What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-16 · 96 added, 89 removed, 119 unchanged (61% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING

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OF OPERATIONS

For the three months ended June 30, 2021, was $5,074 which was $123 lower than for the same period in 2020 which was $5,197.

Company’s IT staffing division had a revenue decline of $542 or 80% from the same period a year ago which offset the improvement

in revenue by EOR $3,981 for quarter, up $174 or 4.6% and Media Staffing $676 up $210 or 45%, and $30 in revenue from a Permanent Placement

staffing revenues do not include an IT permanent placement for $30 in the quarter and expect an increase in this activity as certain

for the three months ended September 30, 2021, was $6,941 which was $740 or 12% greater than for the same period in 2020 which was $6,201.

EOR led the revenue uptick by delivering $5,705 or 82% of the quarterly revenue.

This was a $831 or 17%, improvement over the

third quarter in 2020.

IQS the Company’s IT staffing division saw a revenue decline of $410 or 82% from the same period a year

ago which offset the improvement in revenue by the Media Staffing division which was up $267 or 44% from the same period a year ago.

Permanent Placement which was not an earning center in 2020 contributed $38 which was $8 more than the second quarter.

Although IT staffing

revenues do not include IT direct placements made by the Company, which are considered Permanent Placement these are among the diverse

resources we provide clients along with finance and accounting, and Media.

The Company expects an increase in this activity as certain

new clients are asking us for this service.

The Company will be treating Permanent Placement revenue as a separate business segment as

reflected above in Note 9.

For the six months ended June 30, revenue totaled

$10,868 which was $3,130 less than a year ago.

42% of the revenues for the 6-month period totaling $13,998 a year ago,

were earned prior to any impact by Covid 19.

Business segments with the largest declines in the six-month period ending June

30, 2021, when compared to a year earlier, were EOR at $2.481 or 22.6% and IQS which derived $1,058 less, a 72% decline.

EOR was largely

negatively impacted by COVID-19 which has seen some of our larger clients not yet return to full strength on site.

IQS’s experienced the loss of its largest customer Lifetouch, which informed the Company in the fall of 2020 that it had decided

to offshore their IT software quality assurance professionals effective January 1, 2021, resulting in declines of revenue of $595 year

to date, when compared to same period in 2020.

Meanwhile Tapfin, which is the vendor management solution for Abbott

Labs, has converted a number of IQS’s employees to their staff and have not renewed other employee resulting in a year-to-date

loss of revenue of $201.

In order to offset these lost revenues, the Company will focus business development resources

on growing the IT staffing business in the second half of 2021.

Staffing however has increased its 6-month revenue to 1,286 from $965, a $321 or 33% improvement.

This is due to the acquisition of

6 new clients which added $231 and an increased demand for this service ($90) by our existing clients, driven by our

expertise in delivering top rated media talent to our customers.

Production’s 6-month revenue performance also saw an improvement to the same period a year ago by $80, totaling $661.

Production’s $236 in revenue was $21 higher than the third quarter in 2020 as new clients more than filled the void of those with

declining demand due to COVID-19.

the nine months ended September 30, revenue totaled $17,809 which was $2,390 less than a year ago, or a 12% decrease when compared to

the prior year.

Business segments with the largest declines in the nine-month period ending September 30, 2021, when compared to a year

earlier, were EOR at $1,678 or 11% and IQS which derived $1,593 less, a 76% decline.

EOR was largely negatively impacted by COVID-19,

which has seen some of our larger clients not yet return to full strength on site.

IQS’s experienced the loss of its largest

customer Lifetouch, which informed the Company in the fall of 2020 that it had decided to offshore their IT software quality assurance

professionals effective January 1, 2021, resulting in declines of revenue of $874 year to date, when compared to same period in 2020.

Meanwhile Tapfin, which is the vendor management solution for Abbott Labs, has converted a number of IQS’s employees to their staff

and have not renewed other employee resulting in a year-to-date loss of revenue of $380.

In order to offset these lost revenues, the

Company has begun focusing business development resources on growing the IT staffing business in the second half of 2021.

Media Staffing has increased its nine-month revenue to $2,158 from $1,445, a $713 or 49% improvement.

This is due to the acquisition

of 7 new clients by our revamped 6-month-old sales team, which added $546 and an increased demand for this service ($167) by our existing

clients, driven by our expertise in delivering top rated media talent to our customers.

Production’s nine-month revenue performance also saw an improvement to the same period a year ago by $101, with revenues

totaling $897.

of Revenue / Gross Profit

Profit for the three-month period ending June 30, 2021, was $718 representing 14.2% of revenues, which was $28 below the gross profit

of $723 in the first quarter of 2021 and $5 below the gross profit for the same period in 2020.

the revenue from Q1 declined by 2.4% from Q1 2020, lower cost of revenue resulted in a gross margin decline of just over a half a point

Thus, gross profit at $718 was only $5 less than a year ago at $723.

