FORWARD-LOOKING STATEMENTS

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This section includes several forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current views with respect to future events and financial performance. All statements that address expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue, gross profit, operating profit, cash flow), are forward-looking statements. Some of the forward-looking statements can be identified by words like "anticipates," "believes," "expects," "may," "will," "can," "could," "should," "intends," "project," "predict," "plans," "estimates," "goal," "target," "possible," "potential," "would," "seek," and similar references to future periods. These statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: the impact of the COVID-19 pandemic on us and our clients; our ability to access the capital markets by pursuing additional debt and equity financing to fund our business plan and expenses on terms acceptable to the Vivos Group or at all; negative outcome of pending and future claims and litigation and our ability to comply with our contractual covenants, including in respect of our debt; potential loss of clients and possible rejection of our business model and/or sales methods; weakness in general economic conditions and levels of capital spending by customers in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our customers' projects or the inability of our customers to pay our fees; delays or reductions in U.S. government spending; credit risks associated with our customers; competitive market pressures; the availability and cost of qualified labor; our level of success in attracting, training and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our temporary employees; our performance on customer contracts; and government policies, legislation or judicial decisions adverse to our businesses. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. We recommend readers to carefully review the entirety of this Quarterly Report, the "Risk Factors" in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and the other reports and documents we file from time to time with the Securities and Exchange Commission ("SEC"), particularly our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

The following discussion and analysis of our financial condition and results of operations, our expectations regarding the future performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors including those described in "Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 with the SEC. Our actual results may differ materially from those contained in any forward-looking statements. You should read the following discussion together with our financial statements and related notes thereto and other financial information included in this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS

This discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.





20

There have been no material changes or developments in the Company's evaluation of the accounting estimates and the underlying assumptions or methodologies that it believes to be Critical Accounting Policies and Estimates as disclosed in its Form 10-K for the year ended December 31, 2020.

Management's Discussion included in the Form 10-K for the year ended December 31, 2020 includes discussion of various factors and items related to the Company's results of operations and liquidity. There have been no other significant changes in most of the factors discussed in the Form 10-K and many of the items discussed in the Form 10-K are relevant to 2021 operations; thus, the reader of this report should read Management's Discussion included in Form 10-K for the year ended December 31, 2020.





RESULTS OF OPERATIONS



Revenues

Revenues for the three months ended March 31, 2021 was $5,794 which was $3,007 lower than for the same period in 2020 which was $8,801. EOR revenues declined 37.1% or $2,655, and staffing revenue by 31.5% or $406 as demand for services was down from a year ago which before the mid-March 2020 governmental shutdown caused by the COVID-19 pandemic, was buoyed by election and sporting event client activities. AT&T's DirecTV unit cancellation of several Sirius-XM shows accounted for an estimated $1,000 revenue decline which represents approximately 33% of our overall comparative revenue decline and 37% of the EOR comparative Q1 decline.

Staffing revenue was adversely impacted by our IQS IT division which saw a dramatic decline of $516 or 65.3% from $790 in Q1 2020, to $274 in the Q1 2021, as 2 clients ceased employing our IT solutions almost altogether ($402 revenue decline) and one of our largest clients converted 4 full-time equivalents ("FTE") to permanent roles over the course of 12 months after April 1, 2020, leading to a $84 top line comparative Q1 reduction. Conversely, Media staffing grew 22% to $610 as head count increased by a commensurate percentage of 25% by end of the quarter.

Cost of Revenue / Gross Profit

Gross Profit was $747 representing 12.9% of revenues, which was $285 below the gross profit of $1,032 in the first quarter of 2020. Although revenues from Q1 declined by 34.2% from Q1 2020, gross margins only declined by 27.7%. This was a result of Q1 profit margin improved from 11.7% in Q1 2020 to 13% in Q1 2021. Margin improvement can be attributed to product mix being more titled to higher margin staffing and Video Production, which combined was 22.3% in Q1 2021 versus 18.5% in Q1 2020.

General and Administrative ("G&A")

General and administrative expenses for the three months ended March 31, 2021 were $810, as compared to $1,091 in the comparable period in 2020. The $281decrease in comparative three-month periods is due to $101 in salary and benefit cost reductions, outside legal costs declined by $90 and accounting fees by $19. Given the adverse effect on revenues caused by COVID-19, and the need to add new clients, management restructured the organization accordingly, which improved sales resources, but lowered overhead costs by 15% to a year ago.





Interest Expense

The Company recognized interest expense in the amount of $45 during the three months ended March 31, 2021, compared to $138 during the prior year period. The $93 decrease is directly attributed to a significant decreased reliance on the factoring line that had an outstanding average Q1 2020 balance of $4,711 compared to $2,164 in 1Q 2021. This resulted in a savings of approximately $50 and paying off the convertible note which carried approximately $26 in interest in 2020. The Triumph Loan for $250 which was satisfied in February had $11 more in costs in 2020.





Net Loss

The Company incurred a lower net loss in first quarter of 2021 at $28 compared to a year earlier when it was $237 as the reduced G&A and interest charges (includes VIE related interest), and income tax coupled with $75 in earned interest, totaled a $489 improvement from a year ago, compared to a reduction of $285 netting 204 in net profit improvement in Q1 2021compared to March 31, 2020.





