v2.4.1.9
COMMITMENTS AND CONTINGENCIES
6 Months Ended
Nov. 30, 2015
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]
NOTE 12 – COMMITMENTS AND CONTINGENCIES
 
Employment Agreements
 
On February 24, 2013, the Company entered into an employment agreement with Darren Minton (“Minton Employment Agreement”), to serve as a Senior Vice President of the Company.   Pursuant to the terms of the Minton Employment Agreement, the Company will pay Mr. Minton $48,000 annually. Mr. Minton is also entitled to receive as additional compensation 2,000 common stock shares. On February 24, 2014, the Company entered into a new employment agreement with Mr. Minton to serve as Executive Vice President of the Company. Pursuant to the terms of the Minton Employment Agreement, the Company agreed to pay Mr. Minton $180,000 annually. Mr. Minton received an additional grant of 2,000 common stock shares. The employment agreement has a term of eighteen (18) months. 
  
On November 4, 2013, in connection with the CSI Acquisition, the Company entered into a four (4) year employment agreement with Simon Dealy (“Dealy Employment Agreement”), to serve as Sr. Vice President of the Company and as Chief Executive Officer of CSI, the Company’s professional services and consulting division.  Pursuant to the terms of the Dealy Employment Agreement, the parties agreed that Mr. Dealy will not engage or participate in any business that is in competition in any manner whatsoever with the business of the Company, or any business which the Company contemplates conducting or intends to conduct. Mr. Dealy received a salary of $200,000 annually, plus reasonable expenses. Mr. Dealy was also entitled to an annual base commission equal to two percent (2%) of the gross profit of professional services and consulting division. In addition, Mr. Dealy will receive an additional monthly commission, not to exceed one and three quarters’ percent (1.75%), if the CSI gross profit exceeds $2,200,000. On November 13, 2015, Mr. Dealy’s employment was terminated for cause.
   
On November 4, 2013, in connection with the CSI Acquisition, the Company entered into a four (4) year employment agreement with Margaret Gesualdi (“Gesualdi Employment Agreement”), to serve as Vice President of the Company and as Mid-Atlantic Region Managing Partner of CSI, the Company’s professional services and consulting division.  Pursuant to the Gesualdi Employment Agreement, the parties agreed that Ms. Gesualdi will not engage or participate in any business that is in competition in any manner whatsoever with the business of the Company, or any business which the Company contemplates conducting or intends to conduct. Ms. Gesualdi will receive a salary of $190,000 annually, plus reasonable expenses. Ms. Gesualdi is also entitled to an annual base commission equal to two percent (2%) of the “employee attributable gross profit” of the professional services and consulting division. In addition, Ms. Gesualdi will receive an additional monthly commission, not to exceed one and three quarters’ percent (1.75%), if the employee attributable gross profit exceeds $750,000. The Gesualdi Employment Agreement will automatically renew for successive one (1) year terms following the completion of the initial (4) four year term of the agreement unless terminated by the Company or Ms. Gesualdi ninety (90) days prior to the end of such term. On November 13, 2015, Ms. Gesualdi’s employment was terminated for cause.
 
On November 4, 2013, in connection with the CSI Acquisition, the Company entered into a four (4) year employment agreement with Charlie Cooper (“Cooper Employment Agreement”), to serve as Vice President of the Company and as Chief Operating Officer of CSI, the Company’s professional services and consulting division.   Pursuant to the Cooper Employment Agreement, the parties agreed that Mr. Cooper will not engage or participate in any business that is in competition in any manner whatsoever with the business of the Company, or any business which the Company contemplates conducting or intends to conduct. Mr. Cooper will receive a salary of $200,000 annually, plus reasonable expenses. Mr. Cooper is also entitled to an annual base commission equal to two percent (2%) of the gross profit of professional services and consulting division. In addition, Mr. Cooper will receive an additional monthly commission, not to exceed one and three quarters’ percent (1.75%), if the CSI gross profit exceeds $2,200,000. The Cooper Employment Agreement will automatically renew for successive one (1) year terms following the completion of the initial four (4) year term of the agreement unless terminated by the Company or Mr. Cooper ninety (90) days prior to the end of such term. On March 13, 2015, Mr. Cooper’s employment was terminated for cause.
 
