Attached files
| file | filename |
|---|---|
| EX-99.4 - ADDITIONAL EXHIBITS - HireQuest, Inc. | exh994pressrelease.htm |
| EX-99.2 - ADDITIONAL EXHIBITS - HireQuest, Inc. | exh992-linksept2020financ.htm |
| EX-99.1 - ADDITIONAL EXHIBITS - HireQuest, Inc. | exh991audit.htm |
| EX-23.1 - CONSENTS OF EXPERTS AND COUNSEL - HireQuest, Inc. | exh231consent.htm |
| 8-K - PRIMARY DOCUMENT - HireQuest, Inc. | hqi8-klinkfinal.htm |
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Financial
Information
The following unaudited pro forma financial information presents
the unaudited pro forma condensed combined balance sheet and
unaudited pro forma condensed combined statements of income based
upon the combined historical financial statements of HireQuest,
Inc. (“HQI” or the “Company”) and Link
Staffing Services Corporation, Franlink, Inc., and Stafflink, Inc.
(collectively “Link”), after giving effect to the Asset
Purchase Agreement (the “Link Agreement”) between Link
and HQ Link Corporation (“HQ Link”), a wholly-owned
subsidiary of the Company, and the adjustments described in the
accompanying notes.
On February 12, 2021, HQ Link entered into the Link Agreement with
Link. Pursuant to the Link Agreement, HQ Link will acquire
sellers’ franchise relationships and certain other assets of
the sellers for a purchase price of approximately $11.1 million.
Consummation of the transactions contemplated by the Link Agreement
is subject to the satisfaction or waiver of customary closing
conditions. The transaction was
financed with cash-on-hand and the Company’s credit facility
with Truist Bank and is not subject to any financing
condition.
The unaudited pro forma condensed combined balance sheet as of
September 30, 2020 reflects the transaction as if it occurred on
September 30, 2020. The unaudited pro forma condensed combined
statement of operations for the year ended December 31, 2019
and for the three and nine months ended September 30, 2020 and 2019
reflect the transaction as if it occurred on January 1,
2019.
The unaudited pro forma condensed combined financial information is
for informational purposes only and does not purport to present
what our results would actually have been had these transactions
actually occurred on the dates presented or to project our results
of operations or financial position for any future period. You
should read the information set forth below together with the notes
to the pro forma condensed combined financial statements, the
Annual Report of the Company on Form 10-K for the year ended
December 31, 2019 and the Quarterly Report of the Company on Form
10-Q for the nine months ended September 30, 2020, and the audited
financial statements of Link for the fiscal years ended December
29, 2019 and December 30, 2018 and the unaudited financial
statements for the fiscal quarters ended September 27, 2020 and
September 29, 2019 included as Exhibit 99.1.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
September 30, 2020
|
|
HireQuest, Inc.
|
|
Link Staffing Services Corp.
|
|
Pro forma adjustments
|
|
Pro forma condensed combined
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
$
10,297,147
|
|
$ 8,373,731
|
|
$ (17,973,731)
|
A
|
|
$ 697,147
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
24,024,564
|
|
7,555,508
|
|
(7,555,508)
|
B
|
|
24,024,564
|
|
Notes
receivable
|
2,144,118
|
|
-
|
|
-
|
|
|
2,144,118
|
|
Prepaid
expenses, deposits, and other assets
|
1,179,333
|
|
855,763
|
|
(855,763)
|
B
|
|
1,179,333
|
|
Prepaid
workers' compensation
|
1,978,509
|
|
1,771,256
|
|
(1,771,256)
|
B
|
|
1,978,509
|
|
Total
current assets
|
39,623,671
|
|
18,556,258 |
|
(28,156,258)
|
|
|
30,023,671
|
|
Property
and equipment, net
|
2,958,998
|
|
1,003,199
