What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-14 · 112 added, 127 removed, 90 unchanged (73% of the section changed)

77 unchanged sentences

OF OPERATIONS

for the three months ended September 30, 2023 were $5,341, which was $1,123 or 17.4% less than for the same period in 2022 with revenue

18.7% or $1,027 of the drop can be attributed to the EOR business segment as its third quarter revenues dropped to $4,467

The primary reasons for the EOR downturn were four clients that were down $1,339 in aggregate revenue for reasons of:

losing a high-profile sports television rights to a competitive bid process, one converting more than ten of our employees from our payroll

to theirs, and two reducing their programming due to budgetary reasons.

and Staffing revenues dipped by $138 from $848 in the period ending September 30, 2022 to $710 comparatively in 2023, while Video Production

and Direct Hire revenues were up a combined $42 in the quarter ending September 30, 2023 to the comparable period a year ago.

was up $10 to $83 while Media Staffing dipped $148 to $627 in the third quarter 2023.

The Media Staffing decline was related in part

to the EOR client fall off and the loss of a client with whom we acted in a subcontractor capacity, when our client, the incumbent, failed

to win a renewal bid by the end customer.

the nine-month period ending September 30, 2023, revenues at $15,992 in 2023 are $2,737 or 14.6% off of 2022’s nine-month $18,729

The decline paradigm has been somewhat consistent throughout the year as the reasons cited for the third quarter variance

can be cited with the programming declines by most corporate clients widened.

Overall, seven larger clients accounted for a 2023 year-to-date

negative revenue variance of $3,162 due to the combination of employee conversions, lost programming and decisions to reduce same, and

in one case a lost bid by the primary.

for the nine-month period ending September 30, 2023, EOR and Staffing revenues were down comparatively to the same period in 2022, by

$2,543 and $33, respectively, Video Production revenues have increased by $123 to $299 or 69% and Direct Hire by $16 to $115 or 16.8%.

Both increases have played a part in the continuing increase in the overall business’ gross margin as explained in the next section.

for the three months ended March 31, 2024 were $5,295, which represented an increase of $96 over the $5,199 tallied in the same period

Our top four clients all had increases in revenue when compared to the first quarter a year ago.

Our EOR segment drove our year-over-year growth with $4,572 revenue in all, which was $299 over 2023’s first quarter EOR revenue of $4,273.

Comparatively,

the other three higher margin segments declined, with Staffing, Video Production, and Direct Hire revenues down by $98,

$99, and $6, respectively, from the comparative first quarter 2023.

Production enjoyed $131 in the first quarter ended March 31, 2023 versus the $32 it produced in the same period in 2024.

This was due to some uplift in projects that were not repeated in the first quarter of 2024.

Thus, the $99 relative decline in

revenue from a year ago was not unexpected.

of a $98 decline in Recruiting and Staffing revenue in the first quarter 2024 compared to the same period a year ago was due to the

loss of a client contract that went out to Request for Proposal (RFP) as part of the client’s process, and we did not win the

Otherwise, we had 13 out of 23 staffing clients increase their business by $103 or 26%.

This total, however, was offset by three

larger clients that had certain contract roles not rollover, resulting in $118 in declines when compared to the first quarter of

of Revenue / Gross Profit

profit for the three-month period ending September 30, 2023 was $772 representing 14.5% of revenues, which was $119 lower than the $891

in gross profit MMG earned in 2022’s third quarter when the gross margin was at 13.8%.

margin improvement can be attributed to EOR client mix increasing its contribution percentage, several Staffing clients delivering over

twice their normal volume of business at 24% margins, and the overall mix shifted to Media and IT Staffing as opposed to EOR, which has

peaked at 12.5% for the quarter.

through September 30, 2023, our gross profit margins exceed those of 2022 over the same period 13.9% to 13.4% for a variety of reasons.

