What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-15 · 151 added, 84 removed, 123 unchanged (66% of the section changed)

63 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 condensed consolidated financial

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

The 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.

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.

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OF OPERATIONS

for the three months ending March 31, 2025, totaled $4,746, representing a decrease of $549 over the $5,295 generated in the first

quarter of 2024.

from our EOR segment declined by $817 or 17.9% compared to $4,572 in the first quarter of 2024.

This decline was primarily

attributable to a $366 reduction in revenue from one of our top three clients in 2024 largely due to the absence of election-related activity in this non-election year.

This client-specific reduction accounted for approximately 67% of the total revenue decline and 45% of the decline

within the EOR segment.

Offsetting this, our other top four revenue-generating clients contributed a combined $280 in incremental revenue

compared to the same period last year.

revenue increased to $932 a growth of $265 or 39.7%, from $667 in the prior-year period.

A key contributor to this growth was a government agency client that accounted for $233, or approximately 88%, of

the total increase in staffing revenue.

Production revenue rose was up $17 with $49 compared to $32 in the first quarter of 2024.

Conversely, our Direct Hire business

generated $10 in revenue in the first quarter of 2025, a decrease of $14,000 from $24,000 in the prior-year period.

for the three months ended June 30, 2025 were $4,718, a decrease of $1,323 or 21.9% compared to $6,041 in the second quarter of 2024.

decline was primarily attributable to our Employer of Record (EOR) segment, which generated $3,573 in revenue during the quarter, compared

to $5,243 in the prior-year period, a decrease of $1,670, which exceeded the overall revenue shortfall by another 10%.

of our top three revenue-producing clients contributed a combined $1,069 reduction in EOR revenue, representing approximately 65.4% of

the total EOR decline.

One of these clients had already begun reducing its media expenditure due to the off-cycle election year and was

further impacted by federal agency policy changes initiated by the Department of Government Efficiency (DOGE), which led to additional

cutbacks in services.

Staffing revenue grew for the second consecutive quarter, increasing $385 (54.0%) to $1,098 in Q2 2025 compared to $713 in Q2 2024.

also reflects an 18% improvement over Q1 2025, where staffing revenue was $932.

The increase was primarily driven by two clients:

start of a newly won bid from a federal agency initiating a managed services agreement in late July 2024, generating $227 in Q2 2025

long-standing private sector client that transitioned a portion of its EOR population to managed staffing services, contributing

$220 to Q2 Staffing revenue.

mix of remaining clients being higher than in 2024.

Direct Hire business generated $13 in revenue for the quarter, a decrease of $14 compared to the same period in 2024.

Video Production

revenue totaled $34, a decrease of $24 (41%) from $58 in the prior-year quarter.

the six-month period ended June 30, 2025, revenues were $9,465, compared to $11,336 in the same period in 2024, a decline of $1,871 (16.5%).

Approximately $886 (47.4%) of the decrease was attributable to a large media client that significantly reduced its spend due to 2025

being a non-election year and an unexpected cut in government-related funding.

Another client, which contributed $501 in the first half

of 2024, merged its media department internally and discontinued EOR support.

Additionally,

our top two clients reduced spending by a combined $373 in the first half of 2025.

However, both have indicated that they expect to restore

spending levels in the second half of the year.

year ago, we ceased supporting one client engagement, and a portion of another, due to elevated risk exposure associated with their

This action resulted in a loss of $489 in revenue over the six-month period, but it reflects our commitment to maintaining

prudent operational oversight.

the decline in EOR revenue, which fell by $2,487 year-over-year in the first half of 2025, our Staffing segment improved by $650, increasing

from $1,380 to $2,030 (47.1%).

This growth was largely driven by the previously mentioned federal agency client, which accounted for

71% of the year-over-year increase and a restructured contract with a major broadcasting client, transitioning it from EOR to a Managed

Staffing Services model beginning in April.

Video Production and Direct Hire experienced modest declines over the six-month period, falling by a combined $34 (24.1%).

we implemented cost restructuring initiatives in Q2 aimed at reducing overhead within the Video Production business unit.

of Revenue / Gross Profit

For the three-month period ended March 31, 2025, gross profit totaled $641,

representing a decline of $68 or 9.6%, compared to $709 in the prior-year period.

Despite the year-over-year decrease in gross profit,

gross margins improved by 10 basis points to 13.5%, up from 13.4% in the first quarter of 2024.

