As filed with the Securities and Exchange Commission on December 26, 2024

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ATLANTIC INTERNATIONAL CORP.
(Exact name of Registrant as specified in its Charter)

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270 Sylvan Avenue, Suite 2230
Englewood Cliffs, New Jersey 07632
(201) 899-4470
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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N/A
(Former name or former address, if changed since last report)

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Jeffrey Jagid
Chief Executive Officer
270 Sylvan Avenue, Suite 2230
Englewood Cliffs, New Jersey 07632
(201) 899-4470
(Name, address, including zip code, and telephone number, including area code, of agent for service)

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Copies to:

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Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement is declared effective and upon completion of the Merger described in the enclosed proxy statement/prospectus.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective. Registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “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 7(a)(2)(B) of Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary proxy statement/prospectus is not complete and may change. We may not sell these securities, or accept an offer to buy these securities, until the Registration Statement filed with the Securities and Exchange Commission, of which this proxy statement/prospectus is a part, is effective. This proxy statement/prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

The accompanying proxy statement/prospectus provides you with important information about the special meeting, the Merger, and each of the proposals. We encourage you to read the entire document carefully, in particular the “Risk Factors” section beginning on page 13 of the accompanying proxy statement/prospectus for a discussion of risks relevant to the Merger.

We look forward to the successful completion of the Merger.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, the Atlantic International common stock to be issued in the Merger or determined if the accompanying proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated as of, and is first being mailed to the stockholders of Staffing 360 Solutions on or about [•], 2025.

STAFFING 360 SOLUTIONS

757 3rd Avenue, 27th Floor
New York, New York 10017

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF STAFFING 360 SOLUTIONS, INC.
TO BE HELD ON [•], 2025

To the Stockholders of Staffing 360 Solutions, Inc.:

NOTICE IS HEREBY GIVEN that Staffing 360 Solutions, Inc. (“Staffing 360”) will hold a completely virtual special meeting of its stockholders (the “Special Meeting”) at the Special Meeting’s website, at [•], on [•], 2025, beginning at [•], Eastern Time, for the purpose of considering and voting on the following proposals:

(1)    to adopt that certain Agreement and Plan of Merger, dated November 1, 2024 (as it may be amended from time to time, the “Merger Agreement”), by and among Staffing 360, Atlantic International Corp., a Delaware corporation (“Atlantic International”), and A36 Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Atlantic (the “Merger Sub”) and the transactions contemplated therein and in connection therewith, a copy of which is included as Annex A to the accompanying proxy statement/prospectus (the “Merger Agreement Adoption Proposal”); and

(2)    to approve the adjournment of the Staffing 360 special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Staffing 360 special meeting to approve the Merger Agreement Adoption Proposal (the “Adjournment Proposal).

Staffing 360 will transact no other business at the Special Meeting. The accompanying proxy statement/prospectus, including the Merger Agreement attached thereto as Annex A, contains further information with respect to the Merger.

Only holders of record of Staffing 360 common stock and Staffing 360 Series H Convertible Preferred Stock (the “Series H Preferred Stock”) at the close of business on [•], 2025 (the “Record Date”) are entitled to notice of and to vote at the Special Meeting.

The board of directors of Staffing 360 (the “Staffing 360 Board of Directors”), has determined that the transactions contemplated by the Merger Agreement are advisable and fair to, and in the best interests of, Staffing 360 and its stockholders, and approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement. The Staffing 360 Board of Directors recommends that Staffing 360 stockholders vote “FOR” the Merger Agreement Adoption Proposal and “FOR” the Adjournment Proposal.

The special meeting will be conducted in a virtual format only in order to provide access to Staffing 360 stockholders regardless of geographic location. Stockholders will not be able to attend the special meeting in person; however, stockholders of record will be able to vote and submit questions electronically prior to the special meeting by visiting www.proxyvote.com, and during the special meeting by visiting [•], and entering the 16-digit control number included on the proxy card or on the instructions. You will also be able to dial in via telephone to ask questions during the meeting. Specific instructions for accessing the meeting are provided in the notice, proxy card or voting instruction form you received.

Your vote is very important, regardless of the number of shares of Staffing 360 common stock you own.    The Merger Agreement requires, as a condition to closing of the Merger and the other transactions contemplated by the Merger Agreement, that Staffing 360 stockholders approve the Merger Agreement Adoption Proposal. Assuming a quorum is present at the Staffing 360 special meeting, the approval of the Merger Agreement Adoption Proposal requires the affirmative vote of a majority of the shares outstanding and entitled to vote on such proposal.

A complete list of Staffing 360 stockholders as of the Record Date will be open to the examination of any Staffing 360 stockholder at Staffing 360’s principal executive offices at 757 3rd Avenue, 27th Floor, New York, New York 10017, for a period of 10 days prior to the Staffing 360 special meeting.

Whether or not you plan to attend the Staffing 360 special meeting electronically, Staffing 360 urges you to please promptly mark, sign and date the accompanying proxy card and return it in the enclosed postage-paid envelope, call the toll-free telephone number or use the Internet as described in the instructions included with the proxy card, so that your shares may be represented and voted at the Staffing 360 special meeting. To participate electronically in the Staffing 360 special meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The meeting webcast will begin promptly at [•], Eastern Time.

If your shares are registered in your name, even if you plan to attend the virtual special meeting or any postponement or adjournment of the special meeting, we request that you vote by telephone, over the Internet, or complete, sign and mail your proxy card to ensure that your shares will be represented at the special meeting.

If your shares are held in the name of a broker, trust, bank or other nominee, and you receive notice of the special meeting through your broker or through another intermediary, please vote or complete and return the materials in accordance with the instructions provided to you by such broker or other intermediary or contact your broker directly in order to obtain a proxy issued to you by your nominee holder to vote your shares at or prior to the virtual special meeting. Failure to do so may result in your shares not being eligible to be voted by proxy at the special meeting.

The use of video, still photography or audio recording at the Special Meeting is not permitted. If you have any questions about the Merger or how to vote or direct a vote in respect of your shares of Staffing 360 common stock, you may contact Staffing 360 by e-mail at companysecretary@staffing360solutions.com.

By Order of the Board of Directors of Staffing 360 Solutions, Inc.

Your vote is important. Staffing 360 stockholders are requested to complete, date, sign and return the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States, or to submit a proxy to vote your shares electronically through the Internet or by telephone.

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Atlantic International Corp., a Delaware corporation (“Atlantic International”) from other documents that Atlantic International has filed with the U.S. Securities and Exchange Commission (the “SEC”), and that are contained in or incorporated by reference into this proxy statement/prospectus. For a listing of documents incorporated by reference into this proxy statement/prospectus, please see the section titled “Where You Can Find More Information” of this proxy statement/prospectus. This information is available for you free of charge to review through the SEC’s website at www.sec.gov.

Any person may request a copy of this proxy statement/prospectus or other information concerning Atlantic International or Staffing 360 Solutions, Inc., a Delaware corporation (“Staffing 360”), without charge, by written or telephonic request directed to the Company at the following contact:

Staffing 360 Solutions, Inc.

757 3rd Avenue, 27th Floor

New York, NY 10017

(646) 507-5710

Attention: Corporate Secretary

In order for you to receive timely delivery of the documents in advance of the special meeting of Staffing 360 stockholders to be held on [•], 2025, you must request the information no later than seven (7) calendar days prior to the special meeting.

The contents of the websites of the SEC, Atlantic International, Staffing 360 or any other entity are not being incorporated into this proxy statement/prospectus.

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Atlantic International, constitutes a prospectus of Atlantic International under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock of Atlantic International to be issued to Staffing 360 Solutions equity holders pursuant to the Agreement and Plan of Merger, dated as of November 1, 2024, by and among Atlantic International Corp., a Delaware corporation (“Atlantic International”), Staffing 360 Solutions, Inc., a Delaware corporation (“Staffing 360”), and A36 Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Atlantic (the “Merger Sub”), entered into an Agreement and Plan of Merger, (as it may be amended from time to time, the “Merger Agreement”). This document also constitutes a proxy statement of Staffing 360 under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a Notice of the Special Meeting of Stockholders of Staffing 360.

Atlantic International has supplied all information contained in this proxy statement/prospectus relating to Atlantic International and Staffing 360 has supplied all such information relating to Staffing 360. Atlantic International and Staffing 360 Solutions have both contributed to the information related to the Merger contained in this proxy statement/prospectus.

You should rely only on the information contained in this proxy statement/prospectus and incorporated by reference herein. Atlantic International and Staffing 360 have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this proxy statement/prospectus. This proxy statement/prospectus is dated [•], 2025, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein.

Further, you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than the stated date. Neither the mailing of this proxy statement/prospectus to Staffing 360 Solutions stockholders nor the issuance by Atlantic International of shares of its common stock pursuant to the Merger Agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

TABLE OF CONTENTS

QUESTIONS AND ANSWERS

The following are some questions that you, as a stockholder of Staffing 360, may have regarding the Merger and the other matters being considered at the Staffing 360 special meeting, and brief answers to those questions. You are urged to carefully read this proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus in their entirety because this section may not provide all the information that is important to you regarding these matters. Additional important information is contained in the annexes to this proxy statement/prospectus.

Unless the context otherwise requires, references in this proxy statement/prospectus to “Atlantic International” refers to Atlantic International Corp., a Delaware corporation; “Merger Sub” refers to A36 Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Atlantic International, and “Staffing 360” refers to Staffing 360 Solutions, Inc., a Delaware corporation.

Q:     Why am I receiving this proxy statement/prospectus?

A:     You are receiving this proxy statement/prospectus because on November 1, 2024, Atlantic International, Staffing 360, and the Merger Sub, entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), for the acquisition of Staffing 360 by Atlantic International. Pursuant to the terms of the Merger Agreement, Atlantic International will cause Merger Sub to merge with and into Staffing 360 (the “Merger”), with Staffing 360 surviving the Merger as a wholly-owned subsidiary of Atlantic International.

If the Merger is completed:

(i)      each holder of outstanding shares of Staffing 360 common stock will be entitled to receive the number of shares of Atlantic International common stock equal to the number of shares of Staffing 360 common stock they hold multiplied by the exchange ratio of 1.202 (the “Exchange Ratio”), or an aggregate of approximately 1,975,981 shares of Atlantic International common stock at closing using the Exchange Ratio;

(ii)    all outstanding shares of Series H Preferred Stock of Staffing 360 will convert into 3,500,000 shares of Atlantic International common stock, which shall have piggy-back registration rights commencing six (6) months after the closing of the Merger and be subject to certain lock-up restrictions;

(ii)    each outstanding option to purchase Staffing 360 common stock that is outstanding and has not been exercised prior to the closing of the Merger, whether or not vested, will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become an option to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such option multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed option to purchase Staffing 360 common stock will be equal to the exercise price per share of the option to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent; and

(iv)   each outstanding warrant to purchase shares of common stock of Staffing 360 that has not been exercised prior to the closing of the Merger will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become a warrant to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such warrant multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed warrant to purchase Staffing 360 common stock will be equal to the exercise price per share of the warrant to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent. The Merger Agreement and is attached to this proxy statement/prospectus as Annex A.

For the Merger to be consummated, the Merger Agreement, requires, among other things, unless otherwise waived by Atlantic International and Staffing 360, approval by Staffing 360 stockholders of the proposal to adopt the Merger Agreement and the transactions contemplated therein and in connection therewith (the “Merger Agreement Adoption Proposal”).

Staffing 360 is holding a special meeting of its stockholders to obtain approval of the Merger Agreement Adoption Proposal. Staffing 360 stockholders will also be asked to approve the proposal to adjourn the Staffing 360 special meeting to solicit additional proxies if there are not sufficient votes at the time of the Staffing 360 special meeting to approve the Merger Agreement Adoption Proposal (the “Adjournment Proposal”).

Your vote is very important, regardless of the number of shares that you own. The approval of the Merger Agreement Adoption Proposal is a condition to the obligations of Atlantic International and Staffing 360 to complete the Merger. The approval of the Adjournment Proposal is not a condition to the obligations of Atlantic International or Staffing 360 to complete the Merger.

Q:     How can I access the virtual special meeting?

A:     A virtual meeting format offers the same participation opportunities as those opportunities available to stockholders at in-person meetings. Stockholders will be able to listen, vote, and submit questions. To participate in the special meeting webcast, you must register by visiting [•] on [•], 2025 using your desktop or mobile device.

The special meeting will begin promptly at [•], Eastern Time, on [•], 2025. Staffing 360 encourages you to access the virtual meeting website prior to the start time. Online check-in will begin 15 minutes prior to the start of the special meeting. You should allow ample time to ensure your ability to access the special meeting.

Q:     Are there any other matters to be acted upon at the special meeting?

A:     Management does not intend to present any business for a vote at the special meeting other than the matters set forth above and has no information that others will do so. If other matters requiring a vote of the stockholders properly come before the special meeting, it is the intention of the persons named in the accompanying form of proxy to vote the shares represented by the proxies held by them in accordance with applicable law and their judgment on such matters.

Q:     Does my vote matter?

A:     Yes, your vote is very important, regardless of the number of shares that you own. The Merger cannot be completed unless Staffing 360 stockholders adopt the Merger Agreement.

If you do not return or submit your proxy or vote at the Staffing 360 special meeting as provided in this proxy statement/prospectus, the effect will be the same as a vote “AGAINST” the Staffing 360 Merger Agreement Adoption Proposal and the Adjournment Proposal. The Board of Directors of Staffing 360 (the “Staffing 360 Board of Directors”) recommends that you vote “FOR” the Staffing 360 Merger Agreement adoption proposal, and “FOR” the Staffing 360 adjournment proposal.

Q:     What will I receive if the Merger is completed?

A:     If the Merger is completed:

(i)     each holder of outstanding shares of Staffing 360 common stock will be entitled to receive the number of shares of Atlantic International common stock equal to the number of shares of Staffing 360 common stock they hold multiplied by the Exchange Ratio, or an aggregate of approximately 1,975,981 shares of Atlantic International common stock at closing using the Exchange Ratio;

(ii)    all outstanding shares of Series H Preferred Stock of Staffing 360 will convert into 3,500,000 shares of Atlantic International common stock which shall have piggy-back registration rights commencing 6 months after the closing of the Merger and be subject to certain lock-up restrictions;

(ii)    each outstanding option to purchase Staffing 360 common stock that is outstanding and has not been exercised prior to the closing of the Merger, whether or not vested, will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become an option to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such option multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed option to purchase Staffing 360 common

stock will be equal to the exercise price per share of the option to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent; and

(iv)   each outstanding warrant to purchase shares of common stock of Staffing 360 that has not been exercised prior to the closing of the Merger will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become a warrant to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such warrant multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed warrant to purchase Staffing 360 common stock will be equal to the exercise price per share of the warrant to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent.

For more information regarding the Merger consideration to be received by Staffing 360 equity holders if the Merger is completed, see the section titled “The Merger Agreement — Merger Consideration” of this proxy statement/prospectus.

Q:     Will Staffing 360 options be affected by the Merger?

A:     At the effective time of the Merger, each outstanding option to purchase Staffing 360 common stock that is outstanding and has not been exercised prior to the closing of the Merger, whether or not vested, will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become an option to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such option multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed option to purchase Staffing 360 common stock will be equal to the exercise price per share of the option to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent.

Q:     Will Staffing 360 warrants be affected by the Merger?

A:     At the effective time of the Merger, each outstanding warrant to purchase shares of common stock of Staffing 360 that has not been exercised prior to the closing of the Merger will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become a warrant to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such warrant multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed warrant to purchase Staffing 360 common stock will be equal to the exercise price per share of the warrant to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent.

Q:     What respective equity stakes will Atlantic International stockholders and Staffing 360 stockholders hold in Atlantic International, immediately following the Merger?

A:     As of the date of this proxy statement/prospectus, based on the number of shares of Staffing 360 and Atlantic International common stock outstanding as of [•], 2025 (the “Record Date”), and based on the Exchange Ratio of 1.202, the holders of shares of Atlantic International common stock as of immediately prior to the completion of the Merger would hold, in the aggregate, approximately 90.6% of the issued and outstanding shares of common stock of Atlantic International as combined with Staffing 360 immediately following the completion of the Merger, and holders of shares of Staffing 360 common stock as of immediately prior to the completion of the Merger would hold, in the aggregate, approximately 8%, of the issued and outstanding shares of common stock of Atlantic International and excluding Equity Awards combined with Staffing 360 immediately following the completion of the Merger.

Q:     How does the Staffing 360 Board of Directors recommend that I vote at the Staffing 360 special meeting?

A:     The Staffing 360 Board of Directors recommends that you vote “FOR” the Staffing 360 Merger Agreement adoption proposal and “FOR” the Staffing 360 adjournment proposal.

In considering the recommendations of the Staffing 360 Board of Directors, Staffing 360 stockholders should be aware that Staffing 360 directors and executive officers have interests in the Merger that are different from, or in addition to, their interests as Staffing 360 stockholders. These interests include, among others:

•        after the Merger, each of Brendan Flood and Alicia Barker with continue to be employed within their respective roles with Staffing 360;

•        pursuant to the Merger Agreement, Atlantic International and Staffing 360 have agreed to negotiate and agree to the terms of amended employment agreements with Brendan Flood and Alicia Barker, as President and Executive Vice President, respectively, prior to the filing with the SEC of the Registration Statement on Form S-4 in connection with the Merger, with such terms including an issuance of 1,263,020 of Atlantic common stock to each of Brendan Flood and Alicia Barker, which includes a six-month vesting period and a term of three years; and

•        the continued indemnification of current directors and officers of Staffing 360 and the continuation of directors’ and officers’ liability insurance after the Merger.

For a more complete description of these interests, see the information provided in the section titled “The Merger — Interests of Staffing 360’s Directors and Executive Officers in the Merger” of this proxy statement/prospectus.

Q:     Who is entitled to vote at the Staffing 360 special meeting?

A:     Stockholders of record of Staffing 360 common stock, par value $0.00001 per share (the “common stock”) and Staffing 360 Series H Convertible Preferred Stock (the “Series H Preferred Stock”) at the close of business on the Record Date may vote at the special meeting. On the Record Date, there were [•] shares of common stock and [•] shares of Series H Preferred Stock outstanding. A complete list of registered stockholders entitled to vote at the special meeting will be available for inspection at the principal executive offices of the Company during regular business hours for the 10 calendar days prior to the special meeting. The list will also be available online during the special meeting.

Pursuant to Staffing 360’s Amended and Restated Bylaws (the “Staffing 360 Bylaws”), each share of Staffing 360 common stock is entitled to one vote on all matters listed in this proxy statement/prospectus. Each holder of Series H Preferred Stock is entitled to the number of votes equal to the number of whole shares of common stock into which the shares of Series H Preferred Stock held by such holder is convertible with respect to any and all matters presented to the common stockholders for their action or consideration at the special meeting. Certain holders of Series H Preferred Stock have entered into a voting rights agreement related to the Series H Preferred Stock such that such holders have agreed, at every meeting of Staffing 360 stockholders, and at every adjournment or postponement thereof, to appear or issue a proxy to a third party to be present for purposes of establishing a quorum, and to vote all applicable shares in favor of each matter proposed and recommended for approval by Staffing 360 board of directors either in person or by proxy, amongst other provisions. As of the Record Date, the stockholder parties to the voting rights agreement own shares of the Series H Preferred Stock convertible into an aggregate of approximately [•] shares of common stock, representing approximately [•]% of Staffing 360 common stock outstanding at such time. The voting rights agreement will terminate on the third anniversary of the date of its effectiveness.

Q:     What is a proxy?

A:     A stockholder’s legal designation of another person to vote such stockholder’s shares of common stock at a special meeting is referred to as a proxy. The document used to designate a proxy to vote your shares of Staffing 360 common stock, is referred to as a proxy card.

Q:     What constitutes a quorum?

A:     The presence in person or by proxy of the holders of record of one-third of the shares entitled to vote at a meeting of stockholders constitutes a quorum for purposes of the special meeting. A quorum is necessary in order to

conduct the special meeting. If you choose to have your shares represented by proxy at the special meeting, you will be considered part of the quorum. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. See “What is a broker non-vote?”

If a quorum is not present at the special meeting, the stockholders present in person or by proxy may adjourn the meeting to a later date. If an adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, Staffing 360 will provide notice of the adjourned meeting to each stockholder of record entitled to vote at the meeting.

Q:     Where will the Atlantic International common stock that I receive in the Merger be publicly traded?

A:     The shares of Atlantic International common stock to be issued to Staffing 360 equity holders in the proposed Merger is expected be traded on the Nasdaq Capital Market under the symbol “ATLN.”

Q:     What is a “broker non-vote”?

A:     Broker non-votes occur when shares are held indirectly through a broker, bank or other intermediary on behalf of a beneficial owner (referred to as held in “street name”) and the broker submits a proxy but does not vote for a matter because the broker has not received voting instructions from the beneficial owner and (i) the broker does not have discretionary voting authority on the matter or (ii) the broker chooses not to vote on a matter for which it has discretionary voting authority. Brokers are permitted to exercise discretionary voting authority only on “routine” matters when voting instructions have not been timely received from a beneficial owner. None of proposals presented at the special meeting are considered a “routine matter.” Therefore, if you do not provide voting instructions to your broker regarding such proposals, your broker will not permitted to exercise discretionary voting authority to vote your shares on such proposals.

Q:     Which proposals are considered “routine” or “non-routine”?

A:     None of the proposals currently scheduled to be voted on at the Staffing 360 special meeting are routine matters for which brokers may have discretionary authority to vote. Accordingly, it is not expected that there will be any broker non-votes.

Q:     What stockholder vote is required for the approval of each proposal at the Staffing 360 special meeting? What will happen if I fail to vote or abstain from voting on each proposal at the Staffing 360 special meeting?

A:     Assuming a quorum is present at the special meeting, the approval of the Merger Agreement Adoption Proposal requires the affirmative vote of the majority of the shares outstanding and entitled to vote and approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares entitled to vote on the Adjournment Proposal represented in person or by proxy at the special meeting. For each proposal, you may choose to vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the effect of votes “AGAINST” both proposals, and broker non-votes will have no effect on the proposals.

Q:     How do I vote my shares if I am a stockholder of record?

A:     If you are a stockholder of record, you may vote over the Internet, by telephone, by mail or during the special meeting. Please be aware that if you vote by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible.

•        Vote by Internet.    You can vote via the Internet at www.proxyvote.com. You will need to use the control number appearing on your proxy card to vote via the Internet. You can use the Internet to transmit your voting instructions up until [•], Eastern Time on [•], 2025. Internet voting is available 24 hours a day. If you vote via the Internet, you do not need to vote by telephone or return a proxy card.

•        Vote by Telephone.    You can vote by telephone by calling the toll-free telephone number found on the proxy card. You will need to use the control number appearing on your proxy card to vote by telephone. You may transmit your voting instructions from any touch-tone telephone up until 11:59 p.m. Eastern Time on [•], 2025. Telephone voting is available 24 hours a day. If you vote by telephone, you do not need to vote over the Internet or return a proxy card.

•        Vote by Mail.    If you received a printed proxy card, you can vote by marking, dating and signing it, and returning it in the postage-paid envelope provided. Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the special meeting.

•        Vote online during the special meeting.    To vote online during the special meeting, you must be logged in and registered to virtually attend the special meeting and cast your vote before the announcement of the close of voting during the special meeting. You are entitled to virtually attend the special meeting only if you were a stockholder of the Company as of the close of business on the Record Date or hold a valid proxy for the special meeting.

By completing and submitting the proxy card or by submitting your instructions via the Internet or by telephone, you will direct the designated persons (known as “proxies”) to vote your shares at the special meeting in accordance with your instructions. The Board has appointed Brendan Flood or, in his absence, Alicia Barker, to serve as the proxy for the special meeting. Submitting a proxy will not affect your right to virtually attend the special meeting and change your vote online during the special meeting.

