Nixxy, Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 31, 2025.

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

Overview

Nixxy, Inc., a Nevada corporation (along with its subsidiaries, “we”, “the Company”, “us”, and “our”), is a holding company that, through its subsidiaries, operates recruitment and career-related software platforms. Historically, the Company offered additional recruitment-related services, including on-demand contract recruitment and staffing.

We have eight subsidiaries, Recruiter.com, Inc., Nixxy, LLC, VocaWorks, Inc. (“VocaWorks”), Recruiter.com Scouted Inc. (“Scouted”), Recruiter.com Upsider Inc. (“Upsider”), Recruiter.com OneWire Inc. (“OneWire”), and Recruiter.com Consulting, LLC (“Recruiter.com Consulting”), and Auralink AI, Inc. (“Auralink”). Additionally, the Company owns a controlling interest in Atlantic Energy Solutions, Inc., a Colorado company that is traded on the OTC Markets (OTC: AESO).

The Company is currently undergoing a strategic transformation, having sold its staffing business in 2023 and sold its Recruiter.com website in Q3 of 2024. The Company has announced plans to shift its focus, along with its license agreement with GoLogiq, and spin out the recruitment-related businesses to Atlantic Energy Solutions, which is currently undergoing a name change to CognoGroup, Inc. There can be no assurance that the Company will be able to complete its planned spin-out and strategic transformation.

Operating Businesses and Revenue

We generate revenue or have generated from the following activities:

• Auralink: In 2025, the Company, through its Auralink AI subsidiary, refocused operations on telecommunications by leveraging newly acquired intellectual property and technology from Savitr. Auralink operates a cloud-based communications platform that provides routing, billing, and management services for high-volume SMS and Voice-over-IP (VoiceIP) communications. The telecommunications portfolio includes voice and messaging interconnect services, operator software, and wholesale voice services, including Turnkey Outsourced Switching (TKOS). Auralink generates revenue from providing messaging and voice termination services, primarily under bilateral carrier agreements. These agreements govern both sending and receiving communications traffic and are based on contractual “Rate Decks” which define per-message or per-minute pricing by destination and time of delivery.
• Auralink generates revenue from the delivery of messaging and voice termination services. These services are provided under bilateral agreements with telecommunications partners, which establish pricing per destination and time of delivery through contractual rate decks. Depending on the specific route and agreement, Auralink may act as both a supplier (terminating traffic) and a customer (originating traffic). While traffic settlements under these agreements may occur on a net basis for operational efficiency, each component of traffic is governed by distinct pricing and service-level obligations. The Company exercises control over the delivery of these services and assumes the associated performance obligations, including routing decisions, delivery quality, and pricing. As such, and in accordance with ASC Topic 606, Revenue from Contracts with Customers, Auralink recognizes gross revenue for these services at the point in time when control is transferred to the customer, typically when a voice call is successfully terminated, or a message is delivered.

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• Marketplace: Our “Marketplace” category comprises services for businesses and individuals that leverage our online presence. For businesses, this includes sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising, and other branded electronic communications, such as in our quarterly digital publication on recruiting trends and issues. We earn revenue as we complete agreed upon marketing related deliverables and milestones using pricing and terms set by mutual agreement with the customer. In some cases, we earn a percent of revenue a business receives from attracting new clients by advertising on our online platform. Businesses can also pay us to post job openings on our proprietary job boards to promote open job positions they are trying to fill. In addition to its work with direct clients, we categorize all online advertising and affiliate marketing revenue as Marketplace. For individuals, Marketplace includes services to assist with career development and advancement, including a resume distribution service which involves promoting these job seekers’ profiles and resumes to assist with their procuring employment, and upskilling and training. Our resume distribution service allows a job seeker to upload his/her resume to our database, which we then distribute to our network of recruiters on the Platform. We earn revenue from a one-time flat fee for this service. We also offer a recruiter certification program which encompasses our recruitment related training content, which we make accessible through our online learning management system. Customers of the recruiter certification program use a self-managed system to navigate through a digital course of study. Upon completion of the program, we issue a certificate of completion and make available a digital badge to certify their achievement for display on their online recruiter profile on the Platform. Additionally, we partner with Careerdash, a high-quality training company, to provide Recruiter.com Academy, an immersive training experience for career changers.
• Consulting and Staffing: Consists of providing consulting and staffing personnel services to employers to satisfy their demand for long- and short-term consulting and temporary employee needs. We generate revenue by first referring qualified personnel for the employer’s specific talent needs, then placing such personnel with the employer, but with our providers acting as the employer of record for us, and finally, billing the employer for the time and work of our placed personnel on an ongoing basis. Our process for finding candidates for consulting and staffing engagements largely mirrors our process for full-time placement hiring. This process includes employers informing us of open consulting and temporary staffing opportunities and projects, sourcing qualified candidates through the Platform and other similar means, and, finally, the employer selecting our candidates for placement after a process of review and selection. We bill these employer clients for our placed candidates’ ongoing work at an agreed-upon, time-based rate, typically on a weekly schedule of invoicing.