This marks the third increase in gross

margin during the first quarter over the past four years.

shift in revenue mix positively influenced overall margins.

Staffing revenue increased from 12.6% to 19.6% of total revenue, with a gross

margin of 17.9%, contributing approximately 30 basis points of margin improvement.

Additionally, Video Production delivered gains in

both gross profit and margin, adding another 10 basis points.

These improvements offset a combined 30 basis point negative impact from

Direct Hire and EOR services.

Comparatively year over year, Staffing gross margin fell to 17.9% from 18.4% in 2024, mostly because IT

staffing revenue of 37 lifted margins by thirty basis points.

In the first quarter 2025, all our staffing revenue were from media roles.

gross margin was 12.0%, just 10 basis points below the prior-year level of 12.2%.

Given the trend that began in Q2 2024—where EOR

margins declined modestly due to a heavier reliance on Maslow 1099 resources over W-2 employees, this limited margin compression in Q1

2025 was a positive indicator of stabilization.

Hire’s 20 basis point negative impact on margin was attributable to a decline in revenue compared to the prior year quarter.

Direct Hire typically generates gross margins of approximately 90%, even modest revenue shifts have a disproportionate effect on consolidated

margin performance.

Months Ended June 30, 2025 vs.

profit for the three months ended June 30, 2025 was $713, a $91 or 11.3% decrease compared to $804 in the same period in 2024.

Despite the decline in absolute gross profit, the consolidated gross margin improved to 15.1%, up from 13.3% in the prior year

The margin expansion reflects a continued mix shift toward higher-margin services and targeted cost containment

EOR (Employer of Record) gross profit declined $186, gross margin improved from 12.0% to 12.4% in the second quarter 2024, demonstrating

a larger percentage of the EOR business decline coming from our 1099 supplier processing as opposed to our W2 employee assignments.

Staffing revenue growing 54.0% year over year to $1,098, gross profit increased at a stronger clip by $109 from $143 to $252 or 76.2%.

This is represented by Staffing’s GM landing on 22.9%, compared to 20.0% in the prior year.

The level of the increase in the Staffing

shift in lower margin EOR business to higher margin Staffing coupled with Staffing margins moving up from 270 basis points resulted in

$109 increase in GP to what it otherwise would have landed had to lost revenue been equal.

This was because Staffing gross margin for

the quarter was favorably impacted by approximately 362 basis points, in reaching 22.9% due to lower-than-anticipated direct delivery

costs relative to a consistent revenue base for a single client, a paradigm which will likely not occur in the third and fourth quarters.

Production saw flat gross profit of $8, but margin improved to 23.9%, compared to 14.4% in Q2 2024 which was skewed by what was then

a discretionary credit.

Hire posted $13 in revenue, with gross profit of $12, a gross margin of 90.0%, consistent with prior-year trends.

overall improvement in gross margin was driven largely by the stronger contribution from Staffing and more favorable margin performance

across all segments.

Months Ended June 30, 2025 vs.

profit for the six-month period ended June 30, 2025 was $1,355, a decrease of $157, or 10.4%, compared to $1,512 in the prior-year period.

Despite the reduction of gross profit, consolidated gross margin improved to 14.3%, compared to 13.3% in the six months ended June 30,

This improvement reflects a favorable revenue mix shift, notably the reduction of lower-margin Employer of Record (“EOR”)

revenue and higher profitability in our Staffing segment.

shift toward higher-margin Staffing revenue, combined with an improvement in Staffing gross margin to 20.6% from 19.2%, contributed approximately

$100 in additional gross profit.

Absent this margin expansion and revenue mix shift, had the margin on the revenue loss been equal, gross

profit would be down another $100.

gross profit declined $293, or 24.7%, to $894 from $1,187 in the prior year period.

EOR gross margin increased slightly to 12.2%, compared

to 12.1% a year ago.

The year-over-year decline in EOR revenue was driven primarily by reduced spending from our three largest EOR clients

in 2024, which collectively accounted for $111, or 38%, of the reduction.

Additionally, as disclosed elsewhere in this report, two clients

with elevated risk profiles, lack of revenue and gross profit accounted for $100, or 34%, of the total EOR revenue decline.

the Staffing segment benefitted from a $650 increase in revenue and a 140-basis point expansion in gross margin to 20.6%, compared to

19.2% in the same period of 2024.

This improvement was partly attributable to a short-term fixed-fee client arrangement that temporarily

lowered our delivery costs.

