Recruiter.com Group, Inc. [RCRT] Filings

10-Q 1 rcrt_10q.htm FORM 10Q rcrt_10q.htm

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: September 30, 2023

☐	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 November 14, 2023, the number of shares of the registrant’s common stock outstanding was 1,433,903.

		Page number
Part I - Financial Information
Item 1	Consolidated Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (Unaudited)	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4	Controls and Procedures	55

Part II - Other Information
Item 1	Legal Proceedings	57
Item 1A	Risk Factors	57
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3	Defaults Upon Senior Securities	57
Item 4	Mine Safety Disclosures	57
Item 5	Other Information	57
Item 6	Exhibits	58

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Recruiter.com Group, Inc. and Subsidiaries

Consolidated Balance Sheets

	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS

Current assets:
Cash	$	296,263		$	946,804
Accounts receivable, net of allowance for doubtful accounts of $1,131,457 and $1,384,186, respectively		71,615			1,965,947
Prepaid expenses and other current assets		256,232			255,548
Current assets from discontinued operations		2,042,519			1,223,869
Total current assets		2,666,629			4,392,168

Property and equipment, net of accumulated depreciation of $35,982 and $17,210, respectively		42,568			61,340
Intangible assets, net		1,623,300			2,578,692
Goodwill		7,101,084			7,101,084

Total assets	$	11,433,581		$	14,133,284

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	1,338,049		$	1,569,814
Accrued expenses		843,659			908,743
Accrued compensation		175,084			410,957
Accrued interest		222,126			81,576
Deferred payroll taxes		2,484			2,484
Other liabilities		17,333			17,333
Loans payable - current portion, net of discount		4,744,885			3,700,855
Refundable deposit on preferred stock purchase		285,000			285,000
Warrant liability for puttable warrants		1,200,000			600,000
Deferred revenue		182,523			215,219
Current liabilities associated with discontinued operations		543,698			2,643
Total current liabilities		9,554,841			7,794,624

Loans payable - long term portion		-			1,260,343

Total liabilities		9,554,841			9,054,967

Commitments and contingencies (Note 10)

Stockholders’ Equity:
Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		-			-
Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 86,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		9			9
Preferred stock, Series F, $0.0001 par value; 200,000 shares authorized; 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		-			-
Common stock, $0.0001 par value; 6,666,667 shares authorized; 1,433,903 and 1,085,184 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		143			109
Shares to be issued, 0 and 39,196 shares as of September 30, 2023 and December 31, 2022, respectively		-			4
Additional paid-in capital		76,964,496			74,333,736
Accumulated deficit		(75,085,908	)		(69,255,541	)
Total stockholders’ equity		1,878,740			5,078,317

Total liabilities and stockholders’ equity	$	11,433,581		$	14,133,284

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

Table of Contents

Recruiter.com Group, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months ended September 30, 2023 and 2022

(Unaudited)

	Three			Three			Nine			Nine
	Months Ended			Months Ended			Months Ended			Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022

Revenue	$	183,722		$	5,784,424		$	3,010,870		$	18,296,826
Cost of revenue		251,891			3,899,157			2,163,354			11,331,346

Gross profit (loss)		(68,169	)		1,885,267			847,516			6,965,480
Operating expenses:
Sales and marketing		85,193			342,622			321,229			619,418
Product development (including related party expense of $0, $8,636, $27,041, and $25,407 respectively)		84,871			467,605			411,433			1,150,464
Amortization of intangibles		321,963			952,170			955,391			2,877,882
Impairment Expense		-			2,129,101			-			2,129,101
General and administrative (including share-based compensation expense of $343,951, $765,743, $1,106,460, and $3,415,670 respectively, and related party expense of $0, $0, $0, and $19,825 respectively)		1,534,339			3,714,066			5,255,043			12,876,714
Total operating expenses		2,026,366			7,605,564			6,943,096			19,653,579

Loss from continuing operations		(2,094,535	)		(5,720,297	)		(6,095,580	)		(12,688,099	)

Other income (expenses):
Interest expense		(622,883	)		(208,351	)		(1,784,252	)		(340,257	)
Income from ERC Credit		1,422,773			-			2,177,568			-
Other (expense) income		(12,566	)		(610	)		(11,262	)		13,917
Finance cost		-			-			(327,073	)		-
Gain on settlement of payables		-			-			178,749			-
Gain on debt extinguishment		-			-			-			1,205,195
Total other income (expenses)		787,324			(208,961	)		233,730			878,855

Loss from continuing operations before income taxes		(1,307,211	)		(5,929,258	)		(5,861,850	)		(11,809,244	)
Provision for income taxes		-			-			-			-
Net loss from continuing operations	$	(1,307,211	)	$	(5,929,258	)	$	(5,861,850	)	$	(11,809,244	)

Net income from discontinued operations		276,529			302,893			535,126			811,781
Net loss		(1,030,682	)		(5,626,365	)		(5,326,724	)		(10,997,463	)
Deemed dividends		-			(658,266	)		(503,643	)		(658,266	)
Net loss attributable to common shareholders	$	(1,030,682	)	$	(6,284,631	)	$	(5,830,367	)	$	(11,655,729	)