Revenues as presented on the consolidated statements of operations represent services rendered to customers less sales adjustments and allowances.

Marketplace advertising revenues are recognized on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services. Job posting revenue is recognized at the end of the period the job is posted. Marketplace career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point at which the performance obligations are satisfied. Payments for career services are typically due upon distribution or completion of services.

Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in the net service revenues and equivalent amounts of reimbursable expenses are included in costs of revenue. We record substantially all revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of this line of revenues and expenses. We have concluded that gross reporting is appropriate because we have the task of identifying and hiring qualified employees, and our discretion to select the employees and establish their compensation and duties causes us to bear the risk for services that are not fully paid for by customers. Consulting and staffing revenues are recognized when the services are rendered by the temporary employees. We assume the risk of the acceptability of the employees to customers. Payments for consulting and staffing services are typically due within 90 days of completion of services.

Auralink’s primary performance obligations consist of SMS and VoiceIP transmission services. Each message or call is a distinct transaction, and revenue is recognized at the point in time when delivery is confirmed by the recipient carrier’s platform. These services are priced using dynamic Rate Decks, which vary by destination and time. The transaction price is allocated to each message or call based on its standalone selling price as reflected in the applicable Rate Deck. Auralink acts as principal in these transactions, as it controls the routing infrastructure, sets pricing, assumes delivery risk, and bears responsibility for service quality. Accordingly, revenue is recognized on a gross basis.

Contracts typically span one year and include early termination provisions. Settlements with counterparties are usually conducted on a net basis using reconciled call detail records.

Deferred revenue results from transactions in which we have been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

Sales tax collected is recorded on a net basis and is excluded from revenue.

Quarter Overview

In the second quarter of 2025, the period ending June 30, 2025, the Company continued to concentrate on finalizing its strategic transactions critical to its evolution. The Company is in a period of profound change after significantly reducing its operating footprint to focus primarily on strategic financial matters. The Company also continued preparing for its planned spin-out transaction of certain operating assets to its Atlantic Energy Solutions subsidiary, which is currently being renamed CognoGroup, a Nevada Corporation (“CognoGroup”). CognoGroup is planned to hold the current recruitment-related technology assets, including Mediabistro, a job board for the media industry, as well as other assets and projects of the Company, such as its AI-enabled CandidatePitch software and RecruitingClasses.com.

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

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

Key Highlights:

• On April 8, 2025, Nixxy, Inc. (the “Company”) appointed Ashissh Raichura as a member of the Company’s Board of Directors (the “Board”). As compensation for his appointment as a member of the Board, Mr. Raichura was granted (a) 50,000 shares of restricted common stock under the Company’s 2024 Equity Incentive Plan (the “Plan”) (the “Initial Shares”); (b) for each year following the current year that Mr. Raichura continues to be a member of the Board, either 50,000 shares of restricted common stock or 50,000 non-statutory options under the Plan, which options shall have a cashless exercise provision and shall expire 36 months from the date of his appointment (the “Subsequent Shares”, and together with the Initial Shares, the “Raichura Shares”); and (c) a quarterly payment of $7,500.
• Effective as of May 7, 2025, Nixxy, Inc. (the “Company”) appointed Mike Schmidt as Chief Executive Officer of the Company pursuant to an employment agreement entered into on the same date. Miles Jennings, the Company’s Interim Chief Executive Officer, shall continue with the Company and assist with Mr. Schmidt’s transition. Mr. Jennings shall continue to serve as a director of the Company, President of one of the Company’s wholly-owned subsidiaries, and CEO of Atlantic Energy Solutions, a majority-owned subsidiary of the Company. In connection with Mr. Schmidt’s appointment as the full-time Chief Executive Officer of the Company, effective as of May 7, 2025 (the “Effective Date”), the Company entered into a new employment agreement with Mr. Schmidt (the “Employment Agreement”). The term of the Employment Agreement is for twelve months from the Effective Date at a monthly salary of $10,000. Pursuant to the Employment Agreement, Mr. Schmidt is eligible to receive equity compensation in the amount of one hundred thousand (100,000) Restricted Stock Units (the "RSUs"), subject to approval of the board of directors of the Company. In the event of a Company Change of Control (as defined in the Employment Agreement), if Mr. Schmidt remains employed by the Company through the date of such Company Change of Control, 100% of then unvested Company RSUs shall vest in full effective immediately prior to such event.

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• On June 3, 2025 (the “Closing Date”), Nixxy, Inc. (the “Company” or “Nixxy”) entered into an Asset Purchase Agreement (the “APA”) with NexGenAI Holding Group, Inc., a Delaware corporation (“NexGenAI”), pursuant to which Nixxy agreed to acquire certain assets related to NexGenAI’s technology stack and AI systems, including associated intellectual property (the “Acquisition”). NexGenAI specializes in generative AI and machine learning applications, with a focus on building custom solutions to boost revenue and improve efficiency across various sectors. Pursuant to the APA, Nixxy acquired substantially all of NexGenAI’s assets related to software development and its technology stack. As consideration for the Acquisition, Nixxy agreed to pay NexGenAI $2,250,000 (the “Purchase Price”), payable in restricted shares of Nixxy’s common stock, par value $0.0001 (“Common Stock”). The Shares will be issued to NexGenAI in four (4) installments: (i) $750,000 worth of Shares shall be issued within two business days of the Closing Date, based on the volume-weighted average price of Common Stock traded on the Nasdaq Stock Exchange over the ten (10) consecutive trading days (the “10-Day VWAP”) immediately preceding the Closing Date; (ii) $500,000 hares shall be issued three (3) months after the Closing Date, based on the 10-Day VWAP immediately preceding such date; (iii) $500,000 worth of Shares shall be issued six (6) months after the Closing Date, based on the 10-Day VWAP immediately preceding such date; and (iv) $500,000 worth of Shares shall be issued nine (9) months after the Closing Date, based on the 10-Day VWAP immediately preceding such date.
• On June 4, 2025, the Company today announced the pricing of a registered direct offering for the sale and issuance of up to 846,667 shares of the Company's common stock, par value $0.0001 per share (the “Shares”) at a price per share of $1.50 (the “Offering”). There were no placement agent fees or offering expenses payable by the Company in connection with the Offering.

Amendment to Employment Agreement

Effective August 1, 2025, the Company amended the terms of that certain Executive Employment Agreement, originally dated May 7, 2025 by and between the Company and Mike Schmidt in order to modify Mr. Schmidt’s compensation structure (the “Amendment”). Pursuant to the Amendment, Mr. Schmidt’s base salary was increased to $180,000 per year. Mr. Schmidt is also eligible to receive an annual bonus of $45,000 for the year ended December 31, 2025, contingent upon the Company’s achievement of certain milestones set by the Board (the “Milestones”).

Mr. Schmidt will also be granted restricted stock units (“RSUs”). One hundred and fifty thousand (150,000) RSUs shall vest over a period of four years in equal monthly installments and an additional two hundred and ten thousand (210,000) RSUs shall vest upon the achievement of certain shareholder-friendly milestones to be determined by the Board. The RSUs shall vest subject to Mr. Schmidt’s continued employment with the Company.

The foregoing is a summary of the material terms of the Amendment and does not purport to be a complete statement of the rights, obligations, or provisions contained therein. This summary is qualified in its entirety by reference to the full text of the Amendment, which is filed as an exhibit to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Results of Operations

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024:

Revenue

We had revenue of $13.5 million for the three-month period ended June 30, 2025, as compared to $0.1 million for the three-month period ended June 30, 2024, representing an increase of $13.3 million or 10016%. The increase resulted primarily due to the increase in telecommunication services of $13.4 million.

