~~PROFESSIONAL DIVERSITY NETWORK, INC.~~

~~FORM 10-Q~~

~~FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017~~

~~TABLE OF CONTENTS~~

~~Page~~

Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 Quarterly Report contains forward-looking statements regarding:

~~PART I~~		●	1our beliefs regarding our ability to capture and capitalize on market trends;
	~~ITEM 1.~~●	~~FINANCIAL STATEMENTS~~	1our 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 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 partners or to successfully integrate such businesses;
	●	our history of operating losses;
	●	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;
	●	any future litigation regarding our business, including intellectual property claims;
	●	general and economic business conditions; and
	●	legal and regulatory developments.

PROFESSIONAL DIVERSITY NETWORK, INC.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2020

TABLE OF CONTENTS

	PAGE
PART I

ITEM 1. FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1722
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2833
ITEM 4 CONTROLS AND PROCEDURES	33
	~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~	28
PART II			29
	~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~	29
ITEM 1 LEGAL PROCEEDINGS	~~ITEM 1A.~~	~~RISK FACTORS~~	2934
ITEM 1A RISK FACTORS	34
ITEM 2.	2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3035
	ITEM 3.	3 DEFAULTS UPON SENIOR SECURITIES	3035
	ITEM 4.	4 MINE SAFETY ~~DISCLOSURE~~DISCLOUSRES	3035
	ITEM 5.	5 OTHER INFORMATION	3035
ITEM 6 EXHIBITS	~~ITEM 6.~~35

~~EXHIBITS~~

303

~~PART I~~

~~ITEM 1.~~

~~FINANCIAL STATEMENTS~~

~~Professional Diversity Network, Inc.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

September 30, December 31,
2017 2016
(Unaudited)
Current Assets:
Cash and cash equivalents $ 2,821,729 $ 6,068,973
Accounts receivable, net 1,799,013 2,170,529
Incremental direct costs 241,235 423,023
Prepaid expenses and other current assets 490,581 957,140
Total current assets 5,352,558 9,619,665

Property and equipment, net 291,774 277,534
Capitalized technology, net 141,573 173,368
Goodwill 10,280,885 20,201,190
Intangible assets, net 7,035,139 9,183,439
Merchant reserve 780,849 1,426,927
Security deposits 239,059 220,754
Other assets - 35,000
Total assets $ 24,121,837 $ 41,137,877

Current Liabilities:
Accounts payable $ 1,232,510 $ 2,172,332
Accrued expenses 1,172,435 962,172
Deferred revenue 4,422,715 5,485,599
Total current liabilities 6,827,660 8,620,103

Deferred tax liability 2,492,837 3,653,274
Deferred rent 60,959 55,718
Other liabilities 78,481 33,159
Total liabilities 9,459,937 12,362,254

Commitments and contingencies

Stockholders' Equity
Common stock, $0.01 par value; 45,000,000 shares authorized; 3,936,399 shares and 3,623,899
shares issued as of September 30, 2017 and December 31, 2016, respectively; and 3,931,838 shares
and 3,619,338 shares outstanding as of September 30, 2017 and December 31, 2016, respectively
39,329 36,204
Additional paid in capital 79,783,969 76,234,772
Accumulated other comprehensive loss (1,435 ) -
Accumulated deficit (65,122,846 ) (47,458,236 )
Treasury stock, at cost; 1,048 shares at September 30, 2017 and December 31, 2016 (37,117 ) (37,117 )
Total stockholders' equity 14,661,900 28,775,623

Total liabilities and stockholders' equity $ 24,121,837 $ 41,137,877

Item 1. FINANCIAL STATEMENTS

Professional Diversity Network, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	March 31, 2020			December 31, 2019
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	1,555,203		$	633,615
Accounts receivable, net		287,354			720,750
Incremental direct costs		26,119			33,258
Prepaid expense and other current assets		307,182			240,763
Current assets from discontinued operations		31,182			75,996
Total current assets		2,207,040			1,704,382

Property and equipment, net		13,905			21,188
Capitalized technology, net		74,752			95,884
Goodwill		339,451			339,451
Intangible assets, net		433,333			452,385
Right-of-use assets		54,149			93,251
Merchant reserve		760,849			760,849
Security deposits		15,033			15,033
Long-term assets from discontinued operations		2,882,887			3,109,200
Total assets	$	6,781,399		$	6,591,623

Current Liabilities:
Accounts payable	$	983,713		$	796,137
Accrued expenses		1,031,165			654,169
Deferred revenue		1,549,165			1,699,001
Lease liability, current portion		60,910			105,083
Current liabilities from discontinued operations		322,709			564,044
Total current liabilities		3,947,662			3,818,434

Deferred tax liability		215,345			221,254
Total liabilities		4,163,007			4,039,688

Commitments and contingencies

Stockholders’ Equity
Common stock, $0.01 par value; 45,000,000 shares authorized, 10,922,021 shares and 8,928,611 shares issued as of March 31 2020 and December 31, 2019, and 10,920,973 and 8,927,563 shares outstanding as of March 31, 2020 and December 31, 2019		109,209			89,286
Additional paid in capital		92,625,541			91,126,784
Accumulated other comprehensive income		84,115			44,242
Accumulated deficit		(90,163,356	)		(88,671,260	)
Treasury stock, at cost; 1,048 shares at March 31, 2020 and December 31, 2019		(37,117	)		(37,117	)
Total stockholders’ equity		2,618,392			2,551,935
Total liabilities and stockholders’ equity	$	6,781,399		$	6,591,623

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

~~Professional Diversity Network, Inc.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)~~4

Three Months Ended September 30,
Nine Months Ended
September 30,

2017 2016 2017 2016

Revenues:
Membership fees and related services $ 2,204,909 $ 3,748,334 $ 7,465,202 $ 13,047,652
Lead generation 1,370,465 1,554,370 4,699,399 4,489,919
Recruitment services 694,454 954,887 1,977,101 2,295,556
Product sales and other 18,285 52,857 91,226 544,440
Education and training 68,890 - 898,584 -
Consumer advertising and marketing solutions 65,188 49,719 189,217 176,771
Total revenues 4,422,191 6,360,167 15,320,729 20,554,338

Costs and expenses:
Cost of revenues 658,297 745,159 2,193,224 2,433,550
Sales and marketing 2,275,585 3,064,454 8,114,908 10,314,145
General and administrative 3,236,848 3,010,862 11,322,513 8,928,493
Litigation settlement 155,216 - 155,216 500,000
Goodwill impairment charge - - 9,920,305 -
Depreciation and amortization 806,898 819,894 2,443,511 2,498,136
Total costs and expenses 7,132,844 7,640,369 34,149,677 24,674,324

Loss from operations (2,710,653 ) (1,280,202 ) (18,828,948 ) (4,119,986 )

Other (expense) income
Interest expense - (215,781 ) (12,399 ) (216,948 )
Interest and other income 4,117 150 9,218 801
Other finance income 5,318 - 7,082 -
Other (expense) income, net 9,435 (215,631 ) 3,901 (216,147 )

Change in fair value of warrant liability - (401,000 ) - (401,000 )

Loss before income tax benefit (2,701,218 ) (1,896,833 ) (18,825,047 ) (4,737,133 )
Income tax benefit (213,133 ) (623,699 ) (1,160,437 ) (1,218,092 )
Net loss (2,488,085 ) (1,273,134 ) (17,664,610 ) (3,519,041 )

Other comprehensive loss:
Foreign currency translation adjustment (3,056 ) - (1,435 ) -
Comprehensive loss $ (2,491,141 ) $ (1,273,134 ) $ (17,666,045 ) $ (3,519,041 )

Net loss per common share, basic and diluted $ (0.63 ) $ (0.70 ) $ (4.52 ) $ (1.94 )

Weighted average shares used in computing net
loss per common share:

Basic and diluted 3,932,886 1,809,676 3,912,282 1,809,676

Professional Diversity Network, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

	Three Months Ended March 31,
	2020			2019
Revenues:
Membership fees and related services	$	383,831		$	794,539
Recruitment services		566,687			474,260
Products sales and other		1,431			2,812
Consumer advertising and marketing solutions		30,348			35,716
Total revenues		982,297			1,307,327

Costs and expenses:
Cost of revenues		173,477			183,659
Sales and marketing		524,969			695,767
General and administrative		1,660,854			1,077,900
Depreciation and amortization		52,001			217,183
Total costs and expenses		2,411,301			2,174,509

Loss from continuing operations		(1,429,004	)		(867,182	)

Other income (expense)
Interest expense		-			(2,583	)
Interest and other income		664			-
Other income (expense), net		664			(2,583	)

Loss before income tax benefit		(1,428,340	)		(869,765	)
Income tax benefit		(5,909	)		(65,633	)
Loss from continuing operations		(1,422,431	)		(804,132	)
Loss from discontinued operations		(69,665	)		(355,237	)
Net loss	$	(1,492,096	)	$	(1,159,369	)

Other comprehensive loss:
Net loss	$	(1,492,096	)	$	(1,159,369	)
Foreign currency translation adjustment		39,873			23,035
Comprehensive loss:	$	(1,452,223	)	$	(1,136,334	)

Basic and diluted loss per share:
Continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations	$	(0.01	)	$	(0.07	)
Net loss	$	(0.17	)	$	(0.23	)

Weighted average outstanding shares used in computing net loss per common share:
Basic and diluted		8,969,475			4,969,230

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

~~Professional Diversity Network, Inc.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)~~5

Nine Months Ended
September 30,

2017 2016
Cash flows from operating activities:
Net loss $ (17,664,610 ) $ (3,519,041 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,443,511 2,498,136
Deferred tax (1,160,437 ) (1,218,092 )
Gain on lease cancellation - (423,998 )
Goodwill impairment charge 9,920,305 -
Stock-based compensation expense 731,322 217,547
Provision for bad debt 155,077 -
Amortization of deferred financing costs - 156,594
Amortization of prepaid license fees - 112,500
Amortization of customer deposits - (112,500 )
Chang in fair value of warrant liability - 401,000
Changes in operating assets and liabilities:
Accounts receivable 219,391 671,056
Prepaid expenses and other current assets 467,339 181,903
Incremental direct costs 181,788 476,300
Accounts payable (940,051 ) 893,210
Accrued expenses 209,458 681,779
Deferred revenue
(1,067,652
) (3,560,351 )
Deferred rent 5,241 10,279
Other liabilities 45,322 45,098
Net cash used in operating activities (6,453,996 ) (2,488,580 )

Cash flows from investing activities:
Proceeds from maturities of short-term investments - 500,000
Costs incurred to develop technology (122,597 ) -
Purchases of property and equipment (154,295 ) -
Security deposit (17,603 ) 194,411
Net cash (used in) provided by investing activities (294,495 ) 694,411

Cash flows from financing activities:
Proceeds from the sale of common stock 3,000,000 -
Payment of offering costs (144,000 ) -
Proceeds from line of credit - 1,942,625
Payment of deferred issuance costs related to Master Credit Facility - (488,082 )
Payment of deferred offering costs related to CFL Transaction - (1,049,026 )
Merchant reserve 646,078 (166,078 )
Net cash provided by financing activities 3,502,078 239,439

Effect of exchange rate fluctuations on cash and cash equivalents (831 ) -
Net decrease in cash and cash equivalents (3,247,244 ) (1,554,730 )
Cash and cash equivalents, beginning of period 6,068,973 2,070,693
Cash and cash equivalents, end of period $ 2,821,729 $ 515,963

Supplemental disclosures of other cash flow information:
Cash paid for income taxes $ 1,702 $ 4,605
Cash paid for interest $ - $ 21,740
Issuance of warrants in connection with Master Credit Facility $ - $ 783,458
Reclassification of derivative liability to additional paid in capital $ - $ 781,000

Professional Diversity Network, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Loss from continuing operations	$	(1,422,431	)	$	(804,132	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations:
Depreciation and amortization		52,001			217,184
Deferred tax benefit		(5,909	)		(66,844	)
Amortization of right-of-use asset		39,102			38,003
Accretion of lease liability		1,469			2,568
Stock-based compensation expense		18,680			8,289
Write-off of property and equipment		-			581
Litigation settlement reserve		450,000			-
Payment of lease obligations		(45,642	)		(44,210	)
Changes in operating assets and liabilities, net of effects of discontinued operations:		-			-
Accounts receivable		433,396			370,877
Prepaid expenses and other current assets		(66,419	)		(117,950	)
Incremental direct costs		7,139			(27,357	)
Accounts payable		187,576			(145,584	)
Accrued expenses		(73,004	)		(52,235	)
Deferred revenue		(149,836	)		(206,913	)
Net cash used in operating activities - continuing operations		(573,878	)		(827,723	)
Net cash provided by operating activities - discontinued operations		15,573			365,445
Net cash used in operating activities		(558,305	)		(462,278	)

Cash flows from investing activities:
Costs incurred to develop technology		(3,700	)		-
Purchases of property and equipment		(834	)		-
Net cash used in investing activities - continuing operations		(4,534	)		-
Net cash used in investing activities - discontinued operations		(171	)		(3,640	)
Net cash provided used in investing activities		(4,705	)		(3,640	)

Cash flows from financing activities:
Proceeds from the sale of common stock		1,500,000			372,896
Repayment of note payable - related party		-			(292,882	)
Proceeds from line of credit - related party		-			292,882
Net cash provided by financing activities - continuing operations		1,500,000			372,896
Net cash provided by financing activities		1,500,000			372,896

