Company Quick10K Filing
Truli Technologies
Price0.06 EPS-2
Shares2 P/E-0
MCap0 P/FCF-0
Net Debt-1 EBIT-4
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
S-1 2020-10-01 Public Filing
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TRLI Filing

Note 1 &Mdash; Organization and Summary of Significant Accounting Policies
Note 2 &Mdash; Going Concern
Note 3 &Mdash; Investment in Available for Sale Marketable Securities
Note 4 &Mdash; Goodwill and Other Intangible Assets
Note 5 &Mdash; Liability for Sale of Future Revenues
Note 6 &Mdash; Loans Payable
Note 7 &Mdash; Notes Payable
Note 8 &Mdash; Convertible Notes Payable
Note 9 &Mdash; Stockholders' Equity (Deficit), Temporary Equity and Noncontrolling Interests
Note 10 &Mdash; Stock Options and Warrants
Note 11 &Mdash; Commitments and Contingencies
Note 12 &Mdash; Related Party Transactions
Note 13 &Mdash; Business Combination
Note 14 &Mdash; Income Taxes
Note 15 &Mdash; Subsequent Events
Note 1 &Mdash; Organization and Summary of Significant Accounting Policies
Note 2 &Mdash; Going Concern
Note 3 &Mdash; Investment in Available for Sale Marketable Securities
Note 4 &Mdash; Intangible Assets
Note 5 &Mdash; Liability for Sale of Future Revenues
Note 6 &Mdash; Receivables Financing Agreement
Note 7 &Mdash; Loans Payable
Note 8 &Mdash; Convertible Notes Payable
Note 9 &Mdash; Stockholders' Equity (Deficit), Temporary Equity and Noncontrolling Interests
Note 10 &Mdash; Stock Options and Warrants
Note 11 &Mdash; Commitments and Contingencies
Note 12 &Mdash; Related Party Transactions
Note 13 &Mdash; Business Combination
Note 14 &Mdash; Subsequent Events
Part II
Item 13. Other Expenses of Issuance and Distribution.
Item 14. Indemnification of Directors and Officers.
Item 15. Recent Sales of Unregistered Securities.
Item 16. Exhibits and Financial Statements.
Item 17. Undertakings.
EX-23.1 ea126248ex23-1_recruiter.htm

Truli Technologies Filing 2020-10-01

S-1 1 ea126248-s1_recruiter.htm REGISTRATION STATEMENT

As filed with the Securities and Exchange Commission on October 1, 2020

Registration No. 333-__________

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

RECRUITER.COM GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   7371   90-1505893

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

100 Waugh Dr. Suite 300

Houston, Texas 77007

(855) 931-1500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Evan Sohn

Chief Executive Officer

100 Waugh Dr. Suite 300

Houston, Texas 77007

(855) 931-1500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Joseph Lucosky, Esq.

Lucosky Brookman LLP

101 Wood Avenue South

Woodbridge, New Jersey 08830

(732) 395-4400

 
Steven D. Uslaner, Esq.
Mark F. Coldwell, Esq.

Littman Krooks LLP
655 Third Avenue
New York, New York 10017
(212) 490-2020
 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

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 Securities Exchange Act of 1934.

 

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

 

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 7(a)(2)(B) of the Securities Act. þ

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each Class of Security being registered  Proposed
Maximum
Aggregate
Offering Price(1)
   Amount of
Registration Fee
 
Units, each consisting of one Common Share, par value $0.0001 per share, and one Warrant to purchase Common Stock(1)  $11,500,000   $1,492.70 
Common Stock included as part of the Units (2)(3)   -    - 
Warrants to purchase Common Stock included as part of the Units (3)(4)(5)(6)   -    - 
Common Stock issuable upon exercise of the Warrants (2)  $12,650,000   $1,641.97 
Representative’s Warrants(5)   -    - 
Common Stock issuable upon exercise of Representative’s Warrants(3)(6)(7)  $1,250,000   $162.25 
Total  $25,400,000   $3,296.92 

 

(1) Includes Common Stock to cover the exercise of the over-allotment option granted to the underwriter.
   
(2) Pursuant to Rule 416 of the Securities Act, the securities being registered hereunder include such additional securities as may be issued after the date hereof as a result of share splits, share dividends or similar transactions.
   
(3)

No separate fee is required pursuant to Rule 457(i) under the Securities Act.

   
(4) Includes Common Stock which may be issued upon exercise of additional warrants which may be issued upon exercise of the over-allotment option granted to the underwriter.
   
(5) In accordance with Rule 457(g) under the Securities Act, because the Common Stock underlying the Warrants are registered hereby, no separate registration fee is required with respect to the Warrants registered hereby.
   
(6) The warrants are exercisable at a per share price of 110% of the price per Unit in this offering.
   
(7) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The warrants, or the Representative’s Warrants, are exercisable at a per share exercise price equal to 110% of the public offering price. As estimated solely for the purpose of recalculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the Representative’s Warrants is equal to 125% of US$500,000 (which is equal to 10% of $10,000,000).

 

 

 

 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated September __, 2020

 

PRELIMINARY PROSPECTUS

 

Units

Each Unit Consisting of

One Share of Common Stock and

One Warrant to Purchase Common Stock

 

 

 

We are offering ___________units (each a “Unit” and collectively, the “Units”) of Recruiter.com Group, Inc. (the “Company,” “Recruiter,” “we,” “our” or “us”) at [ ] per Unit. Each Unit consists of one common share, par value $0.0001, which we refer to as the “Common Stock”, and one warrant (the “Warrant”) to purchase one share of Common Stock. The Units have no stand-alone rights and will not be certified or issued as stand-alone securities. The Warrants included in the Units are exercisable immediately and have an exercise price of $____ per share (___% of the price per unit sold in this offering. The warrants will be listed for trading as described below and will expire five years from the date of issuance.

 

We plan on applying to list our Common Stock and Warrants on the Nasdaq Capital Market under the symbol “RCRT” and “RCRTW”, respectively. No assurance can be given that our application will be approved.

 

Unless otherwise noted and other than in our consolidated financial statements and the notes thereto, the share and per share information in this prospectus reflects a proposed reverse stock split of the outstanding common stock and treasury stock of the Company at an assumed 1 for ___ ratio to occur prior to the closing of the offering.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 11 of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before purchasing any of the securities offered by this prospectus.

 

We are an “emerging growth company” as defined under the federal securities laws and may elect to comply with reduced public company reporting requirements. Please read “Implications of Our Being an Emerging Growth Company” beginning on page 5 of this prospectus for more information.

 

    Per Unit(2)     Total  
Offering price   $                  $             
Underwriter’s discounts and commissions (1)   $       $    
Proceeds to our company before expenses   $       $    

 

(1) See “Underwriting” beginning on page 89 for additional information regarding underwriting compensation.
   
(2) The public offering price and underwriting discount in respect of the Units corresponds to (i) a public offering price per share of Common Stock of $                    and (ii) a public offering price per warrant of $0.01.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

We have granted a 45-day option to the representative of the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional shares of Common Stock and/or up to an additional _____Warrants solely to cover over-allotments, at the public offering price per share of Common Stock and per Warrant, respectively, less, in each case, the underwriting discounts payable by us. The securities issuable upon exercise of this overallotment option are identical to those offered by this prospectus and have been registered under the registration statement of which this prospectus forms a part.

 

The underwriters expect to deliver the securities against payment in New York, New York on or about                        , 2020.

 

Sole Book-Running Manager

 

Joseph Gunnar & Co. LLC 

 

 

TABLE OF CONTENTS

 

 

i

 

 

Through and including                 , 2020 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

You should rely only on the information contained in this prospectus. Neither we nor the placement agent have authorized anyone to provide any information or to make any representations other than those contained in this prospectus we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. You should also read this prospectus together with the additional information described under “Additional Information.”

 

Unless the context otherwise requires, we use the terms “we,” “us,” “the Company”, “Recruiter.com” and “our” to refer to Recruiter.com Group, Inc. and its consolidated subsidiaries.

 

ii

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements should be evaluated with consideration given to the risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements.

 

Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all future periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements. Such factors include, among others:

 

our ability to achieve positive cash flow from operations;

 

  the rate and degree of market acceptance of our products and services;

  

  our ability to expand our sales organization to address effectively existing and new markets that we intend to target;

  

  impact from future regulatory, judicial, and legislative changes or developments in the U.S. and foreign countries;

  

  our ability to compete effectively in a competitive industry;

  

  our ability to obtain funding for our operations;

  

  our ability to attract collaborators and strategic partnerships;

  

  our ability to meet the NASDAQ requirements;

  

  our ability to meet our other financial operating objectives;

  

  the availability of qualified employees for our business operations;

  

  general business and economic conditions;

  

  our ability to meet our financial obligations as they become due;

 

  positive cash flows and financial viability of our operations and new business opportunities;

 

  ability to secure intellectual property rights over our proprietary products or enter into license agreements to secure the legal use of certain patents an intellectual property;

 

  our ability to be successful in new markets;

 

  our ability to avoid infringement of intellectual property rights; and

 

  the positive cash flows and financial viability of our operations and new business opportunities

 

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC or in our press releases) for other factors that may cause actual results to differ materially from those projected by the Company. For additional information regarding risk factors that could affect the Company’s, see “Risk Factors” beginning on page 11 of this prospectus, and as may be included from time-to-time in our reports filed with the SEC.

 

The Company intends the forward-looking statements to speak only as of the time of such statements and does not undertake or plan to update or revise such forward-looking statements as more information becomes available or to reflect changes in expectations, assumptions or results. The Company can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this prospectus, could materially and adversely affect our results of operations, financial condition, and liquidity, and our future performance.

 

Industry Data and Forecasts

 

This prospectus contains data related to the permanent and temporary recruitment industry in the United States. These industry data include projections that are based on a number of assumptions which have been derived from industry and government sources which we believe to be reasonable. The permanent and temporary recruitment industry may not grow at the rate projected by industry data, or at all. The failure of the industry to grow as anticipated is likely to have a material adverse effect on our business and the market price of our Common Stock. In addition, the rapidly changing nature of the permanent and temporary recruitment industry subjects any projections or estimates relating to the growth prospects or future condition of our industries to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the industry data turns out to be incorrect, actual results may, and are likely to, differ from the projections based on these assumptions.

 

iii

 

 

PROSPECTUS SUMMARY

 

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this prospectus, including but not limited to, the risk factors beginning on page 11.

 

Overview

 

We are a leading online hiring platform that connects recruiters and employers. We empower businesses to recruit specialized talent faster utilizing virtual teams of recruiters and artificial intelligence (“AI”) proprietary job-matching technology. Our hiring platform (the “Platform”), which is accessible on our website, provides access to over 26,000 small and independent recruiters. The Platform utilizes an innovative web-based system for hiring, inclusive of AI-driven job matching, screening, and soon to be launched video screening, to more easily and quickly recruit talent. Several of our recruiting services are offered via the Platform.

 

We help businesses accelerate and streamline their recruiting and hiring processes by leveraging our expert network of recruiters aided by cutting edge artificial intelligence-based candidate sourcing and matching, and soon, 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 provisions.

 

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.

 

We generate revenue from the following activities:

 

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 that personnel with the employer, but with us or our providers acting as the employer of record, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for fulltime 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.

 

·Fulltime Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate fulltime 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 "fulltime 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.

  

1

 

 

  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.

 

  Career Solutions: We provide services to assist job seekers with their career advancement. These services include a resume distribution service which involves promoting these job seekers’ profiles and resumes to 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19.

 

  Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

  

Our Job Market Platform

 

Our virtual Platform enables our employer and recruiter clients to access the scalable sourcing power of an extensive network of independent recruiters, with the account management and personalized talent delivery of a full-service recruitment services firm. The Platform can be used by employers on a stand-alone basis or can be integrated with platforms operated by vendor management services (“VMS”), managed service providers (“MSP”) or payroll solutions providers to import open jobs into the Platform. The Platform is accessible through our website at www.Recruiter.com. Employers may use the Platform to post descriptions and receive qualified applicants, while independent recruiters may submit their candidates, track the status of those candidates, and view statistics associated with the hiring process, such as number of applicants, interviews, and status of a particular candidate.

 

Our Growth Strategy

 

We intend to grow our business by focusing our efforts on the following key areas:

 

Increase the Number of Recruiters on our Platform: We plan to continue to increase our recruiter network through various marketing programs, including referral programs, content generation and promotion and community strategy through social media. Our referral system, which was implemented in the third quarter of 2019, allows our recruiter users to generate trackable links to send to their recruiting associates, such as friends and colleagues. In addition, the Company drives web traffic and recruiter sign-ups by regularly publishing a large volume of digital content, including over 10,000 articles and a quarterly digital publication on recruiting. The Company’s marketing efforts will continue to be augmented by its social media presence, most notably on the LinkedIn platform, which includes many professional and executive networking communities and forums, each with hundreds of thousands of members. Our primary Recruiter.com Network group on LinkedIn, which, as of September 4, 2020, has 829,723 members and is the fourth largest group on LinkedIn, with the largest three having between 847,165 and 978,966 members. Further, our Recruiter Index survey and recruiting training programs regularly attract new recruiters into our network.

 

2

 

 

Launch new SaaS services on our Platform: We anticipate offering multiple new features during Q4 of 2020, including Video Screening; a platform for recording, screening, searching and sharing interview videos complete with Artificial Intelligence searching.

 

Expand Relationships with Existing Clients: We intend to expand relationships with our existing clients and increase their spending on our Platform and solutions by building new products and features (such as Video Screening and a self-service platform for our Recruiters on Demand solution), enhancing our marketing communications and through regular sales appointments and meetings.

 

Attract New Clients through Strategic Partnerships with Managed Service Providers and Vendor Management Systems (MSP/VMS) and HR Providers: We intend to expand our marketing efforts to increase awareness of our Platform and the benefits of using flexible and remote talent to recruit qualified personnel, and, as a result, attract new clients. Marketing efforts will include the development and optimization of partnerships, integrations, and marketplace profiles with various HR, payroll, and MSP/VMS partners to develop consistent sales channels.

 

Increase Growth and Earning Opportunities for Recruiters on our Platform: We plan to continue to invest in new products and features to help recruiters on our Platform grow their businesses by developing their professional and marketing skills and increasing their earning opportunities.

 

Make Further Investments in Technology: We plan to continue to invest in the development of our SaaS model and improve user experience by enhancing our software capabilities, data science, security, and technology infrastructure and building additional feature enhancements, including planned video screening functionality and an on-demand payment for recruiting services platform.

 

Broaden and Deepen Categories: We intend to focus further on customizing experiences for categories through tailored features and functionalities, thus making it easier and more efficient for employers to connect with the right recruiters.

 

Acquire Complementary Assets and Businesses: We will continue to seek opportunities to acquire complementary businesses and personnel within the recruitment and staffing sector, primarily to expand the overall number of employers using the Platform to source talented employees and contractors. Specifically, the Company plans to approach recruitment companies with strong client control and knowledge, such as Recruitment Process Outsourcing (“RPO”) companies, in major cities within the continental United States, with stable profit and revenues, as well as emerging recruitment technology companies.

 

Recent Developments

 

Convertible Debenture Financing

 

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”). Pursuant to the Purchase Agreement, the Company sold to the Purchasers a total of (i) $2,953,125 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”), and (ii) 1,845,703 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. Under certain circumstances, such as a Qualified IPO (as defined in the Debentures and which the Offering would qualify), the conversion of the foregoing Debentures will be for the same securities issued in the Qualified IPO which could be a combination of shares of our common stock and warrants. 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 and other offering expenses and commissions. The Company also agreed to issue to Joseph Gunnar & Co LLC, the placement agent, as part of its compensation, warrants to purchase shares of our common stock in connection with this private offering. See “Underwriting – Placement Agent Warrants.”

 

3

 

 

Reverse Stock Split

 

Prior to the closing of the offering, we plan to file a certificate of amendment to our amended and restated certificate of incorporation with the Secretary of State of the State of Nevada to effectuate a one-for-   (1:   ) reverse stock split of our common stock without any change to its par value. Such amendment will become effective upon such filing. No fractional shares will be issued in connection with the reverse stock split as all fractional shares will be adjusted to give effect to the reverse stock split.

 

Effects of COVID-19

 

While the Company has continued to operate during the COVID-19 pandemic, we have reduced certain billing rates to respond to the current economic climate. The Company has also experienced a decline in its employer clientele due to the current job market. In addition, 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 to improve staff and human capital expenditures, while maintaining overall workforce levels.

 

Risks Affecting Us

 

Our business is subject to numerous risks and uncertainties, including those discussed in the section titled “Risk Factors” beginning on page 11 and elsewhere in this prospectus. These risks include the following:

 

  our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels;

  

  because we have a limited operating history under our current Platform, it is difficult to evaluate our business and future prospects and increases the risks associated with an investment in our securities;

 

  complete integration of the staffing assets that we acquired from Genesys Talent LLC, a Texas limited liability company (“Genesys”) in March 2019 may be complex and time-consuming, and we may not be able to realize the full benefits of this acquisition;

 

  the rapidly-changing, unsure and/or deleterious effects of the COVID-19 pandemic on the job markets and general economy;

 

  our future growth depends on our ability to attract, retain and incentivize a community of recruiters, and the loss of existing recruiters, or failure to attract new ones, could adversely impact our business and future prospects;

 

  if we are unable to respond to technological advancements and other changes in our industry by developing and releasing new services, or improving our existing services, in a timely and cost-effective manner or at all, our business could be materially and adversely affected;

 

  our future growth depends in part on our ability to form new and maintain existing strategic partnerships with third-party solution providers and continued performance of such solution providers under the terms of our strategic partnerships with them;

 

  we rely in part on certain software that we license from third parties, and if we were to lose the ability to use such software our business and operating results could be materially and adversely affected;

 

  because we rely on a small number of customers for a substantial portion of our revenue, the loss of any of these customers would have a material adverse effect on our operating results and cash flows;

 

  if recruiters on our Platform were classified as employees instead of independent contractors, our business would be materially and adversely affected; and

 

  if we are unable to compete effectively, our business and operating results will be materially and adversely affected.

 

4

 

 

Management

 

Our executives are seasoned professionals in internet-enabled businesses and the recruitment industry. Collectively our management and staff have been cited as career and business experts in publications such as the Wall Street Journal, Entrepreneur, Time, Business Insider, and Forbes. Our key executives have participated in multiple successful exits, orchestrated investments and M&A transactions and have extensive business and financial acumen.

 

Evan Sohn, CEO/Chairman: 25+ years of experience in Fortune 500 and startup environments, including multiple exits and a history of rapidly growing businesses; founder of the Sohn Conference Foundation

 

Miles Jennings, Founder/COO: 15+ years of experience within the recruitment technology industry, including Indeed.com and Adecco Group

 

Ashley Saddul, Founder/CTO: Seasoned entrepreneur and technologist with 20+ years of experience at internet startups and mission-critical banking applications

 

Judy Krandel, CFO: Accomplished board member, CFO, and investor with an extensive background in portfolio management, equity investments, capital markets, executive leadership and business development

 

Rick Roberts, President, Recruiting: 20+ years of achievement leading sales and operations within the recruiting industry

 

Corporate Information

 

Our principal executive offices are located at 100 Waugh Drive, Suite 300, Houston, Texas. Our telephone number is (855) 931-1500. Our website address is www.recruiter.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our securities.

 

Implications of Being an Emerging Growth Company

 

As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:

 

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

 

an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

reduced disclosure about our executive compensation arrangements;

 

exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a stockholder approval of any golden parachute arrangements; and

 

extended transition periods for complying with new or revised accounting standards.

 

We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.

 

We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies.

 

5

 

 

THE OFFERING

 

Issuer  

Recruiter.com Group, Inc.

     
Securities Offered  

______ Units, each consisting of one share of Common Stock and one Warrant to purchase one share of Common Stock (the “Securities”). The Warrants included in the Units are exercisable immediately, have an exercise price of $___ per share (___% of the public offering price per unit described on the cover of this prospectus) and expire five years from the date of issuance. The Units will not be certificated or issued in stand-alone form. The shares of our Common Stock and the Warrants comprising the Units are immediately separable upon issuance and will be issued separately in this offering.

     
Over-allotment option  

We have granted to the representative of the underwriters a 45-day option to purchase up to ______ additional shares of our Common Stock at a public offering price of $_____ per share and/or warrants to purchase shares of our common stock at a public offering price of $0.01 per warrant, less, in each case, the underwriting discounts payable by us, in any combination solely to cover over-allotments, if any.

     
Common Stock outstanding prior to this offering  

5,131,508 shares of common stock outstanding as of the date of this prospectus.

     
Common Stock to be outstanding after this offering   _______ shares, which includes the ______ Units sold in the offering at $____ per unit and _______shares of common stock issuable upon conversion of the Debentures, based on an assumed offering price of $____ per unit.  Excluded are the securities described on page __ below.
     
Use of proceeds   We estimate that the net proceeds to us from this offering will be approximately $       million, or approximately $      million if the underwriters do not exercise their over-allotment option, assuming an offering price of $      per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
     
    We intend to use the net proceeds of this offering primarily for general corporate purposes, including working capital, expanded sales and marketing activities, increased research and development expenditures and funding our growth strategies. See “Use of Proceeds” for additional information.

 

6

 

 

Description of Warrants  

The exercise price of the Warrants is $             per share (110% of the public offering price of one Unit). Each Warrant is exercisable for one share of Common Stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our Common Stock as described herein. A holder may not exercise any portion of a Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding Common Stock after exercise, as such percentage ownership is determined in accordance with the terms of the warrants, except that upon notice from the holder to us, the holder may waive such limitation up to a percentage, not in excess of 9.99%. Each Warrant will be exercisable immediately upon issuance and will expire five years after the initial issuance date. The terms of the Warrants will be governed by a Warrant Agreement, dated as of the effective date of this offering, between us and Philadelphia Stock Transfer as the warrant agent (the “Warrant Agent”). This prospectus also relates to the offering of the Common Stock issuable upon exercise of the Warrants. For more information regarding the Warrants, you should carefully read the section titled “Description of our Securities — Securities in this Offering” in this prospectus.

     

Representative’s Warrant

We have agreed to issue to the Representative (or its permitted assignees) warrants to purchase up to a total of _____ shares of common stock (5% of the shares of common stock included in the Units and issuable upon exercise of the warrants, excluding the over-allotment, if any). We are registering hereby the issuance of the Representative’s Warrants and the shares of common stock issuable upon exercise of the warrants. The warrants will be exercisable at any time, and from time to time, in whole or in part, during the four and one half year period commencing 180 days from the effective date of the registration statement of which this prospectus is a part, which period is in compliance with FINRA Rule 5110(e)(1). The warrants are exercisable for cash or on a cashless basis at a per share price equal to $___ per share, or 125% of the public offering price per Unit in the offering. Please see “Underwriting—Representative’s Warrants” for a further description of these warrants.