Net loss from continuing operations per common share – basic and diluted		(0.96	)		(5.99	)		(4.82	)		(11.96	)
Net income from discontinued operations per common share - basic and diluted		0.20			0.31			0.44			0.82
Net loss per common share – basic and diluted	$	(0.75	)	$	(6.35	)	$	(4.79	)	$	(11.80	)
Weighted average common shares - basic and diluted		1,367,343			990,076			1,215,995			987,625

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

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Recruiter.com Group, Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity

For the Three and Nine Months ended September 30, 2023 and 2022

(Unaudited)


	Preferred stock				Preferred stock				Preferred stock								Common stock to						Additional						Total
	Series D				Series E				Series F				Common stock				be issued						Paid in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Equity
Balance as of December 31, 2022		-	$	-		86,000	$	9		-	$	-		1,085,184	$	109		39,196		$	4		$	74,333,736		$	(69,255,541	)	$	5,078,317
Stock based compensation - Options		-		-		-		-		-		-		-		-		-			-			390,806			-			390,806
Stock based compensation - RSUs		-		-		-		-		-		-		-		-		-			-			152,143			-			152,143
Anti-dilution adjustment to warrants		-		-		-		-		-		-		-		-		-			-			503,643			(503,643	)		-
Common stock issued for restricted stock units		-		-		-		-		-		-		7,387		1		-			-			(1	)		-			-
Common stock issued upon exercise of warrants		-		-		-		-		-		-		54,768		5		-			-			315,173			-			315,178
Net loss		-		-		-		-		-		-		-		-		-			-			-			(3,315,769	)		(3,315,769	)
Balance as of March 31, 2023		-	$	-		86,000	$	9		-	$	-		1,147,339	$	115		39,196		$	4		$	75,695,500		$	(73,074,953	)	$	2,620,675

Stock based compensation - Options		-		-		-		-		-		-		-		-		-			-			219,560			-			219,560
Common stock issued for the exchange of warrants		-		-		-		-		-		-		38,804		4		(39,196	)		(4	)		-			-			-
Net loss		-		-		-		-		-		-		-		-		-			-			-			(980,273	)		(980,273	)
Balance as of June 30, 2023		-	$	-		86,000	$	9		-	$	-		1,186,143	$	119		-		$	-		$	75,915,060		$	(74,055,226	)	$	1,859,962
Stock based compensation - Options		-		-		-		-		-		-		-		-		-			-			343,951			-			343,951
Issuance of common stock, net of equity issuance costs of $250,490		-		-		-		-		-		-		130,000		13		-			-			785,496			-			785,509
Recapitalization		-		-		-		-		-		-		-		-		-			-			(80,000	)		-			(80,000	)
Effect of the August 2023 reverse stock split on common stock		-		-		-		-		-		-		25,537		2		-			-			(2	)		-			-
Common stock issued upon exercise of pre-funded warrants		-		-		-		-		-		-		92,223		9		-			-			(9	)		-			-
Net loss		-		-		-		-		-		-		-		-		-			-			-			(1,030,682	)		(1,030,682	)

Balance as of September 30, 2023		-	$	-		86,000	$	9		-	$	-		1,433,903	$	143		-		$	-		$	76,964,496		$	(75,085,908	)	$	1,878,740

Table of Contents


	Preferred stock				Preferred stock				Preferred stock								Common stock to				Additional						Total
	Series D				Series E				Series F				Common stock				be issued				Paid in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance as of December 31, 2021		-	$	-		86,000	$	9		-	$	-		971,095	$	97		39,196	$	4	$	66,949,755		$	(50,859,640	)	$	16,090,225
Stock based compensation - Options and Warrants		-		-		-		-		-		-		-		-		-		-		1,397,804			-			1,397,804
Stock based compensation - RSUs		-		-		-		-		-		-		-		-		-		-		268,956			-			268,956
Common stock issued for the exchange of warrants		-		-		-		-		-		-		7,515		1		-		-		152,243			-			152,244
Common stock issued for restricted stock units		-		-		-		-		-		-		7,045		1		-		-		(1	)		-			-
Net loss		-		-		-		-		-		-		-		-		-		-		-			(4,182,338	)		(4,182,338	)
Balance as of March 31, 2022		-	$	-		86,000	$	9		-	$	-		985,655	$	99		39,196	$	4	$	68,768,757		$	(55,041,978	)		13,726,891

Stock based compensation - Options and Warrants		-		-		-		-		-		-		-		-		-		-		381,351			-			381,351
Stock based compensation - RSUs		-		-		-		-		-		-		-		-		-		-		237,906			-			237,906
Common stock issued for restricted stock units		-		-		-		-		-		-		4,422		1		-		-		(1	)		-			-
Net loss		-		-		-		-		-		-		-		-		-		-		-			(1,188,760	)		(1,188,760	)
Balance as of June 30, 2022		-	$	-		86,000	$	9		-	$	-		990,076	$	100		39,196	$	4	$	69,386,572		$	(56,230,738	)		13,157,388

