UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2021

 

     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________:

 

Commission file number: 001-40563

 

RECRUITER.COM GROUP, INC.

(Exact name of registrant as specified in its charter)

   

Nevada

 

90-1505893

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

500 Seventh Avenue

New York, New York

 

10018

(Address of principal executive offices)

 

(Zip Code)

 

Issuer’s telephone number (855) 931-1500

 

_______________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

Common Stock Purchase Warrants

 

RCRT

RCRTW

 

The Nasdaq Stock Market LLC

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒      No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes       No ☒

 

As of August 12, 2021, the number of shares of the registrant’s common stock outstanding was 13,551,878.

 

 

 

 

 

 

 

Page

 

 

 

 

number

 

Part I - Financial Information

 

 

 

Item 1.

Financial Statements (Unaudited)

 

3

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020

 

3

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020

 

4

 

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) for the three and six months ended June 30, 2021 and 2020

 

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

28

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

39

 

Item 4.

Controls and Procedures

 

39

 

 

 

 

 

 

Part II - Other Information

 

 

 

Item 1.

Legal Proceedings

 

40

 

Item 1A.

Risk Factors

 

40

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

 

Item 3.

Defaults Upon Senior Securities

 

41

 

Item 4.

Mine Safety Disclosures

 

41

 

Item 5.

Other Information

 

41

 

Item 6.

Exhibits

 

42

 

 

2

  

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

  

Recruiter.com Group, Inc.

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 (unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$86,898

 

 

$99,906

 

Accounts receivable, net of allowance for doubtful accounts of $80,176 and $33,000, respectively

 

 

2,916,391

 

 

 

942,842

 

Accounts receivable - related parties

 

 

46,726

 

 

 

41,124

 

Prepaid expenses and other current assets

 

 

353,374

 

 

 

167,045

 

Investments - marketable securities

 

 

890

 

 

 

1,424

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

3,404,279

 

 

 

1,252,341

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $2,405 and $1,828, respectively

 

 

1,058

 

 

 

1,635

 

Right of use asset - related party

 

 

103,953

 

 

 

140,642

 

Deferred offering costs

 

 

473,896

 

 

 

-

 

Intangible assets, net

 

 

5,645,009

 

 

 

795,864

 

Goodwill

 

 

4,929,897

 

 

 

3,517,315

 

 

 

 

 

 

 

 

 

 

Total assets

 

$14,558,092

 

 

$5,707,797

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$1,168,155

 

 

$616,421

 

Accounts payable - related parties

 

 

1,194,821

 

 

 

779,928

 

Accrued expenses

 

 

827,612

 

 

 

423,237

 

Accrued expenses - related party

 

 

9,647

 

 

 

8,000

 

Accrued compensation

 

 

1,192,888

 

 

 

617,067

 

Accrued compensation - related party

 

 

116,000

 

 

 

122,500

 

Accrued interest

 

 

376,272

 

 

 

60,404

 

Contingent consideration for acquisitions

 

 

2,000,118

 

 

 

-

 

Liability on sale of future revenues, net of discount of $0 and $2,719, respectively

 

 

-

 

 

 

8,185

 

Deferred payroll taxes

 

 

159,032

 

 

 

159,032

 

Other liabilities

 

 

14,493

 

 

 

14,493

 

Loans payable - current portion

 

 

30,653

 

 

 

28,249

 

Convertible notes payable, net of unamortized discount and costs of $1,683,662 and $1,205,699, respectively

 

 

4,154,697

 

 

 

1,905,826

 

Refundable deposit on preferred stock purchase

 

 

285,000

 

 

 

285,000

 

Warrant derivative liability

 

 

8,921,615

 

 

 

11,537,997

 

Lease liability - current portion - related party

 

 

73,378

 

 

 

73,378

 

Deferred revenue

 

 

476,920

 

 

 

51,537

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

21,001,301

 

 

 

16,691,254

 

 

 

 

 

 

 

 

 

 

Lease liability - long term portion - related party

 

 

30,575

 

 

 

67,264

 

Loans payable - long term portion

 

 

33,965

 

 

 

73,541

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

21,065,841

 

 

 

16,832,059

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' (Deficit):

 

 

 

 

 

 

 

 

Preferred stock, 10,000,000 shares authorized, $0.0001 par value: undesignated: 7,013,600 shares authorized; no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

-

 

 

 

-

 

Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; 376,275 and 527,795 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

39

 

 

 

54

 

Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 731,845 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

74

 

 

 

74

 

Preferred stock, Series F, $0.0001 par value; 200,000 shares authorized; 46,847 and 64,382 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

5

 

 

 

7

 

Common stock, $0.0001 par value; 100,000,000 shares authorized; 3,765,739 and 2,203,009 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

377

 

 

 

220

 

Additional paid-in capital

 

 

30,768,568

 

 

 

23,400,408

 

Accumulated deficit

 

 

(37,276,812)

 

 

(34,525,025)
Total stockholders' (deficit)

 

 

(6,507,749)

 

 

(11,124,262)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' (deficit)

 

$14,558,092

 

 

$5,707,797

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

Recruiter.com Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three

Months Ended

 

 

Three

Months Ended

 

 

Six

Months Ended

 

 

Six

Months Ended

 

 

 

June 30, 2021

 

 

June 30, 2020

 

 

June 30, 2021

 

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue (including related party revenue of $0, $7,020, $970 and $13,430, respectively)

 

$4,380,894

 

 

$1,853,414

 

 

$7,545,439

 

 

$4,166,537

 

Cost of revenue (including related party costs of $212,279, $298,172, $417,540 and $954,096, respectively)

 

 

2,946,084

 

 

 

1,418,242

 

 

 

5,200,994

 

 

 

3,169,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

1,434,810

 

 

 

435,172

 

 

 

2,344,445

 

 

 

997,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

75,006

 

 

 

15,068

 

 

 

132,549

 

 

 

40,311

 

Product development (including related party expense of $54,696, $57,401, $112,684 and $118,380, respectively)

 

 

75,004

 

 

 

57,401

 

 

 

145,664

 

 

 

140,494

 

Amortization of intangibles

 

 

675,095

 

 

 

159,173

 

 

 

834,268

 

 

 

318,346

 

General and administrative (including share based compensation expense of $1,112,834, $709,230, $1,615,241 and $1,650,202, respectively, and related party expenses of $106,149, $121,280, $232,781 and $244,198, respectively)

 

 

3,062,597

 

 

 

1,626,362

 

 

 

5,608,502

 

 

 

3,775,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

3,887,702

 

 

 

1,858,004

 

 

 

6,720,983

 

 

 

4,274,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(2,452,892)

 

 

(1,422,832)

 

 

(4,376,538)

 

 

(3,277,357)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense (including related party interest expense of $18,193, $0, $30,466 and $0, respectively)

 

 

(1,592,822)

 

 

(203,874)

 

 

(3,020,410)

 

 

(248,080)
Initial derivative expense

 

 

-

 

 

 

(3,340,554)

 

 

(3,585,983)

 

 

(3,340,554)

Change in derivative value due to anti-dilution adjustments

 

 

-

 

 

 

(2,642,175

)

 

 

-

 

 

 

(2,642,175

)

Change in fair value of derivative liability

 

 

7,574,750

 

 

 

(339,088)

 

 

8,203,371

 

 

 

(904,176)
Forgiveness of debt income

 

 

-

 

 

 

-

 

 

24,925

 

 

 

-
Grant income

 

 

-

 

 

 

7,262

 

 

 

3,382

 

 

 

7,262

 

Net recognized gain (loss) on marketable securities

 

 

(757)

 

 

46

 

 

 

(534)

 

 

(18,740)

Total other income (expenses)

 

 

5,981,171

 

 

 

(6,518,383)

 

 

1,624,751

 

 

 

(7,146,463)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

 

3,528,279

 

 

 

(7,941,215)

 

 

(2,751,787)

 

 

(10,423,820)
Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net Income (loss)

 

 

3,528,279

 

 

 

(7,941,215)

 

 

(2,751,787)

 

 

(10,423,820)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share - basic

 

$0.99

 

 

$(4.11)

 

$(0.89)

 

$(5.78)

 Net income (loss) per common share - diluted

 

$

 (0.69

 

$

 (4.11

 

$

 (0.89

 

$

 (5.78

Weighted average common shares - basic

 

 

3,560,745

 

 

 

1,933,812

 

 

 

3,091,146

 

 

 

1,803,358

 

 Weighted average common shares – diluted

 

 

 5,879,481

 

 

 

 1,933,812

 

 

 

 3,091,146

 

 

 

 1,803,358

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

  

Recruiter.com Group, Inc.

