Recruiter.com Group, Inc. - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2021

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

For the transition period from _________ to _________:

Commission file number: 001-40563

RECRUITER.COM GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada		90-1505893
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Seventh Avenue New York, New York		10018
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number (855) 931-1500

_______________________________________

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

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

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

Common Stock Purchase Warrants

RCRT

RCRTW

The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

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

		Page
		number
Part I - Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	4
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) for the three and six months ended June 30, 2021 and 2020	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

Part II - Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Recruiter.com Group, Inc.
Condensed Consolidated Balance Sheets

	June 30,			December 31,
	2021			2020
	(unaudited)
Assets

Current assets:
Cash	$	86,898		$	99,906
Accounts receivable, net of allowance for doubtful accounts of $80,176 and $33,000, respectively		2,916,391			942,842
Accounts receivable - related parties		46,726			41,124
Prepaid expenses and other current assets		353,374			167,045
Investments - marketable securities		890			1,424

Total current assets		3,404,279			1,252,341

Property and equipment, net of accumulated depreciation of $2,405 and $1,828, respectively		1,058			1,635
Right of use asset - related party		103,953			140,642
Deferred offering costs		473,896			-
Intangible assets, net		5,645,009			795,864
Goodwill		4,929,897			3,517,315

Total assets	$	14,558,092		$	5,707,797

Liabilities and Stockholders' (Deficit)

Current liabilities:
Accounts payable	$	1,168,155		$	616,421
Accounts payable - related parties		1,194,821			779,928
Accrued expenses		827,612			423,237
Accrued expenses - related party		9,647			8,000
Accrued compensation		1,192,888			617,067
Accrued compensation - related party		116,000			122,500
Accrued interest		376,272			60,404
Contingent consideration for acquisitions		2,000,118			-
Liability on sale of future revenues, net of discount of $0 and $2,719, respectively		-			8,185
Deferred payroll taxes		159,032			159,032
Other liabilities		14,493			14,493
Loans payable - current portion		30,653			28,249
Convertible notes payable, net of unamortized discount and costs of $1,683,662 and $1,205,699, respectively		4,154,697			1,905,826
Refundable deposit on preferred stock purchase		285,000			285,000
Warrant derivative liability		8,921,615			11,537,997
Lease liability - current portion - related party		73,378			73,378
Deferred revenue		476,920			51,537

Total current liabilities		21,001,301			16,691,254

Lease liability - long term portion - related party		30,575			67,264
Loans payable - long term portion		33,965			73,541

Total liabilities		21,065,841			16,832,059

Commitments and contingencies (Note 10)		-			-

Stockholders' (Deficit):
Preferred stock, 10,000,000 shares authorized, $0.0001 par value: undesignated: 7,013,600 shares authorized; no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		-			-
Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; 376,275 and 527,795 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		39			54
Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 731,845 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		74			74
Preferred stock, Series F, $0.0001 par value; 200,000 shares authorized; 46,847 and 64,382 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		5			7
Common stock, $0.0001 par value; 100,000,000 shares authorized; 3,765,739 and 2,203,009 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		377			220
Additional paid-in capital		30,768,568			23,400,408
Accumulated deficit		(37,276,812	)		(34,525,025	)
Total stockholders' (deficit)		(6,507,749	)		(11,124,262	)

Total liabilities and stockholders' (deficit)	$	14,558,092		$	5,707,797

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

Recruiter.com Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020

Revenue (including related party revenue of $0, $7,020, $970 and $13,430, respectively)	$	4,380,894		$	1,853,414		$	7,545,439		$	4,166,537
Cost of revenue (including related party costs of $212,279, $298,172, $417,540 and $954,096, respectively)		2,946,084			1,418,242			5,200,994			3,169,438

Gross profit		1,434,810			435,172			2,344,445			997,099

Operating expenses:
Sales and marketing		75,006			15,068			132,549			40,311
Product development (including related party expense of $54,696, $57,401, $112,684 and $118,380, respectively)		75,004			57,401			145,664			140,494
Amortization of intangibles		675,095			159,173			834,268			318,346
General and administrative (including share based compensation expense of $1,112,834, $709,230, $1,615,241 and $1,650,202, respectively, and related party expenses of $106,149, $121,280, $232,781 and $244,198, respectively)		3,062,597			1,626,362			5,608,502			3,775,305

