Filed Pursuant to Rule 424(b)(3)
Registration No. 333-193097

Prospectus Supplement No. 1
(to Prospectus dated April 8, 2014)

 

BG Staffing, Inc.

1,541,470 Shares

Common Stock

This Prospectus Supplement No. 1 updates, amends and supplements the information previously included in our prospectus dated April 8, 2014, which we refer to as our prospectus, relating to the offer for sale of an aggregate of 1,541,470 shares of common stock, par value $0.01 per share, of BG Staffing, Inc., which we refer to herein as our common stock, by the selling stockholders named therein.

This Prospectus Supplement No. 1 incorporates into our prospectus the information contained in our attached Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on April 30, 2014. Any exhibits contained in the Form 10-Q that have been deemed furnished and not filed in accordance with SEC rules or applicable law shall not be included in this Prospectus Supplement No. 1. This Prospectus Supplement No. 1 is also being filed to amend our prospectus to indicate that we have obtained DTC eligibility to permit our shares of common stock to be deposited through DTC.

This Prospectus Supplement No. 1 is not complete without, and may not be delivered or used except in connection with, our prospectus, including all amendments and supplements thereto.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements as further discussed in our prospectus. Investing in our common stock is highly speculative and involves a significant degree of risk. See “Risk Factors” beginning on page 5 of our prospectus for a discussion of information that should be considered before making a decision to purchase our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus Supplement No. 1 is April 30, 2014.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 30, 2014

or

¨ 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: 333-191683

BG STAFFING, INC. 

(exact name of registrant as specified in its charter)

Delaware	26-0656684
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5000 Legacy Drive, Suite 350

Plano, Texas 75024

(972) 692-2400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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   þ     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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   þ     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	þ	(Do not check if a smaller reporting company)	Smaller reporting company	¨

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

The number of shares outstanding of the registrant’s common stock as of April 30, 2014 was 5,598,847.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated Financial Statements	5
	Unaudited Consolidated Balance Sheets as of March 30, 2014 and December 29, 2013	5
	Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended March 30, 2014 and March 31, 2013	6
	Unaudited Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 30, 2014 and March 31, 2013	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II	OTHER INFORMATION	34
Item 6.	Exhibits	35

2

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”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including, but not limited to, statements regarding:

· future financial performance and growth targets or expectations;

· market and industry trends and developments; and

· the benefits of our completed and future merger, acquisition and disposition transactions.

You can identify these and other forward-looking statements by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target” and similar expressions, and variations or negatives of these words.

These forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and our current expectations, forecasts and assumptions and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include:

· the availability of workers’ compensation insurance coverage at commercially reasonable terms;

· the availability of qualified temporary personnel;

· compliance with federal and state labor and employment laws and regulations and changes in such laws and regulations;

· the ability to compete with new competitors and competitors with superior marketing and financial resources;

· management team changes;

· the favorable resolution of current or future litigation;

· the ability to begin to generate sufficient revenue to produce net profits;

· the impact of outstanding indebtedness on the ability to fund operations or obtain additional financing;

· the ability to leverage the benefits of recent acquisitions and successfully integrate newly acquired operations;

· adverse changes in the economic conditions of the industries, countries or markets that we serve;

· disturbances in world financial, credit, and stock markets;

· unanticipated changes in national and international regulations affecting the company’s business;

· a decline in consumer confidence and discretionary spending;

3

· the general performance of the U.S. and global economies;

· economic disruptions resulting from the European debt crisis;

· and continued or escalated conflict in the Middle East; and

· other risks referenced from time to time in our past and future filings with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended December 29, 2013, and in this Quarterly Report on Form 10-Q.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we do not undertake any obligation to update or release any revisions to these forward-looking statements to reflect any events or circumstances, whether as a result of new information, future events, changes in assumptions or otherwise, after the date hereof.

Where You Can Find Other Information

Our website is www.bgstaffinggroup.com. Information contained on our website is not part of this Quarterly Report on Form 10-Q. Information that we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. These reports and other information, including exhibits filed or furnished therewith, are also available at the SEC’s website at www.sec.gov. You may also obtain and copy any document we file with or furnish to the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330. You may request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549.

4

PART I—FINANCIAL INFORMATION

Item  1. Financial Statements.

BG Staffing, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	March 30,		December 29,
	2014		2013
	(unaudited)
Current assets
Accounts receivable (net of allowance for doubtful accounts of $450,250 and $439,886 at 2014 and 2013, respectively)	$	21,610,162	$	23,347,449
Prepaid expenses		1,319,809		1,465,741
Other current assets		438,820		436,796
Total current assets		23,368,791		25,249,986
Property and equipment, net		529,325		523,360
Other assets
Deposits		1,458,148		1,193,608
Deferred financing charges		617,404		362,960
Deferred income taxes		7,671,198		7,255,164
Intangible assets, net		16,874,700		18,183,807
Goodwill		5,863,483		5,853,616
Total other assets		32,484,933		32,849,155
Total assets	$	56,383,049	$	58,622,501
Current liabilities
Long-term debt, current portion	$	2,250,000	$	2,378,333
Accrued interest		193,379		72,711
Accrued interest – related party		-		550,655
Accounts payable		1,646,858		1,933,214
Accrued expenses		7,682,635		7,122,875
Accrued payroll		1,390,085		1,002,301
Accrued workers’ compensation		1,076,106		1,142,486
Contingent consideration		1,350,769		1,946,848
Other current liabilities		673,165		560,750
Accrued taxes		128,108		148,759
Total current liabilities		16,391,105		16,858,932
Line of credit		13,200,000		13,000,000
Long-term debt, less current portion		16,625,000		2,378,333
Long-term debt – related party		-		14,628,099
Other long-term liabilities		2,776,437		3,654,463
Total liabilities		48,992,542		50,519,827
Commitments and Contingencies
Preferred stock, $0.01 par value per share, 500,000 shares authorized, -0- shares issued and outstanding		-		-
Common stock, $0.01 par value per share, 19,500,000 shares authorized, 5,598,847 and 5,598,847 shares issued and outstanding for 2014 and 2013, respectively		54,396		54,396
Additional paid in capital		1,884,753		1,066,820
Retained earnings		5,451,358		6,981,458
Total stockholders’ equity		7,390,507		8,102,674
Total liabilities and stockholders’ equity	$	56,383,049	$	58,622,501

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

5

BG Staffing, Inc. and Subsidiaries

 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Thirteen Week Periods ended March 30, 2014 and March 31, 2013

	Thirteen Weeks Ended
	March 30, 2014			March 31, 2013
Revenues	$	39,037,655		$	24,780,587
Cost of services		31,326,025			19,912,285
Gross profit		7,711,630			4,868,302
Selling, general and administrative expenses		6,505,739			3,709,061
Depreciation and amortization		1,348,855			1,054,005
Operating income (loss)		(142,964	)		105,236
Loss on extinguishment of related party debt		(986,835	)		-
Interest expense, net		(583,482	)		(330,822	)
Interest expense, net – related party		(213,322	)		(333,461	)
Change in fair value of put option		12,922			-
Loss before income taxes		(1,913,681	)		(559,047	)
Income tax benefit (expense)		383,581			(7,591	)
Net loss	$	(1,530,100	)	$	(566,638	)
Net loss per share:
Basic	$	(0.27	)	$	-
Diluted	$	(0.27	)	$	-
Shares:
Basic		5,598,847			-
Dilutive effect		-			-
Diluted		5,598,847			-
Pro forma C corporation data:
Income (loss) before taxes	$	-		$	(559,047	)
Pro forma income tax expense (benefit)		-			196,561
Pro forma income (loss)	$	-		$	(362,486	)
Pro forma income (loss) per share:
Basic	$	-		$	(0.07	)
Diluted	$	-		$	(0.07	)

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

6

BG Staffing, Inc. and Subsidiaries

 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Thirteen Week Periods ended March 30, 2014 and March 31, 2013

	2014			2013
Cash flows from operating activities
Net loss	$	(1,530,100	)	$	(566,638	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,348,855			1,054,005
Loss on extinguishment of related party debt		986,835			-
Amortization of deferred financing costs		52,508			36,537
Amortization of debt discounts		55,660			-
Interest expense on earn out payable		77,467			-
Put option adjustment		(12,922	)		-
Provision for doubtful accounts		16,341			-
Stock-based compensation, net of deferred tax benefit		690,733			-
Deferred income taxes		(189,860	)		(3,458	)
Net changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		1,115,000			(1,586,947	)
Prepaid expenses		2,688			21,161
Other current assets		(7,089	)		(65,136	)
Deposits		(264,540	)		8,250
Accrued interest		120,668			7,160
Accrued interest – related party		(303,543	)		139,582
Accounts payable		(286,356	)		587,415
Accrued expenses		559,759			(94,676	)
Accrued payroll		387,784			133,975
Accrued workers’ compensation		(66,380	)		(122,835	)
Contingent consideration		-			109,941
Other current liabilities		112,415			102,982
Accrued taxes		(20,651	)		(2,211	)
Net cash provided by (used in) operating activities		2,845,272			(240,893	)
Cash flows from investing activities
Capital expenditures		(45,713	)		(53,189	)
Net cash used in investing activities		(45,713	)		(53,189	)
Cash flows from financing activities
Net borrowings (payments) under line of credit		(1,221,471	)		2,300,000
Principal payments on long-term debt		(573,194	)		(973,911	)
Payments on other long-term liabilities		(500,000	)		-
Contingent consideration paid		(453,356	)		(1,029,214	)
Other		(6,746	)		-
Deferred financing costs		(44,792	)		(2,793	)
Net cash provided by (used in) financing activities		(2,799,559	)		294,082
Net change in cash		-			-
Cash, beginning of period		-			-
Cash, end of period	$	-		$	-
Supplemental cash flow information:
Cash paid for interest	$	929,300		$	349,448
Cash paid for taxes, net of refunds		48,040			-
Non-cash transactions:
Prepaid offering costs	$	87,163		$	-
Contingent consideration paid through relief of accounts receivable		596,079			-

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

7

BG Staffing, Inc. and Subsidiaries

 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS

BG Staffing, Inc. (formerly LTN Staffing, LLC, a Delaware limited liability company whose sole member was LTN Acquisition, LLC (“Parent”)), is a provider of temporary staffing services that primarily operates, through its wholly-owned subsidiaries BG Staffing, LLC, B G Staff Services Inc., BG Personnel Services, LP and BG Personnel, LP (collectively, the Company), within the United States of America in three industry segments: Light Industrial, Multi-family, and IT Staffing.