21

LIQUIDITY AND CAPITAL RESOURCES

Our working capital requirements are driven predominantly by EOR field talent payments, G&A salaries, public company costs, interest associated with factoring, and client accounts receivable receipts. Since receipts from client payments are on average 70 days behind payments to field talent, working capital requirements can be periodically challenged. We have a Factoring Facility with Triumph Business Capital ("TBC"). TBC advances 93% of our eligible receivables at an advance rate of 15 basis points, an interest rate of prime plus 2%., and our prime floor rate at 4%. As a result of the impact of the COVID-19 pandemic, our clients may be more likely to be delinquent in their payments. However, to date, we have not seen any adverse change in our collections, with our Days Outstanding (DSO) improving to 63 days compared to 73 on December 31, 2020. Our DSO increased in 2020 because several of our large clients now require 60-to-90-day terms. As of March 31, 23% of our invoicing was > 60 days aged.

As of March 31, 2021, 64% of our $3,964 in total A/R was < 31 days, 34% 1 to 30 days past due, 5% between 31 and 60 days past due and 2% ($66) greater than 60 days. As of March 31, 2021, having 7% of our A/R > 31 days is an improvement over December 31, 2020, where 11% of our A/R was aged >31 days.

Our primary sources of liquidity are cash generated from operations via accounts receivable and borrowings under our Factoring Facility with Triumph enabling access to the 7% unfactored portion. Because certain large clients have changed their payment practices announcing 60- and 90-day terms amounting to a unilateral extension to contractual terms by 30-60 days, we can be adversely impacted since Triumph no longer provides credit if an account obligor pays more than 120 days after the invoice date.

Our primary uses of cash are for payments to field talent, corporate and staff employees, related payroll liabilities, operating expenses, public company costs, including but not limited to, general and professional liability and directors and officer's liability insurance premiums, legal fees, filing fees, auditor and accounting fees, stock transfer services, and board compensation; followed by cash factoring and other borrowing interest; cash taxes; and debt payments.

Since we are an EOR with the majority of contracted talent paid as W-2 employees who are paid known amounts on a consistent schedule; our cash inflows do not typically align with these required payments, resulting in temporary cash challenges, which is why in the past we have employed factoring.

Vivos Debtors as of March 31, 2021, had notes receivable totaling $4, 308 including default on a $3,000 promissory note and on a $750 tax obligation in December 2019. After numerous failed collection attempts, on February 17, 2020 the Company initiated an action in the Circuit Court of Montgomery County Maryland against Naveen Doki and the Vivos Holdings for nonpayment.

It was also anticipated that following the Merger, the Company would both access the capital markets by selling additional shares of Company Common Stock and use shares of Company Common Stock as currency to acquire other business revenues. However, all 300 million authorized shares of Company Common Stock were issued in connection with the Merger. No shares are expected to become available to the Company until the legal dispute with the Vivos Debtors and Vivos Group is resolved. At that point, the Company can decide whether to amend the Company's Certificate of Formation to increase the number of authorized shares of Company Common Stock or approve a reverse-split of the outstanding shares of Company Common Stock to provide additional shares for these purposes. No assurance can be given as to when this might take place.

On May 5, 2020, MMG received a $5,216 loan through the Paycheck Protection Program (the "PPP") with a term of two (2) years and an interest rate of 1% per annum. The PPP provides that the Company may apply for forgiveness of this loan if the loan proceeds were used for payroll and certain other specified operating expenses while maintaining specified headcount requirements. The accrued interest on the PPP loan as of December 31, 2020 was $34.

On June 5, 2020, The Paycheck Protection Program Flexibility Act (the "PPPF Act") went into effect providing more flexibility to participants in the PPP which included extending the time to begin repayment of the PPP loan until the amount of forgiveness, if any, is determined, which could be as late as December 31, 2020. The Company may apply for forgiveness earlier if they determine that doing so will maximize the amount of loan forgiveness.





22

On December 22, 2020, the United States Congress passed an omnibus spending bill (the December relief bill) that included significant revisions and additions to the PPP established by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), and previously amended by the Paycheck Protection Program Flexibility Act ("PPP Flexibility Act"). President Trump signed the bill on December 27, 2020. The December relief bill permits expenses paid with PPP loan funds to be deductible at the Federal level.

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues ?Act (the "PPP2 Act") contained in the Consolidated Appropriations Act, 2021 ("2021 Appropriations Act") ?was enacted. The PPP2 Act and 2021 Appropriations Act included several changes to the forgiveness ?deadline process and deadlines allowing PPP borrowers up to 10 months to apply for loan forgiveness after the covered period ends.

The Company utilized the PPP funds for their intended purposes, in this case for payroll only following guidelines for wage earners >$100.

The funds bolstered our working capital and enabled us to bring back employees and continue to serve our clients even though their requirements had lessened.

As of March 31, 2021, our working capital was $5,938, compared to $5,970 at the end of December 2020, and $566 a year ago as the PPP funds enabled the Company to build A/R reserves since PPP funds were employed to pay salaries of both outsourced and G&A employees during the covered 24-week period between May and October 2020.

© Edgar Online, source Glimpses