UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20172023
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________to________
Commission file number: 001-35824
Professional Diversity Network, Inc.
(Exact name of Registrant as Specified in Its Charter)
Delaware | 80-0900177 |
(State or Other Jurisdiction of |
(I.R.S. Employer Identification No.) |
2120 Chicago, Illinois | 60603 |
(Address of Principal Executive Offices) |
(Zip Code) |
(312) 614-0950
(Registrant’sRegistrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Stock, $0.01 par value per share | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ]☐ No [X]☒
Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ]☐ No [X]☒
Indicate by check mark whether the registrantRegistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files).
Yes [X]☒ No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]☐
Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
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 registrantRegistrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]☐
Indicate by check mark whether the registrantRegistrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]☐ No [X]☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The aggregate market value of the registrant’sRegistrant’s common stock held by non-affiliates of the registrantRegistrant on June 30, 2017,2023, the last business day of the registrant’sRegistrant’s most recently completed second fiscal quarter, was approximately $9,349,000$34,698,000 (based on a price per share of $6.88, the price at which the common shares were last sold as reported on the NASDAQ Capital Market on such date).
There were 4,334,89411,452,008 shares outstanding of the registrant’sRegistrant’s common stock as of March 26, 2018.29, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statementProxy Statement for its 2018 annual meeting of shareholders, which proxy statement will be filed no later than 120 days after the close of the Registrant’s fiscal year ended December 31, 2017,2024 Annual Meeting of Stockholders are hereby incorporated by reference in Part III of this Annual Report on Form 10-K.
PROFESSIONAL DIVERSITY NETWORK, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBERDecember 31, 20172023
PROFESSIONAL DIVERSITY NETWORK, INC.
Unless we specify otherwise, all references in this annual report on Form 10-K (the “Annual Report”) to “PDN,” “the Company,” “we,” “our,” and “us” refer to Professional Diversity Network, Inc. and its consolidated subsidiaries. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business.Our actual results will likely differ materially from those contained in the forward-looking statements.Please read “Special“Special Note Regarding Forward-Looking Statements”Statements” for additional information regarding forward-looking statements used in this Annual Report.
Effective January 5, 2023, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation in order to implement a 2-for-1 reverse stock split, through which each two shares of common stock issued and outstanding were combined and changed into one share of common stock. All share amounts and share prices in this annual report on Form 10-K have been adjusted to give effect to the reverse stock split.
Overview
The Company is a dynamic operator of professional networks with a focus on diversity. We use the term “diversity” (or “diverse”) to describe communities, or “affinities,” that are distinctdistinctly based on a wide array of criteria, which may change from time to time,time-to-time, including ethnic, national, cultural, racial, religious or gender classification. We serve a variety of such communities, including Women, Hispanic-Americans, African-Americans, Asian-Americans, Disabled,persons with disabilities, Military Professionals, and Lesbian, Gay, Bisexual, Transgender and Transgender (LGBT)Queer (LGBTQ+). Our goal is (i) to assist our registered users and members in their efforts to connect with like-minded individuals and identify career opportunities within the network and (ii) connect members with prospective employers while helping the employers address their workforce diversity needs. We believe that the combination of our solutions allows us to approach recruiting and professional networking in a unique way and thus create enhanced value for our members and clients.
On November 7, 2016, we consummatedEnvironmental, Social and Governance
As a global developer and operator of online and in-person networks that provides access to networking, training, educational and employment opportunities for diverse individuals, Professional Diversity Network, Inc. is striving to be at the issuanceforefront of fostering supportive and sale of 1,777,417 sharesinclusive cultures. We are committed to creating permanent, systemic changes that address social inequalities in our communities by providing avenues for employers and under-represented people to engage.
We are proud of our common stock, par value $0.01 per share,continued leadership in social stewardship. Our mission is to Cosmic Forward Limited (“CFL”), a Republicutilize the collective strength of Seychelles company wholly-owned by four Chinese investors. In connection with that transaction, CFL shareholder Maoji (“Michael”) Wang was appointed as Chief Executive Officerour subsidiaries, members, partners and a Director of the Company, and CFL shareholder Jingbo Song was appointed as a Director of the Company serving as the Company’s Co-Chairman of the Board. On December 1, 2016 our Board of Directors (“Board”) authorized the proper officers of the Companyunique proprietary platform to take all action required to create subsidiaries in both Hong Kong and China in order to facilitate expansion of the Company’s business into China. In January of 2017, the Company established two Hong Kong subsidiaries, PDN (Hong Kong) International Education Ltd and PDN(Hong Kong)International Education Information Co., Ltd, and in March of 2017 the Company established its China subsidiary, PDN (China) International Culture Development Co. Ltd. In November of 2017, Jiangxi PDN Culture Media Co.,Ltd became a consolidated variable interest entity. We are currently executing our strategic plan to build in China entirely new networking, training and education businesses. We believe that coupling the Company’s expertise inincrease diversity recruiting, networking and careersprofessional development for women, minorities, veterans, LGBTQ+ and persons with the CFL owners’ expertise in the China market will provide us with an opportunity for success with our overseas expansion.disabilities.
Our StrategyThrough an online employee recruitment platform that leverages our affinity groups, we provide our employer clients a means to identify and acquire diverse talent and assist them with their efforts to diversify their talent pool and comply with the Equal Employment Opportunity Office of Federal Contract Compliance Program.
Following CFL’s investmentInclusion and Diversity
We believe in the Company’s in November 2016, we began efforts to leverage PDN’s assets to maximize profitability, beginning with refining operationsmaintaining a supportive and enhancing sales in order to transform the Company from historical losses to future profits. The Company currently providesinclusive culture that values everyone’s talents, life experiences and backgrounds.
● | We are proud of the strength and diversity within our Board of Directors, comprised of 20% female directors and 60% of directors who are non-white as of December 31, 2023; | |
● | One-third of our Audit Committee members are female; and | |
● | Our Senior Management team is comprised of 25% female members and 25% non-white males. |
The following table depicts a breakdown of ethnicity of our full-time and part-time employees as of December 31, 2023: |
Ethnicity | Female | Male | Total | |||||||||
Asian (not Hispanic or Latino) | 3 | 1 | 4 | |||||||||
Black or African American (not Hispanic or Latino) | 2 | 1 | 3 | |||||||||
Hispanic or Latino | 5 | 3 | 8 | |||||||||
White (not Hispanic or Latino) | 19 | 14 | 33 | |||||||||
Total | 29 | 19 | 48 | |||||||||
Our Strategy
We provide services for employers’employers who want to hire diverse talent, to individuals seeking to network on a professional level and to job seekers who desire to improve their professional situation. Since the control investment in PDN by CFL, we have successfully expanded operations in China in three primary segments that relate to the core US operations. In China, we have launched educational services, business and women’s networking. We now offers membership in the International Association of Women, The Business Elite Club and Educational Services. As a result, in 2017, we began offering our educational, business and networking services to our new members in China and also extended our reach to the Global Women’s Forum Event in Paris, France, for elite members from China.
The core diversity recruitment business expanded in 2017 to include executive placement services for leading companies seeking to hire diverse talent. This new business line addresses a need for employers who want to secure leading diverse talent in management, senior management and executive capacities. Initial efforts have been focused on securing talent in digital transformation and finance. Our diversity recruitment business provides additional value for our other business segments by providing our registered users and members with access to employment opportunityopportunities at leading companies.
In 2018, we plan We have focused our efforts on placing talent in IT, Finance, and similarly related fields. The core diversity recruitment business also includes executive placement services for leading companies seeking to continuehire diverse talent. This business line addresses a need for employers who want to refine the operations within the United States to become more efficient, as we seek to profitably launch new productssecure leading diverse talent in management, senior management and services. Second, we intend to further grow our business in China.executive capacities.
Our strategy encompasses the following key elements:
● | Grow and diversify our member and client base; | |
● | Improve branding and brand awareness; | |
● | Utilize social media to effectively engage with the community; | |
● | Maximize revenue through synergies among the segments; | |
● | Launch new products and services; | |
● | Streamline infrastructure to capture efficiency; and | |
● | Continue to expand in diversity recruitment by growing our core offerings of recruitment advertising, |
We remain interested in pursuing acquisition and/or development opportunities that would increase returns of capital to our shareholders, such as our recent purchase of Expo Experts LLC and the purchase of an additional equity stake in RemoteMore USA, Inc. The timing, size, success and associated potential future capital commitments related to such opportunities are unknown at this time. Accordingly, a material acceleration of our growth strategy could require us to obtain additional capital through debt and/or equity financings. There can be no assurance that adequate debt and equity financing will be available on satisfactory terms.
Industry Overview
The diversity recruitment market is highly fragmented and is characterized by the following trends:
● | Regulatory Environment Favorable to Promoting Diversity in the Workplace. In August |
● | Growing Ethnic Diversity of the U.S. Population and Labor Force. Diversity recruitment is increasingly becoming a common, if not standard, business practice by major employers. Multicultural groups are the fastest growing segment of the U.S. population. Hispanics, African-Americans, Asian-Americans, and all other multicultural groups were estimated by the U.S. Census Bureau to make up |
● | Demographic Trend Toward | |
● | Rising Spending Power of Diverse Population. | |
● | Increasing Socialization of the Internet. The Internet has revolutionized how information is created and communicated - a wealth of information is readily accessible by browsing the Internet anonymously. However, we believe the social aspect of the Internet is emerging as an increasingly powerful influence on our lives. While an individual’s interpersonal connections traditionally have not been visible to others, social and professional networking websites enable members to share, and thereby unlock, the value of their connections by making them visible. Today, personal connections and other information, such as online social and professional networking websites, are increasingly becoming a powerful tool for a growing population of users to connect with one another. | |
|
Our Solutions
We currently operate in fourthree business segments:segments comprised of: (i) Professional Diversity Network (“PDN Network”), which includes online professional networking communities with career resources tailored to the needs of various diverse cultural groups,groups; (ii) National Association of Professional Women (“NAPW Network”), a women-only professional networking organization, and (iii) Noble Voice operationsRemoteMore USA (“Noble VoiceRemoteMore”), a career consultation and lead generation service, and (iv) China operations (“China Operations”). which provides companies with talented engineers to provide solutions to their software needs. In 2017, our PDN Network, NAPW Network, Noble Voice, and China Operations businesses represented 12.8%, 43.0%, 27.1%, and 17.1% of our revenues, respectively. In 2017 we launched the International Association of Women in China and in 2018, we have beenstarted transacting new NAPW Network memberships under the International Association of Women (“IAW”) brand in the USA. Also, on December 2, 2017,
In 2023, our PDN China held its largest educationNetwork, NAPW Network and training eventRemoteMore business units represented approximately 61%, 7%, and 32% of the year. The event, “The International Capital Leadership Summit”, took place in Beijing, China.our gross revenues, respectively.
For financial information about our operating segments please see Note 1715 of our Consolidated Financial Statements included in this Annual Report.
PDN Network
Recruitment Solutions. The PDN Network consists of several online professional job seeker communities dedicated to serving diverse professionals in the United States and employers seeking to hire diverse talent. We use the word “professional” to describe any person interested in the Company’s websites or career fairs presumably for the purpose of career advancement or related benefits offered by the Company, whether or not such person is employed and regardless of the level of education or skills possessed by such person. Leveraging the power of our affinity job seeker groups, these professionals harness the Company’s relationships with employers and recruiters to help advance their careers. We operate these recruitment affinity groups within the following sectors: Women, Hispanic-Americans, African-Americans, Asian-Americans, persons with disabilities, Military Professionals, and LGBTQ+. In addition, the Company also manages the job seeker websites and career fairs for prominent diverse membership-based organizations including but not limited to NAACP, National Urban League, and Kappa Alpha Psi. Employers and recruiters benefit from the Company’s relationship with these organizations and allows them to access a large pool of diverse jobs seekers in a centralized manner.
Our PDN Network has registered users for our recruitment services. We use the term “registered user” to describe a consumer who has affirmatively visited one of our properties, opted into an affinity group and provided us with demographic or contact information enabling us to match them with employers and/or jobs, and to sell them ancillary products and services. We expect that continued registered user growth of the PDN Network will enable us to further develop our list of online professional diversity networking and career placement solutions. We currently provide access to our PDN Network websites to registered users at no cost. The Company is always exploring various partnerships with other service providers to increase their offerings to both job seekers and employers. Our goal is to use an asset light approach to provide quality products and services, to increase our value to those we serve and drive additional capital without significant capital investments. For example, we announced our partnership with Web Scribble, the leading provider of career technology for professional and trade associations. Leveraging our existing assets through relationships with other technology firms allows us to grow our relationships with employers without investing in sophisticated, proprietary resources.
We offer employers of all sizes seeking to diversify their employment ranks, and to third-party recruiters (i) real-time solutions that deliver diverse talent, (ii) advertising and promotion of their job opportunities to our networks of diverse professionals and (iii) assistance with posting their job opportunities to career agencies in a manner compliant with the regulations and requirements of the Equal Employment Opportunity OFCCP, including those of state and local governments. Our recruitment advertising solutions promote hiring and retention success by providing job seekers with information that we believe allows them to look beyond a corporate brand, deeper into employers’ core values. We use sophisticated technology to deliver recruitment advertising using internet banner ads and email marketing targeted by geography and occupation, based upon data from our audiences’ profiles and job searches on our websites. As of December 31, 2023, we had approximately 300 enterprise companies and 1450 total customers utilizing our products and services.
Career Fairs. Through our events business, a part of our PDN Network business segment, we produce premier face-to-face and virtual recruiting events we call Professional Diversity Career Fairs. The Company’s diversity events help employers connect with a new marketplace of diverse professionals. We believe our events are the only events of their type endorsed by leading organizations such as the NAACP, National Urban League, Phi Beta Sigma and others. Participating employers range from Fortune 500 companies to federal, state and local agencies and from smaller employers to non-profit organizations, all of which seek a proactive approach to diversity recruiting. We also produce virtual and in-person career fairs as part of high-profile national events such as the NAACP National Convention, the Urban League National Conference and historically black sorority and fraternity conferences.
In January 2023, through a newly formed wholly-owned subsidiary, we purchased the assets and operations of Expo Experts LLC ("Expo Experts"), an Ohio limited liability company. Expo Experts specializes in producing premier face-to-face and virtual recruiting events for Engineering, Technology and Security Clearance positions. We believe that this acquisition complements our current career fair business.
PDNRecruits. We use matching and targeting technology to match members with our clients' open jobs on a renewing month-to-month license basis, designed to provide the Company with increasing residual income as we add new clients and sell additional licenses. The PDNRecruits product is a significant step towards increasing online sales in a scalable and residual manner.
PDN Diversity Placement. As part of our robust suite of recruitment offerings for employers, the Company offers a contingent hiring solution. It is a pay-per-hire offering that charges a percentage of the first year’s annual salary plus bonus for candidates we source and they hire. We believe our superior brand positioning, large network of diverse talent and our vast employer relationships position us well for continued growth in this segment.
NAPW NetworkingNetwork
The NAPW Network is a professional networking organization for women, with approximately 954,000 paid and unpaid members as of December 31, 2017.women. We use the termterms “member” or “membership” to describe a consumer who has viewed our marketing material, opted into membership with the NAPW Network, provided demographic information and engaged in an onboarding call with a membership coordinator. Paid memberships provide greater access to networking opportunities and other membership perks, including access to upgraded packages. We believe NAPW Network is the most prominent women-only professional networking organization in the United States. Members of the NAPW Network enjoy a wealth of resources dedicated to developing their professional networks, furthering their education and skills and promoting their businesses and career accomplishments.
We provide NAPW Network members with opportunities to network and develop valuable business relationships with other professionals through NAPW’s website, as well as at events hosted at approximately 209 local chapters across the United States. In March 2020, due to the COVID-19 pandemic, all events shifted to a virtual format hosted on third-party electronic platforms, such as Zoom. In October 2021, NAPW launched a Global virtual chapter to expand its audience outside of the United States. PDN Network products and services are being deployed to provide enhanced value to the NAPW membership experience, which we believe will be an important component in increasing both the number of new memberships and renewals of existing memberships.
NAPW eChapter.IAW Leadership Lab. NAPW operates a series of virtual national chapter meetings, hosted by Star Jones, President of NAPW, and Louise Newsome, National Director of Local Chapters. The events are held online bi-weekly, and include presentations by Ms. Jones, and a panel discussion including NAPW VIP members on topics focused on inspiring professional womenIn 2020, IAW launched the Leadership Lab platform as an enhancement to tackle and overcome challenges encountered in their careers and businesses. Topics are aligned with NAPW’s content strategy and include discussions on finding and igniting your passion, turning passion into opportunity, building confidence and professional growth through taking on new challenges. The on-line events also include the opportunity for members to network with other participants in the live chat room. The event attracts approximately 1,000 registrants and 300-350 participants. We define registrants as those who enroll in an eChapter meeting but for some reason fail to attend, and participants as those who both enroll and attend. We track registrants, though they do not attend, because they are an indicator of our marketing reach and membership engagement.
NAPW eCoaching.NAPW platform. IAW also operates a bi-weeklyoffers virtual coaching event,networking roundtable events throughout the month where VIP members who are personal and professional coachesestablished experts in their field provide participants with insight and tips on how to overcome career and business challenges. Hosted by Louise Newsome, NAPW’s National Director of Local Chapters,President, our unique virtual coaching platform connects our members with professional life and career coaches from within the NAPW membership base. Through this event,these events, members gain insight, guidance and inspiration to help them maximize their personal and professional potential. Topics include the Power of Intentionality - Turning Good Intentions Into Actions, The Power of Authentic Communication, and Confident Steps To Create a Thriving Life. The on-line events also include the opportunity for members to network with other participants in the live chat room. The event attracts approximately 800 - 1,000 registrants and 250 - 300 participants.Members are also able to access a recording of these events in the NAPW website.
Professional Identity Management.Management. Through the NAPW Network website, NAPW Network members are able to create, manage and share their professional identity online and promote themselves and their businesses. NAPW Network members can also promote their career achievements and their businesses through placement on the NAPW Network website’s home page, in proprietary press releases, in the online Member Marketplace and in monthly newsletter publications. In addition, the PDN Network provides members with direct access to employers seeking to hire professional women at a high level of connectivity and efficiency. Our synergies enable us to match members with our employment partners and then converse with the member to confirm such member’s desire to take the position to which we matched them, confirm that member is qualified for the position and directly notify the employer about a member that we have qualified and confirmed has competed an application within the employer’s recruitment system.
Networking Events. Historically, NAPW Network’s offline networking opportunities included monthly local chapter events and a large National Networking Conference NAPW. In 2017, we held Power Networking events in eight cities. We expect to continue to leverage the existing PDN Network events platform to host NAPW networking events in major markets around the nation. Because PDN Network networking career events are already being conducted we have the ability to add an additional event for NAPW at the same venue, one hour after the PDN Network event ends, at a substantially lower cost compared to hosting a stand-alone NAPW event. Employers who sponsor the PDN Network career networking events will have the opportunity to participate in the NAPW event and meet with members to discuss employment opportunities in what we believe is an inviting and upscale networking environment. We believe that providing the opportunity for NAPW Registered Users to meet, outside of the monthly local chapter events and the single national event, will add value to all NAPW Registered Users through allowing them to attend any or all of our PDN Network events. Non-members may also attend, subject to certain restrictions.
Access to Knowledge. In addition to networking and promotional opportunities, NAPW Network also provides to its members the ability to further develop their skills and expand their knowledge base through monthly newsletters, online and in-person seminars, webinars and certification courses.
Upgraded Memberships and Ancillary Products. Upgraded packages include the VIP membership, which includes additional promotional and publicity tools, as well as free access for the member and a guest to the National Networking Summits and continuing education programs;programs and the press release package, which provides members with the opportunity to work with professional writers to publish personalized press releases and thereby secure valuable online presence; and the registry product, which allows members to create a durable, historical record chronicling their career achievements.presence.
Partner Discounts. We also offer to NAPW Network members exclusive discounts on third-party products and services.
IAW Global Women’sWomen’s Network. This network offers in-person and online networking with like-minded women to foster enhanced career connections and opportunities. Members can promote their brands, identify new career opportunities, and build lasting relationships at monthly meetings and events. Hosted by Star Jones, theseThese interactive events allow members to improve their verbal resumes, expand their networks, and hear from inspiring speakers. Regional and National Conferencesnational conferences provide inspirational panels, unique networking opportunities, and the chance for members to promote their business or services. Our partners allow members to explore events outside the USUnited States and create opportunities to network with women around the world.
PDN NetworkRemoteMore USA
Recruitment Solutions. The PDN Network consists of several online professional networking communities dedicatedRemoteMore USA is an innovative, global entity that provides remote-hiring marketplace services for software developers and companies. Companies are connected with reliable, cost-efficient, vetted developers, and software developers are empowered to serving diverse professionals in the United States and employers seeking to hire diverse talent. We use the word “professional” to describe any person interested in the Company’s websites presumably for the purpose of career advancement or related benefits offered by the Company, whether or not such person is employed andfind meaningful jobs regardless of the level of education or skills possessed by such person. Our networking communities harness our relationship recruitment methodology to facilitate and empower professional networking within common affinities. We believe that those within a common affinity often are more aggressive in helping others within their affinity progress professionally. We operate these relationship recruitment affinity groups within the following sectors: Women, Hispanic-Americans, African-Americans, Asian-Americans, Disabled, Military Professionals, Lesbians, Gay, Bisexual and Transgender (LGBT), and Students and Graduates seeking to transition from education to career.
location. As of December 31, 2017, the Company had approximately 10,266,000 registered users. We use the term “registered user” to describe a consumer who has affirmatively visited one of our properties, opted into2023, we owned an affinity group and provided us with demographic or contact information enabling us to match them with employers and/or jobs, and to sell them ancillary products and services. We expect that continued registered user growth of the PDN Network will enable us to further develop our list of online professional diversity networking and career placement solutions. We currently provide access to our PDN Network websites to registered users at no cost. The Company is exploring various partnerships with other service providers to increase their offerings to both job seekers and employers. Our goal is to use an asset light approach to provide quality products and services, to increase our value to those we serve and drive additional capital without significant capital investments. For example, we announced our partnership with Diverst, the leading provider of Diversity & Inclusion software. Leveraging our existing assets through relationships with other technology firms such as Diverst allows us to grow our relationships with employers without investingapproximate 73% interest in sophisticated, proprietary resources.RemoteMore USA.
