(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ~~January 12,~~November 14, 2017, there were ~~9,739,795~~19,359,988 outstanding common stock shares, par value $0.00001 per share, of the issuer.

	November 30,			May 31,			September 30,			December 31,
	2016			2016			2017			2016
	(Unaudited)						(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,235		$	1,969		$	5,380		$	650
Accounts receivable, net		23,844			20,378			33,797			22,274
Prepaid expenses and other current assets		680			1,012			1,174			613
Total Current Assets		25,759			23,359			40,351			23,537

Property and equipment, net		938			880			1,241			919
Intangible assets, net		9,377			10,741
Identifiable intangible assets, net								16,199			9,149
Goodwill		15,680			14,833			33,362			15,779
Other assets		4,511			3,946			2,972			4,573
Total Assets	$	56,265		$	53,759		$	94,125		$	53,957
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	18,575		$	17,595		$	22,151		$	18,110
Current portion of debt, net		3,716			6,097			367			3,639
Accounts receivable financing		16,665			14,729			23,076			15,605
Other current liabilities		1,270			1,497			1,247			1,274
Total Current Liabilities		40,226			39,918			46,841			38,628

Term loan - related party, net								36,574			—
Long-term debt, net		3,947			3,186			—			3,997
Other long-term liabilities		3,071			3,143			6,615			3,054
Total Liabilities		47,244			46,247			90,030			45,679

Commitments and contingencies		—			—			—			—
Series D Preferred Stock, 5,000 shares designated, $10,000 stated value, 93 and 0 shares issued and outstanding, respectively		612			—
Series D Preferred Stock, 5,000 shares designated, $10,000 stated value, 0 and 93 shares issued and outstanding, as of September 30, 2017 and December 31, 2016, respectively								—			612

Stockholders' Equity:
Staffing 360 Solutions, Inc. Equity:
Preferred stock, $0.00001 par value, 20,000,000 shares authorized;
Series A Preferred Stock, 1,663,008 shares designated, $10.00 stated value, 1,663,008 shares issued and outstanding		—			—
Series B Preferred Stock, 200,000 shares designated, $10.00 stated value, 0 and 133,000 shares issued and outstanding, respectively		—			—
Series C Preferred Stock, 2,000,000 shares designated, $1.00 stated value, 0 and 175,439 shares issued and outstanding, respectively		—			—
Common stock, $0.00001 par value, 20,000,000 shares authorized; 9,115,545 and 6,306,744 shares issued and outstanding, respectively		—			—
Series A Preferred Stock - Related Party, 1,663,008 shares designated, $10.00 stated value, 1,663,008 shares issued and outstanding, as of September 30, 2017 and December 31, 2016								—			—
Series B Preferred Stock, 200,000 shares designated, $10.00 stated value, 0 shares issued and outstanding, as of September 30, 2017 and December 31, 2016								—			—
Series C Preferred Stock, 2,000,000 shares designated, $1.00 stated value, 0 shares issued and outstanding, as of September 30, 2017 and December 31, 2016								—			—
Common stock, $0.00001 par value, 40,000,000 and 20,000,000 shares authorized as of September 30, 2017 and December 31, 2016, respectively; 19,188,820 and 9,139,795 shares issued and outstanding, as of September 30, 2017 and December 31, 2016, respectively								—			—
Additional paid in capital		54,589			51,474			60,784			54,658
Accumulated other comprehensive income		761			159			662			855
Accumulated deficit		(46,941	)		(44,121	)		(57,351	)		(47,847	)
Total Stockholders' Equity		8,409			7,512			4,095			7,666
Total Liabilities and Stockholders' Equity	$	56,265		$	53,759
Total Liabilities, Mezzanine Equity and Stockholders' Equity							$	94,125		$	53,957

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

	For the Three Months Ended November 30,						For the Six Months Ended November 30,
	2016			2015			2016			2015			July 2, 2017 to September 30, 2017			July 3, 2016 to October 1, 2016			January 1, 2017 to September 30, 2017			January 3, 2016 to October 1, 2016
Revenue	$	47,137		$	41,350		$	94,887		$	77,234		$	50,345		$	45,950		$	133,174		$	135,423

Cost of Revenue, Excluding Depreciation and Amortization Stated Below		39,040			33,880			78,301			63,443			40,768			37,545			108,347			111,802

Gross Profit		8,097			7,470			16,586			13,791			9,577			8,405			24,827			23,621

Operating Expenses:
Selling, general and administrative expenses, excluding depreciation and amortization stated below		7,405			8,334			15,090			14,492			9,140			7,795			23,105			24,102
Depreciation and amortization		761			800			1,519			1,537			790			727			2,310			2,059
Total Operating Expenses		8,166			9,134			16,609			16,029			9,930			8,522			25,415			26,161

Loss From Operations		(69	)		(1,664	)		(23	)		(2,238	)		(353	)		(117	)		(588	)		(2,540	)

Other Expenses:
Interest expense		(553	)		(755	)		(1,196	)		(1,281	)		(761	)		(615	)		(1,843	)		(2,007	)
Amortization of beneficial conversion feature		(184	)		(193	)		(369	)		(366	)		—			(183	)		(184	)		(550	)
Amortization of debt discount and deferred financing costs		(424	)		(568	)		(833	)		(982	)		(1,213	)		(401	)		(2,387	)		(1,310	)
Loss on extinguishment of debt, net														(2,819	)		—			(4,108	)		—
Gain on settlement of warrants														—			—			—			485
Other expense		(168	)		(40	)		(202	)		(10	)		(10	)		(35	)		(31	)		(38	)
Total Other Expenses		(1,329	)		(1,556	)		(2,600	)		(2,639	)		(4,803	)		(1,234	)		(8,553	)		(3,420	)

Loss Before (Provision) Benefit for Income Tax		(1,398	)		(3,220	)		(2,623	)		(4,877	)
Loss Before Provision for Income Tax														(5,156	)		(1,351	)		(9,141	)		(5,960	)

(Provision) Benefit for income taxes		(28	)		42			(97	)		7
(Provision for) benefit from income taxes														(206	)		375			(213	)		(260	)

Net Loss		(1,426	)		(3,178	)		(2,720	)		(4,870	)		(5,362	)		(976	)		(9,354	)		(6,220	)

Net loss attributable to non-controlling interest		—			206			—			221
Net income attributable to non-controlling interest														—			—			—			37

Net Loss Before Preferred Share Dividends		(1,426	)		(3,384	)		(2,720	)		(5,091	)		(5,362	)		(976	)		(9,354	)		(6,257	)

Dividends - Series A preferred stock		(50	)		(50	)		(100	)		(100	)
Dividends - Series A preferred stock - related party														(50	)		(50	)		(150	)		(150	)

Net Loss Attributable to Common Stock	$	(1,476	)	$	(3,434	)	$	(2,820	)	$	(5,191	)	$	(5,412	)	$	(1,026	)	$	(9,504	)	$	(6,407	)

Basic and Diluted Net Loss per Share:

Net Loss	$	(0.16	)	$	(0.68	)	$	(0.34	)	$	(1.06	)	$	(0.33	)	$	(0.13	)	$	(0.65	)	$	(1.01	)
Net Loss Attributable to Common Stock	$	(0.17	)	$	(0.73	)	$	(0.36	)	$	(1.13	)	$	(0.34	)	$	(0.13	)	$	(0.66	)	$	(1.04	)
Weighted Average Shares Outstanding – Basic and Diluted		8,789,725			4,706,554			7,930,032			4,599,032			16,030,315			7,647,407			14,340,445			6,183,678

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

	For the Six Months Ended November 30,
	2016			2015			January 1, 2017 to September 30, 2017			January 3, 2016 to October 1, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,720	)	$	(4,870	)	$	(9,354	)	$	(6,220	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		155			109			250			132
Write-off of property and equipment		—			49
Amortization of intangible assets		1,364			1,428
Amortization of debt discount and beneficial conversion feature		1,202			1,348
Amortization of identifiable intangible assets								2,060			1,927
Amortization of debt discount, deferred financing and beneficial conversion feature								2,571			1,860
Loss on extinguishment of debt, net								4,108			—
Gain on settlement of warrants								—			(485	)
Stock based compensation		344			1,611			1,689			668
Loss (gain) on settlement of debt		169			(36	)
Interest paid in stock		2			31			—			109
Other, net		(89	)		149
Other								(149	)		54
Changes in operating assets and liabilities:
Accounts receivable		(3,466	)		(469	)		(2,907	)		(1,099	)
Prepaid expenses and other current assets		332			74			(552	)		156
Other assets		(565	)		(391	)		196			(828	)
Accounts payable and accrued expenses		980			852			16			4,460
Other current liabilities		(188	)		(46	)		(807	)		(632	)
Other long-term liabilities		(53	)		42			285			357
Other, net		487			—
NET CASH USED IN OPERATING ACTIVITIES		(2,046	)		(119	)
Other								(193	)		328
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES								(2,787	)		787

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired		—			(3,654	)
Acquisition - payments made to seller		(849	)		(83	)
Posting of surety bond								—			(1,405	)
Cash paid for acquisition of businesses, net of cash acquired								(20,817	)		(101	)
Payments made for earn-outs		(69	)		(86	)		(1,094	)		(104	)
Purchase of property and equipment		(213	)		(98	)		(169	)		(245	)
NET CASH USED IN INVESTING ACTIVITIES		(1,131	)		(3,921	)
NET CASH USED IN FROM INVESTING ACTIVITIES								(22,080	)		(1,855	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Third-party financing costs		—			(1,115	)
Proceeds from convertible notes		400			4,279			400			578
Repayment of convertible notes		(1,386	)		(275	)		(6,635	)		(1,589	)
Proceeds from promissory notes		273			1,555			—			700
Repayment of promissory notes		(995	)		(1,052	)		(441	)		(1,506	)
Proceeds from term loan								51,165			783
Repayments of term loan								(14,976	)		(629	)
Repayment of bonds		(5	)		(100	)		(50	)		(949	)
Proceeds from accounts receivable financing		2,800			1,772
Repayment of accounts receivable financing overadvance		(863	)		—
Proceeds from sale of equity		2,495			—
Financing cost associated with private placements		(274	)		—
Proceeds from (repayments on) accounts receivable financing, net								5,242			(1,575	)
Proceeds from overadvance of accounts receivable financing								—			1,050
Proceeds from private placement								—			3,347
Proceeds from Series D Preferred Stock								—			2,000
Repayment of Series D Preferred Stock								(1,500	)		—
Dividends paid to related parties								(515	)		—
Proceeds from At-The-Market Facility								208			—
Third party financing costs								(3,299	)		(777	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,445			5,064			29,599			1,433

NET (DECREASE) INCREASE IN CASH		(732	)		1,024
NET INCREASE IN CASH								4,732			365

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

Cash - Beginning of period		1,969			19			650			991

Cash - End of period	$	1,235		$	1,041		$	5,380		$	1,356

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

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, ~~(“Golden Fork”),~~ which changed its name to Staffing 360 Solutions, Inc., ticker symbol “STAF”, on March 16, 2012.

The Company effected a one-for-ten reverse stock split on September 17, 2015. Following the reverse split, the Company’s issued and outstanding shares of Common Stock decreased from 45,732,674 to 4,573,360. All share and per share information in these condensed consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.

~~The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis which implies~~ On June 25, 2017, the Company ~~will continue~~changed its state of domicile to ~~meet its obligations and continue its operations for the next fiscal year. As of November 30, 2016, the Company had a working capital deficiency of~~ $~~(14,467), an accumulated deficit of $(46,941), for the six months ended November 30, 2016 a net loss of $(2,720), and, as of the date these unaudited condensed consolidated financial statements are issued, the Company has approximately~~ ~~$5,342 associated with debt and other amortizing obligations,~~ due in the next 12 months. The Company’s projected cash flows from operations for the same period are not sufficient to address these obligations in the normal course of business. As a result, the Company will need to seek additional funding through capital raises to meet these short term obligations.Delaware.

Management’s plan to continue as a going concern includes raising capital in the form of debt or equity, increased gross profit from organic revenue growth and managing and reducing operating and overhead costs~~. In addition, the Company has the ability to raise additional capital through private investments.~~ In November of 2016, the Company engaged Source Capital Group, Inc. (‘Source Capital’) to act as a placement agent to conduct a general solicitation private placement offering solely to accredited investors under Rule 506(c) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act. The Company is still in discussions with Source Capital regarding funding through private placement. The private placement expires on January 31, 2017.

Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon the management’s ability to successfully secure additional sources of financing and increased profitable operations. Management also cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for the Company to raise additional capital on an immediate basis. However, based upon an evaluation of the Company’s continued growth trajectory, past success in raising capital and meetings its obligations as well as its plans for raising capital discussed above, management believes that the Company is a going concern.

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. ~~As described below, the Company consolidates PeopleSERVE PRS, Inc. (“PRS”), an entity of which it previously owned 49%, since the Company was deemed to be the primary beneficiary of this entity.~~ All ~~inter-company~~significant intercompany balances and transactions have been ~~eliminated. On April 29, 2016, the Company acquired the remaining 51% for $101. All inter-company transactions have been eliminated.~~

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.

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

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the transition period ended December 31, 2016 and for the years ended May 31, 2016 and 2015, ~~respectively,~~ which are included in the Company’s ~~May~~December 31, 2016 ~~Annual Report on~~ Form ~~10-K~~10-KT, as amended, filed with the United States Securities and Exchange Commission on ~~August 29, 2016.~~April 12, 2017. 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 ~~three and six months~~period ended ~~November~~September 30, ~~2016~~2017 are not necessarily indicative of results for the entire year ending December 30, 2017.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis which implies the Company will continue to meet its obligations for the next 12 months as of the date these financial statements are issued. On September 15, 2017, the Company completed financing of a $40,000 term loan with Jackson Investment Group, LLC, which among other outcomes, significantly alters the Company’s debt service obligations prospectively. The Company believes it can meet its obligations in the next 12 months from the date these financial statements are issued.

On September 15, 2017, Staffing 360 Georgia, LLC (“Staffing Georgia”), a wholly-owned subsidiary of the Company entered into an asset purchase agreement with Firstpro Inc. (“FPI”), Firstpro Georgia, LLC (“FPL”), and certain individuals, pursuant to which the FPI and FPL sold substantially all of their assets to Staffing Georgia (“Firstpro Acquisition”). The purchase price in connection with the Staffing Georgia, was $8,000, of which, (a) $4,500 was paid at closing, (b) $825 is payable in quarterly installments of $75 beginning on October 1, 2017, and (c) $2,675 is payable annually in three equal installments beginning on September 15, 2018.

On September 15, 2017, the Company and Longbridge Recruitment 360 Limited (“Longbridge”), a wholly-owned subsidiary of the Company, entered into an agreement (“Share Purchase Agreement”) with the holders of share capital of CBS Butler Holdings Limited (“CBS Butler”) and an agreement (“Option Purchase Agreement”) with the holders of outstanding options of CBS Butler, pursuant to which the holders of the share capital of CBS Butler and holders of outstanding options of CBS Butler sold all of their shares and options of CBS Butler to Longbridge (the “CBS Butler Acquisition”), in exchange for (i) an aggregate cash payment of £13,810, (ii) an aggregate of 500,000 shares of the Company’s common stock, (iii) an earn-out payment of up to £4,214 (the final amount to be calculated and paid pursuant to the Share Purchase Agreement, payable in December 2018), and (iv) deferred consideration of £150 less the aggregate amount of each CBS Butler Shareholder’s portion of the net asset shortfall amount, if any, as determined pursuant to the Share Purchase Agreement and the Option Purchase Agreement.

$40,000 (the “Jackson Note”). The proceeds of the sale of the secured note were used to (i) repay the existing subordinated notes previously issued to Jackson in the aggregate principal amount of $11,165, (ii) to fund the upfront cash portion of the purchase price consideration of the Firstpro Acquisition and the CBS Butler Acquisition, (iii) to repay substantially all other outstanding indebtedness of the Company and (iv) general working capital purposes. The maturity date for the Jackson Note is September 15, 2020. The Jackson Note will accrue interest at 12% per annum, due quarterly on January 1, April 1, July 1 and October 1 in each year, with the first such payment due on January 1, 2018. Interest on any overdue payment of principal or interest due under the Jackson Note will accrue at a rate per annum that is 5% in excess of the rate of interest otherwise payable thereunder. The Company may prepay the amounts due on the Jackson Note in whole or in part from time to time, without penalty or premium, subject to the conditions set forth in the A&R Note Purchase Agreement, and such prepayments, depending on the timing of the prepayments, may result in a discount on the principal amount to be prepaid as set forth in the A&R Note Purchase Agreement.