On January 3, 2014, in connection with the Initio Acquisition, the Company entered into an employment agreement with Brendan Flood (“Flood Employment Agreement”). Pursuant to the Flood Employment Agreement, Mr. Flood will serve as Executive Chairman of the board of directors, as well as, Chief Executive Officer of Initio. Mr. Flood will be paid a salary of £192,000 (At November 30, 2015, the foreign currency year-to-date average exchange rate of 1.5031 makes this approximately $289,000) per annum, less statutory deductions, plus other benefits including reimbursement for reasonable expenses, paid vacation and insurance coverage for his roles with both Staffing 360 Solutions, Inc. and Staffing (UK). Mr. Flood’s salary will be adjusted (but not decreased) annually based upon the Consumer Price Index for All Urban Consumers for the Northeast Region as determined by the United States Department of Labor Bureau of Labor Statistics. Mr. Flood will also be entitled to an annual bonus of up to 50% of his annual base salary based reaching certain financial milestones. Additionally, Mr. Flood is entitled to Gross Profit Appreciation Participation, which entitles the participants to ten (10%) of Initio’s Excess Gross Profit, which is defined as the increase in Initio gross profits in excess of one hundred twenty percent (120%) of the base year’s gross profit, up to $400,000. Mr. Flood’s participating level is sixty-two and one-half percent (62.5%). On May 29, 2015, the Gross Profit Appreciation Bonus associated with this employment agreement was converted into Series A Preferred Stock. The Flood Employment Agreement has a term of five (5) years and will automatically renew thereafter unless twelve (12) months written notice is provided by either party. This employment agreement includes customary non-compete/solicitation language for a period of twelve (12) months after termination of employment. Effective September 18, 2015, the Board appointed Brendan Flood, the Company’s Executive Chairman, to serve as the interim Chief Financial Officer while the Company actively searches for a permanent Chief Financial Officer. Mr. Flood is not receiving additional compensation for his role as interim Chief Financial Officer.
 
On January 3, 2014, in connection with the Initio Acquisition, the Company entered into an employment agreement with Matt Briand (“Briand Employment Agreement”). Pursuant to the Briand Employment Agreement, Mr. Briand will serve as Co-Chief Executive Officer of the Company, as well as, Chief Executive Officer of Monroe. Mr. Briand will be paid a salary of $300,000 per annum, plus other benefits including reimbursement for reasonable expenses, paid vacation and insurance coverage for his roles with both Staffing 360 Solutions, Inc. and Monroe. Mr. Briand will also be entitled to an annual bonus of up to fifty percent (50%) of his annual base salary based on reaching certain financial milestones. Additionally, Mr. Briand is entitled to Gross Profit Appreciation Participation, which entitles the participants to ten (10%) of Initio’s Excess Gross Profit, which is defined as the increase in Initio gross profits in excess of one hundred twenty percent (120%) of the base year’s gross profit, up to $400,000. Mr. Briand’s participating level is thirty-seven and one-half percent (37.5%). On May 29, 2015, the Gross Profit Appreciation Bonus associated with this employment agreement was converted into Series A Preferred Stock. The Briand Employment Agreement has a term of five (5) years and will automatically renew thereafter unless twelve (12) months written notice is provided by either party. This employment agreement includes customary non-compete/solicitation language for a period of twelve (12) months after termination of employment. On January 27, 2015, Mr. Briand was given the additional title of President.
 
On March 17, 2014, the Company entered into an employment agreement with Jeff R. Mitchell (“Mitchell Employment Agreement”). Pursuant to the Mitchell Employment Agreement, Mr. Mitchell will serve as Executive Vice President and Chief Financial Officer. Mr. Mitchell will receive an annual base salary $250,000, plus other benefits including reimbursement for reasonable expenses, paid vacation and insurance coverage for his role with Staffing 360 Solutions, Inc. Mr. Mitchell will also be entitled to an annual bonus of up to fifty percent (50%) of his annual base salary based on reaching certain milestones. Mr. Mitchell will also receive a grant of 12,500 common stock shares, issuable as follows: (i) 5,000 common stock shares on June 1, 2014, and (ii) 2,500 common stock shares on each one (1) year anniversary thereafter. In addition, Mr. Mitchell is entitled to 15,000 stock options to purchase common stock to be issued under the Company’s Stock Option Plan, which such stock options shall vest as follows: (i) 3,000 on March 17, 2014, and (ii) 3,000 on each one (1) year anniversary thereafter. The initial vesting of stock options have an exercise price of $20.00 per share (all options thereafter will have an exercise price of $10.00 per share), and are exercisable for a period of ten (10) years from the date of grant. The Mitchell Employment Agreement has a term of three (3) years. This employment agreement includes customary non-compete/solicitation language for a period of twelve (12) months after termination of employment. On September 9, 2015, Mr. Mitchell submitted his resignation from his position as the Chief Financial Officer of the Company and all officer and director positions held in any subsidiary of the Company, effective on September 18, 2015.  Mr. Mitchell’s resignation was voluntary and not a result of any disagreement with the Company or its executive officers on any matter relating to the Company’s operations, policies or practices. 
 