Stock based compensation - Options		-		-		-		-		-		-		-		-		-		-		765,743			-			765,743
Stock based compensation - RSUs		-		-		-		-		-		-		-		-		-		-		156,866			-			156,866
Anti-dilution adjustment to warrants		-		-		-		-		-		-		-		-		-		-		658,266			(658,266	)		-
Relative fair value of warrants issued with debt		-		-		-		-		-		-		-		-		-		-		1,032,842			-			1,032,842
Net loss		-		-		-		-		-		-		-		-		-		-		-			(5,626,365	)		(5,626,365	)

Balance as of September 30, 2022		-	$	-		86,000	$	9		-	$	-		990,076	$	100		39,196	$	4	$	72,000,289		$	(62,515,369	)	$	9,486,474

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

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Recruiter.com Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Nine Months ended September 30, 2023 and 2022

(Unaudited)

	Nine months			Nine months
	September 30,			September 30,
	2023			2022
Cash Flows From Operating Activities
Net loss	$	(5,326,724	)	$	(10,997,463	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		974,164			2,881,967
Bad debt expense		175,463			479,065
Gain on debt extinguishment		-			(1,205,195	)
Gain on settlement of debt		(178,749	)		-
Equity based compensation expense		1,106,460			3,415,670
Warrant modification expense		-			152,244
Amortization of debt discount and debt costs		1,212,006			135,161
Impairment expense		-			2,129,101
Change in fair value of earn-out liability		-			26,604
Factoring discount fee and interest		20,480			150,117
Changes in assets and liabilities:
Increase in accounts receivable		(99,801	)		(1,273,012	)
Decrease in accounts receivable - related parties		-			49,033
Increase in prepaid expenses and other current assets		(684	)		(64,221	)
Increase (decrease) in accounts payable and accrued liabilities		277,632			(146,405	)
Decrease in accounts payable and accrued liabilities - related parties		-			(163,672	)
Decrease in deferred revenue		(32,696	)		(226,208	)
Net cash used in operating activities		(1,872,449	)		(4,657,214	)

Cash Flows From Investing Activities:
Capitalized software development costs		-			(1,325,491	)
Purchase of property and equipment		-			(73,037	)
Net cash used in investing activities		-			(1,398,528	)

Cash Flows From Financing Activities:
Proceeds from notes		-			2,135,000
Proceeds from ERC advances		450,000			-
Repayment of ERC advances		(450,000	)		-
Issuance of common stock, net of equity issuance costs of $300,490		785,509			-
Payments of loans		(495,473	)		(1,323,773	)
Proceeds from factoring agreement		871,821			5,613,871
Repayments of factoring agreement		(175,127	)		(2,944,876	)
Purchase of preferred shares pursuant to recapitalization		(80,000	)
Gross proceeds from exercise of warrants		315,178			-
Net cash provided by financing activities		1,221,908			3,480,222

Net decrease in cash		(650,541	)		(2,575,520	)
Cash, beginning of period		946,804			2,584,062

Cash, end of period	$	296,263		$	8,542

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	256,552		$	208,351
Cash paid during the period for income taxes	$	-		$	-

Supplemental schedule of non-cash investing and financing activities:
Accounts receivable owed under factoring agreement collected directly by factor	$	1,000,020		$	1,955,289
Purchase price measurement period adjustment to goodwill and accounts receivable	$	-		$	35,644
Debt discount on warrants granted with notes	$	600,000		$	1,032,842
Debt issuance costs accrued	$	50,000		$	-
Deemed dividends	$	503,643		$	-
Offering costs as a result of modification of warrants to induce exercise	$	10,400		$	-

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

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Recruiter.com Group, Inc., a Nevada corporation (“RGI” or the “Company”), is a holding company based in New York, New York. The Company has eight subsidiaries, Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted Inc. (“Scouted”), Recruiter.com Upsider Inc. (“Upsider”), Recruiter.com OneWire Inc. (“OneWire”), Recruiter.com Consulting, LLC (“Recruiter.com Consulting”) and CognoGroup, Inc. RGI and its subsidiaries as a consolidated group is hereinafter referred to as the “Company,” “we”, “us” or “our”.

On July 25, 2023, the Company acquired a shell company, Atlantic Energy Solutions, Inc., which is a dormant entity quoted on OTC Market under the symbol AESO, in which the Company acquired a controlling and majority equity interest through purchasing 1,000,000 preferred convertible shares providing voting control of Atlantic Energy Solutions, Inc. for $80,000. The transaction is accounted for as a recapitalization due to the intent of the company to spin out the shell to the shareholders of Recruiter.com Group, Inc. and continue certain operations of Recruiter.com, Inc. in AESO

The Company operates an On Demand recruiting platform digitally transforming the $28.5 billion employment and recruiting agencies industry. The Company offers recruiting software and services through an online, AI-powered sourcing platform (the ″Platform”) and network of on-demand recruiters. Businesses from startups to the Fortune 100 use the Company to help address their critical talent needs and solve recruiting and hiring challenges.

