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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2024

☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________:

Commission file number: 001-40563

RECRUITER.COM GROUP, INC.
(Exact name of registrant as specified in its charter)

Nevada |  | 90-1505893
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
123 Farmington Avenue, Suite 252 Bristol, CT |  | 06010
(Address of principal executive offices) |  | (Zip Code)

Issuer’s telephone number (855) 931-1500

___________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock Common Stock Purchase Warrants |  | RCRT RCRTW |  | The Nasdaq Stock Market LLC The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☐
Non-accelerated Filer | ☒ | Smaller reporting company | ☒
| Emerging growth company | ☒

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 13, 2024, the number of shares of the registrant’s common stock outstanding was 3,309,582.

|  |  | Page |
|  |  | number |
Part I - Financial Information |  |  |
Item 1. | Condensed Consolidated Financial Statements |  | 3 |
| Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 |  | 3 |
| Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (Unaudited) |  | 4 |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (Unaudited) |  | 5 |
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (Unaudited) |  | 6 |
| Notes to Unaudited Condensed Consolidated Financial Statements |  | 7 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 27 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |  | 35 |
Item 4. | Controls and Procedures |  | 35 |
Part II - Other Information |  |  |
Item 1. | Legal Proceedings |  | 36 |
Item 1A. | Risk Factors |  | 36 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |  | 36 |
Item 3. | Defaults Upon Senior Securities |  | 36 |
Item 4. | Mine Safety Disclosures |  | 36 |
Item 5. | Other Information |  | 36 |
Item 6. | Exhibits |  | 37 |

2
Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Recruiter.com Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

|  | June 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
ASSETS |  | (Unaudited) |  |  |  |
Current assets: |  |  |  |  |  |
Cash |  | $ | 257,024 |  |  | $ | 1,008,408 |
Accounts receivable, net of allowance for doubtful accounts of $902,245 and $1,051,411, respectively |  |  | 41,042 |  |  |  | 405,786 |
Prepaid expenses and other current assets |  |  | 271,129 |  |  |  | 252,099 |
Investment in marketable securities |  |  | 240,317 |  |  |  | 382,144 |
Total current assets |  |  | 809,512 |  |  |  | 2,048,437 |
Property and equipment, net of accumulated depreciation of $57,336 and $38,776, respectively |  |  | 21,214 |  |  |  | 36,311 |
Intangible assets, net |  |  | 1,841,653 |  |  |  | 1,301,337 |
Goodwill |  |  | 7,101,084 |  |  |  | 7,101,084 |
Total assets |  | $ | 9,773,463 |  |  | $ | 10,487,169 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 1,296,551 |  |  | $ | 1,696,022 |
Accrued expenses |  |  | 787,058 |  |  |  | 770,625 |
Accrued compensation |  |  | 125,721 |  |  |  | 154,764 |
Accrued interest |  |  | 410,599 |  |  |  | 280,597 |
Deferred payroll taxes |  |  | - |  |  |  | 2,484 |
Other liabilities |  |  | 17,333 |  |  |  | 82,188 |
Loans payable - current portion, net of discount |  |  | 3,684,437 |  |  |  | 5,631,633 |
Warrant liability |  |  | 436,380 |  |  |  | 504,000 |
Refundable deposit on preferred stock purchase |  |  | 285,000 |  |  |  | 285,000 |
Deferred revenue |  |  | 116,109 |  |  |  | 149,848 |
Total current liabilities |  |  | 7,159,188 |  |  |  | 9,557,161 |
Total liabilities |  |  | 7,159,188 |  |  |  | 9,557,161 |
Commitments and contingencies (Note 10) |  |  |  |  |  |  |  |
Stockholders' Equity: |  |  |  |  |  |  |  |
Preferred Stock, 10,000,000 authorized, $0.0001 par value |  |  | - |  |  |  | - |
Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; no shares issued and outstanding as of June 30, 2024, and December 31, 2023 |  |  | - |  |  |  | - |
Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 0 and 86,000 shares issued and outstanding as of June 30, 2024, and December 31, 2023 |  |  | - |  |  |  | 9 |
Preferred stock, Series F, 0.0001 par value; 200,000 shares authorized; no shares issued and outstanding as of June 30, 2024, and December 31, 2023 |  |  | - |  |  |  | - |
Common stock, $0.0001 par value; 6,666,667 shares authorized; 3,272,582 and 1,433,903 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively |  |  | 327 |  |  |  | 143 |
Additional paid-in capital |  |  | 80,826,730 |  |  |  | 77,348,939 |
Accumulated deficit |  |  | (78,212,782 | ) |  |  | (76,419,083 | )
Total stockholders' equity |  |  | 2,614,275 |  |  |  | 930,008 |
Total liabilities and stockholders' equity |  | $ | 9,773,463 |  |  | $ | 10,487,169 |

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

3
Table of Contents

Recruiter.com Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three and Six Months ended June 30, 2024 and 2023

(Unaudited)

|  | Three months Ended June 30, |  |  | Three months Ended June 30, |  |  | Six months Ended June 30, |  |  | Six months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
REVENUE |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  | $ | 133,101 |  |  | $ | 575,353 |  |  | $ | 355,658 |  |  | $ | 2,827,149 |
Cost of revenue |  |  | - |  |  |  | 317,974 |  |  |  | 3,029 |  |  |  | 1,911,464 |
Gross Profit |  |  | 133,101 |  |  |  | 257,379 |  |  |  | 352,629 |  |  |  | 915,685 |
OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  | 39,773 |  |  |  | 79,453 |  |  |  | 92,519 |  |  |  | 236,036 |
Product development |  |  | 5,320 |  |  |  | 84,282 |  |  |  | 17,257 |  |  |  | 326,562 |
Amortization of intangibles |  |  | 272,687 |  |  |  | 325,702 |  |  |  | 587,097 |  |  |  | 633,428 |
General and administrative |  |  | 798,510 |  |  |  | 886,579 |  |  |  | 1,692,250 |  |  |  | 3,720,704 |
Total operating expenses |  |  | 1,116,290 |  |  |  | 1,376,016 |  |  |  | 2,389,123 |  |  |  | 4,916,730 |
LOSS FROM CONTINUING OPERATIONS |  |  | (983,189 | ) |  |  | (1,118,637 | ) |  |  | (2,036,494 | ) |  |  | (4,001,045 | )
OTHER INCOME (EXPENSES) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | (152,468 | ) |  |  | (647,213 | ) |  |  | (518,321 | ) |  |  | (1,161,369 | )
Other income |  |  | 176 |  |  |  | 754,312 |  |  |  | 5,346 |  |  |  | 756,099 |
Finance cost |  |  | - |  |  |  | (327,073 | ) |  |  | - |  |  |  | (327,073 | )
Gain on assets sale |  |  | 150,000 |  |  |  | - |  |  |  | 250,000 |  |  |  | - |
Gain on settlement of payables |  |  | - |  |  |  | 178,749 |  |  |  | - |  |  |  | 178,749 |
Loss on fair value of marketable securities |  |  | (33,315 | ) |  |  | - |  |  |  | (141,827 | ) |  |  | - |
Gain on debt extinguishment, net |  |  | - |  |  |  | - |  |  |  | 579,977 |  |  |  | - |
Change in fair value of warrant liability |  |  | 3,524 |  |  |  | - |  |  |  | 67,620 |  |  |  | - |
Total other (expenses) income |  |  | (32,083 | ) |  |  | (41,225 | ) |  |  | 242,795 |  |  |  | (553,594 | )
LOSS BEFORE INCOME TAXES |  |  | (1,015,272 | ) |  |  | (1,159,862 | ) |  |  | (1,793,699 | ) |  |  | (4,554,639 | )
Provision for income taxes |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Net loss from continuing operations |  | $ | (1,015,272 | ) |  | $ | (1,159,862 | ) |  | $ | (1,793,699 | ) |  | $ | (4,554,639 | )
Net income from discontinued operations |  |  | - |  |  |  | 179,589 |  |  |  | - |  |  |  | 258,597 |
Net Loss |  |  | (1,015,272 | ) |  |  | (980,273 | ) |  |  | (1,793,699 | ) |  |  | (4,296,042 | )
Deemed dividends |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (503,643 | )
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |  | $ | (1,015,272 | ) |  | $ | (980,273 | ) |  | $ | (1,793,699 | ) |  | $ | (4,799,685 | )
NET LOSS FROM CONTINUING OPERATIONS PER COMMON SHARE - BASIC AND DILUTED |  | $ | (0.35 | ) |  | $ | (1.00 | ) |  | $ | (0.74 | ) |  | $ | (4.01 | )
NET INCOME FROM DISCONTIUNED OPERATIONS PER COMMON SHARE - BASIC AND DILUTED |  |  | - |  |  |  | 0.15 |  |  |  | - |  |  |  | 0.23 |
NET LOSS PER COMMON SHARE - BASIC AND DILUTED |  |  | (0.35 | ) |  |  | (0.85 | ) |  |  | (0.74 | ) |  |  | (4.22 | )
WEIGHTED AVERAGE COMMON SHARES - BASIC AND DILUTED |  |  | 2,860,568 |  |  |  | 1,159,279 |  |  |  | 2,419,204 |  |  |  | 1,137,127 |

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

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Recruiter.com Group, Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity

For The Three and Six Months Ended June 30, 2024, and 2023

(Unaudited)

|  | Preferred stock Series E |  |  | Common stock |  |  | Additional Paid in |  |  | Accumulated |  |  | Total Stockholders’ |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
Balance as of December 31, 2023 |  |  | 86,000 |  |  | $ | 9 |  |  |  | 1,433,903 |  |  | $ | 143 |  |  | $ | 77,348,939 |  |  | $ | (76,419,083 | ) |  | $ | 930,008 |
Stock based compensation - Options |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 44,247 |  |  |  | - |  |  |  | 44,247 |
Common stock issued for services |  |  | - |  |  |  | - |  |  |  | 180,000 |  |  |  | 18 |  |  |  | 255,582 |  |  |  | - |  |  |  | 255,600 |
Conversion of Preferred stock, Series E, to Common stock |  |  | (86,000 | ) |  |  | (9 | ) |  |  | 28,667 |  |  |  | 3 |  |  |  | 6 |  |  |  | - |  |  |  | (0 | )
Common stock issued in connection with purchase of intangible assets |  |  | - |  |  |  | - |  |  |  | 392,155 |  |  |  | 39 |  |  |  | 647,016 |  |  |  | - |  |  |  | 647,055 |
Warrants issued in connection with purchase of intangible assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 480,358 |  |  |  | - |  |  |  | 480,358 |
Issuance of common stock upon conversion of promissory note |  |  | - |  |  |  | - |  |  |  | 168,414 |  |  |  | 17 |  |  |  | 273,656 |  |  |  | - |  |  |  | 273,673 |
Issuance of common stock upon conversion of promissory notes |  |  | - |  |  |  | - |  |  |  | 286,001 |  |  |  | 29 |  |  |  | 523,351 |  |  |  | - |  |  |  | 523,380 |
Common stock issued upon exercise of warrants |  |  | - |  |  |  | - |  |  |  | 213,186 |  |  |  | 21 |  |  |  | 592,036 |  |  |  | - |  |  |  | 592,057 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (778,427 | ) |  |  | (778,427 | )
Balance as of March 31, 2024 |  |  | - |  |  | $ | - |  |  |  | 2,702,326 |  |  | $ | 270 |  |  | $ | 80,165,191 |  |  | $ | (77,197,510 | ) |  | $ | 2,967,951 |
Stock based compensation - Options |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 27,967 |  |  |  | - |  |  |  | 27,967 |
Proceeds from sale of common stock in offering |  |  | - |  |  |  | - |  |  |  | 481,000 |  |  |  | 48 |  |  |  | 480,952 |  |  |  | - |  |  |  | 481,000 |
Issuance of common stock upon settlement of consulting agreement |  |  | - |  |  |  | - |  |  |  | 89,256 |  |  |  | 9 |  |  |  | 152,620 |  |  |  | - |  |  |  | 152,629 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,015,272 | ) |  |  | (1,015,272 | )
Balance as of June 30, 2024 |  |  | - |  |  | $ | - |  |  |  | 3,272,582 |  |  | $ | 327 |  |  | $ | 80,826,730 |  |  | $ | (78,212,782 | ) |  | $ | 2,614,275 |

|  | Preferred stock Series E |  |  | Common stock |  |  | Common stock to be issued |  |  | Additional Paid in |  |  | Accumulated |  |  | Total Stockholders’ |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
Balance as of December 31, 2022 |  |  | 86,000 |  |  | $ | 9 |  |  |  | 1,085,184 |  |  | $ | 109 |  |  |  | 39,196 |  |  | $ | 4 |  |  | $ | 74,333,736 |  |  | $ | (69,255,541 | ) |  | $ | 5,078,317 |
Stock based compensation - Options and Warrants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 390,806 |  |  |  | - |  |  |  | 390,806 |
Stock based compensation - RSUs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 152,143 |  |  |  | - |  |  |  | 152,143 |
Anti-dilution adjustment to warrants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 503,643 |  |  |  | (503,643 | ) |  |  | - |
Common stock issued for restricted stock units |  |  | - |  |  |  | - |  |  |  | 7,387 |  |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | (1 | ) |  |  | - |  |  |  | - |
Common stock issued upon exercise of warrants, net of offering costs |  |  | - |  |  |  | - |  |  |  | 54,768 |  |  |  | 5 |  |  |  | - |  |  |  | - |  |  |  | 315,173 |  |  |  | - |  |  |  | 315,178 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,315,769 | ) |  |  | (3,315,769 | )
Balance as of March 31, 2023 |  |  | 86,000 |  |  | $ | 9 |  |  |  | 1,147,339 |  |  | $ | 115 |  |  |  | 39,196 |  |  | $ | 4 |  |  | $ | 75,695,500 |  |  | $ | (73,074,953 | ) |  | $ | 2,620,675 |
Stock based compensation - option |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 219,560 |  |  |  | - |  |  |  | 219,560 |
Common stock issued for the exchange of warrants |  |  | - |  |  |  | - |  |  |  | 38,804 |  |  |  | 4 |  |  |  | (39,196 | ) |  |  | (4 | ) |  |  | - |  |  |  | - |  |  |  | - |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (980,273 | ) |  |  | (980,273 | )
Balance as of June 30, 2023 |  |  | 86,000 |  |  |  | 9 |  |  |  | 1,186,143 |  |  |  | 119 |  |  |  | - |  |  |  | - |  |  |  | 75,915,060 |  |  |  | (74,055,226 | ) |  |  | 1,859,962 |

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

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Recruiter.com Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Six Months ended June 30, 2024 and 2023

(Unaudited)

|  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2024 |  |  | 2023 |
Cash Flows From Operating Activities |  |  |  |  |  |
Net loss |  | $ | (1,793,699 | ) |  | $ | (4,296,042 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 602,195 |  |  |  | 645,943 |
Bad debt (recovery) expense |  |  | (69,641 | ) |  |  | 200,000 |
Loss on common stock issued in settlement |  |  | 152,629 |  |  |  | - |
Gain on extinguishment of debt |  |  | (579,977 | ) |  |  | - |
Equity based compensation expense - stock |  |  | 255,600 |  |  |  | 762,509 |
Equity based compensation expense - option |  |  | 72,214 |  |  |  | - |
Loss on fair value of marketable securities |  |  | 141,827 |  |  |  | - |
Gain on assets sale |  |  | (250,000 | ) |  |  | - |
Gain on settlement of debt |  |  | - |  |  |  | (178,749 | )
Change in fair value of warrant liability |  |  | (67,620 | ) |  |  | - |
Amortization of debt discount and debt costs |  |  | 177,072 |  |  |  | 726,708 |
Factoring discount fee and interest |  |  | - |  |  |  | 20,236 |
Changes in assets and liabilities: |  |  |  |  |  |  |  |
Decrease in accounts receivable |  |  | 434,384 |  |  |  | 591,126 |
Decrease (increase) in prepaid expenses and other current assets |  |  | (19,030 | ) |  |  | (10,262 | )
Increase (decrease) in accounts payable and accrued liabilities |  |  | (246,599 | ) |  |  | (133,506 | )
(Decrease) increase in deferred revenue |  |  | (33,739 | ) |  |  | (40,628 | )
Net cash (used) in operating activities |  |  | (1,224,384 | ) |  |  | (1,712,665 | )
Cash Flows From Investing Activities: |  |  |  |  |  |  |  |
Proceeds from sale of assets |  |  | 250,000 |  |  |  | - |
Net cash from investing activities |  |  | 250,000 |  |  |  | - |
Cash Flows From Financing Activities: |  |  |  |  |  |  |  |
Proceeds from ERC advances |  |  | - |  |  |  | 450,000 |
Repayment of ERC advances |  |  | - |  |  |  | (80,528 | )
Proceeds from sale of common stock in offering |  |  | 481,000 |  |  |  | - |
Payments of promissory notes |  |  | (592,057 | ) |  |  | - |
Repayments of notes |  |  | (258,000 | ) |  |  | (173,027 | )
Proceeds from factoring agreement |  |  | - |  |  |  | 871,821 |
Repayments of factoring agreement |  |  | - |  |  |  | (175,127 | )
Gross proceeds from exercise of warrants |  |  | 592,057 |  |  |  | 315,178 |
Net cash provided by financing activities |  |  | 223,000 |  |  |  | 1,208,317 |
Net decrease in cash |  |  | (751,384 | ) |  |  | (504,348 | )
Cash, beginning of period |  |  | 1,008,408 |  |  |  | 946,804 |
Cash, end of period |  | $ | 257,024 |  |  | $ | 442,456 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |
Cash paid during the period for interest |  | $ | 104,293 |  |  | $ | 176,769 |
Cash paid during the period for income taxes |  | $ | - |  |  | $ | - |
Supplemental schedule of non-cash investing and financing activities: |  |  |  |  |  |  |  |
Accounts receivable owed under factoring agreement collected directly by factor |  | $ | - |  |  | $ | 1,000,020 |
Issuance of common stock upon purchase of intangible assets |  | $ | 647,055 |  |  | $ | - |
Warrants issued in connection with purchase of intangible assets |  | $ | 480,358 |  |  | $ | - |
Issuance of common stock upon conversion of note payable |  | $ | 273,673 |  |  | $ | - |
Issuance of common stock from conversion of Preferred stock, Series E |  | $ | 9 |  |  | $ | - |
Issuance of common stock upon exercise of warrants and conversion of debt |  | $ | 1,115,437 |  |  | $ | - |
Deemed dividends |  | $ | - |  |  | $ | 503,643 |
Offering costs as a result of modification of warrants to induce exercise |  | $ | - |  |  | $ | 10,400 |

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

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Recruiter.com Group, Inc. and Subsidiaries

Notes to unaudited Condensed Consolidated Statements

June 30, 2024

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 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 1,000,000 preferred convertible shares providing voting control of Atlantic Energy Solutions, Inc. for $80,000. The transaction was 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 which has not occurred to date.