On May 17, 2014, in connection with the PS Acquisition, the Company entered into an employment agreement with Linda Moraski (“Moraski PSI Employment Agreement”). Pursuant to the Moraski PSI Employment Agreement, Ms. Moraski will serve as President and Chief Executive Officer of PSI for a term of three (3) years, provided however such term shall automatically renew for one (1) year terms unless notice of non-renewal is provided at least one hundred eighty (180) days prior to such renewal. Ms. Moraski shall receive a base salary of $112,500 per year, which such base salary is subject to increase based on the Consumer Price Index (“CPI”). Further, Ms. Moraski will be entitled to receive an annual commission equal to the sum of (i) three percent (3%) of the Gross Profit of PSI for such fiscal year; plus (ii) two and one-half percent (2.5%) of the amount that Gross Profit of PSI for such fiscal year exceeds the Closing Gross Profit as defined in the Agreement. In addition, Ms. Moraski shall also be entitled to an annual bonus, certain benefits, and eligibility to participate in the Company’s stock incentive plan and certain expense reimbursements.
 
On May 17, 2014, in connection with the PS Acquisition, the Company entered into an employment agreement with Linda Moraski (“Moraski PRS Employment Agreement”). The terms of the Moraski PRS Employment Agreement are substantially similar to the Moraski PSI Employment Agreement, provided, however, under the Moraski PRS Employment Agreement, Ms. Moraski’s base salary is $37,500, subject to increase based on CPI. Ms. Moraski is not entitled to any commissions or bonuses pursuant to the Moraski PRS Employment Agreement.
 
On July 8, 2015, pursuant to the terms of the Lighthouse Purchase Agreement, the Company entered into employment agreements with Alison Fogel (the “Alison Fogel Employment Agreement”) and David Fogel (the “David Fogel Employment Agreement”) and together the “Fogel Agreements”. The Alison Fogel Employment Agreement provides that Alison Fogel will serve as the President of Lighthouse and the David Fogel Employment Agreement provides that David Fogel will serve as the Vice President of Lighthouse. The terms of the Fogel agreements are otherwise substantially identical. The Fogel Agreements have terms of 2 years (subject to an additional 1 year extension at the option of either party, provided that if the Company elects to extend the Fogel Agreements, unless otherwise agreed by David and Alison Fogel, only one of the Fogel Agreements, as determined by the Alison and David Fogel, will be extended). Under the Fogel Agreements, they will each receive a salary of $100,000 per year, be eligible to receive an annual bonus, be entitled to participate in the Company’s equity incentive plan and be entitled to receive the same benefits provided to Lighthouse senior employees, which will be at least equivalent to those provided prior to the closing.
 
Earn-out Liability
 
The Earn-out liability is comprised of contractual contingent liabilities resulting from the Company’s acquisitions. The provisions basically state that the seller of a business may receive additional future compensation based upon the business achieving certain future financial performance levels. The earn-out transactions were accounted for under the purchase method in accordance with ASC 805.
 
Pursuant to the TRG Acquisition (See Note 14 - Acquisitions), the TRG Purchase Price includes cash payments to the TRG Shareholders for performance-based compensation equal to the following percentages of TRG’s gross profit from the date of closing through the end of the sixteenth (16th) quarter following the date of closing, not to exceed $1,500,000: (i) twenty percent (20%) of the amount of TRG’s gross profit up to and including an aggregate of $5,000,000 during the Earn-Out Period; plus (ii) seven percent (7%) of the amount of TRG’s gross profit, if any, in excess of an aggregate of $5,000,000 during the Earn-Out Period. At closing, the Company estimated the performance-based compensation was $1,192,000. During the fiscal years ended May 31, 2015 and 2014, the Company paid $111,375 and $254,575 towards the Earn-out liability. On February 27, 2015, the Company satisfied this liability in full by issuing 113,405 common stock shares as part of the sale of TRG with an effective date of January 1, 2015.
 