The Company’s website, www.Recruiter.com, provides access to its network of recruiters to employers seeking to hire talent and utilizes an innovative web platform, software with integrated AI-driven candidate to job matching, and video screening software to source qualified talent more easily and quickly.

The Company helps businesses accelerate and streamline their recruiting and hiring processes by providing on-demand recruiting software and services. The Company leverages its expert network of recruiters to place recruiters on a project basis, aided by cutting-edge AI-based candidate sourcing and matching and video screening technologies.

Through the Company’s Recruiting Solutions division, the Company also provides consulting, staffing, (see note 6), and full-time placement services to employers, leveraging our platform and rounding out our services. The Company’s mission is to help recruit the right talent faster and become the preferred solution for hiring specialized talent.

On June 5, 2023, the Company ("Buyer") entered into a stock purchase agreement (“GoLogiq Stock Purchase Agreement”) with GoLogiq Inc. ("Seller"), a Delaware corporation (“GoLogiq”). GoLogiq owns all of the issued and outstanding membership interests (the “Membership Interests”) of GOLQ LLC, a Nevada limited liability company, that was further amended on August 18 and 29, 2023. Upon the terms and subject to the conditions of the stock purchase agreement, GoLogiq is selling to the Company, and the Company is purchasing from GoLogiq, the Membership Interests. In exchange for the Company Membership Interests, the Buyer will issue to Seller such number of shares of common stock of Buyer, par value $0.0001 per share (the “Buyer Common Stock”) that represents 19.99% of the number of issued and outstanding shares of the Buyer Common Stock on the business day prior to the date of Closing (“Closing Consideration”). Following the issuance of the Closing Consideration, Seller will own 16.66% of the issued and outstanding shares of the Buyer Common Stock. In addition, additional Buyer Common Stock may be issuable to Seller as consideration upon the achievement of one or more of the following milestone targets (each a “Milestone Payment”): (i) if on a date that is six (6) months after the date of Closing, the Revenue for such six-month period is at least $2,000,000, Buyer will issue to Seller such number of additional shares of Buyer Common Stock such that Seller will own, following such issuance, 40.00% of the issued and outstanding shares of the Buyer Common Stock; (ii) if on a date that is nine (9) months after the date of Closing, the Revenue for such nine-month period is at least $4,000,000, Buyer will issue to Seller such number of additional shares of Buyer Common Stock such that Seller will own, following such issuance, 64.00% of the issued and outstanding shares of the Buyer Common Stock. Such issuance may be made as early as six (6) months after the date of Closing if $4,000,000 in Revenue is reached between six (6) and nine (9) months after the date of Closing; and (iii) if on a date that is twelve (12) months after the date of Closing, Revenue for such twelve-month period is at least $6,000,000, Buyer will issue to Seller such number of additional shares of Buyer Common Stock such that Seller will own, following such issuance, 84.00% of the fully-diluted shares of the Buyer Common Stock. Such issuance may be made as early as six (6) months after the date of Closing if $6,000,000 in Revenue is reached between six (6) and twelve (12) months after the date of Closing. Each Milestone Payment under this Section 1.02(b) shall be independent of the other Milestone Payments such that a Milestone Payment shall be payable if and only if the target attributable to such Milestone Payment is achieved within the period of time required by such target. This transaction is awaiting shareholder approval and has not yet closed.

On August 16, 2023, the Company entered into an Asset Purchase Agreement (the “Job Mobz Purchase Agreement”) with Job Mobz Inc., a California corporation (“Job Mobz”). Upon the terms and subject to the conditions of the Job Mobz Purchase Agreement, the Company has agreed to sell and assign its right, title, and interest in the domain name and the assets generally used to operate the business associated therewith to Job Mobz for an aggregate purchase price of $1,800,000, subject to certain adjustments. This transaction has not yet closed. The Company is currently seeking shareholder approval to the terms of that certain Job Mobz Asset Purchase Agreement.

Principles of Consolidation and Basis of Presentation

The unaudited consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying 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 consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the years ended December 31, 2022 and 2021 in our Annual Report on Form 10-K, as filed with the SEC on March 31, 2023. The December 31, 2022 balance sheet is derived from those statements.

In the opinion of management, these unaudited interim financial statements as of and for the three and nine months ended September 30, 2023 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 nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future period. All references to September 30, 2023 in these footnotes are unaudited.

