March 31, 2021
| Nevada | 26-3090646 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 100 Waugh Dr. Suite 300, Houston, Texas | 77007 | |
| (Address of principal executive offices) | (Zip Code) |
| (Former name, former address and former fiscal year, if changed since last report) |
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ | ||
| Page | ||
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i
Condensed
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,731,099 | $ | 306,252 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $33,000 and $21,000, respectively | 583,364 | 864,415 | ||||||
| Prepaid expenses and other current assets | 94,904 | 98,503 | ||||||
| Investments - available for sale marketable securities | 9,017 | 44,766 | ||||||
| Total current assets | 2,418,384 | 1,313,936 | ||||||
| Property and equipment, net of accumulated depreciation of $1,251 and $673, respectively | 2,212 | 2,790 | ||||||
| Right of use asset - related party | 177,331 | 214,020 | ||||||
| Intangible assets, net | 1,114,209 | 1,432,554 | ||||||
| Goodwill | 3,517,315 | 3,517,315 | ||||||
| Total assets | $ | 7,229,451 | $ | 6,480,615 | ||||
| Liabilities and Stockholders’ (Deficit) Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 316,812 | $ | 621,389 | ||||
| Accounts payable - related parties | 932,514 | 825,791 | ||||||
| Accrued expenses | 387,839 | 2,276,444 | ||||||
| Accrued compensation | 405,950 | 276,213 | ||||||
| Accrued interest | 13,550 | 985 | ||||||
| Liability on sale of future revenues, net of discount of $69,832 and $135,641, respectively | 208,044 | 404,101 | ||||||
| Advances on receivables | 68,156 | - | ||||||
| Deferred payroll taxes | 35,061 | - | ||||||
| Other liabilities | 14,493 | - | ||||||
| Loans payable - current portion | 27,335 | 25,934 | ||||||
| Convertible notes payable, net of unamortized discount and costs of $2,804,049 and $0, respectively | 149,076 | - | ||||||
| Refundable deposit on preferred stock purchase | 285,000 | 285,000 | ||||||
| Warrant derivative liability | 9,783,912 | 612,042 | ||||||
| Lease liability - current portion - related party | 73,378 | 73,378 | ||||||
| Deferred revenue | 86,689 | 145,474 | ||||||
| Total current liabilities | 12,787,809 | 5,546,751 | ||||||
| Lease liability - long term portion - related party | 103,953 | 140,642 | ||||||
| Loans payable - long term portion | 461,650 | 77,866 | ||||||
| Total liabilities | 13,353,412 | 5,765,259 | ||||||
| Commitments and contingencies (Note 11) | - | - | ||||||
| Stockholders’ (Deficit) Equity: | ||||||||
| 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, 2020 and December 31, 2019, respectively | - | - | ||||||
| Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; 536,595 and 454,546 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 55 | 46 | ||||||
| Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 731,845 and 734,986 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 74 | 74 | ||||||
| Preferred stock, Series F, $0.0001 par value; 200,000 shares authorized; 64,382 and 139,768 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 7 | 14 | ||||||
| Common stock, $0.0001 par value; 250,000,000 shares authorized; 5,009,508 and 3,619,658 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 501 | 362 | ||||||
| Additional paid-in capital | 21,787,410 | 18,203,048 | ||||||
| Accumulated deficit | (27,912,008 | ) | (17,488,188 | ) | ||||
| Total stockholders’ (deficit) equity | (6,123,961 | ) | 715,356 | |||||
| Total liabilities and stockholders’ (deficit) equity | $ | 7,229,451 | $ | 6,480,615 | ||||
March 31, | December 31, | |
2021 | 2020 | |
(Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash | $662,356 | $99,906 |
| Accounts receivable, net of allowance for doubtful accounts of $47,463 and $33,000, respectively | 1,780,401 | 942,842 |
| Accounts receivable - related parties | 44,383 | 41,124 |
| Prepaid expenses and other current assets | 138,122 | 167,045 |
| Investments - marketable securities | 1,647 | 1,424 |
| Total current assets | 2,626,909 | 1,252,341 |
| Property and equipment, net of accumulated depreciation of $2,116 and $1,828, respectively | 1,347 | 1,635 |
| Right of use asset - related party | 122,297 | 140,642 |
| Intangible assets, net | 6,489,722 | 795,864 |
| Goodwill | 3,517,315 | 3,517,315 |
| Total assets | $12,757,590 | $5,707,797 |
| Liabilities and Stockholders' Deficit | ||
| Current liabilities: | ||
| Accounts payable | $748,764 | $616,421 |
| Accounts payable - related parties | 921,220 | 779,928 |
| Accrued expenses | 710,855 | 423,237 |
| Accrued expenses - related party | 9,656 | 8,000 |
| Accrued compensation | 886,002 | 617,067 |
| Accrued compensation - related party | 116,000 | 122,500 |
| Accrued interest | 101,946 | 60,404 |
| Contingent consideration for acquisitions | 1,974,377 | - |
| 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 | 28,609 | 28,249 |
| Convertible notes payable, net of unamortized discount and costs of $2,864,099 and $1,205,699, respectively | 2,795,010 | 1,905,826 |
| Refundable deposit on preferred stock purchase | 285,000 | 285,000 |
| Warrant derivative liability | 16,496,364 | 11,537,997 |
| Lease liability - current portion - related party | 73,378 | 73,378 |
| Deferred revenue | 139,382 | 51,537 |
| Total current liabilities | 25,460,088 | 16,691,254 |
| Lease liability - long term portion - related party | 48,919 | 67,264 |
| Loans payable - long term portion | 41,435 | 73,541 |
| Total liabilities | 25,550,442 | 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 March 31, 2021 and December 31, 2020, respectively | - | - |
| Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; 444,587 and 527,795 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 46 | 54 |
| Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 731,845 shares issued and outstanding as of March 31, 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 March 31, 2021 and December 31, 2020, respectively | 5 | 7 |
| Common stock, $0.0001 par value; 250,000,000 shares authorized; 7,275,185 and 5,504,008 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 727 | 550 |
| Shares to be issued for acquisitions, 716,861 shares as of March 31, 2021 | 2,248,367 | - |
| Additional paid-in capital | 25,763,020 | 23,400,078 |
| Accumulated deficit | (40,805,091) | (34,525,025) |
| Total stockholders' deficit | (12,792,852) | (11,124,262) |
| Total liabilities and stockholders' deficit | $12,757,590 | $5,707,797 |
Condensed Three Months
Ended June 30, Three Months
Ended June 30, Six Months
Ended June 30, Six Months
Ended June 30, 2020 2019 2020 2019 Revenue $ 1,853,414 $ 1,972,481 $ 4,166,537 $ 2,135,783 Cost of revenue (including related party costs of $298,712, $794,135, $954,096 and $794,135, respectively) 1,418,242 1,461,922 3,169,438 1,461,922 Gross profit 435,172 510,559 997,099 673,861 Operating expenses: Sales and marketing 15,068 2,969 40,311 2,969 Product development 57,401 44,934 140,494 94,788 Amortization of intangibles 159,173 - 318,346 - General and administrative (including share based compensation expense of $709,230, $1,481,322, $1,650,202 and $1,568,027 respectively) 1,626,362 2,653,432 3,775,305 3,073,260 Total operating expenses 1,858,004 2,701,335 4,274,456 3,171,017 Loss from operations (1,422,832 ) (2,190,776 ) (3,277,357 ) (2,497,156 ) Other income (expenses): Interest expense (203,874 ) (14,340 ) (248,080 ) (81,365 ) Initial derivative expense (3,340,554 ) - (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 (339,088 ) 17,627 (904,176 ) 17,627 Grant income 7,262 - 7,262 - Net recognized loss on marketable securities 46 (92,500 ) (18,740 ) (101,417 ) Total other income (expenses) (6,518,383 ) (89,213 ) (7,146,463 ) (165,155 ) Loss before income taxes (7,941,215 ) (2,279,989 ) (10,423,820 ) (2,662,311 ) Provision for income taxes - - - - Net loss (7,941,215 ) (2,279,989 ) (10,423,820 ) (2,662,311 ) Net loss attributable to the noncontrolling interest - - - (30,716 ) Net loss attributable to the controlling interest before preferred stock dividends (7,941,215 ) (2,279,989 ) (10,423,820 ) (2,631,595 ) Preferred stock dividend - - - (140,410 ) Net loss attributable to Recruiter.com Group, Inc. shareholders $ (7,941,215 ) $ (2,279,989 ) $ (10,423,820 ) $ (2,772,005 ) Net loss per common share – basic and diluted $ (1.64 ) $ (1.27 ) $ (2.31 ) $ (3.05 ) Weighted average common shares – basic and diluted 4,834,531 1,788,401 4,508,394 908,798 Revenue (including related party revenue of $970 and $6,410, respectively) Cost of revenue (including related party costs of $205,261 and $655,384, respectively) Operating expenses: Sales and marketing Product development (including related party expense of $57,988 and $60,979, respectively) Amortization of intangibles General and administrative (including share based compensation expense of $502,407 and $870,722, respectively, and related party expenses of $126,632 and $122,918, respectively) Total operating expenses Loss from operations Other income (expenses): Initial derivative expense Change in fair value of derivative liability Forgiveness of debt income Grant income Net recognized gain (loss) on marketable securities Total other income (expenses) Loss before income taxes Provision for income taxes Net loss Net loss per common share – basic and diluted Weighted average common shares – basic and diluted
