Quarterly Report (10-q)

Date : 08/14/2019 @ 9:21PM
Source : Edgar (US Regulatory)
Stock : Staffing 360 Solutions Inc (STAF)
Quote : 0.9657  0.0 (0.00%) @ 9:00AM

Quarterly Report (10-q)

F

 

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 29, 2019

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 13, 2019, there were 8,680,148 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 29, 2019 (unaudited) and December 29, 2018

 

1

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and six month periods ended June 29, 2019 and three and six month periods ended June 30, 2018

 

2

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six month periods ended June 29, 2019 and the three and six month periods ended June 30, 2018

 

3

 

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six month period ended June 29, 2019 and June 30, 2018

 

4

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six month period ended June 29, 2019 and June 30, 2018

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

13

Item 2

 

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

 

17

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

Item 4

 

Controls and Procedures

 

26

 

 

 

 

 

 

 

PART II
OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

Legal Proceedings

 

28

Item 1A

 

Risk Factors

 

28

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

Item 3

 

Defaults Upon Senior Securities

 

28

Item 4

 

Mine Safety Disclosures

 

28

Item 5

 

Other Information

 

28

Item 6

 

Exhibits

 

29

 

 

 

 

 

Signatures

 

 

 

30

 

 

 


PART I-FINANCIA L 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 29,

 

 

December 29,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash

 

$

1,411

 

 

$

3,181

 

Accounts receivable, net

 

 

31,694

 

 

 

32,746

 

Prepaid expenses and other current assets

 

 

1,563

 

 

 

1,197

 

Total Current Assets

 

 

34,668

 

 

 

37,124

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,686

 

 

 

1,639

 

Intangible assets, net

 

 

21,219

 

 

 

22,657

 

Goodwill

 

 

32,061

 

 

 

32,061

 

Right of use asset - leases

 

 

5,409

 

 

 

 

Other assets

 

 

3,410

 

 

 

2,956

 

Total Assets

 

$

98,453

 

 

$

96,437

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

20,712

 

 

$

18,283

 

Payable - related party

 

 

1,917

 

 

 

1,457

 

Current portion of debt

 

 

657

 

 

 

657

 

Accounts receivable financing

 

 

17,288

 

 

 

21,979

 

Lease liabilities, current

 

 

1,724

 

 

 

 

Other current liabilities

 

 

7,021

 

 

 

9,642

 

Total Current Liabilities

 

 

49,319

 

 

 

52,018

 

 

 

 

 

 

 

 

 

 

Term loan - related party, net

 

 

34,870

 

 

 

34,568

 

Term loan

 

 

639

 

 

 

997

 

Lease liabilities, non current

 

 

3,791

 

 

 

 

Other long-term liabilities

 

 

3,939

 

 

 

4,659

 

Total Liabilities

 

 

92,558

 

 

 

92,242

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Series E-1 Preferred Stock, 6,500 designated, $0.00001 par value, 405 and 81 shares issued and outstanding as of June 29, 2019 and December 29, 2018, respectively

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Staffing 360 Solutions, Inc. Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.00001 par value, 20,000,000 shares authorized;

 

 

 

 

 

 

 

 

Series A Preferred Stock - Related Party, 1,663,008 shares designated, $1.00 stated value, 1,663,008 shares issued and outstanding, as of June 29, 2019 and December 29, 2018

 

 

 

 

 

 

Series E Preferred Stock, 13,000 designated, $0.00001 par value, 13,000 shares issued and outstanding as of June 29, 2019 and December 29, 2018

 

 

13

 

 

 

13

 

Common stock, $0.00001 par value, 40,000,000 and 20,000,000 shares authorized as of

     June 29, 2019 and December 29, 2018, respectively; 8,245,948 and 5,326,068 shares

     issued and outstanding, as of June 29, 2019 and December 29, 2018, respectively

 

 

1

 

 

 

 

Additional paid in capital

 

 

76,711

 

 

 

73,772

 

Accumulated other comprehensive income

 

 

2,055

 

 

 

2,053

 

Accumulated deficit

 

 

(72,885

)

 

 

(71,643

)

Total Stockholders' Equity

 

 

5,895

 

 

 

4,195

 

Total Liabilities and Stockholders' Equity

 

$

98,453

 

 

$

96,437

 

 

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 2019

 

 

Q2 2018

 

 

Q2 2019 YTD

 

 

Q2 2018 YTD

 

Revenue

 

$

73,495

 

 

$

59,727

 

 

$

147,324

 

 

$

115,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue, excluding depreciation and amortization stated below

 

 

61,403

 

 

 

47,845

 

 

 

123,114

 

 

 

92,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

12,092

 

 

 

11,882

 

 

 

24,210

 

 

 

23,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

10,700

 

 

 

11,030

 

 

 

21,191

 

 

 

22,218

 

Depreciation and amortization

 

 

877

 

 

 

712

 

 

 

1,754

 

 

 

1,510

 

Total Operating Expenses

 

 

11,577

 

 

 

11,742

 

 

 

22,945

 

 

 

23,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

515

 

 

 

140

 

 

 

1,265

 

 

 

(265

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Expenses) Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and amortization of debt discount and deferred financing costs

 

 

(1,911

)

 

 

(2,066

)

 

 

(3,918

)

 

 

(4,143

)

Gain in fair value of warrant liability

 

 

 

 

 

341

 

 

 

 

 

 

879

 

Re-measurement loss on intercompany note

 

 

(368

)

 

 

(721

)

 

 

(17

)

 

 

(146

)

Gain on sale of business

 

 

 

 

 

238

 

 

 

 

 

 

238

 

Gain on settlement of deferred consideration

 

 

 

 

 

 

 

 

847

 

 

 

 

Other (loss) income, net

 

 

(29

)

 

 

