PROMISSORY NOTES
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Nov. 30, 2015
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Text Block] | NOTE 6 PROMISSORY NOTES Promissory notes short-term consisted of the following:
Promissory notes long-term consisted of the following:
Promissory notes - short-term: In June 2014, the Company issued a promissory note in the amount of $100,000 to a company of which a previous director and shareholder of the Company is a Managing Member. The promissory note was non-interest bearing and due upon demand. The Company issued 500 common stock shares to the note holder as additional consideration. This note has been paid in full. In July 2014, the Company issued three (3) non-interest bearing promissory notes in the aggregate amount of $280,000 to three related parties. The promissory notes were due upon demand. The first was issued on July 16, 2014 to a company owned by a former employee, Vice Chairman, President and Secretary of the Company, in the amount of $30,000. The second was issued on July 17, 2014 to the Company’s former Chief Financial Officer in the amount of $150,000. The Company issued 1,000 common stock shares to the former Chief Financial Officer as additional consideration. The third was issued on July 8, 2014 to a company of which a former director and shareholder of the Company is a Managing Member in the amount of $100,000. The Company issued 700 common stock shares to the note holder as additional consideration. These notes have been paid in full. In August 2014, the Company issued a non-interest bearing promissory note in the amount of $125,000 to a company of which a former director and shareholder of the Company is a Managing Member. The promissory note was due upon demand. The Company issued 750 common stock shares to the note holder as additional consideration. This note has been paid in full. In July and August 2014, the Company issued promissory notes to Sterling National bank totaling $625,000. These notes bear interest at eighteen percent (18%) per annum and were due upon demand. These notes and interest of $7,277 have been paid in full. In August 2014, the Company issued a twelve percent (12%) interest bearing promissory note in the amount of $150,000 to a brother of a former employee, Vice Chairman, President and Secretary of the Company. The promissory note is due upon demand. The Company issued 1,500 common stock shares to the note holder as additional consideration. This note has been paid in full. On September 2, 2014, the Company issued a promissory note in the amount of $125,000 to a company of which a former director and shareholder of the Company is a Managing Member. The promissory note is due upon demand. The Company issued 750 common stock shares to the note holder as additional consideration. This note has been paid in full. On September 15, 2014, the Company issued a promissory note in the amount of $50,000 to a company of which a former director and shareholder of the Company is a Managing Member. The promissory note is due upon demand. The Company issued 250 common stock shares to the note holder as additional consideration. This note has been paid in full. As a result of the 5,450 common stock shares issued as additional consideration above, the Company recorded at the time of issuance a debt discount of $89,706. Since these notes are due on demand, the debt discount was fully amortized at the time of issuance. On December 16, 2014, the Company issued a promissory note to Sterling National Bank in the amount of $250,000. The note bears interest at eighteen (18%) per annum and originally had a maturity date of March 31, 2015 that has subsequently been modified to have no maturity date. Through May 31, 2015, the Company had repaid principal of $198,402 leaving $51,598 outstanding. On July 24, 2015, the Company repaid in full the remaining outstanding balance of the promissory note to Sterling National Bank. During fiscal 2015, twelve (12) Initio promissory note holders converted an aggregate principal amount of $3,056,030 and interest of $302,361 into: (i) 335,840 common stock shares at the rate of $10.00 per share, and (ii) warrants to purchase 369,423 common stock shares at $12.50 per share, exercisable for ten (10) years from the date of conversion (See Note 6 Promissory Notes). From this conversion, 206,538 common stock shares and 227,192 warrants were issued on November 30, 2014, 122,507 common stock shares and 134,758 warrants were issued on January 2, 2015 and, 6,795 common stock shares and 7,474 warrants were issued on May 12, 2015. Pursuant to the purchase of The JM Group on November 5, 2015, the Company executed and delivered to the sellers a six (6) month promissory note (“The JM Group Promissory Note”) in the principal amount of $770,300 (£500,000). The JM Group Promissory Note bears interest at the rate of six percent (6%) per annum. Payments will be made in three monthly installments beginning on the four month anniversary of the closing date. The monthly installments shall first be applied to accrued interest and then to principal. As of November 30, 2015, the principal balance is $770,300. During the six months ended November 30, 2015, the Company incurred $3,633 in interest expense related to The JM Group Promissory Note. Accrued interest at November 30, 2015 totaled $3,633. Promissory notes long-term: Staffing 360 Solutions (UK) related parties: Pursuant to the purchase of Staffing 360 Solutions (UK) (“Staffing (UK)”), the Company executed and delivered three (3) year promissory notes (“Initio Promissory Notes”) in the aggregate principal amount of $3,964,949 to the shareholders of Staffing (UK). The Initio Promissory Notes bear interest at the rate of six percent (6%) per annum and amortize straight line over five (5) years. As of November 30, 2015, the Company has paid $737,223 in principal ($27,855 during the six months ended November 30, 2015, $360,824 during the year ended May 31, 2015 and $348,066 during the fiscal year ended May 31, 2014). As of May 31, 2015, eleven (11) Initio promissory note holders converted an aggregate principal amount of $3,056,030 and interest of $302,361 into: (i) 335,840 common stock shares at the rate of $10.00 per share, and (ii) warrants to purchase 369,423 common stock shares at $12.50 per share, exercisable for ten (10) years from the date of conversion (See Note 6 Promissory Notes). From this conversion, 206,538 common stock shares and 227,192 warrants were issued on November 30, 2014, 122,507 common stock shares and 134,758 warrants were issued on January 2, 2015 and, 6,795 common stock shares and 7,474 warrants were issued on May 12, 2015. The remaining principal balance outstanding at November 30, 2015 is $171,675. During the six months ended November 30, 2015, the Company recorded $5,515 of interest expense and paid accrued interest totaling $5,685 resulting in an accrued interest balance of $847. The future payments related to the Initio Promissory Notes are as follows:
Brendan Flood, a related party and the Company’s Executive Chairman, was a shareholder of Staffing (UK), and was issued a three (3) year promissory note. Mr. Flood’s portion of the $3,964,949 aggregate principal amount totaled $2,064,880. Mr. Flood was paid $378,561 in principal and $98,290 in interest since inception through November 30, 2014. On November 30, 2014, Mr. Flood converted the remaining promissory note principal, $1,720,733, and interest through maturity of $170,248, into (i) 189,099 common stock shares, at the rate of $10.00 per share, and (ii) warrants to purchase 208,008 common stock shares at the price of $12.50 per share, exercisable for ten (10) years from the date of conversion. This conversion satisfied his note in full as of November 30, 2014. Matt Briand, a related party and the Company’s Chief Executive Officer and President, was a shareholder of Staffing (UK) and was issued a three (3) year promissory note. Mr. Briand’s portion of the $3,964,949 aggregate principal amount totaled $1,115,144. Mr. Briand was paid $204,443 in principal and $52,987 in interest since inception through November 30, 2014. On November 30, 2014, Mr. Briand converted the remaining Promissory note principal, $929,287, and interest through maturity, $91,943, into (i) 102,123 common stock shares, at the rate of $10.00 per share, and (ii) warrants to purchase 112,336 common stock shares at the price of $12.50 per share, exercisable for ten (10) years from the date of conversion. The conversion was effective as of November 30, 2014 with the common stock shares and warrants being issued on January 2, 2015. This conversion satisfied his note in full as of January 2, 2015. Promissory note PS related parties: Pursuant to the purchase of PSI and PRS, the Company executed and delivered to the seller a three (3) year promissory note (“PS Promissory Note”) in the principal amount of $2,367,466. The seller continues serving as President and Chief Executive Officer of PSI and PRS. The PS Promissory Note bears interest at the rate of six percent (6%) per annum and is amortized straight line over five (5) years. As of November 30, 2015, the Company paid $1,216,614 in principal. The remaining principal balance is $1,183,733.
For the six months ended November 30, 2015 and 2014, the Company’s interest expense for long-term notes amounted to $41,706 and $65,273, respectively. As of November 30, 2015 and May 31, 2015, accrued and unpaid interest under the long-term notes amounted to $165,539 and $123,833, respectively, and are included in Interest Payable long-term. Promissory note Midcap Financial Trust Term Loan: On April 8, 2015, the Company entered in to a four (4) year Term Loan agreement with Midcap Financial Trust in the amount of $3,000,000. The principal balance is payable in full on the April 8, 2019. This loan bears interest at 9.0% plus LIBOR, with a LIBOR floor of 1.0% per annum. Through May 31, 2015, the Company repaid principal and accrued interest of $250,000 and $92,639, respectively. During the six months ended November 30, 2015, the Company paid principal amounting to $375,500 and the remaining principal balance was $2,562,500. For the six months ended November 30, 2015, interest expense related to the Term Loan amounted to $138,316. As of November 30, 2015, the Company paid $142,153 in accrued interest and had an accrued interest balance of $20,642 which is included in accounts payable and accrued expenses.
Promissory note Midcap Financial Trust Additional Term Loan: The Term Loan provides for an Additional Term Loan of up to $1,350,000 bearing interest at 4.0% plus LIBOR, with a LIBOR floor of 1.0% per annum, provided, that the Additional Term Loan shall be limited to an amount equal to five percent (5.0%) of each $1,000,000 of the aggregate net amount of the Eligible Accounts (as such term is defined in the S360 Credit Agreement) minus the amount of any reserves and/or adjustments provided for in the S360 Credit Agreement. The outstanding principal balance of the Additional Term Loan shall be payable in full on the April 8, 2019. At November 30, 2015, the outstanding balance is $750,000. For the six months ended November 30, 2015, interest expense related to the Additional Term Loan amounted to $18,667. As of November 30, 2015 and May 31, 2015, accrued interest amounted to $3,229 and $3,014, respectively.
MidCap Warrant: In addition to the Midcap Financial Trust Term Loan and Additional Term Loan, the Company issued to MidCap a warrant to purchase 12,000 unregistered shares of the Company’s common stock, par value $0.00001, with an exercise price of $12.50. The warrant is exercisable for a term of four (4) years and contains customary stock-based anti-dilution protection provisions and piggyback registration rights for the holders thereof. Promissory note Sterling National Bank: On July 24, 2015, the Company, through its wholly owned subsidiary CSI, issued a promissory note to Sterling National Bank in the amount of $350,000. The note bears interest at eighteen percent (18%) per annum and has a maturity date of October 24, 2017.
For the six months ended November 30, 2015 and 2014, the Company’s recorded interest expense totaling $22,050 and $0, respectively. Through November 30, 2015, the company paid accrued interest totaling $18,260. As of November 30, 2015 and May 31, 2015, accrued and unpaid interest amounted to $3,790 and $0, respectively. Promissory note ABN AMRO Term Loan: On November 5, 2015, the Company entered into a two (2) year term loan agreement with ABN AMRO Bank in the amount of $1,155,450 (£750,000). Payments will be made in monthly installments. This loan bears interest at 3.0% plus the Bank of England base rate of 0.5%.
For the six months ended November 30, 2015, interest expense related to the term loan amounted to $2,850. As of November 30, 2015 and May 31, 2015, the Company paid $0 in accrued interest which amounted to an accrued interest balance of $2,850 and $0, respectively, and is included in accounts payable and accrued expenses. |