Staffing 360 Solutions, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EX-32.2 - Staffing 360 Solutions, Inc.	staf-ex322_7.htm
EX-32.1 - EX-32.1 - Staffing 360 Solutions, Inc.	staf-ex321_8.htm
EX-31.2 - EX-31.2 - Staffing 360 Solutions, Inc.	staf-ex312_6.htm
EX-31.1 - EX-31.1 - Staffing 360 Solutions, Inc.	staf-ex311_9.htm
EX-10.7 - EX-10.7 - Staffing 360 Solutions, Inc.	staf-ex107_183.htm
EX-10.6 - EX-10.6 - Staffing 360 Solutions, Inc.	staf-ex106_184.htm
EX-10.3 - EX-10.3 - Staffing 360 Solutions, Inc.	staf-ex103_185.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission File Number: 001-37575

STAFFING 360 SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

68-0680859

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

641 Lexington Avenue, Suite 2701

New York, New York 10022

(Address of principal executive offices) (Zip Code)

(646) 507-5710

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2020, there were 9,644,363 outstanding common stock shares, par value $0.00001 per share, of the issuer.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock

STAF

NASDAQ

Form 10-Q Quarterly Report

INDEX

	PART I FINANCIAL INFORMATION

Item 1	Financial Statements		1
	Condensed Consolidated Balance Sheets as of September 26, 2020 (unaudited) and December 28, 2019		1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2020 and September 28, 2019		2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 26, 2020 and September 28, 2019		3
		Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 26, 2020 and September 28, 2019	4
		Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 26, 2020 and September 28, 2019	6
		Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3		Quantitative and Qualitative Disclosures About Market Risk	40
Item 4		Controls and Procedures	40

		PART II OTHER INFORMATION

Item 1		Legal Proceedings	41
Item 1A		Risk Factors	41
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3		Defaults Upon Senior Securities	45
Item 4		Mine Safety Disclosures	45
Item 5		Other Information	45
Item 6		Exhibits	46

Signatures			48

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except share, par values and stated values)

	September 26,			December 28,
	2020			2019
	(Unaudited)
ASSETS
Current Assets:
Cash	$	7,370		$	1,196
Restricted cash		3,300			—
Accounts receivable, net		23,535			26,604
Prepaid expenses and other current assets		1,234			842
Total Current Assets		35,439			28,642

Property and equipment, net		1,218			1,528
Intangible assets, net		16,173			19,511
Goodwill		26,277			31,049
Right of use asset - leases		3,310			4,888
Other assets		2,884			3,223
Total Assets	$	85,301		$	88,841
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	14,427		$	16,577
Accounts receivable financing		14,322			19,374
Current debt - related party		3,000			37,780
Current portion of debt		1,084			676
Payable - related party		2,980			3,884
PPP Loans		10,775			—
Lease liabilities, current		1,194			1,797
Other current liabilities		4,097			3,907
Total Current Liabilities		51,879			83,995

Long-term debt - related party		32,708			—
Long-term debt		1,034			—
PPP Loans, non current		8,620			—
Term loan		—			360
Lease liabilities, non current		2,147			3,183
Other long-term liabilities		4,258			1,670
Total Liabilities		100,646			89,208

Commitments and contingencies		—			—
Series E-1 Preferred Stock - Related Party, 6,500 designated, $0.00001 par value, 1,219 and 729 shares issued and outstanding as of September 26, 2020 and December 28, 2019, respectively		—			—

Stockholders' Deficit:
Staffing 360 Solutions, Inc. Equity:
Preferred stock, $0.00001 par value, 20,000,000 shares authorized;
Series A Preferred Stock - Related Party, $0.00001 par value, 1,039,380 and 1,663,008 shares issued and outstanding, as of September 26, 2020 and December 28, 2019, respectively		—			—
Series E Preferred Stock - Related Party, 13,000 designated, $0.00001 par value, 13,000 shares issued and outstanding as of September 26, 2020 and December 28, 2019		13			13
Common stock, $0.00001 par value, 40,000,000 shares authorized as of September 26, 2020 and December 28, 2019; 9,333,763 and 8,785,748 shares issued and outstanding, as of September 26, 2020 and December 28, 2019, respectively		1			1
Additional paid in capital		74,293			76,214
Accumulated other comprehensive income (loss)		286			(58	)
Accumulated deficit		(89,938	)		(76,537	)
Total Stockholders' Deficit		(15,345	)		(367	)
Total Liabilities and Stockholders' Deficit	$	85,301		$	88,841

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts in thousands, except share and per share values)

(UNAUDITED)

	Q3 2020			Q3 2019			Q3 2020 YTD			Q3 2019 YTD
Revenue	$	48,640		$	67,320		$	150,693		$	214,644

Cost of Revenue, excluding depreciation and amortization stated below		40,317			54,835			124,168			177,949

Gross Profit		8,323			12,485			26,525			36,695

Operating Expenses:
Selling, general and administrative expenses		9,391			11,361			28,609			32,552
Impairment of goodwill		—			—			2,969			—
Depreciation and amortization		768			867			2,312			2,621
Total Operating Expenses		10,159			12,228			33,890			35,173