and Six Months ended June 30,March 31, 2021 and 2020 and 2019 Preferred stock Series D Preferred stock Series E Preferred stock Series F Common stock Additional
Paid in Accumulated Noncontrolling Total
Stockholders’
(Deficit) Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Interest Equity Balance as of December 31, 2019 454,546 $ 46 734,986 $ 74 139,768 $ 14 3,619,658 $ 362 $ 18,203,048 $ (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 ) - - - - 161,250 16 (15 ) - - - Issuance of common shares upon conversion of Series E preferred stock - - (3,141 ) - - - 39,260 4 (4 ) - - - Issuance of common shares upon conversion of Series F preferred stock - - - - (64,272 ) (6 ) 803,414 80 (74 ) - - - 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 4,623,582 $ 462 $ 21,003,182 $ (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 90,000 9 120,491 120,500 Issuance of common shares upon conversion of Series D preferred stock (12,560 ) (1 ) - - - - 157,000 16 (15 ) - - - Issuance of common shares upon conversion of Series F preferred stock - - - - (11,114 ) (1 ) 138,926 14 (13 ) - - - 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 5,009,508 $ 501 $ 21,787,410 $ (27,912,008 ) $ - $ (6,123,961 ) Balance as of December 31, 2018 - $ - 775,000 $ 78 - $ - $ - $ - $ 679,259 $ (5,675,391 ) $ 1,581,585 $ (3,414,469 ) Recapitalization 389,036 39 - - - - 1,747,879 175 3,889,219 - (1,591,221 ) 2,298,212 Stock based compensation - - - - - - - - - 86,705 86,705 Adjustment of redemption value of preferred stock - - - - - - - - - - 23,852 23,852 Beneficial conversion feature of preferred stock dividends - - - - - - - - - - 70,205 70,205 Preferred stock deemed dividend - - - - - - - - - - (70,205 ) (70,205 ) Accrued preferred stock dividends - - - - - - - - - - (70,205 ) (70,205 ) Series F Preferred stock issued for assets - - - - 200,000 20 - - 8,599,980 - - 8,600,000 Sale of Series D Preferred stock units, net of offering costs 31,625 3 - - - - - - 539,994 - - 539,997 Notes and accrued interest cancelled pursuant to merger - - - - - - - - 706,501 - - 706,501 Reclassification of warrant derivative to liabilities related to Series D unit sales - - - - - - - - (691,780 ) - - (691,780 ) Net loss three months ended March 31, 2019 - - - - - - - - - (351,606 ) (30,716 ) (382,322 ) Balance as of March 31, 2019 420,661 42 775,000 78 200,000 20 1,747,879 175 13,723,173 (6,026,997 ) - 7,696,491 Sale of Series D Preferred stock units 43,725 4 - - - - - - 794,996 - - 795,000 Issuance of common shares upon conversion of Series D preferred stock (5,000 ) - - - - - 62,500 6 (6 ) - - - Issuance of common shares for deferred compensation - - - - - - 494,593 50 (50 ) - - - Stock based compensation - - - - - - - - 728,822 - - 728,822 Accrued salary foregiven pursuant to merger - - - - - - - - 187,500 - - 187,500 Stockholder shares transferred as compensation expense - - - - - - - - 752,500 - - 752,500 Reclassification of warrant derivative to liabilities related to Series D unit sales - - - - - - - - (1,058,866 ) - - (1,058,866 ) Net loss three months ended June 30, 2019 - - - - - - - - - (2,279,989 ) - (2,279,989 ) Balance as of June 30, 2019 459,386 $ 46 775,000 $ 78 200,000 $ 20 2,304,972 $ 231 $ 15,128,069 $ (8,306,986 ) $ - $ 6,821,458 Balance as of December 31, 2020 Stock based compensation Issuance of common shares for Scouted acquisition Issuance of common shares for Upsider acquisition Issuance of common shares for accrued compensation issuance of common shares upon conversion of debentures and accrued interest Cancellation of Series D preferred stock Reclassification of derivative liability upon cancellation of Series D warrants Issuance of common shares upon conversion of Series D preferred stock Issuance of common shares upon conversion of Series F preferred stock Net loss three months ended March 31, 2021 Balance as of March 31, 2021 Balance as of December 31, 2019 Stock based compensation Series D Preferred stock issued for accrued penalties Issuance of common shares upon conversion of Series D preferred stock Issuance of common shares upon conversion of Series E preferred stock Issuance of common shares upon conversion of Series F preferred stock Net loss three months ended March 31, 2020 Balance as of March 31, 2020
Net cash provided by (used in) investing activitiesCondensed Six Months Ended Six Months Ended June 30,
2020 June 30,
2019 Cash Flows from Operating Activities Net loss $ (10,423,820 ) $ (2,662,311 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization expense 318,923 96 Bad debt expense 12,000 - Equity based compensation expense 1,650,202 1,568,027 Recognized loss on marketable securities 18,740 101,417 Expenses paid through financings 32,500 15,000 Loan principal paid directly through grant (5,964 ) - Amortization of debt discount and debt costs 214,885 32,522 Initial derivative expense 3,340,554 - Change in derivative value due to anti-dilution adjustments 2,642,175 - Change in fair value of derivative liability 904,176 (17,627 ) Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 9,849 (420,916 ) (Increase) decrease in prepaid expenses and other current assets 269,051 (182,173 ) Increase (decrease) in accounts payable and accrued liabilities (14,641 ) 991,807 Increase in other liabilities 49,554 - Increase (decrease) in deferred revenue (58,785 ) 9,959 Net cash used in operating activities (1,040,601 ) (564,199 ) Cash Flows from Investing Activities Proceeds from sale of marketable securities 17,009 - Cash paid for equipment - (3,463 ) Cash paid for software development - (11,500 ) 17,009 (14,963 ) Cash Flows from Financing Activities Proceeds from notes 398,545 45,005 Proceeds from convertible notes, net of offering costs 2,226,000 - Payments of notes (7,396 ) (66,216 ) Advances on receivables 180,778 - Repayments of advances on receivables (112,622 ) - Repayments of liability on sale of future revenues (261,866 ) - Deposit on purchase of preferred stock - 500,000 Proceeds from sale of preferred stock 25,000 979,997 Net cash provided by financing activities 2,448,439 1,458,786 Net increase in cash 1,424,847 879,624 Cash, beginning of period 306,252 14,152 Cash, end of period $ 1,731,099 $ 893,776 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 86,438 $ 24,245 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 $ 328,125 $ - Debt costs deducted from convertible note proceeds $ 366,500 $ - Preferred stock issued for accrued penalties $ 1,929,516 $ - Preferred stock issued for asset acquisition $ - $ 8,600,000 Non-cash adjustments to Redeemable Preferred Stock of subsidiary $ - $ 2,059,764 Notes payable and accrued interest exchanged for preferred stock $ - $ 116,380 Accounts payable paid through proceeds of preferred stock $ - $ 100,000 Accrued compensation paid with common stock $ - $ 56,250 Value of warrant issued with note $ - $ 42,000 Accounts payable paid through proceeds of note $ - $ 4,995 Warrant derivative liability at inception $ 5,625,519 $ 1,750,646 Accrued compensation forgiven and credited to contributed capital $ - $ 187,500 Marketable securities received as payment for Series D preferred stock $ - $ 240,000 Notes and accrued interest foregiven $ - $ 706,502 Cash Flows from Operating Activities Net loss Depreciation and amortization expense Bad debt expense Gain on forgiveness of debt Equity based compensation expense Recognized loss (gain) on marketable securities Loan principal paid directly through grant Amortization of debt discount and debt costs Initial derivative expense Change in fair value of derivative liability Changes in operating assets and liabilities: (Increase) decrease in accounts receivable Increase in accounts receivable - related parties (Increase) decrease in prepaid expenses and other current assets Increase in accounts payable and accrued liabilities Increase in accounts payable and accrued liabilities - related parties Increase in other liabilities Increase (decrease) in deferred revenue Net cash used in operating activities Cash Flows from Investing Activities Proceeds from sale of marketable securities Cash paid for acquisitions, net of cash assumed Net cash (used in) provided by investing activities Cash Flows from Financing Activities Proceeds from convertible notes, net Payments of notes Advances on receivables Repayments of sale of future revenues Deposit on purchase of preferred stock Net cash provided by financing activities Net increase (decrease) in cash Cash, beginning of period Cash, end of period Supplemental disclosures of cash flow information: Cash paid during the period for interest Cash paid during the period for income taxes Original issue discount deducted from convertible note proceeds Debt costs deducted from convertible note proceeds Contingent consideration for acquisitions Notes and accrued interest converted to common stock Common stock issued/to be issued for asset acquisition Notes payable and accrued interest exchanged for debentures Accrued compensation paid with common stock Warrant derivative liability extinguished Liabilities assumed in acquisition Warrant derivative liability at inception Preferred stock issued for accrued penalties footnotesnotes are inan integral part of these unaudited condensed consolidated financial statements.
