Quarterly Report (10-q)

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 March 30, 2019

☐	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 May 13, 2019, there were 8,239,948 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 March 30, 2019 (unaudited) and December 29, 2018		1
	Unaudited Condensed Consolidated Statements of Operations for the periods ended March 30, 2019 and March 31, 2018		2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the periods ended March 30, 2019 and March 31, 2018		3
		Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended March 30, 2019 and March 31, 2018	4
		Unaudited Condensed Consolidated Statements of Cash Flows for the periods ended March 30, 2019 and March 31, 2018	6
		Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3		Quantitative and Qualitative Disclosures About Market Risk	24
Item 4		Controls and Procedures	24

		PART II OTHER INFORMATION

Item 1		Legal Proceedings	26
Item 1A		Risk Factors	26
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3		Defaults Upon Senior Securities	26
Item 4		Mine Safety Disclosures	26
Item 5		Other Information	26
Item 6		Exhibits	27

Signatures			28

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)

	March 30,			December 29,
	2019			2018
	(Unaudited)
ASSETS
Current Assets:
Cash	$	2,523		$	3,181
Accounts receivable, net		34,286			32,746
Prepaid expenses and other current assets		1,410			1,197
Total Current Assets		38,219			37,124

Property and equipment, net		1,549			1,639
Intangible assets, net		21,938			22,657
Goodwill		32,061			32,061
Right of use asset - leases		4,548			—
Other assets		2,998			2,956
Total Assets	$	101,313		$	96,437
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	22,199		$	18,283
Interest payable - related party		1,462			1,457
Current portion of debt		674			657
Accounts receivable financing		17,112			21,979
Lease liabilities, current		1,691			—
Other current liabilities		8,502			9,642
Total Current Liabilities		51,640			52,018

Term loan - related party, net		34,716			34,568
Term loan		823			997
Lease liabilities, non current		2,938			—
Other long-term liabilities		3,930			4,659
Total Liabilities		94,047			92,242

Commitments and contingencies		—			—
Series E-1 Preferred Stock, 6,500 designated, $1,000 par value, 244 and 81 shares issued and outstanding as of March 30, 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 March 30, 2019 and December 29, 2018		—			—
Series E Preferred Stock, 13,000 designated, $1,000 par value, 13,000 shares issued and outstanding as of March 30, 2019 and December 29, 2018		13			13
Common stock, $0.00001 par value, 40,000,000 and 20,000,000 shares authorized as of March 30, 2019 and December 29, 2018, respectively; 8,234,348 and 5,326,068 shares issued and outstanding, as of March 30, 2019 and December 29, 2018, respectively		—			—
Additional paid in capital		77,232			73,772
Accumulated other comprehensive income		1,435			2,053
Accumulated deficit		(71,414	)		(71,643	)
Total Stockholders' Equity		7,266			4,195
Total Liabilities and Stockholders' Equity	$	101,313		$	96,437

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)

	Q1 2019			Q1 2018
Revenue	$	73,829		$	55,791

Cost of Revenue, excluding depreciation and amortization stated below		61,711			44,210

Gross Profit		12,118			11,581

Operating Expenses:
Selling, general and administrative expenses		10,491			11,188
Depreciation and amortization		877			798
Total Operating Expenses		11,368			11,986

Income (Loss) From Operations		750			(405	)

Other (Expenses) Income:
Interest expense and amortization of debt discount and deferred financing costs		(2,007	)		(2,077	)
Gain in fair value of warrant liability		—			538
Re-measurement gain on intercompany note		351			575
Gain on settlement of deferred consideration		847			—
Other income, net		286			250
Total Other Expenses, net		(523	)		(714	)

Income (Loss) Before Provision for Income Tax		227			(1,119	)

Benefit from (Provision for) income taxes		2			(152	)

Net Income (Loss)		229			(1,271	)

Dividends - Series A preferred stock - related party		50			50
Dividends - Series E preferred stock - related party		390			—
Dividends - Series E-1 preferred stock - related party		182			—

Net Loss Attributable to Common Stock Holders	$	(393	)	$	(1,321	)

Basic and Diluted Loss per Share:

Net Loss Attributable to Common Stock Holders	$	(0.06	)	$	(0.33	)
Weighted Average Shares Outstanding – Basic and Diluted		6,914,601			3,988,624

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)

	Q1 2019			Q1 2018
Net Income (Loss)	$	229		$	(1,271	)

Other Comprehensive loss
Foreign exchange translation adjustment		(618	)		(916	)
Comprehensive Loss Attributable to the Company	$	(389	)	$	(2,187	)

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) 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		—		—		—		—		—		—		5,600		—		199			—			—			199
Sale of common stock, net		—		—		—		—		—		—		2,902,680		—		3,964			—			—			3,964
Dividends - Series A Preferred Stock - Related Party		—		—		—		—		—		—		—		—		(50	)		—			—			(50	)
Dividends - Series E Preferred Stock - Related Party		—		—		—		—		—		—		—		—		(390	)		—			—			(390	)
Dividends - Series E-1 Preferred Stock - Related Party		162		—		—		—		—		—		—		—		(182	)		—			—			(182	)
Dividends - Common Stock holders		—		—		—		—		—		—		—		—		(81	)		—			—			(81	)
Foreign currency translation gain		—		—		—		—		—		—		—		—		—			(618	)		—			(618	)
Net loss		—		—		—		—		—		—		—		—		—			—			229			229
Balance March 30, 2019		243	$	—		1,663,008	$	—		13,000	$	13		8,234,348	$	—	$	77,232		$	1,435		$	(71,414	)	$	7,266

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) 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		—		—		18,200		—		373			—			—			373
At-Market-Facility, net		—		—		130,545		—		408			—			—			408
Additional shares issues on share split		—		—		426		—		—			—			—			—
Dividends - Series A Preferred Stock - Related Party		—		—		—		—		(50	)		—			—			(50	)
Foreign currency translation gain		—		—		—		—		—			(914	)		—			(914	)
Net loss		—		—		—		—		—			—			(1,271	)		(1,271	)
Balance March 31, 2018		1,663,008	$	—		4,058,285	$	—	$	58,305		$	(131	)	$	(66,413	)	$	(8,239	)

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

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands)

(UNAUDITED)

	Q1 2019			Q1 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	229		$	(1,271	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		877			798
Amortization of debt discount and deferred financing costs		157			122
Gain in fair value of warrants		—			(538	)
Stock based compensation		199			373
Gain on settlement of deferred consideration		(847	)		—
Re-measurement gain on intercompany note		(351	)		(575	)
Changes in operating assets and liabilities:
Accounts receivable		(1,717	)		7,026
Prepaid expenses and other current assets		(212	)		(47	)
Other assets		(79	)		(9	)
Accounts payable and accrued expenses		3,547			2,795
Interest payable - related party		—			(160	)
Other current liabilities		(118	)		447
Other long-term liabilities and other		558			(114	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,243			8,847