Pursuant to the CSI Acquisition (See Note 14 - Acquisitions), the CSI Purchase Price includes cash payment to the NCSI Shareholders for performance-based compensation equal to twenty percent (20%) of CSI’s and CCSI’s consolidated gross profit from the date of closing through the end of the sixteenth (16th) quarter following the date of closing not to exceed a total of $2,100,000.  At closing, the Company estimated the performance-based compensation would be $2,100,000. During the six months ended November 30, 2015 and the fiscal year ended May 31, 2015, the Company paid $86,365 and $279,696, respectively, towards the Earn-out liability. At November 30, 2015 the remaining balance was $1,471,223.
 
Pursuant to The JM Group acquisition (See Note 14 - Acquisitions), the JM purchase price includes a cash payment to the JM Shareholders for performance-based compensation of a) £850,000 if the gross profit for the 12 month period ending on the anniversary date of the date of completion (the “Anniversary TTM Gross Profit”) is equal to 90% or more of the gross profit for the twelve months ending October 31, 2015 (“the Completion TTM Gross Profit”); or (b) if the Anniversary TTM Gross Profit is less than 90% of the Completion TTM Gross Profit a sum equal to £850,000 multiplied by the Anniversary TTM Gross Profit/Completion TTM Gross Profit. The Company used the exchange rate on the date of acquisition of 1.5406 to record the earn-out balance in US dollars. The Company recorded the maximum contingent liability amount of £850,000 ($1,309,510). At November 30, 2015 the remaining balance was $1,309,510.
 
Consulting Agreements
 
On February 15, 2013, the Company entered into an advisory agreement whereby the advisor was to provide assistance and advice in seeking out a potential merger or acquisition partners/targets. The Company agreed to pay $10,000 per month for a period of eighteen (18) months and would increase to $15,000 per month on the completion of the first acquisition of a temporary staffing company by the Company and contemporaneous financing. The Company agreed to further compensate advisor as its exclusive buy side advisor to locate and facilitate qualified businesses or companies that may desire to provide financing, (debt or equity) or fund the acquisition of certain of the stock or assets of such business transactions. The advisor was to receive a fee between one (1%) and ten (10%) percent of the total transaction, depending on the transaction value. The Company’s former Chairman of the board of directors, Principal Financial Officer, and Treasurer is the majority shareholder of the advisor. Such individual resigned from the board of directors and all officer positions as of January 3, 2014. This agreement was amended to continue through September 30, 2014. All obligations under this agreement have been paid in full.
 
On February 15, 2013, the Company entered into an advisory agreement whereby the advisor, would provide an investor awareness program designed to create financial market and investor awareness for the Company. The Company agreed to pay the advisor $5,000 per month for a period of eighteen (18) months, which expired in October 2014. On November 13, 2014, the Company entered into a new Advisory Agreement, effective as of January 1, 2015, pursuant to which the advisor may provide advisory services if requested by the Company for a period of twelve (12) months. Pursuant to the Advisory Agreement, the Company agreed to, among other things: (a) pay $300,000, in equal monthly installments of $25,000; and (b) grant 25,000 common stock shares on or before January 30, 2015; and (c) grant an additional 2,500 common stock shares valued at the last trade price at December 31, 2014, in complete settlement of any past due fees and costs owed. The Company’s former employee, President and Board Member is the majority shareholder of the advisor. Such individual resigned from the board of directors and all officer positions as of December 31, 2014. Unless renewed by mutual consent, the Advisory Agreement shall terminate on December 31, 2015. The balance outstanding at November 30, 2015 is $50,000.
 