In connection with the Company’s filing with the Securities and Exchange Commission (the “SEC”), the Company reorganized. The reorganization was completed with a merger of the Parent with and into the Company, with the Company continuing as the surviving entity. Immediately following this merger, the Company converted to a C corporation for federal income tax purposes. The Company converted to a C corporation on November 3, 2013. All unit, share, and per share amounts shown in these Consolidated Financial Statements reflect the affect of the conversion as of the earliest date shown.

The Light Industrial segment provides temporary workers primarily to distributions and logistics costumers needing a flexible workforce in Illinois, Wisconsin, Texas, Tennessee, and Mississippi. The Company completed an acquisition on May 28, 2013, that expanded its Light Industrial operations into Texas, Mississippi, and Tennessee.

The Multifamily segment provides front office and maintenance personnel on a temporary basis to various apartment communities, in Texas and other states, via property management companies responsible for the apartment communities day to day operations.

The IT Staffing segment provides skilled contract labor on a nationwide basis for IT implementation and maintenance projects.

The accompanying unaudited consolidated financial statements for the thirteen week periods ended March 30, 2014 and March 31, 2013, have been prepared by the Company in accordance with generally accepted accounting principles in the United States, pursuant to the applicable rules and regulations of the SEC. The information furnished herein reflects all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to present a fair statement of the financial position and operating results of the Company as of and for the respective periods. However, these operating results are not necessarily indicative of the results expected for a full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. However, management of the Company believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading. The Company has determined that there were no subsequent events that would require disclosure or adjustments to the accompanying consolidated financial statements through the date the financial statements were issued. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited Consolidated Financial Statements of the Company for the fiscal year ended December 29, 2013, included in its annual report on Form 10-K.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation. 

8

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Fiscal Year

The Company has a 52/53 week fiscal year. Fiscal periods for the consolidated financial statements included herein are as of March 30, 2014 and December 29, 2013, and include the thirteen weeks ended March 30, 2014 and March 31, 2013.

Reclassifications

Certain reclassifications have been made to the 2013 financial statements to conform with the 2014 presentation.

Accounts Receivable

The Company extends credit to its customers in the normal course of business. Accounts receivable represent unpaid balances due from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from customers’ non-payment of balances due to the Company. The Company’s determination of the allowance for uncollectible amounts is based on management’s judgments and assumptions, including general economic conditions, portfolio composition, prior loss experience, evaluation of credit risk related to certain individual customers and the Company’s ongoing examination process. Receivables are written off after they are deemed to be uncollectible after all means of collection have been exhausted. Recoveries of receivables previously written off are recorded when received.

Deferred Financing Charges

Deferred financing charges are amortized on a straight-line basis, which approximates the effective interest method, over the term of the respective loans payable. During the thirteen weeks ended March 30, 2014 and March 31, 2013, the Company recognized $52,508 and $36,537 of amortization expense as a component of interest expense related to deferred financing charges, respectively. At March 30, 2014 and December 29, 2013, there were $617,404 and $362,960 of unamortized deferred financing charges, respectively.

Property and Equipment

The Company’s policy is to depreciate the cost of property and equipment over the estimated useful lives of the assets using the straight-line method. The cost of leasehold improvements is amortized over their useful lives, or the applicable lease term, if shorter.

	Years
Leasehold improvements	1-5
Furniture and fixtures	5-7
Computer systems	5
Vehicles	5

Intangible Assets

The Company does not hold any intangible assets with indefinite lives, with the exception of the InStaff Holding Corporation (“InStaff”) trade name for $1,648,000. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, based on a pattern in which the economic benefit of the respective intangible asset is realized, as shown in the following table:

	Years
Customer lists	5
Trade names	5
Covenant not to compete	3-5

9

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Identifiable intangible assets recognized in conjunction with acquisitions are recorded at fair value. Significant unobservable inputs were used to determine the fair value of the identifiable intangible assets based on the income approach valuation model whereby the present worth and anticipated future benefits of the identifiable intangible assets were discounted back to their net present value. Goodwill represents the difference between the enterprise value/cash paid less the fair value of all recognized asset fair values including the identifiable intangible asset values.

The Company evaluates the recoverability of intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. The Company determined that there were no impairment indicators for these assets in 2014 and 2013.

The Company annually evaluates the remaining useful lives of the above intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Goodwill

Goodwill is not amortized, but instead is measured at the reporting unit level for impairment annually at the end of each fiscal year, or more frequently if conditions indicate an earlier review is necessary. If the Company has determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value, the Company may use a qualitative assessment for the annual impairment test.

In conducting the qualitative assessment, the Company assesses the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. Such events and circumstances may include macroeconomic conditions, industry and competitive environment conditions, overall financial performance, reporting unit specific events and market considerations. The Company may also consider recent valuations of the reporting unit, including the magnitude of the difference between the most recent fair value estimate and the carrying value, as well as both positive and adverse events and circumstances, and the extent to which each of the events and circumstances identified may affect the comparison of a reporting unit’s fair value with its carrying value.

For reporting units where the qualitative assessment is not used, goodwill is tested for impairment using a two-step process. In the first step, the estimated fair value of a reporting unit is compared to its carrying value. The fair value of the reporting unit is determined based on discounted cash flow projections. If the estimated fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is not considered impaired and no further testing is required.

If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, a second step of the impairment test is performed in order to determine the implied fair value of a reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, goodwill is deemed impaired and is written down to its implied fair value.

Based on our annual testing, the Company has determined that there was no goodwill impairment in Fiscal 2013. As of March 30, 2014, the Company has allocated $4,483,937, $1,073,755, and $305,791 of total goodwill to our three separate reporting units: Light Industrial, Multifamily and IT Staffing, respectively. There were no events or changes in circumstances during the thirteen weeks ended March 30, 2014 that caused the Company to perform on interim impairment assessment.

Revenue Recognition

The Company provides temporary staffing solutions. The Company and its clients enter into agreements that outline the general terms and conditions of the staffing arrangement. Revenue is recognized as services are performed and associated costs have been incurred. Revenues include reimbursements of travel and out-of-pocket expenses with the equivalent amounts of expense recorded in cost of services. The Company considers revenue to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectibility is reasonably assured.

10

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Income Taxes

Until November 3, 2013, the Company was treated as a partnership for federal income tax purposes except for BG Personnel Services, LP and B G Staff Services Inc., which are taxed as C corporations. Consequently, federal and state income taxes were not payable, or provided for, by the Company, except for those BG entities that were taxed as C corporations. Accordingly, the financial statements reflect the impact of income taxes for the taxable BG entities. Members were taxed individually on their share of the Company’s earnings, not earned in the C corporations, which were allocated among the members in accordance with the operating agreement of the Parent.

In connection with the Company’s reorganization (see Note 1), as of November 2013, the Company is treated as a C corporation for federal income tax purposes. Income taxes are accounted for under the asset and liability method. 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 bases and operating loss and tax credit carry forwards. 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 the period that includes the enactment date.

The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. Management evaluates all positive and negative evidence and uses judgment regarding past and future event, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized. When appropriate, a valuation allowance is recorded against deferred tax assets to off set future tax benefits that may not be realized. There was no valuation allowance recorded as of March 30, 2014 or December 29, 2013.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements was the largest benefit that had a greater than 50 percent likelihood of being realized upon settlement with the relevant tax authority. The Company assessed all tax positions for which the statute of limitations remain open. The Company had no unrecognized tax benefits as of March 30, 2014 or March 31, 2013. The Company is open to examination by tax authorities for federal, state or local income taxes for periods beginning after 2010. The Company recognizes any penalties and interest when necessary as tax expense. There were no penalties or interest recorded in the thirteen weeks ended March 30, 2014 and March 31, 2013.

Stock Based Compensation

The Parent had issued profits interests in the form of Class B Units of the Parent (“Units”) to employees and directors. Compensation expense arising from the Units granted to the Company’s employees by the Parent was recognized as expense using the straight-line method over the vesting period, which represents the requisite service period. The fair value of the Units was based on the fair value of the underlying unit. These Units were converted to common stock as part of the Company’s conversion to a C corporation.

On December 20, 2013, the board of directors adopted the 2013 Long-term Incentive Plan (the “2013 Plan”). Under the plan various employees, directors and consultants may receive incentive stock options. A total of 900,000 shares of our common stock are reserved for issuance pursuant to our 2013 Plan. The Company determines the fair value of options to purchase common stock using the Black-Scholes valuation model. The Company recognizes compensation expense in selling, general and administrative expenses over the service period for options that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates.

11

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Management Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.

Fair Value Measurements

The estimated fair value of accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short period to maturity of these instruments. The estimated fair value of all debt at March 30, 2014 and December 29, 2013 approximated the carrying value as the debt bears market rates of interest. These fair values were estimated based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available. The estimates are not necessarily indicative of the amounts that would be realized in a current market exchange.

Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities.  Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs.

In connection with the InStaff acquisition on May 28, 2013, the Company granted a put option liability which is carried at fair market value in other long-term liabilities on the consolidated balance sheets. The fair value of the put option was $1,299,684 and $1,312,606 at March 30, 2014 and December 29, 2013, respectively. The put option liability is revalued at each balance sheet date at the greater of an adjusted EBITDA method or the fair market value. Changes in fair value are recorded as non-cash, non-operating income in the Company’s consolidated statements of operations. The liability is classified within Level 3 as the lack of an active market during 2013 impairs the calculation of fair market value as an unobservable input used to value the put option. There were no changes in fair value during Fiscal 2013. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during first fiscal quarter of 2014.

The fair value is reviewed on a quarterly basis based on most recent financial performance of the most recent fiscal quarter. An analysis is performed at the end of each fiscal quarter to compare actual results to forecasted financial performance. If performance has deviated from projected levels, the valuation is updated for the latest information available. For the thirteen weeks ended March 30, 2014, the Company recognized $12,922 of expense related to the change in fair value of the put option liability.