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 granted 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 issued 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 or 392,155 shares (see Note 5). Following the issuance of the Shares, GOLQ owned 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 GOLQ entered into an Amendment to Technology License and Commercialization Agreement (the “Amendment”). Under the Amendment, the Company and GOLQ 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 GOLQ 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 GOLQ 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). These GOLQ Warrants were valued at $480,358 and together with the common shares issued to GOLQ, discussed in Note 8, were treated as consideration for the licenses purchased from GOLQ (see Note 5).

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. The Company entered into a number of amendments to the August 16, 2023, Asset Purchase Agreement with Job Mobz, resulting in the extension of the closing date to September 2, 2024. Furthermore, in 2024 the Company received a non-refundable payment of $100,000 from Job Mobz during the quarter ended March 31, 2024, that has been recorded as a gain on assets sale within the accompanying condensed consolidated statements of operations. On April 9, 2024, the Company received $150,000 as the second part of the nonrefundable payment from Job Mobz. The payment shall be credited towards and count against the cash portion of the Purchase Price from the original Asset Purchase Agreement (See Note 12).

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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.

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. During the first and second quarter of 2024, the Company primarily focused on completing strategic transactions with Job Mobz and GoLogiq.

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 shifted its focus during 2023, by selling its consulting and staffing business and discontinued its full-time placement service business. During the first and second quarter of 2024, the Company operated primarily in its Marketplace Solutions line of business, which consists primarily of job board and recruitment advertising activities through its Mediabistro website, located at https://www.mediabistro.com.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. These condensed financial statements should be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC. In the opinion of management, the accompanying condensed financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position as of June 30, 2024, and the results of its operations and its cash flows for the three and six months ended June 30, 2024 and 2023. The balance sheet as of December 31, 2023, is derived from the Company’s audited financial statements. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2024.

The condensed 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.

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 June 30, 2024. As of June 30, 2024, and December 31, 2023, the Company had $0 and $638,299 in excess of the FDIC limit, respectively. The Company had no cash equivalents as of June 30, 2024.

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:

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· | 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 employers hire one of the candidates that referred. 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.

· | 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.

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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 condensed 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.

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 condensed 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 June 30, 2024, or December 31, 2023.

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.

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Revenue Disaggregation

For each of the years, revenues can be categorized into the following:

|  | Three Months Ended June 30, |
|  | 2024 |  |  | 2023 |
Recruiters On Demand |  | $ | 120 |  |  | $ | 209,902 |
Consulting and staffing services |  |  | - |  |  |  | 45,762 |
Software Subscriptions |  |  | - |  |  |  | 35,046 |
Revenue Share |  |  | - |  |  |  | 102,440 |
Marketplace Solutions |  |  | 132,981 |  |  |  | 182,203 |
Total revenue |  | $ | 133,101 |  |  | $ | 575,353 |

|  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |
Recruiters On Demand |  | $ | 120 |  |  | $ | 1,786,755 |
Consulting and staffing services |  |  | 5,550 |  |  |  | 124,181 |
Software Subscriptions |  |  | - |  |  |  | 412,941 |
Full time placement fees |  |  | - |  |  |  | 20,000 |
Marketplace Solutions |  |  | 349,988 |  |  |  | 380,832 |
Revenue Share |  |  | - |  |  |  | 102,440 |
Total revenue |  | $ | 355,658 |  |  | $ | 2,827,149 |

As of June 30, 2024, and December 31, 2023, deferred revenue amounted to $116,109 and $149,848, respectively. During the six months ended June 30, 2024, the Company recognized approximately $83,025 of revenue that was deferred as of December 31, 2023. Deferred revenue as of June 30, 2024, is categorized and expected to be recognized as follows:

Expected Deferred Revenue Recognition Schedule

|  | Total Deferred Q2 2024 |  |  | Recognize Q3 2024 |  |  | Recognize Q4 2024 |  |  | Recognize 2025 |
Other |  | $ | 49,371 |  |  | $ | - |  |  | $ | - |  |  | $ | 49,371 |
Marketplace Solutions |  |  | 66,738 |  |  |  | 51,376 |  |  |  | 11,134 |  |  |  | 4,228 |
TOTAL |  | $ | 116,109 |  |  | $ | 51,376 |  |  | $ | 11,134 |  |  | $ | 53,599 |

Revenue from international sources was approximately 1.66% and 0.2% for the three months ended June 30, 2024, and 2023, respectively, and 2.16% and 0.20% for the six months ended June 30, 2024 and 2023, respectively.

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 $902,245 and $1,051,411 as of June 30, 2024, and December 31, 2023, respectively. Bad debt (recovery) expense was ($20,733) and $0 for the three months ended June 30, 2024, and 2023 and ($69,641) and $200,000 for the six months ended June 30, 2024, and 2023, respectively.

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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 three months ended June 30, 2024, and 2023 was $8,839 and $6,258, respectively and was $15,098 and $12,516 for the six months ended June 30, 2024 and 2023.

Concentration of Credit Risk and Significant Customers and Vendors

As of June 30, 2024, three customers accounted for more than 10% of the accounts receivable balance, at 90% in the aggregate. As of December 31, 2023, one customer accounted for more than 10% of the accounts receivable balance, at 93%.

For the six months ended June 30, 2024, two customers accounted for 10% or more of total revenue, at 40% in the aggregate. For the six months ended June 30, 2023, one customer accounted for 10% or more of total revenue, at 48%.

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).

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 $39,773 and $79,453 for the three months ended June 30, 2024, and 2023, respectively. Advertising and marketing costs were $92,519 and $236,036 for the six months ended June 30, 2024, and 2023, respectively, and are included in sales and marketing on the condensed consolidated statements of operations.

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. In fair valuing these instruments, the income valuation approach is applied, and the valuation inputs include the contingent payment arrangement terms, projected revenues and cash flows, rate of return, and probability assessments. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and loans payable represent fair value based upon their short-term nature.

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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 June 30, 2024, December 31, 2023:

|  | Fair Value at June 30, |  |  | Fair Value Measurement Using |
|  | 2024 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Marketable Securities |  | $ | 240,317 |  |  | $ | 240,317 |  |  | $ | - |  |  | $ | - |
Warrant Liability |  | $ | 436,380 |  |  | $ | - |  |  | $ | - |  |  | $ | 436,380 |

|  | Fair Value at December 31, |  |  | Fair Value Measurement Using |
|  | 2023 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Marketable Securities |  | $ | 382,144 |  |  | $ | 382,144 |  |  | $ | - |  |  | $ | - |
Warrant Liability |  | $ | 504,000 |  |  | $ | - |  |  | $ | - |  |  | $ | 504,000 |

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 three and six months ended June 30, 2024, and year ended December 31, 2023:

Ending balance, December 31, 2022 |  | $ | 600,000 |
Re-measurement adjustments: |  |  | - |
Change in fair value of warrant liability |  |  | (96,000 | )
Ending balance, December 31, 2023 |  | $ | 504,000 |
Re-measurement adjustments: |  |  | - |
Change in fair value of warrant liability |  |  | (64,096 | )
Ending balance, March 31, 2024 |  | $ | 439,904 |
Re-measurement adjustments: |  |  | - |
Change in fair value of warrant liability |  |  | (3,524 | )
Ending balance, June 30, 2024 |  | $ | 436,380 |

Significant unobservable inputs used in the fair value measurements of the Company's derivative liabilities designated as Level 3 are as follows:

|  | June 30, 2024 |
Fair value |  | $ | 436,380 |
Valuation technique |  | Backsolve method |
Significant unobservable input |  | Time to maturity and volatility |

|  | December 31, 2023 |
Fair value |  | $ | 504,000 |
Valuation technique |  | Backsolve method |
Significant unobservable input |  | Time to maturity and volatility |

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Business Combinations

For all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets and liabilities of the acquired business, generally at their fair values with any excess of purchase price over the net assets recorded as goodwill.

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, the assets acquired from Parrut and Novo Group during the third quarter of 2021, and the assets acquired from GoLogiq in February of 2024. 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 condensed consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited (see Note 5).

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 three and six months ended June 30, 2024, has been included in a separate line item on the statement of operations, Gain (Loss) on change in fair value of Marketable Securities.

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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.

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.

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Product Development

Product development costs are included in operating expenses on the condensed consolidated statements of operations and consist of support, maintenance and upgrades of our website and IT platform and are charged to operations as incurred.

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 $503,643 as a result of a triggered down-round feature in the Company’s warrants, and as a result, the amount was reflected as a reduction to the income available to common stockholders in the basic EPS calculation. Common stock equivalents are excluded from the diluted earnings (or loss) per share computation if their effect is anti-dilutive. Common stock equivalents in amounts of 1,020,767 and 817,489 were excluded from the computation of diluted earnings per share for the six months ended June 30, 2024, and 2023, respectively, because their effects would have been anti-dilutive.

|  | Three Months Ended June 30, |
|  | 2024 |  |  | 2023 |
Net loss |  | $ | (1,015,272 | ) |  | $ | (980,273 | )
Deemed dividend |  |  | - |  |  |  | - |
Net loss, numerator, basic computation |  | $ | (1,015,272 | ) |  | $ | (980,273 | )

|  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |
Net loss |  | $ | (1,793,699 | ) |  | $ | (4,296,042 | )
Deemed dividend |  |  | - |  |  |  | (503,643 | )
Net loss, numerator, basic computation |  | $ | (1,793,699 | ) |  | $ | (4,799,685 | )

|  | June 30, |  |  | June 30, |
|  | 2024 |  |  | 2023 |
Options |  |  | 70,511 |  |  |  | 215,954 |
Stock awards |  |  | - |  |  |  | 2,808 |
Warrants |  |  | 950,256 |  |  |  | 570,060 |
Convertible preferred stock |  |  | - |  |  |  | 28,667 |
|  |  | 1,020,767 |  |  |  | 817,489 |

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 the period from January 2024 through July 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 condensed consolidated financial statements.