Discontinued Operations

See Note 6, Discontinued Operations, for a discussion of the Company’s significant accounting policy surrounding the sale of substantially all of the Company’s staffing and consulting services revenue line in connection with the sale of its right, title, and exclusive interest in certain client contracts and associated staff, contractors, business information, and relationships to Insigma and Akvarr.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(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 asset acquisitions and the estimated useful life of assets acquired, fair value of contingent consideration in asset acquisitions and business combinations, fair value of derivative liabilities, fair value of securities issued for acquisitions and business combinations, fair value of assets acquired and liabilities assumed in business combinations, fair value of intangible assets and goodwill, fair value of capitalized software, fair value of non-monetary transactions, 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. At September 30, 2023 and December 31, 2022, the Company had $15,253 and $612,691 in excess of the FDIC limit, respectively. The Company has not experienced any losses related to these balances as of September 30, 2023 and December 31, 2022. 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:

Software Subscriptions: We offer a subscription to our web-based platforms that help employers recruit talent. Our platforms allow 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. Additional fees may be charged when we place a candidate with our customer, depending on the subscription type. In such cases, if the candidate ceases to be employed by the customer during the initial 90 days (the 90-day guarantee), we refund the customer in full for all fees paid by the customer. In December of 2022, we sold one of our software platforms to Talent, Inc. that was used in the delivery of the subscription service. Subsequently, we continued providing the service, but leveraged third-party tools in the delivery of services.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

·	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. We derive revenue from Recruiters On Demand 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. In addition, we also offer talent planning, talent assessment, strategic guidance, and organizational development services, which we market as our “Talent Effectiveness” practice. Companies prepay for a certain number of consulting hours at an agreed-upon, time-based rate. We source and provide the independent consultants that provide the service. In March 2023, we announced a strategic partnership with Job Mobz to transition certain Recruiters on Demand clients and staff to Job Mobz in exchange for an ongoing revenue stream. (See below Revenue Share).

·	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 the 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 base salary or an agreed-upon flat fee.

·	Marketplace: Our Marketplace category comprises services for businesses and individuals that leverage our online presence and career communities. For businesses, this includes job postings, 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 by completing agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In some cases, we earn a percentage of revenue a business receives from attracting new clients by advertising on the Platform. Companies can also pay us to post job openings on our proprietary job boards to promote open job positions they are trying to fill. In addition to our work with direct clients, we categorize all online advertising and affiliate marketing revenue as Marketplace revenue. For individuals, Marketplace includes services to assist with career development and advancement, including a resume distribution service that promotes these job seekers’ profiles and resumes to help with their procuring employment, upskilling, and training. Our resume distribution service allows a job seeker to upload their 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 training program through our online learning management system, located at RecruitingClasses.com and other training and upskilling programs.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

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 our providers acting as the employer of record for us, 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 (see note 6).

Revenue Share: We refer certain clients to a third party in exchange for a referral fee. The amount of the referral fee is dependent upon whether the referral is an existing client of ours and what services we currently provide that client, or a client of a third party who is not historically serviced by us. Referral fees under the revenue share arrangement are subject to certain minimum and maximum payout amounts. We record referral fees earned under our revenue share arrangement on a net basis.

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 fulfil any or all of the revenue segments.

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

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. Talent effectiveness subscription revenues are recognized over the term of the subscription when services are provided. Any payments received prior to the time passing to provide the subscription 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.

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. Talent Effectiveness consulting services are billed to clients upfront for a period of 12 months. Revenue is recognized on a gross basis monthly over the period the consulting services are provided.

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.

Marketplace Solutions 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.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

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. Job posting revenue is recognized at the end of the period the job is posted. 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.

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. 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.

Revenue share revenues represent a percentage of revenue we have earned in relation to client referrals we made to a third party. We record revenue in relation to revenue share on a net basis as an agent under this arrangement. We have concluded that net reporting is appropriate because we do not provide the underlying services and arrangements to meet the demands of the client that we referred to the third party. Revenue is recorded based on a net percentage of revenue that is shared between us and the third party and earned upon delivery of the services by the third party. The third party provides the underlying services in this arrangement.

Deferred revenue results from transactions in which we have 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 September 30, 2023 or December 31, 2022.

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.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

Revenue Disaggregation

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

	Three Months Ended September 30,
	2023		2022
Recruiters on Demand	$	46,040	$	4,540,454
Consulting and staffing services		572		99,295
Software Subscriptions		160		693,495
Marketplace Solutions		136,950		309,680
Full time placement fees		-		141,500
Revenue Share		-		-
Total revenue	$	183,722	$	5,784,424

	Nine Months Ended September 30,
	2023		2022
Recruiters on Demand	$	1,832,795	$	13,430,501
Consulting and staffing services		124,752		903,348
Software Subscriptions		413,101		2,198,232
Marketplace Solutions		517,782		1,005,670
Full time placement fees		20,000		759,075
Revenue Share		102,440		-
Total revenue	$	3,010,870	$	18,296,826

As of September 30, 2023 and December 31, 2022, deferred revenue amounted to $182,523 and $215,219, respectively. During the nine months ended September 30, 2023, the Company recognized approximately $200,000 of revenue that was deferred as of December 31, 2022. Deferred revenue as of September 30, 2023 is categorized and expected to be recognized as follows.