Condensed Consolidated Statements of Changes in Stockholders' (Deficit)

For the Three and Six Months ended June 30, 2021 and 2020

(Unaudited)

 

 

 

Preferred stock Series D

 

 

Preferred stock Series E

 

 

Preferred stock Series F

 

 

Common stock

 

 

Common stock to be issued for Acquisitions

 

 

Additional Paid in

 

 

Accumulated

 

 

Total Stockholders'

 

 

 

 Shares

 

 

Amount

 

 

 Shares

 

 

Amount

 

 

 Shares

 

 

Amount

 

 

 Shares

 

 

Amount

 

 

 Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance as of December 31, 2020

 

 

527,795

 

 

$54

 

 

 

731,845

 

 

$74

 

 

 

64,382

 

 

$7

 

 

 

2,203,009

 

 

$220

 

 

$-

 

 

$-

 

 

$23,400,408

 

 

$(34,525,025)

 

$(11,124,262)

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

502,407

 

 

 

-

 

 

 

502,407

 

Issuance of common shares for Scouted acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

175,421

 

 

 

18

 

 

 

15,591

 

 

 

113,036

 

 

 

1,271,786

 

 

 

-

 

 

 

1,384,840

 

Issuance of shares for Upsider acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

271,153

 

 

 

2,135,331

 

 

 

-

 

 

 

-

 

 

 

2,135,331

 

Issuance of common shares for accrued compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,625

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,425

 

 

 

-

 

 

 

16,425

 

issuance of common shares upon conversion of debentures and accrued interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,485

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

199,396

 

 

 

-

 

 

 

199,403

 

Cancellation of Series D preferred stock

 

 

(8,755)

 

 

(1)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

Reclassification of derivative liability upon cancellation of Series D warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

373,070

 

 

 

-

 

 

 

373,070

 

Issuance of common shares upon conversion of Series D preferred stock

 

 

(74,453)

 

 

(7)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

372,266

 

 

 

37

 

 

 

-

 

 

 

-

 

 

 

(30)

 

 

-

 

 

 

-

 

Issuance of common shares upon conversion of Series F preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,535)

 

 

(2)

 

 

87,674

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

(7)

 

 

-

 

 

 

-

 

Net loss three months ended March 31, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,280,066)

 

 

(6,280,066)

Balance as of March 31, 2021

 

 

444,587

 

 

$46

 

 

 

731,845

 

 

$74

 

 

 

46,847

 

 

$5

 

 

 

2,911,480

 

 

$291

 

 

 

286,744

 

 

$2,248,367

 

 

$25,763,456

 

 

$(40,805,091)

 

$(12,792,852)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

960,334

 

 

 

-

 

 

 

960,334

 

Issuance of common shares for Scouted acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,591

 

 

 

2

 

 

 

(15,591)

 

 

(113,036)

 

 

113,034

 

 

 

-

 

 

 

-

 

Issuance of shares for Upsider acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

271,153

 

 

 

27

 

 

 

(271,153)

 

 

(2,135,331)

 

 

2,135,304

 

 

 

-

 

 

 

-

 

Issuance of shares for One Wire acquisition

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

155,327

 

 

 

16

 

 

 

-

 

 

 

-

 

 

 

1,436,761

 

 

 

-

 

 

 

1,436,777

 

Issuance of shares for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,000

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

152,498

 

 

 

-

 

 

 

152,500

 

issuance of common shares upon conversion of debentures

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,687

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

67,211

 

 

 

-

 

 

 

67,213

 

Issuance of common shares for accounts payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

32,941

 

 

 

3

 

 

 

-

 

 

 

-

 

 

 

139,997

 

 

 

-

 

 

 

140,000

 

Issuance of common shares upon conversion of Series D preferred stock

 

 

(68,312)

 

 

(7)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

341,560

 

 

 

34

 

 

 

-

 

 

 

-

 

 

 

(27)

 

 

-

 

 

 

-

 

Net income three months ended June 30, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,528,279

 

 

 

3,528,279

 

Balance as of June 30, 2021

 

 

376,275

 

 

$

39

 

 

 

731,845

 

 

74

 

 

 

46,847

 

 

5

 

 

 

3,765,739

 

 

377

 

 

 

-

 

 

$-

 

 

30,768,568

 

 

(37,276,812)

 

(6,507,749)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

 

 

454,546

 

 

$46

 

 

 

734,986

 

 

$74

 

 

 

139,768

 

 

$14

 

 

 

1,447,863

 

 

$145

 

 

 

-

 

 

$-

 

 

$18,203,265

 

 

$(17,488,188)

 

$715,356

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

870,722

 

 

 

-

 

 

 

870,722

 

Series D Preferred stock issued for accrued penalties

 

 

106,134

 

 

 

11

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,929,505

 

 

 

-

 

 

 

1,929,516

 

Issuance of common shares upon conversion of Series D preferred stock

 

 

(12,900)

 

 

(1)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

64,500

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

(5)

 

 

-

 

 

 

-

 

Issuance of common shares upon conversion of Series E preferred stock

 

 

-

 

 

 

-

 

 

 

(3,141)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,704

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

(2)

 

 

-

 

 

 

-

 

Issuance of common shares upon conversion of Series F preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(64,272)

 

 

(6)

 

 

321,366

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

(26)

 

 

-

 

 

 

-

 

Net loss three months ended March 31, 2020

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,482,605)

 

 

(2,482,605)

Balance as of March 31, 2020

 

 

547,780

 

 

 

56

 

 

 

731,845

 

 

 

74

 

 

 

75,496

 

 

 

8

 

 

 

1,849,433

 

 

 

185

 

 

 

-

 

 

 

-

 

 

 

21,003,459

 

 

 

(19,970,793)

 

 

1,032,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

665,230

 

 

 

-

 

 

 

665,230

 

Sale of Series D Preferred stock units

 

 

1,375

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

Reclassification of warrant derivative to liabilities related to Series D unit sale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(26,465)

 

 

-

 

 

 

(26,465)

Issuance of shares for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

36,000

 

 

 

4

 

 

 

-

 

 

 

-

 

 

 

120,496

 

 

 

-

 

 

 

120,500

 

Issuance of common shares upon conversion of Series D preferred stock

 

 

(12,560)

 

 

(1)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

62,800

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

(5)

 

 

-

 

 

 

-

 

Issuance of common shares upon conversion of Series F preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,114)

 

 

(1)

 

 

55,570

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

(5)

 

 

-

 

 

 

-

 

Net loss three months ended June 30, 2020

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,941,215)

 

 

(7,941,215)

Balance as of June 30, 2020

 

 

536,595

 

 

$55

 

 

 

731,845

 

 

$74

 

 

 

64,382

 

 

$7

 

 

 

2,003,803

 

 

$201

 

 

 

-

 

 

$-

 

 

$21,787,710

 

 

$(27,912,008)

 

$(6,123,961)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

Recruiter.com Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2021

 

 

June 30, 2020

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net loss

 

$(2,751,787)

 

$(10,423,820)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

834,845

 

 

 

318,923

 

Bad debt expense

 

 

58,726

 

 

 

12,000

 

Gain on forgiveness of debt

 

 

(24,925)

 

 

-

 

Equity based compensation expense

 

 

1,615,241

 

 

 

1,650,202

 

Recognized loss on marketable securities

 

 

534

 

 

 

18,740

 

Expenses paid through financings

 

 

-

 

 

 

32,500

 

Loan principal paid directly through grant

 

 

(2,992)

 

 

(5,964)

Amortization of debt discount and debt costs

 

 

2,486,111

 

 

 

214,885

 

Initial derivative expense

 

 

3,585,983

 

 

 

3,340,554

 

Change in derivative value due to anti-dilution adjustments

 

 

-

 

 

 

2,642,175

 

Change in fair value of derivative liability

 

 

(8,203,371)

 

 

904,176

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

(2,032,275)

 

 

19,964

 

Increase in accounts receivable - related parties

 

 

(5,602)

 

 

 (10,115)

 

(Increase) decrease in prepaid expenses and other current assets

 

 

(186,329)

 

 

269,051

 

Increase in accounts payable and accrued liabilities

 

 

1,900,033

 

 

 

(118,364)

Increase in accounts payable and accrued liabilities - related parties

 

 

410,040

 

 

 

 103,723

 

Increase in other liabilities

 

 

-

 

 

 

49,554

 

Increase (decrease) in deferred revenue

 

 

425,383

 

 

 

(58,785)

Net cash used in operating activities

 

 

(1,890,385)

 

 

(1,040,601)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Proceeds from sale of marketable securities

 

 

-

 

 

 