     
Proposed Nasdaq Capital Market Trading Symbol and Listing   We have applied to list our Common Stock and Warrants on the Nasdaq Capital Market under the symbols “RCRT” and “RCRTW”, respectively. No assurance can be given that such listing will be approved or that a liquid trading market will develop for our Common Stock and Warrants.
     
Lock-up   We, our directors, executive officers, and shareholders who own 5% or more of our outstanding Common Stock have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our Common Stock or securities convertible into Common Stock for a period of 180 days , commencing on the date of this prospectus. See “Underwriting” for additional information.
     
Risk Factors   See “Risk Factors” beginning on page 11 and the other information contained in this prospectus for a discussion of factors you should carefully consider before investing in our securities.

 

7

 

 

The total number of shares of our common stock that will be outstanding after this offering is based on 5,131,508 shares of common stock outstanding as of the date of this prospectus, which does not reflect our anticipated reverse stock split. Unless otherwise indicated, the shares of common stock outstanding after this offering excludes the following:

 

1,355,758 shares of common stock issuable upon exercise of outstanding stock options as of June 30, 2020, with a weighted-average exercise price of $3.73 per share;

 

866,500 shares of our common stock subject to Restricted Stock Units as of June 30, 2020;

 

300,000 shares of our common stock issuable upon exercise of outstanding stock options issued from July 1, 2020 until September 29, 2020;

 

  1,042,335 shares of common stock reserved for future issuance under our 2017 Equity Incentive Plan (the “2017 Plan”);

 

_________shares of common stock issuable upon exercise of warrants being issued to holders of the Debentures upon the closing of this offering;

 

_________ shares of common stock issuable upon exercise of warrants being issued to Joseph Gunnar & Co. LLC as placement agent in the Debenture offering;

 

________ shares of common stock issuable upon exercise of the Representative’s Warrants to be issued in connection with this offering; and

  

any securities issuable upon exercise of the Representative’s over-allotment option.

8

 

 

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

 

The following are summary consolidated statements of operations for the years ended December 31, 2019 and 2018 and for the six months ended June 30, 2020 (unaudited) and June 30, 2019 (unaudited), and the summary consolidated balance sheet data as of December 31, 2019 and 2018 and as of June 30, 2020 (unaudited).

 

Our management believes that the assumptions underlying our consolidated financial statements and the above allocations are reasonable. Our consolidated financial statements, however, may not necessarily reflect our consolidated results of operations, financial position and cash flows as if we had operated as a separate, stand-alone company during the periods presented. You should not view our historical results as an indicator of our future performance.

 

Selected Consolidated Statements of Operations for the years ended December 31, 2019 and 2018, and for the
six months ended June 30, 2020 (unaudited) and June 30, 2019 (unaudited)

 

   Six Months
Ended June 30,
2020
(unaudited)
   Six Months
Ended June 30,
2019
(unaudited)
   Year Ended
December 31,
2019
   Year Ended
December 31,
2018
 
                 
Sales  $4,166,537   $2,135,783   $5,997,987   $828,920 
Gross Profit  $997,099   $673,861   $1,549,785   $828,920 
Operating Expenses                    
G&A including share-based compensation of $1,650,202, $1,568,027, $4,643,127, and $187,156 respectively  $3,775,305   $3,073,260   $8,140,432   $1,725,204 
Amortization of Intangibles  $318,346   $-   $477,518   $- 
Impairment Expense  $-   $-   $3,113,020   $- 
Other  $180,805   $97,757   $322,997   $326,768 
Total Operating Expenses  $4,274,456   $3,171,017   $12,053,967   $2,051,972 
                     
Other Income/(Expenses)                    
Interest Expense  $(248,080)  $(81,365)  $(2,344,486)  $(143,627)
Initial Derivative Liability  $(3,340,554)  $-   $-   $- 
Change in Derivative value due to  $(2,642,175)  $-   $-   $- 
anti-dilution adjustments  $-   $(83,790)  $-   $- 
Change in fair value of derivative liability  $(904,176)  $-   $1,138,604   $- 
Other  $(11,478)  $-   $(133,449)  $(101,208)
Total Other Income/Expenses  $(7,146,463)  $(165,155)  $(1,339,331)  $(244,835)
                     
Net Loss  $(10,423,820)  $(2,662,311)  $(11,843,513)  $(1,467,887)
                     
Net loss attributable to non-controlling interest  $-   $(30,716)  $(30,716)  $(65,070)
Preferred Stock Dividend  $0   $(140,410)  $(140,410)  $(856,472)
Net loss attributable to Recruiter.com Group, Inc. shareholders  $(10,423,820)  $(2,772,005)  $(11,953,207)  $(2,259,289)
                     
Net loss per share - basic and diluted  $(2.31)  $(3.05)  $(8.36)   N/A 
Weighted average common shares - basic and diluted   4,508,394    908,798    1,429,737    N/A 

 

9

 

 

The following table presents our summary consolidated balance sheet data as of December 31, 2019 and 2018, and as of June 30, 2020 (unaudited)

 

Balance Sheet  June 30,
2020
(unaudited)
   December 31,
2019
   December 31,
2018
 
             
Current Assets            
Cash  $1,731,099   $306,252   $14,152 
Accounts Receivable, net  $583,364   $864,415   $56,766 
Prepaid Expenses and other current assets  $94,904   $98,503   $14,883 
Investments - available for sale marketable securities  $9,017   $44,766   $33,917 
Total Current Assets  $2,418,384   $1,313,936   $119,718 
                
Property and Equipment, net  $2,212   $2,790   $- 
Right of Use Asset - related party  $177,331   $214,020   $- 
Intangible assets, net  $1,114,209   $1,432,554   $- 
Goodwill  $3,517,315   $3,517,315   $- 
Software Development  $-   $0   $101,520 
Total Assets  $7,229,451   $6,480,615   $221,238 
                
Current Liabilities               
Accounts Payable  $316,812   $621,389   $222,266 
Accounts Payable - related party  $932,514   $825,791   $- 
Accrued Expenses and other liabilities  $856,893   $2,553,642   $528,431 
Liability on Sale of future revenues, net of discount of $69,832, $135,641 and $0 respectively  $208,044   $404,101   $- 
Advances on receivables  $68,156    -    - 
Loans Payable - current portion  $27,335   $25,934   $105,028 
Convertible notes payable, net of unamortized discount and costs of $2,804,049, $0, and $0 respectively  $149,076   $-   $55,000 
Convertible notes payable, related parties  $-   $-   $200,000 
Notes payable, net of unamortized discount of $0, $0, and $3,056 respectively  $-   $-   $151,944 
Notes payable, related parties  $-   $-   $150,000 
Refundable deposit on preferred stock purchase  $285,000   $285,000   $- 
Warrant Derivative Liability  $9,783,912   $612,042   $- 
Lease liability - current portion - related party  $73,378   $73,378   $- 
Deferred Revenue  $86,689   $145,474   $59,468 
Total Current Liabilities  $12,787,809   $5,546,751   $1,472,137 
                
Lease liability - long term portion - related party  $103,953   $140,642   $- 
Loans Payable - long term portion  $461,650   $77,866   $103,806 
Total Liabilities  $13,353,412   $5,765,259   $1,575,943 
                
Redeemable preferred stock of subsidiary - Noncontrolling interest at redemption value  $-   $-   $2,059,764 
                
Stockholders’ (deficit) Equity               
Preferred Stock series D, $0.0001 par value; 2,000,000 shares authorized; 536,595, 454,546 and 0 shares issued and outstanding respectively  $55   $46   $0 
Preferred Stock series E, $0.0001 par value; 731,845, 734,986 and  775,000 shares issued and outstanding respectively  $74   $74   $78 
Preferred Stock series F, $0.0001 par value; 200,000 shares authorized; 64,382, 139,768 and 0 shares issued and outstanding respectively  $7   $14   $0 
Common Stock, $0.0001 par value; 250,000,000 shares authorized; 5,009,508, 3,619,658 and 0 shares issued and outstanding respectively  $501   $362   $0 
Additional Paid in Capital  $21,787,410   $18,203,048   $679,259 
Accumulated Deficit  $(27,912,008)  $(17,488,188)  $(5,675,391)
Total Stockholders’ (Deficit) Equity attributable to Recruiter.com, Inc. common shareholders  $(6,123,961)  $715,356   $(4,996,054)
                
Stockholder’s equity attributable to the noncontrolling interest  $-   $-   $1,581,585 
                
Total stockholder’s equity (deficit)  $-   $-   $(3,414,469)
                
Total Liabilities and Stockholders’ (Deficit) Equity  $7,229,451   $6,480,615   $221,238 

 

10

 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully consider and evaluate all of the information contained in this prospectus before you decide to purchase the Units, the Warrants and the Common Stock. The risks and uncertainties described in this prospectus are not the only ones we may face. Additional risks and uncertainties that we do not presently know about or that we currently believe are not material may also adversely affect our business, business prospects, results of operations or financial condition. Any of the risks and uncertainties set forth herein, could materially and adversely affect our business, results of operations and financial condition.

 

Risks Related to Our Business and Industry

 

There is substantial doubt regarding our ability to continue as a going concern absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

 

We anticipate that we will continue to lose money for the foreseeable future. Our continued existence is dependent upon raising sufficient funds from this offering and generating sufficient working capital from our operations. Because of our history of losses, and net cash used in our operations we may have to continue to reduce our expenditures without receipt of sufficient proceeds from this offering or improvements in our cash flow from operations. Working capital limitations continue to impinge on our day-to-day operations thus contributing to continued operating losses. If we are unable to raise sufficient funds in this offering, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our stockholders losing their entire investment. There is no guarantee that we will raise sufficient funds in this offering.

 

The Company’s management has determined that there is substantial doubt about the Company’s ability to continue as a going concern and the report of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2019 and 2018 included an explanatory paragraph with respect to the foregoing. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and implement our business plan. This determination was based on the following factors: (i) the Company has a working capital deficit as of December 31, 2019 and 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; (ii) the Company will require additional financing for the fiscal year ending December 31, 2020 to continue at its expected level of operations; and (iii) 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 the consolidated financial statements.

 

The Company’s business depends on a strong reputation and anything that harms its reputation will likely harm its results.

 

As a provider of temporary and permanent staffing solutions as well as consultant services, the Company’s reputation is dependent upon the performance of the employees it places with its clients and the services rendered by its consultants. The Company depends on its reputation and name recognition to secure engagements and to hire qualified employees and consultants. If the Company’s clients become dissatisfied with the performance of those employees or consultants or if any of those employees or consultants engage in or are believed to have engaged in conduct that is harmful to the Company’s clients, the Company’s ability to maintain or expand its client base may be harmed. Any of the foregoing is likely to materially adversely affect the Company.

 

The Company may be unable to find sufficient candidates for its staffing business.

 

The Company’s staffing services business consists of the placement of individuals seeking employment. There can be no assurance that candidates for employment will continue to seek employment through the Company. Candidates generally seek temporary or full-time positions through multiple sources, including the Company and its competitors. Prior to COVID-19, unemployment in the United States has been low in the past couple of years but has sharply increased due to the effects of the COVID-19 pandemic. The availability of qualified talent may change or become more scarce, depending on macro-economic conditions outside of the Company’s control. If finding sufficient eligible candidates to meet employers’ demands becomes more challenging due to falling unemployment rates or other talent availability issues, the Company may experience a shortage of qualified candidates. Any shortage of candidates could materially adversely affect the Company.

 

11

 

 

The Company may incur potential liability to employees and clients.

 

The Company’s consulting and staffing business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. The Company does not have the ability to control the workplace environment. As the employer of record of its temporary employees, the Company incurs a risk of liability to its temporary employees for various workplace events, including claims of physical injury, discrimination, harassment or failure to protect confidential personal information. While such claims have not historically had a material adverse effect upon the Company, there can be no assurance that such claims in the future will not result in adverse publicity or have a material adverse effect upon the Company. The Company also incurs a risk of liability to its employer clients resulting from allegations of errors, omissions or theft by its temporary employees, or allegations of misuse of client confidential information. In many cases, the Company has agreed to indemnify its clients in respect of these types of claims. The Company maintains insurance with respect to many of such claims. While such claims have not historically had a material adverse effect upon the Company, there can be no assurance that the Company will continue to be able to obtain insurance at a cost that does not have a material adverse effect upon the Company or that such claims will be covered by such available insurance.

 

We may require additional capital to fund our business and support our growth, and our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.

 

We intend to continue to make substantial investments to fund our business and support our growth. In addition, we may require additional funds to respond to business challenges, including the need to develop new features or enhance our solutions, improve our operating infrastructure or acquire or develop complementary businesses and technologies. As a result, in addition to the revenues we generate from our business and the proceeds from this offering, we may need to engage in additional equity or debt financings to provide the funds required for these and other business endeavors. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Common Stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain such additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations, which may have a significant adverse impact on our business, operating results and financial condition.

 

Because we have a history of net losses, we may never achieve or sustain profitability or positive cash flow from operations.

 

We have incurred net losses in each fiscal year since our inception, including net losses of approximately $11.8 million for the year ended December 31, 2019 and $1.5 million for the year ended December 31, 2018, and a net loss of approximately $10.4 million for the six months ended June 30, 2020. As of June 30, 2020, we had an accumulated deficit of approximately $28.0 million. We expect to continue to incur substantial expenditures to develop and market our services and could continue to incur losses and negative operating cash flow for the foreseeable future. We may never achieve profitability or positive cash flow in the future, and even if we do, we may not be able to continue being profitable. Any failure to achieve and maintain profitability would continue to have an adverse effect on our stockholders’ deficit and working capital and could result in a decline in our stock price or cause us to cease operations.

 

12

 

 

Because we have a limited operating history under our current platform, it is difficult to evaluate our business and future prospects and thus increases the risks associated with investment in our securities.

 

We have operated our current platform since April 16, 2016, when we acquired the Platform, where it was then put into a multi-year process of further development, integration, and branding. As a result, our platform and business model have not been fully proven, and we have only a limited operating history on which to evaluate our business and future prospects. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including our ability to achieve market acceptance of our platform and attract, retain and incentivize recruiters on our platform, as well as respond to competition and plan for and scale our operations to address future growth. We may not be successful in addressing these and other challenges we may face in the future, and our business and future prospects may be materially and adversely affected if we do not manage these and other risks successfully. Given our limited operating history, we may be unable to effectively implement our business plan which could materially harm our business or cause us to scale down or cease our operations.

 

If we fail to completely successfully integrate the assets we acquired from Genesys on March 31, 2019, currently comprising the majority of our consulting and staffing business, we may not fully realize the anticipated benefits from this acquisition, and our results of operations would be materially and adversely affected.

 

On March 31, 2019 we acquired certain assets from Genesys, which currently comprise the majority of our fulltime placement and consulting and staffing business. Though overall, the integration has been a success, there is still a continued risk that we may encounter difficulties related to the completion of such integration. Some of these factors are outside our control. Our failure to successfully integrate this acquisition may be more difficult, costly or time-consuming than we anticipate, or we may not otherwise realize any of the anticipated benefits of this acquisition. Any of the foregoing could adversely affect our future results of operations or could cause our stock price to decline.

 

Our future growth depends on our ability to attract, retain and incentivize a community of recruiters, and the loss of existing recruiters, or failure to attract new ones, could adversely impact our business and future prospects.

 

The size of our community of employers on our platform is critical to our success. Our ability to achieve profitability in the future will depend, in large part, on our ability to attract new users to, and retain existing users on, our platform. Recruiters on our Platform can generally decide to cease using our platform at any time. While we have experienced rapid growth in the number of recruiters on our platform in recent months, with numbers rising from 25,582 in May 2020 to 26,731 in August, this growth may not continue at the same pace in the future or at all. In addition, it is possible that the ongoing effects of COVID-19 may have a deleterious effect on our user growth in the future. Achieving growth in our community of users may require us to engage in increasingly sophisticated and costly sales and marketing efforts that may not result in additional users. We may also need to modify our pricing model to attract and retain such users. If we fail to attract new users or fail to maintain or expand existing relationships in a cost-effective manner, our business and future prospects would be materially and adversely impacted.

 

If we are unable to respond to technological advancements and other changes in our industry by developing and releasing new services, or improving our existing services, in a timely and cost-effective manner or at all, our business could be materially and adversely affected.

 

Our industry is characterized by rapid technological change, frequent new service launches, changing user demands, and evolving industry standards. The introduction of new services based on technological advancements can quickly render existing services obsolete. We will need to expend substantial resources on researching and developing new services and enhancing our platform by incorporating additional features, improving functionality, and adding other improvements to meet our users’ evolving demands. We may not be successful in developing, marketing, and delivering in a timely and cost-effective manner enhancements or new features to our platform or any new services that respond to continued changes in the market. Furthermore, any enhancements or new features to our platform or any new services may contain errors or defects and may not achieve the broad market acceptance necessary to generate sufficient revenue. Moreover, even if we introduce new services, we may experience a decline in revenue from our existing services that is not offset by revenue from the new services.

 

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If we experience errors, defects, or disruptions in our platform it could damage our reputation, which could in turn materially and adversely impact our operating results and growth prospects.

 

The performance and reliability of our platform is critical to our reputation and ability to attract and retain recruiters and clients. Any system error or failure, or other performance problems with our platform could harm our brand and reputation and may damage the businesses of users. Additionally, our platform requires frequent updates, which may contain undetected errors when first introduced or released. Any errors, defects, disruptions in service, or other performance or stability problems with our platform could result in negative publicity, loss of or delay in market acceptance of our platform, loss of competitive position, delay of payment to us or recruiters, or claims by users for losses sustained by them, which could adversely impact our brand and reputation, operating results and future prospects.

 

Our 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures automatically convert at the closing of this offering, which could negatively impact trading in our securities.

 

$2,953,125 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (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 (a “Qualified Offering”). In the event of a Qualified Offering, the Debentures will be convertible into the same securities issued in the Qualified Offering which could be a combination of warrants and shares of the Company’s common stock. In addition, the Conversion Price of the Debentures would be the lower of (i) the Conversion Price, (ii) the price per share equal to the quotient of (A) the sum of (x) the number of shares Common Stock issued and outstanding on the date immediately prior to the closing date of the Qualified Offering, plus (y) the number of shares of Common Stock issuable upon conversion of any shares of preferred stock of the Company that are issued and outstanding on the date immediately prior to the closing date of the Qualified Offering, plus (z) the number of shares of Common Stock issuable upon vesting of the Company’s restricted stock units, divided by (B) $36 million, and (iii) 80% of the price per share or unit in the Qualified Offering. 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. As a result, the investors in this offering will experience immediate dilution when the Debentures are automatically converted into shares of our common stock and warrants in this offering and could negatively impact the trading market and price of our common stock following the offering

 

The continued operation of our business depends on the performance and reliability of Internet, mobile, and other infrastructures that are not under our control.

 

Our business depends on the performance and reliability of Internet, mobile, and other infrastructures that are not under our control. Disruptions in such infrastructures, including as the result of power outages, telecommunications delay or failure, security breach, or computer virus, as well as failure by telecommunications network operators to provide us with the bandwidth we need to provide our products and offerings, could cause delays or interruptions to our products, offerings, and platform. Any of these events could damage our reputation, resulting in fewer recruiters actively using our platform, disrupt our operations, and subject us to liability, which could adversely affect our business, financial condition, and operating results.

 

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We rely on third parties to host our platform, and any disruption of service from such third parties or material change to, or termination of, our arrangement with them could adversely affect our business.

 

We use third-party cloud infrastructure services providers and co-located data centers in the United States and abroad to host our platform. Software development, remote server administration, quality assurance, and administrative access is managed overseas by Recruiter Mauritius Ltd. under the direction of our Chief Technology Officer, Ashley Saddul. We do not control the physical operation of any of the data centers we use. These facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures, and similar events. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice, or other unanticipated problems could result in lengthy interruptions to our platform. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of violence, and other misconduct. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service. We may not be able to maintain or renew our agreements or arrangements with these third-party service providers on commercially reasonable terms, or at all. If we are unable to renew our agreements on commercially reasonable terms, our agreements are terminated, or we add additional infrastructure providers, we may experience costs or downtime in connection with the transfer to, or the addition of, new data center providers. If these providers increase the cost of their services, we may have to increase the fees to use our platform, and our operating results may be adversely impacted.

 

Because we have arrangements with related parties affecting a significant part of our operations, such arrangements may not reflect terms that would otherwise be available from unaffiliated third parties.

 

We rely on arrangements with related parties for support of our operations, including technical support, back-office and accounting, and may engage in additional related party transactions in the future. For example, we currently rely on a related party provider of information technology and computer services located in Mauritius for software development and maintenance related to our website and platform. Our Chief Technology Officer is an employee of this service provider. Additionally, Icon Information Consultants, LP (“Icon”), a significant stockholder, performs much of the back office and accounting functions for Recruiting Solutions, the subsidiary through which we operate our staffing business. See “Certain Relationships and Related Person Transactions” for further details. Although we believe that the terms of our arrangements with related parties are reasonable and generally consistent with market standards, such terms do not necessarily reflect terms that we or such related parties would agree to in arms-length negotiations with an independent third party. Furthermore, potential conflicts of interest can exist if a related party is presented with an issue that may have conflicting implications for the Company and such related party. If a dispute arises in connection with any of these arrangements, which is not resolved to the satisfaction of the Company, our business could be materially and adversely affected.

 

The COVID-19 pandemic has resulted in a significant downturn in the global and United States economies and accordingly a decreased demand for recruitment and staffing services, which could have a material adverse effect on our business, financial condition and results of operations.

 

In late 2019, an outbreak of COVID-19 was first reported in Wuhan, China. In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The COVID-19 pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans around the world aimed at controlling the spread of the virus. Businesses are also taking precautions, including requiring employees to work remotely or take leave, imposing travel restrictions and temporarily closing their facilities. Initial unemployment numbers have spiked. Uncertainties regarding the impact of COVID-19 on economic conditions are likely to result in sustained market turmoil and reduced demand for employees, which in its turn has had a negative impact on the recruitment and staffing industry. According to a report from CEOToday, the U.S. staffing industry, which previously boasted a market size of $152 billion has now fallen to roughly $119 billion since the COVID-19 outbreak; bringing it down to its lowest level since 2013. This represents a 21% decrease from 2019.