We offer to large and medium employers seeking to diversify their employment ranks, and to third party recruiters (i) real-time solutions that deliver diverse talent, (ii) advertising and promotion of their job opportunities to our networks of diverse professionals and (iii) assistance with posting their job opportunities to career agencies in a manner compliant with the regulations and requirements of the Equal Employment Opportunity OFCCP, including those of state and local governments. Our recruitment advertising solutions promote hiring and retention success by providing job seekers with information that we believe allows them to look beyond a corporate brand, deeper into employers’ core values. We use sophisticated technology to deliver recruitment advertising using internet banner ads and email marketing targeted by geography and occupation, based upon data from our audiences’ profiles and job searches on our websites. As of December 31, 2017, we had over 1,000 companies utilizing our products and services.
Networking Events. In addition to online networking, our registered users can participate in a number of local and national events held across the United States, including monthly NAPW local chapter meetings, business expos, charitable events and other events developed specifically to facilitate face-to-face networking with other professionals. In 2016, we held over 20 Career Networking Conferences, including NAPW’s three-city National Networking Summit Series and two online career fairs for veterans and their spouses. We schedule NAPW Network events after PDN Career Networking Conferences in order to create opportunities for employers participating in the PDN Network events to receive exposure to more candidates. In addition, we derive new members for both our PDN Network affinities and NAPW Network membership roll from participation in the events, promote retention among paying NAPW Network members and derive goodwill and positive publicity for our corporate brands.
Career Fairs.Through our Events business, a part of our PDN Network business segment, we produce premier face-to-face recruiting events we call Professional & Technical Diversity Career Fairs. The Company’s diversity events help employers connect with a new marketplace of diverse professionals. Our events are the only events of their type endorsed by leading organizations such as the NAACP, Urban League, BDPA and others. Participating employers range from Fortune 500 companies to federal, state and local agencies and from smaller employers to non-profit organizations, all of which seek a proactive approach to diversity recruiting. We also produce career fairs as part of high-profile national events such as the NAACP National Convention, the Urban League National Conference and HBCU sorority and fraternity conferences. In 2016 we added virtual career fairs serving veterans, women and STEM professionals.
PDN Quick.Our new Hire AdvantEdge product allows us to sell the qualified candidate lead referral service to employers via an e-commerce model. Hire AdvantEdge is a data-driven product, which matches registered users with jobs offered by our employment partners, qualifies those registered users for our partners’ jobs, secures an indication of interest, and directly provides our partner with the registered user’s information or submits an application on behalf of the registered user to our partner’s recruitment system. This allows us to deliver to recruiters qualified candidates in an efficient manner with very little lag in time. Hire AdvantEdge was made possible by the combination of Noble Voice’s current interaction with job seekers, its technology and Professional Diversity Network’s relationships with employers who desire to recruit qualified diverse talent. The PDN Network Hire AdvantEdge product delivers enhanced membership value to those registered users seeking to reenter the workforce or to upgrade their professional employment condition. This benefit comes at no additional cost to members, reinforcing the membership value proposition and creating long-term value.
PDN(Hired).We use matching and targeting technology to match members with our partners on a renewing license basis, designed to provide the Company with increasing residual income as we add new partners and sell additional licenses. Though in its early stages, the PDN(Hired) product is a significant step towards increasing online sales in a scalable and residual manner. In 2016 we combined the functionality of these two products and relaunched them as PDN Quick. This product meets the increased demand of entry level and hourly workforce needs of our clients. The product is a solution for America’s shrinking unemployment rate which has decreased the amount of readily available hourly/part-time workers but driven demand higher for growing employers. PDN Quick harnesses the 5,000 daily inbound candidate interactions PDN receives and geographically matches these candidates to our clients in real-time while also screening for the exact job requirements needed by each client. The product has a unique Pay Only For Performance structure in which employers only pay when qualified and interested candidates are delivered directly to them for specific in-demand roles. The product utilizes SMS Texting technology to reach interested candidates which creates very little lag time and increased savings and efficiencies for both PDN and our clients. PDN Quick is offered to employers on a Cost Per Applicant (“CPA”) basis. This enables employers to pay only for applicants they receive, as opposed to a diversity outreach campaign that promotes job openings for a fixed amount based on the number of jobs offered and the duration of the job promotions.
PDN Diversity Placement.In 2018, the Company launched a diversity placement service that has initially focused on high demand positions in digital transformation and finance. We are currently recruiting for leading employers who pay a monthly license fee and a percentage of the first year’s annual salary plus bonus for candidates we source and they hire. We believe our superior brand positioning, large network of diverse talent and our vast employer relationships position us well for continued growth in this segment in 2018 and beyond.
Noble Voice
The Noble Voice call centers screen and match callers for real-time job placement. The Noble Voice division typically conducts over 30,700 career consultations per week. We monetize these consultations by using proprietary technology to drive inexpensive online traffic to our offline call centers and generating value-added leads, which we sell to strategic partners who provide continuing education and career services. Noble Voice maintains a sophisticated Customer Relations Management database and interface (“CRM”) and marketing controls, and is able to efficiently manage the number of consultations to match demand. Specifically, Noble Voice promotes leading employers’ job openings online through our web properties and other online locations, and then seeks to match job seekers with promoted openings available through our employer partners. This allows our partners to acquire diverse applicants, either on a CPA or term base. Our PDN and Noble Voice segments coordinate their activities to create opportunities for diverse job seekers and value for employers who desire to recruit diverse talent. Noble Voice’s technology also allowed us to improve our methods of communication for lead-generation, deliver upgraded benefits to our NAPW Network members, PDN Network registered users and our clients through their client portal, launch NAPW Network’s new website in 2015, drive a significant increase in web traffic and time on site and greatly increase the rate of new user registrations on our online properties.
China Operations
The Company began establishing business operations in China in 2017. Our business activities, similar to those in the United States, will focus on providing tools, products and services in China, which will assist in personal and professional development. Our business plans are developed in an asset light format, with the goal of providing maximum positive results for the Company and our customers, with the least capital investment possible. We are cooperating with existing companies and organizations in China in a manner that will deliver best in class products and services, in a short time frame with minimum investment from the Company.
Women’s Networking in China
The Company’s NAPW women’s networking asset gives us the ability to develop and begin similar affinity networking operations in China. We have named our China expansion of NAPW “The International Association of Women” (the “IAW”). IAW will have similar elements as NAPW, but its scope has been customized and expanded to meet the particular needs of Chinese women. The association will be supported by a proprietary web platform that will have key networking functions, including but not limited, to members profile, with members picture and biography. The site will facilitate searching for other members, adding members to one’s platform, posting alerts and updates, endorsing members, suggesting members to other members, job seeking functions, job opportunity advertising from employers seeking to hire IAW members and other functions to support personal and professional development. The IAW website will also serve as a platform for product and service offerings for training and social networking for women in China. IAW plans to integrate various resources to build a new concept for clients : to create part of the cross-border internet, to mix traditional models with internet models and to explore online and offline resources as well as to allow members to build individual social circles of one’s own in the new internet age.
More than only an online network, IAW is intended to be a bilingual, international social platform through which members can enjoy high quality private customized service. We plan on having a very significant structure of off-line activities, events and resources, to facilitate personal and professional development of women in China and further, to expand benefits to other women in other nations. In the near term, we plan on leveraging our NAPW capabilities to provide benefits for our IAW members traveling in the United States. Furthermore, IAW will provide members with personal assistance by which members can enjoy one to one high-end services determined by members’ immediate needs. The platform will provide financial “account housekeepers”, health advisors, exclusive image designers, legal consultations, translation orientation, child care referrals and other comprehensive high-end services in China.
Education and Training for Accomplished Chinese Business People
The Company plans on launching education and training seminars in China and in the United States. The events in China will feature leading experts in business, finance, social networking and lifestyle issues. These events will benefit participants by delivering timely, focused and meaningful content, and at the same time, allow for participants to network together in a manner that will be mutually beneficial. We also plan on starting experiential educational travel seminars, where we will host smaller groups to travel to the United States for extended education, training and mutual cooperation with respected members of the United States Society.
The Company held its first event on March 25, 2017, the 2017 “Sharing Economy Summit,” which was hosted by Hangzhou Shihai Cultural Creativity Co., Ltd. at the Dongguan Malachite International Hotel. Its theme addressed numerous issues, including how to move from traditional communications to modern networking and how to transform and upgrade businesses by seizing the opportunities of the sharing economy in the internet era. The summit attracted more than 2,000 participants.
Since our first event we have held additional events in China, culminated by our final and largest event in December 2017. The event, produced as a series of summit events, was held on December 2-3, 2017 in Beijing, China at the Jiuhua Resort and drew nearly 5,000 paid and non-paid participants both in person and online. The event company behind the event was Shanghai Yuanfu Cultural Company, known for previously having worked on the Olympics. The event was organized by PDN (China) International Culture Development Co. Ltd and Jiangxi PDN Culture Media Co.,Ltd, and the co-hosts of the event were Xinhua News Agency and China Fortune Media Group. Due to strong demand, the event was made available in China via a paid online webcast.
PDN formed our relationship with China Fortune Media Group with the intent of establishing an international elite entrepreneurial club. This club charges a membership fee and provides benefits to members working with national and foreign capital sources, investment professionals, and projects with the goal of accessing capital and financial resources both at home and abroad.
China Fortune Media Group was founded and established by the Xinhua News Agency and approved by the State Council and the Central Publicity Department. It consists of China Securities Journal, Shanghai Securities News, Economic Information Daily, Xinhua Publishing House, China Fortune Net and Huaxin Asset Management Company. The group was created by Xinhua News Agency as a comprehensive, state-of-the-art technological, omni-media modern media group.
The Company received positive feedback from attendees about the topic of the forum, and especially about Vice Chairman of the Nasdaq, Mr. Bruce Aust’s participation. Mr. Aust participated in an exclusive one-on-one Q&A session with PDN President Ms. Star Jones. Afterwards, they were joined by other prominent Chinese CEOs for a roundtable discussion.
Operations: Sales, Marketing and Customer Support
Sales and Marketing
We sell NAPW/IAW Network membership subscriptions offline through our NAPW/IAW Network sales force, which currently includes 21 sales professionals, all of whom sell initial membership services. We developed a secure, work-from-home technology along with a training and supervision platform aimed at reducing the overhead costs, increasing per-representative profitability, and offering our sales professionals flexible working arrangements. All sales representatives are capable of selling upgraded memberships and ancillary products. We believe that we maintained high visibility for the NAPW Network during 2017 through its nearly 300,000,000 advertisements served online, in-person impressions through its live networking activities and interactions via its online properties and social media accounts. The number was lower than previous years as we segmented ads and targeted our audiences, which was designed to yield a lower cost per impression and provide a higher return per marketing dollar spent.
Our PDN sales resources for recruitment and recruitment advertising products and services include a sales force with 117 sales professionals, third-party strategic partners who deliver employers with demand for our products, and technology, which facilitates e-commerce transactions. We market directly to employers and third-party recruiters. Our sales team uses a combination of telephone, email and face-to-face marketing, including personal visits to companies or their recruitment agencies, as well as appearances at industry and trade group events where diversity recruitment recruiters are in attendance. We have also formed strategic alliances with parties who are able to help extend our organic reach. In addition, we are developing purely online marketing channels to bring recruiters to us in bulk and use products based on a matching and targeting technology to facilitate sales. Our recruitment and recruitment advertising sales force is divided between three groups: (i) the “table-setters,” who are responsible for setting up first meetings with prospect companies, (ii) the career sales professionals, who conduct the first meeting and mature the conversation to a successful conclusion, and (iii) sales professionals who provide ongoing account management and are responsible for successful client renewals. We have specialty units within our sales force dedicated to serving: (i) federal, state and local governments and companies and contractors who serve these governmental entities, (ii) small and medium sized businesses as defined by companies with less than 2,500 employees, and (iii) large enterprises with greater than 2,500 employees.
Noble Voice’s main operation is housed in Chicago, IL after PDN consolidated offices into one location in August 2017. The Chicago call center isWe sell NAPW/IAW Network membership subscriptions offline through our NAPW/IAW Network sales force, which currently includes two sales professionals, each of whom sells initial membership services. We also support online membership subscriptions through online sales via our website. We developed a secure, work-from-home technology along with a training and supervision platform aimed at reducing the overhead costs, increasing per-representative profitability, and offering our sales professionals flexible working arrangements. All sales representatives are capable of supporting roughly 100 call center representatives at any one moment. Currently, 58 total agents are employed in the Chicago location. Additionally, Noble Voice employs 62 agents work as independent contractors in a work-at-home model. These agents are centered in the Detroit, MI area. Nearly 100% of Noble Voice call traffic is generated through an inbound call model stemming from SMS text messaging and/or organic traffic from websites. Noble Voice sends roughly 95% of these texts itselfselling upgraded memberships and purchases the remaining inbound calls from partnerships with outside vendors, once those companies are properly vetted and deemed compliant with appropriate regulations and requirements.ancillary products.
RemoteMore contracts with companies that are in need of customized software development and pairs them with developers from a database of developers. Services vary from simple software solutions to detailed programming where teams of developers work together.
Customer Support Compliance and TestingCompliance
In addition to our sales professionals, we also employ support teams to provide customer support, compliance and testing.enhance member experience. Our customer support teams located in our Garden City, NY and Chicago, IL offices, work together to improve engagement with our members and to ensure a high degree of member satisfaction and retention. Our customer support teams also work with our Development and Executive teams to identify new lead-generation, sales and membership product opportunities, and to test those, as well as new approaches to our current sales. Our compliance team focuses on ensuring the integrity of the NAPW Network sales process. The team works closely with customer support and sales management to ensure that sales are conducted in an ethical manner and to identify sales representatives who would benefit from enhanced training. Our testing team consists of representatives who work with our Development and Executive teams to identify new lead-generation, sales and membership product opportunities, and to test those as well as new approaches to our current sales.
Our Strengths
We believe the following elements give us a competitive advantage to accomplish our mission:
● | Dedicated Focus on Diverse Professionals. Our focus on providing career opportunities for diverse professionals differentiates us from other online | |
● | Online and | |
● | Platform That Harnesses the Power of Web Socialization.We believe that our membership base will continue to grow and that our platform will be an increasingly powerful tool that enables our members to leverage their connections and shared information for the collective benefit of all of the participants on our platform. We believe that we are the first online professional network to focus on the diversity recruitment sector. | |
● | Relationships with Strategic Partners.We |
● | Relationships with Professional Entities & Organizations.Our team has experience working with multicultural professional organizations. We partner with a number of leading minority professional organizations, |
○ | DisabledPersons.com | |
○ | HireVeterans.com | |
○ | Delta Sigma Theta | |
○ | Iota Phi Theta | |
○ | Kappa Alpha Psi | |
○ | Phi Beta Sigma | |
○ | Black Women TalkTech | |
○ | ||
Job Opportunities for Disabled American Veterans (JOFDAV) | ||
○ | PR Girl Manifesto | |
○ | ||
National Association for the Advancement of Colored People (NAACP) | ||
○ | The National Urban League | |
○ | Disability Solutions | |
○ | TechLatino | |
○ | LeanIN Latinas | |
○ | ERG Alliance | |
○ | Gamma Phi Omega | |
○ | Lambda Sigma Upsilon | |
○ | Sigma Gamma Rho | |
| ○ | The Authentic Asian | |
○ | Alpha Phi Alpha |
● | Customized Technology Platform. |
We believe that the following elements give us a competitive advantage with respect to the NAPW Network:
● | Exclusive Focus on Professional Women. As a result of NAPW Network’s exclusive focus on professional women, we believe that through NAPW Network we provide a secure and less intimidating environment within which our members can successfully network and establish new and lasting business relationships. | |
● | Attractive Industry Demographic Trends.Favorable demographic trends regarding women’s participation in the labor force will further the growth in NAPW Network’s membership base and we have first-mover advantage with respect to generalized professional networking for women. | |
● | Large | |
● | Comprehensive Product and Service Offerings to Deliver Value to Members.We believe that our comprehensive product offerings provide women valuable tools to help them advance their careers and expand their businesses. Through networking opportunities online and at local chapter events in their communities, regional events and the NAPW Network national | |
● |
|
Strategic Alliances
We consider our partner alliances to be a key value to our clients because it enables us to expand our job distribution and outreach efforts. We continue to expand our relationships with key strategic partners that we believe are valuable to our core clients, as noted in section “Our Strengths” above.
Operations: Geography
Our headquarters is located in Chicago, Illinois, and houses our Executive Co-Chairman and our CFO,key executives, as well as many of our sales, customer support, marketing and IT personnel. We also have an office in Minnetonka, MN where our telesales team for our Events business is located. Websites for the PDN Network are hosted by Engine Yard based in San Francisco, California. Engine Yard provides a robust and easy platform for our hosting needs, allowing us to scale up resources to meet our peak needs. It also allows us to quickly and easily deploy website updates. Our websites have backup and contingency plans in place in the event that an unexpected circumstance occurs.
Membership service operations for the NAPW Network are located in Garden City, New York. NAPW Network’s newsletter and other publication operations are also based in Garden City, New York.
Noble Voice maintains a call center and has telesales agents in Chicago, Illinois.
Our headquarters in China is located in Guangzhou, Guangdong Province, China. We also have an office in Jiangxi, China.
Intellectual Property
To protect our intellectual property rights, we rely on a combination of federal, state and common law rights, as well as contractual restrictions. We rely on trade secret,secrets, copyright and trademark rights to protect our intellectual property. We pursue the registration of our domain names and trademarks in the United States. Our registered trademarks in the United States include the “iHispano” mark with stylized logo, the “Black Career Network” mark with stylized logo, the “Professional Diversity Network” mark with our tagline “the power of millions for the benefit of one,” the name “National Association of Professional Women” and “NAPW,” and the name “International Association of Women” and “IAW.”“IAW”, as well as others. We also own the copyrights to certain articles in NAPW publications. We strive to exert control over access to our intellectual property and customized technology by entering into confidentiality and invention assignment agreements with our employees and contractors and confidentiality agreements with third parties in the ordinary course of our business.
Our efforts to protect our proprietary rights may not be successful. Any significant impairment of our intellectual property rights could adversely impact our business or our ability to compete. In addition, protecting our intellectual property rights is costly and time-consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and adversely affect our operating results.
Competition
We face significant competition in all aspects of our business. Specifically, with respect to our members and our recruitment consumer advertising and marketing solutions, we compete with existing general market online professional networking websites, such as LinkedIn, Indeed, Zip Recruiter, and Monster Worldwide, Inc., as well as ethnic minority focused social networking websites, such as Black Planet and LatPro,Diversityjobs.com, Workplacediversity.com, and other companies such as Facebook, Google, Microsoft and Twitter that are developing or could develop competing solutions. We also generally compete with online and offline enterprises, including newspapers, television and direct mail marketers that generate revenue from recruiters, advertisers and marketers, and professional organizations. With respect to our hiring solutions, we also compete with traditional online recruiting companies such as Career Builder, talent management companies such as Taleo, and traditional recruiting firms. With respect to our call center business focused on lead generation, Noble Voice potentially competes with a large number of call centers of various sizes. However, Noble Voice focuses on career and for-profit education lead generation. While there is competition in that niche, the industry subset in which Noble Voice competes presents an opportunity for collaboration rather than true competition. Additionally, the size of our Noble Voice operation allows for continued relationships with lead aggregators as long as those companies wish to continue as well as the potential expansion of business contracts within the niche.
Larger, more well-established companies may focus on professional networking and could directly compete with us. Other companies might also launch new competing services that we do not offer. Nevertheless, we believe that our focus on diverse online professional networking communities and the number of registered users or members, as the case may be, overall and within each affinity group that we serve, are competitive strengths in our market.
Government Regulation
We are subject to a number of federal, state and foreign laws and regulations that affect companies conducting business on the Internet. These laws are still evolving and could be amended or interpreted in ways that could be detrimental to our business. In the United States and abroad, laws relating to the liability of providers of online services for activities of their users and other third partiesthird-parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the advertisements posted or the content provided by users. Any court ruling or other governmental action that imposes liability on providers of online services for the activities of their users and other third parties could materially harm our business. In addition, rising concernconcerns about the use of social networking technologies for illegal conduct, such as the unauthorized dissemination of national security information, money laundering or supporting terrorist activities may in the future produce legislation or other governmental action that could require changes to our products or services, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our service.
In the area of information security and data protection, many states have passed laws requiring notification to users when there is a security incident, or security breach for personal data, or requiring the adoption of minimum information security standards that are often unclear and difficult to implement. The costs of compliance with these laws are significant and may increase in the future. Further, we may be subject to significant liabilities if we fail to comply with these laws.
We are also subject to federal, state and foreign laws regarding privacy and protection of member data. We post on our websites our privacy policy and terms of use. Compliance with privacy-related laws may be costly. However, any failure by us to comply with our privacy policy or privacy-related laws could result in proceedings against us by governmental authorities or private parties, which could be detrimental to our business. Further, any failure by us to protect our members’ privacy and data could result in a loss of member confidence in us and ultimately in a loss of members and customers, which could adversely affect our business.
Because our services are accessible worldwide, certain foreign jurisdictions may claim that we are required to comply with their laws, including in jurisdictions where we have no local entity, employees or infrastructure.
Our direct marketing operations with respect to the NAPW Network are subject to various federal and state “do not call” list requirements. The Federal Trade Commission has created a national “do not call” registry. Under these federal regulations, consumers may have their phone numbers added to the national “do not call” registry. Generally, we are prohibited from calling anyone on that registry. In September 2003, telemarketers were grantedTelemarketers are required to pay a fee to access to the registry and are now required to compare their call lists against the nationalnation's “do not call” registry at least once every 31 days. Telemarketers are required to pay a fee to access the registry. Enforcement of the “do not call” provisions began in late 2003, and theThe rule provides for fines of up to $16,000 per violation and other possible penalties. These rules may be construed to limit our ability to market our products and services to new customers. Further, we may incur penalties if we do not conduct our telemarketing activities in compliance with these rules.
Our opt-in process with respect to Noble Voice is governed by the provisions of the Telephone Consumer Protection Act of 1991, as updated (“TCPA”), and other federal and state laws and regulations. Under these regulations, certain types of telephone solicitations are restricted and consumers must affirmatively opt in to being contacted by various methods including automated dialing systems and via text messaging. The TCPA provides for a private right of action against companies that violate its provisions, and allows consumers to sue for up to $1,500 per violation. These regulations may be construed to limit our ability to market our products and services to new customers. Further, we may incur penalties if we do not conduct our opt-in process in compliance with these rules.
Seasonality
Our quarterly operating results are affected by the seasonality of employers’ businesses. Historically, demand for employmentbusinesses and hiring is lower during the first quarter and typically increases during the remainder of the year.practices.
Employees
As of December 31, 2017,2023, we had a total of 16748 employees; 14545 were full timefull-time employees in various U.S. locations and 22 full-time employees in China.United States locations. We also regularly engage independent contractors to perform various services. As of December 31, 2017,2023, we engaged 793 independent contractors, primarily in our Noble Voice call center.contractors. None of our employees are covered by a collective bargaining agreement. We believe that we have good relationships with our employees.
