| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 January 2, 2021 which are included in the Company’s January 2, 2021 Form 10-K (“Fiscal
2020”), filed with the United States Securities and Exchange Commission on April 16, 2021. 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 October 2, 2021 are not necessarily indicative of results for the entire year end. This report is
for the period January 3, 2021 to October 2, 2021 (“Q3 2021 YTD”) and December 29, 2019 to September 26, 2020 (“Q3
2020 YTD”). The Company uses a 4-4-5 calendar month which only has 364 days and as such an extra week would need to be added every
few years. In October of 2020, the Company’s board of directors (the “Board”) approved the addition of such an extra
week to last year’s fiscal year end resulting in the last year ended on January 2, 2021. Liquidity The
accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the
Company to continue as a going concern. As shown in the accompanying financial statements as of the quarter ended October 2, 2021, the
Company has an accumulated deficit of $ 77,306
and a working capital deficit of $ 20,251 .
At October 2, 2021, we had total net debt of $ 14,357
and total cash of $ 2,231 .
We have historically met our cash needs through a combination of cash flows from operating activities, term loans, promissory notes,
convertible notes, private placement offerings and sales of equity. Our cash requirements are generally for operating activities along
with debt and equity 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,
the Second Amended and Restated 12% September 30, 2022 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) On
February 12, 2021, the Company closed an offering (the “February 2021 Offering”) of 3,475,200 167,347 5.40 167,347 The
net proceeds to the Company from the February 2021 Offering were approximately $ 18,100 1,596 227 Prior
to the exchange of the Company’s Series E Preferred Stock (as defined herein) for newly issued Series G Preferred Stock (as defined
herein), consummated on May 6, 2021, the Company was required to use the proceeds of any sales of equity securities, including the securities
offered in the February 2021 Offering, exclusively to redeem any outstanding shares of the Company’s Series E Preferred Stock,
subject to certain limitations. On February 5, 2021, the Company received a Limited Consent and Waiver from Jackson (the “Limited
Consent”), the sole holder of the Company’s outstanding shares of Series E Convertible Preferred Stock, to use approximately
(i) 75% of the net proceeds from the February 2021 Offering to redeem a portion of the Jackson Note, which had an outstanding principal
amount of $ 32,710 Pursuant to the Limited Consent, upon closing of the February 2021 Offering, the Company redeemed
a portion of the Jackson Note with an outstanding principal amount of $ 13,556 4,518 19,154 6,172 6,172 On
April 21, 2021, the Company entered into a securities purchase agreement (the “April 2021 Purchase Agreement”) with certain
institutional and accredited investors for the issuance and sale of an aggregate of 4,698 1,000 1,304,901 3.60 five years At issuance the
Series F Preferred Stock was convertible into an aggregate of
approximately 1,304,901
shares of common stock at a conversion price
of $ 3.60
per share, subject to certain ownership limitations,
upon the Company amending its certificate of incorporation to effect
a reverse split within a range of 2-into-1 to up to 20-into-1 to
be determined by the Board. On June 30, 2021, the Company effectuated the Reverse Stock Split. All shares of Series F Preferred Stock
have been converted into shares of common stock. The
net proceeds to the Company from the April 2021 Private Placement were approximately $ 4,200 ,
after deducting placement agent fees and estimated offering expenses payable by the Company. The Company used approximately $ 3,200
of the net proceeds to redeem a portion of the
Jackson Note, which had an outstanding principal amount of $ 19,154
immediately prior to such redemption. In addition,
the Company used $ 1,000
of the net proceeds for working capital purposes. On
July 20, 2021, the Company entered into a securities purchase agreement (the “July 2021 Purchase Agreement”) with certain
institutional investors. Pursuant to the July 2021 Purchase Agreement, the Company agreed to sell in a registered direct offering, 2,199,132 0.00001 3.45 1,099,566 3.80 five years The
net proceeds to the Company from the July 2021 Offerings were approximately $ 6,760 ,
after deducting placement agent fees and estimated offering expenses payable by the Company. The Company used $ 5,000
of the net proceeds to redeem a portion of the
Jackson Note, which had an outstanding principal amount of approximately $ 21,700
immediately prior to such redemption. In addition,
the Company used approximately $ 1,700
of the net proceeds for working capital purposes. On
August 5, 2021, the Company entered into a securities purchase agreement (the “First August 2021 Purchase Agreement”)
with certain institutional investors. Pursuant to the First August 2021 Purchase Agreement, the Company agreed to sell in a registered
direct offering, 1,383,162
shares of the Company’s common stock, to
the purchasers at an offering price of $ 2.6425
per share and associated warrant (the “First
August 2021 Registered Direct Offering”). Pursuant to the First August 2021 Purchase Agreement, in a concurrent private placement
(together with the First August 2021 Registered Direct Offering, the “First
August 2021 Offerings”), the Company also sold to the purchasers unregistered warrants to purchase up to an aggregate of 691,581
shares of common stock, representing 50% of the
shares of common stock that were issued and sold in the First August 2021 Registered Direct Offering (the “First August 2021 Warrants”).
