| STOCKHOLDERS’ DEFICIT | NOTE
9– STOCKHOLDERS’ DEFICIT The
Company issued the following shares of common stock during the six-months ended June 29, 2024: SCHEDULE OF STOCKHOLDERS
DEFICIT
Number
of Fair
Value Fair
Value at Issuance
Common
Shares of
Shares (minimum
and maximum
Shares
issued to/for: Issued Issued per
share)
Warrants Exercised 221,117 $ 1,835 $ 8.30 $ 8.30
Board
and committee members 17,000 2,142 $ 2.80 $ 4.10
238,117 $ 3,977 The
Company issued the following shares of common stock during the six-months ended July 1, 2023:
Number
of Fair
Value Fair
Value at Issuance
Common
Shares of
Shares (minimum
and maximum
Shares
issued to/for: Issued Issued per
share)
Equity
raise 188,452 $ 4,999 $ 26.50 $ 26.50
Employees 17,730 531 $ 28.20 $ 28.20
Board
and committee members 12,000 243 $ 10.50 $ 31.30
218,182 $ 5,773 Reverse
Stock Split On
June 25, 2024, the Company effected the Reverse Stock Split. All share and per share information in this Quarterly Report on Form 10-Q,
including the condensed consolidated financial statements and the notes thereto, has, where applicable, been retroactively adjusted to
reflect the Reverse Stock Split. Increase
of Authorized Common Stock On
December 27, 2023, stockholders approved an amendment to our Charter to increase the number of authorized shares of common stock, par
value $ 0.00001 200,000,000 250,000,000 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) We
previously had a total of 220,000,000 200,000,000 20,000,000 0.00001 200,000,000 250,000,000 220,000,000 270,000,000 February
2023 Public Offering On
February 7, 2023, the Company entered into a securities purchase agreement (“February 2023 Purchase Agreement”) with an institutional,
accredited investor (the “Investor”) for the issuance and sale, in a best efforts public offering (the “February 2023
Offering”), of (i) 31,500 0.0001 156,952 26.532 26.522 Subject
to certain limitations described in the February 2023 Pre-Funded Warrants, the February 2023 Pre-Funded Warrants are immediately exercisable
and may be exercised at a nominal consideration of $0.01 per share any time until all of the February 2023 Pre-Funded Warrants are exercised
in full. A holder will not have the right to exercise any portion of the February 2023 Warrants or the February 2023 Pre-Funded Warrants
if the holder (together with its affiliates) would beneficially own in excess of 4.99% or 9.99%, respectively (or at the election of
the holder of such warrants, 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 February 2023 Warrants or the February 2023 Pre-Funded
Warrants, respectively. However, upon notice from the holder to the Company, the holder may increase the beneficial ownership limitation
pursuant to the February 2023 Warrants, which may not exceed 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 February 2023 Warrants,
provided that any increase in the beneficial ownership limitation will not take effect until 61 days following notice to the Company. In
connection with the February 2023 Offering, the Investor entered into a warrant amendment agreement (the “February 2023 Warrant
Amendment Agreement”) with the Company to amend the exercise price of certain existing warrants to purchase up to an aggregate
of 87,666 58.50 January 7, 2028 24.70 The
Company utilized the net proceeds from the February 2023 Offering for general working capital purposes. H.C.
Wainwright & Co., LLC (“Wainwright”) acted as the Company’s exclusive placement agent in connection with the February
2023 Offering, pursuant to that certain engagement letter, dated as of January 4, 2023, as amended (the “Wainwright Engagement
Letter”), between the Company and Wainwright. Pursuant to the Wainwright Engagement Letter, the Company paid Wainwright (i) a cash
fee equal to 7.5 1.0 14,134 33.165 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
Units, the Pre-Funded Units, the shares of common stock included as part of the Units and Pre-Funded Units, the February 2023 Pre-Funded
Warrants, the February 2023 Warrants, the shares of common stock issuable upon the exercise of the February 2023 Pre-Funded Warrants
and the February 2023 Warrants, the February 2023 Placement Agent Warrants and the shares of common stock issuable upon the exercise
thereof were offered by the Company pursuant to a Registration Statement on Form S-1, as amended (File No. 333-269308), initially filed
on January 20, 2023 with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and declared effective
on February 7, 2023. Series
A Preferred Stock – Related Party As
of June 29, 2024 and July 1, 2023, the Company had $ 125 Restricted
Shares The
Company has issued shares of restricted stock to employees and members of the Board under its 2015 Omnibus Incentive Plan, 2016 Omnibus
Incentive Plan, 2020 Omnibus Plan and 2021 Omnibus Inventive Plan. Under these plans, the shares are restricted for a period of three
years from issuance. As of June 29, 2024, the Company has issued a total of 22,559 362 940 ,
respectively. The table below is a rollforward of unvested restricted shares issued to employees and board of directors. SCHEDULE
OF UNVESTED RESTRICTED SHARES ACTIVITY
Weighted
Restricted Average
Outstanding at December 31, 2022 6,859 $ 67.20
Granted 33,731 23.00
Vested/adjustments (17,769 ) 28.80
Outstanding at December 30, 2023 22,821 31.80
Granted — —
Vested/adjustments (262 ) 11.84
Outstanding at June 29, 2024 22,559 $ 28.28 Warrants In
connection with the private placement consummated in July 2022 (the “July 2022 Private Placement”), on July 7, 2022, the
Company entered into warrant amendment agreements (the “Warrant Amendment Agreements”) with each of the nine existing participating