Renewed agreements have enabled pricing increases, especially impacting EOR which YTD is up to 12.2% as compared with 11.6% through the

first nine months a year ago.

profit for the three-month period ended March 31, 2024, was $709, which was $2 less than the first quarter of 2023 and represented 13.4%

in gross margin versus 13.7% in the first quarter 2023.

revenue mix being weighted heavier to EOR by $200 in the first quarter 2024 when compared to a year ago, accounted for 40

basis points despite EOR gross margins remaining at 12.2% where it ended in 2023, even though 2024 EOR margins are 30-basis point better

than the first quarter 2023 when they were 11.9%.

other factors causing gross margins to dip were a 2.0% heavier use of 1099 labor at margins that were 2.6% lower than the use of W-2 labor

and Staffing margins landing at 18.0% vs.

19.7% a year ago.

These two factors had an estimated 15 and 20 basis point negative impact, respectively.

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

of the year compressing margins.

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

with EOR segment mix decline means a higher percentage of our revenue is subject to the higher margin Media and IT Staffing, Video Production,

and Direct Hire businesses.

Both Video Production and Direct Hire combine for $33 in year-to-date improvement in gross profit in 2023

over 2022, garnering an average of 39.8% in gross margin percentage in 2023.

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

When extending

EOR contracts we continue to incorporate slight pricing markup increases which improve margins.

Additionally, our customer mix continues

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

This is why our EOR

business is now seeing 12.2% margins as opposed to the 9.8% it once did, four years ago.

for our non-EOR business, comparatively, first quarter 2024 to 2023:

Direct Hire margins improved 21.8% from 77.1% in the first

quarter 2023 to 98.9% in 2024, due to lower use of fixed recruiting resources.

Media Staffing margins, however, dipped to 18%

compared to the 19.7% performance a year ago as taxes, resource, and client mix changes reduced the spreads temporarily.

margins are likely to rebound in part because certain state and local taxes are at high points at the beginning of the year.

Production only captured 7.0% gross margins as opposed to more traditional margins of 18.7% in the first quarter of 2023.

unusual in that we afforded a large discount to one of our top clients.

and Administrative (“G&A”)

and administrative expenses for the three months ended September 30, 2023 were $998 compared to $941 in the same period in 2022,

and administrative expenses for the three months ended March 31, 2024 were $947 compared to $933 in the same period in 2023,

representing a $14, or 1.5%, increase.

Loaded salaries had an $84 unfavorable comparison to Q3 2022.

Commissions, however, were down

$35 of the $84 wage increase is in the area of Sales where we have bolstered our team.

The other force driving an increase in

payroll is bonus accruals, which are artificially higher because a year ago at this time, we credited back $62 in over accrued bonuses from

non-salary SG&A total of $168 was $25 favorable (14%) to $193 a year ago.

The most significant positive variance in the third quarter

2023 versus 2022 were legal expenses, which were down by $32.

the nine months ended September 30, 2023, SG&A costs are $2,842, which are $501 (15%) lower than they were in the same period in

2022 when they landed on $3,343.

The cost savings of $501 were derived mostly as a result of the reduction in arbitration related costs

Other major favorable variances were loaded wages $80, with $87 coming from a lower bonus accrual in part because of write back

of over accrued 2022 bonuses, and $35 derived from our business insurance package.

Conversely, there were cost increases of $69 for a

mostly marketing related costs, $56 for staff events and development, when comparing the period ending September 30, 2023 with the same

period in 2022.

expect increases in payroll as certain roles have been contracted and Sales and Sales Support continue to evolve.

Company incurred $12 in interest charges for financing specific client invoices in the third quarter 2023 compared with $46 in factoring

the same period a year ago.

The Company satisfied its factoring obligations in early July, due to a strong cash position, but engaged

the Buyer Initiated Payment Agreement (“BIP”) with American Express (“Amex”) because the average APR has been

an estimated 6.8% (dependent on days clients actually pay their invoice) compared with the prime rate having risen to 8.5% and the factoring

cost at a contractual 11.22%.

the nine months ended September 30, 2023, the combined interest and factoring costs are $77 compared with $111 a year ago.

The marginal increase when compared to 2023’s first quarter was despite an increase of

headcount and $80 in wages.