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(44	)		(56	)
Collection of UK factoring facility deferred purchase price		3,469			1,269
NET CASH PROVIDED BY INVESTING ACTIVITIES		3,425			1,213

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term loan		(156	)		(254	)
Repayments on accounts receivable financing, net		(8,606	)		(9,714	)
Dividends paid to related parties		(245	)		(50	)
Dividends paid on common stock		(81	)		—
Proceeds from sale of common stock		4,914			415
Payments made for earn-outs		(1,200	)		(90	)
Third party financing costs		(950	)		(7	)
NET CASH USED IN FINANCING ACTIVITIES		(6,324	)		(9,700	)

NET (DECREASE) INCREASE IN CASH		(656	)		360

Effect of exchange rates on cash		(2	)		(2	)

Cash - Beginning of period		3,181			3,100

Cash - End of period	$	2,523		$	3,458

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

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Staffing 360 Solutions, Inc. (“we,” “us,” “our,” “Staffing 360,” or the “Company”) was incorporated in the State of Nevada on December 22, 2009, as Golden Fork Corporation, which changed its name to Staffing 360 Solutions, Inc., ticker symbol “STAF,” on March 16, 2012. On June 15, 2017, the Company changed its state of domicile to Delaware.

The Company effected a one-for-ten reverse stock split on September 17, 2015 and a one-for-five reverse stock split on January 3, 2018. All share and per share information in these consolidated financial statements has been retroactively adjusted to reflect these reverse stock splits.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

These condensed consolidated financial statements and related notes are presented in accordance with generally accepted accounting principles in the United States (“GAAP”), expressed in U.S. dollars.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the GAAP.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 29, 2018 are included in the Company’s December 29, 2018 Form 10-K (“Fiscal 2018”), filed with the United States Securities and Exchange Commission on March 25, 2019. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the period ended March 30, 2019 are not necessarily indicative of results for the entire year ending December 28, 2019. This report is for the period December 30, 2018 to March 30, 2019 (“Q1 2019”) and December 31, 2017 to March 31, 2018 (“Q1 2018”).

Liquidity

The accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements as of the quarter ended March 30, 2019, the Company has an accumulated deficit of $71,414 and a working capital deficit of $13,421. At March 30, 2019, we had total debt of $37,237 and $2,523 of cash on hand. We have historically met our cash needs through a combination of cash flows from operating activities, term loans, promissory notes, bonds, convertible notes, private placement offerings and sales of equity. Our cash requirements are generally for operating activities and debt repayments.

The financial statements included in this quarterly report have been prepared assuming that we will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Significant assumptions underlie this belief, including, among other things, that there will be no material adverse developments in our business, liquidity, capital requirements and that our credit facilities with our lenders will remain available to us.

Further, our note issued to Jackson Investment Group LLC includes certain financial customary covenants and the Company has had instances of non-compliance. Management has historically been able to obtain from Jackson Investment Group LLC waivers of any non-compliance and management expects to continue to be able to obtain necessary waivers in the event of future non-compliance; however, there can be no assurance that the Company will be able to obtain such waivers, and should Jackson Investment Group LLC refuse to provide a waiver in the future, the outstanding debt under the agreement could become due immediately.

Revenue Recognition

On December 31, 2017, the Company adopted the new accounting standard ASC 606, Revenue from Contracts with Customers for all open contracts and related amendments as of December 31, 2017 using the modified retrospective method. The adoption had no

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

impact to the reported results. Results for reporting periods beginning after December 31, 2017 are presented under ASC 606, while the comparative information will not be restated and will continue to be reported under th e accounting standards in effect for those periods.

The Company recognizes revenue in accordance with ASC 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.

The Company accounts for revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Payment terms vary by client and the services offered.

The Company has primarily two main forms of revenue – temporary contractor revenue and permanent placement revenue. Temporary contractor revenue is accounted for as a single performance obligation satisfied over time because the customer simultaneously receives and consumes the benefits of the Company’s performance on an hourly basis. The contracts stipulate weekly billing and the Company has elected the “as invoiced” practical expedient to recognize revenue based on the hours incurred at the contractual rate as we have the right to payment in an amount that corresponds directly with the value of performance completed to date. Permanent placement revenue is recognized on the date the candidate’s full-time employment with the customer has commenced. The customer is invoiced on the start date, and the contract stipulates payment due under varying terms, typically 30 days. The contract with the customer stipulates a guarantee period whereby the customer may be refunded if the employee is terminated within a short period of time, however this has historically been infrequent, and immaterial upon occurrence. As such, the Company’s performance obligations are satisfied upon commencement of the employment, at which point control has transferred to the customer. Revenue in Q1 2019 was comprised of $70,998 of temporary contractor revenue and $2,831 of permanent placement revenue, compared with $52,997 and $2,794 for Q1 2018, respectively. Refer to Note 9 for further details on breakdown by segments.

Reclassifications

We may make certain reclassifications to prior period amounts to conform with the current year’s presentation. These reclassifications did not have a material effect on our condensed consolidated statement of financial position, results of operations or cash flows.

Income Taxes

The Company's provision for income taxes is based upon an estimated annual tax rate for the year applied to federal, state and foreign income. On a quarterly basis, the annual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The Company’s effective tax rate may change from period to period based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, and tax audit settlements. The effective income tax rate was (1.06)% and (8.8)% for the period ending Q1 2019 and Q1 2018, respectively.

Foreign Currency

The Company recorded a non cash foreign currency remeasurement gain of $351 and $575 in Q1 2019 and Q1 2018, respectively, associated with its U.S dollar denominated intercompany note.

Recent Accounting Pronouncements

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

Company has elected to apply the ‘package of practical expedients’ which allow us to not reassess i) whether existing or expired arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. The Company has also elected to apply i) the practical expedient which allows us to not separat e lease and non-lease components, and (2) the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurements requirements in the new standard. The adoption of the new standa rd resulted in the recognition of additional lease liabilities of approximately $4,629, and right-of-use assets of approximately $4,548 million as of March 30, 2019 related to the Company’s operating leases. The new standard did not have a material impact to the Company’s consolidated statement of operations or consolidated statement of cash flows.

NOTE 3 – LOSS PER COMMON SHARE

The Company utilizes the guidance per ASC 260, “Earnings per Share.” Basic earnings per share are calculated by dividing income available to stockholders by the weighted average number of common stock shares outstanding during each period. Our Series A preferred stock holders (related parties) receive certain dividends or dividend equivalents that are considered participating securities and our loss per share is computed using the two-class method. For Q1 2019 and Q1 2018, pursuant to the two-class method, as a result of the net loss attributable to common stock holders, losses were not allocated to the participating securities.