17,009

 

Cash and receivables acquired

 

 

220,153

 

 

 

 -

 

Cash paid for acquisitions

 

 

(249,983)

 

 

-

 

Net cash (used) provided by investing activities

 

 

(29,830)

 

 

17,009

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from notes

 

 

250,000

 

 

 

398,545

 

Proceeds from convertible notes

 

 

2,153,200

 

 

 

2,226,000

 

Deferred offering costs

 

 

(473,896)

 

 

-

 

Payments of notes

 

 

(11,193)

 

 

(7,396)

Advances on receivables

 

 

-

 

 

 

180,778

 

Repayments of advances on receivables

 

 

-

 

 

 

(112,622)

Repayments of sale of future revenues

 

 

(10,904)

 

 

(261,866)

Deposit on purchase of preferred stock

 

 

-

 

 

 

25,000

 

Net cash provided by financing activities

 

 

1,907,207

 

 

 

2,448,439

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(13,008)

 

 

1,424,847

 

Cash, beginning of period

 

 

99,906

 

 

 

306,252

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$86,898

 

 

$1,731,099

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$159,325

 

 

$86,438

 

Cash paid during the period for income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Original issue discount deducted from convertible note proceeds

 

$342,554

 

 

$328,125

 

Debt costs deducted from convertible note proceeds

 

$334,800

 

 

$366,500

 

Intangible assets acquired

 

$7,066,165

 

 

$-

 

Notes and accrued interest converted to common stock

 

$356,689

 

 

$-

 

Common stock issued/to be issued for asset acquisitions

 

$4,956,948

 

 

$-

 

Notes payable and accrued interest exchanged for debentures

 

$252,430

 

 

$-

 

Accounts payable paid with common stock

 

$140,000

 

 

 -

 

Accrued compensation paid with common stock

 

$16,425

 

 

$-

 

Warrant derivative liability extinguished

 

$373,070

 

 

$2,642,175

 

Liabilities assumed in acquisition

 

$89,089

 

 

$-

 

Warrant derivative liability at inception

 

$5,960,059

 

 

$5,625,519

 

Preferred stock issued for accrued penalties

 

$-

 

 

$1,929,516

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

RECRUITER.COM GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(UNAUDITED)

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

General

 

Recruiter.com Group, Inc., a Nevada corporation (“RGI”), is a holding company based in New York, New York. The Company has seven subsidiaries, Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), Recruiter.com Consulting, LLC, VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted Inc. (“Scouted”), Recruiter.com Upsider Inc. (“Upsider”) and Recruiter.com OneWire Inc. (“OneWire”) . RGI and its subsidiaries as a consolidated group is hereinafter referred to as the “Company.” The Company operates in Connecticut, Texas, New York, and California.

 

Recruiter.com operates an on-demand recruiting platform (the “Platform”) we have developed to help disrupt the $120 billion recruiting and staffing industry. Recruiter.com combines an online hiring platform with the world’s largest network of over 30,000 small and independent recruiters. Businesses of all sizes recruit talent faster using the Recruiter.com platform, which is powered by virtual teams of Recruiters On Demand and Video and AI job-matching technology.

 

Our website, www.Recruiter.com, provides access to over 30,000 (as of the date of the filing) recruiters and utilizes an innovative web platform, with integrated AI-driven candidate to job matching and video screening software to more easily and quickly source qualified talent.

 

We help businesses accelerate and streamline their recruiting and hiring processes by providing on-demand recruiting services and technology. Recruiter.com leverages our expert network of recruiters to place recruiters on a project basis, aided by cutting edge artificial intelligence-based candidate sourcing, matching and video screening technologies. We operate a cloud-based scalable SaaS-enabled marketplace platform for professional hiring, which provides prospective employers access to a network of thousands of independent recruiters from across the country and worldwide, with a diverse talent sourcing skillset that includes information technology, accounting, finance, sales, marketing, operations, and healthcare specializations.

 

Through our Recruiting Solutions division, we also provide consulting and staffing, and full-time placement services to employers which leverages our platform and rounds out our services.

 

Our mission is to grow our most collaborative and connective global platform to connect recruiters and employers and become the preferred solution for hiring specialized talent.

 

Reincorporation

 

On May 13, 2020, the Company effected a reincorporation from the State of Delaware to the State of Nevada. Following the approval by the Company’s stockholders at a special meeting held on May 8, 2020, Recruiter.com Group, Inc., a Delaware corporation (“Recruiter.com Delaware”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Recruiter.com Group, Inc., a Nevada corporation and a wholly owned subsidiary of Recruiter.com Delaware (“Recruiter.com Nevada”), pursuant to which Recruiter.com Delaware merged with and into Recruiter.com Nevada, with Recruiter.com Nevada continuing as the surviving entity. Simultaneously with the reincorporation, the number of shares of common stock the Company is authorized to issue was increased from 31,250,000 shares to 250,000,000 shares. On June 18, 2021 the Company filed an Amendment to the Articles of Incorporation to effectuate a reverse split of the Company’s issued and outstanding common stock at an exchange ratio of 1-for-2.5. The reverse stock split was effective as of June 18, 2021.  Simultaneously with the reverse stock split, the company reduced the authorized shares from 250,000,000 to 100,000,000. All share and per share data in the accompanying unaudited consolidated financial statements and footnotes has been retroactively adjusted to reflect the effects of the reverse stock split.

 

The reincorporation did not result in any change in the corporate name, business, management, fiscal year, accounting, location of the principal executive office, or assets or liabilities of the Company.

 

Principles of Consolidation and Basis of Presentation

 

The unaudited condensed consolidated financial statements include the accounts of RGI and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

 

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto of RGI for the years ended December 31, 2020 and 2019, filed with the SEC on March 9, 2021. The December 31, 2020 balance sheet is derived from those statements.

 

7

  

In the opinion of management, these unaudited interim financial statements as of and for the three and six months ended June 30, 2021 and 2020 include all adjustments (consisting of normal recurring adjustments and non-recurring adjustments necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented). The results for three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future period. All references to June 30, 2021 and 2020 in these footnotes are unaudited.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may differ from management’s estimates and assumptions. Included in these estimates are assumptions used to estimate collection of accounts receivable, fair value of marketable securities, fair value of assets acquired and liabilities assumed in an asset acquisition and the estimated useful life of assets acquired, fair value of contingent consideration in asset acquisitions, fair value of derivative liabilities, fair value of securities issued for acquisitions, fair value of assets acquired and liabilities assumed in business combinations, fair value of intangible assets and goodwill, valuation of lease liabilities and related right of use assets, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.

 

Cash and Cash Equivalents

 

The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances as of June 30, 2021. There were no uninsured balances as of June 30, 2021 and December 31, 2020. The Company had no cash equivalents during or at the end of either period.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

 

8

  

We generate revenue from the following activities: In prior reporting periods we had two revenue streams called Marketing Solutions and Career Solutions.  We are now combining these streams and calling them Marketplace. We are also introducing a new revenue stream titled Software Subscriptions. This entails multi-month contract commitments based on the Company providing agreed upon services each month. Details on this revenue stream and revenue recognition are presented below:

 

Recruiters on Demand: Consists of a consulting and staffing service specifically for the placement of professional recruiters, which we market as Recruiters on Demand. Recruiters on Demand is a flexible, time-based solution that provides businesses of all sizes access to recruiters on an outsourced, virtual basis for help with their hiring needs. As with other consulting and staffing solutions, we procure for our employer clients qualified professional recruiters, and then place them on assignment with our employer clients. Revenue earned through Recruiters on Demand is derived by billing the employer clients for the placed recruiters’ ongoing work at an agreed-upon, time-based rate. We directly source recruiter candidates from our network of recruiters on the Platform, as the recruiter user base of our Platform has the proper skill-set for recruiting and hiring projects. We had previously referred to this service in our revenue disaggregation disclosure in our consolidated financial statements as license and other, but on July 1, 2020, we rebranded as Recruiters on Demand.

 

Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing such personnel with the employer, but with us or our providers acting as the employer of record, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for full-time placement hiring. This process includes employers informing us of open consulting and temporary staffing opportunities and projects, sourcing qualified candidates through the Platform and other similar means, and, finally, the employer selecting our candidates for placement after a process of review and selection. We bill these employer clients for our placed candidates’ ongoing work at an agreed-upon, time-based rate, typically on a weekly schedule of invoicing.

