altn-20250331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from_______ to _______

Commission file number 001-40760

ATLANTIC INTERNATIONAL CORP.

(Exact name of registrant as specified in its charter)


Delaware						46-5319744
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


270 Slyvan Avenue, Suite 2230
Englewood Cliffs NJ						07632
(Address of principal executive offices)						(Zip Code)

(201) 899-4470

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 9, 2025, 58,375,488 shares of the common stock, $0.00001 par value, of the registrant were outstanding.

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TABLE OF CONTENTS


		Page
	Explanatory Note	ii
PART I	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes in Stockholders’ (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

PART II	OTHER INFORMATION	35

Item 1.	Legal Proceedings	35
Item 1a.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		42

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EXPLANATORY NOTE

On June 18, 2024, Atlantic International Corp (f/k/a SeqLL, Inc., the “Company”) completed its previously announced merger transaction and reorganization with SeqLL Merger LLC, a Delaware corporation (“SeqLL LLC”), Atlantic Acquisition Corp., a Delaware corporation (“Atlantic”), Atlantic Merger LLC, a Delaware limited liability company and a majority-owned subsidiary of Atlantic (“Atlantic Merger LLC”), Lyneer Investments LLC, a Delaware limited liability company (“Lyneer”) and IDC Technologies, Inc., a California Corporation (“IDC”) in accordance with the terms of the Agreement and Plan of Merger, dated as of May 29, 2023 and subsequently amended on June 23, 2023, October 5, 2023, October 17, 2023, November 3, 2023, January 16, 2024, March 7, 2024, April 15, 2024, June 4, 2024 and June 12, 2024 (the “Merger Agreement”) pursuant to which (i) Atlantic Merger LLC was merged with and into Lyneer with Lyneer continuing as the surviving entity and as an approximately 41.7%-owned subsidiary of Atlantic, and an approximately 58.3%-owned subsidiary of IDC , and (ii) SeqLL LLC was subsequently merged with and into Lyneer, with Lyneer continuing as the surviving entity as a wholly-owned subsidiary of the Company.

Pursuant to the terms of the Merger, the Company changed its corporate name from SeqLL Inc. to Atlantic International Corp. and its trading symbol to ATLN.

On August 30, 2023, SeqLL Inc affected a one-for-40 reverse stock split of their common stock (the “Reverse Stock Split”).

Unless the context otherwise requires, references to the “Company,” “Lyneer,” the “combined organization,” “we,” “our” or “us” in this Quarterly Report on Form 10-Q refer to Lyneer and its subsidiaries prior to completion of the Merger and to Atlantic International Corp. and its subsidiaries after completion of the Merger. In addition, references to “SeqLLC” refer to the registrant prior to the completion of the Merger.

The Merger has been accounted for as a reverse capitalization in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Under this method of accounting, Lyneer was deemed to be the accounting acquirer for financial reporting purposes. Following the Merger, the business conducted by Lyneer became the Company’s primary business.

Promptly following the Closing, (i) the legacy business and assets of SeqLL were sold, transferred and assigned to SeqLL Omics Inc a newly-formed private entity (“Newco”) pursuant to the asset purchase agreement dated as of May 29, 2023 (the “Asset Purchase Agreement”) and (ii) SeqLL’s existing cash on hand as of the Closing Date, less withholding taxes and any other obligations due under the Asset Purchase Agreement (or any amount withheld for such taxes or other pre-Closing Expenses under the Asset Purchase Agreement) were retained by SeqLL and not transferred under the Asset Purchase Agreement to SeqLL Omics, Inc.

Except as otherwise noted, references to “common stock” in this report refer to common stock, $0.00001 par value per share, of the Company.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ATLANTIC INTERNATIONAL CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2025		December 31, 2024
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,466,012	$	678,676
Accounts receivable, net of allowance of $2,726,107 and $2,726,107	46,106,554		64,074,337
Unbilled accounts receivable	9,776,021		9,368,565
Prepaid expenses and other current assets	7,332,441		5,898,415
Deposits, current	8,000,000		8,000,000
Total current assets	72,681,028		88,019,993
Non-current assets
Property and equipment, net	281,643		307,620
Right-of-use assets	2,376,433		2,067,906
Intangible assets, net	30,197,223		31,395,556


Other assets	938,166		960,601
Total non-current assets	33,793,465		34,731,683
Total assets	$	106,474,493	$	122,751,676
Liabilities and stockholders’ equity (deficit)
Current liabilities
Accounts payable	$	1,897,512	$	2,028,100
Accrued expenses and other current liabilities	47,928,374		47,933,515
Due to related parties	1,379,210		2,091,035
Current operating lease liabilities	1,315,063		1,313,128
Line of credit, current portion	28,739,104		42,508,379
Notes payable, current portion – related parties	34,804,348		—
Notes payable, current portion	1,375,000		1,375,000
Total current liabilities	117,438,611		97,249,157
Non-current liabilities
Line of credit, net of current portion	1,950,000		1,950,000
Notes payable, net of current portion - related parties	—		34,755,435
Non-current operating lease liabilities	1,121,079		813,740

Total non-current liabilities	3,071,079		37,519,175
Total liabilities	120,509,690		134,768,332
Commitments and contingencies
Stockholders’ (deficit)
Preferred stock, $0.00001 par value; 20,000,000 shares authorized and none issued at March 31, 2025 and December 31, 2024, respectively	—		—
Common stock, $.00001 par value; 300,000,000 shares authorized; 54,553,801 and 53,130,946 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively	546		531
Additional paid-in capital	132,188,332		123,462,703
Accumulated deficit	(146,224,075)		(135,479,890)
Total stockholders’ (deficit)	(14,035,197)		(12,016,656)
Total liabilities and stockholders’ (deficit)	$	106,474,493	$	122,751,676

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

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ATLANTIC INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
		2025		2024
Service revenue, net		$	102,808,807	$	100,623,212
Cost of revenue		91,622,685		90,157,830
Gross profit		11,186,122		10,465,382
Selling, general and administrative		19,399,479		10,341,037
Depreciation and amortization		1,236,389		1,259,554
(Loss) income from operations		(9,449,746)		(1,135,209)


Interest expense		1,284,822		5,022,230

Net loss before provision for income taxes		(10,734,568)		(6,157,439)
Income tax (expense)/benefit		(9,617)		1,290,595
Net loss		$	(10,744,185)	$	(4,866,844)

Net loss per share, basic and diluted		$	(0.20)	$	(0.19)

Weighted-average shares outstanding, basic and diluted		53,975,575		25,423,729

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

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ATLANTIC INTERNATIONAL CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


	Mezzanine Capital				Members’ Capital (Deficit)						Stockholders’ (Deficit)
					Non-Redeemable Interests						Common Stock
	Redeemable Interests		Total Mezzanine Capital		Contributed Capital		Accumulated (Deficit)		Total Members’ Equity/(Deficit)		Shares	Amount		Additional Paid in Capital		Accumulated Deficit		Total Stockholders’ (Deficit)
Balance - December 31, 2024	$	—	$	—	$	—	$	—	$	—	53,130,946	$	531	$	123,462,703	$	(135,479,890)	$	(12,016,656)
Net loss	-		-		-		-		-		-	-		-		(10,744,185)		(10,744,185)
Stock based compensation	-		-		$	-	-		-		-	-		6,039,973		-		6,039,973
Stock issued for services	-		-		$	-	-		-		65,148	1		326,399		-		326,400
Stock issued to legacy stockholders	-		-		$	-	-		-		764,486	8		2,359,263		-		2,359,271
Stock issued for RSUs	-		-		$	-	-		-		593,221	6		(6)		-		133,969
Balance - March 31, 2025	$	-	$	-	$	-	$	-	$	-	54,553,801	$	546	$	132,188,332	$	(146,224,075)	$	(14,035,197)


	Mezzanine Capital				Members’ Capital (Deficit)						Stockholders’ (Deficit)
					Non-Redeemable Interests						Common Stock
	Redeemable Interests		Total Mezzanine Capital		Contributed Capital		Accumulated (Deficit)		Total Members’ (Deficit)		Shares	Amount		Additional Paid in Capital		Accumulated Deficit		Total Stockholders’ (Deficit)
Balance - December 31, 2023	$	10,663,750	$	10,663,750	$	11,786,313	$	(61,804,116)	$	(50,017,803)	25,423,729	$	254	$	22,449,809	$	(61,804,116)	$	(39,354,053)
Net loss	-		-		-		-		-		-	-		-		(4,866,844)		(4,866,844)
Capital contribution	-		-		1,033,969		-		1,033,969		-	-		1,033,969		-		1,033,969
Accretion to redemption value	133,162		133,162		(133,162)		-		(133,162)		-	-		-		-		-
Redemption of redeemable interests	(10,796,912)		(10,796,912)		10,796,912		-		10,796,912		-	-		-		-		-
Effect from merger	-		-		(23,484,032)		61,804,116		38,320,084		-	-		(1,804,116)		61,804,116		60,000,000
Balance - March 31, 2024	$	-	$	-	$	-	$	-	$	-	25,423,729	$	254	$	21,679,662	$	(4,866,844)	$	16,813,072

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

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ATLANTIC INTERNATIONAL CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2025		2024
Net loss	$	(10,744,185)	$	(4,866,844)
Adjustments to reconcile net loss to net cash provided by operating activities:

Amortization, deferred financing cost	48,913		305,250
Interest paid in kind	—		616,163

Deferred income taxes	—		(1,308,089)

Shares issued for services	326,400		—
Depreciation and amortization expense	1,236,389		1,259,553
Right-of-use asset amortization	453,530		392,019
Share based compensation	6,039,973		—
Expenses paid by IDC	—		2,550,970
Changes in operating assets and liabilities:
Accounts receivable	17,967,783		13,352,938
Unbilled accounts receivable	(407,456)		(2,302,753)
Prepaid expenses and other current assets	(1,434,026)		(255,627)
Due from related parties	—		(375,000)
Other assets	22,435		(120,020)

Accounts payable	(130,588)		(212,985)
Due to related parties	(711,825)		(36,848)
Income taxes payable	—		6,957
Accrued expenses and other current liabilities	2,354,130		2,626,366
Operating lease liability	(452,783)		(397,276)
Net cash provided by operating activities	14,568,690		11,234,774
Cash flows from investing activities
Purchase of property and equipment	(12,079)		(14,623)
Net cash (used in) investing activities	(12,079)		(14,623)
Cash flows from financing activities
Borrowings on revolving line of credit	107,630,000		102,704,746
Payments on revolving line of credit	(121,399,275)		(114,284,438)


Debt issuance costs payment	—		(19,500)
Net cash (used in) financing activities	(13,769,275)		(11,599,192)
Net increase/(decrease) in cash and cash equivalents	787,336		(379,041)
Cash and Cash Equivalents – Beginning of period	678,676		1,352,927
Cash and Cash Equivalents – End of period	$	1,466,012	$	973,886

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	1,458,889	$	2,306,490
Federal Income Taxes, net of refunds received	$	(558,566)	$	—
State Income Taxes, net of refunds received	$	3,573	$	16,775
Non-cash investing and financing activities:
Settlement shares issued to legacy stockholders	$	2,359,271	$	—

Accretion of redeemable units to redemption value	$	—	$	133,162
Unpaid debt issuance costs added to Term Note	$	—	$	600,000
Notes payable issued for amounts due under contingent consideration arrangements	$	—	$	6,941,521
Deemed capital contribution	$	—	$	2,684,018

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

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ATLANTIC INTERNATIONAL CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1: Organization and Nature of Operations

On June 18, 2024 (the “Closing Date”), Atlantic International Corp. (“Atlantic” or the “Company,” formerly known as SeqLL Inc.) completed the acquisition (the “Merger”) of Lyneer Investments LLC and its operating subsidiaries, including Lyneer Staffing Solutions, LLC (collectively, “Lyneer”). See Note 2: Merger and Acquistion for further information.