Effect of exchange rate fluctuations on cash and cash equivalents		(15,402	)		20,649
Net increase (decrease) in cash and cash equivalents		936,990			(93,022	)
Cash, cash equivalents, beginning of period		633,615			105,670
Cash and cash equivalents, end of period		1,555,203			33,297

Supplemental disclosures of other cash flow information:
Cash paid for income taxes	$	-		$	6,966

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

Professional Diversity Network, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

																Accumulated
					Additional											Other		Total
	Common Stock				Paid in			Accumulated			Treasury Stock					Comprehensive		Stockholders’
	Shares		Amount		Capital			Deficit			Shares		Amount			Income (Loss)		Equity
Balance at January 1, 2020		8,928,611	$	89,286	$	91,126,784		$	(88,671,260	)		1,048	$	(37,117	)	$	44,242	$	2,551,935

Sale of common stock		1,939,237		19,392		1,480,608			-			-		-			-		1,500,000
Issuance of common stock		53,125		531		(531	)		-			-		-			-		-
Share-based compensation		-		-		18,680			-			-		-			-		18,680
Translation adjustments		-		-		-			-			-		-			39,873		39,873
Net loss		-		-		-			(1,492,096	)		-		-			-		(1,492,096	)
Balance at March 31, 2020		10,920,973	$	109,209	$	92,625,541		$	(90,163,356	)		1,048	$	(37,117	)	$	84,115	$	2,618,392

					Additional
	Common Stock				Paid in		Accumulated			Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital		Deficit			Shares		��	Amount			Income (Loss)			Equity
Balance at January 1, 2019		4,856,213	$	48,562	$	83,728,903	$	(84,826,796	)		1,048		$	(37,117	)	$	(24,340	)	$	(1,110,788	)

Sale of common stock		203,963		2,040		370,856		-			-			-			-			372,896
Share-based compensation		-		-		8,289		-			-			-			-			8,289
Translation adjustments		-		-		-		-			-			-			23,035			23,035
Net loss		-		-		-		(1,159,369	)		-			-			-			(1,159,369	)
Balance at March 31, 2019		5,060,176	$	50,602	$	84,108,048	$	(85,986,165	)		1,048		$	(37,117	)	$	(1,305	)	$	(1,865,937	)

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

Professional Diversity Network, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Basis of Presentation and Description of Business

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

~~1. Description~~The accompanying condensed consolidated financial statements include all adjustments, which consist of ~~Business~~

normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2019 Form 10-K.

Professional Diversity Network, Inc. is both the operator of the Professional Diversity Network (the “Company,” “we,” “our,” “us,” “PDN Network,” “PDN” or the “Professional Diversity Network”) and a holding company ~~for:~~

~~NAPW, Inc., a Delaware corporation and wholly-owned subsidiary of the Company and the operator of the National Association of Professional Women (the “NAPW Network” or “NAPW”);~~

Noble Voice LLC and Compliant Lead LLC (collectively, “Noble Voice”), both Delaware limited liability companies, each of which is a wholly-owned subsidiary of the Company and together provide career consultation services;

AETSI, Inc. (“AETSI”), a Delaware corporation and wholly-owned subsidiary of the Company, which was created to facilitate the Company’s prospective U.S.-China education partnerships, expected to begin later in 2017;

PDN HK International Education Ltd. and PDN HK International Education Information Co. Ltd. (collectively, “PDN Hong Kong”), both Hong Kong limited companies and wholly-owned subsidiaries which were created during the first quarter of 2017 to support the Company’s China expansion; and

PDN (China) International Culture Development Ltd. Co. (“PDN China”), a China wholly-owned foreign enterprise company and wholly-owned subsidiary created during the first quarter of 2017 to operate the China Operations described below.

for NAPW, Inc., a wholly-owned subsidiary of the Company and the operator of the National Association of Professional Women (the “NAPW Network” or “NAPW”). The PDN Network operates online professional networking communities with career resources specifically tailored to the needs of different diverse cultural groups including: 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. The networks’ purposes, among others, are to assist its registered users in their efforts to connect with like-minded individuals, identify career opportunities within the network and connect with prospective employers. The Company’s technology platform is integral to the operation of its business. The NAPW Network is ~~an exclusive women-only~~networking organization for professional ~~networking organization,~~women, whereby its members can develop their professional networks, further their education and skills, and promote their business and career accomplishments. NAPW provides its members with opportunities to network and develop valuable business relationships with other professionals through its website, as well as at events hosted at its local chapters across the country. Noble Voice monetizes its consumer transactions by using proprietary technology to drive inexpensive online traffic to our offline call center and generating value-added leads for the Company’s strategic partners who provide continuing education and career services.

The Company ~~began~~established business operations in China in ~~the first quarter of 2017,~~2017. Our business activities, similar to those in the United States, ~~focusing~~will be focused on providing tools, products and services in China, which will assist in personal and professional development.

In March 2020, our Board decided to suspend all China operations generated by the former CEO, Michael Wang. The ~~Company intends~~results of China operations are presented in the condensed consolidated statements of operations and comprehensive loss as net loss from discontinued operations. On March 19, 2020, Jiangxi PDN Culture Media Co., Ltd. (“Jiangxi PDN”), a company established under the laws of the People’s Republic of China and a variable interest entity (VIE) controlled by Professional Diversity Network, Inc. (“PDN”), issued a Notice of Termination of the Agreement of Acquisition and Equity Transfer (the “Termination”). This Notice was exercised under Jiangxi PDN’s unilateral right and was delivered on March 19, 2020. Under the terms of the Termination, no additional due diligence shall be completed, any materials shall be returned to ~~cooperate~~the respective owners, and there shall be no breakup fee or penalty associated with ~~existing companies and organizations~~this Termination. We expect no further involvement in ~~China to efficiently and promptly deliver valuable products and services to its registered users. The Chinese operations focus on the following areas:~~

Women’s Networking, which is the Chinese expansion of the NAPW segment, and is called “The International Association of Women” or “IAW,” the first marketing event for which was held near the end of the second quarter of 2017;

Secondary Education Services for Chinese Children, which will provide services to assist families in China identify, prepare for and attend secondary education schools in the United States and other countries, with U.S. operations managed by AETSI and China operations managed by PDN China; and

Education and Training for Accomplished Chinese Business People, through PDN China, which is providing education and training seminars in China, as reflected in the Company’s “China Operations / Education and Training” segment information below.

this matter.

2. ~~Liquidity, Financial Condition~~Going Concern and Management’s Plans

At ~~September 30, 2017,~~March 31, 2020, the Company’s principal sources of liquidity were its cash and cash equivalents and the net proceeds from the ~~closings~~sale of common stock during the ~~CFL Transaction (as defined in Note 7).~~

first quarter of 2020.

The Company had an accumulated deficit of ~~approximately $65,123,000~~($90,163,356) at ~~September 30, 2017.~~March 31, 2020. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company generated a net loss from continuing operations of ~~approximately $17,665,000 (including a goodwill impairment charge of $9,920,000),~~($1,422,000) and used cash in continuing operations of ~~approximately $6,454,000, which includes $1,450,000 paid to LinkedIn as a litigation settlement, and the Company expects that it will continue to generate operating losses for the foreseeable future.~~$574,000. At ~~September 30, 2017,~~March 31, 2020, the Company had a cash balance of ~~approximately $2,822,000.~~$1,555,000. Total revenues were approximately ~~$4,422,000~~$982,000 and ~~$6,360,000~~$1,307,000 for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and approximately $15,321,000 and $20,554,000 for the nine months ended September 30, 2017 and 2016, respectively.~~2019. The Company had a working capital deficiency from continuing operations of approximately ($~~1,475,000)~~1,741,000) and ~~$1,000,000~~($2,114,000) at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, respectively.~~

2019. These conditions raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~8

On November 7, 2016, the Company consummated the issuance and sale of 1,777,417 shares of the Company’s common stock to Cosmic Forward Limited, a Republic of Seychelles company wholly-owned by a group of Chinese investors (“CFL”), in a private placement, at a price of $9.60 per share (“Share Issuance”). In addition, on November 7, 2016, the Company completed the repurchase of 312,500 shares of its common stock at a price of $9.60 per share (“Tender Offer”). The Company received total gross proceeds of $17,063,000 from the Share Issuance, or $14,063,000 after giving effect to the payment for the 312,500 shares of common stock from the Tender Offer. The Company received approximately $9,000,000 in net proceeds from the Share Issuance, after repayment of all amounts outstanding under its Master Credit Facility and the payment of transaction-related expenses.

On January 18, 2017, the Company consummated the issuance and sale of 312,500 shares of the Company’s common stock to CFL at a price of $9.60 per share, for total gross proceeds of $3,000,000, or $2,821,000 after giving effect to the payment of transaction-related expenses.

Management believes that its available ~~funds~~ cash on hand and cash ~~generated~~flow from operations ~~will~~may not be sufficient to meet ~~its~~our working capital requirements ~~at least~~for the twelve month period subsequent to the issuance of our financial statements. In order to accomplish our business plan objectives, the Company will need to continue its cost reduction efforts, increase revenues, raising capital through ~~November 2018.~~the issuance of common stock, or through a strategic merger or acquisition. However, there can be no assurances that ~~the~~our business plans and actions ~~proposed by management~~ will be successful, that ~~the Company~~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~~improve liquidity through the issuance of our common stock 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 move money between China and the USA 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 strictly. We need to get approval from Chinese government to move money from China to the U.S. which might take extra time.

On March 22, 2020, the Company entered into an agreement with Malven Group Limited, a company established under the laws of the British Virgin Islands, in connection with the purchase of 1,939,237 shares of common stock of the Company at a price of $0.7735 per share for gross proceeds of $1,500,000. The closing of the transaction took place on March 31, 2020.

3. Summary of Significant Accounting Policies

~~Basis~~Principles of ~~Presentation~~–Consolidation - The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying unaudited interim condensed consolidated financial statements include ~~all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation~~the accounts of the ~~financial position, operating results~~Company, its wholly-owned subsidiaries and ~~cash flows for the periods presented.~~

~~The accompanying unaudited interim condensed consolidated financial statements should be read~~a variable interest entity. All significant intercompany balances and transactions have been eliminated in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC on March 31, 2017 (the “Annual Report”), which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis, for the years ended December 31, 2016 and 2015. The financial information as of December 31, 2016 is derived from the audited financial statements presented in the Annual Report. The interim results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or for any future interim periods.

consolidation.

Use of Estimates– The preparation of ~~unaudited~~ condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ~~unaudited condensed~~ consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the ~~unaudited interim condensed consolidated~~ financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future intervening events. Accordingly, the actual results could differ significantly from estimates.

Significant estimates underlying the financial statements include the fair value of acquired assets and liabilities associated with acquisitions; the assessment of goodwill for impairment, ~~other~~ intangible assets and long-lived assets for impairment; allowances for doubtful accounts and assumptions related to the valuation allowances on deferred taxes, impact of applying the revised federal tax rates on deferred taxes, the valuation of stock-based compensation and the valuation of stock warrants.

5Cash Equivalents - The Company considers 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.

Accounts Receivable - Accounts receivable represent receivables generated from fees earned from customers and advertising revenue. The Company’s policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its 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. As of March 31, 2020 and December 31, 2019, the allowance for doubtful accounts amounted to $47,639 and $20,007.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~9

~~Principles~~Incremental Direct Costs - Incremental direct costs incurred in connection with enrolling members in the NAPW Network consist of ~~Consolidation~~sales commissions paid to the Company’s direct sales agents. Incremental direct costs associated with the PDN Network consists of commissions paid to third-party agencies. Commissions associated with the NAPW Network are deferred and amortized over the term of the membership, which is a 12-month period and agency commissions associated with the PDN Network are deferred and amortized over the membership service period. Total incremental direct costs related to the NAPW and PDN Network amounted to $29,000 and $32,000 during the three months ended March 31, 2020 and 2019.

–Property and Equipment - Property and equipment is stated at cost, including any cost to place the property into service, less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets which currently range from three to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the lease. Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The ~~accompanying unaudited condensed consolidated~~cost of any assets sold or retired and related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting profit or loss is reflected in income or expense for the period.

Capitalized Technology Costs - In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, the Company capitalizes 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.

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 ~~include~~ the ~~accounts~~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 ~~wholly-owned subsidiaries. All significant intercompany balances~~best estimates and ~~transactions have been eliminated in consolidation.~~

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 operations.

Goodwill and Intangible Assets - The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 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.

Goodwill is tested for impairment at the reporting unit level on an annual basis (December 31 for the Company) and between annual tests if an event occurs or circumstances change 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, when performing its goodwill impairment test.

~~Prior to January 1, 2017, when~~

When conducting its annual goodwill impairment assessment, the Company initially ~~performed~~performs a qualitative evaluation of whether it is more likely than not that goodwill ~~was~~is impaired. If it ~~was~~is determined by a qualitative evaluation that it ~~was~~is more likely than not that goodwill ~~was~~is impaired, the Company then ~~applied a two-step impairment test. The two-step impairment test first compared~~compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit ~~exceeded~~exceeds its carrying value, goodwill ~~was~~is not impaired and the Company ~~was~~is not required to perform further testing. If the carrying value of the reporting unit exceeded its fair value, the Company determined the implied fair value of the reporting unit's goodwill and if the carrying value of the reporting unit's goodwill exceeded its implied fair value, then an impairment loss equal to the difference was recorded in the consolidated statements of operations.

