UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The accompanying unaudited pro forma condensed combined financial statements present, for Staffing 360 Solutions, Inc. and its subsidiaries (“Staffing Solutions”) and Control Solutions International, Inc. and its subsidiary (“CSI”), the unaudited pro forma condensed combined statements of operations for the years ended May 31, 2013 for Staffing Solutions and December 31, 2012 for CSI and the unaudited pro forma condensed combined statements of operations for the three months ended August 31, 2013 for Staffing Solutions and nine months ended September 30, 2013 less the six months ended June 30, 2013 for CSI. The unaudited pro forma condensed combined balance sheet is based on the unaudited consolidated balance sheet as of August 31, 2013 for Staffing Solutions and the unaudited balance sheet as of September 30, 2013 for CSI. The unaudited pro forma condensed combined statement of operations is presented as if the acquisition had occurred on June 1, 2012. The unaudited pro forma condensed combined balance sheet gives effect to the transaction as if it occurred on September 30, 2013.

The unaudited pro forma condensed combined financial information and corresponding notes are based on estimates and assumptions that are preliminary and subject to change and which are provided for informational purposes only. The unaudited pro forma condensed combined financial information is not necessarily indicative of the financial position or operating results that would have been achieved had the acquisition been consummated as of the dates indicated, nor is it necessarily indicative of future financial position or operating results. This information should be read in conjunction with the historical financial statements and related notes of Staffing Solutions and CSI included in this Form 8-K.

These unaudited pro forma combined condensed consolidated financial statements are provided for informational purposes only. The unaudited pro forma combined condensed consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the acquisition been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed consolidated financial statements should be read together with:

· the accompanying notes to unaudited pro forma consolidated financial information;

· the unaudited financial statements of CSI as of September 30, 2013 and the notes relating thereto;

· the audited financial statements of CSI for the year ended December 31, 2012 and the notes relating thereto;

· the unaudited consolidated financial statements of Staffing Solutions as of August 31, 2013 and the notes relating thereto; and

· the audited consolidated financial statements of Staffing Solutions for the year ended May 31, 2013 and the notes relating thereto.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Notes to the Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

On November 4, 2013, Staffing Solutions consummated the acquisition (“Acquisition”) of 100% of the issued and outstanding stock of CSI and its wholly owned subsidiary, Canada Control Solutions International, Inc., a Continued British Columbia Corporation, originally incorporated in Ontario, Canada (“CCSI”) pursuant to a definitive Stock Purchase Agreement (the “SPA”) dated August 14, 2013 by and among Staffing Solutions, NewCSI, Inc., a Delaware corporation (“NCSI”), and the shareholders of NCSI. The aggregate consideration paid by Staffing Solutions to the NCSI Shareholders for the Acquisition was $3,530,454 (assuming entire earnout is paid, the “Purchase Price”). The Purchase Price was paid as follows: (i) cash payments at closing to the NCSI Shareholders of $1,311,454; (ii) stock payments valuing $119,000 by issuing to the NCSI Shareholders 136,000 restricted shares of Staffing Solutions’ common stock at a price of $0.875 per share; and (iii) an earnout payment to the NCSI Shareholders for performance based compensation in an amount equal to 20% of the amount of CSI’s and CCSI’s consolidated gross profit from the closing date of the Acquisition (the “Closing Date”) through the end of the sixteenth (16th) quarter following such Closing Date, such earnout amount not to exceed a total of $2,100,000. In addition, each shareholder of CSI agreed to sell, assign, transfer, convey and deliver to Staffing Solutions, and Staffing Solutions agreed to purchase, acquire and take assignment and delivery of, all of the shares of capital stock of CSI held by such shareholders, which on the Closing Date collectively constituted one hundred percent (100%) of the issued and outstanding shares of capital stock of CSI. Staffing Solutions did not acquire an interest in: (i) any bank accounts or investment accounts of CSI or cash therein as such exist immediately prior to the Closing Date except for a Canadian Bank account as agreed in the second amended to the SPA; (ii) any accounts receivable not deemed an “eligible account” (as defined in the SPA) as of the Closing Date; (iii) the cell phones and cell phone numbers of any shareholder or employee of CSI; or (iv) any LinkedIn account or Facebook, Twitter or other social media account of any shareholder or employee of CSI; all of which items in clauses (i) through (iii) shall belong to the shareholders or the employees of CSI, as the case may be. As a result of the Acquisition, CSI became a wholly-owned subsidiary of Staffing Solutions.