 

To date the economic impact of COVID-19 has resulted in certain reductions in the Company’s business and the Company has devoted efforts to shifting its focus in areas of hiring. As of the date of this prospectus, to the Company’s knowledge, no customer of the Company has gone out of business nor have any counterparties attempted to assert the existence of a force majeure clause, which excuses contractual performance. Because we depend on continued demand for recruitment services, a downturn in the recruitment and staffing industry would have a material adverse impact on our business and results of operations.

 

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We also depend on raising additional debt or equity capital to stay operational. While the Company and its subsidiaries applied for loans made available pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act administered by the U.S. Small Business Administration and received a total of $398,545 thereunder, the uses of the proceeds of these loans are limited to payroll costs, rent, utilities, and interest on mortgage obligations which were in place before February 15, 2020. Furthermore, the forgiveness of these loans is subject to meeting certain conditions, including that at least 75% of the forgiven amount must be used for payroll costs. Additionally, the amount eligible for forgiveness is subject to a reduction to the extent the Company fails to maintain its employee or pay levels or restore them to prior levels by June 30, 2020. As of September 4, 2020, the Company is evaluating its payroll levels in light of its pending application for PPP loan forgiveness, which the Company management reasonably expects to receive for the majority of the PPP funds. If these conditions are not met, we may be required to repay a portion of these loans. Furthermore, the economic impact of COVID-19 may make it more difficult for us to raise additional capital when needed. In April 2020, we were informed by a factoring company that we use to supplement our liquidity that it would no longer be able to advance funds to us against our future accounts receivable due to the effect of the COVID-19 pandemic. The terms of any financing, if we are able to complete one, will likely not be favorable to us. If we are unable to raise additional capital, we may not be able to meet our obligations as they come due, raising substantial doubt as to our ability to continue as a going concern.

 

If Internet search engines’ methodologies or other channels that we utilize to direct traffic to our website are modified, or our search result page rankings otherwise decline, it could negatively affect our future growth.

 

We depend in part on various internet search engines, such as Google, Yahoo, Bing and others, as well as other Internet channels and referral partners to direct traffic to our website. Our ability to maintain the number of visitors directed to our website is not entirely within our control. For example, our competitors’ search engine optimization and other efforts may result in their websites receiving a higher search result page ranking than ours, Internet search engines or other channels that we utilize to direct traffic to our website could revise their methodologies in a manner that adversely impacts traffic to our website, or we may make changes to our website that adversely impact our search engine optimization rankings and traffic. As a result, links to our website may not be prominent enough to drive sufficient traffic to our website, and we may not be able to influence the results. Any of these changes could have an adverse impact on our operating results and future growth.

 

If we or our third-party partners experience a security breach resulting in unauthorized access to our clients’ or recruiters’ data, our data, or our platform, networks, or other systems, our reputation would suffer, demand for our services may be reduced, our operations may be disrupted, we may incur significant legal liabilities, and our business could be materially and adversely affected.

 

Our business involves storage, processing, and transmission of our clients’ and recruiters’ proprietary, confidential, and personal information as well as the use of third-party partners who store, process, and transmit such proprietary, confidential, and personal information. We also maintain certain other proprietary and confidential information relating to our business and personal information of our employees. Any security breach or incident affecting us or third parties on which we rely, including resulting from computer viruses, malware, physical or electronic break-ins, or weakness resulting from intentional or unintentional service provider or employee actions, could result in unauthorized access to, misuse of, or unauthorized acquisition of our or our clients’ or recruiters’ data, the loss, corruption, or alteration of this data, interruptions in our operations, or damage to our computers or systems or those of our clients or recruiters. If an actual or perceived security breach affecting us or our third-party partners occurs, public perception of the effectiveness of our security measures would suffer, and result in attrition of recruiters on our platform or loss of clients. Any compromise of our or our third-party partners’ security could result in a violation of applicable privacy and other laws, regulatory or other governmental investigations, enforcement actions, and legal and financial exposure, including potential contractual liability. Any such compromise could also result in damage to our reputation and a loss of confidence in our security measures. Any of these effects could adversely impact our business, operating results and growth prospects.

 

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Our platform contains open source software components, and failure to comply with the terms of the underlying licenses could restrict our ability to market or operate our platform.

 

Our Company incorporates many types of open source software, frameworks and databases, including our core Platform, which is currently architected on the Yii platform using PHP code and MySQL databases. Open source licenses typically permit the use, modification, and distribution of software in source code form subject to certain conditions. Some open source licenses require any person who distributes a modification or derivative work of such software to make the modified version subject to the same open source license. Accordingly, although we do not believe that we have used open source software in a manner that would subject us to this requirement, we may be required to distribute certain aspects of our platform or make them available in source code form. Further, the interpretation of open source licenses is legally complex. If we fail to comply with the terms of an applicable open source software license, we may need to seek licenses from third parties to continue offering our platform and the terms on which such licenses are available may not be economically feasible, to re-engineer our platform to remove or replace the open source software, to limit or stop offering our platform if re-engineering could not be accomplished on a timely or cost-effective basis, to pay monetary damages, or to make available the source code for aspects of our proprietary technology, any of which could adversely affect our business, operating results, and financial condition.

 

In addition, generally there are no warranties, assurances of title, performance, or non-infringement, or controls on the origin of the software provided for the open source software. There is typically no support available for open source software, and no guarantee of periodic updates to address security risks or continued development and maintenance.

 

Our future growth depends in part on our ability to form new and maintain existing strategic partnerships with third party solution providers and continued performance of such solution providers under the terms of our strategic partnerships with them.

 

As part of our growth strategy for the Company and, in particular, its enterprise solution offering, we establish and maintain strategic partnerships with large and established third party solution providers to employers, such as companies specializing in enterprise application software, human resources, payroll, talent, time management, tax and benefits administration. Our strategic partnerships include among other things, integration of our platform with those of our strategic partners, joint marketing and commercial alignment, including joint events, and sales of our services by our partners’ representatives. We may be unable to renew or replace our agreements with such strategic partners as and when they expire on comparable terms, or at all. Moreover, the parties with which we have strategic relationships may fail to devote the resources necessary to expand our reach and increase our distribution. In addition, our agreements with our strategic partners generally do not contain any covenants that would limit competing arrangements. Some of our strategic partners offer, or could in the future offer, competing products and services or have similar strategic relationships with our competitors, and may choose to favor our competitors’ solutions over ours. If we are unsuccessful in establishing or maintaining our relationships with third parties, our growth prospects could be impaired and our operating results may be adversely impacted. Even if we are successful in establishing and maintaining these strategic relationships with third parties, they may not result in the growth of our client base or increased revenue.

 

We rely in part on certain software that we license from related and third parties, and if we were to lose the ability to use such software our business and operating results would be materially and adversely affected.

 

We license certain candidate matching software from Genesys (a related party) and Censia Inc. (“Censia”), a third party, as well as other popular, commercially available third party recruiting and marketing related software systems, such as LinkedIn and Hubspot, much of which is integral to our systems and our business. The license agreement, which was included as part of the asset purchase agreement with Genesys dated March 31, 2019, which transferred the clients, but not the technology of Genesys to the Company, governing the use by us of the Genesys software is perpetual and renewed on a monthly basis, which may be terminated by either party with 15 days written notice prior to the closing of the current term which expires May 31, 2021 or at any time upon a breach by either party. The license agreement governing the use by us of the Censia platform is perpetual, but may be terminated by either party with 180 days of notice. If any of these relationships were terminated or if any of these parties were 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 would be materially and adversely affected.

 

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Because we rely on a small number of customers for a substantial portion of our revenue, the loss of any of these customers would have a material adverse effect on our operating results and cash flows.

 

We derive our revenue from a limited number of customers. As of June 30, 2020, two customers accounted for more than 10% of the accounts receivable balance, at 42% and 13%, for a total of 55%. As of December 31, 2019, three customers accounted for more than 10% of the accounts receivable balance, at 19%, 15% and 13%, for a total of 47%.

 

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%. For the six months ended June 30, 2019 three customers accounted for 10% or more of total revenue, at 25%, 18% and 10%, for a total of 53%. Any termination of a business relationship with, or a significant sustained reduction in business from, one or more of these customers could have a material adverse effect on our operating results and cash flows.

 

Failure to protect our intellectual property could adversely affect our business.

 

Our success depends in large part on our proprietary technology and data, including our trade secrets, software code, the content of our website, workflows, proprietary databases, registered domain names, registered and unregistered trademarks, trademark applications, copyrights, and inventions (whether or not patentable). In order to protect our intellectual property, we rely on a combination of copyright, trademark, and trade secrets, as well as confidentiality provisions and contractual arrangements.

 

Despite our efforts, third parties may infringe upon or misappropriate our intellectual property by copying or reverse-engineering information that we regard as proprietary, including our platform, to create products and services that compete with ours. Further, we may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon, or diminish the value of our domain names, trademarks, service marks, and other proprietary rights. Moreover, our trade secrets may be compromised by third parties or our employees, which would cause us to lose the competitive advantage derived from the compromised trade secrets. Additionally, effective intellectual property protection may not be available to us in every country in which our platform currently is or may in the future be available. Further, we may be unable to detect infringement of our intellectual property rights, and even if we detect such violations and decide to enforce our intellectual property rights, we may not be successful, and may incur significant expenses, in such efforts. In addition, any such enforcement efforts may be time-consuming, expensive and may divert management’s attention. Because we rely on our Chief Technology Officer and his staff who are based in Mauritius, we face a risk based upon any local conditions and difficulties we may face in enforcing our intellectual property rights there. Further, such enforcement efforts may result in a ruling that our intellectual property rights are unenforceable. Any failure to protect or any loss of our intellectual property may have an adverse effect on our ability to compete and may adversely affect our business, financial condition, and operating results.

 

We may become subject to intellectual property infringement claims and challenges by third parties.

 

Third parties may claim that certain aspects of our platform, content, and brand infringe on their intellectual property rights. Any claims or litigation, regardless of merit, could cause us to incur significant legal expenses and, if successfully asserted, could require us to pay substantial damages or make ongoing royalty payments, prevent us from offering certain aspects of our platform, comply with other terms that may be unfavorable to us, or require us to stop using technology that contains the allegedly infringing intellectual property.

 

Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims typically involve large legal fees, and the time and resources necessary to resolve them could divert our management’s attention and adversely affect our business and operating results.

 

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If we or our clients are perceived to have violated or are found in violation of, the anti-discrimination laws and regulations as the result of the use of predictive technologies or external independent recruiters in the recruitment process, it may damage our reputation and have a material adverse effect on our business and results of operations.

 

We and our clients may be exposed to potential claims associated with the use of predictive algorithms and external recruiters in the recruitment process, including claims of age and gender discrimination. For example, Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits employers from limiting employment opportunities based on certain protected characteristics, including race, color, religion, sex, and national origin. The Age Discrimination in Employment Act of 1967 (the “ADA”) prohibits discrimination based on age. Certain social media companies, as well as employers purchasing targeted ads from such companies, have recently come under scrutiny for discriminatory advertising. In September 2019, the U.S. Equal Employment Opportunity Commission (the “EEOC”) ruled that several employers violated the ADA and Title VII by publicizing job openings on social media through the use of ads that targeted young men to the detriment of women and older workers. If we or our clients are perceived to have violated or are found in violation of, Title VII, the ADA, or any other anti-discrimination laws and regulations as the result of the use of predictive technologies in the recruitment process, it may damage our reputation and have a material adverse effect on our business and results of operations.

 

If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.

 

We have recently experienced significant growth following the Company’s acquisition and merger of Genesys. More recently, the number of recruiters on our platform increased from approximately 10,000 recruiters in July 2019 to over approximately 20,000 recruiters in December 2019 and currently stands at over 26,000 recruiters in July, 2020. Businesses that grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. If we continue to grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing additional executive and key personnel capable of providing the necessary support. There can be no assurance that our management, along with our staff, will be able to effectively manage our growth. Our failure to meet the challenges associated with rapid growth could materially and adversely affect our business and operating results.

 

If recruiters on our Platform were classified as employees instead of independent contractors, our business would be materially and adversely affected.

 

The Company believes that the recruiters who engage with us on our platform are independent contractors, due to a number of factors, including our inability to control these recruiters, and the Company’s Terms of Use with our users reflect that understanding. However, if the independent contractor status of recruiters is challenged, we may not be successful in defending against such challenges in some or all jurisdictions. Furthermore, the costs associated with defending, settling, or resolving lawsuits relating to the independent contractor status of recruiters could be material to our business. In September 2019, California enacted a new employee classification law that codified the 2018 decision by the state’s Supreme Court classifying independent contractors as employees unless they satisfy the following requirements: (i) are free from the control and direction of the entity relating to the performance of the work; (ii) perform work outside the usual course of the hiring entity’s business; and (iii) are customarily engaged in an independently established trade, occupation, or business. We cannot be certain if this ruling in California will impact us.

 

If a court or an administrative agency were to determine that the recruiters on our platform must be classified as employees rather than independent contractors, we and/or our clients would become subject to additional regulatory requirements, including but not limited to tax, wages, and wage and hour laws and requirements (such as those pertaining to minimum wage and overtime); employee benefits, social security, workers’ compensation and unemployment; discrimination, harassment, and retaliation under civil rights laws; claims under laws pertaining to unionizing, collective bargaining, and other concerted activity; and other laws and regulations applicable to employers and employees. Compliance with such laws and regulations would require us to incur significant additional expenses, potentially including without limitation, expenses associated with the application of wage and hour laws (including minimum wage, overtime, and meal and rest period requirements), employee benefits, social security contributions, taxes, and penalties. Additionally, any such reclassification would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.

 

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Approximately 50% of the recruiters on our platform are located in jurisdictions outside the United States, which exposes us to risks related to operating abroad.

 

Even though we currently have a limited physical presence outside of the United States, recruiters on our platform are located in approximately 150 countries around the world, the most prevalent being those recruiters who reside in the United States, India, Malaysia, England, and Canada, which subjects us to the risks and uncertainties associated with doing business internationally. Additionally, users on our platform include recruiters from some emerging markets where we have limited experience, where challenges can be significantly different from those we have faced in more developed markets, and where business practices may create greater internal control risks. Because our platform is generally accessible by users worldwide, one or more jurisdictions may claim that we or recruiters on our platform are required to comply with the laws of such jurisdictions. Laws outside of the United States regulating the Internet, payments, escrow, privacy, taxation, terms of service, website accessibility, consumer protection, intellectual property ownership, services intermediaries, labor and employment, wage and hour, worker classification, background checks, and recruiting and staffing companies, among others, which could be interpreted to apply to us, are often less favorable to us than those in the United States, giving greater rights to competitors, users, and other third parties. Compliance with foreign laws and regulations may be more costly than expected, may require us to change our business practices or restrict our product offerings, and the imposition of any such laws or regulations on us, our users, or third parties that we or our users utilize to provide or use our services, may adversely impact our revenue and business. In addition, we may be subject to multiple overlapping legal or regulatory regimes that impose conflicting requirements and enhanced legal risks.

 

Risks inherent in conducting business with an international user base include, but are not limited to: being deemed to conduct business or have operations in jurisdictions where we have users and being subject to their laws and regulatory requirements;

 

new or changed regulatory requirements;

 

varying worker classification standards and regulations;

 

organizing or similar activity by local unions, works councils, or similar labor organizations;

 

tariffs, export and import restrictions, restrictions on foreign investments, sanctions, and other trade barriers or protection measures;

 

costs of localizing services, including adding the ability for clients to pay in local currencies;

 

lack of acceptance of localized services;

 

difficulties in and costs of staffing, managing, and operating international operations or support functions;

 

taxation;

 

weaker intellectual property protection;

 

economic weakness or currency-related challenges or crises;

 

the burden of complying with a wide variety of laws that may be deemed to apply to us, including those relating to labor and employment matters (including but not limited to requirements with respect to work councils or similar labor organizations), consumer and data protection, privacy, network security, encryption, data residency, and taxes, as well as securing expertise in local law and related practices;

 

our ability to adapt to sales practices and client requirements in different cultures;

 

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fluctuations in foreign currency exchange rates;

 

compliance with U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities;

 

corporate or state-sponsored espionage or cyberterrorism;

 

macroeconomic conditions in certain foreign jurisdictions; and

 

political instability and security risks in countries where we have users.

 

The risks described above may also make it more difficult for us to expand our operations internationally. Analysis of, and compliance with, global laws and regulations may substantially increase our cost of doing business. We may be unable to keep current with changes in laws and regulations as they develop. Any violations could result in enforcement actions, fines, civil and criminal penalties, damages, interest, costs and fees (including but not limited to legal fees), injunctions, loss of intellectual property rights, or reputational harm. If we are unable to comply with these laws and regulations or manage the complexity of global operations and supporting an international user base successfully, our business, operating results, and financial condition could be adversely affected.

 

If we are unable to maintain our relationships with payment and banking partners, our business could be materially and adversely affected.

 

We rely on banks and card processors to provide clearing, processing, and settlement functions for the funding of all transactions on our platform. We also rely on a network of disbursement partners to disburse funds to recruiters on our platform, including our banking partners and payment solution providers such as PayPal and Qwil.

 

Relationships with our payment partners are critical to our business. We may not be able to maintain these relationships in the future on terms favorable to us or at all. Our payment partners may, among other things:

 

be unable to effectively accommodate evolving service needs, including as the result of rapid growth or higher volume;

 

choose to terminate or not renew their agreements with us, or only be willing to renew on less advantageous terms;

 

change the scope of their services provided to us, cease doing business with us, or cease doing business altogether; or

 

experience delays, limitations, or closures of their own businesses, networks, or systems, resulting in their inability to process payments or disburse funds for certain periods of time.

 

Alternatively, we may be forced to cease doing business with our payment processors if card association operating rules, certification requirements and laws, regulations, or rules governing electronic funds transfers to which we are subject change or are interpreted to make it more difficult or impossible for us to comply. If we are unable to maintain our current relationships with payment partners on favorable terms, or if we are unable to enter into new agreements with payment partners, our business may be material and adversely affected.

 

If we are unable to compete effectively, our business and operating results will be materially and adversely affected.

 

We face significant competition in all aspects of our business, and we expect such competition to increase, particularly in the market for online procurement of professional employee talent. Larger and more established companies may focus on our direct market and could directly compete with us. Smaller companies, including software developers, could also launch new services that compete with us that could gain market acceptance quickly.

 

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Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition, longer operating histories, greater financial, technical, and other resources, that could allow them to respond more quickly and effectively than we do to new or changing opportunities, technologies, standards, regulatory conditions, or user preferences or requirements. These companies may use these advantages to offer products and services similar to ours at a lower price, develop different products and services to compete with our platform.

 

Moreover, current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others, including our current or future third-party partners. By doing so, these competitors may increase their ability to meet the needs of existing or prospective users. These developments could limit our ability to obtain revenue from existing and new users. If we are unable to compete effectively against current and future competitors, our business and operating results would be materially and adversely impacted.

 

Our future success depends on our ability to retain and attract high-quality personnel, and the efforts, abilities and continued service of our senior management, and unsuccessful succession planning could adversely affect our business.

 

Our future success will depend in large part on our ability to attract and retain high-quality management, operations, and other personnel who are in high demand, are often subject to competing employment offers, and are attractive recruiting targets for our competitors. The loss of qualified executives and key employees, or inability to attract, retain, and motivate high-quality executives and employees required for the planned expansion of our business, may harm our operating results and impair our ability to grow.

 

We depend on the continued services of our key personnel, including Evan Sohn, our Chief Executive Officer and Chairman, Miles Jennings, our President and Chief Operating Officer, Rick Roberts, the President of Recruiting Solutions, and Judy Krandel, our Chief Financial Officer. The Company has entered into either employment agreements or consulting agreements with Evan Sohn, Miles Jennings and Judy Krandel, and does not have either a consulting or employment agreement with Rick Roberts. Our work with each of these key personnel are subject to changes and/or termination, and our inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.

 

If there are adverse changes in domestic and global economic conditions, it may negatively impact our business.

 

Our business depends on the continued demand for labor and on the economic health of current and prospective clients that use our platform and services. Any significant weakening of the economy in the United States or globally, more limited availability of credit, a reduction in business confidence and activity, economic uncertainty, financial turmoil affecting the banking system or financial markets, a more limited market for independent professional service providers or information technology services, and other adverse economic or market conditions may adversely impact our business and operating results. Global economic and political events or uncertainty may cause some of our current or potential clients to curtail spending on hiring, and may ultimately result in new regulatory and cost challenges to our operations. The COVID-19 pandemic has had a negative effect on the global economic condition as well as the U.S. staffing industry. These adverse conditions could result in reductions in revenue, longer sales cycles, slower adoption of new technologies and increased competition, which could in turn materially and adversely affect our business, financial condition, and operating results.

 

The regulatory framework for privacy and data protection is complex and evolving, and changes in laws or regulations relating to privacy or the protection or transfer of personal data, or any actual or perceived failure by us to comply with such laws and regulations, could adversely affect our business.

 

In the course of our day-to-day business operations we receive, collect, store, process, transfer, and use personal information and other user data. As the result, we are subject to numerous federal, state, local, and international laws and regulations regarding privacy, data protection, information security, and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other content. We are also subject to the terms of our privacy policies and obligations to third parties related to privacy, data protection, and information security. We strive to comply with applicable laws, regulations, policies, and other legal obligations relating to privacy, data protection, and information security to the extent possible. However, the regulatory framework for privacy and data protection both in the United States and abroad is, and is likely to remain for the foreseeable future, uncertain and complex, is changing, and the interpretation and enforcement of the rules and regulations that form part of this regulatory framework may be inconsistent among jurisdictions, or conflict with other laws and regulations. Such laws and regulations as they apply to us may be interpreted and enforced in a manner that we do not currently anticipate. Any significant change in the applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of user data, or their interpretation, or any changes regarding the manner in which the express or implied consent of users for the collection, use, retention, or disclosure of such data must be obtained, could increase our costs and require us to modify our platform and our products and services, in a manner that could materially affect our business.

 

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The laws, regulations, and industry standards concerning privacy, data protection, and information security also continue to evolve. For example, in June 2018, California passed the California Consumer Privacy Act (the “CCPA”), effective January 1, 2020, which requires companies that process personal information of California residents to make new disclosures to consumers about such companies’ data collection, use, and sharing practices and inform consumers of their personal information rights such as deletion rights, allows consumers to opt out of certain data sharing with third parties, and provides a new cause of action for data breaches. The State of Nevada has also passed a law, effective October 1, 2019, that amends the state’s online privacy law to allow consumers to submit requests to prevent websites and online service providers from selling personally identifiable information that they collect through a website or online service. The costs of compliance with, and other burdens imposed by, the privacy and data protection laws and regulations may limit the use and adoption of our services and could have a material adverse impact on our business. As a result, we may need to modify the way we treat such information.