Operationally, costs were down $54 in the first quarter 2024 compared to the same period 2023.

the $64 negative variance to the first quarter 2023 was the result of over accrued 2022 bonuses that was reversed in the first

quarter of 2023 as this amount was not earned.

legal costs both commercial and related to the Vivos Matter were reduced by $27, Contract Services was curtailed by $46, Staff

events by $26, and Payroll fees from new provider ADP which are on an agreed signing incentive of three month’s hiatus.

salaries and benefits were comparatively down $139 as the aforementioned 2022 bonus accrual of $83 was reversed in 2023 resulting in

a credit balance of $33 as the first quarter 2023 accrual.

Otherwise, only Staff Development cost have a comparative differential to

a year ago greater than $10, as it was $13 favorable.

expect continued increases in payroll as certain roles have recently been filled, including a new VP of Sales, and there are a few open

positions we expect to fill over the coming months.

Company incurred $16 in interest charges for financing, factoring, and paying an advance rate (BIP) against its invoices in the first

quarter 2024 compared with $44 in the same period a year ago.

Income (Expense)

Income/Expense in the third quarter was ($13) compared with $210 in the third quarter 2022.

The $13 growth was due to

legal expenses related to restructuring layoffs.

Prior to the third quarter, $55 of the Other Expenses have been to contest the SWC

lawsuit, and $65 to address another non-operating related legal matter that has now been settled.

Thus, in the nine months ending

September 30, 2023, Other Expenses total $133.

Comparatively, a year ago when receiving the first quarter 2021 ERC payment, the

Company recorded an additional $210 in what was thought to be an ineligible portion of the ERC calculation, which in fact was not

and received by the IRS during the third quarter 2022.

Expense in the first quarter was $93 due to legal fees associated with SWC matter and other employee matters, including a settlement

on one matter at $50.

We began booking these non-operational fees to Other last year in the second quarter, therefore we had no such

costs in the first quarter of 2023.

AND CAPITAL RESOURCES

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 September 30, 2023 has improved to 53 compared to 57 in

the second quarter 2022, and a DSO of 66 for the trailing twelve months ending March 31, 2022.

12-month DSO has averaged 65 since June 2021 through the first quarter 2023, as some of our largest clients have 60 to 90-day terms.

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

However, in April 2023, we entered into a BIP with Amex which

enables MMG to be advanced 100% of purchase order approved invoices minus a flat interest rate percentage that is based on that day’s

submitted invoice volume.

associated with financing, legal fees associated with the Vivos and related SWC matter and client accounts receivable receipts.

receipts from client payments are on average 60 days behind payments to field talent, working capital requirements can be periodically

To accelerate cash and ensure sufficient liquidity, we have both a Buyer Initiated

Payment (“BIP”) agreement with American Express (“Amex”) and a Factoring Facility with Gulf Coast Bank

BIP agreement with Amex enables MMG to be advanced 100% of purchase order approved invoices minus a flat interest rate percentage that

is based on that day’s submitted invoice volume.

The greater the volume the lower the interest rate charged.

Additionally,

we have had an increase over the past 12 months in client advances which averaged approximately $211 a month.

events have a profound impact on improving our working capital and lowering our DSO which is now at 53, as this combination of pre-pays

and arrangement enabling bank debits and credits to roll straight to A/R as opposed to credits to our factoring liability, have bolstered

our quick and current ratios as well.

BIP program has also lowered our cost of capital in that our effective APR for the period ending September 30, 2023 was estimated at

6.8% versus the 11.22% Gulf can now charge on an annualized basis.

looking at A/R aging in relation to payments to due date, as of September 30, 2023, 78.6% of our $2,653 in total trade A/R was current

and only 4.2% is past 60 days aged, compared to 73.6% and 8.7% a year ago, respectively.

We continue to collect our aged invoices, not

having to account for bad debt > $200 in the past 5 years.

federal and state tax liability is $5 as of September 30, 2023 compared to $6 as of December 31, 2022.

primary sources of liquidity are cash generated from operations via accounts receivable and borrowings under our BIP agreement with Amex

and our Factoring Facility with Gulf enabling access to the 7% unfactored portion.

The BIP agreement enables MMG to accelerate cash on

accounts with 90-day terms.