The First August 2021 Warrants are exercisable at an exercise price of $ 2.58
per share, were exercisable immediately upon
issuance and have a term of exercise equal to five
years from the date of issuance. On
August 22, 2021, the Company entered into a securities purchase agreement (the “Second August 2021 Purchase Agreement”)
with certain institutional investors. Pursuant to the Second August 2021 Purchase Agreement, the Company agreed to sell in a registered
direct offering, 1,360,478
shares of the Company’s common stock, to
the purchasers at an offering price of $ 2.10
per share and associated warrant (the “Second
August 2021 Registered Direct Offering”). Pursuant to the Second August 2021 Purchase Agreement, in a concurrent private placement
(together with the Second August 2021 Registered Direct Offering, the “Second August 2021 Offerings”, and the Second August
2021 Offerings together with the First August 2021 Offerings, the “August 2021 Offerings”), the Company also sold to
the purchasers unregistered warrants to purchase up to an aggregate of 680,239
shares of common stock, representing 50% of the
shares of common stock that were issued and sold in the Second August 2021 Registered Direct Offering (the “Second August 2021
Warrants”). The Second August 2021 Warrants are exercisable at an exercise price of $ 2.04
per share, were exercisable immediately upon
issuance and have a term of exercise equal to five
years from the date of issuance. The
net proceeds to the Company from the August 2021 Offerings were approximately $ 5,683 ,
after deducting placement agent fees and estimated offering expenses payable by the Company. The Company used a portion of
the net proceeds from the First August 2021 Offerings together with other cash on hand to redeem $ 3,281 16,730 Going
concern The
accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going
concern. The Company’s debt obligations and certain unsecured payments associated with historical acquisitions are due in the next
12 months, and the Company’s debt obligations with Jackson and MidCap may become due on demand due to certain covenant violations
discussed above, which are in excess of cash on hand. Historically, the Company has funded such payments either through cash flow from
operations or the raising of capital through additional debt or equity. If the Company is unable to obtain additional capital, such payments
may not be made on time. The
Novel Coronavirus Disease 2019 (“COVID-19”), is impacting worldwide economic activity, and activity in the United States
and the United Kingdom where our operations are based. The nature of work of the contractors we support mostly are on the site of our
clients. As a result, we are subject to the plans and approaches of our clients to work during this period. This includes whether they
support remote working when they have decided to close their facilities. To the extent that our clients have decided to or are required
to close their facilities or not permit remote work when they decide to close facilities, we would no longer generate revenue and profit
from that client. Developments such as social distancing and shelter-in-place directives have impacted the Company’s ability to
deploy its staffing workforce effectively thereby impacting contracts with customers in the Company’s Commercial Staffing and Professional
Staffing business streams where we had declines in revenues during Fiscal 2020. The economic
downturn has resulted in a strong recovery in permanent placement business (or direct hire) over temporary contracting. As
the anticipated return to work following the end of the stimulus check program has been slower than expected, the Company has concentrated
on meeting this direct hire need, principally in the Professional Staffing Business Streams. 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
Company’s negative working capital and liquidity position combined with the uncertainty generated by the economic reaction to the
COVID-19 pandemic raise substantial doubt about the Company’s ability to continue as a going concern. Divesture
of Business On
September 24, 2020, the Company and Staffing 360 Georgia, LLC d/b/a first first first first In
addition, the Buyer agreed to assume certain liabilities related to the Assets. The purchase price in connection with the first 3,300 1,220 2,080 first 2,080 The
Asset Purchase Agreement contains non-competition and non-solicitation provisions customary for agreements of this type. In addition,
under the terms of the Asset Purchase Agreement, the Company has agreed to indemnify the Buyer against certain liabilities, subject to
certain conditions and limitations as set forth in the Asset Purchase Agreement. In
connection with execution of the Asset Purchase Agreement, the Company and certain of its subsidiaries entered into a Consent Agreement
(the “Consent”) with Jackson, a noteholder under our Amended and Restated Note Purchase Agreement, dated September 15, 2017
(the “Existing Note Purchase Agreement”). Under the terms of the Consent and the Certificate of Designation of the
Company’s Series E Convertible Preferred Stock (the “Series E Preferred Stock”), in consideration for Jackson’s
consent to the first 1,300
shares of Series E Convertible Preferred Stock
for $ 1,300
and on July 22, 2021, after conversion of the
Series G Preferred Stock to the New Note (as defined herein), the Company redeemed $ 2,080
of the Jackson Note with the Escrow Funds. To
induce the Buyer to enter into the Asset Purchase Agreement, the Company also entered into a Transition Services Agreement with the Buyer,
pursuant to which each party agreed to provide certain transition services such as payrolling through to year end 2020 to minimize any
disruption to the businesses of the Seller and the Buyer arising from the first COVID-19 The
full impact of the COVID-19 pandemic continues to evolve as of the date of this quarterly report. As such, it is uncertain as to the
full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management
is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, industry, and workforce.
