BGSF, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

The following discussion and analysis of our financial condition and results of
operations from continuing operations, our expectations regarding the future
performance of our business and the other non-historical statements in the
discussion and analysis are forward-looking statements. See "Forward-Looking
Statements" in this Annual Report on Form 10-K. These forward-looking statements
are subject to risks, uncertainties and other factors including those described
in "Item 1A. Risk Factors" of this Annual Report on Form 10-K. Our actual
results of operations may differ materially from those contained in any
forward-looking statements. You should read the following discussion together
with our audited consolidated financial statements and related notes thereto and
other financial information included in this Annual Report on Form 10-K.
Financial information provided is based on the results of our continuing
operations. Please refer to "Note 4 - Discontinued Operations" of our audited
consolidated financial statements for information regarding our discontinued
operations.

Our historical financial information may not be indicative of our future
performance.

Company Overview


We are a leading national provider of professional workforce solutions and have
completed a series of acquisitions including the acquisition of BG Personnel, LP
and B G Staff Services Inc. in June 2010, substantially all of the assets of JNA
Staffing, Inc. in December 2010, Extrinsic, LLC in December 2011, American
Partners, Inc. in December 2012, InStaff in June 2013, D&W in March 2015, VTS in
October 2015, Zycron in April 2017, Smart in September 2017, and LJK in December
2019, 100% of the equity of EdgeRock in February 2020, and substantially all of
the assets of Momentum Solutionz in February 2021. We have continuing operations
in two industry segments Real Estate and Professional, and discontinued
operations in the Light Industrial segment. We provide workforce solutions to
client partners primarily within the United States of America. We now operate
across 46 states and D.C.

On February 28, 2022, we signed a definitive agreement to sell substantially all
our Light Industrial segment, ("InStaff") assets to Jobandtalent ("J&T"),
through their wholly-owned subsidiary, Sentech Engineering Services, Inc. We
will receive approximately $30.3 million at the closing of the sale, and,
subject to the terms of the Asset Purchase Agreement, receive an additional $2
million on the first anniversary of the closing of the transaction.

The Company anticipates that the transaction will close during the first fiscal
quarter of 2022, and anticipates using the proceeds from the transaction to,
among other things, deploy additional capital into managed services and high-end
consulting solutions, drive geographic expansion in the Company's Real Estate
segment, pursue potential acquisition opportunities, reduce outstanding
indebtedness, and for general corporate purposes.

The Light Industrial segment provides field talent primarily to manufacturing,
distribution, logistics, and call center client partners needing a flexible
workforce currently out of 11 locations and 13 on-sites in 11 states.


We have classified the related assets and liabilities associated with our Light
Industrial segment, InStaff, as discontinued operations in our Consolidated
Balance Sheets. The results of InStaff business have been presented as
discontinued operations in our Consolidated Statements of Operations and
Comprehensive Income and Consolidated Statements of Cash Flows for all periods
presented. The sale represents a strategic shift in our business that will have
a major effect on our operations and financial results. See "Note 4 -
Discontinued Operations" of our audited consolidated financial statements for
information regarding our discontinued operations.

InStaff's historical financial results have been reflected in our Consolidated
Statements of Operations and Comprehensive Income and Consolidated Statements of
Cash Flows as discontinued operations. Additionally, the related assets and
liabilities associated with the discontinued operations in the prior periods
have been classified as discontinued operations in our Consolidated Balance
Sheets.

The Real Estate segment provides office and maintenance field talent to various
apartment communities and commercial buildings in 35 states and D.C., via
property management companies responsible for the apartment communities' and
commercial buildings' day-to-day operations. Our Real Estate segment operates
through two divisions, BG Multifamily and BG Talent.

The Professional segment provides skilled field talent on a nationwide basis for
information technology ("IT") and finance, accounting, legal and human resource
client partner projects. The Professional segment operates through three
divisions, IT Consulting, IT Infrastructure & Development, and Finance and
Accounting under various trade names including Extrinsic, American Partners,
Donovan & Watkins, Vision Technology Services, Zycron, Smart Resources, L.J.
Kushner & Associates, EdgeRock Technology Partners, and Momentum Solutionz.
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Impact of COVID-19


We continue to observe the impact of the COVID-19 on our consolidated operating
results, our candidate and field talent supply chain, and our client partners
demand in all segments.

We will continue to monitor the situation and may find it necessary, in the
future, to take further actions that alter our business operations as may be
required by federal, state, local authorities, or that we determine are in the
best interests of our team members, field talent, client partners, and
stockholders.

Results of Operations


The following tables summarize key components of our results from continuing
operations for the periods indicated, both in dollars and as a percentage of
revenues, and have been derived from our consolidated financial statements.