The Company paid a closing fee of $1,000 in connection with its entry into the A&R Note Purchase Agreement and agreed to issue 2,250,000 shares of the Company’s common stock as a closing commitment fee. These shares are subject to registration rights in favor of Jackson and will be included in a new resale registration statement which must be filed by the Company not later than October 30, 2017.

The Jackson Note resulted in the extinguishment of the old notes of $11,165 and recording of the new debt of $40,000 and debt issue costs $3,426. The Company recorded a $2,819 loss upon extinguishment.

On February 28, 2017, the Board of Directors of the Company (the “Board”) approved the change of the Company’s fiscal year end from May 31 ~~2017.~~to a 52-53 week year ending on the Saturday closest to the 31st of December. In a 52 week fiscal year, each of the Company’s quarterly periods will comprise 13 weeks. In a 53 week fiscal year, one quarter will consist of 14 weeks. On April 12, 2017, the Company filed a transition report on Form 10-KT, as amended, covering the transition period June 1, 2016 through December 31, 2016. Annual reports on Form 10-K covering 52-53 week years will be filed thereafter. This filing includes comparative unaudited condensed consolidated financial statements for the period January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016.

Certain reclassifications have been made to conform the prior period data to the current presentations. In accordance with ASU 2015-03, “Imputation of Interest – Simplifying the Presentation of Debt Issuance Costs”, debt issuance costs related to a recognized debt liability are presented in the balance sheet as a direct deduction from the debt liability, consistent with the presentation of a debt discount. These~~These~~ reclassifications had no impact on reported results of operations.

The Company has reclassified the Midcap Additional Term Loan from Long-term debt to Other long-term liabilities, as this represents the long term portion of funds received from the ~~Accounts~~accounts receivable financing facility. These reclassifications had no impact on reported results of operations. The Company paid the Midcap Additional Term Loan in full on September 18, 2017.

The Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. 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 from continuing operations for the period July 2, 2017 to September 30, 2017 and July 3, 2016 to October 1, 2016 was 4% and (37.6)%, respectively. The effective income tax rate from continuing operations for the period January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, was 2.3% and 4.3%, respectively.

In January 2017, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~an Accounting Standards Update (“ASU”)~~ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment”. The amendments in this update modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. The guidance is effective for annual periods fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of adopting this guidance.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business”. The amendments in this ~~Update~~update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) Restricted Cash”. The new guidance requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this guidance.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of adopting this guidance.

In ~~April~~March 2016, the FASB issued ASU 2016 – 10 “Revenue from Contract with Customers: identifying Performance Obligations and Licensing”. The amendments in this Update clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to reduce the degree of judgement necessary to comply with Topic 606. This guidance has no effective date as yet. The Company is currently evaluating the impact of adopting this guidance.

~~In March 2016, the FASB issued authoritative guidance~~2016-09, “Stock Compensation”, regarding the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is to be applied for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The guidance requires companies to apply the requirements retrospectively, modified retrospectively, or prospectively depending on the amendment(s) applied. The ~~Company is currently evaluating the impact~~adoption of ~~adopting~~ this ~~guidance.~~

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

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This guidance will be effective for public entities for fiscal years beginning after December 15, 2018 including the interim periods within those fiscal years. Early application is permitted. 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 Company is currently evaluating the impact of adopting this guidance.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, which amends the guidance relating to the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on ~~available-for-sale~~available-for sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement–Period Adjustments”. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for annual reporting periods beginning after December 15, 2015. The Adoption of this guidance had no material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue recognition requirements of FASB ASC Topic 605, “Revenue Recognition” and most industry-specific guidance throughout the ASC, resulting in the creation of FASB ASC Topic 606, “Revenue from Contracts with Customers”. ASU 2014-09 requires entities to recognize revenue in a way that depicts 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 in exchange for those goods or services. This ASU provides alternative methods of adoption. In August 2015, the FASB issued ASU 2015-14, “Revenue ~~From~~from Contracts ~~With~~with Customers, ~~(Topic 606)”~~Deferral of the Effective Date”. ~~The amendments in this~~ ASU ~~defer~~2015-14 defers the effective date of ~~ASU 2014-09 “Revenue From Contracts With Customers (Topic 606)”. Public business entities should apply the guidance in~~ ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers, Principal versus Agent Considerations” (Reporting Revenue Gross versus Net) clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing”, clarifying the implementation guidance on identifying performance obligations and licensing. The amendments in this ASU clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The effective date and transition requirements for ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09. The Company is ~~still evaluating~~currently assessing the potential impact of adopting ~~this guidance~~.ASU 2014-09, ASU 2016-08 and ASU 2016-10 on its financial statements and related disclosures.

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 earnings (loss) per share is computed using the two-class method. For the ~~three~~period ended September 30, 2017 and ~~six months ended November 30,~~October 1, 2016, ~~and 2015,~~ pursuant to the two-class method, as a result of the net loss, 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 share equivalents consist of common shares issuable upon the conversion of preferred stock, convertible notes 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 ~~November~~September 30, ~~2016~~2017 and ~~2015~~October 1, 2016 have been excluded from the per share computations, since their inclusion would be anti-dilutive:

As of October 1, 2016, convertible preferred shares include the Company’s Series D Preferred Stock which contained both a fixed and variable conversion feature that fluctuated with the Company’s stock price. In addition, other restrictions prevented the holders from converting all of the Series D Preferred Stock at the same time. As a result, it was difficult to estimate the exact amount of shares of common stock the Series D Preferred Stock could be converted into at any time. As a result, only the fixed portion of the conversion features were included in the amounts above. In April 2017, the Company redeemed the remaining 62 shares of Series D Preferred Stock and terminated all future conversion rights, for $1,500 in cash and 300,000 shares of common stock.

On September 15, 2017, the Company entered into an amendment with Midcap Financial Trust, pertaining to its accounts receivable based lending facility. The amendment maintains a total facility of $25,000, with an accordion for an additional $25,000, and interest of LIBOR plus 400 basis points with a LIBOR floor of 100 basis points. The amendment also provides for incremental borrowing against the Company’s unbilled receivables up to 85%, with a borrowing cap of $1,300, of such eligible receivables. In conjunction with closing of the Jackson Note, the Midcap Additional Term Loan was repaid in full.

In conjunction with the closing of the Jackson Note, the Company’s accounts receivable based lending facility with Sterling National Bank was closed.

CBS Butler has a revolving accounts receivable financing arrangement with HSBC Invoice Finance (UK) Ltd “HSBC”. The facility, whose maximum capacity is £8,500, had an original expiration of January 2011, provides for termination by either party with 90 days notice. Under the arrangement, CBS Butler may sell eligible short-term trade receivables HSBC in exchange for cash and a subordinated interest. Upon sale, the Company receives cash equal to approximately 90% (varies slightly by geographical location of the receivable) of the value of the sold receivables. The Company continues to service the receivables sold in exchange for a fee. At September 30, 2017, the outstanding principal amount of receivables sold under this facility amounted to £5,486, which is carried as a liability on the balance sheet in Accounts receivable financing.

	November 30,			May 31,			September 30,			December 31,
	2016			2016			2017			2016
Bonds:
Bonds - Series B	$	50		$	55		$	—		$	50

Convertible Notes:
Non-interest bearing convertible note (January 6, 2016)		359			359
Non-interest bearing convertible note (September 10, 2016)		477			—
Non-interest Bearing Convertible Note (January 6, 2016)								—			359
Non-interest Bearing Convertible Note (September 10, 2016)								—			477
8% Convertible Note (July 8, 2015)		1,960			3,920			—			1,960
8% Convertible Note (February 8, 2016)		728			728			—			728
Lighthouse- Seller Note #1		1,874			2,124			—			1,874
Lighthouse - Seller Note #2		234			390			—			234

Promissory Notes:
Sterling National Bank		184			272
Staffing (UK) - Seller Note		116			144			—			112
PeopleServe - Seller Note		395			789			—			329
Midcap Financial Trust - Term Loan		2,125			2,375
ABN AMRO - Term Loan		741			821

Term Loans:
Jackson Investment Group - related party								40,000			—
Midcap Financial Trust								—			2,025
ABN AMRO								377			694
Sterling National Bank								—			168

Less Debt Discount and Deferred Financing Costs		(1,580	)		(2,694	)		(3,436	)		(1,374	)

Total Debt		7,663			9,283			36,941			7,636

Less: Current Portion, Net		(3,716	)		(6,097	)		(367	)		(3,639	)

Total Long-Term Debt, Net	$	3,947		$	3,186		$	36,574		$	3,997

Series B ~~bonds totaling $50. The holders received a total of 1,250 common stock shares.~~ Bonds

In ~~addition, the~~April 2017, these bonds were ~~extended for six months and will mature on March 31, 2017. For~~paid in full. During the ~~three and six months~~period ended ~~November 30,~~July 2, 2016, the Company paid ~~$0 and $5~~$689 in ~~principal, respectively. For the three and six months ended November 30, 2015, the Company paid $0 and $100, in principal, respectively.~~

Non-interest ~~bearing convertible note~~Bearing Convertible Note (January 6, 2016): ~~On July 8, 2016, the Company~~

This note was paid ~~$59~~ in ~~the form of an extension fee to extend the term for an additional six months.~~

Non-interest ~~bearing convertible note~~Bearing Convertible Note (September 10, 2016):

On September 10, 2016, the Company entered into a non interest bearing convertible note for $477, whereby the Company received cash of $400. This note ~~matures~~was due to mature in March 2017.

~~8% Convertible Note (July 8, 2015):~~ During the three and six months ended November 30, 2016, the Company paid cash of $0 and $980 in principal, respectively. During the three months ended November 30, 2016, the Company converted $980 into 890,910 shares of Common Stock. As of the November 30, 2016, all shares had been issued.

~~On January 3,~~ In March 2017, the Company ~~entered into an agreement~~extended the note to ~~extend the maturities~~September 2017 with a new maturity value of the 8% Convertible Note (July 8, 2015) and 8% Convertible Note (February 8, 2016). Under the terms of the extension, the notes will now mature on October 1, 2018 in the amount of $3,126, with 8% interest, first payable on October 1, 2017 and payable quarterly thereafter.$565. The Company ~~also modified the conversion price reducing it from $10.00 per share to $3.00 per share.~~

~~Lighthouse Seller Note #1:~~ ~~During the three and six months ended November 30, 2016, the Company~~ paid ~~$125 and $250~~this in ~~principal, respectively. During the three and six months ended November 30, 2015, the Company paid $0 and $125 in principal, respectively.~~full on September 18, 2017.

On April 11, 2017, the Company entered into a non-interest bearing convertible note for $477, whereby the Company received cash of $400, maturing in October 2017. The Company paid this in full on September 18, 2017.

On January 3, 2017, the Company entered into an amendment agreement pursuant to which, the parties refinanced an aggregate amount of $2,688 of indebtedness and extended all amortization payments for the two 8% convertible notes dated July 8, 2015 and February 8, 2016 (collectively, the “Amendment”) to October 1, 2018, which was approximately 21 months from the date of the refinancing.

The Amendment had a new face value of $3,126, and an 8% interest rate per annum, with no interest payments due until October 1, 2017, payable quarterly thereafter, and an overall term of 21 months with principal due at maturity. The Amendment was convertible into shares of common stock at a price of $3.00 per share at holder’s election, and the holder agreed to eliminate the 20% pre-payment penalty for an early redemption. In connection with the refinancing, the Company issued the holder 600,000 shares of common stock, valued at $498. The Amendment resulted in the extinguishment of the old notes of $2,688 and recording of the new debt and debt issue costs. The Company recorded a $870 loss upon extinguishment. On January 26, 2017, the Amendment was paid in full resulting a loss of $498.

During the period ended October 1, 2016, the Company paid $980 in principal on the 8% Convertible Note (July 8, 2015) note.

During the ~~three~~period July 2, 2017 to September 30, 2017 and ~~six months ended November~~July 3, 2016 to October 1, 2016, the Company paid $1,624 and $125 in principal, respectively. During the period January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, the Company paid $1,874 and $375 in principal, respectively. The Company paid this in full on September 18, 2017.

During the period July 2, 2017 to September 30, 2017 and July 3, 2016 to October 1, 2016, the Company paid $78 and ~~$156~~$78 in principal, respectively. During the ~~three~~period January 1, 2017 to September 30, 2017 and ~~six months ended November~~January 3, 2016 to October 1, 2016, the Company paid $234 and $234, respectively.

During the period from July 2, 2017 to September 30, ~~2015,~~2017 and July 3, 2016 to October 1, 2016, the Company paid $0 and ~~$78 in principal, respectively.~~

~~Sterling National Bank Promissory Note:~~ ~~During the three and six months ended November 30, 2016, the Company paid $45 and $88~~$197 in principal, respectively. During the ~~three~~period from January 1, 2017 to September 30, 2017 and ~~six months ended November 30, 2015, the Company paid $0 and $52 in principal, respectively.~~

~~Staffing (UK) – Sellers Note~~: ~~During the three and six months ended November 30,~~January 3, 2016 to October 1, 2016, the Company paid ~~$14~~$329 and ~~$28~~$592 in principal, respectively. ~~During the three and six months ended November 30, 2015, the Company paid $14 and $28 in principal, respectively.~~

~~PeopleSERVE – Sellers~~Jackson Investment Group Term Loan Note: During the three and six months ended November 30, 2016, the Company paid $197 and $395 in principal, respectively. During the three and six months ended November 30, 2015, the Company paid $197 and $394 in principal, respectively. #1

~~Midcap Financial Trust – Term Loan:~~ During the three and six months ended November 30, 2016, the Company paid $175 and $250 in principal, respectively. During the three and six months ended November 30, 2015, the Company paid $188 and $375 in principal, respectively.

~~ABN AMRO Term Loan:~~ In June 2016, Company borrowed an additional $273. All terms of the original loan remain unchanged. During the three and six months ended November 30, 2016, the Company paid $117 and $234 in principal, respectively.

In November of 2016, the Company engaged Source Capital Group, Inc. to act as a placement agent to conduct a general solicitation private placement offering solely to accredited investors under Rule 506(c) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act. The Company is still in discussions with Source Capital regarding funding through this private placement offering. The private placement expires onOn January ~~31, 2017. In connection with the private placement, the Company filed certificates of designation for Series E-1 and E-2 preferred shares. No shares have been issued and in January~~26, 2017, the Company ~~had~~entered into a note and warrant purchase agreement with Jackson for $7,400. Under the ~~certificates~~terms of ~~designation withdrawn.~~

~~The~~this agreement, the Company issued ~~2,808,801~~to Jackson 1,650,000 shares of common stock and a warrant to purchase up to 3,150,000 shares of common stock at an initial exercise price of $1.35 per share (the “Warrant”). The note accrues interest on the principal amount at a rate of 6% per annum and has a maturity date of July 25, 2018. No interest or principal is payable until maturity. At any time during the ~~six months ended November 30, 2016 as summarized below:~~

term of the note, upon notice to Jackson, the Company may also, at its option, redeem all or some of the then outstanding principal amount of the note by paying to Jackson an amount not less than $100 of the outstanding principal (and in multiples of $100), plus any accrued but unpaid interest and liquidated damages and other amounts due under the note. The ~~Company’s authorized~~note’s principal is not convertible into shares of common stock; however 50% of the accrued interest on the note may be converted into shares of common stock, ~~consists~~at the sole election of ~~20,000,000~~Jackson at maturity or upon prepayment by the Company, at a conversion price equal to $2.00 per share. On March 14, 2017, the Company and Jackson amended the warrant to include a blocker preventing Jackson from owning more than 19.99% of the Company’s shares ~~having par value~~outstanding as of ~~$0.00001. The Company had issued and outstanding 9,115,545 and 6,306,744~~January 26, 2017, until such ownership is approved by the shareholders consistent with Nasdaq Rule 5635(b). On June 15, 2017, our stockholders approved the issuance of shares of the Company’s common stock ~~shares as~~under the warrant to Jackson that may result in Jackson owning in excess of ~~November 30, 2016 and May 31, 2016, respectively. During~~19.99% of the ~~three months ended November 30, 2016, the Company converted $980 into 890,910 shares of Common Stock.~~Company’s outstanding shares.