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These unaudited condensed 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 $1.2 million in operations during the six months ended June 30, 2024 and has a working capital deficit of approximately $6.4 million at June 30, 2024; (ii) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (iii) the Company will require additional financing for the fiscal year ending December 31, 2024, to continue at its expected level of operations; and (iv) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern as of the date of the end of the period covered by this report and for one year from the issuance of these condensed consolidated financial statements.

Management expects to continue a course of significantly reduced operations until such time that it raises additional capital. During this period, management expects to continue focusing on certain strategic transactions, including the spin-out of certain assets and liabilities to its Atlantic Energy Solutions subsidiary, the sale of certain Recruiter.com-related assets to Job Mobz, and the integration of the GoLogiq license assets into its business.

NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

The components of prepaid expenses and other current assets at June 30, 2024 and December 31, 2023, consisted of the following:

|  | June 30, 2024 |  |  | December 31, 2023 |
Prepaid expenses |  | $ | 95,824 |  |  | $ | 6,126 |
Prepaid advertisement |  |  | 146,500 |  |  |  | 146,500 |
Prepaid insurance |  |  | 28,805 |  |  |  | 86,413 |
Other receivables |  |  | - |  |  |  | 13,060 |
Prepaid expenses and other current assets |  | $ | 271,129 |  |  | $ | 252,099 |

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 $500,000 based on the 30-day Volume Weighted Average Price (VWAP) preceding the Closing Date (see Note 6).

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 was $551,127.

During the year ended December 31, 2023, the Company received 2,000 shares initially valued at $17,000 in exchange for $150,000 of accounts receivable which was fully reserved for.

The Company’s investments in marketable equity securities are being held for an indefinite period and thus have been classified as available for sale. Cost basis of securities held as of both June 30, 2024, and December 31, 2023, is $552,527, while accumulated unrealized losses were $312,210 and $170,383 as of June 30, 2024, and December 31, 2023, respectively. The fair market value of available for sale marketable securities were $240,317 and $382,144 as of June 30, 2024, and December 31, 2023, respectively.

The reconciliation of the investment in marketable securities is as follows for the six months ended June 30, 2024, and 2023:

|  | June 30, 2024 |  |  | June 30, 2023 |
Beginning Balance – January 1 |  | $ | 382,144 |  |  | $ | - |
Additions |  |  | - |  |  |  | - |
Recognized losses |  |  | (141,827 | ) |  |  | - |
Ending Balance – June 30 |  | $ | 240,317 |  |  | $ | - |

Net losses on equity investments were as follows:

|  | Six Months Ended |
|  | June 30, |
|  | 2024 |  |  | 2023 |
Net realized losses on investment sold or assigned |  | $ | - |  |  | $ | - |
Net unrealized losses on investments still held |  |  | 141,827 |  |  |  | - |
Total |  | $ | 141,827 |  |  | $ | - |

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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 $6,696,208 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.

There were no changes in the carrying amount of goodwill for the periods ended June 30, 2024, and December 31, 2023.

Intangible Assets

Intangible assets for the periods ended June 30, 2024, and December 31, 2023, are summarized as follows:

|  | June 30, 2024 |  |  | December 31, 2023 |
Customer contracts |  | $ | 5,644,411 |  |  | $ | 8,093,787 |
Software acquired |  |  | 2,563,937 |  |  |  | 3,785,434 |
License |  |  | 2,854,379 |  |  |  | 1,726,966 |
Internal use software developed |  |  | 157,939 |  |  |  | 325,491 |
Domains |  |  | 40,862 |  |  |  | 40,862 |
|  |  | 11,261,528 |  |  |  | 13,972,539 |
Less accumulated amortization |  |  | (9,419,875 | ) |  |  | (8,832,778 | )
Total |  |  | 1,841,653 |  |  |  | 5,139,762 |
Less impairment |  |  | - |  |  |  | (3,838,425 | )
Carrying value |  | $ | 1,841,653 |  |  | $ | 1,301,337 |

Amortization expense of intangible assets was $272,686 and $325,702 for the three months ended June 30, 2024, and 2023, respectively, and $587,097 and $633,428 for the six months ended June 30, 2024 and 2023 related to the intangible assets acquired in business combinations and licensing agreements. Future amortization of intangible assets is expected to be approximately as follows: 2024 (remainder of year), $440,846; 2025, $814,130; 2026, $524,089; 2027, $40,343; and thereafter, $22,245. The Company began amortizing intangible assets from the Scouted, Upsider and OneWire acquisitions in the second quarter of 2021 and the Parrut and Novo Group acquisitions in the third quarter of 2021.

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 $3,838,425. The Company performed its impairment test during 2023 which resulted in no additional impairment.

On March 31, 2019, the Company acquired Intangible assets totaling $1,910,072 from Genesys, including customer contracts and intellectual property which are being amortized over the three-year useful life.

During 2021, the Company acquired certain intangible assets pursuant to our Scouted, Upsider, OneWire, Parrut, and Novo Group acquisitions. These intangible assets aggregate approximately $11.6 million and consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets. We completed the accounting and valuations of the assets acquired.

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 $50,000, and $200,000 worth of advertising from CEG. Half of the advertising consideration is to be used within one year of this agreement, and the remaining balance is to be used within two years of the agreement. The Company additionally recorded a prepaid advertising expense within prepaid expenses and other current assets on the condensed consolidated balance sheet. As of June 30, 2024, and December 31, 2023, the Company utilized approximately $54,000 of advertising from CEG.

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 $1,000,000 in cash consideration. The recorded value of the internal use software developed at the date of the sale was $1,000,000 resulting in no gain or loss on the sale. For a period of eighteen months from the date of the sale, the Company will have continued access to this platform.

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On February 23, 2024, the Company entered into a certain Technology License and Commercialization Agreement with GoLogiq, Inc. (the “GOLQ”) 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-year renewals.

On March 28, 2024, the Company and GOLQ entered into an Amendment to Technology License and Commercialization Agreement to decrease the future royalty from eight percent to five percent for which the Company agreed to grant GOLQ a warrant to purchase 292,000 shares of Company common stock for a price equal to $0.01 per share. As a result of this transaction the company issued GOLQ 392,155 shares of Company’s common stock valued at $647,055, based on the quoted trading price on the grant date, and warrant to purchase 292,000 shares of Company’s common stock valued at $480,358 based on the Black-Scholes option pricing model. As of June 30, 2024, the total cost basis in the intangible assets purchased from GoLogiq is $1,127,413 with accumulated depreciation of $135,707 and a net carrying value of $991,706.

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.

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 $500,000 based on the 30-day volume weighted average price preceding the closing date, as defined. The Insigma Agreement also provides for the payment of up to $2,000,000 of additional cash consideration as an earnout payment to the Company, which shall be payable in monthly installments beginning 30 days from the closing date and based on the Gross Margin (as defined in the Insigma Agreement) generated by the acquired assets. On October 2, 2023, the Company and Insigma finalized the transfer based on the Closing Date (as defined in the Insigma Agreement). On October 5, 2023, the Company received 9,518,605 shares of common stock of FTRS. The shares were valued at $551,127 based on October 2, 2023, stock price of $0.0579.

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 condensed 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 major income and expense line items relate to the staffing and consulting services revenue as reported in the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023:

|  | Three months ended June 30, |
|  | 2024 |  |  | 2023 |
Revenue |  | $ | - |  |  | $ | 1,465,776 |
Cost of revenue |  |  | - |  |  |  | 1,286,187 |
Gross Profit |  |  | - |  |  |  | 179,589 |
Operating expenses: |  |  |  |  |  |  |  |
General and Administrative |  |  | - |  |  |  | - |
Total operating expenses |  |  | - |  |  |  | - |
Net income from discontinued operations |  | $ | - |  |  | $ | 179,589 |

|  | Six months ended June 30, |
|  | 2024 |  |  | 2023 |
Revenue |  | $ | - |  |  | $ | 2,506,719 |
Cost of revenue |  |  | - |  |  |  | 2,248,122 |
Gross Profit |  |  | - |  |  |  | 258,597 |
Operating expenses: |  |  |  |  |  |  |  |
General and Administrative |  |  | - |  |  |  | - |
Total operating expenses |  |  | - |  |  |  | - |
Net income from discontinued operations |  | $ | - |  |  | $ | 258,597 |

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NOTE 7 - LOANS PAYABLE

Promissory Notes Payable

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 of amounts due under the note and defaulted with Parrut.

On March 27, 2024, the Company and Parrut signed an agreement to convert the current outstanding principal, accrued interest, and penalties in aggregate of $258,714 into 168,414 shares of common stock. As a result of this transaction the Company recognized $14,959 in loss on extinguishment of debt recorded within other expense on condensed consolidated statement of operations for the three-months ended March 31, 2024. As of June 30, 2024, and December 31, 2023, the outstanding balance on the promissory note with Parrut was $0 and $238,723, 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 a gain on debt extinguishment in 2023.

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, through 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 June 30, 2024, and December 31, 2023, the outstanding balance on the promissory note with Novo Group was $1,198,617.

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 were set to be paid off in full on August 17, 2023. As a part of these financings, we granted the noteholders 46,296 warrants to purchase our common stock (See Note 9) (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 to the 8/17/22 Notes. The amendment extends each of the maturity dates of August 17, 2023, and August 30, 2023 respectively, 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, 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.

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.