Vancouver, Canada.NOTESJUNE 30, 2020fourseven subsidiaries, Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), Recruiter.com Consulting, LLC, and VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted Inc. (“Scouted”), Recruiter.com Upsider Inc. (“Upsider”) and Recruiter.com OneWire Inc. (“OneWire”) (see Note 13 Subsequent Events) . RGI and its subsidiaries as a consolidated group is hereinafter referred to as the “Company.” The Company operates in Connecticut, Texas, New York, California and New York.Asset PurchaseEffective March 31, 2019, RGI acquired certain assets and assumed certain liabilities under an asset purchase agreement, dated March 31, 2019, among RGI, Genesys Talent LLC, a Texas limited liability company (“Genesys”), and Recruiting Solutions, a wholly owned subsidiary of the Company (the “Asset Purchase”). As consideration in the Asset Purchase the Company issued a total of 200,000 shares of its Series F Preferred Stock convertible into 2,500,000 shares of the Company’s common stock. The acquired assets and liabilities include certain accounts receivable, accounts payable, deferred revenue, sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets. The Company is utilizing these assets in its employment staffing business operated through Recruiting Solutions. This transaction was treated as a business combination (see Note 13).20192020 and 2018,2019, filed with the SEC on May 8, 2020.March 9, 2021. The December 31, 20192020 balance sheet is derived from those statements.and six months ended June 30,March 31, 2021 and 2020 and 2019 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 the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 20202021 or for any future period. All references to June 30,March 31, 2021 and 2020 and 2019 in these footnotes are unaudited.available for salemarketable 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 thea business combination, fair value of intangible assets and goodwill, valuation of initiallease liabilities and related right of use assets, and corresponding lease liabilities, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.
Revenues are predominantly derived
| ● | 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 |
| ● |
| ● |
| ● | Career Solutions: We provide services to assist job seekers with their career advancement. These services include a resume distribution service which involves promoting these job seekers’ profiles and resumes to |
Direct hire recruitment
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.
Marketing and publishing
2020.
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Consulting and staffing services | $ | 3,490,056 | $ | 1,605,894 | ||||
| Permanent placement fees | 290,767 | 158,381 | ||||||
| License and other | 231,831 | 130,365 | ||||||
| Career services | 79,342 | 72,765 | ||||||
| Marketing and publishing | 74,541 | 168,378 | ||||||
| Total revenue | $ | 4,166,537 | $ | 2,135,783 | ||||
| Three Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Consulting and staffing services | $ | 1,576,662 | $ | 1,605,894 | ||||
| Permanent placement fees | 153,140 | 118,103 | ||||||
| License and other | 46,856 | 130,365 | ||||||
| Career services | 42,408 | 33,483 | ||||||
| Marketing and publishing | 34,348 | 84,636 | ||||||
| Total revenue | $ | 1,853,414 | $ | 1,972,481 | ||||
Three Months Ended March 31, | ||
2021 | 2020 | |
| Recruiters on Demand | $957,479 | $184,975 |
| Consulting and staffing services | 2,072,446 | 1,913,394 |
| Permanent placement fees | 39,966 | 137,627 |
| Marketplace Solutions | 40,981 | 40,193 |
| Career services | 53,673 | 36,934 |
| Total revenue | $3,164,545 | $2,313,123 |
2021.
commissions based on a percentage of Recruiting Solutions gross margin.
7
| Fair Value at June 30, | Fair Value Measurement Using | |||||||||||||||
| 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
| Available for sale marketable securities (Note 3) | $ | 9,017 | $ | 9,017 | $ | - | $ | - | ||||||||
| Warrant derivative liability (Note 10) | $ | 9,783,912 | $ | - | $ | - | $ | 9,783,912 | ||||||||
Fair Value at March 31, | Fair Value Measurement Using | |||
2021 | Level 1 | Level 2 | Level 3 | |
| Available for sale marketable securities (Note 3) | $1,647 | $1,647 | $- | $- |
| Warrant derivative liability (Note 9) | $16,496,364 | $- | $- | $16,496,364 |
| Balance at December 31, 2019 | $ | 612,042 | ||
| Additions to derivative instruments | 5,625,519 | |||
| Anti-dilution adjustments to derivative instruments | 2,642,175 | |||
| Loss on change in fair value of derivative liability | 904,176 | |||
| Balance at June 30, 2020 | $ | 9,783,912 |
Goodwill
In January 2017,
Three Months Ended March 31, | ||
2021 | 2020 | |
| Balance at January 1 | $11,537,997 | $612,042 |
| Additions to derivative instruments | 5,960,058 | - |
| Reclassifications to equity upon extinguishment | (373,070) | - |
| (Gain) loss on change in fair value of derivative liability | (628,621) | 565,088 |
| Balance at March 31 | $16,496,364 | $1,177,130 |
estimated economic lives.
(see Note 4).
| June 30, | June 30, | |||||||
| 2020 | 2019 | |||||||
| Options | 1,355,758 | 540,905 | ||||||
| Stock awards | 866,500 | 494,593 | ||||||
| Warrants | 3,653,443 | 470,939 | ||||||
| Convertible notes | 1,845,703 | - | ||||||
| Convertible preferred stock | 16,660,275 | 17,929,825 | ||||||
| 24,381,679 | 19,436,262 | |||||||
March 31, | March 31, | |
2021 | 2020 | |
| Options | 2,188,258 | 873,420 |
| Stock awards | 554,000 | 402,500 |
| Warrants | 5,796,843 | 470,939 |
| Convertible notes | 3,600,505 | - |
| Convertible preferred stock | 15,290,988 | 16,939,013 |
27,430,594 | 18,685,872 |
on our consolidated financial statements.