The warrant is exercisable beginning on July 25, 2017 for a term of four and a half (4.5) years thereafter. The exercise price is subject to anti-dilution protection, including protection in circumstances where common stock is issued pursuant to the terms of certain existing convertible securities, provided that the exercise price shall not be adjusted below a price that is less than the consolidated closing bid price of the common stock.

The Company paid this note in full on September 18, 2017 and entered in a new note with Jackson (refer to “Jackson Note”).

On April 5, 2017, the Company amended the note and warrant purchase agreement with Jackson and entered into a second subordinated secured note with Jackson for $1,650. Under the terms of this amended agreement, the Company issued to Jackson 296,984 shares of common stock, with an additional 370,921 shares of common stock that was issued after obtaining shareholder approval for issuance of shares to Jackson in excess of the 19.99% limit in June 2017. Also on April 5, 2017, the Company amended the Warrant to allow Jackson to purchase up to an additional 825,463 shares of common stock, modified the initial exercise price of the Warrant to $1.00 per share and modified the conversion price of accrued interest on the note issued to Jackson in January 3,2017 to $1.50. The Warrant was also amended to increase the amount of common stock issuable to Jackson pursuant to the anti-dilution clause contained therein. The second note accrues interest on the principal amount at a rate of 6% per annum and has a maturity date of June 8, 2019; however, in the event the Company satisfies all of its outstanding obligations with Midcap Financial Trust, the maturity date will be adjusted to July 25, 2018. No interest or principal is payable on the second note until maturity. At any time during the term of the second note, upon notice to Jackson, the Company may also, at its option, redeem all or some of the then outstanding principal amount of the note by paying to Jackson an amount not less than $100 of the outstanding principal (and in multiples of $100), plus any accrued but unpaid interest and liquidated damages and other amounts due under the note. The second note’s principal is not convertible into shares of common stock; however, 50% of the accrued interest on the second note can be converted into shares of common stock, at the sole election of Jackson at maturity or in the event of a prepayment by the Company, at a conversion price equal to $1.50 per share. The proceeds of this transaction were used to redeem the remaining shares and conversion rights of the Series D Preferred Stock.

The Company paid this note in full on September 18, 2017 and entered into a new note with Jackson (refer to “Jackson Note – Related Party”)

In August 2017, the Company entered into ~~an agreement to extend the maturities~~a promissory note with Jackson for $1,600, with a term of 60 days at interest of 10% per annum and in return for 160,000 shares of common stock. The proceeds of the ~~8% Convertible Note (July 8, 2015) and 8% Convertible Note (February 8, 2016). Under~~note were used to fund the ~~terms~~satisfaction of ~~the extension, the notes will now mature on October 1, 2018~~a judgment entered in the ~~amount~~matter of ~~$3,126, with 8% interest, first payable~~Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc.

The Company paid this in full on ~~October 1,~~September 18, 2017 and ~~payable quarterly thereafter. The Company also modified the conversion price reducing it from $10.00 per share~~entered into a new note with Jackson (refer to ~~$3.00 per share.~~ “Jackson Note”).

On September ~~27, 2016,~~1, 2017, the ~~Board~~Company into a promissory note with Jackson for $515, with a term of ~~Directors recommended that 790,000 shares~~31 days at interest of ~~Common Stock,~~12% per annum. The proceeds of the note were used to ~~be issued to management, directors and employees be submitted to shareholders for approval at the next shareholder meeting. These shares were issued erroneously.~~fund other debt obligations. The Company ~~processed the retraction of these shares~~paid this in ~~October 2016.~~full on September 18, 2017 and entered into a new note with Jackson (refer to “Jackson Note”).

On ~~July 8, 2016, holders of Series B Preferred Stock elected to convert all 133,000 shares to 133,000 shares of Common Stock.~~

~~The Company had issued and outstanding 0 and 133,000 shares of Series B Preferred Stock, as of November 30, 2016 and May 31, 2016, respectively.~~

On June 16, 2016, the Company filed an Amendment to the Certificate of Designation for the Series C Preferred Stock, par value $0.00001 per share. The Amendment increased the number of Series C Preferred Stock from 500,000 to 2,000,000 shares authorized.

~~On June 24, 2016, holders of Series C Preferred Stock elected to convert all 175,439 shares to 175,439 shares of Common Stock.~~

~~The Company had issued and outstanding 0 and 175,439 shares of Series C Preferred Stock as of November 30, 2016 and May 31, 2016, respectively.~~

~~On June 24, 2016,~~September 15, 2017, the Company entered into a ~~Securities Purchase Agreement~~$40,000 note agreement with ~~certain purchasers~~Jackson (refer to Note 2 above). The proceeds of the sale of the secured note will used to repay the existing subordinated notes previously issued to Jackson pursuant to ~~which~~ the ~~Company sold~~existing note purchase agreement in the aggregate principal amount of $11,165 and to ~~the purchasers 211 shares~~fund a portion of the ~~Company’s Series D Preferred Stock~~purchase price consideration of the Firstpro Acquisition and the CBS Butler Acquisition and repay certain other outstanding indebtedness of the Company. The maturity date for the amounts due under the Jackson Note is September 15, 2020. The Jackson Note will accrue interest at 12% per annum, due quarterly on January 1, April 1, July 1 and October 1 in each year, with the first such payment due on January 1, 2018. Interest on any overdue payment of principal or interest due under the Jackson Note will accrue at a ~~face value of $10,000 (whole dollars)~~rate per ~~share of Series D Preferred, and Original Issue Discount of~~annum that is 5% ~~and a conversion price into common stock of $2.50 per share, for aggregate proceeds of approximately $2,000 before placement fees and estimated offering expenses. The offering~~in excess of the ~~Series D Preferred Stock was made under the Company’s Shelf Registration.~~

~~During the six months ended November 30, 2016, holders~~rate of ~~this series converted 118 shares of Series D Preferred Stock to 1,340,960 shares of Common Stock.~~interest otherwise payable thereunder.

Due to the contingent nature of the cash redemption feature of the Series D Preferred Stock, the Company has classified the shares as temporary equity on the condensed consolidated balance sheet. In addition, at the commitment date these were issued, the Company determined that a beneficial conversion feature (“BCF”) existed in the amount of $615, which was recorded within Additional Paid-In Capital on the condensed consolidated balance sheet.

OnThe Company paid a closing fee of $1,000 in connection with its entry into the A&R Note Purchase Agreement and agreed to issue 2,250,000 shares of the Company’s common stock as a closing commitment fee. These shares are subject to registration rights in favor of Jackson and will be included in a new resale registration statement which must be filed by the Company not later than October 30, 2017. The Jackson Note resulted in the extinguishment of the old notes of $11,165 and recording of the new debt of $40,000 and debt issue costs $3,426. The Company recorded an initial $2,819 loss upon extinguishment. The Company has estimated that the $11,165 of notes extinguished were replaced by $11,165 which equals its fair value. The Company intends to perform a more thorough analysis of the fair value of the new debt which may result in an adjustment to the loss on extinguishment.

Immediately prior to closing the Jackson Note, Jackson owned 2,633,482 shares of common stock and 4,527,537 warrants.

During the period July 2, 2017 to September ~~22,~~30, 2017 and July 3, 2016 to October 1, 2016, the Company paid $1,425 and ~~Discover Growth Fund agreed that~~$113 in principal, respectively. During the period January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, the Company paid $2,025 and $238 in principal, respectively. The Company paid this note in full on September 18, 2017 with the funding received from the Jackson Note. The Company wrote off $533 in deferred financing costs associated with the settlement of this term loan.

During the period July 2, 2017 to September 30, 2017 and July 3, 2016 to October 1, 2016, the Company paid $119 and $131 in principal, respectively. During the period January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, the Company paid $356 and $391 in principal, respectively. On March 29, 2017, Longbridge Recruitment 360 Limited and The JM Group each received a ~~Trigger Event,~~reservation of rights letter from ABN AMRO bank with respect to technical noncompliance with certain financial covenants contained in their financing documents with the bank. There was no financial impact of receiving this letter. During the period from January 3, 2016 to October 1, 2016, the Company borrowed an additional £219. Since payments on this term loan are denominated GBP, the Company is subject to foreign exchange changes.

During the period ended July 2, 2017 to September 30, 2017 and July 3, 2016 to October 1, 2016, the Company paid $70 and $44 in principal, respectively. During the period January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, the Company paid $168 and $126 in principal, respectively. The Company paid this note in full on September 18, 2017 with the funding received from the Jackson Note.

The Company issued 10,049,025 shares of common stock during the period ended September 30, 2017 as ~~defined~~summarized below:

The difference between the fair value of shares issued and the change in Additional Paid-In Capital during the period results from the accounting for conversions of Series D Preferred Stock ~~Purchase Agreement between Staffing 360 Solutions, Inc.~~which uses a historical value versus the fair value of common stock issued on the date of conversion.

As of December 31, 2016, the Company’s authorized common stock consists of 20,000,000 shares having par value of $0.00001. Effective January 26, 2017, after obtaining shareholder approval, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock from 20,000,000 shares to 40,000,000 shares. The Company had issued and ~~Discover Growth Fund dated June 24, 2016, filed as an exhibit to our Current Report on Form 8-K on June 27, 2016 (the “Series D Purchase Agreement”), had occurred~~outstanding 19,188,820 and 9,139,795 shares of common stock as of September ~~22, 2016.~~30, 2017 and December 31, 2016, respectively.

In May 2017, using its effective shelf registration on Form S-3 (No. 333-208910), the Company entered into an at-the-market offering (“ATM”) agreement with Joseph Gunnar & Co., LLC to establish an at-the-market equity offering program pursuant to which they are able, with the Company’s authorization, to offer and sell up to $3 million of the Company’s common stock at prevailing market prices from time to time. As of the date these unaudited condensed consolidated financial statements are issued, the Company had sold 309,920 shares of common stock under this program at a value of $208. In October 2017, the Company had sold 139,168 shares of common stock under this program at a value of $117.

In the quarter ended September 30, 2017, the Company paid $515 in dividends to its Series A preferred stock holders.

During the period ended September 30, 2017, holders converted 31 shares of Series D Preferred Stock to 1,673,000 shares of common stock. On April 5, 2017, the Company entered into an agreement with holders of the Series D Preferred ~~Stock certain additional rights and removes certain restrictions in respect~~shares to redeem the remaining 62 shares of ~~the~~ Series D Preferred Stock ~~as set forth~~and terminate all future conversion rights, in ~~the~~return for $1,500 in cash and 300,000 shares of common stock. The Company recorded a gain of $79 on Series D ~~Purchase Agreement. Discover Growth Fund has agreed not to submit any additional conversion notices until~~Preferred Stock extinguishment.

On January 26, 2017, the Company ~~obtains stockholder approval~~issued the Warrant to Jackson which entitled Jackson to purchase up to 3,150,000 shares of common stock at an initial exercise price of $1.35 per share (subject to adjustment). The Warrant is exercisable beginning on July 25, 2017 for a term of four and a half (4.5) years thereafter. The exercise price is subject to anti-dilution protection, including protection in circumstances where common stock is issued pursuant to the ~~transaction, so long~~terms of certain existing convertible securities, provided that the exercise price shall not be adjusted below a price that is less than the consolidated closing bid price of the common stock.

On April 5, 2017, the Company amended the Warrant and entered into a second subordinated secured note with Jackson for $1,650. Under the terms of the amended Warrant, Jackson may purchase up to an additional 1,377,537 shares of common stock at $1.00 per share. The Warrant was amended to increase the amount of common stock issuable to Jackson pursuant to the anti-dilution clause contained therein, and to adjust the initial exercise price to $1.00 per share. The modification cost associated with this change was $91.

On September 15, 2017, the Company issued 100,000 three-year cashless warrants with an exercise price of $1.00 valued at $28.

Transactions involving the Company’s warrant issuances are summarized as ~~such approval is obtained by~~follows:

On October 25, 2016, our Board adopted the 2016 Omnibus Incentive Plan (the “2016 Plan”) to, among other things, attract and retain the best available personnel, to provide additional incentive to employees, directors and consultants and to promote the success of the Company’s business. On January ~~31, 2017.~~26, 2017, our stockholders approved the 2016 Plan, pursuant to which 2,500,000 shares of the Company’s common stock will be reserved for issuance under stock and stock option awards. During the period ended April 1, 2017 the Company issued to employees and consultants, 838,300 shares and 313,500 options, with an exercise price of $1.35 per share to purchase shares of common stock, and therefore has 1,348,200 remaining under this plan. The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option pricing model. The Company ~~intends to seek stockholder approval~~used the following assumptions for determining the ~~transaction at its annual shareholder meeting~~fair value of options granted under the Black-Scholes option pricing model:

During the period ended September 30, 2017 and October 1, 2016, the Company recorded share based payment expense of $251 and $270, respectively, in ~~January 2017.~~connection with all options outstanding.

Pursuant to the acquisition of Control Solutions International, Inc. (“CSI”), the purchase price includes monthly cash payments to the former owners and shareholders of CSI for performance-based compensation equal to 20% of CSI’s consolidated gross profit from the date of closing through the end of the sixteenth quarter following the date of closing not to exceed a total of $2,100. During the ~~six months~~period ended ~~November~~September 30, ~~2016~~2017 and ~~the fiscal year ended May 31,~~October 1, 2016, the Company paid ~~$69~~$68 and ~~$160,~~$104, respectively, towards the earn-out liability. ~~At November 30, 2016~~This accrual is related to the ~~remaining balance was $1,330~~matter of ~~which approximately $138 is recorded in other current liabilities and $1,192 is recorded in other long-term liabilities.~~

~~On May 22, 2014, NewCSI,~~ below. Under the ~~former owners of Control Solutions International, filed a complaint in the United States District Court for the Western District of Texas, Austin Division, against~~settlement agreement, the Company arising from the terms of the CSI Stock Purchase Agreement dated August 14, 2013. NewCSI claims that the Company breached a provision of the CSI Stock Purchase Agreement (“SPA § 2.7”) that required the Company to calculate and pay to NewCSI 50% of certain “Deferred Tax Assets” within 90 days after December 31, 2013. The Complaint sought payment of the amount allegedly owed under SPA § 2.7 and acceleration of earn-out payments provided for in the CSI Stock Purchase Agreement of $1,400, less amounts paid to date, and attorneys’ fees. The Company responded denying the material allegations and interposing numerous affirmative defenses. On October 8, 2014, NewCSI filed a Motion of Summary Judgment (the “Motion”). On March 30, 2015, a Magistrate Judge of the District Court issued a Report and Recommendation that the District Court deny the Motion. The Recommendation became a final decision on April 13, 2015.

On December 31, 2014, NewCSI filed an amended complaint to which NewCSI added an additional count asserting an “Adjustment Event” had occurred requiring an acceleration of earn-out payments provided for in the CSI Stock Purchase Agreement of $2,100, less amounts paid to date ($1,671 at December 31, 2014), should Staffing 360 or CSI “be unable, or admit in writing its inability,will continue to pay its debts as they mature.” The Company responded denying the material allegations and interposing numerous affirmative defenses, including that the earn-out liability was fully expensed at the time of the acquisition and fully accrued for on the Company’s balance sheet as part of the purchase accounting at the time of the acquisition. The final pretrial conference in this matter was held April 22, 2015. A jury was selected on May 14, 2015, and the trial was held May 18-20, 2015. On May 20, 2015, the jury rendered a verdict, finding that Staffing 360 had not complied with SPA § 2.7 and owed $154, but that NewCSI had not proven that Staffing 360 or CSI had become unable to pay debts as they came due. The Court had held that it was not a question for the jury to decide if damages for breach of SPA § 2.7 should include accelerated earn-out payments.

On June 3, 2015, NewCSI filed a Motion for Entry of Judgment as Matter of Law seeking entry of a judgment in the amount of $154, plus accelerated earn-out payments in the amount of $1,152, plus statutory interest. NewCSI did not challenge the jury verdict on the ability to pay issue. Also on June 3, 2015, Staffing 360 filed a Motion for Entry of Judgment as a Matter of Law seeking entry of judgment against NewCSI on the jury’s finding that Staffing 360 had not complied with SPA § 2.7, or, in the alternative, for a reduction of damages to $54 and to hold that NewCSI may not be awarded accelerated earn-out payments as that would result in an illegal penalty.