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On February 9, 2024, Calvary Fund I LP entered into an agreement to reassign the entire balance of the notes entered into on August 17, 2022, including principal, accrued interest, and any penalties incurred to certain individuals and institutional noteholders. In addition, 104,274 Warrants from Calvary were reassigned to these new noteholders. On February 12, 2024, these new noteholders converted a total of $523,380 of the outstanding principal of the note in exchange for 286,001 shares of the Company’s common stock. On February 12, 2024, the new noteholders elected to exercise such warrants and paid the exercise price thereof through the reduction of debt. A total of $289,882 of debt was repaid with the warrant exercise proceeds. Additionally, the new noteholders agreed to extinguish $370,604 of debt pursuant to this agreement being enacted.

As of June 30, 2024, and December 31, 2023, the outstanding balance on the 8/17/22 Notes, net of the unamortized debt issuance costs and debt discounts of $0 and $13,056, respectively, was $296,082 and $1,421,864 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 were 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, 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.

On February 9, 2024, 8/30/22 Note Holders entered into an agreement to reassign the entire balance of the notes entered into on August 30, 2022, including principal, accrued interest, and any penalties incurred to certain individual and institutional investors (the “new noteholders”).

Also, On February 9, 2024, 8/30/22 Note Holders entered into an agreement with the new noteholders whereas the assignees transferred 108,912 Warrants. On February 12, 2024, the new noteholders elected to exercise such warrants and paid the exercise price of $302,175 through the reduction of debt.

On February 12, 2024, the Company entered into an agreement with the new noteholders whereas they agreed to waive a total of $224,332 of the debt assigned to them.

As a result of the 8/17/22 Notes and 8/30/22 Notes settlement transactions, the Company recognized a gain on extinguishment of debt for the amount of $594,936 recorded within other income for the three-month ended March 31, 2024.

As of June 30, 2024, and December 31, 2023, the outstanding balance on the 8/30/22 Notes, net of the unamortized debt issuance costs and debt discounts of $0 and $0, respectively, was $705,738 and $1,194,445 respectively.

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) which is recorded as a warrant liability for puttable warrants at fair value (See Note 1). 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.

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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 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.

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 $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”).

The Company repaid $258,000 of principle under the Montage note during the six months ended June 30, 2024.

As of June 30, 2024, and December 31, 2023, the outstanding balance on the Loan Agreement, net of the unamortized debt issuance costs and debt discounts of $0 and $164,016, respectively, was $1,484,000 and $1,577,984, respectively.

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.

As of June 30, 2024, and December 31, 2023, the outstanding principal balance on the promissory notes payable totaled $3,684,437 and $5,808,705, respectively.

The status of the loans payable as of June 30, 2024, and December 31, 2023, are summarized as follows:

|  | June 30, 2024 |  |  | December 31, 2023 |
Promissory notes |  | $ | 3,684,437 |  |  | $ | 5,808,705 |
Factoring arrangement |  |  | - |  |  |  | - |
Total loans payable |  |  | 3,684,437 |  |  |  | 5,808,705 |
Less: Unamortized debt discount or debt issuance costs |  |  | - |  |  |  | (177,072 | )
Less current portion |  |  | (3,684,437 | ) |  |  | (5,631,633 | )
Non-current portion |  | $ | - |  |  | $ | - |

The future principal payments of the loans payable are as follows:

Period Ending December 31, |  |  |
2024 (Remainder) |  | $ | 3,684,437 |

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NOTE 8 - STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share.

Our Series E preferred stock is the only class of our preferred stock that was outstanding as of December 31, 2023. Series E preferred stock has a stated value of $20 per share, which is convertible at any time after issuance at the option of the holder, subject to a beneficial ownership limitation of 4.99% or if waived, 9.99%, into common stock based on the stated value per share divided by $4.00 per share, subject to adjustment in the event of stock splits, stock dividends or reverse splits. Holders of Series E Preferred Stock are entitled to vote together with holders of the common stock on an as-converted basis, subject to a beneficial ownership limitation of 4.99% or if waived, 9.99%. If at any time while any shares of Series E Preferred Stock remain outstanding and any triggering event contained in the Certificate of Designation for such series occurs, we shall pay, within three days, to each holder $210 per each $1,000 of the stated value of each such holder’s shares of Series E Preferred Stock.

On February 14, 2024, the sole shareholder of 86,000 shares of Series E preferred stock converted the entire balance into 28,667 shares of common stock. As of June 30, 2024, and December 31, 2023, the Company had 0 and 86,000 shares of Series E preferred stock issued and outstanding.

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 $200,000 as the authorized capital increases without the simultaneous increase in the number of shares outstanding. In May 2020 following stockholder approval at a special meeting the Company effected a reincorporation from Delaware to Nevada and a simultaneous increase in our authorized common stock from 31,250,000 shares to 250,000,000 shares. As of December 31, 2019, we estimated that we owed approximately $6 million in penalties (prior to any waivers of penalties) to holders of preferred stock. Subsequent to December 31, 2019, we have received waivers from a substantial number of the preferred shareholders with respect to these penalties. We have agreed to issue to the holders of Series D Preferred Stock an aggregate of 106,134 additional shares of Series D Preferred Stock (valued at $1,929,516) as consideration for the waivers. We accrued this cost during the year ended December 31, 2019. Additionally, certain holders of Series E and Series F Preferred Stock have not waived the penalties. We accrued $308,893 as of December 31, 2019, related to these Series E and Series F Preferred holders. Due to our ongoing liquidity problems, we will be required to cease operations if faced with material payment requests from investors who did not agree to waive the penalties. The total accrued penalty amount of $2,238,314 was included in accrued expenses on the balance sheet during the year ended December 31, 2019. The $1,929,516 accrual was reclassified to equity during the three months ended March 31, 2020, as a result of our issuance of the 106,134 shares of Series D Preferred Stock. As of June 30, 2024, and December 31, 2023, the remaining balance of $308,798 is included in accrued expense on the consolidated balance sheets.

Common Stock

The Company is authorized to issue 6,666,667 shares of common stock, par value $0.0001 per share. As of June 30, 2024, and December 31, 2023, the Company had 3,272,582 and 1,433,903 shares of common stock outstanding, respectively.

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 report has been retroactively adjusted to reflect the effects of the reverse stock split.

Shares issued upon purchase of intangible assets

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. On February 22, 2024, the effective date, a total of 1,961,755 common shares were issued and outstanding requiring the company to initiate an issuance of 392,155 shares valued at $647,055, based on the quoted trading price on the grant date, to GOLQ per the agreement.

Shares issued upon conversion of note payable

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 $1,305,556. Additionally, the Board of Directors authorized the retirement of partial amounts of that Promissory Note debt to pay the exercise price of their associated warrants, thereby retiring the warrants. The Company issued 286,001 shares of common stock in exchange for the conversion of $523,380 of outstanding debt.

On March 27, 2024, the Company received a notice to convert the outstanding principal of the Parrut Note together with accrued interest in total of $258,714.53 into 168,414 shares of the Company's common stock, The share value based on the grant date was $273,673, and accordingly the Company recognized a loss on conversion of $14,959.

Shares issued for services

During the six months ended June 30, 2024, the company granted a total of 180,000 fully vested shares of common stock to consultants of the Company. The value of the fully vested shares granted was determined by the value of the stock on the quoted trading price of $1.42 and in aggregate of $255,600 and recognized as stock compensation for the six months ended June 30, 2024.

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Shares issued in offering

On June 6, 2023, the Company entered into securities purchase agreements with nine investors, pursuant to which the Company agreed to sell and issue an aggregate of 481,000 shares of common stock, par value $0.0001 of the Company at a purchase price of $1.00 per share for aggregate proceeds to the Company of $481,000.

Shares issued in connection with settlement of consulting agreement

On May 29, 2024, the Company entered into a settlement agreement whereas the Company and vendor agreed to settle disputes arising from certain engagement letters signed December 5, 2022, and June 1, 2023. In exchange for vendor’s settlement, the Company issued the equivalent of $150,000 of common stock, valued at the 30-day Volume Weighted Average Price as of May 29, 2024. The Company issued 89,256 shares of common stock to the vendor and recognized $152,629 of settlement expense in the quarter related to the agreement.

NOTE 9 - STOCK OPTIONS AND WARRANTS

2021 Equity Incentive Plan

In July 2021, our Board and shareholders authorized the 2021 Equity Incentive Plan (the “2021 Plan”), covering 180,000 shares of common stock. In January 2022, the number of shares authorized under the 2021 Plan was automatically increased to 228,530 shares pursuant to an escalation provision in the plan. The purpose of the 2021 Plan is to advance the interests of the Company and our related corporations by enhancing the ability of the Company to attract and retain qualified employees, consultants, officers, and directors, by creating incentives and rewards for their contributions to the success of the Company and its related corporations. The 2021 Plan is administered by our Board or by the Compensation Committee. The following awards may be granted under the 2021 Plan:

| ● | incentive stock options (“ISOs”)
| ● | non-qualified options (“NSOs”)
| ● | awards of our restricted common stock
| ● | stock appreciation rights (“SARs”)
| ● | restricted stock units (“RSUs”)

Any option granted under the 2021 Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant and not less than $4.00 per share, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The plans further provide that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any option holder during any calendar year cannot exceed $100,000. The exercise price of any NSO granted under the 2021 Plan is determined by the Board at the time of grant but must be at least equal to fair market value on the date of grant. The term of each plan option and the manner in which it may be exercised is determined by the Board or the Compensation Committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant. The terms of any other type of award under the 2021 Plan are determined by the Board at the time of grant. Subject to the limitation on the aggregate number of shares issuable under the plans, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person.

Stock Options

There were no stock options granted during the six months ended June 30, 2024.

During the three months ended June 30, 2024, and 2023, we recorded $27,967 and $219,560 of compensation expense, respectively, related to stock options, and during the six months ended June 30, 2024, and 2023, we recorded $72,214 and $762,509 of compensation expense, respectively related to stock options.