(Loss) Income From Operations		(1,836	)		257			(7,365	)		1,522

Other (Expenses) Income:
Interest expense and amortization of debt discount and deferred financing costs		(1,746	)		(2,059	)		(6,277	)		(5,977	)
Re-measurement gain (loss) on intercompany note		442			(467	)		(348	)		(484	)
Gain on business sale		220			—			220			—
Gain on settlement of deferred consideration		—			1,138			—			1,985
Other income		161			51			122			308
Total Other Expenses, net		(923	)		(1,337	)		(6,283	)		(4,168	)

Loss Before Provision for Income Tax		(2,759	)		(1,080	)		(13,648	)		(2,646	)

Benefit from (Provision for) income taxes		118			(28	)		247			296

Net Loss		(2,641	)		(1,108	)		(13,401	)		(2,350	)

Dividends - Series A Preferred Stock - related party		31			50			93			150
Dividends - Series E Preferred Stock - related party		553			390			2,111			1,170
Dividends - Series E-1 Preferred Stock - related party		208			182			575			546

Net Loss Attributable to Common Stock Holders	$	(3,433	)	$	(1,730	)	$	(16,180	)	$	(4,216	)

Basic and Diluted Loss per Share:

Net Loss Attributable to Common Stock Holders	$	(0.39	)	$	(0.20	)	$	(1.85	)	$	(0.53	)
Weighted Average Shares Outstanding – Basic and Diluted		8,777,683			8,821,607			8,767,183			7,974,186

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(All amounts in thousands)

(UNAUDITED)

	Q3 2020			Q3 2019			Q3 2020 YTD			Q3 2019 YTD
Net Loss	$	(2,641	)	$	(1,108	)	$	(13,401	)	$	(2,350	)

Other Comprehensive (Loss) Income
Foreign exchange translation adjustment		(169	)		717			344			719
Comprehensive Loss Attributable to the Company	$	(2,810	)	$	(391	)	$	(13,057	)	$	(1,631	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(All amounts in thousands)

(UNAUDITED)

	Shares		Par Value		Shares			Par Value		Shares		Par Value		Shares		Par Value		Additional paid in capital			Accumulated other comprehensive income (loss)			Accumulated Deficit			Total Deficit
	Series E-1				Series A					Series E				Common Stock
Balance December 28, 2019		729	$	—		1,663,008		$	—		13,000	$	13		8,785,748	$	1	$	76,214		$	(58	)	$	(76,537	)	$	(367	)
Shares issued to/for:
Employees, directors and consultants		—		—		—			—		—		—		31,800		—		479			—			—			479
Share issuance to Jackson		—		—		—			—		—		—		500,000		—		324			—			—			324
Warrants issued to consultants		—		—		—			—		—		—		—		—		55			—			—			55
Conversion of Series A to common shares		—		—		(623,628	)		—		—		—		16,215		—		—			—			—			—
Dividends - Series A Preferred Stock - Related Party		—		—		—			—		—		—		—		—		(93	)		—			—			(93	)
Dividends - Series E Preferred Stock - Related Party		—		—		—			—		—		—		—		—		(2,111	)		—			—			(2,111	)
Dividends - Series E-1 Preferred Stock - Related Party		490		—		—			—		—		—		—		—		(575	)		—			—			(575	)
Foreign currency translation gain		—		—		—			—		—		—		—		—		—			344			—			344
Net loss		—		—		—			—		—		—		—		—		—			—			(13,401	)		(13,401	)
Balance September 26, 2020		1,219	$	—		1,039,380		$	—		13,000	$	13		9,333,763	$	1	$	74,293		$	286		$	(89,938	)	$	(15,345	)

	Shares		Par Value		Shares		Par Value		Shares		Par Value		Shares		Par Value		Additional paid in capital			Accumulated other comprehensive income (loss)		Accumulated Deficit			Total Deficit
	Series E-1				Series A				Series E				Common Stock
Balance June 27, 2020		1,053	$	—		1,039,380	$	—		13,000	$	13		9,322,563	$	1	$	74,890		$	455	$	(87,297	)	$	(11,938	)
Shares issued to/for:
Employees, directors and consultants		—		—		—		—		—		—		11,200		—		140			—		—			140
Share issuance to Jackson		—		—		—		—		—		—		—		—		—			—		—			—
Warrants issued to consultants		—		—		—		—		—		—		—		—		55			—		—			55
Dividends - Series A Preferred Stock - Related Party		—		—		—		—		—		—		—		—		(31	)		—		—			(31	)
Dividends - Series E Preferred Stock - Related Party		—		—		—		—		—		—		—		—		(553	)		—		—			(553	)
Dividends - Series E-1 Preferred Stock - Related Party		166		—		—		—		—		—		—		—		(208	)		—		—

Staffing 360 Solutions, Inc. - FORM 10-Q - November 10, 2020

Attached files