As filed with the Securities and Exchange Commission on May 26, 2021

Registration No. 333-249208

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1/A

(Amendment Number 3)

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

RECRUITER.COM GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		7371		90-1505893
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

100 Waugh Dr. Suite 300

Houston, Texas 77007

(855) 931-1500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Evan Sohn

Chief Executive Officer

100 Waugh Dr. Suite 300

Houston, Texas 77007

(855) 931-1500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Joseph Lucosky, Esq.

Lucosky Brookman LLP

101 Wood Avenue South

Woodbridge, New Jersey 08830

(732) 395-4400

 

 

Steven D. Uslaner, Esq

Mark F. Coldwell, Esq.

Littman Krooks LLP

655 Third Avenue

New York, New York 10017

(212) 490-2020

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☑

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

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 Securities Exchange Act of 1934.

 

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 7(a)(2)(B) of the Securities Act. ☑

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each Class of Security being registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Units, each consisting of one Common Share, par value $0.0001 per share, and one Warrant to purchase Common Stock(1)	$11,500,000	$1,492.70
Common Stock included as part of the Units (2)(3)	-	-
Warrants to purchase Common Stock included as part of the Units (3)(4)(5)(6)	-	-
Common Stock issuable upon exercise of the Warrants (2)	$12,650,000	$1,641.97
Representative’s Warrants(5)	-	-
Common Stock issuable upon exercise of Representative’s Warrants(3)(6)(7)	$1,250,000	$162.25
Total	$25,400,000	$3,296.92(8)

 

(1)	Includes Common Stock to cover the exercise of the over-allotment option granted to the underwriter.
(2)	Pursuant to Rule 416 of the Securities Act, the securities being registered hereunder include such additional securities as may be issued after the date hereof as a result of share splits, share dividends or similar transactions.
(3)	No separate fee is required pursuant to Rule 457(i) under the Securities Act.
(4)	Includes Common Stock which may be issued upon exercise of additional warrants which may be issued upon exercise of the over-allotment option granted to the underwriter.
(5)	In accordance with Rule 457(g) under the Securities Act, because the Common Stock underlying the Warrants are registered hereby, no separate registration fee is required with respect to the Warrants registered hereby.
(6)	The warrants are exercisable at a per share price of 110% of the price per Unit in this offering.
(7)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The warrants, or the Representative’s Warrants, are exercisable at a per share exercise price equal to 125% of the public offering price. As estimated solely for the purpose of recalculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the Representative’s Warrants is equal to 125% of US$1,000,000 (which is equal to 10% of $10,000,000).
(8)	Previously paid.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.

 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION

DATED MAY 26, 2021

  

1,818,182 Units

Each Unit Consisting of One Share of Common Stock and

One Warrant to Purchase Common Stock

 

 

We are offering 1,818,182 units (each a “Unit” and collectively, the “Units”) of Recruiter.com Group, Inc. (the “Company,” “Recruiter,” “we,” “our” or “us”) with each Unit consisting of one share of common stock, par value $0.0001, which we refer to as the “Common Stock”, and one warrant (the “Warrant”) to purchase one share of Common Stock. The Units have no stand-alone rights and will not be certified or issued as stand-alone securities. We anticipate a public offering price between $4.50 and $6.50 per Unit. Furthermore, the 1,818,182 Unit amount referenced above is based on the Units being sold at the mid-point of the estimated offering price range of $5.50 per Unit and such Unit amount shall change if the Unit price is less than $5.50 in such manner to maintain the gross proceeds at $10 million. For instance, if the Unit price is $4.50 per Unit, the number of Unit to be sold in the offering shall be 2,222,222. The Warrants included in the Units are exercisable immediately and have an exercise price of $6.05 per share (110% of the price per unit sold in this offering.) The Warrants will be listed for trading as described below and will expire five years from the date of issuance. This offering also includes the shares of Common Stock issuable from time to time upon exercise of the warrants.

 

Our Common Stock is currently quoted on the OTCQB tier of the OTC Market Group, Inc. under the symbol “RCRT.” The last reported sale price of our Common Stock on May 25, 2021 was $10.00 per share (on a post 1:2.5 reverse stock split basis as further described below). We have applied to list our Common Stock and Warrants on The Nasdaq Capital Market (“Nasdaq Capital Market”) under the symbols “RCRT” and “RCRTW,” respectively. There is no assurance that our listing application will be approved by the Nasdaq Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering.

 

For purposes of this prospectus, the assumed public offering price per Unit is $5.50 (the mid-point of the estimated offering price range). The actual offering price per Unit will be as determined between Joseph Gunnar & Co. LLC (the “Underwriter”) and us at the time of pricing and may be issued at a discount to the current market price of our Common Stock. Factors to be considered will include our historical performance and capital structure, prevailing market conditions and overall assessment of our business. The market price of our Common Stock will be one of several factors to be considered in determining the actual offering price.

 

Other than in our consolidated financial statements and the notes thereto included in this registration statement and unless otherwise noted, the share and per share information in this prospectus reflects a proposed reverse stock split of the outstanding Common Stock of the Company at an assumed one for two-and-one-half (1:2.5) ratio (“Reverse Stock Split”), to occur prior to the closing of this offering.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 14 of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before purchasing any of the securities offered by this prospectus.

 

We are an “Emerging Growth Company” as defined under the federal securities laws and may elect to comply with reduced public company reporting requirements. Please read “Implications of Our Being an Emerging Growth Company” beginning on page 8 of this prospectus for more information.

 

 

	Per Unit	Total
Public offering price (1)	$	$
Underwriting discounts and commissions (2)	$	$
Proceeds, before expenses, to us (3)	$	$

 

(1)	The public offering price and underwriting discount and commissions in respect of each unit correspond to a public offering price per share of Common Stock of $5.49 and a public offering price per accompanying warrant of $0.01.
(2)	This table depicts broker-dealer commissions of 7.0% of the gross offering proceeds. Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the public offering price payable to the Underwriter. See “Underwriting” beginning on page 98 for disclosure regarding compensation payable to the Underwriter by us.
(3)	We estimate the total expenses of this offering will be approximately $540,000. Assumes no exercise of the over-allotment option we have granted to the Underwriter as described below.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

We have granted a 45-day option to the representative of the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional 272,727 shares of Common Stock and/or up to an additional 272,727 Warrants solely to cover over-allotments, at the public offering price per share of Common Stock and per Warrant, respectively, less, in each case, the underwriting discounts payable by us. The securities issuable upon exercise of this overallotment option are identical to those offered by this prospectus and have been registered under the registration statement of which this prospectus forms a part.

 

The Underwriter expects to deliver the securities against payment in New York, New York on or about , 2021.

 

 

Sole Book-Running Manager

 

Joseph Gunnar & Co. LLC

 

The date of this prospectus is May __, 2021

 

TABLE OF CONTENTS

 

	Page
Cautionary Note Regarding Forward-Looking Statements	iii
Prospectus Summary	1
Risk Factors	14
Use of Proceeds	31
Dividend Policy	32
Capitalization	33
Dilution	34
Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Business	50
Management	71
Executive and Director Compensation	76
Principal Shareholders	84
Certain Relationships and Related Person Transactions	87
Description of our Securities	89
Material U.S. Federal Income Tax Considerations	95
Underwriting	98
Legal Matters	103
Experts	103
Where You Can Find Additional Information	103

 

 

Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

You should rely only on the information contained in this prospectus. Neither we nor the underwriter have authorized anyone to provide any information or to make any representations other than those contained in this prospectus we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. You should also read this prospectus together with the additional information described under “Additional Information.”

 

Unless the context otherwise requires, we use the terms “we,” “us,” “the Company”, “Recruiter.com” and “our” to refer to Recruiter.com Group, Inc. and its consolidated subsidiaries.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements should be evaluated with consideration given to the risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements.

 

Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all future periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements. Such factors include, among others:

 

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our ability to achieve positive cash flow from operations;

 

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the rate and degree of market acceptance of our products and services;

 

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our ability to expand our sales organization to address effectively existing and new markets that we intend to target;

 

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impact from future regulatory, judicial, and legislative changes or developments in the U.S. and foreign countries;

 

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our ability to compete effectively in a competitive industry;

 

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our ability to obtain funding for our operations;

 

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our ability to attract collaborators and strategic partnerships;

 

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our ability to meet the NASDAQ requirements;

 

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our ability to meet our other financial operating objectives;

 

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the availability of qualified employees for our business operations;

 

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general business and economic conditions;

 

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our ability to meet our financial obligations as they become due;

 

 

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positive cash flows and financial viability of our operations and new business opportunities;

 

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ability to secure intellectual property rights over our proprietary products or enter into license agreements to secure the legal use of certain patents an intellectual property;

 

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our ability to be successful in new markets;

 

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our ability to avoid infringement of intellectual property rights; and

 

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the positive cash flows and financial viability of our operations and new business opportunities

 

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the Securities and Exchange Commission or in our press releases) for other factors that may cause actual results to differ materially from those projected by the Company. For additional information regarding risk factors that could affect the Company’s, see “Risk Factors” beginning on page 14 of this prospectus, and as may be included from time-to-time in our reports filed with the Securities and Exchange Commission (the “SEC”).

 

The Company intends the forward-looking statements to speak only as of the time of such statements and does not undertake or plan to update or revise such forward-looking statements as more information becomes available or to reflect changes in expectations, assumptions or results. The Company can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this prospectus, could materially and adversely affect our results of operations, financial condition, and liquidity, and our future performance.

 

Industry Data and Forecasts

 

This prospectus contains data related to the permanent and temporary recruitment industry in the United States. These industry data include projections that are based on a number of assumptions which have been derived from industry and government sources which we believe to be reasonable. The permanent and temporary recruitment industry may not grow at the rate projected by industry data, or at all. The failure of the industry to grow as anticipated is likely to have a material adverse effect on our business and the market price of our Common Stock. In addition, the rapidly changing nature of the permanent and temporary recruitment industry subjects any projections or estimates relating to the growth prospects or future condition of our industries to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the industry data turns out to be incorrect, actual results may, and are likely to, differ from the projections based on these assumptions.

 

 

  PROSPECTUS SUMMARY

 

The following highlights certain information contained elsewhere in this prospectus. It does not contain all the details concerning this offering, including information that may be important to you. You should carefully review this entire prospectus including the section entitled “Risk Factors” and the consolidated historical and consolidated pro forma financial statements and accompanying notes contained herein. See “Where You Can Find More Information.”

 

Overview

 

Recruiter.com Group, Inc. (“we,” “the Company”, “Recruiter.com”, “us”, “our”) operates an on-demand recruiting platform aiming to disrupt the $120 billion recruiting and staffing industry. We combine an online hiring platform with what we believe to be the world’s largest network of over 28,000 small and independent recruiters. Businesses of all sizes recruit talent faster using the Recruiter.com platform, which is powered by virtual teams of Recruiters On Demand and Video and Artificial Intelligence (“AI”) job-matching technology.

 

Our website, www.Recruiter.com, provides employers seeking to hire access to over 28,000 independent recruiters and utilizes an innovative web platform, with integrated AI-driven candidate to job matching and video screening software to more easily and quickly source qualified talent.

 

We help businesses accelerate and streamline their recruiting and hiring processes by providing on-demand recruiting services. We leverage our expert network of recruiters to place recruiters on a project basis, aided by cutting edge AI-based candidate sourcing, and matching and video screening technologies. We operate a cloud-based scalable SaaS-enabled marketplace platform for professional hiring, which provides prospective employers access to a network of thousands of independent recruiters from across the country and worldwide, with a diverse talent sourcing skillset that includes information technology, accounting, finance, sales, marketing, operations and healthcare specializations.

 

Through our Recruiting.com Solutions division, we also provide consulting and staffing, and full-time placement services to employers which leverages our platform and rounds out our services.

 

Our mission is to grow our most collaborative and connective global platform to connect recruiters and employers and become the preferred solution for hiring specialized talent.

 

We generate revenue from the following activities:

 

●

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. Revenue earned through Recruiters on Demand is derived 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 on the Platform, as the recruiter user base of our Platform has the proper skill-set for recruiting and hiring projects. We had previously referred to this service in our revenue disaggregation disclosure in our consolidated financial statements as license and other, but on July 1, 2020, we rebranded as Recruiters on Demand.

 

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Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing that personnel with the employer, but with us or our providers acting as the employer of record, 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.

 

 

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Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform or other communications. We source qualified candidate referrals for the employers’ available jobs through independent recruiter users that access our 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’s base salary or an agreed-upon flat fee.

 

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Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including 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. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. 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 addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

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Career Solutions: We provide services to assist job seekers with their career advancement. These services include 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19. We partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.

 

Disrupting an Industry - Recruit Talent Faster

 

We believe we are fundamentally modernizing the recruiting process by digitizing and democratizing the recruiting process. Furthermore, we are dispersing the economic benefits of successful recruitment to a broad group of people and, by doing so, we help businesses recruit talent faster and more efficiently than ever before.

 

Community and Network

 

Our network currently consists of over 28,000 small and independent recruiters. This virtual network of recruiters unite under our innovative web platform that offers earnings opportunities through successful job matching; access to matched candidates driven by artificial intelligence; and on-demand, project-based recruiting assignments.

 

The community or network of recruiters is additionally categorized into virtual teams based on industry vertical, skill or location specialization, and dedicated client resource teams. Through participation in a virtual team, recruiters may receive further job and account updates, personalized recommendations, exclusive job opportunities, and recommended candidate referrals. We operate these teams through its platform and facilitate real-time communication through parallel chat rooms managed by our internal community managers.

 

 

We believe the potential scale of our recruiting community is enormous. Similar to how Uber created the opportunity for anyone to become a taxi driver, we make it possible for anyone to become a recruiter. According to the website of the American Staffing Association (the trade association representing the American staffing, recruiting, and workforce solutions industry), there are approximately 25,000 staffing and recruiting companies, which altogether operate around 49,000 offices, so the recruiting industry’s contribution to employment is significant. However, we enable a broader disruption of the industry, bringing the opportunities to a much broader group of people than previously possible. Through upskilling and engagement with our recruiter users, we make it easier for anyone to get involved in recruiting. With hundreds of thousands of people involved in the general human resource and employment industry in the U.S. alone, and many more interested in referral-based, work-from-home earning opportunities, we believe our addressable network and potential audience is vast.

 

Our Growth Strategy

 

Recruiter.com intends to grow its business by focusing efforts on the following five main areas:

 

1) Grow Our Community:

 

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Grow Recruiter Engagement: Dedicated Community Managers regularly support and service our growing network of independent recruiter users on our platform. We plan to continue to invest in community management initiatives, including enhancement of outreach, communications, reward programs, and training of our Community Managers. We have introduced the concept of Recruiter Rewards, which allows members of our network to earn points, redeemable for merchandise we source, for performing specific actions on the platform. We intend to continue to develop this program, increasing engagement, and earning potential on the platform.

 

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Grow the Number of Recruiters on our Platform: We plan to continue to grow our recruiter network through viral search, referral, content, and community strategy. Investments in content, community sponsorship and thought leadership will continue to drive people back to the platform, creating a real “hub” for recruiters.

 

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Increase Growth and Earning Opportunities for Recruiters on Our Platform: We plan to continue investing in new products and features to help recruiters grow their businesses by expanding their access to technology, developing their professional and marketing skills, and increasing their earning opportunities. This includes expanding on our lead generation capabilities.

 

2) Build Business Model Innovations:

 

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Continue to Innovate and Improve Our Platform to Build Best-in-Class User Experiences: We aim to create the most innovative and easy-to-use solutions for empowering businesses and recruiters to recruit talent faster. For example, we recently launched an improvement to our candidate submittal process, which allowed for bulk sharing and distribution of referral links to candidates through social media. We will strive to continually incorporate such advances into our platform, taking into consideration user feedback.

 

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Invest in Scalable Business Models: We plan to continue to invest in the development of our SaaS model and subscription services while improving recruiter experience by enhancing our software capabilities, data science, security, and technology infrastructure. Further low- and light-touch subscription models and plans promise to facilitate the seamless transactions of candidate and job flows on our platform and, in doing so, increase our gross margins and the efficiency of our business.

 

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Leverage Our Platform to Launch New Products: We believe we can continue to innovate to solve complex challenges involving recruitment and hiring, and we plan to use our highly extensible platform to support the introduction of additional products and services. Our massive network, leading technology, and recruiting expertise allow us to introduce new features and incorporate feedback into such features with speed, efficiency, and scale.

 

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Invest in Advanced Technologies, Including Artificial Intelligence: We believe that recruiting is about people, and people will always drive the hiring process, so long as our current system of employment and human labor exists. Existing technologies cannot supplant human review and involvement in most hiring transactions, including all four stages of recruiting specified previously. However, we also believe that artificial intelligence promises to solve specific issues of scale within the hiring process, for example, by rapidly sifting through a bulk of job applications to surface to the recruiter the best-matched applicants. We have already integrated AI improvements into our candidate campaigning and sourcing processes, and we are currently evaluating new businesses, methods, and partnerships to transform further and improve our technology.

 

 

3) Monetize the Businesses and Candidates Seeking to Access the Community and Platform:

 

We intend to not only develop new clients for all of our services, but also expand relationships with our existing clients and increase their spending on our platform by investing in building new products and features.

 

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Attract New Clients Through Strategic Partnerships with MSP and HR Providers: We intend to expand our marketing efforts with partners to attract new clients by increasing awareness of our platform and the benefits of using flexible and on-demand recruiting.

 

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Broaden and Deepen Categories: We intend to focus on customizing experiences for vertical industry groups, such as Information Technology or Accounting and Finance, through tailored features and functionalities, making it easier and more efficient for clients to connect with the right recruiters.

 

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Build Effective Candidate Solutions: We plan to continue to expand our candidate offerings from basic resume distribution to video resumes, training programs, career coaching, resume writing, job alerts, and other SaaS services to monetize our traffic and help people effectively connect with opportunities.

 

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Build Out Video: We plan to leverage a video offering as a SaaS solution for our enterprise clients, partners, and recruiters, as video interviewing and screening may become a must-have requirement for business recruiting, particularly in the post-COVID-19 environment.

 

4) Acquire Complementary Assets and Businesses:

 

We seek opportunities to acquire complementary businesses and personnel within the recruitment and staffing sector, primarily to expand the overall number of employers using our Platform to source talented employees and contractors.

 

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Increase Employer Demand: We plan to approach recruitment companies with firm client control and knowledge, such as recruitment process outsourcing (RPO) companies in major cities within the continental United States and with stable, diversified client revenues. These types of acquisitions may help increase the number and diversity of jobs in the marketplace platform and allow for the upselling of our new and planned products for employers.

 

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Further Our Technology Offerings: We plan to evaluate specific valuable online tools for recruiters that would enhance our overall platform, such as candidate sourcing technologies, data appending services, job distribution and marketing software, lead generation tools, and others that would improve our value to our community of recruiters, to improve engagement and daily use metrics.

 

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Enhance Strategic Technology: We continually monitor and evaluate third-party companies for technology that would be of strategic value. Management is particularly mindful of the emergence of artificial intelligence being applied to hiring and recruitment processes. We are interested in acquiring or licensing such technologies that offer fundamental advancements to our Platform and, therefore, long-term shareholder value.

 

5) Approach the Future with Clarity and Vision:

 

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Trust Our Vision: Recruiter.com has a big name, but an even bigger purpose: to “recruit” means to inspire someone to join a cause. Our mission at Recruiter.com is more than just primarily connecting job seekers and employers. We also want to inspire people to better themselves, to grab opportunities and to believe in themselves. Simply put, Recruiter.com exists to open doors for people. We are inspired by our mission and purpose, and we trust in our overall vision to continue to inspire the dedication necessary to build a fantastic brand and valuable company.

 

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Maintain Our Values: Our staff developed our core values, which we seek to identify in people that we hire and promote and inspire within ourselves. These core values include being passionate, dependable, adaptable, helpful, resilient, and honest and open communicators. As we grow, we will maintain and build on these core values, and we will use them to inform our business decisions and the ways in which we interact with each other and the community.

 

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Lead in People-First Technology: We are committed to building continuous innovation in technology and being early builders and adopters of technical improvements, such as the use of AI and machine learning. We will strive to be bold leaders in human-centric technology by always positioning that technology for the benefit and economic empowerment of people. We believe that the future holds great promise for further connectivity, collaboration, and community. We aim to be opportunistic in the development and acquisition of such technologies for our users.