 

Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform or other communications. We source qualified candidate referrals for the employers’ available jobs through independent recruiter users that access our Platform and other tools. We support and supplement the independent recruiters’ efforts with dedicated internal employees we call our internal talent delivery team. Our talent delivery team selects and delivers candidate profiles and resumes to our employer clients for their review and ultimate selection. Upon the employer hiring one or more of our candidate referrals, we earn a “full-time placement fee”, an amount separately negotiated with each employer client. The full-time placement fee is typically either a percentage of the referred candidates’ first year’s base salary or an agreed-upon flat fee.

 

 

Software Subscriptions: We offer a subscription to our web-based platforms that help employers recruit talent. Our platforms allow our customers to source, contact, screen and sort candidates using data science, advanced email campaigning tools, and predictive analytics. As part of our software subscriptions, we offer enhanced support packages and on-demand recruiting support services for an additional fee. Depending on the subscription type, additional fees may be charged when we place a candidate with our customer. In such cases, if the candidate ceases to be employed by the customer within 90 days (the 90-day guarantee), the Company refunds the customer in full for all fees paid by the customer.

 

Marketplace: Our Marketplace category comprises services for businesses and individuals that leverage our online presence.  For businesses, this includes sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketplace. For individuals, Marketplace includes services to assist with career development and advancement, including a resume distribution service which involves promoting these job seekers’ profiles and resumes to assist with their procuring employment, and upskilling and training. Our resume distribution service allows a job seeker to upload his/her resume to our database, which we then distribute to our network of recruiters on the Platform. We earn revenue from a one-time flat fee for this service. We also offer a recruiter certification program which encompasses our recruitment related training content, which we make accessible through our online learning management system. Customers of the recruiter certification program use a self-managed system to navigate through a digital course of study. Upon completion of the program, we issue a certificate of completion and make available a digital badge to certify their achievement for display on their online recruiter profile on the Platform. Additionally, we partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.

 

We have a sales team and sales partnerships with direct employers as well as Vendor Management System companies and Managed Service companies that help create sales channels for clients that buy staffing, direct hire, and sourcing services. Once we have secured the relationship and contract with the interested Enterprise customer the delivery and product teams will provide the service to fulfill any or all of the revenue segments.

 

9

  

Revenues as presented on the statement of operations represent services rendered to customers less sales adjustments and allowances.

 

Recruiters on Demand services are billed to clients as either monthly subscriptions or time-based billings. Revenues for Recruiters on Demand are recognized on a gross basis when each monthly subscription service is completed.

 

Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in the net service revenues and equivalent amounts of reimbursable expenses are included in costs of revenue. We record substantially all revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of this line of revenues and expenses. We have concluded that gross reporting is appropriate because we have the task of identifying and hiring qualified employees, and our discretion to select the employees and establish their compensation and duties causes us to bear the risk for services that are not fully paid for by customers. Consulting and staffing revenues are recognized when the services are rendered by the temporary employees. Payroll and related taxes of certain employees that are placed on temporary assignment are outsourced to third party payors or related party payors. The payors pay all related costs of employment for these employees, including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. We assume the risk of acceptability of the employees to customers. Payments for consulting and staffing services are typically due within 90 days of completion of services.

 

Full time placement revenues are recognized on a gross basis when the guarantee period specified in each customer’s contract expires. No fees for direct hire placement services are charged to the employment candidates. Any payments received prior to the expiration of the guarantee period are recorded as a deferred revenue liability. Payments for recruitment services are typically due within 90 days of completion of services.

 

Software subscription revenues are recognized over the term of the subscription for access to services and/or our web-based platform. Revenue is recognized monthly over the subscription term. Any payments received prior to the time passing to provide the services are recorded as a deferred revenue liability. Revenue generated from the enhanced support package and on-demand support are recognized at the point-in-time when the service is provided. Revenue generated from placement fees that are related to the software subscription are recognized at the point-in-time when the 60 or 90-day guarantee expires.

  

Marketplace advertising revenues are recognized on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services. Marketplace career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point at which the performance obligations are satisfied. Payments for career services are typically due upon distribution or completion of services.

 

Deferred revenue results from transactions in which the Company has been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

 

Sales tax collected is recorded on a net basis and is excluded from revenue.

 

Contract Assets

 

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s balance sheet are from contracts with customers.

 

Contract Costs

 

Costs incurred to obtain a contract are capitalized unless they are short term in nature. As a practical matter, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of June 30, 2021 or December 31, 2020.

 

Contract Liabilities - Deferred Revenue

 

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

 

For each of the identified periods, revenues can be categorized into the following:

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Recruiters on Demand

 

$2,754,427

 

 

$231,831

 

Consulting and staffing services

 

 

4,230,104

 

 

 

3,490,056

 

Permanent placement fees

 

 

228,162

 

 

 

290,767

 

Software Subscriptions

 

 

175,790

 

 

 

0

 

Marketplace Solutions

 

 

156,956

 

 

 

153,883

 

Total revenue

 

$7,545,439

 

 

$4,166,537

 

 

 

 

Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

Recruiters on Demand

 

$1,796,948

 

 

$46,856

 

Consulting and staffing services

 

 

2,157,658

 

 

 

1,576,662

 

Permanent placement fees

 

 

188,196

 

 

 

153,140

 

Software Subscriptions

 

 

175,790

 

 

 

0

 

Marketplace Solutions

 

 

62,302

 

 

 

76,756

 

Total revenue

 

$4,380,894

 

 

$1,853,414

 

 

10

 

As of June 30, 2021 and December 31, 2020, deferred revenue amounted to $476,920 and $51,537 respectively. Deferred revenue as of June 30, 2021 is categorized and expected to be recognized as follows:

 

Expected Deferred Revenue Recognition Schedule

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Deferred

6/30/21

 

 

Recognized

Q3 2021

 

 

Recognized

Q4 2021

 

 

Recognized

Q1 2022

 

 

Recognized

Q2 2022

 

Full-time Placement

 

322,994

 

 

322,994

 

 

0

 

 

0

 

 

0

 

Software Subscriptions

 

 

85,526

 

 

 

56,960

 

 

 

11,109

 

 

 

10,868

 

 

 

6,589

 

Recruiters on Demand

 

 

68,400

 

 

 

68,400

 

 

 

0

 

 

 

0

 

 

 

0

 

TOTAL

 

476,920

 

 

448,354

 

 

11,109

 

 

10,868

 

 

6,589

 

 

Revenue from international sources was approximately 4% and 2% for the six months ended June 30, 2021 and 2020, respectively.

 

Costs of Revenue

 

Costs of revenues consist of employee costs, third party staffing costs and other fees, outsourced recruiter fees and commissions based on a percentage of Recruiting Solutions gross margin.

 

Accounts Receivable

 

Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company usually does not require collateral. We have recorded an allowance for doubtful accounts of $80,176 and $33,000 as of June 30, 2021 and December 31, 2020, respectively. Bad debt expense was $41,763 and $750 for the three-month periods ended June 30, 2021 and 2020, respectively, and $58,726 and $12,000 for the six-month periods ended June 30, 2021 and 2020, respectively.

 

Concentration of Credit Risk and Significant Customers and Vendors

 

As of June 30, 2021, two customers accounted for more than 10% of the accounts receivable balance, at 14% and 10%, for a total of 24%.

 

As of December 31, 2020, two customers accounted for more than 10% of the accounts receivable balance, at 32% and 19% for a total of 51%.

 

For the six months ended June 30, 2021 two customers accounted for 10% of more of total revenue, at 20% and 12%, for a total of 32%.

 

For the six months ended June 30, 2020 three customers accounted for 10% of more of total revenue, at 35%, 15% and 14%, for a total of 64%.

 

We use a related party firm for software development and maintenance related to our website and the platform underlying our operations. One of our officers and principal shareholders is an employee of this firm and exerts control over this firm (see Note 11).

 

We are a party to that certain license agreement with a related party firm (see Note 11). Pursuant to the license agreement the firm has granted us an exclusive license to use certain candidate matching software and render certain related services to us. If this relationship was terminated or if the firm was to cease doing business or cease to support the applications we currently utilize, we may be forced to expend significant time and resources to replace the licensed software. Further, the necessary replacements may not be available on a timely basis on favorable terms, or at all. If we were to lose the ability to use this software our business and operating results could be materially and adversely affected.

 

We use a related party firm to provide certain employer of record services (see Note 11).

 

We use a related party firm to provide certain recruiting services (see Note 11).

 

Advertising and Marketing Costs

 

The Company expenses all advertising and marketing costs as incurred. Advertising and marketing costs were $75,006 and $15,068 for the three months ended June 30, 2021 and 2020, respectively. Advertising and marketing costs were $132,549 and $40,311 for the six months ended June 30, 2021 and 2020, respectively. 

  

Fair Value of Financial Instruments and Fair Value Measurements

 

The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a hierarchical framework for measuring fair value, and enhances fair value measurement disclosure.