                                                                                        Fiscal Year Ended
                                                                    December 26,          December 27,          December 29,
                                                                        2021                  2020                  2019
                                                                                     (dollars in thousands)
Revenues                                                           $    239,027          $    207,125          $    219,764
Cost of services                                                        158,086               141,085               149,938
             Gross Profit                                                80,941                66,040                69,826
Selling, general and administrative expenses                             65,115                55,244                50,222
Gain on contingent consideration                                         (2,403)                  (76)                    -
Impairment losses                                                             -                 7,240                     -
Depreciation and amortization                                             3,698                 4,861                 4,718
             Operating income (loss)                                     14,531                (1,229)               14,886
Loss on extinguishment of debt                                                -                     -                   541
Interest expense, net                                                     1,433                 1,584                 1,569
             Income (loss) from continuing operations before
             income taxes                                                13,098                (2,813)               12,776
Income tax expense (benefit) from continuing operations                   2,640                  (741)                3,135
             Income (loss) from continuing operations                    10,458                (2,072)                9,641
Income from discontinued operations, net of tax                           3,652                 3,513                 3,606
             Net income                                            $     14,109          $      1,441          $     13,247

                                                                                        Fiscal Year Ended
                                                                    December 26,          December 27,          December 29,
                                                                        2021                  2020                  2019
Revenues                                                                  100.0  %              100.0  %              100.0  %
Cost of services                                                           66.1                  68.1                  68.2
             Gross Profit                                                  33.9                  31.9                  31.8
Selling, general and administrative expenses                               27.2                  26.7                  22.9
Gain on contingent consideration                                           (1.0)                    -                     -
Impairment losses                                                             -                   3.5                     -
Depreciation and amortization                                               1.5                   2.3                   2.1
             Operating income (loss)                                        6.1                  (0.6)                  6.8
Loss on extinguishment of debt                                                -                     -                   0.2
Interest expense, net                                                       0.6                   0.8                   0.7
             Income (loss) from continuing operations before
             income taxes                                                   5.5                  (1.4)                  5.8
Income tax expense (benefit) from continuing operations                     1.1                  (0.4)                  1.4
             Income (loss) from continuing operations                       4.4  %               (1.0) %                4.4  %


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Fifty-two Week Fiscal Year Ended December 26, 2021 (Fiscal 2021) Compared with
Fifty-two Week Fiscal Year Ended December 27, 2020 (Fiscal 2020)

Revenues:

                                              Fiscal Year Ended
                                 December 26,                   December 27,
                                     2021                           2020
                                            (dollars in thousands)
Revenues by Segment:
Real Estate               $     92,018        38.5  %    $     68,755        33.2  %
Professional                   147,009        61.5  %         138,370        66.8  %
Total Revenues            $    239,027       100.0  %    $    207,125       100.0  %



Real Estate Revenues: Real Estate revenues increased approximately $23.3 million
(33.8%). The increase was due to a 20.1% increase in billed hours and a 11.0%
increase in average bill rate.

Professional Revenues: Professional revenues increased approximately $8.6
million (6.2%), primarily due to the 2020 EdgeRock acquisition which contributed
fifty-two weeks of revenue in Fiscal 2021 vs. forty-seven weeks in Fiscal 2020,
the 2021 Momentum acquisition which contributed $3.5 million of new revenues, an
increase in permanent placements revenue of $1.2 million, and billed hours
increased 5.5%. These increases were partially offset by a decrease in the IT
Infrastructure & Development division of approximately $11.6 million in revenue
and a decrease of 0.2% in average bill rate.

Gross Profit:


Gross profit represents revenues from workforce solutions less cost of services
expenses, which consist of payroll, payroll taxes, payroll-related insurance,
field talent costs, and reimbursable costs.
                                                  Fiscal Year Ended
                                     December 26,                   December 27,
                                         2021                           2020
                                                (dollars in thousands)
Gross Profit by Segment:
Real Estate                   $     34,969        43.2  %    $     25,813        39.1  %
Professional                        45,972        56.8  %          40,227        60.9  %
Total Gross Profit            $     80,941       100.0  %    $     66,040       100.0  %




                                                  Fiscal Year Ended
                                            December 26,        December 27,
                                                2021                2020
Gross Profit Percentage by Segment:
Real Estate                                         38.0  %           37.5  %
Professional                                        31.3  %           29.1  %
Company Gross Profit Percentage                     33.9  %           31.9  %



Overall, our gross profit increased approximately $14.9 million (22.6%). As a
percentage of revenue, gross profit has increased to 33.9% from 31.9%, primarily
due to higher gross profits across all our segments.

We determine spread as the difference between bill rate and pay rate.


Real Estate Gross Profit: Real Estate gross profit increased approximately $9.1
million (35.5%) consistent with the increase in revenue, and an 11.6% increase
in average spread.

