ATLANTIC INTERNATIONAL CORP
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
CIRC$0.19-6.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-069169
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001605888-24-000012
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 159 previous paragraphs and 176 current paragraphs.
98 unchanged; 56 reworded; 20 added; 4 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 25 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
change greater than ± 100%
Current report
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.
Current report
Interest expense for the three and nine months ended September 30, 2024 and 2023 were as follows:
Current report
Other expense for the three and nine months ended September 30, 2024 and 2023 were as follows:
Current report
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.
Current report
(i)the failure to repay an over-advance in the amount of $4,662,495 as of May 31, 2024;
Current report
(ii)failure to complete an initial capital raise (“Initial Capital Raise”) on or before May 15, 2024 and apply the proceeds thereof as specified;
Current report
(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);
Current report
(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;
Current report
(v)the failure to satisfy various financial covenants of the Revolver and failure to timely cure all of the foregoing defaults.
Current report
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.
Current report
(i) the failure to pay interest due on October 1, 2023 and January 2, 2024;
Current report
(ii)failure to complete an Initial Capital Raise by May 15, 2024 and to apply the proceeds as specified therein;
Current report
(iii)failure to complete management presentations to potential buyers and potential lenders;
Current report
(iv)the failure to deliver on or before May 29, 2024, an executed letter of intent with respect to a Sale/Refinancing; and
Current report
(v)the failure to satisfy various financial covenants of the Term Loan and failure to cure.
Current report
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.
Current report
As discussed above, IDC is expected to use a portion of the cash proceeds it receives in the Merger to pay down the Revolver following the closing of the Merger. 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
Current report
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.
Current report
Refer To Note 3: Summary of Significant Accounting Policies, Liquidity.
Removed paragraphs (4)
Previous report
Depreciation and amortization expense for the quarters ended June 30, 2024 and 2023 was $1,249,054 and $1,256,985, respectively, a decrease of $7,931 or 0.6%, which was essentially flat on a year-over year basis.
Previous report
Interest expense for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous report
Other expense for the three and six months ended June 30, 2024 and 2023 were as follows:
Previous report
As discussed above, IDC is expected to use a portion of the cash proceeds it receives in the Merger to pay down the Revolver following the closing of the Merger and this offering, and Lyneer is expected to enter into a new revolving credit facility with the lender on similar terms as the Revolver that will assume the approximately $35,000,000 of outstanding debt under the Revolver for which Lyneer is expected to be responsible. Following such restructuring of the Revolver, it is expected that Lyneer will be required to refinance its new revolving credit facility with either the current lender or a new lender.
Reworded paragraphs (56)
Previous wording
At Atlantic, management understands that finding the perfect candidate starts before the job requisition even comes in. The Company employs the strategy of proactive recruitment to build a pipeline of pre-vetted candidates for order fulfilment. Atlantic’s client mix consists of both small- and medium-size businesses, and large national and multinational client relationships. Client relationships with small- and medium-size businesses are based on a local or regional relationship, and tend to rely less on longer-term contracts, and the competitors for this business are primarily locally owned businesses. Comprising over 60% of the Company’s revenue base, the large national and multinational clients, on the other hand, will frequently enter into non-exclusive arrangements with several firms, with the ultimate choice among them being left to local managers. As a result, employment services firms with a large network of offices compete most effectively for this business, which generally has agreed-upon pricing or mark-up on services performed.
Current wording
At Atlantic, management understands that finding the perfect candidate starts before the job requisition even comes in. The Company employs the strategy of proactive recruitment to build a pipeline of pre-vetted candidates for order fulfillment. Atlantic’s client mix consists of both small- and medium-size businesses, and large national and multinational client relationships. Client relationships with small- and medium-size businesses are based on a local or regional relationship, and tend to rely less on longer-term contracts, and the competitors for this business are primarily locally owned businesses. Comprising over 60% of the Company’s revenue base, the large national and multinational clients, on the other hand, will frequently enter into non-exclusive arrangements with several firms, with the ultimate choice among them being left to local managers. As a result, employment services firms with a large network of offices compete most effectively for this business, which generally has agreed-upon pricing or mark-up on services performed.
Previous wording
Comparison of the Three and Six Months Ended June 30, 2024 and 2023:
Current wording
Comparison of the Three and Nine Months Ended September 30, 2024 and 2023:
Previous wording
Service revenue, net of discounts, for the three and six months ended June 30, 2024 and 2023 consisted of the following:
Current wording
Service revenue, net of discounts, for the three and nine months ended September 30, 2024 and 2023 consisted of the following:
Previous wording
Service revenue, net was $104,636,273 and $89,364,602 for the quarters ended June 30, 2024 and 2023, respectively, an increase of $15,271,671, or 17.1%. This increase was predominately due to the higher revenues from the Company’s temporary placement services business, which increased $15,599,617 or 17.7% in the three months ended June 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 $327,946 or 30.7% due to lower permanent job demand as companies cut back on hiring permanent positions.