~~On October 21, 2015, judgment was entered in this action in favor of NewCSI and against the Company in the amount of $1,307, plus pre-judgment interest, post-judgment interest, and costs.~~

~~On January 26, 2016, the District Court set the bond in respect of the NewCSI litigation at $1,384. The Company has filed a notice of appeal~~earnout through to the ~~United States Court~~end of ~~Appeals for the Fifth Circuit seeking reversal of the judgment and posted a supersedeas bond to~~

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

stay the execution of the judgment pending appeal. On April 18, 2016, the Court granted the NewCSI shareholders’ request for payment of attorneys’ fees, but reserved judgment on the amount of fees to award pending the outcome of the Company’s appeal. As of January 2016, the NewCSI shareholders have claimed they have incurred $552 in attorney’s fees, which could increase during the pendency of the appeal. On November 3, 2016, oral arguments for the appeal were heard and now the Company is awaiting further instruction from the United States Court of Appeals for the Fifth Circuit.

We believe that the Company acted in a manner consistent with our contractual rights, and we intend to aggressively defend the Company against NewCSI. Nevertheless, there can be no assurance that the outcome of this litigation will be favorable to the Company.

~~Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc.~~

On November 13, 2015, in a separate proceeding, Staffing 360 initiated an arbitration before JAMS against three officers of Staffing 360, each a former Staffing 360 officer and employee. In its demand for arbitration and statement of claim, Staffing 360 alleged that these individuals breached their employment agreements with Staffing 360 and the fiduciary duties each owed to the Company. The three respondents responded with a counterclaim alleging wrongful termination and have moved to dismiss the arbitration, as well as moved for severance in relation to the remainder of their contracts. On July 20, 2016, the arbitrator decided in favor of both of the respondents’ motions. Further on September 21, 2016 the arbitrator rendered the final award, which was set at $1,433. The Company is awaiting the respondents’ motion to confirm the award. In addition, the Company has calculated interest and made a payment towards legal fees included in the final award amount. As of November 30, 2016 the balance is $1,591. This amount has already been fully accrued for and expensed on the Company’s balance sheet.

~~The Company’s operating segments, which are consistent with its reportable segments, are organized by geography in accordance with its internal management and reporting structure.~~

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

~~For the three and six months ended November 30, 2016 and 2015, the Company generated revenue and gross profit by segment as follows:~~

For the Three Months Ended November 30,

For the Six Months Ended November 30,

2016

2015

2016

2015

United States

$
42,050

$
36,952

$
80,583

$
70,712

United Kingdom

5,031

4,362

14,223

6,461

Canada

56

36

81

61

Total Revenue

$
47,137

$
41,350

$
94,887

$
77,234

For the Three Months Ended November 30,

For the Six Months Ended November 30,

2016

2015

2016

2015

United States

$
6,470

$
6,255

$
13,620

$
11,713

United Kingdom

1,607

1,208

2,950

2,060

Canada

20

7

16

18

Total Gross Profit

$
8,097

$
7,470

$
16,586

$
13,791

Selling, general and administrative expenses, excluding
depreciation and amortization stated below

$
(7,405
)

$
(8,334
)

$
(15,090
)

$
(14,492
)
Depreciation and amortization

(761
)

(800
)

(1,519
)

(1,537
)
Interest expense

(553
)

(755
)

(1,196
)

(1,281
)
Amortization of beneficial conversion feature

(184
)

(193
)

(369
)

(366
)
Amortization of debt discount and deferred financing costs

(424
)

(568
)

(833
)

(982
)
Other expense

(168
)

(40
)

(202
)

(10
)
Loss Before (Provision) Benefit for Income Tax

$
(1,398
)

$
(3,220
)

$
(2,623
)

$
(4,877
)

~~As of November 30, 2016 and May 31, 2016, the Company has assets in the U.S., the U.K. and Canada as follows:~~

The following unaudited pro forma consolidated results of operations have been prepared, as if the acquisition of Lighthouse Placement Services, Inc. (“Lighthouse”) and The JM Group had occurred as of June 1, 2015:

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

Pursuant to the acquisition of Lighthouse, the sellers received 62,460 shares of Common Stock. In the event that the volume weighted average price (“VWAP”) price for the 90 days prior to the anniversary of the acquisition date, is less than $10.00 per share, then the Company shall pay to the sellers an amount equal to $10.00 per share less the VWAP price multiplied by each share. On the anniversary of the acquisition date, the Company calculated the amount as $500. During the three and six months ended November 30, 2016, the Company paid $100 and $500, respectively. On September 8, 2016, the Company paid $173 in relation to the 20,000 shares issued with a corresponding increase to Goodwill of $173.

Pursuant to the acquisition of The JM Group, ~~Limited (“The JM Group”),~~ the purchase price includes a cash payment to the shareholders for performance-based compensation of (a) £850 if the gross profit for the 12 month period ending on the anniversary date of the date of completion (the “Anniversary TTM Gross Profit”) is equal to 90% or more of the gross profit for the twelve months ending October 31, 2015 (the “Completion TTM Gross Profit”); or (b) if the Anniversary TTM Gross Profit is less than 90% of the Completion TTM Gross Profit, a sum equal to £850 multiplied by the Anniversary TTM Gross Profit/Completion TTM Gross Profit. The Company recorded the maximum contingent liability amount of £850 ($1,180). At ~~November 30,~~December 31, 2016, the remaining balance was ~~$1,063~~$1,026 and iswas recorded in other current liabilities. While unpaid, the ~~liability accrues~~balance accrued interest at 10.25% ~~interest~~ per annum. The balance was paid in full in January 2017.

On May 22, 2014, NewCSI, Inc. (“NewCSI”), the former owners of Control Solutions International, filed a complaint in the United States District Court for the Western District of Texas, Austin Division, against the Company ~~will issue an aggregate of 20,000 shares of Common Stock valued at $4.70 totaling $94, if~~arising from the ~~Anniversary Gross Profit (defined) of The JM Group is 100% or more the Completion Gross Profit (defined). If the Anniversary Gross Profit is greater than or equal to 75%~~terms of the ~~Completion Gross Profit, but less than 100% of The JM Group’s Completion Gross Profit, an amount of shares equal to~~Stock Purchase Agreement dated August 14, 2013 between the ~~product of (i)~~Company and NewCSI. NewCSI claims that the ~~Anniversary Gross Profit divided by the Completion Gross Profit and (ii) 20,000. If the Anniversary Gross Profit is less than 75%~~Company breached a provision of the ~~Completion Gross Profit, no shares are due. Pursuant~~Stock Purchase Agreement (“SPA § 2.7”) that required the Company to calculate and pay to NewCSI 50% of certain “Deferred Tax Assets” within 90 days after December 31, 2013, subject to certain criteria. The Complaint sought payment of the ~~acquisition~~amount allegedly owed under SPA § 2.7 and acceleration of earn-out payments provided for in the Stock Purchase Agreement of $1,400, less amounts paid to date, and attorneys’ fees. The ~~JM Group, in addition to~~Company responded denying the ~~20,000 contingent shares discussed above,~~material allegations and interposing numerous affirmative defenses. On October 8, 2014, NewCSI filed a Motion of Summary Judgment (the “Motion”). On March 30, 2015, a Magistrate Judge of the ~~sellers received 40,000 shares of Common Stock. In the event~~District Court issued a Report and Recommendation that the ~~VWAP price~~District Court deny the Motion. The Recommendation became a final decision on April 13, 2015.

On December 31, 2014, NewCSI filed an amended complaint to which NewCSI added an additional count asserting an “Adjustment Event” had occurred requiring an acceleration of earn-out payments provided for in the ~~90 days prior~~CSI Stock Purchase Agreement of $2,100, less amounts paid as of December 31, 2014 totaling $429 (balance of $1,671 at December 31, 2014), should the Company or CSI “be unable, or admit in writing its inability, to pay its debts as they mature.” The Company responded denying the ~~anniversary~~material allegations and interposing numerous affirmative defenses, including that the earn-out liability was fully expensed at the time of the acquisition ~~date, is~~and fully accrued for on the Company’s balance sheet as part of the purchase accounting at the time of the acquisition. The final pretrial conference in this matter was held April 22, 2015. A jury was selected on May 14, 2015, and the trial was held May 18-20, 2015. On May 20, 2015, the jury rendered a verdict, finding that the Company had not complied with SPA § 2.7 and owed $154, but that NewCSI had not proven that the Company or CSI had become unable to pay debts as they came due. The Court had held that it was not a question for the jury to decide if damages for breach of SPA § 2.7 should include accelerated earn-out payments.

On June 3, 2015, NewCSI filed a Motion for Entry of Judgment as Matter of Law seeking entry of a judgment in the amount of $154, plus accelerated earn-out payments in the amount of $1,152, plus statutory interest. NewCSI did not challenge the jury verdict on the ability to pay issue. Also on June 3, 2015, the Company filed a Motion for Entry of Judgment as a Matter of Law seeking entry of judgment against NewCSI on the jury’s finding that the Company had not complied with SPA § 2.7, or, in the alternative, for a reduction of damages to $154 and to hold that NewCSI may not be awarded accelerated earn-out payments as that would result in an illegal penalty.

On October 21, 2015, judgment was entered in this action in favor of NewCSI and against the Company in the amount of $1,307, plus pre-judgment interest, post-judgment interest, and costs. On January 26, 2016, the District Court set the bond in respect of the NewCSI litigation at $1,384. The Company has filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit (“Appellate Court”) seeking reversal of the judgment and posted a supersedeas bond to stay the execution of the judgment pending appeal. On April 18, 2016, the Court granted the NewCSI shareholders’ request for payment of attorneys’ fees, but reserved judgment on the amount of fees to award pending the outcome of the Company’s appeal. As of January 2016, the NewCSI shareholders have claimed they have incurred $552 in attorney’s fees, which could increase during the pendency of the appeal. On November 3, 2016, oral arguments for the appeal were heard and on July 26, 2017, the Appellate Court affirmed the trial Court’s decision. On August 29, 2017 the surety company released the supersedeas bond to the New CSI shareholders’ counsel, which was amount was approximately $5 less than ~~$10.00 per share, then~~ the ~~Company shall pay~~judgment amount with accumulated interest. Payment of this remaining balance has been made subsequent to period end. The amount of the legal fee award remains open for determination.

On November 13, 2015, in a separate proceeding, Staffing 360 initiated an arbitration before JAMS entitled Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc., against three officers of Staffing 360, each a former Staffing 360 officer and employee. In its demand for arbitration and statement of claim, Staffing 360 alleged that these individuals breached their employment agreements with Staffing 360 and the fiduciary duties each owed to the ~~sellers an amount equal~~Company. The three respondents responded with a counterclaim alleging wrongful termination and have moved to ~~$10.00 per share less~~dismiss the ~~VWAP price multiplied by each share. As a result of the lower stock price, on November 14, 2016 the Company paid $346~~arbitration, as well as moved for severance in relation to the ~~40,000 shares issued~~remainder of their contracts. On July 20, 2016, the arbitrator decided in favor of both of the respondents’ motions. Further on September 21, 2016 the arbitrator rendered the final award, which was set at $1,433. The former officers brought an action in US District Court in New York City under the caption Dealy et al., v. Staffing 360 Solutions, Inc., requesting that the Court convert this arbitration award into a judgment. On July 11, 2017, the Court entered an order confirming the arbitrator’s award and ~~recorded an increase of $346 to Goodwill. On September 8, 2016,~~granting judgement against the Company. In August 2017, the Company paid ~~$173~~$1,582 in ~~relation to the 20,000 shares issued with a corresponding increase to Goodwill~~full satisfaction of ~~$173.~~

During the three and six months ended November 30, 2016, the Company incurred $13 and $25 in board of director fees to Dimitri Villard. Mr. Villard received 1,500 common shares valued at $3 and 1,500 shares valued at $3, respectively, for his services as a board and committee member for the six months ended November 30, 2016. During the three months ended November 30, 2016, Mr. Villard received ~~750~~ ~~common shares valued at $1 and~~ ~~750~~ ~~common shares valued at $~~1, respectively, for his service as a board and committee member. During the three and six months ended November 30, 2015, the Company incurred $13 and $25 for his services as a board and committee member. Mr. Villard received 3,000 common shares valued at $19, for his services as a board and committee member for the six months ended November 30, 2015. During the six months ended November 30, 2015, Mr. Villard received 30,000 shares valued at $150 as a bonus. At November 30, 2016, the Company has $0 ~~accrued in accounts payable and accrued expenses – related parties account.~~

~~During the three and six months ended November 30, 2016, the Company incurred $~~13 ~~and $25 in board of director fees to Jeff Grout. In addition, during the six months ended November 30, 2016, Mr. Grout received~~ ~~1,500~~ ~~common stock shares valued at $3 and~~ ~~1,500~~ ~~common stock shares valued at $~~3~~, respectively, for his service as a board and committee member. In addition, during the three months ended November 30, 2016, Mr. Grout received~~ ~~750~~ ~~common stock shares valued at $1 and~~ ~~750~~ ~~common stock shares valued at $~~1~~, respectively, for his service as a board and committee member. During the three and six months ended November 30, 2015, the Company incurred $~~13 and $25 in board of director fees and Committee fees to Jeff Grout. During the six months ended November 30, 2015, Mr. Grout 3,000 common shares valued at $19 for his service as board and committee member. My Grout also received 30,000 shares valued at $150 as a bonus during the six months ended November 30, 2015. At November 30, 2016, the Company has $0 accrued in accounts payable and accrued expenses – related parties account.

~~During the three and six months ended November 30, 2016, the Company incurred $13~~ ~~and $25~~ ~~in board of director fees to Nick Florio. In the six months ended November 30, 2016, Mr. Florio received~~ ~~1,500~~ ~~common stock shares valued at $3 and~~ ~~1,000~~ ~~common~~this matter.

The Company’s operating segments, which are consistent with its reportable segments, are organized by geography in accordance with its internal management and reporting structure.

For the period ended September 30, 2017 and October 1, 2016, the Company generated revenue and gross profit by segment as follows:

	July 2, 2017 to September 30, 2017			July 3, 2016 to October 1, 2016			January 1, 2017 to September 30, 2017			January 3, 2016 to October 1, 2016
United States	$	37,830		$	38,845		$	107,441		$	112,557
United Kingdom		12,452			7,074			25,634			22,790
Canada		63			31			99			76
Total Revenue	$	50,345		$	45,950		$	133,174		$	135,423

United States	$	7,033		$	6,815		$	19,441		$	18,842
United Kingdom		2,523			1,581			5,352			4,744
Canada		21			9			34			35
Total Gross Profit	$	9,577		$	8,405		$	24,827		$	23,621

Selling, general and administrative expenses, excluding depreciation and amortization stated below	$	(9,140	)	$	(7,795	)	$	(23,105	)	$	(24,102	)
Depreciation and amortization		(790	)		(727	)		(2,310	)		(2,059	)
Interest expense		(761	)		(615	)		(1,843	)		(2,007	)
Amortization of beneficial conversion feature		—			(183	)		(184	)		(550	)
Amortization of debt discount and deferred financing costs		(1,213	)		(401	)		(2,387	)		(1,310	)
Loss on extinguishment of debt, net		(2,819	)		—			(4,108	)		—
Gain on settlement of warrants		—			—			-			485
Other income (expense)		(10	)		(35	)		(31	)		(38	)
Loss Before Provision for Income Tax	$	(5,156	)	$	(1,351	)	$	(9,141	)	$	(5,960	)

As of September 30, 2017, and December 31, 2016, the Company has assets in the U.S., the U.K. and Canada as follows:

Based upon a preliminary valuation, the Company recorded the following identifiable intangible assets in connection with the acquisition of FirstPro and CBS Butler:

In connection with the acquisition of CBS Butler and FirstPro, the Company identified recognized intangible assets of $5,746 and $3,364, respectively, representing trade names, customer relationships, and non-compete agreements. These assets are being amortized on a straight line basis over their weighted average estimated useful life of 10 years. The Company acquired a total of $8,527 in receivables and fair value of these receivables equals the contract value.

The following unaudited pro forma consolidated results of operation have been prepared, as if the acquisition of FirstPro and CBS Butler had occurred as of January 1, 2016:

The Company recorded $6,768 in revenues that came from the acquisitions completed during the quarter. The Company recorded a total of $384 in third party expenses associated with consummating the two acquisitions, which are included in Selling, general and administrative expenses, excluding depreciation and amortization stated below on the Condensed Consolidated Statement of Operations.