The Company was incorporated in Delaware under the name SeqLL Inc. on April 1, 2014. The Company historically operated as a commercial-stage life science instrumentation and research services company engaged in development of scientific assets and novel intellectual property across multiple “Omics” fields. Pursuant to the terms and Conditions of the Amended and Restated Agreement and Plan of Reorganization dated as of June 4, 2024, as amended (the “Merger Agreement”), all of our current business operations have been sold to SeqLL Omics, a newly formed company owned by our former employees and management, our operating business is now that of Lyneer. Our corporate headquarters have been relocated to 270 Sylvan Avenue, Suite 2230, Englewood Cliffs, New Jersey 07632.

Lyneer Investments, LLC (“Lyneer Investments”) is a limited liability company formed in the State of Delaware on January 9, 2018. Lyneer Investments is owned by its members and is now a wholly-owned subsidiary of the Company. The members of Lyneer Investments have limited personal liability for the obligations and debts of Lyneer Investments under Delaware law. Lyneer Holdings, Inc. (“Lyneer Holdings”), a wholly-owned subsidiary of Lyneer Investments, and Lyneer Staffing Solutions, LLC (“LSS”), a wholly-owned subsidiary of Lyneer Holdings, were also incorporated and formed, respectively, in the State of Delaware on January 9, 2018. Lyneer Investments, Lyneer Holdings, and LSS are collectively referred to herein as “Lyneer.”

The Company specializes in the placement of temporary and temporary-to-permanent labor across various industries throughout the United States of America (“USA”). The Company primarily places individuals in accounting and finance, administrative and clerical, information technology, legal, light industrial, and medical roles. The Company is also a leading provider of productivity consulting and workforce management solutions. The Company has more than 100 locations throughout the USA.

On August 31, 2021 (the “Acquisition Date” or the “Transaction Date”), IDC Technologies, Inc., a California corporation (“Parent” “IDC” or the “Acquirer”) obtained a controlling financial interest in Lyneer Investments by acquiring ninety (90%) percent of Lyneer Investments’ outstanding equity (the “Transaction”) pursuant to a membership interest purchase agreement (the “Transaction Agreement”) executed with the selling parties (“Sellers”). Following the closing of the Transaction, one of the Sellers, Lyneer Management Holdings, LLC (“LMH”) an entity owned primarily by certain members of the executive management team of the Company continued to own 10% equity interest in Lyneer. The Transaction represented a change of control with respect to Lyneer Investments and was accounted for as a business combination in accordance with the guidance prescribed in Accounting Standard Codification (“ASC”) Topic 805 - Business Combinations (“ASC 805”). Lyneer Investments applied pushdown accounting as of the Acquisition Date. On February 28, 2024, LMH exercised its right to put the LMH Units to IDC and IDC owned 100% of all the membership interests in Lyneer Investments.

On October 29, 2024, the Company formed a subsidiary in Delaware. This inactive subsidiary is named A36 Merger Sub, Inc. and all 100 shares of its common stock are owned by the Company.

Note 2: Merger and Acquisition

Merger

On May 29, 2023 and subsequently amended on June 23, 2023, October 5, 2023, October 17, 2023, November 3, 2023, January 16, 2024, March 7, 2024 and April 15, 2024, the Company, now known as Atlantic International Corp., a Delaware corporation (“SeqLL”), a Delaware corporation, SeqLL Merger, LLC, a Delaware limited liability company (“SeqLL Merger Sub”), Atlantic Acquisition Corp., a Delaware corporation (“Atlantic”), Atlantic Merger LLC, a Delaware limited liability company and a majority-owned subsidiary of Atlantic (“Atlantic Merger Sub”), Lyneer, IDC and LMH, a Delaware limited liability company (“Lyneer Management”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which (i) Atlantic Merger Sub was merged with and into Lyneer with Lyneer continuing as the surviving entity and as an approximately 41.7%- owned subsidiary of Atlantic, and an approximately 58.3%-owned subsidiary of IDC, and (ii) SeqLL Merger Sub was subsequently be merged with and into Lyneer, with Lyneer continuing as the surviving entity and a wholly-owned subsidiary of SeqLL (collectively referred to as the “Merger”).

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On June 4, 2024, the Company entered into an Amended and Restated Agreement and Plan of Reorganization (the “Amended Merger Agreement”), which amended certain provisions of the Merger Agreement: (i) fixed the number of shares of SeqLL common stock to be issued, (ii) replaced the Cash Consideration that was to be paid with a short-term promissory note, (iii) deleted the requirements of the closing of the Capital Raise and the listing of SeqLL common stock on a national securities exchange as conditions to the closing of the Merger, and (iv) provided for certain additional issuances of SeqLL common stock to IDC if such common stock is not listed on a national securities exchange on or prior to September 30, 2024. On June 12, 2024, the Amended Merger Agreement was amended (“Amendment 1”) to reflect a per share price change from the previous $3.10 to $2.36 and to reflect the Merger price determined by the parties at the time of the Merger.

On June 18, 2024 (the “Closing Date”), Atlantic International Corp. (“Atlantic” or the “Company,” formerly known as SeqLL Inc.) completed the acquisition (the “Merger”) of Lyneer.

Pursuant to the terms of the Merger, the Company changed its corporate name from SeqLL Inc. to Atlantic International Corp. and its trading symbol to ATLN.

The consideration for the Acquisition was the issuance to IDC, the then current owner of Lyneer: (a) a convertible promissory note in the principal amount of $35,000,000 that was originally due on or before September 30, 2024, which has been extended to March 31, 2027 (see Note 8: Debt for further discussion); and (b) 25,423,729 shares of the Company’s common stock at a market value of $2.36 per share, or $60,000,000 in the aggregate. 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 (the “Atlantic Consideration”). In the event of default, IDC shall be issued $10 million of additional shares of Atlantic common stock, valued at the then current price of ATLN common stock. The Company is currently not in default of the convertible promissory note.

In addition, upon the closing of the Merger:

•Atlantic Acquisition Corp (“AAC”) entered into an Assignment and Assumption Agreement pursuant to which AAC irrevocably assigned and transferred to the Company all of AAC’s rights, title and interest to various intangible assets in exchange for a portion of the Atlantic Consideration. The Company assumed all of the employment agreements of AAC personnel and paid/or expects to pay approximately $4.4 million of accrued wages and bonuses. The Company assumed obligations of AAC to issue 593,221 shares to certain advisors upon completion of the Merger, and an additional 1.3 million shares under a directors agreement. See Note 9: Accrued Expenses and Other Current Liabilities for further discussion.

•The Company escrowed 4,704,098 shares of common stock that may be issued to the Company’s stockholders of record as of September 26, 2023, as part of a settlement offer (the “Settlement Offer”) to be commenced within 90 days of the closing of the Merger to settle any claims for the failure to declare and pay certain previously-announced dividends of cash and common stock.

•In addition, following completion of the Merger, subject to the terms and conditions of an Asset Purchase Agreement dated as of May 29, 2023, between the Company and SeqLL Omics, an entity formed by Daniel Jones, the Company’s former Chairman and Chief Executive Officer, and certain other former employees of the Company for the purpose of carrying on the Company’s pre-Merger business following the Merger, SeqLL Omics purchased from the Company for a purchase price of $1,000 all of the Company’s assets, including cash and cash equivalents, and transferred all liabilities other than a promissory note in the principal amount of $1,375,000 to a former co-founder of SeqLL that is due on July 31, 2025 and a one-year leasehold obligation.

Determination of Accounting Acquirer

The Merger was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, although SeqLL acquired all of the outstanding equity interests of Lyneer in the Merger, we will be treated as the “acquiree” and Lyneer will be treated as the “acquirer” for financial reporting purposes. Accordingly, the Merger is reflected as the equivalent of Lyneer issuing shares for SeqLL’s net assets, followed by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Merger will be those of Lyneer. There is no accounting effect or change in the carrying amount of the assets and liabilities because of the Merger. The Merger does not represent a business combination accounted for accounting purposes under ASC 805 – Business Combinations, because neither Atlantic Merger LLC nor SeqLL will meet the definition of a business.

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Having considered Topic 12 of the SEC Financial Reporting Manual, Lyneer has been determined to be the continuing entity for accounting purposes and the Merger represents a reverse recapitalization with regard to Atlantic. We considered the following factors in completing the accounting analysis, with greater weight being given to (a), (d) and (e):

a)Lyneer is the largest entity, in terms of substantive operations;

b)Subsequent to SeqLL’s sale of assets to SeqLL Omics, SeqLL had no or nominal assets and no or nominal operations, and did not meet the definition of a business;

c)Atlantic Merger LLC has no operations and does not meet the definition of a business;

d)Lyneer will comprise the ongoing operations of the combined entity as the only company with historical operations;

e)All of the Lyneer employees will continue with the combined entity;

f)No affiliate entities or individual stockholders of Lyneer, Atlantic or SeqLL will have voting control on our board of directors following the Merger; and

g)Individuals affiliated with Atlantic will be appointed as the Chief Executive Officer and Chief Financial Officer of our company following the Merger

Staffing 360 Acquisition

On November 1, 2024, as amended on January 7, 2025, Atlantic, Staffing 360 Solutions, Inc. a Delaware corporation (“STAF”), and A36 Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of the Company entered into an Agreement and Plan of Merger (the “Staffing 360 Merger Agreement”), pursuant to which Merger Sub would merge with and into STAF, with STAF surviving as a wholly-owned subsidiary of the Company (the “Staffing 360 Merger”). Subject to the terms and conditions of the Staffing 360 Merger Agreement, upon completion of the Staffing 360 Merger, Atlantic would acquire all outstanding shares of STAF’s common stock. On February 26, 2025, Atlantic International Corp. (“Atlantic,” or the “Company”) sent a notice of termination to STAF pursuant to the terms and conditions of the Staffing 360 Merger Agreement by and among the Company, A36 Merger Sub, Inc. and STAF, dated as of November 1, 2024, as amended as of January 7, 2025. There was no material relationship between the Company and its affiliates and STAF other than in respect of the Staffing 360 Merger Agreement.

The Staffing 360 Merger Agreement required STAF to execute and/or deliver: “a signed agreement between the Internal Revenue Service and Company [i.e., STAF] concerning the terms of settlement mutually agreeable to Atlantic” (Emphasis Added). Without the Company’s knowledge, STAF entered into agreements with the Internal Revenue Service that were not agreeable to Atlantic. STAF materially failed to satisfy the terms of the Staffing 360 Merger Agreement and has done so in a manner that cannot be cured. Accordingly, this was a material breach of the covenant and agreement set forth in the Staffing 360 Merger Agreement to deliver: “a signed agreement between the Internal Revenue Service and Company (i.e., STAF) concerning the terms of settlement mutually agreeable to Atlantic.”

Finally, STAF has failed to demonstrate compliance under the Staffing 360 Merger Agreement, namely to (i) operate the Business in the ordinary course in all material respects and (ii) use commercially reasonable efforts to preserve intact the business organization, assets, properties and material business relations of STAF, both as reflected by STAF’s failure to satisfy its obligations and maintain its material business relations, among other reasons.