In connection with the Acquisition, Staffing Solutions identified and recognized an intangible asset of $1,433,730 representing contractual and non-contractual US and foreign customer relationships on a consolidated basis. The asset is being amortized over the estimated life of four years. CSI customer relationships were valued based on the discounted cash flow method applied to projected future cash flows as estimated by Staffing Solutions’ management. This method results in the sum of the future net cash flows discounted to its present day value. The valuation provided for the Contractual and Non Contractual Customer Relationships is based on management’s calculations. Staffing Solutions will recognize amortization expense of $209,869 in the fiscal year ended 2014, $358,433 in the fiscal year ended 2015, $358,433 in the fiscal year ended 2016, $358,433 in the fiscal year ended 2017 and $149,347 in the fiscal year ended 2018. 

The fair value allocation of intangible assets resulting from the Acquisition is based on management estimates. Staffing Solutions intends to retain the services of an independent valuation expert to determine the fair market value of the identifiable intangible assets, including the customer list and employment agreements associated with the Acquisition. Once determined, Staffing Solutions will reallocate the purchase price of the Acquisition based on the results of the independent evaluation if they are materially different from the allocations as recorded on November 4, 2013. Staffing Solutions anticipates this will be completed prior to filing its annual report and reflected in its upcoming audited consolidated financial statements.

Simultaneous with the closing on November 4, 2013, Staffing Solutions sold CSI accounts receivable deemed eligible to a financial institution in a nonrecourse transaction for a total of $1,035,824.

On November 4, 2013 and November 7, 2013, Staffing Solutions completed the first and second closings of its best efforts private offering up to $1,750,000 of 12% Unsecured Convertible Promissory Notes (the “Notes”) to various purchasers (the “Purchasers”). Pursuant to a subscription agreement with the Purchasers, Staffing Solutions issued to the Purchasers Notes for an aggregate of $1,025,000. Such Notes are convertible into 1,025,000 shares of common stock without regard to the conversion of any interest that may become due on the Notes and which also may be converted. Staffing Solutions issued an aggregate of 256,250 shares of common stock to the purchasers in the first and second closing. Such Notes mature on the earlier of: (i) within 10 days following the closing of a $10 million private placement financing, or (ii) February 28, 2014, unless voluntarily converted prior to that date. The Notes are subject to a voluntary conversion at the election of the Purchasers upon the earlier of: (i) the final closing of a pipe financing or (ii) the consummation of an acquisition as described in the Notes. The Purchasers may elect to convert the principal amount of the Note, including all accrued but unpaid interests, into units of Staffing Solutions consisting of shares of common stock and warrants to purchase shares of common stock, at the same price as any units that are sold in a pipe financing. In the event there is no pipe financing, upon notice from Staffing Solutions, the Purchasers may elect to convert the Notes at a conversion price equal to $.90 and receive 12,500 warrants for each $25,000 of principal converted. The warrants will have an exercise price of $2.00 per share. In addition to the Notes, each purchaser of the notes receives equity consideration at a rate of 12,500 shares of Common Stock for each $50,000 investment. 

As stated in Entry #3, the Purchasers of the convertible promissory notes receive equity consideration at a rate of 12,500 shares of common stock for each $50,000 investment. As a result, Staffing Solutions issued 256,250 shares of common stock. In addition, Staffing Solutions recorded a debt discount of $183,974 and a beneficial conversion relating to the conversion feature of the instrument totaling $58,849.

To reflect amortization of the Intangible Assets over a three month period

To reflect amortization of the Intangible Assets over a twelve month period