During the period from July 2, 2017 to September 30, 2017 and July 3, 2016 to October 1, 2016, the Company incurred $19 and $13, respectively, in board of director fees to Dimitri Villard. During the period from January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, the Company incurred $50 and $38, respectively, in board of director fees to Dimitri Villard. During the period from January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, Mr. Villard also received 8,500 and 6,000 shares of common stock ~~shares~~ valued ~~a $~~2at $6 and $15, respectively for his services as a board and committee member. InDuring the ~~three months~~period ended ~~November~~September 30, ~~2016,~~2017, Mr. ~~Florio~~Villard received ~~750~~ ~~common stock~~66,000 shares valued at ~~$1 and~~ ~~750~~ ~~common stock shares valued a $~~1 ~~for his services~~$54 as a board and committee member. At the request of Mr. Florio, all cash payments, common stock issuances and stock option issuances have been made in the name of Citrin Cooperman & Company, LLP. At November 30, 2016, thebonus. The Company has ~~accrued~~ $0 in accrued in accounts payable and accrued expenses – related parties ~~account.~~ account, as of September 30, 2017.

During the ~~six months ended November~~period from July 2, 2017 to September 30, ~~2015,~~2017 and July 3, 2016 to October 1, 2016, the Company incurred ~~$25~~$19 and $13, respectively, in board of director fees to Jeff Grout. During the period from January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, the Company incurred $50 and $38, respectively, in board of director fees to Jeff Grout. During the period from January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, Mr. Grout also received 8,500 and 6,000 shares of common stock valued at $6 and $15, respectively, for his service as a board and committee member. Mr. Grout also received 66,000 shares valued at $54 as a bonus during the period ended September 30, 2017. The Company has $0 balance in accrued in accounts payable and accrued expenses – related parties account as of September 30, 2017.

During the period from July 2, 2017 to September 30, 2017 and July 3, 2016 to October 1, 2016, the Company incurred $19 and $13, respectively, in board of director fees to Nick Florio. ~~In addition, for~~During the ~~six months ended November~~period from January 1, 2017 to September 30, ~~2015,~~2017 and January 3, 2016 to October 1, 2016, the Company incurred $50 and $38, respectively, in board of director fees to Nick Florio. During the period from January 1, 2017 to September 30, 2017 and January 3, 2016 to October 1, 2016, Mr. Florio also received ~~2,500~~9,500 and 5,000 shares of common stock ~~shares~~ valued at ~~$16~~$7 and $12, respectively for his services as a board and committee member. In addition, ~~on October~~during the period ended September 30, ~~2015,~~2017, Mr. Florio received ~~30,000~~66,000 shares valued at ~~$150~~$54 as a bonus. At the request of Mr. Florio, all cash payments, common stock issuances and stock option issuances have been made in the name of Citrin Cooperman & Company, LLP. ~~At November 30, 2015, the~~The Company has ~~accrued~~ $0 balance in ~~accounts payable and accrued expenses – related parties account.~~

~~At November 30, 2015, the Company had $50~~ accrued in accounts payable and accrued expenses – related parties account ~~for advisory services provided by Trilogy Capital Partners, Inc. (“Trilogy”). The Company’s former employee, Vice Chairman, President and Secretary, is the majority owner~~as of Trilogy. Effective December 31, 2014, he voluntarily resigned from his positions with the Company and subsidiaries. The Advisory Agreement terminated by December 31, 2015 and the Company did not renew this advisory agreement.September 30, 2017.

Where applicable, all material subsequent events have been disclosed in their respective footnotes.

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 ~~statement,~~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 Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

~~Staffing 360 Solutions, Inc. (“we,” “us,” “our,” “Staffing 360,” or the “Company”), trading symbol “STAF”, is incorporated in the State of Nevada.~~ 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, ~~United States (“~~U.S.”) and ~~United Kingdom (“~~U.K.”) based staffing companies. Our targeted consolidation model is focused specifically on the accounting and finance, information technology (“IT”), engineering, administration (the “Professional Sector”) and light industrial (the “Light Industrial Sector”) disciplines.

Our business plan is to expand and grow through ~~multiple acquisitions,~~acquisition, which may require additional financing, while continuing to supplement this with organic growth. The Company ~~excluding discontinued operations,~~ generated revenue of ~~$41,198, $128,829~~$109.4 million, $165.6 million, $128.8 million and ~~$165,552~~$41.2 million for the transition period ended December 31, 2016 (“Transition Period”) and fiscal years ended May ~~2014,~~31, 2016, 2015 and ~~2016,~~2014, respectively. This growth has been achieved primarily through acquisitions, while ~~existing~~ operations ~~continue~~continued to grow ~~organically.~~organically 11.1% during the Transition Period and, on average, grew 8.8% between the fiscal years ended May 31, 2014 and 2016. Through September 30, 2017, revenue has declined 1.7% as compared to the year to date ended October 1, 2016.

~~We are a high-growth international staffing company engaged in the acquisition of U.S. and U.K. based staffing companies.~~ As part of our consolidation model, we pursue ~~a broad spectrum of~~ staffing companies supporting primarily the ~~accounting~~Professional and ~~finance, IT, engineering, administration and light industrial disciplines.~~Light Industrial Sectors. 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.

18On September 15, 2017, Staffing 360 Georgia, LLC (“Staffing Georgia”), a wholly-owned subsidiary of the Company entered into an asset purchase agreement with Firstpro Inc. (“FPI”), Firstpro Georgia, LLC (“FPL”), and certain individuals, pursuant to which the FPI and FPL sold substantially all of their assets to Staffing Georgia (“Firstpro Acquisition”). The purchase price in connection with the Staffing Georgia, was $8,000, of which, (a) $4,500 was paid at closing, (b) $825 is payable in quarterly installments of $75 beginning on October 1, 2017, and (c) $2,675 is payable annually in three equal installments beginning on September 15, 2018.

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

To finance the above transactions, the Company entered into an agreement with Jackson Investment Group, LLC (“Jackson”) on September 15, 2017. The Company, as borrower, and certain domestic subsidiaries of the Company, as guarantors, entered into an amended and restated note purchase agreement with Jackson, as lender (the “A&R Note Purchase Agreement”), pursuant to which Jackson made a senior debt investment of $40,000 in the Company in exchange for a senior secured note in the principal amount of $40,000 (the “Jackson Note”). The proceeds of the sale of the secured note were used to (i) repay the existing subordinated notes previously issued to Jackson in the aggregate principal amount of $11,165, (ii) to fund the upfront cash portion of the purchase price consideration of the Firstpro Acquisition and the CBS Butler Acquisition, (iii) to repay almost all other outstanding indebtedness of the Company and (iv) general working capital purposes. The maturity date of the Jackson Note is September 15, 2020. The Jackson Note will accrue interest at 12% per annum, due quarterly on January 1, April 1, July 1 and October 1 in each year, with the first such payment due on January 1, 2018. Interest on any overdue payment of principal or interest due under the Jackson Note will accrue at a rate per annum that is 5% in excess of the rate of interest otherwise payable thereunder. The Company may prepay the amounts due on the Jackson Note in whole or in part from time to time, without penalty or premium, subject to the conditions set forth in the A&R Note Purchase Agreement, and such prepayments, depending on the timing of the prepayments, may result in a discount on the principal amount to be prepaid as set forth in the A&R Note Purchase Agreement.

The Jackson Note resulted in the extinguishment of the old notes of $11,165 and recording of the new debt of $40,000 and debt issue costs of $3,426. The Company recorded a $2,819 loss upon extinguishment.

For the ~~three months ended November~~period July 2, 2017 to September 30, ~~2016~~2017 as compared to the ~~three months ended November 30, 2015~~

~~The following table sets forth the results of our operations for the three months ended November,~~period July 3, 2016 ~~and 2015 indicated as a percentage of revenue:~~to October 1, 2016

	For the Three Months Ended November 30,
	2016			% of Revenue			2015			% of Revenue			Growth			July 2, 2017 to September 30, 2017			% of Revenue			July 3, 2016 to October 1, 2016			% of Revenue			Growth
Revenue	$	47,137			100.0	%	$	41,350			100.0	%		14.0	%	$	50,345			100.0	%	$	45,950			100.0	%		9.6	%
Direct cost of revenue		39,040			82.8	%		33,880			81.9	%		15.2	%		40,768			81.0	%		37,545			81.7	%		8.6	%
Gross profit		8,097			17.2	%		7,470			18.1	%		8.4	%		9,577			19.0	%		8,405			18.3	%		13.9	%
Operating expenses		8,166			17.3	%		9,134			22.1	%		(10.6	)%		9,930			19.7	%		8,522			18.5	%		16.5	%
Loss from operations		(69	)		(0.1	)%		(1,664	)		(4.0	)%		(95.9	)%		(353	)		(0.7	)%		(117	)		(0.3	)%		201.7	%
Other expenses		(1,329	)		(2.8	)%		(1,556	)		(3.8	)%		(14.6	)%		(4,803	)		(9.5	)%		(1,234	)		(2.7	)%		289.2	%
(Provision) benefit for income taxes		(28	)		(0.1	)%		42			0.1	%		(166.7	)%		(206	)		(0.4	)%		375			0.8	%		(154.9	)%
Net loss	$	(1,426	)		(3.0	)%	$	(3,178	)		(7.7	)%		(55.1	)%	$	(5,362	)		(10.7	)%	$	(976	)		(2.1	)%		449.4	%

For the ~~three months ended November~~period July 2, 2017 to September 30, ~~2016,~~2017, revenue grew ~~14.0%~~9.6% to ~~$47,137~~$50,345 as compared to ~~$41,350~~$45,950 for the ~~three months ended November 30, 2015.~~period July 3, 2016 to October 1, 2016. Of that growth, ~~7.2% is organic, 7.5% is~~$6,768 came from the ~~acquisition~~acquisitions completed during the quarter, partially offset by an organic decline of ~~The JM Group,~~$2,379 primarily from exiting lower margin revenue. Foreign currency translation impact was not material.

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

(All amounts in thousands, except share, par values and ~~(0.7%) from foreign currency translation.~~stated values)

Direct cost of services includes the variable cost of labor and various non-variable costs (e.g., workman’s compensation insurance) relating to employees (temporary and permanent) as well as sub-contractors and consultants. For the ~~three months ended November~~period July 2, 2017 to September 30, 2017 and the period July 3, 2016 ~~and 2015,~~to October 1, 2016, direct cost of revenue was ~~$39,040~~$40,768 and ~~$33,880,~~$37,545, respectively, or ~~growth~~an increase of ~~15.2%~~8.6%, compared to ~~growth~~an increase in revenue of ~~14.0%~~9.6%, and is further discussed in the gross profit and gross margin comments below.

~~Our gross~~Gross profit for the ~~three months ended November~~period July 2, 2017 to September 30, 2017 and the period July 3, 2016 to October 1, 2016 was $9,577 and ~~2015 was $8,097 and $7,470,~~$8,405, respectively, representing gross margin of ~~17.2%~~19.0% and ~~18.1%~~18.3% for each period, respectively. ~~While business mix changed during the course of the year with the addition of~~ The ~~JM Group (at generally lower~~increase in margin is primarily attributable to stronger margins ~~than the Company’s average) underlying contract margins were down approximately 220 basis points on the prior year in the Professional segment, and grew by 60 basis points~~ in the Light Industrial ~~segment.~~segment, higher margin revenue from the businesses acquired during the quarter, as well as lower workmans’ compensation insurance.

For the ~~three months ended November~~period July 2, 2017 to September 30, ~~2016,~~2017, operating expenses amounted to ~~$8,166~~$9,930 as compared to ~~$9,134~~$8,522 for the ~~three months ended November 30, 2015, a decrease~~period July 3, 2016 to October 1, 2016, an increase of ~~$968 or 10.6%~~16.5%. ~~In addition to total operating expenses decreasing on an absolute basis, as~~As a percentage of revenue, operating expenses ~~improved~~increased from ~~22.1% for the three months ended November 30, 2015~~18.5% of revenue to ~~17.3% for the three months ended November 30, 2016. The decrease in our operating expenses for the three months ended November 30, 2016 as compared~~19.7% of revenue, mainly due to the ~~three months ended November 30, 2015 was primarily attributable to~~inclusion of the two acquired businesses for a ~~decrease in legal~~portion of the quarter, transaction-related costs of completing the acquisitions and ~~other professional expenses associated with the Company’s legal proceedings and various financing transactions, as well as a reduction~~an increase in non-cash compensation expense.

While cash operating expenses, defined as Total operating expenses excluding Depreciation and amortization as well as other non-cash charges, grew on an absolute basis from $6,970 to $7,178 for the three months ended November 30, 2015 and 2016, respectively, primarily from the acquisition from the JM Group, this represents a significant decline as a percentage of revenue from 16.9% to 15.2% for the same periods. As we continue to grow revenue, and further leverage our existing support functions, we expect operating expenses as a percentage of revenue to continue to trend lower.

For the ~~three months ended November~~periods July 2, 2017 to September 30, 2017 and July 3, 2016 ~~and 2015,~~to October 1, 2016, Other Expenses primarily includes interest and financing expense of ~~$1,161~~$4,793 (of which $2,819 relates to a Loss on extinguishment of debt and ~~$1,516, respectively, other expense (income)~~$588 for write off of ~~$164~~deferred financing fees, both relating to the re-financing and ~~$(5), respectively~~retirement of notes) and ~~other restructuring costs totaling $4 and $45,~~

$1,199, respectively. ~~The restructuring charges in the second quarter of 2017 were residual charges as a result of the Company’s implementation of its Restructuring Plan during fiscal 2015.~~

For the ~~six months ended November~~period January 1, 2017 to September 30, ~~2016~~2017 as compared to the ~~six months ended November 30, 2015~~

~~The following table sets forth the results of our operations for the six months ended November,~~period January 3, 2016 ~~and 2015 indicated as a percentage of revenue:~~to October 1, 2016

	For the Six Months Ended November 30,
	2016			% of Revenue			2015			% of Revenue			Growth			January 1, 2017 to September 30, 2017			% of Revenue			January 3, 2016 to October 1, 2016			% of Revenue			Growth
Revenue	$	94,887			100.0	%	$	77,234			100.0	%		22.9	%	$	133,174			100.0	%	$	135,423			100.0	%		(1.7	)%
Direct cost of revenue		78,301			82.5	%		63,443			82.1	%		23.4	%		108,347			81.4	%		111,802			82.6	%		(3.1	)%
Gross profit		16,586			17.5	%		13,791			17.9	%		20.3	%		24,827			18.6	%		23,621			17.4	%		5.1	%
Operating expenses		16,609			17.5	%		16,029			20.8	%		3.6	%		25,415			19.1	%		26,161			19.3	%		(2.9	)%
Loss from operations		(23	)		(0.0	)%		(2,238	)		(2.9	)%		(99.0	)%		(588	)		(0.4	)%		(2,540	)		(1.9	)%		(76.9	)%
Other expenses		(2,600	)		(2.7	)%		(2,639	)		(3.4	)%		(1.5	)%		(8,553	)		(6.4	)%		(3,420	)		(2.5	)%		150.1	%
(Provision) benefit for income taxes		(97	)		(0.1	)%		7			0.0	%		(1485.7	)%		(213	)		(0.2	)%		(260	)		(0.2	)%		(18.1	)%
Net loss	$	(2,720	)		(2.9	)%	$	(4,870	)		(6.3	)%		(44.1	)%	$	(9,354	)		(7.0	)%	$	(6,220	)		(4.6	)%		50.4	%

For the ~~six months ended November~~period January 1, 2017 to September 30, ~~2016,~~2017, revenue ~~grew 22.9%~~fell 1.7% to ~~$94,887~~$133,174 as compared to ~~$77,234~~$135,423 for the ~~six months ended November 30, 2015.~~period January 3, 2016 to October 1, 2016. Of that ~~growth, 10.7% is~~decline, 1.3% ($1,825) was from foreign currency translation, organic ~~12.9% is~~decline of $7,190, partially offset by $6,768 of revenue from the acquisitions completed during the quarter. The organic decline was largely due to the exiting of ~~Lighthouse~~lower margin revenue and ~~The JM Group, and (0.7%) from foreign currency translation.~~

Direct cost of services includes the variable cost of labor and various non-variable costs (e.g., workmans’ compensation insurance) relating to employees (temporary and permanent) as well as sub-contractors and consultants. For the ~~six months ended November~~period January 1, 2017 to September 30, 2017 and the period January 3, 2016 ~~and 2015,~~to October 1, 2016, direct cost of revenue was ~~$94,887~~$108,347 and ~~$77,234,~~ $111,802,

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

respectively, or ~~growth~~a decline of ~~23.4%~~3.1%, compared to ~~growth~~a decline in revenue of ~~22.9%~~1.7%, and is further discussed in the gross profit and gross margin comments below.