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Professional Gross Profit: Professional gross profit increased approximately
$5.8 million (14.3%) from the 2020 EdgeRock acquisition which contributed
fifty-two weeks of gross profit in Fiscal 2021 vs. forty-seven weeks in Fiscal
2020, the Momentum acquisition which provided gross profit of $1.7 million, and
an overall increase of 1.4% in average spread. These increases were partially
offset by a decrease in the IT Infrastructure & Development division of
approximately $2.4 million in gross profit.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased approximately $9.9 million (17.9%), primarily
due to additional compensation generated from increased overall gross profit,
from the EdgeRock acquisition with fifty-two weeks in Fiscal 2021 vs.
forty-seven weeks in Fiscal 2020, and the Momentum acquisition. The components
of selling, general and administrative expense are detailed in the following
table:
                                                                                                     Fiscal Year Ended
                                                              December 26,                                   December 27,
                                                                  2021                                           2020
                                                                                                                                                   $                 %
                                                    Amount               % of Revenue              Amount               % of Revenue            Change             Change
                                                                                                   (dollars in thousands)
Compensation and related                        $     53,332                       22  %       $     41,563                       20  %       $ 11,769                 28  %
Advertising and recruitment                            1,379                        1  %              1,552                        1  %           (173)               (11) %
Occupancy and office operations                        3,128                        1  %              3,456                        2  %           (328)                (9) %
Client engagement                                        389                        -  %                321                        -  %             68                 21  %
Software                                               2,538                        1  %              2,044                        1  %            494                 24  %
Professional fees                                      1,111                        -  %              1,143                        1  %            (32)                (3) %
Public company related costs                             727                        -  %                691                        -  %             36                  5  %
Bad debt                                                 145                        -  %                344                        -  %           (199)               (58) %
Share-based compensation                               1,058                        -  %                786                        -  %            272                 35  %
Transaction fees                                         170                        -  %                615                        -  %           (445)               (72) %
IT roadmap                                             1,689                        1  %              1,563                        1  %            126                  8  %
Workers' compensation loss retention
return                                                  (348)                       -  %               (464)                       -  %            116                (25) %
CARES Act credit, net                                 (2,083)                      (1) %                  -                        -  %         (2,083)                 -  %
Other                                                  1,879                        1  %              1,630                        1  %            250                 15  %
Total                                           $     65,115                       27  %       $     55,244                       27  %       $  9,871                 18  %


Gain on contingent consideration: As a result of the certain business
developments in Fiscal 2021, the Company recognized a $2.4 million gain on
contingent consideration related to the 2019 LJK acquisition.


Depreciation and Amortization: Depreciation and amortization charges decreased
approximately $1.2 million (23.9%). The decrease in depreciation and
amortization is primarily due to the Professional segment with a decrease
related to the 2015 Vision Technology Services acquisition, which was partially
offset by an increase related to the information technology improvement project.

Impairment loss: As a result of the certain business developments in Fiscal 2020
and changes in the Company's long-term projections, the Company calculated the
quantitative impairment test of the finance and accounting group using the
relief from royalty method for the indefinite-lived intangible assets and
residual method for the definite-lived intangible assets by asset group. In the
Professional segment, the Company recognized a $3.7 million trade name
impairment loss and a $3.5 million client partner list impairment loss in Fiscal
2020.

Interest Expense, net: Interest expense, net decreased approximately
$0.2 million (10)% primarily due to the lower average balance on the Revolving
Facility, offset by an increase in interest income from our workers compensation
loss retention program.

Income Taxes: Income tax expense increased $3.4 million primarily due to higher
pre-tax 2021 income, intangible impairment losses in 2020, non-deductible
transaction fees in 2020 related to the EdgeRock acquisition, and a higher Work
Opportunity Tax Credit in 2021.

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Fifty-two Week Fiscal Year Ended December 27, 2020 (Fiscal 2020) Compared with
Fifty-two Week Fiscal Year Ended December 29, 2019 (Fiscal 2019)

Revenues:

                                              Fiscal Year Ended
                                 December 27,                   December 29,
                                     2020                           2019
                                            (dollars in thousands)
Revenues by Segment:
Real Estate               $     68,756        33.2  %    $     96,422        43.9  %
Professional                   138,370        66.8  %         123,342        56.1  %
Total Revenues            $    207,126       100.0  %    $    219,764       100.0  %



Real Estate Revenues: Real Estate revenues decreased approximately $27.7 million
(28.7%) due to the effects of the COVID-19 pandemic discussed above. The
decrease was due to a 31.7% decrease in billed hours partially offset by a 4.1%
increase in average bill rate. Revenue from new offices was $0.8 million.

Professional Revenues: Professional revenues increased approximately $15.1
million (12.2%), primarily from LJK and EdgeRock acquisitions, which contributed
$36.1 million of new revenues. The remaining professional group revenues
decreased $21.1 million. Even with the overall increase, billed hours decreased
5.0% offsets by an increase of 17.7% in average bill rate and an increase in
permanent placements revenue of $1.2 million.

Gross Profit:


Gross profit represents revenues from workforce solutions less cost of services
expenses, which consist of payroll, payroll taxes, payroll-related insurance,
field talent costs, and reimbursable costs.


