ITEM 8.01 Other Events
On April 10, 2018, Staffing Group, Ltd. (“Staffing Group” or “the Company”), and its former CEO, Kimberly Thompson (“Mrs. Thompson”) were served with a summons and complaint by one of its lenders, Group 10 Holdings, LLC. (Group 10).
The lawsuit stems from a $100,000 loan (a Convertible Debenture) made by Group 10, to the Company, in April of 2017. It alleges that Mrs. Thompson individually, and on behalf of the Company arranged, and received, a loan for the Company, from Group 10, and in doing so: Fraudulently Induced Group 10 to make the loan, Negligently Misrepresented various facts, Unjustly Enriched the Company and ultimately Breached the loan contract. Group 10 is seeking in excess of $106,105.51.
Current management of the Company anticipates similar actions being taken by other lenders from whom Mrs. Thompson arranged, and received, loans for the Company, dating back to December, 2015.
Between December, 2015 and March, 2017, Mrs. Thompson arranged, and received, loans for the Company, from five lenders. These loans were made, to the Company, in the form of Convertible Promissory Notes, Senior Secured Revolving Credit Facilities, and Convertible Debentures in the combined principal amount of $2,516,325. The Lenders currently claim an aggregate amount due in excess of $3,153,364 including principal, interest, penalties, and fees. These loans are also convertible into 21,549,600 shares of the Company’s Common Stock. The Company currently has 1,689,706 Common Shares outstanding.
In addition to these loans, the Company owes in excess of $792,000, to various state tax authorities and the Internal Revenue Service, for unpaid employment taxes dating back to 2016. It is anticipated that, including interest and penalties, this amount could exceed $1,000,000. The Company also owes in excess of $350,000 to various vendors.
The Company’s current management is in the process of determining the best course of action regarding the Group 10 lawsuit and the other contingent liabilities briefly outlined herein.
As reported on April 4, 2018, Staffing Group permanently closed all of its operating branches on April 2, 2018.