||||
Total loan fee payment | $ 3,073,300 |
Subordinated Debt Convertible a
Subordinated Debt Convertible and Non-Convertible (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Sep. 30, 2017 |
Total subordinated debt, convertible and non-convertible | $ 18,104 | $ 18,910 |
Short-term portion of subordinated debt, convertible and non-convertible | (419) | (1,225) |
Long-term portion of subordinated debt, convertible and non-convertible | 17,685 | 17,685 |
10% Convertible Subordinated Note [Member] | ||
Total subordinated debt, convertible and non-convertible | 4,185 | 4,185 |
Amended and Restated Non-negotiable promissory note [Member] | ||
Total subordinated debt, convertible and non-convertible | 419 | 1,225 |
Subordinated Promissory Note [Member] | ||
Total subordinated debt, convertible and non-convertible | 1,000 | 1,000 |
9.5% Convertible Subordinated Note [Member] | ||
Total subordinated debt, convertible and non-convertible | $ 12,500 | $ 12,500 |
Subordinated Debt Convertible40
Subordinated Debt Convertible and Non-Convertible (Details Narrative) $ / shares in Units, $ in Thousands | Apr. 04, 2018USD ($)shares | Jan. 04, 2018USD ($)shares | Oct. 04, 2017USD ($) | Apr. 03, 2017USD ($)Integer$ / sharesshares | Oct. 04, 2015USD ($)Integer | Oct. 02, 2015USD ($) | Jul. 25, 2018USD ($)shares | Nov. 27, 2017USD ($)shares | Jan. 20, 2017USD ($) | Jun. 30, 2018USD ($)shares | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)shares | Jun. 30, 2017USD ($) | Sep. 30, 2017USD ($)shares | Jan. 25, 2018shares | Dec. 13, 2017shares |
Amortization of debt discount | $ 107 | |||||||||||||||
Loss on extinguishment of debt | $ (994) | $ (994) | $ 322 | |||||||||||||
Future minimum payments of subordinated debt for the remainder of 2018 | 313 | 313 | ||||||||||||||
Future minimum payments of subordinated debt for 2019 | 106 | 106 | ||||||||||||||
Future minimum payments of subordinated debt for 2020 | 1,000 | 1,000 | ||||||||||||||
Future minimum payments of subordinated debt for 2021 | 0 | 0 | ||||||||||||||
Future minimum payments of subordinated debt for 2022 | $ 16,685 | $ 16,685 | ||||||||||||||
Common stock, shares issued | shares | 10,609,000 | 10,609,000 | 9,879,000 | |||||||||||||
Common stock value | ||||||||||||||||
Issuance of stock for extinguishment of debt | $ 385 | 385 | ||||||||||||||
SNI Sellers [Member] | ||||||||||||||||
Shares issued for debt, Shares | shares | 120,654 | 280,602 | 128,815 | |||||||||||||
Shares issued for debt, Amount | $ 298 | $ 894 | $ 297 | |||||||||||||
Common stock shares issued upon conversion of preferred stock | shares | 110,083 | |||||||||||||||
Number of preferred stock converted | shares | 110,083 | |||||||||||||||
JAX Legacy [Member] | ||||||||||||||||
Discount on issuance of note payable | $ 647 | |||||||||||||||
Shares issued for debt, Shares | shares | 42,500 | 46,061 | ||||||||||||||
Shares issued for debt, Amount | $ 105 | $ 105 | ||||||||||||||
William Daniel Dampier and Carol Lee Dampier [Member] | ||||||||||||||||
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 | |||||||||||||||
Addendum [Member] | ||||||||||||||||
Cash paid to Sellers | $ 250 | |||||||||||||||
Stock Purchase Agreement [Member] | ||||||||||||||||
Note issued | $ 1,000 | |||||||||||||||
Note payable interest rate | 5.50% | |||||||||||||||
Original principal amount | $ 1,000 | |||||||||||||||
Subscription Agreement [Member] | ||||||||||||||||
Note issued | $ 4,185 | |||||||||||||||
Maturity date of note | Oct. 2, 2018 | |||||||||||||||
10% Convertible Subordinated Note [Member] | ||||||||||||||||
Note issued | $ 4,185 | |||||||||||||||
Maturity date of note | Oct. 3, 2021 | |||||||||||||||
Common stock conversion price | $ / shares | $ 5.83 | |||||||||||||||
Convertible consecutive trading days | Integer | 20 | |||||||||||||||
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] | ||||||||||||||||