(9

)

 

 

257

 

 

 

241

 

Total Other Expenses, net

 

 

(2,308

)

 

 

(2,217

)

 

 

(2,831

)

 

 

(2,931

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Before Provision for Income Tax

 

 

(1,793

)

 

 

(2,077

)

 

 

(1,566

)

 

 

(3,196

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit from income taxes

 

 

322

 

 

 

233

 

 

 

324

 

 

 

81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(1,471

)

 

 

(1,844

)

 

 

(1,242

)

 

 

(3,115

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends - Series A preferred stock - related party

 

 

50

 

 

 

50

 

 

 

100

 

 

 

100

 

Dividends - Series E preferred stock - related party

 

 

390

 

 

 

 

 

 

780

 

 

 

 

Dividends - Series E-1 preferred stock - related party

 

 

182

 

 

 

 

 

 

364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Common Stock Holders

 

$

(2,093

)

 

$

(1,894

)

 

$

(2,486

)

 

$

(3,215

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Common Stock Holders

 

$

(0.25

)

 

$

(0.46

)

 

$

(0.33

)

 

$

(0.79

)

Weighted Average Shares Outstanding – Basic and Diluted

 

 

8,337,066

 

 

 

4,142,309

 

 

 

7,625,834

 

 

 

4,063,316

 

 

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 2019

 

 

Q2 2018

 

 

Q2 2019 YTD

 

 

Q2 2018 YTD

 

Net Loss

 

$

(1,471

)

 

$

(1,844

)

 

$

(1,242

)

 

$

(3,115

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

 

620

 

 

 

1,254

 

 

 

2

 

 

 

338

 

Comprehensive Loss Attributable to the Company

 

$

(851

)

 

$

(590

)

 

$

(1,240

)

 

$

(2,777

)

 

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’ EQUITY

(All amounts in thousands)

(UNAUDITED)

 

 

Shares

 

 

Par

Value

 

 

 

Shares

 

 

Par

Value

 

 

Shares

 

 

Par

Value

 

 

Shares

 

 

Par

Value

 

 

Additional paid in capital

 

 

Accumulated other comprehensive loss

 

 

Accumulated Deficit

 

 

Total Equity

 

 

Series E-1

 

 

 

Series A

 

 

Series E

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 29, 2018

 

81

 

 

$

 

 

 

 

1,663,008

 

 

$

 

 

 

13,000

 

 

$

13

 

 

 

5,326,068

 

 

$

 

 

$

73,772

 

 

$

2,053

 

 

$

(71,643

)

 

$

4,195

 

Shares issued to/for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees, directors and consultants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,200

 

 

 

 

 

 

423

 

 

 

 

 

 

 

 

 

423

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,902,680

 

 

 

1

 

 

 

3,924

 

 

 

 

 

 

 

 

 

3,925

 

Dividends - Series A Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(100

)

 

 

 

 

 

 

 

 

(100

)

Dividends - Series E Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(780

)

 

 

 

 

 

 

 

 

(780

)

Dividends - Series E-1 Preferred Stock - Related Party

 

324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(364

)

 

 

 

 

 

 

 

 

(364

)

Dividends - Common Stock holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(164

)

 

 

 

 

 

 

 

 

(164

)

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,242

)

 

 

(1,242

)

Balance June 29, 2019

 

405

 

 

$

 

 

 

 

1,663,008

 

 

$

 

 

 

13,000

 

 

$

13

 

 

 

8,245,948

 

 

$

1

 

 

$

76,711

 

 

$

2,055

 

 

$

(72,885

)

 

$

5,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

4


STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(All amounts in thousands)

(UNAUDITED)

 

 

 

Shares

 

 

Par

Value

 

 

Shares

 

 

Par

Value

 

 

Additional paid in capital

 

 

Accumulated other comprehensive loss

 

 

Accumulated Deficit

 

 

Total Equity

 

 

 

Series A

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 30, 2017

 

 

1,663,008

 

 

$

 

 

 

3,909,114

 

 

$

 

 

$

57,574

 

 

$

783

 

 

$

(65,142

)

 

 

(6,785

)

Shares issued to/for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees, directors and consultants

 

 

 

 

 

 

 

 

110,322

 

 

 

 

 

 

663

 

 

 

 

 

 

 

 

 

663

 

Acquisition of Clement May

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

21

 

At-Market-Facility, net

 

 

 

 

 

 

 

 

237,232

 

 

 

 

 

 

609

 

 

 

 

 

 

 

 

 

609

 

Additional shares issues on share split

 

 

 

 

 

 

 

 

426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

547

 

 

 

 

 

 

 

 

 

547

 

Dividends - Series A Preferred Stock - Related Party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(100

)

 

 

 

 

 

 

 

 

(100

)

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

338

 

 

 

 

 

 

338

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,115

)

 

 

(3,115

)

Balance June 30, 2018

 

 

1,663,008

 

 

$

 

 

 

4,272,094

 

 

$

 

 

$

59,314

 

 

$

1,121

 

 

$

(68,257

)

 

$

(7,822

)

 

 

 

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

 

5


STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands)

(UNAUDITED)

 

 

 

Q2 2019 YTD

 

 

Q2 2018 YTD

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,242

)

 

$

(3,115

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,754

 

 

 

1,510

 

Amortization of debt discount and deferred financing costs

 

 

315

 

 

 

237

 

Gain in fair value of warrants

 

 

 

 

 

(879

)

Stock based compensation

 

 

423

 

 

 

663

 

Gain on sale of business

 

 

 

 

 

(238

)

Gain on settlement of deferred consideration

 

 

(847

)

 

 

 

Re-measurement loss on intercompany note

 

 

17

 

 

 

146

 

Changes in operating assets and liabilities:

 

 

 

&nbs