Total operating expenses		3,887,702			1,858,004			6,720,983			4,274,456

Loss from operations		(2,452,892	)		(1,422,832	)		(4,376,538	)		(3,277,357	)

Other income (expenses):
Interest expense (including related party interest expense of $18,193, $0, $30,466 and $0, respectively)		(1,592,822	)		(203,874	)		(3,020,410	)		(248,080	)
Initial derivative expense		-			(3,340,554	)		(3,585,983	)		(3,340,554	)
Change in derivative value due to anti-dilution adjustments		-			(2,642,175	)		-			(2,642,175	)
Change in fair value of derivative liability		7,574,750			(339,088	)		8,203,371			(904,176	)
Forgiveness of debt income		-			-			24,925			-
Grant income		-			7,262			3,382			7,262
Net recognized gain (loss) on marketable securities		(757	)		46			(534	)		(18,740	)
Total other income (expenses)		5,981,171			(6,518,383	)		1,624,751			(7,146,463	)

Income (Loss) before income taxes		3,528,279			(7,941,215	)		(2,751,787	)		(10,423,820	)
Provision for income taxes		-			-			-			-
Net Income (loss)		3,528,279			(7,941,215	)		(2,751,787	)		(10,423,820	)

Net income (loss) per common share - basic	$	0.99		$	(4.11	)	$	(0.89	)	$	(5.78	)
Net income (loss) per common share - diluted	$	(0.69	)	$	(4.11	)	$	(0.89	)	$	(5.78	)
Weighted average common shares - basic		3,560,745			1,933,812			3,091,146			1,803,358
Weighted average common shares – diluted		5,879,481			1,933,812			3,091,146			1,803,358

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

Recruiter.com Group, Inc.

Condensed Consolidated Statements of Changes in Stockholders' (Deficit)

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

(Unaudited)

	Preferred stock Series D						Preferred stock Series E					Preferred stock Series F						Common stock				Common stock to be issued for Acquisitions						Additional Paid in			Accumulated			Total Stockholders'
	Shares			Amount			Shares			Amount		Shares			Amount			Shares		Amount		Shares			Amount			Capital			Deficit			(Deficit)
Balance as of December 31, 2020		527,795		$	54			731,845		$	74		64,382		$	7			2,203,009	$	220	$	-		$	-		$	23,400,408		$	(34,525,025	)	$	(11,124,262	)
Stock based compensation		-			-			-			-		-			-			-		-		-			-			502,407			-			502,407
Issuance of common shares for Scouted acquisition		-			-			-			-		-			-			175,421		18		15,591			113,036			1,271,786			-			1,384,840
Issuance of shares for Upsider acquisition		-			-			-			-		-			-							271,153			2,135,331			-			-			2,135,331
Issuance of common shares for accrued compensation		-			-			-			-		-			-			1,625		-		-			-			16,425			-			16,425
issuance of common shares upon conversion of debentures and accrued interest		-			-			-			-		-			-			71,485		7		-			-			199,396			-			199,403
Cancellation of Series D preferred stock		(8,755	)		(1	)		-			-		-			-			-		-		-			-			1			-			-
Reclassification of derivative liability upon cancellation of Series D warrants		-			-			-			-		-			-			-		-		-			-			373,070			-			373,070
Issuance of common shares upon conversion of Series D preferred stock		(74,453	)		(7	)		-			-		-			-			372,266		37		-			-			(30	)		-			-
Issuance of common shares upon conversion of Series F preferred stock		-			-			-			-		(17,535	)		(2	)		87,674		9		-			-			(7	)		-			-
Net loss three months ended March 31, 2021		-			-			-			-		-			-			-		-		-			-			-			(6,280,066	)		(6,280,066	)
Balance as of March 31, 2021		444,587		$	46			731,845		$	74		46,847		$	5			2,911,480	$	291		286,744		$	2,248,367		$	25,763,456		$	(40,805,091	)	$	(12,792,852	)