12

BG Staffing, Inc. and Subsidiaries

 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Earnings per Share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. For the thirteen weeks ended March 30, 2014, the Company had 524,967 common stock equivalents that were antidilutive. As a result, these shares were excluded from the calculation of diluted loss per share.

Pro Forma Loss Per Share

In connection with the Company’s reorganization in fiscal 2013 (see Note 1), the pro forma loss per share has been calculated as if the Company were a C corporation for federal income tax purposes. Pro forma loss per share was calculated using the weighted average number of shares outstanding. The weighted average shares outstanding used in the calculation of pro forma diluted loss per share includes the dilutive effect of options to purchase common shares using the treasury stock method. The calculation of pro forma loss per share was calculated as follows for the thirteen weeks ended March 31, 2013:

Loss before taxes	$	(559,047	)
Pro forma income tax expense		196,561
Pro forma net loss	$	(362,486	)
Shares:
Basic weighted average shares		5,442,220
Dilutive effect of potential common shares		-
Diluted weighted average shares		5,442,220
Pro forma basic loss per share	$	(0.07	)
Pro forma diluted loss per share	$	(0.07	)

For the thirteen weeks ended March 31, 2013, giving effect to the reorganization and conversion to C corporation status as if they had occurred on the first day of fiscal 2013, the Company had 545,100 common stock equivalents that were antidilutive. As a result, the assumed shares under the treasury stock method have been excluded from the calculation of diluted loss per share.

NOTE 3 - ACQUISITIONS

On May 28, 2013, the Company acquired substantially all of the assets of InStaff for cash consideration of $9,000,000 and contingent consideration of $1,000,000 based on the performance of InStaff for the two years following the date of acquisition. The fair value of the contingent consideration at the acquisition date was $800,000 based on a discounted cash flow analysis. The purchase agreement contains a provision for a “true up” of acquired working capital 120 days after the closing date. If actual working capital is greater than the target working capital, the Company will pay additional consideration in the amount of the difference. If actual working capital is less than target working capital, InStaff will pay the Company the amount of the difference. On November 29, 2013, the Company paid approximately $436,000 for the working capital adjustment. The Company incurred costs of approximately $420,000 related to the acquisition. These costs were expensed as incurred in selling, general and administrative expenses.

The consolidated statements of operations include the operating results of InStaff from the date of acquisition. InStaff operations contributed approximately $12.1 million of revenue for the thirteen week period ended March 30, 2014. The assets acquired from InStaff were assigned to the Light Industrial segment. The acquisition of InStaff allows the Company to strengthen and expand its operations in the Light Industrial segment. The preliminary purchase price has been allocated to the assets acquired and liabilities assumed as of the date of acquisition as follows:

13

BG Staffing, Inc. and Subsidiaries

 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Accounts receivable	$	4,437,896
Property and equipment		136,993
Prepaid expenses and other current assets		790,715
Deposits and other assets		909,756
Intangible assets		4,729,000
Goodwill		1,035,032
Liabilities assumed		(1,802,864	)
Total net assets acquired	$	10,236,528
Cash	$	9,436,528
Fair value of contingent consideration		800,000
Total fair value of consideration transferred for acquired business	$	10,236,528

The preliminary allocation of the intangible assets is as follows:

	Estimated Fair Value		Estimated  Useful Lives
Covenants not to compete	$	483,000	5 years
Trade name	$	1,648,000	Indefinite
Customer list	$	2,598,000	5 years
Total	$	4,729,000

The Company does not believe that the final purchase price allocation will be materially different than its preliminary allocations.

The Company estimates that the revenues and net loss for thirteen weeks ended March 31, 2013 that would have been reported if the acquisition of InStaff had taken place on the first day of Fiscal 2013 would be as follows (dollars in thousands):

Revenues	$	37,454
Net loss	$	(457	)
Loss per share:
Basic	$	(0.08	)
Diluted	$	(0.08	)

14

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Note 4 - Intangible Assets

Finite and indefinite lived intangible assets as of March 30, 2014 and December 29, 2013 consist of the following:

	2014
					Net
			Accumulated		Carrying
	Gross Value		Amortization		Value
Finite lives:
Customer lists	$	25,786,810	$	13,919,009	$	11,867,801
Trade names		3,970,000		1,366,267		2,603,733
Covenant not to compete		1,073,000		317,834		755,166
		30,829,810		15,603,110		15,226,700
Indefinite lives:
Trade names		1,648,000		-		1,648,000
Total	$	32,477,810	$	15,603,110	$	16,874,700

	2013
					Net
			Accumulated		Carrying
	Gross Value		Amortization		Value
Finite lives:
Customer lists	$	25,786,810	$	12,862,053	$	12,924,757
Trade names		3,970,000		1,167,767		2,802,233
Covenant not to compete		1,073,000		264,183		808,817
		30,829,810		14,294,003		16,535,807
Indefinite lives:
Trade names		1,648,000		-		1,648,000
Total	$	32,477,810	$	14,294,003	$	18,183,807

Estimated future amortization expense for the next five years is as follows:

Fiscal Year Ending:
2014	$	3,679,965
2015		4,720,815
2016		4,265,398
2017		2,450,271
2018		110,251
Thereafter		-
	$	15,226,700

15

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Total amortization expense for the thirteen weeks ended March 30, 2014 and March 31, 2013 was $1,309,107 and $1,030,775, respectively.

NOTE 5 - ACCRUED EXPENSES

Accrued expenses as of March 30, 2014 and December 29, 2013 consist of the following:

	2014		2013
Subcontractor payable	$	3,427,105	$	2,367,131
Accrued bonuses and commissions		585,229		696,207
Payroll taxes		1,951,672		2,947,134
Other		1,718,629		1,112,403
	$	7,682,635	$	7,122,875

Note 6 - Debt

The Company has a senior credit facility effective May 24, 2010, as amended. On January 29, 2014, the Company entered into an amendment with its lenders under the senior credit facility. The amendment increased the revolving line of credit (“Revolver”) from $12.0 million to $20.0 million, the term loan facility (“Term Loan A”) from $7.1 million to $11.3 million and added $8.0 million of subordinated debt (“Term Loan B”). Borrowings under the senior credit facility and Term Loan A were partially used to repay the senior subordinated indebtedness and $1.0 million was recorded as a loss on extinguishment of related party debt in first quarter of 2014.

As of March 30, 2014 and December 29, 2013, $13.2 million and $13.0 million were outstanding on the Revolver, respectively. Borrowings under the Revolver are subject to a borrowing base, bear interest at the 30-day LIBOR plus a margin that ranges from 3.00% to 3.75% (3.5% at March 30, 2014), and are secured by all assets of the Company. On April 28, 2014, the Company executed the first amendment to the senior credit facility that temporarily increased from 80% to 85% of receivables and other minor documentation modifications. The additional receivables increased the available borrowings under the Revolver from $2.3 million to $3.7 million at March 30, 2014. The Revolver matures on January 29, 2018.

At December 29, 2013, the Company had senior subordinated loans (“Subordinated Loans”) with two private lenders. The holders of these Subordinated Loans also hold equity interests of the Company, and therefore, are related parties. The Subordinated Loans required an annual mandatory prepayment of principal to be made if specific thresholds were met. The Company made such a mandatory prepayment of approximately $0.5 million in the first quarter of 2013. As noted above, the full amount of the Subordinated Loans was repaid on January 29, 2014 through additional borrowings on the senior credit facility.

16

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Long-term debt consists of the following:

	March 30, 2014			December 29, 2013
Term Loan A, payable to a bank in monthly installments of principal and interest with a maturity date of January 29, 2018 is secured by all assets of the Company. Interest is paid on a monthly basis at an annual interest rate of LIBOR plus a margin of 3.75% to 4.5%, determined by certain thresholds (4.25% at March 30, 2014).	$	10,875,000		$	4,756,666
Subordinated Loans, payable to private parties that accrued interest monthly at an annual rate of 14%, of which 12% is paid quarterly in cash and 2% is paid in kind. The Subordinated Loans were paid in full on January 29, 2014.		-			14,628,099
Term Loan B, payable to a bank with principal due in a one lump-sum payment along with a compounding deferred fee of 1.5% per annum. Interest is paid monthly at an annual rate of 11%.		8,000,000			-
Total long-term debt		18,875,000			19,384,765
Less current portion		(2,250,000	)		(2,378,333	)
Long-term debt non-current portion	$	16,625,000		$	17,006,432

For all of its borrowings, the Company must comply with a minimum debt service financial covenant and a senior funded indebtedness to EBITDA covenant, as defined. As of March 30, 2014, the Company was in compliance with these covenants.

Maturities on the Revolver and long-term debt obligations as of March 30, 2014, are as follows:

Fiscal Year Ending:
2014	$	1,687,500
2015		2,250,000
2016		3,281,250
2017		3,375,000
2018		21,481,250
Thereafter		-
	$	32,075,000

17

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

NOTE 7 – EQUITY

Following the Company’s conversion to a C corporation (see Note 1), authorized capital stock consists of 19,500,000 shares of common stock, par value $0.01 per share and 500,000 shares of undesignated preferred stock, par value $0.01 per share.

On December 19, 2013, the subordinated debt holders exercised their warrants to purchase 179,205 shares for a total of $200. As of March 30, 2014 and December 29, 2013, the Company has 5,598,847 shares of common stock outstanding and no shares of preferred stock outstanding.

Prior to the Company’s conversion to a C corporation, the Company was 100% owned by its Parent, who was the sole member. On December 3, 2012, the Parent issued 133,024 Class A Units, valued at $3.75 per unit, or $500,000, in conjunction with the Company’s acquisition of API. This issuance of units was recorded as a noncash contribution from the Parent. Additionally, on December 3, 2012, the Parent completed a private offering and issued 1,200,000 Class A Units at $3.75 per unit, or $4,500,000. The Parent contributed the net proceeds of $4,084,943 to the Company to fund, in part, the cash portion of the purchase price paid in connection with the Company’s acquisition of API.

