What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 81 added, 132 removed, 98 unchanged (68% of the section changed)

77 unchanged sentences

OF OPERATIONS

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 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.

for the three months ended March 31, 2023, were $5,199 which was $584 or 10.1% less than for the same period in 2022 with revenue at

The EOR segment had the greatest negative impact, falling $500 to $2,273 from $4,773 in year over year quarterly revenue.

reason for the dip was that a year ago one client had a creative project that employed a significant number of freelance workers we provided.

It was a project carried over from 2021 that ended in January 2022.

Another reason was one client converted 7 of our employees from our

payroll to theirs.

and Staffing revenues dipped by $158 from $923 in the period ending March 31, 2022, to $765 comparatively in 2023, while Direct Hire

revenues were off the first quarter pace set in 2022 by $9 landing on $30 versus $39 a year ago.

Production grew, however, delivering $131 in the first quarter 2023 versus $48 in the first quarter ending March 31, 2022, which was

a $83 or 173% increase.

It was the highest quarterly revenue total for Video Production since the quarter ending December 31, 2021, which

this business segment then garnered $263 in revenue.

of Revenue / Gross Profit

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.

profit for the three-month period ending March 31, 2023, was $711 representing 13.7% of revenues, which was $19 lower than the $730 in

gross profit MMG earned in 2022’s first quarter when the gross margin was at 12.6%.

catalyst for the 110-basis point quarter over quarter jump was EOR, as first quarter margins increased from 10.4% in 2022 to 11.9% in

Otherwise, comparatively, first quarter 2023 to 2022:

Direct Hire margins were at 77.1% as opposed to 89.6%, as recruiting resources

were required for a longer term than a year ago;

IT Staffing was 22.6% vs.

19.4% in 2022;

Media Staffing at 19.7% vs.

Production at 18.7% vs.

a negative margin due to a cost overrun a year ago.

margins tend to be lower at the beginning of the year as variable costs such as federal and state unemployment taxes reset at the beginning

EOR margins tend to increase throughout the year as these variable costs are exhausted throughout the year.

early 2023 several EOR contracts were extended resulting in a slight improvement in margins and our customer mix continues to be more

weighted to clients that have more favorable pricing terms than those that previously dominated sales.

and Administrative (“G&A”)

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.

and administrative expenses for the three months ended March 31, 2023, were $933 compared to $1,305 in the same period in 2022, representing

a $372 or 29% decrease.

$309 of the $378 was a result in the reduction in arbitration related costs.

Commercial legal dropped $21 as

Employee salaries and benefits were comparatively down $135 as 2022 bonus accrual was $104 higher than approved for payment, loaded

salaries (including benefits and taxes) were down $18 and commissions down $13 compared to a year ago.

A savings of $17 was derived from

our business insurance package as a new less costly D&O insurance policy with greater benefits was put into place.

Conversely contract

service cost increased by $50, Staff events by $26, staff development by $13 and recruiting software by $12.

expect increases in payroll as certain roles have been contracted and sales and sales support had headcount changes in mid-March.

Company incurred $44 in interest charges for financing (factoring) its invoices in the first quarter 2023 compared with $29 in the same

period a year ago, as the prime interest rate soared from 3.5% at the end of the first quarter 2022 to 8% by end of the first quarter

Our interest rate is 2 points greater than prime, meaning comparatively our costs went from approximately 5.5% to 10%.

Income (Expense)

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.

Income in the first quarter was under $1 compared with $3 in the first quarter 2022.

AND CAPITAL RESOURCES

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.

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

our DSO since 2019.

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.

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.

working capital requirements are driven predominantly 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 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 March 31, 2023, is at 66 comparable to 61 DSO for the

trailing twelve months ending March 31, 2022.

is because 53% of our revenue is from clients that over the past 3 years began demanding 90-day terms.

Delays in receipt of purchase

orders also has had an adverse impact on DSO.

Alternatively, we have had an increase over the past 12 months in client advances

which now average approximately $260 a month vs.

$60 prior in 2022.

looking at A/R aging in relation to payments to due date, as of March 31, 2023, 74.9% of our $3,224 in total trade A/R was

current and 91.4% was < 31 days aged, compared to 68.5% and 88.2% a year ago, respectively.

Our > 60 days aged invoices represent

$48 or 1.5% of our total A/R.

Federal and state tax liability is $5 compared to $688 a year ago, and $6 as of December 31, 2022.

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

1 unchanged sentence

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

and 90-day terms amounting to a unilateral extension to contractual terms by 30-60 days, we can be adversely impacted 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;

cash factoring and other borrowing interest;

public company costs, including but not limited to, general and professional liability and directors and officer’s 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;

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 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.

we are an EOR with the majority of contracted talent paid as W-2 employees who are paid known amounts, but on inconsistent schedules;

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

Debtors as of March 31, 2023, had notes receivable totaling $ 5,327 including default on a $3,000 promissory note and on a $750 tax obligation

in December 2019.

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

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

Consequently, MMG received $155 in direct payroll credits from the IRS via its payroll provider Paycom in the late 2 nd quarter

and $1,086 in the third quarter.

MMG returned $842 to the IRS for payroll credits received in the 4 th quarter once the program

ended retroactively in mid-November 2021.This payment was made to the IRS through Paycom, the Company’s payroll provider in January

the past three years MMG received eligible forgiven PPP Loan totaling $5,216, ERC cash of $3,501 out of eligible $4,676, which has bolstered

working capital enabling us to invest in software, build A/R reserves, and hire needed resources for operations.

On April 29, 2023, we

received a check from the IRS for $1,203 to pay for our second quarter 2021’s eligible ERC 941X submission.

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

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.

of March 31, 2023, our working capital was $8,457, compared to $8,815 at the end of March 2022.

This includes the $1,174 in ERC

principal and additional interest received on April 28, 2023.

Our adjusted working capital at the end of March 2023, excluding the

notes receivable related to the Vivos Debtors totals $3,130 compared to 3,776 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