Stock based compensation		-			-			-			-		-			-			-		-		-			-			960,334			-			960,334
Issuance of common shares for Scouted acquisition		-			-			-			-		-			-			15,591		2		(15,591	)		(113,036	)		113,034			-			-
Issuance of shares for Upsider acquisition		-			-			-			-		-			-			271,153		27		(271,153	)		(2,135,331	)		2,135,304			-			-
Issuance of shares for One Wire acquisition		-			-			-			-		-			-			155,327		16		-			-			1,436,761			-			1,436,777
Issuance of shares for services		-			-			-			-		-			-			20,000		2		-			-			152,498			-			152,500
issuance of common shares upon conversion of debentures		-			-			-			-		-			-			17,687		2		-			-			67,211			-			67,213
Issuance of common shares for accounts payable		-			-			-			-		-			-			32,941		3		-			-			139,997			-			140,000
Issuance of common shares upon conversion of Series D preferred stock		(68,312	)		(7	)		-			-		-			-			341,560		34		-			-			(27	)		-			-
Net income three months ended June 30, 2021		-			-			-			-		-			-			-		-		-			-			-			3,528,279			3,528,279
Balance as of June 30, 2021		376,275		$	39			731,845		$	74		46,847		$	5			3,765,739	$	377		-		$	-		$	30,768,568		$	(37,276,812	)	$	(6,507,749	)


Balance as of December 31, 2019		454,546		$	46			734,986		$	74		139,768		$	14			1,447,863	$	145		-		$	-		$	18,203,265		$	(17,488,188	)	$	715,356
Stock based compensation		-			-			-			-		-			-			-		-		-			-			870,722			-			870,722
Series D Preferred stock issued for accrued penalties		106,134			11			-			-		-			-			-		-		-			-			1,929,505			-			1,929,516
Issuance of common shares upon conversion of Series D preferred stock		(12,900	)		(1	)		-			-		-			-			64,500		6		-			-			(5	)		-			-
Issuance of common shares upon conversion of Series E preferred stock		-			-			(3,141	)		-		-			-			15,704		2		-			-			(2	)		-			-
Issuance of common shares upon conversion of Series F preferred stock		-			-			-			-		(64,272	)		(6	)		321,366		32		-			-			(26	)		-			-
Net loss three months ended March 31, 2020		-			-			-			-		-			-			-		-		-			-			-			(2,482,605	)		(2,482,605	)
Balance as of March 31, 2020		547,780			56			731,845			74		75,496			8			1,849,433		185		-			-			21,003,459			(19,970,793	)		1,032,989

Stock based compensation		-			-			-			-		-			-			-		-		-			-			665,230			-			665,230
Sale of Series D Preferred stock units		1,375			-			-			-		-			-			-		-		-			-			25,000			-			25,000
Reclassification of warrant derivative to liabilities related to Series D unit sale		-			-			-			-		-			-			-		-		-			-			(26,465	)		-			(26,465	)
Issuance of shares for services		-			-			-			-		-			-			36,000		4		-			-			120,496			-			120,500
Issuance of common shares upon conversion of Series D preferred stock		(12,560	)		(1	)		-			-		-			-			62,800		6		-			-			(5	)		-			-
Issuance of common shares upon conversion of Series F preferred stock		-			-			-			-		(11,114	)		(1	)		55,570		6		-			-			(5	)		-			-
Net loss three months ended June 30, 2020		-			-			-			-		-			-			-		-		-			-			-			(7,941,215	)		(7,941,215	)
Balance as of June 30, 2020		536,595		$	55			731,845		$	74		64,382		$	7			2,003,803	$	201		-		$	-		$	21,787,710		$	(27,912,008	)	$	(6,123,961	)

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

Recruiter.com Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended			Six Months Ended
	June 30, 2021			June 30, 2020