NOTE 8 – STOCK-BASED COMPENSATION

Stock Options

For the thirteen weeks ended March 30, 2014 and March 31, 2013, the Company recognized $833,204 and $-0- of compensation cost related to stock awards, respectively. Unamortized stock compensation expense as of March 30, 2014 amounted to $761,382 which is expected to be recognized over the next 3.9 years.

The following assumptions were used to estimate the fair value of share options granted for the thirteen weeks ended:

	March 30, 2014			March 31, 2013
Weighted average fair value of options	$	2.82		$	-
Weighted average risk-free interest rate		1.0	%		-	%
Dividend yield		-	%		-	%
Weighted average volatility factor		49.0	%		-	%
Weighted average expected life		5.6	yrs		-	yrs

A summary of stock option activity is presented as follows:

	Number of Shares
Options outstanding at December 29, 2013		-
Granted		566,363
Options outstanding at March 30, 2014		566,363
Options exercisable at March 30, 2014		300,763
Weighted average exercise price at March 30, 2014	$	6.48

18

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

Warrant Activity

For the thirteen weeks ended March 30, 2014 and March 31, 2013, the Company recognized $78,638 and $-0- of compensation cost related to warrants, respectively.

The following assumptions were used to estimate the fair value of warrants for the thirteen weeks ended:

	March 30, 2014			March 31, 2013
Weighted average fair value of warrants	$	1.89		$	-
Weighted average risk-free interest rate		0.1	%		-	%
Dividend yield		-	%		-	%
Weighted average volatility factor		49.0	%		-	%
Weighted average expected life		2.8	yrs		-	yrs

A summary of warrant activity is presented as follows:

	Number of Shares
Warrants outstanding at December 29, 2013		182,632
Granted		41,573
Warrants outstanding at March 30, 2014		224,205
Warrants exercisable at March 30, 2014		224,205
Weighted average exercise price at March 30, 2014	$	7.08

Effective December 15, 2008, the Parent adopted an ownership incentive plan (the “Plan”). The Plan permits the issuance of the Units of the Parent to the officers, directors, employees, consultants and advisors of the Company. The Company determined that the Units had no value at the date of the grant, and therefore, the Company did not recognize compensation expense for Units granted during the thirteen weeks ended March 31, 2013. No Units were outstanding or unvested under the Plan as of December 29, 2013.

19

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

NOTE 9 - RELATED PARTY TRANSACTIONS

Through ownership of the Parent, the Company is affiliated with multiple investors. Two of these investors are private lenders that also hold the Subordinated Loans of $14,628,099 at December 29, 2013 (see Note 6), which were repaid on January 29, 2014 and $986,835 was recorded as a loss on extinguishment of related party debt. Interest payments totaling $471,990 and $193,879 were made to these investors during the thirteen week periods ended March 30, 2014 and March 31, 2013, respectively. Accrued interest of $-0- and $550,655 was due to these investors as of March 30, 2014 and December 29, 2013, respectively.

Until November 3, 2013, the Company was under a Management Services Agreement with a firm associated with one of the investors. The Company paid $-0- and $43,750 in management fees during the thirteen week periods March 30, 2014 and March 31, 2013, respectively.

Note 10 - Concentration of credit risk

Concentration of credit risk is limited due to the Company’s diverse customer base. No single customer accounted for more than 10% of the Company’s revenue or accounts receivable for the thirteen weeks ended March 30, 2014 and March 31, 2013.

NOTE 11 - CONTINGENCIES

The Company is engaged from time to time in legal matters and proceedings arising out of its normal course of business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of the loss can be made. While uncertainties are inherent in the final outcome of such matters, the Company believes that there are no pending proceedings in which the Company is currently involved that will have a material effect on its financial position, results of operations or cash flow.

NOTE 12- EMPLOYEE BENEFIT PLAN

The Company provides a defined contribution plan (the “401(k) Plan”) for the benefit of its eligible full-time employees. The 401(k) Plan allows employees to make contributions subject to applicable statutory limitations. The Company matches employee contributions 100% up to the first 3% and 50% of the next 2% of an employee’s compensation. The Company contributed $56,273 and $36,204 to the 401(k) Plan in the thirteen week periods ended March 30, 2014 and March 31, 2013, respectively.

NOTE 13 - BUSINESS SEGMENTS

The Company operates within three industry segments: Light Industrial, Multi-family and IT Staffing. The Light Industrial segment provides temporary workers primarily to distribution and logistics customers needing a flexible workforce in Illinois, Wisconsin, Texas, Tennessee, and Mississippi. The Multi-family segment provides front office and maintenance personnel on a temporary basis to various apartment communities, in Texas and other states, via property management companies responsible for the apartment communities day to day operations. The IT Staffing segment provides skilled contract labor on a nationwide basis for IT implementations and maintenance projects. The Company provides services to customers primarily within the United States of America.

Segment profit (loss) includes all revenue and cost of services, direct selling expenses, depreciation and amortization expense, and income tax benefit (expense) and excludes all general and administrative (corporate) expenses. Assets of corporate include cash, unallocated prepaid expenses, deferred tax assets, and other assets.

20

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 2014

(Unaudited)

	Thirteen Weeks Ended
	March 30, 2014			March 31, 2013
Revenue:
Light Industrial	$	18,554,930		$	8,261,827
Multifamily		6,309,819			4,120,334
IT Staffing		14,172,906			12,398,426
Total	$	39,037,655		$	24,780,587
Net Income (Loss):
Light Industrial	$	1,284,558		$	15,291
Multifamily		563,731			468,559
IT Staffing		379,711			239,455
Corporate		(2,961,296	)		(625,660	)
Interest expense, net		(796,804	)		(664,283	)
Total	$	(1,530,100	)	$	(566,638	)
Depreciation:
Light Industrial	$	17,628		$	11,891
Multifamily		5,766			3,877
IT Staffing		3,841			1,268
Corporate		12,513			6,194
Total	$	39,748		$	23,230
Amortization:
Light Industrial	$	303,198		$	16,650
Multifamily		37,708			46,041
IT Staffing		968,201			968,084
Corporate		-			-
Total	$	1,309,107		$	1,030,775
Capital Expenditures:
Light Industrial	$	9,203		$	-
Multifamily		4,423			11,868
IT Staffing		-			18,851
Corporate		32,087			22,470
Total	$	45,713		$	53,189

21

BG Staffing, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 30, 214

(Unaudited)

	March 30, 2014		December 29, 2013
Total Assets:
Light Industrial	$	19,301,117	$	7,539,630
Multi-family		5,785,418		4,276,257
IT Staffing		22,761,427		25,485,605
Corporate		8,535,086		429,188
Total	$	56,383,049	$	37,730,680

NOTE 14 – PRO FORMA C CORPORATION DATA

In connection with the Company’s filing with the SEC, the Company reorganized. The reorganization was completed with a merger of the Parent with and into the Company, with the Company continuing as the surviving entity. Immediately following this merger, the Company converted to a C corporation for federal income tax purposes. Upon conversion, the Company established a net current deferred tax assets of $431,032 and net long-term deferred tax assets of $7,045,837. The pro forma C corporation data for the thirteen weeks ended March 31, 2013, are based on the historical consolidated statements of operations and give effect to pro forma taxes as if the Company were a C corporation for the entire duration of the period presented. 

22

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our accompanying Unaudited Consolidated Financial Statements and related notes thereto. Comparative segment revenues and related financial information are discussed herein and are presented in Note 13 to our Unaudited Consolidated Financial Statements. See “Forward Looking Statements” on page 4 of this report and “Risk Factors” included in our filings with the SEC, including in our Annual Report on Form 10-K for the fiscal year ended December 29, 2013, for a description of important factors that could cause actual results to differ from expected results.

Basis of Presentation

We operate under a 52/53 week fiscal year. Our last three completed fiscal years ended on December 25, 2011 (“Fiscal 2011”), December 30, 2012 (“Fiscal 2012”) and December 29, 2013 (“Fiscal 2013”). Fiscal 2011 consist of 52 weeks, Fiscal 2012 consist of 53 weeks and Fiscal 2013 consists of 52 weeks. The differing length of certain fiscal years may affect the comparability of certain data. For example, in Fiscal 2012, the additional week increased revenues by $1.3 million and costs by approximately $1.2 million with an immaterial effect on the operating income and net loss.

Overview

We are a provider of temporary staffing services and have completed a series of acquisitions, which includes BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc. in May 2010, JNA Staffing, Inc. in December 2010, Extrinsic, LLC in November 2011, American Partners, Inc. (“API”) in December 2012 and InStaff in May 2013. We operate within three industry segments: Light Industrial, Multifamily and IT Staffing. We provide services to customers primarily within the United States of America.

The Light Industrial segment provides temporary workers primarily to distribution and logistics customers needing a flexible workforce in Illinois, Wisconsin, Texas, Tennessee and Mississippi. The Company completed an acquisition on May 28, 2013, that expended its Light Industrial operations into Texas, Mississippi, and Tennessee.

The Multifamily segment provides front office and maintenance personnel on a temporary basis to various apartment communities, in Texas and other states, via property management companies responsible for the apartment communities day to day operations.

The IT Staffing segment provides skilled contract labor on a nationwide basis for IT implementations and maintenance projects.

Results of Operations

The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of net sales, and have been derived from our consolidated financial statements.