 

 

Recent Developments

 

OneWire Asset Purchase

 

Effective May 10, 2021, we, through a wholly-owned subsidiary, entered into an Asset Purchase Agreement and Plan of Reorganization (the “APA”) with OneWire Holdings, LLC, a Delaware limited liability company (“OneWire”), to acquire all the assets and several liabilities of OneWire (the “OneWire Purchase”). As consideration for the OneWire Purchase, OneWire’s shareholders will receive a total of 155,327 shares (the “Consideration Shares”) of common stock, valued at $1,255,000, based on a price per share of $8.08, the volume-weighted average price of the common stock for the 30-day period immediately prior to the Closing Date (as defined in the APA). 31,066 of the Consideration Shares are subject to forfeiture pursuant to APA provisions regarding a post-closing working capital adjustment and a revenue true-up and pursuant to OneWire’s indemnity obligations. The assets acquired in the APA consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets, along with a de minimis amount of other assets. OneWire’s expansive candidate database in financial services and candidate matching service amplify our reach to give employers and recruiters access to an even broader pool of specialized talent.

 

Upsider Asset Purchase

 

Effective March 25, 2021, we, through a wholly-owned subsidiary, entered into an Asset Purchase Agreement and Plan of Reorganization (the “APA”) with Upsider Inc., a Delaware corporation (“Upsider”), to acquire all the assets and several liabilities of Upsider (the “Upsider Purchase”). As consideration for the Upsider Purchase, Upsider’s shareholders will receive net cash of $69,983 and a total of 323,094 shares of our common stock (the “Consideration Shares”) (valued at $2,544,362, based on a $7.88 per share acquisition date price), of which 51,941 of the Consideration Shares will be held in reserve and are recorded as a current liability, contingent consideration in the accompanying financial statements. The shareholders of Upsider may also receive earn-out consideration of up to $1,394,760, based on the attainment of specific targets during the six months following closing. We have recorded the fair value of the contingent earn-out consideration of $1,325,003 at March 31, 2021. The total purchase price is approximately $3.9 million. The assets acquired in the APA consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and a de minimis amount of other assets. The Company is utilizing Upsider’s machine learning artificial intelligence to provide a more predictive and efficient recruiting tool that enhances our current technology.

 

The Company also entered into a Registration Rights Agreement with Upsider (the “Registration Rights Agreement”). The Registration Rights Agreement provides that following the Six-Month Anniversary (as defined in the Registration Rights Agreement), and for a period of five years thereafter, Upsider shall have the ability, on three occasions, to demand that Company shall file with the Securities and Exchange Commission a registration statement on Form S-1 or Form S-3, pursuant to the terms of the Registration Rights Agreement, to register the Consideration Shares. Additionally, pursuant to the Registration Rights Agreement, for a period of three years following the Six-Month Anniversary, whenever the Company proposes to register the issuance or sale of any of its Common Stock or its own account or otherwise, and the registration form to be used may be used for the registration of the Consideration Shares.

 

Scouted Asset Purchase

 

Effective January 31, 2021, the Company, through its wholly-owned subsidiary, acquired all assets of RLJ Talent Consulting, Inc., d/b/a Scouted, a Delaware corporation (“Scouted”) (the “Scouted Asset Purchase”). As consideration for the Scouted Asset Purchase, Scouted shareholders are entitled to a total of 224,163 shares of our restricted Common Stock (valued at $1,625,183 based on a $7.25 per share grant date price), of which 33,151 shares of stock will be held in reserve, and an additional amount of $180,000 in cash consideration for a total purchase price of approximately $1.8 million. The Scouted Asset Purchase will be accounted for as a business acquisition. The assets acquired in the Scouted Asset Purchase consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets (the “Scouted Assets”), along with a de minimis amount of other assets. The Company will complete the purchase price allocation of the $1.8 million for the acquired intangible assets during 2021. The Company is utilizing the Scouted Assets to expand its video hiring solutions and curated talent solutions, through its Recruiting Solutions subsidiary.

 

2021 Senior Subordinated Secured Convertible Debentures

 

On January 5, 2021, we entered into a Securities Purchase Agreement, (the “Purchase Agreement”), with two accredited investors (the “Purchasers”). Pursuant to the Purchase Agreement, we sold to the Purchasers (i) $562,500 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”) and (ii) 140,625 common stock purchase warrants (the “Warrants”) representing 100% warrant coverage. We received a total of $500,000 in gross proceeds from such closing, taking into account the 12.5% original issue discount, before deducting offering expenses and commissions, including the placement agent’s commission of $50,000 (10% of the gross proceeds) and approximately $40,000 of other expenses. We also agreed to issue to the placement agent, as additional compensation, 28,126 common stock purchase warrants exercisable at $5.00 per share.

 

On January 20, 2021, we conducted a second closing under the Purchase Agreement (“Second Closing”) with eighteen accredited investors (the “Second Closing Purchasers”). We sold to the Second Closing Purchasers (i) $2,236,500 in the aggregate principal amount Debentures and (ii) 559,126 Warrants, representing 100% warrant coverage. We received a total of $1,988,000 in gross proceeds in the Second Closing, taking into account the 12.5% original issue discount, before deducting offering expenses and commissions, including the placement agent’s commission of $198,800 (10% of the gross proceeds) and approximately $50,500 of other expenses. We also agreed to issue to the placement agent, as additional compensation, 111,826 common stock purchase warrants exercisable at $5.00 per share (the placement agent warrants issued in such offering, collectively the “PA Warrants”). In May 2021, the PA Warrants were amended such that they are now exercisable for 36,364 shares of common stock at an exercise price equal to 125% of the public offering price per Unit in this offering.

 

 

The Debentures mature on January 5, 2022, subject to a six-month extension at the Company’s option on the terms described therein. The Debentures bear interest at 8% per annum payable quarterly, subject to an increase in case of an event of default as provided for therein. The Debentures are convertible into shares of our Common Stock at any time following the date of issuance at each Purchaser’s option at an initial conversion price of $4.00 per share, subject to certain adjustments (the “Voluntary Conversion Price”). The Debentures are subject to mandatory conversion into shares of Common Stock (or units of Common Stock and warrants to purchase Common Stock, if units are offered to the public in the Qualified Offering) in the event of a Qualified Offering, as defined therein, which would include the offering described in this prospectus at a conversion price equal to the lower of (i) the Voluntary Conversion Price and (ii) 80% of the price per share (or unit, if units are offered in the Qualified Offering) at which the Qualified Offering is made. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $101,000 of outstanding senior indebtedness. In addition, the Debentures rank pari-passu with, and amounts owing thereunder shall be paid concurrently with, payments owing pursuant to and in connection with that certain offering by the Company of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures consummated in May and June 2020 in the aggregate principal amount of $2,953,125 which are due and payable on May 28, 2021. The Company may prepay the Debentures at any time at a premium as provided for therein.

 

The Warrants issued pursuant to the Purchase Agreement are exercisable for three years from the date of the applicable closing at an exercise price of $5.00 per share, subject to certain adjustments.

 

Reference is also made to the May/June 2020 Bridge Offering which is described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Financing Arrangements – Senior Subordinated Secured Convertible Debentures. In May 2021, the placement agent warrants issued in June 2020 in connection with the May/June 2020 Bridge Offering were amended such that they are now exercisable for 36,364 shares of common stock at an exercise price equal to 125% of the public offering price per Unit in this offering.

 

Joseph Gunnar & Co. LLC, the Underwriter in this offering, acted as placement agent for the offering of the Debentures described above and the Debentures issued in the May/June 2020 Bridge Offering.

 

Promissory Note Payable

 

We received $250,000 in proceeds from an institutional investor pursuant to a promissory note dated May 6, 2021. The note bears interest at 12% per year and matures on May 6, 2023.

 

Effects of COVID-19

 

While the Company has continued to operate during the COVID-19 pandemic, we have reduced certain billing rates to respond to the current economic climate. The Company has also experienced a decline in its employer clientele due to the current job market. In addition, due to the effects of COVID-19, the Company took steps to streamline certain expenses, such as temporarily cutting certain executive compensation packages by approximately 20%. Management also worked to reduce unnecessary marketing expenditures and to improve staff and human capital expenditures, while maintaining overall workforce levels.

 

Risks Affecting Us

 

Our business is subject to numerous risks and uncertainties, including those discussed in the section titled “Risk Factors” beginning on page 14 and elsewhere in this prospectus. These risks include the following:

 

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our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels;

 

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because we have a limited operating history under our current Platform, it is difficult to evaluate our business and future prospects and increases the risks associated with an investment in our securities;

 

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complete integration of the staffing assets that we acquired from Genesys Talent LLC, a Texas limited liability company (“Genesys”) in March 2019 may be complex and time-consuming, and we may not be able to realize the full benefits of this acquisition;

 

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the rapidly-changing, unsure and/or deleterious effects of the COVID-19 pandemic on the job markets and general economy;

 

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our future growth depends on our ability to attract, retain and incentivize a community of recruiters, and the loss of existing recruiters, or failure to attract new ones, could adversely impact our business and future prospects;

 

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if we are unable to respond to technological advancements and other changes in our industry by developing and releasing new services, or improving our existing services, in a timely and cost-effective manner or at all, our business could be materially and adversely affected;

 

 

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our future growth depends in part on our ability to form new and maintain existing strategic partnerships with third-party solution providers and continued performance of such solution providers under the terms of our strategic partnerships with them;

 

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we rely in part on certain software that we license from third parties, and if we were to lose the ability to use such software our business and operating results could be materially and adversely affected;

 

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because we rely on a small number of customers for a substantial portion of our revenue, the loss of any of these customers would have a material adverse effect on our operating results and cash flows;

 

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if recruiters on our Platform were classified as employees instead of independent contractors, our business would be materially and adversely affected; and

 

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if we are unable to compete effectively, our business and operating results will be materially and adversely affected.

 

Management

 

Our executives are seasoned professionals in internet-enabled businesses and the recruitment industry. Collectively our management and staff have been cited as career and business experts in publications such as the Wall Street Journal, Entrepreneur, Time, Business Insider, and Forbes. Our key executives have participated in multiple successful exits, orchestrated investments and M&A transactions and have extensive business and financial acumen.

 

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Evan Sohn, CEO/Chairman: 25+ years of experience in Fortune 500 and startup environments, including multiple exits and a history of rapidly growing businesses; founder of the Sohn Conference Foundation

 

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Miles Jennings, Founder/COO: 15+ years of experience within the recruitment technology industry, including Indeed.com and Adecco Group

 

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Ashley Saddul, Founder/CTO: Seasoned entrepreneur and technologist with 20+ years of experience at internet startups and mission-critical banking applications

 

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Judy Krandel, CFO: Accomplished board member, CFO, and investor with an extensive background in portfolio management, equity investments, capital markets, executive leadership and business development

 

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Rick Roberts, President, Recruiting: 20+ years of achievement leading sales and operations within the recruiting industry

 

Corporate Information

 

Our principal executive offices are located at 100 Waugh Drive, Suite 300, Houston, Texas. Our telephone number is (855) 931-1500. Our website address is www.recruiter.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our securities.

 

Implications of Being an Emerging Growth Company

 

As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:

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an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

 

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an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

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reduced disclosure about our executive compensation arrangements;

 

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exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a stockholder approval of any golden parachute arrangements; and

 

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extended transition periods for complying with new or revised accounting standards.

 

We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.

 

We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies.

 

Nasdaq Listing and Reverse Stock Split

 

We have applied to list of our Common Stock and Warrants on the Nasdaq Capital Market. If our application to the Nasdaq Capital Market is not approved or we otherwise determine that we will not be able to secure the listing of the Common Stock and Warrants on the Nasdaq Capital Market, we will not complete the offering.

 

Except as otherwise indicated and except in our consolidated financial statements and the notes thereto, all references to our Common Stock, share data, per share data and related information has been adjusted to depict an assumed reverse stock split ratio of 1-for-2.5 (“Reverse Stock Split”) as if it was effective and as if it had occurred at the beginning of the earliest period presented. The Reverse Stock Split, when effective, will combine each two and one-half (2.5) shares of our outstanding Common Stock into one (1) share of Common Stock, without any change in the par value per share.

 

The Reverse Stock Split will be effected prior to the closing of this offering via the filing of a certificate of change with the Nevada Secretary of State pursuant to Nevada Revised Statutes Section 78.209 to (i) decrease the number of authorized shares of the Common Stock from 250,000,000 to 100,000,000 shares and (ii) effectuate the Reverse Stock Split. No fractional shares will be issued in connection with the Reverse Stock Split and all such fractional interests will be rounded up to the nearest whole number of shares of Common Stock. The conversion or exercise prices of our issued and outstanding convertible securities, stock options and warrants will be adjusted accordingly. The number of authorized shares of Preferred Stock will remain 10,000,000 following the effectuation of the Reverse Split.

 

THE OFFERING

 

Issuer		Recruiter.com Group, Inc.
Securities Offered		1,818,182 Units, each consisting of one share of Common Stock and one warrant (the “Warrant”) to purchase one share of Common Stock. The Units will not be certificated or issued in stand-alone form. The shares of our Common Stock and the Warrants comprising the Units are immediately separable upon issuance and will be issued and tradeable separately. The 1,818,182 Unit amount referenced above is based on the Units being sold at the mid-point of the estimated offering price range of $5.50 per Unit and such Unit amount shall change if the Unit price is less than $5.50 in such manner to maintain the gross proceeds at $10 million. For instance, if the Unit price is $4.50 per Unit, the number of Unit to be sold in the offering shall be 2,222,222
Public Offering Price       Description of Warrants included in Units		$5.50 per Unit which is the mid-point of the estimated offering price range described on the cover of this prospectus. The actual offering price per unit will be as determined between Joseph Gunnar & Co. LLC (the “Underwriter”) and us at the time of pricing and may be issued at a discount to the current market price of our Common Stock.   The exercise price of the Warrants is $6.05 per share (110% of the public offering price of one Unit). Each Warrant is exercisable for one share of Common Stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our Common Stock as described herein. A holder may not exercise any portion of a Warrant to the extent thatthe holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding Common Stock after exercise, as such percentage ownership is determined in accordance with the terms of the Warrants, except that upon notice from the holder to us, the holder may waive such limitation up to a percentage, not in excess of 9.99%. Each Warrant will be exercisable immediately upon issuance and will expire five years after the initial issuance date. The terms of the Warrants will be governed by a Warrant Agency Agreement, dated as of the effective date of this offering, between us and Philadelphia Stock Transfer, as the warrant agent (the “Warrant Agent”). This prospectus also relates to the offering of the shares of Common Stock issuable upon exercise of the Warrants. For more information regarding the warrants, you should carefully read the section titled “Description of Our Securities—Warrants” in this prospectus.
Over-allotment option		We have granted the Underwriter an option to purchase up to an additional 272,727 shares of Common Stock and/or Warrants to purchase up to 272,727 shares of Common Stock (equal to 15% of the number of shares of Common Stock and Warrants underlying the Units sold in the offering), from us in any combination thereof, at the public offering price less the underwriting discount and commissions solely to cover over-allotments, if any. The Underwriter may exercise this option in full or in part at any time and from time to time until 45 days after the date of this prospectus.
Common Stock outstanding prior to this offering		3,483,709 shares of Common Stock outstanding as of May 10, 2021.

Common Stock to be outstanding after this offering		12,465,433 shares (assuming that none of the Warrants are exercised) and 14,283,615 if the Warrants offered hereby are exercised in full. If the Underwriter’s over-allotment option is exercised in full, the total number of shares of Common Stock outstanding immediately after this offering would be 12,738,160 (assuming that none of the Warrants are exercised) and 14,829,069 if the Warrants offered hereby are exercised in full. In addition to the 1,818,182 shares offered hereby, the number of shares to be outstanding after this offering include: (i) the exchange of outstanding shares of Series D, E, and F Preferred Stock for 5,231,905 shares of common stock excluding 112,666 shares of Series E Preferred Stock that converts to 563,330 shares of common stock subject to a beneficial owner’s 9.99% blocker; (ii) the automatic conversion of convertible debentures in the principal amount of $5,588,359 and accrued interest of $49,774 as of May 10, 2021 into 1,409,533 shares of common stock (and the same amount of warrants); and (iii) the holders of certain warrants signing exchange agreements pursuant to which they agreed to exchange 522,104 warrants to purchase shares of common stock for the same number of shares eliminating $3,812,098 of warrant derivative liability . Excluded are the securities described on page 11 below.
Use of proceeds		We estimate that the net proceeds to us from this offering will be approximately $8,760,000, or approximately $10,155,000 if the underwriters exercise their over-allotment option, assuming an offering price of $5.50 per Unit, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
		We intend to use the net proceeds of this offering primarily for general corporate purposes, including working capital, expanded sales and marketing activities, increased research and development expenditures and funding our growth strategies. See “Use of Proceeds” for additional information.

 

Representative’s Warrant		We have agreed to issue to the Representative (or its permitted assignees) Warrants to purchase up to a total of 181,818 shares of Common Stock (5% of the shares of Common Stock included in the Units and issuable upon exercise of the Warrants, excluding the over-allotment, if any). We are registering hereby the issuance of the Representative’s Warrants and the shares of Common Stock issuable upon exercise of the Warrants. The Warrants will be exercisable at any time, and from time to time, in whole or in part, during the four and one half year period commencing 180 days from the effective date of the registration statement of which this prospectus is a part, which period is in compliance with FINRA Rule 5110(e)(1). The Warrants are exercisable for cash or on a cashless basis at a per share price equal to $6.875 per share, or 125% of the public offering price per Unit in the offering. Please see “Underwriting—Representative’s Warrants” for a further description of these Warrants.
Proposed Nasdaq Capital Market Trading Symbol and Listing		We have applied to list our Common Stock and Warrants on the Nasdaq Capital Market under the symbols “RCRT” and “RCRTW”, respectively. No assurance can be given that such listing will be approved or that a liquid trading market will develop for our Common Stock and Warrants. The approval of such listing on the Nasdaq Capital Market is a condition of closing this offering.
Lock-ups		We, our directors, and executive officers, along with (i) shareholders who own 5% or more of our outstanding Common Stock and (ii) shareholders who are receiving shares of Common Stock pursuant to the automatic conversion of Debentures and pursuant to exchange agreements with regard to certain warrants and all of the outstanding shares of our preferred stock, have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our Common Stock or securities convertible into Common Stock for a period of 225 days (for our directors and executive officers) and 180 days (for the Company itself, our 5% shareholders, and our shareholders receiving shares pursuant to automatic conversions or exchange agreements), commencing on the date of this prospectus. See “Underwriting” for additional information.
Risk Factors		See “Risk Factors” beginning on page 14 and the other information contained in this prospectus for a discussion of factors you should carefully consider before investing in our securities.
Reverse Stock Split		In order to obtain Nasdaq Capital Market listing approval, we will effect the Reverse Stock Split and the simultaneous decrease of the number of authorized shares of the Common Stock from 250,000,000 to 100,000,000 prior to the closing of this offering.

 

 

The total number of shares of our common stock that will be outstanding after this offering is based on 3,483,709 shares of common stock outstanding as of May 10, 2021. Unless otherwise indicated, the shares of common stock outstanding after this offering excludes the following:

 

 

 

 

 

 

 

 

 

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

 

The following summary consolidated statements of operations and balance sheet data for the fiscal years ended December 31, 2020 and 2019, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Additionally, the summary consolidated statements of operations data for the three months ended March 31, 2021 and 2020 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of March 31, 2021 are derived from our unaudited consolidated financial statements that are included elsewhere in this prospectus. The historical financial data presented below is not necessarily indicative of our financial results in future periods, and the results for the three months ended March 31, 2021 is not necessarily indicative of our operating results to be expected for the full fiscal year ending December 31, 2021 or any other period. You should read the summary consolidated financial data in conjunction with those financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our consolidated financial statements are prepared and presented in accordance with United States generally accepted accounting principles, or U.S. GAAP. Our consolidated financial statements have been prepared on a basis consistent with our audited financial statements and include all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations as of and for such periods.