Note 3: Summary of Significant Accounting Policies

Basis of Presentation

The condensed unaudited consolidated financial statements of the Company are prepared following the requirements of the United States Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that is required by accounting principles generally accepted in the U.S (“U.S. GAAP”) for complete financial statements can be condensed or omitted. Certain information and footnote disclosures normally included in our annual audited financial statements for the fiscal year ended December 31, 2024 have been condensed or omitted. These interim financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for the interim periods ended March 31, 2025 and 2024.

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These Financial Statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2024. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for a full year.

The condensed unaudited consolidated financial statements reflect the operations of Lyneer Investments and our wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. We operate as one operating segment.

Liquidity

Significant assumptions underlie this belief, including, among other things, that there will be no material adverse developments in our business, liquidity, capital requirements and that our credit facilities with lenders will remain available to us.

In accordance with Accounting Standards Codification (“ASC”) Topic 205-40 – Going Concern, Management 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 the Company’s credit facilities, as well as forecasted liquidity. On April 29, 2025, the Company closed with a new ABL lender, replacing the current Revolver, with a maturity date of April 29, 2028. On April 28, 2025, the Company entered into an Amended and Restated Convertible Promissory Note agreement to extend the maturity date of the Merger Note to March 31, 2027.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates its estimated assumptions based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and outcomes may differ from management’s estimates and assumptions. Changes in estimates are reflected in reported results in the period in which they become known.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the consolidated balance sheets and consolidated statements of cash flows reflecting related party transactions and right-of-use amortization.

Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities if their effect is antidilutive. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive.

Joint and Several Liability Arrangements

In connection with the Transaction, Lyneer has entered into several debt facilities under which it is jointly and severally liable for repayment with IDC. The Company measures obligations resulting from joint and several liability arrangements in accordance with ASC 405-40 – Obligations Resulting from Joint and Several Liability Arrangements (“ASC 405-40”). ASC 405-40 requires that when determining the amount of liability to recognize under a joint and several obligation, a reporting entity which is an obligor under a joint and several liability arrangement first look to the terms of a related agreement with its co-obligors and record an amount equal to what it is obligated to pay under that agreement, plus any amount it expects to pay on behalf of the co-obligors. If no agreement with the co-obligors exists a reporting entity should recognize the full amount that it could be required to pay under the joint and several liability obligations. The amounts recognized in the Company’s financial statements represents its portion of amounts Lyneer expects to repay under its respective joint and several liability agreements as of March 31, 2025 and December 31, 2024, respectively. As of the date of the Merger, the Company deconsolidated its joint and several debt obligations as it believes it is reasonably

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probable that IDC has the ability to repay their portion. See Note 8: Debt for more information and discussion regarding the Debt Allocation agreement.

Segments

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer (“CEO”) is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has one operating segment, which is the business of providing commercial staffing solutions.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company assesses, on a quarterly basis, the likelihood that deferred tax assets will be realized in accordance with the provisions of ASC Topic 740 — “Income Taxes” (“ASC 740”). ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. The assessment considers all available positive or negative evidence, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.

The Company recognizes uncertain tax positions that it has taken or expects to take on a tax return. Management makes a determination as to whether it is more likely than not that an income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the Company were to incur an income tax liability from an uncertain tax position in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax liability would be reported as income taxes.

Management’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof as well as other factors.

Recent Accounting Pronouncements

Standards Recently Adopted

In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to expand annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The Company adopted the new standards in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

In December 2023, the FASB issued ASU 2023-09 – Income Taxes (“ASU 2023-09”) to enhance income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The Company adopted ASU 2023-09 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The Company does not believe ASU 2023-07 or ASU 2023-09 have a material effect on its consolidated financial statements.

Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03 – Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”) to improve the disclosures about an entity’s expenses and provide more detailed information about the types of expenses. The guidance is effective for annual reporting periods

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beginning after December 15, 2026. Early adoption is permitted. The Company plans to adopt ASU 2024-03 for the reporting period December 31, 2026.

In January 2025, the FASB issued ASU 2025-01 – Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2025-01”) to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company plans to adopt ASU 2025-01 for the annual reporting period December 31, 2026 and interim periods for the quarterly reporting period March 31, 2027.

The Company does not believe any other recently issued but not yet effective accounting pronouncements will have a material effect on its consolidated financial statements.

Note 4: Revenue Recognition and Accounts Receivable

The Company’s disaggregated revenues are as follows:


	Three Months Ended March 31,
		2025		2024
Temporary placement services		$	101,826,339	$	99,672,902
Permanent placement and other services		982,468		950,310
Total service revenues, net		$	102,808,807	$	100,623,212

When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. Because all its revenues are from placement services, there are no differences in the nature, timing and uncertainty of the Company’s revenues and cash flows from its revenue generating activities. For the three months ended March 31, 2025 and March 31, 2024, revenues from the Company’s largest customer accounted for approximately 13% and 15% of consolidated revenues, respectively. No other customers accounted for more than 10% of the Company’s consolidated revenues in either period. Economic factors specific to this customer could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.

Contract asset consists of unbilled accounts receivable of $9,776,021 and $9,368,565 as of March 31, 2025 and December 31, 2024, respectively. Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment upon receipt of invoice.

Accounts receivable is as follows:


	March 31, 2025		December 31, 2024
Accounts receivable	$	48,832,661	$	66,800,444
Allowance for doubtful accounts	(2,726,107)		(2,726,107)
Accounts receivable, net	$	46,106,554	$	64,074,337

The Company’s accounts receivable serves as collateral for the Revolver and the Term Note has a second lien after the Revolver.

The Company recognized no bad debt expense during the periods ended March 31, 2025 and March 31, 2024, respectively

None of the Company’s customers accounted for more than 10% of the Company’s accounts receivable as of March 31, 2025 and December 31, 2024.

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Note 5: Property and Equipment

Property and equipment consisted of the following:


	March 31, 2025		December 31, 2024		Estimated Useful Life
Computer equipment and software	$	815,996	$	803,917	3 years
Office equipment	94,876		94,876		5 years
Furniture and fixtures	169,258		169,258		7 years
Leasehold improvements	18,420		18,420		Lesser of lease term or asset life
Total	$	1,098,550	$	1,086,471
Less: accumulated depreciation and amortization	(816,907)		(778,851)
Property and equipment, net	$	281,643	$	307,620

Total depreciation expense of $38,056 and $61,220 was recorded during the three months ended March 31, 2025 and 2024, respectively and is included in “depreciation and amortization” in the accompanying consolidated condensed statements of operations.

Note 6: Intangible Assets

Intangible assets consisted of the following:


	March 31, 2025						December 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer Relationships	$	35,000,000	$	(8,367,777)	$	26,632,223	$	35,000,000	$	(7,784,444)	$	27,215,556
Trade Name	12,400,000		(8,835,000)		3,565,000		12,400,000		(8,220,000)		4,180,000
Total intangible assets	$	47,400,000	$	(17,202,777)	$	30,197,223	$	47,400,000	$	(16,004,444)	$	31,395,556

Total amortization expense of $1,198,333 was recorded during each of the three months ended March 31, 2025 and 2024. The Company continuously monitors for events and circumstances that could indicate that it is more likely than not that its finite lived intangible assets and other long-lived assets are impaired or not recoverable (a triggering event), requiring an interim impairment test. During the three months ended March 31, 2025, the Company considered a number of factors including, but not limited to, current macroeconomic conditions such as inflation, economic growth, and interest rate movements, industry and market considerations, and overall financial performance of the Company. Based on the analysis of relevant events and circumstances, the Company concluded a triggering event had not occurred as of March 31, 2025.

Note 7: Leases

We determine whether an arrangement is a lease at inception and whether such leases are operating or financing leases. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. We use these options in determining our capitalized financing and right-of-use assets and lease liabilities.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. To determine the discount rate to use in determining the present value of the lease payments, we use the rate implicit in the lease if determinable, otherwise we use our incremental borrowing rate.

The Company maintains operating leases for corporate and field offices. The Company’s leases have initial terms ranging from one month to three years, some of which include the option to renew, and some of which include an early termination option. During the three months ended March 31, 2025, the Company extended certain of its leases for periods ranging from one to three years.

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The following table summarizes the weighted average remaining lease term and discount rate for operating leases as of March 31, 2025 and December 31, 2024:


	March 31, 2025		December 31, 2024
Weighted average remaining lease term for operating leases	2.27 years		2.07 years
Weighted average discount rate for operating leases	7.06	%	6.29	%

The following table summarizes the future minimum payments for operating leases as of March 31, 2025, due in each year ending December 31:


Year	Minimum Lease Payments
Remainder of 2025	$	1,159,843
2026	825,661
2027	407,416
2028	105,706
2029	64,830
Thereafter	47,068
Total lease payments	2,610,524
Less: imputed interest	(174,382)
Present value of operating lease liabilities	$	2,436,142

Note 8: Debt

Some of the Company’s debt obligations consist of joint and several liabilities with the IDC Technologies Inc. (“IDC”) which are accounted for under ASC 405 – Debt (“ASC 405”). Lyneer will remain jointly and severally liable with the IDC to the lenders of the debt obligations until such time as such joint and several indebtedness is repaid. As of the date of the Merger, the Company deconsolidated the joint and several liabilities with regard to the Debt Allocation Agreement, dated December 31, 2024, between Lyneer and IDC. See below for further discussion.

The table below provides a breakdown of the Company’s recognized debt:


	March 31, 2025		December 31, 2024
Revolver	$	28,739,104	$	42,508,379




Credit Agreement	1,950,000		1,950,000
Promissory Note	1,375,000		1,375,000
Merger Note	35,000,000		35,000,000
Less: unamortized debt issuance costs	(195,652)		(244,565)
Total debt	$	66,868,452	$	80,588,814

Current portion	$	64,918,452	$	43,883,379
Non-current portion	$	1,950,000	$	36,705,435

The revolving credit facility (the “Revolver”) and Term Note contain certain customary financial and non-financial covenants that the Company is required to comply with. The Company and its lenders executed multiple amendments to its debt facilities in anticipation of the closing of the Merger. The multiple amendments executed since 2024 were in response to the delayed closing of the Merger. As of the issuance date of the Company’s March 31, 2025 unaudited financial statements, the Ninth Amendment to the Revolver and Tenth Amendment to the Term Note represent the currently effective amendments to each respective debt facility, as described further below. As of August 12, 2024, the lenders waived all existing events of default as of the date of the agreement and agreed to forbear from exercising their rights and

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remedies with respect to such events of default under the credit facilities through March 31, 2025. On April 29, 2025, the Company closed on a new ABL lender with a maturity date of April 29, 2028. See Note 18: Subsequent Events for further discussion.

Revolver

The Company maintains a Revolver as a co-borrower with IDC with an initial available borrowing capacity of up to $125,000,000, when originally executed in 2022. The facility was partially used to finance the acquisition of Lyneer Investments by IDC in August 2021, with additional borrowing capacity available under the Revolver to finance the Company’s working capital. All the Company’s cash collections and disbursements are currently linked with bank accounts associated with the Lender and funded using the Revolver. These borrowings are determined by the Company’s availability based on a formula of billed and unbilled accounts receivable as defined in the loan agreement. The Revolver matures on August 31, 2025, at which time all outstanding balances are due and payable. There are no scheduled or required principal payments on the Revolver prior to its maturity date. The Company may prepay amounts owed under the Revolver at any time prior to its maturity date without penalty.

As of March 31, 2025, and December 31, 2024, the Company has recognized liability balances on the Revolver of $28,739,104 and $42,508,379, respectively.

On August 12, 2024 the Company entered into extended forbearance agreements with its lender, under which the lenders, waived all existing events of default as of the date of the agreements and agreed to forbear from exercising their rights and remedies with respect to such events of default under the Revolver and Term Note 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 and the uplisting milestone dates were subsequently extended to September 30, 2025, or as agreed between the parties.

