Filing summary
Issuer and period: The supplied filing is Recruiter.com Group, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023, not a filing identified as Nixxy, Inc. The company operates recruiting, staffing, software, and related services businesses.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $2.04 million | $7.11 million | $5.33 million | $13.98 million |
| Gross profit / margin | $437,000 / 21.5% | $2.93 million / 41% | $1.17 million / 22% | $5.62 million / 40% |
| Operating loss | $939,000 | $2.33 million | $3.74 million | $6.46 million |
| Net loss | $980,000 | $1.19 million | $4.30 million | $5.37 million |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $1.71 million | $1.73 million |
- Revenue mix and changes: Q2 Recruiters on Demand revenue fell to $210,000 from $4.68 million, primarily as certain clients and staff transitioned to Job Mobz. Consulting and staffing revenue rose to $1.51 million from $940,000, supported by healthcare staffing. Software subscription revenue was $35,000 versus $808,000; the company had sold a software platform in 2022. Marketplace revenue declined, and full-time placement revenue was nil in Q2.
- Profitability: Lower operating expenses partly offset the sharp revenue contraction. Gross margin fell substantially, which management attributed to a larger mix of lower-margin consulting and staffing services. Q2 other income and expense included $754,000 of employee retention credit income, offset in part by interest and finance costs.
- Cash, working capital, and equity: June 30 cash was $442,000, versus $947,000 at December 31, 2022. Current assets were $2.11 million and current liabilities were $8.34 million; management reported a working-capital deficit of approximately $6.2 million. Total assets were $11.20 million, total liabilities $9.34 million, and stockholders’ equity $1.86 million.
- Debt and liquidity: Loans payable had $5.98 million of principal outstanding, or $5.23 million net of unamortized discounts and issuance costs. Approximately $4.19 million of principal was scheduled for payment in the remainder of 2023. The company also had a $600,000 puttable warrant liability. Factoring advances outstanding were zero at June 30, although the recourse factoring arrangement is secured by substantially all company assets.
- Share count: Common shares outstanding were 17,792,151 at June 30 and August 13, 2023. The filing reports 12.26 million potentially dilutive securities excluded from diluted loss per share as anti-dilutive. A one-for-fifteen reverse split was approved in August, subject to FINRA market-effectiveness approval.
Management commentary, outlook, and risks
- Going concern: Management states that substantial doubt exists about the company’s ability to continue as a going concern. It says available cash is insufficient for the next 12 months, additional financing is required, and failure to obtain capital could require the company to scale back or cease operations. The statements do not include adjustments that might be necessary if the company cannot continue as a going concern.
- Outlook: Management said it expected, but could not guarantee, improvement in recruiting demand during 2023. It cited plans to develop AI-enabled products, training, and job-board capabilities. No quantified financial guidance is provided.
- Strategic transactions: A June 2023 agreement to acquire GOLQ LLC from GoLogiq had not closed as of the filing. The proposed consideration included shares representing 84% of the buyer’s common stock at closing, with a contingent earn-out, and a planned spin-off of Recruiter.com’s existing business. The filing also describes post-quarter agreements to sell certain healthcare-related contracts and assets to Futuris subsidiaries, with stock consideration and a potential earn-out; completion and proceeds are not established in the supplied text.
- Financing and dilution: In August, the company extended two investor note maturities by 180 days in exchange for $50,000 in stock or cash at its discretion. Warrants were repriced, triggering a $503,643 deemed dividend for the six-month period, and warrant exercises and cashless exercises increased shares outstanding.
- Customer and collection concentration: One customer represented 79% of Q2 revenue and 95% of accounts receivable at June 30. Net accounts receivable was $1.40 million, against a $1.56 million doubtful-account allowance.
- Controls and contingencies: Management concluded disclosure controls and internal control over financial reporting were ineffective due to inadequate segregation of duties and insufficient in-house expertise for complex or unusual accounting. A BKR Strategy Group dispute includes a $500,000 counterclaim; the company reports a judgment in its favor on the promissory-note claim but says the other lawsuit remains ongoing and the counterclaim outcome cannot be estimated. No accrual was recorded for the counterclaim.
- Unusual items: The company recorded $754,000 of employee retention credit income and $327,000 of related third-party assistance fees as finance cost. It also recorded a $179,000 gain on settlement of payables. The company reported that it repaid its ERC advances in July 2023.
Most important facts to verify
- Confirm the intended issuer: the request names Nixxy, Inc., but the filing identifies Recruiter.com Group, Inc. (Nasdaq: RCRT and RCRTW).
- Verify the company’s current cash position, financing availability, near-term debt payments, and ability to address the disclosed going-concern uncertainty.
- Check whether the GoLogiq transaction, proposed spin-off, and Futuris asset sale closed, and review their final terms and impact on legacy shareholders.
- Assess the customer concentration, receivable collectability, and the status and outcome of the BKR litigation and counterclaim.
- Confirm the reverse split’s effectiveness and the resulting share count, warrant terms, and potential dilution.
- Review any remediation of the disclosed material weaknesses and any subsequent changes in financial reporting controls.