In response to mandates and recommendations from federal, state and local authorities, as well as decisions we have made to protect the health and safety of our employees with respect to the COVID-19 pandemic, as authorities began updating mandates and recommendations, we adopted a hybrid model where employees worked from the office and remotely.
Corporate History
We were incorporated in Illinois in October 2003, under the name of IH Acquisition, LLC and changed our name to iHispano.com LLC in February 2004. In 2007, we changed our business platform and implemented technology to become the operator of communities of professional networking sites for diverse professionals. In March 2012, we changed our name to Professional Diversity Network, LLC. In March 2013, we completed our initial public offering and converted from an Illinois LLC to a Delaware corporation. In September 2014 weWe acquired the NAPW Network through a merger of NAPW, Inc., a New York corporation (“Old NAPW”) with and into NAPW Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”). Upon the closing of the merger under the Agreement and Plan of Merger, between Merger Sub, Old NAPW and Matthew B. Proman, the sole shareholder of Old NAPW, dated July 11, 2014 (the “Merger Agreement”), Old NAPW ceased to exist and Merger Sub continued as the surviving corporation, and a wholly-owned subsidiary of the Company, which was renamed to NAPW, Inc.in September 2014.
We started our operations in China in March 2017. We established two entities in Hong Kong, PDN (Hong Kong) International Education Ltd and PDN(Hong Kong)International Education Information Co., Ltd in January 2017, and the Company established its China subsidiary, PDN (China) International Culture Development Co. Ltd in March 2017. In November of 2017, Jiangxi PDN Culture Media Co., Ltd became a consolidated variable interest entity.
Our principal executive offices are located at 801 W. Adams55 E. Monroe Street, Suite 600,2120, Chicago, Illinois, 6060760603 and our telephone number is (312) 614-0950. Our Corporate website address iswww.prodivnet.comwww.ipdnusa.com. References to our website addressed in this report are provided as a convenience and do not constitute and should not be viewed as an incorporation by reference of the information contained on, or available through, the website. Therefore, such information should not be considered part of this report.
Investing in our common stocksecurities involves a high degree of risk.risk. You should carefully consider the risks and uncertainties described below together with all of the other information in this Annual Report, including our consolidated financial statements and related notes, before making an investment indecision. The risks described below are not the only ones we face. Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our common stock ..Ifbusiness operations. Our business could be harmed by any of the following risks are realized, our business, results of operations, cash flows and financial condition could be materially and adversely affected.In that event, the marketthese risks. The trading price of our common stock or other securities could decline due to any of these risks, and you may lose all or part of your investment.
Risks Related to Our Business and Financial Condition
We have incurred net losses, our liquidity has been significantly reduced and we could continue to incur losses and negative cash flow in the future.
We recorded a net loss from continuing operations of approximately $22.3$4.5 million for the year ended December 31, 20172023, and $4.1$3.1 million for the year ended December 31, 2016.2022. Our revenue declinedrevenues decreased from $26.2 million to $22.1$8.3 million during 2017, yet2022 to $7.7 million during 2023, and our costs and expenses increased from $29.8 million to $46.1 million, and as a result our losses from operations increased from $3.6 million to $24.0$11.4 million during 2017. Included in the year ended December 31, 2017 is a $14.62022, to $12.2 million goodwill impairment charge.during 2023. In addition, we used $6.3approximately 3.0 million in cash flow from continuing operations during the year ended December 31, 2017.2023. Our independent registered public accounting firm has included in its audit report for the year ended December 31, 2023, an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. We will need to generate increasedcontinue to increase revenues, and implement aggressive cost managementreduce our corporate operating expenses, raise capital through the issuance of common stock, issue capital in relation to our line of equity, or enter into a strategic merger or acquisition, to achieve profitability and positive cash flow from operations. Despite our efforts, including our restructuring and cost-cutting program, we may not achieve profitability or positive cash flow in the future, and even if we do, we may not be able to sustain being profitable.
The market for online professional networks is highly competitive, and if we are unable to compete effectively our sales and results of operations will suffer.
We face significant competition in all aspects of our business, and we expect such competition to increase, particularly in the market for online professional networks.
Our industry is rapidly evolving and is becoming increasingly competitive. Larger and more established online professional networking companies, such as LinkedIn or Monster Worldwide, may focus on the online diversity professional networking market and could directly compete with us. Rival companies or smaller companies, including application developers, could also launch new products and services that could compete with us and gain market acceptance quickly. Individual employers have and may continue to create and maintain their own network of diverse candidates.
We also expect that our existing competitors will focus on professional diversity recruiting. A number of these companies may have greater resources than we do, which may enable them to compete more effectively. For example, our competitors with greater resources may partner with wireless telecommunications carriers or other Internet service providers that may provide Internet users, especially those that access the Internet through mobile devices, incentives to visit our competitors’ websites. Such tactics or similar tactics could decrease the number of our visits, unique visitors and number of users and members, which would materially and adversely affect our business, operating results and financial condition.
Additionally, users of online social networks, such as Facebook, may choose to use, or increase their use of, those networks for professional purposes, which may result in those users decreasing or eliminating their use of our specialized online professional network. Companies that currently do not focus on online professional diversity networking could also expand their focus to diversity networking. LinkedIn may develop its own proprietary online diversity network and compete directly against us. To the extent LinkedIn develops its own network or establishes alliances and relationships with others, our business, operating results and financial condition could be materially harmed. Finally, other companies that provide content for professionals could develop more compelling offerings that compete with us and adversely impact our ability to keep our members, attract new members or sell our solutions to customers.
Our business depends on strong brands, and any failure to maintain, protect and enhance our brands would hurt our ability to retain or expand our base of members, enterprises and professional organizations, or our ability to increase their level of engagement.
Maintaining, protecting and enhancing all of our brands is critical to expanding the base of members for the PDN Network and NAPW Network and increasing their engagement with the product and services offerings of the Company, and will depend largely on our ability to maintain member trust, be a technology leader and continue to provide high-quality offerings, which we may not do successfully in the future. We have devoted significant resources in developing our brands, particularly NAPW. That brand is predicated on the idea that professional women will trust it and find value in building and maintaining their professional identities and reputations on the NAPW Network platform. Despite our efforts to protect our brands and prevent their misuse, if others misuse any of our brands or pass themselves off as being endorsed or affiliated with the PDN Network or the NAPW Network, it could harm our reputation and our business could suffer. If members of any of our networks or potential members determine that they can use other platforms, such as social networks, for the same purposes as or as a replacement for the PDN Network or the NAPW Network, or if they choose to blend their professional and social networking activities, our brands and the business of the Company could be harmed. Members of any of our networks could find that new product or service offerings that are introduced are difficult to use or may feel that they degrade their experience with our organization, which could harm the reputation of the networks and the Company for delivering high-quality offerings. Our brands are also important in attracting and maintaining high performing employees. If we do not successfully maintain strong and trusted brands for our networks, our business can be materially and adversely affected.
If we do not continue to attract new members to the NAPW Network, or if existing NAPW Network members do not renew their subscriptions, renew at lower levels or on less favorable terms, or fail to purchase additional offerings, we may not achieve our revenue projections, and our operating results would be harmed.
Membership fees and related services from NAPW have declined in recent periods. In order to grow the NAPW Network, we must continually attract new members to the NAPW Network, sell additional product and service offerings to existing NAPW Network members and increase the level of renewals. Our ability to do so depends in large part on the success of our sales and marketing efforts. Unlike companies that provide more tangible products, the nature of our product and service offerings is such that members may decide to terminate or not renew their agreements because they do not see their cancellation as causing significant disruptions to their own businesses.
We must demonstrate to NAPW Network members that our product and service offerings provide them with access to an audience of influential, affluent and highly-educatedhighly educated women. However, potential members may not be familiar with our product and service offerings or may prefer other more traditional products and services for their professional advancement and networking needs. The rate at which we expand the NAPW Network’s membership base or increase its members’ renewal rates may decline or fluctuate because of several factors, including the prices of product and service offerings, the prices of products and services offered by competitors or reductions in their professional advancement and networking spending levels due to macroeconomic or other factors and the efficacy and cost-effectiveness of our offerings. If we do not attract new members to the NAPW Network or if NAPW Network members do not renew their agreements for our product and service offerings, renew at lower levels or on less favorable terms or do not purchase additional offerings, our revenue from the segment may grow more slowly than expected or decline.fall short of our projections.
We may not be able to successfully identify and complete sufficient acquisitions to meet our growth strategy, and even if we are able to do so, we may not realize the anticipated benefits of these acquisitions.
Part of our growth strategy is to acquire companies that we believe will add to and/or expand our service offerings.
Identifying suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to identify suitable candidates or complete acquisitions in a timely manner, on a cost-effective basis or at all. Even if we complete an acquisition, we may not realize the anticipated benefits of such an acquisition. Actual cost savings and synergies which may be achieved from an acquired entity may be lower than expected and may take a longer time to achieve than we anticipate. Our acquisitions have previously required, and any similar future transactions may also require, significant efforts and expenditures,expenditure, in particular with respect to integrating the acquired business with our historical business. We may encounter unexpected difficulties, or incur unexpected costs, in connection with acquisition activities and integration efforts, which include:
● | conflicts and inconsistencies in information technology and infrastructures; | |
● | inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures between us and an acquired entity; | |
● | difficulties in the retention of existing customers and attraction of new customers; | |
● | overlap of users and members of an acquired entity and one of our websites; | |
● | difficulties in retaining key employees; | |
● | the identification and elimination of redundant and underperforming operations and assets; | |
● | diversion of management’s attention from ongoing business concerns; | |
● | the possibility of tax costs or inefficiencies associated with the integration of the operations; and | |
● | loss of customer goodwill. |
If we fail to successfully complete the integration of an acquired entity, or to realize the anticipated benefits of the integration of an acquired entity, our financial condition and results of operations could be materially and adversely affected.
We rely heavily on our information systems and if our access to this technology is impaired, or we fail to further develop our technology, our business could be significantly harmed.
Our success depends in large part upon our ability to store, retrieve, process and manage substantial amounts of information, including our database of our members. To achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our information systems. Our future success will depend on our ability to adapt to rapidly changing technologies, to adapt our information systems to evolving industry standards and to improve the performance and reliability of our information systems. This may require the acquisition of equipment and software and the development, either internally or through independent consultants, of new proprietary software. Our inability to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to compete effectively would materially and adversely affect our business, financial condition and operating results.
Our direct sales strategy, which requires personal interaction with employers and third partythird-party recruiters, may limit our ability to grow recruitment revenue and recruitment advertising revenue.
As part of our strategy to market our products and services directly to employers and third partythird-party recruiters, we rely on our direct sales force for recruitment revenue and recruitment advertising revenue. We currently employ professionals in sales, sales support and marketing who are trained in selling our products and services. Since its creation in 2013, we have been optimizingWe continuously attempt to optimize the direct sales team and refiningrefine the manner in which our products and services are sold. While the Company made progress in growing its direct sales, we have not matured the sales force to the point of predictability, nor have we sold enough services to achieve profitability. There is no assurance that our direct sales strategy we will yield sufficient recruitment revenue and recruitment advertising revenue in the future.
We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our websites are accessible within an acceptable load time.
An element that is key to our continued growth is the ability of our members and other users that we work with to access any of our websites within acceptable load times. We call this website performance. We have experienced, and may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously, and denial of service or fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time.
If any of our websites are unavailable when users attempt to access them or they do not load as quickly as users expect, users may seek other websites to obtain the information or services for which they are looking and may not return to our websites as often in the future, or at all. This would negatively impact on our ability to attract members and other users and increase engagement on our websites. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, operating results and financial condition may be materially and adversely affected.
Our business involves higher risks associated with remote work.
RemoteMore’s business heavily relies on remote working with its customers, which means many contractors will use their own personal devices and home networks to perform work tasks. This presents some of the largest risks to the worker and the business. Many personal devices lack the hardened nature of a corporate device and other security capabilities, such as encryption, auto-backups, authentication and security monitoring, which may expose our business or our customers’ business to additional risk of cyber-attack. This remote working environment makes it more difficult to monitor contractor access to data, information sent and received online, and legitimacy of access.
Our systems are vulnerable to natural disasters, acts of terrorism and cyber-attacks.
Our systems are vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, cyber-attacks and similar events. For systems which are not based in cloud storage, we have implemented a disaster recovery program, maintained by a third partythird-party vendor, which allows us to move production to a back-up data center in the event of a catastrophe. Although this program is functional, it does not yet provide a real-time back-up data center, so if our primary data center shuts down, there will be a period of time that such website will remain shut down while the transition to the back-up data center takes place. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our hosting facilities could result in lengthy interruptions in our services. Although we carry cyber security insurance, our claims may exceed the insurance coverage, and we may not be fully compensated by third party insurers in the event of service interruption or cyber-attack. Furthermore, our business may never recover from such an event.
If our security measures are compromised, or if any of our websites are subject to attacks that degrade or deny the ability of members or customers to access our solutions, members and customers may curtail or stop use of our solutions.
Our members provide us with information relevant to their professional networking and/or career-seeking experience with the option of having their information become public or remain private. If we experience compromises to our security that result in website performance or availability problems, the complete shutdown of our websites or the loss or unauthorized disclosure of confidential information, our members may lose trust and confidence in us, and will use our websites less often or stop using our websites entirely. Further, outside parties may attempt to fraudulently induce employees, members or customers to disclose sensitive information in order to gain access to our information or our members’ or customers’ information. Because the methods used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address these methods or to implement adequate preventative measures. Any or all of these issues could negatively impact our ability to attract new members and increase engagement by existing members, cause existing members to close their accounts or existing customers to cancel their contracts, subject us to lawsuits, regulatory fines or other action or liability, thereby materially and adversely affecting our reputation, our business, operating results and financial condition.
The widespread adoption of different smart phones, smart phone operating systems and mobile applications, or apps, could require us to make substantial expenditures to modify or adapt our websites, applications and services.
The number of people who access the Internet through devices other than personal computers, including personal digital assistants, smart phones and handheld tablets or computers, has increased dramatically in the past few years and we believe this number will continue to increase. Each manufacturer or distributor of these devices may establish unique technical standards, and our services may not work or be viewable on these devices as a result. Furthermore, as new devices and new platforms are continually released, it is difficult to predict the problems we may encounter in developing versions of our services for use on these alternative devices and we may need to devote significant resources to the creation, support and maintenance of such devices. Our websites are designed using responsive technology and are built to provide a positive user experience on a user’s Internet device, whether a mobile phone, and tablet, laptop or personal computer. If we are slow to develop products and technologies that are compatible with such devices, we might fail to capture a significant share of an increasingly important portion of the market for our services.
If Internet search engines’engines’ methodologies are modified or our search result page rankings decline for other reasons, our member engagement and number of members and users could decline.
We depend in part on various Internet search engines, such as Google, Bing and Yahoo!, to direct a significant amount of traffic to our websites. Our ability to maintain the number of visitors directed to our websites is not entirely within our control. Our competitors’ search engine optimization (“SEO”) efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking. If search engine companies modify their search algorithms in ways that are detrimental to our new user growth or in ways that make it harder for our members to use our websites, or if our competitors’ SEO efforts are more successful than ours, overall growth in our member base could slow, member engagement could decrease, and we could lose existing members. These modifications may be prompted by search engine companies entering the online professional networking market or aligning with competitors. Our websites have experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our websites would materially harm our business and operating results. Our platform includes connectivity across the social graph, including websites such as Facebook, Google+, LinkedIn and Twitter.X (formerly Twitter). If for any reason these websites discontinue or alter their current open platform policy, it could have a negative impact on our user experience and our ability to compete in the same manner we do today.
Wireless communications providers may give their customers greater access to our competitors’competitors’ websites.
Wireless communications providers may provide users of mobile devices greater access to websites that compete with our websites at more favorable rates or at faster download speeds. This could have a material adverse effect on the Company’s business, operating results and financial condition. Creation of an unequal playing field in terms of Internet access could significantly benefit larger and better capitalized companies competing with us.
The effect of significant declines in our ability to generate revenue may not be reflected in our short-term results of operations.
We recognize revenue from sales of our hiring solutions over the life of a contract (typically 12 months) beginning the first month after the contract is signed. As a result, a significant portion of the revenue we report in each quarter is generated from agreements entered into during previous quarters. In addition, we may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declines in our ability to generate revenue may not be reflected in our short-term results of operations.
The reported number of our registered users is higher than the number of actual individual users, and a substantial majority of our visits are generated by a minority of our users.
The reported number of members in our networks is higher than the number of actual individual members because some members have multiple registrations, other members have died or become incapacitated, and others may have registered under fictitious names. Given the challenges inherent in identifying these accounts, we do not have a reliable system to accurately identify the number of actual members, and thus we rely on the number of members as our measure of the size of our networks. Further, a substantial majority of our members do not visit our websites on a monthly basis, and a substantial majority of our visits are generated by a minority of our members and users. If the number of our actual members does not meet our expectations or we are unable to increase the breadth and frequency of our visiting members, then our business may not grow as fast as we expect, which would materially and adversely affect our business, operating results and financial condition.
The existing global economic and financial market environment has had, and may continue to have, a negative effect on our business and operations.
Demand for our services is sensitive to changes in the level of economic activity. Many companies hire fewer employees when economic activity is slow. Following the financial crisis in 2008, and again following the development of the COVID-19 pandemic in 2020, unemployment in the U.S.United States increased and hiring activity was limited. Although the economy has begun to recover and unemployment in the U.S.United States has improved, if the economy does not continue to recover or worsens, or unemployment returns to high levels, demand for our services and our revenue may be reduced. In addition, lower demand for our services may lead to lower prices for our services. The volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if the economy does not fully recover or worsens, our business, results of operations and financial condition could be materially and adversely affected.
Our growth strategy may fail as a result of changing social trends.
Our business is dependent on the continuity of certain social trends, such as the increasing socialization of the Internet, the demographic trend towards women’s career advancement, the growing ethnic diversity of the United States population and labor force, a regulatory environment that promotes diversity in the workplace, the growing ethnic population’s spending power and the acceptance and growth of online recruitment and advertising. Some or all of these trends may change overtime.over time. For example, increased privacy concerns may jeopardize the growth of online social and professional network websites. Furthermore, it is possible that people may not want to identify in online social or professional networks with a focus on diversity at all. Or alternatively, people who belong to more than one diversity group (such as Hispanic-American females, among others) may not be drawn to our websites, which singularly focus on one specific diversity group. In addition, a recent Supreme Court case ruled that race-conscious admissions decisions by universities are constitutionally impermissible. While the decision does not apply by its terms outside of higher education, it remains to be seen what impact it may have on private sector hiring practices in businesses and corporations or on DEI programs and initiatives generally. To the extent that the Court’s decision leads corporations or other hiring entities to re-examine or scale back their diversity-related programs and initiatives, the market for some of our services may be adversely affected.
Our strategy may fail as a result of these changing social trends, and if we do not timely adjust our strategy to adapt to changing social trends, we will lose members, and our business, operating results and financial condition would be materially and adversely affected.
The regulatory environment favorable to promoting diversity in the workplace may change.
Federal and state laws and regulations require certain companies engaged in business with governmental entities to report and promote diverse hiring practices. Repeal or modification of such laws and regulations could decrease the incentives for employers to actively seek diverse employee candidates through networks such as ours and materially affect our revenues.
If our member profiles are out-of-date, inaccurate or lack the information that users and customers want to see, we may not be able to realize the full potential of our networks, which could adversely impact our future growth.
We do not impose any selective or qualification criteria on membership and do not verify that any member of a particular Company website qualifies as a member of the ethnic, cultural or other group identified by that website. If our members do not update their information or provide accurate and complete information when they join our networks or do not establish sufficient connections, the value of our networks may be negatively impacted because our value proposition as diversity professional networks and as a source of accurate and comprehensive data will be weakened. For example, our hiring solutions customers may find that certain members misidentify their ethnic, national, cultural, racial, religious or gender classification, which could result in mismatches that erode customer confidence in our solutions. Similarly, incomplete or outdated member information would diminish the ability of our marketing solutions customers to reach their target audiences and our ability to provide research data to our customers. Therefore, we must provide features and products that demonstrate the value of our networks to our members and motivate them to add additional, timely and accurate information to their profile and our networks. If we fail to successfully motivate our members to do so, our business, operating results and financial condition could be materially and adversely affected.
Our business depends on strong brands, and any failure to maintain, protect and enhance our brands would hurt our ability to retain or expand our base of members, enterprises and professional organizations, or our ability to increase their level of engagement.
We have devoted significant resources to develop our brands, particularly NAPW. That brand is predicated on the idea that professional women will trust it and find value in building and maintaining their professional identities and reputations on the NAPW Network platform. Maintaining, protecting and enhancing all of our brands is critical to expanding the base of members for the NAPW Network and PDN Network and increasing their engagement with the product and services offerings of the Company, and will depend largely on our ability to maintain member trust, be a technology leader and continue to provide high-quality offerings, which we may not do successfully in the future. Despite our efforts to protect our brands and prevent their misuse, if others misuse any of our brands or pass themselves off as being endorsed or affiliated with the NAPW Network or the PDN Network, it could harm our reputation and our business could suffer. If members of any of our networks or potential members determine that they can use other platforms, such as social networks, for the same purposes as or as a replacement for the NAPW Network or the PDN Network, or if they choose to blend their professional and social networking activities, our brands and the business of the Company could be harmed. Members of any of our networks could find that new product or service offerings that are introduced are difficult to use or may feel that they degrade their experience with our organization, which could harm the reputation of the networks and the Company for delivering high-quality offerings. Our brands are also important in attracting and maintaining high performing employees. If we do not successfully maintain strong and trusted brands for our networks, our business can be materially and adversely affected.
Failure to protect or enforce our intellectual property rights could materially harm our business and operating results.
We regard the protection of our intellectual property as critical to our success. In particular, we must maintain, protect and enhance our brands. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. In the ordinary course, we enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information and customized technology platform. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.
We pursue the registration of our domain names, trademarks, and service marks in the United States and in certain locations outside the United States. Effective trademark,trademarks, trade dress and domain names are expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We are seeking to protect our trademarks and domain names, a process that is expensive and may not be successful.
Litigation may be necessary to enforce our intellectual property rights or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business and operating results. We may incur significant costs in enforcing our trademarks against those who attempt to imitate our brands. If we fail to maintain, protect and enhance our intellectual property rights, our business and financial condition could be materially and adversely affected.
We process, store and use personal information and other data, which subjects us to governmental regulation, enforcement actions and other legal obligations or liability related to data privacy and security, and our actual or perceived failure to comply with such obligations could materially and adversely affect our business.