                                                  Fiscal Year Ended
                                     December 27,                   December 29,
                                         2020                           2019
                                                (dollars in thousands)
Gross Profit by Segment:
Real Estate                   $     25,812        39.1  %    $     36,928        52.9  %
Professional                        40,228        60.9  %          32,898        47.1  %
Total Gross Profit            $     66,040       100.0  %    $     69,826       100.0  %




                                                  Fiscal Year Ended
                                            December 27,        December 29,
                                                2020                2019
Gross Profit Percentage by Segment:
Real Estate                                         37.5  %           38.3  %
Professional                                        29.1  %           26.7  %
Company Gross Profit Percentage                     31.9  %           31.8  %



Overall, our gross profit decreased approximately $3.8 million (5.4%). As a
percentage of revenue, gross profit has increased to 31.9% from 31.8%, primarily
due to higher gross profits in the Professional segment.

We determine spread as the difference between bill rate and pay rate.

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Real Estate Gross Profit: Real Estate gross profit decreased approximately $11.1
million (30.1%) consistent with the decrease in revenue, which was partially
offset by a 2.2% increase in average spread.

Professional Gross Profit: Professional gross profit increased approximately
$7.3 million (22.3%) consistent with the increase in revenue, primarily from LJK
and EdgeRock acquisitions, which contributed $12.2 million of gross profit and
an overall increase of 19.5% in average spread.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased approximately $5.0 million (10.0%), primarily
related from LJK and EdgeRock acquisitions, which contributed $9.5 million of
new expense that was partially offset by reduced compensation costs from the
decline in gross profit and by many of our actions taken starting in March 2020
related to the COVID-19 pandemic to reduce actual and planned operating costs as
detailed in the following table.

                                                                                                     Fiscal Year Ended
                                                              December 27,                                   December 29,
                                                                  2020                                           2019
                                                                                                                                                  $                 %
                                                    Amount               % of Revenue              Amount               % of Revenue            Change            Change
                                                                                                  (dollars in thousands)
Compensation and related                        $     41,563                       20  %       $     37,144                       17  %       $ 4,419                 12  %
Advertising and recruitment                            1,552                        1  %              1,796                        1  %          (244)               (14) %
Occupancy and office operations                        3,456                        2  %              3,356                        2  %           100                  3  %
Client engagement                                        321                        -  %              1,348                        1  %        (1,027)               (76) %
Software                                               2,044                        1  %              1,571                        1  %           473                 30  %
Professional fees                                      1,143                        1  %              1,132                        1  %            11                  1  %
Public company related costs                             691                        -  %                675                        -  %            16                  2  %
Bad debt                                                 344                        -  %                115                        -  %           229                199  %
Share-based compensation                                 786                        -  %                850                        -  %           (64)                (8) %
Transaction fees                                         615                        -  %                434                        -  %           181                 42  %
IT roadmap                                             1,563                        1  %                721                        -  %           842                117  %
Workers' compensation loss retention
return                                                  (464)                       -  %               (357)                       -  %          (107)                30  %
Other                                                  1,630                        1  %              1,437                        1  %           193                 13  %
Total                                           $     55,244                       27  %       $     50,222                       23  %       $ 5,022                 10  %



Depreciation and Amortization: Depreciation and amortization charges increased
approximately $0.1 million (3.0%). The increase in depreciation and amortization
is primarily due to the Professional segment with increases related to the 2019
LJK and 2020 EdgeRock acquisitions that are partially offset by decreases
related to the 2015 VTS and 2015 D&W Talent acquisitions.

Impairment loss: As a result of the certain business developments in Fiscal 2020
and changes in the Company's long-term projections, the Company calculated the
quantitative impairment test of the finance and accounting group using the
relief from royalty method for the indefinite-lived intangible assets and
residual method for the definite-lived intangible assets by asset group. In the
Professional segment, the Company recognized a $3.7 million trade name
impairment loss and a $3.5 million client partner list impairment loss in Fiscal
2020.

Interest Expense, net: Interest expense, net was flat due to the increased
borrowings on the Term Loan related to the EdgeRock acquisition that was
partially offset by decreases in the Revolving Facility, deferred financing
fees, and unused fee.

Income Taxes: Income tax expense decreased $3.9 million (123.6%) primarily due
to lower pre-tax 2020 income and intangible impairment losses, which were
partially offset by non-deductible fees related to the 2020 EdgeRock
transaction.

Liquidity and Capital Resources


Our working capital requirements are primarily driven by field talent payments,
tax payments and client partner accounts receivable receipts. Since receipts
from client partners lag payments to field talent, working capital requirements
increase substantially in periods of growth.
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Our primary sources of liquidity are cash generated from operations and
borrowings under our credit agreement with BMO Harris Bank, N.A. ("BMO"), that
provides for a revolving credit facility maturing July 16, 2024 (the "Revolving
Facility"). Our primary uses of cash are payments to field talent, team members,
related payroll liabilities, operating expenses, capital expenditures, cash
interest, cash taxes, dividends and contingent consideration and debt payments.
We believe that the cash generated from operations, together with the borrowing
availability under our Revolving Facility, will be sufficient to meet our normal
working capital needs for at least the next twelve months, including investments
made, and expenses incurred, in connection with opening new markets throughout
the next year. Our ability to continue to fund these items may be affected by
general economic, competitive and other factors, many of which are outside of
our control. If our future cash flow from operations and other capital resources
are insufficient to fund our liquidity needs, we may be forced to obtain
additional debt or equity capital or refinance all or a portion of our debt.