The Company completed rounds of funding during 2019. Additionally, during 2020
$0.01.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net realized gains (losses) on investment sold | $ | (401 | ) | $ | - | $ | (2,543 | ) | $ | - | ||||||
| Net unrealized gains (losses) on investments still held | 447 | (92,500 | ) | (16,197 | ) | (101,417 | ) | |||||||||
| Total | $ | 46 | $ | (92,500 | ) | $ | (18,740 | ) | $ | (101,417 | ) | |||||
Three Months Ended | ||
March 31, | ||
2021 | 2020 | |
| Net realized gains (losses) on investment sold | $- | $(2,142) |
| Net unrealized gains (losses) on investments still held | 223 | (16,644) |
| Total | $223 | $(18,786) |
| June 30, | June 30, | |||||||
| 2020 | 2019 | |||||||
| Balance – December 31 | $ | 44,766 | $ | 33,917 | ||||
| Additions | - | 240,000 | ||||||
| Proceeds on sales of securities | (17,009 | ) | - | |||||
| Recognized losses | (18,740 | ) | (101,417 | ) | ||||
| Balance – June 30 | $ | 9,017 | $ | 172,500 | ||||
2020:
March 31, | March 31, | |
2021 | 2020 | |
| Balance – December 31 | $1,424 | $44,766 |
| Additions | - | - |
| Proceeds on sales of securities | - | (14,955) |
| Recognized gain (loss) | 223 | (18,786) |
| Balance – March 31 | $1,647 | $11,025 |
March 31,2021 | December 31,2020 | |
| Customer contracts | $233,107 | $233,107 |
| License | 1,726,965 | 1,726,965 |
| Intangible assets, including sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets acquired pursuant to 2021 business acquisitions (see Note 12) | 5,853,031 | - |
7,813,103 | 1,960,072 | |
| Less accumulated amortization | (1,323,381) | (1,164,208) |
| Carrying value | $6,489,722 | $795,864 |
The Company will begin amortizing intangible assets from the three recently acquired acquisitions in the second quarter of 2021 upon completion of the purchase price allocations.
At June 30, 2020 we are party to two agreements
The Company has granted a continuing security interest in the following, to the extent and in the amount of the purchased receivables: all assets including the following property that the Company now owns or shall acquire or create immediately upon the acquisition or creation thereof: (i) any and all amounts owing to the Company now or in the future from any customers; and (ii) all other tangible and intangible personal property of every kind and nature.
11
NOTE 6 — RECEIVABLES FINANCING AGREEMENT
In January 2020 we entered into an agreement with a lender that provides advances against the collection of accounts receivable. Advances made under the agreement are generally repayable in 45 days from the date of the advance and bear interest at 1.5% per month. Advances received under the agreement aggregated $180,778. In April 2020, the lender informed the Company that it would not be able to advance additional funds pursuant to this arrangement due to the impact of the COVID-19 pandemic. We repaid $112,622 during the three months ended June 30, 2020 andMarch 31, 2021, we amortized the remaining advances payable were $68,156 at June 30, 2020.
$2,719 of discount to interest expense.
expense for the three months ended March 31, 2021.
| June 30, 2020 | December 31, 2019 | |||||||
| Term loans | $ | 90,440 | $ | 103,800 | ||||
| Less current portion | (27,335 | ) | (25,934 | ) | ||||
| Non-current portion | $ | 63,105 | $ | 77,866 | ||||
March 31, 2021 | December 31, 2020 | |
| Term loans | $70,044 | $77,040 |
| Less current portion | (28,609) | (28,249) |
| Non-current portion (excluding PPP loan discussed below) | $41,435 | $48,791 |
| Year Ending December 31, | ||||
| 2020 | $ | 13,386 | ||
| 2021 | 28,195 | |||
| 2022 | 30,133 | |||
| 2023 | 18,726 | |||
| Total minimum principal payments | $ | 90,440 | ||
| Year Ending December 31, | |
| 2021 | $21,196 |
| 2022 | 30,133 |
| 2023 | 18,715 |
| Total minimum principal payments | $70,044 |
forgiven.
March 31, 2021.
March 31, 2021.
DEFICIT
No shares of preferred stock were issued during the three months ended March 31, 2021.
During 2020 we have issued to the holders of Series D Preferred Stock an aggregate of 106,134 additional shares of Series D Preferred Stock as consideration for waivers of penalties discussed below.
On June 9, 2020, the Company sold 1,375 Series D preferred stock units (the “Units”) at a purchase price of $18.1818 per Unit, taking into account a 10% discount, each Unit consisting of one share of Series D Preferred Stock and a warrant to purchase 6.25 shares of common stock, subject to adjustment as provided for therein. The Series D Preferred Stock sold in the financing converts into a minimum of 17,188 shares of common stock. The Company received gross proceeds of $25,000 from the sale of the Units. The 8,594 warrants are exercisable for five years from the issuance date at an exercise price of $4.80 per share, subject to adjustment as provided for therein.
Series E Convertible Preferred Stock
January and February 2020,2021, the Company issued 803,414202,988 shares of its common stock upon conversion of 64,27216,239 shares of Series F Preferred Stock.April 2020,March 2021, the Company issued 138,92616,197 shares of its common stock upon conversion of 11,1141,296 shares of Series F Preferred Stock.Preferred Stock PenaltiesOn March 31, 2019, we entered into certain agreements with investors pursuant to which we issued convertible preferred stock and warrants, as described above. Each of the series of preferred stock and warrants required us to reserve shares of common stock in the amount equal to two times the common stock issuable upon conversion of the preferred stock and exercise of the warrants. We did not comply in part due to our attempts to manage the Delaware tax which increases to a maximum of $200,000 as the authorized capital increases without the simultaneous increase in the number of shares outstanding. In May 2020 following stockholder approval at a special meeting the Company effected a reincorporation from Delaware to Nevada and a simultaneous increase in our authorized common stock from 31,250,000 shares to 250,000,000 shares, which we expect will be sufficient to meet the reserve requirements. As of December 31, 2019, we estimated that we owed approximately $6 million in penalties (prior to any waivers of penalties) to holders of preferred stock. Subsequent to December 31, 2019, we have received waivers from a substantial number of the preferred shareholders with respect to these penalties. We have agreed to issue to the holders of Series D Preferred Stock an aggregate of 106,134 additional shares of Series D Preferred Stock (valued at $1,929,516) as consideration for the waivers. We have accrued this cost at December 31, 2019. Additionally, certain holders of Series E and Series F Preferred Stock have not waived the penalties. We have accrued $308,893 at December 31, 2019 related to these Series E and Series F Preferred holders. Because of our ongoing liquidity problems, we will be required to cease operations if faced with material payment requests from investors who did not agree to waive the penalties. The total accrued penalty amount of $2,238,314 was included in accrued expenses on the balance sheet at December 31, 2019. The $1,929,516 accrual was reclassified to equity during the three months ended March 31, 2020 as a result of our issuance of the 106,134 shares of Series D Preferred Stock. At June 30, 2020, the remaining balance of $308,798 is included in accrued expense on the balance sheet.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 in connection with the reincorporation from Delaware to Nevada in May 2020. As of June 30, 2020March 31, 2021 and December 31, 20192020 the Company had 5,009,5087,275,185 and 3,619,6585,504,008 shares of common stock outstanding, respectively.On February 1, 2019, the Company granted to Evan Sohn, its Executive Chairman and CEO, 43,423 sharesrestricted commonpreferred stock which vested on February 1, 2020. We recognized compensation expense of $12,665 during the six months ended June 30, 2020.On May 14, 2019, the Company granted to Mr. Sohn 451,170 shares of restricted common stock, which vested on February 1, 2020. We recognized compensation expense of $318,473 during the six months ended June 30, 2020.On December 23, 2019 the Company granted to a consultant 312,500 restricted stock units (the “RSUs”) pursuant to a consultant agreement. The RSUs vest 63,500 upon grant with the balance vesting monthly in equal installments beginning January 1, 2020 and ending November 1, 2020, subject to the consultants continued service to the Company on each vesting date. The RSU award has been valued at $343,750 and compensation expense will be recorded over the respective vesting periods. We recognized compensation expense of $74,999 and $149,998 during the three and six months ended June 30, 2020, respectively. The shares have not been issued at June 30, 2020. The vested shares will be issued at the earlier of the final vesting period or the termination of services.Effective January 15, 2020 the Company entered into a consulting agreement. Pursuant to the agreement the Company agreed to issue 60,000 shares of restricted common stock, plus a payment of $15,000. The shares are fully vested upon issuance and have been valued at $75,000, based on the quoted market price of our common stock on the grant date. The shares were issued on April 3, 2020. We have recorded compensation expense of $37,500 and $68,750 for the share portion of the agreement during the three and six months ended June 30, 2020, respectively, and expense of $7,500 and $13,750 for the cash portion during the three months ended June 30, 2020, respectively. Prepaid expense of $6,250 for the stock portion and $1,250 for the cash portion was recorded at June 30, 2020.Effective January 15, 2020 the Company entered into a consulting agreement. Pursuant to the agreement the Company agreed to issue 30,000 shares of restricted common stock, earned monthly over the three month term of the agreement. The shares are fully vested upon issuance and have been valued at $45,500, based on the quoted market price of our common stock on the vesting dates. The shares were issued on April 3, 2020. We have recorded compensation expense of $6,500 and $45,500 during the three and six months ended June 30, 2020, respectively.2020,2021, the Company issued 39,260113,476 shares of its common stock upon conversion of 3,1419,078 shares of its Series ED Preferred Stock.January and February 2020,2021, the Company issued 803,414550,000 shares of its common stock upon conversion of 64,27244,000 shares of its Series FD Preferred Stock.2020,2021, the Company issued 161,250202,988 shares of its common stock upon conversion of 12,90016,239 shares of its Series DF Preferred Stock.April 2020,March 2021, the Company issued 138,926267,188 shares of its common stock upon conversion of 11,11421,375 shares of its Series FD Preferred Stock.June 2020,March 2021, the Company issued 157,00016,197 shares of its common stock upon conversion of 12,5601,296 shares of its Series DF Preferred Stock.