Q:     What if during the check-in time or during the Staffing 360 special meeting I have technical difficulties or trouble accessing the virtual meeting website?

A:     We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website for the Staffing 360 special meeting. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time for the Staffing 360 special meeting, please call the technical support number found on the Staffing 360 special meeting website.

Q:     What is the difference between a stockholder of record and a “street name” holder?

A:     If your shares are registered directly in your name with Securities Transfer Corporation, Staffing 360 transfer agent, you are considered the stockholder of record with respect to those shares of stock, and Staffing 360 has sent the Notice directly to you.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of these shares, and your shares are held in “street name.” Your broker, bank or nominee is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your nominee regarding how to vote your shares.

Q:     How do I vote my shares if I hold my shares in “street name”?

A:     If you hold your shares in “street name,” your broker, bank or other nominee should provide you with a request for voting instructions along with the proxy materials. By completing the voting instruction card, you may direct your nominee how to vote your shares. If you sign but do not fully complete the voting instruction card, then your nominee may be unable to vote your shares with respect to the proposals for which you provide no voting instructions. See “What is a broker non-vote?” Alternatively, if you want to vote your shares during the special meeting, you must contact your nominee directly in order to obtain a proxy issued to you by your nominee holder. Note that a broker letter that identifies you as a stockholder is not the same as a nominee-issued proxy. If you fail to bring a nominee-issued proxy to the special meeting, you will not be able to vote your nominee-held shares during the special meeting.

Q:     Can I vote my shares at the special meeting?

A:     Yes. If you are a stockholder of record, you may vote your shares at the special meeting by submitting your vote electronically during the special meeting.

If you hold your shares in “street name,” you may vote your shares at the special meeting only if you obtain a proxy issued by your bank, broker or other nominee giving you the right to vote the shares.

Even if you currently plan to attend the special meeting virtually, we recommend that you also return your proxy or voting instructions as described above so that your votes will be counted if you later decide not to attend the special meeting virtually or are unable to attend.

Q:     How are abstentions and broker non-votes treated for purposes of the special meeting?

A:     Abstentions are included in the determination of the number of shares present at the special meeting for determining a quorum at the meeting. An abstention is not an “affirmative vote,” but an abstaining stockholder is considered “entitled to vote” at the special meeting. Accordingly, an abstention will have the effect of a vote against the Merger Agreement Adoption Proposal and the Adjournment Proposal.

Broker non-votes will be included in the determination of the number of shares present at the special meeting for determining a quorum at the meeting. Broker non-votes will have no effect on the Merger Agreement Adoption Proposal and the Adjournment Proposal.

Q:     Who counts the votes?

A:     All votes will be tabulated by the inspector of election appointed for the special meeting. Votes for each proposal will be tabulated separately.

Q:     If a stockholder gives a proxy, how are the shares of Staffing 360 common stock voted?

A:     Regardless of the method by which you choose to vote, the individuals named on the enclosed proxy card will vote your shares of Staffing 360 common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Staffing 360 common stock should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the special meeting.

Q:     What should I do if I receive more than one set of voting materials?

A:     You may receive more than one set of the proxy materials (consisting of this proxy statement/prospectus, the accompanying Notice of Special Meeting of Stockholders of Staffing 360, and the proxy card or voting instruction form). For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. Similarly, if you are a stockholder of record and also hold shares in a brokerage account, you will receive a copy of the proxy materials, including a proxy card, for shares held in your name and a voting instruction card for shares held in “street name.” Please complete, sign, date and return each proxy card and voting instruction card that you receive to ensure that all of your shares are voted.

Q:     How will my proxy vote my shares if I do not provide specific voting instructions?

A:     If you are a record holder who returns a signed proxy card that does not specify how you want to vote your shares on one or more proposals, the proxies will vote your shares for each proposal as to which you did not provide any voting instructions, and such shares will be voted in the following manner:

•        “FOR” the Merger Agreement Adoption Proposal; and

•        “FOR” the Adjournment Proposal.

We do not intend to bring any other matter for a vote at the special meeting, and we do not know of anyone else who intends to do so. Your proxies are authorized to vote on your behalf, however, using their best judgment, on any other business that properly comes before the special meeting.

Q:     How do I change my vote?

A:     If you are a stockholder of record, you may revoke your proxy at any time before your shares are voted at the special meeting by:

•        notifying Staffing 360 Corporate Secretary in writing at 757 Third Avenue, 27th Floor, New York, New York 10017, that you are revoking your proxy before 5:00 p.m., Eastern Time, on [•], 2025;

•        submitting a new proxy at a later date via the Internet, phone or by signing and delivering a new proxy card relating to the same shares and bearing a later date than the date of the previous proxy prior to the vote at the special meeting, in which case your later-submitted proxy will be recorded and your earlier proxy revoked; or

•        virtually attending and voting online at the special meeting.

If you are a “street name” holder, your broker, bank or other nominee should provide instructions explaining how you may change or revoke your voting instructions. Logging in for virtual attendance at the special meeting alone will not revoke your proxy.

Q:     Where can I find the voting results of the special meeting?

A:     The preliminary voting results for the Staffing 360 special meeting will be announced at that special meeting. In addition, within four business days after completion of its special meeting, Staffing 360 intends to file the final voting results of its respective special meeting with the SEC on a Current Report on Form 8-K.

Q:     Do I have any dissenters’ or appraisal rights with respect to any of the matters to be voted on at the special meeting?

A:     No. Staffing 360 stockholders do not have any dissenters’ or appraisal rights under Delaware law in connection with the proposed merger or with respect to any of the matters to be voted on at the special meeting.

Q:     Are there any risks that I should consider in deciding whether to vote for the approval of the Staffing 360 Merger Agreement adoption proposal?

A:     Yes. You should read and carefully consider the risk factors set forth in the section titled “Risk Factors” of this proxy statement/prospectus. You also should read and carefully consider the risk factors of Atlantic International and Staffing 360 contained in the documents that are incorporated by reference into this proxy statement/prospectus. See the section titled “Where You Can Find More Information” of this proxy statement/prospectus.

Q:     Who is soliciting proxies, how are they being solicited, and who pays the cost

A:     Proxies are being solicited by Staffing 360 officers, directors, and employees on behalf of Staffing 360 either by mail, telephone, telecopy, e-mail or through personal contact. These officers and employees will not receive additional compensation but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees, and fiduciaries, in connection with shares registered in their names, will be asked to forward solicitation material to the beneficial owners of such shares. Staffing 360 will reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation materials and collecting voting instructions.

Q:     What are the U.S. federal income tax consequences of the Merger to Staffing 360 stockholders?

A:     The Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code (the “Code’), but no assurance can be given that the Merger will so qualify, that the U.S. Internal Revenue Service (the “IRS”), will not challenge such qualification or that a court would not sustain such a challenge. While the closing of the Merger is not conditioned upon achieving or receiving a ruling from the IRS or opinion of counsel with respect to, such qualification, Staffing 360 intends to obtain a tax opinion from its counsel, Haynes and Boone, LLP.

Assuming that the Merger qualifies as a “reorganization,” a U.S. holder (as defined in the section titled “U.S. Federal Income Tax Consequences of the Merger” of this proxy statement/prospectus) of Staffing 360 common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of Staffing 360 common stock for Atlantic International common stock in the Merger. If the Merger does not so qualify, the exchange of Staffing 360 common stock for Atlantic International common stock in the Merger will be a taxable transaction for U.S. federal income tax purposes.

See the section titled “U.S. Federal Income Tax Consequences of the Merger” of this proxy statement/prospectus for a more complete description of certain U.S. federal income tax consequences of the Merger. Please consult your tax advisors as to the specific tax consequences to you of the Merger, including the consequences if the Merger does not qualify as a “reorganization.”

Q:     When is the Merger expected to be completed?

A:     Subject to the satisfaction or waiver of the closing conditions described under the section titled “The Merger Agreement — Conditions to the Completion of the Merger” of this proxy statement/prospectus, including the adoption of the Merger Agreement by Staffing 360 stockholders, the Merger is expected to be completed in [•], 2025. However, neither Atlantic International nor Staffing 360 can predict the actual date on which the Merger will be completed, or if the Merger will be completed at all, because completion of the Merger is subject to conditions and factors outside the control of both companies.

Q:     What are the conditions to the completion of the Merger?

A:     The Merger is subject to a number of conditions to closing as specified in the Merger Agreement. These closing conditions include, among others:

•        the Parties shall have performed and complied in all material respects with all terms, covenants and conditions of the Merger Agreement to be complied with and performed by the parties at or before closing of the Merger;

•        there shall be no pending or threatened material third party actions seeking to obtain damages in connection with, or to restrain, prohibit, invalidate, set aside, in whole or in part, the consummation of the Merger Agreement or the transactions contemplated by the Merger Agreement, or which if successful could have a material adverse effect on any party, or any order providing for any of the foregoing;

•        Atlantic International shall have obtained approval of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement by vote of the Atlantic International Board of Directors in accordance with the Delaware law, and Atlantic International’s governing documents; and

•        Staffing 360 shall have obtained approval of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement by required vote of the Staffing 360 stockholders and the Staffing 360 Board of Directors in accordance with Delaware Law, and Staffing 360’s governing documents.

•        Staffing 360 shall have delivered to Atlantic International:

•        a signed agreement between the Internal Revenue Service and Staffing 360 concerning the terms of settlement mutually agreeable to Atlantic International; and

•        a signed settlement agreement with Jackson Investment Group (“Jackson”) converting Staffing 360’s indebtedness with the appropriate Jackson party whereby: (i) all interest accrued and payable to appropriate Jackson party will be waived or forgiven; (ii) the principal amount of the Loan will be converted into a certain number of shares of preferred stock to be agreed to by the parties which shall then depending on certain conditions convert to up to 5.6 million shares of Atlantic International common stock. All shares in each case subject to a one-year lockup.

•        Signed agreements to be mutually agreed to by the Parties whereby the applicable parties shall: (i) convert any amounts owed in Earned Contingent Cash Payment into five million (5,000,000) Series H Preferred Shares of the Company and waive any interest/dividends or other payments due from the Company related to such Earned Contingent Cash Payment; and then (i) convert all Series H Preferred Shares into 3,500,000 shares of Atlantic Common Stock which shall piggy-back registration rights commencing 6 months after Closing and a lock-up such that: (A) (i) all of the shares are subject to a lock up for the 6 months after Closing; (ii) 1,750,000 shares of Atlantic Common Stock are subject to a lock-up for the period starting on 6 months after Closing until 9 months after Closing; (iii) 875,000 shares of Atlantic Common Stock are subject to a lock-up for the period starting on 9 months after Closing until 12 months after Closing; and (iv) the lock-up shall terminate 12 months after Closing and (B) the lock-up shall not apply to the extent shares of Atlantic Common Stock must be sold to pay any taxes from such applicable holder.

No assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, even if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Merger could cause the combined company not to realize, or to be

delayed in realizing, some or all of the benefits that Atlantic International and Staffing 360 expect to achieve if the Merger is successfully completed within the expected timeframe. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Merger, see the sections titled “The Merger Agreement — Conditions to the Completion of the Merger” and “The Merger — Regulatory Approvals” of this proxy statement/prospectus.

Q:     What happens if the Merger is not completed?

A:     If the Merger is not completed for any reason, Staffing 360 stockholders will not receive any Merger Consideration for their shares of Staffing 360 common stock in connection with the Merger. Instead, Staffing 360 will remain an independent public company and Staffing 360 common stock will continue to be traded on the Nasdaq Capital Market and Atlantic International common stock will continue to be quoted on the Nasdaq Global Market and Atlantic International will not complete the share issuance of Atlantic International common stock pursuant to the Merger Agreement.

Q:     How will I receive the Merger consideration to which I am entitled?

A:     If you hold your shares of Staffing 360 common stock in book-entry form, whether through The Depository Trust Company, or otherwise, you will not be required to take any specific actions to exchange your shares of Staffing 360 common stock for shares of Atlantic International common stock. Such shares will, following the effective time, be automatically exchanged for shares of Atlantic International common stock (in book-entry form). If you instead hold your shares of Staffing 360 common stock in certificated form, then, after receiving the proper documentation from you following the effective time, the Exchange Agent will deliver to you the shares of Atlantic International common stock (in book-entry form). For more information, see the section titled “The Merger Agreement — Exchange of Shares.”

Q:     What is “householding” and how does it affect me?

A:     With respect to eligible stockholders who share a single address, Staffing 360 may send only one copy of the proxy materials to that address unless Staffing 360 receives instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce Staffing 360’s printing and postage costs. However, if a stockholder of record residing at such address wishes to receive separate proxy materials in the future, he or she may contact us by sending a request to Staffing 360’s Corporate Secretary at 757 Third Avenue, 27th Floor, New York, NY 10017. Eligible stockholders of record receiving multiple copies of Staffing 360’s proxy materials can request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker or other intermediary can request householding by contacting the intermediary or by contacting us at the above address or phone number.

Staffing 360 hereby undertakes to deliver promptly, upon written or oral request, a copy of the proxy materials to a stockholder at a shared address to which a single copy of the document was delivered. Requests should be directed to the address or phone number set forth above.

Q:     What should I do now?

A:     You should read this proxy statement/prospectus carefully and in its entirety, including the annexes, and return your completed, signed and dated proxy card(s) by mail in the enclosed postage-paid envelope(s) or submit your voting instructions over the Internet, or by telephone, as soon as possible so that your shares will be voted in accordance with your instructions.

Q:     How can I find more information about Atlantic International and Staffing 360?

A:     You can find more information about Atlantic International and Staffing 360 by reading this proxy statement/prospectus and from various sources described under “Where You Can Find More Information.”

Q:     Whom do I call if I have questions about the Staffing 360 special meeting or the Merger?

A:     The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this proxy statement/prospectus. We urge you to carefully read this entire proxy statement/prospectus, including the documents we refer to in this proxy statement/prospectus. If you have any questions, or need additional materials, please feel free to contact the Company at its e-mail address: companysecretary@staffing360solutions.com.

RISK FACTORS

In deciding whether to vote for the adoption of the Merger Agreement, Staffing 360 stockholders are urged to carefully consider all of the information included or incorporated by reference in this proxy statement/prospectus, including the combined and consolidated financial statements and notes thereto. You should also consider carefully the following risks, together with all the other information in this proxy statement/prospectus, including the combined and consolidated financial statements and notes thereto, as well as the risks, uncertainties and other information set forth in the reports and other materials filed or furnished by Atlantic International and Staffing 360, with the U.S. Securities and Exchange Commission (the “SEC”), before you vote your shares. The value of your investment following the completion of the Merger will be subject to significant risks affecting, among other things, Atlantic International’s business, financial condition, results of operations and prospects. If any of the following risks or the risks included in the public filings of Atlantic International actually materializes following the Merger, Atlantic International’s operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of the Atlantic International common stock could decline and you could lose part or all of your investment.

Risks Related to the Merger

The Merger may be delayed or may not be completed and the Merger Agreement may be terminated in accordance with its terms, which could negatively impact Atlantic International and/or Staffing 360.

The Merger is subject to a number of conditions that must be satisfied, some of which are beyond the control of Atlantic International and Staffing 360, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Merger may be delayed or not completed. These conditions include, among others:

•        the Parties shall have performed and complied in all material respects with all terms, covenants and conditions of the Merger Agreement to be complied with and performed by the parties at or before closing of the Merger;

•        there shall be no pending or threatened material third party actions seeking to obtain damages in connection with, or to restrain, prohibit, invalidate, set aside, in whole or in part, the consummation of the Merger Agreement or the transactions contemplated by the Merger Agreement, or which if successful could have a material adverse effect on any party, or any order providing for any of the foregoing;

•        Atlantic International shall have obtained approval of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement by vote of the Atlantic International Board of Directors in accordance with the Delaware aw, and Atlantic International’s governing documents; and

•        Staffing 360 shall have obtained approval of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement by required vote of the Staffing 360 stockholders in accordance with the Delaware law, and Staffing 360’s governing documents.

•        Staffing 360 shall have delivered to Atlantic International:

•        a signed agreement between the Internal Revenue Service and Staffing 360 concerning the terms of settlement mutually agreeable to Atlantic International; and

•        a signed settlement agreement with the appropriate Jackson Investment (“Jackson”) party converting Staffing 360’s indebtedness with the appropriate Jackson party whereby: (i) all interest accrued and payable to appropriate Jackson party will be waived or forgiven; (ii) the principal amount of the Loan will be converted into a certain number of shares of Series H Preferred Stock to be agreed to by the parties which shall then depending on certain conditions convert to up to 5.6 million shares of Atlantic International common stock. All shares in each case subject to a one-year lockup.

•        signed agreements to be mutually agreed to by the Parties whereby the applicable parties shall: (i) convert any amounts owed in Earned Contingent Cash Payment into five million (5,000,000) Series H Preferred Shares of the Company and waive any interest/dividends or other payments due from the Company related to such Earned Contingent Cash Payment; and then (ii) convert all Series H Preferred Shares into 3,500,000 shares of Atlantic Common Stock which shall piggy-back registration rights commencing 6 months after Closing and a lock-up such that: (A) (i) all of the

shares are subject to a lock up for the 6 months after Closing; (ii) 1,750,000 shares of Atlantic Common Stock are subject to a lock-up for the period starting on 6 months after Closing until 9 months after Closing; (iii) 875,000 shares of Atlantic Common Stock are subject to a lock-up for the period starting on 9 months after Closing until 12 months after Closing; and (iv) the lock-up shall terminate 12 months after Closing and (B) the lock-up shall not apply to the extent shares of Atlantic Common Stock must be sold to pay any taxes from such applicable holder;

No assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Merger could cause Atlantic International not to realize, or to be delayed in realizing, some or all of the benefits that Atlantic International expects to achieve if the Merger is successfully completed within the expected time frame. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Merger, see the section titled “The Merger Agreement — Conditions to the Completion of the Merger” of this proxy statement/prospectus.

Additionally, either Atlantic International or Staffing 360 may terminate the Merger Agreement under certain circumstances.

If the Merger is not completed for any reason, including as a result of a failure to obtain the required Staffing 360 stockholder vote to approve the Merger Agreement Adoption Proposal, the ongoing businesses of Atlantic International and Staffing 360 may be adversely affected and, without realizing any of the benefits of having completed the Merger, Atlantic International and Staffing 360 would be subject to a number of risks, including the following:

•        each company may experience negative reactions from the financial markets, including negative impacts on its stock price;

•        each company may experience negative reactions from its partners, suppliers, employees and others;

•        each company will be required to pay their respective costs relating to the Merger, such as financial advisory, legal and accounting costs and associated fees and expenses, including, if applicable, a termination fee (with certain exceptions), whether or not the Merger is completed; and

•        matters relating to the Merger (including financial and accounting matters) will require substantial commitments of time and resources by Atlantic International management and Staffing 360 management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to Atlantic International or Staffing 360, as applicable, as an independent company.

Furthermore, as previously reported by Staffing 360 on Current Report on Form 8-K, on June 20, 2024, Staffing 360 received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (the “Staff”) indicating that it was no longer in compliance with the minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”) for continued listing on the Nasdaq Capital Market (“Nasdaq”) pursuant to Nasdaq Listing Rule 5550(b)(1), which such rule requires listed companies to maintain stockholders’ equity of at least $2,500,000 or meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations, which Staffing 360 does not currently meet.

On August 13, 2024, following the Staff’s review of Staffing 360’s plan to regain compliance with the Minimum Stockholders’ Equity Requirement submitted on June 14, 2024, and on August 5, 2024, Staffing 360 received a letter (the “Notice”) indicating that the Staff determined to deny Staffing 360’s request for continued listing on Nasdaq. Pursuant to the Notice, based on the preliminary nature of Staffing 360’s plan, the Staff determined that Staffing 360 did not provide a definitive plan evidencing its ability to achieve near term compliance with the Minimum Stockholders’ Equity Requirement. Staffing 360 requested an appeal of the Staff’s determination, and a hearing before the Nasdaq Hearings Panel (the “Panel”) was held on October 3, 2024.

On October 8, 2024, Staffing 360 received a letter (the “Letter”) from the Nasdaq Hearings Panel (“Panel”) indicating that the Panel has determined to grant Staffing 360’s request to continue its listing on Nasdaq, subject to the Merger Agreement being signed by November 1, 2024, which, in fact, occurred and the Merger being completed by December 31, 2024. If the Merger is not completed, Staffing 360 may be unable to comply with certain milestone set forth in the Letter, which can result in delisting of Staffing 360 common stock from Nasdaq.

In addition, if the Merger is not completed, Atlantic International and Staffing 360 could be subject to litigation related to any failure to complete the Merger or to perform their respective obligations under the Merger Agreement. If the Merger is not completed, Atlantic International and Staffing 360 cannot assure their stockholders that these risks will not materialize and will not materially affect the business, financial condition, results of operations and stock prices of Atlantic International or Staffing 360.

The market price for shares of Atlantic International common stock following the completion of the Merger may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of shares of Atlantic International common stock and Staffing 360 common stock.

Upon consummation of the Merger, Staffing 360 stockholders will become Atlantic International stockholders. Atlantic International’s business differs from that of Staffing 360 in certain respects, and, accordingly, the financial condition and results of operations of Atlantic International after completion of the Merger, as well as the market price of shares of Atlantic International common stock, may be affected by factors that are different from those currently or historically affecting the financial condition and results of operations of Atlantic International or Staffing 360. In addition, the stock market has experienced significant price and volume fluctuations in recent times, which, if they continue to occur, could adversely affect the market for, or liquidity of, Atlantic International common stock, regardless of Atlantic International’s actual results of operations. For a discussion of the businesses of each of Atlantic International and Staffing 360 and some important factors to consider in connection with those businesses, please see the sections titled “Information About Atlantic International” and “Information About Staffing 360” of this proxy statement/prospectus and the documents and information included elsewhere in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus and listed under the section titled “Where You Can Find More Information” of this proxy statement/prospectus.

The shares of Atlantic International common stock to be received by Staffing 360 stockholders as a result of the Merger will have rights different from the shares of Staffing 360 common stock.

Upon consummation of the Merger, the rights of Staffing 360 stockholders, who will become Atlantic International stockholders, will be governed by the governing corporate documents of Atlantic International in effect at the effective time, including Atlantic International’s Amended and Restated Certificate of Incorporation (“Atlantic International Charter”) and Atlantic International’s Amended and Restated Bylaws (the “Atlantic International Bylaws). Despite the fact that both companies are governed by the DGCL, the rights associated with Staffing 360 common stock are different from the rights which will be associated with Atlantic International common stock. See the section titled “Comparison of Stockholders’ Rights” of this proxy statement/prospectus for a discussion of these rights.

After the Merger, Staffing 360 stockholders will have a significantly lower ownership and voting interest in Atlantic International than they currently have in Staffing 360 and will exercise less influence over management and policies of Atlantic International after completion of the Merger.

After completion of the Merger, the current common stockholders of Staffing 360 (including Senior Management pursuant to the terms of the Merger Agreement) will own approximately 5.9% of Atlantic International common stock compared with their last ownership of 100% of Staffing 360 prior to the Merger. Consequently, former Staffing 360 stockholders will have far less influence over the management and policies of Atlantic International after completion of the Merger than they currently have over the management and policies of Staffing 360.

Until the completion of the Merger or the termination of the Merger Agreement in accordance with its terms, Atlantic International and Staffing 360 are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Atlantic International or Staffing 360 and their respective stockholders.