The resulting gross profit uplift is estimated at approximately $540, with the associated margin impact accounting

for 130 basis points of the segment’s margin expansion.

Absent this temporary benefit, Staffing gross margin would have been approximately

Production revenue was $84, generating gross profit of $21, a notable increase from $11 in the prior year period.

Gross margin improved

to 25.0%, more than doubling year-over-year, largely due to a one-time credit adjustment extended to a top-tier client as a goodwill

Hire revenue declined by $28 to $23, while gross profit also declined $28 to $21.

Despite the revenue reduction, gross margin remained

robust at 91.3%, down slightly from 95.4% in the comparable period last year.

margin expansion during the six-month period was driven by the decline in lower-margin EOR revenue and higher-margin growth in the Staffing

It is estimated that approximately $46 in additional gross profit and 50 basis points in total gross margin were attributable

to the aforementioned temporary cost reductions in Staffing to a single client.

Excluding these effects, year-to-date gross margin would

likely have been closer to 13.8%.

Nonetheless, gross profit continues to be constrained by ongoing revenue declines in the EOR business,

which remains the largest contributor to consolidated revenue.

and Administrative (“G&A”)

and administrative expenses for the three months ended March 31, 2025, totaled $1,023, compared to $947 in the first quarter of 2024,

representing an unfavorable variance of $76 or 8.0%.

The year-over-year increase was primarily driven by higher loaded salaries, which

rose by $37 or 4.9%, led by $20 increase in accrued leave.

Wages increased by $15.

Overall loaded salaries represented 48.6% of the overall

$76 higher SG&A costs.

costs rose by $39 (51.4%), largely due to a $26 increase in ADP payroll processing fees.

This increase was anticipated, as the first

quarter of 2024 benefited from a one-time holiday incentive tied to our 2023 ADP servicing agreement.

Other notable increases by account

were non recruiting software at $10, and business taxes and licenses at $10 which consist of state minimum tax and franchise fees for

states that are not deemed to be state income taxes.

A year ago, in the first quarter of 2024, we were booking these taxes and fees to state

income taxes.

cost savings were realized in Legal by $11, as Receivership fees a year ago resided here, and recruiting software which a greater portion,

was allocated to COR for staffing and Direct Hire searches.

the three-month period ending March 31, 2025, the Company incurred $52 in interest charges for financing, factoring, and paying an advance

rate (BIP) against its invoices compared with $16 in the same period a year ago.

Income (Expense)

December 29, 2023, the Maryland Circuit Court certified the Company’s arbitration award as a judgment.

Given that the associated

legal costs relate primarily to collection and recovery efforts, the Company began reclassifying these non-core legal expenses to Other

Expense starting in the second quarter of 2024.

This practice has continued, effectively isolating non-operational legal obligations

from operating expenses.

Non-operational

income and expenses totaled a net expense of $26 for the three months ended March 31, 2025, reflecting a $67 or 72.0%, decrease compared

and administrative (“G&A”) expenses for the three months ended June 30, 2025 were $966, a decrease of $20, or 2.0%, compared

to $986 in the same period in 2024.

The year-over-year decline was primarily due to a narrower scope of legal activity in the current

In the first quarter of 2025, legal expenses were limited to matters involving the court-appointed receiver, whereas the prior-year

period included additional legal costs related to restructuring activities and obligations associated with the non-award Vivos Group

The $26 net expense in the first quarter of 2025 also includes $1 in credit card rebate income.

This decline was primarily attributable to lower compensation-related expenses resulting from a slight

reduction in average headcount, which declined from 22.8 to 22.1 year over year.

The corresponding $61, or 9.3%, decrease in fully loaded

salaries, including payroll taxes and benefits, reflected several contributing factors:

(i) a $39 reduction related to the suspension

of the Company’s 2025 bonus program, (ii) a $12 decrease in health and welfare costs, and (iii) a $32 favorable variance in accrued

leave expense.

G&A expenses increased by $41 to $307, driven by a $26 rise in human resources-related legal fees, a reclassification of Business

License & Taxes from income tax expense to SG&A, and a $5 increase in software expenses.

Non-salary costs increased by $41 to

$307, primarily due to a $26 increase in HR-related legal fees, a reclassification of Business License & Taxes from income tax expense

to SG&A, and a $5 increase in software-related costs.

December 29, 2023, the Maryland Circuit Court certified an arbitration award as a judgment.

