DEBT

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

DEBT

NOTE 4. DEBT

On June 10, 2021, the SBA notified MMG that it’s Paycheck Protection Program (“PPP”) loan of $5,216 issued in May of 2020 had been forgiven along with $59 in SBA calculated deferred interest. This eliminated the long-term debt on the Company’s books, leaving only the $103 in federal income tax as explained in Tax Liabilities portion below. The Company recorded this forgiveness as a component of other income on the accompanying unaudited consolidated statements of operations.

Convertible Debt

The Company had notes payable in the amount of $890 as of December 31, 2019, pursuant to a convertible debt offering that MMG commenced June 13, 2019. Pursuant to this agreement, MMG issued to each individual a warrant for 0.5 shares of Company Common Stock and a convertible promissory note of same date in the initial principal amount of $50, in exchange for $50. The notes bore interest at 12% per year with the balance becoming due within 1 year from the issuance date unless earlier converted into shares of Company Common Stock upon the issuance by Reliability of Company Common Stock for gross proceeds of at least $5,000. Since no conversion occurred, notes were paid in full as they became due over a 3-month period between June 2020 and September 2020.

Warrants can only be redeemable if the proceeds of $5,000 are secured within 5 years of note issuance, which expires correspondingly to each note between June and October 2024.

Tax Liabilities

When MMG was initially acquired by Vivos Holdings, LLC in December 2016, MMG’s corporate status was changed from an S Corp to a C Corp due to its new ownership structure. This triggered an accelerated tax event, a $215 estimated annual impact per year for four years, that MMG is working with the IRS to pay. As of June 30, 2021, the tax liability was $92 compared to $292 as of December 31, 2020. The Company also accrued current income taxes of $669 as of June 30, 2021, relating to its current operations.

Factoring Facilities

Triumph Business Capital

On November 4, 2016, the MMG entered into a factoring and security agreement with Triumph Business Capital (“Triumph”). Pursuant to the agreement, MMG received advances on its accounts receivable (i.e., invoices) through Triumph to fund growth and operations. The proceeds of this agreement were used to pay operating costs of the business which include employee salaries, vendor payments and overhead expenses. On January 5, 2018, the agreement was amended to lower the factoring fee and interest rate for a term of one year. The agreement was amended again on January 19, 2018, to increase the maximum advance rate to $5,500. In January 2020, a new agreement was negotiated with Triumph lowering advance rate from 18 basis points to 15 and the interest rate from prime plus 2.5% to prime plus 2%. The amount of an invoice eligible for sale to Triumph went from 90% to 93%. The agreement which previously renewed annually, is now month to month. MMG continues to be obligated to meet certain financial covenants in respect to invoicing and reserve account balance.

In accordance with the agreement, a reserve amount is required for the total unpaid balance of all purchased accounts multiplied by a percentage equal to the difference between one hundred percent and the advanced rate percentage. As of June 30, 2021, the required amount was 10%. Any excess of the reserve amount is paid to MMG on a weekly basis, as requested. If a reserve shortfall exists for a period of ten-days, MMG is required to make payment to the financial institution for the shortage.

Accounts receivable (A/R) were sold with full recourse. Proceeds from the sale of receivables were $1,131 For the three months ended June 30, 2021, compared to $2,450 in the same period ending June 30, 2020.

The Factoring Facilities are collateralized by substantially all the assets of MMG. In the event of a default, the Factor may demand that the Company repurchase the receivable or debit the reserve account. Total finance line fees for the three months ended June 30, 2021, and 2020 comparatively totaled $16 and $39, respectively.