Quarterly report [Sections 13 or 15(d)]

Business Acquisition

v3.25.2
Business Acquisition
 9 Months Ended
Jun. 30, 2025
Business Acquisition  
Business Acquisition

2. Business Acquisition

 

On January 3, 2025, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Hornet Staffing, Inc., a Georgia corporation (“Hornet”) and its shareholders, and purchased 100 shares of its capital stock which represents 100% of the ownership interest in Hornet. Hornet is an Atlanta-based provider of staff augmentation services with national service capability. Hornet provides staffing solutions to many markets serving large scale, "blue chip" companies in the information technology ("IT"), professional and customer service staffing verticals. 

 

The total consideration paid for the purchased shares was $1,500, consisting of (i) a $1,100 cash payment, and (ii) the issuance to its former shareholders of subordinated and unsecured promissory notes (the "Promissory Notes") totaling an aggregate initial principal amount of $400. Interest on the outstanding principal balances of the Promissory Notes is payable at a fixed rate of 5% per annum. Payments on the Promissory Notes shall be made annually with the first payment due on the first anniversary of the issuance dates and the second and final payment due on the second anniversary of the issuance date. The Company also paid legal and professional fees of $111 related to the purchase during the nine months ended June 30, 2025, which are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations.

 

The Purchase Agreement also provides that for the initial two-year period after closing, Hornet is required to achieve an agreed upon minimum average gross profit measure equal to $720 for each of the two subsequent twelve-month periods (each twelve-month period being separately measured). If the average gross profit measure during either of the subsequent two years is less than the minimum required average gross profit, then the Company will reduce the remaining balance under the Promissory Notes proportionally by an amount equal to the amount of the shortfall; provided the Company may not deduct more than the amount due under the then current payment for the Promissory Notes and may not seek to claw back any previous payments made under the Notes.

 

The Purchase Agreement contains certain representations and warranties customary and standard for this type of transaction.

 

The assets and liabilities of Hornet were recorded at their estimated fair values as of the closing date of the Purchase Agreement. The Promissory Notes were recorded net of discounts of $8 at the acquisition date. The following table summarizes the preliminary balance sheet at January 3, 2025:

Assets purchased

 

 $ 612

 

Liabilities assumed (a)

 

 

 517

 

Net assets purchased

 

 

 95

 

Purchase consideration:

 

 

 

 

Cash paid at closing

 

 

 1,100

 

Promissory notes, net

 

 

 392

 

Intangible assets from purchase

 

 $ 1,397

 

 

 

(a)

Liabilities assumed includes a $155 deferred tax liability present at January 3, 2025 but recorded by the Company during the three months ended June 30, 2025 due to a post-closing tax election made during the quarter.

 

An independent preliminary purchase price allocation and valuation has been performed to identify intangible assets acquired. The allocation to these intangible assets is as follows:

 

 

 

 Fair Value

 

 

Useful Life

  

Customer relationships

 

 $ 564

 

 

8 years

  

Tradename

 

 

 68

 

 

10 years

  

Non-compete

 

 

 11

 

 

2 years

  

Goodwill (a)

 

 

 754

 

 

Indefinite

  

Total intangible assets acquired

 

 $ 1,397

 

 

 

  

 

 

(a)

Goodwill increased by $155 as a result of the deferred tax liability recorded during the three months ended June 30, 2025, as noted above.

 

The following table represents the unaudited consolidated pro forma results of operations for the three and nine-month periods ended June 30, 2025 and 2024 had the acquisition occurred on October 1, 2023, the first day of the most historic period reported in this Quarterly Report on Form 10-Q. This unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisition occurred on October 1, 2023. This information is based on Hornet’s unaudited historical financial statements.

 

 

 

 Three Months Ended,

June 30,

 

 

 Nine Months Ended,

June 30,

 

 

 

2025

 

 

2024

 

 

2025

 

 

2024

 

Net revenues

 

 $ 24,523

 

 

 $ 28,422

 

 

 $ 74,631

 

 

 $ 85,140

 

Cost of contract services

 

 

 15,842

 

 

 

 18,992

 

 

 

 49,434

 

 

 

 57,550

 

Gross profit

 

 

 8,681

 

 

 

 9,430

 

 

 

 25,197

 

 

 

 27,590

 

Selling, general and administrative expenses

 

 

 8,951

 

 

 

 9,876

 

 

 

 26,847

 

 

 

 29,952

 

Net loss

 

 

 (401 )

 

 

 (18,026 )

 

 

 (33,964 )

 

 

 (20,368 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

 $ 0.00

 

 

 $ (0.17 )

 

 $ (0.31 )

 

 $ (0.19 )