As a result, expenses related to the award

are now focused on collection and recovery.

Beginning in 2024, the Company reclassified legal expenses associated with non-core operational

matters, including those related to the Receiver, from SG&A to Other Expense.

the six-month period ended June 30, 2025, G&A expenses totaled $1,989, an increase of $55, or 2.9%, compared to $1,933 in the same

period in 2024.

While fully loaded salaries declined by $25 due to the aforementioned headcount and bonus reductions, non-salary expenses

increased by $80.

This increase was primarily driven by (i) $26 in higher legal fees related to a human resources matter, and (ii) a

$26 increase in payroll processing costs, attributable to the absence of a first-quarter ADP fee waiver received in the prior year.

increases included $19 in Business License & Taxes, due to reclassification, $10 in software expenses related to platform improvements,

and $9 in depreciation expense.

These increases were partially offset by reductions in staff event costs, business insurance, and consulting

expenses, each of which declined by approximately $6.

Company incurred $36 in interest expense during the three months ended June 30, 2025, compared to $20 for the same period in 2024.

the six months ended June 30, 2025, total interest expense was $88, up from $35 in the prior-year period.

These amounts reflect charges

related to financing, invoice factoring, and the use of an advance rate (BIP) program against client receivables.

The year-over-year

increase in interest expense is primarily attributable to the need to finance a greater portion of bi-weekly payroll obligations through

external sources.

While the volume of factored invoices rose, the Company’s average cost of capital declined during 2025, due to

a lower prime rate environment and the favorable impact of structured invoice sales programs.

Income (Expense)

non-operational one time or short-term costs, in the second quarter totaled $44 consisting solely of in Receiver costs versus $136

which included restructuring-based employee matters and other Vivos related legal charges, in the same period 2024.

there were Receiver and arbitration award related costs being reclassed from SG&A legal.

In the fourth quarter of 2024, we closed

out the employee and the SWC matters.

the six months ended June 30, 2025, Other Expense was $71 consisting exclusively of receivership activities, compared to $229 which consisted

of SWC, and employee severance and related legal fees.

AND CAPITAL RESOURCES

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of 2023 to 49 days by March 2024 and has averaged 51 days since.

For the trailing twelve months ended March 31, 2025, our DSO remained

For the trailing twelve months ended June 30, 2025, our DSO remained

strong at 50.96 compared to 49.5 in the prior year period.

BIP and Receivable Purchase Programs allow MMG to receive payment for 100% of client-approved invoices, net of a flat interest rate.

For Amex and MUFG programs, rates vary based on daily invoice volume, with higher volume reducing the effective rate.

For the MUFG program, rates vary based on daily invoice volume, with higher volume reducing the effective rate.

The JP Morgan agreement,

executed on April 23, 2025, purchases one of our largest client’s invoices within 15 days of approval, using the Secured Overnight

executed on April 23, 2025, purchases only one of our largest client’s invoices within 15 days of approval, using the Secured Overnight

Financing Rate (SOFR) plus an 80-basis point program fee.

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of which involve delayed issuance of purchase orders.

of March 31, 2025, 96.3% of accounts receivable were current (aged <31 days), compared to 96.5% a year earlier.

Our long-term credit

performance remains strong, with total bad debt over the past five years amounting to just one hundred and eighty dollars.

of June 30, 2025, 96.8% of accounts receivable were current (aged <31 days), compared to 97.5% a year earlier.

Our long-term credit performance

remains strong, with total bad debt over the past five years amounting to just one hundred and eighty dollars.

primary uses of cash include payments to field talent, corporate and staff employee payroll and related liabilities, operating expenses,

5 unchanged sentences

financing to ensure timely fulfillment of payroll and other obligations.

of March 31, 2025, the Vivos Debtors owed the Company $5,973 in notes receivable, which includes a $3,000 defaulted promissory note and

of June 30, 2025, the Vivos Debtors owed the Company $6,100 in notes receivable, which includes a $3,000 defaulted promissory note and

a $750 unpaid tax obligation dating back to December 2019.

6 unchanged sentences

is no assurance as to the timing of such actions.

of March 31, 2025, our working capital totaled $6,966, compared to $7,296 as of December 31, 2024.

of June 30, 2025, our working capital totaled $6,773, compared to $7,296 as of December 31, 2024.

Adjusting for the notes receivable

related to the Vivos Debtors, our working capital stood at $673, compared to $1,449 as of December 31, 2024.

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