Effective January 1, 2017, the Company prospectively adopted the provisions of ASU 2017-04, ““Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates the second step of the goodwill impairment test. Therefore, for goodwill impairment tests occurring after January 1, 2017, if the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Treasury Stock – Treasury stock is recorded at cost as a ~~result~~reduction 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. The Company performed its review based on both qualitative and quantitative factors and determined that carrying value of NAPW’s goodwill exceeded its implied fair value. Accordingly, the Company recorded a goodwill impairment charge of $9,920,305stockholders’ equity in the accompanying ~~condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2017.~~

balance sheets.

Revenue Recognition– Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) services are performed, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.

Membership Fees and Related Services

Membership fees are collected up-front and member benefits become available immediately; however those benefits must remain available over the ~~12 month~~12-month membership period. At the time of enrollment, membership fees are recorded as deferred revenue and are recognized as revenue ratably over the ~~12 month~~12-month membership period. Members who are enrolled in this plan may cancel their membership in the program at any time and receive a partial refund (amount remaining in deferred revenue) or due to consumer protection legislation, a full refund based on the policies of the member’s credit card company.

We also offer a monthly membership for which we collect fees on a monthly basis and we recognize revenue in the same month as we collect the monthly fees.

Revenue from related membership services are 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.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

~~Lead Generation~~

~~Professional Diversity Network provides career opportunities~~Deferred Revenue– Deferred revenue includes customer deposits received prior to ~~our registered users. As part of our employment~~performing services we interact with over 27,500 job seekers via telephone on a weekly basis. Our Career Advisors suggest job opportunities for our registered users based on their location and profile. In certain circumstances our Career Advisers offer career support services to our registered users, including resume writing, education opportunities and economic consultations. In certain circumstances we receive compensation from various business partners resulting from our job seeker referrals. The Company derives lead generation revenues pursuant to arrangements with its business partners. Under these arrangements, the Company matches its business partners with potential candidates, pursuant to specific parameters defined in each arrangement. The Company invoices on a monthly basis based upon the number of leads provided. Revenues related to lead generationwhich are recognized inas revenue when revenue recognition criteria are met, and membership fees for annual memberships that are collected at the ~~month when~~time of enrollment and are recognized as revenue ratably over the ~~leads are sent to its business partners.~~

The Company's business partners include educational institutions such as Keypath Education, QuinStreet and Education Dynamics in Noble Voice's traditional, core business, as well as a broad array of corporations such as Avon Products, American Airlines, and Uber, among others.

12-month membership period.

Recruitment Services

The Company’s recruitment services revenue is derived from the Company’s 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. Recruitment revenue includes revenue recognized from direct sales to customers for recruitment services and events, as well as revenue from the Company’s direct e-commerce sales. Direct sales to customers are most typically a ~~twelve month~~twelve-month contract for services and as such the revenue for each contract is recognized ratably over its ~~twelve month~~twelve-month term. Event revenue is recognized in the month that the event takes place and e-commerce sales are for ~~one month~~one-month job postings and the revenue from those sales are recognized in the month the sale is made. Our recruitment services mainly consist of the following products:

●	On-line job postings to our diversity sites and to our broader network of websites including the National Association for the Advancement of Colored People, National Urban League and over 20 other partner organizations

●	OFCCP job promotion and recordation services

●	Diversity job fairs, both in person and virtual fairs

●	Diversity recruitment job advertising services

●	Cost per application, a service that employers can purchase whereby PDN sources qualified candidates and charges only for those applicants who meet the employers’ minimum qualifications

●	Diversity executive staffing services

• On-line job postings to our diversity sites and to our broader network of websites including the National Association for the Advancement of Colored People and the National Urban League

~~• OFCCP job promotion and recordation services~~

~~• Diversity job fairs, both in person and virtual fairs~~

~~• Diversity recruitment job advertising services~~

• Cost per application, a service that employers can purchase whereby PDN sources qualified candidates and charges only for those applicants who meet the employers’ minimum qualifications

~~• Diversity executive staffing services~~

~~The Company's customers in recruitment services include Starbucks, PNC Bank, and US Dept. of Treasury, among others.~~

Product Sales and Other Revenue

Products offered to members relate to custom made plaques. Product sales are recognized as deferred revenue at the time the initial order is placed. Revenue is then recognized at the time these products are shipped. The Company’s shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.

Education and Training

The Company works with its business partners to provide education and training seminars to business people in China. Revenues are recognized in the month when the seminar takes place.

Consumer Advertising and Marketing Solutions

The Company provides career opportunity services to its various partner organizations through advertising and job postings on their websites. The Company works with its partners to develop customized websites and job boards where the partners can generate advertising, job postings and career services to their members, students and alumni. ~~Partner~~Consumer advertising and marketing solutions revenue is recognized as jobs are posted to their hosted sites.

The ~~Company's~~Company’s partner organizations include NAACP and National Urban League,VetJobs, among others.

7Discontinued Operations

China Operations

On November 25, 2019, PDN China received a Seizure Decision Notice (the “Notice”) from the Yuexiu District Branch of the Police Department of Guangzhou City, the People’s Republic of China. The Notice stated that it is necessary to seize the assets of PDN China in connection with the criminal investigation of alleged illegal public fund raising by Gatewang Group (the “Gatewang Case”), a separate company organized under the laws of the People’s Republic of China (“Gatewang”), with which Mr. Maoji (Michael) Wang, the former Chairman and CEO of the Company (“Michael Wang”) is affiliated, who was subsequently held in custody by the local police department.

In response to such events, on December 12, 2019 the Company’s Board of Directors (the “Board”) established the Special Committee to investigate the situation, and ‎retained the international law firm of King & Wood Mallesons (“KWM”) to assist the Special Committee in connection with the Special Committee’s investigation of the Company’s operations in the People’s Republic of China and related events, ‎ in collaboration with the Company’s external auditor Ciro E. Adams CPA LLC. KWM conducted extensive research into public records in China, and interviewed the relevant divisions of the Public Security Bureau in China and any related witnesses in relation to the operations and specific transactions that had some relationship to the Gatewang entities. On April 16, 2020, based upon the information obtained, the investigation team concluded that it did not found any evidence that the Company or PDN China has engaged in the alleged illegal fund-raising by Gatewang.

The Investigation also revealed that three entities and two ‎individuals (the “Payors”), who appeared to be related to Gatewang, collectively paid RMB 14.25 million to PDN China on behalf of ‎EGBT Foundation Ltd., a private placement investor that purchased ‎1,265,823 shares of the Company’s common stock (approximately 11.6%) in September 2019 (the “EGBT Transaction”)‎. To the knowledge of the Investigation team, the bank account holding the proceeds of ‎the EGBT Transaction is still frozen by the Chinese authorities, although the seizure of PDN ‎China by the local police had been lifted on March 23, 2020. Such funds may continue to be subject to the PRC government’s jurisdiction if the source of funds is actually (or perceived to be) connected to Gatewang, which will likely complicate the decision by the Chinese authorities to unfreeze PDN China’s bank account. If and when the bank account is unfrozen, the Company will consider whether the EGBT Transaction needs to be unwound or further documented to be in full compliance with applicable law.

The Company’s operations in China have been suspended since December 2019. On March 4, 2020 the Board decided to discontinue all of the Company’s operations in the People’s Republic of China, namely PDN (China) International Culture Development Co. Ltd.‎, a wholly owned subsidiary of ‎the Company, Jiangxi PDN Culture Media Co., Ltd. (“PDN Jiangxi”), a variable interest entity ‎‎controlled by of the Company‎, and the joint venture between PDN Jiangxi, Guangzhou ‎Zengcheng District Zhili Education ‎Training Center and Guangzhou Angyue Education ‎Consulting Co. Ltd.‎

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~12

All historical operating results for the Company’s China operations are included in a loss from discontinued operations, net of tax, in the accompanying statement of operations. For the three months ended March 31, 2020, loss from discontinued operations was approximately ($70,000) compared to a loss from discontinued operations of ($355,000) for the three months ended March 31, 2019.

Assets and liabilities of China operations are now included in current assets and long-term assets from discontinued operations, and current liabilities and long-term liabilities from discontinued operations. As of March 31, 2020, current assets from discontinued operations were approximately $31,000, compared to approximately $76,000 as of December 31, 2019, and long-term assets from discontinued operations were approximately $2,883,000 at March 31, 2020, compared to approximately $3,109,000 as of December 31, 2019. As of March 31, 2020, current liabilities from discontinued operations were approximately $323,000, compared to approximately $564,000 as of December 31, 2019.

Operating Results of Discontinued Operations

The following table represents the components of operating results from discontinued operations, as presented in the statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020			2019

Revenues	$	-		$	39,178

Cost of Sales		7,356			16,598
Depreciation and amortization		-			4,239
Sales and marketing		1,695			84,980
General and administrative		60,614			283,048
Non-operating income (expense)		-			(5,550	)
Loss from discontinued operations before income tax		(69,665	)		(355,237	)
Income tax expense (benefit)		-			-
Net loss from discontinued operations	$	(69,665	)	$	(355,237	)

Advertising and Marketing Expenses– Advertising and marketing expenses are expensed as incurred or the first time the advertising takes place. The production costs of advertising are expensed the first time the advertising takes place. For the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the Company incurred advertising and marketing expenses of approximately ~~$658,000~~$158,000 and ~~$657,000, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred advertising and marketing expenses of approximately $2,246,000 and $1,842,000, respectively.~~$137,000. These amounts are included in sales and marketing expenses in the accompanying ~~condensed consolidated~~ statements of ~~comprehensive loss.~~operations. At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, there were no prepaid advertising expenses recorded in the accompanying ~~condensed consolidated~~ balance sheets.

Concentrations of Credit Risk - Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents and accounts receivable. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on the account.

Income Taxes - The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement basis and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC 740-20 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company may be subject to potential income tax examinations by federal or state authorities. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. Management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Tax years that remain open for assessment for federal and state tax purposes include the years ended December 31, 2016 through 2019.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of March 31, 2020.

Fair Value of Financial Assets and Liabilities - Financial instruments, including cash and cash equivalents, short-term investments and accounts payable, are carried at cost. Management believes that the recorded amounts approximate fair value due to the short-term nature of these instruments.

Net Loss per Share– - The Company computes basic net loss per share by dividing net loss ~~per share~~ available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic net loss per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 excludes the potentially dilutive securities summarized in the table below because their inclusion would be anti-dilutive.

As of September 30,
2017 2016
Warrants to purchase common stock 170,314 514,064
Stock options 284,897 72,886
Restricted stock units 15,544 -
Unvested restricted stock 2,778 5,556
Total dilutive securities 473,533 592,506

~~Recently Issued~~

	Three Months Ended March 31,
	2020		2019

Warrants to purchase common stock		125,000		170,314
Stock options		39,126		409,126
Unvested restricted stock units		-		83,057
Unvested restricted stock		-		4,886
Total dilutive securities		164,126		667,383

Recent Accounting Pronouncements

In ~~May 2014,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (ASU 2019-02): Simplifying the Accounting ~~Standards Update (“ASU”) No. 2014-09,”Revenue from Contracts with Customers,”~~for Income Taxes which ~~was subsequently modified~~simplifies the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in ~~August 2015~~an interim period, and by clarifying and amending existing guidance in order to improve consistent application of and simplify GAAP for other areas of Topic 740. ASU ~~No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date.” As a result, the ASU No. 2014-09~~2019-12 is effective ~~retrospectively~~ for fiscal years and interim periods within those years beginning after December 15, 2017. The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20). The Company will adopt the standard on January 1, 2018, using the full retrospective transition method, which may result in a cumulative-effect adjustment for deferred revenue to the opening balance sheet for 2018 and the restatement of the financial statements for all prior periods presented. The Company continues to evaluate the impact of adoption of this standard on its consolidated financial statements and disclosures.

In February 2016, the FASB issued new lease accounting guidance ASU No. 2016-02, “Leases” (“ASU 2016-02”). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. ASU 2016-09 is effective for annual and interim periods beginning after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. The Company adopted the methodologies prescribed by ASU 2014-15 as of January 1, 2017. The adoption of ASU 2016-09 did not have a material effect on the Company’s financial position or results of operations.

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting “(“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for all annual periods, and interim periods within those annual periods, beginning after December 15, ~~2017, with early adoption permitted.~~ ~~The adoption of ASU 2017-09 is not expected to have an impact on the Company’s financial position or results of operations.~~

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. It is effective for annual periods beginning after December 31, 2018.2020. Early adoption is ~~permitted.~~permitted, including adoption in an interim period. The Company is currently evaluating the adoption of this pronouncement guidance.

In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modification and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of ~~adopting~~ this ~~guidance.~~ASU on its condensed consolidated financial statements.

