What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-13 · 154 added, 155 removed, 79 unchanged (80% of the section changed)

1 unchanged sentence

FORWARD-LOOKING

following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited

consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

This section includes

several forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current

views with respect to future events and financial performance.

All statements that address expectations or projections about the future,

including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue,

gross profit, operating profit, cash flow), are forward-looking statements.

Some of the forward-looking statements can be identified

by words like “anticipates,” “believes,” “expects,” “may,” “will,” “can,”

“could,” “should,” “intends,” “project,” “predict,” “plans,”

“estimates,” “goal,” “target,” “possible,” “potential,” “would,”

“seek,” and similar references to future periods.

These statements are not a guarantee of future performance and involve

a number of risks, uncertainties and assumptions that are difficult to predict.

Because these forward-looking statements are based on

estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond

our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these

following discussion and analysis of our results of operations and financial condition should be read in conjunction with our

unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

This section includes several forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of

1995, that reflect our current views with respect to future events and financial performance.

All statements that address

expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of

resources and future financial results (such as revenue, gross profit, operating profit, cash flow), are forward-looking statements.

Some of the forward-looking statements can be identified by words like “anticipates,” “believes,”

“expects,” “may,” “will,” “can,” “could,” “should,”

“intends,” “project,” “predict,” “plans,” “estimates,”

“goal,” “target,” “possible,” “potential,” “would,” “seek,”

and similar references to future periods.

These statements are not a guarantee of future performance and involve a number of risks,

uncertainties and assumptions that are difficult to predict.

Because these forward-looking statements are based on estimates and

assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control

or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these

forward-looking statements.

Important factors that could cause actual results to differ materially from these forward-looking statements

include, but are not limited to:

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;

Important factors that could cause actual results to differ materially from these forward-looking

statements include, but are not limited to:

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;

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.

2 unchanged sentences

competitive market pressures;

the availability and cost of qualified labor;

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;

the availability and cost of

qualified labor;

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

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

our performance on customer contracts;

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.

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

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

9 unchanged sentences

ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS

discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these unaudited

consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,

revenues, and expenses based on historical experience and various other factors that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated

financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect

the reported amounts of assets, liabilities, revenues, and expenses based on historical experience and various other factors that

are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or

have been no material changes or developments in the Company’s evaluation of the accounting estimates and the underlying assumptions

7 unchanged sentences

OF OPERATIONS

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.

for the three months ending September 30, 2024, were $6,230, which represented an increase of $889 over the $5,341 generated in the third

quarter of 2023.

This was the first time we have enjoyed three quarters of consecutive revenue beats on comparative periods to a year

ago since 2019.

Our top four clients all had increases in revenue when compared to the third quarter of a year ago of $1,394.

EOR segment continues to drive this year-over-year growth with third quarter revenue of its own of, which was $826 or.18.5% over 2023’s

third quarter EOR revenue of $4,467.

Our top four revenue producing clients overall contributed $4,255 or 80.4% of EOR quarterly revenue

compared to $2,926 a year ago in the period ending September 30, 2023.

The EOR segment revenue quarterly increase from these four clients

was a combined $1,329.

revenue at $822 increased over its performance a year ago by $112 or 15.8%, when the period ended September 30, 2023, resulted in $710.

One new client was the catalyst, adding $156 for the quarter.

Otherwise, if one declining account is omitted, 13 clients were up $20

over the same period a year ago.

Video Production and Direct Hire segments were down comparatively to the third quarter of 2023 as revenue in the third quarter

2024 was $87 and $28, respectively, to $100 and $64 in revenue, respectively, in 2023.

Thus, Video Production was down 13.7% and Direct

at $17,566 grew $1,574 for the nine-month period ending September 30, 2024, versus the same period in 2023 with a total of $15,992.

increase was driven by our top four revenue producers amassing $12,172 in the nine months ending September 30, 2024, which represents 69.3%

of our total revenue and a $3,542 increase over their revenue contributions in the same nine-month period ending September 30, 2023.

The aforementioned four clients have each surpassed the million-dollar mark year to date.

drove the nine-month growth with $15,108 in revenue which was $1,868, or 14.1% more than this business garnered in the same period 2023 when it produced $13,240 in revenue.

Otherwise, in the nine-month period ending September 30, 2024, Staffing at $2,202 was off 2023’s

third quarter pace by $136, or 5.8%, which was about 5.7% better than the gap in the second quarter 2024.

Video Production

at $177 was $122 or 40.9% away from 2023’s nine-month revenue of $299.

Finally, Direct Hire revenue at $79 was $36 off the pace

of where it was to the same nine-month period in 2023 at $115.

of Revenue / Gross Profit

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 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.

the three-month period ended September 30, 2024, gross profit at $834 saw a $62 or 8.0% improvement comparatively to the three-month

period ended September 30, 2023, when gross profit landed on $772.

Gross margins, however, at 13.4% were not as strong as they were a

year ago at 14.5%.

Several factors contributed to the margin drop, including the higher margin Direct Hire revenue being down by $36,

our EOR business increasing by 1.3% to 85.0% of revenue at 12.1% margins vs.

12.5% which was caused by a shift in our labor from W2 to

lower margin 1099.

shift of revenue concentration by 1.3% to EOR at 12.1% margins alone resulted in a loss of gross profit by approximately $44 or seventy

basis points (.7).

terms of gross profit, EOR and Staffing saw increases of $83 and $13 in the third quarter of 2024 compared to 2023, while Video Production

and Direct Hire were off the mark by $1 and $33, respectively.

the nine-month period ended September 30, 2024, gross profit at $2,346 improved by $123 or 5.5% over the $2,223 earned comparatively

to the nine-month period ended September 30, 2023.

margins for the nine-month period ended September 30, 2024, were 13.4%, versus 13.9% where margins stood a year ago at the end of September

The paradigm causing the deficiency is the same as the third quarter, as the nine-month revenue mix weighed heavier to EOR as the

business unit grew in gross profit by $201 while the other three declined by a combined gross margin of $125.