Common stock, shares issued | shares | 135,655 | |||||||||||||||
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% | |||||||||||||||
Common stock conversion price | $ / shares | $ 5.83 | |||||||||||||||
JAX Legacy [Member] | ||||||||||||||||
Shares issued for debt, Shares | shares | 41,000 | 135,655 | ||||||||||||||
Shares issued for debt, Amount | $ 105 | $ 595 |
Equity (Details Narrative)
Equity (Details Narrative) $ / shares in Units, $ in Thousands | Apr. 04, 2018USD ($)shares | Jan. 04, 2018USD ($)shares | Jul. 25, 2018USD ($)shares | Jun. 15, 2018USD ($)shares | Nov. 27, 2017USD ($)shares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($)Integershares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($) | Sep. 30, 2017USD ($) | Jan. 25, 2018shares |
Share based compensation expense | $ | $ 400 | $ 255 | $ 1,028 | $ 641 | ||||||||
Exercise of stock warrants, Amount | $ | $ 1,000 | |||||||||||
Exercisable options outstanding | 590,000 | 590,000 | ||||||||||
Options granted | 780,000 | |||||||||||
Stock option weighted average price | $ / shares | $ 2.45 | $ 2.45 | ||||||||||
Stock option average expected life | 10 years | |||||||||||
Stock granted value share-based compensation | $ | $ 1,747 | |||||||||||
Unrecognized compensation expense | $ | $ 2,802 | |||||||||||
Stock price volatility | 105.00% | |||||||||||
Minimum [Member] | ||||||||||||
Risk-free interest rate | 2.20% | |||||||||||
Maxim [Member] | ||||||||||||
Risk-free interest rate | 2.90% | |||||||||||
Warrant [Member] | ||||||||||||
Common stock shares reserved for future issuance | 497,000 | 497,000 | ||||||||||
JAX Legacy [Member] | ||||||||||||
Shares issued for debt, Shares | 41,000 | 135,655 | ||||||||||
Shares issued for debt, Amount | $ | $ 105 | $ 595 | ||||||||||
Common stock shares reserved for future issuance | 42,529 | 46,061 | ||||||||||
Accrued interest | $ | $ 105 | $ 105 | ||||||||||
Chairman And CEO [Member] | ||||||||||||
Options granted | 600,000 | |||||||||||
Fair value of options granted | $ | $ 1,326 | |||||||||||
SNI [Member] | ||||||||||||
Common stock shares reserved for future issuance | 120,654 | 128,815 | ||||||||||
Accrued interest | $ | $ 297 | $ 297 | ||||||||||
SNI Sellers [Member] | ||||||||||||
Shares issued for debt, Shares | 120,654 | 280,602 | 128,815 | |||||||||
Shares issued for debt, Amount | $ | $ 298 | $ 894 | $ 297 | |||||||||
Common stock shares issued upon conversion of preferred stock | 110,083 | |||||||||||
Number of preferred stock converted | 110,083 | |||||||||||
Officer [Member] | ||||||||||||
Exercise of stock warrants, Amount | $ | $ 1,000 | |||||||||||
Exercise of stock warrants, Shares | 500,000 | |||||||||||
Number of officers | Integer | 2 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes Details Abstract | ||||
Income tax benefit (expense) | $ 407 | $ (202) | $ (259) | $ (332) |
Effective tax rate | 18.00% | 3.00% | (4.00%) | 6.00% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) $ in Thousands | 9 Months Ended |
Jun. 30, 2018USD ($) | |
Income Taxes Details Narrative Abstract | |
Discrete tax benefit due to US tax reforms | $ 400 |
Description for change in income tax rate | Beginning on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond |
Change in deferred tax liability due to change in income tax rate | $ 400 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
Net sales | $ 40,267 | $ 46,069 | $ 125,356 | $ 88,624 | |
Net loss | $ (1,887) | $ (6,020) | $ (6,556) | (6,098) | $ (2,372) |
Pro Forma [Member] | |||||
Net sales | 142,795 | ||||
Cost of sales | 90,286 | ||||
Operating expenses | 50,203 | ||||
Net loss | $ (4,387) | ||||
Basic and dilutive income per common share | $ (0.47) |
Acquisitions (Details Narrative
Acquisitions (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Mar. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