	Thirteen Weeks Ended
	March 30,  2014			March 31,  2013
	(dollars in thousands)
Revenues	$	39,038		$	24,781
Cost of services		31,326			19,913
Gross profit		7,712			4,868
Selling, general and administrative expenses		6,506			3,709
Depreciation and amortization		1,349			1,054
Operating income (loss)		(143	)		105
Loss on extinguishment of related party debt		987			-
Interest expense, net		797			664
Change in fair value of put option		(13	)		-
Loss before income taxes		(1,914	)		(559	)
Income tax benefit (expense)		384			(8	)
Net loss	$	(1,530	)	$	(567	)
Revenues		100.0	%		100.0	%
Cost of services		80.2			80.4
Gross profit		19.8			19.6
Selling, general and administrative expenses		16.7			15.0
Depreciation and amortization		3.5			4.2
Operating income (loss)		(0.4	)		0.4
Loss on extinguishment of related party debt		2.5			-
Interest expense, net		2.0			2.7
Change in fair value of put option		-			-
Loss before income taxes		(4.9	)		(2.3	)
Income tax benefit (expense)		1.0			-
Net loss		(3.9	)%		(2.3	)%

23

Thirteen Week Fiscal Period Ended March 30, 2014 (Fiscal Quarter 2014) Compared to Thirteen Week Fiscal Period Ended March 31, 2013 (Fiscal Quarter 2013)

Revenues:

	Thirteen Weeks Ended
	March 30, 2014		March 31, 2013
	(dollars in thousands)
Revenues by segment:
Light Industrial	$	18,555	$	8,262
Mutlifamily		6,310		4,120
IT Staffing		14,173		12,399
Total Revenues	$	39,038	$	24,781

Light Industrial Revenues : Light Industrial revenues have increased $10.3 million (124.6%) from $8.3 million in Fiscal Quarter 2013 to $18.6 million in Fiscal Quarter 2014, mainly due to the additional volume acquired in the May 2013 acquisition of InStaff, which accounted for substantially all of the increase in Light Industrial revenue.

Multifamily Revenues : Multifamily revenues increased $2.2 million (53.2%) from $4.1 million in Fiscal Quarter 2013 to $6.3 million in Fiscal Quarter 2014, due to an increase in bill rates, as well as an increase in volume. Revenue from branches outside of Texas accounted for $1.4 million of the increase and revenue from branches in Texas increased approximately $0.8 million.

IT Staffing Revenues : IT Staffing revenues increased $1.8 million (14.3%) from $12.4 million in Fiscal Quarter 2013 to $14.2 million in Fiscal Quarter 2014, primarily due to organic growth. Fiscal Quarter 2013 revenues from the API acquisition accounted for $1.2 million of the increase and revenues from the Extrinsic acquisition accounted for $0.6 million, which was acquired in late 2011.

Gross Profit:

Gross profit represents revenues from services less cost of services expenses, which consist of payroll, payroll taxes, payroll-related insurance, subcontractor costs, and reimbursable costs.

	Thirteen Weeks Ended
	March 30, 2014		March 31, 2013
	(dollars in thousands)
Gross Profit by segment:
Light Industrial	$	2,527	$	735
Mutlifamily		2,046		1,356
IT Staffing		3,139		2,777
Total Gross Profit	$	7,712	$	4,868

24

	Thirteen Weeks Ended
	March 30, 2014			March 31, 2013
Gross Profit Percentage by segment:
Light Industrial		13.6	%		8.9	%
Mutlifamily		32.4	%		32.9	%
IT Staffing		22.1	%		22.4	%
Company Gross Profit Percentage		19.8	%		19.6	%

Overall, our gross profit has increased $2.8 million (58.4%) from $4.9 million in Fiscal Quarter 2013 to $7.7 million in Fiscal Quarter 2014, mainly due to increased revenues. As a percentage of revenue, gross profit has increased from Fiscal Quarter 2013 to Fiscal Quarter 2014 mainly due to the acquisition of InStaff in May 2013 which has higher gross margins than our existing Light Industrial business. Light Industrial, which has the lowest gross profit percentages, contributed approximately 8.9% of the gross profit in Fiscal Quarter 2013 and approximately 13.6% of the gross profit in Fiscal Quarter 2014. Increased gross profit in Light Industrial was partially offset by decreased gross profit in Multifamily, which has the highest gross profit percentages. Multifamily contributed approximately 32.9% of the gross profit in Fiscal Quarter 2013 and approximately 32.4% of the gross profit in Fiscal Quarter 2014. Finally, IT Staffing contributed approximately 22.4% of the gross profit in Fiscal Quarter 2013 and approximately 22.1% of the gross profit in Fiscal Quarter 2014.

Light Industrial Gross Profit: Light Industrial gross profit increased $1.8 million (243.8%) from $0.7 million in Fiscal Quarter 2013 to $2.5 million in Fiscal Quarter 2014, mainly due to the additional volume acquired in the May 2013 acquisition of InStaff. As a percentage of revenue, gross profit increased from 8.9% in Fiscal Quarter 2013 to 13.6% in Fiscal Quarter 2014.

Multifamily Gross Profit: Multifamily gross profit increased $0.7 million (50.9%) from $1.4 million in Fiscal Quarter 2013 to $2.1 million in Fiscal Quarter 2014, mainly due to an increase in volume primarily generated by the opening of new branches. As a percentage of revenue, gross profit decreased from 32.9% in Fiscal Quarter 2013 to 32.4% in Fiscal Quarter 2014.

IT Staffing Gross Profit: IT Staffing gross profit increased $0.3 million (13.0%) from $2.8 million in Fiscal Quarter 2013 to $3.1 million in Fiscal Quarter 2014 due to the mix of customers. As a percentage of revenue, gross profit decreased from 22.4% in Fiscal Quarter 2013 to 22.1% in Fiscal Quarter 2014, mainly due to operations of the Extrinsic acquisition.

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Selling, General and Administrative Expenses: Selling, general and administrative expenses increased $2.8 million (75.4%) to $6.5 million in Fiscal Quarter 2014 from $3.7 million in Fiscal Quarter 2013, primarily due to $1.1 million at corporate, which includes $0.8 million in stock-based compensation and $0.2 million in costs related to being a public reporting company, $0.8 million at Light Industrial, which includes $0.6 million from the acquisition of InStaff in May 2013, $0.6 million at Multifamily mainly from branches outside of Texas, and $0.3 million at IT Staffing mainly from organic growth.

Depreciation and Amortization: Depreciation and amortization charges increased $0.3 million (28.0%) to $1.3 million during Fiscal Quarter 2014, compared to $1.0 million during Fiscal Quarter 2013. The increase in depreciation and amortization is primarily due to Light Industrial segment intangible assets acquired in the acquisitions of InStaff in May 2013.

Interest Expense, net: Interest expense, net was $0.8 million during Fiscal Quarter 2014 compared to $0.7 million during Fiscal Quarter 2013, an increase of $0.1 million. The increase in interest expense, net is primarily due to increase in average debt balance from Fiscal Quarter 2013 to Fiscal Quarter 2014.

Income Taxes: We had an income tax benefit of $0.4 million in Fiscal Quarter 2014, compared to income tax expense of $-0- million in Fiscal Quarter 2013. The decrease in income taxes is primarily due to the $1.9 million net loss during Fiscal Quarter 2014. Prior to our reorganization into a Delaware corporation, which occurred on November 3, 2013, we were treated as a partnership for federal income tax purposes except for two subsidiaries, which were and are taxed as C corporations.

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Use of Non-GAAP Financial Measures

We present Adjusted EBITDA (defined below), a measure that is not in accordance with generally accepted accounting principles (non-GAAP), in this Quarterly Report to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under generally accepted accounting principles (GAAP) can provide alone. Our board and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for company management. In addition, the financial covenants in our senior credit facility are based on Adjusted EBITDA, subject to dollar limitations on certain adjustments.

We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, loss on early extinguishment of debt, board fees, transaction fees related to our acquisitions, and other non-cash expenses such as the put option adjustment and stock compensation expense. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of property and intangible assets. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net income (loss) for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

The use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net income (loss). Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from continuing operating activities. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; and (iv) it does not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness.

To properly and prudently evaluate our business, we encourage you to review our unaudited consolidated financial statements included elsewhere in this report and the reconciliation to Adjusted EBITDA from net loss, the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net loss to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect on-going operating performance.

	Thirteen Weeks Ended
	March 30, 2014			March 31, 2013
	(dollars in thousands)
Net loss	$	(1,530	)	$	(567	)
Interest expense, net		797			664
Income tax expense (benefit)		(384	)		8
Depreciation and amortization		1,349			1,054
Loss on extinguishment of related party debt		987			-
Stock-based compensation		912			-
Board fees		6			44
Transaction fees		-			182
Put option adjustment		(13	)		-
Adjusted EBITDA	$	2,124		$	1,385

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Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and borrowings under our senior credit facility. Our primary uses of cash are payroll, subcontractor costs, operating expenses, capital expenditures and debt service. We believe that the cash generated from operations, together with the borrowing availability under our senior credit facility, will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new branches throughout the next year. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to obtain additional debt or equity capital or refinance all or a portion of our debt.

On April 28, 2014, we executed the first amendment to the senior credit facility that temporarily increased our borrowing availability from $2.3 million to $3.7 million at March 30, 2014, and we are in compliance with all debt covenants.

While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional growth opportunities within the next year that could require additional debt or equity financing. If we are unable to secure additional financing at favorable terms in order to pursue such additional growth opportunities, our ability to pursue such opportunities could be materially adversely affected.

A summary of our operating, investing and financing activities are shown in the following table:

	Thirteen Weeks Ended
	March 30, 2014			March 31, 2013
	(dollars in thousands)
Net cash provided by (used in) operating activities	$	2,845		$	(241	)
Net cash used in investing activities		(46	)		(53	)
Net cash provided by (used in) financing activities		(2,799	)		294
Net change in cash and cash equivalents	$	-		$	-

Operating Activities

Cash provided by (used in) operating activities consists of net loss adjusted for non-cash items, including depreciation and amortization, stock compensation expense, changes in deferred income taxes, and the effect of working capital changes. The primary drivers of cash inflows and outflows are accounts receivable, accounts payable and accrued expenses.

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During the thirteen week period ended March 30, 2014, net cash provided by operating activities was $2.8 million, compared to cash used in operating activities of $0.2 million for the corresponding period in 2013. This increase is mainly due to the increased volume of operations due to the acquisition of InStaff.

Investing Activities

Cash used in investing activities consists primarily of cash paid for businesses acquired and capital expenditures.

In the thirteen week period ended March 30, 2014, we made capital expenditures of $0.1 million mainly related computer equipment purchased in the ordinary course of business. In the thirteen week period ended March 31, 2013, we made capital expenditures of approximately $0.1 million mainly related to furniture upgrades at API. We plan to spend approximately $0.1 to $0.2 million on capital expenditures, not including any acquisition costs, during the current fiscal year.