Diluted earnings per share are computed using the weighted average number of common stock shares and dilutive common share equivalents outstanding during the period. Dilutive common stock equivalents consist of common shares issuable upon the conversion of preferred stock, convertible notes, unvested equity awards and the exercise of stock options and warrants (calculated using the modified treasury stock method). Such securities, shown below, presented on a common share equivalent basis and outstanding as of March 30, 2019 and March 31, 2018 have not been included in the diluted earnings per share computations, as their inclusion would be anti dilutive due to the Company’s net loss as of March 30, 2019 and March 31, 2018:

	March 30,		March 31,
	2019		2018
Convertible preferred shares		7,492,995		43,239
Warrants		925,935		925,935
Restricted shares - unvested		557,184		475,332
Long term incentive plan (LTIP)		375,000		178,728
Options		111,400		125,400
Total		9,462,514		1,748,634

NOTE 4 – ACCOUNTS RECEIVABLE BASED FINANCING FACILITIES

HSBC Invoice Finance (UK) Ltd – New Facility

On February 8, 2018, CBS Butler, Staffing 360 Solutions Limited and The JM Group, entered into a new arrangement with HSBC Invoice Finance (UK) Ltd (“HSBC”) which provides for HSBC to purchase the subsidiaries’ accounts receivable up to an aggregate amount of £11,500 across all three subsidiaries. The terms of the arrangement provide for HSBC to fund 90% of the purchased accounts receivable upfront and, a secured borrowing line of 70% of unbilled receivables capped at £1,000 (within the overall aggregate total facility of £11,500). The arrangement has an initial term of 12 months, with an automatic rolling three-month extension and carries a service charge of 1.80%.

On June 28, 2018, Clement May Limited (“CML”), the Company’s new subsidiary entered into a new agreement with a minimum term of 12 months for purchase of debt (“APD”) with HSBC, joining CBS Butler Holdings Limited (“CBS Butler”), Staffing 360 Solutions Limited and The JM Group (collectively, with CML, the “Borrowers”) as “Connected Clients” as defined in the APD. The new Connected Client APDs carry an aggregate Facility Limit of £20,000 across all Borrowers. The obligations of the Borrowers are secured by a fixed charge and a floating charge on the Borrowers’ respective accounts receivable and are subject to cross-company guarantees among the Borrowers. In addition, the secured borrowing line against unbilled receivables was increased to £1,500 for a period of 90 days.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

Under ASU 2016-16, “Statement of Cash Flows (Topic 230, Classification of Certain Cash Receipts and Cash Payments, a consensus of the FASB Eme rging Issues Task Force ), the upfront portion of the sale of accounts receivable is classified within operating activities, while the deferred purchase price portion (or beneficial interest), once collected, is classified within investing activities.

ABN AMRO Commercial Finance

In conjunction with the HSBC Invoice Finance ( UK) Ltd – New Facility, on February 8, 2018, Staffing 360 Solutions Limited and The JM Group terminated its facility with ABN AMRO Commercial Finance and the remaining balance was paid in full.

NOTE 5 – DEBT

	March 30,			December 29,
	2019			2018
Jackson Investment Group - related party	$	35,740		$	35,740
HSBC Term Loan		1,497			1,653
Total Debt, Gross		37,237			37,393
Less: Debt Discount and Deferred Financing Costs		(1,024	)		(1,171	)
Total Debt, Net		36,213			36,222
Less: Current Portion, Net		(674	)		(657	)
Total Long-Term Debt, Net	$	35,539		$	35,565

The note issued to Jackson Investment Group LLC (“Jackson”) includes certain financial customary covenants, including a leverage ratio covenant. As of March 30, 2019, the Company was not in compliance with all covenants. On May 13, 2019, the Company received a waiver from Jackson curing the non-compliance as of March 30, 2019.

NOTE 6 – LEASES

On December 30, 2018, the Company adopted ASC 842 using the modified retrospective transition approach allowed under ASU 2018-11 which releases companies from presenting comparative periods and related disclosures under ASC 842 and requires a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has elected to apply the short-term lease exception to all leases of one year or less. Consequently, as a result of the adoption of ASC 842, we recognized a right of use (“ROU”) lease asset of approximately $ 4,548 with a corresponding lease liability of approximately $4,629 based on the present value of the minimum rental payments of such leases. The Company’s finance leases are immaterial both individually and in the aggregate.

Quantitative information regarding the Company’s leases for the period ended March 30, 2019 is as follows:

Lease Cost		Classification	1Q 2019
Operating lease cost		SG&A Expenses		441

Other information
Weighted average remaining lease term (years)		2.8
Weighted average discount rate		6.3	%

Future Lease Payments
2019	$	1,258
2020		1,494
2021		1,215
2022		405
2023		156
Thereafter		586
	$	5,114

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

Note: As most of the Company’s leases do not provide an implicit rate, we use the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

NOTE 7 – EQUITY

Common Stock

The Company issued the following shares of common stock during the three month period ended March 30, 2019:

Shares issued to/for:	Number of Common Shares Issued		Fair Value of Shares Issued		Fair Value at Issuance (minimum and maximum per share)
Equity raise		2,902,680	$	4,914	$	1.65	$	2.00
Board and Committee members		5,600		10		1.79		1.79
		2,908,280	$	4,924

The Company issued the following shares of common stock during the three month period ended March 31, 2018:


Shares issued to/for:	Number of Common Shares Issued		Fair Value of Shares Issued		Fair Value at Issuance (minimum and maximum per share)
At-the-Market Facility		130,545	$	415	$	2.35	$	3.50
Consultants		14,000		46		3.22		3.42
Board and Committee members		4,200		15		3.25		3.25
Reverse stock split (rounding up shares)		426		-		-		-
		149,171	$	476

Subsequent to March 30, 2019, the Company granted 5,600 shares of common stock valued at $9 to the board of directors.

Restricted Shares

The Company has issued shares to employees and board and committee members under its 2015 Omnibus Incentive Plan and 2016 Omnibus Incentive Plan. Under these plans, the shares are restricted for a period of three years from issuance. As of March 30, 2019, the Company has a total of 557,184 shares unvested issued to employees and Board and committee members. In accordance with ASC 718, Compensation – Stock Compensation, the Company recognizes stock based compensation from restricted stock based upon the fair value of the award at issuance over the vesting term on a straight-line basis. The fair value of the award is calculated by multiplying the number of restricted shares by the Company’s stock price on the date of issuance. The impact of forfeitures has historically been immaterial to the financial statements. The Company recorded compensation expense associated with these restricted shares of $145 and $245, for the periods ended Q1 2019 and Q1 2018, respectively.

Stock Options

The Company recorded share based payment expense of $24 and $82 for the periods ended Q1 2019 and Q1 2018, respectively.

Convertible Preferred Shares

Series A Preferred Stock – Related Party

In the period ended Q1 2019 and Q1 2018, the Company paid $50 and $50, respectively, in dividends to its Series A preferred stock holders. The Company did not have any Series A dividends payable to preferred stock holders at the end of Q1 2019 and Q1 2018.

