|12 Months Ended|
Sep. 30, 2018
|Notes to Financial Statements|
The Company entered into an Agreement and Plan of Merger dated as of March 31, 2017 (the “Merger Agreement”) by and among the Company, GEE Group Portfolio, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, (“GEE Portfolio”), SNI Holdco Inc., a Delaware corporation (“SNIH”), Smith Holdings, LLC a Delaware limited liability company, Thrivent Financial for Lutherans, a Wisconsin corporation, organized as a fraternal benefits society (“Thrivent”), Madison Capital Funding, LLC, a Delaware limited liability company (“Madison”) and Ronald R. Smith, in his capacity as a stockholder (“Mr. Smith” and collectively with Smith Holdings, LLC, Thrivent and Madison, the “Principal Stockholders”) and Ronald R. Smith in his capacity as the representative of the SNIH Stockholders (“Stockholders’ Representative”). The Merger Agreement provided for the merger subject to the terms and conditions set forth in the Merger Agreement of SNI Holdco with and into GEE Portfolio pursuant to which GEE Portfolio would be the surviving corporation (the “Merger”). The Merger was consummated on April 3, 2017 (the “Closing”) and did not require stockholder approval in order to be completed. As a result of the merger, GEE Portfolio became the owner of 100% of the outstanding capital stock of SNI Companies, a Delaware corporation and a wholly-owned subsidiary of SNI Holdco (“SNI Companies” and collectively with SNI Holdco, the “Acquired Companies”).
SNI Companies, formerly led by co-founder and then current Chairman and CEO Ron Smith, is a premier provider of recruitment and staffing services specializing in administrative, finance, accounting, banking, technology, and legal professions. Through its Staffing Now ®, Accounting Now ®, SNI Technology ®, SNI Financial ®, Legal Now ®, SNI Energy ® and SNI Certes ® divisions, SNI Companies delivers staffing solutions on a temporary/contract, temporary contract-to hire, full time and direct hire basis, across a wide range of disciplines and industries including finance, accounting, banking, technical, software, tax, human resources, legal, engineering, construction, manufacturing, natural resources, energy and administrative professional. SNI Companies has offices in Colorado, Connecticut, Washington DC, Illinois, Massachusetts, Minnesota, New Jersey, Texas and Virginia.
Merger Consideration and Closing Payments
The aggregate consideration paid for the shares of SNI Holdco (the “Merger Consideration”) was approximately $66.3 million, plus or minus the “NWC Adjustment Amount” or the difference in the book value of the Closing Net Working Capital (as defined in Merger Agreement) of the Acquired Companies as compared to the Benchmark Net Working Capital (as defined in the Merger Agreement) of the Acquired Companies of $9.2 million.
On the date of the Closing the Company made the following payments:
The intangibles which consist primarily of customer lists, trade names and a non-compete agreement with the Company’s co-founder, Mr. Smith, and goodwill were recorded based on the Company's estimate of their fair values. Identifiable intangibles with definite lives are being amortized over their estimated lives, which range from five to ten years.
All goodwill and intangibles related to the acquisition of SNI companies will not be deductible for tax purposes. An additional deferred tax liability of approximately $11.0 million was created with the merger.
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, 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 fiscal 2017 as if the acquisition occurred on October 1, 2016. Operating expenses have been increased for the amortization expense associated with the estimated fair value adjustment as of each acquisition during the respective period for the expected definite lived intangible assets.
The proforma results of operations for the year ended September 30, 2017, included approximately $54.2 million of sales, respectively, and approximately $2.6 million of net income, respectively of SNI Companies for the period October 1, 2016 through (approximately) April 3, 2017, the consumption date of the Merger.