4. Capitalized Technology

Capitalized ~~technology,~~Technology, net is as follows:

September 30,
2017

December 31,
2016

Capitalized cost:
Balance, beginning of period $ 1,888,791 $ 1,888,791
Additional capitalized cost 122,597 -
Balance, end of period $ 2,011,388 $ 1,888,791

Accumulated amortization:
Balance, beginning of period $ 1,715,423 $ 1,432,268
Provision for amortization 154,392 283,155
Balance, end of period $ 1,869,815 $ 1,715,423
Capitalized Technology, net $ 141,573 $ 173,368

~~Amortization expense of approximately $41,000 and $62,000 for~~

	March 31, 2020		December 31, 2019
Capitalized cost:
Balance, beginning of period	$	2,165,545	$	2,163,044
Additional capitalized cost		3,700		2,501
Balance, end of period		2,169,245		2,165,545

Accumulated amortization:
Balance, beginning of period	$	2,087,886	$	1,968,213
Provision for amortization		6,607		101,448
Balance, end of period		2,094,493		2,069,661
Capitalized Technology, net		74,752		95,884

For the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, amortization expense was $6,605 and $25,000, respectively, and ~~approximately $154,000 and $216,000 for the nine months ended September 30, 2017 and 2016, respectively,~~ is recorded in depreciation and amortization expense in the accompanying ~~condensed consolidated~~ statements of ~~operations and comprehensive loss.~~

operations.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

5. Intangible Assets

Intangible assets, net iswas as follows:

	Useful Lives		Gross Carrying		Accumulated			Net Carrying
March 31, 2020	(Years)		Amount		Amortization			Amount
Long-lived intangible assets:
Sales Process		10	$	2,130,956	$	(1,788,023	)	$	342,933
Paid Member Relationships		5		803,472		(803,472	)		-
Member Lists		5		8,086,181		(8,086,181	)		-
Developed Technology		3		648,000		(648,000	)		-
Trade Name/Trademarks		4		440,000		(440,000	)		-
				12,108,609		(11,765,676	)		342,933
Indefinite-lived intangible assets:
Trade name									90,400
Intangible assets, net								$	433,333

September 30, 2017
Useful Lives
(Years)

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Long-lived intangible assets:
Sales Process 10 $ 3,970,000 $ (1,196,514 ) $ 2,773,486
Paid Member Relationships 5 890,000 (536,472 ) 353,528
Member Lists 5 8,957,000 (5,399,081 ) 3,557,919
Developed Technology 3 978,000 (959,666 ) 18,334
Trade Name/Trademarks 4 480,000 (359,861 ) 120,139
Customer Relationships 5 280,000 (158,667 ) 121,333
$ 15,555,000 $ (8,610,261 ) 6,944,739
Indefinite-lived intangible assets:
Trade Name 90,400

Intangible assets, net $ 7,035,139

December 31, 2016
Useful Lives
(Years)

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Long-lived intangible assets:
Sales Process 10 $ 3,970,000 $ (898,764 ) $ 3,071,236
Paid Member Relationships 5 890,000 (402,972 ) 487,028
Member Lists 5 8,957,000 (4,055,531 ) 4,901,469
Developed Technology 3 978,000 (718,166 ) 259,834
Trade Name/Trademarks 4 480,000 (269,861 ) 210,139
Customer Relationships 5 280,000 (116,667 ) 163,333
$ 15,555,000 $ (6,461,961 ) 9,093,039
Indefinite-lived intangible assets:
Trade Name 90,400

Intangible assets, net $ 9,183,439

~~Future annual~~

	Useful Lives		Gross Carrying		Accumulated			Net Carrying
December 31, 2019	(Years)		Amount		Amortization			Amount
Long-lived intangible assets:
Sales Process		10	$	2,130,956	$	(1,768,971	)	$	361,985
Paid Member Relationships		5		803,472		(803,472	)		-
Member Lists		5		8,086,181		(8,086,181	)		-
Developed Technology		3		648,000		(648,000	)		-
Trade Name/Trademarks		4		440,000		(440,000	)		-
				12,108,609		(11,746,624	)		361,985
Indefinite-lived intangible assets:
Trade name									90,400
Intangible assets, net								$	452,385

As of March 31, 2020, estimated amortization expense in future fiscal years is summarized as follows:

Years ending December 31,
2017 (three months) $ 653,933
2018 2,563,872
2019 1,846,697
2020 397,000
2021 397,000
2022 397,000
Thereafter 689,237
$ 6,944,739

~~Amortization expense of $714,000 and $717,000 for~~

Year ended December 31,
Remaining of 2020	$	57,155
2021		76,207
2022		76,207
2023		76,207
2024 and thereafter		57,157
	$	342,933

For the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, amortization expense was $19,052 and $183,000, respectively, and ~~$2,148,000 and $2,151,000 for the nine months ended September 30, 2017 and 2016, respectively,~~ is recorded in depreciation and amortization expense in the accompanying ~~condensed consolidated~~ statements of ~~operations~~operations.

6. Revolving Credit Facility – Related Party

On November 16, 2018, the Company entered into a revolving credit facility agreement with GNet Tech Holdings Public Limited Company (GNet), “), that matures on May 31, 2020, under which we can draw up to GBP £1,500,000 (approximately $2,000,000). Interest is payable on any outstanding principal balance at a rate equal to the LIBOR rate plus 4%. Amounts drawn under this facility are payable at the end of one, three, or six months periods at the election of the Company. On January 14, 2019, the Company drew $293,000 under this facility and ~~comprehensive loss.~~

repaid it on June 7, 2019. At December 31, 2019, the Company did not have any outstanding debt under this facility. At March 31, 2020, the Company did not have any outstanding debt under this facility and does not intend to draw under it until its expiration.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

6.7. Commitments and Contingencies

Lease Obligations– - The Company leases office space and equipment under various operating lease agreements, including an office for its headquarters, as well as office spaces for its events business, sales and administrative offices under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates.

~~Rent expense, amounting to approximately $268,000~~

As of March 31, 2020, right of use assets were $54,149 and $258,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $811,000 and $808,000 for the nine months ended September 30, 2017 and 2016, respectively, is included in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. Included in rent expense is sublease incomecurrent lease obligations were $60,910.

PDN China’s bank account with balance of approximately ~~$96,000 and $90,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $288,000 and $279,000 for the nine months ended September 30, 2017 and 2016, respectively.~~

~~Legal Proceedings~~

$2,987,939 was frozen by Guangzhou Police due to Gatewang Case. 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.),classified this entire cash balance as a ~~putative class action filed~~long-term asset presented 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.discontinued operations.

The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned In re Professional Diversity Network, Cases 31-CA-159810 and 31-CA-162904, filed with the National Labor Relations Board (“NLRB”) in June 2015 and alleging violations of the National Labor Relations Act (“NLRA”) against the Company and its wholly-owned subsidiary, NAPW, Inc., where employee was allegedly terminated for asserting rights under Section 7 of the NLRA. While the Company disputes that any rights were impacted, the NLRB has issued its order requiring the Company to take certain remedial actions in the form of posting notices and revising certain policies, as well as to pay the claimant certain back pay and offer reinstatement. The Company has complied with the order in all respects except back pay and reinstatement. The Company disputes the amount of back pay owed to the claimant and disputes that reinstatement is appropriate under the circumstances and an evidentiary hearing on the issue of back pay is currently scheduled for January of 2018.

~~The amount of back pay and other potential liabilities ordered by NLRB is $146,000.~~

The Company is a party to a proceeding captioned Paul Sutcliffe v. Professional Diversity Network, Inc., No. 533-2016-00033 (EEOC), filed with the Equal Employment Opportunity Commission (“EEOC”) in April 2016 and alleging violations of Title VII and the Age Discrimination in Employment Act, where employee was allegedly terminated due to his race (Caucasian) and his age (over 40). The EEOC has not yet notified the Company that it has issued a right-to-sue letter, and the complainant has not yet filed a lawsuit.

The Company is a party to a proceeding captioned Wei Aniton v. Professional Diversity Network, Inc., No. 440-2017-04717 (EEOC), filed with the Equal Employment Opportunity Commission (“EEOC”) on July 6, 2017 and alleging violations of Title VII and the Equal Pay Act of 1963, where employee alleges she was discriminated by the Company due to her race and her sex and was paid less than similarly situated white males. On September 20, 2017, the EEOC issued its Notice of Dismissal and Notice of Rights, effectively terminating this matter before the EEOC.

Legal Proceedings

In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened ~~assertion of a claim~~to assert claims against the ~~Company. The letter alleges~~Company in excess of $2 million based on White Winston’s contention that ~~White Winston suffered $2,241,958 in damages as a result of~~ the Company’s ~~alleged~~ conduct ~~that caused a delay in~~delayed White Winston’s ability to sell shares in the Company during a period when the Company’s stock price was generally falling. On April 30, 2018, White Winston filed a lawsuit, entitled White Winston Select Asset Funds, LLC v. Professional Diversity Network, Inc., No. 18-cv-10844, (the “Federal Action”) in the United States District Court for the District of Massachusetts, asserting federal jurisdiction based on diversity of citizenship. The four-count complaint in the Federal Action alleged that White Winston is entitled to recover compensatory damages of $1,708,233, plus attorneys’ fees, treble damages and other amounts. White Winston served the complaint on July 12, 2018, and the Company moved to dismiss the entire action for failure to state a claim. On October 15, 2018, prior to addressing the motion to dismiss, the Court issued an order noting that White Winston (which is a limited liability company) had failed to allege the citizenship of its members and ordered White Winston to show cause that complete diversity exists between the parties and that the Court had jurisdiction. On October 23, 2018, White Winston dismissed the Federal Action without prejudice. On December 18, 2018, White Winston filed a complaint in Massachusetts Superior Court in Suffolk County in Boston alleging the same claims and rights to relief as in the Federal Action. The Company has moved to once again to dismiss the complaint in its entirety for failure to state a claim. The entire motion package, comprised of the Company’s motion to dismiss and accompanying memorandum, White Winston’s opposition, and the Company’s reply brief, were filed with the court on Monday, March 25, 2019. This motion was not granted. We have since then substantially completed all of the discovery process and will begin expert witness disclosures. The Company denies liability for all claims.

NAPW is a defendant in a Nassau County (NY) Supreme Court case, whereby TL Franklin Avenue Plaza LLC has sued NAPW Case index No. LT-000421/2018, with respect to NAPW’s former Garden City NY Premises. NAPW had surrendered the Premises to the Landlord, and the Landlord is suing NAPW for the balance of the rent due under the Lease Term. The case is currently being litigated, and we are currently in the fact damages phase of the litigation.

The Company is a party to a proceeding captioned Gerbie, et al. v. Professional Diversity Network, Inc. (U.S. Dist. Ct., N.D. Ill.), a putative class action alleging violations of the Telephone Consumer Protection Act. A settlement has been reached and case has been dismissed by the court. The Company believes that its practices and procedures were compliant with the Telephone Consumer Protection Act and admitted no fault.

liability and intends to vigorously defend against these claims. The matter is in the final stages of discovery and we have completed depositions of relevant witnesses. During the first quarter of 2020, the Company recorded a $450,000 litigation settlement reserve in the event of an unfavorable outcome in this proceeding.

We are also generally subject to legal proceedings and litigation arising in the ordinary course of business.

General Legal Matters

From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.

8. CFL Transaction

On ~~January 13, 2017,~~August 12, 2016, the Company entered into a stock purchase agreement (the “Purchase Agreement”), with ~~Cosmic Forward Ltd. (“CFL”), pursuant~~CFL, a Republic of Seychelles company wholly-owned by a group of Chinese investors. Pursuant to ~~which,~~the Purchase Agreement, the Company agreed to issue and sell to CFL (the ~~“Second Share Issuance”~~“Share Issuance and Sale”), and CFL agreed to purchase, at a price of $9.60 per share (the “Per Share Price”), upon the terms and subject to the conditions set forth in the Purchase Agreement, ~~312,500~~a number of shares of the Company’s common ~~stock.~~ stock, par value $0.01 per share (the “Common Stock”), such that CFL will hold shares of Common Stock equal to approximately 51% of the outstanding shares of Common Stock, determined on a fully-diluted basis, after giving effect to the consummation of the transactions contemplated by the Purchase Agreement, including the Tender Offer described below (the “CFL Transaction”).

On ~~January 18, 2017,~~November 7, 2016, the Company consummated the ~~Second~~ Share ~~Issuance. As~~Issuance and Sale of 1,777,417 shares of its common stock to CFL at a ~~result~~price of $9.60 per share, pursuant to the terms of the ~~completion~~Purchase Agreement, dated August 12, 2016. In addition, on November 7, 2016, the Company completed the purchase of ~~the Second Share Issuance, as of January 18, 2017, CFL beneficially owned 54.64% of the Company’s outstanding~~312,500 shares of its common stock onat a ~~fully diluted basis.~~

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

price of $9.60 per share, net to the seller in cash, pursuant to the Tender Offer. The Company received ~~total gross proceeds of $3,000,000 from the Second Share Issuance, or~~ approximately ~~$2,821,000~~$9,000,000 in net proceeds from the Share Issuance and Sale, after the payment for the shares repurchased in the Tender Offer, the repayment of all amounts outstanding under the Master Credit Facility and the payment of transaction-related expenses. The Company retained Aegis Capital Corp. (“Aegis”) as the exclusive placement agent in connection with the transaction. Aegis received a cash placement fee of $144,000 in connection with the transaction. The Company accounted for the fee paid to Aegis as a cost of the transaction resulting in a charge directly to stockholders’ equity.

At the closing of the ~~Second~~CFL Transaction, the Company entered into a Stockholders’ Agreement, dated November 7, 2016 (the “Stockholders’ Agreement”) with CFL and each of its shareholders: Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Kou (the “CFL Shareholders”). The Stockholders’ Agreement sets forth the agreement of the Company, CFL and the CFL Shareholders relating to board representation rights, transfer restrictions, standstill provisions, voting, registration rights and other matters following the closing of the Share Issuance and ~~as contemplated~~Sale (see Note 13).

On November 15, 2019, CFL purchased additional 1,142,857 shares of the Company’s common stock for $1.75 per share for gross proceeds of $2,000,000 from an existing shareholder.

9. Stockholders’ Equity

Preferred Stock – The Company has no preferred stock issued. The Company’s amended and restated certificate of incorporation and amended and restated bylaws include provisions that allow the Company’s Board of Directors to issue, without further action by the ~~Purchase Agreement,~~stockholders, up to 1,000,000 shares of undesignated preferred stock.