We receive, store and process personal information and other member data, and we enable our members to share their personal information with each other and with third parties. There are numerous federal, state, local and foreign laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other member data, the scope of which are changing, subject to differing interpretations and may be inconsistent between countries or conflict with other rules. We generally comply with industry standards and adhere to the terms of our privacy policies and privacy-related obligations to third parties (including voluntary third-party certification bodies such as TRUSTe). We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection. However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to users or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other member data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause our members and customers to lose trust in us, which could have an adverse effect on our business. Additionally, if third parties we work with, such as customers, vendors or developers, violate applicable laws or our policies, such violations may also put our members’ information at risk and could in turn have an adverse effect on our business.
Public scrutiny of Internet privacy issues may result in increased regulation and different industry standards, which could deter or prevent us from providing our current products and solutions to our members and customers, thereby materially harming our business.
The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet have recently come under increased public scrutiny. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation for the collection of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain on-line tracking and targeted advertising practices. In addition, various government and consumer agencies have also called for new regulations and changes in industry practices.
Our business could be adversely affected if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices or that require changes to these practices, the design of our websites, products, features or our privacy policy. In particular, the success of our business has been, and we expect will continue to be, driven by our ability to use the data that our members share with us in accordance with each of our website privacy policies and terms of use. Therefore, our business, operating results and financial condition could be materially and adversely affected by any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of data our members choose to share with us, or regarding the manner in which the express or implied consent of consumers for such use and disclosure is obtained. Such changes may require us to modify our products and features, possibly in a material manner, and may limit our ability to develop new products and features that make use of the data that our members voluntarily share with us.
Our business is subject to a variety of U.S. laws and regulations, many of which are unsettled and still developing and which could subject us to claims or otherwise materially harm our business.
We are subject to a variety of laws and regulations in the United States, including laws regarding data retention, privacy and consumer protection, which are continually evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting. For example, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted or the content provided by users. In addition, regulatory authorities are considering a number of legislative and regulatory proposals concerning data protection and other matters that may be applicable to our business. It is difficult to predict how existing laws will be applied to our business and the new laws to which we may become subject. See the discussion included in Part 1, Item 1. “Business – —Government Regulation” beginning on page 12 ofin this Annual Report.
If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain solutions, which would materially and adversely affect our business, financial condition and results of operations. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could materially harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could materially and adversely affect our business, financial condition and results of operations.
We are currently party to litigation and may in the future be subject to additional legal proceedings and litigation, which may be costly to defend and could materially and adversely affect our business results or operating and financial condition.
We are currently party to litigation and may be party to additional lawsuits in the normal course of business. Results of the litigation to which we are a party cannot be predicted with certainty and there can be no assurance that this litigation will be resolved in our favor. We are a party to one proceeding in which the court recently granted summary judgment against NAPW on claims of failure to pay overtime wages. These matters are described in more detail under the heading “Legal Proceedings.” in this Annual Report and our other periodic filings with the SEC. Litigation in general is often expensive and disruptive to normal business operations. We may face in the future allegations and lawsuits that we have infringed the intellectual property and other rights of third parties, including patents, privacy, trademarks, copyrights and other rights. Litigation, particularly intellectual property and class action matters may be protracted and expensive, and the results are difficult to predict. Adverse outcomes may result in significant settlement costs or judgments, including monetary damages, require us to modify our products and features while we develop non-infringing substitutes or require us to stop offering certain features.
From time to time,time-to-time, we may face claims against companies that incorporate open source software into their products, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our solutions, any of which could have a negative effect on our business and operating results.
Our success depends in large part upon our management and key personnel. Our inability to attract and retain these individuals could materially and adversely affect our business, results of operations and financial condition.
We are highly dependent on our management and other key employees. The skills, knowledge and experience of our management team, are critical to the growth of our business. In particular, Mr. Michael Wang,Adam He, our Chief Executive Officer, provides significant leadership in every aspect of our business operations and strategic direction. Mr. Jingbo Song, the company’s Executive Chairman is very important to our China expansion. His understanding of the China market and his relationships with business leaders is very valuable to the company’s future success. In the United States we have a diversified and strong group of experienced and talented leaders, including Ms. Star Jones our President, who is an expert in issues relating to diversity and networking. Ms. JonesHe is supported by a talented group of knowledgeable executives in business operations, sales and marketing, and information technology including Gary XiaoLarry Aichler, our CFOChief Financial Officer, and Joseph BzdylChad Hoersten, our Executive VP of Operations.Chief Technology Officer. Our future performance will be dependent upon the continued successful service of members of our management and key employees. We do not maintain life insurance for any of the members of our management team or other key personnel. Competition for management in our industry is intense, and although we have entered into employment agreements with certain members of our management team, we may not be able to retain our management and key personnel or attract and retain new management and key personnel in the future, which could materially and adversely affect our business, results of operations and financial condition.
The The COVID-19 pandemic has negatively impacted the global economy disrupting consumer spending, workforce development, and global supply chains and creating significant volatility and disruption of financial markets. The COVID-19 pandemic may continue to have an adverse effect on our business and financial performance. The extent of the impact of the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted. The COVID-19 pandemic could also adversely affect our liquidity and ability to access the capital markets. Uncertainty regarding the duration of the COVID-19 pandemic may adversely impact our ability to raise additional capital, or require additional capital, or require additional reductions in capital expenditures that are otherwise needed to implement our strategies. Risks Related to Our Common Stock Our significant stockholder and our directors and executive officers have substantial control over the Company and could limit your ability to influence the outcome of key transactions, including changes of control. Cosmic Forward Limited (“CFL”) beneficially owned approximately The market price for our securities may be subject to wide fluctuations and the value of an investment in our common stock may decline. The trading price of our common stock has been, and is likely to continue to be, volatile. ● price and volume fluctuations in the stock market, including as a result of trends in the economy as a whole or relating to companies in our industry; ● actual or anticipated fluctuations in our revenue, operating results or key metrics, including our number of members and unique visitors; ● investor sentiment with respect to our competitors, our business partners and our industry in general; ● announcements by us or our competitors of significant products or features, technical innovations, strategic partnerships, joint ventures or acquisitions; ● additional shares of our common stock being sold into the market by us or our existing stockholders or the anticipation of such sales; and ● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. The securities of technology companies, especially Internet companies, have experienced wide fluctuations subsequent to their initial public offerings, including trading at prices below the initial public offering prices. Factors that could affect the price of our common stock include risk factors described in this section. In addition, the securities markets have from Substantial future sales of shares of our common stock could cause the market price of our common stock to decline. The market price of our common stock could decline as a result of (i) substantial sales of our common stock, particularly sales by CFL and/or our directors, executive officers, employees, or other significant stockholders, (ii) a large number of shares of our common stock becoming available for sale, or (iii) the perception in the market that holders of a large number of shares intend to sell their shares. In June 2023, we entered into a stock purchase agreement with Tumim Stone Capital LLC (“Tumim Stone”), under which we have the right, but not the obligation, to sell to Tumim Stone, and The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. Following amendments approved by the Company’s stockholders in June 2017, November 2018 and June 2021, the Company was authorized to issue 750,000 shares under In April 2023, the Board of Directors adopted a new equity incentive plan, the Professional Diversity Network, Inc. 2023 Equity Compensation Plan (the “2023 Equity Compensation Plan”). The 2023 Equity Compensation Plan was approved by our stockholders on June 15, 2023. The 2023 Equity Compensation Plan supersedes and replaces the 2013 Plan, and no new awards will be granted under the 2013 Plan. For more information about our Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our Company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: ● authorize our board of directors to issue, without further action by the stockholders, up to 1,000,000 shares of undesignated preferred stock; ● establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors, and also specify requirements as to the form and content of a stockholder’s notice; ● that our directors may be removed only for cause and only by the affirmative vote of at least a majority of the total voting power of our outstanding capital stock, voting as a single class; and ● do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock voting in any election of directors to elect all of the directors standing for election, if they should so choose). These provisions may frustrate or prevent attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Finally, We have in the We do not intend to pay dividends in the foreseeable future. We do not intend to declare or pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. CFL holds participation rights and other rights that could affect our ability to raise funds. Under our stockholders agreement with CFL and each of its shareholders In connection with the Techniques employed by short sellers may drive down the market price of the Short selling is the practice of selling securities that the seller does not own, but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is, therefore, in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short. While traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called research reports that mimic the type of investment analysis performed by large Wall Street firm and independent research analysts. These short attacks have Reports and information have been published about us which have occasionally been followed by a decline in our stock price. It is not clear what additional effects the negative publicity will have on the Company, if any, other than potentially affecting the market price of our common stock. Additionally, such allegations against the Company could negatively impact its business operations and ITEM 1B - UNRESOLVED STAFF COMMENTS Cybersecurity Risk Management and Strategy We face various cyber risks, including, but not limited to, risks related to unauthorized access, misuse, data theft, computer viruses, system disruptions, ransomware, malicious software and other intrusions. We utilize a multilayered, proactive approach, as part of our overall risk mitigation strategy, to identify, evaluate, mitigate and prevent potential cyber and information security threats through our cybersecurity risk management efforts. Our management team engages certain outside advisors and consultants to assist in the identification, evaluation, and management of cybersecurity risks and controls. To oversee and identify risks from cybersecurity threats associated with our use of third-party service providers, we maintain third-party risk management efforts designed to help protect against the misuse of information technology and security breaches. We also maintain cyber insurance coverage; however, such insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches. Our RemoteMore segment relies heavily on remote working with its customers and poses additional risks because contractors typically use their own devices in their work. RemoteMore has a number of policies in place to address these risks, including physical and electronic security measures, mandatory antivirus and antimalware software, multifactor authentication, a “principle of least privilege” policy that limits access only to what is needed for performing the employee’s work tasks, and other measures We have not, to date, identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations, or financial condition. Cybersecurity Governance and Oversight Management is responsible for the cybersecurity risk management program as well as actions to identify, assess, mitigate, and remediate material issues. The Company’s cybersecurity risk management program is supervised by our Chief Technology Officer (CTO), who reports directly to the Company’s Chief Executive Officer. The CTO and his team are responsible for leading cybersecurity strategy, policy, standards, architecture and processes. The Audit Committee of the Board of Directors is charged with oversight of cybersecurity matters and receives reports from the CTO on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s information security systems, and the emerging threat landscape. In accordance with our cyber incident response plan, the Audit Committee is promptly informed by management of cybersecurity incidents with the potential to materially adversely affect the Company or its information systems and is regularly updated about incidents with lesser impact potential. At least annually, the Board reviews and discusses the Company’s technology strategy in combination with the Company’s strategic objectives with Executive Management. In an effort to detect and defend against cyber threats, the Company annually provides its employees with various cybersecurity and data protection training programs. These programs cover timely and relevant topics, including social engineering, phishing, password protection, confidential data protection, asset use and mobile security, and educate employees on the importance of reporting all incidents promptly. We lease approximately We believe that our current facilities are adequate to meet our current needs. We may expand our facilities or add new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate ongoing operations and any such growth. However, we expect to incur additional expenses in connection with such new or expanded facilities. The penalties), NAPW and PDN ITEM 4 - MINE SAFETY DISCLOSURES Not applicable. ITEM 5 - MARKET FOR Listing Our common stock Holders As of March Dividends We have never declared or paid any cash dividends on our capital stock. We currently intend to use the net proceeds from any offerings of our securities and our future earnings, if any, to finance the further development and expansion of our business and do not intend or expect to pay cash dividends in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders, if any. Recent Sales of Unregistered Securities Not applicable. ITEM 7 - The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto in Item 8, Overview We are an operator of professional We currently operate in ● Helping employers address their workforce diversity needs by connecting them with the right candidates from our diverse job seeking communities such as African Americans, Hispanics, Asians, Veterans, individuals with disabilities and members of the LGBTQ+ community (with the ability to roll out to our other affinities); ● Providing a robust online and in-person network for our women members to make professional and personal connections; and ● Connecting companies with reliable, cost-efficient developers to meet their software needs. Sources of Revenue We generate revenue from (i) paid membership subscriptions and related services, (ii) Year Ended December 31, 2023 2022 Revenues: Membership fees and related services Recruitment services Contracted software development Consumer advertising and marketing solutions Recruitment Services. We provide recruitment services through PDN Network to medium and large employers seeking to diversify their employment ranks. Our recruitment services include recruitment advertising, job postings, Consumer Advertising and Cost of Revenue Cost of revenue primarily consists of Year Ended December 31, 2023 2022 Cost of revenues: PDN Network NAPW Network RemoteMore Results of Operations Total Revenues The following tables set forth our Year Ended December 31, Change Change 2023 2022 (Dollars) (Percent) (in thousands) Revenues: Contracted software development Total revenues decreased Revenues by Segment The following table sets forth each operating segment’s revenues for the Year Ended December 31, Change Change 2023 2022 (Dollars) (Percent) (in thousands) PDN Network RemoteMore During the year ended December 31, During the year ended December 31, Costs and Expenses The following tables set forth our costs and expenses for the Year Ended December 31, Change Change 2023 2022 (Dollars) (Percent) (in thousands) Cost and expenses: Cost of revenues Sales and marketing General and administrative Depreciation and amortization Total cost and expenses: Total costs and expenses increased ● The decrease in cost of revenues of approximately $799,000, as compared to the prior year, is predominately a result of decrease in third party computer service costs of approximately $491,000, a decrease of approximately $105,000 related to RemoteMore contractor expenses, which is a result of the aforementioned decrease in RemoteMore revenues, a decrease of approximately $111,000 of member benefits expenses related to NAPW operations, and a decrease of approximately $72,000 of other costs of revenues. Partially offsetting the decrease were approximately $109,000 of costs of revenues related to Expo Experts, for which there were no comparable expenses in the same period of the prior year, and $61,000 one-time contractor expenses relating to PDN operations in fiscal 2023 for which there were no comparable expenses in the same period of the prior year. ● The increase in sales and marketing expense of approximately $895,000, as compared to the same period in the prior year, is a result of increases in third party computer service costs of approximately $320,000, increases in payroll related costs of approximately $174,000, and increases in other purchased services of approximately $141,000. Also contributing to the increase were approximately $344,000 of costs related to Expo Experts operations, for which there were no comparable expenses in the same period of the prior year. Partially offsetting the increase were decreases in employee commission expenses of approximately $84,000. ● The increase in general and administrative expenses of approximately $878,000, as compared to the same period in 2022, was predominately due to settlement of litigation resulting in a one-time, non-cash gain of approximately $908,000 in fiscal 2022, for which there was no comparable transaction in fiscal 2023. Other comparable transactions in fiscal 2023, as compared to the same period in the prior year were increases in third party computer service costs of approximately $165,000, payroll related costs of approximately $145,000, and finance costs primarily related to our equity line of credit of approximately $124,000. Also contributing to the increase were approximately $202,000 of costs related to Expo Experts operations, for which there were no comparable expenses in the same period of the prior year. Partially offsetting the increases in general and administrative expenses in the current year, as compared to the same period in the prior year, were reductions in share-based compensation of approximately $132,000, mergers and acquisition costs of approximately $83,000, legal expenses of approximately $57,000 and approximately $345,000 in other related costs. ● The decrease in depreciation and amortization of approximately $152,000, as compared to the same period in the prior year, is predominately due to $666,000 of prior period amortization related to RemoteMore intangible assets, partially offset by amortization of approximately $475,000 related to Expo Experts intangible assets for which there were no comparable charges in the same period of the prior year, and approximately $35,000 of amortization related to PDN capitalized technology. Costs and Expenses by Segment The following table sets forth each operating segment’s costs and expenses for the Year Ended December 31, Change Change 2023 2022 (Dollars) (Percent) (in thousands) PDN Network NAPW Network RemoteMore Corporate Overhead Total cost and expenses: Costs and expenses related to our PDN Network increased Costs and expenses related to the NAPW Network increased Cost Corporate overhead expenses increased approximately $28,000 or 1.2% during the year December 31, 2023, as compared to the prior year, primarily as a result of an increase of Income Tax Benefit Year Ended December 31, Change Change 2023 2022 (Dollars) (Percent) (in thousands) Income tax benefit During the years ended December 31, In March 2020, our Board of Directors decided to suspend all operations in China. In December 2023, Management determined that there will be no further activity related to the operations in China and as a result, eliminated all balance sheet accounts in the consolidated balance sheets for the fiscal year ending December 31, 2023. This included the extinguishment of contract debt as allowed under Chinese business law and the write-off of non-cash assets. The results for operations of China are presented in the consolidated statements of operations and comprehensive loss as loss from discontinued operations. The following table presents results from discontinued operations for the years ended December 31, Year Ended December 31, 2023 2022 (in thousands) Revenues General and administrative Non-operating (expense) income Loss from discontinued operations before income tax Income tax expense Net loss from discontinued operations Net The following table sets forth each operating segment’s net Year Ended December 31, Change Change 2023 2022 (Dollars) (Percent) (in thousands) PDN Network NAPW Network RemoteMore Corporate Overhead Consolidated net loss from continuing operations Consolidated Net Loss from Continuing Operations. Non-GAAP Financial Measure Adjusted EBITDA We believe Adjusted EBITDA provides a meaningful representation of our operating performance that provides useful information to investors regarding our financial condition and results of operations. Adjusted EBITDA is commonly used by financial analysts and others to measure operating performance. Furthermore, management believes that this non-GAAP financial measure may provide investors with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. However, while we consider Adjusted EBITDA to be an important measure of operating performance, Adjusted EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Further, Adjusted EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled measures, as defined by other companies. The Year Ended December 31, 2023 2022 (in thousands) Loss from Continuing Operations Share-based compensation Litigation settlement reserve Loss attributable to noncontrolling interest Depreciation and amortization Other income (expense) Income tax benefit Adjusted EBITDA Liquidity and Capital Resources The following table summarizes our liquidity and capital resources as of December 31, As of December 31, 2023 2022 (in thousands) Working capital (deficit) from continuing operations As of December 31, 2023, we had cash and cash equivalents of $628,000 compared to cash and cash equivalents of $1,237,000 at December 31, 2022. Our principal sources of liquidity are our cash and cash equivalents, common stock. As of December 31, During 2023, we continued our focus on cost cutting initiatives and improving our overall profitability and shareholder value through new sales and marking initiatives and through strategic business collaborations. However, we have continued to generate negative cash flows from operations, and we expect In September 2022, in connection with the acquisition of a 9% interest in Koala Crypto Limited, the Company issued 863,392 shares of its common stock to the seller in a private placement (the “Consideration Shares”). The Consideration Shares were valued at $1,350,000 (see Note 8 – Long-term Investments). In December 2022, the Company entered into a stock purchase agreement with Ms. Hongjun Chen, in which the Company sold 1,162,791 shares of its common stock at a price In June 2023, we entered into a stock purchase agreement with Tumim Stone Capital LLC (“Tumim Stone”). Under the terms and subject to the conditions of the stock purchase agreement, we have the right, but not the obligation, to sell to Tumim Stone, and Tumim Stone is obligated to purchase, up to $12,775,000 worth of newly issued shares (the “Purchase Shares”) of our common stock, subject to certain limitations and the satisfaction (or, where permissible, the waiver) of the conditions set forth in the stock purchase agreement. Pursuant to the stock purchase agreement, we issued and sold 469,925 Purchase Shares to Tumim Stone, at a price of $4.256 per share (representing the average official closing price of the common stock on The Nasdaq Capital Market for the five consecutive trading days ending on the trading day immediately prior to the date of the stock purchase agreement), for aggregate gross proceeds to the Company of $2,000,000, in an initial purchase (the “Initial Purchase”). Pursuant to the terms of the stock purchase agreement, as consideration for Tumim Stone’s commitment to purchase shares of common stock at our direction from time to time, subject to the conditions and limitations set forth in the stock purchase agreement, upon execution of the stock purchase agreement on September 30, 2023, we also issued to Tumim Stone 176,222 shares of common stock (the “Commitment Shares”), valued at $4.256 per share (the same per share value as each Initial Purchase Share sold in the Initial Purchase), or a total aggregate value equal to $750,000 for the Commitment Shares. Thereafter, the purchase price of shares that we sell to Tumim Stone under this agreement (other than initial sale under that agreement) is 97% of the lowest daily average of the daily volume weighted average prices of our common stock for the three day period prior to our election to sell shares. In December 2023, we issued multiple purchase notices to Tumim Stone under the stock purchase agreement, through which we sold a combined 273,341 shares of our common stock at an average price of $1.70 for an aggregated gross proceeds of approximately $464,300. To date, we have sold 919,488 shares of our common stock to Tumim Stone (excluding the Commitment Shares) for gross proceeds of In December 2023, we entered into a stock purchase agreement