 

Any failure or perceived failure by us to comply with any privacy and data protection policies, laws, rules, and regulations could result in proceedings or actions against us by individuals, consumer rights groups, governmental entities or agencies, or others. We could incur significant costs investigating and defending such claims and, if found liable, significant damages. Further, public scrutiny of or complaints about technology companies or their data handling or data protection practices, even if unrelated to our business, industry, or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs and risks.

 

If we sustain an impairment in the carrying value of long-lived assets and goodwill, it will negatively affect our operating results.

 

As the result of our purchase of certain assets of Genesys in March 2019, we have a significant amount of long-lived intangible assets and goodwill on our consolidated balance sheet. Under the Generally Accepted Accounting Principles in the U.S. (“GAAP”), long-lived assets are required to be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. If business conditions or other factors cause profitability and cash flows to decline, we may be required to record non-cash impairment charges. Goodwill must be evaluated for impairment at least annually or more frequently if events indicate it is warranted. If the carrying value of a reporting unit exceeds its current fair value, the goodwill is considered impaired. Events and conditions that could result in impairment in the value of our long-lived assets and goodwill include, but are not limited to, significant negative industry or economic trends, competition and adverse changes in the regulatory environment, significant decline in the Company’s stock price for a sustained period of time, limited funding, as well as or other factors leading to reduction in expected long-term revenues or profitability. We have begun determine whether to conduct quantitative impairment test on the goodwill and other assets acquired from the Genesys acquisition based on certain economic changes. If we record impairment charges related to our goodwill and long-lived assets, our operating results would likely be materially and adversely affected.

 

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.  We have identified certain material weaknesses in our internal control over financial reporting which we are in the process of remediating.

 

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act which requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

 

As of June 30, 2020, management has determined that there were material weaknesses in both the design and effectiveness of our internal control over financial reporting. Specifically, management determined that we lack a sufficient number of employees to properly segregate duties and provide adequate review of the preparation of our consolidated financial statements and, as of that date, and we lacked sufficient independent directors on our Board to maintain audit and other committees consistent with proper corporate governance standards. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which could result in loss of investor confidence and could have an adverse effect on our stock price.

 

Management has determined that, as of December 31, 2019, there were material weaknesses in both the design and effectiveness of our internal control over financial reporting. A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. Specifically, we restated our Form 10-Q filings for the three months ended June 30, 2019 and March 31, 2019 to switch $484,090 from net revenue to gross revenue. This change had an effect on total revenue and cost of goods sold. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified at least two material weaknesses in our internal control over financial reporting. Specifically, (1) we lack a sufficient number of employees to properly segregate duties and provide adequate review of the preparation of the consolidated financial statements and, as of that date, (2) we lacked sufficient independent directors on our Board to maintain audit and other committees consistent with proper corporate governance standards. Accordingly, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2019.

 

We are working to establish all the checks and balances needed for all financial areas of our business. We have hired a consultant who is working to establish best practices and help us implement these. This consultant is a CPA and has a significant background in running the accounting and budgeting process for public companies. In May 2020, our Board of Directors appointed Judy Krandel as our Chief Financial Officer. We will be adopting these best practices in the fourth quarter and going forward. We believe we will be able to remove this statement from our financial filings starting next year.

 

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Risks Related to this Offering and Our Securities

 

 Investors in this offering will experience immediate and substantial dilution in net tangible book value.

 

The public offering price per unit is substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, investors in this offering will incur immediate dilution of $___ per share, based on the initial public offering price of $____ per unit. Investors in this offering will pay a price per unit that substantially exceeds the book value of our assets after subtracting our liabilities. To the extent that the warrants sold in this offering are exercised, you will experience further dilution. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.

 

Immediately prior to the consummation of this offering, we expect to have approximately                outstanding stock options to purchase our Common Stock with exercise prices that are below the assumed initial public offering price of our Common Stock. To the extent that these options are exercised, there will be further dilution.

 

We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price.

 

The trading price of our Common Stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

 

  market conditions in the broader stock market in general, or in our industry in particular;

 

  actual or anticipated fluctuations in our quarterly financial and operating results;

 

  introduction of new products and services by us or our competitors;

 

  sales, or anticipated sales, of large blocks of our stock;

 

  issuance of new or changed securities analysts’ reports or recommendations;

 

  failure of industry or securities analysts to maintain coverage of our company, changes in financial estimates by any industry or securities analysts that follow our company, or our failure to meet such estimates;

 

  additions or departures of key personnel;

 

  regulatory or political developments;

 

  changes in accounting principles or methodologies;

 

  acquisitions by us or by our competitors;

 

  litigation and governmental investigations; and

 

political and geopolitical events and general economic conditions and trends, including the possible effects of the widespread domestic and global impact of the COVID-19 pandemic.

 

These and other factors may cause the market price and demand for our Common Stock to fluctuate substantially, which may limit or prevent investors from readily selling their Common Stock and may otherwise negatively affect the liquidity of our Common Stock. If the market price of our common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

 

There can be no assurances that our shares and/or warrants once listed on The Nasdaq Capital will not be subject to potential delisting if we do not continue to maintain the listing requirements of The Nasdaq Capital Market.

 

We have applied to list the shares of our common stock and warrants on The Nasdaq Capital Market, or Nasdaq, under the symbols “RCRT” and “RCRTW”, respectively. An approval of our listing application by Nasdaq will be subject to, among other things, our fulfilling all of the listing requirements of Nasdaq. In addition, Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from Nasdaq), would make it more difficult for shareholders to sell our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.

 

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Warrants are speculative in nature.

 

The warrants offered in this offering do not confer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of our common stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the warrants may exercise their right to acquire the common stock and pay an exercise price of              per share, prior to five years from the date of issuance, after which date any unexercised warrants will expire and have no further value. Until holders of the warrants acquire Common Stock upon exercise of the warrants, the holders will have no rights with respect to the Common Stock issuable upon exercise of the warrants. Upon exercise of the warrants, the holder will be entitled to exercise the rights of a common stockholder as to the security exercised only as to matters for which the record date occurs after the exercise. Moreover, following this offering, the market value of the warrants is uncertain and there can be no assurance that the market value of the warrants will equal or exceed their public offering price. There can be no assurance that the market price of the common stock will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever be profitable for holders of the warrants to exercise the warrants.

 

There is no established market for the warrants to purchase shares of our Common Stock being offered in this offering.

 

There is no established trading market for the warrants and we do not expect a market to develop. Although we have applied to list the warrants on the Nasdaq Capital Market there can be no assurance that there will be an active trading market for the warrants. Without an active trading market, the liquidity of the warrants will be limited.

 

Provisions of the warrants offered by this prospectus could discourage an acquisition of us by a third party.

 

In addition to the discussion of the provisions of our governing organizational documents, certain provisions of the warrants offered by this prospectus could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

 

If we cannot satisfy, or continue to satisfy, the initial listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them.

 

We will seek to have our securities approved for listing on the Nasdaq Capital Market upon consummation of this offering. We cannot assure you that we will be able to meet those initial listing requirements at that time. Even if our securities are listed on the Nasdaq Capital Market, we cannot assure you that our securities will continue to be listed on the Nasdaq Capital Market.

 

In addition, following this offering, in order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum shareholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

 

If the Nasdaq Capital Market does not list our securities, or subsequently delists our securities from trading, we could face significant consequences, including:

 

  a limited availability for market quotations for our securities;
     
  reduced liquidity with respect to our securities;
     
  a determination that our Common Stock is a “penny stock,” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Common Stock;
     
  limited amount of news and analyst coverage; and
     
  a decreased ability to issue additional securities or obtain additional financing in the future.

 

Our executive officers and directors, and their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

 

Upon consummation of this offering (based on shares outstanding as of           , 2020), our executive officers and directors, together with entities affiliated with such individuals, along with our two other largest stockholders, will beneficially own approximately     % of our Common Stock (approximately    % if the underwriters’ over-allotment option is exercised in full). Accordingly, these stockholders may, as a practical matter, continue to be able to control the election of a majority of our directors and the determination of all corporate actions after this offering. This concentration of ownership could delay or prevent a change in control of the Company.

 

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If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our Common Stock could decline.

 

If our existing stockholders sell substantial amounts of our Common Stock in the public market following this offering and the expiration of the lock-up agreements, the market price of our Common Stock could decrease significantly. The perception in the public market that our existing stockholders might sell Common Stock could also depress our market price. Upon completion of this offering, we will have outstanding            Common Stock, assuming no exercise by the underwriters of their option to purchase additional shares, and options to purchase            shares of our Common Stock, based on our shares and options to be outstanding as of immediately prior to the consummation of this offering. Our directors, executive officers and other holders of our Common Stock will be subject to the lock-up agreements described in “Underwriting” and the Rule 144 holding period requirements described in “Shares Eligible for Future Sale.” After all of these lock-up periods have expired and the holding periods have elapsed, up to            additional shares will be eligible for sale in the public market.

 

In addition, the holders of               Common Stock will have the right, subject to certain exceptions and conditions, to require us to register their Common Stock under the Securities Act of 1933, and they will have the right to participate in future registrations of securities by us. Registration of any of these outstanding Common Stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. A decline in the price of shares of our Common Stock might impede our ability to raise capital through the issuance of additional shares of our Common Stock or other equity securities.

 

Since we do not expect to pay any cash dividends for the foreseeable future, investors in this offering may be forced to sell their stock in order to obtain a return on their investment.

 

We do not anticipate declaring or paying in the foreseeable future any cash dividends on our capital stock. Instead, we plan to retain any earnings to finance our operations and growth plans discussed elsewhere or incorporated by reference in this prospectus. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our Common Stock.

 

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

 

Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds will be used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We currently intend to use the net proceeds from this offering to expand marketing and brand enhancement related to our products, to fund our ongoing research and development activities, for personnel development and training and for resource management software development.

 

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the commercial success of our systems and the costs of our research and development activities, as well as the amount of cash used in our operations. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.

 

The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our Common Stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

 

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USE OF PROCEEDS

 

Based upon an assumed initial public offering price of $         per Unit (the mid-point of the range set forth on the cover page of this prospectus), we estimate that we will receive net proceeds from this offering, after deducting the underwriting discounts, non-accountable expense allowance and the estimated offering expenses payable by us, of approximately $       assuming the Underwriter does not exercise its over-allotment option.

 

We plan to use the net proceeds we receive from this offering, and any proceeds from the exercise of warrants, for the following purposes:

 

    Use of
Net
Proceeds
 
Working Capital   $                
Sales and Marketing   $    
Research and Development   $    
Funding for Growth Strategies   $    

 

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have some flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

 

Each $1.00 increase or decrease in the assumed public offering price of $[        ] per share would increase or decrease the net proceeds to us from this offering by approximately $[        ], assuming that the amount of units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions payable by us. We may also increase or decrease the number of units we are offering. An increase or decrease of [        ] units offered by us in this offering would increase or decrease the net proceeds to us by approximately $[        ], assuming that the assumed price per unit to the public remains the same, and after deducting underwriting discounts and commissions payable by us. We do not expect that a change by these amounts in the offering price to the public or the common stock offered by us would have a material effect on our uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.

 

Assuming all [        ] units are sold by us, we expect that the net proceeds, together with our existing cash and cash equivalents will enable us to fund our operations for at least [        ] months. In addition, we have granted the representative of the underwriters a 45-day option to purchase up to [        ] additional shares of common stock and/or warrants to purchase up to [        ] shares of our common stock to cover over-allotments in this offering. We will use the proceeds from the sale of these additional shares for working capital and general corporate purposes.

 

The expected use of net proceeds represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of such net proceeds. Furthermore, in the event we make significant capital expenditures, the net proceeds of this offering may not be sufficient to fund such expenditures, and we may need to raise additional capital.

 

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DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our capital stock. Any future determination to declare cash dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board may deem relevant. Nevada law limits when we can pay dividends on our equity securities. Further our continuing losses require us to use funds we receive in financings to meet our working capital needs.

 

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CAPITALIZATION

 

Set forth below is our cash and capitalization as of June 30, 2020:

 

on an actual basis;

 

on a pro forma basis after giving effect to the conversion, upon the closing of this public offering, of the Debentures into an aggregate of ________ shares of common stock and warrants to purchase an aggregate of________ shares of common stock and the aggregate accrued interest was $______ calculated through _______. As a result of this conversion, the Company anticipates that it will be required to record an estimated charge of $____ million, which is comprised of (i) the recognition of a beneficial conversion feature of $_______, and (ii) the acceleration of the existing unamortized debt discount of $_______;

 

on a pro forma as adjusted basis to reflect the issuance and sale of the Units by us in this offering at the initial public offering price of $     per Unit, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated discounts, non-accountable expense allowance and the estimated offering expenses payable by us.

 

You should read the information in the below table together with our consolidated financial statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each included elsewhere in this prospectus.

 

The total number of shares of our common stock that will be outstanding after this offering is based on 5,131,508 shares of common stock outstanding as of the date of this prospectus, which does not reflect our anticipated reverse stock split. Unless otherwise indicated, the shares of common stock outstanding after this offering excludes the following:

 

1,355,758 shares of common stock issuable upon exercise of outstanding stock options as of June 30, 2020, with a weighted-average exercise price of $3.73 per share;

 

866,500 shares of our common stock subject to Restricted Stock Units as of June 30, 2020;

 

300,000 shares of our common stock issuable upon exercise of outstanding stock options issued from July 1, 2020 until September 29, 2020;

 

1,042,335 shares of common stock reserved for future issuance under our 2017 Plan;

 

_________shares of common stock issuable upon exercise of warrants being issued to holders of the Debentures upon the closing of this offering;

 

_________ shares of common stock issuable upon exercise of warrants being issued to Joseph Gunnar & Co. LLC as placement agent in the Debenture offering;

 

________ shares of common stock issuable upon exercise of the Representative’s Warrants to be issued in connection with this offering; and

 

any securities issuable upon exercise of the Representative’s over-allotment option.

 

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DILUTION

 

If you invest in our Units in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of common stock that is part of the Unit and the as adjusted net tangible book value per share of common stock immediately after this offering.

 

Our historical net tangible book value as of December 31, 2019 was $___ million, or $___ per common stock. Our historical net tangible book value is the amount of our total tangible assets less our liabilities. Historical net tangible book value per common stock is our historical net tangible book value divided by the number of outstanding Common Stock as of December 31, 2019.

 

The pro forma net tangible book value of our ordinary shares as of December 31, 2019 was $_____per common stock pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding common stock, after giving effect to the pro forma adjustments referenced under “Capitalization.”

 

After giving effect to the sale of Units that we are offering, attributing no value to the warrants, at an assumed initial public offering price of $       per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value on a pro forma adjusted basis as of December 31, 2019 would have been $      per common stock. This amount represents an immediate increase in net tangible book value of $      per common stock to our existing shareholders and an immediate dilution of $      per common stock to new investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a common stock.

 

The following table illustrates this dilution:

 

Assumed initial public offering price per share (attributing no value to the warrants) $ ​         ​
Net tangible book value per common stock as of December 31, 2019    
Pro forma net tangible book value per ordinary share as of December 31, 2019    
Pro forma as adjusted net tangible book value per ordinary share as of December 31, 2019, to give effect to this offering    
Dilution per share to new investors in this offering $ ​ ​

 

A $         increase (decrease) in the assumed initial public offering price of $      per common stock, would increase (decrease) the as adjusted net tangible book value per share by $        , and increase (decrease) dilution to new investors by $        per share, in each case assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

The foregoing discussion and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding warrants having a per share exercise or conversion price less than the per share offering price to the public in this offering.

 

If the underwriters exercise in full their option to purchase additional Common Stock in this offering, the as adjusted net tangible book value after the offering would be $      per share, the increase in net tangible book value to existing shareholders would be $      per share, and the dilution to new investors would be $      per share, in each case assuming an initial public offering price of $      per share.

 

The total number of shares of our common stock that will be outstanding after this offering is based on 5,131,508 shares of common stock outstanding as of the date of this prospectus, which does not reflect our anticipated reverse stock split. Unless otherwise indicated, the shares of common stock outstanding after this offering excludes the following:

 

1,355,758 shares of common stock issuable upon exercise of outstanding stock options as of June 30, 2020, with a weighted-average exercise price of $3.73 per share;

 

866,500 shares of our common stock subject to Restricted Stock Units as of June 30, 2020;

 

  300,000  shares of our common stock issuable upon exercise of outstanding stock options issued from July 1, 2020 until September 29, 2020;

 

  1,042,335 shares of common stock reserved for future issuance under our 2017 Plan;

 

  _________shares of common stock issuable upon exercise of warrants being issued to holders of the Debentures upon the closing of this offering;

 

  _________ shares of common stock issuable upon exercise of warrants being issued to Joseph Gunnar & Co. LLC as placement agent in the Debenture offering;

 

  ________ shares of common stock issuable upon exercise of the Representative’s Warrants to be issued in connection with this offering; and

  

  any securities issuable upon exercise of the Representative’s over-allotment option.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of financial condition and operating results together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section of the prospectus captioned “Risk Factors” and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.

 

Overview

 

We are an online hiring platform that connects recruiters and employers to assist with their staffing needs. We empower businesses to recruit specialized both fulltime and contract talent faster utilizing virtual teams of recruiters and artificial intelligence (“AI”) proprietary job-matching technology. Our website, www.Recruiter.com, provides access to over 26,000 small and independent recruiters and utilizes an innovative web platform, inclusive of AI-driven job matching, screening, and soon, video interviewing to more easily and quickly recruit talent.

 

We help businesses accelerate and streamline their recruiting and hiring processes by leveraging our expert network of recruiters aided by cutting edge artificial intelligence-based candidate sourcing, matching, and soon, 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 provisions.

 

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.

 

The Company has four wholly-owned subsidiaries: Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), Recruiter.com Consulting, LLC, and VocaWorks, Inc. (“VocaWorks”). The Company operates in Connecticut, Texas, and New York. Subsequently to June 30, 2020, the Company also operates in California and Vancouver, Canada.

 

We generate revenue from the following activities:

 

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 that personnel with the employer, but with us or our providers acting as the employer of record, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for fulltime 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.

 

Fulltime Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate fulltime 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 "fulltime 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.

 

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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.

 

Career Solutions: We provide services to assist job seekers with their career advancement. These services include a resume distribution service which involves promoting these job seekers’ profiles and resumes to 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19.

 

Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

The costs of our revenue primarily consists of employee costs, third-party staffing costs and other fees, outsourced recruiter fees and net margin revenue share.

 

Our results of operations and financial condition may be impacted positively and negatively by certain general macroeconomic and industry wide conditions, such as the effects of the COVID-19 pandemic. The consequences of the pandemic and impact on the U.S. and global economies continue to evolve and the full extent of the impact is uncertain as of the date of this Prospectus. The pandemic has had a detrimental effect on many recruitment technology companies and on the general employment and staffing industry. If the recovery from the COVID-19 pandemic is not robust, the impact could be prolonged and severe. 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 meet the demands of the greater 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. Management has evaluated shifting market demands and adjusting the Company’s strategic focus. As a result of COVID-19, the Company took steps to streamline certain expenses, including 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 in the fourth quarter of 2020, as certain clients re-open or accelerate their hiring initiatives, and new clients utilize our services. The Company does not expect reductions made in Q2 2020 due to COVID-19 to inhibit its ability to meet client demand. Overall, management is focused on effectively positioning the Company for a rebound in hiring, which we expect to occur in the fourth quarter of 2020. 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, which surveys recruiters’ sentiment on the job market and demand for recruiting services.

 

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Quarter Overview

 

During the three-months ended June 30, 2020, the Company focused on sales and marketing improvements, including marketing automation, and the development of a program for the hiring of remote independent sales personnel in order to service a high volume of client requests and to provide quality support to its larger clients. Company management additionally focused on developing effective investor relations, product management and roadmap development, and built additional partnership and potential acquisition opportunities.

 

Our key highlights during the three-months ended June 30, 2020 include the following:

 

Achieved 26,013 recruiters on our platform as of June 30, 2020;

 

Hired a team to augment our Recruiters on Demand solution;

 

In April and May 2020, the Company received loans in the amount of $398,545 from Radius Bank pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration;

 

Launched a new program to further incentivize recruiters on our platform by paying for resume submissions from recruiter users that, after manual review by Recruiter.com staff, are approved for sending to the Company’s clients for open positions. Each approved resume submission from independent recruiters are compensated with a twenty-five dollar stipend, which is paid to the recruiter in the form of Amazon gift cards;

 

Continued build-out and enhancement of our executive team, with the hiring of Evan Sohn, Chairman of the Board, as CEO and Judy Krandel as CFO, while effectively transitioning Miles Jennings to COO;

 

Entered into a Securities Purchase Agreement, effective May 28, 2020 with several accredited investors and 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, and (ii) 1,845,703 common stock purchase 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, 369,141 common stock purchase warrants exercisable at $2.00 per share, subject to adjustment in the event of a Qualified Offering (as defined below and which this offering would qualify). The Debentures mature on May 28, 2021, 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 Common Stock at any time following the date of issuance at the Purchasers’ option at a conversion price of $1.60 per share, subject to certain adjustments, including in the event of a Qualified Offering as defined below. See “Senior Subordinated Secured Convertible Debentures” below. 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 (a “Qualified Offering”). The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $508,000 of the 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 $2.00 per share, subject to certain adjustments;

 

Received multiple major media appearances for the Recruiter Index, Recruiter.com’s survey of recruiter sentiment on the job market and hiring and recruiting demand. Most notably, Evan Sohn appeared on CNBC to discuss the conditions of the job market; and

 

Held a special meeting of shareholders and enacted the reincorporation of the Company’s domicile to Nevada from Delaware and increased the authorized shares from 31,250,000 to 250,000,000.