Series E Preferred Stock - Related Party

The Series E Preferred Stock ranks senior to common stock and any other series or classes of preferred stock now or after issued or outstanding with respect to dividend rights and rights on liquidation, winding up and dissolution. Each share of Series E Preferred Stock is initially convertible into 561.8 shares of our common stock at any time after October 31, 2020 or the occurrence of a Preferred Default. A holder of Series E Preferred Stock is not required to pay any additional consideration in exchange for conversion of such Series E Preferred Stock into our common stock. Series E Preferred Stock is redeemable by the Company at any time at a

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

price per share equal to the stated value ($1,000 per share) plus all accrued and unpaid dividends thereon. While the Series E Preferred Stock is outstanding, the Company is required to use the proceeds of any sales of equity securities, exclusively to redeem any outstanding shares of Series E Preferred Stock, except that the Company is permitted to use up to an aggre gate of $3,000 of the gross proceeds from any equity offering completed on or before November 15, 2019 for working capital purposes.

On January 22, 2019, the Company completed a registered direct offering of 387,500 common stock that generated $775 in gross proceeds that were used for working capital purposes. On February 12, 2019, the Company closed its previously announced firm commitment underwritten public offering in which, pursuant to an underwriting agreement between the Company and the underwriter, dated as of February 8, 2019, the Company issued and sold 2,425,000 shares of its common stock, at a public offering price of $1.65 per share. Notwithstanding the terms of the certificate of designations for Series E Preferred Stock, Jackson, the holder our outstanding shares of Series E Preferred Stock, did not require us to use the proceeds from our recent offerings in excess of $3,000 to redeem outstanding shares of the Series E Preferred Stock. Instead, we used such excess proceeds to make a terminal payment to the sellers of FirstPro in final settlement of all deferred consideration due under our asset purchase agreement with such sellers.

As of March 30, 2019, 7,303,371 shares and 146,386 of common stock were issuable upon the potential conversion of Series E Preferred Stock and Series E-1 Preferred Stock, respectively. Due to the contingent nature of the cash redemption feature of the Series E-1 Preferred Stock, the Company classified the shares as mezzanine equity on the consolidated balance sheets.

In the period ended Q1 2019, the Company paid $195 in dividends to its Series E preferred stock holders.

Warrants

The Company had accounted for certain warrants issued to Jackson as a liability under ASC 815-40 due to certain anti-dilution protection provisions. The warrants issued to Jackson are considered to be Level 3 liabilities under ASC 820. On April 25 , 2018, the Company and Jackson amended the warrant to remove the anti-dilution clauses. No economic terms were adjusted. These clauses were the basis for recording the warrants as a liability. Therefore, upon execution of this amendment, the Company recorded a mark-to-market gain and reclass the remaining liability to Additional paid-in capital. The Company recorded a change in fair value of the warrant liability of $538 in Q1 2018 using Black-Scholes valuation model.

2019 Long-Term Incentive Plan

In January 2019, the Company’s Board approved the 2019 Long-Term Incentive Plan (the “2019 LTIP”).

The Board granted 375,000 units to adequately motivate the participants and drive performance for the period.

Units vest upon the following:

•

50% upon the employee being in good standing on December 31, 2020; and,

•

50% upon the average share price of the Company’s common stock during the 90-day period leading up to December 31, 2020, based upon the following Vesting Rate table:


Average 2019 Price	Vesting Rate
<$8 per share	0
>$8 per share	Pro-rated
>=$12 per share	Full Vesting

The Company recorded share based expense of approximately $30 in Q1 2019 in connection with this. The Company performed a valuation of these units and determined them to be valued at $586 using a combination of Black-Sholes and Monte Carlo valuation models.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Earn-out Liabilities and Stock Value Guarantees

Pursuant to the acquisition of CBS Butler on September 15, 2017, the purchase price includes an earn-out payment of up to £4,214 (payable in December 2018, based upon CBS Butler’s operating performance during the period September 1, 2017 through August 31, 2018) and deferred consideration of £150 less the aggregate amount of any net asset shortfall amount, if any, as determined pursuant to the acquisition agreements for the acquisition of CBE Butler. In September 2018, the Company paid the deferred consideration of £150 ($195). Subsequent to March 30,2019, the Company paid £505 ($656) towards this earnout.

While the Company has recognized the liability for the contingent earn-out due the sellers of CBS Butler within current liabilities as of December 29, 2018, in March 2019 the Company filed a warranty claim against the sellers asserting certain misrepresentations for an amount which approximates the contingent earn-out. In April 2019, the sellers of CBS Butler responded denying the Company’s warranty claim and asserting that the earn-out amount is due.

Pursuant to the acquisition of FirstPro Inc. (“FirstPro”) on September 15, 2017, the purchase price includes deferred quarterly installments of $75 beginning on October 1, 2017, and $2,675 is payable annually in three equal installments beginning on September 15, 2018. On March 1, 2019, the Company paid $1,125 in full satisfaction of the remaining liability, recognizing a gain of $847.

Pursuant to the acquisition of CML on June 28, 2018, the purchase price includes an earnout payment of up to £500 to be paid on or around December 28, 2019; and deferred consideration of £350, the amount to be calculated and paid pursuant to the Share Purchase Agreement, on or around June 28, 2019.

Pursuant to the acquisition of Key Resources Inc. (“KRI”) on August 27, 2018, the purchase price includes earnout consideration payable to the seller of $2,027 and $2,027 on August 27, 2019 and August 27, 2020, respectively. The payment of the earnout consideration is contingent on KRI’s achievement of certain trailing gross profit amounts.

NOTE 9 – SEGMENTS

The Company generated revenue and gross profit by segment as follows:

	Q1 2019			Q1 2018
Commercial Staffing - US	$	30,085		$	21,396
Professional Staffing - US		9,581			14,667
Professional Staffing - UK		34,163			19,728
Total Revenue	$	73,829		$	55,791

Commercial Staffing - US	$	4,632		$	3,898
Professional Staffing - US		3,714			3,985
Professional Staffing - UK		3,772			3,698
Total Gross Profit	$	12,118		$	11,581

Selling, general and administrative expenses	$	(10,491	)	$	(11,188	)
Depreciation and amortization		(877	)		(798	)
Interest expense and amortization of debt discount and deferred financing costs		(2,007	)		(2,077	)
Gain in fair value of warrant liability		—			538
Re-measurement gain on intercompany note		351			575
Gain on settlement of deferred consideration		847			—
Other income, net		286			250
Income (Loss) Before Provision for Income Tax	$	227		$	(1,119	)

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

The following table disaggregates revenues by segments:

	Q1 2019
	Commercial Staffing - US		Professional Staffing - US		Professional Staffing - UK		Total
Permanent Revenue	$	65	$	1,881	$	885	$	2,831
Temporary Revenue		30,020		7,700		33,278		70,998
Total	$	30,085	$	9,581	$	34,163	$	73,829

	Q1 2018
	Commercial Staffing - US		Professional Staffing - US		Professional Staffing - UK		Total
Permanent Revenue	$	72	$	1,507	$	1,215	$	2,794
Temporary Revenue		21,324		13,160		18,513		52,997
Total	$	21,396	$	14,667	$	19,728	$	55,791

As of March 30, 2019 and December 29, 2018, the Company has assets in the U.S., the U.K. and Canada as follows:

	March 30,		December 29,
	2019		2018
United States	$	73,088	$	70,267
United Kingdom		28,099		26,047
Canada		126		123
Total Assets	$	101,313	$	96,437

NOTE 10 – ACQUISITIONS

The following unaudited pro forma consolidated results of operations have been prepared, as if the acquisition of KRI and CML were acquired on January 1, 2017.