This phenomenon alone caused

margins to compress by 42 basis points which explains 79% of the 53-basis point spread (13.4 to 13.95%).

margins declined 20 basis points (12.3% to 12.1%) in the nine months ending September 30, 2024 when compared to the same period in

2023, as a heavier use of 1099 labor of almost $1,500 at a 2.5% lower margin more than offset a W2 margin increase by 30 basis

When extending EOR contracts we continue to incorporate reasonable pricing markup increases which slowly should improve

Additionally, our customer mix continues to be more weighted to clients that have favorable pricing terms than those that

previously dominated sales.

This is why our EOR business is now seeing 12.1% margins as opposed to the 9.8% it did, four years

and Administrative (“G&A”)

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.

and administrative expenses for the three months ending September 30, 2024 were $958 compared to $998 in the same period in 2023,

representing a $40 or 4.0% favorable result.

The decrease in spending when compared to 2023’s second quarter was rooted in $71

in lower legal costs than a year ago, $23 of which were reimbursed outside counsel fees for an employee matter that a client agreed to

take responsibility.

salaries, payroll tax and benefits were higher by $44, and benefits by $30 in the third quarter 2024 compared to the same period 2023.

Bonus and Commissions, though, saw reductions of $65.

and administrative expenses for the nine months ending September 30, 2024, were $2,891 compared to $2,843 a year ago, resulting in $48

or 1.7% more in costs 2024 when compared to the same year to date period ending September 30, 2023.

Loaded Payroll was $221 higher with a $168 increase in salaries as we have continued to bolster our sales and client services departments.

A continued increase in our

health insurance benefits and higher usage of our subsidy resulted in a $47 increase in the nine months ending September 2024 compared

Non-salary SG&A costs $173 or 18.5% favorable as approximately $97 of $103 in Legal cost savings were reclassed or booked

in 2024 to Other (See last paragraph of this section below for further details).

cost savings were realized in Contract Services by $77, Staff Events which were scaled back by $39, Payroll fees by $14, and Travel

and Meals and Entertainment by $9.

Unfavorable changes in SG&A expenses by category were Recruiting Software costs $34 (these

are allocated to COR if associated with Staffing or Direct Hire fulfillment), Business Insurance at $15, Communications at $8, and

Business License and Taxes at $10 which now consist of state minimum tax and franchise fees to states that are not deemed to be

state income taxes.

Prior to 2024, we were booking these taxes and fees to state income taxes.

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

1 unchanged sentence

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.

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 Expense in the second

This practice continues, which lowers costs associated with non-operational legal obligations.

the three-month period ending September 30, 2024, the Company incurred $27 in interest charges for financing, factoring, and paying an

advance rate (BIP) against its invoices compared with $12 in the same period a year ago.

the nine-month period ending September 30, 2024, the Company incurred $62 in interest charges for financing, factoring, and paying an

advance rate (BIP) against its invoices compared with $77 in the same period a year ago.

Income (Expense)

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.

non-operational costs, in the third quarter totaled $68 including $32 in Receiver and arbitration award related legal costs.

This represented

$55 more than the $13 we incurred in the third quarter of 2023.

In the three-month period ending September 30, 2024, we incurred $30

more in legal costs related to the SWC matter (see Note 6), and another $25 for a settlement with HCRN.

We began booking these non-operational

fees to Other Income (Expense) last year in the second quarter.

the nine months ended September 30, 2024, Other Expense was $297, which was $164 greater than a year ago when Other Expenses tallied

Because approximately $97 of the $297 were Receiver related costs, the normalized Other Expense increase year to date in 2024 versus

2023 would have been $68.

AND CAPITAL RESOURCES

14 unchanged sentences

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

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

two weeks, counteract the approximate 32% 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 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.

Our > 60 days aged invoices totaling $57, represent

1% of our total A/R.

Our Days Outstanding (DSO) remained strong for the trailing twelve months ending September 30, 2024,

at 49 compared to a 53 DSO for the trailing twelve months ended September 30, 2023.

programs, plus the portion of our business in which the client has elected or is required to pay in advance of payroll, approximately

$198 every two weeks, counteract the approximate 32% 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 September 30, 2024, 98.7% was < 31 days aged, 93.3% a year ago, respectively.

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

3 unchanged sentences

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

adversely impacted but not since we adopted Amex’s BIP program which coupled with an increase in our client biweekly

prepayments (drawdowns) to $198 from $159, over the past 12 months, have been catalysts to our cash conversion success measured by

our DSO improving from 66 at the start of 2023 to 49 at the end of June and carried over to September 2024.

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

7 unchanged sentences

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

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.

Debtors as of September 30, 2024, had notes receivable totaling $5,827, 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

11 unchanged sentences

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.

of September 30, 2024, our working capital was $7,536 compared to $7,592 on June 30, 2024, $7,783 at the end of March 2024, to $7,913

at end of December 2023 and compared $8,040 at the end of September 2023.

Our adjusted working capital, as of September 30, 2024, excluding

the notes receivable related to the Vivos Debtors, totals $1,709, compared to 1,826 compared at the end of June 2024, compared to 2,212

at the end of the first quarter, to $2,412 at the end of 2023, and finally compared to 2,623 at the end of September 2023.

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