Quarterly Margin improvement from 13.9% to 14.2% was driven

by Permanent Placement revenue of $30 with gross margin at 96.4%;

resulting in overall gross margin improvement by half a point from

13.7 to 14.2%.

Otherwise, quarterly comparative gross margin would have been slightly lower by 20 basis points than it was a year ago.

to date 2021, the Company’s gross margin percentage improved to 13.5% from 12.5% which can be attributed to EOR margin reaching

10% on gross profit of $856 in 2021, compared to 9.3% on $1,018 in same period in 2020.

and Media Staffing margin boosts (.07% and .06% respectively) coupled with Permanent Placement margin of $29 (96.4%) offset the steep

decline in IQS higher margin gross profit which saw a year over year decline by $334 or 73% from $458 to $124.

profit for the three-month period ending September 30, 2021, was $803 representing 11.6% of revenues, which was $149 greater than in

2020’s third quarter when the gross margin was at 10.5%.

Staffing which saw a 44.2% increase in revenue had strong margins at 21.1%, while Permanent Placement margins were greater than 90%.

EOR margins were compressed by just over 1 point to 9.1% due to contractual incentives given to certain clients for reaching predetermined

revenue levels, and a high level of sick leave paid by the company to its outsourced employees.

to date 2021, the Company’s gross margin percentage improved to 12.7% from 11.9% which can be attributed mainly to Media and IT

Staffing margins being > 21% and Permanent Placement which so far have enjoyed margins north of 90%.

Absent our Media Staffing year

over year Growth and Permanent Placement Revenue, our margins year to date for the period ending September 30, 2021, would be half a

point lower at 12.2%.

margin improvement in EOR, Media Staffing and Video Production year over year contributed $82 in gross profit, representing 4.7% of 2020

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and Administrative (“G&A”)

and administrative expenses for the three months ended June 30, 2021, were $878, as compared to $1,240 in the comparable period in 2020,

representing a 28.6% reduction.

The $362 decrease in comparative three-month periods is due to reductions in salary and benefit costs

by $180, outside legal costs $79, and rent costs by $66.

Over the 6-month period ending June 30, 2021, management has trimmed $657 or

28% of G&A costs, as they represented 15.6% of revenue as opposed to 16.8% a year ago.

The reduction was achieved while increasing

the costs of sales G&A year over year for the quarter ending June 30, 2021, by $74 or 45%.

Company recognized interest expense in the amount of $18 during the three months ended June 30, 2021, compared to $114 during the prior

The $96 (84.5%) decrease is directly attributed to a significantly reduced reliance on the factoring line that had an outstanding

ending Q2 2021 balance of $86 compared to $1,043 at conclusion of second quarter 2020.

and administrative expenses for the three months ended September 30, 2021, were $866, as compared to $1,086 in the comparable period

in 2020, representing a 20.3% reduction.

This was also a reduction of $12 from our prior quarter ending on June 30, 2021.

The $220 decrease

in comparative three-month periods can be attributed directly to savings in salary and benefit costs by $109, and outside legal costs

Over the nine-month period ending September 30, 2021, management has trimmed $884 or 25.7% of G&A costs, as they

represent 14.3% of revenue as opposed to 17% a year ago.

The reduction was achieved while increasing the sales portion of G&A in

the last 6 months ending September 30, 2021 by $174 as the Company has added additional sales resources.

Company recognized interest expense in the amount of $15 during the three months ended September 30, 2021, compared to $30 or 50% during

the same prior year period.

For the nine-month period ending September 30, 2021, MMG interest costs were $78 compared to $283 for the

same nine-month period a year earlier, representing a $205, or 72% savings.

This cost reduction is directly attributed to a significantly

reduced reliance on the factoring line that had an outstanding ending Q3 2021 balance of $939 compared to $1,043 at conclusion of second

quarter 2020.

The reduced reliance on factoring is attributed to the Earned Income Credit (“ERC”) which enabled the Company

to reduce its payroll cost obligations by $1,156 during the third quarter.

when compared to the second quarter 2021, MMG’s $939 factoring balance was $853 higher.

This was largely because of our need to

finance $475 to pay Vivos Group outside debt.

The other factor was that the $86 balance at the end of June 2021 was exceedingly

low as our average year to date balance had been around $530.

Income (Expense)

by the PPP forgiveness principal of $5,216, a reversal on PPP interest $59, and ERC totaling $2,767, other income totaled $8,042 resulting

in the Company experiencing second quarter net earnings of $7,942 compared to a $324 net loss a year earlier and net earnings of $7,240

during the six months ended June 30, 2021, compared to a loss of $561 in the comparable period of the prior year.

The ERC consisted of a second quarter request for

a first quarter refund of $1,440.

Subsequently the Company received $153 in ERC credits against the last two payrolls in

June 2021 and has requested a refund of another $1,174 covering the remainder of the second quarter 2021.