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A summary of the status of the Company’s stock options as of June 30, 2024, 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, 2023 |  |  | 240,188 |  |  | $ | 46.96 |  |  |  | 0.78 |  |  | $ | - |
Granted |  |  | - |  |  |  | - |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  |  | - |  |  |  |  |  |  |  |  |
Expired or cancelled |  |  | (169,677 | ) |  |  | 53.05 |  |  |  |  |  |  |  |  |
Outstanding at June 30, 2024 |  |  | 70,511 |  |  | $ | 31.04 |  |  |  | 1.37 |  |  | $ | - |
Exercisable at June 30, 2024 |  |  | 55,258 |  |  | $ | 33.57 |  |  |  | 1.07 |  |  | $ | - |

As of June 30, 2024, there was approximately $159,227 of total unrecognized compensation cost related to non-vested stock options which vest over time and is expected to be recognized over a period of four years, as follows: 2024, $54,007; 2025, $89,018; 2026, $14,683; 2027, $1,223; and thereafter $296. The intrinsic value of options outstanding is $0 at June 30, 2024 and the intrinsic value of options exercisable is $0 at June 30, 2024.

Warrants

2024 Warrant Grants

Warrants issued for intangible purchase

On March 28, 2024, the Company and GOLQ entered into an Amendment to Technology License and Commercialization Agreement (the “Amendment”). Under the Amendment, the Company and GOLQ 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 GOLQ 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 GOLQ 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). These GOLQ Warrants were valued at $480,358 and together with the common shares issued to GOLQ, discussed in Note 8, were treated as consideration for the licenses purchased from GOLQ.

Warrants exercised

On February 9, 2024, the 8/30/2022 noteholders entered into an agreement with the new noteholders (Note 7) whereas the assignees will purchase 108,912 Warrants from the previous holders.

On February 12, 2024, the noteholders elected to exercise such warrants and paid the exercise price thereof through the cancellation of debt. The Parties agreed that the Exercise Price of the Warrants shall be paid by and through reduction and cancellation of aggregate amounts due under the notes previously assigned to them on February 9, 2024. A total of $302,175 of exercise proceeds were received, and 108,912 common shares issued in conjunction with the exercise.

On February 9, 2024, Calvary Fund I L.P entered into an agreement with the new noteholder (Note 7) whereas the assignees will purchase 104,274 Warrants from Calvary.

On February 12, 2024, the noteholders elected to exercise such warrants and paid the exercise price thereof through the cancellation of debt. The Parties agree that the Exercise Price of the Warrants shall be paid by and through reduction and cancellation of aggregate amounts due under the notes previously assigned to them on February 9, 2024. A total of $289,882 of exercise proceeds were received, and 104,274 common shares issued in conjunction with the exercise.

Warrant activity for the six months ended June 30, 2024, is as follows:

|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  |  |  |  | Exercise |
|  | Warrants |  |  | Price per |
|  | Outstanding |  |  | Share |
Outstanding at December 31, 2023 |  |  | 979,853 |  |  | $ | 2.37 |
Issued |  |  | 292,000 |  |  |  | 0.10 |
Exercised |  |  | (213,186 | ) |  |  | 0.19 |
Expired or cancelled |  |  | (108,411 | ) |  |  | 0.38 |
Outstanding at June 30, 2024 |  |  | 950,256 |  |  | $ | 1.89 |

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All warrants are exercisable at June 30, 2024. The weighted average remaining life of the warrants is 2.83 years at June 30, 2024.

The fair values of warrants granted were estimated using Black-Sholes option-pricing model with the following assumptions:

|  | June 30, 2024 |
Risk-free interest rates |  |  | 4.28 | %
Expected life (in years) |  |  | 3.00 |
Expected volatility |  |  | 194.4 | %
Dividend yield |  |  | 0.00 | %

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 June 30, 2024. 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 $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.

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 $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.

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 $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.

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 $9,360 and $17,855 for the three months ended June 30, 2024, and 2023, respectively, and $18,938 and $27,041 for the six months ended June 30, 2024 and 2023, respectively. These Expenses are included in product development expense in our condensed consolidated statements of operations.

NOTE 12 - SUBSEQUENT EVENTS

On July 26, 2024, Recruiter.com and Job Mobz Inc. executed an amendment to their Asset Purchase Agreement, originally signed on August 16, 2023. This amendment extended the closing date to September 2, 2024, and required a non-refundable payment of $120,000 from Job Mobz, credited against the purchase price. Additionally, it included compensation for interest and a penalty if the closing conditions are unmet by the new closing date.

On August 5, 2024, the company granted a total of 37,000 fully vested shares of common stock to consultants of the Company. The value of the fully vested shares granted was determined by the value of the stock on the quoted trading price of $2.26 and in aggregate of $83,620.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 16, 2024.

For purposes of this Quarterly Report, “Recruiter.com,” “we,” “our,” “us,” or similar references refers to Recruiter.com Group, Inc. and its consolidated subsidiaries, unless the context requires otherwise.

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 $28.5 billion dollar Employment and Recruiting Agency industry (Per IBIS World Employment& Recruiting Agencies in the US 2005-2030). The Company offers recruitment-related services, including on-demand contract recruiting, job board platforms, recruitment education services, and a candidate marketing software.

We have seven 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).

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. The Company has announced plans to shift its focus, along with its license agreement with GoLogiq, and spin out the recruitment related businesses to Atlantic Energy Solutions, which is currently undergoing a name change to CognoGroup, Inc. There can be no assurance that the Company will be able to complete its planned spinout and strategic transformation.

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.
· | 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 September 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.
· | 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.

· | 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.

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.

Quarter Overview

In the second quarter of 2024, the period ending June 30, 2024, the Company continued to concentrate on finalizing its strategic transactions critical to its evolution. The Company is in a period of profound change after significantly reducing its operating footprint to focus primarily on strategic financial matters. The Company also continued preparing for its planned spin-out transaction of certain operating assets to its Atlantic Energy Solutions subsidiary, which is currently being renamed CognoGroup, a Nevada Corporation ("CognoGroup"). CognoGroup is planned to hold the current recruitment-related technology assets, including Mediabistro, a job board for the media industry, as well as other assets and projects of the Company, such as its AI-enabled CandidatePitch software and RecruitingClasses.com.

The Company is also expected to close the sale of its Recruiter.com website to Job Mobz shortly; however, the Company executed an extension with Job Mobz as per below Key Highlights.

Product development efforts were limited to continued improvements to Mediabistro and its underlying job board technology, as well as technical projects related to the expected sale of Recruiter.com.

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Our key highlights for the three months ending June 30, 2024, include the following:

Key Highlights:

· | On April 3, 2024, the board approved an Executive Compensation Letter Agreement with Mr. Whitelaw (the “Agreement”) whereby the Company shall pay Mr. Whitelaw an initial base salary of $10,000 per month along with a discretionary bonus as determined by the board.
· | On June 6, 2024, Recruiter.com Group, Inc. (the “Company”) entered into securities purchase agreements (the “Purchase Agreements”) with nine investors (the “Purchasers”), pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of 481,000 shares (the “Shares”) of common stock, par value $0.0001, of the Company (“Common Stock”) at a purchase price of $1.00 per Share for aggregate gross proceeds to the Company of approximately $481,000 (the “Registered Offering”). There were no placement agent fees or offering expenses payable by the Company in connection with the Registered Offering. The Shares are being sold pursuant to Company’s effective shelf registration statement on Form S-3 (File No. 333-26470), including a prospectus contained therein, which was originally filed with the Securities and Exchange Commission (the “SEC”) on September 16, 2022, and was declared effective by the SEC on September 30, 2022, and a related prospectus supplement, dated June 6, 2024, related to the Registered Offering.
· | On June 11, 2024, Recruiter.com Group, Inc. (the “Company”) issued a press release announcing that on June 6, 2024, the Company was formally notified by Nasdaq that it had evidenced full compliance with all requirements for continued listing on The Nasdaq Capital Market, including the Minimum Stockholders’ Equity Requirement, subject to ongoing monitoring and compliance.

Subsequent Events:

· | On July 11, 2024, Recruiter.com entered into Debt Settlement and Release Agreements with holders of the August 17 and August 30, 2022 notes. This agreement, ratified by the Board and majority shareholders, converted all remaining principal, interest, and penalties of the August 17 and August 30, 2022 notes into 5,358,569 shares of common stock, extinguishing approximately $999,253 in principal and interest. The agreements included customary representations, warranties, and indemnification obligations and required several conditions for closing, including shareholder approval and regulatory filings. As the date of this report, the Company remains in the process of finalizing shareholder approval and regulatory filings.
· | On July 11, 2024, the Board and majority shareholders approved the issuance and sale of up to 5,500,000 shares of common stock at $1.00 per share, including an initial 2,000,000 shares to ZK International Group Co., Ltd. in a private placement with a six-month option for an additional 2,000,000 shares. This offering, exempt from registration under Regulation S, included customary conditions and required regulatory and shareholder approvals. Further approvals were obtained for an additional 3,500,000 shares to be sold to U.S. and non-U.S. investors under similar terms, contingent on various conditions including majority shareholder approval and regulatory compliance. As the date of this report, the Company remains in the process of finalizing shareholder approval and regulatory filings.

