What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-15 · 120 added, 111 removed, 110 unchanged (68% of the section changed)

77 unchanged sentences

OF OPERATIONS

for the three months ended June 30, 2022, was $6,481, which was $1,407 or 27.7% greater than for the same period in 2021 with second quarter

for the three months ended September 30, 2022, was $6,464, which was $477 or 6.9% less than for the same period in 2021 with third quarter

revenue at $6,941.

EOR grew by $1,534 or 38.5% to $5,515, which represented 85.1% of second quarter revenue.

grew $86 to $898 in the second quarter of 2022, but approximately $106 of this total was based on two reassignments of specific

US government projects from Video Production to Media Staffing.

Staffing, a subset of Staffing, grew beyond benefitting for $106 in reclassed Video Production project revenue from a year ago, with

second quarterly revenues of $824 compared to $676 a year ago, an increase of $148.

The reclass was merely taking recurring non

project revenue previously classified as Video Production and reassigning it appropriately to Media Staffing.

The impact in 2022 was

$106 in the second quarter.

IT Staffing, the other subset, declined comparatively in the second quarter 2022 to 2021 by $62,

garnering $74 in 2022.

Production would have had a decline in revenue outside the $106 deemed not be staffing work, had remained, as that segment produced $68 in revenue compared

to $250 in the second quarter 2021.

Placement failed to post revenue in the quarter ending June 30, 2022.

the six months ended June 30, 2022, revenue totaled $12,264 compared to $10,868 in the same period a year ago, resulting in $1,396 in

incremental revenue comparably.

revenues produced an even larger comparative gain in the first half of 2022 compared to 2021, with $10,288 for the six months ended June

30, 2022, compared to $8,478 a year ago.

This is an increase of $1,810 or 21.3%, which represented 83.9% of the Company’s total

year to date (YTD) revenue through June 30.

increased as well when comparing six-month performance ending June 30, 2022, to same period in 2021, by $126 to a total of $1,822.

represented a 7.4% increase over 2021’s Staffing Revenue of $1,696 through the six months ending June 30, 2021.

Staffing grew $397 to $1,683 with $206 attributable to the reassignment of two client projects previously credited to Video Production.

Production revenue compared unfavorably to the same period in 2021, with revenues of $115 compared to $661 in

2021, a $546 drop.

If adjusted for the reclassification of work credited to it in 2021, Video Production would have dropped by

EOR declined by $211 or 3.7%, compared to the third quarter of 2021, to $5,494, which represented 85% of third quarter

2022 revenue.

declined by $114 in the third quarter of 2022, or 11.9% to $848.

This consisted of Media Staffing, which declined $99 and IT staffing

which was $15 off the mark of the third quarter comparative in 2021.

Production had a decline in revenue of $174, but Direct Placements garnered $60 compared to $38 in revenue in the third quarter of

the nine months ended September 30, 2022, revenue totaled $18,729 compared to $17,809 year to date for the same period a year ago, resulting

in $920 in incremental revenue comparably.

revenues through nine months ended September 30, 2022, have produced an even larger comparative gain compared to 2021, with $15,783 compared

to $14,186 a year ago.

This is an increase of $1,597 or 11.3%, which represented 84.3% of the Company’s total year to date (YTD)

revenue through September 30.

is $13 ahead of last year’s pace through the nine months ending September 30, 2021, with $2,671 in revenue compared with $2,658

comparatively in 2021.

Staffing has grown $216 to $2,464 but this was almost completely offset by IT Staff’s $203 decline to $207 from $410 in the nine

months ended September 30, a year ago.

Production revenue has compared unfavorably to the same period in 2021, declining $721 with revenues of $176 compared to $897 in

This decline was the result of three clients curtailing projects they had with us in 2021, the loss of one client which

changed its bid requirements, and tour reclassifying certain work with clients as Media Staffing given its

Direct Placement business through nine months in 2022 has $99 in revenue compared to $68 over the same period in 2021, a $31 or 45.6%

increase as we have a few newer clients that focus on direct media placements only.

of Revenue / Gross Profit

profit for the three-month period ending June 30, 2022, was $887 representing 13.7% of revenues, which is a $169 improvement over the

$718 in gross profit MMG earned in 2021’s second quarter when the gross margin reached 14.1%.

quarter over quarter gross margin (“GM”) percentage drop can be partially attributed to the strength of the aforementioned

EOR revenue increase of $1,534, which resulted in EOR dominating the four business segments by accounting for 85.1% of the business versus

78.5% in the second quarter 2021;

as EOR business GM percentage was 11.7% to the rest which totaled 22.7%, the over quarterly average

slipped from a year ago.

