ACQUISITIONS

The purchase method of accounting in accordance with ASC

805,

Business Combination, was applied for all acquisitions. This requires the cost of an acquisition to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisitions is attributable to expected sales synergies from combining the operations of the acquired business with those of the Company.

Future Contingent Payments

As of

December 29, 2018,

the Company had

four

active acquisition agreements whereby additional contingent consideration

may

be earned by the former shareholders:

) effective

July 1, 2012

the Company acquired certain assets of BGA, LLC (“BGA”);

) effective

July 5, 2015,

the Company acquired certain assets of Substation Design Services, LLC (“SDS”);

) effective

October 1, 2017,

the Company acquired all of the stock of PSR Engineering Solutions d.o.o. Beograd (Voždovac) (“PSR”) and

) effective

September 30, 2018

the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC (together, “TKE”). The Company estimates future contingent payments at

December 29, 2018

as follows:

Fiscal Year	Total
December 28, 2019	$	1,588
January 2, 2021		1,461
January 1, 2022		1,724
Estimated future contingent consideration payments	$	4,773

Estimates of future contingent payments are subject to significant judgment and actual payments

may

materially differ from estimates. Potential future contingent payments to be made to all active acquisitions are capped at a cumulative maximum of

$9.8

million. The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of

December 29, 2018.

During the

fifty-two

week period ended

December 29, 2018,

the Company measured the intangibles acquired at fair value on a non-recurring basis. Contingent consideration related to acquisitions are recorded at fair value (level

) with changes in fair value recorded in other (expense) income, net.

The Company paid

$0.3

million and

$1.7

million in contingent consideration for the

fifty-two

week periods ended

December 29, 2018

and

December 30, 2017,

respectively.

The changes in the liability for contingent consideration from acquisitions for the

fifty-two

week periods ended

December 29, 2018

and

December 30, 2017

are as follows:

Balance as of December 31, 2016	$	1,231

Contingent payments made		(1,694	)
Estimated contingent payments, acquisitions		1,773
Increase to contingent payment estimates		781

Balance as of December 30, 2017	$	2,091

Contingent payments made		(300	)
Other changes in contingent consideration		47
Estimated contingent payments, acquisitions		2,935

Balance as of December 29, 2018	$	4,773

TKE

Effective

September 30, 2018,

the Company acquired the business operations of Thermal Kinetics Engineering, PLLC, a New York professional limited liability company and Thermal Kinetics Systems, LLC, a New York limited liability company (together, “TKE”). TKE is an established Buffalo-based engineering company providing full service process equipment supply, engineering, development and design services for construction and industrial customers. TKE provides engineering services on construction and industrial processes. At the forefront of new techniques and technologies, TKE is dedicated to providing environmentally friendly, energy-saving solutions. TKE engineers and builds optimal thermal integrations and unique separations approaches for industrial processes and equipment, with clients primarily in the chemical, oil and gas, renewable fuels, pharmaceutical, and industrial manufacturing industries. TKE will complement and expand the Company’s services offerings, providing a stronger depth of experienced engineering resources and capabilities. The preliminary consideration and estimated fair value of assets acquired and liabilities assumed is as follows:

Cash	$	1,066
Common stock of the Company		1,878
Contingent consideration, at fair value		2,935
Total consideration	$	5,879

The shareholders of TKE are eligible to receive post-closing contingent consideration upon the business exceeding certain base levels of operating income, potentially earned over

three

years. The amount recorded for the contingent consideration represents the acquisition date fair value of expected consideration to be paid based on TKE’s forecasted operating income during the

three

year period. Expected consideration was valued based on different possible scenarios for projected operating income. Each case was assigned a probability which was used to calculate an estimate of the forecasted future payments. Then a discount rate was applied to these forecasted future payments to determine the acquisition date fair value to be recorded. At the time of the acquisition, the book and tax basis of assets and liabilities acquired are the same. The acquisition has been accounted for under the purchase method of accounting. The total preliminary estimated purchase price has been allocated as follows:

Fixed assets	$	12
Restricted covenants		50
Customer relationships		720
Goodwill (a)		5,847
Less: net liabilities assumed		(750	)
Total consideration	$	5,879

(a)

The goodwill is expected to be fully deductible for tax purposes, except for the portion of contingent consideration which is deductible only when paid.

The Company incurred acquisition-related expenses of approximately

$175

which are included in severance, professional fees, office closures and other charges.

The results of operations of TKE have been included in the consolidated statement of operations as of the effective date of acquisition. The following revenue and operating income of TKE are included in the Company’s consolidated results of operations:

	Year Ended
	December 29, 2018
Revenues	$	2,575
Operating income	$	541

The following table represents the pro forma revenue and earnings for the years ended

December 29, 2018

and

December 30, 2017:

	Year Ended December 29, 2018				Year Ended December 30, 2017
	Historical		Pro Forma Combined (Unaudited)		Historical		Pro Forma Combined (Unaudited)
Revenues	$	200,352	$	205,732	$	186,737	$	193,956
Operating income	$	5,415	$	6,333	$	280	$	1,668
Diluted net income per share	$	0.22	$	0.26	$	0.17	$	0.23

The combined pro forma revenue and operating income for the years ended

December 29, 2018

and

December 30, 2017

were prepared as though the TKE Acquisition had occurred as of

January 1, 2017.

The pro forma results do

not

include any anticipated cost synergies or other effects of the planned integration of TKE. This summary is

not

necessarily indicative of what the results of operations would have been had the TKE Acquisition occurred during such period, nor does it purport to represent results of operations for any future periods.

RAF

Effective

April 16, 2017,

the Company acquired the business operations of RAF. RAF has been in business since

1991

as a multi-disciplined engineering and consulting and design company. The firm has been providing Engineering, Design, Permitting, Inspection and Construction Management services to the utility, industrial, commercial, and property management industries. RAF specializes in turnkey above ground tank inspection, repair and cleaning services, as well as concrete, steel, masonry, and roofing routine maintenance inspection and design. The purchase price for RAF was

$133,

all of which was allocated to goodwill as follows:

) assumed liabilities of

$123;

and

) estimated contingent consideration of

$10

paid in fiscal

2017.

PSR

Effective

October 1, 2017

the Company acquired all of the stock of PSR. PSR was established in Serbia in

2006

and specializes in the design and engineering associated with high voltage substations, design engineering for electrical equipment in power plants,

modeling, commissioning, site supervision and other engineering services for clients in Europe, North America, South America and the Middle East. At the time of acquisition, PSR had a highly trained staff of approximately

engineers. PSR acted as a subcontractor to the Company for over

three

years prior to the acquisition. The total purchase price of

$3,248

included cash at closing of

$1,000,

estimated contingent consideration of

$1,763,

payable over

three

years, and

$485

due to seller upon realization of net working capital recorded at closing. The net working capital payment of

$485

was paid in

January 2018.

As part of the working capital recorded at closing, the Company received cash of

$237.

The Company allocated

$58

to fixed assets and the balance to goodwill.