 

Selected Summary Consolidated Statements of Operations

 

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020	Year Ended December 31, 2020	Year Ended December 31, 2019
	(unaudited)	(unaudited)
Revenue	$3,164,545	$2,313,123	$8,502,892	$5,997,987
Gross Profit	909,635	561,927	$2,364,529	$1,549,785
Operating Expenses
General and administrative	2,545,905	2,148,943	$8,033,685	$8,140,432
Amortization of Intangibles	159,173	159,173	$686,691	$477,518
Impairment Expense	-	-	$0	$3,113,020
Total Operating Expenses	2,833,281	2,416,452	$9,102,792	$12,053,967
Total Other Expenses	(4,356,420)	(628,080)	$(10,298,574)	$(1,339,331)
Loss before income taxes	(6,280,066)	(2,482,605)	$(17,036,837)	$(11,843,513)
Provision for income taxes	-	-
Net Loss	$(6,280,066)	$(2,482,605)	$(17,036,837)	$(11,843,513)
Net loss attributable to non-controlling interest	-	-	$-	$(30,716)
Preferred Stock Dividend	-	-	$-	$(140,410)
Net loss attributable to Recruiter.com Group, Inc. shareholders	-	-	$(17,036,837)	$(11,953,207)
Net loss per share - basic and diluted	$(2.40)	$(1.48)	$(8.75)	$(20.9)
Weighted average common shares - basic and diluted	2,614,923	1,672,902	1,949,463	571,895

 

 

Summary Consolidated Balance Sheet Data

 

	March 31, 2021 (Unaudited)	December 31, 2020	December 31, 2019
Cash	$662,356	$99,906	$306,252
Total Assets	$12,757,590	$5,707,797	$6,480,615
Total Current Liabilities	$25,460,088	$16,691,254	$5,546,751
Total Liabilities	$25,550,442	$16,832,059	$5,765,259
Additional Paid in Capital	$25,763,020	$23,400,078	$18,203,048
Accumulated Deficit	$(40,805,091)	$(34,525,025)	$(17,488,188)
Total Stockholders' (Deficit) Equity	$(12,792,852)	$(11,124,262)	$715,356

 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully consider and evaluate all of the information contained in this prospectus before you decide to purchase the Units, the Warrants and the Common Stock. The risks and uncertainties described in this prospectus are not the only ones we may face. Additional risks and uncertainties that we do not presently know about or that we currently believe are not material may also adversely affect our business, business prospects, results of operations or financial condition. Any of the risks and uncertainties set forth herein, could materially and adversely affect our business, results of operations and financial condition.

 

Risks Related to Our Business and Industry

 

There is substantial doubt regarding our ability to continue as a going concern absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

 

The Company’s management has determined that there is substantial doubt about the Company’s ability to continue as a going concern and the report of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2020 and 2019 included an explanatory paragraph with respect to the foregoing. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and implement our business plan. This determination was based on the following factors: (i) the Company has a working capital deficit as of December 31, 2020, used cash in operations of approximately $2.5 million in 2020, and 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; (ii) the Company will require additional financing for the fiscal year ending December 31, 2021 to continue at its expected level of operations; and (iii) 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 the consolidated financial statements.

 

Because we have a history of net losses, we may never achieve or sustain profitability or positive cash flow from operations.

 

We have incurred net losses in each fiscal year since our inception, including net losses of approximately $6 million for the three months ended March 31, 2021, $17 million for the year ended December 31, 2020, and $12.0 million for the year ended December 31, 2019. As of March 31, 2021, we had an accumulated deficit of approximately $40.8 million. We expect to continue to incur substantial expenditures to develop and market our services and could continue to incur losses and negative operating cash flow for the foreseeable future. We may never achieve profitability or positive cash flow in the future, and even if we do, we may not be able to continue being profitable. Any failure to achieve and maintain profitability would continue to have an adverse effect on our stockholders’ deficit and working capital and could result in a decline in our stock price or cause us to cease operations.

 

Because we have a limited operating history under our current platform, it is difficult to evaluate our business and future prospects and thus increases the risks associated with investment in our securities.

 

We have operated our current platform since April 16, 2016, when we acquired the Platform and we then put into a multi-year process of further development, integration, and branding. As a result, our platform and business model have not been fully proven, and we have only a limited operating history on which to evaluate our business and future prospects. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including our ability to achieve market acceptance of our platform and attract, retain and incentivize recruiters on our platform, as well as respond to competition and plan for and scale our operations to address future growth. We may not be successful in addressing these and other challenges we may face in the future, and our business and future prospects may be materially and adversely affected if we do not manage these and other risks successfully. Given our limited operating history, we may be unable to effectively implement our business plan which could materially harm our business or cause us to scale down or cease our operations.

 

Our business depends on a strong reputation and anything that harms our reputation will likely harm our results of operations.

 

As a provider of temporary and permanent staffing solutions as well as consultant services, our reputation is dependent upon the performance of the employees we place with our clients and the services rendered by our consultants. We depend on our reputation and name recognition to secure engagements and to hire qualified employees and consultants. If our clients become dissatisfied with the performance of those employees or consultants or if any of those employees or consultants engage in or are believed to have engaged in conduct that is harmful to our clients, our ability to maintain or expand our client base will be harmed. Any of the foregoing is likely to materially adversely affect us.

 

 

We may be unable to find sufficient candidates for our staffing business.

 

Our staffing services business consists of the placement of individuals seeking employment. There can be no assurance that candidates for employment will continue to seek employment through us. Candidates generally seek temporary or full-time positions through multiple sources, including the Company and our competitors. In the fall of 2019, unemployment rates were at historical lows. The COVID-19 pandemic has had a significant effect on unemployment in every state, industry, and major demographic group in the United States and peaked to unprecedented levels in April 2020. Unemployment rates have decreased to 6% in March 2021, but this remains 2.5 percentage points higher than its pre-COVID-19 pandemic level in February 2020. The availability of qualified talent may change or become more scarce, depending on macro-economic conditions outside of the Company’s control. If finding sufficient eligible candidates to meet employers’ demands becomes more challenging due to falling unemployment rates or other talent availability issues, the Company may experience a shortage of qualified candidates. Any shortage of candidates could materially adversely affect the Company.

 

We may incur liability to employees and clients.

 

Our consulting and staffing business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces, where we have no control over the workplace environments. As the employer of record of our temporary employees, we incur a risk of liability to our temporary employees for various workplace events, including claims of physical injury, discrimination, harassment, or failure to protect confidential personal information. While such claims have not historically had a material adverse effect on us, there can be no assurance that such claims in the future will not result in adverse publicity or have a material adverse effect on our operations. We also incur a risk of liability to our employer clients resulting from allegations of errors, omissions or theft by our temporary employees, or allegations of misuse of client confidential information. In many cases, we agree to indemnify our clients in respect of these types of claims. We maintain insurance with respect to many of such claims. While such claims have not historically had a material adverse effect upon us, there can be no assurance that we will continue to be able to obtain insurance at a cost that does not have a material adverse effect upon us or that future claims will be covered by such available insurance.

 

We may require additional capital to fund our business and support our growth, and our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.

 

We intend to continue to make substantial investments to fund our business and support our growth. In addition, we may require additional funds to respond to business challenges, including the need to develop new features or enhance our solutions, improve our operating infrastructure, or acquire or develop complementary businesses and technologies. As a result, in addition to the revenues we generate from our business and the proceeds from this offering, we may need to engage in additional equity or debt financings to provide the funds required for these and other business endeavors. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Common Stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain such additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations, which may have a significant adverse impact on our business, operating results and financial condition.

 

If we fail to completely and successfully integrate the assets we acquired, we may not fully realize the anticipated benefits from the acquisition, and our results of operations would be materially and adversely affected.

 

We recently acquired certain assets and the business from Scouted, Upsider and OneWire and anticipate acquiring additional assets and businesses in the future. Our failure to successfully integrate the assets we acquire may be more difficult, costly or time-consuming than we anticipate, or we may not otherwise realize any of the anticipated benefits of this acquisition. Any of the foregoing could adversely affect our future results of operations or could cause our stock price to decline.

 

 

If our due diligence process with respect to acquisitions proves not robust enough, we may acquire non-performing assets, people, and companies.

 

Our management is opportunistic in its approach to mergers and acquisitions. We are actively looking to grow our base of clients, intellectual property, assets and suite of recruitment technology solutions. If our processes fail to identify risks and weaknesses of companies that we either acquire or purchase assets from, we may be harmed or have difficulties recouping our investments. Additionally, we may be unable to effectively integrate such assets into our existing business.

 

Our future growth depends on our ability to attract, retain and incentivize a community of recruiters, and the loss of existing recruiters, or failure to attract new ones, could adversely impact our business and future prospects.

 

The size of our community of employers on our platform is critical to our success. Our ability to achieve profitability in the future will depend, in large part, on our ability to attract new users to, and retain existing users on, our platform. Recruiters on our Platform can generally decide to cease using our platform at any time. While we have experienced growth in the number of recruiters on our platform in recent months, with numbers rising from 27,011 on September 30, 2020 to over 28,000 at March 31, 2021, this growth may not continue at the same pace in the future or at all. In addition, it is possible that the ongoing effects of COVID-19 may have a deleterious effect on our user growth in the future. Achieving growth in our community of users may require us to engage in increasingly sophisticated and costly sales and marketing efforts that may not result in additional users. We may also need to modify our pricing model to attract and retain such users. If we fail to attract new users or fail to maintain or expand existing relationships in a cost-effective manner, our business and future prospects would be materially and adversely impacted.

 

If we are unable to respond to technological advancements and other changes in our industry by developing and releasing new services, or improving our existing services, in a timely and cost-effective manner or at all, our business could be materially and adversely affected.

 

Our industry is characterized by rapid technological change, frequent new service launches, changing user demands, and evolving industry standards. The introduction of new services based on technological advancements can quickly render existing services obsolete. We will need to expend substantial resources on researching and developing new services and enhancing our platform by incorporating additional features, improving functionality, and adding other improvements to meet our users’ evolving demands. We may not be successful in developing, marketing, and delivering in a timely and cost-effective manner enhancements or new features to our platform or any new services that respond to continued changes in the market. Furthermore, any enhancements or new features to our platform or any new services may contain errors or defects and may not achieve the broad market acceptance necessary to generate sufficient revenue. Moreover, even if we introduce new services, we may experience a decline in revenue from our existing services that is not offset by revenue from the new services.

 

If we experience errors, defects, or disruptions in our platform it could damage our reputation, which could in turn materially and adversely impact our operating results and growth prospects.

 

The performance and reliability of our platform is critical to our reputation and ability to attract and retain recruiters and clients. Any system error or failure, or other performance problems with our platform could harm our brand and reputation and may damage the businesses of users. Additionally, our platform requires frequent updates, which may contain undetected errors when first introduced or released. Any errors, defects, disruptions in service, or other performance or stability problems with our platform could result in negative publicity, loss of or delay in market acceptance of our platform, loss of competitive position, delay of payment to us or recruiters, or claims by users for losses sustained by them, which could adversely impact our brand and reputation, operating results and future prospects.

 

Our 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures automatically convert into our equity securities at the closing of this offering, which could negatively impact trading in our securities.

 

$6,036,109 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures, together with accrued interest thereon (the "Debentures") are subject to automatic conversion in the event the Company closes an equity offering of at least $5,000,000 resulting in the listing of the Common Stock on a national securities exchange (a “Qualified Offering”). In the event of a Qualified Offering (such as the offering contemplated by this prospectus), the Debentures will be convertible into the same securities issued in the Qualified Offering which could be a combination of warrants and shares of the Common Stock. In addition, the Conversion Price of the Debentures would be the lower of (i) the Conversion Price ($4.00) and (ii) 80% of the Qualified Offering Price (the price per share (or units, if units are offered in the Qualified Offering) at which the Qualified Offering is made. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $508,000 of outstanding senior indebtedness. As a result, the investors in this offering will experience immediate dilution when the Debentures are automatically converted into shares of Common Stock and warrants in this offering and could negatively impact the trading market and price of Common Stock following the offering.

 

 

The continued operation of our business depends on the performance and reliability of the internet, mobile, and other infrastructures that are not under our control.

 

Our business depends on the performance and reliability of the internet, mobile, and other infrastructures that are not always under our control. Disruptions in such infrastructures, including as the result of power outages, telecommunications delay or failure, security breach, or computer virus, as well as failure by telecommunications network operators to provide us with the bandwidth we need to provide our products and offerings, could cause delays or interruptions to our products, offerings, and platform. Any of these events could damage our reputation, resulting in fewer recruiters actively using our platform, disrupt our operations, and subject us to liability, which could adversely affect our business, financial condition, and operating results.

 

We rely on third parties to host our platform, and any disruption of service from such third parties or material change to, or termination of, our arrangement with them could adversely affect our business.

 

We use third-party cloud infrastructure services providers and co-located data centers in the United States and abroad to host our platform. Software development, remote server administration, quality assurance, and administrative access is managed overseas by Recruiter Mauritius Ltd. under the direction of our Chief Technology Officer, Ashley Saddul. We do not control the physical operation of any of the data centers we use. These facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures, and similar events. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice, or other unanticipated problems could result in lengthy interruptions to our platform. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of violence, and other misconduct. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service. We may not be able to maintain or renew our agreements or arrangements with these third-party service providers on commercially reasonable terms, or at all. If we are unable to renew our agreements on commercially reasonable terms, our agreements are terminated, or we add additional infrastructure providers, we may experience costs or downtime in connection with the transfer to, or the addition of, new data center providers. If these providers increase the cost of their services, we may have to increase the fees to use our platform, and our operating results may be adversely impacted.

 

Because we have arrangements with related parties affecting a significant part of our operations, such arrangements may not reflect terms that would otherwise be available from unaffiliated third parties.

 

We rely on arrangements with related parties for support of our operations, including technical support, rent, back-office and accounting, and may engage in additional related party transactions in the future. For example, we currently rely on a related party provider of information technology and computer services located in Mauritius, an island country located off the eastern coast of Africa, for software development and maintenance related to our website and platform. Our Chief Technology Officer is an employee of this service provider. Additionally, Icon Information Consultants, LP (“Icon”), a significant stockholder of the Company, performs much of the back office and accounting functions for Recruiting Solutions, the subsidiary through which we operate our staffing business. See “Certain Relationships and Related Person Transactions” for further details. Although we believe that the terms of our arrangements with related parties are reasonable and generally consistent with market standards, such terms do not necessarily reflect terms that we or such related parties would agree to in arms-length negotiations with an independent third party. Furthermore, potential conflicts of interest can exist if a related party is presented with an issue that may have conflicting implications for the Company and such related party. If a dispute arises in connection with any of these arrangements, which is not resolved to the satisfaction of the Company, our business could be materially and adversely affected.

 

The COVID-19 pandemic has resulted in a significant downturn in the global and United States economies and accordingly a decreased demand for recruitment and staffing services, which could have a material adverse effect on our business, financial condition and results of operations.

 

In late 2019, an outbreak of COVID-19 was first reported in Wuhan, China. In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The COVID-19 pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans around the world aimed at controlling the spread of the virus. Businesses are also taking precautions, including requiring employees to work remotely or take leave, imposing travel restrictions and temporarily closing their facilities. Initial unemployment numbers have spiked. Uncertainties regarding the impact of COVID-19 on economic conditions are likely to result in sustained market turmoil and reduced demand for employees, which in its turn has had a negative impact on the recruitment and staffing industry. According to a June 2020 report from CEOToday, the U.S. staffing industry, which previously boasted a market size of $152 billion fell to roughly $119 billion since the COVID-19 outbreak; bringing it down to its lowest level since 2013. This represents a 21% decrease from 2019.

 

 

To date the economic impact of COVID-19 has resulted in certain reductions in the Company’s business and the Company has devoted efforts to shifting its focus in areas of hiring. As of the date of this filing, to the Company’s knowledge, no customer of the Company has gone out of business nor have any counterparties attempted to assert the existence of a force majeure clause, which excuses contractual performance. Because we depend on continued demand for recruitment services, a downturn in the recruitment and staffing industry would have a material adverse impact on our business and results of operations.

 

While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. We have reduced certain billing rates to respond to the current economic climate. Additionally, while we have experienced, and could continue to experience, a loss of clients as the result of the pandemic, we expect that the impact of such attrition would be mitigated by the addition of new clients resulting from our continued efforts to adjust the Company’s operations to address changes in the recruitment industry. The extent to which the COVID-19 pandemic will impact our operations, ability to obtain financing or future financial results is uncertain at this time. Due to the effects of COVID-19, the Company took steps to streamline certain expenses, such as temporarily cutting certain executive compensation packages by approximately 20%. Management also worked to reduce unnecessary marketing expenditures and worked to improve staff and human capital expenditures, while maintaining overall workforce levels. The Company expects but cannot guarantee that demand for its recruiting solutions will improve later in 2021, as certain clients re-open or accelerate their hiring initiatives, and new clients utilize our services. The Company does not expect reductions made in the second quarter of 2020 due to COVID-19 will inhibit its ability to meet client demand. Overall, management is focused on effectively positioning the Company for a rebound in hiring which we expect later in 2021. Ultimately, the recovery may be delayed and the economic conditions may worsen. The Company continues to closely monitor the confidence of its recruiter users and customers, and their respective job requirement load through offline discussions and the Company’s Recruiter Index survey.

 

We also depend on raising additional debt or equity capital to stay operational. The economic impact of COVID-19 may make it more difficult for us to raise additional capital when needed. The terms of any financing, if we are able to complete one, will likely not be favorable to us. If we are unable to raise additional capital, we may not be able to meet our obligations as they come due, raising substantial doubt as to our ability to continue as a going concern.

 

If internet search engines’ methodologies or other channels that we utilize to direct traffic to our website are modified, or our search result page rankings otherwise decline, it could negatively affect our future growth.

 

We depend in part on various internet search engines, such as Google, Yahoo, Bing and others, as well as other internet channels and referral partners to direct traffic to our website. Our ability to maintain the number of visitors directed to our website is not entirely within our control. For example, our competitors’ search engine optimization and other efforts may result in their websites receiving a higher search result page ranking than ours, internet search engines or other channels that we utilize to direct traffic to our website could revise their methodologies in a manner that adversely impacts traffic to our website, or we may make changes to our website that adversely impact our search engine optimization rankings and traffic. As a result, links to our website may not be prominent enough to drive sufficient traffic to our website, and we may not be able to influence the results. Any of these changes could have an adverse impact on our operating results and future growth.

 

If we or our third-party partners experience a security breach resulting in unauthorized access to our clients’ or recruiters’ data, our data, or our platform, networks, or other systems, our reputation would suffer, demand for our services may be reduced, our operations may be disrupted, we may incur significant legal liabilities, and our business could be materially and adversely affected.

 

Our business involves storage, processing, and transmission of our clients’ and recruiters’ proprietary, confidential, and personal information as well as the use of third-party partners who store, process, and transmit such proprietary, confidential, and personal information. We also maintain certain other proprietary and confidential information relating to our business and personal information of our employees. Any security breach or incident affecting us or third parties on which we rely, including resulting from computer viruses, malware, physical or electronic break-ins, or weakness resulting from intentional or unintentional service provider or employee actions, could result in unauthorized access to, misuse of, or unauthorized acquisition of our or our clients’ or recruiters’ data, the loss, corruption, or alteration of this data, interruptions in our operations, or damage to our computers or systems or those of our clients or recruiters. If an actual or perceived security breach affecting us or our third-party partners occurs, public perception of the effectiveness of our security measures would suffer, and result in attrition of recruiters on our platform or loss of clients. Any compromise of our or our third-party partners’ security could result in a violation of applicable privacy and other laws, regulatory or other governmental investigations, enforcement actions, and legal and financial exposure, including potential contractual liability. Any such compromise could also result in damage to our reputation and a loss of confidence in our security measures. Any of these effects could adversely impact our business, operating results and growth prospects.

 

 

Our platform contains open-source software components, and failure to comply with the terms of the underlying licenses could restrict our ability to market or operate our platform.

 

We incorporate many types of open-source software, frameworks and databases, including our Platform, which is currently architected on the Yii platform using PHP code and MySQL databases. Open-source licenses typically permit the use, modification, and distribution of software in source code form subject to certain conditions. Some open-source licenses require any person who distributes a modification or derivative work of such software to make the modified version subject to the same open source license. Accordingly, although we do not believe that we have used open-source software in a manner that would subject us to this requirement, we may be required to distribute certain aspects of our platform or make them available in source code form. Further, the interpretation of open-source licenses is legally complex. If we fail to comply with the terms of an applicable open source software license, we may need to seek licenses from third parties to continue offering our platform and the terms on which such licenses are available may not be economically feasible, to re-engineer our platform to remove or replace the open source software, to limit or stop offering our platform if re-engineering could not be accomplished on a timely or cost-effective basis, to pay monetary damages, or to make available the source code for aspects of our proprietary technology, any of which could adversely affect our business, operating results, and financial condition.

 

In addition, generally there are no warranties, assurances of title, performance, or non-infringement, or controls on the origin of the software provided for the open-source software. There is typically no support available for open-source software, and no guarantee of periodic updates to address security risks or continued development and maintenance.

 

Our future growth depends in part on our ability to form new and maintain existing strategic partnerships with third party solution providers and continued performance of such solution providers under the terms of our strategic partnerships with them.