While we believe we have sufficient liquidity and capital resources to meet our
current operating requirements and expansion plans, we may elect to pursue
additional growth opportunities within the next year that could require
additional debt or equity financing. If we are unable to secure additional
financing at favorable terms in order to pursue such additional growth
opportunities, our ability to pursue such opportunities could be materially
adversely affected.

During this period of uncertainty of volatility related to COVID-19, we will
continue to monitor our liquidity, particularly payments from our client
partners.

A summary of our working capital, operating, investing and financing activities
are shown in the following table:


                                                                                            Fiscal Year Ended
                                                                        December 26,           December 27,           December 29,
                                                                            2021                   2020                   2019
                                                                                          (dollars in thousands)
Working capital from continuing operations                            $     

25,851 $ 17,960 $ 20,532

Net cash provided by (used in):

                Continuing operating activities                       $       1,358          $      19,680          $      13,244
                Continuing investing activities                              (6,990)               (24,078)                (9,576)
                Continuing financing activities                                 473                  1,890                 (8,225)
Net change in cash and cash equivalents discontinued operations               5,271                  2,508                  4,557
Net change in cash and cash equivalents                               $         112          $           -          $           -



Operating Activities

Cash provided by operating activities consists of net income adjusted for
non-cash items, including depreciation and amortization, share-based
compensation expense, intangible impairment losses, interest expense on
contingent consideration payable, gain on contingent consideration, loss on
extinguishment of debt, and the effect of working capital changes. The primary
drivers of cash inflows and outflows are accounts receivable, accrued payroll
and expenses, and income taxes payable.

During Fiscal 2021, net cash provided by continuing operating activities was
$1.4 million, a decrease of $18.3 million compared with $19.7 million for Fiscal
2020. This decrease is primarily attributable to increased accounts receivable
and payments on accrued payroll and expenses, which were partially offset by an
increase in the accrual in other long-term liabilities from deferred employer
FICA for the CARES Act in Fiscal 2020.

During Fiscal 2020, net cash provided by continuing operating activities was
$19.7 million, an increase of $6.4 million compared with $13.2 million for
Fiscal 2019. This increase is primarily attributable to the non-cash impact of
intangible impairment losses, additional other long-term liabilities that
includes the deferred employer FICA, and payments on accounts receivable,
additional income taxes payable, which were partially offset by lower net
income, reduced deferred income taxes, payments on accrued payroll and expenses,
reduced prepaid expenses and other current assets, payments on accounts payable,
and loss on extinguishment of debt in Fiscal 2019.

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During Fiscal 2019, net cash provided by continuing operating activities was
$13.2 million primarily attributable to higher net income, the timing of
payments on operating assets and liabilities, net deferred tax assets, which was
partially offset by contingent consideration adjustments.

Investing Activities

Cash used in investing activities consists primarily of cash paid for businesses
acquired and capital expenditures.


In Fiscal 2021, we paid $3.8 million in connection with the Momentum acquisition
and we made capital expenditures of $3.2 million mainly related to software and
computer equipment purchased in the ordinary course of business and for the IT
roadmap. In Fiscal 2020, we paid net $22.0 million in connection with the 2020
EdgeRock and 2019 LJK acquisitions and we made capital expenditures of $2.1
million mainly related to software and computer equipment purchased in the
ordinary course of business and for the IT roadmap. In Fiscal 2019 we paid $7.5
million in connection with the LJK acquisition, excluding the hold back paid in
2020, and we made capital expenditures of $2.1 million mainly related to
software and computer equipment purchased in the ordinary course of business and
for the IT roadmap project.

Financing Activities

Cash flows from financing activities consisted principally of borrowings and
payments under our credit agreement, payment of dividends, and contingent
consideration paid.


For Fiscal 2021, we borrowed $6.8 million on our Revolving Facility for
increased working capital needs and to fund the Momentum acquisition, paid $4.6
million in cash dividends on our common stock, and paid down $2.1 million on the
Term Loan, as defined below.

For Fiscal 2020, we borrowed $22.5 million on our Term Loan, as defined below,
to fund the EdgeRock acquisition and pay down the Revolving Facility, we reduced
$14.4 million on our Revolving Facility, paid $5.2 million in cash dividends on
our common stock, and paid down $1.1 million on the Term Loan.

For Fiscal 2019, we paid $12.3 million in cash dividends on our common stock,
paid down $10.1 million on the term loan with Texas Capital Bank, National
Association ("TCB"), and we paid $2.7 million of contingent consideration
related to the Zycron acquisition. We borrowed $9.7 million on our Revolving
Facility and borrowed $7.5 million on our Term Loan in connection with the LJK
acquisition.