 

11

 

ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:

 

Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.

 

Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3 - Unobservable inputs for the asset or liability.

 

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

The Company’s investment in available for sale securities and warrant derivative liabilities are measured at fair value. The securities are measured based on current trading prices using Level 1 fair value inputs. The Company’s derivative instruments are valued using Level 3 fair value inputs. The Company does not have any other financial instruments which require re-measurement to fair value. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and loans payable represent fair value based upon their short-term nature.

 

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The table below summarizes the fair values of our financial assets and liabilities as of June 30, 2021:

 

 

 

Fair Value at

June 30,

 

 

Fair Value Measurement Using

 

 

 

2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale marketable securities (Note 3)

 

$890

 

 

$890

 

 

$-

 

 

$-

 

Warrant derivative liability (Note 9)

 

$8,921,615

 

 

$-

 

 

$-

 

 

$8,921,615

 

 

The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows for the six months ended June 30, 2021 and 2020:

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

Balance at January 1

 

$11,537,997

 

 

$612,042

 

Additions to derivative instruments

 

 

5,960,059

 

 

 

5,625,519

 

Reclassifications to equity upon extinguishment

 

 

(373,070)

 

 

2,642,175

 

(Gain) loss on change in fair value of derivative liability

 

 

(8,203,371)

 

 

904,176

 

Balance at June 30

 

$8,921,615

 

 

$9,783,912

 

 

12

  

Business Combinations

 

For all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration, if any, is recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value are recognized in earnings until settlement and acquisition-related transaction and restructuring costs are expensed rather than treated as part of the cost of the acquisition.

 

Intangible Assets

 

Intangible assets consist primarily of the assets acquired from Genesys in 2019, including customer contracts and intellectual property, acquired on June 30, 2019, the assets acquired from Scouted and Upsider during the first quarter of 2021 (see Note 12), and the assets acquired from OneWire during the second quarter of 2021 (see Note 12). Amortization expense will be recorded on the straight line basis over the estimated economic lives.

 

Goodwill

 

Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur, or circumstances indicate the fair value of a reporting unit is below its carrying value.

 

The Company performs its annual goodwill and impairment assessment on December 31st of each year (see Note 4).

 

When evaluating the potential impairment of goodwill, management first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company’s reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the impairment testing methodology primarily using the income approach (discounted cash flow method).

 

We compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment to be recognized is recognized as the amount by which the carrying amount exceeds the fair value.

 

When required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results.

 

Long-lived assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life of the asset in measuring whether or not the asset values are recoverable.

 

Stock-Based Compensation

 

We account for our stock-based compensation under ASC 718 “Compensation - Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the shorter of the service period or the vesting period of the stock-based compensation. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Determining the fair value of stock-based compensation at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based compensation represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

 

13

  

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with various accounting standards.

 

ASC 480 “Distinguishing Liabilities From Equity” provides that instruments convertible predominantly at a fixed rate resulting in a fixed monetary amount due upon conversion with a variable quantity of shares (“stock settled debt”) be recorded as a liability at the fixed monetary amount.

 

ASC 815 “Derivatives and Hedging” generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”

 

The Company accounts for convertible instruments (when it has determined that the instrument is not a stock settled debt and the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the share transaction and the effective conversion price embedded in the preferred shares.

 

ASC 815-40 provides that generally if an event is not within the entity’s control and could require net cash settlement, then the contract shall be classified as an asset or a liability.

 

14

  

Derivative Instruments

 

The Company’s derivative financial instruments consist of derivatives related to the warrants issued with the sale of our convertible notes in 2020 and 2021 (see Notes 7 and 9) and the warrants issued with the sale of our Series D Preferred Stock in 2020 and 2019 (see Note 9). The accounting treatment of derivative financial instruments requires that we record the derivatives at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income. Upon the determination that an instrument is no longer subject to derivative accounting, the fair value of the derivative instrument at the date of such determination will be reclassified to paid in capital.

 

Product Development

 

Product development costs are included in selling, general and administrative expenses and consist of support, maintenance and upgrades of our website and software platform and are charged to operations as incurred.

 

Earnings (Loss) Per Share

 

The Company follows ASC 260 “Earnings Per Share” for calculating the basic and diluted earnings (or loss) per share. Basic earnings (or loss) per share are computed by dividing earnings (or loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings (or loss) per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if the additional shares were dilutive. Common stock equivalents are excluded from the diluted earnings (or loss) per share computation if their effect is anti-dilutive. Common stock equivalents in amounts of 10,758,507 and 9,752,672 were excluded from the computation of diluted earnings per share for the six months ended June 30, 2021 and 2020, respectively, because their effects would have been anti-dilutive.

  

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

Options

 

 

953,503

 

 

 

542,304

 

Stock awards

 

 

221,600

 

 

 

346,600

 

Warrants

 

 

2,318,736

 

 

 

1,461,377

 

Convertible notes

 

 

1,489,833

 

 

 

738,281

 

Convertible preferred stock

 

 

5,774,835

 

 

 

6,664,110

 

 

 

 

10,758,507

 

 

 

9,752,672

 

  

Diluted loss per share for the three months ended June 30, 2021 is computed as follows:

  

 

 

Three months ended

 

 

 

June 30,

 

 

 

2021

 

Net income attributable to common shareholders

 

$3,528,279

 

Income attributable to warrant derivatives

 

 

 

 

Change in fair value of derivative

 

 

(7,574,750)

Diluted loss attributable to common shareholders

 

$(4,046,471 )

 

 

 

 

 

Basic shares outstanding

 

 

3,560,745

 

Warrant derivative shares

 

 

2,318,736

 

Diluted shares outstanding

 

 

5,879,481

 

 

 

 

 

 

Diluted loss per share

 

$(0.69 )

 

Business Segments

 

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment.

 

Recently Issued Accounting Pronouncements

 

There have not been any recent changes in accounting pronouncements and ASU issued by the FASB that are of significance or potential significance to the Company except as disclosed below.

 

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

 

15

  

NOTE 2 - LIQUIDITY

 

The Company has a history of net losses, including the accompanying financial statements for the six months ended June 30, 2021 where the Company had a net loss of $2,751,787 (which includes $1,615,241 of non-cash stock-based compensation expense), and net cash used in operating activities of $1,890,385. The Company completed an underwritten public offering of equity units including the overallotment for gross proceeds of $13,796,400 before deducting underwriting discounts and offering expenses in July 2021 (See Note 13 – Subsequent Events). The Company converted its entire balance of convertible debenture notes to units including common stock and warrants as part of the underwritten public offering in July 2021 (See Note 13 – Subsequent Events). In addition, the company issued 4,249,596 warrants with an exercise price of $5.50 as part of the July 2021 offering and the conversion of the convertible debentures, which could potentially generate additional capital depending on the market value of our stock, the warrant holders’ ability to exercise them, and the warrant holder’s potential ability to do a cashless exercise.

 

The Company expects to continue to incur losses for a period of time into the future. In addition, there is no guarantee that the warrants will be exercised or that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company. The Company continues to invest in sales and marketing resources as well as business operations and seek out sales contracts that should provide additional revenues and, in time, generate operating profits.

 

Our cash balance at August 11, 2021 was $8,942,366. Management believes it has sufficient cash to fund its liabilities and operations for at least the next twelve months from the issuance of these unaudited condensed consolidated financial statements.

   

In March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company operates. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. We have reduced certain billing rates to respond to the current economic climate. Additionally, while we have experienced, and could continue to experience, a loss of clients as the result of the pandemic, we expect that the impact of such attrition would be mitigated by the addition of new clients resulting from our continued efforts to adjust the Company’s operations to address changes in the recruitment industry. The extent to which the COVID-19 pandemic will impact our operations, ability to obtain financing or future financial results is uncertain at this time. Due to the effects of COVID-19, the Company took steps to streamline certain expenses, such as temporarily cutting certain executive compensation packages by approximately 20%. Management also worked to reduce unnecessary marketing expenditures and worked to improve staff and human capital expenditures, while maintaining overall workforce levels. The Company expects but cannot guarantee that demand for its recruiting solutions will improve later in 2021, as certain clients re-open or accelerate their hiring initiatives, and new clients utilize our services. Overall, management is focused on effectively positioning the Company for a rebound in hiring which we believe is happening in 2021. Ultimately, the recovery may be delayed and the economic conditions may worsen. The Company continues to closely monitor the confidence of its recruiter users and customers, and their respective job requirement load through offline discussions and the Company’s Recruiter Index survey.