 

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Recent Financing Activities

 

Merchant Receivables Purchase and Security Agreements

 

The Company and its subsidiaries are parties to a Merchant Receivables Purchase and Security Agreement, dated December 6, 2019 (the “First Receivables Purchase Agreement”), with Change Capital Holdings I, LLC (“Change Capital”) and a Merchant Receivables Purchase and Security Agreement, dated December 16, 2019, with Change Capital (the “Second Receivables Purchase Agreement” and together with the First Receivables Purchase Agreement, the “Receivables Purchase Agreements”). Pursuant to the Receivables Purchase Agreements, Change Capital has agreed to advance a total of $424,510 in cash (the “Purchase Price”) and the Company and its subsidiaries agreed to pay Change Capital in equal weekly installments over the course of 52 weeks an amount of approximately $567,000 (the “Specified Amount”), which amount includes the fees payable by the Company under the Receivables Purchase Agreements. As long as no default has occurred under the Receivables Purchase Agreements, the Company has the right to pay the remaining balance of the Specified Amount to Change Capital prior to the due date at a total cost of 3% of the Purchase Price per month. Pursuant to the Receivables Purchase Agreements, the Company and the subsidiaries party to the Receivables Purchase Agreements also granted to Change Capital a security interest in all their assets now owned or acquired in the future. In May 2020, the Receivables Purchase Agreements were amended to limit the outstanding principal amount to $408,777 payable as two payments of $5,452 weekly, plus any default fees, late fees, legal fees and expenses and any other costs or expenses incurred in enforcing Change Capital’s rights under the Receivables Purchase Agreements. As of Aug 4, 2020, there are no other fees owed under the Receivables Purchase Agreements in addition to the two weekly payments. The Company does not anticipate receiving any additional advances under the Receivables Purchase Agreements. The Receivables Purchase Agreements contain covenants which limit the Company’s ability to enter into any secured financing agreements without the prior written consent of Change Capital. The transactions pursuant to the Receivables Purchase Agreements have been accounted for as “Sale of Future Revenues.”

 

Agreement with Qwil PBC

 

A wholly-owned subsidiary of the Company is also a party to an arrangement with Qwil PBC, entered into in January 2020, that provides advances against the collection of accounts receivable. Advances made under the agreement are generally repayable in 45 days from the date of the advance and bear interest at 1.5% per month. In April 2020, Qwil informed the Company that it would not be able to advance additional funds pursuant to this arrangement due to the impact of the COVID-19 pandemic. In May 2020, the Company negotiated a more favorable repayment plan with Qwil PBC, which consists of payments of approximately $7,903 bi-weekly through August 14th, 2020 and a payment of $7,903 weekly from August 21st though September 18th, without additional interest. As of August 10, 2020, our outstanding balance with Qwil PBC was approximately $47,419.56.

 

The advances received pursuant to the arrangements with Change Capital and Qwil are carried as liabilities on our consolidated balance sheet and the accounts receivable remain on our books until collected.

 

Senior Subordinated Secured Convertible 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) 1,845,703 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. The Company received a total of $2,226,000 in net proceeds from the offering, after deducting the 12.5% original issue discount of $328,125, offering expenses and commissions, including the placement agent’s commission and fees of $295,000 and reimbursement of the placement agent’s and lead investor’s legal fees and the Company’s legal fees in the aggregate amount of $100,000 and escrow agent fees of $4,000. The Company also agreed to issue to the placement agent, as additional compensation, 369,141 common stock purchase warrants exercisable at $2.00 per share, subject to adjustment in the event of a Qualified Offering.

 

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The Debentures mature on May 28, 2021, 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 at any time following the date of issuance at the purchasers’ option at a conversion price of $1.60 per share, subject to certain adjustments (the “Conversion Price”). 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 (a “Qualified Offering”). In the event of a Qualified Offering, the Debentures will be convertible into the same securities issued in the Qualified Offering which could be a combination of warrants and shares of the Company’s common stock. In addition, the Conversion Price of the Debentures would be the lower of (i) the Conversion Price, (ii) the price per share equal to the quotient of (A) the sum of (x) the number of shares Common Stock issued and outstanding on the date immediately prior to the closing date of the Qualified Offering, plus (y) the number of shares of Common Stock issuable upon conversion of any shares of preferred stock of the Company that are issued and outstanding on the date immediately prior to the closing date of the Qualified Offering, plus (z) the number of shares of Common Stock issuable upon vesting of the Company’s restricted stock units, divided by (B) $36 million, and (iii) 80% of the price per share or unit in the Qualified Offering. 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 Company’s obligations under the Debentures are secured by a first priority lien on all of the assets of the Company and its subsidiaries, subject to certain existing senior liens. The Company’s obligations under the Debentures are guaranteed by the Company’s subsidiaries.

 

The Securities Purchase Agreement for the Debentures and Warrants 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.

 

In order to meet our working capital needs for the next 12 months, we expect to finance our operations through additional debt or equity offerings, including the offering described in this Prospectus. We may not be able to complete these or any other financing transactions on terms acceptable to the Company, or at all. Additionally, any future sales of securities to finance our operations will likely dilute existing shareholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow. If we are unable to raise sufficient capital to fund our operations, it is likely that we will be forced to reduce or cease operations.

 

Results of Operations Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

 

Revenue

 

The Company had revenue of $1,853,414 for the three-month period ended June 30, 2020, as compared to $1,972,481 for the three-month period end June 30, 2019, representing a decrease of $119,067 or 6%. This decrease resulted primarily from enterprise accounts reducing demand for billable consultants as well as reducing the bill rates clients paid for consultants, both as a result of the effect of the COVID-19 pandemic. The Company also had a decline in its licensing business, as our primary licensing customer reduced demand for hiring needs also as a result of the effect of the COVID-19 pandemic. The Company also experienced a decline in marketing revenue as we shifted internal resources to focus more on our core recruiting solutions business. The extent to which the COVID-19 pandemic will impact our revenue in the subsequent future periods is uncertain at this time.

 

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Cost of Revenue

 

Cost of revenue for the three-month period ended June 30, 2020 was primarily attributable to third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys Talent, LLC, (currently the Company’s Recruiting Solutions division). Cost of revenue was $1,418,242 for the three-month period ended June 30, 2020, which included related party costs of $298,712, compared to $1,461,922 for the 2019 three-month period, and included related party costs of $794,135.

 

Our gross profit for the three-month period ended June 30, 2020 was $435,172, producing a gross profit margin of 23.5%. Our gross profit for the corresponding 2019 three month period was $510,559, producing a gross profit margin of 25.9%. The decline in gross profit from 2019 to 2020 is primarily the result of a decline in sales for the period. The decline in the gross profit margin reflects a shift in the mix of business due to the decline in our licensing business.

 

Operating Expenses

 

We had total operating expenses of $1,858,004 for the three-month period ended June 30, 2020 compared to $2,701,335 in the 2019 period, a decrease of $843,331 or 31.2%. This decrease was primarily due to a decrease in general and administrative expense of $1,027,070 or 38.7%.

 

Sales and Marketing

 

Our sales and marketing expense for the three-month period ended June 30, 2020 was $15,068 compared to $2,969 for the 2019 period, which reflects the focus on growth in our business by endeavoring to build traffic, content, and communications for the purpose of outreach to and engagement with its network of recruiters and to further build its network of recruiters.

 

Product Development

 

Our product development expense for the three-months ended June 30, 2020 increased to $57,401 from $44,934 for the corresponding period in 2019, reflecting continued investment in our product offerings. The product development expense in both periods were paid in entirety to Recruiter.com Mauritius, Ltd, a development team employed by Recruiter.com and a related party of the Company, which reflects the focus on growth in our business.

 

Amortization of Intangibles and Impairment Expense

 

For the three-month period ended June 30, 2020, we incurred a non-cash amortization charge of $159,173 related to the intangible assets acquired from Genesys, now the Company’s Recruiting Solutions division.

 

General and Administrative

 

General and administrative expenses for the three-month period ended June 30, 2020 include compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the three-month period ended June 30, 2020, our general and administrative expenses were $1,626,362, including $709,230 of non-cash stock based compensation. In 2019, for the corresponding period, our general and administrative expenses were $2,653,432 including $1,481,322 of non-cash stock-based compensation. This decrease is attributable primarily to the declines in non-cash stock-based compensation of $772,092, legal expense of $297,505 and consulting fees of $126,000 partially offset by increases in compensation, software tools and other expenses.

 

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Other Income (Expenses)

 

Other income (expenses) for the three-month period ended June 30, 2020 consisted of net expense of $6,518,383 compared to net expense of $89,213 in the corresponding 2019 period. The primary reason for the increase of $6,429,170 is a non-cash initial derivative expense of $3,340,554 related to the sale of convertible debentures as well as a non-cash expense of $2,642,175 due to a change in the derivative value of warrants due to anti-dilution adjustments. Other expense also increased due to a non-cash expense of $339,088 from the change in the fair value of the derivative liability from our outstanding warrants issued in 2019. As our common stock price increases, we incur an expense and contrarily if our common stock decreases, we recognize other income. We expect the non-cash income from the anticipated forgiveness of the loans we received under the Paycheck Protection Program to increase our other income, or alternatively decrease our other expense, as the case may be.

 

Net loss

 

For the three-months ended June 30, 2020, we incurred a net loss of $7,941,215 compared to $2,279,989 in the 2019 period. After taking into account the accrued preferred stock dividends as applicable, we incurred a net loss attributable to common stockholders of $7,941,215 for the three-months ended June 30, 2020 compared to $2,279,989 in the 2019 period. It is possible the net loss may increase in near-term future periods due to the effect of the COVID-19 pandemic, which we expect will be partially offset by non-cash income from forgiveness of the loans pursuant to the Paycheck Protection Program.

 

Results of Operations Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019:

 

Revenue

 

The Company had revenue of $4,166,537 for the six months ended June 30, 2020, as compared to $2,135,783 for the 2019 six-month period, an increase of $2,030,754 or 95.1%. The increase resulted primarily from the acquisition in March 2019 of certain assets from Genesys, now the Company’s Recruiting Solutions division, offset by enterprise accounts reducing demand for billable consultants as well as reducing the bill rates clients paid for consultants, as a result of the effect of the COVID-19 pandemic. The Company also had a decline in our licensing business as our primary licensing customer reduced demand for hiring needs also as a result of the effect of the COVID-19 pandemic. The Company also experienced a decline in marketing revenue as we shifted internal resources to focus more on our core solutions business. The extent to which the COVID-19 pandemic will impact our revenue in the subsequent future periods is uncertain at this time.

 

Cost of Revenue

 

Cost of revenue for the six months ended June 30, 2020 was primarily attributable to employee costs, third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys, now the Company’s Recruiting Solutions division. Cost of revenue was $3,169,438 for the six months ended June 30, 2020 and included related party costs of $954,096. This compares to $1,461,922 for the 2019 six-month period, which included related party costs of $794,135.

 

Our gross profit for the 2020 six-month period was $997,099 which produced a gross profit margin of 23.9%. Our gross profit for the 2019 six month period was $673,861 which produced a gross profit margin of 31.6%. The decline in the gross profit margin reflects the impact of a reduction in bill rates from certain clients as well as a shift in the mix of business due to the decline in our licensing business and reduced focus on marketing revenue.

 

Operating Expenses

 

We had total operating expenses of $4,274,456 for the six months ended June 30, 2020 compared to $3,171,017 in the 2019 period, an increase of $1,103,439 or 34.8%. The increase was primarily due to the increase in general and administrative expenses of $702,045 as well as the inclusion of intangible amortization of $318,346.

 

Sales and Marketing

 

Our sales and marketing expense for the six months ended June 30, 2020 was $40,311 compared to $2,969 for the 2019 period, which reflects the focus on growth in the business.

 

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Product Development

 

Our product development expense for the six months ended June 30, 2020 increased to $140,494 from $94,788 for 2019 reflecting continued investment in our product offerings. The product development expense included $118,380 and $94,788 respectively paid in each period to a development team employed by Recruiter.com Mauritius, a related party.

 

Amortization of Intangibles and Impairment Expense

 

For the six months ended June 30, 2020, we incurred a non-cash amortization charge of $318,346 related to the intangible assets acquired from Genesys, now the Company’s Recruiting Solutions division.

 

General and Administrative

 

General and administrative expenses include compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the six months ended June 30, 2020, our general and administrative expenses were $3,775,305, including $1,650,202 of non-cash stock-based compensation. In 2019, our general and administrative expenses were $3,073,260 including $1,568,027 of non-cash stock-based compensation. The increase is attributable primarily to increases in compensation, software tools, and other expenses and non-cash stock-based compensation, partially offset by a decrease in professional fees.

 

Other Income (Expenses)

 

Other income (expenses) for the six months ended June 30, 2020 consisted of net expense of $7,146,463 compared to net expense of $165,155 in the 2019 period. The primary reason for the increase of $6,981,308 is a non-cash initial derivative expense of $3,340,554 related to the sale of convertible debentures and warrants as well as a non-cash expense of $2,642,175 due to a change in the derivative value of warrants due to anti-dilution adjustments. Other expense also increased due to a non-cash expense of $904,176 from the change in the fair value of the derivative liability from our outstanding warrants issued in 2019. As our common stock price increases, we incur an expense and contrarily if our common stock decreases, we recognize other income. We expect the non-cash income from the anticipated forgiveness of the loans we received under the Paycheck Protection Program to increase our other income, or alternatively decrease our other expense, as the case may be.

 

Net loss

 

For the six months ended June 30, 2020, we incurred a net loss of $10,423,820 compared to $2,662,311 in the 2019 period. After taking into account the accrued preferred stock dividends as applicable, we incurred a net loss attributable to common shareholders of $10,423,820 for the six months ended June 30, 2020 compared to $2,772,005 in the 2019 period. It is possible the net loss may increase in near-term future periods due to the effect of the COVID-19 pandemic, which we expect will be partially offset by non-cash income from forgiveness of the loans pursuant to the Paycheck Protection Program.

 

Non-GAAP Financial Measures

 

The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of Recruiter nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

 

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Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

 

Recruiter defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

 

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

 

The following table presents a reconciliation of net loss to Adjusted EBITDA:

 

   Three
months
ended,
June 30,
2020
   Three
months
ended,
June 30,
2019
 
Net loss  $(7,941,215)  $(2,279,989)
Interest expense and finance cost, net   203,874    14,340 
Depreciation & amortization   159,462    96 
EBITDA (loss)   (7,577,879)   (2,265,553)
Bad debt expense   750    - 
Initial derivative expense   3,340,554    - 
Change in derivative value due to anti-dilution adjustments   2,642,175    - 
Loss (gain) on change in fair value of derivatives   339,088    (17,627)
Stock-based compensation   709,230    1,481,322 
Adjusted EBITDA (Loss)  $(546,082)  $(801,858)

 

   Six
months
ended,
June 30,
2020
   Six
months
ended,
June 30,
2019
 
Net loss  $(10,423,820)  $(2,662,311)
Interest expense and finance cost, net   248,080    81,365 
Depreciation & amortization   318,923    96 
EBITDA (loss)   (9,856,817)   (2,580,850)
Bad debt expense   12,000    - 
Initial derivative expense   3,340,554    - 
Change in derivative value due to anti-dilution adjustments   2,642,175    - 
Loss (gain) on change in fair value of derivatives   904,176    (17,627)
Stock-based compensation   1,650,202    1,568,027 
Adjusted EBITDA (Loss)  $(1,307,710)  $(1,030,450)

 

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Liquidity and Capital Resources

 

For the six months ended June 30, 2020, net cash used in operating activities was $1,040,601, compared to net cash used in operating activities of $564,199 for the 2019 period. The increase in cash used in operating activities was attributable to the increase in operating expenses outlined previously supporting the investments to grow our business offset by non-cash charges, net of a decrease in working capital accounts primarily prepaid expenses and other current assets. Net loss (after adjusting for non-cash items) increased by approximately $332,753 and cash used from changes in working capital accounts was $142,659.

 

For the six months ended June 30, 2020, investing activities provided $17,009 from the sale of marketable securities, compared to $14,963 of cash used in investing activities in the six months ended June 30, 2019, which resulted primarily from cash paid for software development and equipment.

 

For the six months ended June 30, 2020, net cash provided by financing activities was $2,448,439. The principal factors were $2,226,000 from the sale of Debentures, net of original issue discounts and offering costs and $398,545 of proceeds from notes payable, offset by $261,866 for the repayments of liability from sale of future revenues. In the 2019 period, financing activities provided $1,458,786, primarily due to $979,997 from the sale of preferred stock and $500,000 for a deposit on the purchase of preferred stock.

 

As of August 4, 2020 the Company had approximately $1,193,864 cash on hand. This balance is after receipt of $398,545 borrowed from a bank pursuant to the Paycheck Protection Program under the CARES Act guaranteed by the SBA, which we expect to be forgiven in part or in full, subject to our compliance with the conditions of the Paycheck Protection Program. This balance also is after receipt of approximately $2.2 million in net proceeds from the offering of the Debentures and common stock purchase warrants completed in May and June 2020. Based on the cash on hand as of August 4, 2020, the Company does not have the capital resources to meet its working capital needs for the next 12 months. We are also party to two lines of credit. Advances under each of these lines of credit mature within 12 months of the advances. Availability under these two lines of credit in the amount of $91,300 at June 30, 2020 has been suspended in 2020 due to COVID-19 uncertainty. 

 

The Company’s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses and negative operating cash flows since inception. For the three-months ended June 30, 2020 and the six months ended June 30, 2020, the Company recorded net losses of $7,941,215 and $10,423,820, respectively. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.

 

The Company’s historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern. We can give no assurances that any additional capital that we are able to obtain, if any, will be sufficient to meet our needs, or that any such financing will be obtainable on acceptable terms. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail our commercial activities. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.

 

To date, private placement offerings have been our primary source of liquidity and we expect to fund future operations through additional securities offerings. We have also entered into arrangements with factoring companies to receive advances against certain future accounts receivable in order to supplement our liquidity. However, the COVID-19 pandemic and debt covenants under outstanding debt and other financing arrangements have affected the Company’s ability to receive advances against its future accounts receivable.

 

40

 

 

Results of Operations for Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

 

Revenue

 

Our revenue for the year ended December 31, 2019 was $5,997,987 compared to $828,920 for the prior year. Revenue for the year ended December 31, 2019 included nine months of operations for the recruitment and staffing business we acquired from Genesys in the March 2019 asset purchase (the “Asset Purchase”). We expect revenue to decrease in future periods due to the effect of the COVID-19 pandemic. The extent to which the COVID-19 pandemic will impact our future revenue is uncertain at this time.

 

Cost of Revenue

 

Cost of revenue for the year ended December 31, 2019 was $4,448,202 compared to $0 in the prior year. Cost of revenue was primarily attributable to third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys in the Asset Purchase and included related party costs of $2,082,367.

 

Our gross profit for 2019 was $1,549,785 which produced a gross profit margin of 25.8%.

 

Operating Expenses

 

We had total operating expenses of $12,053,967 for the year ended December 31, 2019 compared to $2,051,972 in 2018. The increase was primarily due to a $3 million non-cash impairment expense related to the March 2019 Asset Purchase, the non-cash amortization of intangibles and the increased general and administrative expenses resulting from equity grants to employees and consultants and the integration of the business acquired from Genesys (which were also non-cash), partially offset by a decrease in product development expenses.

 

Sales and Marketing

 

Our sales and marketing expenses for the year ended December 31, 2019 were $119,597 compared to $26,960 for the prior year, which reflects the growth in our business.

 

Product Development

 

Our product development expenses for the year ended December 31, 2019 decreased to $203,400 from $299,808 from December 31, 2018. This reduction of product development expenses is attributable to the decrease of personnel required by Recuriter.com Mauritius, thus leading to lower expenses. The product development expenses in 2019 was comprised of $15,000 paid to Ashley Saddul, the Company’s Chief Technology Officer, and approximately $181,400 paid to Recruiter.com Mauritius, a related party. In 2018, product development expenses included $297,631 paid to Recruiter.com Mauritius. In 2019 we were focused on the Genesys integration and having Recruiter.com Inc. newly public, versus 2018, which was more focused on core product development

 

Amortization of Intangibles and Impairment Expense

 

For the year ended December 31, 2019, we incurred a non-cash amortization charge of $477,518 related to the intangible assets acquired from Genesys in the Asset Purchase and a non-cash impairment of intangible assets charge of $113,020 related to our website and iPhone app developed for internal use. Following our annual goodwill impairment test as of December 31, 2019, we also recorded a non-cash goodwill impairment charge of $3,113,020 in 2019 compared to none in 2018, primarily due to the market capitalization of the Company’s Common Stock.

 

General and Administrative

 

General and administrative expenses include compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the year ended December 31, 2019, our general and administrative expenses were $8,140,432, including $4,643,127 of non-cash stock based compensation. In 2018, our general and administrative expenses were $1,725,204, including $187,156 of non-cash stock based compensation.

 

41

 

 

Other Income (Expenses)

 

Other income (expenses) for the year ended December 31, 2019 consisted of net expense of $1,339,331 compared to net expense of $244,835 in 2018. The primary reasons for the increase included accrued penalties in the form of interest expense and finance cost, in the amount of $2,238,314, related to outstanding preferred stock partially offset by a non-cash gain of $1,138,604 from the change in the fair value of the derivative liability from our outstanding warrants issued in 2019. We expect other expenses to decrease in future periods as the result of non-cash income from forgiveness of the loans pursuant to the Paycheck Protection Program.

 

Net loss

 

In 2019, we incurred a net loss of $11,843,513 compared to $1,467,887 in 2018. After taking into account the accrued preferred stock dividends, we incurred a net loss attributable to shareholders of $11,953,207 in 2019 compared to $2,259,289 in 2018. We expect net loss to increase in future periods due to the effect of the COVID-19 pandemic, which we expect will be partially offset by non-cash income from forgiveness of the loans pursuant to the Paycheck Protection Program.

 

Definition of Non-GAAP Financial Measures

 

The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of Recruiter nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

 

Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

 

Recruiter defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

 

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

 

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The following table presents a reconciliation of net loss to Adjusted EBITDA:

 

   Year
ended
December 31,
2019
   Year
ended
December 31,
2018
 
Net loss  $(11,843,513)  $(1,467,887)
Interest expense and finance cost, net   2,344,486(1)   143,627 
Depreciation & amortization   478,191    - 
EBITDA (loss)   (9,020,836)   (1,324,260)
Bad debt expense   23,500    - 
Impairment expense   3,113,020    - 
Gain on change in fair value of derivative   (1,138,604)   - 
Stock-based compensation   4,643,127    187,156 
Adjusted EBITDA (Loss)  $(2,379,793)  $(1,137,104)

 

(1)$2,238,314 of penalties from covenant breaches are included as part of interest expense and finance cost.

 

Liquidity and Capital Resources

 

For the year ended December 31, 2019, net cash used in operating activities was $1,390,858, compared to net cash used in operating activities of $755,174 for 2018. The increase in cash used in operating activities was attributable to the growth in our business following the March 31, 2019 Asset Purchase offset by non-cash charges, net of the change in fair value of derivative liability.

