What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-20 · 140 added, 114 removed, 96 unchanged (73% of the section changed)

65 unchanged sentences

prepared in accordance with accounting principles generally accepted in the United States (“U.S.

The preparation of these

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

and expenses.

The preparation

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

revenues, and expenses.

These estimates are based on historical experience and other factors believed to be reasonable under the circumstances.

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

There have been no material changes or developments in the Company’s

evaluation of its critical accounting policies and estimates from those disclosed in the Form 10-K for the year ended December 31, 2025.

Management’s Discussion included in the Form 10-K discusses various

factors and trends relating to the Company’s results of operations, liquidity and capital resources.

Many of those factors and trends

remain relevant to the Company’s operations and financial condition for the three months ended March 31, 2026.

Accordingly, this

Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2025.

have been no material changes or developments in the Company’s evaluation of its critical accounting policies and estimates from

those disclosed in the Form 10-K for the year ended December 31, 2025.

Discussion and Analysis included in the Form 10-K discusses various factors and trends relating to the Company’s results of operations,

liquidity and capital resources.

Many of those factors and trends remained relevant during the three and six months ended June 30, 2026.

Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended December

OF OPERATIONS

for the three months ended March 31, 2026 were $5,551, an increase of $805, or 17.0%, compared to $4,746 for the three months ended March

revenue increased $740, or 19.7%, to $4,495 from $3,755 in the prior-year quarter.

The increase was primarily driven by growth from our

top client (A), which increased $1,096, or 94.0%.

revenue increased $65, or 7.0%, to $997 from $932 in the prior-year quarter.

The increase was primarily attributable to higher revenue

from 2 of our top 10 clients, which increased revenue contributions by $96 (30.5%), and $68 (41.7%).

These increases were partially offset

by lower activity from certain other staffing clients.

Production revenue increased $10, or 20.4%, to $59 from $49 in the prior-year quarter.

The increase was primarily attributable to two

new clients who accounted for $16 in revenue.

Direct Hire revenue decreased $10 to $0 from $10 in the prior-year

quarter, representing a 100% decrease.

for the three months ended June 30, 2026 was $5,017, an increase of $299, or 6.3%, compared with $4,718 for the three months ended June

For the six months ended June 30, 2026, revenue increased $1,103, or 11.7% to $10,568 from $9,465 in the comparable 2025 period.

For the second quarter, EOR revenue increased $300, or 8.4%, to $3,873

from $3,573 in the prior-year quarter.

For the six-month period, EOR revenue increased $1,040, or 14.2%, to $8,378 from $7,328.

was concentrated in lower-margin EOR activity, including increased 1099 EOR volume.

Staffing revenue decreased $6, or 0.5%, to $1,092 from $1,098 in the prior-year

For the six-month period, Staffing revenue increased $59, or 2.9%, to $2,089 from $2,030.

Production revenue increased $18, or 52.9%, to $52 from $34 in the prior-year quarter and increased $27, or 32.1%, to $111 from $84 for

the six-month period.

Hire generated no revenue during the three or six months ended June 30, 2026, compared with $13 and $23 during the respective 2025 periods.

of Revenue / Gross Profit

Months Ended March 31, 2026 vs.

profit and margin both increased in the first quarter 2026 compared to the same period in the prior year.

Gross profit increased

$129, or 20.1%, to $770 from $641, while gross margin improved to 13.9% from 13.5%.

The improvement reflected a more favorable

client and service mix, pricing realization, and improved execution within certain managed service arrangements.

of Record (“EOR”) gross profit rose by $30 to $482 or 6.6% primarily driven by an $815 increase in 1099-related revenue,

partially offset by a $60 decline in W-2 related revenue.

As a result of the higher concentration of lower-margin 1099 labor, EOR

gross margin decreased to 10.7% from 12.0% in the prior-year quarter.

Margin compression was further impacted by discounted volume

pricing structures associated with certain larger client engagements.

gross profit and gross margins expanded significantly during the quarter.

Staffing gross profit increased to $270 from $167 in the prior-year quarter, representing a 61.7% increase.

gross margin increased to 27.1%, compared to 17.9% in the prior-year quarter, representing the segment’s highest quarterly gross

margin in more than ten years.

The improvement was primarily driven by higher-margin managed service arrangements and improved delivery

efficiencies.

Managed service engagements generated approximately $669 in revenue and $199 in gross profit, representing gross margins

of approximately 29.8%.

Additionally, certain client engagements benefited from lower-than-anticipated delivery costs and improved resource

One newer client engagement generated approximately $21 in revenue with gross margins approaching 35.7%.

Production gross profit improved to $18 from $13 in the prior-year quarter, resulting in gross margin expansion

Months Ended June 30, 2026 vs.

profit for the three months ended June 30, 2026 decreased $21, or 2.9%, to $692 from $713, while gross margin declined 130 basis points

to 13.8% from 15.1%.

