UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(Exact Name of Registrant as Specified in Its Charter) |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 a “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of June 30, 2023, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $
As of April 10, 2024, the Company had
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
Recruiter.com Group, Inc., a Nevada corporation (along with its subsidiaries, “we”, “the Company”, “us”, and “our”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to amend the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was initially filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 16, 2024 (the “Original 2023 Form 10-K”). The purpose of this Amendment is to clarify and update Item 1: Description of the Business, to further detail the restructuring and repositioning plan of the Company. In addition, the Amendment includes and updates certain of the exhibits along with their related hyperlinks.
In addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), currently dated certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, from the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment. Item 15 of Part IV of the Original 2023 Form 10-K is amended to reflect the filing of these new certifications.
Except as described above, this Amendment does not amend, modify, or otherwise update any other information in the Original 2023 Form 10-K and does not reflect events occurring after the filing of the Original 2023 Form 10-K. As such, this Amendment speaks only as of the date the Original 2023 Form 10-K was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original 2023 Form 10-K to give effect to any subsequent events. Accordingly, this Amendment should be read in conjunction with the Original 2023 Form 10-K and the Company’s other filings with the SEC.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Annual Report, other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, potential growth or growth prospects, future research and development, sales and marketing and general and administrative expenses, and our objectives for future operations, are forward-looking statements. Words such as “believes,” “may,” “will,” “estimates,” “potential,” “continues,” “anticipates,” “intends,” “expects,” “could,” “would,” “projects,” “plans,” “targets,” and variations of such words and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including without limitation, the following:
| ● | our ability to continue as a going concern; |
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| ● | raise additional capital, if needed, to support our 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 achieve positive cash flow from operations; |
| ● | our ability to continue to meet the Nasdaq Capital Market 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 and intellectual property; |
| ● | raise additional capital, if needed, to support our operations; |
| ● | our ability to be successful in new markets; |
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| ● | our ability to avoid infringement of intellectual property rights; |
| ● | the positive cash flows and financial viability of our operations and new business opportunities; |
| ● | continued demand for services of recruiters; |
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| ● | unanticipated costs, liabilities, charges or expenses resulting from violations of covenants under our existing or future financing agreements; |
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| ● | our ability to operate our platforms (the “Platform”) free of security breaches; and |
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| ● | our ability to identify suitable complimentary businesses and assets as potential acquisition targets or strategic partners, and to successfully integrate such businesses and /or assets with our business. |
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Item 1A, Risk Factors” in this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report and in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”) that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and circumstances discussed in this Annual Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Annual Report are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update such statements for any reason after the date of this Annual Report or to conform statements to actual results or revised expectations, except as required by law.
You should read this Annual Report and the documents that we reference herein and have filed with the SEC as exhibits to this Annual Report with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
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PART I
ITEM 1. BUSINESS
Overview
Recruiter.com Group, Inc., a Nevada corporation (along with its subsidiaries, “we”, “the Company”, “us”, and “our”), is a holding company that, through its subsidiaries, operates an On Demand recruiting platform aimed at transforming the $46.7 billion dollar Employment and Recruiting Agency industry (Per IBIS World Employment& Recruiting Agencies in the US 2005-2030). The Company offers recruiting related services, including on-demand contract recruiting, job board platforms, recruitment education services, and a candidate marketing software.
We have seven operating subsidiaries, Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted Inc. (“Scouted”), Recruiter.com Upsider Inc. (“Upsider”), Recruiter.com OneWire Inc. (“OneWire”), and Recruiter.com Consulting, LLC (“Recruiter.com Consulting”). Additionally, the Company owns a controlling interest in Atlantic Energy Solutions, Inc., a Colorado company that is traded on the OTC Markets (OTC:AESO) (“Atlantic Energy”).
For employers needing talent acquisition services, we place independent recruiters from our network with our clients on a project basis. To round out our offerings, we provide other talent acquisition support services, including job posting, consulting, and staffing.
The Company is currently undergoing a strategic transformation, having sold its staffing business in 2023 and planning to sell its Recruiter.com website in 2024. In 2023, we laid the groundwork for several transformative transactions that substantially change the direction of the company. Specifically, our license agreement with GoLogiq, Inc. (“GoLogiq”), as described herein, and the planned sale of the Recruiter.com brand represent major shifts in our core revenue lines and business focus. These developments reflect a significant transition in our strategic priorities and operational framework, indicating a fundamental change in the company's trajectory.
On February 12, 2024, the Board of Directors approved a reorganization of the Company whereby the Company will segregate certain of the existing business assets and certain liabilities into its subsidiary Atlantic Energy along with a subsequent spin-out of that business through a distribution of shares of Atlantic Energy (to be renamed CognoGroup, Inc.), which is a material disposition of the Company’s assets, subject to shareholder approval (“CognoGroup Spin-out”).
The assets being transferred to CognoGroup, Inc. will encompass substantially all business assets and operations of Recruiter.com Group, Inc., with the notable exception of the license procured from GoLogiq. The specific assets slated for transfer include, but are not limited to, the following:
| · | Mediabistro: A comprehensive job board technology and business serving the media industry. |
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| · | Recruiter.com: The primary website, which is currently undergoing a sale process to Job Mobz, Inc. In the event that this sale to Job Mobz is consummated, the resultant Job Mobz stock will be transferred to CognoGroup |
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| · | CandidatePitch: A sophisticated Software-as-a-Service (SaaS) platform designed for recruitment marketing. |
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| · | RecruitingClasses.com: An extensive training platform tailored for recruiters. |
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| · | Equity and Profit Share in Futuris. |
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| · | Social Media Assets. |
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| · | Miscellaneous Assets: Including various trademarks, business partnerships, business contacts, agreements, and intellectual properties. |
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The liabilities being transferred to CognoGroup, Inc. will include substantially all liabilities with the exception of debenture debt. The liabilities that are expressly excluded from the transfer and shall remain as obligations of the Company include:
| · | Original Issue Discount Promissory Notes and all related debt, warrants, liabilities, and obligations: Initially dated as of August 17, 2022, and August 30, 2022, issued pursuant to the August 17 and 30, 2022 Securities Purchase Agreements (SPAs) executed with Cavalry Fund I LP, Porter Partners LP, L1 Global Opportunities Master Fund, Firstfire Global Opportunities Fund LLC, and Puritan Partners LLC. This encompasses corresponding debt, warrants, liabilities, and obligations following their transfer to other investors on or around February 12, 2024. |
Additionally, the following assets will be excluded from the transfer and shall remain the property of the Company:
| · | Rights and Obligations under the Technology License and Commercialization Agreement: Executed on February 23, 2024, between Recruiter.com Group, Inc. and GoLogiq, Inc. |
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| · | Shares of Atlantic Energy Solutions, Inc. ("AESO"): These shares are to be distributed to the shareholders of the Company at a subsequent date following shareholder approval. |
The underlying rationale for this strategic spin-out is to enable Recruiter.com Group, Inc. to refocus its business operations on a new line of business and to generate value for its shareholders through the distribution and segregation of its business assets into a newly focused public company. By establishing CognoGroup, Inc., the Company intends to streamline its operational focus and align its strategic objectives more closely with its core business areas, thereby enhancing overall shareholder value.
Subject to shareholder approval of the spin-out, all shares held by Recruiter.com Group, Inc. in CognoGroup, Inc. will be distributed to its shareholders. Recruiter.com Group, Inc. currently holds 1,000,000 preferred shares in CognoGroup, Inc., which are convertible on a 1,000-for-one basis, resulting in a total of one billion shares. The Company plans to convert up to one billion of these shares and distribute them entirely to its shareholders. The final distribution count will be determined at the discretion of management but shall comprise the entirety of the shares held by Recruiter.com Group, Inc.
There can be no assurance that the Company will be able to complete its planned spin out and strategic transformation.
Corporate History
We were incorporated in February 2015 as a Delaware corporation. Effective March 31, 2019 (the “Effective Date”), we completed a merger with Recruiter.com, Inc. (“Pre-Merger Recruiter.com”), an affiliate of the Company, pursuant to a Merger Agreement and Plan of Merger, dated March 31, 2019 (the “Merger”). At the effective time of the Merger, our newly formed wholly owned subsidiary merged with and into Pre-Merger Recruiter.com, with Pre-Merger Recruiter.com continuing as the surviving corporation and as our wholly owned subsidiary.
Following the Merger, on May 9, 2019, we changed our corporate name to Recruiter.com Group, Inc. Our fiscal year end was also changed, as of the Effective Date, from March 31 to December 31.
Immediately prior to the completion of the Merger, Pre-Merger Recruiter.com owned approximately 98% of our outstanding shares of common stock (“Common Stock”). The Merger did not result in a change of control of our Company, as the principal stockholders of Pre-Merger Recruiter.com had controlled the Company since October 2017 and the Merger simply increased their control. In addition, our President and Chief Financial Officer served as the Chief Executive Officer of Pre-Merger Recruiter.com and the majority of our directors at the time were directors (or designees) prior to the Merger. Further, our current Chairman was retained as a consultant prior to the Merger with the understanding that if the Merger occurred, he would be appointed as our Executive Chairman.
On May 13, 2020, we effected a reincorporation from the State of Delaware to the State of Nevada. Following the approval by our stockholders at a special meeting held on May 8, 2020, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Recruiter.com Group, Inc., a Nevada corporation and our wholly owned subsidiary (“Recruiter.com Nevada”), pursuant to which we merged with and into Recruiter.com Nevada, with Recruiter.com Nevada continuing as the surviving entity.
On June 5, 2023, the Company entered into a stock purchase agreement (“GoLogiq Stock Purchase Agreement”) with GoLogiq Inc. ("Seller"), a Delaware corporation (“GoLogiq”). GoLogiq owns all of the issued and outstanding membership interests (the “Membership Interests”) of GOLQ LLC, a Nevada limited liability company, that was further amended on August 18 and 29, 2023. On February 23, 2024, the Company entered into a certain Technology License and Commercialization Agreement with GoLogiq, Inc. that supersedes and replaces in its entirety the GOLQ Agreement, as amended by the August 29 Amendment and the August 18 Amendment. Under the GOLQ Licensing Agreement, GOLQ grants the Company a worldwide, exclusive license (the “GOLQ License”) to the Company to develop its fintech technology (the “GOLQ Technology”) and sell products derived thereof, including its Createapp, Paylogiq, Gologiq, and Radix AI technology and products (the “Licensed Products”), for a term of 10 years, with automatic two (2) year renewals as further described therein (the “Term”). In exchange with such license, the Company will issue to GOLQ such number of shares of Company common stock that represents 19.99% of the number of issued and outstanding shares of the Company common stock on the business day prior to the effective date as defined therein (the “Shares”). Following the issuance of the Shares, GOLQ will own 16.66% of the issued and outstanding shares of the Company common stock. In addition, the Company shall pay to GOLQ a royalty of eight percent (8%) of net sales of Licensed Products, as defined therein, during the Term. Further, GOLQ grants to the Company the option to purchase the GOLQ Technology and the Licensed Products for a purchase price of $400,000 for the duration of the Term, subject to shareholder approval if required under applicable laws and regulations at the time of notice of exercise. On March 28, 2024, the Company and GoLogiq entered into an Amendment to Technology License and Commercialization Agreement (the “Amendment”). Under the Amendment, the Company and GoLogiq agreed to and added Section 3.3 to further detail technical assistance from GOLQ to the Company. In addition, Section 5.1 was amended such that the royalty was lowered from eight percent (8%) to five percent (5%) for which the Company granted to GoLogiq a warrant to purchase two hundred ninety-two thousand (292,000) shares of Company Common Stock (the “Warrant”) for a price equal to $0.01 per share (the “Exercise Price”). The Warrant may be exercised at any time commencing upon the date that is six (6) months from the Effective Date and terminating at 5:00 P.M., New York time, on the three (3) year anniversary of the Effective Date, unless the closing sale price for the common stock of the Company has closed at or above $5.00 for ten consecutive trading days. Further, the Amendment contains a blocker provision that limits shares issuable under the Warrant such that the shares beneficially owned by GoLogiq does not exceed 9.99% of the total number of issued and outstanding shares of the Company’s Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).
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On March 5, 2024, the Company amended the August 16, 2023, agreement. On August 16, 2023, the Company entered into an Asset Purchase Agreement (the “Job Mobz Purchase Agreement”) with Job Mobz Inc., a California corporation (“Job Mobz”). Upon the terms and subject to the conditions of the Job Mobz Purchase Agreement, the Company has agreed to sell and assign its right, title, and interest in the domain name and the assets generally used to operate the business associated therewith to Job Mobz for an aggregate purchase price of $1,800,000, subject to certain adjustments. On March 5, 2024, the Company entered into an amendment to the August 16, 2023, Asset Purchase Agreement with Job Mobz, resulting in the extension of the closing date to June 30, 2024. Furthermore, the Company received non-refundable payments totaling $250,000 from Job Mobz in April of 2024, per the terms of the latest amendment. The payment will be credited towards and count against the cash portion of the Purchase Price from the original Asset Purchase Agreement.
Although the approval of the Job Mobz Agreement and the transactions contemplated therein were not required to be approved by the shareholders of the Company pursuant to the Nevada Revised Statutes, the rules and regulation of Nasdaq or the Company’s bylaws, the Company previously agreed, pursuant to the terms of the Job Mobz Agreement to seek stockholder approval of the transactions contemplated thereby, and included such proposal in its Proxy Statement filed with the Commission on September 15, 2023, and amended on November 8, 2023, November 24, 2023, December 8, 2023, and December 11, 2023. On February 13, 2024, the Company obtained the consent of Job Mobz to proceed with the transactions contemplated by the Job Mobz Agreement without obtaining such shareholder approval. This transaction has not yet closed.
On July 25, 2023, the Company acquired a shell company, Atlantic Energy Solutions, Inc., which is a dormant entity quoted on OTC Market under the symbol AESO, in which the Company acquired a controlling and majority equity interest through purchasing 1,000,000 preferred convertible shares providing voting control of Atlantic Energy Solutions, Inc. for $80,000. The transaction is accounted for as a recapitalization due to the intent of the company to spin out the shell to the shareholders of Recruiter.com Group, Inc. and continue certain operations of Recruiter.com, Inc. in AESO. To prepare and effectuate the spin out of Atlantic Energy Solutions, Inc. (currently being renamed CognoGroup), on February 13,, 2024, the Board authorized certain corporate actions, including the transfer of assets and liabilities between subsidiaries of the Company, the renaming of Recruiter.com Recruiting Solutions, LLC to CognoGroup, LLC, and the reorganization of Recruiter.com Recruiting Solutions, LLC to a subsidiary of Atlantic Energy Solutions, Inc. Additionally, the Board of Directors authorized that management may take such steps necessary to change the name of Recruiter.com Group, Inc. to reflect its purpose and a corresponding change to the company’s stock symbol.
On August 9, 2023, the Company and Insigma, Inc., a Virginia corporation ("Insigma"), and a wholly owned subsidiary of Futuris Company, a Wyoming corporation (“FTRS”), entered into an asset purchase agreement where Recruiter.com Consulting agreed to sell its right, title, and exclusive interest in certain client contracts and associated staff, contractors, business information, and relationships related thereto to Insigma. As consideration for the Acquired Assets, and upon completion of the assignment of certain Acquired Assets to Insigma, Insigma shall issue to Recruiter Consulting a number of shares of common stock of FTRS equal to $500,000 based on the 30-day Volume Weighted Average Price (VWAP) preceding the Closing Date and as adjusted.
The deal was finalized on October 2, 2023, when Management Solutions, LLC approved the transfer to Futuris, and on October 5, 2023, the Company received a total of 9,518,605 FTRS Company common stock. As of the closing date of October 2, 2023, the share price of Futuris common stock was $0.0579 per share. As such, the fair value of the transaction consideration received on the closing date would be $551,127.
Reverse Stock Split
On August 4, 2023, the Company approved a one-for-fifteen (1:15) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On August 22, 2023, the Company filed a Certificate of Change pursuant to Nevada Revised Statutes with the Nevada Secretary of State to affect a reverse stock split of the Common Stock, and the proportional decrease of the Company’s authorized shares of Common Stock at a ratio of one-for-fifteen (15). All share and per share data in the accompanying consolidated financial statements and footnotes and throughout this annual report has been retroactively adjusted to reflect the effects of the reverse stock split.
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Market Opportunity
Industry Overview
Employers invest significant amounts of capital in finding qualified employees, the practice of “talent acquisition.” Market opportunities within talent acquisition are diverse. IBISWorld, in its Online Recruitment Sites in the US report cites revenue at $15.7B, growing at approximately 8.3% from 2018-2023.
With employers continuing to struggle to find relevant candidates in a relatively tight labor market and with 8.8 million open jobs in the U.S. as of April 2024, per the Bureau of Labor Statistics, recruiting represents a solid market opportunity.
Inflation
The Company generally may be impacted by rising costs for certain inflation-sensitive operating expenses such as labor and employee benefits. The Company believes inflation could have a material impact to pricing and operating expenses in future periods due to the state of the economy and current inflation rates.
Employment Rate
The unemployment rate in April 2024 stood at 3.9%, which is historically low, signaling a “tight” labor market and a general lack of available qualified talent. However, many large companies, particularly in the technology, media, finance and retail sectors, implemented layoffs in 2023. The Company generally may continue to be impacted by corporate layoffs of professional employees, if they are substantive, long-term, and/or widespread.
Operating Businesses and Revenue
We generate revenue or have generated from the following activities:
· | Software Subscriptions: We offered a subscription to our web-based platforms that help employers recruit talent. Our platforms allow customers to source, contact, screen, and sort candidates using data science, advanced email campaigning tools, and predictive analytics. As part of our software subscriptions, we offered enhanced support packages and On Demand recruiting support services for an additional fee. Additional fees may be charged when we place a candidate with our customer, depending on the subscription type. In such cases, if the candidate ceases to be employed by the customer during the initial 90 days (the 90-day guarantee), we refund the customer in full for all fees paid by the customer. In December of 2022, we sold one of our software platforms to Talent, Inc. that was used in the delivery of the subscription service. Subsequently, we continued providing the service, but leveraged third-party tools in the delivery of services. |
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| Recruiters On Demand: Consists of a consulting and staffing service specifically for the placement of professional recruiters, which we market as Recruiters On Demand. Recruiters On Demand is a flexible, time-based solution that provides businesses of all sizes access to recruiters on an outsourced, virtual basis for help with their hiring needs. As with other consulting and staffing solutions, we procure for our employer clients qualified professional recruiters, and then place them on assignment with our employer clients. We derive revenue from Recruiters On Demand by billing the employer clients for the placed recruiters' ongoing work at an agreed-upon, time-based rate. We directly source recruiter candidates from our network of recruiters. In addition, we also offer talent planning, talent assessment, strategic guidance, and organizational development services, which we market as our “Talent Effectiveness” practice. Companies prepay for a certain number of consulting hours at an agreed-upon, time-based rate. We source and provide the independent consultants that provide the service. In March 2023, we announced a strategic partnership with Job Mobz to transition certain Recruiters on Demand clients and staff to Job Mobz in exchange for an ongoing revenue stream. We continued providing Recruiters on Demand service through a platform, and anticipate continuing this work alongside Job Mobz as part of the Managed Services portion of the Asset Purchase Agreement, once the transaction closes, which is anticipated by June, 2024. |
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| Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generated full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform, or other communications. We sourced qualified candidate referrals for the employers’ available jobs through independent recruiter users that access the Platform and other tools. We supported and supplemented 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 earned a “full-time placement fee”, an amount separately negotiated with each employer client. The full-time placement fee is typically either a percentage of the referred candidates’ first year base salary or an agreed-upon flat fee. |
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| Marketplace: Our “Marketplace” category comprises services for businesses and individuals that leverage our online presence. For businesses, this includes sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In some cases, we earn a percent of revenue a business receives from attracting new clients by advertising on our online platform. Businesses can also pay us to post job openings on our proprietary job boards to promote open job positions they are trying to fill. In addition to its work with direct clients, we categorize all online advertising and affiliate marketing revenue as Marketplace.
For individuals, Marketplace includes services to assist with career development and advancement, including a resume distribution service which involves promoting these job seekers’ profiles and resumes to assist with their procuring employment, and upskilling and training. Our resume distribution service allows a job seeker to upload his/her resume to our database, which we then distribute to our network of recruiters on the Platform. We earn revenue from a one-time flat fee for this service. We also offer a recruiter certification program which encompasses our recruitment related training content, which we make accessible through our online learning management system. Customers of the recruiter certification program use a self-managed system to navigate through a digital course of study. Upon completion of the program, we issue a certificate of completion and make available a digital badge to certify their achievement for display on their online recruiter profile on the Platform. |
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| Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing such personnel with the employer, but with our providers acting as the employer of record for us, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for full-time placement hiring. This process includes employers informing us of open consulting and temporary staffing opportunities and projects, sourcing qualified candidates through the Platform and other similar means, and, finally, the employer selecting our candidates for placement after a process of review and selection. We bill these employer clients for our placed candidates’ ongoing work at an agreed-upon, time-based rate, typically on a weekly schedule of invoicing. Through a strategic sale to Futuris, Inc. In October, 2023, we exited the Consulting and Staffing line of business, and consider it discontinued. |
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| Revenue Share: We refer certain clients to a third party in exchange for a referral fee. The amount of the referral fee is dependent upon whether the referral is an existing client of ours and what services we currently provide that client, or a client of a third party who is not historically serviced by us. Referral fees under the revenue share arrangement are subject to certain minimum and maximum payout amounts. We record referral fees earned under our revenue share arrangement on a net basis. |
The costs of our revenue primarily consist of employee costs, third-party staffing costs and other fees, outsourced recruiter fees and commissions based on a percentage of our gross margin.
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Disrupting an Industry - Recruit Talent Faster
We believe we are fundamentally modernizing the recruiting process by digitizing and democratizing the recruiting process. 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. By doing so, we help businesses recruit talent faster and more efficiently than ever before.
Community and Network
We operate various publishing, social media, groups, and career communities that allow for user registration. We provide content, community, and resources for recruitment and talent acquisition professionals. We refer to the recruiting and talent acquisition professionals that connect with our various assets as our “Recruiter Network” or our “network of recruiters.” This network of recruiters allows us to maintain a close connection to the industry and be responsive to our clients’ demand for project-based and full-time recruiters. In addition, our network of recruiters serves as a general sales channel, to which we can market recruitment solutions, such as our recruiting software subscriptions.
We believe the potential scale of our Recruiter Network is enormous. With hundreds of thousands of people involved in the general human resource and employment industry in the United States alone, and many more interested in referral-based, work-from-home earning opportunities, we believe the addressable network and potential audience is significant.
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 recruiting business.
We are also active on social media. Most notably, as of April 2024, we operated three of the top thirty largest professional groups globally on the social media platform LinkedIn, out of over 2.5 million groups in total. These groups include the Recruiter.com Network, and groups for the professions of Artificial Intelligence, Marketers, and Information Technology.
The Recruiter.com website and the directly associated social media assets are planned to be transitioned to Job Mobz as part of the planned Asset Purchase Agreement.
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Our Career Communities
We own and develop a proprietary tool for job posting and career community sites, which originated from the purchase of certain assets from Parrut, Inc. known as Uncubed Technology and has since been further developed. We use this technology to operate certain career communities, including sites for recruitment and media professionals. We refer to the technology as our “Recruitment Marketing” technology and to the sites that leverage such technology as our “Career Communities.”
Career Community for Recruiting Professionals
We own and operate Recruiter Jobs, a specialized career community for recruiting and talent acquisition professionals. The community focuses on providing access to both contract and full-time job opportunities for recruiters. Users may search and find suitable job opportunities, create job alerts for notifications, and easily apply to open roles. The career community is currently located at https://jobs.recruiter.com.
MediaBistro - a Career Community for Media Professionals
We own and operate MediaBistro, a specialized job board for media and creative professionals. Clients include broadcasters, television networks, traditional publishing companies, online publications, and many other types of media-related companies. The platform focuses on providing access to job opportunities at media companies. Users may search for and find suitable job opportunities, create job alerts for notifications, and easily apply to open roles. The career community is currently located at https://www.mediabistro.com.
Benefits for Career Community Users
We empower professionals to find suitable career opportunities, surfacing relevant jobs and connecting them with economic opportunity.
Benefits to Employer Clients
Enterprises can leverage our niche communities of professionals to tap into highly unique talent pools.
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. Our “Mediabistro” brand is highly significant to the media industry and has a long operating history as a key job board for the niche. |
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| ● | People: Several of our key executives and personnel have extensive experience and successful track records with internet-enabled recruitment and staffing. |
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| ● | Platform Technology: We offer a proprietary, fully operational software platform and have additionally developed software-as-a-service platforms leveraging artificial intelligence. |
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| ● | 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 our strategic plans, which include strategic divestitures, organic growth, opportunistic acquisitions, and making use of capital provided by the public market. In short, we look to realize the potential of our market position.
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Overall Market Position Potential
Our combination of innovative use of technology, a broad network of specialized recruiting professionals, and curated talent communities enables a traditionally service-heavy industry to be scalable in an entirely new way. We believe our brand and technology put us in a unique position in the market.
Strategy
Recruiter.com intends to grow its business by focusing efforts on the following five main areas:
1) Grow Our Community:
| ● | Grow Engagement: We plan to continue to invest in community management initiatives, including enhancement of outreach and communications. |
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| Grow the Number of Recruiters on the Platform: Investments in content, community sponsorship, and thought leadership will continue to drive people back to the platform, creating a "hub" for recruiters. |
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| Increase Growth and Earning Opportunities for Recruiters on the 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 the 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. |
| ● | Invest in Scalable Business Models: We plan to continue to invest in low- and light-touch products and services to increase our gross margins and the efficiency of our business. |
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| 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 and recruiting expertise allow us to introduce new features and incorporate feedback into such features with speed, efficiency, and scale. |
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| 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. Management believes in the transformational power of new technologies, including AI, and plans to continue exploring various opportunities in the sector. |
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3) Monetize the Businesses and Candidates Seeking to Access the Community and Platform:
We intend to invest in building new products and features to develop new clients for all of our services, expand relationships with our existing clients, and increase their spending on the Platform.
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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. |
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| Build Effective Candidate Solutions: We plan to continue to expand our candidate offerings from basic resume distribution to training programs, career coaching, resume writing, job alerts, and other SaaS services to monetize our traffic and help people effectively connect with opportunities. |
4) Acquire Complementary Assets and Businesses:
From time to time, we evaluate opportunities to acquire complementary businesses and personnel within the recruitment and staffing sector. We plan to continue evaluating opportunities in the sector which add light and low-touch services for recruiters and/or job seekers.
5) Approach the Future with Clarity and Vision:
| ● | Trust Our Vision: We have 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. |
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| 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. |
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| 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. |
Our Clients
Our recruiting solutions allow us to meet the hiring needs of a variety of clients. We typically have focused on filling highly skilled and senior-level roles in specialized fields, including media, technology, healthcare, finance, logistics/transportation, communications, engineering, energy, and others.
Historically, the majority of our revenue was generated by providing recruiting solutions for employers, which consist of hourly and project-based fees for professional consulting and staffing.
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As of December 31, 2023, one customer accounted for more than 10% of the accounts receivable balance at 93%. As of December 31, 2022, one customer accounted for more than 10% of the accounts receivable balance, at 28%.