 

We also may depend on raising additional debt or equity capital to stay operational. The economic impact of COVID-19 may make it more difficult for us to raise additional capital when needed. The terms of any financing, if we are able to complete one, will likely not be favorable to us.

  

The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 - INVESTMENT IN AVAILABLE FOR SALE MARKETABLE SECURITIES

 

The Company’s investment in marketable equity securities is being held for an indefinite period. Cost basis of marketable securities held as of June 30, 2021 and December 31, 2020 were $42,720 for both periods and accumulated unrealized losses were $41,830 and $41,296 as of June 30, 2021 and December 31, 2020, respectively. The fair market value of available for sale marketable securities was $890 and $1,424 as of June 30, 2021 and December 31, 2020, respectively, based on 178,000 shares of common stock held in one entity with an average per share market price of approximately $0.01.

 

Net recognized gains (losses) on equity investments were as follows:

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Net realized gains (losses) on investment sold

 

$-

 

 

$(2,543)

Net unrealized gains (losses) on investments still held

 

 

(534 )

 

 

(16,197)

 

 

 

 

 

 

 

 

 

Total

 

$(534 )

 

$(18,740)

 

16

  

The reconciliation of the investment in marketable securities is as follows for the six months ended June 30, 2021 and 2020:

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

Balance - December 31

 

$1,424

 

 

$44,766

 

Additions

 

 

-

 

 

 

-

 

Proceeds on sales of securities

 

 

-

 

 

 

(17,009)

Recognized gain (loss)

 

 

(534 )

 

 

(18,740)

Balance - June 30

 

$890

 

 

$9,017

 

 

NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS

 

Goodwill

 

Goodwill is derived from our 2019 business acquisition as well as our three asset acquisitions in the first and second quarters of 2021. The aggregate goodwill recognized from our three 2021 acquisitions is $1,412,582. The Company performed its most recent annual goodwill impairment test as of December 31, 2020 using market data and discounted cash flow analysis. Based on that test, we have determined that the carrying value of goodwill was not impaired at December 31, 2020. There were also no indicators of impairment at June 30, 2021.

 

Intangible Assets

 

During the three months ended March 31, 2021, we acquired certain intangible assets pursuant to our Scouted and Upsider acquisitions described in Note 12. During the three months ended June 30, 2021, we acquired certain intangible assets pursuant to our OneWire acquisition described in Note 12. These intangible assets aggregate approximately $5.9 million and consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets. We completed the accounting and valuations of the assets acquired and, accordingly, the estimated fair values of these intangible assets are provisional pending the final valuations which will not exceed one year in accordance with ASC 805.

 

Intangible assets are summarized as follows:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Customer contracts

 

$5,506,808

 

 

$233,107

 

License

 

 

2,103,926

 

 

 

1,726,965

 

Domains

 

 

32,752

 

 

 

-

 

 

 

 

7,643,486

 

 

 

1,960,072

 

Less accumulated amortization

 

 

(1,998,477)

 

 

(1,164,208)

Carrying value

 

$5,645,009

 

 

$795,864

 

 

Amortization expense of intangible assets was $675,095 and $159,173 for the three months ended June 30, 2021 and 2020, respectively, and was $834,268 and $318,346 for the six months ended June 30, 2021 and 2020, respectively, related to the intangible assets acquired in business combinations. Approximate future amortization of intangible assets is expected to be as follows: 2021, $1,236,000; 2022, $1,995,000; 2023 $1,835,000; 2024, $461,000; 2025, $78,000; 2026, $20,000; and thereafter, $20,000. The Company began amortizing intangible assets from the Scouted, Upsider and OneWire acquisitions in the second quarter of 2021.

  

NOTE 5 - LIABILITY FOR SALE OF FUTURE REVENUES

 

During the three months ended March 31, 2021 our remaining agreement related to the sale of future revenues was paid in full. During the three months ended March 31, 2021, we amortized the remaining $2,719 of discount to interest expense.

 

17

  

NOTE 6 - LOANS PAYABLE

 

Term Loans

 

We have outstanding balances of $64,618 and $77,040 pursuant to two term loans as of June 30, 2021 and December 31, 2020, respectively, which mature in 2023. The loans have variable interest rates, with current rates at 6.0% and 7.76%, respectively. Current monthly payments under the loans are $1,691 and $1,008, respectively.

 

One of the term loans is a Small Business Administration (“SBA”) loan. As a result of the COVID-19 uncertainty, the SBA has paid the loan for February and March 2021. The SBA made payments on our behalf of $3,382 during the three months ended June 30, 2021, which have been recorded as grant income in the financial statements. These payments were applied $2,992 to principal and $390 to interest expense for the three months ended June 30, 2021.

 

The status of these loans as of June 30, 2021 and December 31, 2020 are summarized as follows:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Term loans

 

$64,618

 

 

$77,040

 

Less current portion

 

 

(30,653)

 

 

(28,249)

Non-current portion (excluding PPP loan discussed below)

 

$33,965

 

 

$48,791

 

 

Future principal payments under the term notes are as follows:

 

Year Ending December 31,

 

 

 

 

 

 

 

2021

 

$15,770

 

2022

 

 

30,133

 

2023

 

 

18,715

 

Total minimum principal payments

 

$64,618

 

 

Our Chief Operating Officer, who is also a shareholder, has personally guaranteed the loans described above.

 

Paycheck Protection Program Loan

 

During 2021 our remaining loan pursuant to the Paycheck Protection Program under the CARES Act in the amount of $24,750 was forgiven. We recorded forgiveness of debt income of $24,925 for the $24,750 of principal and $175 of related accrued interest forgiven.

 

18

  

NOTE 7 - CONVERTIBLE NOTES PAYABLE

 

2020 Debentures:

 

In May and June 2020, the Company entered into a Securities Purchase Agreement, effective May 28, 2020 (the “Purchase Agreement”) with several accredited investors (the “Purchasers”). Four of the investors had previously invested in the Company’s preferred stock. Pursuant to the Purchase Agreement, the Company sold to the Purchasers a total of (i) $2,953,125 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”), and (ii) 738,282 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. The Company received a total of $2,226,000 in net proceeds from the offering, after deducting the 12.5% original issue discount of $328,125, offering expenses and commissions, including the placement agent’s commission and fees of $295,000, reimbursement of the placement agent’s and lead investor’s legal fees and the Company’s legal fees in the aggregate amount of $100,000 and escrow agent fees of $4,000. The Company also agreed to issue to the placement agent, as additional compensation, 147,657 common stock purchase warrants exercisable at $5.00 per share (see update at Note 9).

 

The Debentures matured on May 28, 2021, subject to a six-month extension at the Company’s option which was taken and the Company incurred $253,767 of penalty. The Debentures bear interest at 8% per annum payable quarterly, subject to an increase in case of an event of default as provided for therein. The Debentures are convertible into shares of Common Stock at any time following the date of issuance at the Purchasers’ option at a conversion price of $4.00 per share, subject to certain adjustments. The Debentures are subject to mandatory conversion in the event the Company closes an equity offering of at least $5,000,000 resulting in the listing of the Company’s common stock on a national securities exchange. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $508,000 of outstanding senior indebtedness. The Company may prepay the Debentures at any time at a premium as provided for therein.

 

The Warrants are exercisable for three years from May 28, 2020 at an exercise price of $5.00 per share, subject to certain adjustments.

 

As of June 30, 2021, there was $2,505,375 outstanding on the Debentures (see Note 8 for conversions) with no unamortized discount and debt costs.

 

2021 Debentures:

 

During January 2021, the Company entered into two Securities Purchase Agreements, effective January 5, 2021 and January 20, 2021 (the “Purchase Agreements”), with twenty accredited investors (the “Purchasers”). Pursuant to the Purchase Agreements, the Company agreed to sell to the Purchasers a total of (i) $2,799,000 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”), and (ii) 699,750 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. The Company received a total of $2,488,000 in gross proceeds from the offerings, after deducting the 12.5% original issue discount, before deducting offering expenses and commissions, including the placement agent’s commission of $241,270 (10% of the gross proceeds less $7,500 paid to its legal counsel) and fees related to the offering of the Debentures of $93,530. The Company also agreed to issue to the placement agent, as additional compensation, 139,950 common stock purchase warrants exercisable at $5.00 per share (the “PA Warrants”) (see update at Note 9).