In May 2020, the number of shares authorized for issuance under the Company’s 2017 Equity Incentive Plan was increased to 1,714,000 shares. In June 2020, the number of shares authorized for issuance under the Company’s 2017 Equity Incentive Plan was further increased to 2,770,000 shares.
As of the issuance date of the unit warrants issued in 2020 in connection with the sale of Series D Preferred Stock (See Note 9), the Company determined a fair value for the derivative liability of $26,465 for the 8,594 warrants, which has been charged to paid in capital. The fair value of the warrants was determined using the Black-Scholes Model based on a risk-free interest rate of 0.34%, an expected term of 5 years, an expected volatility of 344% and a 0% dividend yield.
As a result of the sale of convertible notes and warrants as described in Note 8, the number and exercise price of the Series D Preferred Stock warrants outstanding was adjusted due to anti-dilution provisions in the warrants. The exercise price was reduced to $1.60 from $4.80 and the number of warrants was increased from 479,533 to 1,438,599. We have recorded an expense for the change in derivative value due to the anti-dilution adjustments of $2,642,175 as a result of the trigger of the anti-dilution provision.
| June 30, 2020 | ||||
| Operating office lease | $ | 269,054 | ||
| Less accumulated reduction | (91,723 | ) | ||
| Balance of ROU asset at June 30, 2020 | $ | 177,331 | ||
March 31,2021 | |
| Operating office lease | $269,054 |
| Less accumulated reduction | (146,757) |
| Balance of ROU asset at March 31, 2021 | $122,297 |
| June 30, 2020 | ||||
| Total lease liability | $ | 269,054 | ||
| Reduction of lease liability | (91,723 | ) | ||
| Total | 177,331 | |||
| Less short term portion as of June 30, 2020 | (73,378 | ) | ||
| Long term portion as of June 30, 2020 | $ | 103,953 | ||
March 31,2021 | |
| Total lease liability | $269,054 |
| Reduction of lease liability | (146,757) |
| Total | 122,297 |
| Less short term portion as of March 31, 2021 | (73,378) |
| Long term portion as of March 31, 2021 | $48,919 |
| 2020 | $ | 43,842 | ||
| 2021 | 89,736 | |||
| 2022 | 82,885 | |||
| Total minimum non-cancellable operating lease payments | 216,463 | |||
| Less discount to fair value | (39,132 | ) | ||
| Total fair value of lease payments | $ | 177,331 |
| 2021 | $67,815 |
| 2022 | 82,885 |
| Total minimum non-cancellable operating lease payments | 150,700 |
| Less discount to fair value | (28,403) |
| Total fair value of lease payments | $122,297 |
We
are included in product development expense in our consolidated statement of operations.
finance charges on accounts payable owed to Icon.
March 31, 2021.
Business Combination
On MarchCOMBINATIONS
Intangible assets, including sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets | $1,805,183 |
$1,805,183 |
| Intangible assets, including sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets | $4,047,848 |
Accounts payable | (108,500) |
$3,939,348 |
final valuations which will not exceed one year in accordance with ASC 805.
| June 30, | ||||
| 2019 | ||||
| Revenue | $ | 3,937,422 | ||
| Net Loss | $ | (3,650,641 | ) | |
| Loss per common share, basic and diluted | $ | (4.02 | ) | |
March 31, 2021 and 2020:
March 31, | March 31, | |
2021 | 2020 | |
| Revenue | $3,315,311 | $2,580,491 |
| Net Loss | $(6,250,817) | $(2,545,822) |
| Loss per common share, basic and diluted | $(0.86) | $(0.48) |
In July 2020, the Company
The Company issued 110,000853,000 shares of common stock upon the conversion of 8,80068,312 shares of Series D Preferred Stock.
preferred stock.
If the Bonus compensation totals $350,000, the Company shall issue to the Executive,Consideration Shares are subject to approval by the Company’s Board, qualified optionsforfeiture pursuant to purchase an additional 250,000 shares of the Company’s common stock at an exercise price equalAPA provisions regarding a post-closing working capital adjustment and a revenue true-up and pursuant to the market price as of the date the Bonus compensation is computed, subject to adjustment for any increase or decreaseOneWire’s indemnity obligations. The assets acquired in the numberAPA consist primarily of issued shares resulting fromsales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets, along with a stock dividend, stock split, reverse stock split, orde minimis amount of other subdivision or consolidationassets. OneWire’s expansive candidate database in financial services and candidate matching service amplify our reach to give employers and recruiters access to an even broader pool of shares. These options shall vest over a two (2) year period in equal quarterly installments on the last day of each calendar quarter beginning with the first full calendar quarter after computation of the Bonus compensation totalling $350,000, subject to the Executive’s continued employment with the Company as of each applicable vesting date.
qualified talent.
healthcare specializations.
The Company has four wholly-owned subsidiaries: Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), Recruiter.com Consulting, LLC, and VocaWorks, Inc. (“VocaWorks”). The Company operates in Connecticut, Texas, and New York. Subsequently to Q2, the Company also operates in California and Vancouver, Canada.
| ● | 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 |
| ● |
| ● | Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including 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. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. 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 Marketing Solutions. |
| ● | Career |
commissions based on a percentage of Recruiting Solutions gross margin.
Quarter Overview
Duringdemand. Most notably, Evan Sohn appeared on CNBC on April 1, 2021, to discuss the three-months ended June 30, 2020,job market conditions.
Our key highlights during the three-months ended June 30, 2020 include the following
CNBC.
March 31, 2020:
more profitable mix of clients and services we provided.