investors, which amended warrants to purchase up to 65,786 185.00 380.00 58.50 January 7, 2028 837 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) In
connection with the Third A&R Agreement, the Company (i) issued to Jackson five year warrants to purchase up to an aggregate of 2,434 30.60 October 27, 2027 1,510 600.00 30.60 29 In
connection with the February 2023 Offering, the Company entered into the February 2023 Purchase
Agreement with the Investor for the issuance and sale, in a best efforts public offering, of (i) 31,500 156,952 26.532 26.522 87,666 58.50 January 7, 2028 24.70 176 On
September 1, 2023, 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 276,117 Pursuant
to the Inducement Letter, the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 276,117 8.30 552,234 The
closing of the transactions contemplated pursuant to the Inducement Letter occurred on September 6, 2023 (the “Closing Date”).
The Company received aggregate gross proceeds of approximately $ 2,292 50 50 The
Company issued to Wainwright or its designees warrants (the “September 2023 Placement Agent Warrants”) to purchase up to
20,709 10.375 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) Transactions
involving the Company’s warrant issuances are summarized as follows: SCHEDULE OF WARRANTS ACTIVITY
Weighted
Number
of Average
Shares Exercise
Price
Outstanding
at December 31, 2022 170,369 $ 96.10
Issued 863,193 20.59
Exercised (276,117 ) 5.90
Expired
or cancelled (87,665 ) 58.50
Outstanding
at December 30, 2023 669,780 34.80
Exercised (221,117 ) 8.30
Adjustment 40 —
Outstanding
at June 29, 2024 448,703 $ 54.92 The
following table summarizes warrants outstanding as of June 29, 2024: SCHEDULE OF WARRANTS OUTSTANDING
Weighted
Average
Number Remaining Weighted
Outstanding Contractual Average
Exercise
Price and
Exercisable Life
(years) Exercise
price
$ 24.70 3,000.00 448,703 4.01 $ 54.92 Stock
Options A
summary of option activity during the quarter ended June 29, 2024, is presented below: SCHEDULE OF SHARE-BASED COMPENSATION, STOCK
OPTIONS ACTIVITY
Weighted
Average
Options Exercise
Price
Outstanding
at December 31, 2022 5,151 $ 500.60
Granted — —
Exercised — —
Expired
or cancelled — —
Outstanding
at December 30, 2023 5,151 500.06
Granted — —
Exercised — —
Expired
or cancelled (33 ) 5,303.57
Outstanding
at June 29, 2024 5,118 $ 498.53 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 recorded share-based payment expense of $ 176 362 221 940 Limited
Duration Stockholder Rights Agreement On
September 27, 2023, the board of directors (the “Board”) of the Company declared a dividend of one preferred share purchase
right (a “Right”) for each outstanding share of common stock and. 03889 Rights for each outstanding share of Series H Preferred
Stock (collectively with the common stock, the “Voting Stock”). The dividend was paid on October 21, 2023 to the stockholders
of record at the close of business on October 21, 2023 (the “Record Date”). Each Right initially entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $ 0.0001 20.75 Until
the close of business on the earlier of (i) 10 business days following the first date of public announcement (which, for purposes of
this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) by the Company or an Acquiring Person (as defined below) that an Acquiring Person has become
such, or such other date, as determined by the Board, on which a Person has become an Acquiring Person, or (ii) 10 business days (or
such later date as may be determined by action of the Board prior to such time as any person or group of affiliated or associated persons
becomes an Acquiring Person) after the date of the commencement of, or the first public announcement of an intention to commence, a tender
or exchange offer the consummation of which would result in any person or group of affiliated or associated persons becoming an Acquiring
Person (the earlier of such dates being called the “Distribution Date”), (x) the Rights will be evidenced by the certificates
representing the Voting Stock registered in the names of the holders thereof (or by book entry shares in respect of such Voting Stock)
and not by separate Right Certificates (as defined below), and (y) the Rights will be transferable only in connection with the transfer
of Voting Stock. Until
the Distribution Date (or earlier expiration of the Rights), (i) new Voting Stock certificates issued after the Record Date upon transfer
or new issuances of Voting Stock will contain a legend incorporating the terms of the Rights Agreement by reference, and (ii) the surrender
for transfer of any certificates representing Voting Stock (or book entry shares of Voting Stock) outstanding as of the Record Date will
also constitute the transfer of the Rights associated with the shares of Voting Stock represented thereby. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record
of the Voting Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the
Rights. Except
as otherwise provided in the Rights Agreement, the Rights are not exercisable until the Distribution Date. The Rights will expire on
the earliest of (i) October 2, 2026 or such later date as may be established by the Board prior to the expiration of the Rights, (ii)
the time at which the Rights are redeemed pursuant to the terms of the Rights Agreement, (iii) the closing of any merger or other acquisition
transaction involving the Company pursuant to an agreement of the type described in the Rights Agreement at which time the Rights are