	Q1 2018
Revenues	$	76,801
Net loss from continuing operations		(915	)

Included in revenues for Q1 2018, is $4.3 million associated with PeopleServe Inc., which was disposed in June 2018.

NOTE 11 – OTHER RELATED PARTY TRANSACTIONS

In addition to the Series E and Series E-1 Preferred Shares and notes issued to Jackson, the following are other related party transactions:

Board and Committee Members

The Company had the following activity with its Board and Committee Members:

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share, per share and stated value per share)

(UNAUDITED)

	Q1 2019
	Cash Compensation		Shares Issued		Value of Shares Issued		Compensation Expense Recognized
Dimitri Villard	$	19		1,400	$	3	$	8
Jeff Grout		19		1,400		3		8
Nick Florio		19		1,400		3		8
Alicia Barker		—		1,400		3		—
	$	57		5,600	$	12	$	24

	Q1 2018
	Cash Compensation		Shares Issued		Value of Shares Issued		Compensation Expense Recognized
Dimitri Villard	$	19		1,400	$	5	$	20
Jeff Grout		19		1,400		5		20
Nick Florio		19		1,400		5		20
	$	57		4,200	$	15	$	60

The Company has no balances in accounts payable and accrued expenses – related parties account as of March 30, 2019.

The Briand Separation Agreement Matthew Briand, the Company’s former employee, board member and officer, resigned from his positions with the Company and subsidiaries. The Company entered into an agreement (the “Briand Separation Agreement”) with Mr. Briand dated December 21, 2017, with an effective date (“Separation Date”) of January 31, 2018, pursuant to which Mr. Briand may provide advisory services, if requested by the Company, through the effective date. The Company paid $17 in Q1 2019 to Mr. Briand as part of this separation agreement. The accrued balance due to Mr. Briand as of March 30, 2019 is $184.

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

	Q1 2019		Q1 2018
Cash paid for:
Interest	$	2,210	$	1,710
Income taxes		—		22

Non-Cash Investing and Financing Activities:
Deferred purchase price of UK factoring facility	$	3,712	$	1,144

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. This section includes a number of forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current views with respect to future events and financial performance. All statements that address expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue, gross profit, operating profit, cash flow), are forward-looking statements. Some of the forward-looking statements can be identified by words like “anticipates,” “believes,” “expects,” “may,” “will,” “can,” “could,” “should,” “intends,” “project,” “predict,” “plans,” “estimates,” “goal,” “target,” “possible,” “potential,” “would,” “seek,” and similar references to future periods. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: negative outcome of pending and future claims and litigation; our ability to access the capital markets by pursuing additional debt and equity financing to fund our business plan and expenses on terms acceptable to us or at all; and our ability to comply with our contractual covenants, including in respect of our debt; potential cost overruns and possible rejection of our business model and/or sales methods; weakness in general economic conditions and levels of capital spending by customers in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our customers' capital projects or the inability of our customers to pay our fees; delays or reductions in U.S. government spending; credit risks associated with our customers; competitive market pressures; the availability and cost of qualified labor; our level of success in attracting, training and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our temporary employees; our performance on customer contracts; and government policies, legislation or judicial decisions adverse to our businesses. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. We recommend readers to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (“SEC”), particularly our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

Overview

We are incorporated in the State of Delaware. As a rapidly growing public company in the international staffing sector, our high-growth business model is based on finding and acquiring suitable, mature, profitable, operating, U.S. and U.K. based staffing companies. Our targeted consolidation model is focused specifically on the Professional Sector and Commercial Sector disciplines.

Business Model, Operating History and Acquisitions

We are a high-growth international staffing company engaged in the acquisition of United States (“U.S.”) and United Kingdom (“U.K.”) based staffing companies. Our services principally consist of providing temporary contractors, and, to a much lesser extent, the recruitment of candidates for permanent placement. As part of our consolidation model, we pursue a broad spectrum of staffing companies supporting primarily accounting and finance, IT, engineering, administration (collectively, the “Professional Business Stream”) and commercial (“Commercial Business Stream”) disciplines. Our typical acquisition model is based on paying consideration in the form of cash, stock, earn-outs and/or promissory notes. In furthering our business model, the Company is regularly in discussions and negotiations with various suitable, mature acquisition targets. To date, we have completed ten acquisitions since November 2013.

All share numbers in this section have been adjusted for the one-for-five reverse stock split effective at 5:00 p.m. New York time on January 3, 2018.

PeopleServe Disposition

On June 6, 2018, the Company divested the stock of PeopleServe Inc., and PeopleServe PRS, Inc. for a total consideration of $1,502, net of $567 that was remitted back to the buyer on July 31, 2018 in connection with a net working capital true up. The Company recorded a gain of $238 from sale of business.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Clement May Acquisition

On June 28, 2018, the Company and Staffing 360 Solutions Limited (formerly known as Longbridge Recruitment 360 Limited), a wholly-owned subsidiary of the Company, entered into share purchase agreements (“Share Purchase Agreements”) to acquire all of the share capital of Clement May Limited (“CML”). Consideration for the acquisition of all the shares was (i) an aggregate cash payment of £1,550 ($2,047), (ii) 15,000 shares of the Company’s common stock, (iii) an earn-out payment of up to £500, the amount to be calculated and paid on or around December 28, 2019 pursuant to the Share Purchase Agreement, and (iv) deferred consideration of £350, to be paid on or around June 28, 2019, depending on the satisfaction of certain conditions set forth in that Share Purchase Agreement. To finance the above transaction, the Company entered into a term loan with HSBC Bank plc.

Key Resources Inc. Acquisition

On August 27, 2018, the Company and Monroe Staffing Services, LLC (“Monroe Staffing”), an indirect wholly-owned subsidiary of the Company, entered into a share purchase agreement with Pamela D. Whitaker (“Seller”), pursuant to which the Seller sold 100% of the common shares of Key Resources Inc. (“KRI”) to Monroe Staffing (the “KRI Transaction”).

The KRI Transaction closed simultaneously with the signing of the share purchase agreement. The purchase price in connection with the KRI Transaction was approximately $12,163, of which (a) approximately $8,109 was paid to the Seller at closing, (b) up to approximately $2,027 is payable as earnout consideration to the Seller on August 27, 2019 and (c) up to $2,027 is payable as earnout consideration to the Seller on August 27, 2020. The payment of the earnout consideration is contingent on KRI’s achievement of certain trailing gross profit amounts.