EOR’s 11.7%, margin was strong compared with 10.4% in the first quarter 2022, 10.1% in the second quarter a year ago and a 9.8%

average for all of 2021.

This improvement can be attributed to some pricing changes negotiated with several key clients, and the client

mix being favorable as clients with slightly higher margins contributed more heavily to the quarter.

This is not expected to be the case

throughout 2022.

Staffing gross profit grew modestly by $6 to $191, as volume had more to do with the growth than gross margin percentage as Staffing

margins declined by 80 basis points to 20.7%.

IT Staffing dropped approximately 1% in gross margin percentage to 27.8%.

to date 2022, the Company’s gross profit improved by $153 or 10.5% to $1,616 compared to 2021.

margin percentage fell slightly to 13.2% from 13.5%.

experienced a margin boost year to date to 11.1% compared to 10.1% through June 30, 2021.

Video Production’s YTD GM % also

improved to 24.9% from 20.9% a year ago.

Media Staffing GM % has slipped to 21.9% versus 24.5% in the six months ended June 30,

Gross Profit in Media Staffing for the nine months ending June 30, however rose to $368 from $314 as volumes

profit for the three-month period ending September 30, 2022, was $891 representing 13.8% of revenues, which is an $88 improvement over

the $803 in gross profit MMG earned in 2021’s third quarter when the gross margin reached 11.6%.

overall quarterly gross margin (“GM”) percentage improvement can be attributed to the strength of the EOR margin

reaching 12.4% in the third quarter 2022 and compared to 9.1% a year ago.

two catalysts for EOR margin lift are price increases, and heavier use of W2 resources vs.

1099 labor based on client mix.

example, lower revenues for one large EOR client in ‘22 are highly weighted towards 1099s over W2.

GP would be approximately

20 basis points lower if those revenues still existed.

workers in EOR represented 82% of labor compared to 74% in the third quarter in 2021.

On average in 2022, margins are 9%, 1.1% higher

for EOR W2 labor than 1099.

Staffing gross profit margin slid from 20.1% to 16.7%, due to client mix, however while overall non EOR total margin,

including Video Production and Direct Placements were at 21.9% in the 3 months ending September 30, 2022, compared to

22.8% in the same period in 2021.

to date 2022, the Company’s gross profit improved by $240 or 10.6% to $2,507 compared to $2,267 over the first nine months in 2021.

margin percentage rose from 12.7% in 2021 to 13.4% when comparing the nine months ending September 30, 2022, to same period in 2021.

experienced a year-to-date margin boost to 11.7% compared to 9.5% through September 30, 2021.

Thirty basis points were

spurred by resources moved from billable to indirect overhead.

Increased use of W2 client mix and pricing changes led to the

additional spur in EOR margins.

Media Staffing margins year to date have held steady to where they were a year ago at declined to

19.9% compared to 20.8% through three quarters in 2021, while Video Production’s nine-month gross profit margin has risen to

24.3% compared to 20.6% in nine months ending September 30, 2022.

However, the overall Video Production impact on overall gross

profit margin is nominal given it represents 1% of the business revenue and 1.7% of gross profit.

and Administrative (“G&A”)

and administrative (“G&A”) expenses for the three months ended June 30, 2022, were $1,097, as compared to $878 in the

comparable period in 2021, representing a $220 or 25.1% increase.

This increase was predominantly the result of having an estimated $107

in arbitration related costs, employee salaries and benefits ratcheting up by $64 or 9.4% from the second quarter 2021, and contracted

labor and recruiting costs increasing by $33 comparatively from a year ago.

the six months ending June 30, 2022, G&A was $2,402 compared with $1,688 a year ago, an increase of $714 or 29.7%.

However, the legal

and consulting costs associated with our arbitration (See Note 1) represented $506 in totality, a $419 increase in like costs associated

with the Vivos Matter from a year ago.

MMG salaries and benefits increased $201 with sales and client services department non incentive

based compensation increasing $127, as we increased our investment in these two vital groups.

The other areas of spend increase were

commissions to drive sales and recruiting totaling $33;

bonus accrued at $72 as we move to tie more compensation to performance-based

commercial legal $19;

recruiting software $15;

and travel $11.