with CFL, in which we sold 122,670 shares of our common stock at a price per In January 2023, we exercised our option to purchase an additional 20% interest in RemoteMore for $116,667, and in May 2023, the Company acquired an additional 7% interest in RemoteMore for approximately $235,000 furthering our interest in RemoteMore to 72.62%. In January 2023, through a newly formed wholly-owned subsidiary, we purchased the assets and operations of Expo Experts, LLC, an Ohio limited liability company, for a total consideration of $600,000 funded by the payment of $400,000 in cash and the issuance of restricted shares of PDN common stock valued at $200,000 based on the volume weighted-average price On January 31, 2022, the Company announced its Board of Directors had approved the repurchase of up to $2 million of its outstanding common stock from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased would be determined by the Company’s management based on its evaluation of market conditions and other factors. Repurchases could also be made under a Rule 10b5-1 plan of the Year Ended December 31, 2023 2022 (in thousands) Cash (used in) provided by continued operations Effect of exchange rate fluctuations on cash and cash equivalents Cash (used in) provided by discontinued operations Operating activities Net (decrease) increase in cash and cash equivalents Cash and Cash Equivalents The Company considers cash and cash equivalents to include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Net Cash Used in Operating Activities Net cash used in operating activities Net cash used in operating activities Net Cash Net cash used in investing activities from continuing operations during the year ended December 31, Net Cash Provided by Financing Activities Net cash provided by financing activities from continuing operations during the year ended December 31, Net cash provided by financing activities from continuing operations during the year ended December 31, Off-Balance Sheet Arrangements Since inception, we have not engaged in any off-balance sheet activities as defined in Regulation S-K Item 303(a)(4). Critical Accounting Policies and Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements. We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates. While our significant accounting policies are more fully described in Note 3 to our consolidated financial statements included at the end of this Annual Report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements. Accounts Receivable and Allowance for Credit Losses Our We adopted ASU 2016-13, Financial Instruments - Credit Losses, in the first quarter of fiscal 2023. This accounting standard requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Prior to the adoption of this accounting standard, we recorded incurred loss reserves against receivable balances based on current and historical information. We consider both current conditions and reasonable and supportable forecasts of future conditions when evaluating expected credit losses for uncollectible We are not party to any off-balance sheet arrangements that would require an allowance for credit losses in Goodwill and Intangible Assets When conducting Capitalized Technology Costs We account for capitalized technology costs in accordance with ASC 350-40, Internal-Use Software (“ASC Business Combinations ASC 805, Business Combinations (“ASC 805”), applies the acquisition method of accounting for business combinations to all acquisitions where the acquirer gains a controlling interest, regardless of whether consideration was exchanged. ASC 805 establishes principles and requirements for how the acquirer:a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Accounting for acquisitions requires the Company to recognize, separately from goodwill, the assets acquired, and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of comprehensive loss. Revenue Recognition Our principal sources of revenue are recruitment revenue, consumer marketing and consumer advertising revenue, membership subscription fees, Consumer marketing and consumer advertising revenue is recognized either based upon a Revenue generated from NAPW Network membership subscriptions is recognized ratably over the 12-month membership period, although members pay their annual fees at the commencement of the membership period. Revenues generated from RemoteMore consist of contracts entered into to provide customers with software solutions and are recognized in the month work is performed. Revenue Concentration We, Lease Obligations We leases office space under a non-cancelable operating lease that expires through September 2027. Our facility lease provides for periodic rent increases and may contain escalation clauses and renewal options. Our lease terms include options to We We determinee if a contract contains a lease at lease inception. If the borrowing rate implicit in the lease is not determinable, we use its incremental borrowing rate ("IBR") based Operating lease assets and lease liabilities are recognized at the Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities; instead, these are expensed as incurred and recorded as variable lease expense. Recent Accounting Pronouncements See Note 3 to our consolidated financial statements. Special Note Regarding Forward-Looking Statements This ● ● our expectations on the future growth and financial health of the online diversity recruitment industry and the industry participants, and the drivers of such growth; ● our expectations regarding continued membership growth; ● our beliefs regarding the increased value derived from the synergies among our segments; and ● our beliefs regarding our liquidity requirements, the availability of cash and capital resources to fund our business in the future and intended use of liquidity. These and other forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected, and could in the future affect, our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following: ● our ability to raise funds in the future to support operations; ● failure to realize synergies and other financial benefits from mergers and acquisitions within expected time frames, including increases in expected costs or difficulties related to integration of merger and acquisition partners; ● inability to identify and successfully negotiate and complete additional combinations with potential merger or acquisition ● our history of operating ● our limited operating history in a new and unproven market; ● increasing competition in the market for online professional networks; ● our ability to comply with increasing governmental regulation and other legal obligations related to privacy; ● our ability to adapt to changing technologies and social trends and preferences; ● our ability to attract and retain a sales and marketing team, management and other key personnel and the ability of that team to execute on the Company’s business strategies and plans; ● our ability to obtain and maintain intellectual property protection for our intellectual property; ● the outcome of current or future litigation regarding our business, including intellectual property claims; ● general and economic business conditions; and ● legal and regulatory Additional factors, risks and uncertainties that may affect our results, are discussed in Item 1A. “Risk Factors” of this Annual Report beginning on page 13, and in our subsequent filings with the SEC. You should consider these factors, risks and uncertainties when evaluating any forward-looking statements and you should not place undue reliance on any forward-looking statement. Forward-looking statements represent our views as of the date of this ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company’s consolidated financial statements required by this item are included on pages F-1 through ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A - CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures A control system, no matter how well conceived and operated, can provide only reasonable, not Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (principal executive ● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets; ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Our management conducted an evaluation of the effectiveness of our internal controls over financial reporting as of December 31, Based on this evaluation, This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K. Limitations on the Effectiveness of Controls The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute Changes in Internal Control over Financial Reporting (b) During the three months ended December 31, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements as defined in Item 408 of Regulation S-K. ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE With the exception of the description of our Code of Business Conduct and Ethics Code of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. The code of business conduct and ethics is available on our corporate website at www.ipdnusa.com. Any amendment to, or waiver from, a provision of such code of ethics will be posted on our website. Information on the Company’s website is not incorporated by reference herein. ITEM 11 - EXECUTIVE COMPENSATION Information regarding director and executive compensation is incorporated by reference from the discussion under the headings “Directors and Director Compensation” and “Executive Officers and Executive Compensation” in our definitive Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Securities Authorized for Issuance under Equity Compensation Plans On April 11, 2023, the Board of Directors adopted a new equity incentive plan, the Professional Diversity Network, Inc. 2023 Equity Compensation Plan (the “2023 Equity Compensation Plan”). The 2023 Equity Compensation Plan was approved by our stockholders on June 15, 2023. The 2023 Equity Compensation Plan supersedes and replaces the 2013 Plan, and no new awards will be granted under the 2013 Plan. The 2023 Equity Compensation Plan reserves 750,000 shares of common stock for issuance of awards to directors, officers, employees and qualifying consultants of the Company and its affiliates. Any awards outstanding under the 2013 Equity Compensation Plan ("2013 Plan") remain subject to and will be paid under the 2013 Plan. No new awards will be issued under the 2013 Plan. The following table provides information as of December 31, 2023, with respect to shares of our common stock that may be issued under our existing equity compensation plans: Equity Compensation Plan Information (a) (b) (c) Number of securities remaining available for future Number of issuance securities to be under equity issued upon compensation exercise Weighted - plans of outstanding average (excluding options, exercise price of securities warrants outstanding reflected in Plan category and rights options column (a)) 2013 Equity Compensation Plan (1) 2023 Equity Compensation Plan (2) Equity compensation plans not approved by our shareholders Total (1) Includes outstanding stock options to purchase shares of our common stock pursuant to the Company’s 2013 Equity Compensation Plan, as amended, as approved by our stockholders. (2) Includes outstanding restricted stock awards pursuant to the Company’s 2023 Equity Compensation Plan, as approved by our stockholders. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated herein by reference ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES Our independent registered public accounting firm is Sassetti, LLC, Oak Brook, Illinois (Auditor Firm ID No. 29). The information required by this item is incorporated herein by reference ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 1. Financial Statements The consolidated financial statements and schedules listed in the accompanying Index to Financial Statements on page F-1 are filed as part of this report. 2. Financial Statement Schedules The financial statement schedules have been omitted because they are not applicable or because the required information is given in the consolidated financial statements and notes thereto. 3. Exhibits The exhibits listed on the Index to Exhibits (pages 41 through 42) are filed as part of this Annual Report. None. Exhibit Description of Exhibit 2.1 2.2 3.1 3.2 * Filed herewith # Denotes a management contract or compensation plan or arrangement SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 29, 2024. PROFESSIONAL DIVERSITY NETWORK, INC. By: /s/ Xin (Adam) He Name: Xin (Adam) He Title: Chief Executive Officer (Principal Executive Officer) INDEX TO FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders of Professional Diversity Network, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Professional Diversity Network, Inc. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has incurred recurring operating losses, has a significant accumulated deficit, and will need to raise additional funds to meet its obligations and the costs of its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters To address this matter in our audit, we obtained an understanding of the design and implementation of internal controls as they relate to the revenue process, including the various revenue streams. Our audit procedures included, among others, reading the contract or sales order from the customer to identify the performance obligation(s), including any distinct performance obligations, and evaluating timing of revenue recognition for a sample of sales transactions. A sample of transactions from the billing system was traced to source data as well as cash receipts. We have served as the Company’s auditor since 2022. Oak Brook, Illinois March 29, 2024 Professional Diversity Network, Inc. and Subsidiaries December 31, 2023 2022 Current Assets: Cash and cash equivalents Accounts receivable, net Other receivables Prepaid expense and other current assets Current assets from discontinued operations Total current assets Property and equipment, net Capitalized technology, net Goodwill Intangible assets, net Right-of-use assets Security deposits Long-term restricted cash Other assets Long-term assets from discontinued operations Total assets Current Liabilities: Accounts payable Accrued expenses Deferred revenue Lease liability, current portion Current liabilities from discontinued operations Total current liabilities Lease liability, non-current portion Other long-term liabilities Deferred tax liability Total liabilities Commitments and contingencies Stockholders’ Equity Common stock, $0.01 par value; 45,000,000 shares authorized, 11,452,532 shares and 10,898,376 shares issued as of December 31, 2023 and 2022, and 11,452,008 and 10,367,431 shares outstanding as of December 31, 2023 and 2022 Additional paid in capital Accumulated other comprehensive income Accumulated deficit Treasury stock, at cost; 524 and 530,945 shares at December 31, 2023 and 2022 Total Professional Diversity Network, Inc. stockholders’ equity Non-controlling interest Total stockholders’ equity Total liabilities and stockholders’ equity The accompanying notes are an integral part of these consolidated financial statements. We have expanded our business into the Peoples’ RepublicRegulation and censorship of information disseminated over the Internet in China may adversely affect our business, and we may be liable for information displayed on, retrieved from, or linked to our Internet websites.government of China has adopted certain regulations governing Internet access and the distribution of news and other information over the Internet. Under these regulations, Internet content providers and Internet publishers are prohibited from posting or displaying over the Internet content that, among other things, violates Chinese laws and regulations, impairs the national dignity of China, or is obscene, superstitious, fraudulent or defamatory as determined by the applicable Chinese regulatory authorities. Failure to comply with these requirements, even inadvertently, could result in the revocation of required licenses and the closure of our websites. The website operator may also be held liable for such prohibited information displayed on, retrieved from or linked to such website. In addition, the Ministry of Industry and Information Technology has published regulations that subject website operators to potential liability for content included on their websites and the actions of users and others using their websites, including liability for violations of Chinese laws prohibiting the dissemination of content deemed to be socially destabilizing. The Ministry of Public Security has the authority to order any local Internet service provider, to block any Internet website maintained outside China at its sole discretion. Periodically, the Ministry of Public Security has stopped the dissemination over the Internet of information which it believes to be socially destabilizing. The State Secrecy Bureau, which is directly responsible for the protection of State secretsimpact of the Chinese government,COVID-19 pandemic has had, and is authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets in the dissemination of online information. If we are determined to violate these regulations, even if the offending content is not generated by us, we could be subject to civil or criminal penalties, fines, revocation of our Internet service provider license and other penalties which could materially impair our operations and our abilityexpected to continue in business. As these regulations are subject to interpretation by the relevant authorities, ithave, may not be possible for us to determine in all cases the type of content that could result in liability for us as a website operator. Further, to the extent that the regulations relate to information contained on a website regardless of whether the information is placed on the Internet by the website owner or by a third party, we may not be able to control or restrict the content of other Internet content providers linked to or accessible through our websites, or content generated or placed on our websites by our users, despite our attempt to monitor such content. To the extent that regulatory authorities find any portion of our content objectionable, they may require us to limit or eliminate the dissemination of such information or otherwise curtail the nature of such content on our websites, which may reduce our user traffic and have a materialan adverse effect on our business and our financial condition and results of operations. In addition, we may be subject to significant penalties for violations of those regulations arising from information displayed on, retrieved from or linked to our websites, including a suspension or shutdown of our operations.results.52.9%23.5% of our common stock on a non-diluted basis and 48.1% on a diluted basis as of March 26, 2018.December 31, 2023. As a result of its ownership CFL is able to influence significantly all matters requiring approval by our stockholders, including the election of directors. In addition, our directors and executive officers and their affiliated entities, in the aggregate, beneficially own approximately 6.5 %3.3% of our outstanding common stock as of March 26, 2018.December 31, 2023. Stockholders other than these principal stockholders aremay, therefore, likely to have relatively little influence on decisions regarding such matters. These stockholders may have interests that differ from yours, and they may vote in a way with which you disagree and that may be adverseaverse to your interests. The concentration of ownership of our common stock may have the effect of delaying, preventing or deterring a change of control of our Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our Company and may affect the market price of our common stock. This concentration of ownership also limits the number of shares of stock likely to be traded in public markets and, therefore, will adversely affect liquidity in the trading of our common stock. This concentration of ownership of our common stock may also have the effect of influencing the completion of a change in control that may not necessarily be in the best interests of all of our stockholders.22Since shares of our common stock were sold in our initial public offering at a price of $64.00 per share, ourOur closing stock price has ranged from $1.52 to $13.90 through March 30, 2018 (as adjusted for our 1-for-8 reverse stock split on September 27, 2016).$1.22 to $7.64 during the fiscal year of 2023. In addition to the factors discussed in this Annual Report, the trading price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: time to timetime-to-time experienced significant price and volume fluctuations that are not related to the operating performance of particular industries or companies. These market fluctuations may also have a material adverse effect on the market price of our common stock.As a result of the consummation of the issuance and sale of 1,777,417 shares of our common stock to CFL in November 2016, and a subsequent issuance to CFL of an additional 312,500 shares in January 2017, CFL owns 52.9% of our outstanding common stock as of March 26, 2018, with respect to which CFL has the right to require the Company to register the public resale under a registration statement filed with the SEC. The eventual resale of some or all of such shares, or the perception that such sale or sales could be imminent, could result in a material decline in the market value of our common stock. We have also filed a universal shelfIn addition, sales of securities under our “shelf” registration statement, on Form S-3, with the SEC on December 31, 2014 (as amended on March 31, 2015), which was declared effective on April 2, 2015. This registration statement providesallows for the issuance of shares of our common stock, preferred stock, depositary shares, rights, warrants, and units and debt securitiesfrom time to time up to an aggregate amount of $100,000,000$45,000,000, may cause the market price of our stock to decline.the resale ofTumim Stone is obligated to purchase, up to 6,309,845$12,775,000 worth of newly issued shares of our common stock, subject to certain limitations and conditions and the satisfaction (or, where permissible, the waiver) of the conditions set forth in the stock originally issuedpurchase agreement. See the discussion in Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources”, for more information about our committed equity line program with Tumim Stone and shares we have sold to date. The purchase price of shares that we sell to Tumim Stone under this agreement (other than the former sole shareholderinitial sale under that agreement) is 97% of Old NAPW and certain executive officersthe lowest daily average of Old NAPW.In addition, in March 2015, we registered 500,000 sharesthe daily volume weighted average prices of our common stock reserved for the three-day period prior to our election to sell shares. To the extent we utilize this equity line in the future by selling additional shares of common stock, the market price of our common stock may be adversely affected.ourthe amended 2013 Plan.Once acquired uponAny awards outstanding under the exercise2013 Plan remain subject to and will be paid under the 2013 Plan. The 2023 Equity Compensation Plan reserves 750,000 shares of common stock for issuance of awards to directors, officers, employees and qualifying consultants of the outstanding stock options or warrants, or vesting of restricted stock, these shares could be sold freely in the public market. Company and its affiliates.2013 Equity Compensation Plan,equity compensation plans, please see Note 1413 of our Consolidated Financial Statements included in this Annual Report. Finally, in February 2017 we registered the public resale of up to 246,445 shares of our common stock by White Winston Select Asset Funds LLC. This registration statement was declared effective on February 13, 2017.23 because CFL holds a majoritythe substantial number of our outstanding shares of common stock CFL’s approval will be necessaryowned by CFL may make it more difficult for any third party to effect anya change in control.control without CFL’s approval.Our failure to implement and maintain effective internal control over financial reporting could result in material misstatements in our financial statements, which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and could have an adverse effect on our stock price or our debt ratings.Our management determined that as of December 31, 2017, our internal control over financial reporting had a material weakness related to deficiencies in controls over the application of complex accounting principles, timely and complete financial statement reviews and procedures to ensure all required disclosures are made in our financial statements. During 2016 and 2017, we completed certain measures that were begun in 2015 to remediate material weaknesses related to our internal control over financial reporting that had been identified as of December 31, 2015, and as of December 31, 2016. Specifically, in 2016 we (i) segregated some check signing ability from finance personnel to improve our segregation of incompatible duties within our accounting and financial reporting functions, (ii) consolidated our banking relationships for all companies resulting in improved internal and online cash controls and oversight, (iii) consolidated payroll service providers, allowing for improved control and oversight by senior management. In 2017, we (i) expanded our corporate accounting staff and added qualified personnel with knowledge of U.S. GAAP, and (ii) initiated more effective financial reporting process to help address the material weaknesses identified at December 31, 2016. Although these measures greatly helped improve our internal controls, they did not fully remediate deficiencies in controls. Additionally, in late 2017, our Chinese operations expanded significantly and, in management’s opinion, became material to the company’s consolidated financial statements. In reviewing the controls over financial reporting for these operations, management determined that the Company did not properly design and implement appropriate process-level internal controls related to revenue recognition over service income, resulting in a material weakness. A material weakness is a control deficiency or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. With regard to service income in our China operations, the material weakness in control design was related to contract administration, ensuring that completed contracts were in place and revenue recognition principles were satisfied before the revenue was recorded. This material weakness was identified by management in the fourth quarter of 2017.Because the controls over service income in the Company’s system of internal controls in China rely extensively on manual review and approval, the successful operation of these controls is required for several quarters prior to management being able to conclude that the material weakness has been remediated. Accordingly, at December 31, 2017, we have not yet been able to remediate the material weakness related to our internal control over financial reporting.Additional material weaknesses in our internal control over financial reporting may be identified in the future. Any failure to maintain existing or implement required new or improved controls, or any difficulties we encounter in their implementation, or in remediating identified weakness, could result in additional control deficiencies, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, and cause us to fail to meet our reporting obligations. If we are unable to effectively remediate material weaknesses inmaintain compliance with Nasdaq continued listing standards, including maintenance of at least $2.5 million of stockholders’ equity and maintenance of a timely manner, investors could lose confidence$1.00 minimum bid price, our common stock may be delisted from The Nasdaq Stock Market.accuracypast received notices from The Nasdaq Stock Market relating to a failure to meet continued listing standards, including the $1.00 minimum bid price and completenessthe $2.5 million minimum stockholders’ equity. Most recently, on November 21, 2023, Nasdaq notified us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing as of the end of our financial reports, whichfiscal quarter ended September 30, 2023. While we believe we have regained compliance with this requirement as of December 31, 2023,there can be no assurances that we will be able to maintain our Nasdaq listing in the future. In the event we are unable to maintain compliance with Nasdaq continued listing standards and our common stock is delisted from Nasdaq, it could havelikely lead to a number of negative implications, including an adverse effect on our stock price.24We will lose our “emerging growth company” status under the JOBS Act at the latest by the endprice of 2018, which will increase the costs and demands placed upon our management.We will continue to be deemed an emerging growth company until December 31, 2018. Once we lose emerging growth company status, we expect the costs and demands placed upon our management to increase, as we would have to comply with additional disclosure and accounting requirements, particularly if our public float should exceed $75 million on the last day of our second fiscal quarter in any fiscal year following our initial public offering, which would disqualify us as a smaller reporting company.We are an “emerging growth company” and we cannot be certain that the reduced disclosure requirements applicable to emerging growth companies will not make our common stock, less attractive to investors.The JOBS Act permits “emerging growth companies” like us to rely on some of the reduced disclosure requirements that are already available to smaller reporting companies. Smaller reporting companies are companies which have a public float of less than $75 million. As long as we qualify as an emerging growth company or a smaller reporting company, we would be permitted to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act, as described above and are also exempt from the requirement to submit “say-on-pay”, “say-on-pay frequency” and “say-on-parachute” votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already available to smaller reporting companies.In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards providedliquidity in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.We will cease to be an emerging growth company at such time as described in the risk factor immediately above. Until such time, however, we cannot predict if investors will find our common stock, less attractive becausethe loss of federal preemption of state securities laws and greater difficulty in obtaining financing. In the event of a delisting, we may rely on these exemptions. If some investors findwould take actions to restore our compliance with Nasdaq’s continued listing standards, but we can provide no assurance that any such action taken by us would allow our common stock less attractive as a result, there may be a less active tradingto become listed again, stabilize the market forprice or improve the liquidity of our common stock, andprevent our common stock from dropping below the Nasdaq minimum bid price may be more volatile and could cause our stock price to decline.requirement or prevent future non-compliance with Nasdaq’s continued listing requirements.25You will have limited ability to bring an action against certain of our directors and officers, or to enforce a judgment against them, because the majority of our directors and officers reside outside the United States.A significant number of our directors and officers reside outside the United States and substantially all of the assets of those persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against these individuals in China in the event that you believe your rights have been infringed under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of China may render you unable to enforce a judgment against the assets of our directors and officers. Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Nan Kou (collectively, the “CFL Shareholders”), we granted to CFL and the CFL Shareholders a participation right with respect to any future issuances of common stock by the Company, such that CFL and the CFL Shareholders may purchase an amount of shares necessary to maintain CFL’s then-current beneficial ownership interest, up to a maximum of 54.64% of our then-outstanding common stock, on a fully-diluted basis, subject to certain exceptions. This participation right could limit our ability to enter into equity financingsfinancing and to raise funds from third parties.stockholdersstockholder's agreement with CFL and the CFL Shareholders, we also granted to CFL and the CFL Shareholders unlimited demand, shelf and piggyback registration rights, effective upon the expiration of CFL’s initial lock-up period, to require us to effect a registration under the Securities Act of a resale of the shares of common stock held by CFL. This may create the perception of a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intent to sell their shares, especially if CFL were to exercise its registration rights, thereby potentially further limiting our ability to enter into equity financings and to raise funds from third parties.Company’sCompany’s common stock.in the past, led to the selling of shares in the market, on occasion in large scale and broad base. Issuers who have limited trading volumes and are susceptible to higher volatility levels than U.S. domestic large-cap stocks can be particularly vulnerable to such short attacks.stockholdersstockholders’ equity, and the value of any investment in the Company’s stock could be reduced.26Not applicable.None.11,4544,900 square feet of space for our headquarters in Chicago, Illinois under a lease that expires on JuneSeptember 30, 2020. We also lease approximately 1,800 square feet of office space in Minnetonka, Minnesota for our Events division under a month-to-month lease.We lease approximately 20,000 square feet of office space in Garden City, New York, under a lease that expires on June 30, 2019, which is used by NAPW Network membership coordinators and executive and administrative staff.We lease approximately 15,000 square feet of office space in Jericho, New York, under a lease that ends on June 30, 2018. We currently sub-lease that property to a tenant under a landlord-approved sublease that is coterminous with our prime lease.We leased approximately 16,500 square feet of office space in Darien, Illinois, which served as the headquarters and sales center of Noble Voice. The lease expired on August 31, 2017 and we didn’t renew the Darien lease. We moved our Noble Voice operations to our Chicago office.Beginning January 1, 2017, the Company leases approximately 7,970 square feet office space in Guangzhou, China under a non-cancelable lease arrangement that provides for payments on a graduated basis through December 31, 2019.Beginning November 15, 2017, the Company leases approximately 1,950 square feet of office space in Jiangxi Province, China under a non-cancelable lease arrangement that expires on January 30, 2020.2027.The Company has previously disclosed that it and its wholly-owned subsidiary, NAPW, Inc., are parties to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.), a putative class action filed in January 2016 alleging violations of various California Labor Code (wage & hour) sections. During the first quarter of 2016, the Company executed a settlement agreement, subject to later Court approval, in which the Company agreed in principle to pay $500,000 for a global settlement of the class action. During the first quarter of 2016, the Company also recorded a litigation settlement expense in the amount of $500,000. On November 28, 2016, the Court approved the proposed settlement. In December of 2016 the Company paid the settlement amount in the Court’s fund and the third-party administrator began distributing payments to class members. On August 2, 2017, the Court notified the parties that the case is “reported as complete without the need for a further status conference.” This matter is therefore concluded and will not be further reported.The Company and its wholly-owned subsidiary, NAPW, Inc., became parties during the year ended December 31, 2016 to an action captioned LinkedIn Corp. v. NAPW, Inc. and Professional Diversity Network, Inc., No. 16-CV-299784 (Santa Clara Superior Ct.). The complaint was filed on September 12, 2016. The plaintiff, LinkedIn Corp. (“LinkedIn”), sought paymentThe CompanyWe, and itsour wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned In reDeborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904,Inc., No. 18-cv-3591 (E.D.N.Y.), filed with the National Labor Relations Board (“NLRB”) inon June 201520, 2018, and alleging violations of the NationalFair Labor RelationsStandards Act (“NLRA”) against the Company and its wholly-owned subsidiary, NAPW, Inc., where employee was allegedly terminated for asserting rights under Section 7certain provisions of the NLRA. WhileNew York Labor Law. The class is defined as “all individuals employed in New York from June 20, 2012, through October 15, 2021 by NAPW and PDN to sell memberships to the Company disputes that any rights were impacted,women’s networking organization known as the NLRB has issued its order requiringNational Association of Professional Women and the Company to take certain remedial actions inInternational Association of Women,” excluding corporate officers, shareholders, directors and administrative employees. As it stands, the formclass currently consists of posting notices164 putative class members and revising certain policies, as well as to pay the claimant certain back pay and offer reinstatement. The Company has complied with the order by posting notices, revising certain policies and offering the claimant reinstatement. In March of 2018 the Company settled the remaining backpay portion of the case. Management does not expect the resolution of this case to have a material impact on the Company’s financial condition.60 opt-in plaintiffs.Company is a party to a proceeding captioned Paul Sutcliffe v. Professional Diversity Network, Inc., No. 533-2016-00033 (EEOC), filed withcomplaint alleges that NAPW (and PDN in its capacity as an alleged joint employer) violated similar provisions of the Equal Employment Opportunity Commission (“EEOC”) in April 2016 and alleging violations of Title VIIFLSA and the Age Discrimination in Employment Act, where employee was allegedly terminated dueNYLL by (i) failing to his race (Caucasian) and his age (over 40). The EEOC has not yet notifiedpay overtime wages as required by both the Company that it has issued a right-to-sue letter,FLSA and the complainant has not yet filedNYLL, (ii) failing to provide accurate wage statements under the NYLL, and (iii) willfully violating both of those statutes. The Court, in an order issued on March 25, 2024, granted summary judgment against NAPW on the claims related to willful failure to pay overtime wages. The Court dismissed, without prejudice, claims based on failure to provide accurate wage statements under the NYLL based on lack of subject matter jurisdiction. The Court found that questions of fact remain as to whether PDN was a lawsuit.In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened assertion of a claim against the Company. The letter alleges that White Winston suffered $2,241,958joint employer with NAPW. Damages remain unsettled particularly in damages as a resultlight of the Company’s alleged conduct that causedCourt’s dismissal of the Plaintiff’s claims related to failure to provide accurate wage statements. During the first quarter of 2020, we recorded a delay in White Winston’s ability to sell shares$450,000 litigation settlement reserve in the Company during a period whenevent of an unfavorable outcome in this proceeding. While the Company’s stock price was generally falling. The Company investigated the assertionsPlaintiff seeks damages substantially in the letterexcess of this reserve (including unpaid overtime, liquidated damages and communicated to White Winston that the Company denies liability for any such claim.NAPW is a named Respondent in a Nassau County District Court Landlord/Tenant Summary Proceeding, and is being sued by TL Franklin Avenue Plaza LLC. The Petitioner, TL Franklin Avenue Plaza LLC, is alleging that NAPW is in breach of its Lease Agreement, and the matter involves the payment of back rent owing to Petitioner. The case is on-going, and settlement discussions are underway.are twocontinue to adamantly dispute the amount of the named Respondents in a Nassau County District Court Landlord/Tenant Summary Proceeding, and they are being sued by Hoegh Autoliners Inc. The Petitioner in this matter, Hoegh Autoliners Inc., is alleging that both NAPW and PDN are in breach of its Lease Agreement, and the matter involves the payment of back rent owing to the Petitioner. In this matter, Intercontinental Capital Group, Inc., an Under-Subtenant of PDN, is also named in the action. The case is on-going, and settlement discussions are taking place in an effort to bring any rental obligations current.damages claimed.The Company is a partyFrom time to a proceeding captioned Gerbie, et al. v. Professional Diversity Network, Inc. (Cook County Cir. Ct.), a putative class action alleging violations of the Telephone Consumer Protection Act. This matter istime, we are involved in a very early stage and the Company has not yet had any discovery to allow it to assess the quality of the plaintiff’s claims. However, the Company generally believes that its practices and procedures are compliant with the Telephone Consumer Protection Act.We are also generally subject to legal proceedings and litigationmatters arising in the ordinary course of business. While we believe that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which we are, or could be, involved in litigation, will not have a material adverse effect on our business, financial condition or results of operations.28REGISTRANT’SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIEShas beenis listed on the NASDAQ Capital Market under the symbol “IPDN” since March 5, 2013. Prior to that date, there was no public trading market for our common stock. All per share information in the table below reflects the 1-for-8 reverse stock split which was effected on September 27, 2016. High Low Year Ended December 31, 2017 First Quarter $ 13.90 $ 8.41 Second Quarter $ 11.23 $ 6.06 Third Quarter $ 7.12 $ 3.74 Fourth Quarter $ 6.63 $ 2.45 Year Ended December 31, 2016 First Quarter $ 6.72 $ 1.56 Second Quarter $ 6.32 $ 3.00 Third Quarter $ 11.50 $ 2.85 Fourth Quarter $ 11.98 $ 5.28 On March 27, 2018, the closing price of our common stock was $ 3.32 per share..26, 2018,29, 2024, we had 2150 holders of record of our common stock. Since certain of our shares are held by brokers and other institutions on behalf of stockholders, the foregoing number is not representative of the number of beneficial owners of our common stock.On December 8, 2017, the Company sold 18,200 shares of common stock at a price of $3.49 per Share for gross proceeds of $63,518. The per Share purchase price reflected a ten percent (10%) discount from the closing price of the Company’s common stock on December 7, 2017.On January 29, 2018, the Company sold 380,295 shares of common stock at a price of $3.91 per Share for gross proceeds of $1,486,953. The per Share purchase price reflected the closing price of the Company’s common stock on January 24, 2018. The purchaser is Mr. Shengqi Cai, an individual and a resident of the People’s Republic of China.The issuance of the Shares is exempt from registration due to the exemption found in Regulation S promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”). These sales were offshore transactions since all of the offerees were not in the United States and the purchasers were outside the United States at the time of the purchase. Further, there were no directed selling efforts of any kind made in the United States either by the Company or any affiliate or other person acting on the Company’s behalf in connection with the offering. All offering materials and documents used in connection with the offers and sales of the securities included statements to the effect that the securities have not been registered under the Securities Act and may not be offered or sold in the United States or to U.S. persons unless the securities are registered under the Securities Act or an exemption therefrom is available, and that hedging transactions involving the Shares may not be conducted unless in compliance with the Securities Act. Each purchaser certified that it is not a U.S. person (as that term is defined in Regulation S) and is not acquiring the Shares for the account or benefit of any U.S. person and agreed to resell the Shares only in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from registration. The Shares sold are restricted securities and the certificates representing the Shares will be affixed with a standard restrictive legend, which states that the Shares cannot be sold without registration under the Securities Act or an exemption therefrom.29ITEM 6 - SELECTED FINANCIAL DATAMANAGEMENT’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS“Financial“Financial Statements, and Supplementary Data,” in Part II of this Annual Report.This discussion contains forward-looking statements, which are based on our assumptions about the future of our business.Our actual results will likely differ materially from those contained in the forward-looking statements.Please read “Special“Special Note Regarding Forward-Looking Statements”Statements” for additional information regarding forward-looking statements used in this Annual Report.networkscommunities with a focus on diversity, employment, education and training. We use the term “diversity” (or “diverse”) to describe communities, or “affinities,” that are distinct based on a wide array of criteria, including ethnic, national, cultural, racial, religious or gender classification. We serve a variety of such communities, including Women, Hispanic-Americans, African-Americans, Asian-Americans, Disabled,persons with disabilities, Military Professionals, and Lesbian, Gay, Bisexual, and Transgender (LGBT+(LGBTQ+).fourthree business segments: (i) Professional Diversitysegments. PDN Network, (“PDN Network”), whichour primary business segment, includes online professional networkingjob seeking communities with career resources tailored to the needs of various diverse cultural groups and employers looking to hire members of such groups, (ii) National Associationgroups. Our secondary business segment consists of Professional Women (“the NAPW Network,”), a women-only professional networking organization, (iii) Noble Voice operations (“Noble Voice”), a career consultationorganization. Our third business segment consists of RemoteMore, which connects companies with reliable, cost-efficient developers with less effort and lead generation service,friction, and (iv) China operations (“China Operations”), which focuses on providing tools, products and services in China which will assist women, students and business professionals in personal and professional development.empowers software developers to get meaningful jobs regardless of their location.Our value proposition is simple: (i) we provide a robust online and in-person network for our women members to make professional and personal connections for our diverse audience of women: African Americans, Hispanics, Asians, Veterans, individuals with disabilities and members of the Gay community (with the ability to roll out to our other affinities); (ii) we assist our registered users, or members, in their efforts to connect with like-minded individuals and identify career opportunities within the network; (iii) we help employers address their workforce diversity needs by connecting them with the right candidates; and (iv) we leverage our U.S. expertise and China connections to deliver these values to China, one of the world’s fastest-growing markets for professional networking.In January of 2017, the Company established PDN Hong Kong through its two wholly-owned subsidiaries there and in March of 2017 the Company established PDN China through its subsidiary there. We are currently executing our strategic plan to build in China entirely new networking, training and education businesses. We believe that coupling the Company’s expertise in networking and careers with our Chinese executives’ expertise in the China market will provide us with an opportunity for success with our overseas expansion. During the first two quarters of 2017, we held seven events as part of our education and training business line’s “Shared Economy” summit series, attracting over 7,800 paid attendees. Additionally, during the second quarter of 2017, we held a selective marketing event to introduce IAW, the PDN China women’s networking business.In the third quarter of 2017, PDN China began to transact IAW memberships in China, ranging from RMB 20,000 to RMB 200,000 (Approximately $3,000 to $30,000 annual memberships). Additionally IAW China held its first IAW VIP China event at the Women’s Forum Global Meeting, in Paris, France. Also, on December 2, 2017, PDN China held its largest education and training event of the year. The event, “The International Capital Leadership Summit”, took place in Beijing, China. Amongst many notable speakers, Mr. Bruce Aust, Vice Chairman of the Nasdaq Exchange was featured at the event. In the fourth quarter of 2017, PDN China began to transact business club memberships in China, ranging from RMB 20,000 to RMB 100,000 (Approximately $3,000 to $15,000 annual memberships).In 2017, our PDN Network, NAPW Network, Noble Voice and China Operations businesses represented 12.8%, 43.0%, 27.1% and 17.1% of our revenues, respectively. As of December, 2017, we had approximately 10.0 million registered users in our PDN Network; approximately 954,000 registered users, or members, in the NAPW Network; and over 1,000 companies utilizing our products and services in our combined PDN Network and Noble Voice operations. We believe that the combination of our solutions allows us to approach recruiting and professional networking in a unique way and thus create enhanced value for our members and customers.customers by: 30 lead generation, (iii) recruitment services, (iv) product sales, (v) education(iii) contracted software development, and training and (vi)(iv) consumer advertising and consumer marketing solutions. The following table sets forth our revenues from each significant product as a percentage of total revenue for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results. Year Ended December 31, 2017 2016 Percentage of revenue by product: Membership fees and related services 42 % 62 % Lead generation 27 % 24 % Education and training 17 % 0 % Recruitment services 12 % 11 % Consumer advertising and consumer marketing solutions 1 % 1 % Products sales and other 0 % 2 % 6.9 % 7.7 % 60.3 % 58.5 % 31.6 % 31.8 % 1.2 % 2.0 % Paid Membership SubscriptionsFees and Related ServicesServices. . We offer paid membership subscriptions through our NAPW Network, a women-only professional networking organization, operated by our wholly-owned subsidiary. Members gain access to networking opportunities through a members-only website at www.napw.comwww.iawomen.com and “virtual” eChapter events which occur in a webcast setting, as well as through in-person networking at approximately 209 local chapters nationwide, additional career and networking events such as the National Networking Summit Series, Power Networking Events and the PDN Network events. NAPW members also receive ancillary (non-networking) benefits such as educational discounts, shopping, and other membership perks. Upgraded packages include (i)The basic package is the VIP membership,Initiator level, which provides members with additional promotional and publicity toolsonline benefits only. Upgrades to an Innovator membership include the Initiator benefits, as well as freemembership in local chapters, and access (including guest) to live in-person events. The most comprehensive level, the National Networking SummitsInfluencer, provides all the aforementioned benefits plus admission to exclusive “live” events and free continuing education programsexpanded opportunities for marketing and (ii)promotion, including the creation and distribution of a press release, package, which provides members with the opportunity to work withis prepared by professional writers to publish personalized press releases and thereby secure valuable online presence.sent over major newswires. Additionally, all memberships offer educational programs with discounts or at no cost, based on the membership level. NAPW Membership is renewable, and fees are payable on an annual or monthly basis, with the first annual fee payable at the commencement of membership. We offer new purchasers of our NAPW memberships the membership. NAPW Membership subscriptions represented approximately 98.9% and 96.6%opportunity to purchase a commemorative wall plaque at the time of revenue attributablepurchase. They may purchase up to the NAPW Network business segment for the years ended December 31, 2017 and 2016, respectively.two plaques at that time.As part of the launch of IAW in the United States the Company began to offer a monthly membership option in January 2018, in addition to an annual membership option. While this has increased our performance in registering new members, membership revenue is received on a monthly basis rather than an annual basis. Monthly membership sales is a new strategy for our company and we cannot predict what the monthly renewal rate will be or what the life time value of a member will be going forward. The new IAW has focused on delivering member benefits and providing value to those who join as paid members. The company will be tracking and reporting on the renewal rates and projected LTV, life time value, of our registered members going forward.Lead Generation. We monetize our career consultations conducted by our Noble Voice business segment by generating and selling value-added leads to our strategic partners who provide continuing education and career services. We also generate revenue from sales of data not used in the lead generation process. Lead generation sales represented 100% of the revenue attributable to the Noble Voice business segment for the years ended December 31, 2017 and 2016. The business flow of lead generation also provides value for our recruitment services, because job seekers who are interested in our career opportunities engage with our career advisers on open positions we are offering from companies who sponsor our diversity recruitment network. Our plan is to increase conversions of both lead generation offers from our educational and career services partners and our recruitment partners seeking to employ diverse talent.31semanticcontingent search technology and paid access to,hiring, and placement in, or advertising around our career and networking events.fairs. The majority of recruitment services revenue comes from job recruitment advertising. We also offer to businesses subject to the regulations and requirements of the Equal Employment Opportunity Office of Federal Contract Compliance Program (“OFCCP”) our OFCCP compliance product, which combines diversity recruitment advertising with job postings and compliance services. For the years ended December 31, 2017 and 2016, recruitment advertising revenue constituted approximately 91.1% and 92.9%, respectively, of the revenue attributable to the PDN Network business segment.Product SalesContracted Software Development. We offerRemoteMore generates revenue by providing contracted programmers to new purchasers of our NAPW memberships the opportunity to purchase a commemorative wall plaque at the time of purchase. They may purchase up to two plaques at that time. Product sales represented approximately 1.1% and 3.4% of revenue attributable to the NAPW Network business segment for the years ended December 31, 2017 and 2016, respectively.assist customers with their software solutions through customized software development.Education and Training. In March of 2017 we began our China Operations by creating a Shared Economy summit series designed to provide education and training to Chinese business people. Our initial event was a paid event which generated revenue through paid event admission fees. Education and training represented 100% of the revenue attributable to China Operations for the year ended December 31, 2017. Because China Operations first began in March of 2017 there is no year-over-year comparison. Consumer Marketing Solutions. We work with partner organizations to provide them with integrated job boards on their websites, which offer their members or customers the ability to post recruitment advertising and job openings. We generate revenue from fees charged for those postings. For the years ended December 31, 2017 and 2016, consumer advertising and marketing represented approximately 8.9% and 7.1%, respectively, of the revenue attributable to the PDN Network business segment.data and related costs to generate leads for our Noble Voice customers, costs of producing job fair and other events, revenue sharingrevenue-sharing with partner organizations, costs of web hosting and operating our websites for the PDN Network, and costsNetwork. The cost of producing education and training events and serving IAW members for our China business. Costs of producing wall plaques, hosting member conferences and local chapter meetings are also included in the cost of revenue for NAPW Network. Costs of paying outside developers are included in the cost of revenue for RemoteMore. 31.7 % 34.0 % 4.5 % 10.5 % 63.8 % 55.5 % Key MetricsRevenuesWe believe that one of the key metrics in evaluating and measuring our performance is the number of registered users. We define the number of registered users as (i) the number of individual job seekers who affirmatively visited one of PDN Network’s properties, opted into an affinity group and provided us with demographic or contact information enabling us to match them with employers and/or jobs (PDN Network registered users); and (ii) the number of consumers who have viewed our marketing material, opted into membership in the NAPW Network, provided demographic information and engaged in an onboarding call with a membership coordinator (NAPW Network registered users). We believe that a higher number of registered users will result in increased sales of our products and services, as customers will have access to a larger pool of professional talent. However, a higher number of registered users will not immediately translate to increased revenue, as there is a lag between the time we acquire a registered user through our lead-generation process and the time we generate revenue from a registered user by selling them one of our paid products or services.The following table sets forth the number of registered users as of the periods presented: Year Ended