On April 29, 2025, the Company closed on a new ABL lender, replacing the current Revolver, with a maturity date of April 29, 2028. The current lender has funded the shortfall of the IDC portion owed and IDC has entered into a term loan for $6,000,000, plus a $1,000,000 exit fee. The current Revolver’s lender has assumed IDC’s publicly owned stock of Atlantic International Corp as collateral and intends to sell these shares to pay down these amounts. See Note 18: Subsequent Events for further information.

The Revolver contains certain customary financial and non-financial covenants.

Total available borrowing capacity on the Revolver as of March 31, 2025 was $127,537.

Term Note

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

As of March 31, 2025, and December 31, 2024, the Company has recognized liability balances on the Term Note of $0, and $0, respectively.

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 and the uplisting milestone dates were subsequently extended to September 30, 2025, or later as agreed to between the parties.

On April 28, 2025, the Term Note lender has foreclosed on IDC’s remaining stock of Atlantic International Corp. and intends to sell these shares to pay off the Term Note. See Note 18: Subsequent Events for further discussion.

Additionally, the Term Note obligation is fully covered by the Allocation agreement with IDC, as discussed below.

The Term Note contains certain customary financial and non-financial covenants that the Company is required to comply with.

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Seller Notes

As part of the purchase price consideration for the Transaction, the Company and IDC as co-borrowers issued various Seller Notes to former owners totaling $15,750,000. Payments on the Seller Notes are due in quarterly installments of $1,575,000, and $3,150,000 due at their amended maturity date of April 30, 2024, and bear interest at an amended fixed rate of 11.25% per annum. The Seller Notes represent unsecured borrowings and are subordinated to the Revolver and to the Term Note.

The Company has recognized Seller Note liability balances of $0 and $0 as of March 31, 2025, and December 31, 2024, respectively.

Earnout Notes

As contingent consideration milestones are met in connection with the Transaction Agreement, the Company can elect to pay the obligation in cash or issue notes payable. During 2023, the Company and IDC as co-borrowers issued nine notes payable with an aggregate value of $0. Payments on each of the Earnout Notes are due in quarterly installments through their amended maturity date of January 31, 2025, and each note bears an amended stated interest rate of 11.25% per annum. On January 16, 2024, the Company and IDC as co-borrowers issued six notes payable with an aggregate value of $6,941,521. Payments on each of the Earnout Notes are due in quarterly installments through their maturity date of January 16, 2026, and each note bears interest at a rate of 6.25% per annum. The Company did not make principal and interest payments due to the notice received from the Revolver’s administrative agent of the lender restricting payments to other lenders and the interest rate was increased to the default rate of 11.25% for the January Earnout Notes.

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

The Earnout Note liability was $0 and $0 at the periods ended March 31, 2025 and December 31, 2024, respectively.

2023 and 2024 Amendments to Seller and Earnout Notes

The Company did not make the Seller Note and Earnout Note principal and interest payments due during 2024 or the three months ended March 31, 2025. On May 14, 2023, the Company signed an amendment (the “Omnibus Amendment”) to defer the missed Seller Note and Earnout Note payments through the amendment date until their amended maturity dates of April 30, 2024, and January 31, 2025, respectively. The amendment increased the interest rate of the Seller Note and the Earnout Notes to 11.25% per annum from 6.25% for all remaining payments.

The Omnibus Amendment was treated as a modification after the Company’s analysis according to ASC 470 and as such, the Company is deferring the $40,000 amendment fee and will amortize as an adjustment to interest expense over the remaining term, along with any existing unamortized costs using the effective interest method. Lyneer paid the $40,000 amendment fee and will be reimbursed from IDC. These fees were included in “capital contribution” on the accompanying consolidated statements of stockholders’ earnings (deficit). Fees paid to third parties are expensed as incurred, and no gain or loss was recorded on the modification.

On January 16, 2024, the Company signed the Second Omnibus agreement to defer the missed July 31, 2023 and October 31, 2023, principal and interest payments until February 28, 2024, in addition to the payment of $1,575,000, along with accrued interest, scheduled for payment on January 31, 2024, which shall now be due and payable on February 28, 2024. The Company missed the payment due on February 28, 2024.

Credit Agreement

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

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

Promissory Note

From April 29, 2019 to April 29, 2020, the Company entered into a series of non-convertible promissory notes (the “Promissory Notes”) with St. Laurent Investments LLC amounting to $1,375,000. The Promissory Notes had a one-year term, most recently extended through July 31, 2025 or a later date to be mutually agreed upon. The Promissory Notes bear

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interest accruing at the rate of 5% per annum, and increased to 10% for the period from August 1, 2024, through July 31, 2025.

Merger Note

In connection with the closing of the Merger, we issued to IDC the Merger Note in the principal amount of $35,000,000 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. An event of default under the Merger Note may result in an additional event of default under the Revolver and our other indebtedness for borrowed funds.

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

On April 29, 2025, the Company entered into an Amended and Restated Convertible Promissory Note which extended the maturity date to the earlier of March 31, 2027 or the completion of at least a $40 million capital raise. See Note 18: Subsequent Events for further discussion.

Debt Allocation Agreement

Lyneer and IDC entered into a debt allocation agreement (the “Allocation Agreement”) dated as of December 31, 2023, which specifies and allocates responsibility for repaying (or refinancing) the joint-and-several debts between Lyneer and IDC. The Company reassessed its accounting for joint-and-several liabilities under ASC 405-40 as of the Merger date and concluded it is reasonably probable that IDC can repay their portion of the debt allocated per the Allocation Agreement. As a result, the Company deconsolidated it’s joint and several debt obligations.

Subsequent to the executed amendments of the Company’s debt obligations described herein, the future minimum principal payments on the Company’s outstanding debt are as follows:


	March 31, 2025
Remainder of 2025	$	30,114,104
2026	36,950,000
2027	—
2028	—
2029	—
Thereafter	—
Total	$	67,064,104

Interest Expense

The Company recognized total interest expense of $1,284,822 and $5,022,230 during the three months ended March 31, 2025, and 2024. $48,913 and $305,250 of deferred financing costs were recognized as a component of “interest expense” on the accompanying unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024, respectively.

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Note 9: Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	March 31, 2025		December 31, 2024
Potential settlement offer for legacy stockholders	$	8,742,400	$	11,101,671
Accrued wages and salaries	32,710,947		28,784,955
Accrued commissions and bonuses	2,435,457		3,515,821
Accrued interest	473,944		683,046
Income tax payable	13,913		13,913
Accrued other expenses and current liabilities	3,551,713		3,834,109
Total accrued expenses and other current liabilities	$	47,928,374	$	47,933,515

Legacy Stockholder Dividend Settlements

The Company has extended offers for settlement to stockholders as a result of the Company failing to declare and pay a declared dividend as described in the Company’s filings. The Company has issued 764,486 shares in partial satisfaction of this settlement as of the issuance date of the Company’s March 31, 2025 condensed consolidated unaudited financial statements at the September 10, 2024 closing stock price of $6.45, with an additional 1,000,701 shares pending issuance.

On October 24, 2024 the Company entered into an Amended and Restated Settlement Agreement and General Release of Claims with regard to the Company’s failure to declare and pay a declared dividend as described in the Company’s filings and the Company’s former Chief Executive Officer agreed to provide consulting services to the Company. In full and final satisfaction of any and all obligations related to the dividend and consulting services, the Company agreed to the following:

•$25,000 cash payment as an initial payment under the Consulting Agreement

•Consulting fees will be paid at the sum of $7,500 per month, paid quarterly

•757,833 shares will be issued as additional consideration for up to 10 hours of services a week. Any weekly hours in excess of those hours will be billed at a negotiated rate

•230,027 shares will be issued as a Dividend settlement

Legal Counsel Exchange Agreement

On December 5, 2024, the Company and its legal counsel entered into an exchange agreement whereby the Company shall issue to legal counsel 20,000 restricted shares of common stock in satisfaction of $101,400 of accounts payable to legal counsel at the closing price of $5.07 per share. These shares were transferred to legal counsel on February 12, 2025.

Note 10: Commitments and Contingencies

Litigation

The Company is subject to lawsuits and other claims arising in the ordinary course of business. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in a particular matter or changes in approach, such as a change in settlement strategy in dealing with these matters. With respect to material matters for which the Company believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and an estimate of potential exposure. The Company believes that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s results of operations, financial position or cash flows, although such litigation is subject to certain inherent uncertainties.

On February 2, 2018, Michael Smith on his own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against various defendants in the Superior Court of California, Los Angeles County, that was subsequently amended to add Lyneer as a defendant on April 28, 2022. The complaint alleges wage and hour claims, and

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inaccurate wage statement claims on behalf of the class and plaintiff. The $300,000 final settlement funds were disbursed on March 21, 2024.

On October 30, 2019, Rosanna Vargas filed a complaint in the Superior Court of New Jersey at Camden County against Lyneer and various defendants, including Lyneer’s client, alleging severe personal injury sustained at work. The case is now closed as to all parties. As a result of the matter, Lyneer’s client sought indemnification from Lyneer pursuant to an indemnification demand issued to Lyneer on June 10, 2022. Accordingly, Lyneer agreed to pay approximately $1,030,000 over 36 months, beginning in July 2023, to settle the claim. As of March 31, 2025, the Company owes $492,857.

On January 6, 2021, a class action wage and hour complaint was filed in the Superior Court of California, Los Angeles County, by Enrique Briseno as class representative. The Complaint was filed only against the Company’s client. The matter settled for $425,000, $300,000 of which is to be paid by the Company, and the remaining $125,000 is to be paid by the client. The settlement agreement was signed on December 17, 2024 and has been finalized and executed and provided to the Court for approval. The Company is currently awaiting such approval. If approved, it is anticipated that the settlement payment will be due in the second quarter of 2025. The Company has accrued the full amount of the $300,000 settlement payment due, which is recognized in “accrued expenses and other current liabilities” on the accompanying consolidated balance sheets.

On June 16, 2021, a complaint was filed in the Superior Court of New Jersey Law Division, Middlesex County. The complaint alleges a former minor employee (who obtained employment by providing false information) was injured on October 15, 2020, at the Co-Defendant’s worksite. A settlement conference was held on August 28, 2024, but was unsuccessful. The Company’s liability insurance carrier and the Company's worker's compensation insurance carrier and the liability insurance carrier for the client held a settlement conference on April 14, 2025, but was unsuccessful. The trial commenced April 28, 2025 and a settlement was reached on May 2, 2025 for a total value of $3,050,000, $2,800,000 in cash and $250,000 by virtue of a lien release, of which the Company is responsible for $200,000, with the insurance carriers collectively responsible for the remainder.

On October 8, 2021, a class action wage and hour complaint was filed in the Superior Court of California, Orange County, by Mirna Reyes and Teresa Alvarez as class representatives. The Complaint was filed against the Company as well as the Company’s client. The matter settled for $750,000, $650,000 of which is to be paid by the Company, and the remaining $100,000 is to be paid by the client. The settlement agreement was signed November 16, 2023 and has been finalized and executed and provided to the Court for approval. The Company is currently awaiting such approval. If approved, it is anticipated that the settlement payment will be due in the fourth quarter of 2025. The Company has accrued the full amount of the $650,000 settlement payment due, which is recognized in “accrued expenses and other current liabilities” on the accompanying consolidated balance sheets.