From and after the date of the Merger Agreement and prior to completion of the Merger, the Merger Agreement:

•        restricts Atlantic International and Staffing 360 from taking specified actions without the consent of the other party; and

•        requires each of the parties to use reasonable efforts to take, or cause to be taken, all actions as are to be taken by each of them, respectively, or cause to be done all things reasonably necessary or advisable to consummate and make effective as promptly as reasonably practicable the transactions contemplated by the Merger Agreement.

These restrictions may prevent Atlantic International or Staffing 360 from making certain changes to their respective businesses or organizational structures or from pursuing attractive business opportunities that may arise prior to the completion of the Merger, and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from the pendency of the Merger could be exacerbated by any delays in consummation of the Merger or termination of the Merger Agreement. See the section titled “The Merger Agreement — Conduct of Business Prior to the Effective Time” of this proxy statement/prospectus.

The Merger, and uncertainty regarding the Merger, may cause current or future employees, consultants, vendors or strategic partners to delay or defer decisions concerning Atlantic International and Staffing 360 and adversely affect each company’s ability to effectively manage their respective businesses.

The Merger will happen only if the stated conditions are met, including the relevant stockholder approvals, among other conditions. Many of the conditions are outside the control of Atlantic International and Staffing 360, and both parties also have certain rights to terminate the Merger Agreement. Accordingly, there may be uncertainty regarding the completion of the Merger. This uncertainty may cause current or future employees, consultants, vendors, strategic partners or others that deal with Atlantic International or Staffing 360 to delay or defer entering into contracts with Atlantic International or Staffing 360 or making other decisions concerning Atlantic International or Staffing 360 or could cause such persons or others to seek to change or cancel existing business relationships with Atlantic International or Staffing 360, which could negatively affect their respective businesses. Any delay or deferral of those decisions or changes in existing agreements could have an adverse impact on the respective businesses of Atlantic International and Staffing 360, regardless of whether the Merger is ultimately completed.

Whether or not the Merger is completed, the announcement and pendency of the Merger diverted and will continue to divert significant management resources to complete the Merger, which could have an adverse effect on Atlantic International’ and Staffing 360’s respective businesses, results of operations and/or market prices.

Whether or not the Merger is completed, the announcement and pendency of the Merger diverted and will continue to cause disruptions in the businesses of Atlantic International and Staffing 360 by directing the attention of management of each of Atlantic International and Staffing 360 toward the completion of the Merger and, with respect to Staffing 360 and Atlantic International’s activities. Atlantic International and Staffing 360 have each diverted significant management resources in an effort to complete the Merger and are each subject to restrictions contained in the Merger Agreement on the conduct of their respective businesses in the period prior to the completion of the Merger. If the Merger is not completed, Atlantic International and Staffing 360 will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.

The directors and executive officers of Staffing 360 have interests and arrangements that may be different from, or in addition to, those of Atlantic International and Staffing 360 stockholders generally.

When considering the recommendations of the Staffing 360 Board of Directors with respect to the proposals described in this proxy statement/prospectus, stockholders should be aware that the directors and executive officers of Staffing 360 have interests in the Merger that are different from, or in addition to, those of Staffing 360 stockholders generally. These interests include, among others:

•        after the Merger, each of Brendan Flood and Alicia Barker with continue to be employed within their respective roles with Staffing 360;

•        pursuant to the Merger Agreement, Atlantic International and Staffing 360 have agreed to negotiate and agree to the terms of amended employment agreements with Brendan Flood and Alicia Barker, as President and Executive Vice President, respectively, prior to the filing with the SEC of the Registration Statement on Form S-4 in connection with the Merger, with such terms including an issuance of 1,263,020 of Atlantic common stock to each of Brendan Flood and Alicia Barker, which includes a six-month vesting period and a term of three years; and

•        the continued indemnification of current directors and officers of Staffing 360 and the continuation of directors’ and officers’ liability insurance after the Merger.

Staffing 360 stockholders should be aware of these interests when they consider the recommendation of the Staffing 360 board of directors that they adopt the Merger Agreement.

Atlantic International or Staffing 360 may waive one or more of the closing conditions without re-soliciting stockholder approval.

To the extent permitted by law, Atlantic International or Staffing 360 may determine to waive, in whole or part, one or more of the conditions to its obligations to consummate the Merger. Atlantic International and Staffing 360 currently expect to evaluate the materiality of any waiver and its effect on Atlantic International and Staffing 360 stockholders, as applicable, in light of the facts and circumstances at the time to determine whether any amendment of this proxy statement/prospectus or any re-solicitation of proxies or voting cards is required in light of such waiver. Any determination whether to waive any condition to the Merger or as to re-soliciting stockholder approval or amending this proxy statement/prospectus as a result of a waiver will be made by Atlantic International and Staffing 360, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time.

Each of Atlantic International and Staffing 360 will incur significant transaction and Merger-related costs in connection with the Merger.

Atlantic International and Staffing 360 have each incurred and expect to incur a number of non-recurring costs associated with Atlantic International’s acquisition of Staffing 360, as well as transaction fees and other costs related to the Merger. These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, filing fees, printing expenses and other related charges. Some of these costs are payable by Atlantic International or Staffing 360, regardless of whether the Merger is completed. While both Atlantic International and Staffing 360 have assumed that certain expenses would be incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement, there are many factors beyond their control that could affect the total amount or the timing of any implementation expenses.

Staffing 360 warrants and options could increase the number of shares eligible for future resale in the public market and result in dilution to the stockholders.

As of December 12, 2024, Staffing 360 had outstanding warrants exercisable for 98,876 shares of Staffing 360 common stock with a weighted average exercise price of $240.77 per share and options exercisable for 5,118 shares of Staffing 360 common stock with a weighted average exercise price of $498.53 per share.

At the effective time of the Merger,

(i)     each outstanding option to purchase Staffing 360 common stock that is outstanding and has not been exercised prior to the closing of the Merger, whether or not vested, will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become an option to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such option multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed option to purchase Staffing 360 common stock will be equal to the exercise price per share of the option to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent; and

(ii)    each outstanding warrant to purchase shares of common stock of Staffing 360 that has not been exercised prior to the closing of the Merger will be assumed by Atlantic International, subject to certain terms contained in the Merger Agreement, and become a warrant to purchase a number of shares of the Atlantic International common stock equal to the number of shares of Staffing 360 common stock underlying such warrant multiplied by the Exchange Ratio, and the exercise price for each share of Atlantic International common stock underlying an assumed warrant to purchase Staffing 360 common stock will be equal to the exercise price per share of the warrant to purchase Staffing 360 common stock in effect immediately prior to the completion of the Merger divided by the Exchange Ratio, rounded up to the nearest whole cent.

To the extent the trading price of Atlantic International common stock on the Record Date exceeds the applicable exercise price for the Staffing 360 warrants and options, the shares of Atlantic International common stock issued upon exercise of any of the Staffing 360 warrants or options will result in dilution to the then existing holders of Atlantic International common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of the Atlantic International common stock.

The Merger Agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with either Staffing 360 or Atlantic International.

Staffing 360 is subject to certain restrictions on its ability to solicit alternative acquisition proposals from third parties, to provide information to third parties and to enter into or continue discussions or negotiations with third parties regarding alternative acquisition proposals, subject to customary exceptions. These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of either company from considering or proposing such an acquisition.

The Exchange Ratio is not adjustable based on the market price of Atlantic International common stock, so the Merger Consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set a fixed Exchange Ratio of 1.202. Any changes in the market price of common stock before the completion of the Merger will not affect the number of shares Staffing 360 securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger, the market price of Atlantic International common stock declines from the market price on the date of the Merger Agreement, then Staffing 360 securityholders could receive Merger Consideration with substantially lower value. Similarly, if before the completion of the Merger, the market price of Atlantic International common stock increases from the market price on the date of the Merger Agreement, then Staffing 360 securityholders could receive Merger Consideration with substantially more value for their shares of Staffing 360 common stock than the parties had negotiated for in the establishment of the Exchange Ratio. For a discussion of the Exchange Ratio, see the section titled “The Merger Agreement — Exchange Ratio” in this proxy statement/prospectus.

The analysis received by the Staffing 360 Board of Directors from Cornerstone Valuation has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the analysis.

Such analysis was one of many factors considered by the Staffing 360 Board of Directors in approving the Merger. The analysis does not speak as of the time the Merger will be completed or any date other than the date of such analysis. Subsequent changes in the operation and prospects of Staffing 360 or Atlantic International, general market and economic conditions and other factors that may be beyond the control of Staffing 360 or Atlantic International, may significantly alter the value of Staffing 360 or Atlantic International or the prices of the shares of Staffing 360 common stock and Atlantic International by the time the Merger is to be completed. The analysis does not address the fairness of the Merger Consideration from a financial point of view to Staffing 360 at the time the Merger is to be completed, or as of any other date other than the date of such analysis, and the Merger Agreement does not require that the analysis be updated, revised or reaffirmed prior to the closing of the Merger to reflect any changes in circumstances between the date of the signing of the Merger Agreement and the completion of the Merger as a condition to closing the Merger. See the section titled “The Merger — Opinion of Cornerstone Valuation, Staffing 360’s Financial Advisor” in this proxy statement/prospectus.

If the Merger does not qualify as a “reorganization” under Section 368(a) of the Code, U.S. holders of Staffing 360 common stock may be required to pay additional U.S. federal income taxes.

For U.S. federal income tax purposes, the Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Haynes and Boone, LLP, counsel to Staffing 360, has delivered an opinion to the effect that it is more likely than not that the Merger will qualify as a “reorganization.” Such opinion of counsel is based on, among other things, certain factual representations made by Staffing 360 and Atlantic International and certain assumptions, all of which must be consistent with the state of facts existing at the time of the Merger. If any of these representations and assumptions are, or become, inaccurate or incomplete, such opinion may be invalid. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion, including with respect to the uncertainties referred to above and discussed in more detail in the section titled “U.S. Federal Income Tax Consequences of the Merger.” The closing of the Merger is not conditioned upon achieving, or receiving a ruling from the IRS or opinion of counsel with respect to, such qualification.

If the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder of Staffing 360 common stock generally would recognize gain or loss for U.S. federal income tax purposes on each share of Staffing 360 common stock surrendered in the Merger in an amount equal to the difference between the fair market value, at the time of the Merger, of the Atlantic International common stock received in the Merger and such holder’s adjusted tax basis in the Staffing 360 common stock surrendered in the Merger. Gain or loss must be calculated separately for each block of Staffing 360 common stock exchanged by such U.S. holder if such blocks were acquired at different times or for different prices. Any gain or loss recognized generally would be capital gain or loss, and generally would be long-term capital gain or loss if the U.S. holder’s holding period in a particular block of Staffing 360 common stock is more than one year at the effective time of the Merger. Long-term capital gain of certain non-corporate taxpayers, including individuals, generally is taxed at reduced U.S. federal income tax rates. The deductibility of capital losses is subject to limitations. A U.S. holder’s tax basis in shares of Atlantic International common stock received in the Merger would be equal to the fair market value thereof as of the effective time of the Merger, and such U.S. holder’s holding period in such shares would begin on the day following the closing of the Merger.

See the section titled “U.S. Federal Income Tax Consequences of the Merger” of this proxy statement/prospectus for a more complete description of certain U.S. federal income tax consequences of the Merger. Please consult your tax advisors as to the specific tax consequences to you of the Merger, including the consequences if the Merger does not qualify as a “reorganization” for any reason.

Following the Merger, there can be no assurance that Atlantic International will be able to comply with the continued listing standards of Nasdaq.

Following the Merger, if Atlantic International fails to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum share price requirement, Nasdaq may take steps to delist Atlantic International’ securities. Such a delisting would likely have a negative effect on the price of the securities and would impair stockholders’ ability to sell or purchase the securities when they wish to do so. In the event of a delisting, Atlantic International can provide no assurance that any action taken by it to restore compliance with listing requirements would allow the securities to become listed again, stabilize the market price or improve the liquidity of the securities, prevent the securities from dropping below the Nasdaq minimum share price requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if the securities are not listed on, or become delisted from Nasdaq, for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of the securities may be more limited than if Atlantic International were quoted or listed on Nasdaq or another national securities exchange. Stockholders may be unable to sell their securities unless a market can be established or sustained.

Atlantic International may be exposed to increased litigation, which could have an adverse effect on Atlantic International’s business and operations.

Atlantic International may be exposed to increased litigation from stockholders, distributors, suppliers, consumers and other third parties after completion of the Merger. Such litigation may have an adverse impact on Atlantic International’s business and results of operations or may cause disruptions to Atlantic International’ operations.

The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus may not be indicative of what Atlantic International’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is presented solely for illustrative purposes and is not necessarily indicative of what Atlantic International’s actual financial position or results of operations would have been had the Merger been completed on the dates indicated. This unaudited pro forma condensed combined financial information reflects adjustments that were developed using preliminary estimates based on available information and various assumptions, and may be revised as additional information becomes available. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statement/prospectus.

While presented with numeric specificity, the Atlantic International and Staffing 360 unaudited pro forma condensed combined financial information provided in this proxy statement/prospectus is based on numerous variables and assumptions (including, but not limited to, those related to general business, staffing and related industries, and economic, market and financial conditions and additional matters specific to Atlantic International’s or Staffing 360’s business, as applicable) that are inherently subjective and uncertain and are beyond the control of the respective management teams of Atlantic International and Staffing 360. As a result, actual results may differ materially from the unaudited pro forma condensed combined financial information. Important factors that may affect actual results and cause these unaudited projected financial forecasts to not be achieved include, but are not limited to, risks and uncertainties relating to Atlantic International’s business (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information.”

Risks Relating to Atlantic International’s Business

Unless otherwise indicated, reference in this section and elsewhere in this proxy statement/prospectus to international business being adversely affected, negatively impacted or harmed will include an adverse effect on, or a negative impact or harm to, the business, reputation, financial condition, results of operations, revenue and future prospects. References in under this section, “Risks Relating to Atlantic International’s Business” to the “Company,” “we,” “our,” or “us,” generally refer to Atlantic International. References to the “Lyneer Merger” relate to the merger and other transactions contemplated by the Lyneer Merger Agreement consummated on June 4, 2024.

Our ability to use our federal net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2023, we had federal net operating loss carryforwards of approximately $21,893,488. The available net operating loss carryforwards, if not utilized by us to offset taxable income in subsequent taxable periods, will begin to expire in 2034, except for certain net operating losses that can be carried forward indefinitely. Under the Internal Revenue Code and the Treasury Regulations promulgated thereunder, certain ownership changes could limit a corporation’s ability to utilize its net operating loss carryforwards and other tax attributes to offset its federal taxable income in subsequent taxable periods.

An “ownership change” (generally a 50% change in equity ownership over a three-year period) under Section 382 of the Code could limit our ability to utilize our net operating loss carryforwards to offset, post-change, our U.S. federal taxable income. Section 382 of the Code imposes an annual limitation on the amount of post-ownership change federal taxable income a corporation may offset with pre-ownership change net operating loss carryforwards. We believe the Merger may have caused an ownership change of our company that could limit our ability to utilize our pre-Merger net operating loss carryforwards, and as a result, increase our federal income tax liability in subsequent taxable periods.

Our principal stockholder owns approximately 43% of our outstanding share of majority of our common stock, under a pledge agreement which is in default and its interests may conflict with yours in the future.

All of IDC’s shares have been pledged to Lyneer’s lenders under a loan agreement which is in default. Each share of our common stock initially entitles its holder to one vote on all matters presented to stockholders generally. Accordingly, IDC our principal stockholder, owns approximately forty-three (43%) percent of our outstanding shares, and may be able to control the election and removal of the majority of our directors and thereby determine corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of the articles and by-laws and other significant corporate transactions of our company for so long as it retains significant ownership. This concentration of ownership may delay or deter possible changes in control of our company, which may reduce the value of an investment in our common stock. So long as IDC continues to own a significant amount of the voting power, even through such amount is less than 50% they will continue to be able to strongly influence or effectively control decisions of our company.

Our principal stockholder, has defaulted on its debt obligations which could result in a change of control of our company.

On August 31, 2021, Lyneer and IDC as co-borrowers entered into a Term Note in the amount of $30,300,000 (the “Term Note”) with an investment management firm as administrative agent and certain lenders. Our principal stockholder, IDC owns approximately forty-three (43%) percent of our issued and outstanding common stock. In order to secure the current joint and several debt obligations of IDC and Lyneer until such time as such indebtedness can be restructured

or repaid, we pledged to a second secured lender our equity ownership of Lyneer and IDC pledged to the lender under the Term Note its equity ownership in our Company. IDC has defaulted on its debt obligations under the joint and several debt obligations of IDC and Lyneer under the Term Note. The lender under the Term Note would be able to foreclose on our equity interest in Lyneer and upon IDC’s equity ownership of our Company. IDC and its Lender are negotiating a settlement and no action is being taken to date against Lyneer. Any foreclosure upon our equity in Lyneer and/or IDC’s common stock of our Company by the lender, or any sales by the lender of IDC’s common stock of our Company, may have an adverse effect on the market price of our common stock resulting in a diminution in the value of your investment. See “Certain Beneficial Owners of Atlantic International Common Stock.”

Lyneer operates in an intensely competitive and rapidly changing business environment, and there is a substantial risk that its services could become obsolete or uncompetitive.

The markets for Lyneer’s services are highly competitive. Lyneer’s markets are characterized by pressures to provide high levels of service, incorporate new capabilities and technologies, accelerate job completion schedules and reduce prices. Furthermore, Lyneer faces competition from a number of sources, including other executive search firms and professional search, staffing and consulting firms. Several of Lyneer competitors have greater financial and marketing resources than Lyneer does. New and current competitors are aided by technology, and the market has low barriers to entry and similarly such technologies have allowed employers to find workers without the help of traditional agencies. Specifically, the increased use of the internet may attract technology-oriented companies to the professional staffing industry. Free social networking sites such as LinkedIn and Facebook are also becoming a common way for recruiters and employees to connect without the assistance of a staffing company.

Lyneer’s future success depends largely upon its ability to anticipate and keep pace with those developments and advances. Current or future competitors could develop alternative capabilities and technologies that are more effective, easier to use or more economical than Lyneer’s services. In addition, Lyneer believes that, with continuing development and increased availability of information technology, the industries in which Lyneer competes may attract new competitors. If Lyneer’s capabilities and technologies become obsolete or uncompetitive, its related sales and revenue would decrease. Due to competition, Lyneer may experience reduced margins on its services, loss of market share, and loss of customers. If Lyneer is not able to compete effectively with current or future competitors as a result of these and other factors, Lyneer’s business, financial condition and results of operations could be materially adversely affected.

Lyneer’s debt instruments contain covenants that could limit its financing options and liquidity position, which would limit its ability to grow its business.

Covenants in Lyneer’s debt instruments impose operating and financial restrictions on Lyneer. These restrictions prohibit or limit its ability to, among other things:

•        pay cash dividends to its stockholders, subject to certain limited exceptions;

•        redeem or repurchase its common stock or other equity;

•        incur additional indebtedness;

•        permit liens on assets;

•        make certain investments (including through the acquisition of stock, shares, partnership or limited liability company interests, any loan, advance or capital contribution);

•        sell, lease, license, lend or otherwise convey an interest in a material portion of our assets; and

•        sell or otherwise issue shares of its common stock or other capital stock subject to certain limited exceptions.

Lyneer’s failure to comply with the restrictions in its debt instruments could result in events of default, which, if not cured or waived, could result in Lyneer being required to repay these borrowings before their due date. The holders of Lyneer’s debt may require fees and expenses to be paid or other changes to terms in connection with waivers or amendments. If Lyneer is forced to refinance these borrowings on less favorable terms, Lyneer’s results of operations and financial condition could be adversely affected by increased costs and rates. In addition, these restrictions may limit its ability to obtain additional financing, withstand downturns in its business or take advantage of business opportunities.

Lyneer has a significant amount of debt obligations and its failure to restructure or pay such obligations when due could have a material adverse impact on Lyneer’s financial condition and long-term viability.

In connection with the closing of the Lyneer Merger, Atlantic International issued to IDC the a promissory note in the principal amount of $35,000,000 with an original maturity date of September 30, 2024, which was subsequently extended to the earlier of March 31, 2026 or the completion of at least a $40 million capital raise (the “Merger Note”). In addition to the IDC Merger Note, Lyneer’s existing debt obligations currently include all of the debt obligations of IDC as a co-borrower as all of the loan arrangements entered into by Lyneer and IDC provide that such parties are jointly and severally liable for the full amount of the indebtedness. While Lyneer is legally jointly and severally liable for IDC’s debt obligations, as of the date of the Lyneer Merger, the Company deconsolidated its joint and several debt obligations as it is reasonably probable that IDC has the ability to repay their portion. At September 30, 2024, such indebtedness totaled approximately $104,045,357. The joint indebtedness of Lyneer and IDC is made up of a revolving credit facility and a term loan from their senior lenders and promissory notes that are payable to the two prior owners of Lyneer. Currently, and until such obligations are either repaid in full or restructured by the lenders to release Lyneer as an obligor on such indebtedness, if IDC cannot, or does not, repay any portion of the debt owed by IDC (as described above under “Our Principal Shareholder has defaulted on its debt obligations which could result in a change of control of our company”. Lyneer could be responsible for repaying all of the outstanding obligations and Lyneer’s current operations are not expected to be sufficient to make all of the necessary payments. Pursuant to an Allocation Agreement dated as of December 25, 2023, IDC agreed with Lyneer to assume responsibility for all payments under the term loan and the promissory notes payable to the two prior owners of Lyneer (the “Assumed Debt”), and all but $42,778,061 that was outstanding under the revolving credit facility as of September 30, 2024. However, until such time as Lyneer’s joint and several debt obligations are restructured, the agreement of IDC to assume all but Lyneer’s $42,778,061 of the joint indebtedness is being given effect solely for accounting purposes, although Lyneer will remain a joint and several obligor on such indebtedness and will be obligated to pay such indebtedness if IDC does not do so.

In addition, under the Allocation Agreement, IDC and Prateek Gattani, IDC’s Chief Executive Officer and our Chairman of the Board, have agreed for IDC to work with Lyneer to implement a plan to refinance or otherwise satisfy the Assumed Debt and to restructure their revolving credit facility with current credit availability of up to $60,000,000 for which Lyneer is currently jointly and severally liable with IDC so that Lyneer will be obligated for only its portion under the facility. Lyneer intends to enter into a new revolving credit facility with its current lender or a new lender that will be supportable by Lyneer’s stand-alone borrowing base and is expected to be on terms similar to those of the existing agreement. It is contemplated that the new credit facility will provide credit availability to Lyneer of up to $40,000,000 and will replace Lyneer’s remaining obligations under the existing revolving credit facility. However, there can be no assurance that Lyneer will be able to support its continuing indebtedness, to generate revenues sufficient in amount to enable us to pay our indebtedness under the Merger Note, or to repay or refinance any such indebtedness when due. Lyneer’s failure to comply with its obligations under its existing indebtedness following the Lyneer Merger, or to repay or refinance such indebtedness when due, including our indebtedness under the Merger Note, would likely have a material adverse impact on our financial condition and long-term viability.

Lyneer will remain jointly and severally liable for the Assumed Debt until such indebtedness is restructured to remove Lyneer as an obligor or such indebtedness is paid in full.