Cost of Revenue

Cost of revenue was $13.5 million for the three-month period ended June 30, 2025, compared to $0 for the corresponding three-month period in 2024, representing an increase of $13.5 million. This increase resulted primarily from the increase in revenue generating operations during the quarter.

Operating Expenses

We had total operating expenses of $16.2 million for the three-month period ended June 30, 2025, compared to $1.1 million for the corresponding three-month period in 2024, an increase of $15.1 million or 1351%. This increase was due to increases in general and administrative, amortization of intangibles, and cost of revenue of $1.5 million, $0.3 million, and $13.4 million respectively.

Sales and Marketing

Our sales and marketing expense for the three-month period ended June 30, 2025, was $12 thousand compared to $40 thousand for the corresponding three-month period in 2024, a decrease of $28 thousand, which reflects the decrease in marketing ventures related to the marketplace solutions revenue stream.

Product Development

Our product development expense for the three-months ended June 30, 2025, increased to $27 thousand from $5 thousand for the corresponding period in 2024 due to an increase in hosting and data expense.

Amortization of Intangibles

For the three-month period ended June 30, 2025, we incurred a non-cash amortization charge of $558 thousand as compared to $273 thousand for the corresponding period in 2024. The amortization expense in 2025 and 2024 relates to the intangible assets acquired from Genesys (now our Nixxy, LLC division), Scouted, Upsider, OneWire, Parrut Novo Group, GOLQ, Aqua Software, Wizco, Savitr Tech, and NexGenAI.

General and Administrative

General and administrative expense for the three-month period ended June 30, 2025, includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the three-month period ended June 30, 2025, our general and administrative expenses were $2.2 million, including $1.1 million of non-cash stock-based compensation. In 2024, for the corresponding period, our general and administrative expenses were $0.8 million, including $28 thousand of non-cash stock-based compensation.

Other Income (Expense)

Other income (expense) for the three-month period ended June 30, 2025, was expense of $1.5 million compared to expense of $32 thousand in the corresponding 2024 period. Loss on change in fair value of contingent consideration of $1.3 million was the primary driver in the increase.

Net Loss

For the three-months ended June 30, 2025, we had a net loss from continuing operations of $4.3 million compared to a net loss of $1.0 million during the corresponding three-month period in 2024.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024:

Revenue

We had revenue of $14.9 million for the six-month period ended June 30, 2025, as compared to $0.4 million for the six-month period ended June 30, 2024, representing an increase of $14.5 million or 4079%. The increase resulted primarily due to the increase in telecommunication services of $14.6 million.

Cost of Revenue

Cost of revenue was $14.6 million for the six-month period ended June 30, 2025, compared to $3 thousand for the corresponding six-month period in 2024, representing an increase of $14.6 million. This increase resulted primarily from the increase in revenue generating operations during the quarter.

Operating Expenses

We had total operating expenses of $22.4 million for the six-month period ended June 30, 2025, compared to $2.4 million for the corresponding six-month period in 2024, an increase of $20.0 million or 835%. This increase was due to increases in general and administrative, sales and marketing, and cost of revenue of $4.5 million, $0.6 million, and $14.6 million respectively.

Sales and Marketing

Our sales and marketing expense for the six-month period ended June 30, 2025, was $0.7 million compared to $93 thousand for the corresponding six-month period in 2024, an increase of $0.6 million, which reflects the increase in revenue generating activities.

Product Development

Our product development expense for the six-months ended June 30, 2025, increased to $43 thousand from $17 thousand for the corresponding period in 2024 due to an increase in hosting and data expense.

Amortization of Intangibles

For the six-month period ended June 30, 2025, we incurred a non-cash amortization charge of $831 thousand as compared to $587 thousand for the corresponding period in 2024. The amortization expense in 2025 and 2024 relates to the intangible assets acquired from Genesys (now our Nixxy, LLC division), Scouted, Upsider, OneWire, Parrut Novo Group, GOLQ, Aqua Software, Wizco, Savitr Tech, and NexGenAI.