 

For 2019, investing activities provided $80,739 principally from the sale of marketable securities, compared to $72,486 of cash used in investing activities in 2018. The principal driver in 2018 was cash paid for software development.

 

In 2019, net cash provided by financing activities was $1,602,219. The principal factors were $979,997 from the sale of preferred stock, a $500,000 refundable deposit on the purchase of preferred stock and $424,510 generated by the sale of future receivables, offset by a $215,000 repayment of preferred stock deposit and $105,034 in repayment of notes. In 2018, financing activities provided $463,663, including $300,000 from the sale of preferred stock.

 

Based on cash on hand as of May 5, 2020 of approximately $345,000, the Company does not have the capital resources to meet its working capital needs for the next 12 months. This balance includes $398,545 borrowed from a bank pursuant to the Paycheck Protection Program under the CARES Act guaranteed by the SBA, which we expect to be forgiven in part or in full, subject to our compliance with the conditions of the Paycheck Protection Program. We are party to two lines of credit. Advances under each of these lines of credit mature within 12 months of the advances. Availability under these two lines of credit in the amount of $91,300 at December 31, 2019 has been suspended in 2020 due to COVID-19 uncertainty.

 

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses and negative operating cash flows since inception. For the year ended December 31, 2019, the Company recorded a net loss of $11,843,513. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.

 

The Company’s historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern. We can give no assurances that any additional capital that we are able to obtain, if any, will be sufficient to meet our needs, or that any such financing will be obtainable on acceptable terms. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail our commercial activities. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.

 

To date, private equity offerings have been our primary source of liquidity and we expect to fund future operations through additional securities offerings. We have also entered into arrangements with factoring companies to receive advances against certain future accounts receivable in order to supplement our liquidity. The COVID-19 pandemic has affected the Company’s ability to receive advances against its future accounts receivable as discussed in more detail below.

 

43

 

 

The Company and its subsidiaries are parties to a Merchant Receivables Purchase and Security Agreement, dated December 6, 2019 (the “First Receivables Purchase Agreement”), with Change Capital Holdings I, LLC (“Change Capital”) and a Merchant Receivables Purchase and Security Agreement, dated December 16, 2019, with Change Capital (the “Second Receivables Purchase Agreement” and together with the First Receivables Purchase Agreement, the “Receivables Purchase Agreements”). Pursuant to the Receivables Purchase Agreements, Change Capital has agreed to advance a total of $424,510 in cash (the “Purchase Price”) and the Company and its subsidiaries agreed to pay Change Capital in equal weekly instalments over the course of 52 weeks an amount of approximately $567,000 (the “Specified Amount”), which amount includes the fees payable by the Company under the Receivables Purchase Agreements. As long as no default has occurred under the Receivables Purchase Agreements, the Company has the right to pay the remaining balance of the Specified Amount to Change Capital prior to the due date at a total cost of 3% of the Purchase Price per month. Pursuant to the Receivables Purchase Agreements, the Company and the subsidiaries party to the Receivables Purchase Agreements also granted to Change Capital a security interest in all their assets now owned or acquired in the future. In March 2020, the Receivables Purchase Agreements were amended to increase the amount due by $54,574, extend the term to 65 weeks and to reduce the amount of a weekly payment to $7,298. The transactions pursuant to the Receivables Purchase Agreements have been accounted for as “Sale of Future Revenues.”

 

A wholly-owned subsidiary of the Company is also a party to an arrangement with Qwil PBC, entered into subsequent to December 31, 2019, that provides advances against the collection of accounts receivable. Advances made under the agreement are generally repayable in 45 days from the date of the advance and bear interest at 1.5% per month. As of May 7, 2020, we had an outstanding balance in the amount of approximately $111,777 pursuant to this arrangement. In April 2020, Qwil informed the Company that it would not be able to advance additional funds pursuant to this arrangement due to the impact of the COVID-19 pandemic.

 

The advances received pursuant to the arrangements with Change Capital and Qwil are carried as liabilities on our balance sheet and the accounts receivable remain on our books until collected.

 

The Company cannot guarantee when or if it will generate positive cash flow. If we are unable to raise sufficient capital to fund our operations, it is likely that we will be forced to cease operations.

 

Off-Balance Sheet Arrangements 

 

None. 

 

Critical Accounting Estimates and Recent Accounting Pronouncements 

 

Critical Accounting Estimates 

 

The preparation of consolidated 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 consolidated 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 available for sale securities, fair value of derivative liabilities, fair value of securities issued for acquisitions, fair value of assets acquired and liabilities assumed in the business combination, fair value of intangible assets and goodwill, valuation of initial right of use assets and corresponding lease liabilities, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 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.

 

44

 

 

Revenues are predominantly derived from the following activities

 

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 that personnel with the employer, but with us or our providers acting as the employer of record, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for fulltime 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.

 

Fulltime Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate fulltime 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 "fulltime 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.

 

  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.

 

Career Solutions: We provide services to assist job seekers with their career advancement. These services include a resume distribution service which involves promoting these job seekers’ profiles and resumes to 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19.

 

Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. 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 risk of identifying and hiring qualified employees and has the discretion to select the employees and establish their price and duties and bears 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 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, including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. We assume the risk of acceptability of the employees to its customers. Recruiters on Demand revenue is recognized on a gross basis in the month the services are provided.

 

Direct hire recruitment placement revenues are recognized on a gross basis when the guarantee period specified in the customer contract expires. No fees for direct hire placement services are charged to employment candidates. Any payments received prior to the expiration of the guarantee period are recorded as a deferred revenue liability.

 

Career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point that the performance obligations are satisfied.

 

Marketing and publishing services revenues are 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 that the performance obligations are satisfied.

 

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.

 

45

 

 

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 or earlier if facts and circumstances indicate that an impairment may have occurred.

 

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.

 

Derivative Instruments

 

The Company’s derivative financial instruments consist of embedded derivatives related to the warrants issued with the sale of our preferred stock in 2020 and 2019 and the warrants issued with the sale of convertible notes in 2020. 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.

 

Stock-Based Compensation

 

The Company accounts for all stock-based payment awards made to employees, directors and others based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. If there are any modifications or cancellations of the underlying vested or unvested stock-based awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent we grant additional stock options or other stock-based awards.

 

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 intra-period 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. We are currently evaluating the impact of this guidance.

 

46

 

 

BUSINESS

 

Overview

 

We are an online hiring platform that connects recruiters and employers to provide staffing solutions. We empower businesses to recruit both specialized fulltime and contract talent faster utilizing virtual teams of recruiters and artificial intelligence (“AI”) proprietary job-matching technology. Our website, www.Recruiter.com, provides access to over 26,000 small and independent recruiters and utilizes an innovative web platform, inclusive of AI-driven job matching, screening, and soon, video interviewing to more easily and quickly recruit talent.

 

We help businesses accelerate and streamline their recruiting and hiring processes by leveraging our expert network of recruiters 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 provisions.

 

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. 

 

What Is Recruiting?

 

Recruiting employees and contractors (aka “talent”) is a four-step process, as elaborated below. Typically, professional recruiters, either through professional recruitment firms or internal human resources departments, handle all four aspects of this recruitment process. We offer a scalable approach to what is usually a highly intensive, manual, and laborious process.

 

  1) Finding talent. Whether the business is seeking a specific, highly skilled, talented individual or a large volume of skilled or unskilled talent, the first step in recruiting is sourcing talent. Recruiters or businesses, when hiring, use various tools to source talent. These tools range from their existing applicant databases to online networks and job boards like LinkedIn, Indeed.com, ZipRecruiter, Monster.com, and others, which allow for placing paid advertisements and searching through resume databases. More recently, people use artificial intelligence to assist in finding talent, especially talent that is very hard to find.

 

  2) Engaging talent. Once the candidates are identified, the next step is getting the candidates interested in the open position. On an online job board, the candidates themselves apply to the job. The recruiter will engage the candidate by educating them on the opportunity, as well as ensuring that the job requirements align with the candidate’s skills and abilities. The outreach to the candidate may take any form of communication, such as emails, texts, and phone calls.

 

  3) Screening talent. Given that multiple candidates will typically apply for each job opportunity, there is a screening process through which the hiring manager, recruiter, or business owner reviews resumes and interviews the candidates in their pipeline to narrow down the talent pool until a final candidate is found to be suitable for hire. In job opportunities involving multiple hires, the number of candidates to be screened is usually much higher. Modern methods of screening include various filtering systems, automated processing, and communications, and video interviewing tools.

 

  4) Shepherding the process. Keeping the process moving in terms of scheduling interviews, tracking tasks and calendars, paperwork and resume administration, answering job-related questions, and salary and benefits negotiation represents the final part of the recruiting process before candidate onboarding begins.

 

47

 

 

Disrupting an Industry - Recruit Talent Faster

 

We believe we are fundamentally modernizing the recruiting process through decoupling the four stages of recruiting from professional recruiting and staffing firms. We are distributing both the work and opportunity of recruiting to a broader community than ever before, enabling people to earn money through our platform and be their own bosses. Furthermore, we are dispersing the economic benefits of successful recruitment to a broad group of people and, by doing so, we help businesses recruit talent faster and more efficiently than ever before.

 

Community and Network

 

Our network currently consists of over 26,741 small and independent recruiters, which, as of August 2020, at a rate of approximately 80-100 recruiters per week, from 25,582 in May to 26,731 by the end of August. This virtual network of recruiters unite under our innovative web platform that offers earnings opportunities through successful job matching; access to matched candidates driven by artificial intelligence; and on-demand, project-based recruiting assignments.

 

The community or network of recruiters is additionally categorized into virtual teams based on industry vertical, skill or location specialization, and dedicated client resource teams. Through participation in a virtual team, recruiters may receive further job and account updates, personalized recommendations, exclusive job opportunities, and recommended candidate referrals. We operate these teams through its platform and facilitate real-time communication through parallel chat rooms managed by our internal community managers.

 

We believe the potential scale of our recruiting community is enormous. Similar to how Uber created the opportunity for anyone to become a taxi driver, we makes it possible for anyone to become a recruiter. The American Staffing Association cites about 25,000 staffing and recruiting companies, which altogether operate around 49,000 offices, so the recruiting industry’s contribution to employment is significant. However, we enable a broader disruption of the industry, bringing the opportunities to a much broader group of people than previously possible. Through upskilling and engagement with our recruiter users, we make it easier for anyone to get involved in recruiting. With hundreds of thousands of people involved in the general human resource and employment industry in the U.S. alone, and many more interested in referral-based, work-from-home earning opportunities, we believe our addressable network and potential audience is vast.

 

The Recruiter.com Website - a Top Destination

 

Our website is a popular destination for the recruiting and talent acquisition profession, with millions of pages of indexed content on career and recruitment issues and trends, email newsletters, and digital publications issued every quarter. Our internet traffic is generated by three primary groups of people: (1) recruiters seeking to join the network and platform, (2) enterprises seeking to recruit talent, and (3) candidates seeking to find opportunities through the community of recruiters. Overall, we are a well-known brand in the recruiting industry, and our vision is to build upon this success to become a clear leader in terms of traffic, mindshare, and usage within the business of recruiting.

 

A comprehensive search engine optimization strategy fuels our marketing. SpyFu.com, a traffic analysis website, estimated that, as of August 2020, our website has obtained over 4,700 search terms on the first page of Google.com, resulting in an estimated click value of $3.92 million per month, which is estimated by calculating the price of the Company’s organic traffic, were it to buy that traffic from paid search engine listings, such as on Google.com. We also expanded our reach through social media as we are active on Twitter and Facebook, with almost 50,000 followers on Twitter. Most notably, as of August 2020, we operated four of the top ten largest professional groups in the world on the social media platform LinkedIn, out of over 1.8 million groups in total. One of our groups, The Recruiter.com Network group on LinkedIn, has over 825,000 members as of August 2020.

 

In addition to our online thought leadership and social media presence, we also attract recruiters and enterprises to our community and solution through our recruitment training offering. Through our fully online Recruiter.com Certification Program (RCP), we facilitate upskilling for experienced recruiters and easy entry into the profession for those new to the tasks of recruiting and candidate sourcing. The Society for Human Resource Management (SHRM) certifies the RCP for re-education credits. After completing the RCP course through an integrated online learning management system, we grant our users a certification and badge on their unique online Recruiter.com profiles.

 

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COVID-19 Implications

 

We are creating a highly collaborative and connected global platform for professional recruiting, with the goal of becoming the top-of-mind solution for hiring professional talent. Prior to the COVID-19 pandemic, the U.S. was in an incredibly tight job market, with the demand for talent at its highest levels in years. Now, with millions of people out of work due to COVID-19 set to return to the job market over the next few years, we believe businesses across the country must prepare to reopen or ramp up operations once again. We also believe these businesses will need efficient ways to tap the massive talent pool resulting from the millions of Americans who are currently unemployed or looking for better opportunities in new industries and companies. By combining cutting-edge artificial intelligence with a unified network of more than 26,000 recruiters, we have built what we believe to be the most efficient recruiting network in the world — and we are hoping to use our network to help get the US economy working again.

 

We believe we have the reach, technology, recruiting expertise, and the scalability to connect employers across verticals with the right talent at the right price — no matter where that talent is today. Our mission is clear: to help enable the great re-hiring. We will leverage our growing community and expanding platform to get talented people to return to work as fast as possible, connecting people and creating economic opportunities.

 

Our Job Market Platform

 

Our virtual hiring platform (the “Platform”), which is accessible on our website, provides access to over 26,000 small and independent recruiters. The Platform enables our clients, both employers and recruiters, to access the scalable sourcing power of an extensive network of independent recruiters, with the account management and personalized talent delivery of a full-service recruitment services firm. The Platform can be used by employers on a stand-alone basis or can be integrated with platforms operated by vendor management services (“VMS”), managed service providers (“MSP”) or payroll solutions providers to import open jobs into the Platform. Employers may use the Platform to enter job descriptions and learn about qualified applicants, while independent recruiters may submit their candidates, track the status of those candidates, and view statistics associated with the hiring process, such as number of applicants, interviews, and status of a particular candidate.

 

Recruiting Solutions

 

Our suite of services is designed to address an array of employment and staffing solutions, providing solutions to both employers and employees. Below is a summary of the primary activities that we offer, which accordingly accounts for the majority of our revenue:

 

Revenues are predominantly derived from the following activities:

 

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 that personnel with the employer, but with us or our providers acting as the employer of record, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for fulltime 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.

 

Fulltime Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate fulltime 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 "fulltime 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.

  

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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. For these engagements, we occasionally act as the employer of record and other times enlist a third-party. 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. Our process for the identification and engagement of eligible recruiter candidates differs somewhat from other Consulting and staffing solutions, in that 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.

 

Career Solutions: We provide services to assist job seekers with their career advancement. These services include a resume distribution service which involves promoting these job seekers’ profiles and resumes to 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19.

 

Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

Market Opportunity

 

Overall Industry

 

According to the U.S. Staffing Industry Forecast, published in July 2020 by Staffing Industry Analysts (SIA), the total recruiting and staffing revenue for 2020 is projected to be $126.1 billion. This represents an increase from SIA’s April 2020 forecast, which predicted $119.4 billion in revenue. For 2021, SIA also projected double-digit growth of 11% in temporary staffing revenue and a 19% overall expansion in place and search.

 

This total industry market size includes companies that help other organizations find staff on a temporary or permanent basis, with the temporary staffing segment being significantly larger. The need for qualified and, in many cases, highly specialized talent can be fulfilled by assisting companies in recruiting new internal staff or directly providing temporary staff to fill specific functions.

 

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Overall, the U.S. recruitment industry is enormous, and it continues to grow, driven mainly by robust GDP growth creating demand for both direct-hire and contingent (project-based) workers. Demographic trends are also accelerating the demand for recruitment services: Approximately 10,000 persons from the “Baby-Boomer Generation” will retire each day in 2020, and employers often turn to the recruiting industry to close these talent gaps. Overall corporate spending in recruiting technology continues to grow, expected to surpass $10 billion by 2022, according to Jason Corsello, General Partner of Acadian Ventures.

 

In light of all this market potential, the environment for private investment in recruiting and talent acquisition technology companies has been robust. The Starr Conspiracy’s 2019 Work Tech Investments Report cites 107 deals funded in recruiting and talent acquisition innovation, totaling approximately $2.2 billion. Advisory firm HRWins reported that in Q4 2019, talent acquisition grew to be the most substantial investment category within the broader Human Resources technology sector. The foregoing statistics do not reflect the recent impact of the COVID-19 pandemic on the industry.

 

With employers continuing to struggle to find relevant candidates and more than 6.6 million open jobs in the US as of July 2020 according to the JOB OPENINGS AND LABOR TURNOVER report by the Bureau of Labor Statistics, recruiting represents an enormous market opportunity. According to the leading HR association, SHRM, external sources—whether online job boards, recruiting agencies, campus events, job fairs, or walk-ins—produce the majority (62%),of interviews compared to internal sources such as career sites, in-house recruiters and employee referrals (38%). This 62% of role interviews generated by external sources provide a significant market opportunity for innovative recruiting technology companies to capture.

 

Industry Trends

 

COVID-19

 

The recent COVID-19 pandemic has had a dramatic effect on the US economy and the job market, with a peak of 14.7% unemployment in April 2020. Recently, labor markets have been continually improving, with the unemployment rate falling for three straight months, to 10.2% in July. The July numbers exceeded expectations, per CNBC, with employers adding about 1.8 million jobs to their payrolls. The job market is expected to continue improving, with the Federal Reserve Bank of Cleveland forecasting that unemployment will fall to 7.5% by the end of the year.

 

As discussed earlier, our management team believes that COVID-19 accelerated major trends that had already existed before the pandemic. For example, the growth of the gig economy (i.e. temporary, flexible jobs), virtual and remote tele-work and the emergence of on-demand labor through online marketplaces all happened before the crisis. However, the necessity of lockdowns and business closures drove increased technology adoption and moved these trends forward at a rapid pace. These trends may prove highly beneficial to our long-term business model and may accelerate our product-market fit.

 

Growth in 2020-2021

 

Industry statistics point to a strong rebound in hiring and recruiting industry revenue in the balance of 2020 and 2021. According to a report by Bullhorn, Inc., a recruiting software company, released on June 29, 2020, almost a third (30%) of staffing and recruiting professionals report that their businesses are doing better than or as well as they were this time last year. Healthcare and IT staffing agencies were the most likely to observe stable performance and the least likely to suffer dramatic losses. These outcomes, coupled with overall predictions from SIA and macro forecasts from the Federal Reserve, point to a return to hiring growth and continued improvements in demand for labor.

 

A report by Deloitte dated September 14, 2020 identifies shifts in the growth pattern of labor markets, which may prove positive for the demand for online recruiting solutions. Deloitte points out that, if COVID-19 remains a significant issue, demand in affected industries will continue to lag; thus, people employed in these industries will need to seek jobs in other sectors. Reshoring efforts, for example, within manufacturing, will stimulate demand. This creates disruption and dynamism within the labor markets, forcing businesses to expend substantial energy to attract workers, even as unemployment remains relatively high. We believe that companies like ours, which generate revenue not from the overall consistency of employment levels but rather from movement within labor markets (i.e., job turnover), will benefit from this development.

 

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Recruiting Outsourcing

 

Recruiter.com provides through its online platform a form of outsourcing for employers. By using Recruiter.com, employers are effectively relieving their Human Resources departments of the costs and labor associated with recruitment. The current economic climate may move more companies to increase their use of such outsourcing. For example, a report from Brandon Gaille issued in May 2017 found that, in the aftermath of the Great Recession, a majority of employers (57%) increased their use of outsourcing, with only a small percent (9%) of employers ending such outsourcing arrangements. Recruitment outsourcing promises cost-effective and efficient process improvements, and employers may again increase their use of outsourcing to navigate the current environment.

 

The use of recruitment process outsourcing (RPO) is accelerating. According to Grand View Research, as reported in August 2020, the global recruitment process outsourcing market size was valued at $5.48 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 18.5% from 2020 to 2027. Recruiter.com offers two forms of recruitment process outsourcing through the performance-based hiring solution of its Job Market platform, which allows employers to pay for successful hires and its Recruiters on Demand offering, which will enable employers to engage recruiters on a per-hour or per-project basis.

 

Online Talent Platforms

 

According to a study developed by the McKinsey Global Institute in June of 2015, online talent platforms are the future of hiring and could add $2.7 trillion, or 2.0 percent, to global GDP by 2025. There is growth in demand for both remote workers and outside consultants, areas which we address. Overall, in 2020, IBISWorld estimates the number of temporary employees will increase by 1.8%. Online talent marketplaces, such as ours, may benefit as a result. For example, Upwork has experienced a 50% increase in freelancers entering the market since the coronavirus pandemic began, per IBIS World.

 

McKinsey’s Future of Work in America report states: “In a more technology-driven world, job-matching efforts can be aided by a range of new digital tools and should run on easily accessible digital platforms. New online tools can assess an individual’s skills, suggest appropriate career choices, and clarify which jobs are in demand and the credentials needed to obtain them.” There is a clear need for efficient technology platforms that can adapt to rapidly changing job demands, such as ours.

 

More broadly, McKinsey has predicted that online talent platforms could add $2.7 trillion, or nearly 2 percent, to global GDP by 2025. The firm projects that 10 percent of the worldwide labor force, or 540 million people, could benefit in various ways from online talent platforms by 2025. Again, the current economic climate and pandemic may have accelerated this trend. During the recent COVID-19 epidemic, D’Arcy Coolican and Jeff Jordan of famed venture capital firm Andreessen Horowitz stated in an article entitled “COVID-19 and the Great Re-Hiring” that “If there was ever a time to start a specialized jobs platform, it’s now.”

 

Benefits to Independent Recruiters

 

Overview

 

In this uncertain time, small and independent recruiters are more important than ever. They have the agility and geographical range to respond quickly to the rapidly changing needs of employers across the country. Recruiter.com empowers these front-line professionals by connecting them to top employers in multiple sectors, particularly in the industries that need talent right now: healthcare, logistics, telecommunications, and financial services, among others.

 

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Specific Benefits

 

Client Exposure: Our Platform allows small and independent recruiters to access rewarding recruiting opportunities with more substantial and better-quality clients and a more diverse set of jobs than they may typically access.

 

  Access to Cutting-Edge Technology, Including Candidate-Sourcing and Matching AI: Our Company often sources talent from AI matching systems and provides these resumes to recruiters to expedite the hiring process. An integration with Censia was launched on September 22, 2020, which provides recruiters sourced and AI-matched candidates accessible from the Platform.