Credit Agreements

On July 16, 2019, we entered into a Credit Agreement (the "Credit Agreement"),
maturing July 16, 2024, led by BMO, as lead administrative agent, lender,
letters of credit issuer, and swing line lender. The Credit Agreement provides
for the Revolving Facility permitting us to borrow funds from time to time in an
aggregate amount up to $35 million. The Credit Agreement also provided for a
term loan commitment (the "Term Loan") permitting us to borrow funds from time
to time in an aggregate amount not to exceed $30 million with principal payable
quarterly, based on an annual percentage of the original principal amount as
defined in the Credit Agreement, all of which has been funded. We may from time
to time, with a maximum of two, request an increase in the aggregate Term Loan
commitment by $40 million, with minimum increases of $10 million. Our
obligations under the Credit Agreement are secured by a first priority security
interest in substantially all our tangible and intangible property. The Credit
Agreement bears interest either at the Base Rate plus the Applicable Margin or
LIBOR plus the Applicable Margin (as such terms are defined in the Credit
Agreement). We also pay an unused commitment fee on the daily average unused
amount of Revolving Facility and Term Loan.

The Credit Agreement contains customary affirmative covenants and negative
covenants. We are subject to a maximum Leverage Ratio and a minimum Fixed Charge
Coverage Ratio as defined in the Credit Agreement. The Company was in compliance
with these covenants as of December 26, 2021.

On February 3, 2020, we borrowed $18.5 million on the Term Loan in conjunction
with the closing of the EdgeRock acquisition. In April 2020, we entered into a
pay-fixed/receive-floating interest rate swap agreement with BMO that reduces
the floating interest rate component on the Term Loan obligation. The $25.0
million notional amount was effective on June 3, 2020 and designed as a cash
flow hedge on the underlying variable rate interest payments against a fixed
interest rate that terminates on June 1, 2023. In accordance with cash flow
hedge accounting treatment, we have determined that the hedge is perfectly
effective using the change-in-variable-cash-flow method.

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On February 8, 2021, the Company borrowed $3.8 million on the

Revolving Facility in conjunction with the closing of the Momentum

 acquisition, as  described  in
Note 3 in the Notes to Consolidated Financial Statements

Contractual Obligations


The following table summarizes our cash contractual obligations as of
December 26, 2021.

                                                                                  Payments due by period
                                                                  Less than 1                                                  More than 5
                                                 Total                year             1-3 years           3-5 years              years
                                                                                  (dollars in thousands)
Long-term debt obligations                    $ 39,643          $      3,563          $  36,081          $        -          $          -
Contingent consideration                         2,220                 1,110              1,110                   -                     -
Deferred employer FICA*                          7,100                 3,550              3,550                   -                     -
Operating lease obligations                      4,886                 2,073              2,535                 277                     -
Contractual cash obligations                  $ 53,849          $    

10,295 $ 43,276 $ 277 $ –
* included in Other current liabilities of continuing operations and Other long-term liabilities of continuing operations (see Note 9 in the
Notes to Consolidated Financial Statements)

Off-Balance Sheet Arrangements

Letter of Credit


In March 2020, in conjunction with the 2020 EdgeRock acquisition, we entered
into a standby letter of credit arrangement, which expires December 31, 2024,
for purposes of protecting a lessor against default on lease payments. As of
December 26, 2021, we had a maximum financial exposure from this standby letter
of credit totaling $0.1 million, all of which is considered usage against our
Revolving Facility.

Critical Accounting Policies and Estimates


We have identified the policies listed below as critical to our business and the
understanding of our results of operations. For a detailed discussion of the
application of these and other accounting policies, see Note 2 in the Notes to
the Consolidated Financial Statements of this Annual Report on Form 10-K. The
preparation of financial statements in conformity with GAAP, requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

On an ongoing basis, management evaluates its estimates, including those related
to revenue recognition, allowances for credit losses on accounts receivable,
impairment of goodwill and intangible assets, lease liability and continent
consideration obligations related to acquisitions, contingencies, litigation,
income taxes, share-based compensation option expense. Management bases its
estimates and judgments on historical experiences and on various other factors
believed to be reasonable under the circumstances. However, these estimates and
assumptions may change in the future based on actual experience as well as
market conditions.

We have classified the related assets and liabilities associated with our Light
Industrial segment, InStaff, as discontinued operations in our Consolidated
Balance Sheets. The results of InStaff business have been presented as
discontinued operations in our Consolidated Statements of Operations and
Comprehensive Income and Consolidated Statements of Cash Flows for all periods
presented. The sale represents a strategic shift in our business that will have
a major effect on our operations and financial results. See "Note 4 -
Discontinued Operations" for additional information.

The COVID-19 pandemic continues to have a significant impact on our economy as a
result of measures designed to stop the spread of the virus. In light of the
currently unknown ultimate duration and severity of COVID-19, we face a greater
degree of uncertainty than normal in making the judgments and estimates needed
to apply our significant accounting policies. As COVID-19 continues to develop,
management may make changes to these estimates and judgments over time, which
could result in meaningful impacts to our financial statements in future
periods. Actual results and outcomes may differ from management's estimates and
assumptions.