Note 11: Segment Reporting

The Company reports information about operating segments in accordance with ASU 2023-07, which requires financial information to be reported based on the way management organizes segments within a company for making operating decision and evaluating performance. The Company derives revenue from hourly fees charged from the placement of “light industrial” temporary staffing and placement fees earned from the placement of professional permanent employees at its customers. Revenues are accounted for and tracked by each branch location by temporary or permanent placement. The direct costs are not reported by temporary or permanent placement, but rather reported together. Direct costs, primarily payroll and payroll related costs are included in cost of revenue which is deducted from revenues to determine gross profit. Each branch’s operating expenses, which, similar to direct costs, are not separated into temporary or permanent placement costs are then deducted from gross profit. So ultimately the segment manager does not review discrete financial information summarized by temporary or permanent placement, but rather total by operating branch. Therefore, the Company has one reportable segment, which is the business of providing commercial staffing solutions.

The accounting policies of the commercial staffing solutions segment are the same as those described in Note 3: Summary of Significant Accounting Policies. The Company’s CEO is the CODM and reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The CODM assesses performance for the commercial staffing solutions segment and decides how to allocate resources based on net income/(loss) that is also reported on the condensed consolidated statement of operations as consolidated net income/(loss). The measure of segment assets is reported on the condensed consolidated balance sheet as total consolidated assets.

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The CODM uses net income/(loss) to evaluate income/(loss) generated from segment assets (return on assets) in deciding whether to reinvest profits into the current business segment or into other parts of the entity or parent, such as for acquisitions or other public costs such as investor relations and marketing.

The Company does not have intra-entity sales or transfers.

Note 12: Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

Cash in Excess of FDIC Insured Limits

The Company places its cash and cash equivalents with financial institutions which it believes are of high creditworthiness and where deposits are insured by the United States Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company’s cash balances in excess of FDIC insured limits amounted to $1,410,330 and $424,188 as of March 31, 2025 and December 31, 2024, respectively.

The Company has not experienced any losses with regard to its bank accounts and believes it does not pose a significant credit risk to the Company.

Other Concentrations

As of March 31, 2025 and December 31, 2024, the Company has a deposit in the amount of $8,000,000 with a professional employer organization (“PEO”). The PEO is the employer of record for substantially all of the Company’s engagement professionals, and as such certain costs of revenue are paid to the PEO and subsequently distributed to Company engagement professionals.

Note 13: Members' Capital and Mezzanine Capital

As of March 31, 2024, 100%, of the outstanding membership units were held by IDC.

Under the Operating Agreement, LMH had the right, but not the obligation to require IDC to purchase LMH’s interest in the Company (the “LMH Put”) upon the occurrence of any Triggering Event, or during the Put-Call Period. Upon the occurrence of certain triggering events as defined in the Company’s operating agreement, LMH had the right to require IDC to purchase its membership units in the Company. The Company has determined the LMH Units to be redeemable upon an event that is outside the control of the Company, and accordingly classified the LMH Units as a component of mezzanine capital and outside of permanent equity. These units were exercised on February 28, 2024 and as of March 31, 2024 were reclassed to permanent equity. See below for further detail.

Accordingly, these ownership interests were recorded in mezzanine capital, and subject to subsequent measurement under the guidance provided under ASC Topic 480 – Distinguishing Liabilities from Equity (“ASC 480”). Pursuant to ASC 480, contingently redeemable equity instruments that are not redeemable as of the balance sheet date but probable of becoming redeemable in the future should be accreted to their redemption value either immediately or ratably; the Company has elected to recognize changes in redemption value immediately upon the determination that an outstanding instrument is probable of becoming redeemable in the future.

Net income and losses are allocated to Members’ capital accounts in accordance with the terms of the Operating Agreement which generally provides that these items are allocated in proportion to each Member’s percentage ownership interest in the Company. Distributions to the Members are made at the discretion of the Board of Managers and in accordance with the terms of the Operating Agreement.

The LMH Put is payable by IDC and will be paid by the issuance of the Put-Call Notes. The Put-Call period was extended until February 29, 2024. On February 28, 2024, LMH exercised its right to put the LMH Units to IDC and entered into a Put-Call Option Note on April 17, 2024, in the amount of $10,796,912. While not formalized until April 17, 2024, the terms of the Put-Call Option Note were agreed to by all parties prior to March 31, 2024 and as such, the Company gave effect to the transaction as of March 31, 2024. The Put-Call Option Note provides that IDC owned one hundred percent (100%) of all the membership interests in Lyneer Investments and requires IDC to pay 50% of outstanding principal six months after issuance with the remaining 50% payable in six equal quarterly payments beginning on December 31, 2024 and continuing until the maturity date of June 30, 2026. The Put-Call Option Note provides for the acceleration of payment principal under certain conditions, including upon a change of control, as defined. The Put-Call Option Note bears interest at a stated annual interest rate of 5.25% which is payable quarterly in arrears commencing December 31, 2024. IDC may

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prepay the Put-Call Option Note at any time without premium or penalty. The Put-Call Option Note contains customary covenants.

As part of the consummation of the Merger on June 18, 2024, IDC paid $2,000,000 to LMH as a partial payment on the Put-Call Option Note.

Note 14: Related Party Transactions

Transactions with Lyneer Management Holdings

LMH was a non-controlling member of the Company with a 10% ownership interest at December 31, 2023. Two of the Company’s officers, specifically its CEO and CFO, each owned 44.5% of LMH, respectively.

On November 15, 2022, Lyneer and IDC as co-borrowers issued Year 1 Earnout Notes to LMH with total balances of $5,127,218. On January 16, 2024, Lyneer and IDC as co-borrowers issued Year 2 Earnout Notes to LMH with total balances of $2,013,041. On the date of the Merger, the Company deconsolidated this debt. Refer to Note 8: Debt for additional information.

Interest expense incurred on the Earnout Notes to LMH totaled $0 and $173,737 for the three months ended March 31, 2025 and 2024, respectively.

On June 18, 2024 as part of the Merger, LMH entered into a $6,000,000 guarantee agreement with the PEO, replacing and cancelling the $6,000,000 letter of credit previously held by the lenders of the Revolver.

Transactions with IDC

The Company and IDC are co-borrowers and jointly and severally liable for principal and interest payments under the Revolver, the Term Note, the Seller Notes and the Earnout Notes. In the case of certain of those obligations IDC generally makes certain interest and principal payments to the lenders and collects reimbursement from the Company. For interest payments of that nature, the Company recognizes interest expense when interest is incurred under the relevant loan agreement and a corresponding payable to IDC, which is subsequently removed from the Company’s consolidated balance sheet upon Company’s remittance of the reimbursement funds to IDC. Additionally, when principal payments are made by IDC the Company recognizes a reduction of the associated loan balance, with a corresponding increase in the payable to IDC which is then reduced upon the Company’s payment of funds to IDC.

As a result of the Merger, the Company is required to file short-term income tax returns for the periods of January 1, 2024 to June 18, 2024 and June 19, 2024 to December 31, 2024. For the first short-period, Lyneer and IDC will file consolidated income tax returns in certain states. In connection with this arrangement the Company has recorded a liability payable to IDC for taxes payable by IDC which represent taxes attributable to the Company’s operations included on consolidated state and local income tax returns filed by IDC. These amounts are determined by determining the Company’s taxable income multiplied by the applicable tax rate. Amounts payable to IDC of this nature amounted to $548,432 as of both March 31, 2025 and December 31, 2024, and are included in “due to related parties” on the accompanying unaudited condensed consolidated balance sheets. For the second short-period ended December 31, 2024, Lyneer will file consolidated income tax returns with Atlantic International Corp.

Total amounts payable to IDC, including the above taxes payable to IDC, amounted to $1,379,210 and $2,091,035 as of March 31, 2025, and December 31, 2024, respectively and are included in “due to related parties” on the accompanying condensed consolidated balance sheets. There are no formalized repayment terms.

During the three months ended March 31, 2024, Lyneer included $2,550,970 as an expense paid for by IDC and recorded as a deemed capital contribution to Lyneer, of which all related to interest. Additionally, IDC agreed to reimburse certain expenses paid by Lyneer totaling $133,048 also recorded as deemed capital contributions, by reducing the payable balance owed to IDC. Of this amount, $113,548 related to professional fees and $19,500 related to a debt amendment fee.

On June 18, 2024, the Company entered into a $35,000,000 Merger Note with IDC. See Note 8: Debt for further discussion. Additionally, IDC was issued 25,423,729 shares of the Company’s common stock at a market value of $2.36 per share, or $60,000,000 in the aggregate.

Note 15: Stock-Based Compensation

Upon the consummation of the Merger, the 2023 Equity Incentive Plan (the “Incentive Plan”) became effective. The Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs, dividend

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equivalents, and other stock or cash-based awards, or collectively, awards to officers, employees, non-employee directors, and consultants and those of our subsidiaries as selected from time to time by the plan administrator in its discretion. Unless otherwise set forth in an individual award agreement, each award shall vest over a four-year period, with one-quarter of the award vesting on the first annual anniversary of the date of grant, with the remainder of the award vesting monthly thereafter.

On July 22, 2024 the Company filed a registration statement on Form S-8 to register up to 15% (initially 7,309,322 shares) of the number of shares of common stock, par value $0.00001, to be outstanding immediately following consummation of the Initial Capital Raise following the Merger issuable pursuant to outstanding unvested or unexercised stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, and other stock or cash based awards (collectively, “Awards”) granted under the Company’s Incentive Plan which became effective upon the consummation and completion of the Merger.

Shares underlying any awards under the Incentive Plan that are forfeited, cancelled, held back to cover the exercise price or tax withholding, satisfied without the issuance of stock or otherwise terminated (other than by exercise) will be added back to the shares available for issuance under the Incentive Plan. The payment of dividend equivalents in cash shall not count against the share reserve.

Restricted Stock Units

The Company granted 4,040,198 restricted stock units to employees under its Incentive Plan during the three months ended March 31, 2025. As of March 31, 2025, the Company had 4,161,161 unvested RSUs with a grant date fair value of $5.81.

The following table summarizes the Company’s restricted stock activity consisting of RSUs:


	Shares Outstanding	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2024	241,932	$	2.36
Granted	4,040,198	$	5.91
Vested	(120,969)	$	2.36
Unvested at March 31, 2025	4,161,161	$	5.81

Stock-based compensation expense included in the accompanying consolidated statements of operations was:


	Three Months Ended March 31,
		2025		2024
Stock-based compensation expense		$	6,039,973	$	—

As of March 31, 2025, there was $18,387,815 of unrecognized stock-based compensation related to RSUs outstanding, which is expected to be recognized over a weighted-average remaining service period of less than one year.

Note 16: Income Taxes

For the three months ended March 31, 2025 and 2024, the Company recorded an income tax (expense)/benefit of $(9,617) and $1,290,595, respectively. The Company’s effective tax rate for the three months ended March 31, 2025 and 2024 was 0.1% and 21.0%, respectively. The effective tax rate for the three months ended March 31, 2025 differs from the statutory rate primarily as a result of having a full valuation allowance maintained against our deferred tax assets. The change in effective tax rates between the periods was primarily due to the establishment of a valuation allowance on the Company’s deferred tax assets, initially recorded during the fourth quarter of 2024.

As of March 31, 2025, the Company maintained a valuation allowance against all of its deferred tax assets for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance.

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Note 17: Earnings per Share

The following table summarizes the computation of basic and diluted net loss per share:


	Three Months Ended March 31,
		2025		2024
Numerator:
Net loss		$	(10,744,185)	$	(4,866,844)
Denominator:
Weighted average common shares outstanding, basic and diluted		53,975,575		25,423,729
Net loss per share, basic and diluted		$	(0.20)	$	(0.19)
Excluded anti-dilutive shares		5,008,268		13,825

Note 18: Subsequent Events

The Company has evaluated subsequent events through May 9, 2025, as detailed below.

