UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 1, 2023
Date of Report (Date of earliest event reported)
STAFFING 360 SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | | 001-37575 | | 68-0680859 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification Number) |
757 3rd Avenue
27th Floor
New York, NY 10017
(Address of principal executive offices)
(646) 507-5710
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| | ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| | ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common stock | | STAF | | NASDAQ |
Item 1.01 Entry Into a Material Definitive Agreement.
On September 1, 2023, Staffing 360 Solutions, Inc. (the “Company”) entered into an inducement offer letter agreement (the “Inducement Letter”) with a certain holder (the “Holder”) of certain of its existing warrants to purchase up to an aggregate of 2,761,170 shares of common stock issued to the Holder on July 7, 2022 (as amended on February 10, 2023 (the “July 2022 Warrants”)) and (ii) February 10, 2023 (the “February 2023 Warrants” and together with the July 2022 Warrants, the “Existing Warrants”).
Pursuant to the Inducement Letter, the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 2,761,170 shares of common stock at a reduced exercise price of $0.83 per share in consideration of the Company’s agreement to issue new unregistered common stock purchase warrants (the “New Warrants”), as described below, to purchase up to an aggregate of 5,522,340 shares of the Company’s common stock (the “New Warrant Shares”), par value $0.00001 per share.
The closing of the transactions contemplated pursuant to the Inducement Letter is expected to occur on or about September 6, 2023 (the “Closing Date”), subject to satisfaction of customary closing conditions. The Company expects to receive aggregate gross proceeds of approximately $2.3 million from the exercise of the Existing Warrants by the Holder (the “Exercise”), before deducting placement agent fees and other offering expenses payable by the Company. The Company expects to use 50% of the net proceeds from the Exercise to repay a portion of its outstanding obligations under its existing Third Amended and Restated Senior Secured 12% Promissory Note issued to Jackson Investment Group, LLC and 50% of the net proceeds from the Exercise to repay a portion of its outstanding obligations pursuant to the Credit and Security Agreement with MidCap Funding IV Trust (as successor by assignment to MidCap Funding X Trust).
The Company engaged H.C. Wainwright & Co., LLC (the “Placement Agent”) to act as its exclusive placement agent in connection with the transactions summarized above and has agreed to pay the Placement Agent a cash fee equal to 7.5% of the aggregate gross proceeds received from the Holder’s exercise of their Existing Warrants, as well as a management fee equal to 1.0% of the gross proceeds from the exercise of the Existing Warrants, pursuant to that certain engagement letter by and between the Company and the Placement Agent, dated as of January 4, 2023 (as amended, the “Engagement Letter”).
Pursuant to the Engagement Letter, the Company agreed to reimburse the Placement Agent for its expenses in connection with the exercise of the Existing Warrants and the issuance of the New Warrants of up to $50,000 for its reasonable and documented out-of-pocket expenses, including legal fees and expenses and out-of-pocket expenses, $25,000 for its non-accountable expenses, and $15,950 for its clearing costs. The Company also agreed to issue to the Placement Agent or its designees warrants (the “Placement Agent Warrants”) to purchase up to 207,088 shares of common stock. The Placement Agent Warrants will have substantially the same terms as the New Warrants, except that the Placement Agent Warrants will have an exercise price equal to $1.0375 per share, will be immediately exercisable on or after the Stockholder Approval Date (as defined in the New Warrants) until the five year anniversary of the Stockholder Approval Date.
The resale of the shares of common stock underlying the July 2022 Warrants have been registered pursuant to an existing registration statement on Form S-1 (File No. 333-266162), declared effective by the Securities and Exchange Commission (the “SEC”) on July 20, 2022, and the issuance of the shares of common stock underlying the February 2023 Warrants have been registered pursuant to an existing registration statement on Form S-1 (File No. 333-269308), declared effective by the SEC on February 7, 2023.
The Company has agreed to file a registration statement on Form S-3 (or other appropriate form, including on Form S-1, if it is not eligible to utilize Form S-3) providing for the resale of the New Warrant Shares issued or issuable upon the exercise of the New Warrants (the “Resale Registration Statement”), as soon as practicable after the Closing Date, and to use commercially reasonable efforts to have such Resale Registration Statement declared effective by the SEC within 90 days following the date of the Inducement Letter and to keep the Resale Registration Statement effective at all times until no holder of the New Warrants owns any New Warrants or New Warrant Shares. Pursuant to the Inducement Letter, the Company agreed not to issue any shares of common stock or common stock equivalents or to file any other registration statement with the SEC (in each case, subject to certain exceptions) until 60 days after the Closing Date. The Company has also agreed not to effect or agree to effect any Variable Rate Transaction (as defined in the Inducement Letter) until one (1) year after the Closing Date (subject to an exception).