Common Stock – The Company has one class of common stock outstanding with a total number of shares authorized of 45,000,000. As of March 31, 2020, the Company had 10,920,973 shares of common stock outstanding.

On March 22, 2020, the Company entered into an ~~amendment, dated as~~agreement with Malven Group Limited, a company established under the laws of ~~January 18, 2017 (the “Amendment”), to~~ the ~~Stockholders’ Agreement~~British Virgin Islands, in connection with ~~CFL and~~ the ~~CFL shareholders. The Amendment increased the cap on the amount~~purchase of common stock that CFL, the CFL shareholders and their respective affiliates (collectively, the “CFL Group”) may, directly or indirectly acquire, agree to acquire or publicly propose or offer to acquire from the Company, or pursuant to a tender or exchange offer for any1,939,237 shares of common stock ~~from 51%~~ of the ~~then outstanding~~Company at a price of $0.7735 per share for gross consideration of $1,500,000. The closing of the transaction took place on March 31, 2020.

10. Stock-Based Compensation

Equity Incentive Plans – 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. The Company amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan from 225,000 shares to 615,000 shares, which the Company’s stockholders approved on ~~a fully-diluted basis,~~June 26, 2017. The Company further amended the 2013 Plan to ~~54.64%~~increase the number of ~~the then outstanding~~authorized shares of common stock under the Plan by 300,000 shares, which the Company’s stockholders approved and ratified on November 8, 2018. The Company is now authorized to issue 915,000 shares under the amended 2013 Plan.

Stock Options

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a ~~fully-diluted basis. The Amendment also clarifies that~~number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the ~~312,500 shares of common stock purchased by CFL in the Second Share Issuance are subject to all~~term of the ~~restrictions contained in~~awards, and actual and projected employee stock option exercise behaviors. The risk free rate is based on the ~~Stockholders’ Agreement, as amended. All other terms and conditions~~U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the ~~Stockholders’ Agreement remain in full force~~life of options using the simplified method, and ~~effect and were ratified and affirmed by~~forfeitures are estimated on the ~~parties in~~date of grant based on certain historical data. The Company utilizes the ~~Amendment.~~

~~8. Employment Agreements~~

~~Katherine Butkevich, formerly Chief Executive Officer~~simplified method to determine the expected life of its options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s ~~wholly-owned subsidiary, NAPW, Inc., was party~~history and expectation of dividend payouts.

Forfeitures are required to ~~an employment contract with~~be estimated at the ~~Company dated September 30, 2016. As the Company previously reported~~time of grant and revised, if necessary, in its August 30, 2017 Form 8-K, Ms. Butkevich notified the Company that she was resigning her employment effective September 18, 2017, thereby terminating the employment contract as of the resignation date.

~~Chris Wesser, formerly~~subsequent periods if actual forfeitures differ from those estimates.

The following table summarizes the Company’s Executive Vice President, General Counsel and Corporate Secretary, was party to an employment contract with the Company dated September 24, 2014. Mr. Wesser’s employment contract expired on September 24, 2017. As the Company previously published via press release and reported in its September 29, 2017 Form 8-K, on September 26, 2017 Mr. Wesser and the Company entered into an Employment Separation and Consulting Agreement having a one-year term, under which Mr. Wesser will provide the Company with consulting services on an independent contractor basis.

~~9. Income Taxes~~

~~The effective income tax rate~~stock option activity for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 was 7.9% and 32.9%, respectively, resulting in a $213,000 and $624,000 income tax benefit, respectively. The effective income tax rate for~~2019:

						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Life		Intrinsic
	Options			Price		(in Years)		Value
Outstanding - January 1, 2020		295,793		$	8.88		7.5	$	-
Granted		-			-		-
Exercised		-			-		-
Forfeited		(256,667	)		9.28		-
Outstanding - March 31, 2020		39,126		$	6.27		8.1	$	-

Exercisable at March 31, 2020		29,126		$	7.65		7.8	$	-

						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Life		Intrinsic
	Options			Price		(in Years)		Value
Outstanding - January 1, 2019		499,439		$	6.94	$	9.0	$	-
Granted		30,000			2.23		-
Exercised		-			-		-
Forfeited		(120,313	)		2.88		-
Outstanding - March 31, 2019		409,126		$	7.78		8.4	$	80,520

Exercisable at March 31, 2019		330,959		$	9.01		8.2	$	32,710

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020, vested stock options of 256,667 with a weighted average exercise price of $9.28 were forfeited Total unrecognized pre-tax stock-based compensation expense related to unvested stock options at March 31, 2020 was $16,321, which is expected to be recognized through the first quarter of 2021.

Warrants

As of March 31, 2020 and ~~2016~~December 31, 2019, 125,000 warrants were outstanding and exercisable with an exercise price of $20.00 per share. The aggregate intrinsic value was ~~6.2%~~$0 and ~~25.7%, respectively, resulting~~the warrants are scheduled to expire on December 27, 2021.

Restricted Stock

As of March 31, 2020 and 2019, the following is a summary of restricted stock activity:

	Number of
	Shares
Outstanding - January 1, 2020		27,319
Granted		-
Forfeited		-
Vested		(27,319	)
Outstanding - March 31, 2020		-

	Number of
	Shares
Outstanding - January 1, 2019		60,651
Granted		8,090
Forfeited		(22,730	)
Vested		-
Outstanding - March 31, 2019		46,011

During the three months ended March 31, 2020, 27,319 in ~~a $1,160,000~~restricted stock vested. Additionally, the Company recorded non-cash pre-tax stock-based compensation expense of $0 and ~~$1,218,000 income tax benefit, respectively. The difference in the effective income tax rate~~$3,000 for the three months ended ~~September 30, 2017, compared~~March 31, 2020 and March 31, 2019, as a component of general and administrative expenses in the accompanying statements of operations, pertaining to restricted stock.

Total unrecognized pre-tax stock-based compensation expense related to unvested restricted stock at March 31, 2020 was $0.

11. Income Taxes

The Company’s quarterly income tax provision is based upon an estimated annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of discrete items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

During the three months ended ~~September 30, 2016, is mainly attributable~~March 31, 2020 and 2019, the Company recorded a benefit for income tax of $5,900 and $66,000. The decrease in income tax benefit during the current period was primarily due to ~~the~~a reduction in discrete tax item associated with stock-based compensation expense in addition to a reduction in our valuation allowance

The valuation allowance at March 31, 2020 was approximately $7,701,000. The net change in the valuation ~~allowance. The difference in~~allowance during the ~~effective income tax rate for the nine~~three months ended ~~September 30, 2017, compared to the nine months ended September 30, 2016, is mainly attributable to the impairment charge recognized on NAPW’s goodwill and the change in the valuation allowance.~~March 31, 2020 was a decrease of approximately $41,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on ~~the~~ consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of ~~September 30, 2017 and December~~March 31, ~~2016.~~

~~The Company has not provided deferred income taxes~~2020.

12. Segment Information

Beginning on ~~the undistributed earnings of its foreign subsidiaries. The amount of such earnings was insignificant. These earnings have been permanently reinvested and~~May 26, 2018, the Company does not plan to initiate action that would precipitate the payment of income taxes thereon. It is not practicable to estimate the amount of additional tax that might be payable on the undistributed earnings of its foreign subsidiaries.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

~~10. Stock-Based Compensation~~

~~Equity Incentive Plans~~ – 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. The Company amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan by 390,000 shares, which the Company’s stockholders approved on June 26, 2017. The Company is now authorized to issue 615,000 shares under the amended 2013 Plan.

~~Stock Options~~

~~The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2017:~~

Number of
Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life
(in Years)

Aggregate
Intrinsic
Value

Outstanding - December 31, 2016 69,950 $ 12.07 9.0 $ 156,975
Granted 240,000 10.72
Exercised - -
Forfeited/Canceled/Expired (25,053 ) (13.93 )
Outstanding – September 30, 2017 284,897 $ 10.77 9.3 $ -

Exercisable – September 30, 2017 124,897 $ 10.83 9.2 $ -

The Company granted 210,000 and 30,000 stock options to Messrs. Wang and Xiao, respectively, in connection with their employment agreements. These options had an aggregate fair value of $1,060,800, using the Black-Scholes option-pricing model with the following assumptions:

~~Risk-free interest rate~~		~~2.13~~	%
~~Expected dividend yield~~		~~0.00~~	%
~~Expected volatility~~		~~41.78~~	%
~~Expected term~~	~~5.5 years~~

The options are exercisable at an exercise price of $10.72 per share over a ten-year term and vest over two years, with one-third vested upon grant. The Company recorded $88,000 and $560,000 as compensation expense during the three and nine months ended September 30, 2017, respectively, pertaining to these grants.

Total non-cash compensation expense for grants recorded by the Company amounted to approximately $88,000 and $90,000 for the three months ended September 30, 2017 and 2016, respectively, and $618,000 and $135,000 for the nine months ended September 30, 2017 and 2016, respectively, as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss pertaining to stock options.

Total unrecognized compensation expense related to unvested stock options at September 30, 2017 amounts to approximately $501,000 and is expected to be recognized over a remaining weighted average period of 1.4 years.

~~Warrants~~

As of September 30, 2017, there were 170,314 warrants outstanding and exercisable, with a weighted average exercise price of $32.44 per share. The weighted average remaining contractual life of the warrants at September 30, 2017 and December 31, 2016 was 3.6 and 4.3 years, respectively, and the aggregate intrinsic value was 0.

~~The Company did not grant any warrants to purchase shares of common stock during the nine months ended September 30, 2017.~~

~~No compensation cost was recognized for the three and nine months ended September 30, 2017 and 2016 pertaining to warrants.~~

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

~~Restricted Stock and Restricted Stock Units~~

On June 26, 2017, the Company granted 15,544 restricted stock units (“RSUs”) to certain Board members. The RSUs vest 100% on June 28, 2018, subject to continued service on the vesting date. The RSUs have no voting or dividend rights. The fair value of the common stock on the date of grant was $7.72 per share, based upon the closing market price on the grant date. The aggregate grant date fair value of the combined awards amounted to $120,000.

~~A summary of the restricted stock award activity for the nine months ended September 30, 2017 is as follows:~~

	~~Number of~~ ~~Shares~~

~~Unvested Outstanding at December 31, 2016~~		~~2,778~~
~~Granted~~		~~15,544~~
~~Forfeited~~		-
~~Vested~~		-
~~Unvested Outstanding at September 30, 2017~~		~~18,322~~

The Company recorded non-cash compensation expense of approximately $58,000 and $28,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $113,000 and $83,000 for the nine months ended September 30, 2017 and 2016, respectively.

Total unrecognized compensation expense related to unvested restricted stock and unvested restricted stock units at September 30, 2017 amounts to approximately $108,000 and is expected to be recognized over a weighted average period of 0.6 year.

~~11. Segment Information~~

~~Beginning in January 2017, the Company operates~~operated in the following segments: (A) United States: (i) PDN Network and (ii) NAPW Network, ~~and (iii) Noble Voice operations, and~~ (B) China ~~Operations.~~Operations, and (C) Corporate Overhead. The segments are categorized based on their business activities and organization. ~~Prior~~On March 4, 2020, the Company’s Board of Directors decided to ~~January 2017,~~suspend all China operations. As of December 31, 2019, the Company operated ~~solely in the United States~~ in the following segments: (i) ~~PDN~~NAPW Network, (ii) ~~NAPW~~PDN Network and (iii) Corporate Overhead. Accordingly, all financial results for Noble Voice ~~operations.~~ and China Operations have been reclassified from the Company’s reportable segments to discontinued operations for all periods presented.