|
|
(1,003,199)
|
B
|
|
2,958,998
|
|
Intangible
assets, net
|
186,705
|
|
266,474
|
|
(266,474)
|
B
|
|
186,705
|
|
Notes
receivable, net of current portion and reserve
|
6,377,779
|
|
164,694
|
|
(164,694)
|
B
|
|
6,377,779
|
|
Intangible
assets, franchisee agreements
|
-
|
|
-
|
|
11,100,000
|
C
|
|
11,100,000
|
|
Total
assets
|
$
49,147,153
|
|
$
19,990,625
|
|
$
(18,490,625)
|
|
|
$
50,647,153
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
||||
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
$
5,499
|
|
$ 214,887
|
|
$ (214,887)
|
B
|
|
$ 5,499
|
|
Line of
credit
|
-
|
|
-
|
|
1,500,000
|
D
|
|
1,500,000
|
|
Other
current liabilities
|
1,664,854
|
|
1,700,933
|
|
(1,700,933)
|
B
|
|
1,664,854
|
|
Accrued
benefits and payroll taxes
|
2,088,119
|
|
1,154,233
|
|
(1,154,233)
|
B
|
|
2,088,119
|
|
Due to
franchisees
|
2,311,372
|
|
587,232
|
|
(587,232)
|
B
|
|
2,311,372
|
|
Risk
management incentive program liability
|
1,018,994
|
|
-
|
|
-
|
|
|
1,018,994
|
|
Notes
payable
|
-
|
|
16,498,327
|
|
(16,498,327)
|
B
|
|
-
|
|
Workers'
compensation claims liability
|
3,165,056
|
|
577,612
|
|
(577,612)
|
B
|
|
3,165,056
|
|
Total
current liabilities
|
10,253,894
|
|
20,733,224
|
|
(19,233,224)
|
|
|
11,753,894
|
|
Workers'
compensation claims liability, net of current portion
|
1,743,128
|
|
-
|
|
-
|
|
|
1,743,128
|
|
Franchisee
deposits
|
1,459,335
|
|
-
|
|
-
|
|
|
1,459,335
|
|
Deferred
rent
|
-
|
|
29,817
|
|
(29,817)
|
|
|
-
|
|
Deferred
tax liability
|
273,185
|
|
-
|
|
-
|
|
|
273,185
|
|
Total
liabilities
|
13,729,542
|
|
20,763,041
|
|
(19,263,041)
|
|
|
15,229,542
|
|
Equity
|
|
|
-
|
|
-
|
|
|
1,743,128
|
|
Total
HireQuest, Inc. stockholders’ equity
|
35,417,611
|
|
-
|
|
-
|
|
|
35,417,611
|
|
Total
Link stockholders’ equity
|
-
|
|
(772,416)
|
|
772,416
|
E
|
|
-
|
|
Total
stockholders' equity
|
35,417,611
|
|
(772,416)
|
|
772,416
|
|
|
35,417,611
|
|
Total
liabilities and stockholders' equity
|
$
49,147,153
|
|
$
19,990,625
|
|
$
(18,490,625)
|
|
|
$
50,647,153
|
See
notes to pro forma condensed combined financial
statements.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations for
the
Three Months Ended September 30, 2020
|
|
HireQuest, Inc.
|
|
Link Staffing Services Corp.
|
|
Pro forma adjustments
|
|
Pro forma condensed combined
|
|
|
Franchise royalties/Revenue
|
$ 3,218,606
|
|
$ -
|
|
$ -
|
|
|
$ 3,218,606
|
|
Service revenue
|
164,074
|
|
17,161,413
|
|
-
|
|
|
17,325,487
|
|
Cost of sales
|
-
|
|
15,487,475
|
|
-
|
|
|
15,487,475
|
|
Total
revenue
|
3,382,680
|
|
1,673,938
|
|
-
|
|
|
5,056,618
|
|
Selling, general and administrative expenses
|
1,357,725
|
|
1,691,303
|
|
-
|
|
|
3,049,028
|
|
Depreciation and amortization
|
32,438
|
|
101,676
|
|
185,000
|
A
|
|
319,114
|
|
Income
(loss) from operations
|
1,992,517
|
|
(119,041)
|
|
(185,000)
|
|
|
1,688,476
|
|
Other miscellaneous income
|
392,709
|
|
21,575 |
|
-
|
|
|
414,284
|
|
Interest and other financing expense
|
(10,035)
|
|
(84,897)
|
|
-
|
|
|
(94,932)
|
|
Net
income before income taxes
|
2,375,191
|
|
(182,363)
|
|
(185,000)
|
|
|
2,007,828
|
|
Provision
(benefit) for income taxes
|
404,058
|
|
22,500
|
|
45,510
|
B
|
|
472,068
|
|
Net
income (loss)
|
$
1,971,133
|
|
$
(204,863)
|
|
$
(230,510)
|
|
|
$
1,535,760
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
Basic
|
$ 0.15
|
|
|
|
|
|
|
$ 0.11
|
|
Diluted
|
$
0.15
|
|
|
|
|
|
|
$
0.11
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
13,573,086
|
|
|
|
|
|
|
13,573,086
|
|
Diluted
|
13,574,863
|
|
|
|
|
|
|
13,574,863
|
See
notes to pro forma condensed combined financial
statements.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations for
the
Nine Months Ended September 30, 2020
|
|
HireQuest, Inc.