As described in the previous risk factor, notwithstanding the deconsolidation of debt for accounting purposes, Lyneer will remain legally jointly and severally liable as a co-borrower with IDC on all loan arrangements for which they are now jointly liable until such time as such loan arrangements are restructured or paid in full. The assets of Lyneer have been pledged to the senior lender under the revolving credit facility and, in connection with the closing of the Lyneer Merger, were pledged to the lender under the term loan our equity interests in Lyneer, our sole operating subsidiary, as collateral for the repayment of such loan. Lyneer and IDC agreed that if they are unable to restructure or repay their joint and several indebtedness by September 30, 2024, or there occurs any other event of default under the revolving credit facility or the term loan, including, but not limited to completion of an Initial Capital Raise (as defined) by September 15, 2024, the lenders under the revolving credit facility and the term loan will be able to foreclose upon the equity and assets of Lyneer, which could result in a loss of your investment. As of December 23, 2024, the September 15th and 30th dates have passed without being fulfilled; however, the respective lenders are working with Lyneer and have given no indication that they intend to default to Lyneer. IDC is in default with its lender and is negotiating a settlement on its debt obligations. Notwithstanding the fact that IDC and Prateek Gattani have agreed to repay the joint and several indebtedness under the Allocation Agreement, in the event that IDC cannot or will not

repay any of such indebtedness, Lyneer may be required to make such payments. In such event, IDC would then be required to repay Lyneer for the amounts paid on IDC’s behalf. The failure of IDC to either restructure the existing joint and several obligations to remove Lyneer as a co-borrower and/or to repay the joint and several indebtedness could have a material adverse impact on Lyneer’s financial condition and its long-term viability and the market price of our common stock and there is no guarantee that the lenders will continue to work with the Company amicably.

We will be required to raise additional funds prior to the maturity date of the Merger Note to repay such note and our other outstanding indebtedness and to support our future capital needs.

We believe our cash on hand and cash generated from operations, will not be sufficient to pay the Merger Note and our other outstanding indebtedness in full when due and to fund our ongoing operations. As stated above, Lyneer has been in default under its principal credit facilities and outstanding promissory notes and any future defaults by Lyneer under its credit facilities could have a material adverse impact on Lyneer’s financial condition and long-term viability. Under the forbearance agreements dated August 12, 2024, we are required to seek at least $20 million future financing prior to September 15, 2024, and on or before September 30, 2024, to restructure the outstanding indebtedness that is the subject of such forbearance agreements. In addition, we are required to seek additional financing prior to September 30, 2024, the original maturity date of the Merger Note, to repay the Merger Note when due. Thereafter, we will be required to seek financing to pay or refinance our other outstanding indebtedness. As of December 23, 2024, the September 15th and 30th dates have passed without being fulfilled; however, the respective lenders are working with Lyneer and have given no indication that they intend to default Lyneer; however, there can be no guarantee that the lenders will continue to work with Lyneer amicably.

We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. Our ability to obtain additional financing will be subject to market conditions, our operating performance and investor sentiment, among other factors. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing may contain terms that are not favorable to us or our stockholders.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of those securities could result in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline further and existing stockholders may not agree with our financing plans or the terms of such financings.

In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.

Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets, perhaps on unfavorable terms, which would have a material adverse effect on our business, financial condition and results of operations, and we ultimately could be forced to discontinue our operations and liquidate, in which event it is unlikely that stockholders would receive any distribution on their shares. Further, we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.

Lyneer faces risks associated with litigation and claims.

Lyneer and certain of its subsidiaries may be named as defendants in lawsuits from time to time that could cause them to incur substantial liabilities. Lyneer and certain of its subsidiaries are currently defendants in several actual or asserted class and representative action lawsuits brought by or on behalf of their current and former employees alleging violations of federal and state law with respect to certain wage and hour related matters, among other claims.

The various claims made in one or more of such lawsuits include, among other things, the misclassification of certain employees as exempt employees under applicable law, failure to comply with wage statement requirements, failure to compensate certain employees for time spent performing activities related to the interviewing process, and other related wage and hour violations. Such suits seek, as applicable, unspecified amounts for unpaid overtime compensation, penalties, and other damages, as well as attorneys’ fees. While all of Lyneer’s existing material litigation are subject to pending settlement approvals by the applicable courts, there can be no assurance that such settlements will be approved by the courts. As a result, it is not possible to predict the outcome of these lawsuits. Notwithstanding the proposed settlements, these lawsuits, and future lawsuits that may be brought against Lyneer or its subsidiaries, may consume substantial amounts of Lyneer’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome of the lawsuits. An unfavorable outcome with respect to these lawsuits and any future lawsuits or regulatory proceedings could, individually or in the aggregate, cause Lyneer to incur substantial liabilities or impact its operations in such a way that may have a material adverse effect upon Lyneer’s business, financial condition or results of operations. In addition, an unfavorable outcome in one or more of these cases could cause Lyneer to change its compensation plans for its employees, which could have a material adverse effect upon Lyneer’s business.

Lyneer’s revenue can vary because its customers can terminate their relationship with them at any time with limited or no penalty.

Lyneer focuses on providing mid-level professional and light industrial personnel on a temporary assignment-by-assignment basis, which customers can generally terminate at any time or reduce their level of use when compared with prior periods. To avoid large placement agency fees, large companies may use in-house personnel staff, current employee referrals, or human resources consulting companies to find and hire new personnel. Because placement agencies typically charge a fee based on a percentage of the first year’s salary of a new worker, companies with many jobs to fill have a large financial incentive to avoid agencies.

Lyneer’s business is also significantly affected by its customers’ hiring needs and their views of their future prospects. Lyneer’s customers may, on very short notice, terminate, reduce or postpone their recruiting assignments with Lyneer and, therefore, affect demand for its services. As a result, a significant number of Lyneer’s customers can terminate their agreements at any time, making Lyneer particularly vulnerable to a significant decrease in revenue within a short period of time that could be difficult to quickly replace. This could have a material adverse effect on Lyneer’s business, financial condition and results of operations.

Lyneer’s service revenue increased by $27,885,448, or 9.8% for the nine months ended September 30, 2024, as compared with the prior year. Lyneer’s service revenue declined by $40,169,416, or 9.1%, during the year ended December 31, 2023, as compared to the prior fiscal year. This decrease was predominantly due to the lower revenues from Lyneer’s temporary placement services business due primarily to general economic pressures and lower temporary job demand. Permanent placement and other services decreased by $2,606,962, or 36.0%, due to lower permanent job demand and a lack of qualified workers seeking permanent placement employment.

Most of Lyneer’s contracts do not obligate its customers to utilize a significant amount of Lyneer’s staffing services and may be cancelled on limited notice, so Lyneer’s revenue is not guaranteed. Substantially all of Lyneer’s revenue is derived from multi-year contracts that are terminable for convenience. Under Lyneer’s multi-year agreements, Lyneer contracts to provide customers with staffing services through work or service orders at the customers’ request. Under these agreements, Lyneer’s customers often have little or no obligation to request Lyneer’s staffing services. In addition, most of Lyneer’s contracts are cancellable on limited notice, even if Lyneer is not in default under the contract. Lyneer may hire employees permanently to meet anticipated demand for services under these agreements that may ultimately be delayed or cancelled. Lyneer could face a significant decline in revenues and its business, financial condition or results of operations could be materially adversely affected if:

•        Lyneer sees a significant decline in the staffing services requested under its service agreements; or

•        Lyneer’s customers cancel or defer a significant number of staffing requests; or Lyneer’s existing customer agreements expire or lapse and it cannot replace them with similar agreements.

Lyneer has client concentration and the loss of a significant client could adversely affect Lyneer’s business operations and operating results.

Lyneer has one client that represented approximately 16% and 18% of Lyneer’s 2023 and 2022 revenues, respectively. No other customer accounted for more than 10% of Lyneer’s revenues in either period. The client’s contract with Lyneer consists of a master service agreement (“MSA”) for temporary employee services with various customer locations entering into separate service annexes. None of the revenues from a specific location exceeded 5% of the aggregate revenue associated with the client. The current term of the MSA expires in January 2025 and automatically renews for one-year subsequent terms. However, the client may terminate the agreement for convenience at any time, subject to any accrued payment obligations. If this client were to terminate its relationship with Lyneer, Lyneer would face a material decrease in revenues if it is unable to replace the client’s lost revenues. This, in turn, would be expected to have a material adverse effect on Lyneer’s business and financial condition.

Lyneer could be harmed by improper disclosure or loss of sensitive or confidential company, employee, associate or customer data, including personal data.

In connection with the operation of its business, Lyneer stores, processes and transmits a large amount of data, including personnel and payment information, about its employees, customers, associates and candidates, a portion of which is confidential and/or personally sensitive. In doing so, Lyneer relies on its own technology and systems, and those of third-party vendors it uses for a variety of processes. Lyneer and its third-party vendors have established policies and procedures to help protect the security and privacy of this information. Unauthorized disclosure or loss of sensitive or confidential data may occur through a variety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through our information systems, whether by Lyneer’s employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/or state-sponsored organizations, who may develop and deploy viruses, worms or other malicious software programs.

While Lyneer maintains cyber insurance with respect to many such claims and has provisions of agreements with third-parties that detail security obligations and typically have indemnification obligations related to the same, any such unauthorized disclosure, loss or breach could harm Lyneer’s reputation and subject Lyneer to government sanctions and liability under its contracts and laws that protect sensitive or personal data and confidential information, resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices that Lyneer and its third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such information. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions in which Lyneer provides services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment to Lyneer’s reputation in the marketplace. Following consummation of the Lyneer Merger, our board of directors and its audit committee will consult with Lyneer’s management and will be briefed by, and receive appropriate recommendations from, management on matters associated with regulatory compliance and security.

Lyneer has been and may be exposed to employment-related claims and losses, including class action lawsuits that could have a material adverse effect on its business.

Lyneer employs people internally and in the workplaces of other businesses. Many of these individuals have access to customer information systems and confidential information. The risks of these activities include possible claims relating to:

•        discrimination and harassment;

•        wrongful termination or denial of employment;

•        violations of employment rights related to employment screening or privacy issues;

•        classification of temporary workers;

•        assignment of illegal aliens;

•        violations of wage and hour requirements;

•        retroactive entitlement to temporary worker benefits;

•        errors and omissions by Lyneer’s temporary workers;

•        misuse of customer proprietary information;

•        misappropriation of funds;

•        damage to customer facilities due to negligence of temporary workers; and

•        criminal activity.

Lyneer may incur fines and other losses or negative publicity with respect to these problems. In addition, these claims may give rise to litigation, which could be time-consuming and expensive. New employment and labor laws and regulations may be proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. There can be no assurance that the corporate policies Lyneer has in place to help reduce its exposure to these risks will be effective or that Lyneer will not experience losses as a result of these risks. There can also be no assurance that the insurance policies Lyneer has purchased to insure against certain risks will be adequate or that insurance coverage will remain available on reasonable terms or be sufficient in amount or scope of coverage.

Long-term contracts do not comprise a significant portion of Lyneer’s revenue.

Because long-term contracts are not a significant part of Lyneer’s staffing services business, future results cannot be reliably predicted by considering past trends or extrapolating past results. Additionally, Lyneer’s clients will frequently enter nonexclusive arrangements with several firms, which the client is generally able to terminate on short notice and without penalty. The nature of these arrangements further exacerbates the difficulty in predicting Lyneer’s future results.

Lyneer may be unable to find sufficient candidates for its talent solutions business.

Lyneer’s talent solutions services business consists of the placement of individuals seeking employment. There can be no assurance that candidates for employment will continue to seek employment through Lyneer. Candidates generally seek contract or permanent positions through multiple sources, including Lyneer and its competitors. Before the COVID-19 pandemic, unemployment in the U.S. was at historic lows and during the second half of 2021, as the economy recovered, competition for workers in a number of industries became intense. When unemployment levels are low, finding sufficient eligible candidates to meet employers’ demands is more challenging. Although unemployment has risen in some areas in which Lyneer operates, talent shortages have persisted in a number of disciplines and jurisdictions. Any shortage of candidates could materially adversely affect Lyneer’s business or financial condition.

Lyneer’s growth of operations could strain its resources and cause its business to suffer.

While Lyneer plans to continue growing its business organically through expansion, sales efforts, and strategic acquisitions, while maintaining tight controls on its expenses and overhead, lean overhead functions combined with focused growth may place a strain on its management systems, infrastructure and resources, resulting in internal control failures, missed opportunities, and staff attrition that could have a negative impact on its business and results of operations.

Lyneer is dependent on its management personnel and employees, and a failure to attract and retain such personnel could harm its business.

Lyneer is engaged in the services business. As such, its success or failure is highly dependent upon the performance of its management personnel and employees, rather than upon tangible assets (of which Lyneer has few). There can be no assurance that Lyneer will be able to attract and retain the personnel that are essential to its success.

Lyneer’s results of operations can be negatively impacted by variable costs.

Lyneer’s results of operations can be negatively impacted by, among other things, changes in unemployment tax rates, changes in workers’ compensation insurance rates and claims relating to audits, and write-offs of uncollectible customer receivables.

Lyneer’s expansion and acquisition strategy may not be executed effectively.

Lyneer’s plan for strategic growth is dependent upon finding suitable acquisition targets and executing upon the transactions in a viable manner. Lyneer has not reached any definitive agreement with any acquisition targets, and Lyneer cannot assure you that it will consummate any acquisition on favorable terms or at all.

Risks of our roll-up strategy.

Our roll-up strategy, assumes, in part, we will be able to convince smaller firms that they can increase their profitability and market share through an affiliation with us and the use of our infrastructure, systems and programs the strategy will be to purchase, or merge with, smaller businesses in the staffing industry, thus decreasing certain operating inefficiencies and increasing economics of sale. Should these assumptions be incorrect, our strategy is unlikely to succeed. We will depend upon the abilities of people who own the businesses we acquire, or on the managers they employ. In addition, we must be able to attract and retain qualified personnel at all levels of operations and maintain the same levels of quality control over our services as previously maintained by acquired operations. Although Atlantic’s senior management has extensive experience in managing acquired operations, there can be no assurance that any acquired operations will be profitable. Thus, there can be no assurance that we will be successful our or roll-up strategy, that such strategy will result in increased profits, or that we can obtain, on affordable terms, any additional financing that might be necessary to affect our growth strategy.

Our strategy of growing our company through acquisitions may impact our business in unexpected ways.

Our growth strategy involves acquisitions that will help us expand our service offerings and diversify our geographic footprint. It is expected that we will continuously evaluate acquisition opportunities. However, there can be no assurance that we will be able to identify acquisition targets that complement our strategy and are available at valuation levels accretive to our business. Even if we are successful in acquiring additional entities, our acquisitions may subject our business to risks that may impact our results of operations, including:

•        our inability to integrate acquired companies effectively and realize anticipated synergies and benefits from the acquisitions;

•        the diversion of management’s attention to the integration of the acquired businesses at the expense of delivering results for the legacy business;

•        our inability to appropriately scale critical resources to support the business of the expanded enterprise and other unforeseen challenges of operating the acquired business as part of Lyneer’s operations;

•        our inability to retain key employees of the acquired businesses and/or inability of such key employees to be effective as part of Lyneer’s operations;

•        the impact of liabilities of the acquired businesses undiscovered or underestimated as part of the acquisition due diligence;

•        our failure to realize anticipated growth opportunities from a combined business, because existing and potential customers may be unwilling to consolidate their business with a single supplier or to stay with the acquirer post-acquisition;

•        the impacts of cash on hand and debt incurred to finance acquisitions, thus reducing liquidity for other significant strategic objectives;

•        the internal controls over financial reporting, disclosure controls and procedures, corruption prevention policies, human resources and other key policies and practices of the acquired companies may be inadequate or ineffective;

•        as a public company, we are required to continue to comply with the rules and regulations of the SEC and, as a substantially larger company, we will require increased marketing, compliance, accounting and legal costs; and

•        notwithstanding the fact that any future acquisitions may or may not continue to operate as independent entities in their particular markets, keeping their own brand identity and management teams, we will, in all likelihood, require our lenders’ approval under existing loan covenants.

The requirements of complying with the Exchange Act and the Sarbanes-Oxley Act may strain our resources and distract management.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002. The costs associated with these requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Historically, we have maintained a small accounting staff and use supplemental resources such as contractors and consultants to provide additional accounting and finance support. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant additional resources and management oversight may be required. This effort may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we may need to hire additional accounting and financial persons with appropriate public company experience and technical accounting knowledge. Failure to properly hire, train and supervise the work of our accounting staff could lead to a material weakness in our control environment and our internal controls, including internal controls over financial reporting.

Disruption of critical information technology systems or material breaches in the security of our systems could harm our business, customer relations and financial condition.

Information technology (“IT”) helps us to operate efficiently, interface with customers, maintain financial accuracy and efficiently and accurately produce our financial statements. IT systems are used extensively in virtually all aspects of our business, including sales forecast, order fulfilment and billing, customer service, logistics, and management of data from running samples on our products. Our success depends, in part, on the continued and uninterrupted performance of our IT systems. IT systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, power loss, natural disasters, human acts, computer viruses, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems. Certain of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality. Despite any precautions we may take, such problems could result in, among other consequences, disruption of our operations, which could harm our reputation and financial results.

If we do not allocate and effectively manage the resources necessary to build and sustain the proper IT infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions or loss of or damage to intellectual property through security breach. If our data management systems do not effectively collect, store, process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies or human error, our ability to effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially. Any such impairment could materially and adversely affect our reputation, financial condition, results of operations, cash flows and the timeliness with which we report our internal and external operating results.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our employees, on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our IT infrastructure may be vulnerable to attacks by hackers, computer viruses, malicious codes, unauthorized access attempts, and cyber- or phishing-attacks, or breached due to employee error, malfeasance, faulty password management or other disruptions. Third parties may attempt to fraudulently induce employees or other persons into disclosing usernames, passwords or other sensitive information, which may in turn be used to access our IT systems, commit identity theft or carry out other unauthorized or illegal activities. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disruption of our operations and damage to our reputation, which could divert our management’s attention from the operation of our business and materially and adversely affect

our business, revenues and competitive position. Moreover, we may need to increase our efforts to train our personnel to detect and defend against cyber- or phishing-attacks, which are becoming more sophisticated and frequent, and we may need to implement additional protective measures to reduce the risk of potential security breaches, which could cause us to incur significant additional expenses.

We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. We can face serious consequences for violations.

Among other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations.

Risks Related to Ownership of Atlantic International’s Common Stock

The market price of our common stock may be highly volatile, and you could lose all or part of your investment.

The market price of our common stock may be highly volatile. You may be unable to sell your shares of common stock at or above the offering price. The market prices of our common stock could be subject to wide fluctuations in response to a variety of factors, which include:

•        actual or anticipated fluctuations in our financial condition and operating results;

•        announcements of technological innovations by us or our competitors;

•        announcements by our customers, partners or suppliers relating directly or indirectly to our products, services or technologies;

•        overall conditions in our industry and market;

•        addition or loss of significant customers;

•        changes in laws or regulations applicable to our products;

•        actual or anticipated changes in our growth rate relative to our competitors;

•        announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or achievement of significant milestones;

•        additions or departures of key personnel;

•        competition from existing products or new services that may emerge;

•        fluctuations in the valuation of companies perceived by investors to be comparable to us;

•        disputes or other developments related to proprietary rights, including patents, litigation matters or our ability to obtain intellectual property protection for our technologies;

•        announcement or expectation of additional financing efforts;

•        sales of our common stock or warrants by us or our stockholders;

•        stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

•        reports, guidance and ratings issued by securities or industry analysts; and

•        general economic and market conditions.

If any of the forgoing occurs, it could cause our common stock or trading volumes to decline. Stock markets in general and the over-the-counter market and the market for companies in our industry in particular have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market prices of our common stock. You may not realize any return on your investment in us and may lose some or all of your investment.

The price of our common stock could be subject to rapid and substantial volatility.

There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent public offerings, especially among those with relatively smaller public floats. As a smaller-capitalization company with a small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume, and less liquidity than larger-capitalization companies. In particular, our common stock may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and asked prices. Such volatility, including any stock run-ups, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our shares of common stock.

In addition, if the trading volumes of our common stock are low, persons buying or selling in relatively small quantities may easily influence the price of our common stock. This low volume of trades could also cause the price of our common stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our common stock. As a result of this volatility, investors may experience losses on their investment in our common stock. A decline in the market price of our common stock also could adversely affect our ability to issue additional shares of common stock or other of our securities and our ability to obtain additional financing in the future. There can be no assurance that an active market in our common stock will be sustained. If an active market is not sustained, holders of our common stock may be unable to readily sell the shares they hold or may not be able to sell their shares at all.

We may be subject to securities litigation, which is expensive and could divert our management’s attention.

The market price of our securities may be volatile, and in the past companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

If our shares become subject to the penny stock rules, it would become more difficult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we fail to maintain a listing on the Nasdaq Stock Market, and, if the price of the common stock trades at less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. We may remain an emerging growth company until as late as December 2026 (the fiscal year-end following the fifth anniversary of the completion of our initial public offering), though we may cease to be an emerging growth company earlier under certain circumstances, including (1) if the market value of our common stock that is held by non-affiliates exceeds $700,000,000 as of any June 30, in which case we would cease to be an emerging growth company as of the following December 31, or (2) if our gross revenue exceeds $1.235 billion in any fiscal year. Emerging growth companies may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Investors could find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Because we have elected to use the extended transition period for complying with new or revised accounting standards for an emerging growth company our financial statements may not be comparable to companies that comply with public company effective dates.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates, and thus investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended certificate of incorporation and bylaws, as amended and restated, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:

•        authorize our board of directors to issue, without further action by the stockholders, up to 20,000,000 shares of undesignated preferred stock and up to 300,000,000 shares of authorized but unissued shares of common stock;

•        require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

•        specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of the Board, the Chief Executive Officer or the President;

•        establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

•        provide that our directors may be removed only for cause; and

•        provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain litigation that may be initiated by our stockholders.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory law or Delaware common law, subject to certain exceptions: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders; (3) any action asserting a claim against us arising pursuant to provisions of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws; or (4) any action asserting a claim governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. By agreeing to the exclusive forum provisions, investors will not be deemed to have waived our compliance obligations with any federal securities laws or the rules and regulations thereunder.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We have never declared or paid cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, any future loan arrangements we enter into may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock offered hereby will be your sole source of gain for the foreseeable future.

Risks Relating to Staffing 360’s Business

Unless otherwise indicated, reference in this section and elsewhere in this proxy statement/prospectus to Staffing 360’s business being adversely affected, negatively impacted or harmed will include an adverse effect on, or a negative impact or harm to, the business, reputation, financial condition, results of operations, revenue and future prospects.    References in this section under the heading “Risks Related to Staffing 360’s Business” to the “Company,” “we,” “our,” or “us,” generally refer to Staffing 360.

Risks Relating to Staffing 360’s Organization and Our Financial Condition

We have incurred significant losses since our inception and may continue to incur losses and thus may never achieve or maintain profitability.

We have incurred substantial losses since our inception, anticipate that we will continue to incur losses for the foreseeable future and may not achieve or sustain profitability. Because of the numerous risks and uncertainties associated with the staffing industry, we are unable to predict the extent of any future losses or when we will become

profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources, stockholders’ equity and working capital. Our negative working capital and liquidity position raise substantial doubt about our ability to continue as a going concern.

Our failure to become and remain profitable could depress the value of our common stock and impair our ability to raise capital, expand our business, maintain our development efforts, diversify our portfolio of staffing companies, or continue our operations. A decline in the value of our common stock could also cause you to lose all or part of your investment.

Our independent registered public accounting firms have included an explanatory paragraph in its report as of and for the year ended December 30, 2023 expressing substantial doubt in our ability to continue as a going concern based on our negative working capital and liquidity position and other macro-economic indicators. Our consolidated financial statements do not include any adjustments that might result from the outcome of this going concern uncertainty and have been prepared under the assumption that we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we are unable to continue as a going concern, we may be forced to liquidate our assets which would have an adverse impact on our business and developmental activities. In such a scenario, the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The reaction of investors to the inclusion of a going concern statement by our independent registered public accounting firm and our potential inability to continue as a going concern may materially adversely affect our stock price and our ability to raise new capital or to enter into strategic alliances.

Our debt level could negatively impact our financial condition, results of operations and business prospects.