Financing Activities

Cash flows from financing activities consisted principally of borrowings and payments under our senior credit facility, and contributions from LTN Acquisition, LLC. We currently do not intend to pay cash dividends on our common stock.

	Thirteen Weeks Ended
	March 30, 2014			March 31, 2013
	(dollars in thousands)
Principal payments on long-term debt	$	(573	)	$	(974	)
Payment on other long-term obligations		(500	)		-
Contingent consideration paid		(453	)		(1,029	)
Net borrowings (payments) under line of credit		(1,221	)		2,300
Other		(7	)		-
Deferred financing costs		(45	)		(3	)
Net cash provided by (used in) financing activities	$	(2,799	)	$	294

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For the thirteen weeks ended March 30, 2014, we decreased our revolving line of credit by $1.2 million, decreased our long-term debt and other long-term liabilities by $1.1 million using excess cash flows from operations and we paid $0.4 million of contingent consideration related to the December 2012 acquisition of API.

For the thirteen weeks ended March 31, 2013, we increased our borrowings on our revolving line of credit by $2.3 million. This was mainly done to cover the timing between cash receipts from customers and payments to contractors, we paid $1.0 million of contingent consideration related to the November 2011 acquisition of Extrinsie and we paid the $0.5 million mandatory prepayment of principal to our subordinated debtholders, as determined by an excess cash flow calculation, as defined, performed annually.

Senior Credit Facility

On January 29, 2014, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Fifth Third Bank. The Loan Agreement amended and restated that certain Loan and Security Agreement, dated as of May 24, 2010, as amended (the “Prior Loan Agreement”), which had until January 29, 2014 governed our senior credit facility.

The Loan Agreement governs our senior credit facility (which now matures on January 29, 2018), which permits the Company to borrow funds from time to time in an aggregate amount equal to the lesser of the borrowing base and the revolving loan commitment of $20.0 million. The borrowing base is adjusted on a monthly basis and is based on our accounts receivables. On April 28, 2014, we executed the first amendment to the Loan Agreement that temporarily increased from 80% to 85% of receivables and other minor documentation modifications. The Loan Agreement further provides for a term loan of approximately $11.3 million (“Term Loan A”) and a term loan of $8.0 million (“Term Loan B”), each of which matures on January 29, 2018. Our obligations under the Loan Agreement are secured by a continuing and unconditional first priority security interest in all of our tangible and intangible property.

Our senior credit facility and Term Loan A bear interest at the LIBOR Rate plus the Applicable Margin (as those terms are defined in the Loan Agreement). Accrued and unpaid interest on borrowings under our senior credit facility and Term Loan A are due and payable monthly in arrears and, with respect to Term Loan A, principal payments are required monthly and upon the occurrence of certain events. Term Loan B bears interest at a fixed rate of 11.0% per annum. Accrued and unpaid interest on borrowings under the Term Loan B are due and payable monthly in arrears, a compounding deferred fee of 1.5% per annum is due in a lump-sum payment, and principal payments are required upon the occurrence of certain events. Borrowings under our senior credit facility and Term Loan A were partially used to prepay the senior subordinated indebtedness of the Company (as described below under “Subordinated Loans”).

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At closing, we paid commitment fees of $100,000 (with respect to the senior credit facility and Term Loan A) and $160,000 (with respect to Term Loan B). We must pay an unused commitment fee of 0.25% of the difference between the Revolving Loan Commitment (i.e., $20.0 million) and the average daily balance of the senior credit facility for each month, payable in arrears, and a Compounding Deferred Fee (as defined in the Loan Agreement) on the earlier of the date Term Loan B matures or is paid in full.

The Loan Agreement contains negative covenants that, among other things, restricts our ability to, with certain exceptions, (i) incur indebtedness, (ii) grant liens, (iii) make investments, (iv) dispose of assets, (v) enter into mergers, consolidations or similar transactions, (vi) issue securities, (vii) pay dividends or make distributions, (viii) enter into transactions with affiliates or (ix) change the nature of the business.

In addition, the Loan Agreement requires us to satisfy certain financial covenants, specifically: (i) we may not permit the Debt Service Coverage Ratio (as defined in the Loan Agreement) for the four fiscal quarter period ending in March 2014 and for the four fiscal quarter period ending in each fiscal quarter thereafter to be less than 1.20 to 1.00; (ii) as of the end of each fiscal quarter for the four fiscal quarter period then ending, we may not permit the Total Funded Indebtedness to Adjusted EBITDA Ratio (as such term is defined in the Loan Agreement) to be greater than 3.50 to 1.00 for the four fiscal quarters ended in March 2014, 3.25 to 1.00 for the four fiscal quarters ended in June 2014, 3.25 to 1.00 for the four fiscal quarters ended in September 2014, 3.00 to 1.00 for the four fiscal quarters ended in December 2014, 3.00 to 1.00 for the four fiscal quarters ended in March 2015, and 2.50 to 1.00 for the four fiscal quarters ended in June 2015 and each fiscal quarter thereafter; (iii) we must have, as of the end of each fiscal quarter for the four fiscal quarters then ending, consolidated Adjusted EBITDA (as defined in the Loan Agreement) of least $9.5 million; and (iv) we may not incur capital expenditures in excess of $500,000 in the aggregate in any fiscal year).

We are permitted to prepay in part or in full amounts due under our senior credit facility and may prepay the Term A Loan and Term B Loan without penalty provided certain conditions are met. Events of default include, among other things, late payment or non-payment, breach of representations, breach of affirmative or negative covenants (including financial covenants), defaults on other indebtedness, default of a Borrower with respect to a material purchase or lease of goods or services where the default might reasonably be expected to have a Material Adverse Effect (as defined in the Loan Agreement), bankruptcy or insolvency, certain judgments, a Change of Control (as defined in the Loan Agreement) and impairment of collateral. If an event of default occurs, the interest rate applicable to our senior credit facility and Term Loan A will increase by 2% per annum, and the interest rate applicable to Term Loan B will increase by 2% per annum or to the default interest rate applicable to our senior credit facility and Term Loan A, whichever is higher.

Subordinated Loans

We had approximately $14.6 million of outstanding subordinated loans at December 29, 2013. The subordinated notes were prepaid on January 29, 2014 through the use of proceeds obtained pursuant to the Loan Agreement with Fifth Third (discussed above). The subordinated notes were expressly junior and subordinated only to the debt outstanding under the senior credit facility. Interest on the subordinated notes accrued at a rate of 14.0% per annum (of which 12% was cash and 2% was paid in kind). Accrued interest on the subordinated loans was approximately $0.6 million as of December 29, 2013. The subordinated loans required, effective December 30, 2012, that an excess cash flow payment to be made if specific thresholds were met. A mandatory principal payment of approximately $0.5 million was made in the first quarter of 2013. The subordinated loans were to mature on May 31, 2015. The former holders of the subordinated loans currently hold shares of our common stock, and therefore are related parties.

For all of our borrowings, we must comply with various financial covenants. As of March 30, 2014, we were in compliance with these covenants.

The foregoing is a summary of the material terms with respect to our senior credit facility and subordinated loans, and is qualified in its entirety by reference to the actual text of the agreements applicable to our senior credit facility and the subordinated loans.

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Off-Balance Sheet Arrangements

We are not party to any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our accounting policies are described in Note 2 to the audited Consolidated Financial Statements of the Company for the fiscal year ended December 29, 2013, included in its annual report on Form 10-K. The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates, assumptions and judgments that affect amounts of assets and liabilities reported in the consolidated financial statements, the disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the year. We believe our estimates and assumptions are reasonable; however, future results could differ from those estimates. Critical accounting policies reflect material judgment and uncertainty and may result in materially different results using different assumptions or conditions.

Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results and the uncertainties that could impact our results of operations, financial condition and cash flows.

Revenue Recognition

We provide temporary staffing solutions. We enter into agreements with our clients that outline the general terms and conditions of the staffing arrangement. Revenue is recognized as services are performed and associated costs have been incurred. Revenues include reimbursements of travel and out-of-pocket expenses with the equivalent amounts of expense recorded in cost of services. We consider revenue to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectibility is reasonably assured.

Allowance for doubtful accounts

We establish an allowance for doubtful accounts for estimated losses resulting from the failure of our customers to make required payments. The allowance for doubtful accounts is determined based on management’s judgments and assumptions, including general economic conditions, portfolio composition, prior loss experience, and expectations of future write-offs. The allowance for doubtful accounts is reviewed quarterly and past due balances are written off after they are deemed to be uncollectible after all means of collection have been exhausted. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

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Goodwill and intangible assets

Goodwill is not amortized, but instead is measured at the reporting unit level for impairment annually at the end of each fiscal year, or more frequently if conditions indicate an earlier review is necessary. If the Company has determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value, the Company may use a qualitative assessment for annual impairment test.

In conducting the qualitative assessment, the Company assess the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. Such events and circumstances may include macroeconomic conditions, industry and competitive environment conditions, overall financial performance, reporting unit specific events and market considerations. The Company may also consider recent valuations of the reporting unit, including the magnitude of the difference between the most recent fair value estimate and the carrying value, as well as both positive and adverse events and circumstances, and the extent to which each of the events and circumstances identified may affect the comparison of a reporting unit’s fair value with its carrying value.

For reporting units where the qualitative assessment is not used, goodwill is tested for impairment using a two-step process. In the first step, the estimated fair value of a reporting unit is compared to its carrying value. The fair value of the reporting unit is determined based on discounted cash flow projections. If the estimated fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is not considered impaired and no further testing is required.

If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, a second step of the impairment test is performed in order to determine the implied fair value of a reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, goodwill is deemed impaired and is written down to its implied fair value.

Based on our annual testing, the Company has determined that there was no goodwill impairment in Fiscal 2013. As of December 29, 2013, the Company has allocated $4.5 million, $1.1 million, and $0.3 million of total goodwill to our three separate reporting units: Light Industrial, Multifamily and IT Staffing, respectively.  There were no events or changes in circumstances during the thirteen weeks ended March 30, 2014 that caused the Company to perform an interim impairment assessment.