Terms of the New Warrants
Duration and Exercise Price
Each New Warrant will have an exercise price equal to $0.83 per share. The New Warrants will be exercisable on or after the Stockholder Approval Date (as defined in the New Warrants) until the five year anniversary of the Stockholder Approval Date. The exercise price and number of New Warrant Shares issuable upon exercise of the New Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, subsequent rights offerings, pro rata distributions, reorganizations, or similar events affecting the Company’s common stock and the exercise price.
Stockholder Approval
The shares of common stock issuable upon exercise of the New Warrants is subject to stockholder approval. The Company agreed to convene a stockholders’ meeting on or before 90 days following the Closing Date, to obtain such approval.
Exercisability
The New Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering a duly executed exercise notice accompanied by payment in full for the number of shares of common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of such holder’s New Warrants to the extent that the holder would own more than 4.99% (or, at the election of the holder, 9.99%) of the outstanding common stock immediately after exercise, except that upon prior notice from the holder to the Company, the holder may increase or decrease the amount of ownership of outstanding stock after exercising the holder’s New Warrants up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the New Warrants, provided that any increase will not be effective until 61 days following notice to the Company.
Cashless Exercise
If, at the time a holder exercises its New Warrants, a registration statement registering the resale of the New Warrant Shares by the holder under the Securities Act of 1933, as amended (the “Securities Act”) is not then effective or available, then in lieu of making the cash payment otherwise contemplated to be made upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part), the net number of shares of common stock determined according to a formula set forth in the New Warrants.
Rights as a Stockholder
Except as otherwise provided in the New Warrants or by virtue of the holder’s ownership of shares of common stock, such holder of New Warrants does not have the rights or privileges of a holder of common stock, including any voting rights, until such holder exercises such holder’s New Warrants. The New Warrants will provide that the holders of the New Warrants have the right to participate in distributions or dividends paid on shares of common stock.
Fundamental Transactions
If at any time the New Warrants are outstanding, the Company, either directly or indirectly, in one or more related transactions effect a Fundamental Transaction (as defined in the New Warrants), a holder of New Warrants will be entitled to receive, the number of shares of common stock of the successor or acquiring corporation or of the Company, if the Company is the surviving corporation, and any additional consideration receivable as a result of the Fundamental Transaction by such holder of the number of shares of common stock for which the New Warrants are exercisable immediately prior to the Fundamental Transaction. As an alternative, and at the holder’s option in the event of a Fundamental Transaction, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable fundamental transaction), the Company shall purchase the unexercised portion of the New Warrants from the holder by paying to the holder an amount of cash equal to the Black Scholes Value (as defined in the New Warrants) of the remaining unexercised portion of the New Warrants on the date of the consummation of such Fundamental Transaction.
Waivers and Amendments
The New Warrants may be modified or amended, or the provisions of the New Warrants waived with the Company’s and the holder’s written consent.
The forms of Inducement Letter and New Warrants are attached as Exhibits 10.1 and 4.1, respectively. The description of the terms of the Inducement Letter and the New Warrants are not intended to be complete and are qualified in its entirety by reference to such exhibits. The Inducement Letter contains customary representations, warranties and covenants by the Company which were made only for the purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
Item 3.02 Unregistered Sales of Equity Securities.
The New Warrants and the Placement Agent Warrants were issued pursuant to the exemption from the registration requirements of the Securities Act available under Section 4(a)(2). Neither the issuance of the New Warrants, the Placement Agent Warrants, nor the New Warrant Shares or the shares of common stock issuable upon the exercise of the Placement Agent Warrants have been registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. The description of the New Warrants and the Placement Agent Warrants under Item 1.01 of this Form 8-K is incorporated by reference herein.
Neither this Current Report on Form 8-K nor any exhibit attached hereto is an offer to sell or the solicitation of an offer to buy the Company’s securities.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
SIGNATURES
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 hereunto duly authorized.
| Date: September 5, 2023 | STAFFING 360 SOLUTIONS, INC. |
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| | By: | /s/ Brendan Flood |
| | | Brendan Flood |
| | | Chairman and Chief Executive Officer |