Current wording
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.
Previous wording
Service revenue, net was $205,259,485 and $187,392,724 for the six months ended June 30, 2024 and 2023, respectively, an increase of $17,866,761, or 9.5%. This increase was predominately due to the higher revenues from the Company’s temporary placement services business, which increased $18,209,217 or 9.8% in the six months ended June 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 $342,456 or 16.9% due to lower permanent job demand as companies cut back on hiring permanent positions.
Current wording
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.
Previous wording
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 six months ended June 30, 2024 and 2023 consisted of the following:
Current wording
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:
Previous wording
Cost of revenue for the quarters ended June 30, 2024 and 2023 was $93,146,627 and $78,426,842, respectively, an increase of $14,719,785 or 18.8%. The increase in cost of revenue was due primarily to higher service revenue, net driven primarily by higher temporary placement services revenue, which increased $15,271,671 or 17.1%. Gross profit for the quarter ended June 30, 2024 and 2023 was $11,489,646 and $10,937,760, respectively, an increase of $551,886 or 5.0%. As a percentage of service revenue, net, gross profit was 11.0% and 12.2% for the quarter ended June 30, 2024 and 2023, respectively, which decreased due to increasing labor related costs.
Current wording
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.
Previous wording
Cost of revenue for the six months ended June 30, 2024 and 2023 was $183,304,457 and $164,708,406, respectively, an increase of $18,596,051 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 $17,866,761 or 9.5%. Gross profit for the six months ended June 30, 2024 and 2023 was $21,955,028 and $22,684,318, respectively, a decrease of $729,290 or 3.2%. As a percentage of service revenue, net, gross profit was 10.7% and 12.1% for the six months ended June 30, 2024 and 2023, respectively, which decreased due to increasing labor related costs.
Current wording
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.
Previous wording
Total operating expenses for the three and six months ended June 30, 2024 and 2023 consisted of the following:
Current wording
Total operating expenses for the three and nine months ended September 30, 2024 and 2023 consisted of the following:
Previous wording
Selling, general and administrative expenses for the quarters ended June 30, 2024 and 20232 were $18,553,150 and $11,187,268, respectively, an increase of $7,365,882, or 65.8%, due primarily to higher transaction costs related to the Merger, offset partially by cost cutting measures, including personnel layoffs. As a percentage of service revenue, net, selling, general and administrative costs were 17.7% in the quarter ended June 30, 2024 as compared to 12.5% in the quarter ended June 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 June 30, 2024 compared to the quarter ended June 30, 2023.
Current wording
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.
Previous wording
Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023 were $28,894,187 and $21,329,274, respectively, an increase of $7,564,913, or 35.5%, due primarily to higher transaction costs related to the Merger, offset partially by cost cutting measures, including personnel layoffs. As a percentage of service revenue, net, selling, general and administrative costs were 14.1% in the six months ended June 30, 2024 as compared to 11.4% in the six months ended June 30, 2023. The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to higher transactions costs and RSU stock compensation expense in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current wording
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.
Previous wording
Changes in the fair value of contingent consideration liabilities for the quarters ended June 30, 2024 and 2023 were $0 and $(400,000), respectively. The change of $400,000 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.
Current wording
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.
Previous wording
Changes in the fair value of contingent consideration liabilities for the six months ended June 30, 2024 and 2023 were $0 and $(500,000), respectively. The change of $500,000 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.
Current wording
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.
Previous wording
Depreciation and amortization expense for the six months ended June 30, 2024 and 2023 was $2,508,608 and $2,520,804, respectively, a decrease of $12,196 or 0.5%, which was essentially flat on a year-over year basis.
Current wording
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.
Previous wording
Loss on debt extinguishment, for the three and six months ended June 30, 2024 and 2023 were as follows:
Current wording
Loss on debt extinguishment, for the three and nine months ended September 30, 2024 and 2023 were as follows:
Previous wording
Loss on debt extinguishment during the three and six months ended June 30, 2024 relate 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.
Current wording
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.
Previous wording
Advisory fees paid in merger for the three and six months ended June 30, 2024 and 2023 were as follows:
Current wording
Advisory fees paid in the merger for the three and nine months ended September 30, 2024 and 2023 were as follows:
Previous wording
The shareholders 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.
Current wording
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.