Expected Deferred Revenue Recognition Schedule

	Total Deferred September 30, 2023		Recognize Q4 2023		Recognize 2024
Recruiters on Demand	$	49,371	$	49,371	$	-
Marketplace Solutions	$	133,152	$	102,443	$	30,709
TOTAL	$	182,523	$	151,814	$	30,709

Revenue from international sources was approximately 0.01% and 1.0% for the three months ended September 30, 2023 and 2022, respectively. Revenue from international sources was approximately 0.02% and 3% for the nine months ended September 30, 2023 and 2022, respectively.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

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 $1,131,457 and $1,384,186 as of September 30, 2023 and December 31, 2022, respectively. Bad debt expense (recovery) was $(24,537)and $115,363 for the three-month periods ending September 30, 2023 and 2022, respectively, and $175,463 and $479,065 for the nine months ending September 30, 2023 and 2022, respectively.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is recognized over an asset’s estimated useful life using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred.

Property and equipment depreciation expense for the three months ended September 30, 2023 and 2022 was $6,257 and $3,603 respectively and was $18,772 and $4,084 for the nine months ended September 30, 2023 and 2022, respectively.

Concentration of Credit Risk and Significant Customers and Vendors (Continuing Operations)

As of September 30, 2023, three customers accounted for more than 10% of the accounts receivable balance, for a total of 63%.

As of December 31, 2022, there were no customers accounted for more than 10% of the accounts receivable balance.

For the three months ended September 30, 2023 two customer accounted for more than 10% of total revenue at 35%.

For the three months ended September 30, 2022 one customer accounted for more than 10% of total revenue, at 18%.

For the nine months ended September 30, 2023, there were no customers accounted for more than 10% of total revenue

For the nine months ended September 30, 2022, one customer accounted for more than 10% of total revenue, at 12% and 10%, for a total of 22%.

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

We were a party to a license agreement with a related party firm (see Note 11).

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

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

Advertising and Marketing Costs

The Company expenses all advertising and marketing costs as incurred. Advertising and marketing costs were $85,193 and $342,622 for the three months ended September 30, 2023 and 2022, respectively. Advertising and marketing costs were $321,229 and $619,418 for the nine months ended September 30, 2023 and 2022, respectively and included in sales and marketing in the accompanying consolidated statements of operations.

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’s contingent accrued earn-out business acquisition consideration liability was considered Level 3 fair value liability instruments requiring period fair value assessments. Contingent consideration liabilities are recorded at fair value on the acquisition date and are re-measured quarterly based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3. In April 2022, the earn-out liability was forgiven in full and recorded as a gain on debt extinguishment on the consolidated statement of operations. In fair valuing these instruments, the income valuation approach is applied, and the valuation inputs include the contingent payment arrangement terms, projected revenues and cash flows, rate of return, and probability assessments. 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.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

For the Company’s earn-out liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balance for each category therein, and gains or losses recognized during the periods ended September 30, 2023 and December 31, 2022:

Beginning balance, December 31, 2021	$	578,591
Re-measurement adjustments:
Change in fair value of earn-out liability		26,604
Gain on debt extinguishment		(605,195	)

Ending balance, December 31, 2022		-
Re-measurement adjustments:
Change in fair value of earn-out liability		-
Ending balance, September 30, 2023	$	-

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, generally at their fair values with any excess of purchase price over the net assets recorded as goodwill.

Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value and accretion costs are recognized in earnings. The increases or decreases in the fair value of contingent consideration can result from changes in anticipated revenue levels and changes in assumed discount periods and rates.

Intangible Assets

Intangible assets consist primarily of the assets acquired from Genesys in the third quarter of 2019, including customer contracts and intellectual property, the assets acquired from Scouted and Upsider during the first quarter of 2021, the assets acquired from OneWire during the second quarter of 2021, and the assets acquired from Parrut and Novo Group during the third quarter of 2021. Amortization expense is 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.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

The Company performs its annual goodwill impairment assessment on December 31st of each year or as impairment indicators dictate (see Note 5).

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 quantitative impairment testing methodology.

Under the quantitative method we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined using an appropriate valuation method. 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 may 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 the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited (see Note 5).

Software Costs

We capitalize certain software development costs incurred in connection with developing or obtaining software for internal use when both the preliminary project stage is completed, and it is probable that the software will be used as intended. Capitalization ceases after the software is operational; however, certain upgrades and enhancements may be capitalized if they add functionality. Capitalized software costs include only (i) external direct costs of materials and services utilized in developing or obtaining software, (ii) compensation and related benefits for employees who are directly associated with the software project and (iii) interest costs incurred while developing internal-use software.

Income Taxes

We utilize ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. Our practice is to recognize interest and/or penalties, if any, related to income tax matters in income tax expense.

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 its 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.”

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.

Product Development

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

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

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 1,039,501 and 895,491 were excluded from the computation of diluted earnings per share for the nine months ended September 30, 2023 and 2022, respectively, because their effects would have been anti-dilutive.

	September 30,		September 30,
	2023		2022
Options		218,551		248,114
Stock awards		-		10,195
Warrants		792,283		608,515
Convertible preferred stock		28,667		28,667
		1,039,501		895,491

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 October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in purchase accounting. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. On January 1, 2023 the adoption of ASU 2021-08 did not have a material impact on the Company’s consolidated financial statements.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

NOTE 2 - GOING CONCERN

Management believes it may not have sufficient cash to fund its liabilities and operations for at least the next twelve months from the issuance of these consolidated financial statements.