New ABL Lender

On April 29, 2025, the Company’s subsidiary, Lyneer Staffing Solutions, LLC (“Lyneer”) entered into a Loan and Security Agreement (the “Loan Agreement”) providing for a $70 million senior secured revolving credit facility (the “New Revolving Credit Facility”). The Loan Agreement replaced Lyneer’s prior senior secured revolving credit facility provided by BMO Bank, N.A. (“BMO”). Lyneer’s current lender funded the shortfall of $6,000,000, the portion of the joint and several debt owed to BMO by IDC, and IDC and Lyneer has entered into a term loan with BMO for this amount, plus a $1,000,000 exit fee. BMO has assumed 3,439,803 shares of Atlantic International Corp. previously owned by IDC as collateral.

Term Note

On April 28, 2025, the Term Note lender foreclosed on IDC’s remaining 21,983,926 shares of Atlantic International Corp. stock and intends to sell these shares to pay off the Term Note.

Merger Note Amendment

In connection with the loan transaction described above, the Company and IDC amended a convertible promissory note, originally issued on June 18, 2024 from the Company to IDC, in the principal amount of $35,000,000. By mutual agreement, the parties extended the Maturity Date to March 31, 2027.

Prateek Gattani Resignation

On April 29, 2025, at the request of the Company’s Board of Directors, in consideration of the Company’s subsidiary entering into a revolver, as described above, with a new ABL lender, Prateek Gattani resigned as Chairman of the Board of the Company.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion relates to Atlantic International Corp. (Atlantic or the Company) and its consolidated subsidiaries and should be read together with the Company’s Consolidated Financial Statements and accompanying notes included in Part I, Item 1.—Financial Statements of this Quarterly Report on Form 10-Q.

Overview

Atlantic, through its subsidiaries, is a national strategic staffing firm servicing the commercial, professional, finance, direct placement, and managed service provider verticals. Lyneer was formed under the principles of honesty and integrity, and with the view of becoming the preferred outside employer of choice. Since its formation, the Company has grown from a regional operation to a national staffing firm with offices and geographic reach across the United States. The Company primarily places individuals in accounting and finance, administrative and clerical, information technology, legal, light industrial, and medical roles. The Company is also a leading provider of productivity consulting and workforce management solutions. Atlantic is headquartered in Englewood Cliffs, New Jersey and has more than 100 locations in the USA.

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

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.

Results of Operations

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

Comparison of the Three Months Ended March 31, 2025 and 2024:

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

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

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	Three Months Ended March 31,				Change
	2025		2024		Amount		Percent
Service revenue, net	$	102,808,807	$	100,623,212	$	2,185,595	2.2	%
Cost of revenue	91,622,685		90,157,830		1,464,855		1.6	%
Gross profit	11,186,122		10,465,382		720,740		6.9	%
Selling, general and administrative	19,399,479		10,341,037		9,058,442		87.6	%
Depreciation and amortization	1,236,389		1,259,554		(23,165)		(1.8)	%
Loss from operations	(9,449,746)		(1,135,209)		(8,314,537)		+


Interest expense	1,284,822		5,022,230		(3,737,408)		(74.4)	%

Net loss before provision for income taxes	(10,734,568)		(6,157,439)		(4,577,129)		74.3	%
Income tax (expense)/benefit	(9,617)		1,290,595		(1,300,212)		+
Net loss	$	(10,744,185)	$	(4,866,844)	$	(5,877,341)	+

Net loss per share, basic and diluted	$	(0.20)	$	(0.19)	$	(0.01)	5.3	%
Weighted average shares outstanding, basic and diluted	53,975,575		25,423,729		28,551,846		+

+ - change greater than ± 100%

Service Revenue, Net

Service revenue, net of discounts, for the three months ended March 31, 2025 and 2024 consisted of the following:


	Three Months Ended March 31,
		2025		2024
Temporary placement services		$	101,826,339	$	99,672,902
Permanent placement and other services		982,468		950,310
Total service revenues, net		$	102,808,807	$	100,623,212

Service revenue, net was $102,808,807 and $100,623,212 for the three months ended March 31, 2025 and 2024, respectively, an increase of $2,185,595, or 2.2%. This increase was predominately due to the higher revenues from the Company’s temporary placement services business, which increased $2,153,437 or 2.2% in the three months ended March 31, 2025 as compared to the same period in 2024 due primarily to a strong sales initiative by the Company. Permanent placement and other services increased $32,158 or 3.4% due to strong demand from our current clients.

Cost of Revenue and Gross Profit

Gross profit reflects the difference between realized service revenue, net and cost of revenues for providing temporary and permanent placement solutions. Cost of revenue consists primarily of fixed and variable directs costs, including payroll, payroll taxes and employee benefit costs. Cost of revenue and gross profit for the three months ended March 31, 2025 and 2024 consisted of the following:


	Three Months Ended March 31,
		2025		2024
Service revenue, net		$	102,808,807	$	100,623,212
Cost of revenue		91,622,685		90,157,830
Gross profit		$	11,186,122	$	10,465,382

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Cost of revenue for the three months ended March 31, 2025 and 2024 was $91,622,685 and $90,157,830, respectively, an increase of $1,464,855 or 1.6%. The increase in cost of revenue was due primarily to higher service revenue, net driven primarily by higher temporary placement services revenue, which increased $2,153,437 or 2.2%. Gross profit for the three months ended March 31, 2025 and 2024 was $11,186,122 and $10,465,382, respectively, an increase of $720,740 or 6.9%. As a percentage of service revenue, net, gross profit was 10.9% and 10.4% for the three months ended March 31, 2025 and 2024, respectively, which increased due to the Company’s initiative to sell higher margin accounts.

Total Operating Expenses

Total operating expenses for the three months ended March 31, 2025 and 2024 consisted of the following:


	Three Months Ended March 31,
		2025		2024
Selling, general and administrative		$	19,399,479	$	10,341,037
Depreciation and amortization		1,236,389		1,259,554
Total operating expenses		$	20,635,868	$	11,600,591

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

Selling, General and Administrative Costs

Selling, general and administrative expenses for the three months ended March 31, 2025 and 2024 were $19,399,479 and $10,341,037, respectively, an increase of $9,058,442, or 87.6%, due primarily to stock compensation expense and higher transaction costs related to the Merger. As a percentage of service revenue, net, selling, general and administrative costs were 18.9% in the three months ended March 31, 2025 as compared to 10.3% in the three months ended March 31, 2024. The increase in selling, general and administrative costs as a percentage of service revenue, net was due primarily to stock compensation expense and higher transaction costs related to the Merger in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended March 31, 2025 and 2024 was $1,236,389 and $1,259,554, respectively, a decrease of $23,165 or 1.8%, which was slightly lower on a year-over year basis primarily due to more of the Company’s computer software being fully depreciated at the end of 2024.

Interest Expense

Interest expense for the three months ended March 31, 2025 and 2024 were as follows:


	Three Months Ended March 31,
		2025		2024
Interest expense		$	1,284,822	$	5,022,230

Interest expense for the three months ended March 31, 2025 and 2024 was $1,284,822 and 5,022,230, respectively. The decrease of $3,737,408, or 74.4%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was attributed to the Company deconsolidating the joint and several debt obligations as of the Merger date.

Income Tax (Expense)/Benefit

Provision for income taxes for the three months ended March 31, 2025 and 2024 were as follows:


	Three Months Ended March 31,
		2025		2024
Income tax (expense)/benefit		$	(9,617)	$	1,290,595

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Income tax (expense)/benefit for the three months ended March 31, 2025 and 2024 was $(9,617) and $1,290,595, respectively. The change between the periods was primarily due to the establishment of a valuation allowance on the Company’s deferred tax assets, initially recorded during the fourth quarter of 2024.

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Liquidity & Capital Resources

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

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

In 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 condensed consolidated financial statements. On April 29, 2025, the Company closed on a new ABL lender, replacing the current Revolver and converting it into a term loan, with a maturity date of April 29, 2028. The current lender has funded the shortfall of $6,000,000, the IDC portion owed, and IDC and Lyneer entered into a term loan for this amount, plus a $1,000,000 exit fee for the remaining joint and several former ABL lender debt. The previous lenders have acquired IDC’s publicly owned stock of Atlantic International Corp as collateral and intends to sell these shares to pay down the amounts due related to the joint and several debt. See Note 18: Subsequent Events for further information.

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

In the Allocation Agreement, IDC and Mr. Gattani have agreed to implement a plan to refinance or otherwise satisfy the joint and several indebtedness. 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, further extended to March 31, 2027 when the Company entered into an Amended and Restated Convertible Promissory Note. On April 29, 2025, the Company closed on a new ABL lender, replacing the current Revolver, with a maturity date of April 29, 2028. The current lender has funded the shortfall of $6,000,000, the IDC portion owed, and IDC has entered into a term loan for this amount, plus a $1,000,000 exit fee. The certain junior lenders assumed portions of IDC’s publicly owned stock of Atlantic International Corp as collateral and intends to sell these shares their respective joint and several debt. See Note 18: Subsequent Events for further information.

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Cash flows for the three months ended March 31, 2025 and 2024 consisted of the following:


	Three Months Ended March 31,
	2025		2024
Net cash provided by operating activities	$	14,568,690	$	11,234,774
Net cash (used in) investing activities	(12,079)		(14,623)
Net cash (used in) financing activities	(13,769,275)		(11,599,192)
Net increase/(decrease) in cash and cash equivalents	$	787,336	$	(379,041)

Cash flows provided by operating activities for the three months ended March 31, 2025 compared to the three months March 31, 2024 was higher primarily due to a decrease in accounts receivable from the prior year end.

Investing Activities

Cash used in investing activities for the three months ended March 31, 2025 decreased compared to March 31, 2024 and consisted entirely of purchases of property and equipment.

Financing Activities

Cash used in financing activities decreased for the three months ended March 31, 2025 compared to March 31, 2024 and consisted of borrowings and payments under the Company’s debt arrangements of the Revolver.

Revolver

Until April 29, 2025, as described below, the Company maintained the Revolver as a co-borrower with IDC with an available borrowing capacity of up to $60,000,000. The facility was partially used to finance the acquisition of Lyneer by IDC in August 2021, with additional borrowing capacity available under the Revolver to finance Lyneer’s working capital. All of Lyneer’s cash collections and disbursements are currently linked with bank accounts associated with the lender and funded using the Revolver. These borrowings are determined by Lyneer’s availability based on a formula of billed and unbilled accounts receivable as defined in the loan agreement.

As of March 31, 2025 and December 31, 2024, the total balance on the Revolver was $40,793,199 and $53,983,962, respectively. As of March 31, 2025 and December 31, 2024, the Company recorded a liability of $28,739,104 and $42,508,379, respectively, and IDC owed the remaining $12,054,095 and $11,475,583, respectively. Total available borrowing capacity on the Revolver as of March 31, 2025 was $127,537, net of a $71,683 reserve required on the Revolver. The borrowing base calculation is based on Lyneer’s eligible assets.

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 and the uplisting milestone dates were subsequently extended to September 30, 2025, or as agreed between the parties.

On April 29, 2025, the Company closed on a new ABL credit facility, replacing the current Revolver, with a maturity date of April 29, 2028. The current lender has funded the shortfall of $6,000,000, the IDC portion owed, and IDC has entered into a term loan for this amount, plus a $1,000,000 exit fee. The current Revolver’s lender has assumed IDC’s publicly owned stock of Atlantic International Corp as collateral and intends to sell these shares to pay down these amounts. See Note 18: Subsequent Events for further information.