As of December 30, 2023, our total gross debt was approximately $19,116. Our level of debt could have significant consequences to our stockholders, including the following:

•        requiring the dedication of a substantial portion of cash flow from operations to make payments on debt, thereby reducing the availability of cash flow for working capital, capital expenditures and other general business activities;

•        requiring a substantial portion of our corporate cash reserves to be held as a reserve for debt service, limiting our ability to invest in new growth opportunities;

•        limiting the ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate and other activities;

•        limiting the flexibility in planning for, or reacting to, changes in the business and industry in which we operate;

•        increasing our vulnerability to both general and industry-specific adverse economic conditions

•        putting us at a competitive disadvantage versus less leveraged competitors; and

•        increasing vulnerability to changes in the prevailing interest rates.

Our ability to make payments of principal and interest, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors. We had negative cash flows from operations for the fiscal year ended December 30, 2023, and we may not generate cash flow in the future sufficient to service our debt because of factors beyond our control, including but not limited to our ability to expand our operations. If we are unable to generate sufficient cash flows, we may be required to adopt one or more alternatives, such as restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. A default on our debt obligations could have a material adverse effect on our business, financial condition and results of operations and may cause you to lose all or part of your investment.

Further, the outstanding Amended and Restated Senior Secured 12% Promissory Note (the “2022 Jackson Note”) and the 12% Senior Secured Promissory Note (the “2023 Jackson Note” and together with the 2022 Jackson Note, the “Jackson Notes”) each issued to Jackson Investment Group LLC (“Jackson”) and due October 14, 2024 contain certain customary financial covenants, and we have had instances of non-compliance. Management has historically

been able to obtain, from Jackson, waivers of any non-compliance and management expects to continue to be able to obtain necessary waivers in the event of future non-compliance; however, there can be no assurance that we will be able to obtain such waivers, and should Jackson refuse to provide a waiver in the future, the outstanding debt under the agreement could become due immediately. Our financing with MidCap Funding X Trust (“MidCap”) includes customary financial covenants and we have had instances of non-compliance. We have been able to obtain forbearance of any non-compliance from MidCap, and management expects to continue to be able to obtain necessary forbearance in the event of future non-compliance; however, there can be no assurance that we will be able to obtain such forbearance, and should MidCap refuse to provide a forbearance in the future, the outstanding debt under the agreement could become due immediately, which exceeds our current cash balance.

Our debt instruments contain covenants that could limit our financing options and liquidity position, which would limit our ability to grow our business.

Covenants in our debt instruments impose operating and financial restrictions on us. These restrictions prohibit or limit our ability to, among other things:

•        pay cash dividends to our stockholders, subject to certain limited exceptions;

•        redeem or repurchase our common stock or other equity;

•        incur additional indebtedness;

•        permit liens on assets;

•        make certain investments (including through the acquisition of stock, shares, partnership or limited liability company interests, any loan, advance or capital contribution);

•        sell, lease, license, lend or otherwise convey an interest in a material portion of our assets;

•        cease making public filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

•        sell or otherwise issue shares of our common stock or other capital stock subject to certain limited exceptions.

Our failure to comply with the restrictions in our debt instruments could result in events of default, which, if not cured or waived, could result in us being required to repay these borrowings before their due date. The holders of our debt may require fees and expenses to be paid or other changes to terms in connection with waivers or amendments. If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates. In addition, these restrictions may limit our ability to obtain additional financing, withstand downturns in our business or take advantage of business opportunities.

The Jackson Notes are secured by substantially all of our assets that are not secured by our revolving loan facility with Midcap and the terms of the Jackson Notes may restrict our current and future operations. Additionally, Jackson may be able to exert significant influence over us as our senior secured lender.

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

•        incur or guarantee additional indebtedness;

•        pay distributions on, redeem or repurchase shares of our capital stock or redeem or repurchase any of our subordinated debt;

•        make certain investments;

•        sell assets;

•        enter into agreements that restrict distributions or other payments from our restricted subsidiaries;

•        incur or allow the existence of liens;

•        consolidate, merge or transfer all or substantially all of our assets; and

•        engage in transactions with affiliates.

In addition, the Jackson Notes contain 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 Notes. If any such default occurs, Jackson may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable, which would adversely impact our financial condition and operations. In addition, following an event of default under the Jackson Notes, 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 Notes were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt. As a condition to completing the Merger, Staffing 360 is required to deliver a Conversion Agreement and Waiver pursuant to which all outstanding indebtedness of approximately $10.1 million will be converted into approximately 5.6 million shares of Atlantic International upon completion of the Merger and all outstanding interest will be waived.

We review the recoverability of goodwill and other indefinite lived intangible assets annually as of the first day of our fiscal fourth quarter, and whenever events or circumstances indicate that the carrying value of a reporting unit, including goodwill, or an indefinite lived intangible asset may not be recoverable.

To evaluate goodwill and other indefinite lived intangible assets for impairment, we may use qualitative assessments to determine whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite lived intangible asset is less than its carrying amount. The qualitative assessments require assumptions to be made regarding multiple factors, including the current operating environment, historical and future financial performance and industry and market conditions. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. Alternatively, we may elect to bypass the qualitative assessment and instead perform a quantitative impairment test to calculate the fair value of the reporting unit in comparison to its associated carrying value.

The quantitative impairment tests require us to make an estimate of the fair value of our reporting units. An impairment could be recorded as a result of changes in assumptions, estimates or circumstances, some of which are beyond our control. Because a number of factors may influence determinations of fair value of goodwill, we are unable to predict whether impairments of goodwill will occur in the future, and there can be no assurance that continued conditions will not result in future impairments of goodwill. The future occurrence of a potential indicator of impairment could include matters such as (i) a decrease in expected net earnings; (ii) adverse equity market conditions; (iii) a decline in current market multiples; (iv) a decline in our common stock price; (v) a significant adverse change in legal factors or the general business climate; and (vi) a significant downturn in employment markets in the United States. Any such impairment would result in us recognizing a non-cash charge in our consolidated statement of operations, which could adversely affect our business, results of operations and financial condition.

We cannot accurately predict the effect of the weakness in the national economy on our future operating results or the market price of our voting common stock.

The national economy in general is currently facing challenges of a scope unprecedented in recent history. We cannot accurately predict the severity or duration of the current economic downturn, which has adversely impacted the markets we serve. Any further deterioration in national or local economic conditions would have an adverse effect, which could be material, on our business, financial condition, results of operations and prospects, and could also cause the market price of our voting common stock to decline. While it is impossible to predict how long these conditions may exist, the current economic downturn could present substantial risks for some time for the banking industry and for us. The Company currently does not have any exposure to Silicon Valley Bank (now owned by First Citizens Bank), Signature Bank (now owned by New York Community Bancorp), Republic Bank (now owned by JPMorgan Chase & Co.) or Pacific Western Bank (now owned by Bank of California) during the regional banking of crisis of 2023, nor does the Company believe that any of the banks with which it does business currently face a material risk of collapse.

We will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive and may cause the market price of our common stock to decline.

As of September 30, 2024, we had a working capital deficiency of $7,343,793, an accumulated deficit of $66,828,192 and a net loss for the nine months ended September 30, 2024, of $66,828,192. We will need to raise additional capital to pursue growth opportunities, improve our infrastructure, finance our operations and otherwise make investments in assets and personnel that will allow us to remain competitive. Additional capital would be used to accomplish the following:

•        financing our current operating expenses;

•        pursuing growth opportunities;

•        making capital improvements to improve our infrastructure;

•        hiring and retaining qualified management and key employees;

•        responding to competitive pressures;

•        complying with regulatory requirements; and

•        maintaining compliance with applicable laws.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of those securities could result in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline further and existing stockholders may not agree with our financing plans or the terms of such financings. In connection with this offering, we may agree to amend the terms of certain of our outstanding warrants held by certain purchasers in this offering. Any such amendments may, among other things, decrease the exercise prices or increase the term of exercise of those warrants.

In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.

Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets, perhaps on unfavorable terms, which would have a material adverse effect on our business, financial condition and results of operations, and we ultimately could be forced to discontinue our operations and liquidate, in which event it is unlikely that stockholders would receive any distribution on their shares. Further, we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.

We review the recoverability of goodwill and other indefinite lived intangible assets annually as of the first day of our fiscal fourth quarter, and whenever events or circumstances indicate that the carrying value of a reporting unit, including goodwill, or an indefinite lived intangible asset may not be recoverable.

To evaluate goodwill and other indefinite lived intangible assets for impairment, we may use qualitative assessments to determine whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite lived intangible asset is less than its carrying amount. The qualitative assessments require assumptions to be made regarding multiple factors, including the current operating environment, historical and future financial performance and industry and market conditions. If an initial qualitative assessment identifies that it is more likely than not that

the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. Alternatively, we may elect to bypass the qualitative assessment and instead perform a quantitative impairment test to calculate the fair value of the reporting unit in comparison to its associated carrying value.

The quantitative impairment tests require us to make an estimate of the fair value of our reporting units. An impairment could be recorded as a result of changes in assumptions, estimates or circumstances, some of which are beyond our control. Because a number of factors may influence determinations of fair value of goodwill, we are unable to predict whether impairments of goodwill will occur in the future, and there can be no assurance that continued conditions will not result in future impairments of goodwill. The future occurrence of a potential indicator of impairment could include matters such as (i) a decrease in expected net earnings; (ii) adverse equity market conditions; (iii) a decline in current market multiples; (iv) a decline in our common stock price; (v) a significant adverse change in legal factors or the general business climate; and (vi) a significant downturn in employment markets in the U.S. Any such impairment would result in us recognizing a non-cash charge in our consolidated statement of operations, which could adversely affect our business, results of operations and financial condition.

We have significant working capital needs and if we are unable to satisfy those needs from cash generated from our operations or borrowings under our debt instruments, we may not be able to continue our operations.

We require significant amounts of working capital to operate our business. We often have high receivables from our customers, and as a staffing company, we are prone to cash flow imbalances because we have to fund payroll payments to temporary workers before receiving payments from clients for our services. Cash flow imbalances also occur because we must pay temporary workers even when we have not been paid by our customers. If we experience a significant and sustained drop in operating profits, or if there are unanticipated reductions in cash inflows or increases in cash outlays, we may be subject to cash shortfalls. If such a shortfall were to occur for even a brief period of time, it may have a significant adverse effect on our business. In particular, we use working capital to pay expenses relating to our temporary workers and to satisfy our workers’ compensation liabilities. As a result, we must maintain sufficient cash availability to pay temporary workers and fund related tax liabilities prior to receiving payment from customers.

In addition, our operating results tend to be unpredictable from quarter to quarter. Demand for our services is typically lower during traditional national vacation periods when customers and candidates are on vacation. No single quarter is predictive of results of future periods. Any extended period of time with low operating results or cash flow imbalances could have a material adverse effect on our business, financial condition and results of operations.

We derive working capital for our operations through cash generated by our operating activities, equity raises, and borrowings under our debt instruments. If our working capital needs increase in the future, we may be forced to seek additional sources of capital, which may not be available on commercially reasonable terms. The amount we are entitled to borrow under our debt instruments is calculated monthly based on the aggregate value of certain eligible trade accounts receivable generated from our operations, which are affected by financial, business, economic and other factors, as well as by the daily timing of cash collections and cash outflows. The aggregate value of our eligible accounts receivable may not be adequate to allow for borrowings for other corporate purposes, such as capital expenditures or growth opportunities, which could reduce our ability to react to changes in the market or industry conditions.

We face risks associated with litigation and claims.

We are a party to certain legal proceedings as further described under “Legal Proceedings”. In addition, from time to time, we may become involved in various claims, disputes and legal or regulatory proceedings that arise in the ordinary course of business and relate to contractual and other obligations. Due to the uncertainties of litigation, we can give no assurance that we will prevail on any claims made against us in any such lawsuit. Also, we can give no assurance that any other lawsuits or claims brought in the future will not have an adverse effect on our financial condition, liquidity or operating results. Adverse outcomes in some or all of these claims may result in significant monetary damages that could adversely affect our ability to conduct our business.

Our revenue can vary because our customers can terminate their relationship with us at any time with limited or no penalty.

We focus on providing mid-level professional and light industrial personnel on a temporary assignment-by-assignment basis, which customers can generally terminate at any time or reduce their level of use when compared with prior periods. To avoid large placement agency fees, large companies may use in-house personnel staff, current employee

referrals, or human resources consulting companies to find and hire new personnel. Because placement agencies typically charge a fee based on a percentage of the first year’s salary of a new worker, companies with many jobs to fill have a large financial incentive to avoid agencies.

Our business is also significantly affected by our customers’ hiring needs and their views of their future prospects. Our customers may, on very short notice, terminate, reduce or postpone their recruiting assignments with us and, therefore, affect demand for our services. As a result, a significant number of our customers can terminate their agreements with us at any time, making us particularly vulnerable to a significant decrease in revenue within a short period of time that could be difficult to quickly replace. This could have a material adverse effect on our business, financial condition and results of operations.

Most of our contracts do not obligate our customers to utilize a significant amount of our staffing services and may be cancelled on limited notice, so our revenue is not guaranteed.

Substantially all of our revenue is derived from multi-year contracts that are terminable for convenience. Under our multi-year agreements, we contract to provide customers with staffing services through work or service orders at the customers’ request. Under these agreements, our customers often have little or no obligation to request our staffing services. In addition, most of our contracts are cancellable on limited notice, even if we are not in default under the contract. We may hire employees permanently to meet anticipated demand for services under these agreements that may ultimately be delayed or cancelled. We could face a significant decline in revenues and our business, financial condition or results of operations could be materially adversely affected if:

•        we see a significant decline in the staffing services requested from us under our service agreements; or

•        our customers cancel or defer a significant number of staffing requests; or our existing customer agreements expire or lapse and we cannot replace them with similar agreements.

We could be adversely affected by risks associated with acquisitions and joint ventures.

We are engaged in the acquisition of staffing companies, and our typical acquisition model is based on paying consideration in the form of cash, stock, earn-outs and/or promissory notes. To date, we have completed 10 acquisitions. We intend to expand our business through acquisitions of complementary businesses, services or products, subject to our business plans and management’s ability to identify, acquire and develop suitable investments or acquisition targets in both new and existing service categories. In certain circumstances, acceptable investments or acquisition targets might not be available. Acquisitions involve a number of risks, including:

•        difficulty in integrating the operations, technologies, products and personnel of an acquired business, including consolidating redundant facilities and infrastructure;

•        potential disruption of our ongoing business and the distraction of management from our day-to-day operations;

•        difficulty entering markets in which we have limited or no prior experience and in which competitors have a stronger market position;

•        difficulty maintaining the quality of services that such acquired companies have historically provided; potential legal and financial responsibility for liabilities of acquired businesses;

•        overpayment for the acquired company or assets or failure to achieve anticipated benefits, such as cost savings and revenue enhancements;

•        increased expenses associated with completing an acquisition and amortizing any acquired intangible assets;

•        challenges in implementing uniform standards, accounting policies, customs, controls, procedures and policies throughout an acquired business;

•        failure to retain, motivate and integrate key management and other employees of the acquired business; and

•        loss of customers and a failure to integrate customer bases.

Our business plan for continued growth through acquisitions is subject to certain inherent risks, including accessing capital resources, potential cost overruns and possible rejection of our business model and/or sales methods. Therefore, we provide no assurance that we will be successful in carrying out our business plan. We continue to pursue additional debt and equity financing to fund our business plan. We have no assurance that future financing will be available to us on acceptable terms or at all.

In addition, if we incur indebtedness to finance an acquisition, it may reduce our capacity to borrow additional amounts and require us to dedicate a greater percentage of our cash flow from operations to payments on our debt, thereby reducing the cash resources available to us to fund capital expenditures, pursue other acquisitions or investments in new business initiatives and meet general corporate and working capital needs. This increased indebtedness may also limit our flexibility in planning for, and reacting to, changes in or challenges relating to our business and industry. The use of our common stock or other securities (including those convertible into or exchangeable or exercisable for our common stock) to finance any such acquisition may also result in dilution of our existing shareholders.

The potential risks associated with future acquisitions could disrupt our ongoing business, result in the loss of key customers or personnel, increase expenses and otherwise have a material adverse effect on our business, results of operations and financial condition.

Our business is subject to cybersecurity risks and we could be harmed by improper disclosure or loss of sensitive or confidential company, employee, associate or customer data, including personal data.

Our operations are increasingly dependent on information technologies and services and in connection with the operation of our business, we store, process and transmit a large amount of data, including personnel and payment information, about our employees, customers, associates and candidates, a portion of which is confidential and/or personally sensitive. We rely on our own technology and systems, and those of third-party vendors we use for a variety of processes. We and our third-party vendors have established policies and procedures to help protect the security and privacy of this information. Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow, and include, among other things, storms and natural disasters, terrorist attacks, utility outages, theft, viruses, phishing, malware, design defects, human error, and complications encountered as existing systems are maintained, repaired, replaced, or upgraded. Risks associated with these threats include, among other things:

•        theft or misappropriation of funds;

•        loss, corruption, or misappropriation of proprietary, confidential or personally identifiable information (including employee data);

•        disruption or impairment of our and our business operations and safety procedures;

•        damage to our reputation with our potential partners, clients, and the market;

•        exposure to litigation;

•        increased costs to prevent, respond to or mitigate cybersecurity events.

Additionally, unauthorized disclosure or loss of sensitive or confidential data may occur through a variety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through our information systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/or state-sponsored organizations, who may develop and deploy viruses, worms or other malicious software programs.

Such disclosure, loss or breach could harm our reputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information, resulting in increased costs or loss of revenues. Moreover, we have no control over the information technology systems of third-party vendors and others with which our systems may connect and communicate. It is possible that security controls over sensitive or confidential data and other practices we and our third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such information. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions in which we provide services. Any failure or perceived

failure to successfully manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment to our reputation in the marketplace.

We have cybersecurity insurance coverage in the event we become subject to various cybersecurity attacks, however, we cannot ensure that it will be sufficient to cover any particular losses we may experience as a result of such cyberattacks. Any cyber incident could have a material adverse effect on our business, financial condition and results of operations.

We have been and may be exposed to employment-related claims and losses, including class action lawsuits, which could have a material adverse effect on our business.

We employ people internally and in the workplaces of other businesses. Many of these individuals have access to customer information systems and confidential information. The risks of these activities include possible claims relating to:

•        discrimination and harassment;

•        wrongful termination or denial of employment;

•        violations of employment rights related to employment screening or privacy issues;

•        classification of temporary workers;

•        assignment of illegal aliens;

•        violations of wage and hour requirements;

•        retroactive entitlement to temporary worker benefits;

•        errors and omissions by our temporary workers;

•        misuse of customer proprietary information;

•        misappropriation of funds;

•        damage to customer facilities due to negligence of temporary workers; and

•        criminal activity.

We may incur fines and other losses or negative publicity with respect to these problems. In addition, these claims may give rise to litigation, which could be time-consuming and expensive. New employment and labor laws and regulations may be proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. There can be no assurance that the corporate policies we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. There can also be no assurance that the insurance policies we have purchased to insure against certain risks will be adequate or that insurance coverage will remain available on reasonable terms or be sufficient in amount or scope of coverage.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation, as amended (the “Staffing 360 Certificate of Incorporation”) and in Staffing 360 Bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors (the “Board”). Because our

Board is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions include that:

•        our Board has the exclusive right to expand the size of our Board and to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board;

•        a special meeting of stockholders may be called only by a majority of the Board, the executive chairman or the president, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

•        our stockholders do not have the right to cumulate votes in the election of directors, which limits the ability of minority stockholders to elect director candidates;

•        our Board may alter our Bylaws without obtaining stockholder approval;

•        stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and

•        our Board is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.

In addition, the terms of the Jackson Notes limit our ability to consolidate, merge, or transfer all or substantially all of our assets or to effect a change in control of ownership of our company. A breach of such restrictions could result in a default under the Jackson Notes, under which Jackson may elect to declare all outstanding borrowings under the Jackson Notes, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Furthermore, our Certificate of Incorporation specifies that, unless we consent in writing to the selection of an alternative forum, a state court located within the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders, which may include federal claims and derivative actions, except that if no state court located within the State of Delaware has jurisdiction over such claims (including subject matter jurisdiction), the sole and exclusive forum for such claim shall be the federal district court for the District of Delaware. We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, these provisions may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the Certificate of Incorporation to be inapplicable or unenforceable in such action. Specifically, the choice of forum provision in requiring that the state courts of the State of Delaware be the exclusive forum for certain suits would (i) not be enforceable with respect to any suits brought to enforce any liability or duty created by the Exchange Act and (ii) have uncertain enforceability with respect to claims under the Securities Act of 1933, as amended (the “Securities Act”). The choice of forum provision in the Certificate of Incorporation does not have the effect of causing our stockholders to have waived our obligation to comply with the federal securities laws and the rules and regulations thereunder.

Certain of our warrants contain provisions that may prevent us from effectuating a change in control transaction, or obligate us to make cash payments to the holders of such warrants upon a change of control transaction, which may affect our liquidity, financial condition, and results of operations.

The warrants issued to H.C. Wainwright & Co., LLC and its designees as placement agent compensation in connection with the February 2023 Offering (the “February 2023 Wainwright Warrants”), contain certain provisions that may make it difficult for us to effectuate a change in control transaction, or obligate us to make cash payments to such holders upon a change in control transaction.

Pursuant to the terms of the February 2023 Wainwright Warrant, in the event of a fundamental transaction (as defined in the February 2023 Wainwright Warrants, and includes, among other events, any merger any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% or more of the voting power represented by our outstanding common stock), the holders of the February 2023 Wainwright Warrants will be entitled to receive upon exercise of the February 2023 Wainwright Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the February 2023 Wainwright Warrants immediately prior to such fundamental transaction. In addition, upon a fundamental transaction, the holder of a February 2023 Wainwright Warrant will have the right to require us to repurchase such holder’s February 2023 Wainwright Warrants at the Black-Scholes value; provided, however, that, if the fundamental transaction is not within our control, including not approved by our Board, then the holder will only be entitled to receive the same type or form of consideration (and in the same proportion), at the Black-Scholes value of the unexercised portion of the February 2023 Wainwright Warrant that is being offered and paid to the holders of our common stock in connection with the fundamental transaction. Such amount calculated at the Black-Scholes value could be significantly more than the holders would otherwise receive if they were to exercise their warrants and receive the same consideration as the other holders of common stock, which in turn could reduce the consideration that holders of common stock would be concurrently entitled to receive in such fundamental transaction. The foregoing obligation to repurchase the February 2023 Wainwright Warrants in cash equal to the Black-Scholes value may impair our cash position, as well as delay, hinder or prevent us from completing such fundamental transaction or prevent a third party from acquiring us, which may in turn affect our liquidity and financial condition and results of operations.

Risks Relating to Our Business and Industry

Our growth of operations could strain our resources and cause our business to suffer.

While we plan to continue growing our business organically through expansion, sales efforts, and strategic acquisitions, while maintaining tight controls on our expenses and overhead, lean overhead functions combined with focused growth may place a strain on our management systems, infrastructure and resources, resulting in internal control failures, missed opportunities, and staff attrition which could impact our business and results of operations.

Our strategy of growing through acquisitions may impact our business in unexpected ways.

Our growth strategy involves acquisitions that help us expand our service offerings and diversify our geographic footprint. We continuously evaluate acquisition opportunities, but there are no assurances that we will be able to identify acquisition targets that complement our strategy and are available at valuation levels accretive to our business.