The Company does not hold any intangible assets with indefinite lives, with the exception of the InStaff trade name. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to five years, based on a pattern in which the economic benefit of the respective intangible asset is realized. The Company annually evaluates the remaining useful lives of our finite intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. The Company also evaluates the recoverability of intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. The Company determined that there were no impairment indicators for these assets in 2014 and 2013.

Identifiable intangible assets recognized in conjunction with acquisitions are recorded at fair value. Significant unobservable inputs were used to determine the fair value of the identifiable intangible assets based on the income approach valuation model whereby the present worth and anticipated future benefits of the identifiable intangible assets were discounted back to their net present value. Goodwill represents the difference between the enterprise value/cash paid less the fair value of all recognized asset fair values including the identifiable intangible asset values.

JOBS Act

The JOBS Act provides that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay the adoption of new or revised accounting pronouncements applicable to public and private companies until such pronouncements become mandatory for private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public and private companies.

Additionally, as an “emerging growth company,” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 or (ii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risks relate primarily to changes in interest rates. Borrowings under our existing senior credit facility bear floating interest rates that are tied to LIBOR and, therefore, our results of operations and our cash flows will be exposed to changes in interest rates. A one percentage point increase in LIBOR would cause an annual increase to the interest expense on our borrowings under our senior credit facility of approximately $0.9 million.

We do not have any foreign currency or any other derivative financial instruments.

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Item  4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures are effective, at a reasonable assurance level, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

For the quarter ended March 30, 2014, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

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Item 6. Exhibits.

The following exhibits are filed or furnished with this Quarterly Report on Form 10-Q.

Exhibit Number	Description
3.1	Certificate of Incorporation of BG Staffing, Inc. (incorporated by reference from Amendment No. 2 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed November 4, 2013)
3.2	Bylaws of BG Staffing, Inc. (incorporated by reference from Amendment No. 2 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed November 4, 2013)
4.1	Form of Common Stock Certificate (incorporated by reference to Amendment No. 1 to the registrant’s registration statement on Form S-1 (File No. 333-191683) filed October 28, 2013)
10.1+	Form of Nonqualified Stock Option Agreement (Vested Options) (incorporated by reference from the registrant’s Form 8-K filed on February 12, 2014)
10.2+	Form of Incentive Stock Option Agreement (incorporated by reference from the registrant’s Form 8-K filed on February 12, 2014)
10.3+	Form of Nonqualified Stock Option Agreement (incorporated by reference from the registrant’s Form 8-K filed on February 12, 2014)
10.4+	Form of Indemnification Agreement for Directors and Executive Officers (incorporated by reference from the registrant’s Form 8-K filed on February 4, 2014)
10.5	Amended and Restated Loan and Security Agreement, dated as of January 29, 2014, by and among BG Staffing, Inc., BG Staffing, LLC, BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc., and Fifth Third Bank (incorporated by reference from the registrant’s Form 8-K filed on February 4, 2014)
10.6*	First Amendment to Amended and Restated Loan and Security Agreement, dated as of April 28, 2014, by and among BG Staffing, Inc., BG Staffing, LLC, BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc., and Fifth Third Bank
10.7	Second Amendment to Amended and Restated Securities Purchase Agreement and Other Documents, dated as of January 29, 2014, by and among BG Staffing, Inc., BG Staffing, LLC, BG Personnel Services, LP, BG Personnel, LP, and B G Staff Services Inc., and Legg Mason SBIC Mezzanine, L.P., Brookside Pecks Capital Partners, L.P. and Brookside Mezzanine Fund II, L.P. (incorporated by reference from the registrant’s Form 8-K filed on February 4, 2014)
31.1*	Certification of Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

**	Furnished herewith.
+	Management contract or compensatory plan or arrangement.
†	This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

35

SIGNATURES

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

	BG STAFFING, INC.
		/s/ L. Allen Baker, Jr.
	Name:	L. Allen Baker, Jr.
	Title:	President and Chief Executive Officer
		/s/ Michael A. Rutledge
	Name:	Michael A. Rutledge
	Title:	Chief Financial Officer and Secretary
		(Principal Financial Officer)
Date: April 30, 2014

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FIRST AMENDMENT TO AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

AND OTHER LOAN DOCUMENTS

This FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS (this “Amendment”) is made as of the 28th day of April, 2014, by and among BG STAFFING, INC., a Delaware corporation, f/k/a LTN Staffing, LLC, a Delaware limited liability company (“BG Staffing, Inc.”), BG STAFFING, LLC, a Delaware limited liability company (“BG Staffing, LLC”), BG PERSONNEL SERVICES, LP, a Texas limited partnership (“BG Personnel Services”), BG PERSONNEL, LP, a Texas limited partnership (“BG Personnel”), and B G STAFF SERVICES INC., a Texas corporation (“B G Staff Services”, and together with BG Staffing, Inc., BG Staffing, LLC, BG Personnel Services and BG Personnel, collectively, “Borrowers” and each a “Borrower”), and FIFTH THIRD BANK, an Ohio banking corporation, successor by merger with Fifth Third Bank, a Michigan banking corporation (“Lender”).

W I T N E S S E T H:

WHEREAS, Borrowers and Lender are parties to that certain Amended and Restated Loan and Security Agreement dated as of January 29, 2014 (as amended, restated, modified or supplemented and in effect from time to time, the “Loan Agreement”); and

WHEREAS, Borrowers have requested that Lender amend the Loan Agreement and the other Loan Documents in certain respects, and Lender is agreeable to such request, on and subject to the terms and conditions set forth herein.

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used herein which are defined in the Loan Agreement and not otherwise defined herein are used with the meanings given such terms in the Loan Agreement.

2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:

(a) by amending and restating the following definitions in Section 1.1 in their respective entireties to read as follows:

“Borrowing Base Amount” shall mean:

(a) (i) for the period from March 30, 2014 through and including August 31, 2014, an amount equal to eighty-five percent (85%) of the net amount (after deduction of such reserves and allowances as Lender deems proper and necessary, including an accrual for sales rebates) of all Eligible Accounts, and (ii) on September 1, 2014 and thereafter, an amount equal to eighty percent (80%) of the net amount (after deduction of such reserves and allowances as Lender deems proper and necessary, including an accrual for sales rebates) of all Eligible Accounts; plus

(b) an amount equal to the lesser of (i) (A) for the period from March 30, 2014 through and including August 31, 2014, an amount equal to eighty-five percent (85%) of the net amount (after deduction of such reserves and allowances as Lender deems proper and necessary) of all Eligible Unbilled Accounts, and (B) on September 1, 2014 and thereafter, an amount equal to eighty percent (80%) of the net amount (after deduction of such reserves and allowances as Lender deems proper and necessary) of all Eligible Unbilled Accounts, and (ii) One Million and No/100 Dollars ($1,000,000.00).

“Debt Service Coverage Ratio” shall mean the ratio of (a) consolidated EBITDA plus (i) all Earn Out Payments made by any Borrower for such period to the extent treated as an expense, plus (ii) all management fees due to Taglich Brothers, Inc. and its affiliates which Borrowers have accrued but not paid and all director fees due by BG Staffing, Inc. to its directors which Borrowers have accrued but not paid, less (iii) all distributions and dividends made to the members, shareholders or partners of Borrowers (other than distributions and/or dividends to other Borrowers), less (iv) federal and state income taxes paid by Borrowers for such period, less (v) capital expenditures (other than capital expenditures financed with the proceeds of purchase money indebtedness or capital leases to the extent permitted under this Agreement), to (b) consolidated Debt Service.

“EBITDA” shall mean for any period, the consolidated net income of Borrowers, determined in accordance with GAAP consistently applied, plus (i) Interest Expense for such period, plus (ii) federal and state income taxes of Borrowers for such period, plus (iii) all depreciation and amortization of capitalized costs for such period, plus (iv) actual closing costs in an amount not to exceed $400,000 incurred by Borrowers in connection with closing the API Purchase Transaction, provided that such closing costs are verified by Lender and consented to by Lender in its sole discretion, plus (v) actual closing costs in an amount not to exceed $400,000 incurred by Borrowers in connection with closing the InStaff Purchase Transaction, provided that such closing costs are verified by Lender and consented to by Lender in its sole discretion, plus (vi) actual closing costs in an amount not to exceed $250,000 incurred by Borrowers in connection with the conversion of BG Staffing, Inc. from a limited liability company to a corporation and related transactions, provided that such closing costs are verified by Lender and consented to by Lender in its sole discretion, plus (vii) all other non-cash items. Notwithstanding the foregoing, however, for purposes of testing the Debt Service Coverage Ratio financial covenant pursuant to Section 10.1 of this Agreement, the Total Funded Indebtedness to Adjusted EBITDA Ratio financial covenant pursuant to Section 10.2 of this Agreement and the Adjusted EBITDA financial covenant pursuant to Section 10.3 of this Agreement, the following shall be permitted to be added back to EBITDA for the relevant calculation periods: (A) pre-transaction InStaff EBITDA in the amount of $60,413 for the month of January 2013, $117,224 for the month of February 2013, $336,562 for the month of March 2013, $206,803 for the month of April 2013, and $204,664 for the month of May 2013, and (B) the non-cash portion of loss on extinguishment of Debt not to exceed $960,000 for the month of February 2014.

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3. Amendment to the Other Loan Documents. The other Loan Documents are hereby amended to the extent necessary to be consistent with the foregoing amendments to the Loan Agreement.

4. Reaffirmation and Confirmation of Security Interests. Each Borrower hereby confirms to Lender that such Borrower has granted to Lender a security interest in or Lien upon substantially all of the property of such Borrower, including, without limitation, the Collateral, to secure the Obligations. Each Borrower hereby reaffirms its grant of such security interest and Lien to Lender for such purpose in all respects.