Cash Flows from Operating Activities
Net loss	$	(2,751,787	)	$	(10,423,820	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense		834,845			318,923
Bad debt expense		58,726			12,000
Gain on forgiveness of debt		(24,925	)		-
Equity based compensation expense		1,615,241			1,650,202
Recognized loss on marketable securities		534			18,740
Expenses paid through financings		-			32,500
Loan principal paid directly through grant		(2,992	)		(5,964	)
Amortization of debt discount and debt costs		2,486,111			214,885
Initial derivative expense		3,585,983			3,340,554
Change in derivative value due to anti-dilution adjustments		-			2,642,175
Change in fair value of derivative liability		(8,203,371	)		904,176
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(2,032,275	)		19,964
Increase in accounts receivable - related parties		(5,602	)		(10,115)
(Increase) decrease in prepaid expenses and other current assets		(186,329	)		269,051
Increase in accounts payable and accrued liabilities		1,900,033			(118,364	)
Increase in accounts payable and accrued liabilities - related parties		410,040			103,723
Increase in other liabilities		-			49,554
Increase (decrease) in deferred revenue		425,383			(58,785	)
Net cash used in operating activities		(1,890,385	)		(1,040,601	)

Cash Flows from Investing Activities
Proceeds from sale of marketable securities		-			17,009
Cash and receivables acquired		220,153			-
Cash paid for acquisitions		(249,983	)		-
Net cash (used) provided by investing activities		(29,830	)		17,009

Cash Flows from Financing Activities
Proceeds from notes		250,000			398,545
Proceeds from convertible notes		2,153,200			2,226,000
Deferred offering costs		(473,896	)		-
Payments of notes		(11,193	)		(7,396	)
Advances on receivables		-			180,778
Repayments of advances on receivables		-			(112,622	)
Repayments of sale of future revenues		(10,904	)		(261,866	)
Deposit on purchase of preferred stock		-			25,000
Net cash provided by financing activities		1,907,207			2,448,439

Net increase (decrease) in cash		(13,008	)		1,424,847
Cash, beginning of period		99,906			306,252

Cash, end of period	$	86,898		$	1,731,099

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	159,325		$	86,438
Cash paid during the period for income taxes	$	-		$	-

Supplemental schedule of non-cash investing and financing activities:
Original issue discount deducted from convertible note proceeds	$	342,554		$	328,125
Debt costs deducted from convertible note proceeds	$	334,800		$	366,500
Intangible assets acquired	$	7,066,165		$	-
Notes and accrued interest converted to common stock	$	356,689		$	-
Common stock issued/to be issued for asset acquisitions	$	4,956,948		$	-
Notes payable and accrued interest exchanged for debentures	$	252,430		$	-
Accounts payable paid with common stock	$	140,000		$	-
Accrued compensation paid with common stock	$	16,425		$	-
Warrant derivative liability extinguished	$	373,070		$	2,642,175
Liabilities assumed in acquisition	$	89,089		$	-
Warrant derivative liability at inception	$	5,960,059		$	5,625,519
Preferred stock issued for accrued penalties	$	-		$	1,929,516

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

RECRUITER.COM GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(UNAUDITED)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

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

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

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

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

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

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

Reincorporation

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

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

Principles of Consolidation and Basis of Presentation

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

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

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

Use of Estimates

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

Cash and Cash Equivalents

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

Revenue Recognition

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

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

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

●

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

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

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

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

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

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

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

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

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

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

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

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

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

Contract Assets

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

Contract Costs

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

Contract Liabilities - Deferred Revenue

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

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

	Six Months Ended June 30,
	2021		2020
Recruiters on Demand	$	2,754,427	$	231,831
Consulting and staffing services		4,230,104		3,490,056
Permanent placement fees		228,162		290,767
Software Subscriptions		175,790		0
Marketplace Solutions		156,956		153,883
Total revenue	$	7,545,439	$	4,166,537

	Three Months Ended June 30,
	2021		2020
Recruiters on Demand	$	1,796,948	$	46,856
Consulting and staffing services		2,157,658		1,576,662
Permanent placement fees		188,196		153,140
Software Subscriptions		175,790		0
Marketplace Solutions		62,302		76,756
Total revenue	$	4,380,894	$	1,853,414

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

Expected Deferred Revenue Recognition Schedule

	Total Deferred 6/30/21		Recognized Q3 2021		Recognized Q4 2021		Recognized Q1 2022		Recognized Q2 2022
Full-time Placement	$	322,994	$	322,994	$	0	$	0	$	0
Software Subscriptions		85,526		56,960		11,109		10,868		6,589
Recruiters on Demand		68,400		68,400		0		0		0
TOTAL	$	476,920	$	448,354	$	11,109	$	10,868	$	6,589

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

Costs of Revenue

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

Accounts Receivable

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

Concentration of Credit Risk and Significant Customers and Vendors

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

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

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

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

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

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

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

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

Advertising and Marketing Costs

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

Fair Value of Financial Instruments and Fair Value Measurements

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

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

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

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

Level 3 - Unobservable inputs for the asset or liability.