On February 14, 2013, the Company entered into a corporate services agreement whereby the advisor would provide assistance and advice in identifying potential merger or acquisition targets and integrating such acquired business into the Company for a period of eighteen (18) months. Pursuant to the agreement, for any merger and acquisition transaction, the advisor would receive a fee between three percent (3%) and five percent (5%) of the transaction value. Advisor would also receive equity compensation in the amount of two percent (2%) of the outstanding common stock shares on the date of the first acquisition, and one percent (1%) of the outstanding common stock shares on the date of the second transaction. All common stock shares issued under the agreement shall have “piggyback” registration rights at the Company’s election and shall be included in any registration statement filed by the Company with the Securities and Exchange Commission. Upon the closing of the first transaction, the Company would pay a monthly retainer of $5,000 per month. The Company would also pay two percent (2%) of the revenue of the Company for administrative services rendered. The agreement was terminable by either party upon ninety (90) days written notice. On April 26, 2013, the Company acquired TRG. As such, the advisor was issued 175,734 common stock shares based on the terms of the agreement. In February 2014, the Company issued the advisor an additional 15,000 common stock shares as full settlement and termination of the agreement. On March 1, 2014, the Company entered into a new twelve (12) month advisory agreement with the advisor agreeing to pay $5,000 per month and performance-based fees. On July 8, 2015, the Company acquired Lighthouse. As such, advisor was issued 10,460 common stock shares based on the terms of the agreement. All obligations under this agreement have been paid in full.
 
On August 22, 2013, the Company entered into a twelve (12) month advisory agreement agreeing to pay $3,000 and 5,000 common stock shares per month for advisory services. Specifically, the advisor was to provide support for business activities related to the Company’s consolidation model in the staffing industry. In addition, the advisor was to provide business and financial advice and services. On January 1, 2014, the parties amended the agreement increasing the advisory fee to $13,000 per month. On April 1, 2014, the parties agreed to extend the term of the agreement to April 1, 2015 and discontinued the monthly equity consideration of 500 common stock shares which was replaced with a one-time issuance of 20,000 common stock shares. At November 30, 2015, the remaining balance is $52,000.
 
On December 17, 2014, the Company entered into an exclusive agreement with a New York-based investment bank.  The investment bank provides services across a wide variety of potential financings as part of the Company's buy-and-build acquisition strategy, which includes, but is not limited to: convertible debt, secondary offerings and private placements. The Company agreed to pay investment bank varying percentages of capital raised based upon the type and structure of the financing. As of November 30, 2015, the Company has paid the investment bank an aggregate of $1,024,000 under the agreement. The initial term of retention was 180 days and could be extended or voided by either party if certain benchmarks were not achieved; otherwise, after the initial 180 day term, the agreement continued month to month unless cancelled with prior written notice. On July 9, 2015, the Company terminated the agreement. Although the agreement was terminated, there were additional costs in finalizing this relationship. (See footnote 15).
 
On February 28, 2015, the Company reviewed two (2) historical consulting contracts under which the consultants were to provide certain services including roadshows, aftermarket support, and awareness activity and advising management. The consultants had failed to perform or provide such services. Further, they did not respond to the Company’s requests or attempts to contact them. Therefore, the Company considers the contracts null and void and has reversed the remaining unpaid consulting accrual in the amount of $102,500, all of which had been previously expensed in the fiscal year ended May 31, 2015.
 
Directors Agreements
 
On July 15, 2012, the Company entered into an advisory agreement with Dimitri Villard. From July 1, 2012 to June 30, 2013, Mr. Villard served as a member of the board of directors and as an advisor for the Company. The Company agreed to pay Mr. Villard $45,000, consisting of: (i) $22,500 of common stock shares based on the value equal to fifty (50%) of the per share price of the common stock sold in the private placement financing, and (ii) $22,500 of cash to be paid in monthly payments of $1,875. This agreement expired on June 30, 2013, but was continued by the Company on a month to month basis. Effective July 1, 2013, Mr. Villard entered into a new agreement with the Company, to serve as a member of the board of directors for $30,000 annually, payable $2,500 per month. Additionally, Mr. Villard was awarded 250 common stock shares per month.  In addition, effective January 1, 2014, Mr. Villard entered into a separate advisory agreement (“Villard Advisory Agreement”) for a term of one year for $30,000 per year, payable $2,500 per month, and 3,000 common stock shares, issued at 250 common stock shares per month. In April 2014, the Villard Advisory Agreement was terminated. For his services as an advisor in 2014, Mr. Villard was paid $10,000 and was awarded 1,000 common stock shares. In May 2014, Mr. Villard was named the Chairman of the Corporate Governance and Nominating Committee. For his service as Chairman of the Corporate Governance and Nominating Committee, Mr. Villard will receive an annual payment of $20,000, payable $1,667 per month. In addition, Mr. Villard will receive 83 common stock shares per month (1,000 common stock shares annually). In May 2014, Mr. Villard was named as a member of the Audit Committee and the Compensation Committee. For his service as a member of the Audit Committee and Compensation Committee, Mr. Villard will receive 83 common stock shares per month (1,000 common stock shares annually) for each committee. In September 2014, Mr. Villard was appointed to serve on the Restructuring Committee. For his service on the Restructuring Committee, Mr. Villard received a one-time grant of 2,500 common stock shares. In March 2015, Mr. Villard received 25,000 options valued at $7,192 for his service as a board and committee member. In addition, on October 30, 2015, Mr. Villard received 30,000 shares valued at $149,997 as a bonus for his service as a board and committees member.
 