 

As part of our growth strategy for the Company and, in particular, its enterprise solution offering, we establish and maintain strategic partnerships with large and established third party solution providers to employers, such as companies specializing in enterprise application software, human resources, payroll, talent, time management, tax and benefits administration. Our strategic partnerships include among other things, integration of our platform with those of our strategic partners, joint marketing and commercial alignment, including joint events, and sales of our services by our partners’ representatives. We may be unable to renew or replace our agreements with such strategic partners as and when they expire on comparable terms, or at all. Moreover, the parties with which we have strategic relationships may fail to devote the resources necessary to expand our reach and increase our distribution. In addition, our agreements with our strategic partners generally do not contain any covenants that would limit competing arrangements. Some of our strategic partners offer, or could in the future offer, competing products and services or have similar strategic relationships with our competitors, and may choose to favor our competitors’ solutions over ours. If we are unsuccessful in establishing or maintaining our relationships with third parties, our growth prospects could be impaired, and our operating results may be adversely impacted. Even if we are successful in establishing and maintaining these strategic relationships with third parties, they may not result in the growth of our client base or increased revenue.

 

We rely in part on certain software that we license from related and third parties as part of our service offerings, and if we were to lose the ability to use such software our business and operating results would be materially and adversely affected.

 

We license certain candidate matching software from Genesys, which was recently rebranded “Opptly,” video screening technology from MyInterview, AI-candidate matching software from Censia, as well as other popular, commercially available third party recruiting, communications, and marketing related software systems, such as LinkedIn and Hubspot, much of which is integral to our systems and our business. The license agreement, which was included as part of the asset purchase agreement with Genesys dated March 31, 2019, which transferred the clients, but not the technology of Genesys to the Company, governing the use by us of the Genesys software expires on May 31, 2021, however, it automatically renews for another year on May 31st of each year unless terminated by either party with 30 days written notice prior to May 31st or at any time upon a breach by either party. As there have been no breaches of the agreement and we are unaware of any plans for either party to terminate the license agreement, we expect the license agreement to automatically renew on May 31, 2021. The license agreement governing the use by us of the Censia platform is perpetual, but may be terminated by either party with 180 days of notice. If any of these relationships were terminated or if any of these parties were to cease doing business or cease to support the applications we currently utilize, we may be forced to expend significant time and resources to replace the licensed software. Further, the necessary replacements may not be available on a timely basis on favorable terms, or at all. If we were to lose the ability to use this software our business and operating results would be materially and adversely affected.

 

Because we rely on a small number of customers for a substantial portion of our revenue, the loss of any of these customers would have a material adverse effect on our operating results and cash flows.

 

We derive our revenue from a limited number of customers and our relationships with these customers are fundamental to our success. For the three months ended March 31, 2021 two customers accounted for 10% of more of total revenue, at 27% and 15%, respectively, for a total of 42%. For the year ended December 31, 2020 three customers accounted for 10% or more of total revenue, at 30%, 20% and 11%, for a total of 61%. For the year ended December 31, 2019 two customers accounted for 10% or more of total revenue, at 32% and 17%, for a total of 49%. Any termination of a business relationship with, or a significant sustained reduction in business from, one or more of these customers would have a material adverse effect on our operating results and cash flows unless we are able to secure new customers with similar volume.

 

 

Failure to protect our intellectual property could adversely affect our business.

 

Our success depends in large part on our proprietary technology and data, including our trade secrets, software code, the content of our website, workflows, proprietary databases, registered domain names, registered and unregistered trademarks, trademark applications, copyrights, and inventions (whether or not patentable). In order to protect our intellectual property, we rely on a combination of copyright, trademark, and trade secrets, as well as confidentiality provisions and contractual arrangements.

 

Despite our efforts, third parties may infringe upon or misappropriate our intellectual property by copying or reverse-engineering information that we regard as proprietary, including our platform, to create products and services that compete with ours. Further, we may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon, or diminish the value of our domain names, trademarks, service marks, and other proprietary rights. Moreover, our trade secrets may be compromised by third parties or our employees, which would cause us to lose the competitive advantage derived from the compromised trade secrets. Additionally, effective intellectual property protection may not be available to us in every country in which our platform currently is or may in the future be available. Further, we may be unable to detect infringement of our intellectual property rights, and even if we detect such violations and decide to enforce our intellectual property rights, we may not be successful, and may incur significant expenses, in such efforts. In addition, any such enforcement efforts may be time-consuming, expensive and may divert management’s attention. Because we rely on our Chief Technology Officer and his staff who are based in Mauritius, we face a risk based upon any local conditions and difficulties we may face in enforcing our intellectual property rights there. Further, such enforcement efforts may result in a ruling that our intellectual property rights are unenforceable. Any failure to protect or any loss of our intellectual property may have an adverse effect on our ability to compete and may adversely affect our business, financial condition, and operating results.

 

We may become subject to intellectual property infringement claims and challenges by third parties.

 

Third parties may claim that certain aspects of our platform, content, and brand infringe on their intellectual property rights. Any claims or litigation, regardless of merit, could cause us to incur significant legal expenses and, if successfully asserted, could require us to pay substantial damages or make ongoing royalty payments, prevent us from offering certain aspects of our platform, comply with other terms that may be unfavorable to us, or require us to stop using technology that contains the allegedly infringing intellectual property.

 

Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims typically involve large legal fees, and the time and resources necessary to resolve them could divert our management’s attention and adversely affect our business and operating results. Although the Company takes steps to ensure the validity and security of purchased assets, the purchase of assets or businesses may give rise to claims of intellectual property infringement.

 

We may become subject to marketing use, image, defamation, or representation claims and challenges by third parties.

 

We expect to increase our use of image- and video-based recruiting technology solutions, which function by the recording and capture of images and videos of individuals. We store and communicate these images and video to third parties, including the employers that desire to hire individuals as contractors and employees. In providing the transmission of user-generated content, which includes but is not limited to images and video, we may be exposed to certain litigation risks, including but not limited to the right-to-use, defamation, marketing-use, representation, and other claims by both employers and individuals.

 

If we or our clients are perceived to have violated or are found in violation of, the anti-discrimination laws and regulations as the result of the use of predictive technologies or external independent recruiters in the recruitment process, it may damage our reputation and have a material adverse effect on our business and results of operations.

 

We and our clients may be exposed to potential claims associated with the use of predictive algorithms and external recruiters in the recruitment process, including claims of age and gender discrimination. For example, Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits employers from limiting employment opportunities based on certain protected characteristics, including race, color, religion, sex, and national origin. The Age Discrimination in Employment Act of 1967 (the “ADA”) prohibits discrimination based on age. Certain social media companies, as well as employers purchasing targeted ads from such companies, have recently come under scrutiny for discriminatory advertising. In September 2019, the U.S. Equal Employment Opportunity Commission (the “EEOC”) ruled that several employers violated the ADA and Title VII by publicizing job openings on social media through the use of ads that targeted young men to the detriment of women and older workers. If we or our clients are perceived to have violated or are found in violation of, Title VII, the ADA, or any other anti-discrimination laws and regulations as the result of the use of predictive technologies in the recruitment process, it may damage our reputation and have a material adverse effect on our business and results of operations.

 

 

If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.

 

We have experienced significant growth following our acquisition of assets of Genesys in March 2019. More recently, the number of recruiters on our platform increased from approximately 10,000 recruiters in July 2019 to over approximately 28,300 recruiters as of March 2021. Businesses that grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. If we continue to grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing additional executive and key personnel capable of providing the necessary support. There can be no assurance that our management, along with our staff, will be able to effectively manage our growth. Our failure to meet the challenges associated with rapid growth could materially and adversely affect our business and operating results.

 

If recruiters on our Platform were classified as employees instead of independent contractors, our business would be materially and adversely affected.

 

We believe that the recruiters who engage with us on our Platform are independent contractors, due to a number of factors, including our inability to control these recruiters, and the Company’s Terms of Use with our users reflect that understanding. However, if the independent contractor status of recruiters is challenged, we may not be successful in defending against such challenges in some or all jurisdictions. Furthermore, the costs associated with defending, settling, or resolving lawsuits relating to the independent contractor status of recruiters could be material to our business. In September 2019, California enacted a new employee classification law that codified the 2018 decision by the state’s Supreme Court classifying independent contractors as employees unless they satisfy the following requirements: (i) are free from the control and direction of the entity relating to the performance of the work; (ii) perform work outside the usual course of the hiring entity’s business; and (iii) are customarily engaged in an independently established trade, occupation, or business. We cannot be certain if this ruling in California will impact us.

 

If a court or an administrative agency were to determine that the recruiters on our platform must be classified as employees rather than independent contractors, we and/or our clients would become subject to additional regulatory requirements, including but not limited to tax, wages, and wage and hour laws and requirements (such as those pertaining to minimum wage and overtime); employee benefits, social security, workers’ compensation and unemployment; discrimination, harassment, and retaliation under civil rights laws; claims under laws pertaining to unionizing, collective bargaining, and other concerted activity; and other laws and regulations applicable to employers and employees. Compliance with such laws and regulations would require us to incur significant additional expenses, potentially including without limitation, expenses associated with the application of wage and hour laws (including minimum wage, overtime, and meal and rest period requirements), employee benefits, social security contributions, taxes, and penalties. Additionally, any such reclassification would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.

 

Approximately 52% of the recruiters on our platform are located in jurisdictions outside the United States, which exposes us to risks related to operating abroad.

 

Even though we currently have a limited physical presence outside of the United States, recruiters on our platform are located in approximately 162 countries (aside from the US) around the world, the most prevalent being those recruiters who reside in India, Malaysia, England, and Canada, which subjects us to the risks and uncertainties associated with doing business internationally. Additionally, users on our platform include recruiters from some emerging markets where we have limited experience, where challenges can be significantly different from those we have faced in more developed markets, and where business practices may create greater internal control risks. Because our platform is generally accessible by users worldwide, one or more jurisdictions may claim that we or recruiters on our platform are required to comply with the laws of such jurisdictions. Laws outside of the United States regulating the Internet, payments, escrow, privacy, taxation, terms of service, website accessibility, consumer protection, intellectual property ownership, services intermediaries, labor and employment, wage and hour, worker classification, background checks, and recruiting and staffing companies, among others, which could be interpreted to apply to us, are often less favorable to us than those in the United States, giving greater rights to competitors, users, and other third parties. Compliance with foreign laws and regulations may be more costly than expected, may require us to change our business practices or restrict our product offerings, and the imposition of any such laws or regulations on us, our users, or third parties that we or our users utilize to provide or use our services, may adversely impact our revenue and business. In addition, we may be subject to multiple overlapping legal or regulatory regimes that impose conflicting requirements and enhanced legal risks.

 

 

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Risks inherent in conducting business with an international user base include, but are not limited to: being deemed to conduct business or have operations in jurisdictions where we have users and being subject to their laws and regulatory requirements;

 

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new or changed regulatory requirements;

 

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varying worker classification standards and regulations;

 

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organizing or similar activity by local unions, works councils, or similar labor organizations;

 

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tariffs, export and import restrictions, restrictions on foreign investments, sanctions, and other trade barriers or protection measures;

 

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costs of localizing services, including adding the ability for clients to pay in local currencies;

 

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lack of acceptance of localized services;

 

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difficulties in and costs of staffing, managing, and operating international operations or support functions;

 

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taxation;

 

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weaker intellectual property protection;

 

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economic weakness or currency-related challenges or crises;

 

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the burden of complying with a wide variety of laws that may be deemed to apply to us, including those relating to labor and employment matters (including but not limited to requirements with respect to work councils or similar labor organizations), consumer and data protection, privacy, network security, encryption, data residency, and taxes, as well as securing expertise in local law and related practices;

 

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our ability to adapt to sales practices and client requirements in different cultures;

 

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fluctuations in foreign currency exchange rates;

 

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compliance with U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities;

 

 

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corporate or state-sponsored espionage or cyberterrorism;

 

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macroeconomic conditions in certain foreign jurisdictions; and

 

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political instability and security risks in countries where we have users.

 

The risks described above may also make it more difficult for us to expand our operations internationally. Analysis of, and compliance with, global laws and regulations may substantially increase our cost of doing business. We may be unable to keep current with changes in laws and regulations as they develop. Any violations could result in enforcement actions, fines, civil and criminal penalties, damages, interest, costs and fees (including but not limited to legal fees), injunctions, loss of intellectual property rights, or reputational harm. If we are unable to comply with these laws and regulations or manage the complexity of global operations and supporting an international user base successfully, our business, operating results, and financial condition could be adversely affected.

 

If we are unable to maintain our relationships with payment and banking partners, our business could be materially and adversely affected.

 

We also rely on a network of disbursement partners to disburse funds to recruiters on our platform, including our banking partners and payment solution providers such as PayPal. We also rely on Amazon.com to send gift cards and merchandise from time to time to independent recruiters and members of our network and community, as incentives for various actions, including submission of qualified candidates and responding to surveys.

 

Relationships with our payment partners are critical to our business. We may not be able to maintain these relationships in the future on terms favorable to us or at all. Our payment partners may, among other things:

 

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be unable to effectively accommodate evolving service needs, including as the result of rapid growth or higher volume;

 

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choose to terminate or not renew their agreements with us, or only be willing to renew on less advantageous terms;

 

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change the scope of their services provided to us, cease doing business with us, or cease doing business altogether; or

 

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experience delays, limitations, or closures of their own businesses, networks, or systems, resulting in their inability to process payments or disburse funds for certain periods of time.

 

Alternatively, we may be forced to cease doing business with our payment processors if card association operating rules, certification requirements and laws, regulations, or rules governing electronic funds transfers to which we are subject change or are interpreted to make it more difficult or impossible for us to comply. If we are unable to maintain our current relationships with payment partners on favorable terms, or if we are unable to enter into new agreements with payment partners, our business may be material and adversely affected.

 

We operate in an intensively competitive industry, and we may not be able to compete successfully.

 

The staffing and recruitment industry is intensely competitive and we face significant competition in all aspects of our business, and we expect such competition to increase, particularly in the market for online procurement of professional employee talent. Larger and more established companies may focus on our direct market and could directly compete with us. Smaller companies, including software developers, could also launch new services that compete with us that could gain market acceptance quickly.

 

 

Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition, longer operating histories, greater financial, technical, and other resources, that could allow them to respond more quickly and effectively than we do to new or changing opportunities, technologies, standards, regulatory conditions, or user preferences or requirements. These companies may use these advantages to offer products and services similar to ours at a lower price, develop different products and services to compete with our platform.

 

Moreover, current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others, including our current or future third-party partners. By doing so, these competitors may increase their ability to meet the needs of existing or prospective users. These developments could limit our ability to obtain revenue from existing and new users. If we are unable to compete effectively against current and future competitors, our business and operating results would be materially and adversely impacted.

 

Our future success depends on our ability to retain and attract high-quality personnel, and the efforts, abilities and continued service of our senior management, and unsuccessful succession planning could adversely affect our business.

 

Our future success will depend in large part on our ability to attract and retain high-quality management, operations, and other personnel who are in high demand, are often subject to competing employment offers, and are attractive recruiting targets for our competitors. The loss of qualified executives and key employees, or inability to attract, retain, and motivate high-quality executives and employees required for the planned expansion of our business, may harm our operating results and impair our ability to grow.

 

We depend on the continued services of our key personnel, including Evan Sohn, our Chief Executive Officer and Chairman, Miles Jennings, our President and Chief Operating Officer, Rick Roberts, the President of Recruiting Solutions, and Judy Krandel, our Chief Financial Officer. The Company has entered into either employment agreements or consulting agreements with Evan Sohn, Miles Jennings, Judy Krandel, and Rick Roberts. Our work with each of these key personnel are subject to changes and/or termination, and our inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.

 

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an emerging growth company. Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected to opt out of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

 

For as long as we continue to be an emerging growth company, we may take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory stockholder vote on executive compensation and any golden parachute payments not previously approved, exemption from the requirement of auditor attestation in the assessment of our internal control over financial reporting and exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). If we do take advantage of these exemptions, the information that we provide stockholders will be different than what is available with respect to other public companies. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If investors find our common stock less attractive as a result of our status as an emerging growth company, if and when our stock becomes publicly traded, there may be less liquidity for our common stock and our stock price may be more volatile.

 

We will remain an emerging growth company until the earliest of (1) the last day of the year (a) following the fifth anniversary of the completion of a public offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

If there are adverse changes in domestic and global economic conditions, it may negatively impact our business.

 

Our business depends on the continued demand for labor and on the economic health of current and prospective clients that use our platform and services. Any significant weakening of the economy in the United States or globally, more limited availability of credit, a reduction in business confidence and activity, economic uncertainty, financial turmoil affecting the banking system or financial markets, a more limited market for independent professional service providers or information technology services, and other adverse economic or market conditions may adversely impact our business and operating results. Global economic and political events or uncertainty may cause some of our current or potential clients to curtail spending on hiring and may ultimately result in new regulatory and cost challenges to our operations. The COVID-19 pandemic has had a negative effect on the global economic condition as well as the U.S. staffing industry. These adverse conditions could result in reductions in revenue, longer sales cycles, slower adoption of new technologies and increased competition, which could in turn materially and adversely affect our business, financial condition, and operating results.

 

The regulatory framework for privacy and data protection is complex and evolving, and changes in laws or regulations relating to privacy or the protection or transfer of personal data, or any actual or perceived failure by us to comply with such laws and regulations, could adversely affect our business.

 

During our day-to-day business operations we receive, collect, store, process, transfer, and use personal information and other user data. As the result, we are subject to numerous federal, state, local, and international laws and regulations regarding privacy, data protection, information security, and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other content. We are also subject to the terms of our privacy policies and obligations to third parties related to privacy, data protection, and information security. We strive to comply with applicable laws, regulations, policies, and other legal obligations relating to privacy, data protection, and information security to the extent possible. However, the regulatory framework for privacy and data protection both in the United States and abroad is, and is likely to remain for the foreseeable future, uncertain and complex, is changing, and the interpretation and enforcement of the rules and regulations that form part of this regulatory framework may be inconsistent among jurisdictions, or conflict with other laws and regulations. Such laws and regulations as they apply to us may be interpreted and enforced in a manner that we do not currently anticipate. Any significant change in the applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of user data, or their interpretation, or any changes regarding the manner in which the express or implied consent of users for the collection, use, retention, or disclosure of such data must be obtained, could increase our costs and require us to modify our platform and our products and services, in a manner that could materially affect our business.

 

 

The laws, regulations, and industry standards concerning privacy, data protection, and information security also continue to evolve. For example, in June 2018, California passed the California Consumer Privacy Act (the “CCPA”), effective January 1, 2020, which requires companies that process personal information of California residents to make new disclosures to consumers about such companies’ data collection, use, and sharing practices and inform consumers of their personal information rights such as deletion rights, allows consumers to opt out of certain data sharing with third parties, and provides a new cause of action for data breaches. The State of Nevada has also passed a law, effective October 1, 2019, that amends the state’s online privacy law to allow consumers to submit requests to prevent websites and online service providers from selling personally identifiable information that they collect through a website or online service. The costs of compliance with, and other burdens imposed by, the privacy and data protection laws and regulations may limit the use and adoption of our services and could have a material adverse impact on our business. As a result, we may need to modify the way we treat such information.

 

Any failure or perceived failure by us to comply with any privacy and data protection policies, laws, rules, and regulations could result in proceedings or actions against us by individuals, consumer rights groups, governmental entities or agencies, or others. We could incur significant costs investigating and defending such claims and, if found liable, significant damages. Further, public scrutiny of or complaints about technology companies or their data handling or data protection practices, even if unrelated to our business, industry, or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs and risks.

 

If we sustain an impairment in the carrying value of long-lived assets and goodwill, it will negatively affect our operating results.

 

As the result of our purchase of certain assets of Genesys in March 2019 and subsequent 2021 asset acquisitions, we have a significant amount of long-lived intangible assets and goodwill on our consolidated balance sheet. Under the Generally Accepted Accounting Principles in the U.S. (“GAAP”), long-lived assets are required to be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. If business conditions or other factors cause profitability and cash flows to decline, we may be required to record non-cash impairment charges. Goodwill must be evaluated for impairment at least annually or more frequently if events indicate it is warranted. If the carrying value of a reporting unit exceeds its current fair value, the goodwill is considered impaired. Events and conditions that could result in impairment in the value of our long-lived assets and goodwill include, but are not limited to, significant negative industry or economic trends, competition and adverse changes in the regulatory environment, significant decline in the Company’s stock price for a sustained period of time, limited funding, as well as or other factors leading to reduction in expected long-term revenues or profitability. If we record impairment charges related to our goodwill and long-lived assets, our operating results would likely be materially and adversely affected.