· | On July 26, 2024, Recruiter.com and Job Mobz Inc. executed an amendment to their Asset Purchase Agreement, originally signed on August 16, 2023. This amendment extended the closing date to September 2, 2024, and required a non-refundable payment of $120,000 from Job Mobz, credited against the purchase price. Additionally, it included compensation for interest and a penalty if the closing conditions are unmet by the new closing date.
· | On August 2, 2024, we filed a Schedule 14C Information Statement with the SEC, outlining recent corporate actions approved by our majority shareholders. These actions include amending our Articles of Incorporation to increase the authorized common stock to 200,000,000 shares, while maintaining the authorized preferred stock at 10,000,000 shares, changing our corporate name to Nixxy, Inc., adopting the 2024 Equity Incentive Plan, authorizing the issuance of shares in private placements and debt settlements, and approving the spin-out of specific business assets. These actions are subject to shareholder approval, with their implementation contingent upon meeting all necessary regulatory compliance requirements. Finalization will occur following the completion of the approval process and any required filings with regulatory agencies.

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Results of Operations

Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023:

Revenue

We had revenue of $0.1 million for the three-month period ended June 30, 2024, as compared to $0.6 million for the three-month period ended June 30, 2023, representing a decrease of $0.5 million or 77%. The decreases resulted primarily from a decrease in our Recruiters on Demand business of $0.2 million or 100% as we transitioned this business to JobMobz, a Recruitment Process Outsourcing company. Software Subscriptions contributed $0 of revenue in 2024 compared to $35 thousand in 2023 as we had sold our AI sourcing software technology last year to Talent, Inc. Marketplace Solutions revenue of $133 thousand decreased by $49 thousand or 27% and only partially offset the decreases outlined above.

Cost of Revenue

Cost of revenue was $0 for the three-month period ended June 30, 2024, compared to $0.3 million for the corresponding three-month period in 2023, representing a decrease of $0.3 million or 100%. This decrease resulted primarily from a decrease in compensation expense in line with the decrease in revenue and a higher margin revenue stream in 2024. Cost of revenue in 2023 was primarily attributable to third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys, which after its purchase, serves as our Recruiting Solutions division, as well as costs for contract recruiters supporting the Recruiters on Demand business.

Our gross profit for the three-month period ended June 30, 2024, was $0.1 million, producing a gross profit margin of 100%. Our gross profit for the corresponding 2023 three-month period was $0.3 million, producing a gross profit margin of 45%. The increase in the gross profit margin from the 2024 period to the 2023 period reflects the shift in the mix in sales for the period as revenue is now primarily generated through marketplace solutions.

Operating Expenses

We had total operating expenses of $1.1 million for the three-month period ended June 30, 2024, compared to $1.4 million for the corresponding three-month period in 2023, a decrease of $0.3 million or 19%. This decrease was due to decreases in general and administrative, sales and marketing, product development, and amortization expenses of $88, $39, 79, and $53 thousand, respectively.

Sales and Marketing

Our sales and marketing expense for the three-month period ended June 30, 2024, was $40 thousand compared to $79 thousand for the corresponding three-month period in 2023, a reduction of $39 thousand, which reflects a decrease in technology and advertising expenses.

Product Development

Our product development expense for the three-months ended June 30, 2024, decreased to $5 thousand from $84 thousand for the corresponding period in 2023 due to the reduction in operations and revenue during that same period.

Amortization of Intangibles

For the three-month period ended June 30, 2024, we incurred a non-cash amortization charge of $273 thousand as compared to $326 thousand for the corresponding period in 2023. The amortization expense in 2024 and 2023 relates to the intangible assets acquired from Genesys (now our Recruiting Solutions division), Scouted, Upsider, OneWire, Parrut Novo Group, and GOLQ in 2024.

General and Administrative

General and administrative expense for the three-month period ended June 30, 2024, includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the three-month period ended June 30, 2024, our general and administrative expenses were $797 thousand, including $28 thousand of non-cash stock-based compensation. In 2023, for the corresponding period, our general and administrative expenses were $887 thousand, including $220 thousand of non-cash stock-based compensation.

Other Income (Expense)

Other income (expense) for the three-month period ended June 30, 2024, was expense of ($32) thousand compared to expense of ($41) thousand in the corresponding 2023 period.

Net Loss

For the three-months ended June 30, 2024, we had a net loss from continuing operations of $1.0 million compared to a net loss of $1.2 million during the corresponding three-month period in 2023. For the three-months ended June 30, 2024, we had a net income from discontinued operations of $0 thousand compared to a net income of $180 thousand during the corresponding three-month period in 2023.

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Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023:

Revenue

We had revenue of $0.4 million for the six-month period ended June 30, 2024, as compared to $2.8 million for the six-month period ended June 30, 2023, representing a decrease of $2.4 million or 87%. The decreases resulted primarily from decreases within our Recruiters on Demand, Consulting and Staffing Services, and Software Subscriptions business lines of $1.8 million, $0.1 million, and $0.4, respectively.

Cost of Revenue

Cost of revenue was $3 thousand for the six-month period ended June 30, 2024, compared to $1.9 million for the corresponding six-month period in 2023, representing a decrease of $1.9 million or 99%. Cost of revenue in 2023 was primarily attributable to third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys, which after its purchase, serves as our Recruiting Solutions division, as well as costs for contract recruiters supporting the Recruiters on Demand business.

Our gross profit for the six-month period ended June 30, 2024, was $0.4 million, producing a gross profit margin of 99%. Our gross profit for the corresponding 2023 three-month period was $0.9 million, producing a gross profit margin of 32%. The increase in the gross profit margin from the 2024 period to the 2023 period reflects the shift in the mix in sales for the period as revenue is now primarily generated through marketplace solutions.

Operating Expenses

We had total operating expenses of $2.4 million for the six-month period ended June 30, 2024, compared to $4.9 million for the corresponding six-month period in 2023, a decrease of $2.5 million or 51%. This decrease was primarily due to a decrease in general and administrative expenses of $2.0 million. Additionally, sales and marketing, and product development decreased by $144 and $309 thousand, respectively.

Sales and Marketing

Our sales and marketing expense for the six-month period ended June 30, 2024, was $93 thousand compared to $236 thousand for the corresponding three-month period in 2023, a reduction of $144 thousand, which reflects a decrease in technology and advertising expenses.

Product Development

Our product development expense for the six-months ended June 30, 2024, decreased to $17 thousand from $327 thousand for the corresponding period in 2023. This decrease was primarily attributable to a $309 thousand decrease in hosting and data expenses during the period.

Amortization of Intangibles

For the six-month period ended June 30, 2024, we incurred a non-cash amortization charge of $587 thousand as compared to $633 thousand for the corresponding period in 2023. The amortization expense in 2024 and 2023 relates to the intangible assets acquired from Genesys (now our Recruiting Solutions division), Scouted, Upsider, OneWire, Parrut Novo Group, and GOLQ in 2024.

General and Administrative

General and administrative expense for the six-month period ended June 30, 2024, includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the six-month period ended June 30, 2024, our general and administrative expenses were $1.7 million, including $328 thousand of non-cash stock-based compensation. In 2023, for the corresponding period, our general and administrative expenses were $3.7 million, including $763 thousand of non-cash stock-based compensation.

Other Income (Expense)

Other income (expense) for the six-month period ended June 30, 2024, was income of $243 thousand compared to expense of ($554) thousand in the corresponding 2023 period. The primary reason for the increase in income in 2024 was due to a gain on debt extinguishment of $580 thousand.

Net Income (Loss)

For the six-months ended June 30, 2024, we had a net loss from continuing operations of $1.8 million compared to a net loss of $4.6 million during the corresponding six-month period in 2023. For the six-months ended June 30, 2024, we had a net income from discontinued operations of $0 thousand compared to a net income of $259 thousand during the corresponding three-month period in 2023.

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Non-GAAP Financial Measures

The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives, to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of our historical operating results 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 us and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

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

|  | Three months Ended June 30, |
|  | 2024 |  |  | 2023 |
Net Income (loss) |  | $ | (1,015,272 | ) |  | $ | (980,273 | )
Interest expense and finance cost, net |  |  | (152,468 | ) |  |  | (974,286 | )
Depreciation & amortization |  |  | 281,528 |  |  |  | 331,959 |
EBITDA (loss) |  |  | (886,212 | ) |  |  | (1,622,600 | )
Bad debt (recovery) expense |  |  | (20,733 | ) |  |  | - |
Gain on Settlement of Payables |  |  | - |  |  |  | 178,749 |
Stock-based compensation |  |  | 27,967 |  |  |  | 219,560 |
Gain on debt extinguishment |  |  | - |  |  |  | - |
Adjusted EBITDA (Loss) |  | $ | (878,978 | ) |  | $ | (1,224,291 | )

|  | Six months Ended June 30, |
|  | 2024 |  |  | 2023 |
Net Income (loss) |  | $ | (1,793,699 | ) |  | $ | (4,296,042 | )
Interest expense and finance cost, net |  |  | (518,321 | ) |  |  | (1,488,442 | )
Depreciation & amortization |  |  | 602,195 |  |  |  | 645,943 |
EBITDA (loss) |  |  | (1,709,825 | ) |  |  | (5,138,541 | )
Bad debt (recovery) expense |  |  | (69,641 | ) |  |  | 200,000 |
Gain on Settlement of Payables |  |  | - |  |  |  | 178,749 |
Stock-based compensation |  |  | 327,814 |  |  |  | 762,509 |
Gain on debt extinguishment |  |  | 579,977 |  |  |  | - |
Adjusted EBITDA (Loss) |  | $ | (871,675 | ) |  | $ | (3,997,283 | )

Liquidity and Capital Resources

For the six months ended June 30, 2024, net cash used in operating activities was $1.2 million, compared to net cash used in operating activities of $1.7 million for the corresponding six-month period in 2023. For the six months ended June 30, 2024, net loss was $1.8 million. Net loss includes non-cash items of depreciation and amortization expense of $602 thousand, equity-based compensation expense of $328 thousand, change in fair value of warrant of $68 thousand, amortization of debt discount and debt costs of $177 thousand, loss on marketable securities of $142 thousand, and a gain on extinguishment of debt of $580 thousand. Changes in operating assets and liabilities include primarily the following: accounts receivable decreased by $434 thousand, and prepaid expenses and other current assets increased by $19 thousand. Accounts payable, accrued liabilities, deferred payroll taxes, other liabilities, and deferred revenue decreased in total by $280 thousand.