~~Our gross~~Gross profit for the ~~six months ended November~~period January 1, 2017 to September 30, 2017 and the period January 3, 2016 to October 1, 2016 was $24,827 and ~~2015 was $16,586 and $13,791,~~$23,621, respectively, representing gross margin of ~~17.5%~~18.6% and ~~17.9%~~17.4% for each period, respectively. The ~~decrease~~increase in margin is primarily attributable to ~~the acquisition of The JM Group and strong organic growth~~stronger margins in the Light Industrial segment, ~~(both at~~higher margin revenue from the businesses acquired during the quarter, as well as lower ~~margins than the Company’s average).~~

For the ~~six months ended November~~period January 1, 2017 to September 30, ~~2016,~~2017, operating expenses amounted to ~~$16,609~~$25,415 as compared to ~~$16,029~~$26,161 for the ~~six months ended November 30, 2015, an increase~~period January 3, 2016 to October 1, 2016, a decrease of ~~$580 or 3.6%~~2.9%. Total operating expenses increased on an absolute basis, mainly resulting from the acquisition of Lighthouse and The JM Group, partially offset by decreases in professional fees and non-cash compensation expenses. However, asAs a percentage of revenue, ~~these amounts were an improvement from 20.8% for the six months ended November 30, 2015 to 17.5% for the six months ended November 30, 2016.~~

~~While cash~~ operating expenses ~~defined as Total operating expenses excluding Depreciation and amortization as well as other non-cash charges, grew on an absolute basis~~declined from $12,906 to $14,698 for the six months ended November 30, 2015 and 2016, respectively, this represents a significant decline as a percentage of revenue from 16.7% to 15.5% for the same periods. As we continue to grow revenue, and further leverage our existing support functions, we expect operating expenses as a percentage19.3% of revenue to ~~continue~~19.1% of revenue. The dollar increase is attributable to ~~trend lower.~~the inclusion of the two acquired businesses for a portion of the period, transaction-related costs of completing the acquisitions, an increase in non-cash compensation, partially offset by lower compensation expenses on lower revenue and lower professional fees.

For the ~~six months ended November 30,~~periods January 1, 2017 to July 2, 2017 and January 3, 2016 ~~and 2015,~~to October 1, 2016, Other Expenses primarily includes interest and financing expense of ~~$2,396~~$8,522 (of which $4,187 relates to a Loss on extinguishment of debt and ~~$2,629, respectively, other expense (income)~~$588 for write off of ~~$192~~deferred financing fees, both relating to the re-financing and ~~$(40), respectively~~retirement of notes) and ~~other restructuring costs totaling $10 and $50,~~

$3,867, respectively. ~~The restructuring charges~~Other Income of $(485) in ~~first quarter 2017 were residual charges as~~the period January 3, 2016 to October 1, 2016 primarily related to a ~~result~~gain on the conversion of ~~the Company’s implementation of its Restructuring Plan during fiscal 2015.~~warrants.

To supplement our ~~condensed~~ consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we ~~may~~ 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.

Revenue and Gross Profit by ~~Service Segment~~Sector We use ~~Revenue and Gross Profit by Service Segment~~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 and believe this measure is useful to investors for the same purpose.~~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 ~~measure~~KPI to benchmark the Company against the industry.

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

The following table details Revenue and Gross Profit by ~~Service Segment~~Sector for the ~~three months ended November~~period July 2, 2017 to September 30, 2017 as compared to the period July 3, 2016 to October 1, 2016, and ~~2015, respectively:~~for the period January 1, 2017 to September 30, 2017 as compared to the period January 3, 2016 to October 1, 2016:

	For the Three Months Ended November 30,
	2016						2015
				Mix						Mix			July 2, 2017 to September 30, 2017			Mix		July 3, 2016 to October 1, 2016			Mix		January 1, 2017 to September 30, 2017			Mix		January 3, 2016 to October 1, 2016			Mix
Light Industrial	$	27,346			58	%	$	23,749			57	%	$	25,635			51%	$	25,148			55%	$	71,354			54%	$	70,036			52%
Professional		19,791			42	%		17,601			43	%		24,710			49%		20,802			45%		61,820			46%		65,387			48%
Total Service Revenue	$	47,137					$	41,350					$	50,345				$	45,950				$	133,174				$	135,423

Light Industrial	$	4,309			53	%	$	3,622			48	%		4,295			45%		3,835			46%		11,648			47%		10,291			44%
Professional		3,788			47	%		3,848			52	%		5,282			55%		4,570			54%		13,179			53%		13,330			56%
Total Gross Profit	$	8,097					$	7,470					$	9,577				$	8,405				$	24,827				$	23,621

Light Industrial		15.8	%					15.3	%					16.8	%				15.2	%				16.3	%				14.7	%
Professional		19.1	%					21.9	%					21.4	%				22.0	%				21.3	%				20.4	%
Total Gross Margin		17.2	%					18.1	%					19.0	%				18.3	%				18.6	%				17.4	%

For the period July 2, 2017 to September 30, 2017 as compared to the period July 3, 2016 to October 1, 2016:

~~The increase~~While growth in the Light Industrial Sector continued, the decrease in Light Industrial revenue as a percentage of total revenue from ~~57%~~55% for the ~~three months ended November 30, 2015~~period July 3, 2016 to ~~58%~~October 1, 2016 to 51% for the ~~three months ended November~~period July 2, 2017 to September 30, ~~2016~~2017, was ~~primarily~~ attributable to ~~strong organic growth in that segment, partially offset by the acquisition of The JM Group, as well as organic~~ growth in the ~~existing~~ Professional ~~businesses. While~~segment, which was driven by the revenue from the acquisitions completed during the quarter. Professional revenue as a percentage of total revenue ~~declined~~increased from ~~43%~~45% for the ~~three months ended November 30, 2015~~period July 3, 2016 to ~~42%~~October 1, 2016 to 49% for the ~~three months ended November~~period July 2, 2017 to September 30, ~~2016, revenue in this segment for the three months ended November 30, 2016 increased by 12.4% compared to the three months ended November 30, 2015.~~

Gross margin for the Light Industrial segment increased from ~~15.3%~~15.2% for the ~~three months ended November 30, 2015~~period July 3, 2016 to ~~15.8%~~October 1, 2016 to 16.8% for the ~~three months ended November~~period July 2, 2017 to September 30, ~~2016.~~2017. The increase was attributable to changes in client mix and pricing, as well as savings on ~~workers’~~workmans’ compensation insurance costs.

Gross margin for the Professional segment decreased from ~~21.9%~~22.0% in the period July 3, 2016 to October 1, 2016 to 21.4% for the ~~three months ended November~~period July 2, 2017 to September 30, ~~2015 to 19.1% for the three months ended November 30, 2016.~~2017. The ~~decrease~~increase was primarily attributable to ~~the acquisition~~a higher mix of ~~The JM Group, which has~~revenue at lower margins, ~~than much of~~including the ~~U.S. based portion of~~two newly acquired businesses.

For the ~~Professional staffing segment. Additionally, permanent placement revenue~~period January 1, 2017 to September 30, 2017 as ~~a percentage of Professional segment revenue fell from 4.9% for~~compared to the ~~three months ended November 30, 2015~~period January 3, 2016 to 3.8% for the three months ended November 30, 2016 as contract revenue grew. Contract gross margins for the three months ended November 30, 2016 for most businesses in the Professional segment were approximately in line with gross margins for the three months ended November 30, 2015.

~~The following table details Revenue and Gross Profit by Service Segment for the six months ended November 30, 2016 and 2015, respectively:~~

The increase in Professional revenue as a percentage of total revenue from 42% for the six months ended November 30, 2015 to 45% for the six months ended November 30, 2016 was primarily attributable to the acquisition of Lighthouse and The JM Group, as well as organic growth in the existing Professional businesses. While Light Industrial revenue as a percentage of total revenue ~~declined~~ from ~~58%~~52% for the ~~six months ended November 30, 2015~~period January 3, 2016 to ~~55%~~October 1, 2016 to 54% for the ~~six months ended November~~period January 1, 2017 to September 30, ~~2016, revenue in this segment for the six months ended November 30, 2016 increased by 15% compared to the six months ended November 30, 2015, with the increase attributable solely to organic growth.~~

~~Gross margin for the Professional segment decreased from 22.2% for the six months ended November 30, 2015 to 20.0% for the six months ended November 30, 2016. The decrease~~2017 was primarily attributable to ~~the acquisition of The JM Group, which has lower margins than much of the US based portion of the~~growth in that segment (up 1.8%) compared to Total Service Revenue (down 1.7%). Professional ~~staffing segment. Additionally, permanent placement~~ revenue as a percentage of ~~Professional segment~~total revenue ~~fell~~declined from ~~5.4%~~48% for the ~~six months ended November 30, 2015~~period January 3, 2016 to ~~3.5%~~October 1, 2016 to 46% for the ~~six months ended November~~period January 1, 2017 to September 30, ~~2016~~2017, as ~~contract~~a percentage of total revenue. Of the decline in this segment, $1,825 was currency related, with the remaining $1,742 resulting from the decline in some business units as discussed above, partially offset by revenue ~~grew. Contract gross margins for~~from the ~~six months ended November 30, 2016 for most businesses in the Professional segment were approximately in line with gross margins for the six months ended November 30, 2015.~~

Gross margin for the Light Industrial segment increased from ~~14.8%~~14.7% for the ~~six months ended November 30, 2015~~period January 3, 2016 to ~~15.4%~~October 1, 2016 to 16.3% for the ~~six months ended November~~period January 1, 2017 to September 30, ~~2016.~~2017. The increase was attributable to changes in client mix and pricing, as well as ~~savings on workers’~~lower workmans’ compensation insurance and payroll costs.

Gross margin for the Professional segment increased from 20.4% in the period January 3, 2016 to October 1, 2016 to 21.3% for the period January 1, 2017 to September 30, 2017. The increase was primarily attributable to mix of revenue to higher margin business. Higher margin revenue from the acquisitions did not have a material impact.

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

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 (income) expense, net, in operating income (loss); amortization and impairment of identifiable intangible assets; impairment of goodwill; depreciation; operational restructuring and other charges; other income (expense), net, below operating income (loss); non-cash expenses 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 ~~believe~~use this measure ~~is helpful to investors~~ because we believe it provides a more meaningful understanding of the profit and cash flow generation of the Company.

	July 2, 2017 to September 30, 2017			July 3, 2016 to October 1, 2016			January 1, 2017 to September 30, 2017			January 3, 2016 to October 1, 2016
Net loss attributable to common stock	$	(5,412	)	$	(1,026	)	$	(9,504	)	$	(6,407	)

Interest expense		761			615			1,843			2,007
Provision for (benefit from) income taxes		206			(375	)		213			260
Depreciation and amortization (1)		2,003			1,311			4,881			3,919
EBITDA	$	(2,442	)	$	525		$	(2,567	)	$	(221	)

Acquisition, capital raising and other non- recurring expenses (2)		934			872			1,194			3,572
Other non-cash charges (3)		677			164			1,685			790
Loss on extinguishment of debt, net		2,819			—			4,108			—
Restructuring charges		5			6			7			16
Modification expense		11			—			37			31
Dividends - Series A preferred stock		50			50			150			150
Other income / (expense)		(6	)		29			(13	)		(494	)
Net income attributable to non-controlling interest		—			—			—			37
Adjusted EBITDA	$	2,048		$	1,646		$	4,601		$	3,881

Trailing Twelve Months ("TTM") Adjusted EBITDA	$	5,794		$	5,362		$	5,794		$	5,362

Pro Forma TTM Adjusted EBITDA (4)	$	11,034		N/A			$	11,034		N/A

Gross Profit	$	9,577		$	8,405		$	24,827		$	23,621

Adjusted operating expenses (5)	$	7,529		$	6,759		$	20,226		$	19,740
Adjusted operating expenses percentage of gross profit		78.6	%		80.4	%		81.5	%		83.6	%

For all periods presented, the growth in Adjusted EBITDA is primarily attributable to focused management of Adjusted ~~EBITDA for the three months ended November 30, 2016 and 2015 respectively, to its most directly comparable GAAP measure:~~

~~(2)~~ ~~Acquisition, capital raising and other non-recurring expenses~~ ~~primarily relate to capital raising expenses, acquisition and integration~~operating expenses and ~~legal expenses incurred in relation to matters outside the ordinary course of business.~~

~~(3)~~ ~~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.~~

Adjusted EBITDA for the three months ended November 30, 2016 of $1,393, grew by 10.1% from $1,265 for the three months ended November 30, 2015. For the trailing 12-months (“TTM”) ended November 30, 2016, AEBITDA of $5,379, grew over 120% from Adjusted EBITDA of $2,435 for the TTM ended November 30, 2015. This growth is attributable to earningscontribution from the ~~acquisition of Lighthouse~~acquisitions completed during the quarter.

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

(All amounts in thousands, except share, par values and ~~The JM Group, as well as flow through of revenue arising from organic growth.~~

~~The following table provides a reconciliation of Adjusted EBITDA for the six months ended November 30, 2016 and 2015 respectively, to its most directly comparable GAAP measure:~~

~~(2)~~ ~~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.~~

Adjusted EBITDA for the six months ended November 30, 2016 of $3,151, grew by 67.3% from $1,883 for the six months ended November 30, 2015. For the trailing 12-months (“TTM”) ended November 30, 2016, AEBITDA of $5,379, grew over 120% from AEBITDA of $2,435 for the TTM ended November 30, 2015. This growth is attributable to earnings from the acquisition of Lighthouse and The JM Group, as well as flow through of revenue arising from organic growth.

Operating Leverage ~~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 (“TTM”).~~basis. We use this KPI because we believe ~~Operating Leverage~~it provides ~~investors with~~ a measure of the Company’s efficiency for converting incremental gross profit into ~~incremental~~ Adjusted EBITDA.

~~The following table details the Company’s Operating Leverage for the twelve months ended November 30, 2016 and 2015, respectively:~~

~~Operating leverage in TTM November 30, 2015 is unusually high due to the reversal from negative AEBITDA – TTM (prior period) to significant positive AEBITDA – TTM (current period).~~

Leverage Ratio Calculated as Total Long-Term Debt, Net, gross of any ~~debt discount and deferred financing costs,~~Original Issue Discount, plus ~~earnouts,~~Earnouts, less ~~surety bonds for such earnouts,~~assets held against Long Term Debt, divided by Adjusted EBITDA for the trailing 12-months. We ~~believe~~use this ~~measure is helpful to investors~~KPI as an indicator of the Company’s ability to service its ~~debt.~~debt prospectively.

~~The following table details the Company’s Leverage Ratio as of November 30, 2016 and 2015, respectively:~~

Operating Cash Flow Including Proceeds from Accounts Receivable Financing calculated as net cash (used in) provided by operating activities plus net proceeds from accounts receivable financing. Because much of the Company’s ~~contractor~~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 ~~contractor~~temporary payroll. As such, we believe this measure is helpful to investors as an indicator of the Company’s underlying operating cash flow.

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

During the ~~operating cash flow including~~period January 1, 2017 to September 30, 2017, the Company used approximately $3,500 of the proceeds from Jackson Investment to pay accounts ~~receivable financing for~~payable and accrued expenses. In addition, cash provided by operating activities includes the ~~six months ending November 30, 2016 and 2015, respectively:~~cash paid of $1,582 to settle the Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc. arbitration.

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 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 ~~from advances from our majority shareholders/officers/directors.~~

Assales of November 30, 2016, the Company had a working capital deficiency of $(14,467), an accumulated deficit of $(46,941), for the six months ended November 30, 2016 a net loss of $(2,720), and, as of the date these unaudited condensed consolidated financial statements are issued, the Company has approximately $5,342 associated with debt and other amortizing obligations, due in the next 12 months. The Company’s projected cash flows from operations for the same period are not sufficient to address these obligations in the normal course of business. Management’s plan to continue as a going concern includes raising capital in the form of debt or equity, increased gross profit from organic revenue growth and managing and reducing operating and overhead costs. As a result, the Company will need to seek additional funding through capital raises to meet these short term obligations. In November of 2016, the Company engaged Source Capital Group, Inc.(“Source Capital”) to act as a placement agent to conduct a general solicitation private placement offering solely to accredited investors under Rule 506(c) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act. The Company is still in discussions with Source Capital regarding funding through this private placement offering. The private placement expires on January 31, 2017. ~~In addition, the Company may seek to raise additional capital through private investments. Management continues to have discussions with other potential investors.~~

Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon the management’s ability to successfully secure additional sources of financing and increased profitable operations. Management also cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for the Company to raise additional capital on an immediate basis. However, based upon an evaluation of the Company’s continued growth trajectory, past success in raising capital and meeting its obligations, as well as its plans for raising capital discussed above, management believes that the Company is a going concern.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:

25Increases in advertising, public relations and sales promotions for existing and new brands as we expand within existing markets or enter new markets,

•

~~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.