 

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired. We reported material weaknesses in both the design and effectiveness of our internal control over financial reporting for the year ended December 31, 2020.

 

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act which requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

 

Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which could result in loss of investor confidence and could have an adverse effect on our stock price.

 

As of December 31, 2019, management determined that here were material weaknesses in both the design and effectiveness of our internal control over financial reporting. 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. Specifically, we restated our Form 10-Q filings for the three months ended June 30, 2019 and March 31, 2019 to switch $484,090 from net revenue to gross revenue. This change had an effect on total revenue and cost of goods sold but not on cash flow. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified at least two material weaknesses in our internal control over financial reporting. Specifically, (1) we lack a sufficient number of employees to properly segregate duties and provide adequate monitoring during the process leading to and including the preparation of the consolidated financial statements and, as of that date, (2) we lacked sufficient independent directors on our Board to maintain audit and other committees consistent with proper corporate governance standards.

 

 

In May 2020, our Board appointed Judy Krandel as our Chief Financial Officer. 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 in the fourth quarter.

 

Deborah Leff, Robert Heath and Steve Pemberton were approved by the Board as independent directors. We now have a board with a majority of independent directors. As such, as of the date of this filing, management has determined that the concern regarding material weaknesses regarding lack of independent directors in the Company’s internal controls over financial reporting has been sufficiently addressed.

 

Although the material weakness identified as of December 31, 2019 as described above has been remediated as of December 31, 2020, management has determined that, as of that date, there were still material weaknesses in both the design and effectiveness of our internal control over financial reporting. 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, we lack a sufficient number of employees to properly segregate duties and provide adequate monitoring during the process leading to and including the preparation of the consolidated financial statements. Accordingly, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2020. The Company anticipates that, prior to December 31, 2021, it will be able to hire a sufficient number of employees to remediate the material weakness identified in the previous paragraph.

 

Risks Related to this Offering and Our Common Stock

 

As a result of our recent financings and acquisitions we have issued a substantial number of additional shares of Common Stock, which dilutes present stockholders and have issued dilutive instruments which will dilute present stockholders.

 

During the period from March 2019 through January 2021, we engaged in a series of private placement transactions issuing to several accredited investors shares of convertible preferred stock, convertible debentures and warrants to purchase Common Stock. We have also issued convertible preferred stock in connection with the Merger and Asset Purchase. See “Prospectus Summary – Recent Developments – 2021 Senior Subordinated Secured Convertible Debentures”, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Financing Arrangements – Senior Subordinated Secured Convertible Debentures” and “Business – March 31, 2019 Acquisitions” for further details. As of the date of this Prospectus, there were approximately split adjusted 10 million shares of Common Stock issuable upon conversion of our outstanding convertible preferred stock and convertible debentures and upon exercise of outstanding warrants (including warrants issued to the placement agent in our private placement transactions). In the future, we may grant additional options, warrants and convertible securities. The exercise, conversion or exchange of options, warrants or convertible securities, including for other securities, will dilute the percentage ownership of our existing stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such options, warrants and convertible securities at a time when we would be able to obtain additional equity capital on terms more favorable than such securities or when our Common Stock is trading at a price higher than the exercise or conversion price of the securities. If we issue them with conversion or exercise prices below the conversion prices of the preferred stock or exercise price of warrants held by the investors, we will be required to reduce the conversion prices of our preferred stock and/or exercise price of warrants held by the investors, which will increase future dilution. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.

 

Because our Common Stock is subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our Common Stock, which adversely affects its liquidity and market price.

 

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our Common Stock on OTCQB is presently less than $5.00 per share and therefore we are considered a “penny stock” according to SEC rules. Further, while we are going to effect the Reverse Stock Split in connection with this Offering, and our stock price may rise above $5.00, there is no guarantee that our stock price will stay above $5.00 per share. The “penny stock” designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our Common Stock and therefore reduce the liquidity of our shares.

 

Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers decline to permit investors to purchase and sell or otherwise make it difficult to sell shares of penny stocks. The “penny stock” designation may continue to have a depressive effect upon our Common Stock price.

 

 

Our Common Stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our Common Stock.

 

To date there has been limited trading in our Common Stock and there can be no assurance that an active trading market in our Common Stock will either develop or be maintained. Our Common Stock is likely to experience significant price and volume fluctuations in the future, which could adversely affect the market price of our Common Stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets, including as the result of the COVID-19 pandemic, could cause the price of our Common Stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our Common Stock will be stable or appreciate over time.

 

Because we may issue preferred stock without the approval of our stockholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price.

 

In general, the Board may authorize, without a vote of our stockholders, an issuance of one or more additional series of preferred stock that have more than one vote per share, although the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our Common Stock. This could cause the market price of our Common Stock shares to drop significantly, even if our business is performing well, and make it more difficult for shareholders to sell their Common Stock.

 

Investors in this offering will experience immediate and substantial dilution in net tangible book value.

 

The public offering price per Unit is substantially higher than the net tangible book value per share of our outstanding shares of Common Stock. As a result, investors in this offering will incur immediate dilution of $5.06 per share, based on the assumed public offering price of $5.50 per Unit, the mid-point of the estimated offering price range described on the cover of this prospectus. Investors in this offering will pay a price per unit that substantially exceeds the book value of our assets after subtracting our liabilities. To the extent that the Warrants sold in this offering are exercised, you will experience further dilution. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.

 

Immediately prior to the consummation of this offering, we expect to have approximately 254,531 outstanding stock options to purchase our Common Stock with exercise prices that are below the assumed initial public offering price of our Common Stock. To the extent that these options are exercised, there will be further dilution.

 

We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price.

 

The trading price of our Common Stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

 

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market conditions in the broader stock market in general, or in our industry in particular;

 

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actual or anticipated fluctuations in our quarterly financial and operating results;

 

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introduction of new products and services by us or our competitors;

 

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sales, or anticipated sales, of large blocks of our stock;

 

 

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issuance of new or changed securities analysts’ reports or recommendations;

 

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failure of industry or securities analysts to maintain coverage of our company, changes in financial estimates by any industry or securities analysts that follow our company, or our failure to meet such estimates;

 

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additions or departures of key personnel;

 

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regulatory or political developments;

 

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changes in accounting principles or methodologies;

 

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acquisitions by us or by our competitors;

 

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litigation and governmental investigations; and

 

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political and geopolitical events and general economic conditions and trends, including the possible effects of the widespread domestic and global impact of the COVID-19 pandemic.

 

These and other factors may cause the market price and demand for our Common Stock to fluctuate substantially, which may limit or prevent investors from readily selling their Common Stock and may otherwise negatively affect the liquidity of our Common Stock. If the market price of our Common Stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

 

There can be no assurances that our securities once listed on The Nasdaq Capital Market will not be subject to potential delisting if we do not continue to maintain the listing requirements of The Nasdaq Capital Market.

 

We have applied to list the shares of our Common Stock and Warrants on The Nasdaq Capital Market, or Nasdaq, under the symbols “RCRT” and “RCRTW”, respectively and such listing is a condition of closing this offering. An approval of our listing application by Nasdaq will be subject to, among other things, our fulfilling all of the listing requirements of Nasdaq. In addition, Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from Nasdaq), would make it more difficult for shareholders to sell our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. This could have an adverse effect on the price of our Common Stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Common Stock is not traded on a national securities exchange.

 

Warrants are speculative in nature.

 

The Warrants included in the Units in this offering do not confer any rights of Common Stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of our Common Stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the Warrants may exercise their right to acquire the Common Stock and pay an exercise price of per share, prior to five years from the date of issuance, after which date any unexercised Warrants will expire and have no further value. Until holders of the Warrants acquire Common Stock upon exercise of the Warrants, the holders will have no rights with respect to the Common Stock issuable upon exercise of the Warrants. Upon exercise of the Warrants, the holder will be entitled to exercise the rights of a Common Stockholder as to the security exercised only as to matters for which the record date occurs after the exercise. Moreover, following this offering, the market value of the Warrants is uncertain and there can be no assurance that the market value of the Warrants will equal or exceed their public offering price. There can be no assurance that the market price of the Common Stock will ever equal or exceed the exercise price of the Warrants, and consequently, whether it will ever be profitable for holders of the Warrants to exercise the Warrants.

 

 

Although we have applied to list the Warrants included in the Units to trade on the Nasdaq Capital Market, there is no assurance that an active trading market will develop.

 

Although we have applied to list the Warrants on the Nasdaq Capital Market there can be no assurance that there will be an active trading market for the Warrants. Without an active trading market, the liquidity of the Warrants will be limited.

 

Provisions of the Warrants offered by this prospectus could discourage an acquisition of us by a third party.

 

In addition to the discussion of the provisions of our governing organizational documents, certain provisions of the Warrants offered by this prospectus could make it more difficult or expensive for a third party to acquire us. The Warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the Warrants. These and other provisions of the Warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

 

Our executive officers and directors, and their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

 

Upon consummation of this offering (based on shares outstanding as of May 10, 2021, our executive officers and directors, together with entities affiliated with such individuals, along with our two other largest stockholders, will beneficially own approximately 55% of our Common Stock (approximately 54% if the underwriters’ over-allotment option is exercised in full). Accordingly, these stockholders may, as a practical matter, continue to be able to control the election of a majority of our directors and the determination of all corporate actions after this offering. This concentration of ownership could delay or prevent a change in control of the Company.

 

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our Common Stock could decline.

 

If our existing stockholders sell substantial amounts of our Common Stock in the public market following this offering and the expiration of the lock-up agreements, the market price of our Common Stock could decrease significantly. The perception in the public market that our existing stockholders might sell Common Stock could also depress our market price. Upon completion of this offering, we will have 12,465,433 shares of Common Stock outstanding, assuming no exercise by the underwriters of their option to purchase additional shares, and 925,704 options to purchase shares of our Common Stock, based on our shares and options to be outstanding as of immediately prior to the consummation of this offering. Our directors, executive officers and other holders of our Common Stock will be subject to the lock-up agreements described in “Underwriting” and the Rule 144 holding period requirements described in “Shares Eligible for Future Sale.” After all of these lock-up periods have expired and the holding periods have elapsed, up to additional shares will be eligible for sale in the public market.

 

In addition, the holders of Common Stock will have the right, subject to certain exceptions and conditions, to require us to register their Common Stock under the Securities Act of 1933, and they will have the right to participate in future registrations of securities by us. Registration of any of these outstanding Common Stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. A decline in the price of shares of our Common Stock might impede our ability to raise capital through the issuance of additional shares of our Common Stock or other equity securities.

 

We do not anticipate that we will pay dividends on our Common Stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Common Stock.

 

We have never declared or paid any dividends on our Common Stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, in the future we may enter into agreements that prohibit or restrict our ability to declare or pay dividends on our Common Stock. As a result, you may only receive a return on your investment in our Common Stock if the market price of our Common Stock increases.

 

 

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

 

Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds will be used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We currently intend to use the net proceeds from this offering to expand marketing and brand enhancement related to our products, to fund our ongoing research and development activities, for personnel development and training and for resource management software development.

 

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the commercial success of our systems and the costs of our research and development activities, as well as the amount of cash used in our operations. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.

 

The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our Common Stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

 

 

USE OF PROCEEDS

 

Based upon an assumed public offering price of $5.50 per Unit (the mid-point of the estimated offering price range described on the cover of this prospectus), we estimate that the net proceeds in this offering will be approximately $8,760,000, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, or $10,155,000 if the Underwriter exercises its over-allotment option in full.

 

The Company intends to use the net proceeds from this offering to improve the efficiency of its operations, increase sales and marketing efforts, invest in partnership development strategies, and invest in the Company’s existing business initiatives and products, as well as general working capital.

 

We plan to use the net proceeds we receive from this offering, and any proceeds from the exercise of Warrants, for the following purposes:

 

	Use of Net Proceeds
Working Capital	$2,000,000
Sales and Marketing	$3,200,000
Research and Development	$2,000,000
Funding for Growth Strategies	$1,560,000

 

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have some flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

 

Each $1.00 increase or decrease in the assumed public offering price of $5.50 per share would increase or decrease the net proceeds to us from this offering by approximately $1,690,909, assuming that the amount of units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions payable by us. We may also increase or decrease the number of units we are offering. An increase or decrease of 90,000 units offered by us in this offering would increase or decrease the net proceeds to us by approximately $460,350, assuming that the assumed price per unit to the public remains the same, and after deducting underwriting discounts and commissions payable by us. We do not expect that a change by these amounts in the offering price to the public or the Common Stock offered by us would have a material effect on our uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.

 

Assuming all 1,818,182 units are sold by us, we expect that the net proceeds, together with our existing cash and cash equivalents will enable us to fund our operations for at least 24 months. In addition, we have granted the representative of the underwriters a 45-day option to purchase up to 272,727 additional shares of Common Stock and/or Warrants to purchase up to 272,727 shares of our Common Stock to cover over-allotments in this offering. We will use the proceeds from the sale of these additional shares for working capital and general corporate purposes.

 

The expected use of net proceeds represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of such net proceeds. Furthermore, in the event we make significant capital expenditures, the net proceeds of this offering may not be sufficient to fund such expenditures, and we may need to raise additional capital.

 

 

DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our capital stock. Any future determination to declare cash dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board may deem relevant. Nevada law limits when we can pay dividends on our equity securities. Further our continuing losses require us to use funds we receive in financings to meet our working capital needs.

 

 

 

 

 

 

 

 

 

 

 

CAPITALIZATION

 

Set forth below is our cash and capitalization as of March 31, 2021:

 

 

 

 

	As of March 31, 2021
	Actual (unaudited)	Pro Forma (unaudited)	Pro Forma As Adjusted (unaudited)
Cash	$662,356	$912,356	$9,672,356
Convertible notes payable, net of unamortized discount and costs of $2,864,099 and $2,863,215, respectively	2,795,010	2,725,144	-
Warrant Derivative liability	16,496,364	16,496,364	-
Preferred stock, Series D, $0.0001 par value; 2,000,000 shares authorized; 444,587 shares issued and outstanding as of March 31, 2021	46	39	-
Preferred stock, Series E, $0.0001 par value; 775,000 shares authorized; 731,845 shares issued and outstanding as of March 31, 2021	74	74	11
Preferred stock, Series F, $0.0001 par value; 200,000 shares authorized; 46,847 shares issued and outstanding as of March 31, 2021	5	5	-
Common stock, $0.0001 par value; 100,000,000 shares authorized; 2,910,074 shares issued and outstanding	291	349	1,245
Additional paid-in capital	25,763,456	27,380,771	58,274,484
Accumulated (deficit)	(40,805,091)	(40,805,091)	(43,668,306)
Total stockholders’ equity	(12,792,852)	(11,327,986)	16,703,301

 

You should read the information in the table above together with our unaudited consolidated financial statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each included elsewhere in this prospectus.

 

The table above under the heading "Actual" is based on 2,910,074 shares of Common Stock outstanding as of March 31, 2021 and excludes the following as of that date:

 

 

 

 

 

 

 

 

 

DILUTION

 

If you invest in our Units in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of Common Stock that is part of the Unit and the as adjusted net tangible book value per share of Common Stock immediately after this offering.

 

Our historical net tangible book value as of March 31, 2021 was ($22.8) million, or ($7.83) per share of Common Stock. Our historical net tangible book value is the amount of our total tangible assets less our liabilities. Historical net tangible book value per share of Common Stock is our historical net tangible book value divided by the number of outstanding Common Stock as of March 31, 2021.

 

The pro forma net tangible book value of our Common Stock as of March 31, 2021 was ($6.48) per share of Common Stock. Pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding Common Stock, after giving effect to the pro forma adjustments referenced under “Capitalization.”

 

After giving effect to the sale of Units that we are offering, attributing no value to the Warrants, at an assumed initial public offering price of $5.50 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value on a pro forma adjusted basis as of March 31, 2021 would have been $.44 per share of Common Stock. This amount represents an immediate increase in net tangible book value of $8.27 per share of Common Stock to our existing shareholders and an immediate dilution of ($5.06) per share of Common Stock to new investors purchasing Common Stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of Common Stock.

 

The following table illustrates this dilution:

 

Assumed initial public offering price per share (attributing no value to the Warrants)		5.5​ ​
Net tangible book value per Common Stock as of March 31, 2021		(7.835)
Pro forma net tangible book value per share of Common Stock as of March 31, 2021	(6.48)
Pro forma as adjusted net tangible book value per share of Common Stock as of March 31, 2021, to give effect to this offering	.44
Dilution per share to new investors in this offering		$(5.06​​)

 

A $1 increase (decrease) in the assumed initial public offering price of $5.50 per share of Common Stock, would increase (decrease) the as adjusted net tangible book value per share by $0.14, and decrease dilution to new investors by $0.14 per share, in each case assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

The foregoing discussion and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding Warrants having a per share exercise or conversion price less than the per share offering price to the public in this offering.

 

If the underwriters exercise in full their option to purchase additional Common Stock in this offering, the as adjusted net tangible book value after the offering would be $0.54 per share, the increase in net tangible book value to existing shareholders would be $0.10 per share, and the dilution to new investors would be $(4.96) per share, in each case assuming an initial public offering price of $5.50 per share.

 

 

The table above under the heading "Actual" is based on 2,910,074 shares of Common Stock outstanding as of March 31, 2021 and excludes the following as of that date:

 

 

 

 

 

 

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Prospectus. 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 in “Risk Factors.”

 

Overview

 

We are an on-demand recruiting platform aimed to disrupt the $120 billion recruiting and staffing industry. Recruiter.com combines an online hiring platform with the world’s largest network of over 28,000 small and independent recruiters. Businesses of all sizes recruit talent faster using the Recruiter.com platform, which is powered by virtual teams of Recruiters On Demand and Video and AI job-matching technology.

 

Our website, www.Recruiter.com, currently provides access to over 28,000 recruiters and utilizes an innovative web platform, with integrated AI-driven candidate to job matching and video screening software to more easily and quickly source qualified talent.

 

We help businesses accelerate and streamline their recruiting and hiring processes by providing on-demand recruiting services and technology. We leverage our expert network of recruiters to place recruiters on a project basis, aided by cutting edge artificial intelligence-based candidate sourcing, matching and video screening technologies. We operate a cloud-based scalable SaaS-enabled marketplace platform for professional hiring, which provides prospective employers access to a network of thousands of independent recruiters from across the country and worldwide, with a diverse talent sourcing skillset that includes information technology, accounting, finance, sales, marketing, operations and healthcare specializations.

 

Our mission is to grow our most collaborative and connective global platform to connect recruiters and employers and become the preferred solution for hiring specialized talent.

 

We generate revenue from the following activities:

 

●

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. Revenue earned through Recruiters on Demand is derived 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 on the Platform, as the recruiter user base of our Platform has the proper skill-set for recruiting and hiring projects. We had previously referred to this service in our revenue disaggregation disclosure in our consolidated financial statements as license and other, but on July 1, 2020, we rebranded as Recruiters on Demand.

  

●

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 that personnel with the employer, but with us or our providers acting as the employer of record, 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.

 

●

Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform or other communications. We source qualified candidate referrals for the employers’ available jobs through independent recruiter users that access our 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’s base salary or an agreed-upon flat fee.

  

●

Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including 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. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. 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 addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

 

●

Career Solutions: We provide services to assist job seekers with their career advancement. These services include 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19. We partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.

 

The costs of our revenue primarily consist of employee costs, third-party staffing costs and other fees, outsourced recruiter fees and net margin revenue share.

 

2021 First Quarter Business Update

 

During the three months ended March 31, 2021, the Company focused on the continued development of its innovative technology and platform offerings, strategic merger and acquisition opportunities, improving the results of sales and marketing, engagement of its growing network of recruiters, and the development of new, more automated ways to engage its on-demand recruiter community. Company management also focused on developing effective public relations outreach and successfully integrating the staff and assets from its acquisitions.

 

Our key highlights during the three months ended March 31, 2021, include the following:

 

Acquiring two technology companies:

 

 

 

Select achievements:

 

 

 

 

 

 

 

 

 

 

 

Since March 31, 2021, our key highlights include the following:

 

 

 

 

Results of Operations.

 

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020:

 

Revenue

 

The Company had revenue of $3,164,545 for the three-month period ended March 31, 2021, as compared to $2,313,123 for the three-month period ended March 31, 2020, representing an increase of $851,422 or 36.8%. This increase resulted primarily from an increase in our Recruiters on Demand business of 418% due to significant growth in new customers, some of which we acquired, on July 1, 2020. We also had an increase in our Consulting and Staffing business of 8.3% from internal growth from some of our long-term customers. The increase in revenue was offset partially by a decline in revenue from our Permanent Placement business of 71% as hiring demand was slower which we believe reflected some impact from the presidential election and the COVID-19 pandemic. The extent to which the COVID-19 pandemic will impact our revenue in the subsequent future periods is uncertain at this time.