In February 2014, the Company entered into an agreement with Jeff Grout to serve as a member of the board of directors for an annual payment of $30,000, payable $2,500 per month. In addition, for his service as a member of the board of directors, Mr. Grout will receive 250 common stock shares per month.  In February 2014, Mr. Grout was named the Chairman of the Compensation Committee. For his service as Chairman of the Compensation Committee, Mr. Grout will receive an annual payment of $20,000, payable $1,667 per month. Mr. Grout will also receive 83 common stock shares per month (1,000 common stock shares annually). Mr. Grout was also named as a member of the Corporate Governance and Nominating Committee and the Audit Committee. For his service as a member of these committees, Mr. Grout will receive 83 common stock shares per month for each committee (1,000 common stock shares annually per committee). In March 2015, Mr. Grout received 25,000 options valued at $7,192 for his service as a board and committee member. In addition, on October 30, 2015, Mr. Grout received 30,000 shares valued at $149,997 as a bonus for his service as a board and committees member.
 
In May 2014, the Company entered into an agreement with Nick Florio to serve as a member of the board of directors for an annual payment of $30,000, payable $2,500 per month. In addition, for his service as a member of the board of directors, Mr. Florio will receive 250 common stock shares per month.  In May 2014, Mr. Florio was named the Chairman of the Audit Committee. For his service as Chairman of the Audit Committee, Mr. Florio will receive an annual payment of $20,000, payable $1,667 per month. Mr. Florio will also receive 83 common stock shares per month (1,000 common stock shares annually). Mr. Florio was also named as a member of the Corporate Governance and Nominating Committee. For his service as a member of the Corporate Governance and Nominating Committee, Mr. Florio will receive 83 common stock shares per month (1,000 common stock shares annually). In September 2014, Mr. Florio was named the Chairman of the Restructuring Committee. For his service as Chairman of the Restructuring Committee, Mr. Florio received a one-time fee of 5,000 common stock shares. In March 2015, Mr. Florio received 25,000 options valued at $7,192 for his service as a board and committee member.  In addition, on October 30, 2015, Mr. Florio received 30,000 shares valued at $149,997 as a bonus for his service as a board and committees member. At the request of Mr. Florio, all cash payments and common stock issuances have been made in the name of Citrin Cooperman& Company, LLP.
 
Lease Obligations
 
The Company entered into multiple lease agreements for office space. The agreements require monthly rental payments through May 2020. Total minimum lease obligation approximate $457,685, $442,860, $146,065 and $299,130 for the years ended May 31, 2016, 2017, 2018 and beyond, respectively. For the six months ended November 30, 2015 and 2014, rent expense amounted to $522,263 and $560,783, respectively.
 
Legal Proceedings 
 
On May 22, 2014, NewCSI Inc. (“NCSI”), the former owners of CSI, filed a complaint in the United States District Court for the Western District of Texas, Austin Division, against the Company arising from the terms of the CSI Stock Purchase Agreement dated August 14, 2013. NCSI claims that the Company breached a provision of the CSI Stock Purchase Agreement (“SPA § 2.7”) which required the Company to calculate within 90 days after December 31, 2013 and pay to NCSI fifty percent (50%) of certain “Deferred Tax Assets”. The Complaint sought payment of the amount allegedly owed under SPA § 2.7 and acceleration of earn-out payments provided for in the CSI Stock Purchase Agreement of $1,400,000, less amounts paid to date, and attorneys’ fees. The Company responded denying the material allegations and interposing numerous affirmative defenses. On October 8, 2014, NCSI filed a Motion of Summary Judgment (the “Motion”). On March 30, 2015, a Magistrate Judge of the District Court issued a Report and Recommendation that the District Court deny the Motion. The Recommendation became a final decision on April 13, 2015.
 