Term Note

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

On April 28, 2025, the Term Note lender foreclosed on certain amounts of IDC’s stock of Atlantic International Corp. and intends to sell these shares to pay off the Term Note. See Note 18: Subsequent Events for further discussion.

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The Term Note is covered by the Allocation Agreement discussed above and as such the Company deconsolidated it’s joint and several debt obligations as of the Merger date. See Note 8: Debt for further information.

The Company reassessed its accounting for joint-and-several liabilities under ASC 405-40 as of the Merger date and concluded it is reasonably probable that IDC can repay their portion of the debt allocated per the Allocation Agreement. As a result, the Company deconsolidated it’s joint and several debt obligations.

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 The Initial Capital Raise milestone and the uplisting milestone dates were subsequently extended to September 30, 2025, or as agreed between the parties.

Seller Notes

As part of the purchase price consideration for the Transaction, Lyneer and IDC as co-borrowers issued various Seller Notes to former owners in the aggregate principal amount of $15,750,000. Principal payments on the Seller Notes are due in quarterly installments of $1,575,000, and $3,150,000 is due at their amended maturity dates of April 30, 2024. The Seller Notes bear interest at an amended fixed rate of 11.25% per annum. The Seller Notes represent unsecured borrowings and are subordinated to the Revolver and to the Term Note.

The Seller Notes are covered by the Allocation Agreement discussed above and as such the Company deconsolidated it’s joint and several debt obligations as of the Merger date. See Note 8: Debt for further information.

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

Earnout Notes

As contingent consideration milestones are met in connection with the Transaction Agreement, Lyneer and IDC can elect to pay the milestone payments in cash or to issue notes payable. During 2022, Lyneer and IDC as co-borrowers have issued nine promissory notes in the aggregate principal amount of $0. Payments on each of the Earnout Notes are due in quarterly installments through their amended maturity date of January 31, 2025 and each note bears an amended stated interest rate of 11.25% per annum. On January 16, 2024, Lyneer and IDC as co-borrowers issued six notes payable with an aggregate value of $6,941,521. Payments on each of the Earnout Notes are due in quarterly installments through their maturity date of January 16, 2026 and each note bears interest at a rate of 6.25% per annum. The Company missed the March 31, 2024 principal and interest payment and the interest rate increased to the default rate of 11.25%.

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

The Earnout Notes are covered by the Allocation Agreement discussed above and as such the Company deconsolidated it’s joint and several debt obligations as of the Merger date. See Note 8: Debt for further information.

2023 Amendment to Seller and Earnout Notes

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

On January 16, 2024, Lyneer and IDC signed an amendment to the Omnibus Agreement with the holders of the Seller Notes and the Earnout Notes to defer the missed July 31, 2023 and October 31, 2023 principal and interest payments, each in the amount of $1,575,000 plus accrued interest, together with the principal payment in the amount of $1,575,000 plus accrued interest that is payable on January 31, 2024, all of which were payable on February 28, 2024. Lyneer has not refinanced or restructured the credit facility and missed all payments of the Seller Notes and the Earnout Notes during 2024 and is in default of the Seller Notes and Earnout Notes. The Seller Noes and the Earnout Notes are covered by the Allocation Agreement discussed above.

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Credit Agreement

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

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

Promissory Note

Merger Note

In connection with the closing of the Merger, we issued to IDC the Merger Note in the principal amount of $35,000,000 that originally matured on September 30, 2024. The Merger Note does not bear interest and is not convertible prior to an event of default under the Merger Note. If an event of default should occur under the Merger Note, the Merger Note will bear interest at the rate of 7% per annum commencing upon the date of such event of default and will be convertible into shares of our common stock at a price per share that equals the lowest daily volume weighted average price per share (VWAP) during the five trading days immediately preceding the date on which the applicable conversion notice is delivered to us, but not less than 80% of the price per share in our Initial Capital Raise, provided, however, that the number of shares of our common stock issuable upon conversion of the Merger Note will not exceed 19.99% of the number of our outstanding shares of common stock without shareholder approval. 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.

Interest Expense

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

For the three months ended March 31, 2025 and 2024 total interest expense was $1,284,822 and $5,022,230, respectively. Total cash paid for interest for the three months ended March 31, 2025 and 2024 totaled $1,458,889 and $2,306,490, respectively, with the remaining portion of the interest expense as non-cash due to the PIK interest and change in values of the accrued interest liability and amortization of deferred financing costs.

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Assessment of Liquidity Position

The Company has assessed its liquidity position as of March 31, 2025 and December 31, 2024. As of March 31, 2025 and December 31, 2024, the total committed resources available were as follows:


	March 31, 2025		December 31, 2024
Cash and Cash Equivalents	$	1,466,012	$	678,676
Committed Liquidity Resources Available:
Short-term Revolving Credit Facility	127,537		(1,299,463)
Total Committed Resources Available	$	1,593,549	$	(620,787)

The Company has closed on a new ABL lender credit facility on April 29, 2025, replacing its obligations under the current Revolver, with an increased borrowing capacity of up to $70 million. The Company believes the borrowing capacity under this new credit facility and its cash flow from operations will provide sufficient liquidity and capital resources to conduct its planned operations for at least one year.

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

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Related Party Transactions

Transactions with Lyneer Management Holdings LLC (“LMH”)

LMH was 90% owned by Lyneer’s Chief Financial Officer, James Radvany, and its Chief Executive Officer, Todd McNulty, each of whom owns 44.5% of LMH. On February 28, 2024, LMH exercised its right to put its 10% ownership interest in the Company to IDC. On November 15, 2022, Lyneer and IDC as co-borrowers issued Year 1 Earnout Notes to LMH with total balances of November 15, 2022. On January 16, 2024, Lyneer and IDC as co-borrowers issued Year 2 Earnout Notes to LMH with total balances of $2,013,041. On the date of the Merger, the Company deconsolidated this debt. Refer to Note 8: Debt for additional information.

Interest expense incurred on the Earnout Notes to LMH totaled $0 and $173,737 for the three months ended March 31, 2025 and 2024, respectively.

Transactions with IDC

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

As a result of the Merger, the Company is required to file short-term income tax returns for the periods of January 1, 2024 to June 18, 2024 and June 19, 2024 to December 31, 2024. For the first short-period, Lyneer and IDC will file consolidated income tax returns in certain states. In connection with this arrangement the Company has recorded a liability payable to IDC for taxes payable by IDC which represent taxes attributable to the Company’s operations included on consolidated state and local income tax returns filed by IDC. These amounts are determined by determining the Company’s taxable income multiplied by the applicable tax rate. Amounts payable to IDC of this nature amounted to $548,432 as of both March 31, 2025 and December 31, 2024, respectively, and are included in “due to related parties” on the accompanying condensed consolidated balance sheets. For the second short-period ended December 31, 2024, Lyneer will file consolidated income tax returns with Atlantic International Corp.

Off Balance Sheet Arrangements

The Company has not entered into any off-balance sheet arrangements and does not have any holdings in variable interest entities.

Critical Accounting Policies and Estimates

The preparation of Atlantic’s consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accounts receivable, allowance for doubtful accounts, unbilled accounts receivable and intangible assets valuation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

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Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

The Company derives its revenues from two service lines: temporary placement services and permanent placement and other services. Revenues are recognized when promised goods or services are delivered to customers in an amount that reflects the consideration with which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606 — “Revenue From Contracts with Customers” (“ASC 606”), the Company performs the following five steps: (i) it identifies the contracts with a customer; (ii) it identifies the performance obligations in the contract; (iii) it determines the transaction price; (iv) it allocates the transaction price to the performance obligations in the contract; and (v) it recognizes revenue when (or as) the Company satisfies a performance obligation.

Temporary Placement Services Revenue

Temporary placement services revenue from contracts with customers are recognized in the amount which the Company has a right to invoice when the services are rendered by its engagement professionals. The Company invoices its customers for temporary placement services concurrently with each periodic payroll which coincides with the services provided. While all customers are invoiced weekly and payment terms vary, the majority of our customers have payments terms of 30 days; however, the Company may extend to 150 days from the invoice date. Customers are assessed for credit worthiness upfront through a credit review, which is considered in establishing credit terms for individual customers. Revenues that have been recognized but not invoiced for temporary staffing customers are included in “unbilled accounts receivable” on the accompanying consolidated balance sheets and represent a contract asset under ASC 606. Terms of collection vary based on the customer; however, payment generally is due within 30 days.

Most engagement professionals placed on assignment by the Company are legally our employees while they are working on assignments. The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security, and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers.

The Company records temporary placement services revenue on a gross basis as a principal, rather than on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because it (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and establish their price and duties, and (iii) bears the risk for services that are not fully paid for by customers.

Permanent Placement and Other Services Revenue

Permanent placement and other services revenue from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment and begin work for the Company’s customers. Certain of the Company’s permanent placement contracts contain a 30-day guarantee period. The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 30-day guarantee period. In the event that a candidate voluntarily leaves or is terminated for cause prior to the completion of 30 days of employment, we will provide a replacement candidate at no additional cost, as long as the placement fee is paid within 30 days of the candidate’s start date. When required, the Company defers the recognition of revenue until a replacement candidate is found and hired, and any associated collected amount is recorded as a contract liability. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement talent solutions services are charged to employment candidates, regardless of whether the candidate is placed.

Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheets.

Intangible Assets

The Company’s identifiable intangible assets as of March 31, 2025 and December 31, 2024 consisted of customer relationships and tradenames and were initially recognized as a result of the Transaction and represent definite lived intangible assets. The Company does not currently have any indefinite lived intangible assets. Intangible assets are amortized using the straight-line method over their estimated useful lives.

In accordance with the accounting standard for the impairment or disposal of long-lived assets under ASC 360, our long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable (i.e., information indicates that an impairment might exist).

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For long-lived assets to be held and used, the Company recognizes an impairment loss only if the carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value. For the three months ended March 31, 2025 and the year ended December 31, 2024 no impairments were recognized on our intangible assets.

Income Taxes

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on that assessment, our management has identified certain material weaknesses in our internal control over financial reporting.

Prior to the Merger, we were a private company and had limited accounting and financial reporting personnel with which to address our internal controls and related procedures. Our management concluded that as of March 31, 2025, our internal control over financial reporting was not effective, and that material weaknesses existed in the areas of accounting for complex financial transaction or non-routine transactions. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and by the Public Company Accounting Oversight Board (United States), such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We currently consult with third-party experts to overcome this weakness. Additionally, we had a material weakness related to segregation of duties in finance and accounting. Due to our limited accounting and financial reporting personnel, we have ineffective controls over the period end financial disclosure and reporting process.

We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate the material weaknesses and have plans to implement them in the first half of 2025. For example, we plan to design and implement improved processes and internal controls, including ongoing senior management review and Audit Committee oversight. Additionally, we plan to further develop and implement formal policies, processes and documentation procedures relating to our financial reporting, including the oversight of third-party service providers. Our actions are subject to ongoing executive management review and will also be subject to Audit Committee oversight.

Notwithstanding the material weaknesses in internal control over financial reporting described above, our management has concluded that our condensed unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be involved in various disputes and litigation matters that arise in the ordinary course of business. Atlantic is currently not a party to any material legal proceedings, except as follows.