These unaudited consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of the end of the period covered by this report. This determination was based on the following factors: (i) the Company used cash of approximately $1.9 million cash used in operating activities operations during the nine months ended September 30, 2023 and has a working capital deficit of approximately $6.9 million at September 30, 2023; (ii) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (iii) the Company will require additional financing for the fiscal year ending December 31, 2023 to continue at its expected level of operations; and (iv) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern as of the date of the end of the period covered by this report and for one year from the issuance of these consolidated financial statements.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

The components of prepaid expenses and other current assets at September 30, 2023 and December 31, 2022, consisted of the following:

	September 30, 2023		December 31, 2022
Prepaid expenses	$	60,977	$	40,860
Prepaid advertisement		146,500		200,000
Employee advance		-		8,500
Prepaid insurance		-		3,302
Other receivables		48,755		2,886
Prepaid expenses and other current assets	$	256,232	$	255,548

NOTE 4 - 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 September 30, 2023 and December 31, 2022 were $59,720 and $42,720 and accumulated unrealized losses were $58,320 and $42,720 as of September 30, 2023 and December 31, 2022, respectively. The fair market value of available for sale marketable securities was $1,400 and $0 as of September 30, 2023 and December 31, 2022, respectively, based on 178,000 shares of common stock held in one entity with an average per share market price of approximately $0.00 and 2,000 shares of preferred convertible stock held in another entity with the estimated average value upon conversion into common stock of $1,400, and is included within prepaid expenses and other current assets within accompanying consolidated balance sheet.

During the three months ended September 30, 2023, the Company received 2,000 shares initially valued at $17,000 in exchange for $150,000 of accounts receivable which was fully reserved for.

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill is derived from our 2019 business combination as well as our five business combinations in the first three quarters of 2021. The aggregate goodwill recognized from our five 2021 acquisitions was $6,731,852 while the remaining goodwill from the 2019 acquisition was $3,517,315 at December 31, 2020. The Company performed a goodwill impairment test during 2021 using market data and discounted cash flow analysis. Based on that test, we have determined that the carrying value of goodwill related to the 2019 acquisition of Genesys was further impaired in the amount of $2,530,325 during 2021. The Company performed its annual goodwill impairment test during 2022 using market data and discounted cash flow analysis and determined that goodwill was further impaired by $582,114.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

The changes in the carrying amount of goodwill for the periods ended September 30, 2023 and December 31, 2022 are as follows:

	2023		2022
Carrying value - January 1	$	7,101,084	$	7,718,842
Purchase price measurement period adjustments		-		(35,644	)
Impairment losses		-		(582,114	)
Carrying value - end of period	$	7,101,084	$	7,101,084

Intangible Assets

On March 31, 2019, the Company acquired Intangible assets totaling $1,910,072 from Genesys, including customer contracts and intellectual property which are being amortized over the three year useful life.

During 2021, we acquired certain intangible assets pursuant to our Scouted, Upsider, OneWire, Parrut, and Novo Group acquisitions. These intangible assets aggregate approximately $11.6 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.

Intangible assets for the periods ended September 30, 2023 and December 31, 2022 are summarized as follows:

	2023			2022
Customer contracts	$	8,093,787		$	8,093,787
Software acquired		3,785,434			3,785,434
License		1,726,965			1,726,965
Internal use software developed		325,491			325,491
Domains		40,862			40,862
		13,972,539			13,972,539
Less accumulated amortization		(8,510,814	)		(7,555,422	)
Total		5,461,725			6,417,117
Less accumulated impairment		(3,838,425	)		(3,838,425	)
Carrying value	$	1,623,300		$	2,578,692

Amortization expense of intangible assets was $321,963 and $952,170 for the three months ended September 30, 2023 and 2022, respectively, and was $955,391 and $2,877,882 for the nine months ended September 30, 2023 and 2022, respectively related to the intangible assets acquired in business combinations. Future amortization of intangible assets is expected to be approximately as follows: 2023 (remainder of year), $280,426; 2024 $739,547; 2025, $455,683; 2026, $122,507; 2027, $2,738; and thereafter, $22,399. The Company began amortizing intangible assets from the Scouted, Upsider and OneWire acquisitions in the second quarter of 2021 and the Parrut and Novo Group acquisitions in the third quarter of 2021.

The Company performed its impairment test during 2022 using the market and income approach, and determined that the Company’s customer contracts, software acquired, internal use software developed, and domains were impaired by $3,838,425.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

On November 21, 2022, the Company entered into a Domain Name sale and Ownership Transfer Agreement with Chief Executive Group (“CEG”). Per the agreement, the Company agreed to sell and transfer to CEG all ownership rights in and to the domain name CFO-Job.com and its associated social media property (“Domain Assets’). In exchange for the Domain Assets, the Company received cash consideration of $50,000, and $200,000 worth of advertising from CEG. Half of the advertising consideration is to be used within one year of this agreement, and the remaining balance is to be used within two years of the agreement. During the year ended December 31, 2022, the Company recorded a gain on sale of intangible asset of $250,000 which was included in general and administrative expenses on the consolidated statements of operations during the year ended December 31, 2022. The Company additionally recorded a prepaid advertising expense within prepaid expenses and other current assets on the consolidated balance sheet. As of September 30, 2023, the Company utilized approximately $54,000 of advertising from CEG.