The following tables present key financial information of the Company’s reportable segments as of March 31, 2020 and December 31, 2019 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~

Three Months Ended September 30, 2017
United States

PDN
Network

NAPW
Network
Noble Voice
China
Operations
Consolidated

Membership fees and related services $ - $ 2,204,909 $ - $ - $ 2,204,909
Lead generation - - 1,370,465 - 1,370,465
Recruitment services 694,454 - - - 694,454
Products sales and other - 18,285 - - 18,285
Education and training - - - 68,890 68,890
Consumer advertising and marketing solutions 65,188 - - - 65,188
Total revenues 759,642 2,223,194 1,370,465 68,890 4,422,191
Loss from operations (249,017 ) (1,651,322 ) (448,310 ) (362,004 ) (2,710,653 )
Depreciation and amortization 13,213 740,489 49,754 3,442 806,898
Income tax expense (benefit) (17,311 ) (123,091 ) (29,688 ) (43,043 ) (213,133 )
Net loss (217,589 ) (1,528,231 ) (418,622 ) (323,643 ) (2,488,085 )
Capital expenditures 93,676 - (5,575 ) 12,356 100,457

2019:

	Three Months Ended March 31, 2020
	PDN			NAPW			Corporate
	Network			Network			Overhead			Consolidated
Membership fees and related services	$	-		$	383,831		$	-		$	383,831
Recruitment services		566,687			-			-			566,687
Products sales and other		-			1,431			-			1,431
Consumer advertising and marketing solutions		30,348			-			-			30,348
Total revenues		597,035			385,262			-			982,297
Loss from continuing operations		(150,024	)		(68,110	)		(1,210,870	)		(1,429,004	)
Depreciation and amortization		14,675			37,326			-			52,001
Income tax benefit		(951	)		(407	)		(4,551	)		(5,909	)
Net loss from continuing operations		(148,409	)		(67,703	)		(1,206,319	)		(1,422,431	)

	As of March 31, 2020
Goodwill	$	339,451	$	-	$	-	$	339,451
Intangibles assets, net		90,400		342,933		-		433,333
Assets from continuing operations		2,625,138		1,242,192		-		3,867,330

	Three Months Ended March 31, 2019
	PDN			NAPW			Corporate
	Network			Network			Overhead			Consolidated
Membership fees and related services	$	-		$	794,539		$	-		$	794,539
Recruitment services		474,260			-			-			474,260
Products sales and other		-			2,812			-			2,812
Consumer advertising and marketing solutions		35,716			-			-			35,716
Total revenues		509,976			797,351			-			1,307,327
Loss from continuing operations		(171,416	)		(107,731	)		(587,975	)		(867,122	)
Depreciation and amortization		15,741			201,442			-			217,183
Income tax benefit		(8,129	)		(13,135	)		(44,369	)		(65,633	)
Net loss from continuing operations		(160,924	)		(99,602	)		(543,606	)		(804,132	)

	As of December 31, 2019
Goodwill	$	339,451	$	-	$	-	$	339,451
Intangibles assets, net		90,400		361,985		-		452,385
Assets from continuing operations		2,151,734		1,254,693		-		3,406,427

1413. Subsequent Events

The CARES Act was enacted on March 27, 2020. Among the provisions contained in the CARES Act was the creation of the Paycheck Protection Program (“PPP”) that provides for under the Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. PPP loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves, rent, utilities and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Company’s full-time headcount during the eight-week period following the funding of the PPP loan. The Company applied for the PPP loan and on May 5, 2020, the Company received total proceeds of $651,077 from the SBA. In accordance with the loan forgiveness requirements under the CARES Act, the Company intends to use the proceeds from the PPP Loan primarily for payroll costs, rent and utilities, thus the Company anticipates that 100% of the loan will be forgiven.

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~21

Nine Months Ended September 30, 2017
United States

PDN
Network

NAPW
Network
Noble Voice
China
Operations
Consolidated

Membership fees and related services $ - $ 7,465,202 $ - $ - $ 7,465,202
Lead generation - - 4,699,399 - 4,699,399
Recruitment services 1,977,101 - - - 1,977,101
Products sales and other - 91,226 - - 91,226
Education and training - - - 898,584 898,584
Consumer advertising and marketing solutions 189,217 - - - 189,217
Total revenues 2,166,318 7,556,428 4,699,399 898,584 15,320,729
Loss from operations (2,001,870 ) (14,969,177 ) (1,449,279 ) (408,622 ) (18,828,948 )
Depreciation and amortization 67,099 2,220,806 149,499 6,107 2,443,511
Income tax expense (benefit) (125,444 ) (943,633 ) (91,360 ) - (1,160,437 )
Net loss (1,864,520 ) (14,025,544 ) (1,357,919 ) (416,627 ) (17,664,610 )
Capital expenditures 100,823 10,646 (5,234 ) 48,060 154,295

September 30, 2017
Goodwill $ 339,451 $ 9,941,434 $ - $ - $ 10,280,885
Intangible assets, net 90,400 6,793,406 151,333 - 7,035,139
Total assets 1,814,350 18,425,123 1,624,568 2,257,796 24,121,837

Three Months Ended September 30, 2016
PDN Network
NAPW
Network
Noble Voice Consolidated

Membership fees and related services $ - $ 3,748,334 $ - $ 3,748,334
Lead generation - - 1,554,370 1,554,370
Recruitment services 954,887 - - 954,887
Products sales and other - 52,857 - 52,857
Consumer advertising and marketing solutions 49,719 - - 49,719
Total revenues 1,004,606 3,801,191 1,554,370 6,360,167
Loss from operations (118,948 ) (894,361 ) (266,893 ) (1,280,202 )
Depreciation and amortization 33,471 738,473 47,950 819,894
Income tax expense (benefit) (222,808 ) (289,767 ) (111,124 ) (623,699 )
Net loss (512,771 ) (604,594 ) (155,769 ) (1,273,134 )

Nine Months Ended September 30, 2016
PDN Network
NAPW
Network
Noble Voice Consolidated

Membership fees and related services $ - $ 13,047,652 $ - $ 13,047,652
Lead generation - - 4,489,919 4,489,919
Recruitment services 2,295,556 - - 2,295,556
Products sales and other - 544,440 - 544,440
Consumer advertising and marketing solutions 176,771 - - 176,771
Total revenues 2,472,327 13,592,092 4,489,919 20,554,338
Loss from operations (839,840 ) (2,173,251 ) (1,106,895 ) (4,119,986 )
Depreciation and amortization 130,121 2,207,703 160,312 2,498,136
Income benefit (373,717 ) (557,439 ) (286,936 ) (1,218,092 )
Net loss (1,083,270 ) (1,615,812 ) (819,959 ) (3,519,041 )

15ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Professional Diversity Network, Inc.~~

~~Condensed Consolidated Notes to Financial Statements (Unaudited)~~

December 31, 2016
Goodwill $ 339,451 $ 19,861,739 $ - $ 20,201,190
Intangible assets, net 90,400 8,809,706 283,333 9,183,439
Total assets 7,643,471 31,457,958 2,036,448 41,137,877

~~12. Subsequent Events~~

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed consolidated financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

~~ITEM~~ 2.

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

~~Unless we specify otherwise, all references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to the “Company,” “we,” “our,” and “us” refer to Professional Diversity Network, Inc. and its consolidated subsidiaries. The following discussion and analysis~~Basis of ~~our financial condition and results of operations~~Presentation

This MD&A should be read in conjunction with ~~our~~the accompanying condensed consolidated financial statements and the ~~related~~ notes thereto, and the audited consolidated financial statements and notes thereto included in ~~Item 1, “Financial Statements,”~~our 2019 Form 10-K.

Forward-looking statements in ~~Part I~~this MD&A are not guarantees of ~~this Quarterly Report. This discussion contains forward-looking statements, which are based on our assumptions about the~~ future ~~of our business. Our~~performance and may involve risks and uncertainties that could cause actual results ~~will likely~~to differ materially from those ~~contained in~~projected. Refer to the ~~forward-looking statements. Please read “Special Note Regarding Forward-Looking~~“Forward-Looking Statements” section of this MD&A and Item 1A. Risk Factors of our 2019 Form 10-K for ~~additional information regarding forward-looking statements used in this Quarterly Report.~~

a discussion of these risks and uncertainties.

Overview

We are an operator of professional networks 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, Military Professionals, and Lesbian, Gay, Bisexual and Transgender (LGBT+).

We currently operate in ~~four~~two business segments: (i) Professional Diversity Network (“(“PDN ~~Network~~ ”)Network”), which includes online professional networking communities with career resources tailored to the needs of various diverse cultural groups and employers looking to hire members of such groups, and (ii) National Association of Professional Women (“(“NAPW ~~Network~~ ”)Network”), a women-only professional networking ~~organization, (iii) Noble Voice~~organization. On March 4, 2020 the Board decided to discontinue all of the Company’s operations (“ ~~Noble Voice~~ ”)in the People’s Republic of China, (“China Operations”), ~~a career consultation and lead generation service, and (iv) China operations (~~ ~~“China Operations”~~ ), which ~~focus~~focused on providing tools, products and services in China ~~which will~~to assist women, students and business professionals in personal and professional development.

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~~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 ~~market.~~

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 opportunitymarkets for ~~success with our overseas expansion.~~ professional networking.

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, IPDN China began to transact IAW memberships in China, ranging from RMB 20,000 to RMB200,000 (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 in the third quarter, IPDN China finalized plans and secured commitments to hold its largest education and training event of the year. The event will be held on December 2, 2017 in Beijing, China, “The International Capital Leadership Summit”. Mr. Bruce Aust, Vice Chairman of the Nasdaq Exchange will be featured at the event.

~~Through the third quarter of 2017,~~three months ended March 31, 2020 our PDN Network and NAPW Network ~~Noble Voice and China Operations~~ businesses represented ~~14.1%, 49.3%, 30.7%~~61% and ~~5.9%~~39% of our ~~revenues, respectively.~~revenues. As of ~~September 30, 2017,~~March 31, 2020, we had approximately ~~10.0~~10.8 million registered users in our PDN ~~Network;~~Network and approximately ~~952,000~~948,000 registered users, or members, in the NAPW ~~Network;~~Network. Included in 948,000 NAPW Network registered users, there were 5,000 and ~~over 1,000 companies utilizing our products~~9,000 paid members as of March 31, 2020 and ~~services in our combined PDN Network and Noble Voice operations.~~2019. 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.

On March 4, 2020, our Board of Directors (the “Board”) decided to discontinue all operations in China. The resolution approved by the Board does not contemplate a sale of the business unit or a sale of any assets to a third-party for its China operations, but to effectively cease operations, which will commence during the second quarter of 2020. Accordingly, all historical financial results associated with the China operations have been reclassified to discontinued operations and current and prior period financial results have been reclassified. China operations were previously disclosed as a reportable operating segment as “China Operations”.

17Impact of COVID-19

The outbreak of the novel coronavirus (COVID-19) has resulted and will continue to result in disruptions to our business and operations. In March 2020, we began to experience reductions in new memberships and enrollment renewals due to COVID-19 as customers deferred our services due to financial and economic concerns. Additionally, revenues associated with our events business may be delayed or cancelled due to social distancing measures currently in place as well as travel restrictions. General business and customer financial uncertainty may negatively impact new and existing customers that could result in a reduction in expected revenues and an increase in certain costs.

We are focused on ensuring that our employees are safe and transitioned our workforce to work from home. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration, severity and spread of the pandemic, related restrictions on travel and transportation and other actions that may be taken by governmental authorities are uncertain and cannot be predicted.

We believe that our existing cash balances will provide us the necessary capital to navigate the COVID-19 pandemic.

Sources of Revenue

We generate revenue from (i) paid membership subscriptions and related services, (ii) ~~lead generation, (iii)~~ recruitment services, ~~(iv)~~(iii) product sales, ~~(v)~~(iv) education and training and ~~(vi)~~(v) consumer advertising and consumer marketing solutions. The following table sets forth our revenues from each 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.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
Percentage of revenue by product:
Membership fees and related services 49.9 % 58.9 % 48.7 % 63.5 %
Lead generation 31.0 % 24.5 % 30.7 % 21.8 %
Recruitment services 15.7 % 15.0 % 12.9 % 11.2 %
Products sales and other 0.4 % 0.8 % 0.6 % 2.6 %
Education and training 1.5 % 0.0 % 5.9 % 0.0 %
Consumer advertising and consumer marketing solutions 1.5 % 0.8 % 1.2 % 0.9 %

Paid Membership Subscriptions and Related ~~Services~~.Services.Paid Membership Subscriptions and Related Services. 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.com~~www.iawomen.com and “virtual” eChapter events which occur in a webcast setting as well as through in-person networking at approximately ~~190~~100 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 tools~~online benefits only. Upgrades to an Innovator membership include the Initiator benefits as well as ~~free~~membership in local chapters, and access ~~(including guest)~~ to live in-person events. The most comprehensive level, the ~~National Networking Summits~~Influencer, provides all the aforementioned benefits plus admission to exclusive “live” events and ~~free continuing education programs~~expanded opportunities for marketing and ~~(ii)~~promotion, including the creation and distribution of a press release, ~~package,~~ which ~~provides members with the opportunity to work with~~is 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 the membership. ~~NAPW Membership subscriptions represented approximately 99.2% and 98.6%, respectively,~~

As part of ~~revenue attributable to~~ the ~~NAPW Network business segment for the three months ended September 30, 2017 and 2016, and 98.8% and 96.0%, respectively, for the nine months ended September 30, 2017 and 2016.~~

~~Lead Generation.~~ We monetize our career consultations conducted by our Noble Voice segment by generating and selling value-added leads to our strategic partners who provide continuing education and career services. We also generate revenue from saleslaunch of ~~data not used~~IAW in the ~~lead generation process. Lead generation sales represented 100%~~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 the number of ~~the~~new members registering, membership revenue ~~attributable~~is received on a monthly rather than an annual basis. The new IAW is focused on delivering member benefits and providing value to ~~the Noble Voice business segment for the three and nine months ended September 30, 2017 and 2016.~~

those who join as paid members.

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, semantic search technology and paid access to, and placement in, or advertising around our career and networking events. 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. Recruitment advertising revenue constituted approximately 91.4% and 95.0%, respectively, of revenue attributable to the PDN Network business segment for the three months ended September 30, 2017 and 2016. For the nine months ended September 30, 2017 and 2016, recruitment advertising revenue constituted approximately 91.3% and 92.8%, respectively, of the revenue attributable to the PDN Network business segment.

Product Sales. We offer to new purchasers of our NAPW ~~Network~~ memberships the opportunity to purchase ~~up to two~~a commemorative wall ~~plaques~~plaque at the time of ~~membership~~ purchase. ~~Product sales represented approximately 0.8% and 1.4%, respectively, of revenue attributable~~They may purchase up to the NAPW Network business segment for the three months ended September 30, 2017 and 2016, and 1.2% and 4.0%, respectively, of revenue attributable to the NAPW Network business segment for the nine months ended September 30, 2017 and 2016.

two plaques at that time.

~~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 three months ended September 30, 2017. Because China Operations first began in March of 2017 there is no period-over-period comparison.