 

The Debentures mature in January 2022 on the one year anniversary, subject to a six-month extension at the Company’s option. The Debentures bear interest at 8% per annum payable quarterly, subject to an increase in case of an event of default as provided for therein. The Debentures are convertible into shares of the Company’s common stock (the “Common Stock”) at any time following the date of issuance at the Purchasers’ option at a conversion price of $4.00 per share, subject to certain adjustments. The Debentures are subject to mandatory conversion in the event the Company closes an equity offering of at least $5,000,000 resulting in the listing of the Common Stock on a national securities exchange. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $95,000 of outstanding senior indebtedness. In addition, the Debentures rank pari-passu with, and amounts owing thereunder shall be paid concurrently with, payments owing pursuant to and in connection with that certain offering by the Company of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures due May 28, 2021 consummated in May and June 2020 in the aggregate principal amount of $2,953,125. The Company may prepay the Debentures at any time at a premium as provided for therein.

 

The Warrants are exercisable for three years from the dates of the Purchase Agreements at an exercise price of $5.00 per share, subject to certain adjustments.

 

The Company’s obligations under the Purchase Agreement and the Debentures are secured by a first priority lien on all of the assets of the Company and its subsidiaries pursuant to Security Agreements, dated January 5, 2021 and January 20, 2021 (the “Security Agreements”) by and among the Company, its wholly-owned subsidiaries, and the Purchasers, subject to certain existing senior liens. The Company’s obligations under the Debentures are guaranteed by the Company’s subsidiaries.

 

The Purchase Agreement contains customary representations, warranties and covenants of the Company, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company and its subsidiaries, without the prior written consent of the Debenture holders, to incur additional indebtedness, including further advances under a certain preexisting secured loan, and repay outstanding indebtedness, create or permit liens on assets, repurchase stock, pay dividends or enter into transactions with affiliates. The Debentures contain customary events of default, including, but not limited to, failure to observe covenants under the Debentures, defaults on other specified indebtedness, loss of admission to trading on OTCQB or another applicable trading market, and occurrence of certain change of control events. Upon the occurrence of an event of default, an amount equal to 130% of the principal, accrued but unpaid interest, and other amounts owing under each Debenture will immediately come due and payable at the election of each Purchaser, and all amounts due under the Debentures will bear interest at an increased rate.

 

19

  

Pursuant to the Purchase Agreement, the Purchasers have certain participation rights in future equity offerings by the Company or any of its subsidiaries after the closing, subject to customary exceptions. The Debentures and the Warrants also contain certain price protection provisions providing for adjustment of the number of shares of Common Stock issuable upon conversion of the Debentures and/or exercise of the Warrants and the conversion or exercise price in case of future dilutive offerings.

 

In February 2021, the holder of a $250,000 November 2020 promissory note elected to convert the $250,000 note, plus accrued interest of $2,430, into $283,984 principal amount of Debentures (including 12.5% Original Issue Discount of $31,554) based on the same terms as those issued in January 2021 (described above), plus 70,996 Warrants.

 

We have incurred a total of $1,254,779 of debt costs related to the issuance of the 2021 Debentures, including commissions, costs and fees of $334,800. We have also recorded a cost related to the fair value of the placement agent warrants of $919,979 (see Note 9). The costs which have been recorded as debt discounts are being amortized over the life of the notes. Amortization expense was $312,835 and $568,628 for the three and six months ended June 30, 2021, respectively. Unamortized debt costs were $686,151 at June 30, 2021.

 

We have recorded a total of $1,796,651 of debt discount related to the sale of the 2021 Debentures and February 2021 note exchange, including original issue discount of $342,554 and a warrant discount of $1,454,097 at fair value for the warrants issued with the debt (see Note 9). The discount is being amortized over the life of the notes. Amortization expense was $447,933 and $799,140 for the three and six months ended June 30, 2021, respectively. Unamortized debt discount was $997,511 at June 30, 2021.

 

On July 2, 2021, the 2020 and 2021 Debentures were exchanged for common stock and warrants (See Note 13 – Subsequent Events).

 

NOTE 8 - STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share. As of June 30, 2021 and December 31, 2020, the Company had 1,154,967 and 1,324,022 shares of preferred stock issued and outstanding, respectively. No shares of preferred stock were issued during the six months ended June 30, 2021.

 

Series D Convertible Preferred Stock

 

Pursuant to an agreement with the holder, 8,755 shares of Series D preferred stock and 53,336 Series D warrants were cancelled in January 2021.

 

In January 2021, the Company issued 45,390 shares of its common stock upon conversion of 9,078 shares of its Series D Preferred Stock.

 

In February 2021, the Company issued 220,000 shares of its common stock upon conversion of 44,000 shares of its Series D Preferred Stock.

 

In March 2021, the Company issued 106,875 shares of its common stock upon conversion of 21,375 shares of its Series D Preferred Stock.

 

In April 2021, the Company issued 40,000 shares of its common stock upon conversion of 8,000 shares of its Series D Preferred Stock.

 

In April 2021, the Company issued 50,000 shares of its common stock upon conversion of 10,000 shares of its Series D Preferred Stock.

 

In April 2021, the Company issued 101,560 shares of its common stock upon conversion of 20,312 shares of its Series D Preferred Stock.

 

In May 2021, the Company issued 150,000 shares of its common stock upon conversion of 30,000 shares of its Series D Preferred Stock.

 

In July 2021, the Company exchanged all of its outstanding Series D Preferred Stock for shares of common stock (See Note 13 – Subsequent Events).

  

Series F Convertible Preferred Stock

 

In February 2021, the Company issued 81,195 shares of its common stock upon conversion of 16,239 shares of Series F Preferred Stock.

 

In March 2021, the Company issued 6,479 shares of its common stock upon conversion of 1,296 shares of Series F Preferred Stock.

 

In July 2021, the Company exchanged all of its outstanding Series F Preferred Stock for shares of common stock (See Note 13 – Subsequent Events). 

  

Common Stock

 

The Company is authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2021 and December 31, 2020 the Company had 3,765,739 and 2,203,009 shares of common stock outstanding, respectively.

 

20

  

Shares issued upon conversion of preferred stock

 

In January 2021, the Company issued 45,390 shares of its common stock upon conversion of 9,078 shares of its Series D Preferred Stock.

 

In February 2021, the Company issued 220,000 shares of its common stock upon conversion of 44,000 shares of its Series D Preferred Stock.

 

In February 2021, the Company issued 81,195 shares of its common stock upon conversion of 16,239 shares of Series F Preferred Stock.

 

In March 2021, the Company issued 106,875 shares of its common stock upon conversion of 21,375 shares of its Series D Preferred Stock.

 

In March 2021, the Company issued 6,479 shares of its common stock upon conversion of 1,296 shares of Series F Preferred Stock.

 

In April 2021, the Company issued 40,000 shares of its common stock upon conversion of 8,000 shares of its Series D Preferred Stock.

 

In April 2021, the Company issued 50,000 shares of its common stock upon conversion of 10,000 shares of its Series D Preferred Stock.

 

In April 2021, the Company issued 101,560 shares of its common stock upon conversion of 20,312 shares of its Series D Preferred Stock.

 

In May 2021, the Company issued 150,000 shares of its common stock upon conversion of 30,000 shares of its Series D Preferred Stock.

 

Reverse Stock Split

  

On June 18, 2021 the Company filed an Amendment to the Articles of Incorporation to effectuate a reverse split of the Company’s issued and outstanding common stock at an exchange ratio of 1-for-2.5. The reverse stock split was effective as of June 18, 2021.  Simultaneously with the reverse stock split, the Company reduced the authorized shares from 250,000,000 to 100,000,000. All share and per share data in the accompanying consolidated financial statements and footnotes has been retroactively adjusted to reflect the effects of the reverse stock split.

 

Shares issued for Business Acquisitions

 

In January and June 2021, we issued a total of 175,421 and 15,591 shares of common stock, respectively pursuant to the Scouted acquisition. In April 2021, we issued a total of 271,153 shares of common stock pursuant to the Upsider acquisition. In May 2021, we issued a total of 155,327 shares of common stock pursuant to the OneWire acquisition. All transactions are more fully described in Note 12.

 

Shares granted for services

 

On June 18, 2020 the Company awarded to Evan Sohn, our Executive Chairman and CEO, 221,600 restricted stock units (the “RSUs”) subject to and issuable upon the listing of the Company’s common stock on the Nasdaq Capital Market or NYSE American, or any successor of the foregoing (the “Uplisting”). The RSUs will vest over a two-year period from the date of the Uplisting in equal quarterly installments on the last day of each calendar quarter, with the first portion vesting on the last day of the calendar quarter during which the Uplisting takes place, subject to Mr. Sohn serving as an executive officer of the Company on each applicable vesting date, provided that the RSUs shall vest in full immediately upon the termination of Mr. Sohn’s employment by the Company without Cause (as defined in the Employment Agreement). The RSU award has been valued at $1,662,000 and compensation expense will be recorded over the estimated vesting period. We recognized compensation expense of $148,836 and $297,672 during the three and six months ended June 30, 2021, respectively. The shares began vesting on June 30, 2021, the quarter the Uplisting occurred. The shares have not been issued at June 30, 2021.