For the year ended December 31, 2023, one customer accounted for more than 10% of total revenue, at 57%. For the year ended December 31, 2022, one customer accounted for more than 10% of total revenue, at 14%.
Our focus is to increase and improve our suite of product offerings and solutions to address different needs of potential employers in order to increase our client base and reduce reliance on the three customers accounting for the large percentage of our accounts receivables and revenue.
Our Platform and Technology
Our Technology Infrastructure
Hosting
We currently host websites and data with Amazon’s web hosting service.
Personnel
Software development, database management, remote server administration, quality assurance, and administrative systems access is managed by our development team. From time to time, we also engage technical personnel on an as-needed basis from other locations, including overseas locations.
Product Development
We continue to invest in product development, develop new products and features, and further build our infrastructure. Our goal is to enable employers to identify and engage with top talent faster than ever before.
Roadmap
The following roadmap outlines Platform improvements that we intend 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:
| · | Improvements in the user interface of our career communities |
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| · | Improvements in automation of our On Demand recruiting services |
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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 100 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.
Sales Strategy
Most of our sales opportunities are derived from internet marketing and content strategies, which generate interest and traffic from search engines, such as Google, which index our website content. Word of mouth, customer and user referrals, and general brand recall and recognition also generate a significant number of visits to our website. Visitors to our website then express interest and contact us through standard electronic forms on our website.
Public Relations
For PR and marketing purposes, we rely mostly on the continued development of our thought leadership content. Recruiter Index®, our proprietary analysis that pinpoints recruiting trends and forecasts business growth, will 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. 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® consistent media appearances beginning in June 2020, including on CNBC, there appears to be strong demand for leading labor market indicators.
Community Management
We consider 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. |
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| ● | Understanding: We form relationships with a human touch and develop real understandings of recruiters’ business needs and capacities. |
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| ● | Personal: Every On Demand recruiter has a named contact. |
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| ● | Shared Success: We take pride in our community, and we incentivize success and connections. |
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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.; |
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| ● | Other e-staffing and recruitment marketplace providers, such as Hired.com, Scout Exchange, and Reflik; |
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| ● | Professional and personal social media platforms, such as LinkedIn and Facebook; |
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| ● | Software and business services companies focused on video hiring talent acquisition, management, invoicing, or staffing management products and services; |
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| ● | 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; and |
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| ● | 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:
| ● | Our people, who are experts in the recruiting industry; |
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| ● | The power of our robust network of recruiters, top internet brand, distribution channels, and content and social media followings; and |
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| ● | The Platform, which is a complete and custom-built 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 April 3, 2024, our trademarks include the terms “Recruiter.com,” “OneWire,” and “Matchbook.” The Company also has trademarks in the process of becoming registered, which include “Mediabistro,” “Recruiter Index,” and “MyRecruiter.”
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Government Regulation
We are subject to a number of U.S. 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 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
We operate virtually and from time to time in leased flexible office space, such as WeWork offices.
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
We are currently pursuing two related collections matters against BKR Strategy Group. Since 2013, BKR Strategy Group has provided talent acquisition strategy and services to top companies. Starting in the third quarter of 2021, BKR Strategy Group subcontracted Recruiter.com to perform on Demand recruiter services on behalf of BKR Strategy Group’s clients. Although payments for services rendered were initially received in a timely fashion, BKR Strategy Group’s balance grew throughout the third and fourth quarters of 2021. This led to BKR Strategy Group executing a Promissory Note with a payment schedule for $500,000 on November 30, 2021, with a personal guarantee from its business principal as part of the note. After failing to meet the payment schedule and after repeated attempts to collect the balance due, we retained the law firm of Berkovitch & Bouskila, PLLC and filed two lawsuits against BKR Strategy Group on February 18, 2022, the first, to collect on unpaid invoices and the second, to enforce the promissory note, for a total sum of $1,400,000. On March 24, 2022, BKR Strategy Group made a counterclaim against us for $500,000 on the grounds of alleged overbilling. Management denies the basis for the counterclaim and expects to vigorously defend itself from this counterclaim. Outside counsel for the company has advised that at this stage in the proceedings, it cannot offer an opinion as to the probable outcome. As it is not possible to estimate if a loss will be incurred, there has been no accrual.
On June 21, 2022, the Supreme Court of the State of New York, New York County ruled in favor of the Company that BKR Strategy Group owes the Company $500,000, plus interest at 12% since November 22, 2021, through the entry of judgement in the lawsuit related to the enforcement on the Promissory Note executed by BKR Strategy Group. Proceedings in the other lawsuit remain ongoing.
On September 6, 2023, Recruiter.com Group, Inc. (the "Company") was served with a civil lawsuit filed by Pipl, Inc. in the Superior Court of the State of Connecticut, Judicial District of New Britain. The lawsuit alleges that the Company failed to pay for goods and/or services provided by Pipl, Inc. between January 3, 2021, and December 7, 2022, with the claimed amount due exceeding $266,562.59 plus interest, costs, and attorneys' fees. The Company is currently evaluating the complaint with counsel and intends to vigorously defend against the claims. Given the early stage of the litigation, the Company is unable to predict the outcome of the case or estimate the possible loss or range of loss, if any.
On April 1, 2024, Recruiter.com Group, Inc. ("the Company") became involved in legal proceedings initiated by Creditors Adjustment Bureau, Inc. ("CAB"), as documented in the Superior Court of California, County of Santa Clara, case number 24CV433086. CAB's complaint, filed on March 13, 2024, alleges that the Company failed to fulfill payment obligations under contracts with CAB's assignor, totaling approximately $213,899.94. CAB seeks recovery of the owed amounts, interest, attorney fees, costs, and other damages deemed appropriate by the court. The Company is currently reviewing the complaint and intends to defend itself vigorously. At this stage, the Company is unable to predict the outcome of the case or estimate the potential financial impact.
Except for the aforementioned proceedings described above, as of the date of this filing, 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.
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Employees
As of April 3, 2024, the Company employed 4 full time employees and a number of independent contractors.
Culture and Team
After significant changes to our business, we are a small team of qualified professionals. Our management has years of experience in online recruiting and technology and are supplemented by additional finance and legal support.
Diversity
We are committed to being an equal opportunity employer and are proud to have diverse staff, management, and board members.
Corporate Information
We operate virtually. Our principal mailing address is 123 Farmington Avenue, Suite 252, Bristol, CT 06010. Our telephone number is (855) 931-1500. Our website address is https://www.recruiter.com. The information contained on, or that can be accessed through, our site is not a part of this filing. Investors should not rely on any such information in deciding whether to purchase our securities.
ITEM 1A. RISK FACTORS
You should carefully consider the following risk factors, together with all of the other information included or incorporated in this Annual Report. Each of these risk factors, either alone or taken together, could adversely affect our business, financial condition and results of operations, and adversely affect the value of an investment in our Common Stock. There may be additional risks that we do not know of or that we believe are immaterial that could also impair our business and financial condition.
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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 equity or debt financing activities 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 financing activities 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 from financing activities, 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 from financing activities.
Our management has determined that there is substantial doubt about our 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, 2023, and 2022 includes 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) used cash in operations of approximately $0.9 million in 2023, and our available cash as of the date of this filing will not be sufficient to fund our anticipated level of operations for the next 12 months; (ii) we will require additional financing for the fiscal year ending December 31, 2024, to continue at our expected level of operations; and (iii) if we fail to obtain the needed capital, we 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 our ability 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.
Our business depends on a strong reputation and anything that harms our reputation will likely harm our results.
As a provider of temporary and permanent staffing solutions as well as consultant services, our reputation is dependent upon the performance of the employees we place with our clients and the services rendered by our consultants. We depend on our reputation and name recognition to secure engagements and to hire qualified employees and consultants. If our 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 our clients, our ability to maintain or expand our client base may be harmed. Any of the foregoing is likely to materially adversely affect our business, financial condition, results of operations or cash flows.
We may be unable to find sufficient candidates for our staffing business.
Our 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 us. Candidates generally seek temporary or full-time positions through multiple sources, including us and our competitors. Prior to COVID-19, unemployment in the United States had been low in the past couple of years but sharply increased and then decreased due to the effects of the COVID-19 pandemic. The availability of qualified talent may change or become even more scarce, depending on macro-economic conditions outside of our control. If finding sufficient eligible candidates to meet employers’ demands becomes more challenging due to falling unemployment rates or other talent availability issues, we may experience a shortage of qualified candidates. Any shortage of candidates could materially adversely affect our business, financial condition, results of operations or cash flows.
We may incur potential liability to employees and clients.
Our consulting and staffing business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. We do not have the ability to control the workplace environment. As the employer of record of our temporary employees, we incur a risk of liability to our 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 our business or financial condition, there can be no assurance that such claims in the future will not result in adverse publicity or have a material adverse effect upon our business or financial condition. We also incur a risk of liability to our employer clients resulting from allegations of errors, omissions or theft by our temporary employees, or allegations of misuse of client confidential information. In many cases, we have agreed to indemnify our clients in respect of these types of claims. We maintain insurance with respect to many of such claims. While such claims have not historically had a material adverse effect upon our business or financial condition, there can be no assurance that we will continue to be able to obtain insurance at a cost that does not have a material adverse effect on our business or financial condition or that such claims will be covered by such available insurance.
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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, we may need to engage in 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 $6.7 million for the year ended December 31, 2023 and, $16.5 million for the year ended December 31, 2022. As of December 31, 2023, we had an accumulated deficit of approximately $76.4 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.
Because we have a limited operating history under our current platform, it is difficult to evaluate our business and future prospects.
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.
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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.
If we experience errors, defects, or disruptions on the 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 the 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 the Platform could harm our brand and reputation and may damage the businesses of users. Additionally, the 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 the Platform could result in negative publicity, loss of or delay in market acceptance of the 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.
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 service providers and co-located data centers in the United States and abroad to host the Platform. Software development, remote server administration, quality assurance, and administrative access is managed by international personnel. 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 the 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 the Platform, which could cause us to lose clients, or we may have to assume those increased costs, and our operating results may be adversely impacted.
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Because we have historically had 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, 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, an island country located off the eastern coast of Africa, for software development and maintenance related to our website and the Platform. 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 us and such related party. If a dispute arises in connection with any of these arrangements, which is not resolved to our satisfaction, our business could be materially and adversely affected.
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.
We incorporate many types of open-source software, frameworks, and databases, including our 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 the Platform and the terms on which such licenses are available may not be economically feasible, to re-engineer the Platform to remove or replace the open source software, to limit or stop offering the 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.
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 and, in particular, our 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 the 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.
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We rely in part on certain software that we license from related and third parties as part of our service offerings, 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 video screening technology from MyInterview, as well as other popular, commercially available third-party recruiting, communications, and marketing related software systems, such as LinkedIn and Hubspot, much of which is integral to our systems and our business. 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.
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.
As of December 31, 2023, one customer accounted for more than 10% of the accounts receivable balance, at 93%. As of December 31, 2022, one customer accounted for more than 10% of the accounts receivable balance, at 28%.
For the year ended December 31, 2023, one customer accounted for more than 10% of total revenue, at 57%. For the year ended December 31, 2022, one customer accounted for more than 10% of total revenue, at 14%.
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 development staff who are internationally located, 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.
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If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.
We have experienced significant growth following our acquisitions of Scouted, Upsider, OneWire, Parrut, and Novo during 2021. Businesses that grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. There can be no assurance that our management, along with our staff, will be able to effectively manage continued growth or successful integrate our products, services, and staff. Our failure to meet the challenges associated with rapid growth could materially and adversely affect our business and operating results.
If the overall economy experiences a reduced need for specialized personnel, our results of operations would be materials and adversely affected.
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 Directors Evan Sohn, Lillian Mbeki, Deborah Leff, Steve Pemberton, Wallace D. Ruiz, our Chief Executive Officer Granger Whitelaw, and our Interim Chief Financial Officer Miles Jennings. Our work with each of these key personnel is 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 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 and Scouted, OneWire, Parrut, Upsider and Novo Group in 2021, 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 our 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. If we record impairment charges related to our goodwill and long-lived assets, our operating results would likely be materially and adversely affected.
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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.
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.
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 consolidated 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.
Risks Related to Strategic Transactions and Resource Limitations
Our company is currently engaged in a series of strategic transactions that involve complex financial and legal arrangements, characterized by a multitude of contingencies and obligations. These transactions are integral to our strategy for growth and expansion in a competitive marketplace. However, the intricate nature of these deals, combined with our limited resources and capital, present significant risks that could materially and adversely affect our business, financial condition, and operational results.
The successful execution of these transactions demands a high degree of financial acumen, legal expertise, and strategic foresight, areas where our resources are constrained. The complexity and scope of the arrangements increase the likelihood of unforeseen challenges, including but not limited to regulatory hurdles, integration obstacles, and potential disputes with counterparties. Given our limited capital, any delays or unexpected costs arising from these transactions could strain our financial resources, forcing us to reallocate funds from other critical areas of our business or seek additional capital at unfavorable terms.
Moreover, the contingencies associated with these transactions introduce uncertainty regarding their ultimate benefit to our company. While we anticipate that these strategic endeavors will enhance our competitive position and operational capabilities, their complexity and the inherent unpredictability of their outcomes mean that we cannot guarantee these benefits will be realized as expected, or at all.
In light of these factors, our future performance and ability to execute our business strategy effectively could be compromised. Investors should consider the risks associated with our involvement in these complex strategic transactions, especially in the context of our limited resources and capital, before making an investment decision.
Risks Related to Regulation
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 recruiters on the Platform were classified as employees instead of independent contractors, our business would be materially and adversely affected.
We believe 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 our 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 40% of visitors to our websites originate from countries 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 the Platform are located in approximately 162 countries (aside from the U.S.) around the world, the most prevalent being those recruiters who reside in India, England, and Canada, which subjects us to the risks and uncertainties associated with doing business internationally. Additionally, users on the 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 the Platform is generally accessible by users worldwide, one or more jurisdictions may claim that we or recruiters on the Platform are required to comply with the laws of such jurisdictions. Laws outside of the United States regulating the internet, payments, 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.
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.
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.
During our day-to-day business operations we receive, collect, store, process, transfer, and use personal information and other user data. As a 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.
Risks Relating to Investments in Our Common Stock
As a result of our recent financings and acquisitions we have issued a substantial number of additional shares of Common Stock, which dilutes present stockholders and have issued dilutive instruments which may dilute present stockholders.
During the period from March 2019 through April 2024, we engaged in a series of private placement and conversion transactions issuing to several accredited investors shares of stock and/or warrants to purchase Common Stock. We have also issued shares of our Common Stock in connection with the Scouted Asset Purchase, the Upsider Purchase, the OneWire Purchase, the Parrut Purchase, and the Novo Purchase. As of the date of this Annual Report, there were approximately 1 million shares of Common Stock issuable upon conversion of our outstanding convertible preferred stock, stock options and exercise of warrants (including warrants issued to the placement agent in our private placement transactions). In the future, we may grant additional options, warrants and convertible securities. The exercise, conversion, or exchange of options, warrants or convertible securities, including for other securities, will dilute the percentage ownership of our existing stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such options, warrants and convertible securities at a time when we would be able to obtain additional equity capital on terms more favorable than such securities or when our Common Stock is trading at a price higher than the exercise or conversion price of the securities. If we issue them with conversion or exercise prices below the prices of the convertible securities held by the held by investors, we will be required to reduce the conversion prices of certain of our convertible securities held by the investors, which will increase future dilution. The exercise or conversion of outstanding warrants, options and convertible securities will have a dilutive effect on the securities held by our stockholders. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.
Because we may issue preferred stock without the approval of our stockholders and a concentrated group of stockholders own a significant percentage of our Common Stock, it may be more difficult for a third party to acquire us and could depress our stock price.
In general, the Board may authorize, without a vote of our stockholders, an issuance of one or more additional series of preferred stock that have more than one vote per share. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our Common Stock. This could make it more difficult for shareholders to sell their Common Stock. This could also cause the market price of our Common Stock shares to drop significantly, even if our business is performing well.
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A small number of ten stockholders, including members of our management, controls approximately 14% of our outstanding voting power as of March 31, 2024, and therefore is able to exert a significant amount of influence over our management and affairs and all matters requiring stockholder approval, including significant corporate transactions. These stockholders may have interests that differ from yours, and they may vote in a way with which you disagree and that may be adverse to your interests. This concentration of ownership may have the effect of delaying or preventing any change in control transaction, and by limiting the number of shares of our stock traded in public markets could adversely affect liquidity and price of our Common Stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We do not currently own any physical properties and operate virtually. We do not currently have other leased offices.
We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable space will be available to accommodate any such expansion of our operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may be a party to, or otherwise involved in, legal proceedings arising in the normal course of business. The nature of our business ordinarily results in a certain amount of pending as well as threatened claims, litigation, investigations, regulatory and legal and administrative cases, matters and proceedings, all of which are considered incidental to the normal conduct of business. When we determine that we have meritorious defenses to the claims asserted, we vigorously defend ourselves. We consider settlement of cases when, in management’s judgment, it is in the best interests of both the Company and its shareholders to do so.
We are currently pursuing two related collections matters against BKR Strategy Group. Since 2013, BKR Strategy Group has provided talent acquisition strategy and services to top companies. Starting in the third quarter of 2021, BKR Strategy Group subcontracted Recruiter.com to perform on Demand recruiter services on behalf of BKR Strategy Group’s clients. Although payments for services rendered were initially received in a timely fashion, BKR Strategy Group’s balance grew throughout the third and fourth quarters of 2021. This led to BKR Strategy Group executing a Promissory Note with a payment schedule for $500,000 on November 30, 2021, with a personal guarantee from its business principal as part of the note. After failing to meet the payment schedule and after repeated attempts to collect the balance due, we retained the law firm of Berkovitch & Bouskila, PLLC and filed two lawsuits against BKR Strategy Group on February 18, 2022, the first, to collect on unpaid invoices and the second, to enforce the promissory note, for a total sum of $1,400,000. On March 24, 2022, BKR Strategy Group made a counterclaim against us for $500,000 on the grounds of alleged overbilling. Management denies the basis for the counterclaim and expects to vigorously defend itself from this counterclaim. Outside counsel for the company has advised that at this stage in the proceedings, it cannot offer an opinion as to the probable outcome. As it is not possible to estimate if a loss will be incurred, there has been no accrual.
On June 21, 2022, the Supreme Court of the State of New York, New York County ruled in favor of the Company that BKR Strategy Group owes the Company $500,000, plus interest at 12% since November 22, 2021, through the entry of judgement in the lawsuit related to the enforcement on the Promissory Note executed by BKR Strategy Group. Proceedings in the other lawsuit remain ongoing.
On September 6, 2023, Recruiter.com Group, Inc. (the "Company") was served with a civil lawsuit filed by Pipl, Inc. in the Superior Court of the State of Connecticut, Judicial District of New Britain. The lawsuit alleges that the Company failed to pay for goods and/or services provided by Pipl, Inc. between January 3, 2021, and December 7, 2022, with the claimed amount due exceeding $266,562.59 plus interest, costs, and attorneys' fees. The Company is currently evaluating the complaint with counsel and intends to vigorously defend against the claims. Given the early stage of the litigation, the Company is unable to predict the outcome of the case or estimate the possible loss or range of loss, if any.
On April 1, 2024, Recruiter.com Group, Inc. ("the Company") became involved in legal proceedings initiated by Creditors Adjustment Bureau, Inc. ("CAB"), as documented in the Superior Court of California, County of Santa Clara, case number 24CV433086. CAB's complaint, filed on March 13, 2024, alleges that the Company failed to fulfill payment obligations under contracts with CAB's assignor, totaling approximately $213,899.94. CAB seeks recovery of the owed amounts, interest, attorney fees, costs, and other damages deemed appropriate by the court. The Company is currently reviewing the complaint and intends to defend itself vigorously. At this stage, the Company is unable to predict the outcome of the case or estimate the potential financial impact.
Except for the aforementioned proceedings described above, as of the date of this filing, 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.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Common Stock trades on the Nasdaq Capital Market under the symbol “RCRT.”
Holders
The number of shareholders of record of our Common Stock as of March 31, 2024, was approximately 612 recordholders. This is not the actual number of beneficial owners of our Common Stock, as shares are held in “street name” by brokers and others on behalf of such owners. As of March 31, 2024, there were no holders of record of our Series E Convertible Preferred Stock.
Dividends
To date, we have not paid cash dividends on our Common Stock and do not plan to pay such dividends in the foreseeable future. Our Board will determine our future dividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions. Dividends, under the Nevada Revised Statutes, may only be paid from our net profits or surplus. To date, we have not had a fiscal year with net profits and, subject to a valuation by the Board of the present value of the Company’s assets, do not have surplus.
Unregistered Sales of Equity Securities
We have previously disclosed all sales of securities without registration under the Securities Act of 1933.
Repurchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) describes the matters that we consider to be important to understanding the results of our operations for each of the two years in the years ended December 31, 2023, and 2022, and our capital resources and liquidity as of December 31, 2023, and 2022. Our fiscal year begins on January 1 and ends on December 31. We analyze the results of our operations for the last two years, including the trends in the overall business followed by a discussion of our cash flows and liquidity, and contractual commitments. We then provide a review of the critical accounting judgments and estimates that we have made that we believe are most important to an understanding of our MD&A and our consolidated financial statements. We conclude our MD&A with information on recent accounting pronouncements which we adopted during the year, as well as those not yet adopted that are expected to have an impact on our financial accounting practices.
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto, all included elsewhere herein. The forward-looking statements in this section and other parts of this document involve risks and uncertainties including statements regarding our plans, objectives, goals, strategies, and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under the caption “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995” below and as a result of certain factors, including but not limited to those set forth in “Part I - Item 1A. Risk Factors”. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of the Company.
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Overview
We operate an On Demand recruiting platform aimed at transforming the Employment and Recruitment Agency industry. Recruiter.com combines an online hiring software solution with On Demand recruiting services. Businesses of all sizes recruit talent faster using the Recruiter.com platform.
We help businesses accelerate and streamline their recruiting and hiring processes by providing On Demand recruiting services and technology. We leverage our network of recruiters to place recruiters on a project basis, aided by cutting edge artificial intelligence-based candidate sourcing, matching and video screening technologies. We operate cloud-based scalable software for professional hiring, which provides prospective employers access to a rich and diverse data set of prospective candidates.
Our mission is to become a preferred solution for hiring specialized talent.
Operating Businesses and Revenue
We generate revenue from the following activities:
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| Software Subscriptions: We offered a subscription to our web-based platforms that helped employers recruit talent. Our platforms allowed customers to source, contact, screen, and sort candidates using data science, advanced email campaigning tools, and predictive analytics. As part of our software subscriptions, we offered enhanced support packages and On Demand recruiting support services for an additional fee. Additional fees may be charged when we placed a candidate with our customer, depending on the subscription type. In such cases, if the candidate ceases to be employed by the customer during the initial 90 days (the 90-day guarantee), we refund the customer in full for all fees paid by the customer. In December of 2022, we sold one of our software platforms to Talent, Inc. that was used in the delivery of the subscription service. Subsequently, we continued providing the service, but leveraged third-party tools in the delivery of services. |
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| Recruiters On Demand: Consists of a consulting and staffing service specifically for the placement of professional recruiters, which we market as Recruiters On Demand. Recruiters On Demand is a flexible, time-based solution that provides businesses of all sizes access to recruiters on an outsourced, virtual basis for help with their hiring needs. As with other consulting and staffing solutions, we procure for our employer clients qualified professional recruiters, and then place them on assignment with our employer clients. We derive revenue from Recruiters On Demand by billing the employer clients for the placed recruiters’ ongoing work at an agreed-upon, time-based rate. We directly source recruiter candidates from our network of recruiters. In addition, we also offer talent planning, talent assessment, strategic guidance, and organizational development services, which we market as our “Talent Effectiveness” practice. Companies prepay for a certain number of consulting hours at an agreed-upon, time-based rate. We source and provide the independent consultants that provide the service. In March 2023, we announced a strategic partnership with Job Mobz to transition certain Recruiters on Demand clients and staff to Job Mobz in exchange for an ongoing revenue stream. (See below Revenue Share). |
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| Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generated full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we referred. Employers alerted us of their hiring needs through our Platform, or other communications. We sourced qualified candidate referrals for the employers’ available jobs through independent recruiter users that access the Platform and other tools. We supported and supplemented the independent recruiters’ efforts with dedicated internal employees we call our internal talent delivery team. Our talent delivery team selected and delivered 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 earned a “full-time placement fee”, an amount separately negotiated with each employer client. The full-time placement fee is typically either a percentage of the referred candidates’ first year base salary or an agreed-upon flat fee. |
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· | Marketplace: |
| Our Marketplace category comprises services for businesses and individuals that leverage our online presence and career communities. For businesses, this includes job postings, sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. We earn revenue by completing agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In some cases, we earn a percentage of revenue a business receives from attracting new clients by advertising on the Platform. Companies can also pay us to post job openings on our proprietary job boards to promote open job positions they are trying to fill. In addition to our work with direct clients, we categorize all online advertising and affiliate marketing revenue as Marketplace revenue. |
| For individuals, Marketplace includes services to assist with career development and advancement, including a resume distribution service that promotes these job seekers’ profiles and resumes to help with their procuring employment, upskilling, and training. Our resume distribution service allows a job seeker to upload their resume to our database, which we then distribute to our network of recruiters on the Platform. We earn revenue from a one-time flat fee for this service. We also offer a recruiter 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.
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·
| Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing such personnel with the employer, but with our providers acting as the employer of record for us, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for full-time placement hiring. This process includes employers informing us of open consulting and temporary staffing opportunities and projects, sourcing qualified candidates through the Platform and other similar means, and, finally, the employer selecting our candidates for placement after a process of review and selection. We bill these employer clients for our placed candidates’ ongoing work at an agreed-upon, time-based rate, typically on a weekly schedule of invoicing. Through a strategic sale to Futuris, Inc. In October, 2023, we exited the Consulting and Staffing line of business, and consider it discontinued.
Revenue Share: We refer certain clients to a third party in exchange for a referral fee. The amount of the referral fee is dependent upon whether the referral is an existing client of ours and what services we currently provide that client, or a client of a third party who is not historically serviced by us. Referral fees under the revenue share arrangement are subject to certain minimum and maximum payout amounts. We record referral fees earned under our revenue share arrangement on a net basis. |
Revenues as presented on the consolidated statements of operations represent services rendered to customers less sales adjustments and allowances.
Software subscription revenues are recognized over the term of the subscription for access to services and/or our web-based platform. Revenue is recognized monthly over the subscription term. Talent effectiveness subscription revenues are recognized over the term of the subscription when services are provided. Any payments received prior to the time passing to provide the subscription services are recorded as a deferred revenue liability. Revenue generated from the enhanced support package and On Demand support are recognized at the point-in-time when the service is provided. Revenue generated from placement fees that are related to the software subscription are recognized at the point-in-time when the 60 or 90-day guarantee expires.
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Recruiters On Demand services are billed to clients as either monthly subscriptions or time-based billings. Revenues for Recruiters On Demand are recognized on a gross basis when each monthly subscription service is completed. Talent Effectiveness consulting services are billed to clients upfront for a period of 12 months. Revenue is recognized on a gross basis monthly over the period the consulting services are provided.
Full-time placement revenues are recognized on a gross basis when the guarantee period specified in each customer’s contract expires. No fees for direct hire placement services are charged to the employment candidates. Any payments received prior to the expiration of the guarantee period are recorded as a deferred revenue liability. Payments for recruitment services are typically due within 90 days of completion of services.
Marketplace advertising revenues are recognized on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services. Job posting revenue is recognized at the end of the period the job is posted. Marketplace career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point at which the performance obligations are satisfied. Payments for career services are typically due upon distribution or completion of services.
Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in the net service revenues and equivalent amounts of reimbursable expenses are included in costs of revenue. We record substantially all revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of this line of revenues and expenses. We have concluded that gross reporting is appropriate because we have the task of identifying and hiring qualified employees, and our discretion to select the employees and establish their compensation and duties causes us to bear the risk for services that are not fully paid for by customers. Consulting and staffing revenues are recognized when the services are rendered by the temporary employees. We assume the risk of the acceptability of the employees to customers. Payments for consulting and staffing services are typically due within 90 days of completion of services.
Revenue share revenues represent a percentage of revenue we have earned in relation to client referrals we made to a third party. We record revenue in relation to revenue share on a net basis as an agent under this arrangement. We have concluded that net reporting is appropriate because we do not provide the underlying services and arrangements to meet the demands of the client that we referred to the third party. Revenue is recorded based on a net percentage of revenue that is shared between us and the third party and earned upon delivery of the services by the third party. The third party provides the underlying services in this arrangement.
Deferred revenue results from transactions in which we have been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.
Sales tax collected is recorded on a net basis and is excluded from revenue.
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2023 Business Update
In 2023, we focused on streamlining operations, reducing expenses, and bringing certain strategic transactions to fruition. Additionally, we continued investing in software development, including new functionality, developing our Mediabistro candidate and employer traffic, and improving the administration of our web-based assets. All the while, we shared our progress with media outreach and focused on providing clear updates to investors.
Since December 31, 2022, we:
| · | Announced a client case study with First, a leading global brand experience agency, which Recruiter.com helped grow its specialized talent pool. |
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| · | Launched a ChatGPT content series that explores the impact of this powerful artificial intelligence technology on talent acquisition and recruiting. |
| · | Formed a strategic partnership with hireEZ, the award-winning outbound recruiting platform, to provide the recruitment industry with an elevated level of efficiency and effectiveness when hiring talent. |
| · | Launched a Marketplace Platform at ondemand.Recruiter.com for providing recruiters and launched RecruitingClasses.com, a training platform for recruitment professionals. |
| · | Launched CandidatePitch, a software tools using artificial intelligence for the instant generation of candidate profiles. The tool is sold on a software-as-a-service, monthly basis. |
| · | Announced a transaction with GoLogiq to bring certain technology tools to the business; this transaction was later amended to a License Agreement, which was executed in March of 2024. |
| · | Executed certain financial transactions, including effecting a reverse stock split of issued and outstanding common stock at a ratio of 1-for-15 and closing a $1M registered direct and private placement offering. |
| · | Closed an asset purchase transaction with Futuris, Inc., which sold certain recruiting solutions clients in exchange for a share of gross profit and an amount of their publicly-held stock. |
| · | Announced the planned acquisition of Recruiter.com website and other certain assets by Job Mobz for cash and stock consideration; this transaction was later amended, with a current closing date set before June 30, 2024. |
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| Subsequent Events after December 31, 2023: | |
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| · | On March 22, 2024, the Company held its annual meeting, which elected members of our Board of Directors and nominated Salberg and Company as our auditor. |
| · | The Company announced the conversion of a Promissory Note with Parrut on April 2, 2024. |
| · | Announced the entry into a material agreement with GoLogiq, whereby the Company purchased a technology license and entered into a commercialization agreement. The agreement was subsequently amended on February 23, 2024. |
| · | Announced on March 7, 2024 the appointment of Granger Whitelaw as Chief Executive Officer of the Company. |
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Results of Operations
Revenue
Our revenue for the year ended December 31, 2023, was $3.2 million compared to $21.3 million for the prior year, representing a decrease of $18.1 million or 85%. This decrease resulted primarily from a decrease in our Recruiters on Demand business of $14.2 million or 87.8%. Additionally, Software Subscriptions contributed $0.4 million in revenue in 2023, compared to $2.5 million in 2022. We had a decrease in our Marketplace Solutions revenue of $468 thousand or 40.9%. We had a decrease in Permanent Placement fees of $917 thousand or 98% and a decrease in our Consulting and Staffing business of $567 thousand or 81% as we focused resources on growing more strategic lines of business.
Cost of Revenue
Cost of revenue for the year ended December 31, 2023, was $2.7 million, compared to $13.7 million in the prior year. This decrease resulted primarily due to decreases in compensation expense, third party staffing costs, and other fees related to the recruitment and staffing businesses acquired. The overall decrease in cost of revenue was proportionate to the decrease in revenue for the year at (80%) and (85%), respectively.
Our gross profit for 2023 was $0.5 million which produced a gross profit margin of 15%. In 2022 our gross profit was $7.6 million which produced a gross profit margin of 36%. The decrease in the gross profit margin from 2022 to 2023 reflects the decreases in both revenue and cost of revenue discussed above.
Operating Expenses
We had total operating expenses of $8.2 million for the year ended December 31, 2023, compared to $25.4 million for the year ended December 31, 2022. This decrease was primarily due to decreases in sales and marketing expense of $338 thousand, product and development of $942 thousand, amortization of intangibles of $2.4 million, impairment expense of $4.4 million, and other general and administrative expenses of $9.2 million.
Sales and Marketing
Our sales and marketing expense for the year ended December 31, 2023, was $0.4 million compared to $0.7 million for the prior year, which reflects a decrease in personnel, advertising, and marketing expense to help drive growth in our business.
Product Development
Our product development expense for the year ended December 31, 2023, decreased to $0.4 million from $1.4 million for the prior year. This decrease was attributable to the continued investment in our product offerings which primarily occurred during 2022. Technology and design expenses were $26 thousand for the current period compared to $772 thousand for the prior period.
Amortization of Intangibles and Impairment Expense
For the year ended December 31, 2023, we incurred a non-cash amortization charge of $1.3 million as compared to $3.7 million for the corresponding period in 2022. For the year ended December 31, 2023, we incurred a non-cash impairment expense of $0 as compared to $4.4 million for the corresponding period in 2022. The impairment expense decrease was a direct result of the acquisitions of intangible assets that occurred in 2021, with a full year of amortization and impairment charges in 2022 and amortization in 2023.
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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, 2023, our general and administrative expense was $6.1 million including $1.5 million of non-cash stock-based compensation. In 2022, our general and administrative expense was $15.3 million including $4.1 million of non-cash stock-based compensation. This decrease primarily reflects the decline in non-cash stock-based compensation, as well as a $0.6 million decrease in bad debt expense and a $5.3 million decrease in salaries and wages, payroll taxes, and commission expense.
Other Income (Expense)
Other income (expense) for the year ended December 31, 2023, consisted of other income of $2 thousand compared to other income of $258 thousand in 2022. In 2023, the other income was mostly from ERC income of $2.1 million in the period offset by the interest expense of $2.1 million.
Net loss from continuing operations
In the year ended December 31, 2023, we incurred a net loss of $7.7 million compared to a net loss of $17.6 million in the year ended December 31, 2022.
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Definition of Non-GAAP Financial Measures
The following discussion and analysis include 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 our 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.
We define 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 our results 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:
|
| Year Ended December 31, |
| |||||
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| 2023 |
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| 2022 |
| ||
Net loss |
| $ | (7,734,290 | ) |
| $ | (17,595,945 | ) |
Interest expense and finance cost, net |
|
| 2,645,694 |
|
|
| 965,323 |
|
Depreciation & amortization |
|
| 1,302,384 |
|
|
| 3,663,953 |
|
EBITDA (loss) |
|
| (3,786,212 | ) |
|
| (12,980,416 | ) |
Bad debt (recovery) expense |
|
| (143,774 | ) |
|
| 492,906 |
|
Gain on debt extinguishment |
|
| - |
|
|
| (1,205,195 | ) |
Impairment expense |
|
| - |
|
|
| 4,420,539 |
|
Stock-based compensation |
|
| 1,490,903 |
|
|
| 4,106,040 |
|
Adjusted EBITDA (Loss) |
| $ | (2,439,083 | ) |
| $ | (5,389,761 | ) |
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Liquidity and Capital Resources
For the year ended December 31, 2023, net cash used in operating activities was $0.9 million, compared to net cash used in operating activities of $6.9 million for 2022. The decrease in cash used in operating activities was attributable to the change in operating expenses outlined previously to support the changes in our business. For the year ended December 31, 2023, net loss was $6.7 million. Net loss includes non-cash items of depreciation and amortization expense of $1.3 million, bad debt expense (recovery) of ($143) thousand, equity-based compensation expense of $1.5 million, and amortization of debt discount and debt costs of $1.3 million. Changes in operating assets and liabilities include primarily the following: accounts receivable decreased by $1.9 million and prepaid expenses and other current assets decreased by $96 thousand. Accounts payable, accrued liabilities, deferred payroll taxes, other liabilities, and deferred revenue decreased in total by $84 thousand.
For 2023, cash used in investing activities was $0 compared to $350 thousand of cash used in investing activities in 2022 principally as a result of cash paid for software development costs offset by proceeds from sale of intangibles assets.
In 2023, net cash provided by financing activities was $1.0 million. The principal factors were $786 thousand from issuance of common stock net of equity issuance costs, $871 thousand from proceeds from a factoring agreement, and $315 thousand from proceeds from exercised warrants. The proceeds were partially offset by $80 thousand from purchased preferred shares, $668 thousand from repayments of loans, and $215 thousand from repayments of a factoring agreement. In 2022, net cash provided by financing activities was $5.7 million. The principal factors were $4.1 million from the sale of notes, net of original issue discounts and offering costs and $7.3 million from proceeds from factor, offset by $2.0 million in repayments of notes, and $3.7 million in repayments to factor.
Based on cash on hand as of March 26, 2024, of approximately $428,000, we do not have the capital resources to meet our working capital needs for the next 12 months.
Our 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. We incurred net losses and negative operating cash flows since inception. For the year ended December 31, 2023, we recorded a net loss of $6.7 million. We have not yet established an ongoing source of revenue that is sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable.
Our historical operating results indicate substantial doubt exists related to our 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. 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, equity and debt 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.
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Financing Arrangements
Promissory Notes Payable
We received $250,000 in proceeds from an institutional investor pursuant to a promissory note dated May 6, 2021. The note bears interest at 12% per year and matures on May 6, 2023. In April 2022, we paid off the total principal balance of the note and the accrued interest.
We issued a promissory note for $1,750,000 pursuant to the Parrut acquisition agreement dated July 7, 2021. The note had a term of 24 months, accrued interest at 6%, and originally matured on July 1, 2023. The note required monthly payments of $77,561. On October 19, 2022, Parrut agreed to subordinate their note to a promissory note issued to Montage Capital II, L.P. In return, we restructured the payment schedule for the Parrut note which was set to mature on August 31, 2023, and bears interest at 12%. On August 31, 2023, we did not make payments on amounts due under the note with Parrut and are currently in process of amending the maturity date of the note. As of December 31, 2023, and December 31, 2022, the outstanding balance on the promissory note with Parrut was $238,723 and $444,245, respectively.
We issued a promissory note for $3,000,000 pursuant to the Novo Group acquisition agreement dated August 27, 2021. The note originally had a term of 30 months, bears interest at 6%, and was scheduled to mature on February 1, 2024. The note requires monthly payments of $85,000 for the first 12 months, $110,000 for months 13 through 24, $155,000 for months 25 through 29, and $152,357 for month 30. In April 2022, we negotiated a reduction in this promissory note with Novo Group due to employee turnover that occurred following the acquisition. We entered into an agreement with Novo Group to reduce the outstanding principal balance by $600,000 and changed the maturity date to November 1, 2023. The reduction in the promissory note was accounted for as gain on debt extinguishment on the consolidated statement of operations.
In October 2022, Novo Group entered into a Subordination Agreement (“Subordination Agreement”), pursuant to which Novo agreed to subordinate all its indebtedness and obligations we owe to Novo to all the indebtedness and obligations we owe to Montage Capital.
In February 2023, we entered into an additional Amendment to the Promissory Note with Novo Group, Inc. (the “Novo Amendment”). The Novo Amendment further modifies the Promissory Note issued to Novo on August 27, 2021 (the “Novo Note”) and amended on April 1, 2022, by amending the payment schedule pursuant to which we would make payments of principal and interest to Novo. Novo agreed we would pay interest only for the period starting November 1, 2022, though and including March 31, 2023, with payments of principal and interest to resume starting April 1, 2023. We also replaced the existing payment schedule with a new payment schedule terminating on October 31, 2023. On November 1, 2023, we did not make payments due on the promissory note with Novo Group and are currently in process of amending the maturity date of the note. On December 31, 2023, and December 31, 2022, the outstanding balance on the promissory note with Novo Group was $1,198,617 and $1,292,360, respectively.
On August 17, 2022, we issued promissory notes for $1,111,111, in the aggregate (the “8/17/22 Notes”) We received proceeds of $960,000, net of debt issuance costs of $40,000 and an original issue discount of $111,111. The 8/17/22 Notes have a term of 12 months, bear interest at 6%, and was set to mature on August 17, 2023. The 8/17/22 Notes was set to be paid off in full on August 17, 2023. As a part of these financings, we granted the noteholders 694,445 warrants to purchase our common stock (See Note 8) (the “8/17/22 Warrants”). The 8/17/22 Warrants were valued at $463,737 and treated as a debt discount to be amortized over the life of the note. On August 7, 2023, the Company signed an amendment 8/17/22 Notes. The amendment extends each of the maturity dates of August 17, 2023, by 180 days. In return, the company has agreed to give $50,000 in either stock or cash at its discretion within ninety days of signing the amendment. As of December 31, 2023, and December 31, 2022, the outstanding balance on the 8/17/22 Notes, net of the unamortized debt issuance costs and debt discounts of $13,056 and $384,280, respectively, was $1,421,864 and $726,831, respectively.
On November 6, 2023, the Company received written notice (the “Default Notice”) from Cavalry Fund I LP that the Company was in default under that certain (i) the August 17 Note issued by the Company to Cavalry, and that certain (ii) the August 30 Note. As a result of the Identified Defaults, the Company would be in default under the following agreements for indebtedness: (i) Original Issue Discount Promissory Note, dated as of August 17, 2022, issued pursuant to the August 17 SPA by the Company to Porter Partners, L.P., (ii) Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to L1 Capital Global Opportunities Master Fund, (iii)Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to Firstfire Global Opportunities Fund LLC, and (iv) Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to Puritan Partner, LLC (collectively, the “Other August 2022 Notes”). An event of default under the Other August 2022 Notes would cause the default interest rate of 15% to apply as set forth in the Other August 2022 Notes and the holders of the Other August 2022 Notes would be permitted to elect to accelerate payment of amounts due, at the Mandatory Default Amount, as defined in the Other August 2022 Notes, under each of the holder’s respective Other August 2022 Note.
As of December 31, 2023, we had defaulted on the Promissory Note, dated as of August 17, 2022, the (“8/17/22 Notes”). In event of default under the 8/17/22 Notes caused the default interest rate of 15% to apply as set forth in the 8/17/22 Notes and the holders of the 8/17/22 Notes would be permitted to elect to accelerate payment of amounts due, at the Mandatory Default Amount, as defined in the 8/17/2022 Notes, under each of the holder’s respective 8/17/22 Notes. As of December 31, 2023, and December 31, 2022, the outstanding balance on the 8/17/22 Notes, net of the unamortized debt issuance costs and debt discounts of $13,056 and $384,280, respectively, was $1,421,864 and $726,831, respectively.
On August 30, 2022, we issued promissory notes for $1,305,556, in the aggregate (the “8/30/22 Notes,” and together with the 8/17/22 Notes, the “August 2022 Notes”). We received proceeds of $1,175,000, net of an original issue discount of $130,556. The 8/30/22 Notes have a term of 12 months, bear interest at 6%, and was set to mature on August 30, 2023. The 8/30/22 Notes were set to be paid off in full on August 30, 2023. As a part of these financings, we granted the noteholders 54,398 warrants to purchase our common stock (See Note 9) (the “8/30/22 Warrants, and together with the 8/17/22 Warrants, the “August 2022 Warrants”). These 8/30/22 Warrants were valued at $569,106 and treated as a debt discount to be amortized over the life of the note. As of December 31, 2023, and December 31, 2022, the outstanding balance on the 8/30/22 Notes, net of the unamortized debt issuance costs and debt discounts of $0 and $466,441, respectively, was $1,194,445 and $839,115, respectively.
On November 6, 2023, the Company received written notice (the “Default Notice”) from Cavalry Fund I LP that the Company was in default under that certain (i) the August 17 Note issued by the Company to Cavalry, and that certain (ii) the August 30 Note. As a result of the Identified Defaults, the Company would be in default under the following agreements for indebtedness: (i) Original Issue Discount Promissory Note, dated as of August 17, 2022, issued pursuant to the August 17 SPA by the Company to Porter Partners, L.P., (ii) Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to L1 Capital Global Opportunities Master Fund, (iii)Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to Firstfire Global Opportunities Fund LLC, and (iv) Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to Puritan Partner, LLC (collectively, the “Other August 2022 Notes”). An event of default under the Other August 2022 Notes would cause the default interest rate of 15% to apply as set forth in the Other August 2022 Notes and the holders of the Other August 2022 Notes would be permitted to elect to accelerate payment of amounts due, at the Mandatory Default Amount, as defined in the Other August 2022 Notes, under each of the holder’s respective Other August 2022 Note.
As of December 31, 2023, we had defaulted on the Promissory Note, dated as of August 30, 2022, the (“8/30/22 Notes”). In event of default under the 8/30/22 Notes caused the default interest rate of 15% to apply as set forth in the 8/30/22 Notes and the holders of the 8/30/22 Notes would be permitted to elect to accelerate payment of amounts due, at the Mandatory Default Amount, as defined in the 8/30/2022 Notes, under each of the holder’s respective 8/30/22 Notes. As of December 31, 2023, and December 31, 2022, the outstanding balance on the 8/30/22 Notes, net of the unamortized debt issuance costs and debt discounts of $0 and $466,441, respectively, was $1,194,445 and $839,115, respectively.
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On October 19, 2022, the “Company closed a Loan and Security Agreement (the “Loan Agreement”), by and among the Company and Montage Capital II, L.P. (the “Lender”). Pursuant to the Loan Agreement, the Lender will make advances (“Advances”) in the aggregate principal amount of $2,250,000, with the first Advance of $2,000,000 being provided on or around the Closing Date and the second Advance of $250,000 being available to the Company upon request prior to April 30, 2023. Interest will accrue on all Advances under the Loan Agreement at a per annum rate of 12.75%. In the event of a default under the terms of the Loan Agreement, the interest rate increases by 5 percentage points above the interest rate in effect immediately prior to a default. The entire outstanding principal balance of the Advances, all accrued and unpaid interest thereon, and all fees and other amounts outstanding thereunder will be immediately due and payable on the 42nd month anniversary of the Closing Date (the “Maturity Date”). In connection with the Loan Agreement, the Company granted and pledged to the Lender a continuing security interest in all presently existing and hereafter acquired or arising Collateral (as more specifically defined in the Loan Agreement) which includes all personal property of the Company and its subsidiaries. The Loan Agreement contains certain affirmative and negative covenants to which the Company is also subject. The Company agreed to pay the Lender a fee of $45,600, with $40,000 due upon the execution of the Loan Agreement and the balance due upon the funding of the second Advance.
The Company is permitted to prepay any amounts due to the Lender; provided, however, that a Prepayment Fee (as more specifically defined in the Loan Agreement) shall be owed to the Lender depending on when the amounts are prepaid.
In addition, in connection with the Loan Agreement, the Company issued 47,103 warrants to purchase common stock of the Company (the “Warrants”) to the Lender, with 41,520 Warrants issued and exercisable upon the Closing Date and the additional 5,580 Warrants becoming exercisable upon funding of the second Advance. The Warrants are exercisable for ten years from the Closing Date at an exercise price of $30.00 per share, subject to certain adjustments. Upon the earlier of the Maturity Date or a sale of the Company or other change in control, the Lender has the right to cause the Company to repurchase the Warrants for up to $703,125 ($600,000 if only the first Advance has been made and $703,125 if both Advances have been made). The Company is also obligated to pay the Lender a cash fee equal to 1.25% of the aggregate principal amount of the Advances that is outstanding on each anniversary of the Closing Date if (i) the average closing price of the Company’s common stock for the thirty (30) day period prior to such anniversary date is less than $30.00 or (ii) the closing price of the Company’s common stock for the date immediately prior to such anniversary date is less than $30.00.
The Company accrues anniversary fees each year on the one-year anniversary of the issuance date of 1.25% of the outstanding advance balance depending on the stock price. The accrued anniversary fees are payable on the date the buyout fee becomes due and payable. The Company records an expense for the 1.25% cash fee ratably over the 12 months.
On February 2, 2023, the Company entered into a First Amendment to Loan and Security Agreement (the “Montage Amendment”), by and between the Company, its subsidiaries (Recruiter.com, Inc., Recruiter.com Recruiting Solutions, LLC, Recruiter.com Consulting, LLC, VocaWorks, Inc., Recruiter.com Scouted, Inc., Recruiter.com Upsider, Inc., and Recruiter.com - OneWire, Inc.), and Montage, effective as December 18, 2022. The Montage Amendment modifies that certain Loan and Security Agreement by and among the Company, its subsidiaries, and Montage to provide the Company with additional time to meet certain post-closing covenants.
On August 16, 2023, we entered into a Second Amendment to Loan and Security Agreement (the “the Second Montage Amendment”), by and among the Company, its subsidiaries Montage. The Second Montage Amendment modifies that certain Loan and Security Agreement by and among the Company, its subsidiaries, and Montage, as amended (the “Loan and Security Agreement”) to join CognoGroup, Inc. as an additional borrower to the Loan and Security Agreement and amend and restate the definition of “Maturity Date” to the earlier of (i) the four month anniversary of the initial closing of the Purchase Agreement or (ii) February 28, 2024. Additionally, the Montage Amendment provides for Montage’s consent to certain transactions that would have otherwise been prohibited under the Loan and Security Agreement, including the transaction contemplated by the Purchase Agreement with Job Mobz.
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In addition, in connection with the Second Montage Amendment, the Company will issue warrants to purchase common stock of CognoGroup, Inc. (the “CognoGroup, Inc Warrants”) to the Lender. The number of shares shall be equal to 1.4% of the CognoGroup, Inc outstanding capital stock on a fully diluted basis at the exercise price of $0.01 per share and with expiration date of October 19, 2032. On and after the earlier to occur of (i) October 19, 2026, (ii) any sale, license, or other disposition of all or substantially all of the assets of the CognoGroup, Inc., or any reorganization, consolidation, or merger of the CognoGroup, Inc. where the holders of the CognoGroup, Inc.’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction, (iii) a transaction in which any “person” or “group” becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of the CognoGroup, Inc. ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the CognoGroup, Inc., who did not have such power before such transaction (“Change in Control”), or (iv) the dissolution or liquidation of the CognoGroup, Inc (“Wind-Up”), CognoGroup, Inc shall, at the request of Holder, purchase all rights that Holder has under this CognoGroup, Inc Warrants for a cash payment in the amount equal to $600,000 (the “Buyout Fee”). Upon the consummation of the Gologiq Acquisition and the Asset Transfer, the Warrant to Purchase Stock issued by Parent to Lender on October 19, 2022, shall automatically terminate and be of no further force or effect.
As of December 31, 2023, and December 31, 2022, the outstanding balance on the Loan Agreement, and a puttable liability was established, net of the unamortized debt issuance costs and debt discounts of $164,016 and $622,630, respectively, was $1,577,984 and $1,377,370, respectively.
Factoring Arrangement
We entered into a factoring agreement with CSNK Working Capital Finance Corp. d/b/a Bay View Funding, a subsidiary of Heritage Bank of Commerce (the “Buyer”), effective April 27, 2022 (the “Factoring Agreement”), for the purpose of factoring our trade accounts receivable with recourse. The proceeds of the factoring are used to fund our general working capital needs. The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. The agreement is for a term of twelve months with an auto renewal clause for an additional twelve months unless terminated by the parties. The agreement is secured by substantially all assets of the Company.
Pursuant to the Factoring Agreement, we sell certain trade accounts receivable to the Buyer. We are charged a finance fee, defined as a floating rate per annum on outstanding advances under the Factoring Agreement, equal to the prime rate plus 3.25% due on the first day of each month. We are also charged a factoring fee of 0.575% of the gross face value of any trade accounts receivables for the first 30 days from when the trade accounts receivable is purchased and 0.30% for each fifteen days afterward until the purchased receivable is paid in full or repurchased.
We receive advances of up to 85% of the amount of eligible trade accounts receivable. Advances outstanding shall not exceed the lesser of $3,000,000 or an amount equal to the sum of all undisputed purchased trade accounts receivable multiplied by 85%, less any reserved funds.
All collections of purchased receivables go directly to the Buyer controlled lockbox and Buyer shall apply these collections to the Company’s obligations. The Company will immediately turn over to the Buyer any payment on a purchased receivable, or receivable assigned to Buyer under the Factoring Agreement, that comes into the Company’s possession. In the event the Company comes into possession of a remittance comprising payments of both a purchased receivable and receivable which has not been purchased by Buyer, the Company is required to hold the same in accordance with the provisions set forth above and immediately turn same over to Buyer.
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As stated previously, the Company factors the accounts receivable on a recourse basis. Therefore, if the Buyer cannot collect the factored accounts receivable from the customer, the Company must refund the advance amount remitted to us for any uncollected accounts receivable from the customer. Accordingly, the Company records the liability of potentially having to refund the advance amount as short-term debt when the factoring arrangement is utilized. As of December 31, 2023, and December 31, 2022, $0 and $545,216 of advances were outstanding under the factoring arrangement, respectively, and $6,318 and $263,939, was due from the factor, respectively, resulting in a net $0 and $281,277 loan payable to the factor, respectively.
As consideration for Buyer forgoing other factoring transactions in the marketplace and for establishing the maximum credit of $3,000,000, the Company paid the Buyer a facility fee upon entering into the Factoring Agreement (the “Facility Fee”) in the amount of one half of one percent (0.50%) of the maximum credit, $15,000. An additional Facility Fee is charged for increases to the maximum credit, but only for the incremental increase. The Facility Fee was accounted for as a factoring fee expense, which is included as part of the interest expense along with all other factor fees.
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 marketable securities, fair value of assets acquired and liabilities assumed in asset acquisitions and the estimated useful life of assets acquired, fair value of contingent consideration, asset acquisitions and business combinations, fair value of derivative liabilities, fair value of securities issued for acquisitions and business combinations, fair value of assets acquired and liabilities assumed in business combinations, fair value of intangible assets and goodwill, fair value of capitalized software, fair value of non-monetary transactions, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.
Revenue Recognition
Policy
We recognize 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 we expect 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.
Revenues as presented on the statement of operations represent services rendered to customers less sales adjustments and allowances.
Software subscription revenues are recognized over the term of the subscription for access to services and/or our web-based platform. Revenue is recognized monthly over the subscription term. Talent effectiveness subscription revenues are recognized over the term of the subscription when services are provided. Any payments received prior to the time passing to provide the subscription services are recorded as a deferred revenue liability. Revenue generated from the enhanced support package and On Demand support are recognized at the point-in-time when the service is provided. Revenue generated from placement fees that are related to the software subscription are recognized at the point-in-time when the 60 or 90-day guarantee expires.
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Recruiters On Demand services are billed to clients as either monthly subscriptions or time-based billings. Revenues for Recruiters On Demand are recognized on a gross basis when each monthly subscription service is completed. Talent Effectiveness consulting services are billed to clients upfront for a period of 12 months. Revenue is recognized on a gross basis monthly over the period the consulting services are provided.
Full-time placement revenues are recognized on a gross basis when the guarantee period specified in each customer’s contract expires. No fees for direct hire placement services are charged to the employment candidates. Any payments received prior to the expiration of the guarantee period are recorded as a deferred revenue liability. Payments for recruitment services are typically due within 90 days of completion of services.
Marketplace Solutions revenues are recognized either on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services.
Marketplace advertising revenues are recognized on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services. Job posting revenue is recognized at the end of the period the job is posted. Marketplace career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point at which the performance obligations are satisfied. Payments for career services are typically due upon distribution or completion of services.
Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. Reimbursements, including those related to travel and out- of-pocket expenses, are also included in the net service revenues and equivalent amounts of reimbursable expenses are included in costs of revenue. We record substantially all revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of this line of revenues and expenses. We have concluded that gross reporting is appropriate because we have the task of identifying and hiring qualified employees, and our discretion to select the employees and establish their compensation and duties causes us to bear the risk for services that are not fully paid for by customers. Consulting and staffing revenues are recognized when the services are rendered by the temporary employees. We assume the risk of acceptability of the employees to customers. Payments for consulting and staffing services are typically due within 90 days of completion of services.
Revenue share revenues represent a percentage of revenue we have earned in relation to client referrals we made to a third party. We record revenue in relation to revenue share on a net basis as an agent under this arrangement. We have concluded that net reporting is appropriate because we do not provide the underlying services and arrangements to meet the demands of the client that we referred to the third party. Revenue is recorded based on a net percentage of revenue that is shared between us and the third party and earned upon delivery of the services by the third party. The third party provides the underlying services in this arrangement.
Deferred revenue results from transactions in which we have been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.
Sales tax collected is recorded on a net basis and is excluded from revenue.
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. We test 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.
We perform our annual goodwill impairment assessment on December 31st of each year or as impairment indicators dictate.
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When evaluating the potential impairment of goodwill, management first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of our reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the impairment testing methodology using an appropriate valuation method.
We compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment to be recognized is recognized as the amount by which the carrying amount exceeds the fair value.
When required, we may arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results.
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Discontinued Operations
In accordance with ASC 205-20 Discontinued Operations, the results of the Recruiter Businesses are presented as discontinued operations in the Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Recruiter Businesses as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of December 31, 2022, and recorded a gain on the sale of discontinued operations, net of tax during the year ended December 31, 2023. The Company evaluated the divestitures of the Recruiter Business in accordance with ASC 205-20 and determined that transactions in aggregate represented a strategic shift that had a major impact on the Company. Accounting for discontinued operations and the related gain on sale of discontinued operations requires us to make estimates and judgements regarding the allocation of costs and net asset values to discontinued operations.
Recently Issued Accounting Pronouncements
There have not been any recent changes in accounting pronouncements and ASU issued by the FASB that are of significance or potential significance to the Company except as disclosed below.
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in purchase accounting. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. On January 1, 2023, the adoption of ASU 2021-08 did not have a material impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022, for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities.
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.
In the period from January 2024 through March 2024 the FASB has not issued any additional accounting standards updates that have a significant impact on the Company. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on page F-1 of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
(a) | Disclosure Controls and Procedures |
Our principal executive officer and principal financial officer, with the assistance of other members of our management, have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report. Based on such evaluation, our principal executive officer and principal financial officer had concluded that our disclosure controls and procedures were not effective due to material weaknesses in internal controls over financial reporting as identified below.
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(b) | Management’s Report on Internal Control over Financial Reporting |
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report. In making this assessment, our management used the criteria set forth by the Committee of Sponsor Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on that evaluation, as a result of the material weaknesses described below, management has concluded that our internal control over financial reporting was not effective as of December 31, 2023.
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified 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 monitoring during the process leading to and including the preparation of the consolidated financial statements, and (2) We do not have the in-house technical expertise to identify and analyze complex or unusual transactions for proper accounting treatment. Accordingly, management’s assessment is that our internal controls over financial reporting were not effective as of December 31, 2023.
Changes in Internal Control over Financial Reporting
We have worked to establish all the checks and balances needed for all financial areas of our business. We hired a consultant in mid-2020 to establish best practices and help us document and implement these. This consultant is a CPA and has a significant background in running the accounting and budgeting process for public companies. We began adopting these best practices during the fourth quarter of 2020. We retained an outsourced firm with a panel of CPA consultants in 2021 to assist in building internal controls and preparing financial reports.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table provides information regarding our executive officers and directors:
Director Nominee |
| Age |
| Position |
| Director Since |
Evan Sohn |
| 56 |
| Director |
| April 2019 |
Granger Whitelaw |
| 57 |
| Chief Executive Officer and Director |
| March 2024 |
Miles Jennings |
| 46 |
| Interim Chief Financial Officer and Director |
| April 2019 |
Lillian Mbeki |
| 47 |
| Director |
| March 2024 |
Deborah Leff |
| 56 |
| Director |
| August 2020 |
Steve Pemberton |
| 57 |
| Director |
| March 2021 |
Wallace D. Ruiz |
| 72 |
| Director |
| May 2018 |
Each of our directors currently holds a one-year term, serving until our annual meeting of shareholders to be held in 2024.
Executive Officers
Granger Whitelaw - Mr. Whitelaw has served as the Company’s Chief Executive Officer since March 2024. Prior to that, Mr. Whitelaw was appointed as a director of GoLogiq, Inc. effective March 15, 2022. Currently based in Vietnam, Mr. Whitelaw is a serial entrepreneur who has successfully built and advised many businesses in Media, Aviation, Racing, Entertainment, Software, Technology, Consumer Products, and Real Estate in the U.S and countries around the world. Mr. Whitelaw has raised over $3.4 Billion for independent projects over his career and completed many mergers, acquisitions, public offerings, and private equity financings. Along with a strong background in Finance and Operations, Mr. Whitelaw’s core strengths are Strategy, Sales, Marketing, Mergers/Acquisitions, Governance and Corporate Development.
Miles Jennings - Mr. Jennings has served as the Company’s Chief Financial Officer since March 2024, after serving as its Chief Executive Officer. 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 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 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.
Non-Employee Directors
Evan Sohn - Mr. Sohn served as the Company’s Chief Executive Officer since July 2020 and then subsequently, 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.
Lillian Mbeki - Ms. Mbeki has served on the Board since March 2024. Ms. Mbeki has been the Chief Executive Officer of ELLEM Marketing & Communications LTD since July 2013. She was awarded a Doctorate in Business Administration from Edinburgh Business School, Herriot Watt University, UK in 2015, a Master of Science in Health Systems Management from Kenyatta University, Kenya in 2011, a MBA with Specialism in Strategy & Negotiation from Edinburgh Business School, Herriot Watt University, UK in 2011 and a Bachelor of Science in Nursing from University of Nairobi, Kenya in 2000.
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Wallace D. Ruiz - Mr. Ruiz has served on the Board since May 2018. Mr. Ruiz, Chief Executive Officer 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 has served on the Board from August 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.
Steve Pemberton - Mr. Pemberton has served on the Board since March 2021. Mr. Pemberton has served as chief human resources officer of Workhuman, a provider of cloud-based human capital management solutions since December 2017. In such a capacity, Mr. Pemberton works with HR leaders and senior management executives worldwide to help build inspiring workplaces where every employee feels recognized, respected, and appreciated for who they are and what they do. He champions and promotes the Workhuman movement to inspire HR leaders to embrace more humanity and foster a sense of purpose in the workplace. Prior to joining Workhuman, Mr. Pemberton served as VP Diversity and Inclusion, Chief Diversity Officer at Walgreens Boots Alliance (and as Chief Diversity Officer at its predecessor Walgreens) from 2011 to 2017 and as VP, Chief Diversity Officer at Monster.com from 2005 to 2010. In 2015, Mr. Pemberton was appointed by United States Secretary of Labor Thomas Perez to serve on the Advisory Committee for the Competitive Integrated Employment of People with Disabilities. Mr. Pemberton earned his undergraduate and graduate degrees at Boston College and serves on several nonprofit boards, including UCAN and Disability:IN, in addition to his own A Chance in the World Foundation, the non-profit he founded to help young people aging out of the foster care system.
Family Relationships
There are no family relationships among our directors and/or executive officers.
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”).
The following table identifies the independent and non-independent current Board and committee members:
Name |
| Audit(1) |
| Compensation(2) |
| Nominating(3) |
| Independent |
Evan Sohn |
|
|
|
|
|
|
|
|
Miles Jennings |
|
|
|
|
|
|
|
|
Deborah Leff |
| X |
| X |
|
|
| X |
Granger Whitelaw |
|
|
|
|
|
|
|
|
Wallace D. Ruiz |
| Chairman |
|
|
|
|
| X |
Lillian Mbeki |
| X |
| X |
| X |
| X |
Steve Pemberton |
|
|
|
|
| X |
| X |
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Board and Committee Meetings
During the year ended December 31, 2023, the Board had nine meetings, the Audit Committee had four meetings, the Compensation Committee had two meetings, and the Nominating Committee had zero 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 responsibility for the financial statements and the reporting process, including the system of internal controls. The Audit Committee reviews the Company’s financial reporting process on behalf of the Board and administers our engagement of the independent registered public accounting firm. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examinations, the evaluations of our internal controls, and the overall quality of our financial reporting.
Audit Committee Financial Expert
Our Board has determined that Mr. Ruiz is qualified as an Audit Committee Financial Expert, as that term is defined under the rules of the SEC and in compliance with the Sarbanes-Oxley Act.
Compensation Committee
The function of the Compensation Committee is to determine the compensation of our executive officers. The Compensation Committee has the power to set performance targets for determining annual bonuses payable to executive officers and may review and make recommendations with respect to stockholder proposals related to compensation matters.
Nominating Committee
The responsibilities of the Nominating Committee include the identification of individuals qualified to become Board members, the selection of nominees to stand for election as directors, the oversight of the selection and composition of committees of the Board, establishing procedures for the nomination process, oversight of possible conflicts of interests involving the Board and its members, developing corporate governance principles, and the oversight of the evaluations of the Board and management. The Nominating Committee has not established a policy with regard to the consideration of any candidates recommended by stockholders. If we receive any stockholder recommended nominations, the Nominating Committee will carefully review the recommendation(s) and consider such recommendation(s) in good faith.
Board Diversity
While we do not have a formal policy on diversity, our Board considers diversity to include the skill set, background, reputation, type and length of business experience of our Board members as well as a particular nominee’s contributions to that mix. Our Board believes that diversity promotes a variety of ideas, judgments and considerations to the benefit of our Company and stockholders. Although there are many other factors, the Board primarily focuses on public company board experience, knowledge of the recruiting industry, or background in finance or technology, and experience operating growing businesses. Our current Board Diversity Matrix can be found at our investor website at https://investors.recruiter.com/board-diversity-matrix.
Board Leadership Structure
Our Board has not adopted a formal policy regarding the separation of the offices of Chief Executive Officer and Chairman of the Board. Rather, the Board believes that different leadership structures may be appropriate for our Company at different times and under different circumstances, and it prefers flexibility in making this decision based on its evaluation of the relevant facts at any given time.
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Board Role in Risk Oversight
Our Board bears responsibility for overseeing our risk management function. Our management keeps the Board apprised of material risks and provides to directors’ access to all information necessary for them to understand and evaluate the effect of these risks, individually or in the aggregate, on our business, and how management addresses them. Our Executive Chairman works closely together with the Board once material risks are identified on how to best address such risks. If the identified risks present an actual or potential conflict with management, our independent directors may conduct the assessment.
Code of Ethics
Our Board has adopted a Code of Ethics that applies to all of our employees, including our Chief Executive Officer and Chief Financial Officer. Although not required, the Code of Ethics also applies to our directors. The Code of Ethics provides written standards that we believe are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure and compliance with laws, rules and regulations, including insider trading, corporate opportunities and whistleblowing or the prompt reporting of illegal or unethical behavior. We will provide a copy of our Code of Ethics, without charge, upon request in writing to Recruiter.com Group, Inc. at 123 Farmington Avenue Suite 252 Bristol CT 06010, Attention: Corporate Secretary.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who own more than 10% of our Common Stock to file initial reports of ownership and changes in ownership of our Common Stock with the SEC. These individuals are required by the regulations of the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of the forms furnished to us none of our directors, executive officers, and persons who own more than 10% of our Common Stock failed to comply with Section 16(a) filing requirements, except an unreported grant of stock options for each of Messrs. Sohn, Jennings, Pemberton, and Heath and Ms. Krandel, one late reported open market purchase by Mr. Sohn, one unreported open market purchase of units by Messrs. Ruiz and Heath in connection with our July 2021 underwritten public offering, and a late Form 3 filing for each of Messrs. Pemberton and Heath.
Communication with our Board
Although we do not have a formal policy regarding communications with the Board, stockholders may communicate with the Board by writing to us at Recruiter.com Group, Inc., 123 Farmington Avenue, Suite 252 Bristol, CT, Attention: Corporate Secretary. Stockholders who would like their submission directed to a member of the Board may specify, and the communication will be forwarded, as appropriate.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following information is related to all plan and non-plan compensation awarded to, earned by, or paid by us for the years ended December 31, 2023 and December 31, 2022, for all individuals serving as our principal executive officer or acting in a similar capacity during the year ended December 31, 2023, and our two most compensated executive officers, other than the principal executive officer, serving at December 31, 2023 whose total compensation exceeded $100,000 (the “Named Executive Officers”).
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Summary Compensation Table
|
|
| Salary |
|
| Bonus |
|
| Stock Awards |
|
| Option Awards |
|
| Non-Equity Incentive Plan Compensation |
|
| All Other Compensation |
| |||||||||||
Name and Principal Position |
| Year |
| ($) |
|
| ($) |
|
| ($)(1) |
|
| ($)(1) |
|
| ($) |
|
| ($) |
|
| Total ($) |
| |||||||
Evan Sohn Executive Chairman |
| 2023 |
|
| 140,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| — |
|
|
| — |
|
|
| 140,000 |
|
and Chief Executive Officer (2) |
| 2022 |
|
| 194,000 |
|
|
| - |
|
|
| - |
|
|
| 245,436 |
|
|
| 90,000 |
|
|
| — |
|
|
| 529,436 |
|
Miles Jennings President and |
| 2023 |
|
| 182,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| — |
|
|
| — |
|
|
| 182,000 |
|
Chief Operating Officer (3) |
| 2022 |
|
| 208,584 |
|
|
| - |
|
|
| - |
|
|
| 123,293 |
|
|
| 45,000 |
|
|
| — |
|
|
| 376,877 |
|
Josh McBride Former Chief Revenue Officer (4) |
| 2023 |
|
| 84,427 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 84,427 |
|
|
| 2022 |
|
| 197,744 |
|
|
| - |
|
|
| - |
|
|
| 96,574 |
|
|
| 167,597 |
|
|
| - |
|
|
| 461,945 |
|
Xuan Smith Former Chief Technology Officer (5) |
| 2023 |
|
| 11,294 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,294 |
|
|
| 2022 |
|
| 236,952 |
|
|
| - |
|
|
| - |
|
|
| 96,956 |
|
|
| 84,193 |
|
|
| - |
|
|
| 417,741 |
|
(1) | The amounts in this column represent the fair value of each award as of the grant date as computed in accordance with FASB ASC Topic 718 and the SEC disclosure rules. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures related to service-based vesting conditions and do not reflect the actual economic value realized by the Named Executive Officer. The assumptions used in calculating the grant date fair value of stock awards and option awards may be found in Note 9 to our audited financial statements included in this Annual Report on Form 10-K. |
|
|
(2) | Mr. Sohn served as our Chief Executive Officer from June 2020 until June 2023, and Executive Chairman until March 2024 |
|
|
(3) | Mr. Jennings has served as our President and Chief Operating Officer from June 2020 until March 2024. He served as Chief Executive Officer from October 2017 to June 2020. He served as Chief Executive Officer and Interim Chief Financial Officer from June 2023 until March 2024. |
|
|
(4) | Mr. McBride served as an executive officer from April 2022 until March 2023. |
|
|
(5) | Mr. Smith served as an executive officer from April 2022 until December 2022. |
Named Executive Officer Employment Agreements
In February 2024, the Board of Directors entered into an agreement with Evan Sohn and Miles Jennings to eliminate the severance and certain bonus and target portions of their Employment Agreements in exchange for equity compensation.
Executive Incentive Program
Performance Bonuses
For fiscal 2023, each of our named executive officers was eligible to receive an award under the annual executive cash incentive program as follows per the terms of their respective employment agreements: (i) up to 150% of annual base salary for Mr. Sohn, and (ii) up to 75% of annual base salary for Mr. Jennings. The performance bonuses, as well as severance payments, were canceled in lieu of equity grants.
The Compensation Committee has the authority to grant discretionary equity awards to our executive officers, including our non-statutory stock options, under the 2017 Plan and our 2021 Equity Incentive Plan (the “2021 Plan”).
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In Fiscal year 2022 and 2023, the Compensation Committee approved the following grants to our Named Executive Officers, including 8,333 option shares to Miles Jennings on August 30, 2022, 16,666 option shares to Evan Sohn on August 30, 2022, 5,000 option shares to Judy Krandel on August 30, 2022, and an additional 3,333 option shares on June 8, 2023.
Outstanding Equity Awards at December 31, 2023
The following table sets forth certain information regarding unexercised options, shares that have not vested, and equity incentive plan awards for each Named Executive Officer as of December 31, 2023:
Outstanding Equity Awards At Fiscal Year-End
|
| Option Awards |
| Stock Awards |
| |||||||||||||||||
|
| Number of Securities Underlying Unexercised |
|
| Number of Securities Underlying Unexercised |
|
| Option |
|
| Option |
| Number of shares of stock that |
|
| Market Value of Shares of Stock That |
| |||||
|
| Options # Exercisable |
|
| Options # Unexercisable |
|
| Exercise Price |
|
| Expiration date |
| have not vested |
|
| Have Not Vested |
| |||||
Evan Sohn |
|
| 1,158 |
|
|
| - |
|
|
| 132.00 |
|
| 1/31/2024 |
|
| - |
|
|
| - |
|
|
|
| 12,031 |
|
|
| - |
|
|
| 240.00 |
|
| 5/12/2024 |
|
| - |
|
|
| - |
|
|
|
| 1,021 |
|
|
| - |
|
|
| 54.38 |
|
| 12/21/2024 |
|
| - |
|
|
| - |
|
|
|
| 6,667 |
|
|
| - |
|
|
| 68.85 |
|
| 9/12/2026 |
|
| - |
|
|
| - |
|
|
|
| 11,115 |
|
|
| 5,552 | (1) |
|
| 19.65 |
|
| 8/29/2024 |
|
| - |
|
|
| - |
|
Miles Jennings |
|
| 1,362 |
|
|
| - |
|
|
| 54.38 |
|
| 12/21/2024 |
|
| - |
|
|
| - |
|
|
|
| 6,667 |
|
|
| - |
|
|
| 68.85 |
|
| 9/12/2026 |
|
| - |
|
|
| - |
|
|
|
| 5,555 |
|
|
| 2,778 | (1) |
|
| 19.65 |
|
| 8/29/2024 |
|
| - |
|
|
| - |
|
(1) | Options vest monthly over a two-year period in equal installments, ending on August 30, 2024 |
Compensation of Non-Employee Directors
We do not compensate employees for serving as members of our Board. Our non-employee directors receive compensation for their service as directors and members of committees of the Board, consisting of cash and equity awards. In January 2021, our Compensation Committee approved an annual retainer to be paid to each non-employee director in the amount of $20,000 in cash. In January 2022, the Board also approved an incremental stipend of $5,000 to all committee chairpersons, $3,500 for all non-chairperson members of the audit committee, and $2,500 for all non-chairperson members of the nominating and compensation committee. With respect to our non-employee directors, the Board approved one-year stock options to purchase 1,000 shares of our Common Stock at an exercise price of $36.00 for the year 2021. The options shall vest in equal quarterly amounts beginning on the effective date and ending on the first anniversary of the effective date of the grant. In addition, directors are reimbursed for reasonable expenses incurred in attending meetings and carrying out duties as board and committee members. Under the 2017 and 2021 Plans, our non-employee directors receive grants of stock options as compensation for their services on the Board.
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For the year ended 2023, our non-employee directors were compensated as follows in the table below:
|
|
|
| Fees Earned or Paid in Cash |
|
| Option Awards |
|
| All Other Compensation |
|
| Total |
| ||||
Name (1) |
| Year |
| ($) |
|
| ($)(2) |
|
| ($) |
|
| ($) |
| ||||
Deborah Leff |
| 2023 |
|
| 33,500 |
|
|
| - |
|
|
| - |
|
|
| 33,500 |
|
|
| 2022 |
|
| 25,000 |
|
|
| 75,251 |
|
|
| - |
|
|
| 100,251 |
|
Timothy O’Rourke |
| 2023 |
|
| 20,000 |
|
|
| - |
|
|
| - |
|
|
| 20,000 |
|
|
| 2022 |
|
| 20,000 |
|
|
| 75,251 |
|
|
| - |
|
|
| 95,251 |
|
Douglas Roth |
| 2023 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2022 |
|
| 33,500 |
|
|
| 75,251 |
|
|
| - |
|
|
| 108,751 |
|
Wallace D. Ruiz |
| 2023 |
|
| 30,000 |
|
|
| - |
|
|
| - |
|
|
| 30,000 |
|
|
| 2022 |
|
| 30,000 |
|
|
| 75,251 |
|
|
| - |
|
|
| 105,251 |
|
Steve Pemberton |
| 2023 |
|
| 22,500 |
|
|
| - |
|
|
| - |
|
|
| 22,500 |
|
|
| 2022 |
|
| 22,500 |
|
|
| 75,251 |
|
|
| - |
|
|
| 97,751 |
|
Robert Heath |
| 2023 |
|
| 26,000 |
|
|
| - |
|
|
| - |
|
|
| 26,000 |
|
|
| 2022 |
|
| 26,000 |
|
|
| 75,251 |
|
|
| - |
|
|
| 101,251 |
|
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our Common Stock as of April 10, 2024, of:
| · | each of our directors and executive officers; and |
| · | each person known to us to beneficially own 5% of our Common Stock on an as-converted basis. |
The calculations in the table are based on 1,462,570 common shares issued and outstanding as of April 10, 2024.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
Unless otherwise indicated, the address for each beneficial owner listed in the table below is c/o Recruiter.com Group, Inc., 123 Farmington Avenue, Suite 252, Bristol, CT.
Name of Beneficial Owner (1) |
| No. of Shares Beneficially Owned |
|
| % of Class |
| ||
Evan Sohn (1) |
|
| 63,601 |
|
|
| 4.3 | % |
Miles Jennings (2) |
|
| 82,741 |
|
|
| 5.7 | % |
Josh McBride (3) |
|
| 26,662 |
|
| 1.8 | % | |
Deborah Leff (4) |
|
| 5,500 |
|
| * |
| |
Tim O’Rourke (5) |
|
| 25,394 |
|
|
| 1.7 | % |
Wallace Ruiz (6) |
|
| 5,271 |
|
| * |
| |
Steve Pemberton (7) |
|
| 5,333 |
|
| * |
| |
Robert Heath (8) |
|
| 5,333 |
|
| * |
| |
Xuan Smith (9) |
|
| 11,713 |
|
| * |
| |
Douglas Roth (10) |
|
| 5,271 |
|
| * |
| |
5% Stockholders |
|
|
|
|
|
|
|
|
Cede & Co |
|
| 1,140,370 |
|
|
| 78.0 | % |
* Less than 1%.
(1) | Evan Sohn is the Director. Includes 37,544 shares of our Common Stock issuable upon exercise of stock options that are vested or vesting within 60 days from April 10, 2024. |
(2) | Miles Jennings is the President and Chief Operating Officer. Includes 16,362 shares issuable upon exercise of stock options that are vested or vesting within 60 days from April 10, 2024. |
(3) | Includes 9,000 shares of our Common Stock issuable upon exercise of stock options that are vested or vesting within 60 days from April 10, 2024. |
(4) | Includes 5,500 shares of Common Stock issuable upon exercise of stock options that are vested or vesting within 60 days from April 10, 2024. |
(5) | Includes (i) 20,123 shares of our Common Stock beneficially owned by Icon Information Consultants, LP, of which Mr. O’Rourke is the Managing Director, and (ii) 5,271 shares of our Common Stock issuable upon exercise of stock options that have vested or vesting within 60 days from April 10, 2024. Mr. O’Rourke disclaims beneficial ownership of the shares beneficially owned by Icon Information Consultants, LP, except to the extent of his pecuniary interest therein. |
(6) | Includes 5,271 shares of our Common Stock issuable upon exercise of stock options that have vested or vesting within 60 days from April 10, 2024. |
(7) | Includes 5,333 shares of Common Stock issuable upon exercise of stock options that are vested or vesting within 60 days from April 10, 2024. |
(8) | Includes 5,333 shares of our Common Stock issuable upon exercise of stock options that have vested or vesting within 60 days from April 10, 2024 and 533 shares of our Common Stock issuable upon exercise of our common stock purchase warrants. |
(9) | Includes 1,458 shares of Common Stock issuable upon exercise of stock options that are vested or vesting within 60 days from April 10, 2024 |
(10) | Includes 5,271 shares of our Common Stock issuable upon exercise of stock options that have vested or vesting within 60 days from April 10, 2024. |
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Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information as of December 31, 2023, with respect to our compensation plans under which equity securities may be issued.
Plan Category |
| Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |
|
| Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights |
|
| Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
| |||
|
| (a) |
|
| (b) |
|
| (c) |
| |||
Equity compensation plans approved by security holders: |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
2017 Equity Incentive Plan (1) |
|
| 67,685 |
|
|
| 46.65 |
|
|
| 942 |
|
2021 Equity Incentive Plan (1) |
|
| 172,503 |
|
|
| 37.15 |
|
|
| 42,852 |
|
Total |
|
| 240,188 |
|
|
| 39.76 |
|
|
| 43,794 |
|
(1) | The weighted average exercise price relates to the options only. RSUs were excluded as they have no exercise price. |
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ITEM 13. CERTAIN RELATIONSHIPS RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The following includes a summary of transactions since January 1, 2023 to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation.
There have been no applicable transactions since January 1, 2023.
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 our current members of our Board, meets the independence requirements under the Listing Rules of The Nasdaq Stock Market, LLC.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table provides detail about fees for professional services rendered to us by Salberg & Company, P.A., our independent registered public accounting firm engaged to provide accounting services for the fiscal years ended December 31, 2023 and 2022.
|
| Fiscal Year Ended December 31, 2023 |
|
| Fiscal Year Ended December 31, 2022 |
| ||
Audit fees (1) |
| $ | 132,100 |
|
| $ | 159,800 |
|
Audit related fees (2) |
|
| 5,900 |
|
|
| 9,300 |
|
Tax fees |
|
| - |
|
|
| - |
|
All other fees |
|
| - |
|
|
| - |
|
Total |
| $ | 138,000 |
|
| $ | 169,100 |
|
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission, review of registration statements and other accounting consulting.
Tax Fees - This category consists of professional services rendered for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
Policy on Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors
Consistent with the SEC policies regarding auditor independence, our Board has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, our Board has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.
Prior to engagement of the independent auditor for next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of the following four categories of services to the Board for approval.
56 |
Table of Contents |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) | Documents filed as part of this Annual Report. | |
|
|
|
| (1)
| Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item. |
|
|
|
| (2)
| Financial Statements Schedules. All schedules are omitted because they are not applicable or because the required information is contained in the consolidated financial statements or notes included in this report. |
|
|
|
| (3) | Exhibits. See the Exhibit Index. |
57 |
Table of Contents |
EXHIBIT INDEX
58 |
Table of Contents |
| Director Agreement, by and between Recruiter.com Group, Inc. and Steve Pemberton* |
| 8-K |
| 4/2/21 |
| 10.1 |
|
| |
| Director Agreement, by and between Recruiter.com Group, Inc. and Robert Heath* |
| 8-K |
| 4/2/21 |
| 10.2 |
|
| |
|
| 10-Q |
| 5/14/21 |
| 10.5 |
|
| ||
|
| 8-K |
| 3/31/21 |
| 10.1 |
|
| ||
|
| 8-K |
| 3/31/21 |
| 10.2 |
|
| ||
|
| 10-Q |
| 5/14/21 |
| 10.8 |
|
| ||
|
| 8-K |
| 7/12/21 |
| 10.1 |
|
| ||
|
| 8-K |
| 7/12/21 |
| 10.2 |
|
| ||
|
| 8-K |
| 9/2/21 |
| 10.1 |
|
| ||
|
| 8-K |
| 9/2/21 |
| 10.2 |
|
| ||
|
| DEFA |
| 7/28/21 |
| A |
|
| ||
| Executive Employment, by and between the Company and Josh McBride, dated March 25, 2021* |
|
|
|
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|
|
| Filed | |
| Executive Employment by and between the Company and Xuan Smith, dated March 25, 2021* |
|
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|
|
| Filed | |
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|
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|
|
| Filed | ||
|
|
|
|
|
|
|
| Filed | ||
|
| 8-K |
| 04/07/22 |
| 10.1 |
|
| ||
|
| 8-K |
| 05/02/22 |
| 10.1 |
|
| ||
|
| 8-K |
| 08/17/22 |
| 10.1 |
|
| ||
| Form of Original Issue Discount Promissory Note dated August 17, 2022 |
| 8-K |
| 08/17/22 |
| 10.2 |
|
| |
|
| 8-K |
| 08/31/22 |
| 10.1 |
|
| ||
| Form of Original Issue Discount Promissory Note dated August 30, 2022 |
| 8-K |
| 08/31/22 |
| 10.2 |
|
| |
|
| 8-K |
| 10/20/22 |
| 10.1 |
|
| ||
|
| 8-K |
| 02/08/23 |
| 10.1 |
|
| ||
|
| 8-K |
| 02/08/23 |
| 10.2 |
|
|
59 |
Table of Contents |
|
| 10-K |
| 3/9/21 |
| 21.1 |
| |||
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|
|
| Filed | ||
| Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer |
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| Filed | |
| Rule 13a-14/15d-14(a) certification of Chief Financial Officer |
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| Filed | |
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| Filed | ||
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|
| Filed | ||
101.INS |
| XBRL Instance Document |
|
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|
|
|
|
| Filed |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
| Filed |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
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|
|
| Filed |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
|
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|
|
|
|
| Filed |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
| Filed |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
| Filed |
104 |
| Cover Page Interactive Data File (embedded within the inline document and included in Exhibit 101) |
|
|
|
|
|
|
| Filed |
* | Management contract or compensatory plan or arrangement. |
** | This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. |
+
| Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplemental to the Securities and Exchange Commission staff upon request. |
ITEM 16. FORM 10-K SUMMARY
Not applicable.
60 |
Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 14, 2024 | RECRUITER.COM GROUP, INC. |
| |
|
|
| |
| By: | /s/ Granger Whitelaw |
|
|
| Granger Whitelaw |
|
|
| Chief Executive Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE |
| TITLE |
| DATE |
|
|
|
|
|
/s/ Granger Whitelaw |
| President & Chief Executive Officer |
| August 14, 2024 |
Granger Whitelaw |
| (Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Miles Jennings |
| Interim Chief Financial Officer and Director |
| August 14, 2024 |
Miles Jennings |
|
|
|
|
61 |
Table of Contents |
RECRUITER.COM GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
| Page No. |
|
Report of Independent Registered Public Accounting Firm (PCAOB firm ID. |
| F-2 |
|
|
|
| |
| F-4 |
| |
|
|
| |
| F-5 |
| |
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| |
| F-6 |
| |
|
|
| |
| F-7 |
| |
|
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| |
| F-8 |
|
F-1 |
Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of:
Recruiter.com Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Recruiter.com Group, Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has had historical net losses and net cash used in operating activities and will require additional financing to continue operations in 2024. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431
Phone: (561) 995‑8270 • Toll Free: (866) CPA‑8500 • Fax: (561) 995‑1920
www.salbergco.com • info@salbergco.com
Member National Association of Certified Valuation Analysts • Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
F-2 |
Table of Contents |
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Goodwill Impairment Assessment
As described in footnote 1 “Goodwill” and in footnote 5, “Goodwill and Other Intangible Assets” to the consolidated financial statements, the Company’s consolidated Goodwill balance was $7,101,084 at December 31, 2023. Goodwill is tested for impairment by management at least annually at the reporting unit level. The determination of fair value of a reporting unit for the goodwill impairment test requires management to make significant estimates and assumptions in a market approach valuation method such as comparable valuation multiples. As disclosed by management, changes in these assumptions could have a significant impact on the fair value of the reporting unit and any potential impairment charges.
We identified the goodwill impairment assessment as critical audit matter. Auditing management’s judgments regarding the assumptions discussed above involved a high degree of subjectivity.
The primary procedures we performed to address these critical audit matters included (a) gained an understanding of management’s process to conduct the impairment test (b) evaluated if the valuation method used by management was appropriate (c) evaluated the reasonableness of the comparable valuation multiples assumptions including the relevance and the reliability of the data utilized in the market approach valuation method, and (d) recomputed the valuation amount. We agreed with management’s conclusion.
/s/
SALBERG & COMPANY, P.A.
We have served as the Company’s auditor since 2019
April 16, 2024
F-3 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Accounts receivable, net of allowance for doubtful accounts of $ |
|
|
|
|
|
| ||
Prepaid expenses and other current assets |
|
|
|
|
|
| ||
Investment in marketable securities |
|
|
|
|
|
| ||
Current assets from discontinued operations |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $ |
|
|
|
|
|
| ||
Intangible assets, net |
|
|
|
|
|
| ||
Goodwill |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ |
|
| $ |
| ||
Accrued expenses |
|
|
|
|
|
| ||
Accrued compensation |
|
|
|
|
|
| ||
Accrued interest |
|
|
|
|
|
| ||
Deferred payroll taxes |
|
|
|
|
|
| ||
Other liabilities |
|
|
|
|
|
| ||
Loans payable - current portion, net of discount |
|
|
|
|
|
| ||
Warrant liability |
|
|
|
|
|
| ||
Refundable deposit on preferred stock purchase |
|
|
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|
|
| ||
Deferred revenue |
|
|
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|
|
| ||
Current liabilities associated with discontinued operations |
|
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|
|
| ||
Total current liabilities |
|
|
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|
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| ||
|
|
|
|
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|
|
Loans payable - long term portion, net of discount |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
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|
|
|
|
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
|
|
|
Preferred Stock, |
|
|
|
|
|
| ||
Preferred stock, Series D, $ |
|
|
|
|
|
| ||
Preferred stock, Series E, $ |
|
|
|
|
|
| ||
Preferred stock, Series F, $ |
|
|
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|
|
| ||
Common stock, $ |
|
|
|
|
|
| ||
Shares to be issued, |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders' equity |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
| $ |
|
| $ |
| ||
| ||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
F-4 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of revenue |
|
|
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|
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| ||
|
|
|
|
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|
|
|
Gross Profit |
|
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| ||
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|
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|
Operating expenses: |
|
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|
Sales and marketing |
|
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| ||
Product development |
|
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| ||
Amortization of intangibles |
|
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| ||
Impairment expense |
|
|
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| ||
General and administrative |
|
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| ||
Total operating expenses |
|
|
|
|
|
| ||
|
|
|
|
|
|
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|
|
Loss from Operations |
|
| ( | ) |
|
| ( | ) |
|
|
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|
|
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|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
Interest expense |
|
| ( | ) |
|
| ( | ) |
Finance cost |
|
| ( | ) |
|
|
| |
Gain on assets sale |
|
|
|
|
|
| ||
Gain on debt extinguishment |
|
|
|
|
|
| ||
Gain or loss on fair value of marketable securities |
|
| ( | ) |
|
|
| |
Fair value of warrant liability |
|
|
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|
| ||
Income from ERC Credit |
|
|
|
|
|
| ||
Other income (expense) |
|
| ( | ) |
|
|
| |
Total other income (expenses) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes |
|
| ( | ) |
|
| ( | ) |
Provision for income taxes |
|
|
|
|
|
| ||
Net Loss from continuing operations |
| $ | ( | ) |
| $ | ( | ) |
Net income from discontinued operations |
|
|
|
|
|
| ||
Net Loss |
|
| ( |
|
|
| ( |
|
Deemed dividends |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net loss from continuing operations per common share - basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
Net income from discontinued operations per common share - basic and diluted |
| $ |
|
| $ |
| ||
Net loss per common share - basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
Weighted average common shares - basic and diluted |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common |
|
| Common Stock |
|
| Additional |
|
|
|
|
| Total |
| ||||||||||||||||||||||||||||
|
| Series D |
|
| Series E |
|
| Series F |
|
| Stock |
|
| to be Issued |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders’ |
| ||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||||||||
Balance as of December 31, 2022 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
|
| - |
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||||||||
Stock based compensation - Options |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Stock based compensation - RSUs |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common stock issued for the exchange of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
Common stock issued for restricted stock units |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||||||
Common stock issued upon exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Anti-dilution adjustment to warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||||||
Issuance of common stock, net of equity issuance costs of $250,490 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 130,000 |
|
|
| 13 |
|
|
| - |
|
|
| - |
|
|
| 785,496 |
|
|
| - |
|
|
| 785,509 |
|
Recapitalization |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
Effect of the August 2023 reverse stock split on common stock |
|
| - |
|
|
|
|
|
| - |
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| - |
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| - |
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| ( | ) |
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Common stock issued upon exercise of pre-funded warrants |
|
| - |
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| - |
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| - |
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| - |
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| ( | ) |
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Net loss |
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| - |
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| - |
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| - |
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| - |
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| - |
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| ( | ) |
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| ( | ) | ||||||
Balance as of December 31, 2023 |
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| - |
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| $ |
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| $ |
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| - |
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| $ |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
|
|
| Preferred Stock |
|
| Preferred Stock |
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| Preferred Stock |
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| Common |
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| Common Stock |
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| Additional |
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| Total |
| ||||||||||||||||||||||||||||
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| Series D |
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| Series E |
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| Series F |
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| Stock |
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| to be Issued |
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| Paid-in |
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| Accumulated |
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| Stockholders’ |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
| |||||||||||||
Balance as of December 31, 2021 |
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| - |
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| $ |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
| ||||||||||
Stock based compensation - Options and Warrants |
|
| - |
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| - |
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| - |
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| - |
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| - |
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| ||||||||
Stock based compensation - RSUs |
|
| - |
|
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|
|
| - |
|
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|
|
| - |
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|
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| - |
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| - |
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| ||||||||
Common stock issued for the exchange of warrants |
|
| - |
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| - |
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|
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| - |
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| - |
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| |||||||||
Common stock issued as restricted stock units |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
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|
|
| - |
|
|
|
|
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| ( | ) |
|
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| ||||||||
Issuance of warrants to purchase to common stock |
|
| - |
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|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
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| - |
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|
| ||||||||
Anti-dilution adjustment to warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
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|
|
|
| - |
|
|
|
|
|
|
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| ( | ) |
|
|
| |||||||
Issuance of earn-out shares |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
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|
|
|
|
|
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|
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|
|
| - |
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| ( | ) |
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| ||||||||
Shares issued for acquisition |
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| - |
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| |||||
Net loss |
|
| - |
|
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|
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| - |
|
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| - |
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|
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| - |
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|
|
| - |
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| ( | ) |
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| ( | ) | ||||||
Balance as of December 31, 2022 |
|
| - |
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| $ |
|
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| $ |
|
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| - |
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| $ |
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| $ |
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| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Year Ended |
| |||||
|
| December 31, |
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| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Cash Flows From Operating Activities |
|
|
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| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
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Depreciation and amortization expense |
|
|
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| ||
Bad debt expense (recovery) |
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| ( | ) |
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| |
Gain on debt extinguishment |
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| ( | ) | |
Equity based compensation expense |
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| ||
Warrant modification expense |
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| ||
Change in fair value of warrant liability |
|
| ( | ) |
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| |
Amortization of debt discount and debt costs |
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Loss on loan amendment |
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| |
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| |
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Impairment expense |
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| ||
Gain on sale of intangible assets |
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| ( | ) | |
Change in fair value of earn-out liability |
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|
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| ||
Factoring discount fee and interest |
|
|
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|
| ||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in accounts receivable |
|
|
|
|
| ( | ) | |
Decrease in accounts receivable - related parties |
|
|
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|
| ||
Investment in Marketable Securities |
|
| ( | ) |
|
|
| |
Increase (decrease) in prepaid expenses and other current assets |
|
|
|
|
|
| ||
Increase in accounts payable and accrued liabilities |
|
| ( | ) |
|
| ( | ) |
Decrease in accounts payable and accrued liabilities - related parties |
|
|
|
|
| ( | ) | |
Deferred payroll taxes |
|
|
|
|
| ( | ) | |
(Decrease) increase in deferred revenue |
|
| ( | ) |
|
| ( | ) |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
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Cash Flows From Investing Activities: |
|
|
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|
Capitalized software development costs |
|
|
|
|
| ( | ) | |
Proceeds from sale of intangible assets |
|
|
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|
|
| ||
Purchase of property and equipment |
|
|
|
|
| ( | ) | |
Net cash (used) in investing activities |
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|
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| ( | ) | |
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|
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Cash Flows From Financing Activities: |
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|
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|
|
Proceeds from notes |
|
|
|
|
|
| ||
Proceeds from ERC advances |
|
|
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|
| ||
Repayment of ERC advances |
|
| ( | ) |
|
|
| |
Issuance of common stock, net of equity issuance costs of $280,490 |
|
|
|
|
|
| ||
Purchase of preferred shares pursuant to recapitalization |
|
| ( | ) |
|
|
| |
Payments of loans |
|
| ( | ) |
|
| ( | ) |
Proceeds from factoring agreement |
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|
|
|
|
| ||
Repayments of factoring agreement |
|
| ( | ) |
|
| ( | ) |
Gross proceeds from exercise of warrants |
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|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
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|
|
|
|
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|
|
|
Net increase (decrease) in cash |
|
|
|
|
| ( | ) | |
Cash, beginning of year |
|
|
|
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|
| ||
Cash, end of year |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
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|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
| $ |
|
| $ |
| ||
Cash paid during the period for income taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
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|
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Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Accounts receivable owed under factoring agreement collected directly by factor |
| $ |
|
| $ |
| ||
Purchase price measurement period adjustment to goodwill and accounts receivable |
| $ |
|
| $ |
| ||
Common shares issued to settle accrued liability |
| $ | - |
|
| $ |
| |
Debt discount on warrants granted with notes |
| $ |
|
| $ |
| ||
Deemed dividends |
| $ |
|
| $ |
| ||
Offering costs as a result of modification of warrants to induce exercise |
| $ |
|
| $ |
| ||
Financing of insurance premium |
| $ |
|
| $ |
| ||
Debt Discount on loan amendment |
| $ | |
|
| $ | |
|
Transfer of accrued interest to loan principal upon loan amendment |
| $ | |
|
| $ | |
|
| ||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
F-7 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Recruiter.com Group, Inc., a Nevada corporation (“RGI” or the “Company”), is a holding company based in New York, New York. The Company has seven material subsidiaries, Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), Recruiter.com Consulting, LLC, VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted Inc. (“Scouted”), Recruiter.com Upsider Inc. (“Upsider”) and Recruiter.com OneWire Inc. (“OneWire”). RGI and its subsidiaries as a consolidated group is hereinafter referred to as the “Company,” “we”, “us” or “our”.
On July 25, 2023, the Company acquired a shell company, Atlantic Energy Solutions, Inc., which is a dormant entity quoted on OTC Pink Markets under the symbol AESO, in which the Company acquired a controlling and majority equity interest through purchasing
To prepare and effectuate the spin out of Atlantic Energy Solutions, Inc. (currently being renamed CognoGroup), on February 13,, 2024, the Board authorized certain corporate actions, including the transfer of assets and liabilities between subsidiaries of the Company, the renaming of Recruiter.com Recruiting Solutions, LLC to CognoGroup, LLC, and the reorganization of Recruiter.com Recruiting Solutions, LLC to a subsidiary of Atlantic Energy Solutions, Inc. Additionally, the Board of Directors authorized that management may take such steps necessary to change the name of Recruiter.com Group, Inc. to reflect its purpose and a corresponding change to the company’s stock symbol.
On June 5, 2023, the Company entered into a stock purchase agreement (“GoLogiq Stock Purchase Agreement”) with GoLogiq Inc. ("Seller"), a Delaware corporation (“GoLogiq”). GoLogiq owns all of the issued and outstanding membership interests (the “Membership Interests”) of GOLQ LLC, a Nevada limited liability company, that was further amended on August 18 and 29, 2023. On February 23, 2024, the Company entered into a certain Technology License and Commercialization Agreement with GoLogiq, Inc. that supersedes and replaces in its entirety the GOLQ Agreement, as amended by the August 29 Amendment and the August 18 Amendment. Under the GOLQ Licensing Agreement, GOLQ grants the Company a worldwide, exclusive license (the “GOLQ License”) to the Company to develop its fintech technology (the “GOLQ Technology”) and sell products derived thereof, including its Createapp, Paylogiq, Gologiq, and Radix AI technology and products (the “Licensed Products”), for a term of 10 years, with automatic two (2) year renewals as further described therein (the “Term”). In exchange with such license, the Company will issue to GOLQ such number of shares of Company common stock that represents
On August 16, 2023, the Company entered into an Asset Purchase Agreement (the “Job Mobz Purchase Agreement”) with Job Mobz Inc., a California corporation (“Job Mobz”). Upon the terms and subject to the conditions of the Job Mobz Purchase Agreement, the Company has agreed to sell and assign its right, title, and interest in the domain name and the assets generally used to operate the business associated therewith to Job Mobz for an aggregate purchase price of $
Although the approval of the Job Mobz Agreement and the transactions contemplated therein were not required to be approved by the shareholders of the Company pursuant to the Nevada Revised Statutes, the rules and regulation of Nasdaq or the Company’s bylaws, the Company previously agreed, pursuant to the terms of the Job Mobz Agreement to seek stockholder approval of the transactions contemplated thereby, and included such proposal in its Proxy Statement filed with the Commission on September 15, 2023, and amended on November 8, 2023, November 24, 2023, December 8, 2023, and December 11, 2023. On February 13, 2024, the Company obtained the consent of Job Mobz to proceed with the transactions contemplated by the Job Mobz Agreement without obtaining such shareholder approval. This transaction has not yet closed.
F-8 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The Company’s website, www.Recruiter.com, provides access to its network of recruiters to employers seeking to hire talent and utilizes an innovative web platform, software with integrated AI-driven candidate to job matching, and video screening software to source qualified talent more easily and quickly.
The Company helps businesses accelerate and streamline their recruiting and hiring processes by providing on-demand recruiting software and services. The Company leverages its expert network of recruiters to place recruiters on a project basis, aided by cutting-edge AI-based candidate sourcing and matching and video screening technologies.
Through the Company’s Recruiting Solutions division, the Company also provides consulting, staffing, and full-time placement services to employers, leveraging our platform and rounding out our services. The Company’s mission is to help recruit the right talent faster and become the preferred solution for hiring specialized talent.
On August 4, 2023, the Company approved a one-for-fifteen (1:15) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On August 22, 2023, the Company filed a Certificate of Change pursuant to Nevada Revised Statutes with the Nevada Secretary of State to affect a reverse stock split of the Common Stock, and the proportional decrease of the Company’s authorized shares of Common Stock at a ratio of one-for-fifteen (15). All share and per share data in the accompanying consolidated financial statements and footnotes and throughout this annual report has been retroactively adjusted to reflect the effects of the reverse stock split.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of RGI and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Discontinued Operations
See Note 6, Discontinued Operations, for a discussion of the Company’s significant accounting policy surrounding the sale of substantially all of the Company’s staffing and consulting services revenue line in connection with the sale of its right, title, and exclusive interest in certain client contracts and associated staff, contractors, business information, and relationships to Insigma and Akvarr.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may differ from management’s estimates and assumptions. Included in these estimates are assumptions used to estimate collection of accounts receivable, fair value of marketable securities, fair value of warrant liabilities, fair value of intangible assets and goodwill, fair value of capitalized software, fair value of non-monetary transactions, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.
F-9 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances as of December 31, 2023. As of December 31, 2023, and December 31, 2022, the Company had $
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied we generate revenue from the following activities:
·
| Software Subscriptions: We offer a subscription to our web-based platforms that help employers recruit talent. Our platforms allow customers to source, contact, screen, and sort candidates using data science, advanced email campaigning tools, and predictive analytics. As part of our software subscriptions, we offer enhanced support packages and On Demand recruiting support services for an additional fee. Additional fees may be charged when we place a candidate with our customer, depending on the subscription type. In such cases, if the candidate ceases to be employed by the customer during the initial 90 days (the 90-day guarantee), we refund the customer in full for all fees paid by the customer. In December of 2022, we sold one of our software platforms to Talent, Inc. that was used in the delivery of the subscription service. Subsequently, we continued providing the service, but leveraged third-party tools in the delivery of services. |
·
| Recruiters On Demand: Consists of a consulting and staffing service specifically for the placement of professional recruiters, which we market as Recruiters on Demand. Recruiters On Demand is a flexible, time-based solution that provides businesses of all sizes access to recruiters on an outsourced, virtual basis for help with their hiring needs. As with other consulting and staffing solutions, we procure for our employer clients qualified professional recruiters, and then place them on assignment with our employer clients. We derive revenue from Recruiters on Demand by billing the employer clients for the placed recruiters’ ongoing work at an agreed-upon, time-based rate. We directly source recruiter candidates from our network of recruiters. In addition, we also offer talent planning, talent assessment, strategic guidance, and organizational development services, which we market as our “Talent Effectiveness” practice. Companies prepay for a certain number of consulting hours at an agreed-upon, time-based rate. We source and provide the independent consultants that provide the service. In March 2023, we announced a strategic partnership with Job Mobz to transition certain Recruiters on Demand clients and staff to Job Mobz in exchange for an ongoing revenue stream. (See below Revenue Share). |
|
|
·
| Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform, or other communications. We source qualified candidate referrals for the employers’ available jobs through independent recruiter users that access the Platform and other tools. We support and supplement the independent recruiters’ efforts with dedicated internal employees we call our internal talent delivery team. Our talent delivery team selects and delivers candidate profiles and resumes to our employer clients for their review and ultimate selection. Upon the employer hiring one or more of our candidate referrals, we earn a “full-time placement fee”, an amount separately negotiated with each employer client. The full-time placement fee is typically either a percentage of the referred candidates’ first year base salary or an agreed-upon flat fee. |
|
|
· | Marketplace: Our “Marketplace” category comprises services for businesses and individuals that leverage our online presence. For businesses, this includes sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In some cases, we earn a percent of revenue a business receives from attracting new clients by advertising on our online platform. Businesses can also pay us to post job openings on our proprietary job boards to promote open job positions they are trying to fill. In addition to its work with direct clients, we categorize all online advertising and affiliate marketing revenue as Marketplace.
For individuals, Marketplace includes services to assist with career development and advancement, including a resume distribution service which involves promoting these job seekers’ profiles and resumes to assist with their procuring employment, and upskilling and training. Our resume distribution service allows a job seeker to upload his/her resume to our database, which we then distribute to our network of recruiters on the Platform. We earn revenue from a one-time flat fee for this service. We also offer a recruiter certification program which encompasses our recruitment related training content, which we make accessible through our online learning management system. Customers of the recruiter certification program use a self-managed system to navigate through a digital course of study. Upon completion of the program, we issue a certificate of completion and make available a digital badge to certify their achievement for display on their online recruiter profile on the Platform. Additionally, we partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers. |
F-10 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
· · Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing such personnel with the employer, but with our providers acting as the employer of record for us, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for full-time placement hiring. This process includes employers informing us of open consulting and temporary staffing opportunities and projects, sourcing qualified candidates through the Platform and other similar means, and, finally, the employer selecting our candidates for placement after a process of review and selection. We bill these employer clients for our placed candidates’ ongoing work at an agreed-upon, time-based rate, typically on a weekly schedule of invoicing (See Note 6). Revenue Share: We refer certain clients to a third party in exchange for a referral fee. The amount of the referral fee is dependent upon whether the referral is an existing client of ours and what services we currently provide that client, or a client of a third party who is not historically serviced by us. Referral fees under the revenue share arrangement are subject to certain minimum and maximum payout amounts. We record referral fees earned under our revenue share arrangement on a net basis.
We have a sales team and sales partnerships with direct employers as well as vendor management system companies and managed service companies that help create sales channels for clients that buy staffing, direct hire, and sourcing services. Once we have secured the relationship and contract with the interested Enterprise customer, the delivery and product teams will provide the service to fulfil any or all of the revenue segments.
Revenues as presented on the consolidated statements of operations represent services rendered to customers less sales adjustments and allowances.
Software subscription revenues are recognized over the term of the subscription for access to services and/or our web-based platform. Revenue is recognized monthly over the subscription term. Talent effectiveness subscription revenues are recognized over the term of the subscription when services are provided. Any payments received prior to the time passing to provide the subscription services are recorded as a deferred revenue liability. Revenue generated from the enhanced support package and On Demand support are recognized at the point-in-time when the service is provided. Revenue generated from placement fees that are related to the software subscription are recognized at the point-in-time when the 60 or 90-day guarantee expires.
Recruiters On Demand services are billed to clients as either monthly subscriptions or time-based billings. Revenues for Recruiters on Demand are recognized on a gross basis when each monthly subscription service is completed. Talent Effectiveness consulting services are billed to clients upfront for a period of 12 months. Revenue is recognized on a gross basis monthly over the period the consulting services are provided.
Full-time placement revenues are recognized on a gross basis when the guarantee period specified in each customer’s contract expires. No fees for direct hire placement services are charged to the employment candidates. Any payments received prior to the expiration of the guarantee period are recorded as a deferred revenue liability. Payments for recruitment services are typically due within 90 days of completion of services.
F-11 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Marketplace advertising revenues are recognized on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services. Job posting revenue is recognized at the end of the period the job is posted. Marketplace career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point at which the performance obligations are satisfied. Payments for career services are typically due upon distribution or completion of services.
Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in the net service revenues and equivalent amounts of reimbursable expenses are included in costs of revenue. We record substantially all revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of this line of revenues and expenses. We have concluded that gross reporting is appropriate because we have the task of identifying and hiring qualified employees, and our discretion to select the employees and establish their compensation and duties causes us to bear the risk for services that are not fully paid for by customers. Consulting and staffing revenues are recognized when the services are rendered by the temporary employees. We assume the risk of the acceptability of the employees to customers. Payments for consulting and staffing services are typically due within 90 days of completion of services.
Revenue share revenues represent a percentage of revenue we have earned in relation to client referrals we made to a third party. We record revenue in relation to revenue share on a net basis as an agent under this arrangement. We have concluded that net reporting is appropriate because we do not provide the underlying services and arrangements to meet the demands of the client that we referred to the third party. Revenue is recorded based on a net percentage of revenue that is shared between us and the third party and earned upon delivery of the services by the third party. The third party provides the underlying services in this arrangement.
Deferred revenue results from transactions in which we have been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.
Sales tax collected is recorded on a net basis and is excluded from revenue.
Contract Assets
The Company does not have any contract assets. All trade receivables on the Company’s consolidated balance sheet are from contracts with customers.
Contract Costs
Costs incurred to obtain a contract are capitalized unless they are short term in nature. As a practical matter, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of December 31, 2023, or 2022.
Contract Liabilities - Deferred Revenue
The Company’s contract liabilities consist of advanced customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.
Revenue Disaggregation
For each of the years, revenues can be categorized into the following:
|
| Years Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Recruiters On Demand |
| $ |
|
| $ |
| ||
Consulting and staffing services |
|
|
|
|
|
| ||
Software Subscriptions |
|
|
|
|
|
| ||
Full time placement fees |
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|
| ||
Marketplace Solutions |
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| ||
Revenue Share |
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| ||
Total revenue |
| $ |
|
| $ |
|
F-12 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Expected Deferred Revenue Recognition Schedule
|
| Total Deferred 12/31/2023 |
|
| Recognize Q1 2024 |
|
| Recognize Q2 2024 |
|
| Recognize Q3 2024 |
|
| Recognize Q4 2024 |
|
| Recognize 2025 |
| ||||||
Other |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
Marketplace Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
TOTAL |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
Revenue from international sources was approximately
Cost of Revenue
Cost of revenue consists of employee costs, third party staffing costs and other fees, outsourced recruiter fees and commissions based on a percentage of Recruiting Solutions gross margin.
Accounts Receivable
On January 1, 2023, the Company adopted ASC 326, "Financial Instruments - Credit Losses". In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make the required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers.
Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Any required allowance is based on specific analysis of past due accounts and also considers historical trends of write-offs. Past due status is based on how recently payments have been received from customers. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company usually does not require collateral. We have recorded an allowance for doubtful accounts of $
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation. Depreciation is recognized over an asset’s estimated useful life using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred. Depreciation expense for the years ended December 31, 2023, and 2022 was $
Concentration of Credit Risk and Significant Customers and Vendors
For the year ended December 31, 2023, one customer accounted for
We use a related party firm located overseas for software development and maintenance related to our website and the platform underlying our operations. One of our former employees and principal shareholders is an employee of this firm but exerts control over this firm (see Note 11).
F-13 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
We were a party to a license agreement with a related party firm (see Note 11). Pursuant to the license agreement the firm has granted us an exclusive license to use certain candidate matching software and render certain related services to us. If this relationship was terminated or if the firm was to cease doing business or cease to support the applications we currently utilize, we may be forced to expend significant time and resources to replace the licensed software. Further, the necessary replacements may not be available on a timely basis on favorable terms, or at all. If we were to lose the ability to use this software our business and operating results could be materially and adversely affected.
We had used a related party firm to provide certain employer of record services (see Note 11)
Advertising and Marketing Costs
The Company expenses all advertising and marketing costs as incurred. Advertising and marketing costs were $
Fair Value of Financial Instruments and Fair Value Measurements
The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a hierarchical framework for measuring fair value, and enhances fair value measurement disclosure.
ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.
Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs for the asset or liability.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company’s investment in available for sale securities and warrant derivative liabilities are measured at fair value. The securities are measured based on current trading prices using Level 1 fair value inputs. The Company’s derivative instruments are valued using Level 3 fair value inputs. The Company’s contingent accrued earn-out business acquisition consideration liability is considered Level 3 fair value liability instruments requiring period fair value assessments. This contingent consideration liability was recorded at fair value on the acquisition date and is re-measured quarterly based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3. As of December 31, 2023, and 2022, the earn-out liability account balance as reported in the balance sheets is $
F-14 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The tables below summarize the fair values of our financial assets and liabilities as of December 31, 2023, and 2022:
|
| Fair Value at December 31, |
|
| Fair Value Measurement Using |
| ||||||||||
|
| 2023 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
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|
|
|
|
|
|
|
|
|
|
|
| ||||
Marketable Securities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Warrant Liability |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| Fair Value at December 31, |
|
| Fair Value Measurement Using |
| ||||||||||
|
| 2022 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Warrant Liability |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
For the Company's earn-out and warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balance for each category therein, and gains or losses recognized during the year ended December 31, 2023 and 2022:
Beginning balance, December 31, 2021 |
| $ |
| |
Warrant liability recorded |
|
| |
|
Re-measurement adjustments: |
|
|
|
|
Change in fair value of earn-out liability |
|
|
| |
Gain on debt extinguishment |
|
| ( | ) |
Ending balance, December 31, 2022 |
| $ |
| |
Re-measurement adjustments: |
|
|
|
|
Change in fair value of warrant liability |
|
| ( | ) |
Ending balance, December 31, 2023 |
| $ | |
|
F-15 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Significant unobservable inputs used in the fair value measurements of the Company's derivative liabilities designated as Level 3 are as follows:
|
| December 31, 2023 |
| |
Fair value |
| $ |
| |
Valuation technique |
|
| ||
Significant unobservable input |
|
|
| December 31, 2022 |
| ||
Fair value |
| $ |
| |
Valuation technique |
|
| ||
Significant unobservable input |
|
|
Business Combinations
For all business combinations (whether partial, full or step acquisitions), the Company records
Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value and accretion costs are recognized in earnings. The increases or decreases in the fair value of contingent consideration can result from changes in anticipated revenue levels and changes in assumed discount periods and rates.
Intangible Assets
Intangible assets consist primarily of the assets acquired from Genesys in the third quarter of 2019, including customer contracts and intellectual property, the assets acquired from Scouted and Upsider during the first quarter of 2021, the assets acquired from OneWire during the second quarter of 2021, and the assets acquired from Parrut and Novo Group during the third quarter of 2021. Amortization expense is recorded on the straight-line basis over the estimated economic lives.
Goodwill
Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur, or circumstances indicate the fair value of a reporting unit is below its carrying value.
The Company performs its annual goodwill impairment assessment on December 31st of each year or as impairment indicators dictate (see Note 5).
When evaluating the potential impairment of goodwill, management first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company’s reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the quantitative impairment testing methodology.
Under the quantitative method we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined using an appropriate valuation method. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment to be recognized is recognized as the amount by which the carrying amount exceeds the fair value.
When required, we may arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results.
Long-lived assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life of the asset in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited (see Note 5).
F-16 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Marketable Securities
The Company has adopted Accounting Standards Update (“ASU”) 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The unrealized gain (loss) on the marketable securities during the year ended December 31, 2023, has been included in a separate line item on the statement of operations, Net Recognized Gain (Loss) on Marketable Securities.
Software Costs
We capitalize certain software development costs incurred in connection with developing or obtaining software for internal use when both the preliminary project stage is completed, and it is probable that the software will be used as intended. Capitalization ceases after the software is operational; however, certain upgrades and enhancements may be capitalized if they add functionality. Capitalized software costs include only (i) external direct costs of materials and services utilized in developing or obtaining software, (ii) compensation and related benefits for employees who are directly associated with the software project and (iii) interest costs incurred while developing internal-use software.
Income Taxes
We utilize ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. Our practice is to recognize interest and/or penalties, if any, related to income tax matters in income tax expense.
Stock-Based Compensation
We account for our stock-based compensation under ASC 718 “Compensation - Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the shorter of the service period or the vesting period of the stock-based compensation. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Determining the fair value of stock-based compensation at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based compensation represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with various accounting standards.
F-17 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
ASC 480 “Distinguishing Liabilities From Equity” provides that instruments convertible predominantly at a fixed rate resulting in a fixed monetary amount due upon conversion with a variable quantity of shares (“stock settled debt”) be recorded as a liability at the fixed monetary amount.
ASC 815 “Derivatives and Hedging” generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”
ASC 815-40 provides that generally if an event is not within the entity’s control and could require net cash settlement, then the contract shall be classified as an asset or a liability.
Leases
In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)” whereby lessees need to recognize almost all leases on their balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019, using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment will be based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less.
Product Development
Product development costs are included in operating expenses on the consolidated statements of operations and consist of support, maintenance and upgrades of our website and IT platform and are charged to operations as incurred.
F-18 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Earnings (Loss) Per Share
The Company follows ASC 260 “Earnings Per Share” for calculating the basic and diluted earnings (or loss) per share. Basic earnings (or loss) per share are computed by dividing earnings (or loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings (or loss) per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if the additional shares were dilutive. For the year ended December 31, 2023, the Company recorded a deemed dividend of $
|
| Years Ended December 31, |
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| 2023 |
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| 2022 |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Deemed dividend |
|
| ( | ) |
|
| ( | ) |
Net loss, numerator, basic computation |
| $ | ( | ) |
| $ | ( | ) |
|
| December 31, |
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| December 31, |
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| 2023 |
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| 2022 |
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Options |
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Stock awards |
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| - |
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Warrants |
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Convertible preferred stock |
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Business Segments
The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment.
Recently Issued Accounting Pronouncements
There have not been any recent changes in accounting pronouncements and ASU issued by the FASB that are of significance or potential significance to the Company except as disclosed below.
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in purchase accounting. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. On January 1, 2023, the adoption of ASU 2021-08 did not have a material impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022, for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities.
F-19 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.
In the period from January 2024 through March 2024 the FASB has not issued any additional accounting standards updates that have a significant impact on the Company. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.
NOTE 2 - GOING CONCERN
Management believes it may not have sufficient cash to fund its liabilities and operations for at least the next twelve months from the issuance of these consolidated financial statements.
These consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of the end of the period covered by this report. This determination was based on the following factors: (i) the Company used cash of approximately $
The Company expects but cannot guarantee that demand for recruiting solutions will improve in 2024. These conditions will affect the company’s overall business and potentially the results of its revenue share and transactions with other third parties. Overall, management is focused on its strategic transactions and effectively positioning the Company for a pivot based on the GoLogiq license and planned spin-out to Atlantic Energy Solutions.
The Company may depend on raising additional debt or equity capital to stay operational. Economic conditions may make it more difficult for the Company to raise additional capital when needed. The terms of any financing, if the Company is able to complete one, will likely not be favorable to the Company.
NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
The components of prepaid expenses and other current assets at December 31, 2023 and 2022, consisted of the following:
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| December 31, 2023 |
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| December 31, 2022 |
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Prepaid expenses |
| $ |
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| $ |
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Prepaid advertisement |
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Employee advance |
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Prepaid insurance |
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Other receivables |
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Prepaid expenses and other current assets |
| $ |
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| $ |
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NOTE 4 - INVESTMENT IN AVAILABLE FOR SALE MARKETABLE SECURITIES
On August 9, 2023, the Company and Insigma, Inc., a Virginia corporation ("Insigma"), and a wholly owned subsidiary of Futuris Company, a Wyoming corporation (“FTRS”), entered into an asset purchase agreement where Recruiter Consulting agreed to sell its right, title, and exclusive interest in certain client contracts and associated staff, contractors, business information, and relationships related thereto to Insigma. As consideration for the Acquired Assets, and upon completion of the assignment of certain Acquired Assets to Insigma, Insigma shall issue to Recruiter Consulting a number of shares of common stock of FTRS equal to $
The deal was finalized on October 2, 2023, when Management Solutions, LLC approved the transfer to Futuris, and on October 5, 2023, the Company received a total of
During the year ended December 31, 2023, the Company received
F-20 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The Company’s investments in marketable equity securities are being held for an indefinite period and thus have been classified as available for sale. The Company received
The reconciliation of the investment in marketable securities is as follows for the years ended December 31, 2023, and 2022:
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| December |
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| December |
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| 31, 2023 |
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| 31, 2022 |
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Beginning Balance - December 31 |
| $ |
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| $ |
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Additions |
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Recognized losses |
|
| ( | ) |
|
| ( | ) |
Ending Balance - December 31 |
| $ |
|
| $ |
|
Net losses on equity investments were as follows:
|
| Years Ended |
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| December 31, |
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| 2023 |
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| 2022 |
| ||
Net realized losses on investment sold or assigned |
| $ |
|
| $ |
| ||
Net unrealized losses on investments still held |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
|
NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Goodwill is derived from our 2019 business combination as well as our five business combinations in the first three quarters of 2021. The aggregate goodwill recognized from our five 2021 acquisitions was $6,731,852 while the remaining goodwill from the 2019 acquisition was $3,517,315 as of December 31, 2020. The Company performed a goodwill impairment test during 2021 using market data and discounted cash flow analysis. Based on that test, we have determined that the carrying value of goodwill related to the 2019 acquisition of Genesys was further impaired in the amount of $2,530,325 during 2021. The Company performed its goodwill impairment test during 2022, based on the net losses and net cash used in operations in 2022 and a decline in the valuation of the business, managements application of the formula to compute goodwill impairment resulted in an impairment charge in fiscal 2022 of $582,114. The Company performed its impairment test during 2023 which resulted in no additional impairment.
The changes in the carrying amount of goodwill for the years ended December 31, 2023, and 2022 are as follows:
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Carrying value - January 1 |
| $ |
|
| $ |
| ||
Goodwill acquired during the year |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| ||
Purchase price measurement period adjustments |
|
|
|
|
| ( | ) | |
Impairment losses |
|
|
|
|
| ( | ) | |
Carrying value - end of year |
| $ |
|
| $ |
|
F-21 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Intangible Assets
On March 31, 2019, the Company acquired Intangible assets totaling $
During 2021, we acquired certain intangible assets pursuant to our Scouted, Upsider, OneWire, Parrut, and Novo Group acquisitions. These intangible assets aggregate approximately $
Intangible assets are summarized as follows:
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Customer contracts |
| $ |
|
| $ |
| ||
Software acquired |
|
|
|
|
|
| ||
License |
|
|
|
|
|
| ||
Internal use software developed |
|
|
|
|
|
| ||
Domains |
|
|
|
|
|
| ||
|
|
| 13,972,539 |
|
|
| 13,972,539 |
|
Less accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Total |
|
|
|
|
|
| ||
Less impairment |
|
| ( | ) |
|
| ( | ) |
Carrying value |
| $ |
|
| $ |
|
Amortization expense of intangible assets was $
The company performed its impairment test during 2022 using the market and income approach, and determined that the Company’s customer contracts, software acquired, internal use software developed, and domains were impaired by $
On November 21, 2022, the Company entered into a Domain Name sale and Ownership Transfer Agreement with Chief Executive Group (“CEG”). Per the agreement, the Company agreed to sell and transfer to CEG all ownership rights in and to the domain name CFO-Job.com and its associated social media property (“Domain Assets’). In exchange for the Domain Assets, the Company received cash consideration of $
On December 5, 2022, The Company entered into an asset purchase agreement in which the Company sold to a third party Upsider’s candidate sourcing and engagement platform and all related intellectual property for $
NOTE 6 – DISCONTINUED OPERATIONS
On August 4, 2023, (i) Recruiter.com Consulting and Insigma, Inc.(“Insigma”), a wholly owned subsidiary of Futuris Company (“FTRS”), entered into an asset purchase agreement (“Insigma Agreement”) and (ii) Recruiter.com Consulting and Akvarr, Inc., (“Akvarr”) and a wholly owned subsidiary of FTRS, entered into an asset purchase agreement (“Insigma Agreement”). Upon the terms and subject to the conditions of the agreements, the Company agreed to sell its right, title, and exclusive interest in certain client contracts and associated staff, contractors, business information, and relationships related staffing and consulting services revenue stream (“Assets Sold”) to Insigma and Akvarr.
F-22 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
As consideration for the assets sold, and upon completion of the assignment of certain acquired assets to Insigma, Insigma would issue to the Company a number of shares of common stock of FTRS equal to $
The Company determined all of the required criteria for held-for-sale in accordance with ASC 205-20-45-1E and discontinued operations classification were met as of December 31, 2023.
In accordance with ASC 205-20, Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity (disposal group) is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the disposal group meets the criteria to be classified as held-for-sale. The consolidated statements of operations reported for current and prior periods report the results of operations of the discontinued operations recognized as a component of net income separate from the net loss from continuing operations.
The following table presents the components in assets and liabilities associated with discontinued operations:
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
|
|
|
|
|
|
| ||
Accounts receivable, net of allowance for doubtful accounts of $0 and $62,427, respectively |
| $ |
|
| $ |
| ||
Total current assets from discontinued operations |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Accrued expenses and compensation |
| $ |
|
| $ |
| ||
Total current liabilities associated with discontinued operations |
| $ |
|
| $ |
|
The following table presents the major income and expense line items relate to the staffing and consulting services revenue as reported in the consolidated statements of operations for the years ended December 31, 2023, and 2022:
|
| Years Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of revenue |
|
|
|
|
|
| ||
Gross Profit |
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
|
|
|
|
General and Administrative |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
Other Income |
|
| |
|
|
| |
|
Net income from discontinued operations |
| $ |
|
| $ |
|
F-23 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
NOTE 7 - LOANS PAYABLE AND FACTORING AGREEMENT
Promissory Notes Payable
We received $
We issued a promissory note for $
We issued a promissory note for $
In October 2022, Novo Group entered into a Subordination Agreement (“Subordination Agreement”), pursuant to which Novo agreed to subordinate all its indebtedness and obligations we owe to Novo to all the indebtedness and obligations we owe to Montage Capital.
In February 2023, we entered into an additional Amendment to the Promissory Note with Novo Group, Inc. (the “Novo Amendment”). The Novo Amendment further modifies the Promissory Note issued to Novo on August 27, 2021 (the “Novo Note”) and amended on April 1, 2022, by amending the payment schedule pursuant to which we would make payments of principal and interest to Novo. Novo agreed we would pay interest only for the period starting November 1, 2022 though and including March 31, 2023, with payments of principal and interest to resume starting April 1, 2023. We also replaced the existing payment schedule with a new payment schedule terminating on October 31, 2023. On November 1, 2023, we did not make payments due on the promissory note with Novo Group and are currently in process of amending the maturity date of the note. As of December 31, 2023, we had defaulted on the Promissory Note, dated as of August 27, 2021 (the “Novo Note”), issued by the Company to Novo Group, Inc. (“Novo”). In an event of default under the Novo Note would cause the default interest rate of 12%to apply as set forth in the Novo Note and Novo would be permitted to elect to accelerate payment of amounts due under the Novo Note. As of December 31, 2023 and 2022, the outstanding balance on the promissory note with Novo Group was $1,198,617 and $1,292,360, respectively.
On August 17, 2022, we issued promissory notes for $
On November 6, 2023, the Company received written notice (the “Default Notice”) from Cavalry Fund I LP that the Company was in default under that certain (i) the August 17 Note issued by the Company to Cavalry, and that certain (ii) the August 30 Note. As a result of the Identified Defaults, the Company would be in default under the following agreements for indebtedness: (i) Original Issue Discount Promissory Note, dated as of August 17, 2022, issued pursuant to the August 17 SPA by the Company to Porter Partners, L.P., (ii) Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to L1 Capital Global Opportunities Master Fund, (iii)Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to Firstfire Global Opportunities Fund LLC, and (iv) Original Issue Discount Promissory Note, dated as of August 30, 2022, issued pursuant to the August 30 SPA by the Company to Puritan Partner, LLC (collectively, the “Other August 2022 Notes”). An event of default under the Other August 2022 Notes would cause the default interest rate of 15% to apply as set forth in the Other August 2022 Notes and the holders of the Other August 2022 Notes would be permitted to elect to accelerate payment of amounts due, at the Mandatory Default Amount, as defined in the Other August 2022 Notes, under each of the holder’s respective Other August 2022 Note.
As of December 31, 2023, and December 31, 2022, the outstanding balance on the 8/17/22 Notes, net of the unamortized debt issuance costs and debt discounts of $
On August 30, 2022, we issued promissory notes for $
F-24 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
On October 19, 2022, the Company closed a Loan and Security Agreement (the “Loan Agreement”), by and among the Company and Montage Capital II, L.P. (the “Lender”). Pursuant to the Loan Agreement, the Lender will make advances (“Advances”) in the aggregate principal amount of $
The Company agreed to pay the Lender a fee of $
In addition, in connection with the Loan Agreement, the Company issued
The Company accrues anniversary fees each year on the one-year anniversary of the issuance date of 1.25% of the outstanding advance balance depending on the stock price. The accrued anniversary fees are payable on the date the buyout fee becomes due and payable. The Company records an expense for the 1.25% cash fee ratably over the 12 months.
On February 2, 2023, the Company entered into a First Amendment to Loan and Security Agreement (the “Montage Amendment”), by and between the Company, its subsidiaries (Recruiter.com, Inc., Recruiter.com Recruiting Solutions, LLC, Recruiter.com Consulting, LLC, VocaWorks, Inc., Recruiter.com Scouted, Inc., Recruiter.com Upsider, Inc., and Recruiter.com - OneWire, Inc.), and Montage, effective as December 18, 2022. The Montage Amendment modifies that certain Loan and Security Agreement by and among the Company, its subsidiaries, and Montage to provide the Company with additional time to meet certain post-closing covenants.
On August 16, 2023, we entered into a Second Amendment to Loan and Security Agreement (the “Second Montage Amendment”), by and among the Company, its subsidiaries and Montage. The Second Montage Amendment modifies that certain Loan and Security Agreement by and among the Company, its subsidiaries, and Montage, as amended (the “Loan and Security Agreement”) to join Cogno. Group, Inc. as an additional borrower to the Loan and Security Agreement and amend and restate the definition of “Maturity Date” to the earlier of (i) the four-month anniversary of the initial closing of the Purchase Agreement or (ii) February 28, 2024. Additionally, the Montage Amendment provides for Montage’s consent to certain transactions that would have otherwise been prohibited under the Loan and Security Agreement, including the transaction contemplated by the Purchase Agreement with Job Mobz.
In addition, in connection with the Second Montage Amendment, the Company issued warrants to purchase common stock of CognoGroup, Inc. (the “CognoGroup, Inc. Warrants”) to the Lender. The number of shares shall be equal to 1.4% of the CognoGroup, Inc. outstanding capital stock on a fully diluted basis at the exercise price of $
F-25 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
On November 8, 2023, we notified Montage and other lenders of the occurrence of the receipt of a default notice from Cavalry, which would have the effect of triggering a cross default. On February 13, 2024, the Board of Directors authorized the conversion of promissory notes, along with their associated interest and penalties to equity, connected with the original issuance of Promissory Notes issued August 17, 2022, originally in the amount of $
As of December 31, 2023, and December 31, 2022, the outstanding balance on the Loan Agreement, net of the unamortized debt issuance costs and debt discounts of $
As of December 31, 2023, and December 31, 2022, the outstanding principal balance on the promissory notes payable totaled $
Factoring Arrangement
We entered into a factoring agreement with CSNK Working Capital Finance Corp. d/b/a Bay View Funding, a subsidiary of Heritage Bank of Commerce (the “Buyer”), effective April 27, 2022 (the “Factoring Agreement”), for the purpose of factoring our trade accounts receivable with recourse. The proceeds of the factoring are used to fund our general working capital needs. The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. The agreement is for a term of twelve months with an auto renewal clause for an additional twelve months unless terminated by the parties. The agreement is secured by substantially all assets of the Company.
Pursuant to the Factoring Agreement, we sell certain trade accounts receivable to the Buyer. We are charged a finance fee, defined as a floating rate per annum on outstanding advances under the Factoring Agreement, equal to the
We receive
All collections of purchased receivables go directly to the Buyer controlled lockbox and Buyer shall apply these collections to the Company’s obligations. The Company will immediately turn over to Buyer any payment on a purchased receivable, or receivable assigned to Buyer under the Factoring Agreement, that comes into the Company’s possession. In the event the Company comes into possession of a remittance comprising payments of both a purchased receivable and receivable which has not been purchased by Buyer, the Company is required to hold the same in accordance with the provisions set forth above and immediately turn same over to Buyer.
As stated previously, the Company factors the accounts receivable on a recourse basis. Therefore, if the Buyer cannot collect the factored accounts receivable from the customer, the Company must refund the advance amount remitted to us for any uncollected accounts receivable from the customer. Accordingly, the Company records the liability of potentially having to refund the advance amount as short-term debt when the factoring arrangement is utilized. As of December 31, 2023 and December 31, 2022, $
As consideration for Buyer forgoing other factoring transactions in the marketplace and for establishing the maximum credit of $3,000,000,
F-26 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The cost of factoring for the year ended December 31, 2023, and 2022, was $
The status of the loans payable as of December 31, 2023, and December 31, 2022 is summarized as follows:
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Promissory notes |
| $ |
|
| $ |
| ||
Factoring arrangement |
|
|
|
|
|
| ||
Total loans payable |
|
|
|
|
|
| ||
Less: Unamortized debt discount or debt issuance costs |
|
| ( | ) |
|
| ( | ) |
Less current portion |
|
| ( | ) |
|
| ( | ) |
Non-current portion |
| $ |
|
| $ |
|
The future principal payments of the loans payable are as follows:
Year Ending December 31, |
|
|
| |
2024 |
| $ |
|
NOTE 8 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue
Our Series E preferred stock is the only class of our preferred stock that is currently outstanding. Series E preferred stock has a stated value of $
Preferred Stock Penalties
On March 31, 2019, we entered into certain agreements with investors pursuant to which we issued convertible preferred stock and warrants, as described above. Each of the series of preferred stock and warrants required us to reserve shares of common stock in the amount equal to two times the common stock issuable upon conversion of the preferred stock and exercise of the warrants. We did not comply in part due to our attempts to manage the Delaware tax which increases to a maximum of $
effected a reincorporation from Delaware to Nevada and a simultaneous increase in our authorized common stock from
F-27 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Common Stock
The Company is authorized to issue
Reverse Stock Split
On August 4, 2023, the Company approved a one-for-fifteen (1:15) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On August 22, 2023, the Company filed a Certificate of Change pursuant to Nevada Revised Statutes with the Nevada Secretary of State to affect a reverse stock split of the Common Stock, and the proportional decrease of the Company’s authorized shares of Common Stock at a ratio of one-for-fifteen (15). All share and per share data have been retrospectively adjusted for the effects of the reserve split.
Shares Issued for Cash
On August 17, 2023, we entered into a securities purchase agreement with the investor, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i)
Shares issued upon exchange of common stock warrants
On January 6, 2022, upon agreement with a warrant holder, the Company issued
Restricted Stock Units
On September 18, 2020 the Company awarded to Evan Sohn, our Executive Chairman and CEO,
On February 2, 2022,
F-28 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
During the three months ended March 31, 2022,
During the three months ended June 30, 2022,
During the three months ended September 30, 2022, no RSUs were granted to vendors for services. 500 RSUs were vested and issuable as of September 30, 2022, related to RSUs granted in prior periods.
During the year ended December 31, 2022,
Restricted stock grant activity for the two years ended December 31, 2023 is as follows:
|
| Stock Awards |
| |
Outstanding at December 31, 2021 |
|
|
| |
Granted |
|
|
| |
Vested |
|
| ( | ) |
Vested and issuable |
|
| ( | ) |
Forfeited or cancelled |
|
| - |
|
Outstanding at December 31, 2022 |
|
|
| |
Granted |
|
| - |
|
Vested and issued |
|
| ( | ) |
Vested and issuable |
|
| ( | ) |
Forfeited or cancelled |
|
| - |
|
Outstanding at December 31, 2023 |
|
| - |
|
NOTE 9 - STOCK OPTIONS AND WARRANTS
Stock Option Plans
2017 Equity Incentive Plan
In October 2017, our Board and shareholders authorized the 2017 Equity Incentive Plan (the “2017 Plan”), covering
| ● | incentive stock options (“ISOs”) |
|
|
|
| ● | non-qualified options (“NSOs”) |
|
|
|
| ● | awards of our restricted common stock |
|
|
|
| ● | stock appreciation rights (“SARs”) |
|
|
|
| ● | restricted stock units (“RSUs”) |
F-29 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
In May 2020, the number of shares authorized for issuance under the Company’s 2017 Equity Incentive Plan increased to
2021 Equity Incentive Plan
In July 2021, our Board and shareholders authorized the 2021 Equity Incentive Plan (the “2021 Plan”), covering
| ● | incentive stock options (“ISOs”) |
|
|
|
| ● | non-qualified options (“NSOs”) |
|
|
|
| ● | awards of our restricted common stock |
|
|
|
| ● | stock appreciation rights (“SARs”) |
|
|
|
| ● | restricted stock units (“RSUs”) |
Stock Options Granted
On January 6, 2022, the Company granted to a consultant a total of
F-30 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
On January 10, 2022, the Company granted to a director a total of
On January 19, 2022, the Company granted to a director a total of
On January 20, 2022, the Company granted directors a total of
On March 11, 2022, the Company granted employees a total of
On April 1, 2022, the Company granted an employee a total of
On April 5, 2022, the Company granted an employee a total of
On April 5, 2022, the Company granted employees a total of
On April 7, 2022, the Company granted employees a total of
On April 28, 2022, the Company granted a consultant a total of
On May 17, 2022, the Company granted a consultant a total of
On May 17, 2022, the Company granted employees a total of
On June 2, 2022, the Company granted a consultant a total of
On June 27, 2022, the Company granted employees a total of
On August 30, 2022, the Company granted directors a total of
On August 30, 2022, the Company granted employees a total of
On September 22, 2022, the Company granted employees a total of
On December 6, 2022, the Company granted to employees a total of
On December 15, 2022, the Company granted to a vendor a total of
F-31 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
On January 9, 2023, the Company granted an employee a total of
On March 22, 2023, the Company granted three employees a total of
On June 2, 2023, the Company granted five employees a total of
On June 8, 2023, the Company granted one employee a total of
On August 10, 2023, the Company granted an employee
The fair values of stock options granted during the years ended December 31, 2023 and 2022, were estimated using Black-Sholes option-pricing model with the following assumptions:
|
| 2023 |
|
| 2022 |
| ||
Risk-free interest rates |
|
|
|
| ||||
Expected life (in years) |
|
|
|
| ||||
Expected volatility |
|
|
|
| ||||
Dividend yield |
|
|
The Company recorded stock-based compensation expense on stock options of $
A summary of the status of the Company’s stock options as of December 31, 2023, and 2022, and changes during the period are presented below:
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Life (In Years) |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
Expired or cancelled |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| |
Outstanding at December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
Expired or cancelled |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| |
Outstanding at December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Exercisable at December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
F-32 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
As of December 31, 2023, there was approximately $
Warrants
2023 Warrant Grants
Warrant Repricing
On February 3, 2023, the Company entered into amendments to Common Stock Purchase Warrants issued on August 17, 2022, to each of Cavalry Fund I LP, Firstfire Global Opportunities Fund LLC, and Porter Partners, L.P. The warrant amendments modify the time period until the holders of these warrants are permitted to exercise the Warrants by means of a “cashless exercise.” In addition, the warrant amendments lower the exercise price of the Warrants to $
Warrants exercised into Common Stock
In February 2023, we issued
In June 2023, we issued
Warrants issued with 2023 Equity Financing
On August 17, 2023, in connections with the securities purchase agreement (the “2023 Purchase Agreement”) with the investor (See Note 8) the Company issued
In August 2023, we issued
Warrants issued with Debt Financing
In connection with the Second Montage Amendment, as discussed in Note 7, the Company will issue warrants to purchase common stock of CognoGroup, Inc. (the “CognoGroup, Inc Warrants”) to the Lender. The number of shares shall be equal to 1.4% of the CognoGroup, Inc outstanding capital stock on a fully diluted basis at the exercise price of $0.01 per share and with expiration date of October 19, 2032. On and after the earlier to occur of (i) October 19, 2026, (ii) any sale, license, or other disposition of all or substantially all of the assets of the CognoGroup, Inc., or any reorganization, consolidation, or merger of the CognoGroup, Inc. where the holders of the CognoGroup, Inc.’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction, (iii) a transaction in which any “person” or “group” becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of the CognoGroup, Inc. ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the CognoGroup, Inc., who did not have such power before such transaction (“Change in Control”), or (iv) the dissolution or liquidation of the CognoGroup, Inc (“Wind-Up”), CognoGroup, Inc shall, at the request of Holder, purchase all rights that Holder has under this CognoGroup, Inc Warrants for a cash payment in the amount equal to $600,000 (the “Buyout Fee”). In addition to the foregoing, at any time on or after October 19, 2026, and in the absence of an Acquisition, Change in Control, or Wind-Up, Holder may elect to receive a portion of the Buyout Fee. Upon the consummation of the Gologiq Acquisition and the Asset Transfer, the Warrant to Purchase Stock issued by Parent to Lender on October 19, 2022, shall automatically terminate and be of no further force or effect.
F-33 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
2022 Warrant Grants
Warrant exchange for Common Stock
On January 6, 2022, the Company issued
Warrants issued with Debt Financing
During August 2022, the Company granted
In connection with the October 19, 2022 Loan Agreement, as discussed in Note 7, the Company will issue
The Company recorded the puttable warrant at its fair value, which is the cash surrender value the holder can put the warrant at. As such, on the issuance date, the Company recorded a $
Warrant Repricing
As a result of the sale in August 2022 of notes and warrants as described above and in Note 7, the number and exercise price of the 2020 Warrants and the 2021 Warrants in connection with the 2020 and 2021 debentures were adjusted due to anti-dilution provisions in such warrants.
On October 19, 2022, as a result of the Parrut earnout shares issued we reduced the exercise price of the 2020 and 2021 Debenture Note holder warrants from $
Warrants for Services
On December 8, 2022, the Company issued
F-34 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Warrant activity for the years ended December 31, 2023, and 2022 is as follows:
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| Warrants Outstanding |
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| Weighted Average Exercise Price Per Share |
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Outstanding at December 31, 2021 |
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Issued |
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Exchanged to common stock |
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| ( | ) |
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Increase due to trigger of anti-dilution provisions |
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Outstanding at December 31, 2022 |
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| $ |
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Issued |
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Exercised |
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| ( | ) |
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| - |
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Expired or cancelled |
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| ( | ) |
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Outstanding at December 31, 2023 |
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| $ |
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All warrants are exercisable at December 31, 2023. The weighted average remaining life of the warrants is
The fair values of warrants granted were estimated using Black-Sholes option-pricing model with the following assumptions:
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| December 31, 2023 |
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Risk-free interest rates |
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Expected life (in years) |
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Expected volatility |
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Dividend yield |
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| December 31, 2022 |
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Risk-free interest rates |
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Expected life (in years) |
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Expected volatility |
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Dividend yield |
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NOTE 10 - COMMITMENTS AND CONTINGENCIES
Legal Proceedings
With the exception of the below, the Company is not a party to any legal proceedings or claims on December 31, 2023. From time to time, we may be a party to, or otherwise involved in, legal proceedings arising in the normal course of business. The nature of our business ordinarily results in a certain amount of pending as well as threatened claims, litigation, investigations, regulatory and legal and administrative cases, matters and proceedings, all of which are considered incidental to the normal conduct of business. When we determine that we have meritorious defenses to the claims asserted, we vigorously defend ourselves. We consider settlement of cases when, in management’s judgment, it is in the best interests of both the Company and its shareholders to do so.
Recruiter.com Group, Inc. v. BKR Strategy Group.
We are currently pursuing two related collections matters against BKR Strategy Group. Since 2013, BKR Strategy Group has provided talent acquisition strategy and services to top companies. Starting in the third quarter of 2021, BKR Strategy Group subcontracted Recruiter.com to perform on Demand recruiter services on behalf of BKR Strategy Group’s clients. Although payments for services rendered were initially received in a timely fashion, BKR Strategy Group’s balance grew throughout the third and fourth quarters of 2021. This led to BKR Strategy Group executing a Promissory Note with a payment schedule for $
On June 21, 2022, the Supreme Court of the State of New York, New York County ruled in favor of the Company that BKR Strategy Group owes the Company $
Recruiter.com Group, Inc. v. Pipl, Inc.
On September 6, 2023, Recruiter.com Group, Inc. (the "Company") was served with a civil lawsuit filed by Pipl, Inc. in the Superior Court of the State of Connecticut, Judicial District of New Britain. The lawsuit alleges that the Company failed to pay for goods and/or services provided by Pipl, Inc. between January 3, 2021, and December 7, 2022, with the claimed amount due exceeding $
Recruiter.com Group, Inc. v. LinkedIn
On April 1, 2024, Recruiter.com Group, Inc. ("the Company") became involved in legal proceedings initiated by Creditors Adjustment Bureau, Inc. ("CAB"), as documented in the Superior Court of California, County of Santa Clara, case number 24CV433086. CAB's complaint, filed on March 13, 2024, alleges that the Company failed to fulfill payment obligations under contracts with CAB's assignor, totaling approximately $
F-35 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
ERC Activity
During the second and third quarters in 2023, the Company received $
Service Agreement
In December of 2021 we entered into an agreement wherein a third party will assume responsibility for several of our staffing clients and in return the third party would enter into Recruiters on Demand service agreements and software subscriptions with us. As of December 31, 2022, all the conditions of the agreement have not been met. However, one of the provisions has been implemented whereby we entered into a payroll service agreement for employer of record services for one of our clients. As a result, we have recognized revenue of $
NOTE 11 – RELATED PARTY TRANSACTIONS
Under a technology services agreement entered into on January 17, 2020, we use a related party firm of the Company, Recruiter.com Mauritius, for software development and maintenance related to our website and platform underlying our operations. This was an oral arrangement prior to January 17, 2020. The initial term of the Services Agreement is five years, whereupon it shall automatically renew for additional successive 12-month terms until terminated by either party by submitting a 90-day prior written notice of non-renewal. The firm was formed outside of the United States solely for the purpose of performing services for the Company and has no other clients. The consultant to the Company, who was our Chief Technology Officer until July 15, 2021, and thereafter our Chief Web Officer until August 23, 2023, is an employee of Recruiter.com Mauritius and exerts control over Recruiter.com Mauritius. Pursuant to the Services Agreement, the Company has agreed to pay Recruiter.com Mauritius fees in the amount equal to the actualized documented costs incurred by Recruiter.com Mauritius in rendering the services pursuant to the Services Agreement, expenses to this firm were $
We were a party to that certain license agreement with Genesys. An executive officer of Genesys is a significant equity holder and a member of our Board of Directors. Pursuant to the License Agreement, Genesys has granted us an exclusive license to use certain candidate matching software and renders certain related services to us. The Company has agreed to pay to Genesys (now called Opptly) a monthly license fee of $
An employer of a director utilized the Company for services during the years ended December 31, 2023, and 2022 in the amount of $
F-36 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
NOTE 12 - INCOME TAXES
The Company has, subject to limitation, approximately $
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| 2023 |
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| 2022 |
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Deferred tax assets (liabilities): |
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Net operating loss carryover |
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Intangibles amortization |
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Stock compensation |
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Capital losses |
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Bad debt allowance |
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Other |
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Deferred revenue |
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Total deferred tax assets, net |
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Less: valuation allowance |
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Net deferred tax assets |
| $ |
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| $ |
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The above NOL carryforward may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL carryforward that can be utilized to offset future taxable income.
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Statutory federal income tax rate |
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Non-deductible items |
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True ups |
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Change in valuation allowance |
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| - | % |
Effective income tax rate |
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| % |
The Company’s tax returns for the previous four years remain open for audit by the respective tax jurisdictions.
NOTE 13 - SUBSEQUENT EVENTS
On August 17, 2023, Recruiter.com Group, Inc. received a notice from Nasdaq for non-compliance with the $
F-37 |
Table of Contents |
RECRUITER.COM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Although the approval of the Job Mobz Agreement and the transactions contemplated therein were not required to be approved by the shareholders of the Company pursuant to the Nevada Revised Statutes, the rules and regulation of Nasdaq or the Company’s bylaws, the Company previously agreed, pursuant to the terms of the Job Mobz Agreement to seek stockholder approval of the transactions contemplated thereby, and included such proposal in its Proxy Statement filed with the Commission on September 15, 2023, and amended on November 8, 2023, November 24, 2023, December 8, 2023, and December 11, 2023. On February 13, 2024, the Company obtained the consent of Job Mobz to proceed with the transactions contemplated by the Job Mobz Agreement without obtaining such shareholder approval.
On February 13, 2024, the Board of Directors authorized the conversion of promissory notes, along with their associated interest and penalties to equity, connected with the original issuance of Promissory Notes issued August 17, 2022, originally in the amount of $1,111,111 and August 30, 2022, originally in the amount of $
To prepare and effectuate the spin out of Atlantic Energy Solutions, Inc. (currently being renamed CognoGroup), on February 13,, 2024, the Board authorized certain corporate actions, including the transfer of assets and liabilities between subsidiaries of the Company, the renaming of Recruiter.com Recruiting Solutions, LLC to CognoGroup, LLC, and the reorganization of Recruiter.com Recruiting Solutions, LLC to a subsidiary of Atlantic Energy Solutions, Inc. Additionally, the Board of Directors authorized that management may take such steps necessary to change the name of Recruiter.com Group, Inc. to reflect its purpose and a corresponding change to the company’s stock symbol.
On September 13, 2021, the Company entered into employment agreements with its Executive Chairman President and Chief Executive Officer. On February 13, 2024, the Board agreed to compensate each executive with $
On February 23, 2024, the Company entered into a certain Technology License and Commercialization Agreement with GoLogiq, Inc. that supersedes and replaces in its entirety the GOLQ Agreement, as amended by the August 29 Amendment and the August 18 Amendment. Under the GOLQ Licensing Agreement, GOLQ grants the Company a worldwide, exclusive license (the “GOLQ License”) to the Company to develop its fintech technology (the “GOLQ Technology”) and sell products derived thereof, including its Createapp, Paylogiq, Gologiq, and Radix AI technology and products (the “Licensed Products”), for a term of 10 years, with automatic two (2) year renewals as further described therein (the “Term”). In exchange with such license, the Company will issue to GOLQ such number of shares of Company common stock that represents
On March 28, 2024, the Company and GOLQ entered into an Amendment to Technology License and Commercialization Agreement (the “Amendment”). Under the Amendment,
On February 14, 2024, the Company issued
F-38 |
EXHIBIT 4.7
DESCRIPTION OF REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Set forth below is the description of each class of securities of Recruiter.com Group, Inc. (“we,” “our,” “us,” and the “Company”) outstanding as of December 31, 2021. The following description summarizes the most important terms of these securities. This summary does not purport to be complete and is qualified in its entirety by the provisions of our Articles of Incorporation, our Bylaws, the Articles of Designations of the Series E Convertible Preferred Stock, the provisions of the warrant agency agreement between us and Philadelphia Stock Transfer, Inc., as the warrant agent, and the form of warrant, all of which have been previously filed with the Securities and Exchange Commission and are incorporated by reference into the Annual Report on Form 10-K. You should refer to our Articles of Incorporation, Articles of Designations of the Series E Convertible Preferred Stock, the Bylaws, the warrant agency agreement between us and Philadelphia Stock Transfer, Inc., as the warrant agent, the form of warrant and the applicable provisions of the Nevada Revised Statutes for a complete description.
Our authorized capital stock consists of (i) 100,000,000 shares of common stock, par value $0.0001 per share (“Common Stock”), and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. Of our preferred stock, 775,000 shares have been designated as Series E Convertible Preferred Stock.
Our Common Stock and Warrants are the only classes of our securities currently registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”).
Common Stock
Dividend Rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our Common Stock are entitled to receive dividends out of funds legally available if our Board of Directors (“Board”), in its discretion, determines to declare and pay dividends and then only at the times and in the amounts that our Board may determine.
Voting Rights
Holders of our Common Stock are entitled to one vote for each share held on all matters properly submitted to a vote of stockholders on which holders of Common Stock are entitled to vote. We have not provided for cumulative voting for the election of directors in our Articles of Incorporation. The directors are elected by a plurality of the outstanding shares entitled to vote on the election of directors. On all other matters the affirmative vote of a majority of the voting power of the shares present or represented by proxy at the meeting and entitled to vote on the subject matter constitutes the act of the stockholders, except as otherwise expressly provided by the Nevada Revised Statutes.
No Preemptive or Similar Rights
Our Common Stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.
Right to Receive Liquidation Distributions
If we become subject to a liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Common Stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Transfer Agent and Registrar
Philadelphia Stock Transfer, Inc., is the transfer agent and registrar in respect of the Common Stock.
Preferred Stock
Our Board is authorized, subject to limitations prescribed by Nevada law, to issue preferred stock in one or more series, to establish from time-to-time the number of shares to be included in each series, and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our Board can also increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding) the number of shares of any series of preferred stock, without any further vote or action by our stockholders. Our Board may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our Common Stock or other series of preferred stock. The issuance of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control of our company and might adversely affect the market price of our Common Stock and the voting and other rights of the holders of our Common Stock.
Series E Convertible Preferred Stock
No Maturity, Sinking Fund or Mandatory Redemption
The Series E Convertible Preferred Stock (the “Existing Preferred Stock”) has no stated maturity and will not be subject to any sinking fund or mandatory redemption. Shares of the Existing Preferred Stock will remain outstanding indefinitely unless we decide to redeem or otherwise repurchase them, or the holders decide to convert them.
Dividend Rights
The holders of our Existing Preferred Stock are entitled to receive dividends out of funds legally available if our Board, in its discretion, determines to declare and pay dividends and then only at the times and in the amounts that our Board may determine. Upon announcement of dividends by our Boar, holders of our Existing Preferred Stock are entitled to such consideration as if the Existing Preferred Stock had been, immediately prior to such dividend, converted into our Common Stock.
Voting Rights
Holders of the Existing Preferred Stock are entitled to vote together with the holders of our Common Stock on an as-converted basis, subject to the conversion limitation described below.
Conversion Rights
Each holder of the Existing Preferred Stock is entitled to convert any portion of the outstanding shares of Existing Preferred Stock held by such holder into validly issued, fully paid and non-assessable shares of our Common Stock Each share of the Existing Preferred Stock is convertible into our Common Stock at a conversion rate equal to 5 shares of Common Stock per 1 share of Existing Preferred Stock, subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock.
Liquidation Preference
The Existing Preferred Stock has senior liquidation preference rights compared to the Common Stock. Upon a liquidation, the Existing Preferred Stock shares are entitled to receive a preference to a stated value of $20.00.
Conversion Limitation
A holder of the Existing Preferred Stock may not convert any shares of the Existing Preferred Stock 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 Existing Preferred Stock, except that upon prior notice from the holder to us, the holder may waive such limitation up to a percentage not in excess of 9.99%.
Fractional Shares
No fractional shares of our Common Stock will be issued upon any conversion of the Existing Preferred Stock. If the conversion would result in the issuance of a fraction of a share of Common Stock, the number of shares of Common Stock issuable upon such conversion will be rounded up to the nearest whole share.
Warrants
Overview. The following summary of certain terms and provisions of the warrants (“Warrants”) traded on the Nasdaq Capital Market is not complete and is subject to, and qualified in its entirety by, the provisions of the warrant agency agreement between us and Philadelphia Stock Transfer, Inc., as the warrant agent, and the form of warrant, both of which have been previously filed with the Securities and Exchange Commission and are incorporated by reference into the Annual Report on Form 10-K.
The Warrants entitle the registered holder to purchase shares of Common Stock at a price equal to $5.50 per share, subject to adjustment as discussed below, immediately following the issuance of such warrant and terminating at 5:00 p.m., New York City time, on July 2, 2026.
The exercise price and number of shares of Common Stock issuable upon exercise of the Warrants may be adjusted in certain circumstances, including in the event of a stock dividend or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuances of Common Stock at prices below its exercise price.
As of December 31, 2021, there are 2,961,688 shares of Common Stock registered as issuable upon exercise of the Warrants.
Exercisability. The Warrants are exercisable at any time after their original issuance and at any time up to the date that is five (5) years after their original issuance. Under the terms of the Warrant Agreement, we must use our best efforts to maintain the effectiveness of the registration statement and current prospectus relating to Common Stock issuable upon exercise of the Warrants until the expiration of the Warrants. If we fail to maintain the effectiveness of the registration statement and current prospectus relating to the shares of Common Stock issuable upon exercise of the Warrants, the holders of the Warrants shall have the right to exercise the Warrants solely via a cashless exercise feature provided for in the Warrants, until such time as there is an effective registration statement and current prospectus.
Exercise Limitation. 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 shares of Common Stock after exercise, as such percentage ownership is determined in accordance with the terms of the Warrant, except that upon prior notice from the holder to us, the holder may waive such limitation up to a percentage not in excess of 9.99%.
Exercise Price. The exercise price per whole share of shares of Common Stock purchasable upon exercise of the Warrants is $5.50. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our shares of Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Fractional Shares. No fractional shares of Common Stock will be issued upon exercise of the Warrants. As to any fraction of a share which the holder would otherwise be entitled to purchase upon such exercise, the Company will round up or down, as applicable, to the nearest whole share.
Transferability. Subject to applicable laws, the Warrants may be offered for sale, sold, transferred or assigned without our consent.
Fundamental Transactions. In the event of a fundamental transaction, as described in the Warrants and generally including any reorganization, recapitalization or reclassification of our shares of Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Stock, the holders of the Warrants will be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrants immediately prior to such fundamental transaction.
Rights as a Stockholder. The Warrant holders do not have the rights or privileges of holders of shares of Common Stock or any voting rights until they exercise their Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Governing Law. The Warrants and the warrant agency agreement are governed by New York law.
Transfer Agent, Warrant Agent and Registrar
Philadelphia Stock Transfer, Inc. acts as the registrar, transfer agent, warrant agent and dividend and redemption price disbursing agent in respect of the Warrants.
Anti-Takeover Effects of Various Provisions of Nevada Law and Our Articles of Incorporation and Bylaws
Provisions of the Nevada Revised Statutes, our Articles of Incorporation, as amended, and Bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, would be expected to discourage certain types of takeover practices and takeover bids our Board may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us will outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
Blank Check Preferred Stock. Our Articles of Incorporation permit our Board to issue preferred stock with voting, conversion and exchange rights that could negatively affect the voting power or other rights of our Common Stock stockholders, and the Board could take that action without stockholder approval. The issuance of preferred stock could delay or prevent a change of control of the Company.
Board Vacancies to be Filled by Remaining Directors and Not Stockholders. Our Bylaws provide that any vacancies on the Board, including any newly created directorships, will be filled by the affirmative vote of the majority of the remaining directors then in office, even if such directors constitute less than a quorum.
Removal of Directors by Stockholders. Our Bylaws and the Nevada Revised Statutes provide that directors may be removed by stockholders only by the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding capital stock entitled to vote.
Special Meetings of Stockholders. Under our Bylaws, only the Company’s Executive Chairman, the Chief Executive Officer, the Board, or stockholders who in the aggregate beneficially own at least 20% of all the outstanding shares of the Company entitled to vote at the meeting may call special meetings of the Company’s stockholders.
Nevada Anti-Takeover Statute. We are subject to Nevada’s Combination with Interested Stockholders Statute (Nevada Corporation Law Sections 78.411-78.444) which prohibits an “interested stockholder” from entering into a “combination” with the corporation, unless certain conditions are met. An “interested stockholder” is a person who, together with affiliates and associates, beneficially owns (or within the prior two years, did beneficially own) 10% or more of the corporation’s capital stock entitled to vote.
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.21
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”) is entered into as of [DATE], between Recruiter.com Group, Inc. (the “Company”) and [NAME OF OPTIONEE] (the “Optionee”).
WHEREAS, by action taken by the Board of Directors (the “Board”) the Company has authorized the 2021 Equity Incentive Plan, (the “Plan”), which authorization was approved by the Company’s stockholders on August 18, 2021; and
WHEREAS, pursuant to the Plan, it has been determined that in order to enhance the ability of the Company to attract and retain qualified employees, consultants and directors, the Company has granted the Optionee the right to purchase the common stock of the Company pursuant to stock options.
NOW THEREFORE, in consideration of the mutual covenants and promises hereafter set forth and for other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:
1. Grant of Incentive Stock Options. The Company hereby irrevocably grants to the Optionee not in lieu of salary or other compensation for services, the right and option to purchase all or any part of [NUMBER OF SHARES] shares of authorized but unissued or treasury common stock of the Company (the “Incentive Options”) on the terms and conditions herein set forth. This Agreement replaces any stock option agreement or offer letter previously provided to the Optionee, if any, with respect to these Incentive Options. The Optionee acknowledges receipt of a copy of the Plan, as amended. The exercise of the Incentive Options is subject to the Company effecting a reverse split or
2.Price. The exercise price of the Incentive Options is $[PRICE] per share.
3. Vesting - When Exercisable.
(a) Subject to Section 3(c) of this Agreement, vested Incentive Options may be until 6:00 p.m. New York time until five years from the grant date (the “Expiration Date”). Subject to this Section 3 and Sections 4 and 5, vested Incentive Options shall be automatically cashlessly exercised on the Expiration Date in accordance with Exhibit 1.
(b)The Incentive Options shall vest based on the following schedule: [VESTING SCHEDULES – QUARTERLY OVER A ONE, TWO, OR FOUR YEAR PERIOD(S) OR OTHER SCHEDULES WHICH MAY INCLUDE A CLIFF AS PART OF THE SCHEDULE], subject to the Optionee’s continued service as an employee to the Company as of each vesting date. Notwithstanding any other provision in this Agreement, the Incentive Options shall vest immediately on the occurrence of a Change of Control as defined under the Plan (a “Triggering Event”); provided, however, that there shall be no immediate vesting under clause (ii) of the definition of Change of Control if the directors serving just prior to the Triggering Event remain the majority of the Board after the Triggering Event. Additionally, all Incentive Options shall vest immediately (subject to the preceding sentence) on the date the Company publicly announces, by press release, by disclosure in a filing with the Securities and Exchange Commission or otherwise (the “Public Announcement”), its intention to sell substantially all of the Company’s assets or to enter into a merger or consolidation as described under the definition of Change of Control in the Plan. If the Optionee exercises the Incentive Options within 10 calendar days from the date of the Public Announcement, the Optionee shall be deemed a record holder of the shares underlying the Incentive Options as of the record date of the Change of Control.
(c) Notwithstanding any other provision of this Agreement, upon resolution of the Board or the Compensation Committee (as defined in the Plan), the Incentive Options, whether vested or unvested, shall be immediately forfeited and no longer exercisable if any of the events specified in Section 24 of the Plan occur.
4. Termination of Relationship.
(a) If for any reason the Optionee ceases to perform services for the Company, all rights granted hereunder shall terminate effective ninety days from that date.
(b) If the Optionee ceases to provide services for the Company as a result of his death, the Optionee’s estate or any Transferee, as defined herein, shall have the right within ninety days from the date of the Optionee’s death to exercise the Optionee’s the Incentive Options subject to Section 3(c). For the purpose of this Agreement, “Transferee” shall mean a person to whom such shares are transferred by will or by the laws of descent and distribution.
(c) If the Optionee ceases to provide services as a result of becoming disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, all rights granted hereunder shall terminate effective ninety days from that date.
(d) Notwithstanding anything contained in this Section 4, the Incentive Options may not be exercised after the Expiration Date.
(e) Any of the Incentive Options that were not vested immediately prior to termination of services shall terminate at that time.
For purposes of this Agreement “Company” shall include subsidiaries and/or affiliates of the Company.
5. Forfeiture and Clawback. The Incentive Options granted hereunder shall all be subject to forfeiture and clawback provisions provided for under Sections 24 of the Plan.
6. Profits on the Sale of Certain Shares; Redemption. If any of the events specified in Section 24 of the Plan occur within one year from the last date the Optionee performs services for the Company in the capacity for which the Incentive Options were granted (the “Termination Date”), all profits earned from the sale of the Company’s securities, including the sale of shares of common stock underlying the Incentive Options, during the two-year period commencing one year prior to the Termination Date shall be forfeited and forthwith paid by the Optionee to the Company. Further, in such event, the Company may at its option redeem shares of common stock acquired upon exercise of the Incentive Options by payment of the exercise price to the Optionee. The Company’s rights under this Section 6 do not lapse one year from the Termination Date but are a contract right subject to any appropriate statutory limitation period.
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7. Status of the Incentive Options. These Incentive Options are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), but the Company does not represent or warrant that these Incentive Options qualify as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of these Incentive Options and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. To the extent any portion of these Incentive Options does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any these Incentive Options within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of these Incentive Options, he or she will so notify the Company within 30 days after such disposition.
8. Method of Exercise. The Incentive Options shall be exercisable by a written notice which shall:
(a) state the election to exercise the Incentive Options, the number of shares to be exercised, the person in whose name the stock certificate or certificates for such shares of common stock is to be registered, address and social security number of such person (or if more than one, the names, addresses and social security numbers of such persons);
(b) if applicable, contain such representations and agreements as to the holder’s investment intent with respect to such shares of common stock as set forth in Section 12 hereof;
(c) be signed by the person or persons entitled to exercise the Incentive Options and, if the Incentive Options are being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Incentive Options;
(d) be accompanied by full payment of the exercise price by tender to the Company of an amount equal to the exercise price multiplied by the number of underlying shares being purchased either in cash, by wire transfer, or by certified check or bank cashier’s check, payable to the order of the Company or be cashlessly exercised in accordance with Exhibit 1; and
(e) be accompanied by payment of any amount that the Company, in its sole discretion, deems necessary to comply with any federal, state or local withholding requirements for income and employment tax purposes. If the Optionee fails to make such payment in a timely manner, the Company may: (i) decline to permit exercise of the Incentive Options or (ii) withhold and set-off against compensation and any other amounts payable to the Optionee the amount of such required payment. Such withholding may be in the shares underlying the Incentive Options at the sole discretion of the Company.
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(f) The certificate or certificates for shares of common stock as to which the Incentive Options shall be exercised shall be registered in the name of the person or persons exercising the Incentive Options.
9.Anti-Dilution Provisions. The Incentive Options granted hereunder shall have the anti-dilution rights set forth in the Plan.
10. Necessity to Become Holder of Record. Neither the Optionee, the Optionee’s estate, nor any Transferee shall have any rights as a shareholder with respect to any of the shares underlying the Incentive Options until such person shall have become the holder of record of such shares. No cash dividends or cash distributions, ordinary or extraordinary, shall be provided to the holder if the record date is prior to the date on which such person became the holder of record thereof.
11. Reservation of Right to Terminate Relationship. Nothing contained in this Agreement shall restrict the right of the Company to terminate the relationship of the Optionee at any time, with or without cause. The termination of the relationship of the Optionee by the Company, regardless of the reason therefor, shall have the results provided for in this Agreement.
12. Conditions to Exercise of Incentive Options. In order to enable the Company to comply with the Securities Act of 1933 (the “Securities Act”) and relevant state law, the Company may require the Optionee, the Optionee’s estate, or any Transferee as a condition of the exercising of the Incentive Options, to give written assurance satisfactory to the Company that the shares underlying the Incentive Options are being acquired for such persons own account, for investment only, with no view to the distribution of same, and that any subsequent resale of any such shares either shall be made pursuant to a registration statement under the Securities Act and applicable state law which has become effective and is current with regard to the shares being sold, or shall be pursuant to an exemption from registration under the Securities Act and applicable state law.
The Incentive Options are subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares of common stock underlying the Incentive Options upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with the issue or purchase of the shares underlying the Incentive Options, the Incentive Options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected.
13.Transfer. No transfer of the Incentive Options by the Optionee by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the letters testamentary or such other evidence as the Board may deem necessary to establish the authority of the estate and the acceptance by the Transferee or Transferees of the terms and conditions of the Incentive Options.
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14. Duties of the Company. The Company will at all times during the term of the Incentive Options:
(a) Reserve and keep available for issue such number of shares of its authorized and unissued common stock as will be sufficient to satisfy the requirements of this Agreement;
(b) Pay all original issue taxes with respect to the issuance of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith;
(c) Use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.
15. Parties Bound by Plan. The Plan and each determination, interpretation or other action made or taken pursuant to the provisions of the Plan shall be final and shall be binding and conclusive for all purposes on the Company and the Optionee and the Optionee’s respective successors in interest.
16. Severability. In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.
17. Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.
18. Notices and Addresses. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, or by FedEx or similar receipted delivery, as follows (or to such other address as either of them, by notice to the other may designate from time to time):
The Optionee:
To Optionee at the address on the signature page of this Agreement
The Company:
Recruiter.com Group, Inc.
500 Seventh Avenue, New York, NY 10018
Attention: Chief Executive Officer
Email: evan@recruiter.com
With a copy to (which will not constitute notice):
Lucosky Brookman LLP
101 Wood Avenue South Woodbridge, NJ 08830
Attention: Joseph Lucosky, Esq.
Email: jlucosky@lucbro.com
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19. Attorney’s Fees. In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled to a reasonable attorneys’ fees, costs and expenses.
20. Governing Law; Exclusive Jurisdiction. This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the laws of the State of Delaware without regard to choice of law considerations. Any action, suit or proceeding relating to this Option shall be brought exclusively in the courts located in New York County, New York , and, for all purposes of any such action, suit or proceeding, each of the parties hereby irrevocably (i) submits to the exclusive jurisdiction of such courts, (ii) waives any objection to such choice of venue based on forum non conveniens or any other legal or equitable doctrine, and (iii) waives trial by jury and, in the case of the Company, the right to interpose any set-off or counterclaim, of any nature or description whatsoever, in any such action, suit or proceeding.
21. Oral Evidence. This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party or parties against whom enforcement or the change, waiver discharge or termination is sought.
22. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.
23. Section or Paragraph Headings. Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part any of the terms or provisions of this Agreement.
24. Stop-Transfer Orders.
(a) The Optionee agrees that, in order to ensure compliance with the restrictions set forth in the Plan and this Agreement, the Company may issue appropriate “stop transfer” instructions to its duly authorized transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(b) The Company shall not be required (i) to transfer on its books any shares of the Company’s common stock that have been sold or otherwise transferred in violation of any of the provisions of the Plan or the Agreement or (ii) to treat the owner of such shares of common stock or to accord the right to vote or pay dividends to any purchaser or other Transferee to whom such shares of common stock shall have been so transferred.
[Signature Page to Follow]
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IN WITNESS WHEREOF the parties hereto have set their hand and seals the day and year first above written.
RECRUITER.COM GROUP, INC. | |||
By: | |||
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Chief Executive Officer | |||
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NOTICE OF EXERCISE
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Please be advised that I hereby elect to exercise my option to purchase shares of , pursuant to the Incentive Stock Option Agreement dated .
Number of Shares to Be Purchased: |
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Multiplied by: Purchase Price Per Share |
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Total Purchase Price |
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Please check the payment method below:
Enclosed is a check for the total purchase price above.
Wire transfer sent on , 20 Cashless exercise pursuant to Exhibit 1.
Please contact me as soon as possible to discuss the possible payment of withholding taxes and any other documents we may require.
Name of Option Holder (Please Print): |
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Address of Option Holder |
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If the certificate is to be issued to person other than the Option Holder, please provide the following for such person:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
(Telephone Number)
_______________________________
(Social Security Number)
In connection with the issuance of the Common Stock, if the Common Stock may not be immediately publicly sold, I hereby represent to the Company that I am acquiring the Common Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933 (the “Securities Act”).
I am___________________am not_______________________[please initial one] an accredited investor for at least one of the reasons on the attached Exhibit A. If the SEC has amended the rule defining the definition of accredited investor, I acknowledge that as a condition to exercise the Incentive Options, the Company may request updated information regarding the Holder’s status as an accredited investor. My exercise of the Incentive Options shall be in compliance with the applicable exemptions under the Securities Act and applicable state law.
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Exhibit A
To Notice of Exercise of Incentive Stock Option Agreement
For Individual Investors Only:
1. A person who has an individual net worth, or a person who with his or her spouse has a combined net worth, in excess of $1,000,000. For purposes of calculating net worth under this paragraph (1), (i) the primary residence shall not be included as an asset, (ii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iii) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to exercising the stock options, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability.
2a. A person who had individual income (exclusive of any income attributable to the person’s spouse) of more than who has $200,000 in each of the two most recently completed years and who reasonably expects to have an individual income in excess of $200,000 this year.
2b. Alternatively, a person, who with his or her spouse, has joint income in excess of $300,000 in each applicable year.
3. A director or executive officer of the Company.
Other Investors:
4. Any bank as defined in Section 3(a)(2) of the Securities Act of 1933 (“Securities Act”) whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; insurance company as defined in Section 2(13) of the Securities Act; investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or if a self-directed plan, with investment decisions made solely by persons that are accredited investors.
5. A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.
6. An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
7. A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act.
8. An entity in which all of the equity owners are accredited investors.
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Exhibit 1
Cashless Exercise. The Optionee may exercise the Incentive Options by surrendering such number of shares of Common Stock received upon exercise of the Incentive Options with an aggregate Fair Market Value (as defined below) equal to the number of Options to be exercised times the exercise price, as described in the following paragraph (a “Cashless Exercise”).
If the Optionee elects to conduct a Cashless Exercise, the Company shall cause to be delivered to the Optionee a certificate or certificates representing the number of shares of Common Stock computed using the following formula:
X =
Y(A-B)
A
Where:
X = the number of shares of Common Stock to be issued to the Optionee;
Y = the portion of the Incentive Options (in number of shares of Common Stock) being exercised by the Optionee (at the date of such calculation);
A = the Fair Market Value (as defined below) of one share of Common Stock;
and
B = the exercise price (as adjusted to the date of such calculation).
For purposes of the Incentive Options, Fair Market Value shall mean: (i) if the principal trading market for such securities is a national securities exchange, OTCQX or the OTCQB (or a similar system then in use), the average of the last five reported sales prices on the principal market the last five trading days immediately prior to such expiration date; or (ii) if (i) is not applicable, and if bid and ask prices for shares of Common Stock are reported by the principal trading market, the average of the high bid and low asked prices so reported for the trading day immediately prior to such expiration date. Notwithstanding the foregoing, if there is no last reported sales price or bid and ask prices, as the case may be, for the day in question, then Fair Market Value shall be determined as of the latest day prior to such day for which such last reported sales price or bid and asked prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the Fair Market Value shall be determined in good faith by and reflected in a formal resolution of the board of directors of the Company.
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EXHIBIT 10.22
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the “Agreement”) is entered into as of__________, between Recruiter.com Group, Inc. (the “Company”) and__________ (the “Optionee”).
WHEREAS, by action taken by the Board of Directors (the “Board”) the Company has authorized the 2021 Equity Incentive Plan (the “Plan”), which authorization was approved by the Company’s stockholders on August 18, 2021; and
WHEREAS, pursuant to the Plan, it has been determined that in order to enhance the ability of the Company to attract and retain qualified employees, consultants and directors, the Company has granted the Optionee the right to purchase the common stock of the Company pursuant to stock options.
NOW THEREFORE, in consideration of the mutual covenants and promises hereafter set forth and for other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:
1. Grant of Non-Qualified Stock Options. On__________ (the “Grant Date”), the Company irrevocably granted to the Optionee not in lieu of salary or other compensation for services, the right and option to purchase all or any part of__________ shares of authorized but unissued or treasury common stock of the Company (the “Options”) on the terms and conditions herein set forth. This Agreement replaces any stock option agreement or offer letter previously provided to the Optionee, if any, with respect to these Options. The Optionee acknowledges receipt of a copy of the Plan, as amended.
2. Price. The exercise price of the Options is_____ per share.
3. Vesting-When Exercisable.
(a) Subject to Section 3(c) of this Agreement, vested Options may be exercised until 6:00 p.m. New York time for five years from the Grant Date (the “Expiration Date”).
(b) The Options shall vest in based on the following schedule: [VESTING SCHEDULES – QUARTERLY OVER A ONE, TWO, OR FOUR YEAR PERIOD(S) OR OTHER SCHEDULES WHICH MAY INCLUDE A CLIFF AS PART OF THE SCHEDULE], subject to the Optionee’s continued service as an employee to the Company as of each vesting date. Notwithstanding any other provision in this Agreement, the Options shall vest immediately on the occurrence of a Change of Control as defined under the Plan (a “Triggering Event”); provided, however, that there shall be no immediate vesting under clause (ii) of the definition of Change of Control if the directors serving just prior to the Triggering Event remain the majority of the Board after the Triggering Event. Additionally, all Options shall vest immediately (subject to the preceding sentence) on the date the Company publicly announces, by press release, by disclosure in a filing with the Securities and Exchange Commission or otherwise (the “Public Announcement”), its intention to sell substantially all of the Company’s assets or to enter into a merger or consolidation as described under the definition of Change of Control in the Plan. If the Optionee exercises the Options within 10 calendar days from the date of the Public Announcement, the Optionee shall be deemed a record holder of the shares underlying the Options as of the record date of the Change of Control.
(c) Notwithstanding any other provision of this Agreement, upon resolution of the Board or the Compensation Committee (as defined in the Plan), the Options, whether vested or unvested, shall be immediately forfeited and no longer exercisable if any of the events specified in Section 24 of the Plan occur.
4. Termination of Relationship.
(a) If for any reason the Optionee ceases to perform services for the Company, all rights granted hereunder shall terminate effective one year from that date.
(b) If the Optionee ceases to provide services for the Company as a result of his death, the Optionee’s estate or any Transferee, as defined herein, shall have the right within one year from the date of the Optionee’s death to exercise the Optionee’s the Options subject to Section 3(c). For the purpose of this Agreement, “Transferee” shall mean a person to whom such shares are transferred by will or by the laws of descent and distribution.
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(c) If the Optionee ceases to provide services as a result of becoming disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, all rights granted hereunder shall terminate effective one year from that date.
(d) Notwithstanding anything contained in this Section 4, the Options may not be exercised after the Expiration Date.
(e) Any of the Options that were not vested immediately prior to termination of services shall terminate at that time.
For purposes of this Agreement “Company” shall include subsidiaries and/or affiliates of the Company.
5. Forfeiture and Clawback. The Options granted hereunder shall all be subject to forfeiture and clawback provisions provided for under Sections 24 of the Plan.
6. Profits on the Sale of Certain Shares; Redemption. If any of the events specified in Section 24 of the Plan occur within one year from the last date the Optionee performs services for the Company (the “Termination Date”), all profits earned from the sale of the Company’s securities, including the sale of shares of common stock underlying the Options, during the two-year period commencing one year prior to the Termination Date shall be forfeited and forthwith paid by the Optionee to the Company. Further, in such event, the Company may at its option redeem shares of common stock acquired upon exercise of the Options by payment of the exercise price to the Optionee. The Company’s rights under this Section 6 do not lapse one year from the Termination Date but are a contract right subject to any appropriate statutory limitation period.
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7. Method of Exercise. The Options shall be exercisable by a written notice which shall:
(a) state the election to exercise the Options, the number of shares to be acquired upon exercise of the Options, the person in whose name the stock certificate or certificates for such shares of common stock is to be registered, address and social security number of such person (or if more than one, the names, addresses and social security numbers of such persons);
(b) if applicable, contain such representations and agreements as to the holder’s investment intent with respect to such shares of common stock as set forth in Section 11 hereof;
(c) be signed by the person or persons entitled to exercise the Options and, if the Options are being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Options;
(d) be accompanied by full payment of the exercise price by tender to the Company of an amount equal to the exercise price multiplied by the number of underlying shares being purchased either in cash, by wire transfer, or by certified check or bank cashier’s check, payable to the order of the Company; and
(e) be accompanied by payment of any amount that the Company, in its sole discretion, deems necessary to comply with any federal, state or local withholding requirements for income and employment tax purposes. If the Optionee fails to make such payment in a timely manner, the Company may: (i) decline to permit exercise of the Options or (ii) withhold and set- off against compensation and any other amounts payable to the Optionee the amount of such required payment. Such withholding may be in the shares underlying the Options at the sole discretion of the Company.
(f) The certificate or certificates for shares of common stock as to which the Options shall be exercised shall be registered in the name of the person or persons exercising the Options.
8. Anti-Dilution Provisions. The Options granted hereunder shall have the anti-dilution rights set forth in the Plan.
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9. Necessity to Become Holder of Record. Neither the Optionee, the Optionee’s estate, nor any Transferee shall have any rights as a shareholder with respect to any of the shares underlying the Options until such person shall have become the holder of record of such shares. No cash dividends or cash distributions, ordinary or extraordinary, shall be provided to the holder if the record date is prior to the date on which such person became the holder of record thereof.
10. Reservation of Right to Terminate Relationship. Nothing contained in this Agreement shall restrict the right of the Company to terminate the relationship of the Optionee at any time, with or without cause. The termination of the relationship of the Optionee by the Company, regardless of the reason therefor, shall have the results provided for in this Agreement.
11. Conditions to Exercise of Options. In order to enable the Company to comply with the Securities Act of 1933 (the “Securities Act”) and relevant state law, the Company may require the Optionee, the Optionee’s estate, or any Transferee as a condition of the exercising of the Options, to give written assurance satisfactory to the Company that the shares underlying the Options are being acquired for such persons own account, for investment only, with no view to the distribution of same, and that any subsequent resale of any such shares either shall be made pursuant to a registration statement under the Securities Act and applicable state law which has become effective and is current with regard to the shares being sold, or shall be pursuant to an exemption from registration under the Securities Act and applicable state law.
The Options are subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares of common stock underlying the Options upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with the issue or purchase of the shares underlying the Options, the Options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected.
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12. Transfer. No transfer of the Options by the Optionee by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the letters testamentary or such other evidence as the Board may deem necessary to establish the authority of the estate and the acceptance by the Transferee or Transferees of the terms and conditions of the Options.
13. Duties of the Company. The Company will at all times during the term of the Options:
(a) Reserve and keep available for issue such number of shares of its authorized and unissued common stock as will be sufficient to satisfy the requirements of this Agreement;
(b) Pay all original issue taxes with respect to the issuance of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith;
(c) Use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.
14. Parties Bound by Plan. The Plan and each determination, interpretation or other action made or taken pursuant to the provisions of the Plan shall be final and shall be binding and conclusive for all purposes on the Company and the Optionee and the Optionee’s respective successors in interest.
15. Severability. In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.
16. Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.
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17. Notices and Addresses. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, or by FedEx or similar receipted delivery, as follows (or to such other address as either of them, by notice to the other may designate from time to time):
The Optionee:
To Optionee at the address on the signature page of this Agreement
The Company:
Recruiter.com Group, Inc.
500 Seventh Avenue, New York, NY 10018
Attention: Chief Executive Officer
Email: evan@recruiter.com
With a copy to (which will not constitute notice):
Lucosky Brookman LLP
101 Wood Avenue South Woodbridge, NJ 08830
Attention: Joseph Lucosky, Esq.
Email:
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18. Attorney’s Fees. In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled to a reasonable attorneys’ fees, costs and expenses.
19. Governing Law; Exclusive Jurisdiction. This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the laws of the State of Nevada without regard to choice of law considerations. Any action, suit or proceeding relating to this Option shall be brought exclusively in the courts located in New York County, New York , and, for all purposes of any such action, suit or proceeding, each of the parties hereby irrevocably (i) submits to the exclusive jurisdiction of such courts, (ii) waives any objection to such choice of venue based on forum non conveniens or any other legal or equitable doctrine, and (iii) waives trial by jury and, in the case of the Company, the right to interpose any set-off or counterclaim, of any nature or description whatsoever, in any such action, suit or proceeding.
20. Oral Evidence. This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party or parties against whom enforcement or the change, waiver discharge or termination is sought.
21. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.
22. Section or Paragraph Headings. Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part any of the terms or provisions of this Agreement.
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23. Stop-Transfer Orders.
(a) The Optionee agrees that, in order to ensure compliance with the restrictions set forth in the Plan and this Agreement, the Company may issue appropriate “stop transfer” instructions to its duly authorized transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(b) The Company shall not be required (i) to transfer on its books any shares of the Company’s common stock that have been sold or otherwise transferred in violation of any of the provisions of the Plan or the Agreement or (ii) to treat the owner of such shares of common stock or to accord the right to vote or pay dividends to any purchaser or other Transferee to whom such shares of common stock shall have been so transferred.
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[Signature Page to Follow]
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IN WITNESS WHEREOF the parties hereto have set their hand and seals the day and year first above written.
RECRUITER.COM GROUP, INC. | |||
Date | By: | ||
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Chief Executive Officer | |||
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NOTICE OF EXERCISE
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Please be advised that I hereby elect to exercise my option to purchase shares of____________________, pursuant to the Stock Option Agreement dated____________________.
Number of Shares to Be Purchased: |
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Multiplied by: Purchase Price Per Share | $ |
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Total Purchase Price | $ |
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Please check the payment method below: |
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_______ Enclosed is a check for the total purchase price above. |
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_______ Wire transfer sent on_______________, 20__. |
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Please contact me as soon as possible to discuss the possible payment of withholding taxes and any other documents we may require.
Name of Option Holder (Please Print): |
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Address of Option Holder |
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Telephone Number of Option Holder: |
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Social Security Number of Option Holder: |
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If the certificate is to be issued to person other than the Option Holder, please provide the following for such person:
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(Name) |
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(Address) |
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(Telephone Number) |
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In connection with the issuance of the Common Stock, if the Common Stock may not be immediately publicly sold, I hereby represent to the Company that I am acquiring the Common Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933 (the “Securities Act”).
I am______ am not______ [please initial one] an accredited investor for at least one of the reasons on the attached Exhibit A. If the SEC has amended the rule defining the definition of accredited investor, I acknowledge that as a condition to exercise the Options, the Company may request updated information regarding the Holder’s status as an accredited investor. My exercise of the Options shall be in compliance with the applicable exemptions under the Securities Act and applicable state law.
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Signature of Option Holder |
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Exhibit A
To Notice of Exercise of Stock Option Agreement
For Individual Investors Only:
1. A person who has an individual net worth, or a person who with his or her spouse has a combined net worth, in excess of $1,000,000. For purposes of calculating net worth under this paragraph (1), (i) the primary residence shall not be included as an asset, (ii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iii) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to exercising the stock options, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability.
2a. A person who had individual income (exclusive of any income attributable to the person’s spouse) of more than who has $200,000 in each of the two most recently completed years and who reasonably expects to have an individual income in excess of $200,000 this year.
2b. Alternatively, a person, who with his or her spouse, has joint income in excess of $300,000 in each applicable year.
3. A director or executive officer of the Company.
Other Investors:
4. Any bank as defined in Section 3(a)(2) of the Securities Act of 1933 (“Securities Act”) whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; insurance company as defined in Section 2(13) of the Securities Act; investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or if a self-directed plan, with investment decisions made solely by persons that are accredited investors.
5. A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.
6. An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
7. A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act.
8. An entity in which all of the equity owners are accredited investors.
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EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statement on Form S-1 filed on December 17, 2021 (File No. 333-261734), Form’s S-3 filed on September 16, 2022 (File No. 333-267470) and filed on March 16, 2023 (File No. 333-270611), and Form’s S-8 filed on June 27, 2022 (File. No. 333-265855) and (File No. 333-265853) of our report dated April 16, 2024 on the consolidated financial statements of Recruiter.com Group, Inc. as of and for the years ended December 31, 2023 and 2022, which report is included in the Annual Report on Form 10-K and 10-K/A (Amendment No. 1) of Recruiter.com Group, Inc. for the year ended December 31, 2023.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
August 14, 2024
EXHIBIT 31.1
CERTIFICATION
I, Granger Whitelaw, Chief Executive Officer of Recruiter.com Group, Inc., certify that:
1. | I have reviewed this annual report on Form 10-K/A of Recruiter.com Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 14, 2024 |
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/s/ Granger Whitelaw |
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Granger Whitelaw |
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Chief Executive Officer |
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(Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION
I, Miles Jennings, Principal Accounting Officer of Recruiter.com Group, Inc., certify that:
1. | I have reviewed this annual report on Form 10-K/A of Recruiter.com Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 14, 2024 |
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/s/ Miles Jennings |
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Miles Jennings Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Recruiter.com Group, Inc. (the "Company") on Form 10-K/A for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Granger Whitelaw, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ Granger Whitelaw |
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| Granger Whitelaw |
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| Chief Executive Officer |
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Date: August 14, 2024
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this annual report of Recruiter.com Group, Inc. (the “Company”), on Form 10-K/A for the period ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Miles Jennings, Principal Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Date: August 14, 2024 | By: | /s/ Miles Jennings |
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| Miles Jennings Interim Chief Financial Officer |
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| Principal Financial Officer |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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