 

Cost of Revenue

 

Cost of revenue was $2,254,910 for the three-month period ended March 31, 2021, which included related party costs of $205,261, compared to $1,751,196 for the 2020 three-month period, representing an increase of $503,714 or 28.8% and included related party costs of $655,384. This increase resulted primarily from an increase in compensation expense to support revenue growth. Cost of revenue for the three-month period ended March 31, 2021 was primarily attributable to third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys Talent, LLC (“Genesys”), (currently the Company’s Recruiting Solutions division).

 

Our gross profit for the three-month period ended March 31, 2021 was $909,635, producing a gross profit margin of 28.7%. Our gross profit for the corresponding 2020 three-month period was $561,927, producing a gross profit margin of 24.3%. The increase in the gross profit margin from 2020 to 2021 reflects the shift in the mix in sales for the period as our Recruiters on Demand revenue has higher gross margins than our staffing revenue. We also had a higher margin within our Staffing business due to the more profitable mix of clients and services we provided.

 

 

Operating Expenses

 

We had total operating expense of $2,833,281 for the three-month period ended March 31, 2021 compared to $2,416,452 in the 2020 period, an increase of $416,829 or 17.3%. This increase was primarily due to the higher general and administrative expense.

 

Sales and Marketing

 

Our sales and marketing expense for the three-month period ended March 31, 2021 was $57,543 compared to $25,243 for the corresponding three-month period in 2020, which reflects an increase in advertising and marketing expense to help drive growth in our business.

 

Product Development

 

Our product development expense for the three-months ended March 31, 2021 decreased to $70,660 from $83,093 for the corresponding period in 2020. This decrease is attributable to timing of launching new development projects. The product development expense included $57,988 and $60,979 for the three months ended March 31, 2021 and 2020, respectively paid to Recruiter.com Mauritius, Ltd, a development team employed by Recruiter.com and a related party of the Company.

 

Amortization of Intangibles and Impairment Expense

 

For the three-month period ended March 31, 2021, we incurred a non-cash amortization charge of $159,173 as compared to $159,173 for the corresponding period in 2020. The amortization expense relates to the intangible assets acquired from Genesys, now the Company’s Recruiting Solutions division.

 

General and Administrative

 

General and administrative expense for the three-month period ended March 31, 2021 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 March 31, 2021, our general and administrative expense was $2,545,905, including $502,407 of non-cash stock-based compensation. In 2020, for the corresponding period, our general and administrative expense was $2,148,943 including $870,722 of non-cash stock-based compensation. This increase is attributable primarily to increases in compensation supporting the growth in our Recruiters on Demand business, investor relations, legal and contractor fees of $976,167 partially offset by the decline in non-cash stock-based compensation of $368,315..

 

Other Income (Expense)

 

Other income (expense) for the three-month period ended March 31, 2021 was a loss of $4,356,420 compared to a loss of $628,080 in the corresponding 2020 period. The primary reason for the increase of $3,728,340 is due to a non-cash initial derivative expense of $3,585,983 and an increase in non-cash interest expense of $1,277,235 reflecting the debt discount and finance costs from the convertible note financings completed in May and June of 2020 and January of 2021. The net loss was offset partially by non-cash income of $1,193,709 resulting from a change in the fair value of the derivative liability from our outstanding warrants. As our common stock price increases, we incur an expense and contrarily if our common stock decreases, we recognize other income.

 

Net Income (Loss)

 

For the three-months ended March 31, 2021, we had a net loss of $6,280,066 compared to a net loss of $2,482,605 during the corresponding three-month period in 2020.

 

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 the historical operating results of Recruiter nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

 

 

Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

 

We define Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

 

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between the Company 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 March 31,
	2021	2020
Net loss	$(6,280,066)	$(2,482,605)
Interest expense and finance cost, net	1,427,588	44,206
Depreciation & amortization	159,461	159,461
EBITDA (loss)	(4,693,017)	(2,278,938)
Bad debt expense	16,963	11,250
Forgiveness of debt income	(24,925)	-
Initial derivative expense	3,585,983	-
Loss (gain) on change in fair value of derivative	(628,621)	565,088
Stock-based compensation	502,407	870,722
Accrued stock-based compensation	152,500	70,250
Adjusted EBITDA (Loss)	$(1,088,710)	$(761,628)

  

Fiscal Year Ended December 31, 2020 Compared to Fiscal Year Ended December 31, 2019

 

Revenue

 

Our revenue for the year ended December 31, 2020 was $8,502,892 compared to $5,997,987 for the prior year representing an increase of $2,504,905 or 41.8%. This increase resulted primarily from the acquisition in March 2019 of certain assets and business from Genesys Talent, LLC (“Genesys”), now housed within the Company’s Recruiting Solutions division. The Company’s Consulting and Staffing businesses also began to show sequential growth from the third to the fourth quarter as we benefitted from efforts to grow existing relationships as well as build new customers in the health care, and mortgage finance industries. We also had an increase in our Recruiters on Demand business due to beginning work with new customers, some of which we acquired through the hiring of a key employee, on July 1, 2020 and others we developed internally. We also experienced growth in our Career Solutions business through a sales channel partner, as general job market conditions were favorable for the product. Offsetting our growth was a decline in marketing revenue as we continued to shift internal resources to focus on our core on-demand recruiting and recruiting technology business. The extent to which the COVID-19 pandemic will impact our revenue in the subsequent future periods is uncertain at this time.

 

Cost of Revenue

 

Cost of revenue for the year ended December 31, 2020 was $6,138,363, which included related party costs of $1,363,905, compared to $4,448,202 in the prior year which included related party costs of $2,082,367. Cost of revenue was primarily attributable to third party staffing costs and other fees related to the recruitment and staffing business acquired from Genesys.

 

Our gross profit for 2020 was $2,364,529 which produced a gross profit of 27.8%. In 2019 our gross profit was $1,549,785 which produced a gross profit margin of 25.8%. The increase in the gross profit margin from 2019 to 2020 reflects in part the shift in the mix in sales for the year as our Permanent Placement, Recruiters on Demand and Career Services revenue, which have higher gross margins than our Consulting and Staffing revenue, represented a larger percentage of our total revenue. Additionally, we experienced a higher gross margin in our Consulting and Staffing business year over year as we focused on growing business with clients that yielded higher gross margins and retained more business as the employer of record which yields higher gross margins.

 

Operating Expenses

 

We had total operating expenses of $9,102,792 for the year ended December 31, 2020 compared to $12,053,967 for the year ended December 31, 2019. The decrease was primarily due to a $3 million non-cash impairment expense in 2019 related to the Genesys asset purchase. Declines in sales and marketing and general and administrative expense were offset by increases in product development expense and the amortization of intangibles.

 

 

Sales and Marketing

 

Our sales and marketing expense for the year ended December 31, 2020 was $82,904 compared to $119,597 for the prior year, which reflected more conservative spending given COVID-19 and the uncertain financial and political environment.

 

Product Development

 

Our product development expense for the year ended December 31, 2020 increased to $299,512 from $203,400 for the prior year. This increase is attributable to the continued investment in our product offerings. The product development expense in 2020 included approximately $235,444 paid to Recruiter.com Mauritius, a related party. In 2019, product development expense included $181,400 paid to Recruiter.com Mauritius.

 

Amortization of Intangibles and Impairment Expense

 

For the year ended December 31, 2020, we incurred a non-cash amortization charge of $686,691 related to the intangible assets acquired from Genesys and the cost of acquiring customer contracts on July 1, 2020 for our Recruiters on Demand business. For 2019 we incurred an amortization charge of $477,518. We began to record amortization expense for the Genesys asset acquisition starting in the fourth quarter of 2019 when the purchase allocation was finalized. Following our annual goodwill impairment test as of December 31, 2019, we recorded a non-cash goodwill impairment charge of approximately $3,000,000, primarily due to the market capitalization of the Company’s Common Stock. We also recorded approximately $113,000 of software impairment in 2019.

 

General and Administrative

 

General and administrative expense include compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the year ended December 31, 2020, our general and administrative expenses were $8,033,685 including $3,212,772 of non-cash stock-based compensation. In 2019, our general and administrative expense was $8,140,432, including $4,643,127 of non-cash stock-based compensation. The increase in general and administrative expense excluding stock-based compensation was due in part to expenses related to a full year of business in 2020 versus a partial year in 2019 due to the merger in March 2019. Additionally, we had an increase in salaries, software, insurance, filing and investor relations fees building our infrastructure to support future growth of our business.

 

Other Income (Expense)

 

Other income (expense) for the year ended December 31, 2020 consisted of net expense of $10,298,574 compared to net expense of $1,339,331 in 2019. The primary reason for the increase of $8,959,243 is due to non-cash charges of $3,340,554 from an initial derivative expense and $2,642,175 from a change in derivative value due to anti-dilution adjustments. Additionally, we had a non-cash charge of $2,658,261 due to a change in the fair value of derivative liability from our outstanding warrants issued in 2019. As our Common Stock price increases, we incur an expense and contrarily if our Common Stock decreases, we recognize other income. We also had interest expense of $2,022,113 which is primarily related to note discount amortization and note debt cost amortization from our convertible note financing completed in May and June of 2020. We did recognize income of $376,177 from the forgiveness of Payroll Protection Program debt.

 

Net loss

 

In 2020, we incurred a net loss of $17,036,837 compared to $11,843,513 in 2019. After taking into account the accrued preferred stock dividends, we incurred a net loss attributable to shareholders of $17,036,837 in 2020 compared to $11,953,207 in 2019.

 

 

Definition of 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 the historical operating results of Recruiter nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

 

Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

 

Recruiter defines 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 the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

 

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

 

 

	Year EndedDecember 31,
	2020	2019
Net loss	$(17,036,837)	$(11,843,513)
Interest expense and finance cost, net	2,022,113	2,344,486 1
Depreciation & amortization	687,845	478,191
EBITDA (loss)	(14,326,879)	(9,020,836)
Bad debt expense	12,000	23,500
Forgiveness of debt income	(376,177)	-
Impairment expense	-	3,113,020
Initial derivative expense	3,340,554	-
Change in derivative value due to anti-dilution adjustments	2,642,175	-
Loss (gain) on change in fair value of derivative	2,658,261	(1,138,604)
Stock-based compensation	3,212,772	4,643,127
Adjusted EBITDA (Loss)	$(2,837,294)	$(2,379,793)

 

1	$2,238,314 of penalties from covenant breaches are included as part of interest expense and finance cost in 2019.

Liquidity and Capital Resources

 

For the three months ended March 31, 2021, net cash used in operating activities was $1,324,096, compared to net cash used in operating activities of $93,227 for the corresponding 2020 period. The increase in cash used in operating activities was attributable to the increase in operating expenses outlined previously supporting the investments to grow our business. For the three months ended March 31, 2021, net loss (after adjusting for non-cash items) was $1,379,764. Accounts receivable increased by $857,781 and prepaid expenses decreased by $28,923. Accounts payable, accrued liabilities, and deferred revenue decreased in total by $867,563. For the three months ended March 31, 2020, net loss (after adjusting for non-cash items) was $825,322. Accounts receivable and prepaid expenses together increased by $16,147. Accounts payable, accrued liabilities, other liabilities and deferred revenue in total decreased by $748,242.

 

 

For the three months ended March 31, 2021, net cash used in investing activities was $249,983 due to cash used for acquisitions, compared to $14,955 of cash provided by investing activities in the three months ended March 31, 2020, which resulted primarily from the sale of marketable securities.

 

For the three months ended March 31, 2021, net cash provided by financing activities was $2,136,529. The principal factors were $2,153,200 from the sale of convertible notes, net of original issue discounts and offering costs. In the 2020 period, financing activities provided $73,553, primarily due to $180,778 from advances from the sale of receivables and $25,000 from a deposit from the sale of preferred stock, partially offset from the repayments of the sale of future revenue.

 

As of May 10, 2021, the Company had approximately $521,000 in cash on hand. Based on this cash on hand, the Company does not have the capital resources to meet its working capital needs for the next 12 months. We are also party to two lines of credit with current outstanding balances of $0. Advances under each of these lines of credit mature within 12 months of the advances. Availability under these two lines of credit in the amount of $91,300 at September 30, 2020 has been suspended in 2020 due to COVID-19 uncertainty.

 

The Company’s unaudited 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. The Company has incurred net losses and negative operating cash flows annually. For the three-months ended March 31, 2021 and the three months ended March 31, 2020, the Company recorded a net loss of $6,280,066 and $2,482,605, respectively. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.

 

The Company’s historical operating results indicate substantial doubt exists related to the Company’s 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. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying unaudited 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, private placement offerings have been our primary source of liquidity and we expect to fund future operations through additional securities offerings. We had also entered into arrangements with factoring companies to receive advances against certain future accounts receivable in order to supplement our liquidity. However, the COVID-19 pandemic and debt covenants under outstanding debt and other financing arrangements have affected the Company’s ability to receive advances against its future accounts receivable as discussed in more detail below.

 

Financing Arrangements

 

Lines of Credit

 

At March 31, 2021 and December 31, 2020 we are party to two lines of credit with outstanding balances of $0. Advances under each of these lines of credit mature within 12 months of the advances. Availability under the two lines was $91,300 at March 31, 2021; however, due to COVID -19 uncertainty (see Note 2), the availability under both lines has been suspended since 2020.

 

Term Loans

 

We have outstanding balances of $70,044 and $77,040 pursuant to two term loans as of March 31, 2021 and December 31, 2020, respectively, which mature in 2023. The loans have variable interest rates, with current rates at 6.0% and 7.76.0%, respectively. Current monthly payments under the loans are $1,691 and $1,008, respectively.

 

Paycheck Protection Program Loan

 

During 2021 our remaining loan pursuant to the Paycheck Protection Program under the CARES Act in the amount of $24,750 was forgiven. We recorded forgiveness of debt income of $24,925 for the $24,750 of principal and $175 of related accrued interest forgiven.

 

Senior Subordinated Secured Convertible Debentures

 

In May and June 2020, the Company entered into a Securities Purchase Agreement, effective May 28, 2020 (the “Purchase Agreement”) with several accredited investors (the “Purchasers”). Four of the investors had previously invested in the Company’s preferred stock. Pursuant to the Purchase Agreement, the Company sold to the Purchasers a total of (i) $2,953,125 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”), and (ii) 1,845,703 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. The Company received a total of $2,226,000 in net proceeds from the offering, after deducting the 12.5% original issue discount of $328,125, offering expenses and commissions, including the placement agent’s commission and fees of $295,000 and reimbursement of the placement agent’s and lead investor’s legal fees and the Company’s legal fees in the aggregate amount of $100,000 and escrow agent fees of $4,000. The Company also agreed to issue to the placement agent, as additional compensation, 369,141 common stock purchase warrants exercisable at $2.00 per share. 

 

The Debentures mature on May 28, 2021, subject to a six-month extension at the Company’s option. The Debentures bear interest at 8% per annum payable quarterly, subject to an increase in case of an event of default as provided for therein. The Debentures are convertible into shares of the Company’s common stock at any time following the date of issuance at the purchasers’ option at a conversion price of $1.60 per share, subject to certain adjustments. The Debentures are subject to mandatory conversion in the event the Company closes an equity offering of at least $5,000,000 resulting in the listing of the Company’s common stock on a national securities exchange. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $508,000 of outstanding senior indebtedness. The Company may prepay the Debentures at any time at a premium as provided for therein.

 

The Company’s obligations under the Debentures are secured by a first priority lien on all of the assets of the Company and its subsidiaries, subject to certain existing senior liens. The Company’s obligations under the Debentures are guaranteed by the Company’s subsidiaries.

 

The Securities Purchase Agreement for the Debentures and Warrants contains customary representations, warranties and covenants of the Company, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company and its subsidiaries, without the prior written consent of the Debenture holders, to incur additional indebtedness, including further advances under a certain preexisting secured loan, and repay outstanding indebtedness, create or permit liens on assets, repurchase stock, pay dividends or enter into transactions with affiliates. The Debentures contain customary events of default, including, but not limited to, failure to observe covenants under the Debentures, defaults on other specified indebtedness, loss of admission to trading on OTCQB or another applicable trading market, and occurrence of certain change of control events. Upon the occurrence of an event of default, an amount equal to 130% of the principal, accrued but unpaid interest, and other amounts owing under each Debenture will immediately come due and payable at the election of each Purchaser, and all amounts due under the Debentures will bear interest at an increased rate. 

 

On January 5, 2021, the Company entered into a Securities Purchase Agreement, effective January 5, 2021 (the “Purchase Agreement”), with two accredited investors (the “Purchasers”). Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchasers a total of (i) $562,500 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”), and (ii) 351,562 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. The Company received a total of $500,000 in gross proceeds from the offering, taking into account the 12.5% original issue discount, before deducting offering expenses and commissions, including the placement agent’s commission of $50,000 (10% of the gross proceeds) and fees related to the offering of the Debentures of approximately $40,000. The Company also agreed to issue to the placement agent, as additional compensation, 70,313 common stock purchase warrants exercisable at $2.00 per share (the “PA Warrants”). Gunnar acted as placement agent for the offering of the Debentures.

 

On January 20, 2021, the Company entered into a Securities Purchase Agreement, (the “Purchase Agreement”) with eighteen accredited investors (the “Purchasers”). Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchasers a total of (i) $2,236,500 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”), and (ii) 1,397,813 common stock purchase warrants (the “Warrants”), which represents 100% warrant coverage. Gunnar acted as placement agent for the offering of the Debentures. The Company received a total of $1,988,000 in gross proceeds from the offering, taking into account the 12.5% original issue discount, before deducting offering expenses and commissions, including Gunnar’s commission of $191,270 (10% of the gross proceeds minus $7,500 paid to Gunnar’s counsel) and additional fees related to the offering of the Debentures of approximately $50,500. The Company also agreed to issue to Gunnar, as additional compensation, 279,563 common stock purchase warrants exercisable at $2.00 per share (the “PA Warrants”).

 

The Debentures mature on January 5th and January 20th, 2022 respectively, subject to a six-month extension at the Company’s option. The Debentures bear interest at 8% per annum payable quarterly, subject to an increase in case of an event of default as provided for therein. The Debentures are convertible into shares of the Company’s common stock (the “Common Stock”) at any time following the date of issuance at the Purchasers’ option at a conversion price of $1.60 per share, subject to certain adjustments. The Debentures are subject to mandatory conversion in the event the Company closes an equity offering of at least $5,000,000 resulting in the listing of the Common Stock on a national securities exchange. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $95,000 of outstanding senior indebtedness. In addition the Debentures rank pari-passu with, and amounts owing thereunder shall be paid concurrently with, payments owing pursuant to and in connection with that certain offering by the Company of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures due May 28, 2021 consummated in May and June 2020 in the aggregate principal amount of $2,953,125. The Company may prepay the Debentures at any time at a premium as provided for therein.

 

The Warrants are exercisable for three years from January 5th and January 20th, 2021 respectively at an exercise price of $2.00 per share, subject to certain adjustments.

 

The Company’s obligations under the Purchase Agreement and the Debentures are secured by a first priority lien on all of the assets of the Company and its subsidiaries pursuant to a Security Agreement, dated January 5th and January 20th, 2021 respectively (the “Security Agreement”) by and among the Company, its wholly-owned subsidiaries, and the Purchasers, subject to certain existing senior liens. The Company’s obligations under the Debentures are guaranteed by the Company’s subsidiaries.

The Purchase Agreement contains customary representations, warranties and covenants of the Company, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company and its subsidiaries, without the prior written consent of the Debenture holders, to incur additional indebtedness, including further advances under a certain preexisting secured loan, and repay outstanding indebtedness, create or permit liens on assets, repurchase stock, pay dividends or enter into transactions with affiliates. The Debentures contain customary events of default, including, but not limited to, failure to observe covenants under the Debentures, defaults on other specified indebtedness, loss of admission to trading on OTCQB or another applicable trading market, and occurrence of certain change of control events. Upon the occurrence of an event of default, an amount equal to 130% of the principal, accrued but unpaid interest, and other amounts owing under each Debenture will immediately come due and payable at the election of each Purchaser, and all amounts due under the Debentures will bear interest at an increased rate.

 

Pursuant to the Purchase Agreement, the Purchasers have certain participation rights in future equity offerings by the Company or any of its subsidiaries after the closing, subject to customary exceptions. The Debentures and the Warrants also contain certain price protection provisions providing for adjustment of the number of shares of Common Stock issuable upon conversion of the Debentures and/or exercise of the Warrants and the conversion or exercise price in case of future dilutive offerings.