On December 31, 2014, NCSI filed an amended complaint to which NCSI added an additional count asserting an “Adjustment Event” had occurred requiring an acceleration of earn-out payments provided for in the CSI Stock Purchase Agreement of $2,100,000, less amounts paid to date ($1,670,635 balance at December 31, 2014), required should the Company or NCSI “be unable, or admit to in writing, its inability to pay its debts as they become due.” The Company responded denying the material allegations and interposing numerous affirmative defenses. The Earn-out liability was fully expensed at the time of the acquisition and fully accrued for on the Company’s balance sheet as part of the purchase accounting at the time of the acquisition.
 
The final pretrial conference in this matter was held April 22, 2015. A jury was selected on May 14, 2015, and the trial was held May 18-20, 2015. On May 20, 2015, the jury rendered a verdict, finding that S360 had not complied with SPA § 2.7 and owed $154,433, but that NCSI had not proved that S360 or NCSI had become unable to pay debts as they came due. The Court had held that it was not a question for the jury to decide if damages for breach of SPA § 2.7 should include accelerated earn-out payments.
 
On June 3, 2015, NCSI filed a Motion for Entry of Judgment as Matter of Law seeking entry of a judgment in the amount of $154,433, plus accelerated earn-out payments in the amount of $1,152,143, plus statutory interest. NCSI did not challenge the jury verdict on the ability to pay issue. Also on June 3, 2015, the Company filed a Motion for Entry of Judgment as a Matter of Law seeking entry of judgment against NCSI on the jury’s finding that the Company had not complied with SPA § 2.7, or, in the alternative, for a reduction of damages to $54,452 and to hold that NCSI may not be awarded accelerated earn-out payments as that would result in an illegal penalty. As of July 1, 2015, the motions were fully briefed and submitted to the Court.
 
On October 21, 2015, the United States District Court for the Western District of Texas, Austin Division (the Court) rendered a final judgment against Staffing 360 Solutions, Inc., (the Company) and in favor of NewCSI, Inc., (NewCSI) in the amount of $1,306,576 (Final Judgment Amount). NewCSI filed a complaint against the Company on May 22, 2014, in which NewCSI alleged that the Company breached a provision of the Stock Purchase Agreement, dated August 14, 2013, between the Company, NewCSI, and the shareholders of NewCSI (Complaint). (In that Stock Purchase Agreement, the Company purchased from NewCSI all of the issued and outstanding stock of Control Solutions, International, Inc.) The Court also awarded NewCSI: (i) pre-judgment interest on the final judgment amount, in the amount of $77,186.50; (ii) costs incurred in connection with the Complaint; and (iii) post-judgment interest on all amounts described above at a rate of 0.23 percent per annum from the date of this final judgment until such amounts are paid in full. In rendering its final judgment, the Court granted NewCSI’s post-verdict Motion for Entry of Judgment as a Matter of Law in part and denied the Company’s post-verdict Motion for Entry of Judgment as a Matter of Law in its entirety. The Company believes that the final judgment is unsupported by the evidence and contrary to the law, and filed its notice of appeal of the final judgment to the United States Court of Appeals for the Fifth Circuit on January 6, 2016. While the results of an appeal cannot be predicted with certainty, the Company believes the final outcome of such litigation and appeal will not have a material adverse effect on the Company’s financial condition or results of operations. The Company has previously accrued for this matter. A full description of the Complaint can be found under Item 3 of the Company’s 10-K filed with the Securities and Exchange Commission on July 31, 2015.
 
We believe that the Company acted in a manner consistent with our contractual rights, and we intend to aggressively defend the Company against this claim which we believe is not meritorious. Nevertheless, there can be no assurance that the outcome of this litigation will be favorable to the Company.
 
On November 13, 2015, Staffing 360 initiated a Judicial Arbitration and Mediation Services (“JAMS”) Arbitration against the three shareholders of NewCSI, each a former Staffing 360 officer and employee.  In the Demand for Arbitration and Statement of Claim, Staffing 360 alleges that these individuals breached their employment agreements with Staffing 360 and the fiduciary duties each owed to the Company.