Attached files

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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

or

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.

1


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.

 

 

2


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.

 

3


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

)