In addition to the foregoing:

(a) BG Staffing, Inc. hereby confirms to Lender that BG Staffing, Inc. has granted to Lender a security interest in or Lien upon the Pledged Collateral (as defined in that certain Membership Interests Security Agreement dated as of May 24, 2010 by and between BG Staffing, Inc. and Lender (as amended, restated, modified or supplemented and in effect from time to time, the “Membership Interests Security Agreement”)), to secure the Liabilities (as defined in the Membership Interests Security Agreement), under and pursuant to the Membership Interests Security Agreement. BG Staffing, Inc. hereby expressly agrees that the Lien on the Pledged Collateral shall secure all of the Liabilities (as defined in the Membership Interests Security Agreement), including, without limitation, the Loans, and hereby reaffirms its grant of such security interest and Lien to Lender for such purpose in all respects. BG Staffing, Inc. hereby further expressly agrees that upon consummation of the Subject Transactions, the Lien on such Pledged Collateral shall continue to secure all of the Liabilities, including, without limitation, the Loans.

(b) BG Staffing, Inc. hereby confirms to Lender that BG Staffing, Inc. has granted to Lender a security interest in or Lien upon the Pledged Collateral (as defined in that certain Partnership Interests Security Agreement dated as of May 24, 2010 by and between BG Staffing, Inc. and Lender (as amended, restated, modified or supplemented and in effect from time to time, the “Partnership Interests Security Agreement”)), to secure the Liabilities (as defined in the Partnership Interests Security Agreement), under and pursuant to the Partnership Interests Security Agreement. BG Staffing, Inc. hereby expressly agrees that the Lien on the Pledged Collateral shall secure all of the Liabilities (as defined in the Partnership Interests Security Agreement), including, without limitation, the Loans, and hereby reaffirms its grant of such security interest and Lien to Lender for such purpose in all respects. BG Staffing, Inc. hereby further expressly agrees that upon consummation of the Subject Transactions, the Lien on such Pledged Collateral shall continue to secure all of the Liabilities, including, without limitation, the Loans.

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(c) BG Staffing, LLC hereby confirms to Lender that BG Staffing, LLC has granted to Lender a security interest in or Lien upon the Pledged Collateral (as defined in that certain Partnership Interests Security Agreement dated as of May 24, 2010 by and between BG Staffing, LLC and Lender (as amended, restated, modified or supplemented and in effect from time to time, the “BG Staffing, LLC Partnership Interests Security Agreement”)), to secure the Liabilities (as defined in the BG Staffing, LLC Partnership Interests Security Agreement), under and pursuant to the BG Staffing, LLC Partnership Interests Security Agreement. BG Staffing, LLC hereby expressly agrees that the Lien on the Pledged Collateral shall secure all of the Liabilities (as defined in the BG Staffing, LLC Partnership Interests Security Agreement), including, without limitation, the Loans, and hereby reaffirms its grant of such security interest and Lien to Lender for such purpose in all respects. BG Staffing hereby further expressly agrees that upon consummation of the Subject Transactions, the Lien on such Pledged Collateral shall continue to secure all of the Liabilities, including, without limitation, the Loans.

(d) BG Staffing, Inc. hereby confirms to Lender that BG Staffing, Inc. has granted to Lender a security interest in or Lien upon the Pledged Collateral (as defined in that certain Securities Pledge Agreement dated as of May 24, 2010 by and between BG Staffing, Inc. and Lender (as amended, restated, modified or supplemented and in effect from time to time, the “Securities Pledge Agreement”)), to secure the Liabilities (as defined in the Securities Pledge Agreement), under and pursuant to the Securities Pledge Agreement. BG Staffing, Inc. hereby expressly agrees that the Lien on the Pledged Collateral shall secure all of the Liabilities (as defined in the Securities Pledge Agreement), including, without limitation, the Loans, and hereby reaffirms its grant of such security interest and Lien to Lender for such purpose in all respects. BG Staffing, Inc. hereby further expressly agrees that upon consummation of the Subject Transactions, the Lien on such Pledged Collateral shall continue to secure all of the Liabilities, including, without limitation, the Loans.

5. Representations and Warranties. Each Borrower hereby represents, warrants and covenants to Lender that:

(a) Authorization. Each Borrower is duly authorized to execute and deliver this Amendment and all deliveries required hereunder, and is and will continue to be duly authorized to borrow monies under the Loan Agreement, as amended hereby, and to perform its obligations under the Loan Agreement and the other Loan Documents.

(b) No Conflicts. The execution and delivery of this Amendment and all deliveries required hereunder, and the performance by each Borrower of its obligations under the Loan Agreement and the other Loan Documents do not and will not conflict with any provision of law or of the charter or by-laws, operating agreement or partnership agreement of any Borrower or of any agreement binding upon any Borrower.

(c) Validity and Binding Effect. This Amendment, the Loan Agreement and the other Loan Documents are a legal, valid and binding obligation of each Borrower, enforceable against such Borrower in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies.

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(d) No Events of Default. As of the date hereof, no default or Event of Default under the Loan Agreement or any of the other Loan Documents has occurred or is continuing.

(e) Warranties. As of the date hereof, the representations and warranties in the Loan Agreement and the other Loan Documents are true and correct in all material respects as though made on such date, except where a different date is specifically indicated.

6. Conditions to Effectiveness. This Amendment shall be deemed to be effective as of the date hereof (the “Amendment Effective Date”), and the effectiveness of this Amendment shall be subject to, the satisfaction of all of the following conditions:

(a) This Amendment, duly authorized and fully executed by each Borrower and Lender, and the Consent and Ratification of Amended and Restated Capital Contribution Agreement attached hereto and made a part hereof, duly authorized and fully executed by the parties thereto, shall have been delivered to Lender.

(b) Payment by Borrowers to Lender of an amendment fee in the amount of Seven Thousand Five Hundred and No/100 Dollars ($7,500.00).

(c) Such other documents, instruments or agreements as Lender may reasonably request in order to effectuate fully the transactions contemplated herein shall have been duly executed and delivered to Lender.

7. Costs and Expenses. Borrowers shall jointly and severally pay all costs and expenses in connection with the preparation of this Amendment and other related loan documents, including, without limitation, reasonable attorneys’ fees.

8. Further Assurances. Each Borrower shall take such actions as are necessary or as Lender may reasonably request from time to time to ensure that the Obligations under the Loan Documents are secured by substantially all of the assets of such Borrower, in each case as Lender may determine, including (a) the execution and delivery of security agreements, pledge agreements, mortgages, deeds of trust, financing statements and other documents, and the filing or recording of any of the foregoing, and (b) the delivery of certificated securities and other collateral with respect to which perfection is obtained by possession.

9. Miscellaneous.

(a) Recitals; Captions. The WHEREAS clauses at the beginning of this Amendment are part of this Amendment. Section captions and headings used in this Amendment are for convenience only and are not part of and shall not affect the construction of this Amendment.

(b) Governing Law. This Amendment shall be a contract made under and governed by the laws of the State of Illinois, without regard to conflict of laws principles. Whenever possible, each provision of this Amendment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

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(c) Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall together constitute but one and the same document.

(d) Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

(e) References. From and after the Amendment Effective Date, any reference to the Loan Agreement or the other Loan Documents contained in any notice, request, certificate or other instrument, document or agreement executed concurrently with or after the execution and delivery of this Amendment shall be deemed to include this Amendment unless the context shall otherwise require.

(f) Continued Effectiveness. Notwithstanding anything contained herein, the terms of this Amendment are not intended to and do not serve to effect a novation as to the Loan Agreement. The parties hereto expressly do not intend to extinguish the Loan Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Loan Agreement and secured by the Collateral. The Loan Agreement and each of the other Loan Documents, except as modified hereby, remain in full force and effect and are hereby reaffirmed in all respects.

(g) Customer Identification - USA Patriot Act Notice; OFAC and Bank Secrecy Act. Lender hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and Lender’s policies and practices, Lender is required to obtain, verify and record certain information and documentation that identifies such Borrower, which information includes the name and address of such Borrower and such other information that will allow Lender to identify such Borrower in accordance with the Act. In addition, each Borrower shall (a) ensure that no person who owns a controlling interest in or otherwise controls such Borrower or any subsidiary of such Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.

[Remainder of page intentionally left blank; signature pages follow]

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IN WITNESS WHEREOF, the parties have executed this First Amendment to Amended and Restated Loan and Security Agreement and Other Loan Documents as of the date first set forth above.

BORROWERS:
BG STAFFING, INC., a Delaware corporation, f/k/a LTN Staffing, LLC, a Delaware limited liability company
By:
Name:	L. Allen Baker, Jr.
Title:	President and Chief Executive Officer
BG STAFFING, LLC, a Delaware limited liability company
By:	BG Staffing, Inc., a Delaware corporation, f/k/a LTN Staffing, LLC, a Delaware limited liability company
Its:	Sole Member
	By:
	Name:	L. Allen Baker, Jr.
	Title:	President and Chief Executive Officer

BG PERSONNEL SERVICES, LP, a Texas limited partnership
By:	BG Staffing, LLC, a Delaware limited liability company
Its:	General Partner
		By: BG Staffing, Inc., a Delaware corporation, f/k/a LTN Staffing, LLC, a Delaware limited liability company
	Its:	Sole Member
		By:
		Name:	L. Allen Baker, Jr.
		Title:	President and Chief Executive Officer

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BG PERSONNEL, LP, a Texas limited partnership
By:	BG Staffing, LLC, a Delaware limited liability company,
Its:	General Partner
		By: BG Staffing, Inc., a Delaware corporation, f/k/a LTN Staffing, LLC, a Delaware limited liability company
	Its:	Sole Member
		By:
		Name:	L. Allen Baker, Jr.
		Title:	President and Chief Executive Officer

B G STAFF SERVICES INC., a Texas corporation
By:
Name:	L. Allen Baker, Jr.
Title:	President and Chief Executive Officer

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LENDER:
FIFTH THIRD BANK, an Ohio banking corporation, successor by merger with Fifth Third Bank, a Michigan banking corporation
By:
Name:	David L. Mistic
Title:	Vice President
By:
Name:	Clayton A. Bruce
Title:	Vice President

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Exhibit 31.1

Certification of Chief Executive Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, L. Allen Baker, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 30, 2014 of BG Staffing, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2014

By:	/s/ L. Allen Baker, Jr.
Name:	L. Allen Baker, Jr.
Title:	President and Chief Executive Officer

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael A. Rutledge, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 30, 2014 of BG Staffing, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2014

By:	/s/ Michael A. Rutledge
Name:	Michael A. Rutledge
Title:	Chief Financial Officer and Secretary