$368,315.. (Expense) Income (Loss) 2020. $748,242. the sale of future revenue. forgiven. 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) 1,845,703 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 and 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, 369,141 common stock purchase warrants exercisable at $2.00 per share. Payments for marketing and publishing are typically due within 30 days of completion of services. occurred. 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. previous paragraph. June 30, 2020March 31, 2021 was $15,068$57,543 compared to $2,969$25,243 for the 2019corresponding three-month period in 2020, which reflects the focus onan increase in advertising and marketing expense to help drive growth in our business. The Company endeavored to build traffic, content, and communications for the purpose of outreach to and engagement with its network of recruiters and to further build its network of recruiters.June 30, 2020 increasedMarch 31, 2021 decreased to $57,401$70,660 from $44,934$83,093 for the corresponding period in 2019, reflecting continued investment in our product offerings.2020. This decrease is attributable to timing of launching new development projects. The product development expense in both periods wereincluded $57,988 and $60,979 for the three months ended March 31, 2021 and 2020, respectively paid in entirety to Recruiter.com Mauritius, Ltd, a development team employed by Recruiter.com and a related party of the Company.June 30, 2020,March 31, 2021, we incurred a non-cash amortization charge of $159,173 relatedas compared to $159,173 for the corresponding period in 2020. The amortization expense relates to the intangible assets acquired from Genesys, now the Company’s Recruiting Solutions division.expensesexpense for the three-month period ended June 30, 2020 includeMarch 31, 2021 includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the three-month period ended June 30, 2020,March 31, 2021, our general and administrative expenses were $1,626,362,expense was $2,545,905, including $709,230$502,407 of non-cash stock basedstock-based compensation. In 2019,2020, for the corresponding period, our general and administrative expenses were $2,653,432expense was $2,148,943 including $1,481,322$870,722 of non-cash stock-based compensation. This decreaseincrease is attributable primarily to increases in compensation supporting the declinesgrowth in our Recruiters on Demand business, investor relations, legal and contractor fees of $976,167 partially offset by the decline in non-cash stock-based compensation of $772,092, legal expense of $297,505 and consulting fees of $126,000 partially offset by increases in compensation, software tools and other expenses.(Expenses)(expenses)(expense) for the three-month period ended June 30, 2020 consisted of net expense of $6,518,383March 31, 2021 was $4,356,420 compared to net expensea loss of $89,213$628,080 in the corresponding 20192020 period. The primary reason for the increase of $6,429,170$3,728,340 is due to a non-cash initial derivative expense of $3,340,554 related to the sale of convertible debentures as well as a$3,585,983 and an increase in non-cash interest expense of $2,642,175 due to a change in$1,277,235 reflecting the derivative value of warrants due to anti-dilution adjustments. Other expense also increased due to a non-cash expense of $339,088debt discount and finance costs from the convertible note financings completed in May and June of 2020 and January of 2021. The net loss was offset partially by non-cash income of $1,193,709 resulting from a change in the fair value of the derivative liability from our outstanding warrants issued in 2019.warrants. As our common stock price increases, we incur an expense and contrarily if our common stock decreases, we recognize other income. We expect the non-cash income from the anticipated forgiveness of the loans we received under the Paycheck Protection Program to increase our other income, or alternatively decrease our other expense, as the case may be.lossJune 30, 2020,March 31, 2021, we incurredhad a net loss of $7,941,215$6,280,066 compared to $2,279,989 in the 2019 period. After taking into account the accrued preferred stock dividends as applicable, we incurred a net loss attributable to common shareholders of $7,941,215 for the three-months ended June 30, 2020 compared to $2,279,989 in the 2019 period. It is possible the net loss may increase in near-term future periods due to the effect of the COVID-19 pandemic, which we expect will be partially offset by non-cash income from forgiveness of the loans pursuant to the Paycheck Protection Program.Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019:RevenueThe Company had revenue of $4,166,537 for the six months ended June 30, 2020, as compared to $2,135,783 for the 2019 six-month period, an increase of $2,030,754 or 95.1%. The increase resulted primarily from the acquisition in March 2019 of certain assets from Genesys, now the Company’s Recruiting Solutions division, offset by enterprise accounts reducing demand for billable consultants as well as reducing bill rates clients paid for consultants, as a result of the effect of the COVID-19 pandemic. The Company also had a decline in our licensing business as our primary licensing customer reduced demand for hiring needs also as a result of the effect of the COVID-19 pandemic. The Company also experienced a decline in marketing revenue as we shifted internal resources to focus more on our core solutions business. The extent to which the COVID-19 pandemic will impact our revenue in the subsequent future periods is uncertain at this time.Cost of RevenueCost of revenue was primarily attributable to employee costs, third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys, now the Company’s Recruiting Solutions division. Cost of revenue was $3,169,438 for the six months ended June 30, 2020 and included related party costs of $954,096. This compares to $1,461,922 for the 2019 six-month period, which included related party costs of $794,135.Our gross profit for the 2020 six-month period was $997,099 which produced a gross profit margin of 23.9%. Our gross profit for the 2019 six month period was $673,861 which produced a gross profit margin of 31.6%. The decline in the gross profit margin reflects the impact of a reduction in bill rates from certain clients as well as a shift in the mix of business due to the decline in our licensing business and reduced focus on marketing revenue.Operating ExpensesWe had total operating expenses of $4,274,456 for the six months ended June 30, 2020 compared to $3,171,017 in the 2019 period, an increase of $1,103,439 or 34.8%. The increase was primarily due to the increase in general and administrative expenses of $702,045 as well as the inclusion of intangible amortization of $318,346.Sales and MarketingOur sales and marketing expense for the six months ended June 30, 2020 was $40,311 compared to $2,969 for the 2019 period, which reflects the focus on growth in the business.Product DevelopmentOur product development expense for the six months ended June 30, 2020 increased to $140,494 from $94,788 for 2019 reflecting continued investment in our product offerings. The product development expense included $118,380 and $94,788 respectively paid to a development team employed by Recruiter.com Mauritius, a related party.Amortization of Intangibles and Impairment ExpenseFor the six months ended June 30, 2020, we incurred a non-cash amortization charge of $318,346 related to the intangible assets acquired from Genesys, now the Company’s Recruiting Solutions division.General and AdministrativeGeneral and administrative expenses include compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the six months ended June 30, 2020, our general and administrative expenses were $3,775,305, including $1,650,202 of non-cash stock-based compensation. In 2019, our general and administrative expenses were $3,073,260 including $1,568,027 of non-cash stock-based compensation. The increase is attributable primarily to increases in compensation, software tools, and other expenses and non-cash stock-based compensation, partially offset by a decrease in professional fees.Other Income (Expenses)Other income (expenses) for the six months ended June 30, 2020 consisted of net expense of $7,146,463 compared to net expense of $165,155 in the 2019 period. The primary reason for the increase of $6,981,308 is a non-cash initial derivative expense of $3,340,554 related to the sale of convertible debentures and warrants as well as a non-cash expense of $2,642,175 due to a change in the derivative value of warrants due to anti-dilution adjustments. Other expense also increased due to a non-cash expense of $904,176 from the change in the fair value of the derivative liability from our outstanding warrants issued in 2019. As our common stock price increases, we incur an expense and contrarily if our common stock decreases, we recognize other income. We expect the non-cash income from the anticipated forgiveness of the loans we received under the Paycheck Protection Program to increase our other income, or alternatively decrease our other expense, as the case may be.Net lossFor the six months ended June 30, 2020, we incurred a net loss of $10,423,820 compared to $2,662,311$2,482,605 during the corresponding three-month period in the 2019 period. After taking into account the accrued preferred stock dividends as applicable, we incurred a net loss attributable to common shareholders of $10,423,820 for the six months ended June 30, 2020 compared to $2,772,005 in the 2019 period. It is possible the net loss may increase in near-term future periods due to the effect of the COVID-19 pandemic, which we expect will be partially offset by non-cash income from forgiveness of the loans pursuant to the Paycheck Protection Program.Recruiter defines Three Months Ended
June 30, 2020 2019 Net loss $ (7,941,215 ) $ (2,279,989 ) Interest expense and finance cost, net 203,874 14,340 Depreciation & amortization 159,462 96 EBITDA (loss) (7,577,879 ) (2,265,553 ) Bad debt expense 750 - Initial derivative expense 3,340,554 - Change in derivative value due to anti-dilution adjustments 2,642,175 - Loss (gain) on change in fair value of derivatives 339,088 (17,627 ) Stock-based compensation 709,230 1,481,322 Adjusted EBITDA (Loss) $ (546,082 ) $ (801,858 ) Six Months Ended