December 31, Change 2017 2016 (Percent) (in thousands) Registered users: PDN Network Registered Users (1) 10,266 9,201 11.6 % NAPW Network Total Membership (2) 954 918 3.9 % (1)The number of registered users may be higher than the number of actual users due to various factors. For more information, see “Risk Factors page #13—The reported number of our registered users is higher than the number of actual individual users, and a substantial majority of our visits are generated by a minority of our users”.(2)Includes both Paid Members and Unpaid Members.Non-GAAP Financial MeasureAdjusted EBITDAWe believe Adjusted EBITDA provides a meaningful representation of our operating performance that provides useful information to investors regarding our financial condition and results of operations. Adjusted EBITDA is commonly used by financial analysts and others to measure operating performance. Furthermore, management believes that this non-GAAP financial measure may provide investors with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. However, while we consider Adjusted EBITDA to be an important measure of operating performance, Adjusted EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Further, Adjusted EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled measures, as defined by other companies.32The following table provides a reconciliation of Adjusted EBITDA to Net Loss, the most directly comparable GAAP measure reported in our consolidated financial statements: Year Ended December 31, 2017 2016 (in thousands) Net loss $ (22,288 ) $ (4,109 ) Impairment expense 14,611 - Stock-based compensation expense 900 264 Litigation settlement, net 155 (1,240 ) Gain on settlement of debt - (148 ) Gain on lease cancellation - (424 ) Depreciation and amortization 3,197 3,324 Change in fair value of warrant liability - 401 Interest expense 12 1,567 Interest and other income (8 ) (9 ) Income tax expense (benefit) (1,746 ) (1,290 ) Adjusted EBITDA $ (5,167 ) $ (1,664 ) Results of OperationsRevenuesrevenuerevenues for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.years ended December 31, 2023, and 2022: Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) Revenues Membership fees and related services $ 9,372 $ 16,255 $ (6,883 ) (42.3 )% $ 531 $ 639 $ (108 ) (16.8 )% Lead generation 5,974 6,239 (265 ) (4.2 )% Education and training 3,777 0 3,777 100.0 % Recruitment services 2,579 2,932 (353 ) (12.0 )% 4,640 4,862 (222 ) (4.6 )% 2,437 2,646 (209 ) (7.9 )% Consumer advertising and marketing solutions 253 223 30 13.5 % 91 167 (76 ) (45.5 )% Products sales and other 100 578 (478 ) (82.7 )% Total revenues $ 22,055 $ 26,227 $ (4,172 ) (15.9 )% $ 7,699 $ 8,314 $ (615 ) (7.4 )% $4,172,000,approximately $615,051, or 15.9%,7.4% from $26,227,000$8,314,088 for the year ended December 31, 20162022 to $22,055,000$7,699,037 for the year ended December 31, 2017.2023. The decrease is mainlywas predominately attributable to a decrease of approximately $667,000 of organic revenues related to PDN as compared to the result of reductionssame period in our sales staff and workforce in our NAPW segment as part of restructuring and centralizing our operations. This wasthe prior year, partially offset by $3,777,000 additional revenue generated by our Chinaapproximately $368,000 of revenues related to Expo Experts for which there were no comparable revenues in the same period of the prior year. Also contributing to the decrease was a decrease in contracted software development related to RemoteMore operations that we launchedof approximately $208,000, and an approximate $109,000 decrease in March of 2017.membership fees and related services revenues related to NAPW operations, as compared to the same period in the prior year.periods presented. The period-to-period comparison is not necessarily indicative of future results.years ended December 31, 2023, and 2022: Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) $ 4,731 $ 5,029 $ (298 ) (5.9 )% NAPW Network $ 9,472 $ 16,833 $ (7,361 ) (43.7 )% 531 639 (108 ) (16.8 )% PDN Network 2,832 3,155 (323 ) (10.2 )% Noble Voice 5,974 6,239 (265 ) (4.2 )% China 3,777 - 3,777 100.0 % 2,437 2,646 (209 ) (7.9 )% Total revenues $ 22,055 $ 26,227 $ (4,172 ) (15.9 )% $ 7,699 $ 8,314 $ (615 ) (7.4 )% 33Membership fees and related services and products sales attributable to the NAPW Network of $9,472,000 forDuring the year ended December 31, 2017 represent2023, our PDN Network generated approximately $4,731,000 in revenues compared to $5,029,000 in revenues during the year ended December 31, 2022, a reductiondecrease of $7,361,000 from the comparable period in 2016,approximately $298,000 or 43.7%5.9%. The decrease iswas primarily due to reductionsdecreases in PDN operations, specifically decreases in e-commerce revenues of approximately $361,000, revenues related to sales by our third-party partner alliance of approximately $219,000, event and partner sales revenue of approximately $137,000 and other revenues of approximately $102,000, compared to the same period in the prior year. Partially offsetting the decreases was an increase in PDN direct sales revenues of approximately $154,000, compared to the same period in the prior year, and event revenues derived from Expo Experts of approximately $398,000 for which there were no comparable revenues in the same period of the NAPW sales staff and workforce as a result of rebranding our NAPW business. Additionally, several aspects of operations were relocated to our Chicago headquarters aimed to increase efficiency and reduce costs. We do not anticipate further reductions in workforce and expect to increase the salesforce in future periods. We also expect a decrease in NAPW revenues during the first half of year 2018 as we rebrand the NAPW business and introduce several new membership products.prior year.2017, our PDN2023, NAPW Network generated $2,832,000 in revenuerevenues were approximately $531,000, compared to $3,155,000 generated in the prior year period, a decreaserevenues of $323,000 or 10.2%. The decrease was mainly attributable to (i) a decrease of $140,000 in direct sales of our recruitment services resulting from the downsizing of the PDN Network sales team, and (ii) a $218,000 decline in PDN Hired revenue, as a result of poor sales performance in the product line.Noble Voice generated $5,974,000 of lead generation revenue for$639,000 during the year ended December 31, 2017,2022, a decrease of approximately $108,000 or 16.9%. The decrease in revenues was primarily due to an approximate $100,000 decrease in renewal membership and an approximate $31,000 decrease in new membership, as compared to $6,239,000 for the same period in 2016, representing a decrease of 4.2%.the prior year. The decrease in revenuefiscal 2023 revenues was the result of continuing compressionlowest year over year decrease in NAPW since its acquisition. We believe that the markets served by Noble Voice coupledreductions in membership services revenues havelargely stabilized. The NAPW Network services provided to our customers is a discretionary spending decision and we continue to research services and price points to increase our future membership revenue to go along with the loss of a large, strategic vendor which forced a significant mid-year reductionexpense reductions that we have made in force. The loss of this vendor was abrupt and not reflective of the Noble Voice business, but rather that vendor’s change in business strategy. Currently, our efforts are focused on capturing additional market share through increased sales to our existing customer base and internal efforts to add new customers. We have capacity at our Chicago, IL call center to significantly grow our sales team without incurring additional rental costs. We’ve also experienced success in transitioning to a work-at-home model both in the Chicago and Detroit areas.fiscal 2023.We started our operations in China in Q1 2017. 2017, China Operations generated $3,777,000 of revenue. $2,875,000 of the2023, RemoteMore revenue was generated from “The International Capital Leadership Summit” that was held on December 2, 2017 and featured Mr. Bruce Aust, Vice Chairmanapproximately $2,437,000, compared to revenues of approximately $2,646,000 during the Nasdaq Exchange. Of the $2,875,000 Summit revenue, $2,565,000 was generated from an entity that was affiliated with certain CFL shareholders who had significant influence on this entity prior to August 2017. Additionally,same period in the third quarter of 2017, PDN China began to transact IAW memberships in China, ranging from RMB 20,000 to RMB 200,000 (Approximately $3,000 to $30,000 annual memberships). In the fourth quarter of 2017, PDN China began to transact business club memberships in China, ranging from RMB 20,000 to RMB 100,000 (Approximately $3,000 to $15,000 annual memberships). In 2017, we developed 18 IAW members and 10 business club members with total membership feesprior year, a decrease of approximately $400,000, which we recognize ratably over$209,000. We believe that the membership period (ranging from 12reduction in revenues had a direct correlation to 36 months).the war in Ukraine and economic unsettling in Europe and the Middle East resulting in companies not wanting to spend on the expansion of their IT infrastructure.periods presented (certain items may not foot due to rounding). The period-to-period comparison of financial results is not necessarily indicative of future results.years ended December 31, 2023, and 2022: Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) Costs and expenses: Cost of revenues $ 3,968 $ 3,082 $ 886 28.7 % Sales and marketing 10,285 13,315 (3,030 ) (22.8 )% General and administrative 13,875 11,333 2,542 22.4 % Litigation settlements, net 155 (1,240 ) 1,395 112.5 % Goodwill impairment charge 14,611 - 14,611 100.0 % Depreciation and amortization 3,197 3,324 (127 ) (3.8 )% Total costs and expenses $ 46,091 $ 29,814 $ 16,277 54.6 % 34 $ 3,461 $ 4,260 $ (799 ) (18.8 )% 3,701 2,806 895 31.9 % 4,452 3,574 878 24.6 % 624 776 (152 ) (19.6 )% $ 12,238 $ 11,416 $ 822 7.2 % in the year ended December 31, 2017 to $46,091,000 compared to $29,814,000 for the year ended December 31, 2016. This increase of 54.6% is primarily the result of goodwill impairment charge of $14,611,000 taken during2023,to approximately $12,238,000 compared to $11,416,000 for the year ended December 31, 2017, combined with $3,323,000 total2022. The approximate $822,000, or 7.2%, increase in costs and expenses that were incurred by our China operations that we launched in Q1 2017.was primarily attributable to the following:periods presented. The period-to-period comparison is not necessarily indicative of future results.years ended December 31, 2023, and 2022: Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) NAPW Network $ 29,884 $ 18,293 $ 11,591 63.4 % PDN Network 5,102 4,152 950 22.9 % Noble Voice 7,782 7,369 413 5.6 % China 3,323 - 3,323 100.0 % Total costs and expenses $ 46,091 $ 29,814 16,277 54.6 % $ 6,216 $ 4,614 $ 1,602 34.7 % 962 835 127 15.2 % 2,719 3,654 (935 ) (25.6 )% 2,341 2,313 28 1.2 % $ 12,238 $ 11,416 $ 822 7.2 % by $11,591,000,approximately $1,602,000 or 63.4%34.7%, in the NAPW Network segment primarily as a result of goodwill impairment charge of $14,611,000 taken during the year ended December 31, 2017, offset by $3,405,000, or 39.3% decrease2023, as compared to the prior year, primarily due to approximately $1,130,000 of costs related to Expo Experts for which there was no comparable costs in the same period of the prior year. Also contributing to the increase were approximately $428,000 of payroll related costs, of which there was approximately $287,000 of sales and marketing expenses, and $865,000, or 11.5% decrease in general & administrative expenses as a result of our newly created marketing department in fiscal 2023 for which there was no comparable expense in the management focus on cost reduction, including the reductions in sales force,prior year, and reduction in marketing related expenses.$14,000 of other accumulated costs.by $950,000,approximately $127,000, or 22.9%15.2%, in the PDN Network segment primarily due to $635,000, or 239.6% increase in stock based compensation, and increase in corporate overhead costs such as legal and consulting, offset by $320,000, or 26.7% reduction in cost of revenue, and $168,000, or 9.6% reduction in sales & marketing expenses. While the corporate overhead costs grew in 2017, the operational expenses were largely reduced as a result of the management’s efforts to reduce costs and improve efficiency.Costs and expenses in our Noble Voice segment increased by $413,000, or 5.6%, primarily due to $525,000, or 18.9% increase in corporate overhead expenses such as legal and consulting, offset by $215,000, or 14.4% reduction in cost of revenue as a result of reduced volume and increased efficiencies in purchasing data.Costs and expenses in our China segment were $3,323,000 during the year ended December 31, 2017. Because we started our operations2023, as compared to the prior year. The increase was predominately due to settlement of litigation resulting in Chinaa one-time, non-cash gain of approximately $908,000 in Q1 2017,fiscal 2022 for which there iswas no year over year comparison.comparable transaction in the current period. Partially offsetting the increase were decreases in payroll related costs of approximately $219,000, conference expenses incurred of approximately $165,000 primarily related to an October 2022 Gala event for which there was no comparable event in fiscal 2023, approximately $111,000 of member benefits, approximately $68,000 of legal expenses, and $218,000 of other related charges. The significant decreases in charges are a direct result of the continued efforts to cut costs and create efficiencies in the NAPW Network operating segment.Operating Expensesof revenues: Cost of revenuesand expenses related to RemoteMore decreased approximately $935,000, or 25.6%, during the year ended December 31, 2017 was $3,968,000,2023, as compared to the prior year, predominately consisting of amortization of intangibles of approximately $666,000, contractor costs of approximately $105,000, and other operating costs.$886,000, or 28.7%, from $3,082,000, forapproximately $214,000 of payroll related costs, an approximately $123,000 in financing costs and $102,000 in legal fees predominately related to the yearequity line of credit entered into in fiscal 2023. Partially offsetting the increase was an approximate $157,000 decrease in share-based compensation costs, and reductions of approximately $83,000 related to mergers and acquisition charges, approximately $45,000 related to accounting expenses, and approximately $101,000 of other charges, as compared to the same period in the prior year. $ (139 ) $ (13 ) $ (126 ) 954.0 % 2016.2023, and 2022, we recorded a benefit for income tax of $139,000 and $13,000. The increase is mainly attributable to an increase $1,533,000 related to our China Operations that was launchedchange in March 2017, offset by a decrease of $320,000 at Noble Voice, a decrease of $215,000 at PDN Network, and a decrease of $112,000 at NAPW. The reduction of cost of revenues at Noble Voice and PDN Network was at a greater percentage than reduction of revenue, which was a result of improved efficiencies in spending and lead data sourcing.Sales and marketing expense: Sales and marketing expense forincome tax benefit during the year ended December 31, 2017 was $10,285,000, a decrease of $3,030,000, or 22.8%, from $13,315,000 for the year ended December 31, 2016. The decrease is mainly attributable to a decrease of $3,405,000, or 39.3% at our NAPW segment, due to a cost reduction plan we implemented in the second half on 2017 that resulted in 43% year-over-year reduction in the salesforce, lower digital advertising expenses, and overall better marketing cost management. In the future, we expect our overall sales and marketing costs to increase, particularly in NAPW Network, as we introduce new products and reinvest in our business.35General and administrative expense: General and administrative expenses increased by $2,542,000, or 22.4%, to $13,875,000 for the year ended December 31, 2017. The increasecurrent period was primarily due to (i) $1,359,000 of general and administrative expenses incurred bya reduction in our China operations that we launcheddeferred tax liabilities in March of 2017, and (ii) $636,000 year over year increase of stock-based compensation.the current year.Litigation settlements:Discontinued Operations Litigation settlement2017 represents primarily $146,000 expense that was accrued for the potential back-pay related to the “NLRB” legal proceeding (please refer to “Legal Proceedings” for details). In December 2016, we settled for $1,450,000 a breach of contract lawsuit filed by LinkedIn in which LinkedIn was seeking $3,290,000, plus interest2023, and costs. As a result of the settlement and release, we recorded a gain on litigation settlement in the amount of $1,740,000 as of December 31, 2016. In addition, in April 2016, we settled for $500,000 a class action lawsuit. As a result of this settlement, we recorded litigation settlement expense of $500,000 as of December 31, 2016.2022:Goodwill impairment charge: As a result of the recurring operating losses incurred in NAPW since its acquisition in September 2014, the Company undertook a review of the carrying amount of its goodwill as of June 30, 2017 and December 31 2017. Accordingly, the Company recorded a goodwill impairment charge of $14,611,000 for the year ended December 31, 2017. No goodwill impairment charge was recorded during the year ended December 31, 2016. $ - $ - 28 65 - - (28 ) (65 ) - - $ (28 ) $ (65 ) Depreciation and amortization expense : Depreciation and amortization expense for the year ended December 31, 2017 was $3,197,000, compared to $3,324,000 for the year ended December 31, 2016, a decrease of $127,000, or 3.8%. The decrease is mainly attributable to (i) a $96,000 reduction in amortization expense of the capitalized technology costs from the PDN Network.Other Income (Expenses) Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) Total $ 4 $ (1,411 ) $ 1,415 (100.3 )% During the year ended December 31, 2016, interest expense resulting from our terminated Master Credit Facility, which primarily includes cash interest expense and non-cash amortization of debt issue costs was $1,565,000. This amount includes $1,371,000 related to the amortization of the remaining balance of debt issue costs in connection with the termination of the Master Credit Facility in November 2016. Included in other income for the year ended December 31, 2016 is a $148,000 gain on the settlement of our outstanding promissory note and related accrued interest with Matthew Proman, our former COO. Interest earned on investments during the year ended December 31, 2017 was negligible.36Change in Fair Value of Warrant Liability Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) Total $ - $ (401 ) $ 401 100.0 % The change in the fair value of the warrant liability was related to (i) the common stock purchase warrants issued to the White Winston on June 30, 2016 and (ii) the common stock purchase warrants issued to underwriters in the Company’s IPO on March 4, 2013. During the year ended December 31, 2017, there was no change in fair value of warrant liability. During the year ended December 31, 2016, we recorded a non-cash expense of $401,000 related to the warrants issued to White Winston. There was no change in the fair value of warrant liability during the year ended December 31, 2016 related to the warrants issued to underwriters.Income Tax (Benefit) Expense Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) Total $ (1,746 ) $ (1,290 ) $ (456 ) 35.3 % The effective income tax rate for the year ended December 31, 2017 was 7.26%, resulting in an income tax benefit of $1,746,000. The effective income tax rate for the year ended December 31, 2016 was 23.89%, resulting in an income tax benefit of $1,290,000. The majority of the difference in the effective income tax rate was due to a goodwill impairment charge of $14,611,000 that was recognized during the year ended December 31, 2017, the Tax Act’s change in corporate tax rate from 35% to 21% resulting in a benefit of $788,000, and a change in valuation allowance resulting in a benefit of $213,000.37lossLoss from Continuing Operationsgainincome or loss for the periods presented. The period-to-period comparison is not necessarily indicative of future results. Year Ended December 31, Change Change 2017 2016 (Dollars) (Percent) (in thousands) NAPW Network $ (18,828 ) $ (1,110 ) $ (17,718 ) 1,596.2 % PDN Network (2,094 ) (2,138 ) 44 (2.1 )% Noble Voice (1,697 ) (861 ) (836 ) 97.1 % China 332 - 332 (100.0 )% Consolidated net loss $ (22,288 ) $ (4,109 ) $ (18,178 ) 442.4 % $ (1,430 ) $ 415 $ (1,846 ) (444.2 )% (414 ) (220 ) (195 ) 88.6 % (277 ) (1,021 ) 745 (72.9 )% (2,265 ) (2,266 ) 1 (0.0 )% $ (4,386 ) $ (3,092 ) $ (1,294 ) 41.8 % . As the result of the factors discussed above, during the year ended December 31, 2017,2023, we incurred $22,288,000a net loss of approximately $4,386,000 from continuing operations, an increase in net losses, and increaseloss of 442.4%approximately $1,294,000 or 41.8% from a net lossesloss of $3,092,000 for the year ended December 31, 2016. 2022.changes were primarily attributablefollowing table provides a reconciliation of net loss from continuing operations to a goodwill impairment charge of $14,611,000 taken duringAdjusted EBITDA for the yearyears ended December 31, 2017 against NAPW Network,2023, and reduction of revenue by $7,949,000 year over year at NAPW Network, PDN Network and Noble Voice, offset by additional revenue of $3,777,000 generated by our China operations that we launched2022, the most directly comparable GAAP measure as reported in Q1 2017. Reduction of year over year net loss was also caused by a non-recurring net gain of $1,240,000 related to litigation settlements, and a $424,000 gain on the lease cancellation of our former Los Angeles, California NAPW office.consolidated financial statements:NAPW Network Net Loss . During the year ended December 31, 2017, we incurred a net loss of $18,828,000, compared to $1,110,000 for the prior year period. The increase in net loss was primarily attributable to a goodwill impairment charge of $14,611,000 during the year ended December 31, 2017, reduction in revenue by $7,361,000, and a net gain of $1,240,000 from lawsuit settlements, a gain from the lease cancellation, the closing of NAPW Network office facilities that we recorded during the year ended December 31, 2016. The increase in net loss was partially offset by a large, $3,405,000 reduction of sales and marketing expense, mainly as a result of substantial cuts in salesforce and reduced spending on digital advertising. $ (4,386 ) $ (3,092 ) 300 481 - (909 ) 103 555 624 776 (13 ) 4 (139 ) (13 ) $ (3,511 ) $ (2,198 ) PDN Network Net Loss . During the year ended December 31, 2017, we incurred $2,094,000 of net losses attributable to the PDN Network, a decrease of $44,000, compared to the net losses incurred for the year ended December 31, 2016. The decrease in net loss is primarily a result of one-time interest expense of $1,565,000 that resulted from our terminated Master Credit Facility, and a non-cash expense of $401,000 related to the warrants issued to White Winston, both recorded during the year ended in December 31, 2016. Excluding these two one-time expenses, PDN Network net loss incurred in year 2017 saw an increase of $1,922,000, compared to year 2016. The increase is mainly due to an increase of $636,000 of stock-based compensation, higher legal and board of directors compensation expenses allocated to the PDN Network as a portion of the Company corporate overhead expenses, and $323,000 reduction in revenue. These increases were partially offset by a $320,000 reduction of cost of revenue, and $168,000 reduction of sales and marketing expenses as a result of our efforts in increasing efficiency and reducing operational expenses.Noble Voice Net Loss. During the year ended December 31, 2017, we recognized a net loss of $1,697,000 attributable to the Noble Voice division, compared to net losses of $861,000 for the year ended December 31, 2016. The $836,000, or 97.1% increase in net loss for the year ended December 31, 2017, compared to the year ended December 31, 2016 was primarily due to a $515,000 increase in Company corporate overhead expenses, primarily legal and consulting that were allocated to the Noble Voice segment, and a decline in revenue of $265,000. This was partially offset by reductions in costs of sales and service largely due to efficiencies made in the purchase of data the Company uses to drive internet traffic.3820172023, and 2016, respectively, and is intended to supplement the more detailed discussion that follows:2022: December 31, 2017 2016 (in thousands) Cash and cash equivalents $ 3,014 $ 6,069 $ 628 $ 1,237 Working capital (deficiency) $ (1,140 ) $ 1,000 $ (1,107 ) $ (187 ) and theincluding net proceeds from the issuanceissuances of Common Stock to CFL. During the year ended December 31, 2016, our principal sources of liquidity also included the proceeds from the Master Credit Facility with White Winston, which was terminated on November 7, 2016 as discussed in more detail below.2017 and 2016,2023, we had deficiencya working capital deficit from continuing operations of approximately $1,140,000 and$1,107,000, compared to a working capital deficit from continuing operations of approximately $1,000,000, respectively.$187,000 as of December 31, 2022. We had an accumulated deficit of approximately $69,746,000$99,903,000 at December 31, 2017.2023. During the yearyears ended December 31, 2017,2023, and 2022, we generated a net loss from continuing operations, net of tax, of approximately $22,288,000,$4,386,000 and $3,092,000 and used cash infrom continuing operations of approximately $6,331,000,$3,009,000 and $2,250,000.that we will continue to generate operatingincur net losses for the short-term foreseeable future. These conditions raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to further implement our business plan of increased sales and market share through the generation of organic growth in revenues from our existing operating segments, raise capital, issue capital in relation to our line of equity, and make strategic acquisitions. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.On November 7, 2016, we consummatedIn February 2022, in connection with the issuanceSeptember 2021 acquisition of the 45.62% interest in RemoteMore USA, Inc., and saleas a component of 1,777,417the $500,000 to be paid within one year, the Company issued 139,860 shares of Common Stockits common stock, with a value of $400,000, to CFL,the co-founders of RemoteMore (see Note 4 – Business Combinations).of $9.60 per share (giving effect to the Reverse Split), pursuant to the terms of the Purchase Agreement with CFL. We received total$0.86 for gross proceeds of approximately $17.1 million from the Share Issuance, or $14.1 million after giving effect to the payment for 312,500 shares of Common Stock tendered and not withdrawn in the Tender Offer. We received approximately $9.0 million in net proceeds from the Share Issuance, after repayment of outstanding indebtedness and the payment of transaction-related expenses at the closing.$1,000,000.On November 7, 2016,In March 2023, we entered into a stock purchase agreement with Ms. Yiran Gu, a former investor of the Company and a citizen of the People’s Republic of China, in connection with the closingpurchase by Ms. Gu of the Share Issuance, we (i) repaid in full all amounts owed under the Master Credit Facility, and (ii) terminated the Master Credit Facility and related agreements between the Company and White Winston, including the Board Representation Agreement, dated as of June 30, 2016. All security interests created under the Master Credit Facility were released upon repayment of the amounts under and termination of the Master Credit Facility.On January 18, 2017, we sold 312,500333,181 shares of Common Stock to CFL at a price of $9.60 per share, for total gross proceeds of $3,000,000, or $2,800,000 after giving effect to the payment of transaction-related expenses.On December 8, 2017, the Company sold 18,200 shares ofour common stock at a price of $3.49approximately $2.10 per share for aggregate gross proceeds of $700,000.$63,518.00. The$2,464,300.Shareshare of $1.63 for gross proceeds of approximately $200,000.reflected a ten percent (10%) discount fromas of twenty (20) days prior to the closing pricedate.Company’sSecurities Exchange Act of 1934, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. Since inception of the Stock Buyback Plan through December 20, 2022, the Company purchased 530,421 shares of its common stock onshares, for a total of approximately $855,000 at an average cost of approximately $1.62 per share (excluding commissions). Transactions occurred in open market purchases and pursuant to a trading plan under Rule 10b5-1. As of December 7, 2017.20, 2022, the Company suspended the Stock Buyback Plan.The management of the Company also made efforts in 2017 and first quarter of 2018 to contain and reduce cost, including implementing new approval process over travel and other expenses, significantly reducing the cash compensation for independent board directors, terminating non-performing employees and eliminating certain positions, replacing and negotiating with certain vendors, and consolidating our PDN and Noble Voice operations into one location. IfWhile we are not successful in reducing our costs we may then need to dispose of certain of these assets or discontinue certain business lines.We currently anticipatebelieve that our available fundscash and cash equivalents of approximately $628,000, at December 31, 2023, and cash flow from operations, willmay be sufficient to meet our working capital requirements for the twelve months subsequentfiscal year 2024, our available funds and cash flow from operations may not be sufficient to meet our working capital requirements without the need to increase revenues or raise capital by the issuance of our financial statements. However, therecommon stock. There can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all. In addition, due to China’s foreign currency control, the Company cannot moveCash and cash equivalents consist primarily of cash on deposit with banks and investments in money between China and the U.S. freely. The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) regulate the flow of foreign exchange in and out of the country. We need to get approval from Chinese government to move money from China to the U.S. which might take extra time.market funds.We collect membership fees generally at the commencement of the membership term or at renewal periods thereafter. The memberships we sell are for one year and we defer recognition of the revenue from membership sales and renewals and recognize it ratably over the twelve month period. Starting January 2, 2018, we also offer a monthly membership for IAW USA for which we collect a fee on a monthly basis. Our PDN Network also sells recruitment services to employers, generally on a one yearone-year contract basis. This revenue is also deferred and recognized over the life of the contract. Our payment terms for PDN Network and Noble Voice customers range from 30 to 60 days. We consider the difference between the payment terms and payment receipts a result of transit time for invoice and payment processing and to date have not experienced any liquidity issues as a result of the payments extending past the specified terms. CashOur NAPW network collects membership fees generally at the commencement of the membership term or at renewal periods thereafter. The memberships we sell are for one year and cash equivalentswe defer recognition of the revenue from membership sales and short term investments consist primarily of cash on deposit with banksrenewals and investments in money market funds, corporate and municipal debt and U.S. government and U.S. government agency securities.recognize it ratably over the twelve-month period. 