Company incurred $66 in interest charges for financing (factoring) its invoices in the first six months of 2022 compared with $63 in

the same period a year ago, In the second quarter MMG incurred $36 in interest changes compared to

$18 in the same period a year ago as MMG increased its average position under finance from $1.3M a year ago to $2.5M in the second quarter

and administrative (“G&A”) expenses for the three months ended September 30, 2022, were $941, as compared to $866 in

the comparable period in 2021, representing a $75 or 8.7% increase.

This increase was predominantly the result of having increases in

the following areas;

$53 in legal, $37 in contract services, $24 in employee health insurance related costs, and $21 in commissions.

Of the $53 in legal fees, $34 were arbitration related costs, as were $9 of the $37 in contract services, for the three months ended

September 30, 2022.

related costs represented $43, an increase of $35 comparatively from a year ago.

the nine months ending September 30, 2022, G&A was $3,343 compared with $2,554 a year ago, an increase of $789 or 30.9%.

the legal and consulting costs associated with our arbitration (See Note 1) represents $543 in totality, a $525 increase in like costs

associated with the Vivos Matter from a year ago.

MMG salaries and benefits increased $190, $69 of which are wages and payroll taxes,

$54 commissions, and $39 health insurance benefits for employees.

$50 of the $69 in wage and payroll tax proliferation is attributed

to a need to move certain billable resources from EOR clients to overhead as described above in the Gross Profit section.

Departmentally,

our Client Services group, which includes recruiters, has developed, resulting in increase of $60 of the $190.

Company incurred $111 in interest charges for financing (factoring) its invoices in the first nine months of 2022 compared with $78 in

the same period a year ago.

In the third quarter MMG incurred $46 in interest changes compared to $15 in the same period a year ago as

MMG increased its average position under finance from $1,088 a year ago to $2,276 in the third quarter 2022.

The cost of financing increased

from a year ago when the prime rate was 3.25% in the third quarter 2021 with two increases in the third quarter 2022, ending at 6.25%.

Thus, our borrowing rates were 6% in the third quarter 2021 and ranged from 7.5% to 8.25% in the third quarter 2022.

Income (Expense)

benefitted from $1 in corporate credit card rebate in the second quarter 2022.

For the six months ended June 3, 2021, MMG had $0 in other

income compared to a year ago when MMG earned $8,042 in other income courtesy of $5,273 in the PPP Forgiveness which included the recovery

of accrued interest, and $2,769 In Employee Retention Credits (ERC).

the nine months ended September 30, 2022, MMG received $210 in other income by way of ERC funds compared to a year ago when MMG earned

$9,855 in other income courtesy of $5,273 in the PPP Forgiveness which included the recovery of accrued interest, and $4,582 In Employee

Retention Credits (ERC).

The $210 was thought to be ineligible portion of 2021’s first quarter ERC, but it was deemed to be based

on our payrolls, eligible per the IRS.

The Company has taken a tax loss of $117 over the

nine months ending September 30, 2022, to record discrete tax items and true up of prior year returns.

AND CAPITAL RESOURCES

working capital requirements are driven primarily by EOR field talent payments, G&A salaries, public company costs, interest associated

with factoring, and client accounts receivable receipts.

Since receipts from client payments are on average 70 days behind payments to

field talent, working capital requirements can be periodically challenged.

We have a Factoring Facility with Triumph, whereas Triumph

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

Our Days Outstanding (DSO) for the trailing 12 months ending June 30, 2022, is at 64 comparable to 62 DSO for the trailing

twelve months ending June 30, 2021.

working capital requirements are driven primarily by EOR field talent payments, G&A salaries, public company costs, attorney fees

associated with the protracted Vivos Matter, interest associated with factoring, and client accounts receivable receipts.

Since receipts

from client payments are on average 70 days behind payments to field talent, working capital requirements can be periodically challenged.

We have a Factoring Facility with Gulf Coast Bank (“Gulf”), whereas Gulf 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%.

Our Days Outstanding (DSO) for the trailing

12 months ending September 30, 2022, is at 66 comparable to 62 DSO for the trailing twelve months ending September 30, 2021.

much to do with extended payment terms to our larger clients as well as delays of up to 30 days on receiving purchase orders after the

invoice has been prepared.

MMG management is working on ways to speed back up the cash conversion process outside of financing.