Consumer Advertising and 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. Consumer advertising and marketing solutions represented approximately 8.6% and 5.0%, respectively, of the revenue attributable to the PDN Network business segment for the three months ended September 30, 2017 and 2106. For the nine months ended September 30, 2017 and 2016, consumer advertising and consumer marketing solutions revenue constituted approximately 8.7% and 7.2%, respectively, of the revenue attributable to the PDN Network business segment.

Cost of Revenue

Cost of revenue primarily consists of ~~data and related costs to generate leads for our Noble Voice customers,~~ costs of producing job fair and other events, revenue sharing with partner organizations, ~~costs of producing education and training events, and~~ costs of web hosting and operating our websites for the PDN Network. Costs of producing wall plaques, hosting member conferences and local chapter meetings are also included in the cost of revenue for NAPW Network.

~~Financial Overview~~

During the quarter and nine months ended September 30, 2017, we experienced losses as we continued our efforts to integrate new management and China Operations, reduce costs and streamline our business. For the three months ended September 30, 2017, we realized a net loss of approximately $~~2,489,000, a $1,216,000~~ increase from the comparable prior year period. This increase in net loss was primarily driven by a decrease of $1,578,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, partially offset by a decrease of $788,000 in overall sales and marketing expenses. For the nine months ended September 30, 2017, we realized a net loss of approximately $~~17,666,000, a $14,147,000~~ ~~increase from the comparable prior year period. This increase in net loss is primarily related to~~ ~~goodwill impairment charge~~ ~~of $9,920,000, the decrease in membership fees and related services revenue, an increase in stock-based compensation, and an increase in legal expenses.~~

~~Recent Events~~

On January 13, 2017, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with Cosmic Forward Ltd. (“CFL”), pursuant to which, the Company agreed to issue and sell to CFL (the “Second Share Issuance”), and CFL agreed to purchase, at a price of $9.60 per share (the “Per Share Price”), upon the terms and subject to the conditions set forth in the Purchase Agreement, 312,500 shares of the Company’s common stock. On January 18, 2017, the Company consummated the Second Share Issuance. As a result of the completion of the Second Share Issuance, as of January 18, 2017, CFL beneficially owned 54.64% of the Company’s outstanding shares of common stock, on a fully diluted basis. The Company received total gross proceeds of $3,000,000 from the Second Share Issuance, or approximately $2,821,000 in net proceeds after payment of transaction-related expenses.

Key Metrics

We believe that one of the key metrics in evaluating and measuring our performance is the number of registered ~~users or members.~~users. We ~~offer free memberships and in our NAPW segment we also offer a paid membership, one that provides a greater level~~define the number of ~~services and networking potential. The vast majority of our~~ registered users ~~are non-paid members. We define a registered user~~ as an(i) the number of individual job ~~seeker~~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 ~~him or her~~them with employers and/or jobs ~~(“PDN~~(PDN Network registered ~~user”). We believe that a higher~~users); and (ii) the number of ~~registered users will result in increased sales of our products and services, as employers will~~consumers who have ~~access to a larger pool of professional talent.~~

~~We define a member as a consumer who has~~ viewed our marketing material, opted into membership in the NAPW Network, provided demographic information and engaged in an onboarding call with a membership coordinator ~~(the “NAPW~~(NAPW Network ~~member”)~~registered users). NAPW Network total membership is therefore comprised of members who paid for additional services (“Paid Members”) as well as members who opted into the NAPW Network and have not yet paid for additional services (“Unpaid Members”). The number of Unpaid Members at the NAPW Network segment is significantly higher than the number of Paid Members. We believe that a higher number of ~~NAPW Network Unpaid Members~~registered users will result in increased ~~conversions~~sales of our products and services, as customers will have access to ~~Paid Members, which~~a larger pool of professional talent. However, a higher number of registered users will ~~further~~not immediately translate ~~into~~to increased ~~revenues~~revenue, as there is a lag between the time we acquire a registered user through ~~membership subscriptions.~~

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 ~~on our PDN Network and total membership on our NAPW Network~~ as of the periods presented:

As of September 30, Change
2017 2016 (Percent)
(in thousands)
PDN Network Registered Users (1) 9,975 8,951 11.4 %
NAPW Network Total Membership (2) 952 880 8.2 %

~~(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—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~~ ~~” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”).~~

~~(2)~~

~~Includes both Paid Members and Unpaid Members.~~

	As of March 31,				Change
	2020		2019		(Percent)
	(in thousands)
PDN Network Registered Users⁽¹⁾		10,826		10,695		1.2	%
NAPW Network Total Membership⁽²⁾		948		952		-0.4	%

19(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 #17 —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” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report” as filed with the SEC on May 4, 2020).

(2) Includes both Paid Members and Unpaid Members. There were 5,000 and 9,000 Paid Members as of March 31, 2020 and 2019.

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 following table provides a reconciliation of ~~Net Loss~~net loss from continuing operations to Adjusted EBITDA for the three months ended March 31, 2020 and 2019, the most directly comparable GAAP measure reported in our consolidated financial statements:

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(in thousands)
Net loss $ (2,488 ) $ (1,273 ) $ (17,665 ) $ (3,519 )
Stock-based compensation expense 146 118 731 218
Goodwill impairment charge - - 9,920 -
Litigation Settlement 155 - 155 500
Gain on lease cancellation - - - (424 )
Depreciation and amortization 807 820 2,444 2,498
Change in fair value of Warrant Liability - 401 - 401
Interest Expense - 216 12 217
Interest and other income (4 ) - (9 ) (1 )
Income tax benefit (213 ) (624 ) (1,160 ) (1,218 )
Adjusted EBITDA $ (1,597 ) $ (342 ) $ (5,572 ) $ (1,328 )

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Loss from Continuing Operations	$	(1,422	)	$	(804	)
Stock-based compensation		19			8
Litigation settlement reserve		450			-
Depreciation and amortization		52			217
Interest expense		-			3
Interest and other income		1			-
Income tax benefit		(6	)		(66	)
Adjusted EBITDA	$	(906	)	$	(642	)

Results of Operations

Revenues

Total Revenues

The following tables set forth our ~~revenues~~revenue for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.

Three Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
Revenues
Membership fees and related services $ 2,205 $ 3,748 $ (1,543 ) (41.2 )%
Lead generation 1,370 1,554 (184 ) (11.8 )%
Recruitment services 694 955 (261 ) (27.3 )%
Products sales and other 18 53 (35 ) (66.0 )%
Education and training 69 - 69 100.0 %
Consumer advertising and marketing solutions 65 50 15 30.0 %
Total revenues $ 4,421 $ 6,360 $ (1,939 ) (30.5 )%

Nine Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
Revenues
Membership fees and related services $ 7,465 $ 13,048 $ (5,583 ) (42.8 )%
Lead generation 4,699 4,490 209 4.7 %
Recruitment services 1,977 2,295 (318 ) (13.9 )%
Products sales and other 91 544 (453 ) (83.3 )%
Education and training 899 - 899 100.0 %
Consumer advertising and marketing solutions 189 177 12 6.8 %
Total revenues $ 15,320 $ 20,554 $ (5,234 ) (25.5 )%

	Three Months Ended March 31,				Change			Change
	2020		2019		(Dollars)			(Percent)
	(in thousands)
Revenues:
Membership fees and related services	$	384	$	794	$	(410	)		-51.6	%
Recruitment services		567		474		93			19.6	%
Products sales and other		1		3		(2	)		-66.7	%
Consumer advertising and marketing solutions		30		36		(6	)		-16.7	%
Total revenues	$	982	$	1,307	$	(325	)		-24.9	%

Total revenues decreased ~~$1,939,000,~~$325,000, or ~~30.5% for~~24.9%, from $1,307,000 during the three months ended ~~September 30, 2017, compared~~March 31, 2019, to $982,000 during the ~~same prior year period, and $5,234,000, or 25.5%, for the nine~~three months ended ~~September 30, 2017, compared~~March 31, 2020. The decrease was primarily attributable to ~~the same prior year period, due primarily to decrease~~a $410,000 decline in new membership ~~fees~~ and ~~products sales as the management focuses on cost reduction efforts, including the reduction~~related services revenues in the ~~salesforce.~~

current period, partially offset by a $93,000 increase in recruitment revenues during the three months ended March 31, 2020.

Revenues by Segment

The following table sets forth each operating segment’s revenues for the periods presented. The period-to-period comparison is not necessarily indicative of future results.

Three Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
NAPW Network $ 2,223 $ 3,801 $ (1,578 ) (41.5 )%
PDN Network 759 1,005 (246 ) (24.5 )%
Noble Voice 1,370 1,554 (184 ) (11.8 )%
China 69 - 69 100.0 %
Total revenues $ 4,421 $ 6,360 $ (1,939 ) (30.5 )%

Nine Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
NAPW Network $ 7,556 $ 13,592 $ (6,036 ) (44.4 )%
PDN Network 2,166 2,472 (306 ) (12.4 )%
Noble Voice 4,699 4,490 209 4.7 %
China 899 - 899 100.0 %
Total revenues $ 15,320 $ 20,554 $ (5,234 ) (25.5 )%

	Three Months Ended March 31,				Change			Change
	2020		2019		(Dollars)			(Percent)
	(in thousands)
PDN Network	$	597	$	510	$	87			17.1	%
NAPW Network		385		797		(412	)		-51.7	%
Total revenues	$	982	$	1,307	$	(325	)		-24.9	%

During the three months ended ~~September 30, 2017,~~March 31, 2020, our ~~NAPW~~PDN Network generated ~~$2,223,000~~$597,000 in ~~revenue from membership fees and related services and product sales,~~revenues compared to ~~$3,801,000 for~~$510,000 in revenues during the ~~same period~~three months ended March 31, 2019, an increase of $87,000 or 17.1%. The increase in revenues was primarily of an increase in recruitment revenues generated in the prior year, a decrease of $1,578,000, or 41.5%. During the nine months ended September 30, 2017, our NAPW Network generated $7,556,000 in revenue from membership fees and related services and product sales and other, compared to $13,592,000 for the same period in the prior year, a decrease of $6,036,000, or 44.4%. The decrease was mainly attributable to reductions of the NAPW sales staff while the Company re-tooled its lead-generation and other marketing activities and replaced and re-trained sales staff on new sales practices we expect to lead to improved long-term productivity. During the third quarter, the Company formed a transition team and tasked the team on transitioning NAPW to long-term profitability. The core transition team’s objections are to increase the value for members, enhance membership sales productivity and to develop new methods of deriving revenue. To date the transition team has revamped membership outreach, new membership marketing and reducing indirect labor costs. In 2018 the Company will be investing in increasing women’s networking membership sales and expanding from NAPW (National Association of Professional Women), a national organization to IAW (International Association of Women), an international women’s networking organization. The C~~ompany believes that in a global market place, the IAW organization can offer all the value of today’s NAPW and add an international platform to enhance membership value.~~

current period.

During the three months ended ~~September 30, 2017,~~March 31, 2020, our ~~PDN~~NAPW Network ~~generated $759,000 in revenue,~~revenues were $385,000, compared to ~~$1,005,000 for the same period in the prior year, a decrease~~revenues of $246,000, or 24.5%. During the nine months ended September 30, 2017, our PDN Network generated $2,166,000 in revenue, compared to $2,472,000 for the same period in the prior year, a decrease of $306,000, or 12.4%. While Q1 2017 saw a modest uptick in sales and revenue generation over the prior year’s performance, Q2, and Q3 experienced a decline. The sales team experienced a reduction in staff with a corresponding drop in revenue generation. Additionally, sales strategy and operational changes implemented in Q2 are expected to result in an increase in revenue$797,000 during ~~Q4 and beyond.~~

~~During~~ the three months ended ~~September 30, 2017, our Noble Voice business generated $1,370,000 of lead generation revenue, compared to $1,554,000 for the same period in the prior year,~~March 31, 2019, a decrease of ~~$184,000~~$412,000 or ~~11.8%~~51.7%. The decrease in revenues was ~~caused by an unexpected loss~~primarily due to the effects of ~~a business partner at~~staffing reductions in our sales force during the ~~end~~first quarter of ~~Q2,~~2019, which ~~disrupted our business and~~ resulted in a ~~reduction~~corresponding decline in ~~staff while the business re-strategized. During the nine months ended September 30, 2017, our Noble Voice business generated $4,699,000 of~~customer lead generation revenue, compared to $4,490,000 for the same period in the prior year, an increase of $209,000 or 4.7%. The increase was mainly attributable to sales increase in the first half of 2017 due to an improvement in the private education marketplace, coupled with strategic internal initiatives to increase volume and ~~better lead quality.~~

We started our operations in China in Q1 2017. During the three months ended September 30, 2017, China Operations generated $69,000 of revenue. During the nine months ended September 30, 2017, China Operations generated $899,000 of revenue. During the third quarter of 2017, we developed 18 IAW members with total membership ~~fees of $278,000, which we~~ enrollment and renewals.

~~recognize ratably over the membership period (ranging from 12 to 36 months)~~.

Costs and Expenses

The following tables set forth our costs and expenses for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.