June 30, 2020 2019 Net loss $ (10,423,820 ) $ (2,662,311 ) Interest expense and finance cost, net 248,080 81,365 Depreciation & amortization 318,923 96 EBITDA (loss) (9,856,817 ) (2,580,850 ) Bad debt expense 12,000 - Initial derivative expense 3,340,554 - Change in derivative value due to anti-dilution adjustments 2,642,175 - Loss (gain) on change in fair value of derivatives 904,176 (17,627 ) Stock-based compensation 1,650,202 1,568,027 Adjusted EBITDA (Loss) $ (1,307,710 ) $ (1,030,450 ) Net loss Interest expense and finance cost, net Depreciation & amortization EBITDA (loss) Bad debt expense Forgiveness of debt income Initial derivative expense Loss (gain) on change in fair value of derivative Stock-based compensation Adjusted EBITDA (Loss) sixthree months ended June 30, 2020,March 31, 2021, net cash used in operating activities was $1,040,601,$1,324,096, compared to net cash used in operating activities of $564,199$93,227 for the 2019corresponding 2020 period. The increase in cash used in operating activities was attributable to the increase in operating expenses outlined previously supporting the investments to grow our business offset by non-cash charges,business. For the three months ended March 31, 2021, net of a decrease in working capital accounts primarily prepaid expenses and other current assets. Net loss (after adjusting for non-cash items) was $1,379,764. Accounts receivable increased by approximately $333,000$857,781 and accounts receivable, prepaid expenses and other current assets decreased by $881,989 and accounts$28,923. Accounts payable, and accrued liabilities, and deferred revenue decreased in total by $867,563. For the three months ended March 31, 2020, net loss (after adjusting for non-cash items) was $825,322. Accounts receivable and prepaid expenses together increased by $16,147. Accounts payable, accrued liabilities, other liabilities and deferred revenue in total decreased by $1,006,448.sixthree months ended June 30, 2020,March 31, 2021, net cash used in investing activities was $249,983 due to cash used for acquisitions, compared to $14,955 of cash provided $17,009by investing activities in the three months ended March 31, 2020, which resulted primarily from the sale of marketable securities, compared to $14,963 of cash used in investing activities insecurities.sixthree months ended June 30, 2019, which resulted primarily from cash paid for software development and equipment.For the six months ended June 30, 2020,March 31, 2021, net cash provided by financing activities was $2,448,439.$2,136,529. The principal factors were $2,226,000$2,153,200 from the sale of convertible notes, net of original issue discounts and offering costs and $398,545 of proceeds from notes payable, offset by $261,866 for the repayments of liability from sale of future revenues.costs. In the 20192020 period, financing activities provided $1,458,786,$73,553, primarily due to $979,997$180,778 from advances from the sale of receivables and $25,000 from a deposit from the sale of preferred stock, and $500,000 for a deposit onpartially offset from the purchaserepayments of preferred stock.August 4, 2020May 10, 2021, the Company had approximately $1,193,864$521,000 in cash on hand. This balance is after receipt of $398,545 borrowed from a bank pursuant to the Paycheck Protection Program under the CARES Act guaranteed by the SBA, which we expect to be forgiven in part or in full, subject to our compliance with the conditions of the Paycheck Protection Program. This balance also is after receipt of approximately $2.2 million in net proceeds from the offering of the 12.5% Original Issue Discount Senior Subordinated Convertible Debentures and common stock purchase warrants completed in May and June 2020. Based on thethis cash on hand, as of August 4, 2020, the Company does not have the capital resources to meet its working capital needs for the next 12 months. We are also party to two lines of credit.credit with current outstanding balances of $0. Advances under each of these lines of credit mature within 12 months of the advances. Availability under these two lines of credit in the amount of $91,300 at JuneSeptember 30, 2020 has been suspended in 2020 due to COVID-19 uncertainty.since inception.annually. For the three-months ended June 30, 2020March 31, 2021 and the sixthree months ended June 30,March 31, 2020, the Company recorded a net lossesloss of $7,941,215$6,280,066 and $10,423,820,$2,482,605, respectively. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.havehad also entered into arrangements with factoring companies to receive advances against certain future accounts receivable in order to supplement our liquidity. However, the COVID-19 pandemic and debt covenants under outstanding debt and other financing arrangements have affected the Company’s ability to receive advances against its future accounts receivable as discussed in more detail below.Merchant Receivables PurchaseSecurity AgreementsThe Company and its subsidiariesDecember 31, 2020 we are partiesparty to a Merchant Receivables Purchase and Security Agreement, dated December 6, 2019 (the “First Receivables Purchase Agreement”),two lines of credit with Change Capital Holdings I, LLC (“Change Capital”) and a Merchant Receivables Purchase and Security Agreement, dated December 16, 2019, with Change Capital (the “Second Receivables Purchase Agreement” and together withoutstanding balances of $0. Advances under each of these lines of credit mature within 12 months of the First Receivables Purchase Agreement, the “Receivables Purchase Agreements”). Pursuant to the Receivables Purchase Agreements, Change Capital has agreed to advance a total of $450,000 in cash (the “Purchase Price”) and the Company and its subsidiaries agreed to pay Change Capital in equal weekly installments over the course of 52 weeks an amount of approximately $567,000 (the “Specified Amount”), which amount includes the fees payable by the Companyadvances. Availability under the Receivables Purchase Agreements. As longtwo lines was $91,300 at March 31, 2021; however, due to COVID -19 uncertainty (see Note 2), the availability under both lines has been suspended since 2020.no default has occurredof March 31, 2021 and December 31, 2020, respectively, which mature in 2023. The loans have variable interest rates, with current rates at 6.0% and 7.76.0%, respectively. Current monthly payments under the Receivables Purchase Agreements, the Company has the right to pay theloans are $1,691 and $1,008, respectively.balance of the Specified Amount to Change Capital prior to the due date at a total cost of 3% of the Purchase Price per month. Pursuant to the Receivables Purchase Agreements, the Company and the subsidiaries party to the Receivables Purchase Agreements also granted to Change Capital a security interest in all their assets now owned or acquired in the future. In May 2020, the Receivables Purchase Agreements were amended to limit the outstanding principal amount to $408,777 payable as two payments of $5,452 weekly, plus any default fees, late fees, legal fees and expenses and any other costs or expenses incurred in enforcing Change Capital’s rights under the Receivables Purchase Agreements. As of Aug 4, 2020, there are no other fees owed under the Receivables Purchase Agreements in addition to the two weekly payments. The Company does not anticipate receiving any additional advances under the Receivables Purchase Agreements. The Receivables Purchase Agreements contain covenants which limit the Company’s ability to enter into any secured financing agreements without the prior written consent of Change Capital. The transactionsloan pursuant to the Receivables Purchase Agreements have been accounted for as “Sale of Future Revenues.”Agreement with Qwil PBCA wholly-owned subsidiary of the Company is also a party to an arrangement with Qwil PBC, entered into in January 2020, that provides advances against the collection of accounts receivable. Advances madePaycheck Protection Program under the agreement are generally repayableCARES Act in 45 days from the dateamount of $24,750 was forgiven. We recorded forgiveness of debt income of $24,925 for the advance$24,750 of principal and bear$175 of related accrued interest at 1.5% per month. In April 2020, Qwil informed the Company that it would not be able to advance additional funds pursuant to this arrangement due to the impact of the COVID-19 pandemic. In May 2020, the Company negotiated a more favorable repayment plan with Qwil PBC, which consists of payments of approximately $7,903 bi-weekly through August 14th, 2020 and a payment of $7903 weekly from August 21st though September 18th, without additional interest. As of Aug 10, 2020, our outstanding balance with Qwil PBC was approximately $47,419.56.The advances received pursuant to the arrangements with Change Capital and Qwil are carried as liabilities on our balance sheet and the accounts receivable remain on our books until collected.Cautionary Note Regarding Forward-Looking StatementsThis Quarterly Report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management’s beliefs with respect to the impact of the COVID-19 pandemic, including the anticipated effect of client attrition, expected changes in expenses, expected increase in future demand for recruiting solutions, and the anticipated impact of our cost-cutting measures on our ability to meet client demand, our expected decrease in future revenues and increase in the net loss, our expectations regarding advances under the Receivables Purchase Agreements, expected future capital-raising activity, expected forgiveness of the loans received under the Paycheck Protection Program and the anticipated effect of such forgiveness on our operating results, and our liquidity. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including without limitation, the following:●our ability to continue as a going concern;●our ability to raise additional capital to support our operations;●the effect of COVID-19 on our Company and the national and global economies;●our ability to achieve positive cash flow from operations;●continued demand for services of recruiters;●unanticipated costs, liabilities, charges or expenses resulting from violations of covenants under our existing or future financing agreements;●our ability to operate the Recruiter.com Platform free of security breaches; and●our ability to identify suitable complimentary businesses and assets as potential acquisition targets or strategic partners, and to successfully integrate such businesses and /or assets with the Company’s business.Please refer to “Part I – Item 1A. Risk Factors” of our 2019 Form 10-K for additional information regarding the risks and uncertainties that could affect our business, financial condition and results of operations. New risk factors emerge from time-to-time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report. Revenues are predominantly derived● 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. RepresentsStaffing: Consists of providing consulting and staffing personnel providedservices to customersemployers to satisfy their demand for permanentlong- 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 that 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.● Recruiting Solutions. FacilitatedFull-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 our Job Market software platform and artificial intelligence matching technologies, placement of specialized personnel at employers, generating success-basedearning 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 direct-hire.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.● Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including 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. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. 