What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-15 · 133 added, 101 removed, 101 unchanged (70% of the section changed)

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include, but are not limited to:

the impact of the COVID-19 pandemic on us and our clients;

our ability to access the capital markets

by pursuing additional debt and equity financing to fund our business plan and expenses on terms acceptable to the Vivos Group or at

negative outcome of pending and future claims and litigation and our ability to comply with our contractual covenants, including

in respect of our debt;

potential loss of clients and possible rejection of our business model and/or sales methods;

weakness in general

economic conditions and levels of capital spending by customers in the industries we serve;

weakness or volatility in the financial and

capital markets, which may result in the postponement or cancellation of our customers’ projects or the inability of our customers

to pay our fees;

our ability to access the capital markets by pursuing additional debt and equity financing to fund our

business plan and expenses;

negative outcome of pending and future claims and litigation

and our ability to comply with our contractual covenants, including in respect of our debt;

potential loss of clients and possible rejection

of our business model and/or sales methods;

weakness in general economic conditions and levels of capital spending by customers in the

industries we serve;

weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation

of our customers’ projects or the inability of our customers to pay our fees;

delays or reductions in U.S.

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the availability and cost of qualified labor;

our level of success in attracting, training and retaining qualified management personnel

and other staff employees;

changes in tax laws and other government regulations, including the impact of health care reform laws and

the possibility of incurring liability for our business activities, including, but not limited to, the activities of our

temporary employees;

success in attracting, training and retaining qualified management personnel and other staff employees;

changes in tax laws and other

government regulations, including the impact of health care reform laws and regulations;

the possibility of incurring liability for our

business activities, including, but not limited to, the activities of our temporary employees;

our performance on customer contracts;

and government policies, legislation or judicial decisions adverse to our

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required

We recommend readers to carefully review the entirety of this Quarterly Report, the “Risk Factors” in Item 1A of

the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and the other reports and documents we file from

time to time with the Securities and Exchange Commission (“SEC”), particularly our Quarterly Reports on Form 10-Q and our

Current Reports on Form 8-K.

and government policies, legislation or judicial decisions adverse to our businesses.

Readers are cautioned not to place undue reliance

on these forward-looking statements, which speak only as of the date hereof.

We assume no obligation to update such statements, whether

as a result of new information, future events or otherwise, except as required by law.

We recommend readers to carefully review the entirety

of this Quarterly Report, the “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended

December 31, 2023, and the other reports and documents we file from time to time with the Securities and Exchange Commission (“SEC”),

particularly our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

following discussion and analysis of our financial condition and results of operations, our expectations regarding the future performance

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OF OPERATIONS

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

for the three months ended June 30, 2024 were $6,041, which represented an increase of $589 over the $5,452 tallied in the second quarter

This was the first time we have had consecutive revenue beats on comparative periods a year ago since 2019.

Our top four clients

all had increases in revenue when compared to the second quarter a year ago by $1,445.

EOR segment drove this year-over-year growth with $5,243 revenue in all, which was $744 or 16.5% over 2023’s second quarter EOR

revenue of $4,499.

The top three revenue producing clients overall contributed $3,809 or 68% of EOR quarterly revenue compared to $2,401

a year ago in the period ending June 30, 2023.

The EOR segment revenue increase from these three clients was $1,388.

however, saw a dip in revenue by $150 or 17.4% from $863 to $713 in the period ending June 30, 2023 to 2024.

Three clients caused

one being a lost client (to the bidding process conducted at the end of their contract) for $108 of the $150 negative

an account that had curtailed their media spending steeply post COVID and who converted 10 of our employees to their own a

year ago, accounted for $73;

and one client contracted their list of IT resource vendors, having a $57 negative impact.

10 of 13 active staffing clients had increased staffing revenues totaling $105.

Direct Hire business garnered $27 in revenue which was $5 greater than the same period ending June 30, 2023.

Video Production saw a $10,

or 14.7% decline in the second quarter comparative revenue going from $68 a year ago to $58.

grew $685 for the six-month period ending June 30, 2024 with a total of $11,336 versus $10,651 in the same period 2023.

was driven by our top 3 revenue producers who amassed $6,741 in the six months ending June 30, 2024 which is 59.5% of our total revenue

and a $1,906 increase over their revenue contributions in the same 6-month period ending June 30, 2023.

drove the six-month growth with $9,815 in revenue which was $1,042, or 11.9% more than this business garnered in the same period 2023,

when it produced $8,773 in revenue.

Otherwise, in the six-month period ending June 30, 2024, Direct Hire revenue was identical to the

same period 2023 at $51, Staffing at $1,380 was off 2023’s second quarter pace by $248, or 15.2%, and Video Production at $90 was

$109 or 54.8% away from 2023’s six-month revenue of $199.

of Revenue / Gross Profit

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

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

the three-month period ended June 30, 2024, gross profit at $804 saw a $64 or 8.6% improvement comparatively to the three-month period

ended June 30, 2023, when gross profit landed on $740.

Gross margins, however, slipped from a year ago to 13.3% from 13.6% as our EOR

revenue mix increased to 86.9% of all quarterly revenue from 82.5% in the same period 2023.

EOR revenue increasing by $744 coupled with almost twice

the weighting toward lower margin 1099 COR at 28% versus 12.5% in the second quarter 2023, had the greatest impact on the gross margin

slipping by thirty basis points.