Even if we are successful in acquiring, our acquisitions may subject our business to risks that may impact our results of operations, including:

•        inability to integrate acquired companies effectively and realize anticipated synergies and benefits from the acquisitions;

•        diversion of management’s attention to the integration of the acquired businesses at the expense of delivering results for the legacy business;

•        inability to appropriately scale critical resources to support the business of the expanded enterprise and other unforeseen challenges of operating the acquired business as part of our operations;

•        inability to retain key employees of the acquired businesses and/or inability of such key employees to be effective as part of our operations;

•        impact of liabilities of the acquired businesses undiscovered or underestimated as part of the acquisition due diligence;

•        failure to realize anticipated growth opportunities from a combined business, because existing and potential clients may be unwilling to consolidate business with a single supplier or to stay with the acquirer post-acquisition;

•        impacts of cash on hand and debt incurred to finance acquisitions, thus reducing liquidity for other significant strategic or operational objectives; and

•        internal controls, disclosure controls, corruption prevention policies, human resources and other key policies and practices of the acquired companies may be inadequate or ineffective.

We operate in an intensely competitive and rapidly changing business environment, and there is a substantial risk that our services could become obsolete or uncompetitive.

The markets for our services are highly competitive. Our markets are characterized by pressures to provide high levels of service, incorporate new capabilities and technologies, accelerate job completion schedules and reduce prices. Furthermore, we face competition from a number of sources, including other executive search firms and professional search, staffing and consulting firms. Several of our competitors have greater financial and marketing resources than we do. New and existing competitors are aided by technology, and the market has low barriers to entry. Furthermore, Internet employment sites expand a company’s ability to find workers without the help of traditional agencies. Personnel agencies often work as intermediaries, helping employers accurately describe job openings and screen candidates. Increasing the use of sophisticated, automated job description and candidate screening tools could make many traditional functions of staffing companies obsolete. Specifically, the increased use of the internet may attract technology-oriented companies to the professional staffing industry. Free social networking sites such as LinkedIn and Facebook are also becoming a common way for recruiters and employees to connect without the assistance of a staffing company.

Our future success will depend largely upon our ability to anticipate and keep pace with those developments and advances. Current or future competitors could develop alternative capabilities and technologies that are more effective, easier to use or more economical than our services. In addition, we believe that, with continuing development and increased availability of information technology, the industries in which we compete may attract new competitors. If our capabilities and technologies become obsolete or uncompetitive, our related sales and revenue would decrease. Due to competition, we may experience reduced margins on our services, loss of market share, and loss of customers. If we are not able to compete effectively with current or future competitors as a result of these and other factors, our business, financial condition and results of operations could be materially adversely affected.

Risks Relating to Staffing 360 Common Stock

We may not meet the continued listing requirements of Nasdaq, which could result in a delisting of our common stock.

As previously reported, on June 20, 2024, we received a letter from the Staff of the Listing Qualifications Department of Nasdaq (the “Staff”) indicating that we were no longer in compliance with the minimum stockholders’ equity requirement (the “Minimum Stockholders’ Equity Requirement”) for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(b)(1), which such rule requires listed companies to maintain stockholders’ equity of at least $2,500,000 or meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations.

On August 13, 2024, following the Staff’s review of our plan to regain compliance with the Minimum Stockholders’ Equity Requirement submitted on June 14, 2024, and on August 5, 2024, we received a letter (the “Notice”) indicating that the Staff determined to deny our request for continued listing on Nasdaq. Pursuant to the Notice, based on the preliminary nature of our plan, the Staff determined that we did not provide a definitive plan evidencing our ability to achieve near term compliance with the Minimum Stockholders’ Equity Requirement. We requested an appeal of the Staff’s determination, and a hearing before the Nasdaq Hearings Panel (the “Panel”) was held on October 3, 2024.

On October 8, 2024, we received a letter from the Nasdaq Hearings Panel (“Panel”) indicating that the Panel determined to grant our request to continue our listing on Nasdaq, subject to certain milestones being met on November 1, 2024 to sign the Merger agreement which was done and to complete the Merger by December 31, 2024. If we are unable to extend Nasdaq’s deadline of December 31, 2024 to complete the Merger it is not a

condition precedent to complete the Merger. The Merger will be completed even if Staffing 360’s securities are delisted. However, if Atlantic International fails to meet Nasdaq’s listing standards for continued listing, an investor would likely find it significantly more difficult to dispose of or obtain Atlantic International’s shares, and its ability to raise future capital through the sale of its shares or issue its shares as consideration in acquisitions could be severely limited. Additionally, Atlantic International may not be able to list its common stock on another national securities exchange, which could result in its securities being quoted on an over-the-counter market. If this were to occur, Atlantic International’s stockholders could face significant material adverse consequences, including limited availability of market quotations for Atlantic International’s common stock and reduced liquidity for the trading of Atlantic International’s securities. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.

A more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.

Historically, the market price of our common stock has fluctuated over a wide range. There has been relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained for Atlantic International Common Stock. Limited liquidity in the trading market for Atlantic International’s common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes to sell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop we may be limited in our ability to raise capital by selling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is a thin trading market or “float” for Atlantic International stock, the market price for Atlantic International common stock may fluctuate significantly more than the stock market as a whole. Without a large float, Atlantic International common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of Atlantic International common stock may be more volatile and it would be harder for a stockholder to liquidate any investment in Atlantic International common stock. Furthermore, the stock market is subject to significant price and volume fluctuations, and the price of Atlantic International common stock could fluctuate widely in response to several factors, including:

•        our quarterly or annual operating results;

•        changes in our earnings estimates;

•        investment recommendations by securities analysts following our business or our industry;

•        additions or departures of key personnel;

•        changes in the business, earnings estimates or market perceptions of our competitors;

•        our failure to achieve operating results consistent with securities analysts’ projections;

•        changes in industry, general market or economic conditions; and

•        announcements of legislative or regulatory changes.

The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in the staffing industry. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.

Upon our dissolution, you may not recoup all or any portion of your investment.

In the event of our liquidation, dissolution or winding-up, our proceeds and/or assets remaining after giving effect to such transaction, and the payment of all of our debts and liabilities will be distributed to the stockholders of common stock on a pro rata basis. There can be no assurance that we will have available assets to pay to the holders of common stock, or any amounts, upon such our liquidation, dissolution or winding-up. In this event, you could lose some or all of your investment.

General Risk Factors

Global, market and economic conditions may negatively impact our business, financial condition and share price.

Concerns over inflation, geopolitical issues, the U.S. financial markets, capital and exchange controls, unstable global credit markets and financial conditions, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. In addition, there is a risk that one or more of our current or future service providers and other partners could be negatively affected by difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.

In addition, we face several risks associated with international business and are subject to global events beyond our control, including war, public health crises, such as pandemics and epidemics, trade disputes, economic sanctions, trade wars and their collateral impacts and other international events. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results of operations. There may be changes to our business if there is instability, disruption or destruction in a significant geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease. In 2022, armed conflict escalated between Russia and Ukraine and in 2023, armed conflict escalated between Israel and Palestine. The sanctions announced by the U.S. and other countries, following Russia’s invasion of Ukraine against Russia to date include restrictions on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia. The U.S. and other countries could impose wider sanctions and take other actions should the conflict further escalate. It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could impact our business, financial condition and results of operations.

We depend on attracting, integrating, managing, and retaining qualified personnel.

Our success is substantially dependent upon our ability to attract, integrate, manage and retain personnel who possess the skills and experience necessary to fulfill our customers’ needs. Our ability to hire and retain qualified personnel could be impaired by any diminution of our reputation, decrease in compensation levels relative to our competitors or modifications to our total compensation philosophy or competitor hiring programs. If we cannot attract, hire and retain qualified personnel, our business, financial condition and results of operations may suffer. Our future success also depends upon our ability to manage the performance of our personnel. Failure to successfully manage the performance of our personnel could affect our profitability by causing operating inefficiencies that could increase operating expenses and reduce operating income. An overall tightening and competitive labor market in the U.S. employment market generally, has been observed in the U.S. A sustained labor shortage or increased turnover rates within our employee base, as a result of general macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate and our overall business. If we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures, we may take to respond to a decrease in labor availability have unintended negative effects, our business could be adversely affected. An overall labor shortage, lack of skilled labor, increased turnover or labor inflation as a result of general macroeconomic factors, could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

We depend on our ability to attract and retain qualified temporary workers.

In addition to the members of our own team, our success is substantially dependent on our ability to recruit and retain qualified temporary workers who possess the skills and experience necessary to meet the staffing requirements of our customers. We are required to continually evaluate our base of available qualified personnel to keep pace with

changing customer needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available.

If we are unable to retain existing customers or attract new customers, our business and results of operations could suffer.

Increasing the growth and profitability of our business is particularly dependent upon our ability to retain existing customers and capture additional customers. Our ability to do so is dependent upon our ability to provide high quality services and offer competitive prices. If we are unable to execute these tasks effectively, we may not be able to attract a significant number of new customers and our existing customer base could decrease, either or both of which could have an adverse impact on our business and revenues.

We are dependent upon technology services, and if we experience damage, service interruptions or failures in our computer and telecommunications systems, our customer relationships and our ability to attract new customers may be adversely affected.

Our business could be interrupted by damage to or disruption of our computer and telecommunications equipment and software systems, and we may lose data. Our customers’ businesses may be adversely affected by any system or equipment failure we experience. As a result of any of the foregoing, our relationships with our customers may be impaired, we may lose customers, our ability to attract new customers may be adversely affected and we could be exposed to contractual liability. Precautions in place to protect us from, or minimize the effect of, such events may not be adequate. If an interruption by damage to or disruption of our computer and telecommunications equipment and software systems occurs, we could be liable, and the market perception of our services could be harmed.

Our management has identified a material weakness in our internal control over financial reporting relating to the lack of a sufficient complement of competent finance personnel to appropriately account for, review and disclose the completeness and accuracy of transactions entered into by us. This material weakness, if not remediated, could result in material misstatements in our consolidated financial statements. We may be unable to develop, implement and maintain appropriate internal controls over financial reporting. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results and current and potential stockholders may lose confidence in our financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and the Sarbanes-Oxley Act of 2002 and the SEC rules require that our management report annually on the effectiveness of our internal control over financial reporting and our disclosure controls and procedures. Among other things, our management must conduct an assessment of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.

A “material weakness” is 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 our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. During the preparation of our financial statements for the year ended December 30, 2023, we and our auditors identified a material weakness in our internal control over financial reporting. We lack a sufficient complement of competent finance personnel to appropriately account for, review, and disclose the completeness and accuracy of transactions entered into by us. In addition, the Company has ineffective design and operating effectiveness over forecasts used in our annual goodwill and intangibles evaluation. As part of our remediation plan, we hired additional employees and external consultants who have the technical skillset to improve our financial reporting; implement new policies, procedures and controls; properly review transactions recorded and classified in the financial statements; provide effective design and operating effectiveness over forecasts; and ensure proper accounting and related disclosures for complex accounting matters when necessary.

Although we are working to remedy the material weaknesses in our internal controls over financial reporting discussed above and have so far implemented additional controls relating to payroll, treasury, and accounts payable, there can be no assurance as to when the remediation plan will be fully developed, when it will be fully implemented or the aggregate cost of implementation. Until our remediation plan is fully implemented, our management will continue to devote significant time and attention to these efforts. If we do not complete our remediation in a timely fashion, or at

all, or if our remediation plan is inadequate, there will continue to be an increased risk that we will be unable to timely file future periodic reports with the SEC and that our future consolidated financial statements could contain errors that will be undetected. Further and continued determinations that there are material weaknesses in the effectiveness of our internal control over financial reporting relating the above items could also reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures of both money and our management’s time to comply with applicable requirements.

Any failure to implement or maintain required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, or could result in material misstatements in our consolidated financial statements. These misstatements could result in a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing or cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

The ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify material weaknesses in internal control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the U.S. Our management, including our Chief Executive Officer and Principal Financial Officer, does not expect that our internal controls and disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our business have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such as growth of our business or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

In addition, discovery and disclosure of a material weakness could have a material adverse impact on our financial statements. Such an occurrence could discourage certain customers or suppliers from doing business with us, cause downgrades in our future debt ratings leading to higher borrowing costs and affect how our stock trades. This could, in turn, negatively affect our ability to access public debt or equity markets for capital.

Our compliance with complicated regulations concerning corporate governance and public disclosure has resulted in additional expenses.

We are faced with expensive, complicated and evolving disclosure, governance and compliance laws, regulations and standards relating to corporate governance and public disclosure. In addition, as a staffing company, we are regulated by the U.S. Department of Labor, the Equal Employment Opportunity Commission, and often by state authorities. New or changing laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing compliance work.

Our failure to comply with all laws, rules and regulations applicable to U.S. public companies could subject us or our management to regulatory scrutiny or sanction, which could harm our reputation and stock price. Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

The requirements of being a public company place significant demands on our resources.

As a public company, we incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules subsequently implemented by the SEC and Nasdaq, have imposed various requirements on public companies. New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and changes in required accounting practices and rules adopted by the SEC and Nasdaq, would likely result in increased costs to us as we respond to their requirements.

Shareholder activism, the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain and maintain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This registration statement on Form S-4, of which this proxy statement/prospectus forms a part, and the documents to which Atlantic International and Staffing 360 refer you to in this registration statement, as well as oral statements made or to be made by Atlantic International and Staffing 360, include certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act, and Section 21E of the Exchange Act. The words “believe,” “continue,” “could,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “should,” “may,” “will,” “would” or the negative thereof and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the control of Atlantic International and Staffing 360. Statements in or incorporated by reference into this registration statement regarding Atlantic International, Staffing 360, or the proposed Merger, referred to as the proposed transaction, that are forward-looking, including statements regarding the anticipated benefits of the proposed transaction, the impact of the proposed transaction on Atlantic International’s and Staffing 360’s employees, business and future financial and operating results, the ability of the parties to complete the proposed transaction considering the various closing conditions, the closing date for the proposed transaction are based on Atlantic International’s and Staffing 360’s management’s estimates, assumptions and projections, and are subject to significant uncertainties and other factors, many of which are beyond Atlantic International’s and Staffing 360’s control. These factors and risks include risks factors, contingencies and uncertainties applicable to Atlantic International and Staffing 360 described in the section titled “Risk Factors” of this proxy statement/prospectus and in Atlantic International’s and Staffing 360’s other filings with the SEC incorporated by reference into this proxy statement/prospectus.

All subsequent written or oral forward-looking statements attributable to Atlantic International or Staffing 360 or any person acting on its or their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. The forward-looking statements included in this proxy statement/prospectus are made only as of the date of this proxy statement/prospectus. Neither Atlantic International nor Staffing 360 is under any obligation, and each expressly disclaims any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise, except as may be required by law.

INFORMATION ABOUT ATLANTIC INTERNATIONAL

Atlantic International Corp.

Atlantic International is a Delaware corporation incorporated on April 1, 2014 under the name SeqLL Inc. Atlantic International is a leading strategic staffing, outsourced services, and workforce solutions company executing a high-growth strategy. Through its principal operating subsidiary, Lyneer Investments LLC (“Lyneer”), Atlantic’s approximately 300 employees generated over $400 million in revenue for the twelve months ended December 31, 2023.

Lyneer’s management believes, based on their knowledge of the industry, that Lyneer is one of the prominent and leading staffing firms in the ever-evolving staffing industry. Lyneer, headquartered in Lawrenceville, New Jersey, has over 100 total locations and approximately 300 internal employees. Its management also believes that Lyneer is an industry leader in permanent, temporary and temp-to-perm placement services in a wide variety of areas, including, but not limited to, accounting & finance, administrative & clerical, hospitality, IT, legal, light industrial and medical fields. Its deep expertise and extensive experience have helped world class companies revolutionize their operations, resulting in greater efficiency and streamlined processes. Its comprehensive suite of solutions covers all aspects of workforce management, from recruitment and hiring to time and attendance tracking, scheduling, performance management, and predictive analytics. Lyneer takes a personalized approach to each client, working closely with them to understand their unique needs and develop a tailored roadmap for success. In addition, Lyneer offers a comprehensive range of recruiting services, including temporary and permanent staffing, within the light industrial, administrative, and financial sectors. Its services are designed to meet each client’s needs, including payroll services and vendor management services/managed service provider solutions. Its extensive network of offices and onsite operations provide local support for its clients, while its national presence gives Lyneer the resources to tackle even the most complex staffing needs. With a focus on integrity, transparency and customer service and a commitment to results over a 25-year period, management believes Lyneer has earned a reputation as one of the premier workforce solutions partners in the United States.

Atlantic International common stock is listed quoted on the Nasdaq Global Market under the ticker symbol “ATLN.”

For more information about Atlantic International, please visit Atlantic International’ website at www.atlantic-international.com. The information contained on Atlantic International’s website or accessible through it (other than the documents specifically incorporated by reference herein) does not constitute a part of this proxy statement/prospectus or any other report or document on file with or furnished to the SEC.

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

You should read the following discussion and analysis of Atlantic International’s financial condition and results of operations in conjunction with Atlantic International’s consolidated financial statements and the related notes included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Atlantic International’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this proxy statement/prospectus. References to the “Company,” “we”, “us”, and “our” in this section refers to Atlantic International.

Results of Operations

The following discussion summarizes the key factors Atlantic’s management team believes are necessary for an understanding of Atlantic’s financial statements.

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023:

Certain related party and non-related party financial statement line-item amounts have been aggregated for purposes of analysis below, which is consistent with management’s evaluation of its business results.

The following table summarizes our results of operations for the periods presented:

____________

+ - change greater than ± 100%

Service Revenue, Net

Service revenue, net of discounts, for the three and nine months ended September 30, 2024 and 2023 consisted of the following:

Service revenue, net was $107,803,843 and $97,785,156 for the quarters ended September 30, 2024 and 2023, respectively, an increase of $10,018,687, or 10.2%. This increase was predominately due to the higher revenues from the Company’s temporary placement services business, which increased $10,342,841 or 10.7% in the three months ended September 30, 2024 as compared to the same period in 2023 due primarily to a strong sales initiative by the Company. Permanent placement and other services decreased $324,154 or 23.9% due to lower permanent job demand as companies cut back on hiring permanent positions.

Service revenue, net was $313,063,328 and $285,177,880 for the nine months ended September 30, 2024 and 2023, respectively, an increase of $27,885,448, or 9.8%. This increase was predominately due to the higher revenues from the Company’s temporary placement services business, which increased $28,552,058 or 10.1% in the nine months ended September 30, 2024 as compared to the same period in 2023 due primarily to a strong sales initiative by the Company. Permanent placement and other services decreased $666,610 or 19.7% due to lower permanent job demand as companies cut back on hiring permanent positions.

Cost of Revenue and Gross Profit

Gross profit reflects the difference between realized service revenue, net and cost of revenues for providing temporary and permanent placement solutions. Cost of revenue consists primarily of fixed and variable directs costs, including payroll, payroll taxes and employee benefit costs. Cost of revenue and gross profit for the three and nine months ended September 30, 2024 and 2023 consisted of the following:

Cost of revenue for the quarters ended September 30, 2024 and 2023 was $95,918,373 and $86,179,981, respectively, an increase of $9,738,392 or 11.3%. The increase in cost of revenue was due primarily to higher service revenue, net driven primarily by higher temporary placement services revenue, which increased $10,342,841 or 10.7%. Gross profit for the quarter ended September 30, 2024 and 2023 was $11,885,470 and $11,605,175, respectively, an increase of $280,295 or 2.4%. As a percentage of service revenue, net, gross profit was 11.0% and 11.9% for the quarter ended September 30, 2024 and 2023, respectively, which decreased due to increasing labor related costs and reduced permanent placements.

Cost of revenue for the nine months ended September 30, 2024 and 2023 was $279,222,830 and $250,888,387, respectively, an increase of $28,334,443 or 11.3%. The increase in cost of revenue was due primarily to higher service revenue, net driven primarily by higher temporary placement services revenue, which increased $28,552,058 or 10.1%. Gross profit for the nine months ended September 30, 2024 and 2023 was $33,840,498 and $34,289,493, respectively, a decrease of $448,995 or 1.3%. As a percentage of service revenue, net, gross profit was 10.8% and 12.0% for the nine months ended September 30, 2024 and 2023, respectively, which decreased due to increasing labor related costs and reduced permanent placements.

Total Operating Expenses

Total operating expenses for the three and nine months ended September 30, 2024 and 2023 consisted of the following:

The changes in each financial statement line item for the respective periods are described below.

Selling, General and Administrative Costs

Selling, general and administrative expenses for the quarters ended September 30, 2024 and 2023 were $17,151,567 and $10,372,122, respectively, an increase of $6,779,445, or 65.4%, due primarily to higher transaction costs related to the Merger, offset partially by cost cutting measures. As a percentage of service revenue, net, selling, general and administrative costs were 15.9% in the quarter ended September 30, 2024 as compared to 10.6% in the quarter ended September 30, 2023. The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to higher transactions costs in the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023.

Selling, general and administrative expenses for the nine months ended September 30, 2024 and 2023 were $46,045,754 and $31,701,396, respectively, an increase of $14,344,358, or 45.2%, due primarily to higher transaction costs related to the Merger, offset partially by cost cutting measures. As a percentage of service revenue, net, selling, general and administrative costs were 14.7% in the nine months ended September 30,

2024 as compared to 11.1% in the nine months ended September 30, 2023. The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to higher transactions costs in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Changes in Fair Value of Contingent Consideration Liabilities

Changes in the fair value of contingent consideration liabilities for the quarters ended September 30, 2024 and 2023 were $0 and $349,907, respectively. The change of $(349,907) reflects the change in fair value of the liability balance. The measurement period for the contingent consideration arrangements expired on August 31, 2023, at which time amounts owed Lyneer to its former owners were computed and represent fixed amounts.

Changes in the fair value of contingent consideration liabilities for the nine months ended September 30, 2024 and 2023 were $0 and $(150,093), respectively. The change of $150,093 reflects the change in fair value of the liability balance. The measurement period for the contingent consideration arrangements expired on August 31, 2023, at which time amounts owed Lyneer to its former owners were computed and represent fixed amounts.

Depreciation and Amortization

Depreciation and amortization expense for the quarters ended September 30, 2024 and 2023 was $1,245,557 and $1,263,820, respectively, a decrease of $18,263 or 1.4%, a slight decrease on a year-over year basis.

Depreciation and amortization expense for the nine months ended September 30, 2024 and 2023 was $3,754,165 and $3,784,624, respectively, a decrease of $30,459 or 0.8%, which was essentially flat on a year-over year basis.

Loss on Debt Extinguishment

Loss on debt extinguishment, for the three and nine months ended September 30, 2024 and 2023 were as follows:

Loss on debt extinguishment during the nine months ended September 30, 2024 relates to the Seventh Amendment and Forbearance Agreement to the Revolver being treated as a debt extinguishment after the Company’s analysis of Accounting Standards Codification (“ASC”) Topic 470 — Debt.

Advisory Fees Paid in the Merger

Advisory fees paid in the merger for the three and nine months ended September 30, 2024 and 2023 were as follows:

The stockholders of Atlantic Acquisition Corp. were issued an aggregate of 18,220,338 shares of Company’s common stock at a market value of $2.36 per share, or $43,000,000 in the aggregate, on the date of the Merger.

Interest Expense

Interest expense for the three and nine months ended September 30, 2024 and 2023 were as follows:

Interest expense for the quarters ended September 30, 2024 and 2023 was $1,472,564 and $4,887,247, respectively. The decrease of $3,414,683, or 69.9%, in the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 was due to the Company deconsolidating the joint and several debt obligations as of the Merger date.

Interest expense for the nine months ended September 30, 2024 and 2023 was $10,494,818 and 12,610,280, respectively. The decrease of $2,115,462, or 16.8%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was attributed to the Company deconsolidating the joint and several debt obligations as of the Merger date, partially offset by higher interest rates on the revolving credit facility on a year-over-year basis, an increase in the rates on the term, seller and earnout notes due to amendments in May 2023 and August 2023, and, new earnout notes issued in January 2024.