The increase primarily reflected strategic pricing initiatives and improved execution efficiencies.

Although revenue increased, the revenue mix shifted toward lower-margin EOR business, particularly 1099 activity,

which more than offset margin contributions from higher-margin EOR w2 and Staffing services.

EOR gross profit declined by $41, or 9.3%, to

$402 from $440 in the prior-year quarter, while gross margin declined to 10.4% from 12.3%, primarily reflecting higher benefit

utilization and other employment-related costs.

Staffing improved in both profit and margin with gross

profit increasing $28, or 11.1%, to $280 from $252 in the prior-year quarter, while quarterly Staffing gross margin advanced to 25.6%

Production gross profit increased $3 to $11 from $8 in the prior-year quarter, while gross margin declined to 21.2% from 23.5%.

Six Months Ended June 30, 2026 vs.

For the six months ended June 30, 2026, gross

profit increased $107, or 7.9%, to $1,462 from $1,355;

however, gross margin declined approximately 50 basis points to 13.8% from

EOR represented a greater proportion of consolidated revenue however its margin declined as w2 margins were negatively

impacted by higher benefit, workers compensation and leave costs.,.

the six-month period, EOR gross profit declined by $11, or 1.2%, to $883 from $894, while EOR gross margin declined to 10.6% from

The margin compression reflected both a higher concentration of lower-margin 1099 activity and volume-pricing structures

associated with certain larger client engagements, and w2 compression caused by higher benefit utilization.

Staffing gross profit increased $131, or 31.3%,

to $550 from $419, while gross margin improved to 26.3% from 20.6%, reflecting stronger performance and higher-margin

managed-service arrangements.

For the six-month period, Video Production gross profit

increased by $8 to $29 from $21 and gross margin improved to 26.1% from 25.0%.

and Administrative (“G&A”)

and administrative (“G&A”) expenses for the three months ended March 31, 2026 were $856, a decrease of $167, or 16.3%,

compared to $1,023 in the same period of 2025.

The decrease was primarily attributable to cost reduction measures implemented during

the fourth quarter of 2025, which were fully realized during the first quarter of 2026.

salaries, including payroll taxes and benefits, decreased $164 year-over-year, primarily driven by a $102 reduction in wages and a $17

reduction in payroll taxes and benefits.

In addition, the prior-year quarter included bonus accruals of $45, which were subsequently

reversed later in 2025, compared to no bonus accruals in the current-year quarter.

savings were realized in liability insurance, marketing, payroll processing, and administrative fees, which collectively declined by

approximately $40 compared to the prior-year quarter.

These reductions were partially offset by a $28 increase in contract services expense,

reflecting the Company’s strategic use of lower-cost outsourced resources to support operations following workforce reductions.

expense for the three months ended March 31, 2026 was $20, compared to $52 in the same period of 2025.

The decrease primarily reflected

lower borrowing costs associated with the Company’s receivables purchase programs and a decline in market interest rates.

the quarter, approximately 30% of the Company’s accounts receivable were funded through structured receivables purchase arrangements,

which reduced the need to factor funds, resulting in lower interest and factoring fees.

general and administrative (“SG&A”) expenses for the three months ended June 30, 2026 were $811, a decrease of $155,

or 16.0%, compared with $966 in the same period of 2025.

For the six-month period, SG&A decreased $323, or 16.2%, to $1,666 from

These reductions reflect cost-containment measures implemented during the second half of 2025 and second quarter 2026

resulting in lower recurring costs.

salaries and related benefit costs decreased approximately $133 during the quarter and $325 for the six-month period.

Quarterly office

payroll decreased approximately $128, with additional reductions in payroll taxes and benefits, partially offset by accrued leave expense

and HRA contributions.

costs were down year over by $24 for the second quarter as savings were realized in legal fees, business insurance, payroll

processing, communications, marketing and other administrative costs.

These reductions were partially offset by an increase of

approximately $27 in quarterly contract-services expense, principally reflecting the Company’s use of outsourced accounting resources following internal workforce reductions.

Loaded salaries accounted for $325 (23.1%) of the savings, while non-salary expenses

were reduced by $35.

The paradigm was the same as far as where savings and increases lie, with contract services growing the most by $55,

with approximately $57 of the increase in outsourced accounting services.

expense for the three months ended June 30, 2026 was $23, compared with $36 in the same period of 2025.

For the six-month period, interest

expense decreased to $44 from $88.

The decreases reflected greater use of lower-cost receivables purchase programs, reduced reliance

on traditional factoring for eligible receivables, and lower market interest rates.

For the six months ended June 30, 2026, related-party interest income declined to $66 from $253, interest expense

decreased to $44 from $88, and other expense increased to $136 from $70.