2021, a few of our large clients began demanding 90-day terms.

1 unchanged sentence

our DSO since 2019.

Despite these challenges, our DSO in the second quarter ending June 30, 2022, improved to 65 from 80 in the first

three months of 2022.

looking at A/R aging in relation to due date, as of June 30, 2022, 77.4% or $3,620 of our $4,668 in total trade receivables were <

Thus, trailing twelve-month DSO ending September 30, 2022, was 66 from 62 in the first nine months of 2021.

has more to do with revenue mix to clients with whom have 60 and 90 day payment terms than delinquent accounts.

However, our over 60

days past due represented 8.7% or $398 of our total A/R compared to 1% in the same nine-month period ending September 30, 2021.By October

31, $308 of the $398 had been collected.

looking at A/R aging in relation to due date, as of September 30, 2022, 73.6% or $3,370 of our $4,581 in total trade receivables were

< 31 days aged, compared to 96.5% a year ago.

This has much to do with extended payment terms to our larger clients as well as delays of

up to 30 days on receiving purchase orders after the invoice has been prepared.

MMG management is working on ways to speed back up the

cash conversion process outside of financing.

Federal and state tax liability has a balance of $92 at the end of the second quarter 2022, mainly because we deposited $725 for our

2021 expected tax liability.

Our over 60 days past due represented 8.7% or $398

of our total A/R compared to 1% in the same nine-month period ending September 30, 2021.

By October 31, $308 of the $398 has been collected.

Federal and state tax liability has a balance of $2 76 at the end of the third quarter 2022,

this is mainly for state income taxes because we deposited $725 of our 2021 expected federal tax liability in the first quarter.

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

Triumph enabling access to the 7% unfactored portion.

Gulf enabling access to the 7% unfactored portion.

Because certain large clients have changed their payment practices announcing 60-

and 90-day terms amounting to a unilateral extension to contractual terms by 30-60 days, we can experience an adverse cash flow impact

since Triumph does not provide credit if an account obligor pays more than 120 days after the invoice date.

since Gulf does not provide credit if an account obligor pays more than 120 days after the invoice date.

primary uses of cash are for payments to field talent, corporate, and staff employees, related payroll liabilities, operating expenses,

public company costs, including but not limited to, general and professional liability and directors’ and officers’ liability insurance

premiums, legal fees, filing fees, auditor and accounting fees, stock transfer services, and board compensation;

followed by cash factoring

and other borrowing interest;

public company costs, including but not limited to, general and professional liability and directors’ and officers’ liability

insurance premiums, legal fees, filing fees, auditor and accounting fees, stock transfer services, and board compensation;

cash factoring and other borrowing interest;

and debt payments.

we are an EOR with the majority of contracted talent paid as W-2 employees who are paid known amounts on a consistent schedule;

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, 2022, had notes receivable totaling $5,094 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 Dr.

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

Debtors as of September 30, 2022, had notes receivable totaling $5,157 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 Dr.

Doki and the Vivos Holdings for non-payment.

The Vivos Matter moved to

arbitration where on August 31,2022 the Arbitrator issued an award (the “Award”) with the Company and MMG prevailing on

their claims.

This is not inclusive of the additional amounts awarded in the arbitration.

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

8 unchanged sentences

No assurance can be given as to when this might take

May 5, 2020, MMG received a $5,216 loan through the Paycheck Protection Program (the “PPP”) with a term of two (2) years

and an interest rate of 1% per annum.

The PPP provided that the Company be eligible for forgiveness if the loan proceeds were used for

payroll and certain other specified operating expenses while maintaining specified headcount requirements.

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 totaling $57 were forgiven.

our first three-quarter revenues in 2021 were 80% or less than they were in 2019, the Company was eligible for the Employee Retention

4 unchanged sentences

these programs bolstered our working capital and enabled us to bring back employees and continue to serve our clients.

of June 30, 2022, our working capital was $8,608 compared to $9,361 on December 31, 2021, and compared to $9,361 on December 31,

Our adjusted working capital at the end of June 2022, excluding the notes receivable related to the Vivos Debtors totals

$3,514 compared to $3,605 a year earlier.

of September 30, 2022, our working capital was $8,725 compared to $9,417 a year ago and $9,361 on December 31, 2021.

Our adjusted working

capital at the end of September 2022, excluding the notes receivable related to the Vivos Debtors totals $3,568 compared to $4,468 a

year earlier.

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