If we are able to secure potential future financings, we believe that we will be able to implement our business plan and pursue the acquisition of a broad spectrum of staffing agencies primarily in the accounting and finance, IT, engineering, administration and light industrial disciplines. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a potential downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

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 ~~to continue to~~could significantly ~~contribute to~~increase our legal and financial compliance costs and ~~to make some activities more time consuming and costly.~~increase the use of resources.

OnAs of September ~~22, 2016,~~30, 2017, the Company had a working capital deficiency of $6,490, an accumulated deficit of $57,351, for the period January 1, 2017 to September 30, 2017, a net loss of $9,354, and, ~~Discover Growth Fund have agreed that a Trigger Event,~~ as ~~defined~~of the date these unaudited condensed consolidated financial statements are issued, the Company has approximately $1,778 associated with debt and other amortizing obligations, due in the Stock Purchase Agreement between Staffing 360 Solutions, Inc. and Discover Growth Fund dated June 24, 2016, filed as an exhibit to our Current Report on Form 8-K on June 27, 2016 (the “Series D Purchase Agreement”), has occurrednext 12 months.

The amounts due discussed above, are a subset of the Company’s total gross debt obligations as of September ~~22,~~30, 2017 of $40,377, as compared with $9,010 as of the Company’s most recent period ended December 31, 2016. ~~A Trigger Event gives~~Those balances are comprised of various instruments that can be summarized as follows:

	September 30,		December 31,
	2017		2016
Bonds	$	—	$	50
Convertible Notes		—		5,632
Promissory Notes		—		441
Term Loans		40,377		2,887
Total Long-Term Debt	$	40,377	$	9,010

In January 2017, the ~~holders~~Company entered into an amendment agreement in which, the parties refinanced an aggregate amount of $2,708 million of convertible notes and extended all amortization payments (collectively “the Amendment”) to October 1, 2018. The new gross balance of the remaining note was $3,126. The Amendment had an 8% interest rate, with no interest payments due until October 1, 2017, payable quarterly thereafter, and an overall term of 21 months with principal due at maturity. The Amendment was convertible into shares of common stock at a price of $3.00 per share at holder’s election, and the holder has agreed to eliminate the 20% pre-payment penalty for an early redemption. In connection with the refinancing, the Company issued the holder 600,000 shares of common stock. Later in January 2017, the amended note was paid in full.

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)

In addition, in January 2017, the Company closed a financing with Jackson in the amount of $7,400 million. The financing is a term loan, maturing in July 2018 and carries interest at 6%. No interest or principal is due until maturity. In connection with the transaction, Jackson received 1,650,000 shares of common stock and a warrant to purchase up to 3,150,000 shares of common stock (the “Warrant”), exercisable for five years, with an initial cash exercise price of $1.35. At Jackson’s election, 50% of accrued interest paid or payable on the note may be converted into shares of common stock at a conversion price of $2.00.

In connection with the Jackson financing, in addition to paying $3,126 to satisfy the Company’s obligation under the note issued in connection with the Amendment, the Company satisfied in full the earn-out liability associated with the Company’s acquisition of The JM Group of $1,026 and related interest, as well as approximately, $562 of debt obligations that were due in January 2017.

In April 2017, the Company amended the note and warrant purchase agreement with Jackson and entered into a second subordinated secured note with Jackson for $1,650. Under the terms of this amended agreement, the Company issued to Jackson 296,984 shares of common stock, with an additional 370,921 shares of common stock to be issued upon shareholder approval of the issuance of shares to Jackson in excess of the 19.99% limit. Also on April 5, 2017, the Company amended the Warrant to allow Jackson to purchase up to an additional 825,463 shares of common stock, modified the initial exercise price of the Warrant to $1.00 per share and modified the conversion price of accrued interest on note issued to Jackson in January 2017 to $1.50. The Warrant was also amended to increase the amount of common stock issuable to Jackson pursuant to the anti-dilution clause contained therein. The second note accrues interest on the principal amount at a rate of 6% per annum and has a maturity date of June 8, 2019; however, in the event the Company satisfies all of its outstanding obligations with Midcap Financial Trust, the maturity date will be adjusted to July 25, 2018. No interest or principal is payable until maturity. At any time during the term of the second note, upon notice to Jackson, the Company may also, at its option, redeem all or some of the then outstanding principal amount of the second note by paying to Jackson an amount not less than $100 of the outstanding principal (and in multiples of $100), plus any accrued but unpaid interest and liquidated damages and other amounts due under the note. The second note’s principal is not convertible into shares of common stock; however, 50% of the accrued interest on the second note may be converted into shares of common stock, at the sole election of Jackson at maturity or in the event of a prepayment by the Company, at a conversion price equal to $1.50 per share. The proceeds of this transaction were used to redeem the remaining shares and conversion rights of the Series D Preferred ~~Stock certain additional rights~~Stock.

In August 2017, the Company entered into a Promissory Note with Jackson for $1,600, with a term of 60 days at interest of 10% per annum and ~~removes certain restrictions~~ in ~~respect~~return for 160,000 shares of common stock. The proceeds of the ~~Series D Preferred Stock, as set forth~~note were used to fund the satisfaction of a judgment entered in the ~~Series D Purchase Agreement. Discover Growth Fund has agreed not~~matter of Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc.

On September 1, 2017, the Company into a promissory note with Jackson for $515, with a term of 31 days at interest of 12% per annum. The proceeds of the note were used to ~~submit any additional conversion notices until we obtain stockholder approval~~fund other debt obligations.

On September 15, 2017, the Company entered into the Jackson Note. The proceeds of the sale of the secured note were used to (i) repay the existing subordinated notes previously issued to Jackson in the aggregate principal amount of $11,165, (ii) to fund a portion of the upfront cash portion of purchase price consideration of the Firstpro Acquisition and the CBS Butler Acquisition, (iii) repay substantially all other outstanding indebtedness of the Company and (iv) for general working capital purposes. The maturity date for the ~~transaction, so long~~Jackson Note is September 15, 2020. The Jackson Note will accrue interest at 12% per annum, due quarterly on January 1, April 1, July 1 and October 1 in each year, with the first such payment due on January 1, 2018. Interest on any overdue payment of principal or interest due under the Jackson Note will accrue at a rate per annum that is 5% in excess of the rate of interest otherwise payable thereunder.

The Company paid a closing fee of $1,000 in connection with its entry into the A&R Note Purchase Agreement and agreed to issue 2,250,000 shares of the Company’s common stock as ~~such approval~~a closing commitment fee. These shares are subject to registration rights in favor of Jackson and will be included in a new resale registration statement which must be filed by the Company not later than October 30, 2017. The Jackson Note resulted in the extinguishment of the old notes of $11,165 and recording of the new debt of $40,000 and debt issue costs $3,426. The Company recorded a $2,819 loss upon extinguishment.

Management believes the Company is ~~obtained by January 2017. We intend to seek stockholder approval~~a going concern meaning it will meet its obligations for the ~~transaction~~next 12 months as of the date these financial statements are issued.

STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES

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

(All amounts in ~~our proxy statement.~~ thousands, except share, par values and stated values)

Operating activities

For the ~~six months ended~~ ~~November~~period January 1, 2017 to September 30,~~, 2016,~~ 2017, net cash used in operations of ~~$2,046~~$2,787 was primarily attributable ~~to the net loss of $2,720,~~ changes in operating assets and liabilities totaling ~~$(2,473)~~$3,962 and net loss of $9,354; offset by non-cash adjustments of ~~$3,147.~~$10,529. Changes in operating assets and liabilities primarily relates an increase in other long-term liabilities of $285, a decrease in other assets of $196, and increase accounts payable and accrued expenses of $16; offset by an increase in accounts receivable of $2,907, decrease in other current liabilities of $807, an increase in prepaid expenses of $552 and other of $193. Total non-cash adjustments of $10,529 primarily includes costs related to the extinguishment of debt of $4,108, amortization of debt discounts and beneficial conversion features of $2,571, depreciation and amortization of intangible assets of $2,310, stock based compensation of $1,689, and offset by other of $149. During the period January 1, 2017 to September 30, 2017, the Company used approximately $3,500 of the proceeds from Jackson to pay accounts payable and accrued expenses. In addition, cash used in operations is net of $1,582 for settlement of the Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc. arbitration.

For the period January 3, 2016 to October 1, 2016, net cash provided by operations of $787 was primarily attributable non-cash adjustments of $4,265 and changes in operating assets and liabilities totaling $2,414 offset by the net loss of $6,220. Changes in operating assets and liabilities primarily relates to an increase in accounts receivable of $3,466, an increase in other non current assets of $565, a decrease in other current liabilities of $188; a decrease in other long term liabilities of $53, partially offset by an increase in accounts payable and accrued expenses of ~~$980, a decrease in prepaid expenses and other current asset of $332 and an~~$4,460, increase in other long-term liabilities of ~~$487. Total non-cash adjustments of $3,147 primarily includes amortization of intangible assets of $1,364, amortization of debt discounts and beneficial conversion features of $1,202,~~$357, other of ~~$(89), stock based compensation of $344, loss on settlement of debt of $169~~$328 and ~~depreciation of $155.~~

For the six months ended November 30, 2015, net cash used in operations of $119 was primarily attributable to the net loss of $4,870 and non-cash adjustments of $4,689 offset by changes in operating assets and liabilities totaling $62. Changes in operating assets and liabilities primarily relates to an increase ~~in accounts receivable of $469, decrease~~ in prepaid expenses and other current assets of ~~$74, increase in other assets of $391,~~$156; offset by increase in accounts ~~payable~~receivable of $1,099, other assets $828 and ~~accrued expenses of $852, increase in other long term liabilities of $42 and a decrease in~~ other current liabilities $632. Non cash adjustments of ~~$46. Non-cash adjustments totaling $4,689~~$4,265 primarily ~~includes~~relates to depreciation and amortization ~~totaling $2,885, share~~of intangible assets of $2,059, amortization of deferred financing costs of $1,860, stock based compensation ~~totaling $1,611,~~expense of $668, interest paid in stock of $109, other of $54; offset by a gain on settlement of ~~debt~~warrants of ~~$36, write off of fixed assets of $49 and other of $149.~~

~~Operating cash flow including proceeds from accounts receivable financing was $754 and $1,653 for the six months ended November 30, 2016 and November 30, 2015 respectively.~~ $485.

Investing activities

For the ~~six months ended November~~period January 1, 2017 to September 30, 2017, net cash flows used in investing activities was $22,080 which is primarily due to acquisition of CBS Butler for upfront consideration of $16,317, acquisition of Firstpro for upfront consideration of $4,500, payments made towards earn-out agreements totaling $1,094 and purchased of property and equipment of $169.

For the period January 3, 2016 to October 1, 2016, net cash flows used in investing activities was ~~$1,131~~$1,855 which is primarily due to ~~payments made~~cash posting of a surety bond of $1,405 relating to ~~sellers of $849 for~~ the ~~purchase of JM Group,~~NewCSI legal proceedings, purchase of property and equipment of ~~$213, and~~$245, payments made towards ~~earn-out agreements totaling $69.~~

~~For the six months ended November 30, 2015, net cash flows used in investing activities was $3,921 and was attributable to the purchase~~earnouts of ~~property and equipment of $98, payments due to sellers of $83, payments of $86 made for the earn-out agreement~~$104 and cash paid ~~for purchase~~to acquire the remaining 51% of ~~subsidiaries (Lighthouse and The JM Group)~~PeopleServe PRS, Inc. of ~~$3,654.~~$101.

Financing activities

For the ~~six months ended November~~period January 1, 2017 to September 30, 2017, net cash flows provided by financing activities totaled $29,599 which is primarily due to proceeds from term loans of $51,165, proceeds from convertible notes of $400, proceeds from the At-The-Market Facility of $208 and proceeds from accounts receivable financing net of $5,242, offset by repayments of term loans of $14,976, repayment of convertible notes of $6,635, third-party financing costs of $3,299, Series D Series D pay off of $1,500, dividends paid to related parties of $515, repayment of promissory notes of $441, and repayment of bonds of $50.

For the period January 3, 2016 to October 1, 2016, net cash flows provided by financing activities totaled ~~$2,445 and was attributable~~$1,433 which is primarily due to proceeds from private placement of $3,347, proceeds from Series D Preferred Stock $2,000, proceeds from overadvance of accounts receivable financing ~~$2,800,~~$1,050, proceeds from ~~sale of equity $2,495,~~term loans $783, proceeds from promissory notes $700, proceeds from convertible notes ~~of $400, proceeds from promissory note of $273;~~$578; offset by repayment of convertible notes $1,589, repayment on accounts receivable financing of ~~$(1,386),~~$1,575, repayment of promissory notes ~~$(995), payments for over advance~~ of ~~accounts receivable financing $(863),~~$1,506, repayment of bonds $949, repayment of term loans $629 and ~~financing cost associated with private placements $(274).~~

For the six months ended November 30, 2015, net cash flows provided by financing activities totaled $5,064 and was attributable to proceeds of $4,279 from the issuance of convertible note payable, proceeds of $1,555 from the issuance of promissory notes and $1,772 from proceeds from accounts receivable financing. In addition, the Company recorded third party financing costs of ~~$1,115, repaid $275 in convertible notes, and repaid promissory notes of $1,052.~~$777.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our significant accounting policies are fully described in Note 2 to our consolidated financial statements for the ~~year ended May~~period June 1, 2016 to December 31, 2016, filed on Form 10-KT, as amended, with the SEC on ~~August 29, 2016.~~April 12, 2017.

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)

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment”. The amendments in this update modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. The guidance is effective for annual periods fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of adopting this guidance.

In January 2017, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~an Accounting Standards Update (“ASU”)~~ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business”. The amendments in this ~~Update~~update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance.

In November 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2016-18, “Statement of Cash Flows (Topic 230) Restricted Cash”. The new guidance requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this guidance.

In August 2016, the ~~Financial Accounting Standards Board (FASB)~~FASB issued ~~an Accounting Standards Update (ASU)~~ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of adopting this guidance.

~~In March 2016, the FASB issued authoritative guidance~~2016-09, “Stock Compensation”, regarding the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is to be applied for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The guidance requires companies to apply the requirements retrospectively, modified retrospectively, or prospectively depending on the amendment(s) applied. The Company is currently evaluating the impact of adopting this guidance. The adoption of this standard had no material financial impact.

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)

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue recognition requirements of FASB ASC Topic 605, “Revenue Recognition” and most industry-specific guidance throughout the ASC, resulting in the creation of FASB ASC Topic 606, “Revenue from Contracts with Customers”. ASU 2014-09 requires entities to recognize revenue in a way that depicts 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 in exchange for those goods or services. This ASU provides alternative methods of adoption. In August 2015, the FASB issued ASU 2015-14, “Revenue ~~From~~from Contracts ~~With~~with Customers, ~~(Topic 606)”~~Deferral of the Effective Date”. ~~The amendments in this~~ ASU ~~defer~~2015-14 defers the effective date of ~~ASU 2014-09 “Revenue From Contracts With Customers (Topic 606)”. Public business entities should apply the guidance in~~ ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers, Principal versus Agent Considerations” (Reporting Revenue Gross versus Net) clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing”, clarifying the implementation guidance on identifying performance obligations and licensing. The amendments in this ASU clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The effective date and transition requirements for ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09. The Company is ~~still evaluating~~currently assessing the potential impact of adopting ~~this guidance.~~ASU 2014-09, ASU 2016-08 and ASU 2016-10 on its financial statements and related disclosures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not ~~required for smaller reporting companies.~~applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure 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 Quarterly 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 ~~ineffective, due to material weaknesses in our control environment and financial reporting process.~~operating effectively.

~~Notwithstanding the existence of some material weaknesses, described below, management~~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 ~~in the United States~~ (“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 ~~are not~~were effective in accordance with Item 308(a)(3) of Regulation ~~S-K and we had “material weaknesses” (as such term is defined below) in our control environment and financial reporting process consisting of the following as of the Evaluation Date:~~S-K.