|
|
Link Staffing Services Corp.
|
|
Pro forma adjustments
|
|
Pro forma condensed combined
|
|
|
Franchise royalties
|
$ 9,563,135
|
|
$ -
|
|
$ -
|
|
|
$ 9,563,135
|
|
Service revenue
|
840,515
|
|
48,760,965
|
|
-
|
|
|
49,601,480
|
|
Cost of sales
|
-
|
|
43,769,233
|
|
-
|
|
|
43,769,233
|
|
Total
revenue
|
10,403,650
|
|
4,991,732
|
|
-
|
|
|
15,395,382
|
|
Selling, general and administrative expenses
|
6,542,171
|
|
5,702,535
|
|
-
|
|
|
12,244,706
|
|
Depreciation and amortization
|
96,654
|
|
303,641
|
|
555,000
|
A
|
|
955,295
|
|
Income
(loss) from operations
|
3,764,825
|
|
(1,014,444)
|
|
(555,000)
|
|
|
2,195,381
|
|
Other miscellaneous income
|
932,254
|
|
23,129
|
|
-
|
|
|
955,383
|
|
Interest and other financing expense
|
(39,174)
|
|
(175,984)
|
|
-
|
|
|
(215,158)
|
|
Net
income before income taxes
|
4,657,905
|
|
(1,167,299)
|
|
(555,000)
|
|
|
2,935,606
|
|
Provision
for income taxes
|
654,592
|
|
67,450
|
|
136,530
|
B
|
|
858,572
|
|
Net
income (loss)
|
$
4,003,313
|
|
$
(1,234,749)
|
|
$
(691,530)
|
|
|
$
2,077,034
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
Basic
|
$ 0.30
|
|
|
|
|
|
|
$ 0.15
|
|
Diluted
|
$
0.30
|
|
|
|
|
|
|
$
0.15
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
13,551,507
|
|
|
|
|
|
|
13,551,507
|
|
Diluted
|
13,553,619
|
|
|
|
|
|
|
13,553,619
|
See
notes to pro forma condensed combined financial
statements.
HireQuest, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations for
the
Year Ended December 31, 2019
|
|
HireQuest, Inc.
|
|
Link Staffing Services Corp.
|
|
Pro forma adjustments
|
|
Pro forma condensed combined
|
|
|
Franchise royalties
|
$ 14,673,636
|
|
$ -
|
|
$ -
|
|
|
$ 14,673,636
|
|
Service revenue
|
1,202,824
|
|
85,034,061
|
|
-
|
|
|
86,236,885
|
|
Cost of sales
|
-
|
|
75,215,530
|
|
-
|
|
|
75,215,530
|
|
Total
revenue
|
15,876,460
|
|
9,818,531
|
|
-
|
|
|
25,694,991
|
|
Selling, general and administrative expenses
|
12,692,297
|
|
9,634,564
|
|
-
|
|
|
22,326,861
|
|
Depreciation and amortization
|
400,132
|
|
65,000
|
|
740,000
|
A
|
|
1,205,132
|
|
Income
(loss) from operations
|
2,784,031
|
|
118,967
|
|
(740,000)
|
|
|
2,162,998
|
|
Other miscellaneous income
|
751,077
|
|
90,781
|
|
-
|
|
|
841,858
|
|
Interest and other financing expense
|
(559,585)
|
|
(243,453)
|
|
-
|
|
|
(803,038)
|
|
Net
income before income taxes
|
2,975,523
|
|
(33,705)
|
|
(740,000)
|
|
|
2,201,818
|
|
Provision
for income taxes
|
3,480,996
|
|
73,129
|
|
182,040
|
B
|
|
3,736,165
|
|
Loss
from continuing operations
|
(505,473)
|
|
(106,834)
|
|
(922,040)
|
|
|
(1,534,347)
|
|
Income
from discontinued operations, net of tax
|
215,494
|
|
-
|
|
-
|
|
|
215,494
|
|
Net
loss
|
$
(289,979)
|
|
$
(106,834)
|
|
$
(922,040)
|
|
|
$
(1,318,853)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$ (0.05)
|
|
|
|
|
|
|
$ (0.12)
|
|
Discontinued
operations
|
0.02
|
|
|
|
|
|
|
0.02
|
|
Total
|
$ (0.03)
|
|
|
|
|
|
|
$ (0.10)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
11,588,776
|
|
|
|
|
|
|
11,588,776
|
See
notes to pro forma condensed combined financial
statements.