 

In March 2021, we issued to Mr. Sohn 1,625 shares of common stock as payment for $16,425 of compensation which had been accrued at December 31, 2020.

 

In April 2021, we issued 20,000 shares to a vendor for services valued at $152,500.

 

Shares issued upon conversion of convertible notes

 

During the three months ended March 31, 2021, the Company issued 71,485 shares of its common stock upon conversion of $283,637 of convertible notes payable and related accrued interest of $2,302 (see note 7).

 

During the three months ended June 30, 2021, the Company issued 17,687 shares of its common stock upon conversion of $70,750 of convertible notes payable (see note 7).

 

NOTE 9 - STOCK OPTIONS AND WARRANTS

 

Stock Options

 

On March 9, 2021 the Company granted to employees an aggregate of 159,000 options to purchase common stock, exercisable at $8.625 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over one year, with the first portion vesting on June 9, 2021. The options have been valued at $1,371,231 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $342,808 and $428,510 related to the options during the three and six months ended June 30, 2021, respectively. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 346%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years.

 

21

  

On February 10, 2021 the Company granted to a director 20,000 options to purchase common stock, exercisable at $6.75 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over three years with the first portion vesting on May 10, 2021. The options have been valued at $134,986 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $11,249 and $17,549 related to the options during the three and six months ended June 30, 2021, respectively. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 354%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years.

 

On March 24, 2021 the Company granted to a director 20,000 options to purchase common stock, exercisable at $8.125 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over three years, with the first portion vesting on June 24, 2021. The options have been valued at $162,491 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $13,541 and $14,669 related to the options during the three and six months ended June 30, 2021, respectively. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 359%, (3) risk-free interest rate of 0.83%, (4) expected term of 5 years.

 

On May 5, 2021 the Company granted to employees an aggregate of 11,800 options to purchase common stock, exercisable at $8.125 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over one year, with the first portion vesting on August 8, 2021. The options have been valued at $95,925 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $15,988 related to the options during the three and six months ended June 30, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 350%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years.

 

On May 5, 2021 the Company granted to employees an aggregate of 12,000 options to purchase common stock, exercisable at $8.125 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over two years, with the first portion vesting on August 8, 2021. The options have been valued at $97,551 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $8,129 related to the options during the three and six months ended June 30, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 350%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years.

 

On May 5, 2021 the Company granted to consultants an aggregate of 16,600 options to purchase common stock, exercisable at $8.125 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over one year, with the first portion vesting on August 8, 2021. The options have been valued at $134,946 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $22,491 related to the options during the three and six months ended June 30, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 350%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years.

 

On May 5, 2021 the Company granted to consultants an aggregate of 8,800 options to purchase common stock, exercisable at $8.125 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options vested immediately upon issuance. We have recorded compensation expense of $71,538 related to the options during the three and six months ended June 30, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 350%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years.

 

On June 30, 2021 the Company granted to an employee 29,000 options to purchase common stock, exercisable at $4.50 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of one year. The options vested immediately upon issuance. We have recorded compensation expense of $65,315 related to the options during the three and six months ended June 30, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 135%, (3) risk-free interest rate of 0.07%, (4) expected term of 1 year.

 

During the three and six months ended June 30, 2021, we recorded $260,440 and $520,880 of compensation expense, respectively related to stock options granted in prior years.

 

Warrants Recorded as Derivative Liabilities

 

Series D Preferred Stock Warrants

 

The Company identified embedded features in the warrants issued with Series D Preferred Stock in 2019 and 2020 which caused the warrants to be classified as a derivative liability. These embedded features included the right for the holders to request for the Company to cash settle the warrants to the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the warrants on the date of the consummation of a fundamental transaction, as defined in the warrant instrument. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as a derivative as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.

 

During the three and six months ended June 30, 2021, the Company recorded other income of $1,619,531 and $2,097,826, respectively, related to the change in the fair value of the derivative. The fair value of the embedded derivative was $2,192,568 as of June 30, 2021, determined using the Black Scholes model based on a risk-free interest rate of 0.46% - 0.665%, an expected term of 2.75 - 3.9 years, an expected volatility of 213% - 313% and a 0% dividend yield.

 

Convertible Debenture Warrants and Placement Agent Warrants

 

The Company identified embedded features in the warrants issued with the convertible debt and the placement agent warrants in 2020 and 2021 (see Note 7) and which caused the warrants to be classified as a derivative liability. These embedded features included the right for the holders to request for the Company to cash settle the warrants to the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the warrants on the date of the consummation of a fundamental transaction, as defined in the warrant instrument. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as a derivative as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.

 

As of the issuance date of the 2021 Debenture warrants, the Company determined a fair value of $5,040,080 for the 770,746 warrants. The fair value of the warrants was determined using the Black-Scholes Model based on a risk-free interest rate of 0.17% - 0.19%, an expected term of 3 years, an expected volatility of 215% - 216% and a 0% dividend yield. Of this amount, $1,454,097 was recorded as debt discount (see Note 7) and $3,585,983 was charged to expense as initial derivative expense.

 

22

 

As of the issuance date of the 2021 placement agent warrants, the Company determined a fair value of $919,979 for the 139,950 warrants. The fair value of the warrants was determined using the Black-Scholes Model based on a risk-free interest rate of 0.17% - 0.19%, an expected term of 3 years, an expected volatility of 215% and a 0% dividend yield. The value of $919,979 has been recorded as a debt discount for debt cost (see Note 7). In June 2021, we amended the debenture agreement and reduced the number of placement agent warrants from 139,950 to 36,364. 

 

During the three and six months ended June 30, 2021, the Company recorded other income of $5,955,219 and $6,105,545, respectively, related to the change in the fair value of the derivative. The fair value of the embedded derivative was $6,729,047 as of June 30, 2021, determined using the Black Scholes model based on a risk-free interest rate of 0.25% - 0.355%, an expected term of 1.91 - 2.6 years, an expected volatility of 180% - 203% and a 0% dividend yield.

 

The number of placement agent warrants issued in 2020 and 2021 was reduced subsequent to June 30, 2021,from 287,606 to 72,728, and the exercise price was increased to $6.25.

   

NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

We are currently not involved in any material litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

  

Leases:

 

On June 30, 2019, the Company entered into a sublease with a related party (see Note 11) for its current corporate headquarters. The sublease expires in November 2022. Monthly lease payments increased from $7,307 to $7,535 in April 2021 and continue at that rate for the remainder of the lease.

 

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)” whereby lessees need to recognize almost all leases on their balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method. We calculated the present value of the remaining lease payment stream using our incremental effective borrowing rate of 10%. We initially recorded a right to use asset and corresponding lease liability amounting to $269,054 on June 30, 2019. The right to use asset and the corresponding lease liability are being equally amortized on a straight-line basis over the remaining term of the lease.

 

For the six months ended June 30, 2021, lease costs amounted to $71,014 which includes base lease costs of $44,526 and common area and other expenses of $26,488. For the six months ended June 30, 2020, lease costs amounted to $74,286 which includes base lease costs of $43,155 and common area and other expenses of $31,131. All costs were expensed during the periods and included in general and administrative expenses on the accompanying consolidated statements of operations.

 

Right-of-use asset (“ROU”) is summarized below:

 

 

 

June 30,

2021

 

Operating office lease

 

$269,054

 

Less accumulated reduction

 

 

(165,101)

Balance of ROU asset at June 30, 2021

 

$103,953

 

 

Operating lease liability related to the ROU asset is summarized below:

 

 

 

June 30,

2021

 

Total lease liability

 

$269,054

 

Reduction of lease liability

 

 

(165,101)

Total

 

 

103,953

 

Less short term portion as of June 30, 2021

 

 

(73,378)

Long term portion as of June 30, 2021

 

$30,575

 

 

In July 2021, we cancelled the remaining term of the lease with no future payments remaining (see Note 11).

 

23

  

COVID-19 Uncertainty:

 

In late 2019, an outbreak of COVID-19 was first reported in Wuhan, China. In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The COVID-19 pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans around the world aimed at controlling the spread of the virus. Businesses are also taking precautions, including requiring employees to work remotely or take leave, imposing travel restrictions and temporarily closing their facilities. Initial unemployment numbers have spiked. Uncertainties regarding the impact of COVID-19 on economic conditions are likely to result in sustained market turmoil and reduced demand for employees, which in its turn has had a negative impact on the recruitment and staffing industry. Accor