Other income was $3 compared with $1 in 2025.

Company continued to use its receivables purchase programs to reduce the amount and duration of traditional factoring borrowings.

Income (Expense)

expense totaled $76 during the three months ended March 31, 2026, consisting primarily of $43 of legal expenses related to the Vivos

The remaining $33 was attributable to the losses on sale of receivables associated with the Company’s receivables

purchase programs.

Although the volume of receivables sold was comparative to the prior year period, the Company’s overall cost of capital declined due to

lower prime rates and comparatively favorable rates available under the receivables purchase programs.

comparison, other expense totaled $26 during the three months ended March 31, 2025, consisting primarily of $23 related to

the Vivos matter and $3 associated with the disposal of technology-related assets.

currently expects legal expenses associated with the Vivos matter to substantially conclude during the second quarter of 2026.

the three months ended June 30, 2026, other income (credit card rebate) was $3 and other expense was $61 compared with no other

income and other expense of $44 in the prior-year quarter.

Loss on sales of receivables represented $27 of the $61.

Related-party

interest income decreased to zero from $127 following completion of the Vivos settlement.

Including interest income and interest

expense, total other expense, net, was $80 in the 2026 quarter, compared with total other income, net, of $48 in 2025.

For the six months ended June 30, 2026, Other Expense totaled $136 which was $66 higher than $70 in same period a

year ago, as legal fees concluding the Vivos Matter and $60 in l oss

on receivable purchase agreements which were not in place a year ago.

loss improved by $134 to $119 for the second quarter of 2026 from $253 in the prior-year quarter.

However, because of the loss of

related-party interest income following the Vivos settlement and higher other expense, net loss was $206 compared with $205.

For the six-month period, operating loss improved by $430 or 67.8% to $204

from $634 and net loss improved by $213 or 39.6% to $325 from $538.

settlement and related share transfer were completed during the second quarter of 2026.

Although the Company incurred residual and

other legal costs during the quarter, management expects expenses directly associated with enforcement of the Vivos awards and

settlement to substantially conclude, apart from immaterial administrative or wind-down matters.

AND CAPITAL RESOURCES

working capital requirements are driven primarily by payroll for Employer of Record (EOR) field talent, general and administrative (G&A)

salaries, public company expenses, interest on financing arrangements, legal fees related to the enforcement of arbitration awards against

the Vivos Group (which has concluded as of early April), and the timing of collections on client accounts receivable.

Because client

payments, on average, lag field talent payroll by approximately 60 days (not adjusted for invoice purchase programs), working capital

demands can fluctuate and occasionally present short-term challenges.

working capital requirements are driven primarily by payroll for Employer of Record (“EOR”) field talent, corporate salaries,

public-company costs, interest on financing arrangements, and the timing of collections on client accounts receivable.

Enforcement activity

related to the Vivos awards concluded following the settlement and share transfer completed in April 2026, although residual legal costs

were incurred during the quarter.

Because client payments, on average, lag field-talent payroll by approximately 60 days before considering

receivables purchase programs, working capital demands can fluctuate and periodically create short-term liquidity pressure.

to the nature of our EOR business, where most contracted talent are W-2 employees paid known amounts on varying schedules, cash inflows

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stock transfer agent costs, and board compensation), as well as factoring and borrowing-related interest, taxes, and debt service.

Several larger clients previously extended payment terms from approximately

30 days to between 60 and 90 days, increasing working capital demands and lengthening the Company’s cash conversion cycle.

mitigate the impact of these extended payment terms, the Company utilized lower cost receivables purchase

programs with MUFG and JPMorgan, in addition to its factoring facility and client prepayment arrangements, which currently average

approximately $25 biweekly.

Collectively, these programs materially improved liquidity and accelerated cash conversion.

result, trailing twelve months Days Sales Outstanding (DSO) improved from 50 days at the end of March 2025 to 29 days by March 31,

larger clients previously extended payment terms from approximately 30 days to between 60 and 90 days, increasing working capital demands

and lengthening the Company’s cash conversion cycle.

mitigate the impact of these extended payment terms, the Company utilized lower cost receivables purchase programs with MUFG and JPMorgan,

in addition to its factoring facility and client prepayment arrangements, which currently average approximately $25 biweekly.

Collectively,

these programs materially improved liquidity and accelerated cash conversion.

As a result, trailing twelve months Days Sales Outstanding

(DSO) improved from 51 days at the end of June 2025 to 22 days by June 30, 2026.

Financing and Factoring Arrangements

Company maintains a receivables factoring facility with Gulf to provide working capital liquidity.