terminated, or (iv) the time at which such Rights are exchanged pursuant to the terms of the Rights Agreement. 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
Purchase Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights
is subject to adjustment from time to time, among others, (i) in the event of a stock dividend on, or a subdivision, combination or reclassification
of, the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase
Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion price, less than the then-current market
price of the Preferred Stock, or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends or dividends payable in Preferred Stock) or of subscription rights or warrants (other than
those referred to above). The
number of outstanding Rights is subject to adjustment in the event of a stock dividend on any class or series of Voting Stock payable
in shares of a class or series of Voting Stock or subdivisions, consolidations or combinations of any class or series of Voting Stock
occurring, in any such case, prior to the Distribution Date. Shares
of Preferred Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Preferred Stock will be entitled, when,
as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $100.00 and (b) the sum of (1) 10,000
(subject to adjustments for stock dividends, stock splits, or stock combinations) times the aggregate per share amount of all cash dividends,
plus (2) 10,000 (subject to adjustments for stock dividends, stock splits, or stock combinations) times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of common stock, or a subdivision
of the outstanding shares of common stock (by reclassification or otherwise), in each case declared on the common stock. In the event
of liquidation, dissolution or winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential
payment of the greater of (a) $100.00 per share (plus any accrued but unpaid dividends and distributions), and (b) an amount equal to
10,000 times (subject to adjustments for stock dividends, stock splits, or stock combinations) made per share amount of all cash and
other property to be distributed in respect of common stock. Each share of Preferred Stock will be initially entitled to 10,000 votes
(subject to adjustment for stock dividends, stock splits, or stock combinations). In addition to voting together with the holders of
common stock for the election of other directors of the Company, the holders of Preferred Stock, voting separately as a class to the
exclusion of the holders of common stock, shall be entitled at the meeting of stockholders (and at each subsequent annual meeting of
stockholders), unless all dividends in arrears on the Preferred Stock have been paid or declared and set apart for payment prior thereto,
to vote for the election of two directors of the Company. Holders of Preferred Stock shall otherwise have no special voting rights and
their consent shall not be required (except to the extent they are entitled to vote with holders of common stock as set forth herein)
for taking any corporate action, other than as required by law. In
the event of any merger, consolidation, combination or other transaction in which outstanding shares of common stock are converted or
exchanged, each share of Preferred Stock will be entitled to receive 10,000 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for which each share of common stock is changed or exchanged. In
the event that any person or group of affiliated or associated persons becomes an Acquiring Person (the first occurrence of such event,
a “Flip-In Event”), each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon
become void), will thereafter have the right to receive upon exercise of a Right that number of shares of common stock equal to the number
of shares of common stock obtained by dividing the Purchase Price (subject to adjustments) by 50% of the current per share market price
of the common stock on the date of the Flip-In Event. Except in certain situations, a person or group of affiliated or associated persons
becomes an “Acquiring Person” upon acquiring beneficial ownership of 10% (20% in the case of a Passive Investor (as defined
in the Rights Agreement)) or more in voting power of the shares of Voting Stock then outstanding, subject to certain exclusions. 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) In
the event that, after a Flip-In Event, the Company is acquired in a merger or other business combination transaction or 50 50 At
any time after a Flip-In Event and prior to the acquisition by an Acquiring Person of 50 With
certain exceptions, no adjustment in the Purchase Price will be required unless such adjustment would require an increase or decrease
of at least 1% in such Purchase Price. At
any time prior to a Flip-In Event, the Board may redeem all but not less than the then outstanding Rights at a price of $ 0.1 For
so long as the Rights are then redeemable, the Company may, in its sole discretion, except with respect to the Redemption Price, supplement
or amend any provision in the Rights Agreement without the approval of any holders of the Rights. After the Rights are no longer redeemable,
the Company may, except with respect to the Redemption Price, supplement or amend the Rights Agreement without the approval of any holders
of Rights, provided that no such supplement or amendment may adversely affect the interests of holders of the Rights, cause the Rights
Agreement to become amendable contrary to the provisions of the Rights Agreement, or cause the Rights to again to become redeemable. Until
a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends. 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) |