The Company qualified

for the ERC in 2021 as its quarterly revenue was < 80% of its 2019 revenue for the same periods.

by ERC other income for the three-month period ending September 30, 2021, which totaled $1,813 resulting in the Company experiencing

third quarter pre-tax net income of $1,816 compared to a $429 pre-tax net loss a year earlier.

the nine-month period ending September 30, 2021, the PPP forgiveness of $5,216 and the ERC’s totaling $4,674 enabled the

Company to experience pre-tax net earnings of $9,725 compared to a loss of $1,221 in the comparable period of the prior year.

AND CAPITAL RESOURCES

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payments to field talent, working capital requirements can be periodically challenged.

We have a Factoring Facility with Triumph Business

Capital (“TBC”).

TBC advances 93% of our eligible receivables at an advance rate of 15 basis points, an interest rate of

prime plus 2%., and our prime floor rate at 4%.

As a result of the impact of the COVID-19 pandemic, our clients may be more likely to

be delinquent in their payments.

However, to date, we have not seen any adverse change in our collections, with our Days Outstanding

(DSO) for first half of the year at 63 comparable to the 68 DSO for period ending December 31, 2020.

In 2020 our DSO increased in from

60 in 2019 to 68 as several of our large clients began demanding 60-to-90-day terms.

Delays in receipt of purchase orders also had an

adverse impact on DSO.

However, as of June 30, 2021, only 2.4% of $3,303 in Accounts Receivable (“A/R”) was > 31

We have a Factoring Facility with TBC, whereas

TBC advances 93% of our eligible receivables at an advance rate of 15 basis points, an interest rate of prime plus 2%., and our prime

floor rate at 4%.

As a result of the impact of the COVID-19 pandemic, our clients may be more likely to be delinquent in their payments.

However, to date, we have not seen any adverse change in our collections, with our Days Outstanding (DSO) for first nine months of 2021

at 59 comparable to the 61 DSO for period ending December 31, 2020.

By June 2020 our DSO increased to 67 from 60 in 2019 as several of

our large clients began demanding 60-to-90-day terms.

Delays in receipt of purchase orders also had an adverse impact on DSO.

the pendulum over the past 3 quarters has swung favorably as only 3.5% of $4,405 in Accounts Receivable (“A/R”) was >

31 days past invoice due dates, with only 1% > 60.

looking at A/R aging in relation to invoice date, as of June 30, 2021, 61% of our $3,303 in total A/R was < 31 days, compared to 64%

in the quarter ending March 31, 2021.

Company has an additional $2,615 in other receivables associated with our ERC eligibility for first and second quarters 2021.

looking at A/R aging in relation to invoice date, as of September 30, 2021, 56.3% of our $4,405 in total A/R was < 31 days aged, compared

to 49% a year ago.

Company has an additional $3,221 in other receivables associated with our ERC eligibility for the first three quarters of 2021.

our Federal and state tax liability has now increased to $1,030.

primary sources of liquidity are cash generated from operations via accounts receivable and borrowings under our Factoring Facility with

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inflows do not typically align with these required payments, resulting in temporary cash challenges, which is why we employ factoring.

Debtors as of June 30, 2021, had notes receivable totaling $4,387 including default on a $3,000 promissory note and on a $750

tax obligation in December 2019.

After numerous failed collection attempts, on February 17, 2020, the Company initiated an action in

the Circuit Court of Montgomery County Maryland against Naveen Doki and the Vivos Holdings for nonpayment.

Debtors as of September 30, 2021, had notes receivable totaling $4,949 including default on a $3,000 promissory note and on a $750 tax

obligation in December 2019.

After numerous failed collection attempts, on February 17, 2020, the Company initiated an action in the

Circuit Court of Montgomery County Maryland against Naveen Doki and the Vivos Holdings for non-payment.

was also anticipated that following the Merger, the Company would both access the capital markets by selling additional shares of Company

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On June 10, 2021, the Company

was informed by the SBA that it had met the requirements and that both the $5,216 and of accrued interest, through May 2021, totaling

$57 were forgiven

was informed by the SBA that it had met the requirements and that both the $5,216 and of accrued interest totaling $57 were forgiven

funds bolstered our working capital and enabled us to bring back employees and continue to serve our clients even though their requirements

had lessened.

of June 30, 2021, our working capital was $7,991, compared to $5,970 at the end of December 2020, and $6,152 the quarter

ending June 30, 2020, approximately a month before the PPP funds were received.

The PPP funds enabled the Company to build A/R reserves

since PPP funds were employed to pay salaries of both outsourced and G&A employees during the covered 24-week period between May

and October 2020.

Working capital at the end of June 2021, excluding the notes receivable of $4,387, was $3,604.

of September 30, 2021, our working capital was $9,417, compared to $5,970 at the end of December 2020, $7,991 as of September

30, 2020, and $566 as of March 30, 2020, approximately one month before the PPP funds were received.

The PPP funds enabled the

Company to build A/R reserves since PPP funds were employed to pay salaries of both outsourced and G&A employees during the covered

24-week period between May and October 2020.

Our adjusted working capital at the end of September 2021, excluding the notes receivable

related to the Vivos Debtors totaling $4,949, was $4,865.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis