Filing summary
Entity discrepancy: The supplied filing is Recruiter.com Group, Inc.’s Form 10-Q, not a filing under the name Nixxy, Inc. It covers the unaudited quarter ended March 31, 2022 and was signed May 16, 2022.
Business context
Recruiter.com operates an online recruiting platform and provides on-demand recruiting, software subscriptions, staffing, placement, and marketplace services. The company said it was shifting toward software and on-demand recruiting, which it described as higher-margin and more scalable.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $6.87 million | $3.16 million |
| Gross profit / margin | $2.69 million / 39.2% | $0.91 million / 28.7% |
| Operating expenses | $6.82 million | $2.83 million |
| Operating loss | $4.13 million | $1.92 million |
| Net loss | $4.18 million | $6.28 million |
| Adjusted EBITDA loss | $1.35 million | $1.09 million |
| Cash used in operations | $1.20 million | $1.32 million |
Revenue rose 116%, principally from Recruiters on Demand growth and contributions from acquisitions; consulting and staffing revenue declined 36% as the company shifted focus. Gross margin improved, but operating expenses increased 139%, including $1.74 million of share-based compensation and $1.01 million of intangible amortization. The smaller net loss versus 2021 largely reflects the prior-year period’s substantial derivative and interest-related expenses; adjusted EBITDA loss increased.
At March 31, cash was $908,494, down from $2.58 million at year-end. Current assets were $6.20 million and current liabilities $6.80 million. Loans payable totaled $3.87 million, including $1.78 million current; total liabilities were $8.89 million. The filing reported no income tax provision. Accounts receivable, net, was $4.84 million, with an allowance for doubtful accounts of $899,756.
Material changes, outlook, and risks
- Management stated that available cash was insufficient for the next 12 months and disclosed substantial doubt about the company’s ability to continue as a going concern. It expected to need additional financing; failure to obtain capital could force it to reduce or stop activities.
- After quarter-end, the company entered a recourse factoring arrangement, effective April 27, 2022, allowing advances of up to the lesser of $3 million or 85% of eligible receivables, subject to fees and reserves. This provides a potential liquidity source but is borrowing secured by receivables.
- In April 2022, Novo Group reduced the principal on its acquisition note by $600,000, forgave a $52,117 working-capital adjustment, and waived the earn-out. The company said the debt reduction would be recognized as income in Q2 2022. The remaining note has revised payment terms.
- The company paid off a $250,000 promissory note plus accrued interest in April 2022. It also reported approximately $998,000 cash on hand as of May 12, 2022.
- Management expected recruiting demand to improve in 2022 but cautioned that the recovery was uncertain and could be affected by COVID-19 and broader economic conditions. No quantified financial guidance was provided.
- The company is pursuing BKR Strategy Group for approximately $1.4 million in unpaid invoices and a promissory note. BKR counterclaimed for $500,000, alleging overbilling. Management disputes the counterclaim; no loss was accrued because the outcome could not be estimated.
- Disclosure controls and internal control over financial reporting were deemed ineffective due to material weaknesses, including insufficient staffing to segregate duties and monitor financial reporting. Management anticipated remediation before year-end 2022.
- Common shares outstanding were 14,784,821 at March 31 and 14,887,401 at May 11. Warrants, options, and other potential shares create dilution risk.
Important facts for investors to verify
- Confirm the filing’s registrant and whether it is relevant to the requested Nixxy, Inc.; the filing itself names Recruiter.com Group, Inc.
- Assess near-term liquidity, operating cash burn, the availability and cost of factoring, and the company’s ability to secure additional financing.
- Review receivable collectability and customer concentration: two customers accounted for 22% of Q1 revenue, and one customer represented 11% of period-end receivables.
- Track execution of the Novo note amendments, remaining debt payments, and the Q2 accounting for the debt forgiveness.
- Monitor the BKR litigation and counterclaim, internal-control remediation, acquisition-related amortization, and potential share dilution.