 

Flexibility: By allowing recruiters to engage with a large volume of diverse jobs, our Platform enables recruiters to match more of their candidates to suitable opportunities, as well as stabilize fluctuations in their business amid changes in client and candidate demand.

 

Branding Exposure: Our Platform allows for the creation of recruiter profiles highlighting the skill sets and industry backgrounds of professional recruiters. These online profiles provide exposure and verification for independent recruiters, who lack a standardized method of credentialing.

 

Loyalty Rewards Program: We provide recruiters on our platform with an opportunity to earn points at every step of the recruitment process, including regular activities like submitting resumes for open positions and the acceptance of resumes by a client. Recruiter reward points are redeemable for select merchandise.

 

SHRM-Certified Recruitment Training Program: We offer professional recruitment training that both helps current recruiters further develop their skills and assists aspiring recruiters in breaking into the profession. The Recruiter.com Certification Program is a flexible 6-to-12-week virtual training program certified for continuing education credits through SHRM, the leading HR association. The Company charges a flat fee of approximately $299 for the service and offers an additional business development course for $99.

 

Marketing and Reputation-Building: We enable independent recruiters to build a business reputation and increase demand for their specialized skills by accumulating badges and training credentials on their profiles.

 

Benefits to Employer Clients

 

Overview

 

We believe we are among the world’s largest, most agile network of small and independent recruiters, distributed worldwide, and armed with leading-edge technology. Enterprises can leverage our network of over 26,000 recruiters to tap into existing talent pools and fill open roles immediately.

 

Long, expensive hiring processes are never worthwhile — especially not during times of economic upheaval. Our marketplace platform’s scalability allows employers to quickly tune recruiting activity up or down as needed, which is critical as organizations respond to a dynamic and volatile talent market.

 

Recruiter.com differentiates itself with its “three uniques” of people, platform, and power. Our people are recruiting experts, cited and published thought leaders within recruitment and staffing. Our software platform, with proprietary AI technology (and video technology in Q4 2020), is key to our distributed, virtual talent engagement process. Finally, our broad distribution, with one of the largest network of recruiters and millions of social media followers, helps us draw from a diverse and expansive audience. Our people, platform, and power help us recruit talent faster for employers across the country.

 

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Specific Benefits

 

Access to an Extensive Network of Recruiters: As of August 31, 2020, approximately 26,731 recruiters with specializations ranging from healthcare and technology to accounting and marketing are registered on our Platform.

 

Account Management and Personalized Talent Delivery: Internal account managers help review and develop specifications and skill requirements for our clients’ open jobs. Our internal talent delivery specialists, in turn, review all candidates to ensure quality before sending these candidates to employers.

 

Cost Savings: Our platform allows employers to use an extensive network of small and independent recruiters, reducing reliance on traditional staffing and recruitment firms without compromising the quality of candidates. We believe that clients may realize significant cost savings through this crowdsourced method of recruiting, which distributes the labor of hiring across many providers, versus the traditional way, which typically relies on a handful of vendors.

 

Speed: The use of AI-powered candidate-sourcing and matching technology, paired with seamless platform integrations, allows us to expedite the hiring process.

 

Our Strengths

 

Reliable Brand: As the name “Recruiter.com” defines an entire profession and captures the essence of the business and software platform, we benefit from strong brand recognition. Additionally, the Company believes that based on recent legal precedent, generic trade names like “Recruiter.com” may be trademarked. Although the Company cannot be assured of a trademark on its primary domain, the Company has filed an intent-to-use trademark application

 

People: Several of our key executives and personnel have extensive experience and successful track records with internet-enabled recruitment and staffing.

 

Platform Technology: We offer a complete multi-sided marketplace software platform, with completed integrations into many major software and service providers.

 

Power of Our Reach: We benefit from excellent placement and visibility within popular search engines and broad distribution and followings on social media networks.

 

Our Growth Strategy

 

We seek to unlock the full potential of our brand by executing its strategic plans, which include organic growth, opportunistic acquisitions, and making use of the capital markets provided by the public market. In short, we look to realize the potential of our market position.

 

Overall Market Position Potential

 

Companies in the recruiting technology space, such as LinkedIn and Indeed.com, have achieved “unicorn” status as billion-dollar companies. Management believes that our full potential could lead to our achieving a much larger market position and presence, as Recruiter.com is a defining brand for the profession of recruiters. Recruiting as a business generates over $125 billion in revenue, therefore management believes there to be a very large addressable market and opportunities for growth.

 

Our combination of innovative candidate-matching technology, a broad network of specialized recruiting professionals, and curated talent communities enable a traditionally service-heavy industry to be scalable in an entirely new way. The traditional recruitment and staffing industry is dominated by industry roll-ups in the public markets. We believe our brand and platform position us to capitalize on M&A opportunities, enabling further overall growth and consolidation.

 

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Strategy

 

Recruiter.com intends to grow its business by focusing efforts on the following five main areas:

 

1) Grow Our Community:

 

  Grow Recruiter Engagement: Dedicated Community Managers regularly support and service our growing network of independent recruiter users on our platform. We plan to continue to invest in community management initiatives, including enhancement of outreach, communications, reward programs, and training of our Community Managers. We have introduced the concept of Recruiter Rewards, which allows members of our network to earn points, redeemable for merchandise, for performing specific actions on the platform. We intend to continue to develop this program, increasing engagement, and earning potential on the platform.

 

  Grow the Number of Recruiters on our Platform: We plan to continue to grow our recruiter network through viral search, referral, content, and community strategy. Investments in content, community sponsorship and thought leadership will continue to drive people back to the platform, creating a real “hub” for recruiters.

 

  Increase Growth and Earning Opportunities for Recruiters on Our Platform: We plan to continue investing in new products and features to help recruiters grow their businesses by expanding their access to technology, developing their professional and marketing skills, and increasing their earning opportunities. This includes expanding on our lead generation capabilities.

 

2) Build Business Model Innovations:

 

  Continue to Innovate and Improve Our Platform to Build Best-in-Class User Experiences: We aim to create the most innovative and easy-to-use solutions for empowering businesses and recruiters to recruit talent faster. For example, we recently launched an improvement to our candidate submittal process, which allowed for bulk sharing and distribution of referral links to candidates through social media. We will strive to continually incorporate such advances into our platform, taking into consideration user feedback.

 

  Invest in Scalable Business Models: We plan to continue to invest in the development of our SaaS model and subscription services while improving recruiter experience by enhancing our software capabilities, data science, security, and technology infrastructure. Further low- and light-touch subscription models and plans promise to facilitate the seamless transactions of candidate and job flows on our platform and, in doing so, increase our gross margins and the efficiency of our business.

 

  Leverage Our Platform to Launch New Products: We believe we can continue to innovate to solve complex challenges involving recruitment and hiring, and we plan to use our highly extensible platform to support the introduction of additional products and services. Our massive network, leading technology, and recruiting expertise allow us to introduce new features and incorporate feedback into such features with speed, efficiency, and scale.

 

  Invest in Advanced Technologies, Including Artificial Intelligence: We believe that recruiting is about people, and people will always drive the hiring process, so long as our current system of employment and human labor exists. Existing technologies cannot supplant human review and involvement in most hiring transactions, including all four stages of recruiting specified previously. However, we also believe that artificial intelligence promises to solve specific issues of scale within the hiring process, for example, by rapidly sifting through a bulk of job applications to surface to the recruiter the best-matched applicants. We have already integrated AI improvements into our candidate campaigning and sourcing processes, and we are currently evaluating new businesses, methods, and partnerships to transform further and improve our technology.

 

3) Monetize the Businesses and Candidates Seeking to Access the Community and Platform:

 

We intend to expand relationships with our existing clients and increase their spending on our platform by investing in building new products and features.

 

  Attract New Clients Through Strategic Partnerships with MSP and HR Providers: We intend to expand our marketing efforts with partners to attract new clients by increasing awareness of our platform and the benefits of using flexible and on-demand recruiting.

 

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  Broaden and Deepen Categories: We intend to focus on customizing experiences for vertical industry groups, such as Information Technology or Accounting and Finance, through tailored features and functionalities, making it easier and more efficient for clients to connect with the right recruiters.

 

  Build Effective Candidate Solutions: We plan to continue to expand our candidate offerings from basic resume distribution to video resumes, training programs, career coaching, resume writing, job alerts, and other SaaS services to monetize our traffic and help people effectively connect with opportunities.

 

  Build Out Video: We plan to leverage a video offering as a SaaS solution for our enterprise clients, partners, and recruiters, as video interviewing and screening may become a must-have requirement for business recruiting, particularly in the post-COVID-19 environment.

 

4) Acquire Complementary Assets and Businesses:

 

The Company seeks opportunities to acquire complementary businesses and personnel within the recruitment and staffing sector, primarily to expand the overall number of employers using our Platform to source talented employees and contractors.

 

  Increase Employer Demand: The Company plans to approach recruitment companies with firm client control and knowledge, such as recruitment process outsourcing (RPO) companies in major cities within the continental United States and with stable, diversified client revenues. These types of acquisitions may help increase the number and diversity of jobs in the marketplace platform and allow for the upselling of our new and planned products for employers.

 

  Further Our Technology Offering: The Company plans to evaluate specific valuable online tools for recruiters that would enhance our overall platform, such as candidate sourcing technologies, data appending services, job distribution and marketing software, lead generation tools, and others that would improve our value to our community of recruiters, to improve engagement and daily use metrics.

 

  Enhance Strategic Technology: The Company continually monitors and evaluates third-party companies for technology that would be of strategic value. Management is particularly mindful of the emergence of artificial intelligence being applied to hiring and recruitment processes. We are interested in acquiring or licensing such technologies that offer fundamental advancements to our Platform and, therefore, long-term shareholder value.

 

5) Approach the Future with Clarity and Vision:

 

  Trust Our Vision: Recruiter.com has a big name, but an even bigger purpose: to “recruit” means to inspire someone to join a cause. Our mission at Recruiter.com is more than just primarily connecting job seekers and employers. We also want to inspire people to better themselves, to grab opportunities and to believe in themselves. Simply put, Recruiter.com exists to open doors for people. We are inspired by our mission and purpose, and we trust in our overall vision to continue to inspire the dedication necessary to build a fantastic brand and valuable company.

 

  Maintain Our Values: Our staff developed our core values, which we seek to identify in people that we hire and promote and inspire within ourselves. These core values include being passionate, dependable, adaptable, helpful, resilient, and honest and open communicators. As we grow, we will maintain and build on these core values, and we will use them to inform our business decisions and the ways in which we interact with each other and the community.

 

  Lead in People-First Technology: We are committed to building continuous innovation in technology and being early builders and adopters of technical improvements, such as the use of AI and machine learning. We will strive to be bold leaders in human-centric technology by always positioning that technology for the benefit and economic empowerment of people. We believe that the future holds great promise for further connectivity, collaboration, and community. We aim to be opportunistic in the development and acquisition of such technologies for our users.

 

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Technical Vision Strategy - Towards Autonomous Recruiting

 

The job market and broader economy itself are evolving to adapt to automation, technology adoption, disruption, and, more recently, machine learning. McKinsey’s Future of Work in America report, states: “What lies ahead is not a sudden robot takeover but a period of ongoing, and perhaps accelerated, change in how work is organized and the mix of jobs in the economy. Even as some jobs decline, the US economy will continue to create others — and technologies themselves will give rise to new occupations. All workers will need to adapt as machines take over routine and some physical tasks and as demand grows for work involving socio-emotional, creative, technological, and higher cognitive skills.”

 

As in many professions, recruiting itself is both threatened and positively enabled by technology. As a platform company, we are optimistic about our positioning and ability to not only adapt to, but to lead some of these transformations. Through our marketplace and network, we are gathering data intelligence while we improve our work processing, enabling a virtuous cycle of systemic and profitable improvements. Specifically, as our artificial intelligence tools get better, our community of recruiters strengthens their ability to deliver talent by leveraging these tools. Additionally, the community’s work output informs our systems, and, over time, this helps tune and develop our approach to further intelligent automation.

 

We are building our overall technology platform toward a vision of efficient, near-autonomous recruiting. That said, recruiting — the process of inspiring others to join a better opportunity and the subsequent judgment of their abilities and fit to do so — is an inherently social practice. We will attempt to lead in the development of technology that remembers and supports this most critical factor, with the overall mission of connecting talent to opportunity in a more fluid, rapid, and seamless manner.

 

Our Clients

 

Recruiter.com’s unique, scalable, AI-powered network allows it to meet the hiring needs of a variety of clients, from Fortune 100 enterprises to high-quality startups. We typically focus on filling highly skilled and senior-level roles in specialized fields, including technology, healthcare, finance, logistics/transportation, communications, engineering, energy, and many others. Our network’s vast reach is also well-suited for high-volume hiring projects requiring large numbers of candidates in a short period.

 

The majority of our revenue (approximately 90%) is generated by providing Recruiting Solutions for employers, consisting of success-based placement fees for fulltime employee referrals and hourly and project based fees for professional consulting and staffing. Our clients include Schlumberger, Halliburton Co., Ford Motor Co., Coca Cola Co., and Bluebeam, Inc. As of June 30, 2020, two customers accounted for more than 10% of the accounts receivable balance, at 42% and 13%, for a total of 55%. As of December 31, 2019, three customers accounted for more than 10% of the accounts receivable balance, at 19%, 15% and 13%, for a total of 47%.

  

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%. For the six months ended June 30, 2019 three customers accounted for more than 10% of total revenue, at 25%, 18% and 10%, for a total of 53%. The Company’s focus is to increase and improve its suite of product offerings and solutions to address different needs of potential employers in order to increase its client base and reduce reliance on the three customers accounting for the large percentage of its revenue.

 

Our Platform and Technology

 

Our Platform

 

Our Job Market Platform, augmented with AI-powered candidate-sourcing and matching technology, allows our clients to leverage the scalable sourcing power of an extensive network of independent recruiters, with the account management and personalized talent delivery of a full-service recruitment firm. Our Platform can be used on a stand-alone basis or can be integrated with platforms operated by third parties or managed service providers (MSP) to drive client demand. Our Platform is accessible through our website at www.recruiter.com.

 

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Artificial Intelligence

 

We use AI candidate-sourcing and matching technology to improve the functionality and effectiveness of our solutions. This technology helps match job descriptions to candidate resumes to find the best potential matches, which are then provided to the user. We license candidate-matching software from third parties, including Genesys and Censia. The initial term of our license agreement with Genesys, which was executed in connection with our asset purchase agreement with Genesys, expires on May 31, 2021, and Genesys or Recruiter.com can choose not to renew the license for successive one-year terms after that. Our license agreement with Censia may be terminated either by Censia or us at any time with a 180-day prior written notice.

 

  Genesys: Genesys is an AI talent-matching system designed primarily to address more critical higher-volume or recurring demands. Genesys works collaboratively with customers to proactively develop talent clouds to address hiring needs. Rather than relying solely on resumes from job boards or applicant tracking systems, Genesys combines a holistic sourcing strategy with force multipliers such as recruitment marketing and referrals to reach widely dispersed audiences of specific candidates. In the past year, Recruiter.com has developed deep functional integrations with Genesys, including job and candidate transmission, and the development of automated matched lists of candidates that are relayed to our network of independent recruiters.

 

  Censia: Censia’s Talent Intelligence Platform instantly models and delivers the best talent for organizations. The comprehensive platform replaces writing job descriptions, posting positions, passive searching, reviewing resumes and previous applicants, and searching the company for candidates with two clicks and intuitive search filters. The partnership with Censia will allow both our network of independent recruiters and its internal Talent Delivery team access to Censia on a performance basis. Recruiter.com users will source candidates directly from the Recruiter.com platform, powered by a unique application integration. Recruiters will tap into hundreds of millions of professionals, matched and ranked according to Censia’s predictive algorithms and machine learning. The technical integration with Censia was officially launched on September 22, 2020.

 

Our Technology Infrastructure

 

Hosting

 

We currently host our platform at data centers owned by Databank in Baltimore, MD, which has systems for automated backup storage and retrieval. Our websites, applications, and infrastructure were designed to support high-volume traffic. Our management has reviewed Databank’s independently audited “SOC 2® TYPE 2 REPORT ON CONTROLS RELEVANT TO SECURITY AND AVAILABILITY FOR DATA CENTER SERVICES” and believes Databank’s security protocols to be at or exceeding the level of equivalent technology providers.

 

Personnel

 

Software development, database management, remote server administration, quality assurance, and administrative systems access is managed overseas by Recruiter Mauritius Ltd. under the direction of our Chief Technology Officer, Ashley Saddul, who works in Mauritius along with other technical personnel. From time to time, the Company also engages technical personnel on an as-needed basis from other locations, including the United States and India, who are also managed by Ashley Saddul.

 

Product Development

 

We continue to invest in product development, including our SaaS model, which will allow for greater self-service, enhance our platform, improve user experience, develop new products and features, and further build our infrastructure. Our goal is to create the most extensive online marketplace of recruiters enabling employers to identify and engage with top talent.

 

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Roadmap

 

The following roadmap outlines platform improvements that Recruiter.com intends to launch over the next year. While our overall strategic direction changes little, these specific projects cannot be guaranteed and often change. Specific projects include:

 

  Integration of AI-matched candidates into a recruiter’s dashboard

 

  Job search and matching improvements

 

  Graphical redesign of the primary Recruiter.com marketing site and software platform

 

  Performance and speed improvements

 

  Propagation and sharing of individual recruiter profiles

 

  Display of Recruiter Index® data and graphs

 

  Recruiters on Demand platform, with automated payment and escrow features

 

Additional Specific Growth Plans

 

  Steady organic growth of enterprise services through continued onboarding of and delivery for major enterprise clients

 

  Verticalizing services through the formation of domain-specific teams of specialized independent recruiters (e.g., healthcare, financial services, transportation/logistics, communications, energy) to respond more quickly and efficiently to hiring needs in these areas

 

  Continuing to organize our candidates into specific talent pools based on industry experience and skillsets to market to our community of recruiters and enterprise clients

 

  Implementing a video-first screening platform to build the world’s largest database of video resumes

 

  Launching a SaaS subscription model for recruiter users

 

  Capitalizing on web traffic and partnerships with job boards to expand the placement of recruiters through the newly launched Recruiters on Demand program

 

  Assisting businesses of all sizes with the re-hiring process which will take place as the threat of COVID-19 lessens and people return to work

 

Integrations

 

Recruiter.com partners and integrates with many different types of synergistic companies and technologies for the purpose of developing sales channels and improving functionality for our community of recruiters and employers. Our product functionality will derive substantive improvements by providing seamless access to specific other innovative tools and functions. We have two key planned integrations, and both are expected to be launched in Q3-Q4 of 2020:

 

  Censia: As described above, Censia’s Talent Intelligence Platform instantly models and delivers the best talent for organizations. The comprehensive platform replaces writing job descriptions, posting positions, passive searching, reviewing resumes and previous applicants, and searching the company for candidates with two clicks and intuitive search filters. Censia directly provides AI matched candidates in the Recruiter.com dashboard, through a technical integration which was launched on September 22, 2020.

 

  Video Screening: In a world where in-person interviewing of candidates is difficult and often impossible, it can be hard to get a real sense of an applicant’s fit. Using video screening technology, hiring managers can better assess a candidate’s personality and make use of data and predictive analytics to make faster and more informed data-driven hiring decisions. We have contracted with a leading video screening platform company to provide a custom experience for recruiters and employers on Recruiter.com.

 

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Sales and Marketing Strategy

 

Our sales and marketing strategy is centered around driving cost-effective awareness of our brand and the benefits of our platform among recruiters and employers of all sizes, from small businesses to Fortune 500 companies. Most of our new recruiter and employer registrations come from direct navigation to our website through unpaid search engine results listings, social media, and other content-based, no-cost referrals. We draw on our robust recruiting and staffing business foundation to build a sales pipeline and grow account relationships.

 

Network Effect Strategy

 

The Recruiter.com platform and network is a form of marketplace, governed by supply and demand. In our business, supply is the availability of in-demand candidate talent, which is enabled by the specialization and volume of our recruiter community members. Demand consists of the need for hiring services by employers, which is represented by job postings on our platform.

 

Supply and demand are inextricably linked, and we create virtuous cycles of growth in each by increasing one side or the other. Our strategy is to create the largest network of recruiters in each local market and industry, creating an unprecedented supply of recruiting talent, encompassing every type of industry, skill, and specialization. This broad availability of supply creates a liquidity network effect, where we can offer services anywhere to any employer, thus increasing demand potential.

 

Already, because of our network strategy, we can offer a highly differentiated solution to employers, as we can provide a multidisciplinary talent supply. As an example of our supply diversity, we provide nursing talent to one employer in California, call center personnel to an employer in Texas, and mortgage brokers to yet another. Texas employer. Over time, we expect this network effect will lead to a margin advantage as compared to our competitors, which tend to scale supply through physical office footprints and acquisitions alone. 

 

Sales Strategy

 

Most of our sales opportunities are derived through lead generation forms on our website. We employ Customer Success Managers, who follow up with these leads and perform inbound or inside sales functions to develop quality relationships with our customers. As much as possible, we rely on automated contract solutions to engage with our clients seamlessly.

 

Our sales strategy includes the hiring of both internal and external sales and sales management personnel to conduct our sales relationships. As we expand our solution offerings, we also intend to dedicate individual teams to particular products, distinguishing enterprise offerings from Recruiters on Demand, for example, and effectively cross-selling.

 

We intend to employ several strategic methods to attract the best sales talent, including by offering attractive commission splits, bonuses, technology capabilities, and lead generation. These factors, in addition to the benefits of our Recruiter.com brand, should facilitate the recruitment of highly qualified talent. Also, we look for ways to partner with leading recruiting firms and successful independent recruiting salespeople, allowing them to sell under the Recruiter.com brand to accelerate our organic growth significantly.

 

Partnerships

 

Recruiter.com has forged relationships with many firms in the recruiting, HR, and payroll space. Partnerships constitute an essential component of our sales and marketing strategy, as these partnerships may stimulate sales demand for our hiring solutions, including success-based recruiting, on-demand offerings, and, in the future, video screening services. We pursue strategic alliances with employer service providers for joint marketing and cross-selling activities, and we seek platform integrations with strategic partners to generate client demand.

 

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Examples of partnerships include:

 

  SAP: Recruiter.com is a Silver digital partner of SAP. SAP Fieldglass helps organizations find, engage, manage, pay, and unlock more value from their growing external workforces. Through our integration with SAP Fieldglass, Recruiter.com receives open jobs from leading employers around the country.