~~inadequate segregation of duties consistent with control objectives;~~

~~ineffective controls over period end financial disclosure and reporting processes; and~~

~~lack of accounting personnel with adequate experience and training.~~

A “material weakness” is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

As of the date of this Quarterly Report, the Company intends to remedy the foregoing weaknesses. However, 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. The Company’s plan for remediating the material weaknesses include the following:

~~Add resources in the form of personnel on an as needed basis;~~

~~Add additional systems to enhance the controls over financial reporting and limit the manual intervention currently required.~~

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

No change in our system of internal control over financial reporting occurred during the ~~six months~~period ended ~~November~~September 30, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2932

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

NewCSI, Inc. vs. Staffing 360 Solutions, Inc.

On ~~May 22, 2014, NewCSI,~~July 26, 2017, the ~~former owners of Control Solutions International, filed~~Appellate Court affirmed the Court’s decision granting a ~~complaint in the United States District Court for the Western District of Texas, Austin Division,~~judgment against the Company ~~arising from~~for $1,307. On August 29, 2017 the ~~terms of~~surety company released the CSI Stock Purchase Agreement dated August 14, 2013. NewCSI claims that the Company breached a provision of the CSI Stock Purchase Agreement (“SPA § 2.7”) that required the Company to calculate and pay to NewCSI 50% of certain “Deferred Tax Assets” within 90 days after December 31, 2013. The Complaint sought payment of the amount allegedly owed under SPA § 2.7 and acceleration of earn-out payments provided for in the CSI Stock Purchase Agreement of $1,400, less amounts paid to date, and attorneys’ fees. The Company responded denying the material allegations and interposing numerous affirmative defenses. On October 8, 2014, NewCSI filed a Motion of Summary Judgment (the “Motion”). On March 30, 2015, a Magistrate Judge of the District Court issued a Report and Recommendation that the District Court deny the Motion. The Recommendation became a final decision on April 13, 2015.

On December 31, 2014, NewCSI filed an amended complaint to which NewCSI added an additional count asserting an “Adjustment Event” had occurred requiring an acceleration of earn-out payments provided for in the CSI Stock Purchase Agreement of $2,100, less amounts paid to date ($1,671 at December 31, 2014), should Staffing 360 or CSI “be unable, or admit in writing its inability, to pay its debts as they mature.” The Company responded denying the material allegations and interposing numerous affirmative defenses, including that the earn-out liability was fully expensed at the time of the acquisition and fully accrued for on the Company’s balance sheet as part of the purchase accounting at the time of the acquisition. The final pretrial conference in this matter was held April 22, 2015. A jury was selected on May 14, 2015, and the trial was held May 18-20, 2015. On May 20, 2015, the jury rendered a verdict, finding that Staffing 360 had not complied with SPA § 2.7 and owed $154, but that NewCSI had not proven that Staffing 360 or CSI had become unable to pay debts as they came due. The Court had held that it was not a question for the jury to decide if damages for breach of SPA § 2.7 should include accelerated earn-out payments.

~~On October 21, 2015, judgment was entered in this action in favor of NewCSI and against the Company in the amount of $1,307, plus pre-judgment interest, post-judgment interest, and costs.~~

On January 26, 2016, the District Court set the bond in respect of the NewCSI litigation at $1,384. The Company has filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit seeking reversal of the judgment and posted a supersedeas bond to ~~stay~~ the ~~execution~~New CSI shareholders’ counsel, which was amount was approximately $5 less than the judgment amount with accumulated interest. Payment of this remaining balance has been made subsequent to period end. The amount of the ~~judgment pending appeal. On April 18, 2016, the Court granted the NewCSI shareholders’ request~~legal fee award remains open for payment of attorneys’ fees, but reserved judgment on the amount of fees to award pending the outcome of the Company’s appeal. As of January 2016, the NewCSI shareholders have claimed they have incurred $552 in attorney’s fees, which could increase during the pendency of the appeal. On November 3, 2016, oral arguments for the appeal were heard and now the Company is awaiting further instruction from the United States Court of Appeals for the Fifth Circuit.

Staffing 360 Solutions, Inc. v. Former Officers of Staffing 360 Solutions, Inc.

On ~~November 13, 2015,~~July 11, 2017, the Court entered an order confirming the arbitrator’s award and granting judgement against the Company. In August 2017, the Company paid $1,582 in ~~a separate proceeding, Staffing 360 initiated an arbitration before JAMS against three officers~~full satisfaction of ~~Staffing 360, each a former Staffing 360 officer and employee. In its demand~~this matter.

Item 1A. Risk Factors.

There have been no material developments to alter the risk factors disclosed in our Annual Report on Form 10-KT for ~~arbitration and statement~~the transition period ended December 31, 2016, except as set forth below:-

The Jackson Note is secured by substantially all of ~~claim, Staffing 360 alleged that these individuals breached their employment agreements with Staffing 360~~the Company’s and the ~~fiduciary duties each owed~~terms of the Jackson Note may restrict the Company’s current and future operations. Additionally, Jackson may be able to exert significant influence over us as our senior secured and the beneficial owner of in excess of 39.4% of our outstanding shares of common stock

The Jackson Note contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. The Jackson Note includes covenants limiting or restricting, among other things, our ability to:

incur or guarantee additional indebtedness;

pay distributions on, redeem or repurchase shares of the Company’s capital stock or redeem or repurchase any of the Company’s subordinated debt;

make certain investments;

sell assets;

enter into agreements that restrict distributions or other payments from our restricted subsidiaries to the ~~Company. The three respondents responded with a counterclaim alleging wrongful termination and have moved to dismiss~~Company;

incur or allow the ~~arbitration, as well as moved for severance in relation to the remainder~~existence of ~~their contracts.~~ ~~On July 20, 2016, the arbitrator decided in favor of both~~liens;

consolidate, merge or transfer all or substantially all of the ~~respondents’ motions. Further on September 21, 2016 the arbitrator rendered the final award, which was set at $1,433. The Company is awaiting the respondents’ motion to confirm the award.~~Company’s assets;

engage in transactions with affiliates.

In addition, the ~~Company has calculated~~Jackson Note contains financial covenants including, among other things, a fixed charge coverage ratio, minimum liquidity requirements and total leverage ratio. A breach of any of these financial covenants could result in a default under the Jackson Note. If any such default occurs, Jackson may elect to declare all outstanding borrowings, together with accrued interest and ~~made a payment towards legal fees included~~other amounts payable thereunder, to be immediately due and payable. In addition, following an event of default under the Jackson Note, Jackson will have the right to proceed against the collateral granted to it to secure the debt, which includes our available cash. If the debt under the Jackson Note was to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt.

In addition to being our senior secured lender, the ~~final award amount. As~~Jackson beneficially owns in excess of ~~November 30, 2016 the balance is $1,591. This amount has already been fully accrued for and expensed on~~39.4% of the Company’s ~~balance sheet.~~

~~Item 1A. Risk Factors.~~

~~Smaller reporting companies are not required~~outstanding common stock. Accordingly, Jackson may be able to ~~provide~~exert significant influence over the ~~information required by this item.~~Company.

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

~~None.~~During the period January 1, 2017 through September 30, 2017, we issued 7,500 shares of common stock, with an aggregate value of $6, to Wayne Miiller PLLC in return for advisory services provided to our board of directors, and 15,000 shares of common stock with an aggregate value of at $14, to Greenridge Global for investor relations advisory services. The shares were issued in reliance upon an exemption pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

3134

Item 6. Exhibits

Exhibit No.		Description
2.1		Asset Purchase Agreement, dated September 15, 2017, by and among Staffing 360 Georgia, LLC, FirstPro Inc., Firstpro Georgia LLC, April F. Nagel and Philip Nagel (incorporated by reference from Exhibit 2.1 to the Company’ Form 8-K filed on September 19, 2017)
~~3.1~~ 4.1		~~Certificate of Designations, Preferences and Rights of Series E-1 Preferred Stock~~10% Subordinated Secured Note, dated August 2, 2017, issued to the Jackson Investment Group, LLC (incorporated by reference from Exhibit 4.1 to the Company’ Form 8-K filed on August 8, 2017)
~~3.2~~		~~Certificate of Designations, Preferences and Rights of Series E-2 Preferred Stock~~
10.1		~~Letter~~Second Amended Purchase Agreement, dated ~~October 3, 2016, between Staffing 360 Solutions, Inc.~~August 2, 2017, by and ~~Hillair Capital Investments L.P.~~among the Company, Jackson Investment Group, LLC and certain subsidiaries of the Company (incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed on ~~October 7, 2016)~~August 8, 2017)
10.2		Second Amended ~~Letter~~Subordination Agreement, dated ~~October 14, 2016, between~~August 2, 2017, by and among Midcap Funding X Trust, Jackson Investment Group, LLC, the Company and certain subsidiaries of the Company (incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed on August 8, 2017)
10.3		Amended and Restated Note Purchase Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., certain subsidiaries of Staffing 360 Solutions, Inc. and ~~Hillair Capital Investments L.P., and described in~~Jackson Investment Group, LLC (incorporated by reference from Exhibit 10.3 to the ~~Company’s~~Company’ Form ~~8-K/A~~8-K filed on ~~October 20, 2016~~September 19, 2017)
10.4		Intercreditor Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., certain subsidiaries of Staffing 360 Solutions, Inc., MidCap Funding X Trust and Jackson Investment Group, LLC (incorporated by reference from Exhibit 10.4 to the Company’ Form 8-K filed on September 19, 2017)
10.5		Share Purchase Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., Longbridge Recruitment 360 Limited and the holders of outstanding shares of CBS Butler Holdings Limited (incorporated by reference from Exhibit 10.1 to the Company’ Form 8-K filed on September 19, 2017)
10.6		Amendment No.8 to the Credit and Security Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., certain subsidiaries of Staffing 360 Solutions, Inc. and MidCap Funding X Trust (incorporated by reference from Exhibit 10.2 to the Company’ Form 8-K filed on September 19, 2017)
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.

3235

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 thereunto duly authorized.

Date: ~~January 13,~~November 14, 2017	STAFFING 360 SOLUTIONS, INC.

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

Date: ~~January 13,~~November 14, 2017	STAFFING 360 SOLUTIONS, INC.

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

3336

Large Accelerated Filer	☐		Accelerated Filer	☐

Non-Accelerated Filer	☐	(Do not check if a smaller reporting company)	Smaller Reporting Company	☒
			Emerging Growth Company	☐

	November 30,				September 30,		October 1,
	2016		2015		2017		2016
Convertible bonds - Series A		—		17,500
Convertible bonds - Series B		5,401		89,062		—		5,777
Convertible promissory notes		1,227,416		895,159		—		2,141,077
Convertible preferred shares		592,191		216,191		216,191		592,191
Warrants		83,764		1,637,903		4,661,167		83,764
Long term incentive plan (LTIP)						1,085,602		1,002,265
Options		319,500		330,000		627,300		320,500
Total		2,228,272		3,185,815		6,590,260		4,145,574



Shares issued to/for:	Number of common shares issued		Fair Value of shares issued		Fair Value at Issuance (per share)
Conversion of Series D preferred Stock		1,340,960	$	2,157	$	1.31	$	1.74
Conversion of debt		890,910		1,149		1.29		1.29
Private placements		210,645		426		2.35		2.35
Conversion of Series C preferred stock		175,439		332		1.89		1.89
Conversion of Series B preferred stock		133,000		198		1.49		1.49
Consultants		38,297		66		1.56		1.96
Employees		9,800		38		0.69		1.59
Board and Committee members		8,500		15		1.59		1.99
Shares issued for extension of Convertible Bonds		1,250		2		1.36		1.36
		2,808,801	$	4,383

	Shares			Balance
Face Value		211		$	2,110
Original Issue Discount					(110	)
Beneficial Conversion Feature					(615	)
Beginning Balance, Net					1,385
Conversions		(118	)		(773	)
Ending Balance, Net		93		$	612

Shares issued to/for:	Number of common shares issued		Fair Value of shares issued		Fair Value at Issuance (per share)
Conversion of Series D Preferred Stock		1,973,000	$	1,265	$	0.56	$	0.76
Jackson Investment Group		4,727,905		2,580		0.55		0.74
Employees		1,691,200		1,136		0.55		0.94
Extension of convertible notes		600,000		498		0.83		0.83
CBS Butler Acquisition		500,000		430		0.86		0.86
Board and Committee members		224,500		182		0.62		0.94
At-the-Market Facility		309,920		208		0.63		0.70
Consultants		22,500		20		0.70		0.94
		10,049,025	$	6,319

	PART I FINANCIAL INFORMATION

Item 1	Financial Statements	31
	Condensed Consolidated Balance Sheets as of ~~November~~September 30, ~~2016~~2017, (unaudited) and ~~May~~December 31, 2016	1
	Unaudited Condensed Consolidated Statements of Operations for the period July 2, 2017 to September 30, 2017, for the period July 3, 2016 to October 1, 2016, for the period January 1, 2017 to September 30, 2017, and for the period January 3, 2016 to October 1, 2016	2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the period July 2, 2017 to September 30, 2017, for the period July 3, 2016 to October 1, 2016, for the period January 1, 2017 to September 30, 2017, and for the period January 3, 2016 to October 1, 2016	3
	~~Condensed Consolidated Statements of Operations for the Three and Six Months ended November 30, 2016 and 2015 (unaudited)~~	4
	~~Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months ended November 30, 2016 and 2015 (unaudited)~~	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Six Months Ended November~~period January 1, 2017 to September 30, 2017 and January 3, 2016 ~~and 2015 (unaudited)~~to October 1, 2016	64
	Notes to Unaudited Condensed Consolidated Financial Statements	75
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1820
Item 3	Quantitative and Qualitative Disclosures About Market Risk	2832
Item 4	Controls and Procedures	2832

	PART II OTHER INFORMATION

Item 1	Legal Proceedings	2933
Item 1A	Risk Factors	3033
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3033
Item 3	Defaults Upon Senior Securities	3134
Item 4	Mine Safety Disclosures	3134
Item 5	Other Information	3134
Item 6	Exhibits	3235

Signatures		3336

	Number of shares		Weighted Average Price Per Share
Outstanding at December 31, 2016		33,630	$	19.52
Issued		4,627,537		1.00
Exercised		—		—
Expired or cancelled		—		—
Outstanding at September 30, 2017		4,661,167	$	1.13

Exercise price	$	1.35
Market price at date of grant	$	0.62
Volatility		99.38	%
Expected dividend rate		—
Expected term (years)		5
Risk-free interest rate		1.93	%

	CBS Butler		FirstPro
Goodwill	$	14,565	$	4,531

Intangible assets
Tradenames	$	1,123	$	35
Non-compete		150		193
Customer Relationships		4,473		3,136
	$	5,746	$	3,364

	For the Twelve Months Ended November 30,
	2016			2015			October 2, 2016, to September 30, 2017			October 4, 2015 to October 1, 2016
Gross Profit - TTM (Current Period)	$	31,842		$	24,333		$	32,768		$	31,490
Gross Profit - TTM (Prior Period)		24,333			20,066			31,490			23,488
Gross Profit - Growth	$	7,509		$	4,267		$	1,278		$	8,002

Adjusted EBITDA - TTM (Current Period)	$	5,379		$	2,435		$	5,794		$	5,362
Adjusted EBITDA - TTM (Prior Period)		2,435			(991	)		5,362			1,911
Adjusted EBITDA - Growth	$	2,944		$	3,426		$	432		$	3,451

Operating Leverage		39.2	%		80.3	%		33.8	%		43.1	%

	November 30,					September 30, 2017		October 1, 2016
	2016			2015
Total Debt, Net	$	7,663		$	12,058
Total Long-Term Debt, Net						$	36,574	$	2,499
Addback: Total Debt Discount and Deferred Financing Costs		1,580			2,490		3,436		1,988
Earnouts		2,390			2,781		5,749		2,453
Less: Surety Bond		(1,405	)		—		—		(1,405	)
Net Debt	$	10,228		$	17,329
Total Long-Term Debt						$	45,759	$	5,535

Adjusted EBITDA - TTM	$	5,379		$	2,435
TTM Adjusted EBITDA						$	5,794	$	5,362

Pro Forma TTM Adjusted EBITDA						$	11,034	N/A

Leverage Ratio	1.9x			7.1x		N/A		1x

Pro Forma Leverage Ratio						4.1x		N/A