Other Expense

Other expense for the three and nine months ended September 30, 2024 and 2023 were as follows:

Other expense for the three months ended September 30, 2024 related to stock compensation expense for third parties as advisors to the Company for RSUs that were granted on the date of the Merger. Other expense for the nine months ended September 30, 2024 related to accrued amounts pertaining to a potential settlement for legacy stockholders and stock compensation expense for to third parties as advisors to the Company for RSUs that were granted on the date of the Merger.

Income Tax Benefit

Provision for income taxes for the three and nine months ended September 30, 2024 and 2022 were as follows:

Income tax benefit for the quarters ended September 30, 2024 and 2023 was $1,220,072 and $1,346,969, respectively, a decrease of $126,897, which was driven primarily by the increase in net loss before taxes of $8,269,701 for the quarter ended September 30, 2024 compared to $5,267,921 for the quarter ended September 30, 2023, or an increase in the net loss before taxes of $3,001,780.

Income tax benefit for the nine months ended September 30, 2024 and 2023 was $19,732,646 and $3,791,387, respectively, an increase of $15,941,259, which was driven primarily by the increase in net loss before taxes of $86,560,838 for the nine months ended September 30, 2024 compared to $13,656,714 for the nine months ended September 30, 2023, or an increase in the net loss before taxes of $72,904,124.

Liquidity & Capital Resources

Atlantic’s primary sources of liquidity have historically been cash generated from operations and borrowings under its revolving credit agreement (the “Revolver”). Atlantic’s working capital requirements are primarily driven by personnel payments and client accounts receivable receipts. As receipts from client partners lag behind payments to personnel, working capital requirements increase substantially in periods of growth. Primary uses of cash are payments to engagement personnel, corporate personnel, related payroll costs and liabilities, operating expenses, capital expenditures, cash interest, cash taxes, and contingent consideration and debt payments.

Atlantic believes that the cash generated from operations, together with the borrowing availability under its portion of the Revolver or under any revolving credit facility that Lyneer may enter into to replace the Revolver, would be sufficient to meet its normal working capital needs for at least the 12-month period following the date of its September 30, 2024 financial statements, including investments made, and expenses incurred, in connection with opening new markets throughout the next year. Atlantic’s ability to continue to fund these items may be affected by

general economic, competitive and other factors, many of which are outside of Atlantic’s control. If Atlantic’s future cash flow from operations and other capital resources are insufficient to fund its liquidity needs, Atlantic may be forced to obtain additional debt or equity capital or refinance all or a portion of its debt.

Atlantic’s working capital requirements are primarily driven by personnel payments and client accounts receivable receipts. As receipts from client partners lag behind payments to personnel, working capital requirements increase substantially in periods of growth.

Atlantic’s primary sources of liquidity have historically been cash generated from operations and borrowings under its revolving credit agreement (the “Revolver”). Atlantic’s primary uses of cash are payments to engagement personnel, corporate personnel, related payroll costs and liabilities, operating expenses, capital expenditures, cash interest, cash taxes, and contingent consideration and debt payments. If Atlantic and IDC are able to refinance their existing indebtedness as described below, Atlantic believes that the cash generated from operations, together with the borrowing availability under its portion of the Revolver or under any revolving credit facility that Lyneer may enter into to replace the Revolver, would be sufficient to meet its normal working capital needs for at least the 12-month period following the issue date of its financial statements, including investments made, and expenses incurred, in connection with opening new markets throughout the next year. Atlantic’s ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of Atlantic’s control. If Atlantic’s future cash flow from operations and other capital resources are insufficient to fund its liquidity needs, Atlantic may be forced to obtain additional debt or equity capital or refinance all or a portion of its debt.

In connection with the closing of the Merger, Atlantic issued to IDC the Merger Note in the principal amount of $35,000,000 with an original maturity date of September 30, 2024. The Merger Note does not bear interest and is not convertible prior to an event of default under the Merger Note. If an event of default should occur under the Merger Note, the Merger Note will bear interest at the rate of 7% per annum commencing upon the date of such event of default and will be convertible into shares of our common stock at a price per share that equals the lowest daily volume weighted average price per share (VWAP) during the five trading days immediately preceding the date on which the applicable conversion notice is delivered to us, but not less than 80% of the price per share in our Initial Capital Raise, provided, however, that the number of shares of our common stock issuable upon conversion of the Merger Note will not exceed 19.99% of the number of our outstanding shares of common stock without shareholder approval if our common stock is then listed on a National Stock Exchange (“NSE”). An event of default under the Merger Note may result in an additional event of default under the Revolver and our other indebtedness for borrowed funds.

On September 12, 2024 the Company entered into Amendment No 1 to the Convertible Promissory Note (“Amendment 1 to the Merger Note”) which extended the maturity date to the earlier of March 31, 2026 or the completion of at least a $40 million capital raise.

On June 6, 2023, Lyneer and IDC were informed by a letter from the administrative agent of the lender under the Revolver that the borrowing base calculation under the Revolver was required to be changed from how it was historically calculated. This change caused Lyneer and IDC as co-borrowers to be over-advanced, and the agent required the co-borrowers to cure the over-advance. On December 31, 2023, the total over-advance was $22,518,585.

On August 31, 2023 and January 30, 2024, Lyneer and IDC entered into consent and forbearance agreements with its lender under the Revolver pursuant to which the lender waived all existing events of default as of the date of the agreements and agreed to forbear from exercising its rights and remedies with respect to such events of default under the credit facilities through November 17, 2023 and March 15, 2024, respectively. On April 17, 2024, Lyneer and IDC entered into a limited consent and amendment to the forbearance agreement with the lender under the Revolver under which the lender agreed to extend its forbearance with respect to all then-existing events of default until July 31, 2024. As a result of the Company being unable to complete its Initial Capital Raise by May 15, 2024, the Company was required to obtain additional forbearance agreements.

On June 18, 2024, Lyneer and IDC entered into consent and forbearance agreements with its lender under the Revolver under which the Lender agreed to extend its forbearance with respect to all then-existing events of default until July 15, 2024, subject to the satisfaction of various conditions, all of which have been satisfied, and agreed to a revised schedule for the repayment of the over-advance. The events of default of the borrowers under the Revolver included:

(i)     the failure to repay an over-advance in the amount of $4,662,495 as of May 31, 2024;

(ii)    failure to complete an initial capital raise (“Initial Capital Raise”) on or before May 15, 2024 and apply the proceeds thereof as specified;

(iii)   failure to have completed presentations to potential buyers under a sale and potential lenders in respect of a refinancing transaction resulting in payment in full of all Obligations (as defined);

(iv)   the failure to deliver to the administrative agent, on or before May 29, 2024, an executed letter of intent with respect to a Sale/Refinancing;

(v)    the failure to satisfy various financial covenants of the Revolver and failure to timely cure all of the foregoing defaults.

Under the Revolver, a “Sale/Refinancing” is defined as the sale of one of the borrowers under the Revolver, including possibly IDC or Lyneer, that will generate proceeds in an amount sufficient to pay in full all obligations of the borrowers under the Revolver.

The lenders’ consent to IDC’s transfer of ownership of the equity of Lyneer was conditioned upon: (i) our limited guaranty and pledge of our ownership of the equity of Lyneer upon the effective date of the Merger, (ii) IDC’s pledge to the lender of a security interest in the Merger Note and the shares of our common stock that IDC received in the Merger, as well as the proceeds thereof, and (iii) a replacement guaranty by Lyneer Management Holdings LLC to replace a $6 million letter of credit for the benefit of Employers Personnel, LLC; (iv) an executed amendment to the Term Note; (v) a consent and amendment to the Intercreditor Agreement with the lender under the Term Note; (vi) an executed Master Turnover Agreement pursuant to which the Company agreed, until payment in full of all Obligations, upon any disposition of Equity Interests (as defined including the Initial Capital Raise) or any Secondary Capital Raise proceeds to turn the proceeds to the lender under mandatory prepayment provisions; (vii) consent to a prepayment on the Lyneer Put Option note in the aggregate of $2 million (viii) an updated budget; and (ix) customary closing conditions.

The failure of Lyneer and IDC to comply with any of such additional covenants would create additional events of default under the Revolver and the Term Note that have not been waived by the lenders under the Revolver or the Term Note in the existing forbearance agreements.

On August 12, 2024 the Company entered into the Ninth Amendment and with its lender of the Revolver, under which the lender, waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Revolver through September 30, 2024. The maximum aggregate principal amount of $60,000,000 will be reduced by $500,000 on each Thursday starting August 15, 2024 and continuing through and including September 26, 2024. The Initial Capital Raise milestone was extended to September 15, 2024 with additional milestones including an uplisting milestone date of September 15, 2024. The Company has received conditional approval to extend the current milestone for the Company’s Initial Capital Raise to January 30, 2025 and its continuing negotiations with its lender.

The Company has received conditional approval by a new ABL lender and expects to close on a new credit facility by the end of November 2024. One of our current lenders has committed to fund a minimum of $8 million of the IDC shortfall on the Revolver. The Company will continue to borrow under the existing facility in its normal course of business until closing.

On June 18, 2024, IDC and Lyneer also entered into an amendment to the forbearance agreement with the lender under the Term Note pursuant to which, the lender (i) extended its forbearance with respect to all events of default until the earlier of July 15, 2024, or an Event of Default; (ii) requires a limited guaranty and continued pledge by us of our equity interest in Lyneer; (iii) requires the execution of new three-year employment agreements with Todd McNulty and James Radvany, CEO and CFO, respectively of Lyneer. The events of default under the Term Note included:

(i)     the failure to pay interest due on October 1, 2023 and January 2, 2024;

(ii)    failure to complete an Initial Capital Raise by May 15, 2024 and to apply the proceeds as specified therein;

(iii)   failure to complete management presentations to potential buyers and potential lenders;

(iv)   the failure to deliver on or before May 29, 2024, an executed letter of intent with respect to a Sale/Refinancing; and

(v)    the failure to satisfy various financial covenants of the Term Loan and failure to cure.

On August 12, 2024, the Company entered into the Tenth Amendment and with its lender of the Term Note, under which the lender, waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Term Note through September 30, 2024. The Initial Capital Raise milestone was extended to September 30, 2024 with additional milestones including an uplisting milestone date of September 15, 2024.

The Company has received conditional approval to extend the current milestone for the Company’s Initial Capital Raise to January 30, 2025. Additionally, the Term Note is covered by the Allocation agreement discussed below.

The Lenders’ consent to IDC’s transfer of ownership of the equity of Lyneer was conditioned upon substantially the same terms stated above under the Revolver, as well as issuance of a secured bridge loan (“Credit Agreement”) to the Company in the principal amount of $1,950,000 at an interest rate of 5% per annum. The Maturity date of the Credit Agreement was originally September 30, 2024. However, mandatory prepayments shall be made from the Initial Capital Raise, on the issuance of new debt or new Equity Interests, or upon a change of control.

On July 22, 2024, the Company entered into an amendment to extend the maturity date of the Credit Agreement to June 18, 2026.

In addition, on January 16, 2024, IDC and Lyneer entered into an amendment agreement with the holders of the Seller Notes and Earnout Notes to defer the missed July 31, 2023 and October 31, 2023 principal and interest payments on the Seller Notes and the Earnout Notes, each in the amount of $$1,575,000 plus accrued interest, until February 28, 2024, and to defer to February 28, 2024 the payment of $1,575,000 with accrued interest scheduled for January 31, 2024. Lyneer has not refinanced or restructured the credit facility and missed all payments of the Seller Notes and the Earnout Notes during 2024.

In accordance with ASC Topic 205-40, Going Concern, Atlantic evaluates whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for one year from the date the financials are issued. This evaluation includes considerations related to financial and other covenants contained in Atlantic’s credit facilities, as well as Atlantic’s forecasted liquidity. Atlantic has concluded that there is no substantial doubt about its ability to continue as a going concern for at least one year from the date of issuance of its consolidated financial statements. The Company has received conditional approval by a new ABL lender and expects to close on the new credit facility by the end of December 2024. One of our current lenders has committed to fund a minimum of $8 million of the IDC shortfall on the Revolver. The Company will continue to borrow under the existing facility in its normal course of business until closing.

IDC, Lyneer and Prateek Gattani, IDC’s Chief Executive Officer and our Chairman of the Board following the Merger, have entered into an Allocation Agreement dated as of December 31, 2023, pursuant to which IDC agreed that, subject to subordination to the taxes as between IDC and Lyneer, in connection with the Merger, the Term Note and the Seller Notes, will either be paid in full or assumed by IDC, and all but $35 million of the Revolver will be paid in full or assumed by IDC, and Lyneer will have no further liability or responsibility for such indebtedness. However, as IDC and Lyneer were unable to obtain the release of Lyneer from the holders of such indebtedness for accounting purposes, with respect to any of such indebtedness that was not repaid by IDC with the Allocation Agreement not being given effect for accounting purposes and Lyneer will remain jointly and severally liable with IDC to such lenders until such time as such joint and several indebtedness is restructured, at which time IDC will be obligated to repay in full all remaining amounts payable under the Term Note and the Seller Notes and will repay or assume all but approximately $35 million under Revolver. In the event IDC does not repay any of this debt and the Company is required to make payments, IDC will be obligated to repay the Company for the amounts paid on IDC’s behalf. Upon the consummation of the Merger, the Company determined that it was no longer probable that IDC would default on its portion of the joint and several obligations and deconsolidated the joint and several debt obligations in the accompanying condensed financial statements.

In the Allocation Agreement, IDC and Mr. Gattani have agreed to implement a plan to refinance or otherwise satisfy the joint and several indebtedness. IDC and Mr. Gattani are currently exploring refinancing opportunities with several lenders to address the assumed debt, as well as the IDC portion of the Revolver. However, it is expected that the Company will not be legally released from its joint and several obligations with respect to the indebtedness to be assumed by IDC until payment in full of the Merger Note, which originally matured on September 30, 2024. The maturity date of the Merger Note has been extended to March 31, 2026. The Company has received conditional approval by a new ABL lender and expects to close on a new credit facility by the end of November 2024. One of our current lenders has committed to fund a minimum of $8 million of the IDC shortfall on the Revolver. It is expected that the new credit facility will be supportable by the Company’s stand-alone borrowing base, will be on terms similar to those of the existing credit agreement and will provide credit availability to the Company of up to $40,000,000.

Cash flows for the nine months ended September 30, 2024 and 2023 consisted of the following:

Cash flows provided by operating activities for the nine months ended September 30, 2024 compared to the nine months September 30, 2023 was lower due to an increase in accounts receivable and accrued expenses and other current liabilities and due to related parties.

Investing Activities

Cash used in investing activities for the nine months ended September 30, 2024 decreased compared to September 30, 2023 and consisted entirely of purchases of property and equipment.

Financing Activities

Cash used in financing activities increased for the nine months ended September 30, 2024 compared to September 30, 2023 and consisted of borrowings and payments under the Company’s debt arrangements of the Revolver and Seller Notes (as described below). Additionally, during the nine months ended September 30, 2024, the Company issued shares, entered into additional debt obligations, and had a deemed contribution as a result of the Merger.

Revolver

The Company currently maintains the Revolver as a co-borrower with IDC with an available borrowing capacity of up to $60,000,000. The facility was partially used to finance the acquisition of Lyneer by IDC in August 2021, with additional borrowing capacity available under the Revolver to finance Lyneer’s working capital. All of Lyneer’s cash collections and disbursements are currently linked with bank accounts associated with the lender and funded using the Revolver. These borrowings are determined by Lyneer’s availability based on a formula of billed and unbilled accounts receivable as defined in the loan agreement.

As of September 30, 2024 and December 31, 2023, the total balance on the Revolver was $53,337,869 and $90,906,217, respectively. As of September 30, 2024 and December 31, 2023, the Company recorded a liability of $42,778,061 and $85,092,695, respectively, and IDC owed the remaining $10,559,808 and $5,813,522, respectively. Total available borrowing capacity on the Revolver as of September 30, 2024 was $(11,682,375), net of a $2,000,065 reserve required on the Revolver. The borrowing base calculation is based on Lyneer’s eligible assets.

Borrowings under the Revolver are classified as SOFR Revolving Credit Loans, SOFR FILO Loans, Base Rate Revolving Credit Loans, Base Rate FILO Loans or Swing-Line Loans (each as defined in the Revolver). Applicable margins for each loan type under the original facility are as follows:

Swing Line Loans on the Revolver bear interest at a rate equal to the Base Rate (as defined) plus the applicable margin.

On May 5, 2023, Lyneer entered into the Third Amendment to the Revolver. The Third Amendment to the Revolver was treated as a modification based upon Lyneer’s analysis according to ASC 470 — Debt. As such, Lyneer is deferring the recognition of the amendment fee and will amortize such fee as an adjustment to interest expense over the remaining term of the Revolver, along with any existing unamortized costs, using the effective interest method. The amendment fee was $750,000 (paid by IDC), split evenly between IDC and Lyneer. Fees paid to third parties are expensed as incurred, and no gain or loss was recorded on the modification.

The Third Amendment increased the applicable margin thresholds for various products as follows:

On July 14, 2023, Lyneer received notice from the administrative agent of the lender that Lyneer was in default under the Revolver due to its failure to repay the over-advance on the Revolver. Further, on July 21, 2023, Lyneer received notice from the lender advising Lyneer that it may not make payments on its Term Loan until the over-advance payment default has been cured or waived.

On August 31, 2023, Lyneer and IDC entered into the Fourth Amendment and Forbearance Agreement with the lender under the Revolver under which the lender waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Revolver through November 17, 2023. The Fourth Amendment and Forbearance Agreement was treated as a debt extinguishment after Lyneer’s analysis of ASC 470, and a loss of $189,951 was recorded. The total amendment fee was $1,550,000 and the structuring fee was $100,000, allocated evenly between IDC and Lyneer. This fee will be amortized as an adjustment to interest expense over the remaining term, along with any existing unamortized costs using the effective interest method. Fees paid other than to the lenders are expensed as incurred.

Lyneer and its lenders did not execute a fifth amendment and forbearance agreement. Instead on January 30, 2024, Lyneer and IDC entered into a consent and amendment to the forbearance agreement with the lender under the Revolver under which the lender extended its forbearance with respect to all events of default until March 15, 2024, revised certain financial ratio covenants, with March 31, 2024 as the first calculation date for such ratios, and agreed to a revised schedule for the repayment of the over-advance.

The January 2024 amendment to the forbearance agreement was treated as a modification after Lyneer’s analysis according to ASC 470 and as such, Lyneer is deferring the $750,000 amendment, forbearance and structuring fees, split evenly between IDC and Lyneer, and will amortize as an adjustment to interest expense over the remaining term, along with any existing unamortized costs using the effective interest method. Fees paid to third parties are expensed as incurred, and no gain or loss was recorded on the modification.

As described above, on April 17, 2024, Lyneer and IDC entered into an additional amendment to the forbearance agreement with the lender under the Revolver under which the lender waived all then-existing events of default as of the effective date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such

events of default under the Revolver through July 31, 2024 and eliminated certain financial ratios. The maturity date of the Revolver was accelerated to July 31, 2024 and the available borrowing capacity decreased to $70,000,000 and further decreasing to $40,000,000 upon the consummation of the Merger. Additionally, the sublimit for letters of credit was decreased to $6,000,000, further decreasing to $0 upon the consummation of the Merger.

As described above, on June 18, 2024, Lyneer and IDC entered into an additional amendment to the forbearance agreement with the lender under the Revolver under which the lender waived all then-existing events of default as of the effective date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Revolver through July 15, 2024. The maturity date of the Revolver was extended to August 31, 2025 and the available borrowing capacity was decreased to $60,000,000, decreasing to $40,000,000 with the Initial Capital Raise (as defined) and further decreasing upon the Secondary Capital Raise (as defined). The maximum consolidated cash balance at the end of any business day was reduced to $1,000,000.

As described above, on August 12, 2024, the Company entered into the Ninth Amendment and with its lender, under which the lender, waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Revolver through September 30, 2024. The maximum aggregate principal amount of $60,000,000 will be reduced by $500,000 on each Thursday starting August 15, 2024 and continuing through and including September 26, 2024. The Initial Capital Raise milestone was extended to September 15, 2024 with additional milestones including an uplisting milestone date of September 15, 2024.

The Company has received conditional approval by a new ABL lender and expects to close on a new credit facility by the end of December 2024. One of our current lenders has committed to fund a minimum of $8 million of the IDC shortfall on the Revolver.

Term Note

On August 31, 2021, Lyneer and IDC as co-borrowers entered into a Term Note in the amount of $30,300,000. The proceeds of this loan were primarily used to finance the acquisition of Lyneer by IDC in August 2021. The Term Note matures on February 28, 2026, at which time all outstanding balances are due and payable. There are no scheduled principal payments on the Term Note prior to its maturity date. The Term Note is subordinated to the Revolver and initially bore interest at the stated interest rate of 14% per annum.

As of September 30, 2024 and December 31, 2023, Lyneer had recognized liability balances on the Term Note of $0, and $34,223,489, respectively.

On May 5, 2023, the Term Note was amended to amend the stated interest rate, which may vary between 14% and 16% per annum, with the cash portion of the stated rate varying from 10% to 11% per annum and the Paid-in-Kind (“PIK”) portion varying from 4% to 5% per annum, based on specified financial ratios and similar metrics.

The May 2023 amendment to the Term Note was treated as a modification pursuant to ASC 470 — Debt. As such, Lyneer is deferring recognition of the $100,000 amendment fee and will amortize such fee as an adjustment to interest expense over the remaining term of the Term Note, along with any existing unamortized costs, using the effective interest method. IDC paid the $100,000 amendment fee, which is included in “capital contribution” on the accompanying consolidated statements of mezzanine capital and members’ capital (deficit). Fees paid to third parties are expensed as incurred, and no gain or loss was recorded on the modification.

The Term Note was further amended on June 30, 2023 to defer the July 1, 2023 cash interest payment until August 1, 2023. However, Lyneer did not make this payment when due based upon the notice received from the administrative agent of the lender under the Revolver, which restricted payment on the Term Note as discussed above.

On August 4, 2023, Lyneer received a notice from the administrative agent of the Term Note advising Lyneer that it was in default under the loan agreement relating to the Term Note due to non-payment of the August 1, 2023 interest payment and that interest under the Term Note would accrue at the default rate of the stated rate plus 2% per annum. The Term Note contains certain customary financial and non-financial covenants with which Lyneer is required to comply.

The Term Note was further amended on August 31, 2023. Pursuant to such agreement, the lender waived all existing events of default as of the date of such amendment and agreed to forbear from exercising its rights and remedies through November 17, 2023. This amendment also increased the stated interest rate on the Term Note to 19% per annum and the cash portion of the stated rate increased to 14% per annum, with a default rate equal to the stated rate plus 2%. This amendment was treated as a modification after Lyneer’s analysis according to ASC 470 and as such, Lyneer will amortize any existing unamortized costs using the effective interest method, as an adjustment to interest expense over the remaining term. The structuring fee of $32,500 and the total forbearance fee of $325,000 is the responsibility of IDC. These fees were not paid and as such, were added to the principal amount of the Term Note. This amendment had the same contingencies as the forbearance agreement for the Revolver.

Lyneer and IDC did not execute a sixth amendment and forbearance agreement. Instead on January 30, 2024, Lyneer and IDC entered into an amendment to the forbearance agreement with its lender under the Term Note under which the lender agreed, subject to satisfaction of various conditions precedent, to waive all existing events of default under the Term Note as of the date of the amendment and to forbear from exercising its rights and remedies with respect to such events of default through March 15, 2024. The January 2024 amendment to the forbearance agreement was treated as a modification after Lyneer’s analysis according to ASC 470 and as such, Lyneer will amortize any existing unamortized costs using the effective interest method, as an adjustment to interest expense over the remaining term. The structuring fee of $100,000, the forbearance fee of $500,000 and the amendment fee of $150,000 are the responsibility of IDC. These fees were not paid and as such, was added to the principal of the Term Note. Fees paid other than to the lenders are expensed as incurred, and no gain or loss was recorded on the modification.