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Revenue Recognition


We derive our revenues from continuing operations in Real Estate and
Professional segments. We provide workforce solutions and placement services.
Revenues are recognized when promised workforce solutions are delivered to
client partners, in an amount that reflects the consideration we expect to be
entitled to in exchange for those services. Revenues as presented on the
consolidated statements of operations and comprehensive income represent
workforce solutions rendered to client partners less sales adjustments and
allowances. Reimbursements, including those related to out-of-pocket expenses,
are also included in revenues, and the related amounts of reimbursable expenses
are included in cost of services.
We record revenue on a gross basis as a principal versus on a net basis as an
agent in the presentation of revenues and expenses. We have concluded that gross
reporting is appropriate because we (i) have the risk of identifying and hiring
qualified field talent, (ii) have the discretion to select the field talent and
establish their price and duties and (iii) we bear the risk for services that
are not fully paid for by client partners.

Workforce solution revenues - Field talent revenues from contracts with client
partners are recognized in the amount to which we have a right to invoice, when
the services are rendered by our field talent.

Contingent placement revenues - Any revenues associated with workforce solutions
that are provided on a contingent basis are recognized once the contingency is
resolved, as this is when control transferred to the client partner, usually
when employment candidates start their employment.

Retained search placement revenues - Any revenues from these workforce solutions
are recognized based on the contractual amount for services completed to date
which best depicts the transfer of control of services, which is less than 1% of
consolidated revenues.

We estimate the effect of placement candidates who do not remain with our client
partners through the guarantee period (generally 90 days) based on historical
experience. Allowances, recorded as a liability, are established to estimate
these losses. Fees to client partners are generally calculated as a percentage
of the new worker's annual compensation. No fees for placement workforce
solutions are charged to employment candidates. These assumptions determine the
timing of revenue recognition for the reported period.

Payment terms in our contracts vary by the type and location of our client
partner and the workforce solutions offered. The term between invoicing and when
payment is due is not significant.

Intangible Assets


We hold intangible assets with indefinite and finite lives. Intangible assets
with indefinite useful lives are not amortized. Intangible assets with finite
useful lives are amortized over their respective estimated useful lives, ranging
from three to ten years, based on a pattern in which the economic benefit of the
respective intangible asset is realized.

Identifiable intangible assets recognized in conjunction with acquisitions are
recorded at fair value. Significant unobservable inputs are used to determine
the fair value of the identifiable intangible assets based on the income
approach valuation model whereby the present worth and anticipated future
benefits of the identifiable intangible assets are discounted back to their net
present value.

We capitalize purchased software and internal payroll costs directly incurred in
the modification of software for internal use. Software maintenance and training
costs are expensed in the period incurred.

We evaluate the recoverability of intangible assets whenever events or changes
in circumstances indicate that an intangible asset's carrying amount may not be
recoverable. We considered the current and expected future economic and market
conditions surrounding COVID-19 and its impact on each of the reporting units.
We annually evaluate the remaining useful lives of all intangible assets to
determine whether events and circumstances warrant a revision to the remaining
period of amortization. In the Professional segment, we recognized a $3.7
million trade name impairment loss and a $3.5 million client partner list
impairment loss in Fiscal 2020 (see Note 7 in the Notes to Consolidated
Financial Statements). We determined that there were no impairment indicators
for these assets in Fiscal 2021 and 2019.


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Goodwill


Goodwill represents the difference between the enterprise value/cash paid less
the fair value of all recognized net asset fair values including identifiable
intangible asset values in a business combination. We review goodwill for
impairment annually during the fourth quarter or whenever events or changes in
circumstances indicate the carrying value of goodwill may not be recoverable. We
considered the current and expected future economic and market conditions
surrounding COVID-19 and its impact on each of the reporting units. Based on
annual testing, the Company has determined that there was no goodwill impairment
in Fiscal 2021, 2020 or 2019.

We first evaluate qualitative factors to determine whether it is more likely
than not (that is, a likelihood of more than 50 percent) that the fair value of
the reporting unit is less than its carrying amount, including goodwill. If
after qualitatively assessing the totality of events or circumstances, we
determine that it is not more likely than not that the fair value of the
reporting unit is less than its carrying amount, then further testing is
unnecessary. If after assessing the totality of events or circumstances, we
determine that it is more likely than not that the fair value of the reporting
unit is less than its carrying amount, we then estimate the fair value of the
reporting unit and compare the fair value of the reporting unit with its
carrying amount, including goodwill, as discussed below.

In assessing whether it is more likely than not that an indefinite-lived
intangible asset is impaired, we assess relevant events and circumstances that
could affect the significant inputs used to determine the fair value.


The quantitative impairment test for an indefinite-lived intangible asset
consists of a comparison of the fair value of the asset with its carrying
amount. If the carrying amount of an intangible asset exceeds its fair value, a
reporting unit shall recognize an impairment loss in an amount equal to that
excess.