 

  ADP: Recruiter.com is integrating into ADP’s marketplace. ADP is a top payroll and HR solutions provider offering industry-leading online payroll and HR solutions, plus tax, compliance, benefits administration, and more. Through the integration, Recruiter.com plans to receive open jobs from leading employers around the country.

  

Public Relations

 

For PR and marketing purposes, Recruiter.com relies mostly on the continued development of our thought leadership content. Recruiter Index®, our proprietary analysis that pinpoints recruiting trends and forecasts business growth, will likely form the bedrock of our thought leadership strategy.

 

No one understands the talent market like the recruiters, HR professionals, and talent acquisition experts working on the front lines. At Recruiter.com, we have the unique ability to survey our vast network of independent recruiting and talent acquisition specialists to uncover job market trends. Given the Recruiter Index’s ® multiple major media appearances in the past few months, including CNBC, there appears to be strong demand for leading indicators of the labor market.

 

Community Management

 

The Company considers our community management an essential part of our revenue generation strategy, as active engagement of our network leads to the further output of successful candidate matches. The principles of our approach to community management include:

 

  Value: Each member of the recruiter network is an asset to our business.

 

  Understanding: We form relationships with a human touch and develop real understandings of recruiters’ business needs and capacities.

 

  Personal: Every recruiter has a named Community Manager contact.

 

  Shared Success: We take pride in our community, and Community Managers are incentivized around their recruiters’ successes.

 

Our Community Managers:

 

  Drive the engagement and performance of our network of recruiters through consistent communication and meetings.

 

  Meet and exceed goals for the number of engaged recruiters under management.

 

  Assist in onboarding recruiters to the platform.

 

  Develop learning sessions and webinars for recruiters about client jobs.

 

  Assist with support inquiries from recruiters and liaise with the Customer Support team.

 

  Manage requisition traffic and delivery across Recruiter.com.

 

  Work with clients and Account Managers to understand all requirements and distribute to the best sources for fulfillment.

 

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  Review submissions for quality and submit to assigned client accounts.

 

  Create a delivery strategy for all assigned new and existing client accounts.

 

  Liaise with solutions and on-demand teams to ensure effective delivery.

 

Competition

 

The market for online staffing and recruitment services is highly competitive, fragmented, and undergoing rapid changes following increasing demand, technological advancements, and shifting needs. We compete with several online and offline platforms and services, including but not limited to, the following:

 

  Traditional talent acquisition and staffing service providers and other outsourcing providers, such as The Adecco Group; Korn Ferry; Russell Reynolds Associates, Inc.; and Robert Half International, Inc.;

 

  Other e-staffing and recruitment marketplace providers, such as Hired.com, Scout Exchange, and Reflik;

 

  Professional and personal social media platforms, such as LinkedIn and Facebook;

 

  Software and business services companies focused on talent acquisition, management, invoicing, or staffing management products and services;

 

  Online and offline job boards, classified ads, and other traditional means of finding work and service providers, such as Craigslist, CareerBuilder, Indeed, Monster, and ZipRecruiter.

 

  Additionally, well-established internet companies, such as Google and Amazon, have entered or may decide to join our market and compete with our platform.

 

We compete based on several factors, including, among other things: size and engagement of user base, brand awareness and reputation, relationships with third-party partners, and pricing. We differentiate ourselves through what we call our “three uniques:” people, power, and platform. We pride ourselves on:

 

  1. Our people, who are experts in the recruiting industry;

 

  2. The power of our robust network of recruiters, top internet brand, distribution channels, and content and social media followings; and

 

  3. The platform, which is a complete and custom-built marketplace software platform, with many integrations and partnerships, which has developed over several years.

 

These “three uniques” form our competitive “moat,” which management believes would be highly challenging for any competitor to replicate.

 

Intellectual Property

 

The protection of our intellectual property is an essential aspect of our business. We own our domain names and trademarks relating to our website’s design and content, including our brand name and various logos and slogans. We rely upon a combination of trademarks, trade secrets, copyrights, confidentiality procedures, contractual commitments, and other legal rights to establish and protect our intellectual property. We generally enter into confidentiality agreements and invention or work product assignment agreements with our employees and consultants to control access to and clarify ownership of our software, documentation, and other proprietary information.

 

As of July 20, 2020, we held five registered trademarks in the United States. Trademarks include the terms “Recruiter Hire,” “Recruiter Index,” “Recruiter Direct,” “VocaWorks,” and our trademarked logo.

 

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Recruiter.com considers its brand, “Recruiter.com,” as an essential and valuable asset, and part of its intellectual property. Russell Racine of Cranfill Sumner & Hartzog LLP wrote on JDSupra, “Recently the Supreme Court affirmed registration on the principal register for what appeared to be a generic term. In the United States Patent & Trademark Office v. Booking.com B. V., 140 S. Ct. 2298 (2020), the Court affirmed registration of a trademark that used a generic term followed by the addition of the top-level domain moniker ‘.com’ to the end of the mark. Based on this action, Recruiter.com has filed an intent-to-use application for the generic domain and brand of “Recruiter.com.” The Company cannot be assured of being granted this trademark.

 

Government Regulation

 

We are subject to a number of US federal and state and foreign laws and regulations that apply to internet companies and businesses that operate online marketplaces connecting businesses with recruiters. These laws and regulations may involve worker classification, employment, data protection, privacy, online payment services, content regulation, intellectual property, taxation, consumer protection, background checks, payment services, money transmitter regulations, anti-corruption, anti-money laundering, and sanctions laws, or other matters. Many of the rules and regulations that are or may apply to our business are still evolving and being tested in courts and could be interpreted in ways that could adversely impact our business. Also, the application and interpretation of these laws and regulations are often uncertain, particularly in the industry in which we operate.

 

Additionally, our technology platform and the platform user data it uses, collects, or processes to run our business is an integral part of our business model and, as a result, our compliance with laws dealing with the use, collection, and processing of personal data is part of our strategy to improve platform user experience and build trust.

 

Regulators around the world have adopted, or proposed requirements regarding the collection, use, transfer, security, storage, destruction, and other processing of personally identifiable information and other data relating to individuals, and these laws are increasing in number, enforcement, fines, and other penalties. Two such governmental regulations that carry implications for our platform are the GDPR and the CCPA.

 

The GDPR went into effect in May 2018, implementing more stringent requirements in relation to companies’ use of personal data relating to all EU individuals (“data subjects”). Under the GDPR, the expanded definition of personal data includes information such as name, identification number, email address, location data, online identifiers such as internet protocol addresses and cookie identifiers, or any other type of information that can identify a living individual. The GDPR imposes a number of new requirements, which include: a valid ground for processing each instance of personal data; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; providing expanded information about how data subjects’ personal data is or will be used; carrying out data protection impact assessments for operations which present specific risks to individuals due to the nature or scope of the processing operation; an obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights; the principle of accountability and demonstrating compliance through policies, procedures, training, and audit; profiling restrictions; and a new mandatory data breach reporting regime.

 

In the United States, California recently adopted the CCPA, which came into effect in January 2020. Similar in certain respects to the GDPR, the CCPA establishes a new privacy framework for covered businesses, including an expanded definition of “personal information”; new data privacy rights for California residents, requiring covered businesses to provide further disclosure to consumers and affording consumers the right to opt-out of individual sales of personal information; special rules on the collection of consumer data from minors; and a potentially severe statutory damages framework and private rights of action for CCPA violations and failure to implement reasonable security procedures and practices.

 

Facilities

 

Our corporate headquarters are located in Houston, Texas, where we occupy facilities totaling approximately 5,480 square feet under a lease that expires in November 2022 with a related party. We do not currently have other leased offices but do operate from time to time in flexible office space, such as WeWork offices.

 

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Three of our senior executives — our Chief Executive Officer, our Chief Operating Officer, and our Chief Financial Officer — work remotely. A fourth key executive, our Chief Technology Officer, is an employee of a third-party service company based in Mauritius. However, there are plans to shift this to a standard at-will employment agreement. Our Chief Technology Officer devotes substantially all of his time to his duties for the Company.

 

We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations.

 

Legal Proceedings

 

As of the date of this prospectus, there are no material pending legal or governmental proceedings relating to our Company or properties to which we are a party, and, to our knowledge, there are no material proceedings to which any of our directors, executive officers, or affiliates are a party adverse to us or which have a material interest adverse to us.

 

Employees

 

As of September 2020, we had 100 full-time employees and seven part-time employees and contractors.

 

Culture and Team

 

Most of our staff members have many years of experience in online recruiting and technology. We’re inspired every day by our mission to connect people better to create terrific job matches. Our people are musicians, programmers, writers, speakers, mathematicians, gardeners, parachuters, runners, hikers, sports fanatics, backyard chicken farmers, and photographers. We are a family-first company, with many hard-working parents raising the next generation of Recruiter.com interns.

 

As we build the next generation of recruiting technology, we look for people who are passionate about connecting people and helping to develop better work experiences and career opportunities for others. We pride ourselves on being a team on a mission, with big goals and even bigger dreams for the company. We work virtually, with lean operations and an efficient cost model, while staying firmly connected through chat and video.

 

We are a place to make an impact. We pay little attention to job titles and much more attention to results - who’s thinking creatively and making positive contributions daily. At all times, we try to effectively tie things like compensation to direct contribution and foster an environment of inclusion and fair equity. To summarize, we’re specialists in recruiting and know what it takes to be an employer of choice and a great place to work. We strive to make our work enjoyable, rewarding, and full of growth opportunities for our staff. 

 

Diversity

 

We connect people from an extraordinarily diverse range of backgrounds and locations. We strive to make a product that makes a difference, and one that helps build a just, equitable future for us all. We are committed to being an equal opportunity employer ourselves, and we only work with clients who respect both the law and spirit of equal opportunity employment. Further, we believe that, as we grow as a company, our success will be predicated on drawing from and amplifying a diverse range of voices, both internally and externally.

 

We are fortunate to have a vibrant and innovative staff from diverse backgrounds. We hold ourselves to a high standard of equity and inclusion. Currently, we have people of color, women, and members of the LGBTQ+ community in senior roles at the company, including executive leadership and on our Board of Directors.

 

We welcome people from all backgrounds to apply to our internal careers and our client roles. We are also very interested in developing new practices to increase fairness in our hiring processes, including quantitative assessments, bias training, and reducing bias from new virtual tools that we introduce, such as video screening. We regularly and routinely seek out ways to improve our recruiting practices and expand the breadth and depth of our network of recruiters.

 

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Corporate Structure and History

 

The Company is a holding company consisting of four-wholly owned subsidiaries: Recruiter.com, Inc.; Recruiting Solutions; Recruiter.com Consulting, LLC; and VocaWorks. Our Company was incorporated in Oklahoma on July 28, 2008. On March 17, 2015, we reincorporated in Delaware. On March 31, 2019, we completed a merger with an affiliate and acquired a staffing business, as described below.

 

Before the merger, our primary business was operating under a License Agreement, dated October 30, 2017, (the “License Agreement”) among the Company, Recruiter.com, Inc. (“Recruiter.com”), and VocaWorks, under which Recruiter.com had granted VocaWorks a license to use certain of its proprietary software and related intellectual property in the field of online and mobile-enabled staffing and talent acquisition solutions.

 

Merger with Recruiter.com, Inc., and Corporate Name and Fiscal Year-End Change

 

On March 31, 2019, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) by and among the Company; Truli Acquisition Co., Inc., a Delaware corporation and a wholly owned subsidiary of the Company; and Recruiter.com and completed the acquisition of Recruiter.com under the Merger Agreement. According to the Merger Agreement, the newly formed merger subsidiary (“Merger Sub”) merged with and into Recruiter.com (the “Merger”), with Recruiter.com continuing as the surviving corporation in the Merger and a wholly owned subsidiary of the Company. As consideration in the Merger, the equity holders of Recruiter.com received 775,000 shares of our newly designated Series E Preferred Stock (“Series E”) which is convertible into approximately 9,687,500 shares of the Company’s common stock, subject to adjustment for stock dividends and stock splits. As a result, the former stockholders of Recruiter.com controlled about 90% of our outstanding common stock and over 50% of the total voting power.

 

Following the completion of the Merger, on May 9, 2019, we changed our corporate name to Recruiter.com Group, Inc. Our fiscal year-end was also changed, effective as of the Merger’s effective date, from March 31 to December 31.

 

Immediately before the completion of the Merger, Recruiter.com owned approximately 98% of our outstanding common stock. The Merger did not result in a change of control of our Company, as the principal stockholders of Recruiter.com had controlled the Company since October 2017, and the Merger simply increased their control. Also, our Chief Executive Officer served as the Chief Executive Officer of Recruiter.com, and the majority of our Board were directors (or designees) before the Merger. Further, our Executive Chairman was retained as a consultant before the Merger with the understanding that if the Merger occurred, he would be appointed Executive Chairman of the Company.

 

Before the completion of the Merger, Recruiter.com distributed the 1,562,500 shares of our common stock that it had previously acquired as consideration in accordance with the License Agreement.

 

For accounting purposes, the Merger was accounted for as a reverse recapitalization of Recruiter.com, and a combination of entities under a common control (“recapitalization”) with Recruiter.com considered the accounting acquirer and historical issuer. Our consolidated financial statements for the years ended December 31, 2019, and 2018, are the financial statements of Recruiter.com. Since Recruiter.com owned a majority interest in the Company before the completion of the Merger, the consolidated financial statements for the years ended December 31, 2019, and 2018, contained herein include the historical operations of the Company and VocaWorks since October 30, 2017. The accompanying notes have been retroactively restated to reflect the effect of the Merger. 

 

On May 13, 2020, we 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.

 

Genesys Asset Purchase

 

Effective March 31, 2019, we acquired certain assets and assumed certain liabilities under an asset purchase agreement, dated March 31, 2019, among the Company; Genesys Talent, LLC, a Texas limited liability company (“Genesys”); and Recruiter.com Recruiting Solutions, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (the “Asset Purchase”). As consideration in the Asset Purchase, Genesys received 200,000 shares of our newly designated Series F Preferred Stock (the “Series F”) convertible into approximately 2,500,000 shares of our common stock, subject to adjustment for stock dividends and stock splits. The acquired assets and liabilities include accounts receivable, accounts payable, deferred revenue, sales and client relationships, contracts, intellectual property, partnership and vendor agreements, and certain other assets. The Company is utilizing these assets in its employment staffing business operated through Recruiter.com Recruiting Solutions, LLC (“Recruiting Solutions”). This transaction was treated as a business combination for accounting purposes.

 

Corporate Information

 

Our principal executive offices are located at 100 Waugh Dr., Suite 300, Houston, Texas. Our telephone number is (855) 931-1500. Our website address is www.recruiter.com. The information contained on, or that can be accessed through, our site is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our securities.

 

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MANAGEMENT

 

Executive Officers and Directors

 

The following table provides information regarding our executive officers and directors as of the date of this prospectus:

 

Name   Age   Position(s)
Executive Officers        
Miles Jennings   43   Chief Operating Officer, President and Director
Judy Krandel   55   Chief Financial Officer
Evan Sohn   52   Chief Executive Officer and Chairman
Ashley Saddul   50   Chief Technology Officer
Rick Roberts   59   President of Recruiting Solutions
Non-Employee Directors        
Timothy O’Rourke   54   Director
Douglas Roth   51   Director
Deborah Leff   52   Director
Wallace D.  Ruiz   69   Director

 

Executive Officers

 

Evan Sohn – Mr. Sohn has served as our Chief Executive Officer since July 1, 2020 and our Chairman since April 2019. He served as Vice President of Sales at Veea Inc., a company offering a platform-as-a-service (PaaS) platform for computing, mobile payment, point of sale, and retail solutions, from April 2018 until June 2020 Prior to joining Veea Inc., from September 2015 to April 2018, Mr. Sohn served as the Vice President of Sales at Poynt Inc., a company developing and marketing Poynt, a platform for next generation payments. Prior to that, from April 2012 to September 2015, Mr. Sohn was the Vice President of Sales at VeriFone, Inc., a company designing, marketing, and servicing electronic payment systems. Mr. Sohn is also the co-founder and Vice President of the Sohn Conference Foundation, a non-for-profit dedicated to the treatment and cure of pediatric cancer and related childhood diseases. He is a graduate of the NYU Stern School of Business with a degree in computer information systems and management.

 

Miles Jennings – Mr. Jennings has served as the Company’s Chief Operating Officer and President since July 1, 2020. Prior to that, Mr. Jennings founded the Company and served as the Chief Executive Officer of Recruiter.com, Inc. from 2015 until October 2017, and then as Chief Executive Officer of Truli Technologies, Inc. and its subsidiary, VocaWorks, Inc., from then until March 31, 2019, when Truli Technologies merged with Recruiter.com, Inc. Mr. Jennings served as Chief Executive Officer of the merged company, Recruiter.com Group, Inc. through July 1, 2020, when he moved into the role of President and Chief Operating Officer. Mr. Jennings currently serves on Recruiter.com’s Board. Mr. Jennings has worked in the recruiting and online recruiting industry since 2003 at employers including Modis, an Adecco division, and Indeed.com. He is a graduate of Trinity College in Hartford, CT with a degree in Philosophy.

 

Judy Krandel, CFA - Ms. Krandel has served as the Company’s Chief Financial Officer since June 25, 2020. From November 2016 until December 2019, she served as Chief Financial Officer, and then Senior Business Development Consultant for PeerStream, Inc. From March 2012 until November 2016, Ms. Krandel was the Portfolio Manager for Juniper Investment Company, a small-cap hedge fund. Ms. Krandel spent the earlier part of her career as an equity analyst and portfolio manager focusing on small-cap public equities. She currently also sits on the board of directors of Lincoln First Bancorp, and served on the board of directors of Snap Interactive and Cynergistek in the digital media and healthcare cybersecurity industries. She is a graduate of the Wharton School of Business of the University of Pennsylvania with a degree in finance and the Booth School of Business of the University of Chicago with an MBA in finance and accounting.

 

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Rick Roberts – Mr. Roberts has served as the President of Recruiting Solutions, a subsidiary of the Company, since April 2019. Mr. Roberts is also the founder of Genesys, an artificial intelligence sourcing platform focusing on building proactive talent clouds for enterprise customers, where he served as President from May 2016 through March 2019. Prior to that from September 2010 until May 2016, Mr. Roberts was the President of Genuent, LLC, a staffing company focused on niche, high margin segments. He received a master’s degree in Business and Education from Texas Tech University.

 

Ashley Saddul – Mr. Saddul has served as our Chief Technology Officer since April 2019. Prior to his appointment, Mr. Saddul had served as the Chief Technology Officer of Recruiter.com, since August 2010. He is a graduate of Murdoch University with a degree in computer science and mathematics.

 

Non-Employee Directors

 

Timothy O’Rourke – Mr. O’Rourke has served on the Board since March 31, 2019. Mr. O’Rourke was designated by Genesys pursuant to the terms of the Asset Purchase. Mr. O’Rourke has served as the Managing Director of Icon Information Consultants, LP (“Icon”), a provider of human capital solutions, consulting, payroll and professional services, and a shareholder of Genesys, since February 2001. Mr. O’Rourke brings to the Board his experience and expertise in HR and recruitment solutions for employers. He is a graduate of the University of Houston with a degree in electrical engineering.

 

Douglas Roth – Mr. Roth has served on the Board since February 2018. Mr. Roth has been a Director and Investment Manager at Connecticut Innovations, Inc. since 2011 and is responsible for sourcing new investment opportunities, serving on the boards of portfolio companies, and supporting their growth and success. Mr. Roth was selected for appointment to the Board for his experience serving on the board of technology companies and the skills he gained from previously advising companies regarding product development and launch. He is a graduate of Boston University with an undergraduate degree in economics and mathematics as well as a master’s degree in electrical engineering. He also has an MBA in Entrepreneurial and Strategic Management from the Wharton School of the University of Pennsylvania.

 

Wallace D. Ruiz – Mr. Ruiz was appointed to the Board on May 24, 2018. Mr. Ruiz has served as the Chief Financial Officer of Inuvo, Inc. (NYSE: INUV), an advertising technology company based in Little Rock, AR since June 2010. Mr. Ruiz was selected for appointment to the Board for his experience with public companies as well as his accounting skills. Mr. Ruiz is a Certified Public Accountant in the State of New York. He is a graduate of St. John’s University with a degree in computer science and Columbia University with a MBA in finance and accounting.

 

Deborah S. Leff - Ms. Leff was appointed to the Board on August 31, 2020. Ms. Leff has served as a Global Leader at IBM since October 2012 and most recently held the position of Global Industry CTO for Data Science and AI. Ms. Leff was selected for appointment to the Board for her experience with successfully implementing Artificial Intelligence and Machine Learning projects to drive strategic outcomes. Ms. Leff has worked with Senior Leaders of Fortune 1000 companies to gain critical insights from data to drive customer experience and optimize business operations. In addition, Ms. Leff has built and run global sales teams and brings experience and expertise in Sales Management and Sales Execution. Ms. Leff is also the Founder of Girls Who Solve, a STEM education program for high school girls that focuses on how Data Science and technology can be used to solve a range of challenges in both for-profit and nonprofit organizations.

 

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Family Relationships 

 

There are no family relationships among our directors and/or executive officers.

 

Involvement in Certain Legal Proceedings

        

To the best of our knowledge, none of our directors or executive officers has, during the past 10 years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.

 

Director Independence

 

Our Board has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based on this review, our Board has affirmatively determined that each of Ms. Leff and Messrs. Roth and Ruiz, current members of our Board, meets the independence requirements under the Listing Rules of Nasdaq.

 

Board Committees

 

The Board currently has the following standing committees: the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee (the “Nominating Committee”). Each of the standing committees has a written

 

The following table identifies the independent and non-independent current Board and committee members:

 

Name   Audit   Compensation   Nominating
Evan Sohn            
Miles Jennings            
Timothy O’Rourke            
Douglas Roth*   X   X   Chairman
Wallace D.  Ruiz*   Chairman   Chairman   X
Deborah Leff*   X   X   X

 

*Independent Board Member

 

Board and Committee Meetings

 

During the six months ended June 30, 2020, the Board had 2 meetings, the Audit Committee had 2 meetings, the Compensation Committee had 0 meetings and the Nominating Committee had 0 meetings.

 

There were no directors (who were incumbent at the time) who attended fewer than 75 percent of the aggregate total number of Board meetings and meetings of the Board committees of which the director was a member during the applicable period.

 

Audit Committee

 

Management has the primary