 

In order to meet our working capital needs for the next 12 months, we expect to finance our operations through additional debt or equity offerings. We may not be able to complete these or any other financing transactions on terms acceptable to the Company, or at all. Additionally, any future sales of securities to finance our operations will likely dilute existing shareholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow. If we are unable to raise sufficient capital to fund our operations, it is likely that we will be forced to reduce or cease operations. 

 

Off-Balance Sheet Arrangements

 

None.

 

Critical Accounting Estimates and Recent Accounting Pronouncements

 

Critical Accounting Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may differ from management’s estimates and assumptions. Included in these estimates are assumptions used to estimate collection of accounts receivable, fair value of available for sale securities, fair value of assets acquired in an asset acquisition and the estimated useful life of assets acquired, fair value of derivative liabilities, fair value of securities issued for acquisitions, fair value of assets acquired and liabilities assumed in the business combination, fair value of intangible assets and goodwill, valuation of lease liabilities and related right of use assets, deferred income tax asset valuation allowances, and valuation of stock based compensation expense.

 

Revenue Recognition

 

Policy

 

The Company recognizes 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 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:

 

●

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. Revenue earned through Recruiters on Demand is derived 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 on the Platform, as the recruiter user base of our Platform has the proper skill-set for recruiting and hiring projects. We had previously referred to this service in our revenue disaggregation disclosure in our consolidated financial statements as license and other, but on July 1, 2020, we rebranded as Recruiters on Demand.

 

●

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 that personnel with the employer, but with us or our providers acting as the employer of record, 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.

 

●

Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform or other communications. We source qualified candidate referrals for the employers’ available jobs through independent recruiter users that access our 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’s base salary or an agreed-upon flat fee.

 

●

Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including 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. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. 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 addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

●

Career Solutions: We provide services to assist job seekers with their career advancement. These services include 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19. We partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.

 

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 statement of operations represent services rendered to customers less sales adjustments and allowances.

 

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.

 

 

 

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.

 

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.

 

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.

 

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. 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 and impairment assessment on December 31st of each year.

 

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 or not the asset values are recoverable.

 

Derivative Instruments

 

The Company’s derivative financial instruments consist of derivatives related to the warrants issued with the sale of our preferred stock in 2020 and 2019 and the warrants issued with the sale of convertible notes in 2020 and subsequently in January 2021. The accounting treatment of derivative financial instruments requires that we record the derivatives at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.

 

 

Stock-Based Compensation

 

The Company accounts for all stock-based payment awards made to employees, directors and others based on their fair values and recognizes such awards as compensation expense over the vesting period for employees or service period for non-employees using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. If there are any modifications or cancellations of the underlying vested or unvested stock-based awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent we grant additional stock options or other stock-based awards.

 

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 December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance.

 

Cautionary Note Regarding Forward-Looking Statements

 

This Prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management’s beliefs with respect to the impact of the COVID-19 pandemic, the expected launch of the AI-sourced candidate matching on the Recruiter.com Platform, the anticipated benefits to our clients from the recruitment services that we provide, our plans with respect to continued growth of our network of recruiters and methods of growing such network, expansion of existing client relationships, growing our client base through strategic partnerships, investment in new products and features to help recruiters on the Recruiter.com Platform grow their business, investment of future development of our technology, development of tailored features and functionalities to customize client experience, potential future acquisitions, our beliefs regarding the possibility of emerging future direct competitors, expected future expenditures on marketing efforts, our expectation regarding the timing and expected effect of the Company’s changing its state of incorporation from Delaware to Nevada, the expected future characterization of the small and independent recruiters on the Recruiter.com Platform as independent contractors, expected future increase in competition, expected future fluctuations in our stock price, our beliefs with respect to the adequacy of our facilities and our ability to accommodate any future expansion, our plans with respect to payment of dividends, our expectations for the recovery of the recruitment industry in 2021, the timing of the software rollout resulting from integration with Censia, our expected decrease in future revenues and increase in the net loss, future capital-raising activity, expected forgiveness of the loans received under the Paycheck Protection Program, and liquidity. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including without limitation, the following:

 

●

our ability to continue as a going concern;

 

●

our ability to raise additional capital to support our operations;

 

●

the effect of COVID-19 on our Company and the national and global economies;

 

 

●

our ability to achieve positive cash flow from operations;

 

●

continued demand for services of recruiters;

 

●

unanticipated costs, liabilities, charges or expenses resulting from violations of covenants under our existing or future financing agreements;

 

	●	our ability to operate the Recruiter.com Platform free of security breaches; and
	●	our ability to identify suitable complimentary businesses and assets as potential acquisition targets or strategic partners, and to successfully integrate such businesses and /or assets with the Company’s business.

 

See “Risk Factors” for additional information regarding the risks and uncertainties that could affect our business, financial condition and results of operations. New risk factors emerge from time-to-time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Prospectus, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Prospectus.

 

 

BUSINESS

 

Overview

 

Recruiter.com Group, Inc. (“we,” “the Company”, “Recruiter.com”, “us”, “our”) operates an on-demand recruiting platform aiming to disrupt the $120 billion recruiting and staffing industry. We combine an online hiring platform with what we believe to be the world’s largest network of over 28,000 small and independent recruiters. Businesses of all sizes recruit talent faster using the Recruiter.com platform, which is powered by virtual teams of Recruiters On Demand and Video and Artificial Intelligence (“AI”) job-matching technology.

 

Our website, www.Recruiter.com, provides employees seeking to hire access to over 28,000 independent recruiters and utilizes an innovative web platform, with integrated AI-driven candidate to job matching and video screening software to more easily and quickly source qualified talent.

 

We help businesses accelerate and streamline their recruiting and hiring processes by providing on-demand recruiting services. We leverage our expert network of recruiters to place recruiters on a project basis, aided by cutting edge AI-based candidate sourcing, and matching and video screening technologies. We operate a cloud-based scalable SaaS-enabled marketplace platform for professional hiring, which provides prospective employers access to a network of thousands of independent recruiters from across the country and worldwide, with a diverse talent sourcing skillset that includes information technology, accounting, finance, sales, marketing, operations and healthcare specializations.

 

Through our Recruiting.com Solutions division, we also provide consulting and staffing, and full-time placement services to employers which leverages our platform and rounds out our services.

 

Our mission is to grow our most collaborative and connective global platform to connect recruiters and employers and become the preferred solution for hiring specialized talent.

 

Recent Developments

 

OneWire Asset Purchase

 

Effective May 10, 2021, we, through a wholly-owned subsidiary, entered into an Asset Purchase Agreement and Plan of Reorganization (the “APA”) with OneWire Holdings, LLC, a Delaware limited liability company (“OneWire”), to acquire all the assets and several liabilities of OneWire (the “OneWire Purchase”). As consideration for the OneWire Purchase, OneWire’s shareholders will receive a total of 155,327 shares (the “Consideration Shares”) of common stock, valued at $1,255,000, based on a price per share of $8.08, the volume-weighted average price of the common stock for the 30-day period immediately prior to the Closing Date (as defined in the APA). 31,066 of the Consideration Shares are subject to forfeiture pursuant to APA provisions regarding a post-closing working capital adjustment and a revenue true-up and pursuant to OneWire’s indemnity obligations. The assets acquired in the APA consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets, along with a de minimis amount of other assets. OneWire’s expansive candidate database in financial services and candidate matching service amplify our reach to give employers and recruiters access to an even broader pool of specialized talent 

 

Upsider Asset Purchase

 

Effective March 25, 2021, the Company, through a wholly-owned subsidiary, entered into an Asset Purchase Agreement and Plan of Reorganization (the “APA”) with Upsider, Inc., (“Upsider”), to acquire all the assets and certain liabilities of Upsider (the “Upsider Purchase”). As consideration for the Upsider Purchase, Upsider’s shareholders will receive net cash of $69,983 and a total of 323,094 shares of our common stock (the “Consideration Shares”) (valued at $2,544,362, based on a $7.88 per share acquisition date price), of which 51,941 of the Consideration Shares will be held in reserve and are recorded as a current liability, contingent consideration in the accompanying financial statements. The shareholders of Upsider may also receive earn-out consideration of up to $1,394,760, based on the attainment of specific targets during the six months following closing. We have recorded the fair value of the contingent earn-out consideration of $1,325,003 at March 31, 2021. The total purchase price is approximately $3.9 million. The assets acquired in the APA consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and a de minimis amount of other assets. The Company is utilizing Upsider’s machine learning artificial intelligence to provide a more predictive and efficient recruiting tool that enhances our current technology.

 

 

Scouted Asset Purchase

 

Effective January 31, 2021, the Company, through its wholly-owned subsidiary, acquired all assets of RLJ Talent Consulting, Inc., d/b/a Scouted, a Delaware corporation (“Scouted”) (the “Scouted Asset Purchase”). As consideration for the Scouted Asset Purchase, Scouted shareholders are entitled to a total of 224,163 shares of our restricted Common Stock (valued at $1,625,183 based on a $7.25 per share grant date price), of which 33,151 shares of stock will be held in reserve, and an additional amount of $180,000 in cash consideration for a total purchase price of approximately $1.8 million. The Scouted Asset Purchase will be accounted for as a business acquisition. The assets acquired in the Scouted Asset Purchase consist primarily of sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets (the “Scouted Assets”), along with a de minimis amount of other assets. The Company will complete the purchase price allocation of the $1.8 million for the acquired intangible assets during 2021. The Company is utilizing the Scouted Assets to expand its video hiring solutions and curated talent solutions, through its Recruiting Solutions subsidiary.

 

2021 Senior Subordinated Secured Convertible Debentures

 

On January 5, 2021, we entered into a Securities Purchase Agreement, (the “Purchase Agreement”), with two accredited investors (the “Purchasers”). Pursuant to the Purchase Agreement, we sold to the Purchasers (i) $562,500 in the aggregate principal amount of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures (the “Debentures”) and (ii) 140,625 common stock purchase warrants (the “Warrants”) representing 100% warrant coverage. We received a total of $500,000 in gross proceeds from such closing, taking into account the 12.5% original issue discount, before deducting offering expenses and commissions, including the placement agent’s commission of $50,000 (10% of the gross proceeds) and approximately $40,000 of other expenses. We also agreed to issue to the placement agent, as additional compensation, the first portion of the PA Warrants.

 

On January 20, 2021, we conducted a second closing under the Purchase Agreement (“Second Closing”) with eighteen accredited investors (the “Second Closing Purchasers”). We sold to the Second Closing Purchasers (i) $2,236,500 in the aggregate principal amount Debentures and (ii) 559,126 Warrants, representing 100% warrant coverage. We received a total of $1,988,000 in gross proceeds in the Second Closing, taking into account the 12.5% original issue discount, before deducting offering expenses and commissions, including the placement agent’s commission of $198,800 (10% of the gross proceeds) and approximately $50,500 of other expenses. We also agreed to issue to the placement agent, as additional compensation, the second portion of the PA Warrants.

 

The Debentures mature in January, 2022, subject to a six-month extension at the Company’s option on the terms described therein. The Debentures bear interest at 8% per annum payable quarterly, subject to an increase in case of an event of default as provided for therein. The Debentures are convertible into shares of the Company’s common stock at any time following the date of issuance at each Purchaser’s option at an initial conversion price of $4.00 per share, subject to certain adjustments (the “Voluntary Conversion Price”). The Debentures are subject to mandatory conversion into shares of Common Stock (or units of Common Stock and warrants to purchase Common Stock, if units are offered to the public in the Qualified Offering) in the event of a Qualified Offering, as defined therein, which would include the offering described in this prospectus at a conversion price equal to the lower of (i) the Voluntary Conversion Price and (ii) 80% of the price per share (or unit, if units are offered in the Qualified Offering) at which the Qualified Offering is made. The Debentures rank senior to all existing and future indebtedness of the Company and its subsidiaries, except for approximately $101,000 of outstanding senior indebtedness. In addition, the Debentures rank pari-passu with, and amounts owing thereunder shall be paid concurrently with, payments owing pursuant to and in connection with that certain offering by the Company of 12.5% Original Issue Discount Senior Subordinated Secured Convertible Debentures consummated in May and June 2020 in the aggregate principal amount of $2,953,125 which are due and payable on May 28, 2021. The Company may prepay the Debentures at any time at a premium as provided for therein.

 

The Warrants issued pursuant to the Purchase Agreement are exercisable for three years from the date of the applicable closing at an exercise price of $5.00 per share, subject to certain adjustments.

 

Reference is also made to the May/June 2020 Bridge Offering which is described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Financing Arrangements – Senior Subordinated Secured Convertible Debentures.

 

Joseph Gunnar & Co. LLC, the Underwriter in this offering, acted as placement agent for the offering of the Debentures described above and the Debentures issued in the May/June 2020 Bridge Offering.

 

 

Effects of COVID-19

 

While the Company has continued to operate during the COVID-19 pandemic, we have reduced certain billing rates to respond to the current economic climate. The Company has also experienced a decline in its employer clientele due to the current job market. In addition, due to the effects of COVID-19, the Company took steps to streamline certain expenses, such as temporarily cutting certain executive compensation packages by approximately 20%. Management also worked to reduce unnecessary marketing expenditures and to improve staff and human capital expenditures, while maintaining overall workforce levels.

 

Corporate History

 

Effective March 31, 2019 (the “Effective Date”), we completed a merger with Recruiter.com, Inc. (“Pre-Merger Recruiter.com”), an affiliate of the Company, pursuant to a Merger Agreement and Plan of Merger, dated March 31, 2019 (the “Merger”). At the effective time of the Merger, our newly formed wholly-owned subsidiary merged with and into Recruiter.com, with Recruiter.com continuing as the surviving corporation and our wholly-owned subsidiary. As consideration in the Merger, the equity holders of Pre-Merger Recruiter.com received a total of 775,000 shares of our newly designated Series E convertible preferred stock (“Series E Preferred Stock”) convertible into approximately 3,875,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). As a result, the former stockholders of Pre-Merger Recruiter.com controlled approximately 90% of our outstanding Common Stock and in excess of 50% of the total voting power of the Company.

 

Following the Merger, on May 9, 2019, we changed our corporate name to Recruiter.com Group, Inc. Our fiscal year end was also changed, as of the Effective Date, from March 31 to December 31.

 

Immediately prior to the completion of the Merger, Pre-Merger Recruiter.com owned approximately 98% of our outstanding Common Stock. The Merger did not result in a change of control of our Company, as the principal stockholders of Pre-Merger Recruiter.com had controlled the Company since October 2017 and the Merger simply increased their control. In addition, our Chief Executive Officer served as the Chief Executive Officer of Pre-Merger Recruiter.com and the majority of our directors were directors (or designees) prior to the Merger. Further, our Executive Chairman was retained as a consultant prior to the Merger with the understanding that if the Merger occurred, he would be appointed Executive Chairman of the Company.

 

Prior to the completion of the Merger, Pre-Merger Recruiter.com distributed to its stockholders the 625,000 shares of our Common Stock that it had previously acquired as consideration pursuant to the license agreement with us. See “Certain Relationships and Related Transactions – Recruiter.com License” for further information.

 

For accounting purposes, the Merger was accounted for as a reverse recapitalization of Pre-Merger Recruiter.com and combination of entities under common control (“recapitalization”) with Pre-Merger Recruiter.com considered the accounting acquirer and historical issuer. Our consolidated financial statements are the financial statements of Pre-Merger Recruiter.com. Since Pre-Merger Recruiter.com owned a majority interest in the Company prior to the completion of the Merger, the consolidated financial statements contained herein include the historical operations of the Company and VocaWorks, Inc., (“VocaWorks”), the Company’s wholly-owned subsidiary. All share and per share data in the consolidated financial statements and the accompanying notes have been retroactively restated to reflect the effect of the Merger.

 

 

Genesys Asset Purchase

 

Effective March 31, 2019, we acquired certain assets and assumed certain liabilities under an asset purchase agreement, dated March 31, 2019, among the Company, Genesys Talent LLC, a Texas limited liability company (“Genesys”), and Recruiter.com Recruiting Solutions, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (the “Asset Purchase”). As consideration in the Asset Purchase, Genesys received a total of 200,000 shares of our newly designated Series F convertible preferred stock (the “Series F Preferred Stock”) convertible into approximately 1,000,000 shares of our Common Stock. The acquired assets and liabilities include certain accounts receivable, accounts payable, deferred revenue, sales and client relationships, contracts, intellectual property, partnership and vendor agreements and certain other assets. The Company is utilizing these assets in its employment staffing business operated through Recruiter.com Recruiting Solutions, LLC (“Recruiting Solutions”). This transaction was treated as a business combination for accounting purposes.

 

Market Opportunity

 

Industry Overview

 

The staffing and recruiting industry consists of companies that help other organizations find staff on a temporary or permanent basis. This can be achieved through either assisting companies to recruit new internal staff (recruiting), or directly providing temporary staff to fill specific functions (temporary or agency staffing). The temporary staffing segment is significantly larger than recruitment segment.

 

According to the U.S. Staffing Industry Forecast, published in July 2020 by Staffing Industry Analysts (“SIA”), the total recruiting and staffing revenue for 2020 was projected to be $126.1 billion; an increase from SIA’s April 2020 forecast, which predicted only $119.4 billion in revenue as a result of the coronavirus outbreak. For 2021, SIA also projected double-digit growth of 11% in temporary staffing revenue and a 19% overall expansion in the placement and employment search market.

 

Overall, the U.S. recruitment industry is enormous, and it continues to grow, driven mainly by robust GDP growth creating demand for both direct-hire and contingent (project-based) workers. Demographic trends are also accelerating the demand for recruitment services: According to Seniorliving.org, approximately 10,000 persons from the “Baby-Boomer Generation” were projected to retire each day in 2020, and employers often turn to the recruiting industry to close these talent gaps. Overall corporate spending in recruiting technology continues to grow, expected to surpass $10 billion by 2022, according to Jason Corsello, General Partner of Acadian Ventures.

 

In light of this market potential, the appetite for on-demand recruiting and talent acquisition technology companies has been robust. According to a “Recruitment Software Market Forecast and Analysis 2020-2024” published by Technavio, the global recruitment software market will expand by $683.8 million during 2020-2024. The same report details that even amid the COVID-19 pandemic, the global recruitment software market registered a YOY growth of 4.74% in 2020, with the market estimated to expand at a CAGR of over 5% during the forecast period of 2020-2024.

 

With employers continuing to struggle to find relevant candidates and more than 6.6 million open jobs in the US as of December 2020 according to the Job Opening and Labor Turnover report by the Bureau of Labor Statistics published on February 9, 2021, recruiting represents an enormous market opportunity. According to the leading human resource association, the Society for Human Resource Management, external sources—whether online job boards, recruiting agencies, campus events, job fairs, or walk-ins—produce approximately 62% of interviews compared to internal sources such as career sites, in-house recruiters and employee referrals (38%). This 62% of role interviews generated by external sources provide a significant market opportunity for innovative recruiting technology companies to capture.

 

 

Industry Trends

 

COVID-19

 

The COVID-19 pandemic had a dramatic effect on the US economy and the job market. Unemployment peaked at 14.7% in April of 2020. Since then, labor markets have been continually improving, with the unemployment rate falling to 6% in March 2021, although this remains 2.5 percentage points higher than its pre-pandemic level in February 2020. In its most recent projections released in mid-March 2021, the Federal Reserve forecasted that the unemployment rate will continue to fall, reaching 4.5% later in 2021, then ticking down closer to pre-pandemic levels — 3.9 percent in 2022 and 3.5 percent in 2023.

 

Our management team believes that COVID-19 accelerated major technology trends that had already existed before the pandemic. For example, the growth of the gig economy (i.e. temporary, flexible jobs) was facilitated by technology, virtual and remote tele-work with video and the emergence of on-demand labor through online marketplaces all happened before the crisis. The necessity of lockdowns and business closures drove increased technology adoption and moved these trends rapidly forward. As we operate as virtual, AI and video-based hiring platform operating in the gig economy, these trends may act as headwinds for the adoption of our products and services.

 

Recruiting Outsourcing

 

We provide through our on-demand platform a form of recruiting outsourcing for employers. By using our services, employers are effectively relieving their human resources departments of the costs and labor associated with recruitment and talent acquisition. We believe that the current economic climate may move more companies to increase their use of such outsourcing. For example, a report from Brandon Gaille issued in May 2017 found that, in the aftermath of the Great Recession, a majority of employers (57%) increased their use of outsourcing, with only a small percent (9%) of employers ending such outsourcing arrangements. Recruitment outsourcing promises cost-effective and efficient process improvements, and employers may again increase their use of outsourcing to navigate the current environment.