General and Administrative

General and administrative expense for the six-month period ended June 30, 2025, includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. For the six-month period ended June 30, 2025, our general and administrative expenses were $6.2 million, including $3.3 million of non-cash stock-based compensation. In 2024, for the corresponding period, our general and administrative expenses were $1.7 million, including $328 thousand of non-cash stock-based compensation.

Other Income (Expense)

Other income (expense) for the six-month period ended June 30, 2025, was expense of $1.3 million compared to income of $243 thousand in the corresponding 2024 period. Loss on change in fair value of contingent consideration of $1.2 million was the primary driver in the increase.

Net Loss

For the six-months ended June 30, 2025, we had a net loss from continuing operations of $8.8 million compared to a net loss of $1.8 million during the corresponding six-month period in 2024.

Non-GAAP Financial Measures

The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives, to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of our historical operating results nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

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

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

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between us and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

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

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Liquidity and Capital Resources

For the six months ended June 30, 2025, net cash used in operating activities was $3.0 million, compared to net cash used in operating activities of $1.2 million for the corresponding six-month period in 2024. For the six months ended June 30, 2025, net loss was $8.8 million. Net loss includes non-cash items of depreciation and amortization expense of $839 thousand, bad debt expense of $11 thousand, stock-based compensation expense of $3.3 million, loss on fair value of warrant liability of $7 thousand, loss on fair value of contingent consideration of $1.2 million, loss on fair value of derivative liability of $17 thousand, and loss on fair value of marketable securities of $44 thousand. Net cash used in operation activities also includes an increase in accounts receivable of $412 thousand, a decrease in prepaid expenses and other current assets of $312 thousand, and an increase in accounts payable and accrued liabilities of $507 thousand.

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

For the six months ended June 30, 2025, net cash used in investing activities was $0.4 million. The principal factor was purchase of intangible assets of $0.4 million. The Company received $0.3 million for the six months ended June 30, 2024 from the sale of assets.

For the six months ended June 30, 2025, net cash provided by financing activities was $1.8 million. The principal factor was $1.8 million of cash received from issuance of common stock.

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

Based on cash on hand as of June 30, 2025, of approximately $0.9 million, we do not have the capital resources to meet our working capital needs for the next 12 months.

Our condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We incurred net losses and negative operating cash flows since inception. For the six months ended June 30, 2025, we recorded a net loss of $8.8 million. We have not yet established an ongoing source of revenue that is sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable.

Our historical operating results indicate substantial doubt exists related to our ability to continue as a going concern. We can give no assurances that any additional capital that we are able to obtain, if any, will be sufficient to meet our needs, or that any such financing will be obtainable on acceptable terms. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail our commercial activities. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.

To date, equity offerings have been our primary source of liquidity and we expect to fund future operations through additional securities offerings.

Off-Balance Sheet Arrangements

None.

Critical Accounting Estimates and Policies

Critical Accounting Estimates

The preparation of 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. Critical accounting estimates are the fair value of intangible assets and goodwill, and valuation of stock based compensation expense.

Policy

Revenue Recognition

We recognize revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

Revenues as presented on the consolidated statements of operations represent services rendered to customers less sales adjustments and allowances.

Marketplace advertising revenues are recognized on a gross basis when the advertising is placed and displayed or when lead generation activities and online publications are completed, which is the point at which the performance obligations are satisfied. Payments for marketing and publishing are typically due within 30 days of completion of services. Job posting revenue is recognized at the end of the period the job is posted. Marketplace career services revenues are recognized on a gross basis upon distribution of resumes or completion of training courses, which is the point at which the performance obligations are satisfied. Payments for career services are typically due upon distribution or completion of services.

Consulting and Staffing Services revenues represent services rendered to customers less sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in the net service revenues and equivalent amounts of reimbursable expenses are included in costs of revenue. We record substantially all revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of this line of revenues and expenses. We have concluded that gross reporting is appropriate because we have the task of identifying and hiring qualified employees, and our discretion to select the employees and establish their compensation and duties causes us to bear the risk for services that are not fully paid for by customers. Consulting and staffing revenues are recognized when the services are rendered by the temporary employees. We assume the risk of the acceptability of the employees to customers. Payments for consulting and staffing services are typically due within 90 days of completion of services.

