6.	Acquisitions

The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration. The Company gives

assurance that it will make acquisitions in the future and if they do make acquisitions gives

assurance that such acquisitions will be successful.

Future Contingent Payments

As of

September 28, 2019,

the Company had

two

active acquisition agreements whereby additional contingent consideration

may

be earned by the former shareholders:

) 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

September 28, 2019

as follows:

Fiscal Year Ending	Total
December 28, 2019 (after September 28, 2019)	$	-
January 2, 2021		388
January 1, 2022		1,754
December 31, 2022		919
Estimated future contingent consideration payments	$	3,061

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 after

September 28, 2019

are capped at a cumulative maximum of

$6.3

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

September 28, 2019.

During the

thirty-nine

week period ended

September 28, 2019,

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.

For acquisitions that involve contingent consideration, the Company records a liability equal to the fair value of the estimated contingent consideration obligation as of the acquisition date. The Company determines the acquisition date fair value of the contingent consideration based on the likelihood of paying the additional consideration. The fair value is estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level

inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the fair value of the contingent consideration liability is recognized in the consolidated statements of comprehensive income. During the measurement period, which

may

be up to

one

year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of comprehensive income.

The Company paid contingent consideration of

$0.6

million and

$0.3

million during the

thirty-nine

week periods ended

September 28, 2019

and

September 29, 2018,

respectively.

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. 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 Company estimated the contingent consideration to be paid to TKE as of the acquisition date and indicated such estimate resulted in a preliminary purchase price and allocation. Those estimates were highly dependent on uncertain estimates. The Company has finalized the purchase price by reducing its original estimate of contingent consideration by

$1.2

million. The final 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		1,757
Total consideration	$	4,701

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 purchase price has been allocated as follows:

Fixed assets	$	12
Restricted covenants		50
Customer relationships		720
Goodwill		4,669
Less: net liabilities assumed		(750	)
Total consideration	$	4,701

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 loss of TKE are included in the Company’s consolidated results of operations:

	Thirteen Week			Thirty-Nine Week
	Period Ended September 28, 2019			Period Ended September 28, 2019
Revenue	$	398		$	3,761
Operating loss	$	(236	)	$	(63	)

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

thirteen

and

thirty-nine

week periods ended

September 29, 2018:

	Thirteen Week Period Ended September 29, 2018				Thirty-Nine Week Period Ended September 29, 2018
	Historical		Pro Forma Combined (Unaudited)		Historical		Pro Forma Combined (Unaudited)
Revenue	$	42,559	$	44,352	$	145,081	$	150,161
Operating income	$	1,232	$	1,538	$	3,842	$	4,760
Diluted net income per share	$	0.06	$	0.07	$	0.17	$	0.22

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

September 29, 2018

was prepared as though the TKE Acquisition had occurred as of

January 1, 2018.

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.