Developments such as social distancing and shelter-in-place directives have impacted the Company’s ability to generate revenues.
Given the daily evolution of the COVID-19 pandemic, including new information which may emerge concerning the severity of COVID-19 and
the global responses to curb its spread and to treat its impact, the Company is not able to estimate the duration of the effects of the
COVID-19 pandemic on its results of operations, financial condition, or liquidity beyond fiscal year 2021, however the Company continues
to take action to reduce the negative effects of the COVID-19 pandemic on its operations through various cost cutting initiatives including
reductions to support personnel, temporary salary reductions, and elimination of other non-essential spend. Should the impact from the
pandemic go on for an extended period of time, management has developed further plans to partially mitigate the impact of the pandemic. On
March 27, 2020, the U.S. President signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The
CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security
payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations,
increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement
property. It also appropriated funds for the SBA Paycheck Protection Program (“PPP”) loans that are forgivable in certain
situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed
by COVID-19. On
May 12, 2020, Monroe Staffing Services, LLC (“Monroe”), an indirect subsidiary of the Company, entered into a note (the “May
12 Note”) with Newton Federal Bank (the “Bank”), pursuant to the PPP of the CARES Act administered by the SBA. The
principal amount of the May 12 Note is $ 10,000 In
accordance with the requirements of the CARES Act, the Company and Monroe (collectively, the “May 12 Note Borrowers”) used
the proceeds from the May 12 Note in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll
costs, rent and utility costs. Interest accrues on the May 12 Note at the rate of 1.00% 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) Prior to forgiveness under
the PPP, the May 12 Note was to mature two years following the date of issuance of the May 12 Note and included a period for the
first ten months during which time required payments of interest and principal are deferred. Beginning on the eleventh month following
the date of the May 12 Note, the May 12 Note Borrowers would be required to make 14 monthly payments of principal and interest.
The May 12 Note may be prepaid at any time prior to maturity. The May 12 Note provides for customary events of default, including, among
others, those relating to breaches of obligations under the May 12 Note, including a failure to make payments, any bankruptcy or similar
proceedings involving the May 12 Note Borrowers, and certain material effects on the May 12 Note Borrowers’ ability to repay the
May 12 Note. The May 12 Note Borrowers did not provide any collateral or guarantees for the May 12 Note. On
May 25, 2021, the Company was notified by its lender, Affinity Bank, that the May 12 Note, in the amount of $ 10,000
of principal and $ 105
in interest, was forgiven in its entirety by
the SBA, which was recorded as Other Income as a PPP forgiveness gain. On
May 20, 2020, Key Resources Inc. (“KRI”), Lighthouse Placement Services, LLC (“LH”) and Staffing 360 Georgia,
LLC (“SG”), each a wholly owned direct or indirect subsidiary of the Company, entered into the following notes, each dated
May 20, 2020, with the Bank, pursuant to the PPP of the CARES Act administered by the SBA. KRI entered into a note (the “KRI Note”)
for the principal amount of approximately $ 5,443 1,890 2,063 9,395 In
accordance with the requirements of the CARES Act, the Company, KRI, LH and SG (collectively, the “May 20 Note Borrowers”)
used the proceeds from the May 20 Notes in accordance with the requirements of the PPP to cover certain qualified expenses, including
payroll costs, rent and utility costs. Interest accrues on each of the May 20 Notes at the rate of 1.00 Prior to
any forgiveness under the PPP, each of the May 20 Notes was to mature two years following the date of issuance of the May 20
Notes and included a period for the first ten months during which time required payments of interest and principal are deferred.