Previous wording
Interest expense for the quarters ended June 30, 2024 and 2023 was $4,000,024 $4,032,944, respectively. The decrease of $32,920, or 0.8%, in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was essentially flat due to the Company deconsolidating the joint and several debt obligations as of the Merger date.
Current wording
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.
Previous wording
Interest expense for the six months ended June 30, 2024 and 20232 was $9,022,254 and $7,723,033, respectively. The increase of $1,299,221, or 16.8%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was attributed primarily to significantly 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, partially offset by the Company deconsolidating the joint and several debt obligations as of the Merger date.
Current wording
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 offsest 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.
Previous wording
Other expense for the quarter and six months ended June 30, 2024 related to accrued amounts pertaining to a potential settlement for legacy shareholders and stock compensation expense related to third parties as advisors to the Company.
Current wording
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.
Previous wording
Provision for income taxes for the three and six months ended June 30, 2023 and 2022 were as follows:
Current wording
Provision for income taxes for the three and nine months ended September 30, 2024 and 2022 were as follows:
Previous wording
Income tax benefit for the quarters ended June 30, 2024 and 2023 was $17,221,979 and $1,523,345, respectively, an increase of $15,698,634, which was driven primarily by the increase in net loss before taxes of $72,133,698 for the quarter ended June 30, 2023 compared to $5,139,437 for the quarter ended June 30, 2023, or an increase in the net loss before taxes of $66,994,261.
Current wording
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.
Previous wording
Income tax benefit for the six months ended June 30, 2024 and 2023 was $18,512,574 and $2,444,418, respectively, an increase of $16,068,156, which was driven primarily by the increase in net loss before taxes of $78,291,137 for the six months ended June 30, 2024 compared to $8,388,793 for the six months ended June 30, 2023, or an increase in the net loss before taxes of $69,902,344.
Current wording
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.
Previous wording
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 date of its June 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.
Current wording
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.
Previous wording
In connection with the closing of the Merger, Atlantic issued to IDC the Merger Note in the principal amount of $35,000,000 that will mature 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 (“NSE”). 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.
Current wording
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.
Previous wording
On August 31, 2023 and January 16, 2024, later replaced on 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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
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 30, 2024 with additional milestones including an uplisting milestone date of September 15, 2024.
Current wording
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.
Previous wording
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 is 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.
Current wording
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.
Previous wording
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. 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. Atlantic is currently negotiating to refinance its debt obligations with its lenders to provide greater flexibility.
Current wording
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 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.
Previous wording
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 matures on September 30, 2024. It is also expected that, in connection with such payments by IDC, the Company will enter into a new revolving credit facility with its current lender to replace the existing credit facility. 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.
Current wording
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.
Previous wording
Cash flows for the six months ended June 30, 2024 and 2023 consisted of the following:
Current wording
Cash flows for the nine months ended September 30, 2024 and 2023 consisted of the following:
Previous wording
Cash flows provided by operating activities for the six months ended June 30, 2024 compared to the six months June 30, 2023 was lower due to deferred income taxes, an increase in accounts receivable and accrued expenses and other current liabilities and due to related parties.
Current wording
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.
Previous wording
Cash used in investing activities for the six months ended June 30, 2024 increased compared to June 30, 2023 and consisted entirely of purchases of property and equipment.
Current wording
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.
Previous wording
Cash used in financing activities decreased for the six months ended June 30, 2024 compared to June 30, 2023 consisted borrowings and payments under the Company’s debt arrangements of the Revolver and Seller Notes (as described below). Additionally, during the six months ended June 30, 2024, the Company issued shares, entered into additional debt obligations, and had a deemed contribution as a result of the Merger.
Current wording
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.
Previous wording
As of June 30, 2024 and December 31, 2023, the total balance on the Revolver was $49,347,477 and $90,906,217, respectively. As of June 30, 2024 and December 31, 2023, the Company recorded a liability of $40,163,261 and $85,092,695, respectively, and IDC owed the remaining $9,184,216 and $5,813,522, respectively. Total available borrowing capacity on the Revolver as of June 30, 2024 was ($10,613,516), net of a $1,552,329 reserve required on the Revolver. The borrowing base calculation is based on Lyneer’s eligible assets.
Current wording
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.
Previous wording
As described above, on June 18, 2924, 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.
Current wording
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.
Previous wording
As of June 30, 2024 and December 31, 2023, Lyneer had recognized liability balances on the Term Note of $36,062,862, and $34,223,489, respectively.
Current wording
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.
Previous wording
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 PIK portion varying from 4% to 5% per annum, based on specified financial ratios and similar metrics.
Current wording
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.
Showing the first 40 of 56 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.