The quantitative goodwill impairment test involves a two-step process. In the
first step,we compare the fair value of each reporting unit to its carrying
value. If the fair value of the reporting unit exceeds its carrying value,
goodwill is not impaired and no further testing is required. If the fair value
of the reporting unit is less than the carrying value, we must perform the
second step of the impairment test to measure the amount of impairment loss. In
the second step, the reporting unit's fair value is allocated to all of the
assets and liabilities of the reporting unit, including any unrecognized
intangible assets, in a hypothetical analysis that calculates the implied fair
value of goodwill in the same manner as if the reporting unit was being acquired
in a business combination. If the implied fair value of the reporting unit's
goodwill is less than the carrying value, the difference is recorded as an
impairment loss.

Contingent Consideration


We have obligations, to be paid in cash, related to our acquisitions if certain
future operating and financial goals are met. The fair value of this contingent
consideration is determined using expected cash flows and present value
technique. The fair value calculation of the expected future payments uses a
discount rate commensurate with the risks of the expected cash flow. The
resulting discount is amortized as interest expense over the outstanding period
using the effective interest method.

Leases


We lease all their office space through operating leases, which expire at
various dates through 2025. Many of the lease agreements obligate us to pay real
estate taxes, insurance and certain maintenance costs, which are accounted for
separately. Certain of our lease arrangements contain renewal provisions from 3
to 10 years, exercisable at our option. Our lease agreements do not contain any
material residual value guarantees or material restrictive covenants.

We determine if an arrangement is an operating lease at inception. Leases with
an initial term of 12 months or less are not recorded on the balance sheet. All
other leases are recorded on the balance sheet as right-of-use assets and lease
liabilities for the lease term.

Right of use lease assets and lease liabilities are recognized at commencement
date based on the present value of lease payments over the lease term and
include options to extend or terminate the lease when they are reasonably
certain to be exercised. The present value of lease payments is determined
primarily using the incremental borrowing rate based on the information
available at lease commencement date. Our operating lease expense is recognized
on a straight-line basis over the lease term and is recorded in selling, general
and administrative expenses.

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Financial Instruments


We use fair value measurements in areas that include, but are not limited to,
interest rate swap agreements used to mitigate interest rate risk, and the
allocation of purchase price consideration to tangible and identifiable
intangible assets and contingent consideration. The carrying values of cash and
cash equivalents, accounts receivables, prepaid expenses, accounts payable,
accrued liabilities, and other current assets and liabilities approximate their
fair values because of the short-term nature of these instruments. The carrying
value of bank debt approximates fair value due to the variable nature of the
interest rates under the credit agreement with BMO that provides for the
revolving credit facility and term loan and current rates available to us for
debt with similar terms and risk. The fair value on the interest rate swap is
based on quoted prices from BMO.

Share-Based Compensation

We recognize compensation expense in selling, general and administrative
expenses over the service period for options or restricted stock that are
expected to vest and records adjustments to compensation expense at the end of
the service period if actual forfeitures differ from original estimates.
Income Taxes


The current provision for income taxes represents estimated amounts payable or
refundable on tax returns filed or to be filed for the year. We recognizes any
penalties when necessary as part of selling, general and administrative
expenses. As of December 26, 2021, goodwill of $29.7 million, which is limited
annually, is expected to be deductible for tax purposes.

Deferred tax assets and liabilities are recorded for the estimated future tax
effects of temporary differences between the tax basis of assets and liabilities
and amounts are classified net as noncurrent in the consolidated balance sheets.
Deferred tax assets are also recognized for net operating loss and tax credit
carryovers. The overall change in deferred tax assets and liabilities for the
period measures the deferred tax expense or benefit for the period. Effects of
changes in enacted tax laws on deferred tax assets and liabilities are reflected
as adjustments to tax expense in the period of enactment. As of December 26,
2021, we have a $5.2 million net operating loss carry forward from the 2020
EdgeRock acquisition with no expiration date. These net operating losses are
subject to an annual Internal Revenue Code Section 382 limitation of $1.3
million.

When appropriate, we will record a valuation allowance against net deferred tax
assets to offset future tax benefits that may not be realized. In determining
whether a valuation allowance is appropriate, we consider whether it is more
likely than not that all or some portion of our deferred tax assets will not be
realized, based in part upon management's judgments regarding future events and
past operating results. We believe that it is more likely than not that all
deferred tax assets will be realized and thus, believes that a valuation
allowance is not required as of December 26, 2021 or December 27, 2020.

We follow the guidance of Accounting Standards Codification ("ASC") Topic 740,
Accounting for Uncertainty in Income Taxes. ASC Topic 740 prescribes a
more-likely-than-not measurement methodology to reflect the financial statement
impact of uncertain tax positions taken or expected to be taken in a tax return.

Recent Accounting Pronouncements


For a discussion of recent accounting pronouncements and their potential effect
on our results of operations and financial condition, refer to Note 2 in the
Notes to the Consolidated Financial Statements of this Annual Report on Form
10-K.

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