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For the six months ended June 30, 2023, net cash used in operating activities was $1.7 million, compared to net cash used in operating activities of $1.7 million for the corresponding six-month period in 2022. For the six months ended June 30, 2023, net loss was $4.3 million. Net loss includes non-cash items of depreciation and amortization expense of $646 thousand, bad debt expense of $200 thousand, equity-based compensation expense of $763 thousand, amortization of debt discount and debt costs of $727 and a factoring discount fee and interest of $20 thousand, and a gain on settlement of payables of $179 thousand. Changes in operating assets and liabilities include primarily the following: accounts receivable increased by $591 thousand and prepaid expenses and other current assets decrease by $10 thousand. Accounts payable, accrued liabilities, deferred payroll taxes, other liabilities, and deferred revenue increase in total by $184 thousand.

For the six months ended June 30, 2024, and 2023, net cash provided by investing activities was $250,000 and $0, respectively. The Company received $250 thousand through proceeds of a sale of asset in 2024 comprising of the total amount during the year.

For the six months ended June 30, 2024, net cash provided by financing activities was $233 thousand. The principal factor was $481 thousand of cash received from a fundraising event in which the Company agreed to sell 481,000 shares of their common stock (See Note 8). This cash proceed was partially offset by $258 thousand in repayments of notes payable in the period.

For the six months ended June 30, 2023, net cash provided by financing activities was $1.2 million. The principal factor was $450 thousand of proceeds from ERC advances, $871 thousand of proceeds from factoring agreement, and $315 thousand of proceeds from the exercise of warrants, offset by repayment of ERC advances notes and the factoring agreement of $347 thousand.

Based on cash on hand as of June 30, 2024, of approximately $257 thousand, we do not have the capital resources to meet our working capital needs for the next 12 months.

Our condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We incurred net losses and negative operating cash flows since inception. For the six months ended June 30, 2024, we recorded a net loss of $1.8 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 condensed 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 offerings have been our primary source of liquidity and we expect to fund future operations through additional securities offerings.

Off-Balance Sheet Arrangements

None.

Critical Accounting Estimates and Policies

Critical Accounting Estimates

The preparation of condensed 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.

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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.

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.

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.

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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.

Discontinued Operations

In accordance with ASC 205-20 Discontinued Operations, the results of certain Recruiter Businesses are presented as discontinued operations in the condensed consolidated statements of operations and, as such, have been excluded from continuing operations. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. 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 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.

(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 Quarterly 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 June 30, 2024.

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 condensed consolidated financial statements, and (2) 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 June 30, 2024.

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.

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PART II: OTHER INFORMATION

ITEM 1 - 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.

ITEM 1A. - RISK FACTORS

Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, filed April 16, 2024. These risks are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on us. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

None.

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ITEM 6 - EXHIBITS

The following exhibits are filed as part of this Quarterly Report:

|  |  |  | Incorporated by Reference | Filed or Furnished
Exhibit No. |  | Exhibit Description |  | Form |  | Filing Date |  | Number |  | Herewith
2.1 |  | Agreement and Plan of Merger, by and between Recruiter.com Group, Inc., a Delaware corporation and Recruiter.com Group, Inc., a Nevada corporation, and a wholly owned subsidiary of the Company, resulting in the Company’s reincorporation from the State of Delaware to the State of Nevada |  | 10-K |  | 3/9/21 |  | 2.1 |  |
2.2 |  | Stock Purchase Agreement, by and between Recruiter.com Group, Inc. and GoLogiq Inc., dated June 5, 2023. |  | 8-LK |  | 6/9/23 |  | 2.1 |  |
2.3* |  | Asset Purchase Agreement, dated as of August 9, 2023, by and between Recruiter Consulting, LLC and Insigma, Inc. |  | 8-K |  | 8/11/23 |  | 2.1 |  |
2.4* |  | Asset Purchase Agreement, dated as of August 9, 2023, by and between Recruiter Consulting, LLC and Akvarr, Inc. |  | 8-K |  | 8/11/23 |  | 2.2 |  |
2.5* |  | Asset Purchase Agreement, dated as of August 16, 2023, by and between Recruiter.com Group, Inc. and Job Mobz Inc. |  | 8-K |  | 8/22/23 |  | 2.1 |  |
2.6* |  | Amendment to Stock Purchase Agreement, by and between Recruiter.com Group, Inc. and GoLogiq Inc., dated August 18, 2023. |  | 8-K |  | 8/24/23 |  | 2.1 |  |
2.2 |  | Stock Purchase Agreement, by and between Recruiter.com Group, Inc. and GoLogiq Inc., dated June 5, 2023. |  | 8-LK |  | 6/9/23 |  | 2.1 |  |
3.1(a) |  | Articles of Incorporation |  | 10-Q |  | 6/25/20 |  | 3.1(a) |  |
3.1(b) |  | Certificate of Designation of Series E Convertible Preferred Stock |  | 10-Q |  | 6/25/20 |  | 3.1(c) |  |
3.1(c) |  | Certificate of Change pursuant to NRS 78.209, filed with Nevada Secretary of State on June 17, 2021 |  | 8-K |  | 6/24/21 |  | 3.1 |  |
3.2 |  | Bylaws, as amended |  | 10-Q |  | 6/25/20 |  | 3.2 |  |
3.1(d) |  | Certificate of Change Pursuant to NRS 78.209, filed with the Nevada Secretary of State on August 22, 2023 |  | 8-K |  | 8/28/23 |  | 3.1 |  |
4.1 |  | Warrant Agent Agreement by and between Recruiter.com Group, Inc., and Philadelphia Stock Transfer, Inc., dated July 2, 2021 |  | 8-K |  | 7/6/21 |  | 4.3 |  |
4.2 |  | Promissory Note issued to Parrut, Inc. on July 7, 2021. |  | 8-K |  | 7/12/21 |  | 4.1 |  |
4.3 |  | Promissory Note issued to the Novo Group, Inc. on August 27, 2021. |  | 8-K |  | 9/2/21 |  | 4.1 |  |
4.4 |  | Form of Representative Warrant |  | 8-k |  | 7/6/21 |  | 4.1 |  |
4.5 |  | Form of Placement Agent Warrant |  | 8-k |  | 7/6/21 |  | 4.2 |  |
4.6 |  | Form of Amended and Restated Warrant |  | S-1 |  | 12/17/21 |  | 4.5 |  |
4.7 |  | Legended Promissory Note, originally dated August 27, 2021, by the Company in favor of Novo Group, Inc. |  | 8-K |  | 4/7/22 |  | 4.1 |  |
4.8 |  | Form of First Amendment to Warrant Agreement |  | 8-K |  | 2/8/23 |  | 4.1 |  |
4.9 |  | Form of Pre-Funded Warrant |  | 8-K |  | 8/21/23 |  | 4.1 |  |
4.10 |  | Form of Warrant |  | 8-K |  | 8/21/23 |  | 4.2 |  |

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10.1 |  | Securities Purchase Agreement, by and between Synergy Management Group, LLC and Recruiter.com Group, Inc., dated July 25, 2023 |  | 8-K |  | 7/31/23 |  | 10.1 |  |
10.2 |  | Amendment to Calvary Notes Agreements, dated August 7, 2023, by and between Recruiter.com Group, Inc. and Calvary Fund I LP. |  | 8-K |  | 8/11/23 |  | 10.1 |  |
10.3 |  | Form of Securities Purchase Agreement, dated August 17, 2023, by and between the Company and the Purchaser |  | 8-K |  | 8/21/23 |  | 10.1 |  |
10.4 |  | Second Amendment to Loan and Security Agreement, dated as of August 16, 2023, by and among Recruiter.com Group, Inc., Recruiter.com, Inc. Recruiter.com Recruiting Solutions, LLC, Recruiter.com Consulting, LLC, VocaWorks, Inc., Recruiter.com Scouted, Inc., Recruiter.com Upsider, Inc, Recruiter.com – OneWire, Inc., CognoGroup, Inc., and Montage Capital II, L.P. |  | 8-K |  | 8/22/23 |  | 10.1 |  |
10.5 |  | Amendment to Stock Purchase Agreement, by and between Recruiter.com Group, Inc. and GoLogiq Inc., dated August 29, 2023 |  | 8-K |  | 9/5/23 |  | 10.1 |  |
31.1 |  | Certification of Principal Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
31.2 |  | Certification of Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
32.1 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted X pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
32.2 |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted X pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
101.INS |  | Inline XBRL Instance Document |  |  |  |  |  |  |  | Filed
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  |  |  |  |  |  |  | Filed
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  |  |  |  | Filed
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  |  |  |  | Filed
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  |  |  |  | Filed
104 |  | The cover page for Recruiter.com Group, Inc.’s quarterly report on Form 10-Q for the period ended September 30, 2023, formatted in Inline XBRL (included with Exhibit 101 attachments). |  |  |  |  |  |  |  | Filed
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |  | Filed

# Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally copies of omitted schedules and exhibits to the Securities and Exchange Commission or its staff upon its request.

* 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.

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SIGNATURES

Pursuant to the requirements 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.

| RECRUITER.COM GROUP, INC. |
Dated: August 14, 2024 | By: | /s/ Granger Whitelaw |
|  | Granger Whitelaw |
|  | Chief Executive Officer |
Dated: August 14, 2024 | By: | /s/ Miles Jennings |
|  | Miles Jennings |
|  | Interim Chief Financial Officer and Director |

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