Labor SMART, Inc.

January 29, 2015 07:45 ET

Labor SMART, Inc. Provides Shareholder Update

Multi-Prong Approach to Improve Balance Sheet Is Progressing Successfully

ATLANTA, GA--(Marketwired - Jan 29, 2015) - Labor SMART, Inc. (OTCBB: LTNC) (the "Company"), a leader in providing on-demand blue collar staffing primarily in the southeastern United States, is pleased to report improved operating cash flow and provide its shareholders with an update on its strategy to improve its balance sheet.

As reported in an 8-K filing on January 27, 2015, the Company entered into three Partial Note Payment Agreements with holders of outstanding convertible promissory notes. In aggregate, the Company shall pay $153,000 in cash to satisfy $126,000 of principal due under convertible promissory notes.

Ryan Schadel, Chairman and Chief Executive Officer of Labor SMART, stated, "As expected, recent changes and improvements in internal processes continue to bear fruit. After negotiating with some of our note holders we were able to come to a reasonable agreement to redeem portions of three promissory notes in cash, preventing the potential issuance of approximately 700 million shares in a conversion of debt to equity. We expect a continued increase in cash flow over the next 2 months and will pay down our debt with cash versus shares when possible, while not sacrificing long term growth opportunities for our business. In addition to utilizing our cash flow to reduce dilution to shareholders, we continue to seek alternative means of financing that would enable the company to prepay its entire promissory note balance, reducing further dilution."

Commenting on the recent authorized share increase Mr. Schadel said, "Late last year we found ourselves in a situation that required us to reserve a significant amount of treasury stock as required by note holders. This action was triggered by a much lower share price than when the notes were entered into. Since the November 2014 increase in authorized shares, our market cap has continued to slide, resulting in a similar situation and another increase in our authorized shares. I greatly underestimated the repercussions caused by debt to equity conversions. Our note holders require us to reserve as much as five times the amount of shares necessary to pay off our debt with equity at any given time, regardless of whether or not there is eligibility for a conversion. Being in compliance with this covenant is important to preventing a default on our debt, which would potentially cost the company many millions of dollars and in some cases void the prepayment options included in the notes. As painful as it is to give news of an increase in authorized but unissued stock, it would be much worse to give news of a default. We continue to work aggressively to remove this debt from our balance sheet as quickly as possible."

The company also confirmed it has not issued any new convertible debt since November 2014 and expects to eliminate all convertible debt from its balance sheet by mid-2015.

About Labor SMART, Inc.
Labor SMART, Inc. provides On-Demand temporary labor to a variety of industries. The Company's clients range from small businesses to Fortune 100 companies. Labor SMART was founded to provide reliable, dependable and flexible resources for on-demand personnel to small and large businesses in areas that include construction, manufacturing, hospitality, event-staffing, restoration, warehousing, retailing, disaster relief and cleanup, demolition and landscaping. Labor SMART believes it can make a positive contribution each and every day for the benefit of its clients and temporary employees. The Company's mission is to be the provider of choice to its growing portfolio of customers with a service-focused approach that enables Labor SMART to be seen as a resource and partner to its clients.

Safe Harbor Statement
This release contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements appear in a number of places in this release and include all statements that are not statements of historical fact regarding the intent, belief or current expectations of Labor SMART, Inc., its directors or its officers with respect to, among other things: (i) financing plans; (ii) trends affecting its financial condition or results of operations; (iii) growth strategy and operating strategy. The words "may", "would", "will", "expect", "estimate", "can", "believe", "potential", and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond Labor SMART, Inc.'s ability to control, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. More information about the potential factors that could affect the business and financial results is and will be included in Labor SMART, Inc.'s filings with the U.S. Securities and Exchange Commission.

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