To finance the KRI Transaction, the Company entered into an agreement with Jackson Investment Group, LLC (“Jackson”) on August 27, 2018, pursuant to which the note purchase agreement dated as of September 15, 2017 was amended to add an additional senior debt investment of approximately $8,428.

For three-month periods ended March 30, 2019 and March 31, 2018

	Q1 2019			% of Revenue			Q1 2018			% of Revenue			Growth
Revenue	$	73,829			100.0	%	$	55,791			100.0	%		32.3	%
Direct cost of revenue		61,711			83.6	%		44,210			79.2	%		39.6	%
Gross profit		12,118			16.4	%		11,581			20.8	%		4.6	%
Operating expenses		11,368			15.4	%		11,986			21.5	%		(5.2	)%
Income (loss) from operations		750			1.0	%		(405	)		(0.7	)%		(285.2	)%
Other expenses		(523	)		(0.7	)%		(714	)		(1.3	)%		(26.8	)%
Benefit from (Provision for) income taxes		2			0.0	%		(152	)		(0.3	)%		(101.3	)%
Net Income (Loss)	$	229			0.3	%	$	(1,271	)		(2.3	)%		(118.0	)%

Revenue

For Q1 2019, revenue increased by 32.3% to $73,829, as compared with $55,791, for Q1 2018. Of that growth, $21,010 was from the acquisitions of Clement May and KRI coupled with organic growth of $2,509. This was partially offset by a decline of $4,337 from divesting of PeopleServe and $1,144 from unfavorable foreign currency translation. Within organic growth, temporary contractor revenue grew $2,415 and permanent placement grew $94.

Revenue in Q1 2019 was comprised of $70,998 of temporary contractor revenue and $2,831 of permanent placement revenue, compared with $52,997 and $2,794 for Q1 2018, respectively.

Direct cost of revenue, Gross profit and gross margin

Direct cost of services includes the variable cost of labor and various non-variable costs (e.g., workers’ compensation insurance) relating to employees (temporary and permanent) as well as sub-contractors and consultants. For Q1 2019, direct cost of revenue was $61,711, an increase of 39.6% from $44,210 in Q1 2018, compared with revenue growth of 32.3%.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Gross profit for Q1 2019 was $12,118, an increase of 4.6% over $11,581 for Q1 2018, representing gross margin of 16.4% and 20.8% for each period, respectively. Gross profit growth was primarily attributable to the impact of acquisitions. This was partly offset by the divestiture of the lower margin PeopleServe business, workers’ compensation insurance savings realized in Q1 2018 with no co rresponding credit in Q1 2019, and mix within the organic revenue growth.

Operating expenses

Operating expenses for Q1 2019 were $11,368, a decrease of 5.2% over $11,986 for Q1 2018. The acquisitions of Clement May, and KRI drove an additional increase of 9.5% in operating expense. Excluding the acquisitions, operating expenses decreased by 14.7% driven by lower non-recurring costs, legal, and other costs associated with acquisitions, lower variable costs and savings attributable to synergies within the subsidiaries, cost savings initiatives, and PeopleServe divesture.

Other Expenses

Other expenses for Q1 2019 was $523, a decrease of 26.8% from $714 in Q1 2018. The decrease is driven by the following: $105 lower interest expense recorded in Q1 2019 versus Q1 2018 due to the $13 million debt conversion in Q3 2018; $847 gain on settlement of firstPRO deferred consideration in Q1 2019; $36 higher other income driven mainly by higher investment income on the Company’s workers’ compensation collateral. These were partially offset by a gain of $538 from fair valuing warrants in Q1 2018, with no corresponding gain in Q1 2019; $224 of lower gain in Q1 2019 versus Q1 2018 from remeasuring the Company’s intercompany note; $35 of higher amortization of debt discount and deferred financing costs.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Non-GAAP Measures

To supplement our consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we also use non-GAAP financial measures and Key Performance Indicators (“KPIs”) in addition to our GAAP results. We believe non-GAAP financial measures and KPIs may provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

We present the following non-GAAP financial measure and KPIs in this report:

Revenue and Gross Profit by Sector We use this KPI to measure the Company’s mix of Revenue and respective profitability between its two main lines of business due to their differing margins. For clarity, these lines of business are not the Company’s operating segments, as this information is not currently regularly reviewed by the chief operating decision maker to allocate capital and resources. Rather, we use this KPI to benchmark the Company against the industry.

The following table details Revenue and Gross Profit by Sector:

	Q1 2019			Mix	Q1 2018			Mix
Commercial Staffing - US	$	30,085		41%	$	21,396		38%
Professional Staffing - US		9,581		13%		14,667		26%
Professional Staffing - UK		34,163		46%		19,728		36%
Total Revenue	$	73,829			$	55,791

Commercial Staffing - US	$	4,632		38%	$	3,898		34%
Professional Staffing - US		3,714		31%		3,985		34%
Professional Staffing - UK		3,772		31%		3,698		32%
Total Gross Profit	$	12,118			$	11,581

Commercial Staffing - US		15.4	%			18.2	%
Professional Staffing - US		38.8	%			27.2	%
Professional Staffing - UK		11.0	%			18.7	%
Total Gross Margin		16.4	%			20.8	%

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Adjusted EBITDA This measure is defined as net loss attributable to common stock before: interest expense, benefit from (provision for) income taxes; income (loss) from discontinued operations, net of tax; other (in come) expense, net, in operating income (loss); amortization and impairment of intangible assets; impairment of goodwill; depreciation; operational restructuring and other charges; other income (expense), net, below operating income (loss); non-cash expens es associated with stock compensation; and charges the Company considers to be non-recurring in nature such as legal expenses associated with litigation, professional fees associated potential and completed acquisitions. We use this measure because we beli eve it provides a more meaningful understanding of the profit and cash flow generation of the Company.

	Q1 2019			Q1 2018			Trailing Twelve Months Q1 2019			Trailing Twelve Months Q1 2018
Net income (loss)	$	229		$	(1,271	)	$	(5,001	)	$	(16,681	)

Interest expense and amortization of debt discount and deferred financing costs		2,007			2,077			8,896			7,506
(Benefit from) Provision for income taxes		(2	)		152			(132	)		1,079
Depreciation and amortization		877			798			3,203			3,604
EBITDA	$	3,111		$	1,756		$	6,966		$	(4,492	)

Acquisition, capital raising and other non-recurring expenses (1)		211			847			2,488			2,455
Other non-cash charges (2)		197			373			982			1,409
Gain in fair value of warrant liability		—			(538	)		(341	)		(1,013	)
Re-measurement (gain) loss on intercompany note		(351	)		(575	)		910			(575	)
Gain on settlement of deferred consideration		(847	)		—			(847	)		—
Loss on extinguishment of debt, net		—			—			—			4,764
Restructuring charges		—			—			(57	)		780
Impairment of goodwill		—			—			—			4,790
Gain from sale of business		—			—			(238	)		—
Other income		(286	)		(250	)		(434	)		(142	)
Adjusted EBITDA	$	2,035		$	1,613		$	9,429		$	7,976

Pre-Acquisition Adjusted EBITDA (3)							$	1,389		$	2,364

Pro Forma TTM Adjusted EBITDA (4)							$	10,818		$	10,340

Gross Profit TTM							$	48,841		$	40,996

TTM Adjusted EBITDA as percentage of gross profit TTM								19.3	%		19.5	%

(1)

Acquisition, capital raising and other non-recurring expenses primarily relate to capital raising expenses, acquisition and integration expenses and legal expenses incurred in relation to matters outside the ordinary course of business.