Staffing gross profit declined by $12 from $155 to $143 in the second quarter 2024 compared to 2023.

Whereas revenue for staffing was down

17.4%, gross margin was up 4.8% to 44.7%, thus softening the 7.7% gross profit decline.

Hire gross profit improved by $10 even though revenue increased by $5 as margins were 92.4% in the second quarter 2024 versus 69.3% in

the same period ending June 30, 2023.

Our searches required less recruiting software time allocation, hence the higher margin.

Video Production had $8 in gross profit in the second quarter ending June 30, 2024, compared to $20 in the same period in 2023.

Profit grew $61 or 4.2% to $1,512 in the six months ending June 30, 2024 versus $1,451 in the same period a year ago but not quite at

the same 6.4% rate that revenue increased.

This is because the $1,512 represented 13.3% in gross margin versus the 13.6% in the second

quarter 2023.

six-month revenue mix weighted heavier to EOR by $1,041 in the six months ending June 30, 2024 when compared to a year ago, accounted

for 30 basis points despite EOR gross margins dropping only .1% from 12.2% to 12.1% year over year.

margins would have ordinarily increased but a heavier use of 1099 labor at a 2.6% lower margin offset a W2 margin increase.

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.

EOR contracts we continue to incorporate reasonable pricing markup increases which slowly 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.

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

for our non-EOR business in the first six months of 2024, compared to 2023:

Direct Hire margins improved 21.8% from 73.7% in the first six months of 2023 to 95.4% in 2024, due to lower use of fixed recruiting resources.

Media Staffing margins also improved to 18.9% from 18.4%

year-over-year.

Video Production captured an 11.8% gross margin as opposed to a more traditional margin of 18.7% in the six months

ending June 2023 due to our affording a large discount to one of our premier clients.

and Administrative (“G&A”)

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.

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

and administrative expenses for the three months ended June 30, 2024 were $986 compared to $911 in the same period in 2023, representing

an $75 or 8.2% increase.

The increase in spending when compared to 2023’s second quarter was rooted in higher base salaries,

payroll tax and benefits by $88.

Sales headcount was increased from an average of 3 Full Time Equivalents (FTE) to 4.2 FTE leading to

$39 higher in loaded salaries in the period ending June 30, 2024 compared to 2023.

Operational non loaded salaries were higher by $6,

in the second quarter 2024 compared to the same period 2023.

A $36 reduction in contract services coupled with a favorable legal cost

differential of $10 were overshadowed by higher software costs by $32 and payroll costs of $13.

December 29, 2023 we learned the Maryland Circuit court certified the arbitration award as a judgement.

The costs related to the award

are now centered on collection and recovery.

Since we began separating non-core operational expenses in 2023 and

recording them to Other Expense, MMG decided to begin recording all related Receiver expenses from SG&A (operational) legal to Other

Thus $64 in legal costs for the first six months of 2024 were reclassed to Other Expense, creating a favorable legal cost

comparison to the same period in 2023.

Company incurred $20 in interest charges for financing, factoring, and paying an advance rate (BIP) against its invoices in the second

quarter 2024 compared with $22 in the same period a year ago.

Income (Expense)

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.

mostly non-operational one time or short-term costs, in the second quarter totaled $136 including $64 in Receiver and arbitration award

related costs being reclassed from SG&A legal.

We closed out employee matters with $51 in costs for the second quarter but incurred

$13 more costs related to the SWC matter (see Note 6).

We began booking these non-operational fees to Other Income (Expense) last year

in the second quarter, which consisted of all SWC and employment matters totaling $119.

Thus, the increase in expenses in 2024 was $17.

the six months ended June 30, 2024, Other Expense was $229 which consisted of the following costs:

$64 in aforementioned award recovery

related costs, $68 in SWC, and $97 in employee severance and related legal fees.

A year ago, we recorded $119 comparatively in the same

period consisting of $66 in employment matters and $53 related to SWC.

We have now incurred $110 in legal fees for the SWC matter since

September 2022.

AND CAPITAL RESOURCES

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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

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 (“Gulf”).

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

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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.

Our Days Outstanding (DSO) remained steady for the trailing twelve months ending June 30, 2024, is at

49 compared to a 58 DSO for the trailing twelve months ended June 30, 2023.

programs plus the portion of our business in which the client has elected or is required to pay in advance of approximately $168 every

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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

looking at A/R aging in relation to payments to due date, as of June 30, 2024, 91.8% of our $3,742 in total trade A/R was current and

97.6% was < 31 days aged, compared to 89.2% and 99.0% a year ago, respectively.

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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 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 $168 from

$161, over the past 12 months, has been catalysts to our cash conversion success measured by DSO moving from 58 a year ago to

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

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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

Debtors as of June 30, 2024 had notes receivable totaling $5,766 including default on a $3,000 promissory note and on a $750 tax obligation

in December 2019.

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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.

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 June 30, 2024, our working capital was $7,592 compared to $7,913 at end of December 2023 and $7,783 at the end of March 2024, and

$8,220 and the end of June 2023.

Our adjusted working capital at the end of June 2024, excluding the notes receivable related to the

Vivos Debtors, totals $1,826 compared to $2,412 at the end of 2023, 2,212 at the end of the first quarter 2024.

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