Under this arrangement,

eligible invoices are sold or advanced at a specified percentage of face value, with fees based on advance rates and interest spreads

Under this arrangement, eligible invoices

are sold or advanced at a specified percentage of face value, with fees based on advance rates and interest spreads above prime.

provides immediate liquidity but requires settlement upon ultimate client payment, and the effective cost of capital is influenced by

2 unchanged sentences

(“MUFG”) for certain invoices related to a large enterprise client.

the JPM arrangement, invoices are purchased at a discount based on a rate at approximately 80 basis points over SOFR for the expected

the JPM arrangement, invoices are purchased at a discount based on a rate of approximately 80 basis points over SOFR for the expected

collection period, typically ranging from 100 to 105 days.

In the first quarter 2026 the SOFR rate average was 3.66%, resulting in our

average basis being 4.46% APR.

the MUFG arrangement invoices are purchased at a discount based on a rate of approximately 235 basis points over SOFR for the expected

collection period, typically at 60 days.

With SOFR averaging 3.66% in the first quarter, our MUFG average rate was 6.01%.

to traditional factoring, both the JPM and MUFG programs provide a lower cost of capital for these receivables but typically result

in funding within five to ten days after invoice approval rather than immediate advance.

During the six months ended June 30, 2026, the applicable SOFR rate averaged

approximately 3.62%, resulting in an average annualized rate of approximately 4.42%.

the MUFG arrangement, invoices are purchased at a discount based on a rate of approximately 235 basis points over SOFR for an expected

collection period of approximately 60 days.

During the six months ended June 30, 2026, the applicable SOFR rate averaged approximately

3.62%, resulting in an average annualized rate of approximately 5.97%.

to traditional factoring, both the JPM and MUFG programs provide a lower cost of capital for these receivables but typically result in

funding within five to ten days after invoice approval rather than immediate advance.

Company evaluates funding alternatives based on cost of capital, timing requirements, and concentration exposure.

of March 31, 2026, 90.9% of accounts receivable were current or less than 30 days past due, compared to 96.3% a year earlier.

Our long-term

credit performance remains strong, with total bad debt over the past seven years amounting to just over two thousand three hundred dollars.

of June 30, 2026, 95.0% of accounts receivable were current compared to 96.8% a year earlier.

Invoices aged 60 days or more

represent 1.0% of our accounts receivable on June 30, 2026 compared to 3.2% a year ago.

Our long-term credit performance remains

strong, with total bad debt over the past seven years amounting to just $2.

Structure and Strategic Flexibility

Following the MMG–Reliability merger, all

300 million authorized shares of the Company’s common stock had been issued in connection with the transaction and related matters.

Effective April 2, 2026, pursuant to the previously

disclosed settlement with the Vivos Group, 253,292,210 shares of the Company’s common stock were transferred to the Company.

April 7, 2026, the Company was notified by Equiniti Shareholder Services, LLC, its transfer agent, that the transfers had been completed

effective April 2, 2026.

the MMG–Reliability merger, all 300 million authorized shares of the Company’s common stock had been issued in connection

with the transaction and related matters.

April 2, 2026, pursuant to the previously disclosed settlement with the Vivos Group, 253,292,210 shares of the Company’s common

stock were transferred to the Company.

On April 7, 2026, the Company was notified by Equiniti Shareholder Services, LLC, its transfer

agent, that the transfers had been completed effective April 2, 2026.

Following the transfer, the shares were no longer outstanding.

The reduction in outstanding shares provides the

Company with increased flexibility to pursue future capital raising activities, mergers and acquisitions, investments in business development

and technology infrastructure, other strategic transactions and growth-oriented initiatives, and general working capital purposes.

As of March 31, 2026, working capital totaled

$6,532, compared to $6,646 as of December 31, 2025 and $6,966 as of March 31, 2025.

Excluding the related-party notes receivable associated

with the Vivos Group, which were subsequently satisfied through the share transfer completed effective April 2, 2026, adjusted working

capital would have been $110 as of March 31, 2026, compared to $290 as of December 31, 2025 and $993 as of March 31, 2025.

reduction in outstanding shares provides the Company with increased flexibility to pursue future capital raising activities, mergers

and acquisitions, investments in business development and technology infrastructure, other strategic transactions and growth-oriented

initiatives, and general working capital purposes.

June 30, 2026, the Company had cash of $470 and a working-capital deficit of $104, compared with working capital of $6,647 as of

December 31, 2025.

The decline in reported working capital primarily reflects the noncash settlement of $6,422 of related-party

notes receivable.

The Company’s liquidity position, however, was also adversely affected by $147 of cash used in operating

activities during the six months ended June 30, 2026, together with the timing of accounts payable, accrued payroll and factoring

During June 2026, the Company also received a board approved $110 unsecured advance from an officer to support

short-term working-capital requirements.

The Company continues to manage its liquidity through the collection of accounts

receivable, availability under its factoring arrangement, management of operating expenditures and evaluation of additional

financing alternatives.

Quantitative and Qualitative Disclosures About Market Risk

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