Michael Smith v. Infinity Staffing Solutions, LLC, et. al., Case No. BC692644

Rosanna Vargas v. DHL Express (USA), Inc. et. al., Case No. L-4352-19

Enrique Briseno , et al. vs. Three Hands Corporation, et al., Case No. 21STCV00443, Superior Court of the State of California for the County of Los Angeles

Aguilar, et al v Lyneer Staffing Solutions, et al Docket No. MID-L-3595-21 (Middlesex County Superior Court NJ)

Mirna Reyes vs. Liquid Graphics, Inc., Lyneer Staffing Solutions, LLC, Liz Long, et. al, Case No 30-2021-01225386-CU-WT-CJC, Superior Court for the State of California, County of Orange

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Item 1a. Risk Factors

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from results expressed or implied in this Quarterly Report on Form 10-Q. These forward-looking statements include, but are not limited to, statements about:

•our expectations regarding the market size and growth potential for our business;

•our ability to refinance our outstanding indebtedness in a timely manner to avoid a future default;

•our ability to generate sustained revenue or achieve profitability;

•the pricing and expected gross margin for our services;

•the expected benefits and synergies of the Merger;

•the expected financial condition, results of operations, earnings outlook and prospects of our Company, Lyneer and the combined company, including any projections of sales, earnings, revenue, margins or other financial items;

•the ability of the new management team to execute our business plan;

•our’s and Lyneer’s business strategies and goals;

•any statements regarding the plans, strategies and objectives of management for future operations;

•any statements regarding future economic conditions or performance;

•all assumptions, expectations, predictions, intentions or beliefs about future events;

•changes in applicable laws, regulations or permits affecting our, Atlantic’s or Lyneer’s operations or the industries in which each appears;

•general economic and geopolitical conditions;

•our competitive position; and

•our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing as necessary.

The forward-looking statements contained in this Quarterly Report on Form 10-Q and the documents incorporated herein by reference are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2025, and under similar headings in the documents that are incorporated by reference herein. Moreover, we operate in a very competitive and rapidly changing environment.

New risks and uncertainties emerge from time to time, and it is not possible for us to predict all such risk factors, nor can we assess the effect of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

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The forward-looking statements made by us in this Quarterly Report on Form 10-Q and the documents incorporated herein by reference speak only as of the date of such statement. Except to the extent required under the federal securities laws and rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.

Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law, you are advised to consult any additional disclosures we make in the documents that we file with the SEC.

You should carefully consider the following risks in evaluating us and our business as well as the risks set forth in our Annual Report on Form 10-K filed with the SEC on March 28, 2025. You should also refer to the other information set forth in this report, including the information set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as in our consolidated financial statements and the related notes. Our business prospects, financial condition or results of operations could be adversely affected by any of the following risks.

Risks Related to Lyneer’s Business

While Lyneer’s historical financial statements report net losses primarily as a result of its accounting for its acquisition by IDC in August 2021 and in 2024 for transaction costs in connection with the Merger, there can be no assurance of profitability post-Merger.

Atlantic has reported a net loss of $10,744,185 for the three-month period ended March 31, 2025 and net losses of $135,479,890 and $15,252,020 for the years ended December 31, 2024 and 2023, respectively. The consolidated financial statements of Lyneer since August 31, 2021 reflect the post-acquisition activity of Lyneer since its acquisition by IDC. The loss for the three-months ended March 31, 2025, resulted primarily from: (i) selling, general and administrative costs of $19,399,479 due primarily to higher transaction costs related to the Merger and stock compensation expense. There can be no assurance that Lyneer will operate profitably in the future.

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

In addition to the Merger Note to IDC, in the principal amount of $35 million, issued at the closing of the Merger, Lyneer’s existing debt obligations currently include all of the debt obligations of IDC as a co-borrower as all of the loan arrangements entered into by Lyneer and IDC provide that such parties are jointly and severally liable for the full amount of the indebtedness. While Lyneer is legally jointly and severally liable for IDC’s debt obligations, as of the date of the Merger, the Company deconsolidated its joint and several debt obligations as it is reasonably probable that IDC has the ability to repay their portion. At March 31, 2025, such indebtedness totaled approximately $104,045,357. The joint indebtedness of Lyneer and IDC is made up of a revolving credit facility, which was refinanced on April 29, 2025, and a term loan from their senior lenders and promissory notes that are payable to the two prior owners of Lyneer. Until such obligations are either repaid in full or restructured by the lenders to release Lyneer as an obligor on such indebtedness, if IDC cannot, or does not, repay any portion of the debt owed by IDC, Lyneer could be responsible for repaying all of the outstanding obligations and Lyneer’s current operations are not expected to be sufficient to make all of the necessary payments. Pursuant to an Allocation Agreement dated as of December 31, 2023, IDC agreed with Lyneer to assume responsibility for all payments under the term loan and the promissory notes payable to the two prior owners of Lyneer (the “Assumed Debt”), and all but $28,739,104 that was outstanding under the revolving credit facility as of March 31, 2025. However, until such time as Lyneer’s joint and several debt obligations are restructured, the agreement of IDC to assume all but Lyneer’s $28,739,104 of the joint indebtedness is being given effect solely for accounting purposes, although Lyneer will remain a joint and several obligor on such indebtedness and will be obligated to pay such indebtedness if IDC does not do so.

In addition, under the Allocation Agreement, IDC and Prateek Gattani, IDC’s Chief Executive Officer and our then Chairman of the Board, have agreed for IDC to work with Lyneer to implement a plan to refinance or otherwise satisfy the Assumed Debt for which Lyneer is currently jointly and severally liable with IDC so that Lyneer will be obligated for only its portion under the facility. Lyneer has entered into a new revolving credit facility that will be supportable by Lyneer’s stand-alone borrowing base. The new credit facility provides credit availability to Lyneer of up to $70,000,000 and will replace Lyneer’s remaining obligations under the existing revolving credit facility. However, there can be no assurance that Lyneer will be able to support its continuing indebtedness, to generate

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revenues sufficient in amount to enable us to pay our indebtedness under the Merger Note, or to repay or refinance any such indebtedness when due. Lyneer’s failure to comply with its obligations under its existing indebtedness following the Merger, or to repay or refinance such indebtedness when due, including our indebtedness under the Merger Note, would likely have a material adverse impact on our financial condition and long-term viability.

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

As described in the previous risk factor, notwithstanding the deconsolidation of debt for accounting purposes, Lyneer remains legally jointly and severally liable as a co-borrower with IDC on all loan arrangements for which they are now jointly liable until such time as such loan arrangements are paid in full. The assets of Lyneer have been pledged to the new lender under the new ABL credit facility and, in connection with the closing of the Merger, were pledged to the lender under the term loan our equity interests in Lyneer, our sole operating subsidiary, as collateral for the repayment of such loan. In the event Lyneer or IDC is unable to repay their joint and several indebtedness, or there occurs any other event of default under the revolving credit facility or the term loan, including, but not limited to, completion of an Initial Capital Raise (as defined), the lenders under the revolving credit facility and the term loan will be able to foreclose upon the equity and assets of Lyneer, which could result in a loss of your investment. Notwithstanding the fact that IDC and Prateek Gattani have agreed to repay the joint and several indebtedness under the Allocation Agreement, IDC has been unable to repay such indebtedness and Lyneer may be required to make such payments. In such event, IDC would then be required to repay Lyneer for the amounts paid on IDC’s behalf. The failure of IDC to repay the joint and several indebtedness would be expected to have a material adverse impact on Lyneer’s financial condition and its long-term viability and the market price of our common stock and there is no guarantee that the lenders will continue to work with the Company amicably.

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

We believe our cash on hand and cash generated from operations, will not be sufficient to pay the Merger Note and our other outstanding indebtedness in full when due and to fund our ongoing operations. As stated above, Lyneer has been in default under its principal credit facilities and outstanding promissory notes and any future defaults by Lyneer under its credit facilities could have a material adverse impact on Lyneer’s financial condition and long-term viability. We will be required to seek financing to pay or refinance our other outstanding indebtedness.

We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. Our ability to obtain additional financing will be subject to market conditions, our operating performance and investor sentiment, among other factors. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing may contain terms that are not favorable to us or our stockholders. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of those securities could result in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline further and existing stockholders may not agree with our financing plans or the terms of such financings.

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

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

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

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

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

•redeem or repurchase its common stock or other equity;

•incur additional indebtedness;

•permit liens on assets;

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

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

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

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

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

Lyneer has one client that represented approximately 13% and 15% of Lyneer’s revenues for the three months ended March 31, 2025 and March 31, 2024, respectively. No other customer accounted for more than 10% of Lyneer’s revenues in either period. The client’s contract with Lyneer consists of a master service agreement (“MSA”) for temporary employee services with various customer locations entering into separate service annexes. None of the revenues from a specific location exceeded 5% of the aggregate revenue associated with the client. The current term of the MSA expires in January 2026 and automatically renews for one-year subsequent terms. However, the client may terminate the agreement for convenience at any time, subject to any accrued payment obligations. If this client were to terminate its relationship with Lyneer, Lyneer would face a material decrease in revenues if it is unable to replace the client’s lost revenues. This, in turn, would be expected to have a material adverse effect on Lyneer’s business and financial condition.

IDC, our principal stockholder, defaulted on the joint and several debt obligations of IDC and our Lyneer subsidiary which could result in a change of control of our company.

Our principal stockholder, IDC owned approximately 43% of our issued and outstanding common stock. In order to secure the current joint and several debt obligations of IDC and Lyneer until such time as such indebtedness can be restructured or repaid, we pledged to the lender under the Term Note our equity ownership of Lyneer and IDC pledged to such lender its equity ownership in our Company. The Lender under the original ABL Revolver foreclosed on IDC’s equity ownership of our Company. Any sales by the lender of IDC’s common stock of our Company, may have an adverse effect on the market price of our common stock resulting in a diminution in the value of disputes or other developments related to proprietary rights, including patents, litigation matters or our ability to obtain intellectual property protection for our technologies;

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

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.


Exhibit Number						Description
2.1						Amended and Restated Agreement and Plan of Reorganization dated as of June 4, 2024 (1)
2.2						Amendment No. 1 to Amended and Restated Agreement and Plan of Reorganization dated as of June 12, 2024 (2)
2.3						Certificate of Merger of Atlantic Merger LLC with and into Lyneer Investments LLC (3)
2.4						Certificate of Merger of SeqLL Merger LLC with and into Lyneer Investments LLC (3)
3.1						Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of SeqLL Inc. (2)
*31.1						Rule 13a-14(1) Certification of the Chief Executive Officer
*31.2						Rule 13a-14(1) Certification of the Chief Financial Officer
*32.1						Certification Pursuant to 18 U.S.C. Section 1350 by the Chief Executive Officer, as adopted pursuant to Section 9006 of the Sarbanes-Oxley Act of 2002.
*32.2						Certification Pursuant to 18 U.S.C. Section 1350 by the Chief Financial Officer, as adopted pursuant to Section 9006 of the Sarbanes-Oxley Act of 2002.
*101.INS						Inline XBRL Instance Document
*101.SCH						Inline XBRL Taxonomy Extension Schema Document
*101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
*104						Cover Page Interactive Date File - the cover page XBRL tags are embedded within the Inline XBRL document

*Filed with this Report.

**Schedules, exhibits and similar supporting attachments to this exhibit are omitted pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

(1)Incorporated by reference to the Issuer’s Current Report on Form 8-K filed with the SEC on June 6, 2024.

(2)Incorporated by reference to the Issuer’s Current Report on Form 8-K filed with the SEC on June 18, 2024.

(3)Incorporated by reference to the Issuer’s Current Report on Form 8-K filed with the SEC on June 25, 2024.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Atlantic International Corp.

Date:	May 14, 2025	By:	/s/ Christopher Broderick
			Christopher Broderick
			Chief Financial Officer