Auralink’s primary performance obligations consist of SMS and VoiceIP transmission services. Each message or call is a distinct transaction, and revenue is recognized at the point in time when delivery is confirmed by the recipient carrier’s platform. These services are priced using dynamic Rate Decks, which vary by destination and time. The transaction price is allocated to each message or call based on its standalone selling price as reflected in the applicable Rate Deck. Auralink acts as principal in these transactions, as it controls the routing infrastructure, sets pricing, assumes delivery risk, and bears responsibility for service quality. Accordingly, revenue is recognized on a gross basis.

Contracts typically span one year and include early termination provisions. Settlements with counterparties are usually conducted on a net basis using reconciled call detail records.

Contract liabilities result from transactions in which we have been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the contract liabilities are recognized.

Sales tax collected is recorded on a net basis and is excluded from revenue.

Goodwill

Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. We test goodwill for impairment for its reporting units on an annual basis, or when events occur, or circumstances indicate the fair value of a reporting unit is below its carrying value.

We perform our annual goodwill impairment assessment on December 31st of each year or as impairment indicators dictate.

When evaluating the potential impairment of goodwill, management first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of our reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the impairment testing methodology using an appropriate valuation method.

We compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment to be recognized is recognized as the amount by which the carrying amount exceeds the fair value.

When required, we may arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation-Stock Compensation (“ASC 718”), which requires all share-based payments be recognized in the consolidated financial statements based on their fair values. In accordance with ASC 718, the Company has elected to use the Black-Scholes option pricing model to determine the fair value of options granted and recognizes the compensation cost of share-based awards on a straight-line basis over the vesting period of the award.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company as of the specified effective date.

In November 2023, the FASB issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures (ASU 2023-07), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 should be applied on a retrospective basis. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company has adopted the reportable segment disclosure requirements with no significant impact on its disclosures.

In December 2023, the FASB issued ASU 2023-09-Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which is intended to enhance the transparency and decision usefulness of income tax disclosures, primarily by amending disclosure requirements for the effective tax rate reconciliation and income taxes paid. ASU 2023-09 should be applied on a prospective basis, and retrospective application is permitted. ASU 2023-09 is effective January 1, 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.

Evaluation of Disclosure Controls and Procedures

(a) Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, with the assistance of management, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2025. Based on this evaluation, they concluded that disclosure controls and procedures were not fully effective due to previously identified material weaknesses in internal control over financial reporting.

However, during the second quarter of 2025, the Company initiated and implemented key remediation measures designed to strengthen internal controls, improve oversight, and enhance financial reporting processes. Management believes these actions represent substantial progress toward remediation and is actively monitoring the effectiveness of the updated controls.

(b) Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining effective internal control over financial reporting. These controls are designed to provide reasonable assurance regarding the reliability of financial reporting and compliance with GAAP.

As of June 30, 2025, management assessed the Company’s internal control over financial reporting under the COSO 2013 framework. Based on this assessment, the Company concluded that internal control over financial reporting was not fully effective due to the material weaknesses identified in prior periods, including:

• Limited accounting personnel resulting in insufficient segregation of duties, and
• Gaps in technical accounting expertise for complex transactions.

Remediation Actions Taken:

• Engaged an experienced consultant to support SEC reporting and GAAP compliance,
• Strengthened internal review procedures and monthly closing processes,
• Improved segregation of duties and workflow documentation.

While these actions have materially enhanced the Company’s internal controls, management will continue to monitor their consistent application. As such, the material weaknesses are considered ongoing as of this reporting date but are expected to be fully remediated in the near term.

Changes in Internal Control over Financial Reporting

We have worked to establish all the checks and balances needed for all financial areas of our business. We hired a consultant in mid-2020 to establish best practices and help us document and implement these. This consultant is a CPA and has a significant background in running the accounting and budgeting process for public companies. We began adopting these best practices during the fourth quarter of 2020. We retained an outsourced firm with a panel of CPA consultants in 2021 to assist in building internal controls and preparing financial reports.

Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed March 31, 2025. These risks are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on us. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.