(2)

Other non-cash charges primarily relate to staff option and share compensation expense, expense for shares issued to directors for board services, and consideration paid for consulting services.

(3)

Pre-Acquisition Adjusted EBITDA excludes the Adjusted EBITDA of acquisitions for the period prior to the acquisition date.

(4)

Pro Forma TTM Adjusted EBITDA includes the Adjusted EBITDA of acquisitions for the period prior to the acquisition date.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Operating Leverage This measure is calculated by dividing the growth in Adjusted EBITDA by the growth in Gross Profit, on a trailing 12-month basis. We use this KPI because we believe it provides a measure of the Company’s efficiency for converting incremental gross profit into Adjusted EBITDA.

	Three Months Ended
	March 30, 2019			March 31, 2018
Gross Profit - TTM (Current Period)	$	48,841		$	40,996
Gross Profit - TTM (Prior Period)		40,996			31,662
Gross Profit - Growth	$	7,845		$	9,334

Adjusted EBITDA - TTM (Current Period)	$	9,429		$	7,976
Adjusted EBITDA - TTM (Prior Period)		7,976			5,390
Adjusted EBITDA - Growth	$	1,453		$	2,586

Operating Leverage		18.5	%		27.7	%

Leverage Ratio Calculated as Total Long-Term Debt, Net, gross of any Original Issue Discount, divided by Pro Forma Adjusted EBITDA for the trailing 12-months. We use this KPI as an indicator of the Company’s ability to service its debt prospectively.

	March 30, 2019		December 29, 2018
Total Long-Term Debt, Net	$	35,539	$	35,565
Addback: Total Debt Discount and Deferred Financing Costs		1,024		1,171
Total Long-Term Debt	$	36,563	$	36,736

TTM Adjusted EBITDA	$	9,429	$	9,007

Pro Forma TTM Adjusted EBITDA	$	10,818	$	11,384

Pro Forma Leverage Ratio	3.4x		3.2x

Operating Cash Flow Including Proceeds from Accounts Receivable Financing c alculated as net cash (used in) provided by operating activities plus net proceeds from accounts receivable financing. Because much of the Company’s temporary payroll expense is paid weekly and in advance of clients remitting payment for invoices, operating cash flow is often weaker in staffing companies where revenue and accounts receivable are growing. Accounts receivable financing is essentially an advance on client remittances and is primarily used to fund temporary payroll. As such, we believe this measure is helpful to investors as an indicator of the Company’s underlying operating cash flow.

On February 8, 2018, CBS Butler, Staffing 360 Solutions Limited and The JM Group, entered into a new arrangement with HSBC Invoice Finance (UK) Ltd (“HSBC”) which provides for HSBC to purchase the subsidiaries’ accounts receivable up to an aggregate amount of £11,500 across all three subsidiaries. The terms of the arrangement provide for HSBC to fund 90% of the purchased accounts receivable upfront and, a secured borrowing line of 70% of unbilled receivables capped at £1,000 (within the overall aggregate total facility of £11,500). Under ASU 2016-16, “Statement of Cash Flows (Topic 230, Classification of Certain Cash Receipts and Cash Payments, a consensus of the FASB Emerging Issues Task Force , the upfront portion of the sale of accounts receivable is classified within operating activities, while the deferred purchase price portion (or beneficial interest), once collected, is classified within investing activities.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

	Q1 2019			Q1 2018
Net cash provided by operating activities	$	2,243		$	8,847

Collection of UK factoring facility deferred purchase price		3,469			1,269

Repayments on accounts receivable financing		(8,606	)		(9,714	)

Net cash (used in) provided by operating activities including proceeds from accounts receivable financing	$	(2,894	)	$	402

The Leverage Ratio and Operating Cash Flow Including Proceeds from Accounts Receivable Financing should be considered together with the information in the “Liquidity and Capital Resources” section, immediately below.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Historically, we have funded our operations through term loans, promissory notes, bonds, convertible notes, private placement offerings and sales of equity.

Our primary uses of cash have been for professional fees related to our operations and financial reporting requirements and for the payment of compensation, benefits and consulting fees. The following trends may occur as the Company continues to execute on its strategy:

•

An increase in working capital requirements to finance organic growth,

•

Addition of administrative and sales personnel as the business grows,

•

Increases in advertising, public relations and sales promotions for existing and new brands as we expand within existing markets or enter new markets,

•

A continuation of the costs associated with being a public company, and

•

Capital expenditures to add technologies.

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations could significantly increase our legal and financial compliance costs and increase the use of resources.

As of and for the period ended March 30, 2019, the Company had a working capital deficiency of $13,421, an accumulated deficit of $71,414, and a net gain of $229. Management believes the Company is a going concern meaning it will meet its obligations for the next 12 months as of the date these financial statements are issued.

Operating activities

For Q1 2019, net cash provided by operations of $2,243 was primarily attributable changes in operating assets and liabilities totaling $1,979, non-cash adjustments of $35 and net income of $229. Changes in operating assets and liabilities primarily relates to an increase in accounts receivable of $1,717, increase in prepaid expenses and other current assets of $212, increase other assets of $79, decrease in current liabilities of $118; offset by increase in accounts payable and accrued expenses of $3,547 and increase in other long term liabilities and other of $558. Total non-cash adjustments of $35 primarily includes depreciation and amortization of intangible assets of $877, stock based compensation of $199, amortization of debt discounts and deferred financing of $157; offset by foreign currency re-measurement on intercompany loan of $351 and gain from settlement of the FirstPro deferred consideration of $847.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

For Q1 2018, net cash provided by operations of $8,847 was primarily attributable changes in operating assets and liabilities totaling $9,938, non-cash adjustments of $180, offset by net loss of $1,271. Changes in operating assets and liabilities primarily relates decrease in accounts receivable of $7,026, increase in accounts payable and accrued expenses of $2,795, increase in o ther current liabilities of $447, increase in other long-term liabilities of $50, offset by decrease in related party interest payable of $160, increase in prepaids and other current assets of $47, and other of $164. Total non-cash adjustments of $180 prim arily includes amortization of debt discounts and deferred financing of $122, stock based compensation of $373, depreciation and amortization of intangible assets of $798; offset by gain on fair value of warrants of $538 and foreign currency re-measurement gain on intercompany loan of $575.