HireQuest, Inc.
Notes to Pro Forma Condensed Combined Financial
Statements
Note 1 – Basis of Presentation
The historical financial information has been adjusted to give pro
forma effect to events that are directly attributable to the Link
Agreement and expected to have a continuing impact on the combined
results. The pro forma adjustments are preliminary and based on
estimates. They have been prepared to illustrate the estimated
effect of the Link Agreement and certain other
adjustments.
Note 2 – Preliminary Purchase Price Allocation
Under the purchase method of accounting, the total purchase price
of $11.1 million allocated to the tangible and intangible assets
acquired and liabilities assumed by the Company based on their
preliminary estimated fair values. The fair value assessments are
preliminary and are based upon available information and certain
assumptions which the Company believes are reasonable. Actual
results may differ materially from the unaudited pro forma
condensed combined financial statements.
|
Description
|
|
Amount
|
|
Fair value of franchise agreements assumed
|
|
$ 11,100,000
|
|
Total
allocated purchase price
|
|
$ 11,100,000
|
Note 3 – Adjustments to the Unaudited Pro Forma Condensed
Combined Balance Sheet
|
|
(A) -
Adjustments to cash:
|
|
|
Description
|
|
Amount
|
|
Borrowing on line of credit
|
|
$ 1,500,000
|
|
Cash consideration paid for Link
|
|
(11,100,000)
|
|
Link cash balance not acquired
|
|
(8,373,731)
|
|
Pro
forma adjustment to cash
|
|
$ (17,973,731)
|
|
|
(B)
-Assets not acquired and liabilities not assumed pursuant to the
Link Agreement.
|
|
|
(C)
-Preliminary estimated value of franchise agreements
assumed.
|
|
|
(D) -
Borrowing on line of credit to fund transaction.
|
|
(E) -Adjustment to Link stockholders historical
equity.
|
Note 4 – Adjustments to the Unaudited Pro Forma Condensed
Combined Statement of Income
|
|
(A)
-The newly acquired intangible assets consisting of assumed
franchise agreements will be amortized on a straight-line basis
over their estimated useful lives. The fair value assessment is
preliminary and any changes to the preliminary values will have a
direct impact on future earnings via amortization
expense.
|
|
Description
|
|
Estimated fair value
|
|
Estimated useful life
|
|
Three months ended September 30, 2020
|
|
Nine months ended September 30, 2020
|
|
Year ended December 31, 2019
|
|
Franchise agreements
|
|
$ 11,100,000
|
|
15 years
|
|
$ 185,000
|
|
$ 555,000
|
|
$ 740,000
|
|
Pro
forma adjustment to amortization expense
|
|
|
|
|
|
$ 185,000
|
|
$ 555,000
|
|
$ 740,000
|
|
|
(B) -
To record the income tax impact of the pro forma adjustments (A)
above.
|
|
Description
|
|
Three months ended September 30, 2020
|
|
Nine months ended September 30, 2020
|
|
Year ended December 31, 2019
|
|
Pro forma change in income before income tax
|
|
$ 185,000
|
|
$ 555,000
|
|
$ 740,000
|
|
Combined Federal and State statutory rate
|
|
24.6%
|
|
24.6%
|
|
24.6%
|
|
Pro
forma adjustment to provision for income taxes
|
|
$ 45,510
|
|
$ 136,530
|
|
$ 182,040
|