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

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

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

	Fair Value at June 30,		Fair Value Measurement Using
	2021		Level 1		Level 2		Level 3

Available for sale marketable securities (Note 3)	$	890	$	890	$	-	$	-
Warrant derivative liability (Note 9)	$	8,921,615	$	-	$	-	$	8,921,615

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

	Six Months Ended June 30,
	2021			2020
Balance at January 1	$	11,537,997		$	612,042
Additions to derivative instruments		5,960,059			5,625,519
Reclassifications to equity upon extinguishment		(373,070	)		2,642,175
(Gain) loss on change in fair value of derivative liability		(8,203,371	)		904,176
Balance at June 30	$	8,921,615		$	9,783,912

Business Combinations

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

Intangible Assets

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

Goodwill

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

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

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

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

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

Long-lived assets

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

Stock-Based Compensation

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

Convertible Instruments

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

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

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

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

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

Derivative Instruments

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

Product Development

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

Earnings (Loss) Per Share

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

	June 30,		June 30,
	2021		2020
Options		953,503		542,304
Stock awards		221,600		346,600
Warrants		2,318,736		1,461,377
Convertible notes		1,489,833		738,281
Convertible preferred stock		5,774,835		6,664,110
		10,758,507		9,752,672

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

	Three months ended
	June 30,
	2021
Net income attributable to common shareholders	$	3,528,279
Income attributable to warrant derivatives
Change in fair value of derivative		(7,574,750	)
Diluted loss attributable to common shareholders	$	(4,046,471	)

Basic shares outstanding		3,560,745
Warrant derivative shares		2,318,736
Diluted shares outstanding		5,879,481

Diluted loss per share	$	(0.69	)

Business Segments

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

Recently Issued Accounting Pronouncements

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

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

NOTE 2 - LIQUIDITY

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

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

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

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

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

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

NOTE 3 - INVESTMENT IN AVAILABLE FOR SALE MARKETABLE SECURITIES

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

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

	Six Months Ended
	June 30,
	2021			2020
Net realized gains (losses) on investment sold	$	-		$	(2,543	)
Net unrealized gains (losses) on investments still held		(534	)		(16,197	)

Total	$	(534	)	$	(18,740	)

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

	June 30,			June 30,
	2021			2020
Balance - December 31	$	1,424		$	44,766
Additions		-			-
Proceeds on sales of securities		-			(17,009	)
Recognized gain (loss)		(534	)		(18,740	)
Balance - June 30	$	890		$	9,017

NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

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

Intangible Assets

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

Intangible assets are summarized as follows:

	June 30, 2021			December 31, 2020
Customer contracts	$	5,506,808		$	233,107
License		2,103,926			1,726,965
Domains		32,752			-
		7,643,486			1,960,072
Less accumulated amortization		(1,998,477	)		(1,164,208	)
Carrying value	$	5,645,009		$	795,864

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

NOTE 5 - LIABILITY FOR SALE OF FUTURE REVENUES

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

NOTE 6 - LOANS PAYABLE

Term Loans

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

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

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

	June 30, 2021			December 31, 2020
Term loans	$	64,618		$	77,040
Less current portion		(30,653	)		(28,249	)
Non-current portion (excluding PPP loan discussed below)	$	33,965		$	48,791

Future principal payments under the term notes are as follows:

Year Ending December 31,

2021	$	15,770
2022		30,133
2023		18,715
Total minimum principal payments	$	64,618

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

Paycheck Protection Program Loan

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

NOTE 7 - CONVERTIBLE NOTES PAYABLE

2020 Debentures:

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

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

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

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

2021 Debentures:

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

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

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

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

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

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

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

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

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

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

NOTE 8 - STOCKHOLDERS’ DEFICIT

Preferred Stock

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

Series D Convertible Preferred Stock

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

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

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

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

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

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

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

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

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

Series F Convertible Preferred Stock

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

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

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

Common Stock

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

Shares issued upon conversion of preferred stock