AmrF

 

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 June 27, 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 August 11, 2020, there were 9,322,563 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 June 27, 2020 (unaudited) and December 28, 2019

 

1

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 27, 2020 and June 29, 2019  

 

2

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 27, 2020 and June 29, 2019  

 

3

 

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and six months ended June 27, 2020 and June 29, 2019  

 

4

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 27, 2020 and June 29, 2019  

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4

 

Controls and Procedures

 

34

 

 

 

 

 

 

 

PART II
OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

Legal Proceedings

 

35

Item 1A

 

Risk Factors

 

35

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

Item 3

 

Defaults Upon Senior Securities

 

38

Item 4

 

Mine Safety Disclosures

 

38

Item 5

 

Other Information

 

38

Item 6

 

Exhibits

 

39

 

 

 

 

 

Signatures

 

 

 

40

 

 

 


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)

 

 

 

June 27,

 

 

December 28,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash

 

$

13,831

 

 

$

1,196

 

Accounts receivable, net

 

 

22,640

 

 

 

26,604

 

Prepaid expenses and other current assets

 

 

1,486

 

 

 

842

 

Total Current Assets

 

 

37,957

 

 

 

28,642

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,399

 

 

 

1,528

 

Intangible assets, net

 

 

17,896

 

 

 

19,511

 

Goodwill

 

 

27,500

 

 

 

31,049

 

Right of use asset - leases

 

 

4,173

 

 

 

4,888

 

Other assets

 

 

2,892

 

 

 

3,223

 

Total Assets

 

$

91,817

 

 

$

88,841

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

14,311

 

 

$

16,577

 

Accounts receivable financing

 

 

14,941

 

 

 

19,374

 

Current debt - related party

 

 

35,599

 

 

 

37,780

 

Current portion of debt

 

 

912

 

 

 

676

 

Payable - related party

 

 

6,453

 

 

 

3,884

 

PPP Loans

 

 

6,465

 

 

 

 

Lease liabilities, current

 

 

1,620

 

 

 

1,797

 

Other current liabilities

 

 

4,056

 

 

 

3,907

 

Total Current Liabilities

 

 

84,357

 

 

 

83,995

 

 

 

 

 

 

 

 

 

 

PPP Loans, non current

 

 

12,930

 

 

 

 

Term loan

 

 

1,139

 

 

 

360

 

Lease liabilities, non current

 

 

2,601

 

 

 

3,183

 

Other long-term liabilities

 

 

2,728

 

 

 

1,670

 

Total Liabilities

 

 

103,755

 

 

 

89,208

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Series E-1 Preferred Stock, 6,500 designated, $0.00001 par value, 1053 and 729 shares issued and outstanding as of June 27, 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 June 27, 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 June 27, 2020 and December 28, 2019

 

 

13

 

 

 

13

 

Common stock, $0.00001 par value, 40,000,000 shares authorized as of June 27, 2020 and December 28, 2019; 9,322,563 and 8,785,748 shares issued and outstanding, as of June 27, 2020 and December 28, 2019, respectively

 

 

1

 

 

 

1

 

Additional paid in capital

 

 

74,890

 

 

 

76,214

 

Accumulated other comprehensive income (loss)

 

 

455

 

 

 

(58

)

Accumulated deficit

 

 

(87,297

)

 

 

(76,537

)

Total Stockholders' Deficit

 

 

(11,938

)

 

 

(367

)

Total Liabilities and Stockholders' Deficit

 

$

91,817

 

 

$

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)

 

 

 

Q2 2020

 

 

Q2 2019

 

 

Q2 2020 YTD

 

 

Q2 2019 YTD

 

Revenue

 

$

43,361

 

 

$

73,495

 

 

$

102,053

 

 

$

147,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue, excluding depreciation and amortization stated below

 

 

35,807

 

 

 

61,403

 

 

 

83,851

 

 

 

123,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

7,554

 

 

 

12,092

 

 

 

18,202

 

 

 

24,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

8,257

 

 

 

10,700

 

 

 

19,218

 

 

 

21,191

 

Impairment of goodwill

 

 

 

 

 

 

 

 

2,969

 

 

 

 

Depreciation and amortization

 

 

759

 

 

 

877

 

 

 

1,544

 

 

 

1,754

 

Total Operating Expenses

 

 

9,016

 

 

 

11,577

 

 

 

23,731

 

 

 

22,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income From Operations

 

 

(1,462

)

 

 

515

 

 

 

(5,529

)

 

 

1,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Expenses) Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and amortization of debt discount and deferred financing costs

 

 

(2,114

)

 

 

(1,911

)

 

 

(4,531

)

 

 

(3,918

)

Re-measurement loss on intercompany note

 

 