SNI [Member] | |||
Ownership percentage | 100.00% | ||
Fair value adjustment of definite lived intangible assets | $ 2,009 | $ 2,009 | |
SNI Holdco [Member] | |||
Business acquisition consideration transferred | $ 66,300 |
Commitments and Contingencies46
Commitments and Contingencies (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Commitments And Contingencies Details Abstract | |
Fiscal 2,018 | $ 605 |
Fiscal 2,019 | 2,283 |
Fiscal 2,020 | 1,294 |
Fiscal 2,021 | 668 |
Fiscal 2,022 | 622 |
thereafter | 988 |
Total | $ 6,460 |
Commitments and Contingencies47
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Commitments And Contingencies Details Narrative Abstract | ||||
Rent expense | $ 892 | $ 345 | $ 2,447 | $ 1,029 |
Purchase Commitment, Description | The Company retained approximately $1,500,000 of the purchase price, in cash, as a guarantee from the sellers of the SNI Companies that would provide a minimum of $9,200,000 of working capital, as defined in the purchase agreement. As of March 31, 2018, the Company and the sellers of the SNI Companies have not agreed to the provided working capital and the cash continues to be retained by the Company with a corresponding liability reported in its consolidated balance sheet, pending final determination and resolution among the parties. | |||
Office lease expiry period | 2,020 |
Segment Data (Details)
Segment Data (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
Operating income | $ 595 | $ (2,446) | $ 2,084 | $ (1,642) | |
Depreciation & amortization | 4,486 | 2,636 | |||
Accounts receivable - net | (2,827) | 3,458 | |||
Total assets | 134,361 | 134,361 | $ 141,815 | ||
Consolidated [Member] | |||||
Operating income | 595 | (2,446) | 2,084 | (1,642) | |
Depreciation & amortization | 1,501 | 1,748 | 4,486 | 2,636 | |
Accounts receivable - net | 21,166 | 24,040 | 21,166 | 24,040 | |
Intangible asset | 30,862 | 37,286 | 30,862 | 37,286 | |
Goodwill | 76,593 | 73,051 | 76,593 | 73,051 | |
Total assets | 134,361 | 140,962 | 134,361 | 140,962 | |
Total revenue | 40,267 | 46,069 | 125,356 | 88,624 | |
Unallocated Expenses [Member] | |||||
Corporate administrative expenses | 686 | 900 | 1,065 | 2,135 | |
Corporate facility expenses | 139 | 80 | 287 | 223 | |
Stock option amortization expense | 399 | 255 | 1,028 | 640 | |
Board related expenses | 38 | ||||
Acquisition, integration and restructuring expenses | 514 | 2,206 | 1,712 | 2,306 | |
Total unallocated expenses | 1,738 | 3,441 | 4,092 | 5,342 | |
Professional Staffing Services [Member] | |||||
Operating income | 2,301 | 535 | 5,861 | 2,659 | |
Depreciation & amortization | 1,436 | 1,705 | 4,289 | 2,452 | |
Accounts receivable - net | 17,780 | 20,073 | 17,780 | 20,073 | |
Intangible asset | 30,336 | 36,541 | 30,336 | 36,541 | |
Goodwill | 75,509 | 71,967 | 75,509 | 71,967 | |
Total assets | 128,806 | 132,487 | 128,806 | 132,487 | |
Permanent placement revenue | $ 6,388 | $ 5,969 | $ 17,496 | $ 8,578 | |
Placement services gross margin | 100.00% | 100.00% | 100.00% | 100.00% | |
Professional services revenue | $ 28,713 | $ 33,382 | $ 91,695 | $ 61,222 | |
Professional services gross margin | 26.67% | 29.29% | 26.54% | 26.87% | |
Industrial Staffing Services [Member] | |||||
Industrial services revenue | $ 5,166 | $ 6,718 | $ 16,165 | $ 18,824 | |
Industrial services gross margin | 13.06% | 14.08% | 14.15% | 14.69% | |
Operating income | $ 31 | $ 365 | $ 315 | $ 954 | |
Depreciation & amortization | 65 | 43 | 197 | 184 | |
Accounts receivable - net | 3,386 | 3,967 | 3,386 | 3,967 | |
Intangible asset | 526 | 745 | 526 | 745 | |
Goodwill | 1,084 | 1,084 | 1,084 | 1,084 | |
Total assets | $ 5,555 | $ 8,484 | $ 5,555 | $ 8,484 |
Segment Data (Details Narrative
Segment Data (Details Narrative) | 9 Months Ended |
Jun. 30, 2018Integer | |
Disclosure Segment Data Details Abstract | |
Number of reportable segments | 2 |