On December 5, 2022, the Company entered into an asset purchase agreement in which the Company sold to a third party Upsider’s candidate sourcing and engagement platform and all related intellectual property for $1,000,000 in cash consideration. The recorded value of the internal use software developed at the date of the sale was $1,000,000 resulting in no gain or loss on the sale. For a period of eighteen months from the date of the sale, the Company will have continued access to this platform.

NOTE 6 – DISCONTINUED OPERATIONS

On August 4, 2023, (i) Recruiter.com Consulting and Insigma, Inc.(“Insigma”), a wholly owned subsidiary of Futuris Company (“FTRS”), entered into an asset purchase agreement (“Insigma Agreement”) and (ii) Recruiter.com Consulting and Akvarr, Inc., (“Akvarr”) and a wholly owned subsidiary of FTRS, entered into an asset purchase agreement (“Insigma Agreement”). Upon the terms and subject to the conditions of the agreements, the Company agreed to sell its right, title, and exclusive interest in certain client contracts and associated staff, contractors, business information, and relationships related staffing and consulting services revenue stream (“Assets Sold”) to Insigma and Akvarr.

The Company’s carrying net book value of the related assets and liabilities in connection with assets sale under the Insigma Agreement as of September 30, 2023 and December 31, 2022 was $0.

As consideration for the assets sold, and upon completion of the assignment of certain acquired assets to Insigma, Insigma would issue to the Company a number of shares of common stock of FTRS equal to $500,000 based on the 30 day volume weighted average price preceding the closing date, as defined. The Insigma Agreement also provides for the payment of up to $2,000,000 of additional cash consideration as an earnout payment to the Company, which shall be payable in monthly installments beginning 30 days from the closing date and based on the Gross Margin (as defined in the Insigma Agreement) generated by the acquired assets. On October 2, 2023 the Company and Insigma finalized the transfer based on the Closing Date (as defined in the Insigma Agreement). On October 5, 2023 the Company received 9,518,605 shares of common stock of FTRS. The shares were Valued at $634,605 based on the October 2, 2023, stock price of $0.0667.

The Company determined all of the required criteria for held-for-sale in accordance with ASC 205-20-45-1E and discontinued operations classification were met as of September 30, 2023.

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RECRUITER.COM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

In accordance with ASC 205-20, Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity (disposal group) is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the disposal group meets the criteria to be classified as held-for-sale. The consolidated statements of operations reported for current and prior periods report the results of operations of the discontinued operations recognized as a component of net income separate from the net loss from continuing operations.

The following table presents the components in assets and liabilities associated with discontinued operations:

	September 30, 2023		December 31, 2022

Accounts receivable, net of allowance for doubtful accounts of $270,291 and $62,427, respectively	$	2,042,519	$	1,223,869
Total current assets from discontinued operations	$	2,042,519	$	1,223,869

Accrued expenses and compensation	$	543,698

Recruiter.com Group, Inc. [RCRT] Filings
Recruiter.com Group, Inc. [RCRTW] Filings
10-Q	[2023-11-20]
10-Q	[2023-08-14]
10-Q	[2023-05-15]
10-K	[2023-03-31]
10-Q	[2022-11-14]
10-Q	[2022-08-15]
10-Q	[2022-05-16]
10-K	[2022-03-31]
S-1	[2021-12-17]
10-Q	[2021-11-15]
10-Q	[2021-08-16]
10-Q	[2021-05-14]
10-K	[2021-03-09]
10-Q	[2020-11-12]
S-1	[2020-10-01]
10-Q	[2020-08-13]
10-Q	[2020-06-25]
10-K	[2020-05-08]
10-Q	[2019-11-14]
10-Q	[2019-08-19]
10-Q	[2019-05-20]
10-Q	[2019-02-14]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-K	[2018-06-29]
10-Q	[2018-02-20]
10-Q	[2017-11-16]
10-Q	[2017-08-14]
10-K	[2017-06-30]
10-Q	[2017-02-14]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-K	[2016-06-29]
10-Q	[2016-02-16]
10-Q	[2015-11-16]
10-Q	[2015-08-14]
10-K	[2015-07-14]
10-Q	[2015-02-17]
10-Q	[2014-11-19]
10-Q	[2014-08-14]
10-K	[2014-07-15]
10-Q	[2014-02-14]
10-Q	[2013-11-14]
10-Q	[2013-08-14]
10-K	[2013-07-01]
10-Q	[2013-02-14]
10-Q	[2012-11-20]
10-Q	[2012-08-20]
10-K	[2012-06-12]
10-Q	[2012-01-17]

Recruiter.com Group, Inc. [RCRT] Filings

Recruiter.com Group, Inc. [RCRTW] Filings