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 Marketing Solutions. ● Career Solutions. Consisting of (i) Resume Distribution, wherebySolutions: We provide services to assist job seekers with their career advancement. These services include 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 send out candidate resumesthen distribute to our network of independent recruiters and (ii) Recruiter Certification Program, whereby users accesson the Platform. We earn revenue from a one-time flat fee for this service. We also offer a recruiter certification program which encompasses our recruitmentrecruitmentrelated training content, which we make accessible through anour 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19. We partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.●Marketing Solutions. Web portal monetization, lead generation, and digital publication advertising, structured for specialized B2B software companies to access niche industry audience, primarily of recruitment and HR audience.risktask of identifying and hiring qualified employees, and has theour discretion to select the employees and establish their pricecompensation and duties and bearscauses 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 its customers.Direct hire recruitment Payments for consulting and staffing services are typically due within 90 days of completion of services.the customereach 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.Career Payments for recruitment services are typically due within 90 days of completion of services.on a gross basis upon distribution of resumes or completion of training courses, which is the point that the performance obligations are satisfied.Marketing and publishing services revenues are recognizedeither 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 thatat which the performance obligations are satisfied.occured. embedded derivatives related to the warrants issued with the sale of our preferred stock in 2020 and 2019 and the warrants issued with the sale of convertible notes in 2020.2020 and subsequently in January 2021. 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.may bemaybe required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent we grant additional stock options or other stock-based awards.We are currently evaluating theThe adoption of ASU 2019-12 did not have a material impact of this guidance.on our consolidated financial statements.ITEMTEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEMTEM 4. CONTROLS AND PROCEDURESmanagement carried out an evaluation,principal executive officer and principal financial officer, with the participationassistance of other members of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 or 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) ofmanagement, have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) or 15d-15(e)Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act. In making this assessment, our management used the criteria set forth by the CommitteeAct of Sponsor Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on their evaluation1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report,Report. Based on such evaluation, our Chief Executive Officerprincipal executive officer and our Chief Financial Officer, haveprincipal financial officer had concluded as a result of the material weaknesses described below, that our disclosure controls and procedures were not effective due to ensure that the information relating to our Company, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal controlcontrols over financial reporting.ManagementJune 30, 2020March 31, 2021, there were still material weaknesses in both the design and effectiveness of our internal control over financial reporting. A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified at least two material weaknesses in our internal control over financial reporting. Specifically, (1) we lack a sufficient number of employees to properly segregate duties and provide adequate review ofmonitoring during the process leading to and including the preparation of the consolidated financial statements and, asstatements.that date, (2) we lacked sufficient independent directors on our Board of Directorsemployees to maintain audit and other committees consistent with proper corporate governance standards. As ofremediate the end ofmaterial weakness identified in the period covered by this Quarterly Report, these material weaknesses have not been cured. During the three-months ended March 31, 2020, the Company planned and developed strategies to improve accounting operations and remediate these material weaknesses, including appointing a new Chief Financial Officer. In May 2020, the Board of Directors appointed Judy Krandel as the Chief Financial Officer of the Company, effective upon the filing of the Company’s Quarterly Report for the period ended March 31, 2020, which was filed on June 25, 2020.At the endthree-monthsExchange Act) that occurred during the quarter ended June 30, 2020, the Company hired Ms. Krandel as CFO which we believeMarch 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting in future quarters. During July 2020, the Company hired a financial consultant to establish certain procedures that we also believe is reasonably likely to materially affect our internal control over financial reporting in future quarters.reporting.PARTART II: OTHER INFORMATIONITEMTEM 1 - LEGAL PROCEEDINGSITEMTEM 1A. - RISK FACTORS11A of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 8.012020 along with the “Risk Factors” section of our Current Report on Form 8-K filed onS-1/A dated May 15, 2020 (the “May 2020 8-K”). The4, 2021. These risks described in our Form 10-K and in the May 2020 8-K are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.There have been no material changes to the risk factors set forth in Item 1A of our 10-K or in the May 2020 8-K.ITEMTEM 3 - DEFAULTS UPON SENIOR SECURITIESITEMTEM 4 - MINE SAFETY DISCLOSURESrelating to: “Item 1.01—regarding this agreement and transaction, the Company is providing disclosure in Part II, Item 5 of this Report.Agreement,” and “Item 3.02—Unregistered Sales of Equity Securities,” of Form 8-K. WeAgreement.executive employment agreement on July 1, 2020Asset Purchase Agreement and Plan of Reorganization (the “Employment Agreement”“APA”) with Chad MacRae asOneWire Holdings, LLC, a Delaware limited liability company (“OneWire”), to acquire all the Senior Vice President Recruitersassets and several liabilities of OneWire (the “OneWire Purchase”). As consideration for the OneWire Purchase, OneWire’s shareholders will receive a total of 388,318 shares (the “Consideration Shares”) of common stock, valued at $1,255,000, based on Demand. The Employment Agreement specifies that certain customer contracts, databases, and computer equipment were to be transferreda price per share of $3.231894, the volume-weighted average price of the common stock for the 30-day period immediately prior to the Company in connection with the hiring of Mr. MacRae. The Company’s management is currently evaluating the proper accounting treatment for this transaction. Mr. MacRae’s compensation package includes a $50,000 signing bonus and an annual base salary of $125,000. He is also entitled to earn a bonus package capped at $350,000 equal to any profit his division generates during the first full year of his employment, payable on a quarterly basis (the “Bonus”). In addition, Mr. MacRae received five-year incentive stock options to purchase 250,000 shares of the Company’s common stock with an exercise price of $1.85, issuable under the 2017 Equity Incentive Plan. The options will vest on the last calendar day of each month over a 12 month period in equal monthly increments, subject to continued employment with the Company as of each applicable vesting date and subject to execution of the Company’s standard Stock Option Agreement. Unless the Executive is terminated by the Company for CauseClosing Date (as defined in the Employment Agreement) before allAPA). 77,664 of the stock options have vested then, upon termination, any remaining unvested stock options shall automatically accelerate and vest. Upon a termination for Cause, all unvested options shall terminate.If the Bonus compensation totals $350,000, the Company shall issue to the Executive,Consideration Shares are subject to approval byforfeiture pursuant to APA provisions regarding a post-closing working capital adjustment and a revenue true-up and pursuant to OneWire’s indemnity obligations. The assets acquired in the Company’s Board, qualified optionsAPA consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets, along with a de minimis amount of other assets. OneWire’s expansive candidate database in financial services and candidate matching service amplify our reach to purchasegive employers and recruiters access to an additional 250,000 shareseven broader pool of specialized talent Company’s common stock at an exercise price equal to the market price as of the date the Bonus compensation is computed, subject to adjustment for any increase or decrease in the number of issued shares resulting from a stock dividend, stock split, reverse stock split, or other subdivision or consolidation of shares. These options shall vest over a two (2) year period in equal quarterly installments on the last day of each calendar quarter beginning with the first full calendar quarter after computation of the Bonus compensation totalling $350,000, subject to the Executive’s continued employment with the Company as of each applicable vesting date.The foregoing description of thematerial terms of the Debentures, the Warrants, Employment Agreement and the transactions contemplated therebyAPA, does not purport to be a complete description of the rights and isobligations of the parties thereunder, and such descriptions are qualified in itstheir entirety by reference to the Employment Agreementfull text of the form of the APA filed as Exhibit 10.310.8 to this Quarterly Report on Form 10-Q.ITEMTEM 6 – EXHIBITS*Management contract or compensatory plan or arrangement.**This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. Incorporated by Reference Filed or Furnished Exhibit No. Exhibit Description Form Date Number Herewith 10-K 3/9/21 4.7 10-K 3/9/21 4.8 10-K 3/9/21 10.12 10-K 3/9/21 10.13 8-K 1/21/21 10.1 8-K 4/2/21 10.1 X Asset Purchase Agreement and Plan of Reorganization, dated March 25, 2021, by and among Recruiter.com Group, Inc., Recruiter.com Upsider, Inc., Upsider, Inc, the selling shareholders named therein and Josh McBride. 8-K 3/31/21 10.1 Registration Rights Agreement, dated March 25, 2021, between Recruiter.com Group, Inc. and Upsider, Inc. 8-K 3/31/21 10.2 Asset Purchase Agreement, dated May 10, 2021, by and among Recruiter.com Group, Inc., Recruiter.com Onewire, Inc., OneWire Holdings, LLC, and Eric Stutzke X Certification of Principal Executive Officer (302) X X X** 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X SIGNATURESIGNATURESDated: August 13, 2020May 14, 2021RECRUITER.COM GROUP, INC. By: /s/ Evan Sohn Evan Sohn Chief Executive Officer(Officer(Principal Executive Officer) By: /s/ Judy Krandel Judy Krandel Chief Financial Officer(Officer(Principal Financial Officer)31