Beginning on the eleventh month following the date of each of the May 20 Notes, the May 20 Note Borrowers are required to make 14
monthly payments of principal and interest. The May 20 Notes may be prepaid at any time prior to maturity. The May 20 Notes provide
for customary events of default, including, among others, those relating to breaches of obligations under the May 20 Notes,
including a failure to make payments, any bankruptcy or similar proceedings involving the Borrowers, and certain material effects on
the Borrowers’ ability to repay the May 20 Notes. The May 20 Note Borrowers did not provide any collateral or guarantees for
the May 20 Notes. The
application for these funds required the Company to certify in good faith that the current economic uncertainty made the loan request
necessary to support the ongoing operations of the Company. This certification further required the Company to take into account our
current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that
is not significantly detrimental to the business. The Company made this good faith assertion based upon the adverse impact the COVID-19
pandemic had on our business and the degree of uncertainty introduced to the capital markets. While the Company has made this assertion
in good faith based upon all available guidance, management will continue to assess their continued qualification if and when updated
guidance is released by the Treasury Department. 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) On
July 14, 2021, the Company was notified by its lender, Affinity Bank, that the May 20 Notes for the Company’s subsidiaries KRI,
LH and SG, in the amounts of $ 5,443 ,
$ 1,890
and $ 2,063 ,
respectively, in principal and $ 63 ,
$ 22
and $ 24 ,
respectively, in interest, were forgiven in their entirety by the SBA, which was recorded as Other Income as a PPP forgiveness gain. Effective
March 27, 2020, the Company is deferring Federal Insurance Contributions Act taxes under the CARES Act section 2302. Payment of these
tax deferrals of $ 2,473 2,473 Goodwill Goodwill
relates to amounts that arose in connection with various acquisitions and represents the difference between the purchase price and the
fair value of the identifiable intangible and tangible net assets when accounted for using the purchase method of accounting. Goodwill
is not amortized, but it is subject to periodic review for impairment. Events that would indicate impairment and trigger an interim impairment
assessment include, but are not limited to, current economic and market conditions, a decline in the equity value of the business, a
significant adverse change in certain agreements that would materially affect reported operating results, business climate or operational
performance of the business and an adverse action or assessment by a regulator. In
accordance with ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350) Testing Goodwill for Impairment, or ASU 2011-08, the Company
is required to review goodwill by reporting unit for impairment at least annually or more often if there are indicators of impairment
present. During the year ended January 2, 2021 the Company changed its annual measurement date from the first day of the fiscal fourth
quarter to the last day of the fiscal year end. A reporting unit is either the equivalent of, or one level below, an operating segment.
The Company early adopted the provisions in ASU 2017-04, which eliminates the second step of the goodwill impairment test. As a result,
the Company’s goodwill impairment tests include only one step, which is a comparison of the carrying value of each reporting unit
to its fair value, and any excess carrying value, up to the amount of goodwill allocated to that reporting unit, is impaired. The
carrying value of each reporting unit is based on the assignment of the appropriate assets and liabilities to each reporting unit. Assets
and liabilities were assigned to each reporting unit if the assets or liabilities are employed in the operations of the reporting unit
and the asset and liability is considered in the determination of the reporting unit fair value. The
Company recognized an impairment with respect to its first 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) No
impairments to goodwill were recognized during the period ended October 2, 2021. In assessing potential impairment to goodwill,
management has made assumptions regarding partial recovery from the COVID-19 pandemic. If the assumptions utilized by
management are not achieved and declines to operations are greater than anticipated, while failing to achieve growth in future periods
as a result of the prolonged impact of COVID-19 pandemic, an impairment to goodwill could be recorded and such amount could be material
to the financial statements. A reduction in the projected long-term operating performance of the reporting units, market declines, changes
in discount rates or other conditions could result in a material impairment in the future. Revenue
Recognition 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 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. Revenues in Q3 2021 was comprised of $ 46,168 1,333 47,177 1,463 143,274
of temporary contractor revenue and $ 3,708
of permanent placement revenue, compared with
$ 145,150
and $ 5,543
in Q3 2020 YTD, respectively. Refer to
Note 10 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 with those forecasted at the beginning of the fiscal year and each interim period thereafter. The
effective income tax rate was 1.48% ,
( 4.28% ),
0.67% and ( 1.81% )
for the period ending Q3 2021, Q3 2020, Q3 2021 YTD and Q3 2020 YTD, respectively. The Company’s effective tax rate differs from
the U.S. federal statutory rate of 21% ,
primarily due to changes in valuation allowances in the U.S., which eliminates the effective tax rate on current year losses, offset
by current state taxes and changes to goodwill naked credit. The Company may have experienced an IRC Section 382 limitation during
2021, for which it is in process of conducting an analysis to determine the tax consequences of such a limitation. 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) Foreign
Currency The
Company recorded a non-cash foreign currency remeasurement (loss) gain of $ (315) 422 (219)
348)
Warrants The Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable
authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The
assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period
end date while the warrants are outstanding. For issued or modified warrants
that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in
capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants
are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the
warrants the Company has privately placed were estimated using a Black Scholes model. Refer to Note 8 for further details. Recent
Accounting Pronouncements In
August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments
by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial
conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will
account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will
reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within
the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per
share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15,
2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company will adopt this standard
for the fiscal year ending January 1, 2022. On
December 31, 2019, the FASB issued ASC 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes” (Topic 740). The
amendments in this update simplify the accounting for income taxes by removing certain exceptions. For public business entities, the
amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2020. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods
for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not
yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments
as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt
all the amendments in the same period. In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments” (“ASU 2016-13”). This standard requires an impairment model, known as the current exp |