(115

)

 

 

(368

)

 

 

(790

)

 

 

(17

)

Gain on settlement of deferred consideration

 

 

 

 

 

 

 

 

 

 

 

847

 

Other (loss) income, net

 

 

(25

)

 

 

(29

)

 

 

(39

)

 

 

257

 

Total Other Expenses, net

 

 

(2,254

)

 

 

(2,308

)

 

 

(5,360

)

 

 

(2,831

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Before Provision for Income Tax

 

 

(3,716

)

 

 

(1,793

)

 

 

(10,889

)

 

 

(1,566

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Provision for) Benefit from income taxes

 

 

(47

)

 

 

322

 

 

 

129

 

 

 

324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(3,763

)

 

 

(1,471

)

 

 

(10,760

)

 

 

(1,242

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends - Series A Preferred Stock - related party

 

 

31

 

 

 

50

 

 

 

62

 

 

 

100

 

Dividends - Series E Preferred Stock - related party

 

 

1,168

 

 

 

390

 

 

 

1,558

 

 

 

780

 

Dividends - Series E-1 Preferred Stock - related party

 

 

185

 

 

 

182

 

 

 

367

 

 

 

364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Common Stock Holders

 

$

(5,147

)

 

$

(2,093

)

 

$

(12,747

)

 

$

(2,486

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Common Stock Holders

 

$

(0.59

)

 

$

(0.25

)

 

$

(1.47

)

 

$

(0.33

)

Weighted Average Shares Outstanding – Basic and Diluted

 

 

8,689,265

 

 

 

8,337,066

 

 

 

8,662,213

 

 

 

7,625,834

 

 

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)

 

 

 

Q2 2020

 

 

Q2 2019

 

 

Q2 2020 YTD

 

 

Q2 2019 YTD

 

Net Loss

 

$

(3,763

)

 

$

(1,471

)

 

$

(10,760

)

 

$

(1,242

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

55

 

 

 

620

 

 

 

513

 

 

 

2

 

Comprehensive Loss Attributable to the Company

 

$

(3,708

)

 

$

(851

)

 

$

(10,247

)

 

$

(1,240

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,600

 

 

 

 

 

 

339

 

 

 

 

 

 

 

 

 

339

 

Share issuance to Jackson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500,000

 

 

 

 

 

 

324

 

 

 

 

 

 

 

 

 

324

 

Conversion of Series A to common shares

 

 

 

 

 

 

 

 

(623,628

)

 

 

 

 

 

 

 

 

 

 

 

16,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends - Series A Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(62

)

 

 

 

 

 

 

 

 

(62

)

Dividends - Series E Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,558

)

 

 

 

 

 

 

 

 

(1,558

)

Dividends - Series E-1 Preferred Stock - Related Party

 

324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(367

)

 

 

 

 

 

 

 

 

(367

)

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

513

 

 

 

 

 

 

513

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,760

)

 

 

(10,760

)

Balance June 27, 2020

 

1,053

 

 

$

 

 

 

 

1,039,380

 

 

$

 

 

 

13,000

 

 

$

13

 

 

 

9,322,563

 

 

$

1

 

 

$

74,890

 

 

$

455

 

 

$

(87,297

)

 

$

(11,938

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par

Value

 

 

 

Shares

 

 

Par

Value

 

 

Shares

 

 

Par

Value

 

 

Shares

 

 

Par

Value

 

 

Additional paid in capital

 

 

Accumulated other comprehensive income

 

 

Accumulated Deficit

 

 

Total Deficit

 

 

Series E-1

 

 

 

Series A

 

 

Series E

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 28, 2020

 

891

 

 

$

 

 

 

 

1,039,380

 

 

$

 

 

 

13,000

 

 

$

13

 

 

 

9,107,563

 

 

$

1

 

 

$

76,028

 

 

$

400

 

 

$

(83,534

)

 

$

(7,092

)

Shares issued to/for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees, directors and consultants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

 

166

 

 

 

 

 

 

 

 

 

166

 

Share issuance to Jackson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200,000

 

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Dividends - Series A Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31

)

 

 

 

 

 

 

 

 

(31

)

Dividends - Series E Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,168

)

 

 

 

 

 

 

 

 

(1,168

)

Dividends - Series E-1 Preferred Stock - Related Party

 

162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(185

)

 

 

 

 

 

 

 

 

(185

)

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

55

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,763

)

 

 

(3,763

)

Balance June 27, 2020

 

1,053

 

 

$

 

 

 

 

1,039,380

 

 

$

 

 

 

13,000

 

 

$

13

 

 

 

9,322,563

 

 

$

1

 

 

$

74,890

 

 

$

455

 

 

$

(87,297

)

 

$

(11,938

)