As described above, on April 17, 2024, Lyneer and IDC entered into an additional amendment to the forbearance agreement with its lender under the Term Note under which the lender waived all then-existing events of default under the Term Note and agreed to forbear from exercising its rights and remedies with respect to such events of default through July 31, 2024. IDC has agreed with Lyneer under an Allocation Agreement that IDC will assume all payment obligations under the Term Note. However, it is not expected that Lyneer will be legally released as an obligor under the Term Note until the Merger Note is paid in full and the indebtedness evidenced by the Term Note is restructured.

As described above, on June 18, 2024, Lyneer and IDC entered into an additional amendment to the forbearance agreement with its lender under the Term Note under which the lender waived all then-existing events of default under the Term Note and agreed to forbear from exercising its rights and remedies with respect to such events of default through July 15, 2024. IDC has agreed with Lyneer under an Allocation Agreement that IDC will assume all payment obligations under the Term Note. However, it is not expected that Lyneer will be legally released as an obligor under the Term Note until the Merger Note is paid in full and the indebtedness evidenced by the Term Note is restructured.

As described above, on August 12, 2024, the Company entered into the Tenth Amendment and with its lender, under which the lender, waived all existing events of default as of the date of the agreement and agreed to forbear from exercising its rights and remedies with respect to such events of default under the Term Note through September 30, 2024. The Initial Capital Raise milestone was extended to September 15, 2024 with additional milestones including an uplisting milestone date of September 15, 2024. The Company has received conditional approval to extend the current milestone for the Company’s Initial Capital Raise to January 30, 2025 and is continuing negotiations with its lender.

Seller Notes

As part of the purchase price consideration for the Transaction, Lyneer and IDC as co-borrowers issued various Seller Notes to former owners in the aggregate principal amount of $15,750,000. Principal payments on the Seller Notes are due in quarterly instalments of $1,575,000, and $3,150,000 is due at their amended maturity dates of April 30, 2024.

The Seller Notes bear interest at an amended fixed rate of 11.25% per annum. The Seller Notes represent unsecured borrowings and are subordinated to the Revolver and to the Term Note.

Lyneer had recognized Seller Note liability balances of $0 and $7,875,000 as of September 30, 2024 and December 31, 2023, respectively.

Lyneer and IDC did not make the principal and interest payments due July 31, 2023 and October 31, 2023 on the Seller Notes as payments to any other debt holders was prohibited by the administrative agent of the lender under the Revolver.

Pursuant to the terms of the August 31, 2023 forbearance agreements, IDC agreed to use a portion of the Merger Consideration to pay down the Seller Notes upon the consummation of the Merger, following which Lyneer will have no further liability or responsibility for the payment of the Seller Notes. However, under the allocation agreement between IDC and Lyneer, IDC agreed with Lyneer that IDC will assume all payment obligation under the Seller Notes. It is not expected that Lyneer will be released as an obligor under the Seller Notes until the Merger Note is paid in full and the indebtedness evidenced by the Seller Notes is restructured.

Earnout Notes

As contingent consideration milestones are met in connection with the Transaction Agreement, Lyneer and IDC can elect to pay the milestone payments in cash or to issue notes payable. During 2022, Lyneer and IDC as co-borrowers have issued nine promissory notes in the aggregate principal amount of $13,494,133. Payments on each of the Earnout Notes are due in quarterly installments through their amended maturity date of January 31, 2025 and each note bears an amended stated interest rate of 11.25% per annum. On January 16, 2024, Lyneer and IDC as co-borrowers issued six notes payable with an aggregate value of $6,941,521. Payments on each of the Earnout Notes are due in quarterly installments through their maturity date of January 16, 2026 and each note bears interest at a rate of 6.25% per annum. The Company missed the March 31, 2024 principal and interest payment and the interest rate increased to the default rate of 11.25%.

The Earnout Notes are subordinated to the Revolver and the Term Note and represent unsecured borrowings.

The Earnout Note liability was $0 and $13,494,133 at the periods ended September 30, 2024 and December 31, 2023, respectively.

Lyneer and IDC did not make the principal and interest payments due July 31, 2023, October 31, 2023, February 28, 2024 and March 31, 2024 on the Earnout Notes as payments to any other debt holders was prohibited by the administrative agent of the lender under the Revolver.

Pursuant to the terms of the August 31, 2023 forbearance agreements, IDC agreed to use a portion of the Merger Consideration to pay down the Earnout Notes upon the consummation of the Merger, following which Lyneer will have no further liability or responsibility for the payment of the Earnout Notes. However, under the Allocation Agreement, IDC agreed with Lyneer that IDC will assume all payment obligation under the Earnout Notes. It is not expected that Lyneer will be released as an obligor under the Earnout Notes until the Merger Note is paid in full and the indebtedness is restructured.

2023 Amendment to Seller and Earnout Notes

Lyneer and IDC did not make the principal and interest payments due on the Seller Notes and the Earnout Notes during 2023 or the first six months of 2024. On May 14, 2023, Lyneer signed an amendment, dated as of May 11, 2023 (the “Omnibus Amendment”), to defer the missed payments under the Seller Notes and Earnout Notes until the amended maturity dates of such notes of April 30, 2024 and January 31, 2025, respectively. The Omnibus Amendment changed the interest rate of the Seller Notes and the Earnout Notes to 11.25% per annum from 6.25% per annum for all remaining payments.

The Omnibus Amendment was treated as a modification based upon Lyneer’s analysis according to ASC 470 — Debt. As such, Lyneer is deferring its recognition of the $40,000 amendment fee and will amortize such fee as an adjustment to interest expense over the remaining terms of such notes, along with any existing unamortized costs, using the effective interest method. Lyneer paid the $40,000 amendment fee and will be reimbursed from IDC. These fees were included in “capital contribution” on the accompanying consolidated statements of mezzanine capital and members’ capital (deficit) for the year ended June 30, 2023. Fees paid to third parties are expensed as incurred, and no gain or loss was recorded on the modification.

As described above, on January 16, 2024, Lyneer and IDC signed an amendment to the Omnibus Agreement with the holders of the Seller Notes and the Earnout Notes to defer the missed July 31, 2023 and October 31, 2023 principal and interest payments, each in the amount of $1,575,000 plus accrued interest, together with the principal payment in the amount of $1,575,000 plus accrued interest that is payable on January 31, 2024, all of which will now be payable on February 28, 2024. Lyneer missed the February 28, 2024 payment and is in default of the Seller Notes and Earnout Notes.

The January 2024 Omnibus Amendment was treated as a modification after Lyneer’s analysis according to ASC 470 and as such, Lyneer is deferring the $19,500 amendment fee and will amortize as an adjustment to interest expense over the remaining term, along with any existing unamortized costs using the effective interest method. Lyneer paid the $19,500 amendment fee and will be reimbursed from IDC. These fees were included in “capital contribution” on the accompanying consolidated statements of mezzanine capital and members’ capital (deficit). Fees paid to third parties are expensed as incurred, and no gain or loss was recorded on the modification.

Credit Agreement

On June 18, 2024, the Company entered into a secured bridge loan (“Credit Agreement”) in the principal amount of $1,950,000 at an interest rate of 5% per annum. The maturity date of the Credit Agreement was originally September 30, 2024. However, mandatory prepayments shall be made from the Initial Capital Raise, on the issuance of new debt or new equity interests, or upon a change of control.

On July 22, 2024, the Company entered into an amendment to extend the maturity date of the Credit Agreement to June 18, 2026.

Promissory Note

From April 29, 2019 to April 29, 2020, the Company entered into a series of non-convertible promissory notes (the “Promissory Notes”) with St. Laurent Investments LLC amounting to $1,375,0000. The Promissory Notes had a one-year term, most recently extended through July 31, 2025 or a later date to be mutually agreed upon. The Promissory Notes bear interest accruing at the rate of 5% per annum, and increased to 10% for the period from August 1, 2024 through July 31, 2025.

Merger Note

In connection with the closing of the Merger, we issued to IDC the Merger Note in the principal amount of $35,000,000 that originally matured on September 30, 2024. The Merger Note does not bear interest and is not convertible prior to an event of default under the Merger Note. If an event of default should occur under the Merger Note, the Merger Note will bear interest at the rate of 7% per annum commencing upon the date of such event of default and will be convertible into shares of our common stock at a price per share that equals the lowest daily volume weighted average price per share (VWAP) during the five trading days immediately preceding the date on which the applicable conversion notice is delivered to us, but not less than 80% of the price per share in our Initial Capital Raise, provided, however, that the number of shares of our common stock issuable upon conversion of the Merger Note will not exceed 19.99% of the number of our outstanding shares of common stock without shareholder approval if our common stock is then listed on a National Stock Exchange. As we do not believe we will have sufficient liquidity and capital resources to pay the Merger Note in full when due, as well as to restructure our joint and several debt obligations, we believe we will have to sell additional equity or debt securities prior to the maturity date of the Merger Note to pay or refinance the Merger Note when due. However, as Prateek Gattani, our Chairman of the Board following the Merger, is also the Chief Executive Officer and controlling stockholder of IDC, we also believe we will be able to negotiate an extension of the Merger Note if we are unable to pay it in full at maturity. An event of default under the Merger Note may result in an additional event of default under the Revolver and our other indebtedness for borrowed funds.

On September 10, 2024, the Company entered into Amendment No 1 to the Convertible Promissory Note (“Amendment 1 to the Merger Note”) which extended the maturity date to the earlier of March 31, 2026 or the completion of at least a $40 million capital raise. Amendment 1 to the Merger Note was treated as a modification after the Company’s analysis according to ASC 470 and as such, the Company is deferring the $300,000 amendment fee and will amortize as an adjustment to interest expense over the remaining term using the effective interest method.

Interest Expense

Total interest expense is comprised of a cash and non-cash component as described in the debt arrangements described above.

For the three and nine months ended September 30, 2024, total interest expense totaled $1,472,564 and $10,494,818, respectively. For the three and nine months ended September 30, 2023 total interest expense totaled $4,887,247 and $12,610,280, respectively. Total cash paid for interest for the three and nine months ended September 30, 2024

totaled $1,386,833 and $5,437,928, respectively, and $3,881,382 and $9,021,326 for the three and nine months ended September 30, 2023, respectively, with the remaining portion of the interest expense as non-cash due to the PIK interest and change in values of the accrued interest liability and amortization of deferred financing costs.

Assessment of Liquidity Position

Lyneer has assessed its liquidity position as of September 30, 2024 and December 31, 2023. As of September 30, 2024 and December 31, 2023, the total committed resources available were as follows:

As noted above under the caption Liquidity and Capital Resources, pursuant to the Forbearance Agreement, following the payment of the Merger Note, Lyneer intends to replace its obligations under the Revolver with a new revolving credit facility with a borrowing capacity of up to $60,000,000. Lyneer believes the borrowing capacity under such new credit facility, its cash flow from operations and the available net proceeds from the Merger will provide sufficient liquidity and capital resources to conduct its planned operations for at least one year.

Refer To Note 3: Summary of Significant Accounting Policies, Liquidity.

Related Party Transactions

Transactions with Lyneer Management Holdings LLC (“LMH”)

LMH is owned by Lyneer’s Chief Financial Officer, James Radvany, and its Chief Executive Officer, Todd McNulty, each of whom owns 44.5% of LMH. On November 15, 2022, Lyneer and IDC as co-borrowers issued Year 1 Earnout Notes to LMH with total balances of November 15, 2022. The balance of the Year 1 Earnout Notes payable to LMH was $0 and $5,127,218 as of September 30, 2024 and December 31, 2023, respectively. On January 16, 2024, Lyneer and IDC as co-borrowers issued Year 2 Earnout Notes to LMH with total balances of $2,013,041. The balance of the Year 2 Earnout Notes payable to LMH was $0 for both September 30, 2024 and December 31, 2023.

The principal balance of the combined Earnout Notes payable to LMH was $0 and $5,127,218 as of September 30, 2024 and December 31, 2023, respectively, and was included in “notes payable, current” on the accompanying consolidated balance sheets. Interest expense incurred on the Earnout Notes to LMH totaled $347,766 and $236,457 for the nine months ended September 30, 2024 and 2023, respectively.

Transactions with IDC

Lyneer and IDC are co-borrowers and are jointly and severally liable for principal and interest payments under the Revolver, the Term Note, the Seller Notes and the Earnout Notes. In the case of certain of those obligations, IDC generally makes certain interest and principal payments to the lenders and collects reimbursement from Lyneer. When interest or principal payments of that nature are made by IDC, Lyneer recognizes interest expense and a payable to IDC, which is removed from Lyneer’s balance sheet upon remittance of the funds to IDC.

Lyneer and IDC file consolidated income tax returns in certain states. In connection with this arrangement, Lyneer has recorded a liability payable to IDC for taxes payable by IDC, which represent taxes attributable to Lyneer’s operations included on consolidated state and local income tax returns filed by IDC. These amounts are calculated by determining Lyneer’s taxable income multiplied by the applicable tax rate. These amounts totaled $543,547 and $522,472 as of September 30, 2024 and December 31, 2023, respectively, and are included in “due to related parties” on the accompanying consolidated balance sheets.

INFORMATION ABOUT STAFFING 360

General

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, which changed its name to Staffing 360 Solutions, Inc., ticker symbol “STAF”, on March 16, 2012. On June 15, 2017, we changed our domicile to the State of Delaware. As a rapidly growing public company in the domestic staffing sector, our high-growth business model is based on finding and acquiring, suitable, mature, profitable, operating, domestic staffing companies. Our targeted consolidation model is focused specifically on the accounting and finance, information technology (“IT”), engineering, administration and light industrial disciplines. All amounts in this section, “Information About Staffing 360,” are expressed in thousands, except share and per share amounts, or unless otherwise indicated.

Business Model and Acquisitions

We are a high-growth domestic staffing company engaged in the acquisition of United States (“U.S.”) based staffing companies. As part of our consolidation model, we pursue a broad spectrum of staffing companies supporting primarily accounting and finance, IT, engineering, administration (collectively, the “Professional Business Stream”) and commercial (“Commercial Business Stream”) disciplines. 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, we are regularly in discussions and negotiations with various suitable, mature acquisition targets. To date, we have completed 10 acquisitions since November 2013.

Operating History

We generated revenue of $190,876 and $184,884 for the years ended December 30, 2023 (“Fiscal 2023”) and December 31, 2022 (“Fiscal 2022”), respectively. This increase was primarily caused by the acquisition of Headway Workforce Solutions (“Headway”), partly offset due to the decline in commercial staffing revenue.

Headway Acquisition and Series H Convertible Preferred Stock

On April 18, 2022, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Headway and Chapel Hill Partners, LP, as the representatives of all the stockholders of Headway (“Chapel Hill”), pursuant to which, among other things, we agreed to purchase all of the issued and outstanding securities of Headway in exchange for (i) a cash payment of $14, and (ii) 9,000,000 shares of our Series H Convertible Preferred Stock (the “Series H Preferred Stock”), with a value equal to the Closing Payment, as defined in the Stock Purchase Agreement (the “Headway Acquisition”). On May 18, 2022, the Headway Acquisition closed. The purchase price in connection with the Headway Acquisition was approximately $9,000. Pursuant to certain covenants in the Stock Purchase Agreement, the Company may be subject to a Contingent Payment of up to $4,450 based on the Adjusted EBITDA (such term as defined in the Stock Purchase Agreement) of Headway during the Contingent Period (such term as defined in the Stock Purchase Agreement), subject to additional potential adjustments tied to customary purchase price adjustments described in the Stock Purchase Agreement.

Industry Background

The staffing industry is divided into three major segments: temporary staffing services, professional employer organizations (“PEOs”) and placement agencies. Temporary staffing services provide workers for limited periods, often to substitute for absent permanent workers or to help during periods of peak demand. These workers, who are often employees of the temporary staffing agency, will generally fill clerical, technical, or industrial positions. PEOs, sometimes referred to as employee leasing agencies, contract to provide workers to customers for specific functions, often related to human resource management. In many cases, a customer’s employees are hired by a PEO and then contracted back to the customer. Placement agencies, sometimes referred to as executive recruiters or headhunters, find workers to fill permanent positions at customer companies. These agencies may specialize in placing senior managers, mid-level managers, technical workers, or clerical and other support workers.

We consider ourselves a temporary staffing company within the broader staffing industry. However, we provide permanent placements at the request of existing clients and some consulting services clients.

Staffing companies identify potential candidates through online advertising and referrals, and interview, test and counsel workers before sending them to the customer for approval. Pre-employment screening can include skills assessment, drug tests and criminal background checks. The personnel staffing industry has been radically changed by the internet. Many employers list available positions with one or several internet personnel sites like www.monster.com or www.careerbuilder.com, and on their own sites. Personnel agencies operate their own sites and often still work as intermediaries by helping employers accurately describe job openings and by screening candidates who submit applications.

Major end-use customers include businesses from a wide range of industries such as manufacturing, construction, wholesale and retail. Marketing involves direct sales presentations, referrals from existing clients and advertising. Agencies compete both for customers and workers. Depending on market supply and demand at any given time, agencies may allocate more resources either to finding potential employers or potential workers. Permanent placement agencies work either on a retained or on a contingency basis. Clients may retain an agency for a specific job search or on contract for a specific period. Temporary staffing services charge customers a fixed price per hour/day or a standard markup on prevailing hourly/daily rates.

For many staffing companies, demand is lower late in the fourth calendar quarter and early in the first calendar quarter, partly because of holidays, and higher during the rest of the year. Staffing companies may have high receivables from customers. Temporary staffing agencies and PEOs must manage a high cash flow because they funnel payroll payments from employers. Cash flow imbalances also occur because agencies must pay workers even though they haven’t been paid by clients.

STAFFING 360 MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of Staffing 360’s financial condition and results of operations in conjunction with Staffing 360’s consolidated financial statements and the related notes included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Staffing 360’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this proxy statement/prospectus. References to the “Company,” “we”, “us”, and “our” in this section refers to Staffing 360. All Staffing 360 financial information is presented in thousands.

Results of Operations

The following discussion summarizes the key factors Staffing 360’s management team believes are necessary for an understanding of Staffing 360’s financial statements.

Three and Nine Months Ended September 28, 2024 and September 30, 2023

For the nine months ended September 28, 2024 and September 30, 2023

Revenue

For the nine months ended September 28, 2024, revenue decreased by 9.6% to $131,719 as compared with $145,776 in revenue for the nine months ended September 30, 2023. The decline in revenue was more prevalent in Commercial Staffing as a result of a challenging U.S. operating environment. Commercial Staffing declined by 17.1% and Professional Staffing Business was down by 2.6%. In the Quarter-ended September 28, 2024, the Commercial Staffing business was down by 19.1% year-on-year with Professional Staffing up by 4.3%.

Revenue for the nine months ended September 28, 2024, was comprised of $130,922 of temporary contractor revenue and $797 of permanent placement revenue, compared with $144,864 and $913 of temporary contractor revenue and permanent placement revenue, respectively, for the nine months ended September 30, 2023.

Cost of revenue, Gross profit and Gross margin

Cost of revenue includes the variable cost of labor and various non-variable costs (e.g., workers’ compensation insurance) relating to employees (temporary and permanent) as well as sub-contractors and consultants. For the nine months ended September 28, 2024, cost of revenue was $114,432, a decrease of 7.4% from $123,600 for the nine months ended September 30, 2023, compared with a decline in revenue of 9.6%. Overall gross profit margin declined from 15.2% to 13.1% mainly driven by the proportion of the revenue driven by lower margin Employer of Record (EOR) being 38.6% in the nine months ended September 28, 2024 versus 32.1% in the nine months ended September 30, 2023.

Operating expenses

Total operating expenses for the nine months ended September 28, 2024, were $21,450, a decrease of 15.9% from $25,498 for the nine months ended September 30, 2023. The decrease in operating expenses was driven primarily by reductions in force put into effect in May 2023 and again in February 2024.

Other expenses, net

Total other income (expenses), net for the nine months ended September 28, 2024 were ($102), an increase of 96.9% from ($3,262) for the nine months ended September 30, 2023. The increase was driven by an income recognized for discontinued operations of $901 as of July 29, 2024 versus an expense of $2,879 as of September 30, 2023.

Amortization of debt discount and deferred financing costs for the nine months ended September 28, 2024 were $347, an increase of $27, compared with amortization of debt discount and deferred financing costs for the nine months ended September 30, 2023, which were $321. In addition, for the nine months ended September 28, 2024, we had other income of $127 compared with other loss of $63 for the nine months ended September 30, 2023.

Non-GAAP Measures

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we 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.

We present the following non-GAAP financial measure and KPIs in this report:

Revenue and Gross Profit by Business Streams    We use this KPI to measure our mix of Revenue and respective profitability between our two main lines of business due to their differing margins. For clarity, these lines of business are not our 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 KPI to benchmark our business against the industry.

The following table details Revenue and Gross Profit by sector:

Adjusted EBITDA.    This measure is defined as net income (loss) attributable to common stock before: interest expense, benefit from income taxes; depreciation and amortization; acquisition, capital raising and other non-recurring expenses; other non-cash charges; impairment of goodwill; re-measurement gain on intercompany note; restructuring charges; other income (loss); and charges the Company considers to be non-recurring in nature such, as legal expenses associated with litigation, professional fees associated with potential and completed acquisitions. We use this measure because we believe it provides a more meaningful understanding of our profit and cash flow generation.

____________

(1)      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.

(2)      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.

Operating Leverage.    This measure is calculated by dividing the growth in Adjusted EBITDA by the growth in adjusted gross profit, on a trailing 12-month basis. We use this KPI because we believe it provides a measure of our efficiency for converting incremental gross profit into Adjusted EBITDA.

Leverage Ratio.    Calculated as total debt, net, gross of any original issue discount, divided by pro forma adjusted EBITDA for the trailing 12-months. We use this KPI as an indicator of our ability to service debt prospectively.

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 our 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 temporary payroll. As such, we believe this measure is helpful to investors as an indicator of our underlying operating cash flow.

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.

Operating activities

For the nine months ended September 28, 2024, net cash used in continuing operating activities of $549 was primarily attributable to net loss of $7,370 an increase in accounts receivable of $1,744, a decrease in accounts payable of $1,552 and an increase in and accrued payroll costs of $6,049. The net cash used in all operating activities was impacted by $3,007 from discontinued operations to give a total cash used in operating activities of $3,556.

For the nine months ended September 30, 2023, net cash provided by continuing operating activities of $672 was primarily attributable to net loss of $9,989, increases in Other Assets of $7,403 and the impact of non-cash items of $3,869. A negative impact of $11,397 for discontinued operations brought the total cash used in operating activities to $10,725.

Investing activities

For the nine months ended September 28, 2024, net cash provided by investing activities totaled $1,993, primarily due to $2,046 related discontinued operations offset by $53 purchase of property and equipment.

For the nine months ended September 30, 2023, net cash provided by investing activities totaled $4,718, primarily due to $138 purchase of property and equipment and $4,856 related to discontinued operations.

Financing activities

For the nine months ended September 28, 2024, net cash provided by financing activities totaled $2,340, due to additional cash received of $2,140 on accounts receivable financing, net, conversion of dividends on Series H preferred stock to principal $700 offset by payments made on earnouts $500.

For the nine months ended September 30, 2023, net cash provided by financing activities totaled $4,677 primarily due to repayments of $3,139, net proceeds from the sale of common stock and a warrant inducement transaction of $4,433 and $2,292, respectively, third party financing costs of $633 and discontinued operations of $256.

Year Ended December 30, 2023, Compared to Year Ended December 31, 2022