39 Year Ended December 31, 2017 2016 (in thousands) Cash provided by (used in): Operating activities $ (6,331 ) $ (6,664 ) $ (3,009 ) $ (2,250 ) Investing activities (343 ) 658 (947 ) (61 ) Financing activities 3,586 10,005 3,364 145 Effect on exchange rate on cash 34 - Net increase in cash and cash equivalents $ (3,054 ) $ 3,999 - 2 (17 ) (2 ) $ (609 ) $ (2,166 ) for the year ended December 31, 2017 was $6,331,000. We had a net loss of $22,288,000from continuing operations during the year ended December 31, 2017,2023 was $3,009,000. We had a net loss from continuing operations of $4,386,000 during the year ended December 31, 2023, which included share-based compensation expense of $300,000 and a deferred tax benefit of $1,746,000, which were partially offset by non-cash goodwill impairment charge of $14,611,000, depreciation and amortization of $3,197,000, stock-based compensation expense of $900,000, provision$624,000, predominately due to amortization of intangible assets related to the acquisition of Expo Experts, reduction for bad debtthe allowance for credit losses of $171,000,approximately $16,000, accretion for the extinguishment of liabilities related to discontinued operations of approximately $157,000, and loss on litigation settlementnoncash lease expense of $155,000.$91,000. Changes in operating assets and liabilities used $1,333,000provided approximately $551,000 of cash during the year ended December 31, 2017,2023, consisting primarily of decreasesa $186,000 increase in deferred revenue, accounts payable, a $200,000 increase in accounts receivable, a $466,000 increase in prepaid expenses, and incremental direct costs,a $6,000 increase in deferred revenues, which was partially offset by increasesan approximate $204,000 decrease in accrued expenses.liabilities and $104,000 in lease liability.for the year ended December 31, 2016 was $6,664,000. We had a net loss of $4,109,000from continuing operations during the year ended December 31, 2016,2022 was $2,250,000. We had a deferred tax benefitnet loss from continuing operations of $1,290,000,$3,092,000 during the year ended December 31, 2022, which included a gain on settlement of $908,564 in litigation settlementssettlement reserves, share-based compensation expense of $1,240,000$481,000 and a gain on lease cancellation of $424,000, which were partially offset by non-cash depreciation and amortization expense of $3,324,000, deferred financing cost$776,000, predominately due to amortization of $1,528,000, a changeintangible assets related to the acquisition of RemoteMore, reduction of our merchant reserve of $381,000, reduction in the fair valueallowance for credit losses of warrant liabilities of $401,000approximately $145,000, and stock-based compensationnoncash lease expense of $264,000.$91,000. Changes in operating assets and liabilities used $4,970,000provided approximately $185,000 of cash during the year ended December 31, 2016,2022, consisting primarily of decreasesa $90,000 increase in deferred revenue and accounts payable, and increaseda $216,000 increase in accounts receivable, a $103,000 increase in prepaid expenses, and a $102,000 increase in accrued liabilities, which was partially offset by increasesa $224,000 decrease in incremental direct costsdeferred revenues and decreases$101,000 in accounts receivable.lease liability.(Used in) Provided byUsed in Investing Activities20172023 was $343,000, consistingapproximately $947,000, which consisted primarily of $185,000$400,000 related to the acquisition of Expo Experts, approximately $335,000 related to the acquisition of additional interest in RemoteMore, approximately $181,000 in costs incurred to developassociated with internally developed technology $154,000 inand approximately $30,000 associated with the purchases of property and equipment and $5,000 of returned security deposits.Net cash provided by investing activities duringcomputer equipment. During the year ended December 31, 20162022, net cash used in investing activities from continuing operations was $658,000, consistingapproximately $61,000, which consisted primarily of $500,000 of proceeds from$45,000 in costs associated with internally developed technology and $16,000 associated with the maturities of short-term investments, $5,000 in purchases of property and equipment and $163,000 of returned security deposits.computer equipment.20172023, was $3,586,000, consisting of $3,064,000 ofapproximately $3,364,000, which reflected the proceeds from the sale of common stock to CFL and IAW members, $666,000 proceeds due to the reduction in the merchant reserve for NAPW Network, partially offset by the payment of $144,000 of costs related to the CFL Transaction.as described above.4020162022, was $10,005,000, consisting of $17,063,000 ofapproximately $145,000, which reflected the proceeds from the sale of, common stock to CFL, $2,159,000 of proceeds drawn on our Master Credit Facility, $687,000 in proceeds fromand the exercise of warrants, partially offset by the payment of $3,530,000 of costs related to the CFL Transaction, the payment of $3,000,000 in connection with our repurchasereacquisition of, common stock the repayment of $2,159,000 upon the termination of our Master Credit Facility, $744,000 of costs related to securing the Master Credit Facility, $166,000 due to the increase in the merchant reserve for NAPW Network and $5,000 for the repurchase of restricted stock.as described above.On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may delay adoption of new or revised accounting standards applicable to public companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period for complying with such new or revised accounting standards. We have elected to take advantage of the benefits of this extended transition period. Our consolidated financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Upon issuance of new or revised accounting standards that apply to our consolidated financial statements, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting guidelines.41policy isaccounts receivable consists principally of uncollateralized amounts billed to reservecustomers. These receivables are generally due within 30 to 90 days of the period in which the corresponding sales occur and do not bear interest. They are recorded at net realizable value less an allowance for credit losses and are classified as account receivable, net on the consolidated balance sheets. accounts based onreceivable balances. In our best estimatedetermination of the amountallowance for credit losses, we pool receivables by days outstanding and apply an expected credit loss percentage to each pool. The expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of probablefuture economic conditions. Current conditions considered include predefined aging criteria, as well as specified events that indicate the balance due is not collectible. Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses.our existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.accordance with this accounting standard.We accountThe Company accounts for goodwill and intangible assets in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles -– Goodwill and Other (“ASC 350”350”). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.We evaluate goodwillGoodwill is tested for impairment annuallyat the reporting unit level on an annual basis (December 31)31 for the Company) and whenever eventsbetween annual tests if an event occurs or changes in circumstances indicatechange that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, may not be recoverable. Triggering events that may indicatewhen performing its goodwill impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected cash flows.test.ourits annual goodwill impairment assessment, we apply the two-step impairment test. The first step, identifyingCompany initially performs a potential impairment,qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit withexceeds its carrying amount.value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of a reporting unit exceeds its fair value, the second step would need to be conducted; otherwise, no further steps are necessaryCompany will measure any goodwill impairment losses as no potential impairment exists. The second step, measuring the impairment loss, compares the implied fair value of the goodwill withamount by which the carrying amount of that goodwill. Any excess of the goodwill carrying value over the respective implieda reporting unit exceeds its fair value, is recognized as an impairment loss, andnot to exceed the carrying valuetotal amount of goodwill is written downallocated to fair value.that reporting unit.350-40”350-40”). In accordance with ASC 350-40, we capitalize certain external and internal computer software costs incurred during the application development stage. The application development stage generally includes software design and configuration, coding, testing and installation activities. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized software costs are amortized over the estimated useful lives of the software assets on a straight-line basis, generally not exceeding three years.lead generation revenues and product sales.contracted software development. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from our direct ecommerce sales. Revenues from recruitment services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed or determinable and collectability is probable. Our recruitment revenue is derived from agreements through single and multiple job postings, recruitment media, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services.fixed feefixed-fee for revenue sharingrevenue-sharing agreements in which payment is required at the time of posting or billed based upon the number of impressions (the number of times an advertisement is displayed) recorded on the websites as specified in the customer agreement.Starting January 2, 2018, weWe also offer a monthly membership for which we collect fees on a monthly basis and we recognize revenue in the same month as the fees are collected. Revenue from related membership services areis derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.derive lead generation revenues pursuantin alliance with another company, partner to arrangements with for-profit educational centers. Under these arrangements,sell two recruitment services products. This alliance member builds, hosts, and manages our job boards and website. This alliance member also bills customers, collects fees, and provides customer services. For the years ended December 31, 2023, and 2022, we match educational centers with potential candidates, pursuantrecorded approximately 8.1% and 11.4% of our recruitment services revenue from this alliance sales relationship.specific parameters defined in each arrangement. extend the lease if we are reasonably certain of being exercised.invoice the educational centersrecognizes operating lease expense on a monthlystraight-line basis over the lease term and variable lease payments are expensed as incurred. Lease costs are primarily recorded within SG&A expenses in the Company's consolidated statements of loss and comprehensive loss. uponon information available at lease commencement including prevailing financial market conditions to determine the numberpresent value of leads provided. Revenues relatedfuture lease payments. We have elected the option to lead generationcombine lease and non-lease components as a single component for our entire population of lease assets.timelease commencement date. Operating lease liabilities represent the educational centerspresent value of lease payments not yet paid. Operating lease assets represent the right to use an underlying asset and are invoiced.based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, and lease incentives. We have elected not to apply the recognition requirements to short-term leases of 12 months or less and instead recognizes lease payments as expense on a straight-line basis over the lease term. Our lease agreement does not contain any material residual value guarantees or material restrictive covenants. Leased assets are presented net of accumulated amortization.annual reportAnnual Report on Form 10-K, including Part I, Item 1. “Business” and Part II, Item 7. “Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations,” contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this annual reportAnnual Report contains forward-looking statements regarding: 43●our beliefs regarding our ability to capture and capitalize on market trends; partners or to successfully integrate such businesses, including our ability to realize the benefits and cost savings from, and limit any unexpected liabilities acquired as a result of, any such business combinations;partners; loss in 2015 and 2016;losses; our ability to execute our China growth plan●any developments.developments, including those affecting the market for services focused on the promotion of workplace diversity and other services we provide.annual report,Annual Report, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date of this annual report.Annual Report.Not applicable.We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such are not required to provide information under this item.F-28F-27 of this Annual Report. See Item 15(a)(l) for a listing of financial statements provided.44Under the supervision and with the participationAs of December 31, 2023, our management including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness as of the end of the period covered by this Annual Report,design and operation of our disclosure controls and procedures, as such term is defined in Rulesunder Rule 13a-15(e) and 15d-15(e)promulgated under the Securities Exchange Act of 1934, as amended (the “(“Exchange Act”Act”). The purpose, under the supervision of this evaluation was to determine whether as of the evaluation date our disclosure controls and procedures were effective to provide reasonable assurance that the information we are required to disclose in our filings with the SEC under the Exchange Act: (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated toparticipation of our management, including ourthe Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.Officer. Based on thisthat evaluation, and because ofour management, including the material weakness described below, our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures were effective on December 31, 2023, and during the period prior to and including the date of this report.effective asabsolute, assurance that the objectives of the endcontrol system are met. Because of the period coveredinherent limitations in this Annual Report on Form 10-K.all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.Management’sManagement’s Report on Internal Control over Financial Reportingofficer and principal financial officer, respectively)officer), is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. We have designed our internal controls to provide reasonable assurance that our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP), and include those policies and procedures that: ● ●2017.2023. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in its 2013Internal Control — Integrated Framework. and because of the material weakness described below, our Chief Executive Officer and Chief Financial Officer have concluded that our internal controls over financial reporting were not effective as of the end of the period covered in this Annual Report on Form 10-K. The management undertook several remediation actions, including additional segregation of duties within our accounting and financial reporting functions, an expansion of our corporate accounting staff and the addition of qualified personnel with knowledge of U.S. GAAP to help address the material weaknesses identified at December 31, 2016. These measures helped improve our internal controls and remediate lack of segregation of incompatible duties that was identified as material weakness at December 31, 2016. The other deficiencies in controls the Company identified as of December 31, 2016 such as (i) lack of sufficient qualified personnel with the relative U.S. GAAP knowledge, and (ii) lack of effective financial reporting process to prepare financial statements in accordance with U.S. GAAP still existed at December 31, 2017. Additionally, during the evaluation, a new material weakness was identified in our China operations that we launched in March 2017. To address this material weakness, we have expanded our internal controls to include additional analysis and other procedures over the preparation of the financial statements included in this report. Accordingly, our management has concluded that the financial statements included in this report fairly present in all material respects our financial position and results of operations.Material Weakness in Internal Control Over Financial ReportingA material weakness is a control deficiency or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our management had concluded that, as of December 31, 2017, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements. Specifically, we noted the following:●The Company lacks sufficient qualified personnel with the relative U.S. GAAP knowledge to review conclusions reached regarding the accounting for complex transactions and related analyses to record amounts resulting from such transactions in our financial records.●We did not maintain an effective financial reporting process to prepare financial statements in accordance with U.S. GAAP. Specifically, our process lacked timely and complete financial statement reviews and procedures to ensure all required disclosures were made in our financial statements.●With regard to service income in our China operations, a material weakness existed in control design related to contract administration, ensuring that completed contracts were in place and revenue recognition principles were satisfied before the revenue was recorded. This material weakness was identified by management in the fourth quarter of 2017.Plan for Remediation of Material WeaknessDuring 2017, we continued our initiatives to improve and remediate material weaknesses related to our internal control over financial reporting for the period ended December 31, 2017. Specifically:●We expanded our corporate accounting staff and added qualified personnel with knowledge of U.S. GAAP,●We initiated more effective financial reporting process that included monthly and quarterly closing check-list and monthly review of the financial reports by the Company’s Finance Dept. leadership.The material weakness in our China operations was identified near the end of the fourth quarter 2017. As a consequence, there was insufficient time for management to design and implement a remediation strategy in 2017. However, during the first quarter in 2018, the company implemented new policies and processes to enhance the internal control structure in our China operations, as noted below:●Design and implement standard processes and controls over revenue recognition of service income in China. All recognized contracts must be executed by both parties and stamped with their respective official seals.●Invoices will be recorded with a sequential numbering system to ensure all invoices are recorded and tracked on a timely basis.We anticipate that the actions described above and resulting improvements in controls will strengthen the Company’s internal control over financial reporting and will, over time, address the related material weakness. However, because many of the controls in the Company’s system of internal controls, particularly in the China operations, rely extensively on manual review and approval, the successful operation of these controls may be required for several quarters prior to management being able to conclude that the material weakness has been remediated.46assurances.assurance. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.During the fourth quarter of 2017 we continued to undertake efforts to enhance the overall internal control structure. We implemented additional review and approval policies and procedures within our operations. There have been no other changes in our internal control over financial reporting that occurred during our fiscal quarter ended December 31, 20172023, that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.None.(a) None.We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Code of Ethics is located on our internet web site atwww.prodivnet.com under “Company-Investor Relations – Corporate Governance – Governance Documents.” We intend to provide disclosure of any amendments or waivers of our Code of Ethics on our website within four business days following below, the date of the amendment or waiver.Other information required by this item, including information regarding directors, executive officers and corporate governance matters will be incorporated herein by reference to the sections entitled “Proposal 1: Nomination and Election of Directors–Nominees for Director,” “Corporate Governance – Meetings and Committees of the Board of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement for its 2018 annual meeting of shareholders (the “2018 Proxy Statement”), which proxy statement will be filed no later than 120 days after the close of the Company’s fiscal year ended December 31, 2017.ITEM 11 - EXECUTIVE COMPENSATIONThe information required by this item is incorporated herein by reference tofrom the sections entitled “Executivediscussion under the headings “Directors and Director Compensation,,” “Corporate“Corporate Governance, – Compensation Committee Interlocks” “Executive Officers” and Insider Participation” and ““Other Matters—Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in the 2018our definitive Proxy Statement which proxy statement willto be filed no later than 120 days after the closein connection with our 2024 Annual Meeting of the Company’s fiscal year ended December 31, 2017.Stockholders.47TheCertain of the information regarding security ownership of management and certain beneficial owners required by this item is incorporated herein by reference tofrom the section entitled “Securitydiscussion under the heading “Security Ownership of Certain Beneficial OwnersHolders and Management” in the 2018our definitive Proxy Statement which proxy statement willto be filed no later than 120 days after the closein connection with our 2024 Annual Meeting of the Company’s fiscal year ended December 31, 2017.Stockholders. 28,063 $ 9.04 - 110,488 - 553,330 - - - 138,551 $ 9.04 553,330 Certain Relationships and Related Party Transactionstofrom the sections entitled “Corporate Governance – Certain Relationshipsdiscussion under the headings “Certain Transactions and Related Party Transactions”Business Relationships” and “Corporate Governance – Director Independence”“Corporate Governance” in the 20182023 Proxy Statement, which proxy statement will be filed no later than 120 days after the close of the Company’s fiscal year ended December 31, 2017.Statement.tofrom the section entitled “discussion under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in the 2018our definitive Proxy Statement which proxy statement willto be filed no later than 120 days after the closein connection with our 2024 Annual Meeting of the Company’s fiscal year ended December 31, 2017.Stockholders.(a)1. Financial Statements
Number 484950†Confidential treatment requested as to certain portions of this exhibit. Such portions have been redacted and submitted separately to the SEC.±The Common Stock Purchase Warrants issued by the Company to each of Craig Skop, Priyanka Mahajan, Kevin Mangan, Eric Lord, Ramnarain Jaigobind, Zachary Hirsch , Joseph Haughton, Phillip Michals, Raffaele Gambardella and Robert Eide, all of whom are affiliates of Aegis Capital Corp., are substantially identical in all material respects to the Common Stock Purchase Warrant issued to David Bocchi and filed as an exhibit, except as to the recipient of such warrants and the number of shares of Common Stock issuable upon exercise of such warrants. Pursuant to SEC regulation, we have omitted filing copies of such warrants as exhibits to this Annual Report on Form 10-K. 51 
Shareholders and Board of Directors ofand and Subsidiariesand Subsidiaries (the “Company”)Company) as of December 31, 20172023, and 2016,2022, and the related consolidated statements of operations andoperationsand comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the two-year period ended December 31, 2017,2023, and the related notes (collectively referred to as the “financial statements”)financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023, and 2016,2022, and the results of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2017,2023 in conformity with accounting principles generally accepted in the United States of America.Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion./s/ MarcumllpThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.MarcumllpRevenue RecognitionWe have served as the Company’s auditor since 2012.Critical Audit Matter DescriptionMelville, NYAs described in Note 5 to the consolidated financial statements, the Company derives its revenue from multiple sources, including recruitment services, contracted software development, and membership fees. Most contracts have one performance obligation and are recognized at a point in time contemporaneous when the service is performed or with the date of the event. The Company has other agreements for services that may stretch over longer periods of time or contain multiple performance obligations which are accounted for separately, if they are distinct that require further analysis to determine proper recognition.March 30, 2018How the Critical Audit Matter was Addressed in the Audit
F-2 
December 31, 2017 2016 Current Assets: Cash and cash equivalents (Amount related to variable interest entity of $1,671,378 in 2017) $ 3,013,927 $ 6,068,973 Accounts receivable, net 1,997,983 2,170,529 Incremental direct costs 145,292 423,023 Prepaid expenses and other current assets 478,379 957,140 Total current assets 5,635,581 9,619,665 Property and equipment, net 237,037 277,534 Capitalized technology, net 158,142 173,368 Goodwill 5,590,150 20,201,190 Intangible assets, net 6,381,206 9,183,439 Merchant reserve 760,849 1,426,927 Security deposits 225,957 220,754 Other assets - 35,000 Total assets $ 18,988,922 $ 41,137,877 Current Liabilities: Accounts payable $ 1,524,066 $ 2,172,332 Accrued expenses 1,247,116 962,172 Deferred revenue 4,004,015 5,485,599 Total current liabilities 6,775,197 8,620,103 Deferred rent 56,082 55,718 Deferred tax liability 1,803,519 3,653,274 Other liabilities 52,321 33,159 Total liabilities 8,687,119 12,362,254 Commitments and contingencies Stockholders’ Equity Common stock, $0.01 par value, 45,000,000 shares authorized, 3,963,864 shares and 3,623,899 shares issued as of December 31, 2017 and 2016, respectively, and 3,962,816 and 3,619,338 shares outstanding as of December 31, 2017 and 2016, respectively 39,639 36,204 Additional paid in capital 80,016,218 76,234,772 Accumulated other comprehensive income 28,848 - Accumulated deficit (69,745,785 ) (47,458,236 ) Treasury stock, at cost; 1,048 shares at December 31, 2017 and 2016 (37,117 ) (37,117 ) Total stockholders’ equity 10,301,803 28,775,623 Total liabilities and stockholders’ equity $ 18,988,922 $ 41,137,877 See Note 3 for Additional Variable Interest Entity Disclosures. $ 627,641 $ 1,236,771 1,134,067 1,318,217 50,000 350,000 556,698 347,807 - 4,600 2,368,406 3,257,395 42,043 35,341 186,103 64,499 1,417,753 1,274,785 225,848 225,221 298,485 365,324 66,340 66,340 184,055 - 1,537,499 1,350,000 - 197,228 $ 6,326,532 $ 6,836,133 $ 524,854 $ 338,600 867,884 1,071,842 1,999,841 1,925,788 82,652 103,555 - 503,090 3,475,231 3,942,875 283,060 341,165 - 100,000 - 143,069 3,758,291 4,527,109 - - 114,520 103,675 102,873,474 101,728,600 - (10,986 ) (99,902,718 ) (98,382,540 ) (37,117 ) (892,482 ) 3,048,159 2,546,267 (479,918 ) (237,243 ) 2,568,241 2,309,024 $ 6,326,532 $ 6,836,133