 

The use of recruitment process outsourcing (RPO) is accelerating. According to its December 29, 2020 report, “Global Recruitment Process Outsourcing Industry,” Reportlinker projects that the RPO industry will reach a revised size of $14.4 billion by 2027, growing at a CAGR of 13.8%, with the current U.S. Market estimated at $1.7 billion. We offer two forms of recruitment process outsourcing through the performance-based hiring solution of its job market platform, which allows employers to pay for successful hires and its Recruiter.com On Demand offering, which enables businesses to engage recruiters on a flexible project or hourly basis. We additionally have active RPO customers, for which we provide on-demand recruiting labor.

 

Online Talent Platforms

 

According to a study developed by the McKinsey Global Institute in June 2015, online talent platforms are the future of hiring and could add $2.7 trillion, or 2.0 percent, to global GDP by 2025. The firm projected that 10 percent of the worldwide labor force, or 540 million people, could benefit in various ways from online talent platforms by 2025. There is growth in demand for both remote workers and outside consultants. Overall, in 2020, IBISWorld estimates the number of temporary employees will increase by 1.8%. Online talent marketplaces, such as Recruiter.com, may benefit as a result.

 

McKinsey’s Future of Work in America report states: “In a more technology-driven world, job-matching efforts can be aided by a range of new digital tools and should run on easily accessible digital platforms. New online tools can assess an individual’s skills, suggest appropriate career choices, and clarify which jobs are in demand and the credentials needed to obtain them.” There is a clear need for efficient technology platforms that can adapt to rapidly changing job demands, such as ours.

 

Again, the current economic climate and COIVD-19 may have accelerated these technology trends. During the recent COVID-19 epidemic, D’Arcy Coolican and Jeff Jordan of famed venture capital firm Andreessen Horowitz stated in an article entitled “COVID-19 and the Great Re-Hiring” that “If there was ever a time to start a specialized jobs platform, it’s now.”

 

 

Operating Businesses and Revenue

 

The Company has six wholly-owned and active subsidiaries: Recruiter.com, Inc., Recruiter.com Recruiting Solutions LLC (“Recruiting Solutions”), Recruiter.com Consulting, LLC, VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted, Inc. (“Scouted”) and Recruiter.com Upsider Inc. (“Upsider”). As of April 30, 2021 the Company employed 261 employees in 19 states and 3 provinces in Canada.

 

We generate revenue from the following activities:

 

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Recruiters on Demand: Consists of a consulting and staffing service specifically for the placement of professional recruiters, which we market as Recruiters on Demand. Recruiters on Demand is a flexible, time-based solution that provides businesses of all sizes access to recruiters on an outsourced, virtual basis for help with their hiring needs. As with other consulting and staffing solutions, we procure for our employer clients qualified professional recruiters, and then place them on assignment with our employer clients. Revenue earned through Recruiters on Demand is derived 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 on the Platform, as the recruiter user base of our Platform has the proper skill-set for recruiting and hiring projects. We had previously referred to this service in our revenue disaggregation disclosure in our consolidated financial statements as license and other, but on July 1, 2020, we rebranded as Recruiters on Demand.

 

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Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing that personnel with the employer, but with us or our providers acting as the employer of record, 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.

 

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Full-time Placement: Consists of providing referrals of qualified candidates to employers to hire staff for full-time positions. We generate full-time placement revenue by earning one-time fees for each time that employers hire one of the candidates that we refer. Employers alert us of their hiring needs through our Platform or other communications. We source qualified candidate referrals for the employers’ available jobs through independent recruiter users that access our 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’s base salary or an agreed-upon flat fee.

  

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Marketing Solutions: Our “Marketing Solutions” allow companies to promote their unique brands on our website, the Platform, and our other business-related content and communication. This is accomplished through various forms of online advertising, including 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. Customers who purchase our Marketing Solutions typically specialize in B2B software and other platform companies that focus on recruitment and human Resources processing. 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 addition to its work with direct clients, the Company categorizes all online advertising and affiliate marketing revenue as Marketing Solutions.

 

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Career Solutions: We provide services to assist job seekers with their career advancement. These services include 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. For approximately the four months following March 31, 2020, the Company provided the recruiter certification program free in response to COVID-19. We partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.

 

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 Recruiting Solutions gross margin.

 

 

Disrupting an Industry - Recruit Talent Faster

 

We believe we are fundamentally modernizing the recruiting process by digitizing and democratizing the recruiting process. Furthermore, we are dispersing the economic benefits of successful recruitment to a broad group of people and, by doing so, we help businesses recruit talent faster and more efficiently than ever before.

 

Community and Network

 

Our network currently consists of over 28,000 small and independent recruiters. This virtual network of recruiters unite under our innovative web platform that offers earnings opportunities through successful job matching; access to matched candidates driven by artificial intelligence; and on-demand, project-based recruiting assignments.

 

The community or network of recruiters is additionally categorized into virtual teams based on industry vertical, skill or location specialization, and dedicated client resource teams. Through participation in a virtual team, recruiters may receive further job and account updates, personalized recommendations, exclusive job opportunities, and recommended candidate referrals. We operate these teams through a dedicated platform and facilitate real-time communication through parallel chat rooms managed by our internal community managers.

 

We believe the potential scale of our recruiting community is enormous. Similar to how Uber created the opportunity for anyone to become a taxi driver, we make it possible for anyone to become a recruiter. According to the website of the American Staffing Association (the trade association representing the American staffing, recruiting, and workforce solutions industry), there are approximately 25,000 staffing and recruiting companies, which altogether operate around 49,000 offices, so the recruiting industry’s contribution to employment is significant. However, we enable a broader disruption of the industry, bringing the opportunities to a much broader group of people than previously possible. Through upskilling and engagement with our recruiter users, we make it easier for anyone to get involved in recruiting. With hundreds of thousands of people involved in the general human resource and employment industry in the U.S. alone, and many more interested in referral-based, work-from-home earning opportunities, we believe our addressable network and potential audience is vast.

 

The Recruiter.com Website - a Top Destination

 

Our website is a popular destination for the recruiting and talent acquisition profession, with millions of pages of indexed content on career and recruitment issues and trends, email newsletters, and digital publications issued every quarter. Our internet traffic is generated by three primary groups of people: (1) recruiters seeking to join the network and platform, (2) enterprises seeking to recruit talent, and (3) candidates seeking to find opportunities through the community of recruiters. Overall, we are a well-known brand in the recruiting industry, and our vision is to build upon this success to become a clear leader in terms of traffic, mindshare, and usage within the business of recruiting.

 

A comprehensive search engine optimization strategy fuels our marketing. SpyFu.com, a traffic analysis website, estimated that, as of January 2021, our website has obtained over 4,952 search terms on the first page of Google.com, resulting in an estimated click value of $4.14 million per month, which is estimated by calculating the price of the Company’s organic traffic, were it to buy that traffic from paid search engine listings, such as on Google.com. We also expanded our reach through social media as we are active on Twitter and Facebook, with almost 50,000 followers on Twitter. Most notably, as of January 2021, we operated four of the top ten largest professional groups in the world on the social media platform LinkedIn, out of over 1.8 million groups in total. One of our groups, The Recruiter.com Network group on LinkedIn, currently has over 860,000 members.

 

In addition to our online thought leadership and social media presence, we also attract recruiters and enterprises to our community and solution through our recruitment training offering. Through our fully online Recruiter.com Certification Program (RCP) and Recruiter.com Academy, an on-demand, live instructor-led training program, that we recently launched in partnership with CareerDash, we facilitate upskilling for experienced recruiters and easy entry into the profession for those new to the tasks of recruiting and candidate sourcing. The Society for Human Resource Management (SHRM) has certified the RCP for re-education credits so that after completing the RCP course through an integrated online learning management system, we grant our users a certification and badge on their unique online Recruiter.com profiles. In addition, we intend to pursue a similar accreditation for the Recruiter.com Academy program.

 

 

COVID-19 Implications

 

We are creating a highly collaborative and connected global platform for professional recruiting, with the goal of becoming the top-of-mind solution for hiring talent rapidly. Prior to the COVID-19 pandemic, the U.S. was in an incredibly tight job market, with the demand for talent at its highest levels in years. Now, with millions of people that remain out of work due to COVID-19 set to return to the job market over the next few years, we believe businesses across the country must prepare to reopen or ramp up operations once again. We also believe these businesses will need efficient ways to tap the massive talent pool resulting from the millions of Americans who are either unemployed or looking for better opportunities in new industries and companies. We believe that on-demand recruiting technology companies like ours, which generate revenue not from the overall consistency of employment levels but rather from movement within labor markets (i.e., job turnover), will benefit from this development. By combining cutting-edge artificial intelligence with a unified network of more than 28,000 recruiters, we have built what we believe to be the most efficient recruiting network in the world — and we are hoping to use our network to get workers back in the job market and contribute to the full recovery of the US economy.

 

We believe we have the reach, technology, recruiting expertise, and the scalability to connect employers across verticals with the right talent at the right price — no matter where that talent is today. Our mission is clear: to help enable the great re-hiring. We will leverage our growing community and expanding platform to get talented people to return to work as fast as possible, connecting people and creating economic opportunities.

 

Our Job Market Platform

 

Our virtual AI- and video-enabled hiring platform (the “Platform”), which is accessible on our website, Recruiter.com, provides access to over 28,000 small and independent recruiters. The Platform enables our clients, both employers and recruiters, to access the scalable on-demand sourcing power of an extensive network of independent recruiters, with the account management and personalized talent delivery of a full-service recruitment services firm. The Platform can be used by employers on a stand-alone basis or can be integrated with platforms operated by vendor management services (“VMS”), managed service providers (“MSP”) or payroll solutions providers to import open jobs into the Platform. Employers may use the Platform to enter job descriptions and learn about qualified applicants, while independent recruiters may submit their candidates, track the status of those candidates, and view statistics associated with the hiring process, such as number of applicants, interviews, and status of a particular candidate.

 

Benefits to Independent Recruiters

 

Overview

 

In this uncertain time, small and independent recruiters are more important than ever. They have the agility and geographical range to respond quickly to the rapidly changing needs of employers across the country. Recruiter.com empowers these front-line professionals by connecting them to top employers in multiple sectors, particularly in the industries that need talent right now: healthcare, logistics, telecommunications, and financial services, among others.

 

Specific Benefits

 

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Client Exposure: Our Platform allows small and independent recruiters to access rewarding recruiting opportunities with more substantial and better-quality clients and a more diverse set of jobs than they may typically access.

 

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Access to Cutting-Edge Technology, Including Video, Candidate-Sourcing and Matching AI: Our Company often sources talent from AI matching systems and provides these resumes to recruiters to expedite the hiring process. An integration with Censia, Inc. (“Censia”), an AI-candidate matching software was launched on September 22, 2020, which provides recruiters sourced and AI-matched candidates accessible from the Platform.

 

 

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Flexibility: By allowing recruiters to engage with a large volume of diverse jobs, our Platform enables recruiters to match more of their candidates to suitable opportunities, as well as stabilize fluctuations in their business amid changes in client and candidate demand.

 

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Branding Exposure: Our Platform allows for the creation of recruiter profiles highlighting the skill sets and industry backgrounds of professional recruiters. These online profiles provide exposure and verification for independent recruiters, who lack a standardized method of credentialing.

 

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Loyalty Rewards Program: We provide recruiters on our Platform with an opportunity to earn points at every step of the recruitment process, including regular activities like submitting resumes for open positions and the acceptance of resumes by a client. Recruiter reward points are redeemable for select merchandise.

 

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SHRM-Certified Recruitment Training Program: We offer professional recruitment training that both helps current recruiters further develop their skills and assists aspiring recruiters in breaking into the profession. The Recruiter.com Certification Program is a flexible 6-to-12-week virtual training program certified for continuing education credits through SHRM, the leading HR association. The Company charges a flat fee of approximately $299 for the service and offers an additional business development course for $99.

 

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Marketing and Reputation-Building: We enable independent recruiters to build a business reputation and increase demand for their specialized skills by accumulating badges and training credentials on their profiles.

 

Benefits to Employer Clients

 

Overview

 

We believe we are among the world’s largest, most agile network of 28,000 small and independent recruiters, distributed worldwide, and armed with leading-edge technology. Enterprises can leverage our network of over 26,000 recruiters to tap into existing talent pools and fill open roles immediately.

 

Long, expensive hiring processes are never worthwhile — especially not during times of economic upheaval. Our Platform’s scalability allows employers to quickly tune recruiting activity up or down as needed, which is critical as organizations respond to a dynamic and volatile talent market.

 

Recruiter.com differentiates itself with its “three uniques” of people, platform, and power. Our people are recruiting experts, cited and published thought leaders within recruitment and staffing. Our software platform, with proprietary AI technology (and video technology in Q4 2020), is key to our distributed, virtual talent engagement process. Finally, our broad distribution, with one of the largest network of recruiters and millions of social media followers, helps us draw from a diverse and expansive audience. Our people, platform, and power help us recruit talent faster for employers across the country.

 

Specific Benefits

 

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Access to an Extensive Network of Recruiters: As of January 31, 2021, approximately 28,000 recruiters with specializations ranging from healthcare and technology to accounting and marketing are registered on our Platform.

 

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Account Management and Personalized Talent Delivery: Internal account managers help review and develop specifications and skill requirements for our clients’ open jobs. Our internal talent delivery specialists, in turn, review all candidates to ensure quality before sending these candidates to employers.

 

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Cost Savings: Our platform allows employers to use an extensive network of small and independent recruiters, reducing reliance on traditional staffing and recruitment firms without compromising the quality of candidates. We believe that clients may realize significant cost savings through this crowdsourced method of recruiting, which distributes the labor of hiring across many providers, versus the traditional way, which typically relies on a handful of vendors.

 

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Speed: The use of AI-powered candidate-sourcing and matching technology, paired with seamless platform integrations, allows us to expedite the hiring process.

 

 

Our Strengths

 

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Reliable Brand: As the name “Recruiter.com” defines an entire profession and captures the essence of the business and software platform, we benefit from strong brand recognition. Additionally, the Company believes that based on recent legal precedent, generic trade names like “Recruiter.com” may be trademarked. Although the Company cannot be assured of a trademark on its primary domain, the Company has filed for inclusion in the Supplemental Register.

 

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People: Several of our key executives and personnel have extensive experience and successful track records with internet-enabled recruitment and staffing.

 

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Platform Technology: We offer a complete multi-sided marketplace software platform, with completed integrations into many major software and service providers.

 

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Power of Our Reach: We benefit from excellent placement and visibility within popular search engines and broad distribution and followings on social media networks.

 

Our Growth Strategy

 

We seek to unlock the full potential of our brand by executing its strategic plans, which include organic growth, opportunistic acquisitions, and making use of the capital markets provided by the public market. In short, we look to realize the potential of our market position.

 

Overall Market Position Potential

 

Companies in the recruiting technology space, such as LinkedIn and Indeed.com, have achieved “unicorn” status as billion-dollar companies. Management believes that our full potential could lead to our achieving a much larger market position and presence, as Recruiter.com is a defining brand for the profession of recruiters. Recruiting as a business generates over $125 billion in revenue, therefore management believes there to be a very large addressable market and opportunities for growth.

 

Our combination of innovative candidate-matching technology, a broad network of specialized recruiting professionals, and curated talent communities enable a traditionally service-heavy industry to be scalable in an entirely new way. The traditional recruitment and staffing industry is dominated by industry roll-ups in the public markets. We believe our brand and platform position us to capitalize on M&A opportunities, enabling further overall growth and consolidation.

 

Strategy

 

Recruiter.com intends to grow its business by focusing efforts on the following five main areas:

 

1) Grow Our Community:

 

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Grow Recruiter Engagement: Dedicated Community Managers regularly support and service our growing network of independent recruiter users on our platform. We plan to continue to invest in community management initiatives, including enhancement of outreach, communications, reward programs, and training of our Community Managers. We have introduced the concept of Recruiter Rewards, which allows members of our network to earn points, redeemable for merchandise we source, for performing specific actions on the Platform. We intend to continue to develop this program, increasing engagement, and earning potential on the Platform.

 

 

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Grow the Number of Recruiters on our Platform: We plan to continue to grow our recruiter network through viral search, referral, content, and community strategy. Investments in content, community sponsorship and thought leadership will continue to drive people back to the Platform, creating a real “hub” for recruiters.

 

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Increase Growth and Earning Opportunities for Recruiters on Our Platform: We plan to continue investing in new products and features to help recruiters grow their businesses by expanding their access to technology, developing their professional and marketing skills, and increasing their earning opportunities. This includes expanding on our lead generation capabilities.

 

2) Build Business Model Innovations:

 

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Continue to Innovate and Improve Our Platform to Build Best-in-Class User Experiences: We aim to create the most innovative and easy-to-use solutions for empowering businesses and recruiters to recruit talent faster. For example, we recently launched an improvement to our candidate submittal process, which allowed for bulk sharing and distribution of referral links to candidates through social media. We will strive to continually incorporate such advances into our platform, taking into consideration user feedback.

 

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Invest in Scalable Business Models: We plan to continue to invest in the development of our SaaS model and subscription services while improving recruiter experience by enhancing our software capabilities, data science, security, and technology infrastructure. Further low- and light-touch subscription models and plans promise to facilitate the seamless transactions of candidate and job flows on our platform and, in doing so, increase our gross margins and the efficiency of our business.

 

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Leverage Our Platform to Launch New Products: We believe we can continue to innovate to solve complex challenges involving recruitment and hiring, and we plan to use our highly extensible platform to support the introduction of additional products and services. Our massive network, leading technology, and recruiting expertise allow us to introduce new features and incorporate feedback into such features with speed, efficiency, and scale.

 

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Invest in Advanced Technologies, Including Artificial Intelligence: We believe that recruiting is about people, and people will always drive the hiring process, so long as our current system of employment and human labor exists. Existing technologies cannot supplant human review and involvement in most hiring transactions, including all four stages of recruiting specified previously. However, we also believe that artificial intelligence promises to solve specific issues of scale within the hiring process, for example, by rapidly sifting through a bulk of job applications to surface to the recruiter the best-matched applicants. We have already integrated AI improvements into our candidate campaigning and sourcing processes, and we are currently evaluating new businesses, methods, and partnerships to transform further and improve our technology.

 

3) Monetize the Businesses and Candidates Seeking to Access the Community and Platform:

 

We intend to not only develop new clients for all of our services, but also expand relationships with our existing clients and increase their spending on our platform by investing in building new products and features.

 

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Attract New Clients Through Strategic Partnerships with MSP and HR Providers: We intend to expand our marketing efforts with partners to attract new clients by increasing awareness of our platform and the benefits of using flexible and on-demand recruiting.

 

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Broaden and Deepen Categories: We intend to focus on customizing experiences for vertical industry groups, such as Information Technology or Accounting and Finance, through tailored features and functionalities, making it easier and more efficient for clients to connect with the right recruiters.

 

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Build Effective Candidate Solutions: We plan to continue to expand our candidate offerings from basic resume distribution to video resumes, training programs, career coaching, resume writing, job alerts, and other SaaS services to monetize our traffic and help people effectively connect with opportunities.

 

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Build Out Video: We plan to leverage a video offering as a SaaS solution for our enterprise clients, partners, and recruiters, as video interviewing and screening may become a must-have requirement for business recruiting, particularly in the post-COVID-19 environment.

 

 

4) Acquire Complementary Assets and Businesses:

 

The Company seeks opportunities to acquire complementary businesses and personnel within the recruitment and staffing sector, primarily to expand the overall number of employers using our Platform to source talented employees and contractors.

 

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Increase Employer Demand: The Company plans to approach recruitment companies with firm client control and knowledge, such as recruitment process outsourcing (RPO) companies in major cities within the continental United States and with stable, diversified client revenues. These types of acquisitions may help increase the number and diversity of jobs in the marketplace platform and allow for the upselling of our new and planned products for employers.

 

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Further Our Technology Offering: The Company plans to evaluate specific valuable online tools for recruiters that would enhance our overall platform, such as candidate sourcing technologies, data appending services, job distribution and marketing software, lead generation tools, and others that would improve our value to our community of recruiters, to improve engagement and daily use metrics.

 

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Enhance Strategic Technology: The Company continually monitors and evaluates third-party companies for technology that would be of strategic value. Management is particularly mindful of the emergence of artificial intelligence being applied to hiring and recruitment processes. We are interested in acquiring or licensing such technologies that offer fundamental advancements to our Platform and, therefore, long-term shareholder value.