The implementation

of this program in the second quarter of 2023 profoundly impacted our ability to accelerate cash conversion and lower DSO as well as

our borrowing costs.

Given our use of BIP is with 90-day terms clients , our approximate APR is 6.1% compared to Factoring average approximate

APR rate of 11.1% based on the current prime rate of 8.5%.

on the other hand, 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 twelve months ended March 31, 2024, is at 49 compared to

66 DSO for the trailing twelve months ended March 31, 2023.

programs plus the portion of our business in which the client has elected or is required to pay in advance of approximately $173 every

two weeks, counteract the approximate 26% of our revenue from clients that are on 90-day terms, some of which were demanded by larger

clients, and have delays in providing receipt of purchase orders.

looking at A/R aging in relation to payments to due date, as of March 31, 2024, 87.1% of our $2,628 in total trade A/R was current and

96.5% was < 31 days aged, compared to 74.9% and 91.4% a year ago, respectively.

Our > 60 days aged invoices totaling $60, represent

2.3% of our total A/R.

We had only one hundred and eighty dollars in bad debt over the past five years.

Federal and state tax liability is $0 compared to $5 a year ago, and $0 as of December 31, 2023.

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

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 would otherwise be adversely impacted but

not since we adopted Amex’s BIP program which coupled with an increase in prepayments to $173 from $100, over the past 12 months,

has been catalysts to our cash conversion success measured by DSO moving from 66 a year ago to 49.

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 officer’s liability insurance

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

followed by cash factoring

auditor and accounting fees;

stock transfer services;

and board compensation, followed by cash factoring

and other borrowing interest;

and debt payments.

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

our cash inflows do not typically align with these required payments, resulting in temporary cash challenges, which is why

we employ factoring.

Debtors as of September 30, 2023 had notes receivable totaling $5,417, 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 Common Stock and use shares of Company Common Stock as currency to acquire other business revenues.

However, all 300 million

authorized shares of Company Common Stock were issued in connection with the Merger.

No shares are expected to become available to

the Company until the legal dispute with the Vivos Debtors and Vivos Group is resolved.

At that point, the Board and/or the

shareholders can decide whether to amend the Company’s Certificate of Formation to increase the number of authorized shares of

Company Common Stock or approve a reverse-split of the outstanding shares of Company Common Stock to provide additional shares for

these purposes.

Under the Arbitration Award, it is possible that shares may be returned to MMG treasury which may give the Board

greater flexibility in selling shares or using shares to acquire other businesses.

No timetable has been set as to when any of these

events might take place.

the past three years MMG received eligible ERC cash of $4,676, which has bolstered working capital

enabling us to invest in software and hire needed resources for operations.

On April 29, 2023, we received our final ERC check from the

IRS for $1,203 which was for our second quarter 2021’s eligible ERC 941X submission and eligible interest.

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

of September 30, 2023, our working capital was $8,040, compared to $8,645 at the end of December 2022.

Our adjusted working capital at

the end of September 2023, excluding the notes receivable related to the Vivos Debtors totals $2,623 compared to 3,394 at the end of

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

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

Debtors as of March 31, 2024 had notes receivable totaling $5,571 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

Common Stock and use shares of Company Common Stock as currency to acquire other business revenues.

However, all 300 million authorized

shares of Company Common Stock were issued in connection with the Merger.

No shares are expected to become available to the Company until

the legal dispute with the Vivos Debtors and Vivos Group is resolved.

At that point, the Company can decide whether to amend the Company’s

Certificate of Formation to increase the number of authorized shares of Company Common Stock or approve a reverse-split of the outstanding

shares of Company Common Stock to provide additional shares for these purposes.

No assurance can be given as to when this might take

On April 22, 2024, MMG received a refund of $288 from the IRS.

The proceeds were accrued in the first quarter since

the credits were for past tax events.

of March 31, 2024, our working capital was 7,783 compared to $7,913 at end of December 2023 and $8,457 at the end of March 2023.

Our adjusted working capital at the end of March 2024, excluding the notes receivable related to the Vivos Debtors, totals $2,212 compared

to $2,412 at the end of 2023 and $3,130 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