Investing activities

For Q1 2019, net cash flows provided by investing activities was $3,425, $3,469 related to collection of the beneficial interest from HSBC partially offset by purchase of property and equipment of $44.

For Q1 2018, net cash flows provided by investing activities was $1,213, of which $1,269 is collection of the beneficial interest from HSBC, partially offset by purchase of property and equipment of $56.

Financing activities

For Q1 2019, net cash flows used in financing activities totaled $6,324, of which $8,606 relates to repayments on accounts receivable financing, net, payment on FirstPro deferred consideration for $1,200, third party financing costs of $950, dividends paid to related parties of $245, dividends paid to shareholders of $81, and repayment on HSBC loan of $156; offset by proceeds from equity raise of $4,914.

For Q1 2018, net cash flows used in financing activities totaled $9,700, of which $9,714 primarily relates to settlement of the prior U.K. secured borrowing facilities in connection with the new HSBC facility (see discussion above), $254 is for the repayment of the ABN AMRO term loan, $90 is for deferred payments associated with the Firstpro acquisition and CSI earnout, third party financing costs of $7, partially offset by proceeds from the At-market facility of $415.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Refer to the Form 10-K filed with the SEC on March 25, 2019.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). The Company adopted this guidance effective December 30, 2018. Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. All other leases will fall into one of two categories: (i) Financing leases, similar to capital leases, which will require the recognition of an asset and liability, measured at the present value of the lease payments and (ii) Operating leases which will require the recognition of an asset and liability measured at the present value of the lease payments. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. For sale leaseback transactions, the sale will only be recognized if the criteria in the new revenue recognition standard are met. The new standard provides a number of optional practical expedients in transition. The Company has elected to apply the ‘package of practical expedients’ which allow us to not reassess i) whether existing or expired arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. The Company has also elected to apply i) the practical expedient which allows us to not separate lease and non-lease components, and (2) the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurements requirements in the new standard. The adoption of the new standard resulted in the recognition of additional lease liabilities of approximately $4,629, and right-of-use assets of approximately $4,548 million as of March 30, 2019 related to the Company’s operating leases. The new standard did not have a material impact to the Company’s consolidated statement of operations or consolidated statement of cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

Item 4. Controls and Procedures

Evaluation of D isclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Quarterly Report.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures.

Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this Annual Report (“Evaluation Date”), pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were operating effectively.

Management believes that the condensed consolidated financial statements in this quarterly report on Form 10-Q fairly present, in all material respects, the Company’s financial condition as of the Evaluation Date, and results of its operations and cash flows for the Evaluation Date, in conformity with United States Generally Accepted Accounting Principles (“GAAP”).

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Based on our evaluation under the framework described above, our management concluded that our internal controls over financial reporting were effective in accordance with Item 308(a)(3) of Regulation S-K.

A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on our evaluation under the framework described above, our management concluded that our internal controls over financial reporting were effective in accordance with Item 308(a)(3) of Regulation S-K.

Attestation report of the registered public accounting firm

This Quarterly Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC.

Changes in Internal Control over Financial Reporting

There has been no change in our system of internal control over financial reporting occurred during the period ended March 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

No material developments.

Item 1A. Risk Factors.

Except as otherwise set forth below, there have been no material developments to alter the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018.

Our Amended and Restated Certificate of Incorporation includes a forum selection clause, which could limit our stockholders’ ability

to obtain a favorable judicial forum for disputes with us. Our Amended and Restated Certificate of Incorporation provides that, unless

we consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding

brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or

other employee to us or our stockholders, (c) any action asserting a claim against us or any director or officer or other employee arising pursuant to any provision of the General Corporation Law of the State of Delaware or our Amended and Restated Certificate of

Incorporation or our By-Laws (as either may be amended from time to time), or (d) any action asserting a claim against us or any director or officer or other employee governed by the internal affairs doctrine shall be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware). This exclusive forum provision will apply to state and federal law claims, including claims under the federal securities laws (including actions arising under the Securities Exchange Act of 1934 or the Securities Act of 1933), although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act of 1933, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act of 1933 or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under federal securities

laws. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and

consented to the foregoing provisions. This forum selection provision in our Amended and Restated Certificate of Incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our bylaws, a court could rule that such a provision is inapplicable or unenforceable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.3 to the Company’s Form 8-K, filed with the SEC on June 15, 2017)
3.2		Amendment to Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Form 8-K, filed with the SEC on January 3, 2018)
3.3		Amended and Restated By-Laws (previously filed as Exhibit 3.1 to the Company’s Form 8-K, filed with the SEC on March 29, 2018)
3.4		Certificate of Amendment to Certificate of Designation of Series E Convertible Preferred Stock, dated February 7, 2019 (previously filed as Exhibit 3.1 to the Company’s current Report on Form 8-K filed with the SEC on February 11, 2019)
10.1		Form of Securities Purchase Agreement, dated January 22, 2019, by and between the Company and the Purchaser (Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 23, 2019).
10.2		Placement Agency Agreement dated January 22, 2019, between the Company and ThinkEquity (Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 23, 2019)
10.3		Waiver Agreement – Series A Preferred Stock (Previously filed as Exhibit 10.99 to Amendment No. 1 to the Company’s Registration Statement on Form S-1/A filed on January 31, 2019)
10.4		Amendment Agreement, dated February 27, 2019, by and among Staffing 360 Georgia, LLC, Firstpro, Inc., Firstpro Georgia, LLC, April F. Nagel and Philip Nagel (Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 5, 2019)
10.5		Amendment No. 11 to the Credit Agreement dated February 7, 2019 by and among Midcap Funding X Trust, the Company and certain subsidiaries of the Company (Previously filed as Exhibit 10.101 to the Company’s Annual Report on Form 10-K filed on March 25, 2019)
10.6		Third Omnibus Amendment and Reaffirmation Agreement dated February 7, 2019, by and among Jackson Investment Group LLC, the Company and certain subsidiaries of the Company (Previously filed as Exhibit 10.102 to the Company’s Annual Report on Form 10-K filed on March 25, 2019)
31.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1†		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002
32.2†		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema
101.CAL		XBRL Taxonomy Calculation Linkbase
101.DEF		XBRL Taxonomy Definition Linkbase
101.LAB		XBRL Taxonomy Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

† In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.

SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 13, 2019	STAFFING 360 SOLUTIONS, INC.

	By:	/s/ Brendan Flood
		Brendan Flood
		Chairman and Chief Executive Officer
		(Duly Authorized Officer and Principal Executive Officer)

Date: May 13, 2019	STAFFING 360 SOLUTIONS, INC.

	By:	/s/ David Faiman
		David Faiman
		Chief Financial Officer
		(Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)