Three Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
Costs and expenses:
Cost of revenue $ 658 $ 745 $ (87 ) (11.7 )%
Sales and marketing 2,276 3,064 (788 ) (25.7 )%
General and administrative 3,237 3,011 226 7.5 %
Litigation settlement 155 - 155 100.0 %
Depreciation and amortization 807 820 (13 ) (1.6 )%
Total costs and expenses $ 7,133 $ 7,640 $ (507 ) (6.6 )%

~~During~~

	Three Months Ended March 31,				Change			Change
	2020		2019		(Dollars)			(Percent)
	(in thousands)
Cost and expenses:
Cost of revenues	$	173	$	184	$	(11	)		-6.0	%
Sales and marketing		525		696		(171	)		-24.6	%
General and administrative		1,661		1,078		583			54.1	%
Depreciation and amortization		52		217		(165	)		-76.0	%
Total cost and expenses:	$	2,411	$	2,175	$	236			10.9	%

Total costs and expenses increased during the three months ended ~~September 30, 2017, total~~March 31, 2020 to $2,411,000 compared to $2,175,000 during the three months ended March 31, 2019. The increase was primarily the result of $450,000 litigation settlement reserve and $251,000 in higher legal and accounting fees, partially offset by lower intangible amortization expense of $165,000 in the current period. The litigation settlement reserve is reflected in our Corporate Overhead segment in general and administrative expenses.

Costs and Expenses by Segment

The following table sets forth each operating segment’s costs and expenses ~~were $7,133,000, compared to $7,640,000~~ for ~~same period~~the periods presented. The period-to-period comparison is not necessarily indicative of future results.

	Three Months Ended March 31,				Change			Change
	2020		2019		(Dollars)			(Percent)
	(in thousands)
PDN Network	$	747	$	681	$	66			9.7	%
NAPW Network		453		905		(452	)		-49.9	%
Corporate Overhead		1,211		589		622			105.6	%
Total cost and expenses:	$	2,411	$	2,175	$	236			10.9	%

Costs and expenses decreased $452,000, or 49.9%, in ~~the prior year,~~our NAPW Network segment primarily as a ~~decrease~~result of ~~$507,000 or 6.6%. The decrease is mainly attributable to $788,000 or 25.7%~~lower intangible amortization expense of $165,000, $95,000 decrease in sales and marketing ~~expense mostly due to reduction in sales force,~~expenses as a ~~decrease~~result of ~~$87,000 or 11.7% in cost of revenue, and~~staffing reductions, a ~~slight decrease of $13,000 or 1.6% in depreciation and amortization. The~~$56,000 decrease in ~~expenses was partially offset by an decrease of $226,000 or 7.5%~~digital advertising and marketing initiatives and $50,000 in lower general and administrative personnel costs.

Costs and expenses increased $66,000, or 9.7%, in the PDN Network segment primarily due to an increase in bad debt expense of $28,000 and ~~$155,000 litigation settlement~~$11,000 in higher rent expenses.

Corporate overhead expenses ~~in Q3 2017, of which $146,000 was accrued for~~increased $622,000 during the ~~potential back pay related to the “NLRB” legal proceeding (please refer to “Legal Proceedings” for details).~~

Nine Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
Costs and expenses:
Cost of revenue $ 2,193 $ 2,434 $ (241 ) (9.9 )%
Sales and marketing 8,115 10,314 (2,199 ) (21.3 )%
General and administrative 11,323 8,928 2,395 26.8 %
Litigation settlement 155 500 (345 ) (69.0 )%
Goodwill impairment charge 9,920 - 9,920 100.0 %
Depreciation and amortization 2,444 2,498 (54 ) (2.2 )%
Total costs and expenses $ 34,150 $ 24,674 $ 9,476 38.4 %

~~During the nine~~three months ended ~~September 30, 2017, total costs and expenses were $34,150,000, compared to $24,674,000 for the same period in the prior year, and increase of $9,476,000, or 38.4%. The increase is~~March 31, 2020 primarily as a result of ~~goodwill impairment charge of $9,920,000, an increase of $2,395,000 or 26.8% in general and administrative expense, partially offset by~~ a ~~decrease of $2,199,000 or 21.3% in sales and marketing, a decrease of $345,000~~ litigation settlement ~~a decrease~~reserve of ~~$241,000 or 9.9%~~$450,000 recorded in ~~cost~~the first quarter of ~~revenue~~2020 in addition to $251,000 in higher legal and ~~a decrease of $54,000 or 2.2% in depreciation and amortization.~~

accounting fees.

Operating Expenses

Cost of ~~revenue~~:revenues: Cost of revenues during the three months ended ~~September 30, 2017 were $658,000, compared to $745,000 for the same period in the prior year,~~March 31, 2020 was $173,000, a decrease of ~~$87,000,~~$11,000, or ~~11.7%~~6.0%, from $184,000 during the three months ended March 31, 2019 as a result of lower revenues of $325,000, or 24.9%, which resulted in a corresponding decrease in cost of revenue.

Sales and marketing expense: Sales and marketing expense during the three months ended March 31, 2020 was $525,000, a decrease of $171,000, or 24.6%, from $696,000 during the three months ended March 31, 2019. The decrease is mainly attributable to a decrease of ~~$85,000~~$95,000 in personnel cost, a $36,000 reduction in digital marketing spending and $20,000 in lower branding and marketing costs in the ~~PDN segment~~current period.

General and ~~a decrease of $44,000 in the Noble Voice segment due~~administrative expense: General and administrative expenses increased by $583,000, or 54.1%, to decline in revenue, partially offset by an increase of $70,000 related to our China Operations that was launched in March 2017. Cost of revenues during the nine months ended September 30, 2017 were $2,193,000, compared to $2,434,000 for the same period in the prior year, a decrease of $241,000, or 9.9%, mainly attributable to a decrease of $271,000 in the PDN segment as a result of improved efficiencies in spending, and a decrease of $221,000 in the Noble Voice segment as a result of improved efficiencies in lead data sourcing and spending, partially offset by an increase of $338,000 related to our China Operations that was launched in March 2017.

~~Sales and marketing expense~~: ~~Sales and marketing expense~~ $1,661,000 during the three months ended ~~September 30, 2017 were $2,276,000,~~March 31, 2020. The increase was a result of a litigation settlement reserve of $450,000 recorded in the first quarter of 2020, a $251,000 increase in legal and accounting fees, partially offset by a reduction of $133,000 in personnel costs.

Depreciation and amortization expense: Depreciation and amortization expense during the three months ended March 31, 2020 was $52,000, compared to ~~$3,064,000 for~~$217,000 during the ~~same period in the prior year,~~three months ended March 31, 2019, a decrease of ~~$788,000,~~$165,000, or ~~25.7%~~76.0%. ~~Sales~~The decrease was primarily attributable to $165,000 in lower intangible amortization expense due to a $2,796,000 impairment charge recorded in the fourth quarter of 2018 in our NAPW segment.

Income Tax Benefit

	Three Months Ended March 31,						Change		Change
	2020			2019			(Dollars)		(Percent)
	(in thousands)
Income tax benefit	$	(6	)	$	(66	)	$	60		-90.9	%

During the three months ended March 31, 2020 and ~~marketing~~2019, we recorded a benefit for income tax of $6,000 and $66,000, respectively. The decrease in income tax benefit during the ~~nine months ended September 30, 2017 were $8,115,000, compared to $10,314,000 for the same~~current period ~~in the prior year, a decrease of $2,199,000, or 21.3%. The decreases for the three and nine months ended September 30, 2017 are~~was primarily due to a reduction in a discrete tax item associated with stock-based compensation expense in addition to a reduction in our valuation allowance

Discontinued Operations

In March 2020, our Board decided to suspend all China operations generated by the ~~NAPW~~former CEO, Michael Wang. The results of operations for China operations are presented in the statements of operation and comprehensive loss as loss from discontinued operations. In May 2018, we sold Noble Voice to a long-time customer of the Company and exited the business segment ~~sales force~~previously conducted by Noble Voice. For the three months ended March 31, 2019, results from ~~64 sales representatives as of September 30, 2016 to 51 as of September 30, 2017.~~ discontinued operations incudes costs and expenses associated with Noble Voice.

~~General and administrative expense: General and administrative expense~~

The following table presents results from discontinued operations for the three months ended ~~September 30, 2017 was $3,237,000, compared to $3,011,000 for the same period in the prior year, an increase of 226,000 or 7.5%. The increase was mainly attributable to a $268,000 general~~March 31, 2020 and administrative expense related to our China Operations that were launched in March 2017, a $183,000 rent liability accrual related to the unused space at our Garden City office related to NAPW segment, a $183,000 severance accrual for reduction in force in NAPW segment, and a $115,000 increase in compensation to independent board directors. This was partially offset by a $106,000 decrease in credit card fees due to lower sales and lower credit card rates, a $101,000 decrease in legal expenses, an $83,000 decrease in salaries and benefits, an $83,000 decrease in corporate insurance expenses, and a $52,000 decrease in consulting fees. General and administrative expense for the nine months ended September 30, 2017 was $11,323,000, compared to $8,928,000 for the same period in the prior year, an increase of $2,395,000 or 26.8%. The increase was mainly attributable to a $774,000 increase related to our China Operations that was launched in March 2017, a $616,000 increase in legal fees, a $514,000 increase in stock based compensation, 2019:

~~a gain on lease cancellation of $424,000 related to the closing of its Los Angeles, CA office recorded in prior year, and a $364,000 increase in compensation to independent board directors. This was partially offset by a $253,000 decrease in credit card fees due to lower sales volume, and a $92,000 decrease in professional fees.~~

	Three Months Ended March 31,
	2020			2019

Revenues	$	-		$	39

Cost of Sales		7			17
Depreciation and amortization		-			4
Sales and marketing		2			85
General and administrative		61			283
Non-operating income (expense)		-			(6	)
Loss from discontinued operations before income tax		(70	)		(356	)
Income tax expense (benefit)		-			-
Net loss from discontinued operations	$	(70	)	$	(356	)

~~Litigation settlement:~~

Litigation settlement for the three and nine months ended September 30, 2017 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). Litigation settlement for the nine months ended September 30, 2016 represents the expense related to a $500,000 settlement of a class action lawsuit that was recorded during the first quarter of 2016.

~~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. Accordingly, the Company recorded a goodwill impairment charge of $9,920,000 for the nine months ended September 30, 2017. No goodwill impairment charge was recorded during the three and nine months ended September 30, 2016.

~~Depreciation and amortization expense: Depreciation and amortization expense~~ for the three months ended September 30, 2017 was $807,000, compared to $820,000 for the same period in the prior year, a decrease of $13,000 or 1.6%. Depreciation and amortization expense for the nine months ended September 30, 2017 was $2,444,000, compared to $2,498,000 for the same period in the prior year, a decrease of $54,000 or 2.2%. The decrease for the three and nine months ended September 30, 2017 was mainly attributable to a reduction in amortization expense resulting from the amortization of the capitalized technology costs.

~~Income Tax Benefit~~

Three Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
Total $ (213 ) $ (624 ) $ 411 (65.9 )%

Nine Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
Total $ (1,160 ) $ (1,218 ) $ 58 (4.8 )%

The effective income tax rate for the three months ended September 30, 2017 and 2016 was 7.9% and 32.9%, respectively, resulting in a $213,000 and $624,000 income tax benefit, respectively. The effective income tax rate for the nine months ended September 30, 2017 and 2016 was 6.2% and 25.7%, respectively, resulting in a $1,160,000 and $1,218,000 income tax benefit, respectively. The difference in the effective income tax rate for the three months ended September 30, 2017, compared to the three months ended September 30, 2017, is mainly attributable to the change in the valuation allowance. The difference in the effective income tax rate for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2017, is mainly attributable to the impairment charge recognized on NAPW’s goodwill and the change in the valuation allowance. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of September 30, 2017 and December 31, 2016.

Net ~~Loss~~

loss

The following table sets forth each operating segment’s net income or loss for the periods presented. The period-to-period comparison is not necessarily indicative of future results.

Three Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
NAPW Network $ $(1,528 ) $ (604 ) $ (924 ) 153.0 %
PDN Network (218 ) (513 ) 295 (57.5 )%
Noble Voice (419 ) (156 ) (263 ) 168.6 %
China (324 ) - (324 ) 100.0 %
Consolidated Net Loss $ (2,489 ) $ (1,273 ) $ (1,216 ) 95.5 %

Nine Months Ended
September 30, Change Change
2017 2016 (Dollars) (Percent)
(in thousands)
NAPW Network $ (14,026 ) $ (1,616 ) $ (12,410 ) 767.9 %
PDN Network (1,865 ) (1,083 ) (782 ) 72.2 %
Noble Voice (1,358 ) (820 ) (538 ) 65.6 %
China (417 ) - (417 ) 100.0 %
Consolidated Net Loss $ (17,666 ) $ (3,519 ) $ (14,147 ) 402.0 %

	Three Months Ended March 31,						Change			Change
	2020			2019			(Dollars)			(Percent)
	(in thousands)
PDN Network	$	(148	)	$	(161	)	$	13			-8.1	%
NAPW Network		(68	)		(100	)		32			-32.0	%
Corporate Overhead		(1,206	)		(543	)		(663	)		122.1	%
Consolidated net loss from continuing operations	$	(1,422	)	$	(804	)	$	(618	)		76.9	%

Consolidated Net Loss from Continuing Operations.As the result of the factors discussed above, during the three ~~and nine~~ months ended September 30, 2017 we incurred $2,489,000 and $17,666,000 respectively, of net losses, an increase (decrease) of 95.5% and 402.0% from net loss of $1,273,000 and $3,519,000 during the three and nine months ended September 30, 2016. The $1,216,000 increase in net loss for the three months ended September 30, 2017 was primarily driven by a decrease of $1,578,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, partially offset by a decrease of $788,000 in overall sales and marketing expenses. The $14,147,000 increase in net loss for the nine months ended September 30, 2017 was primarily driven by a decrease of $6,036,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, along with NAPW segment goodwill impairment charge of $9,920,000, and an increase of $2,395,000 in overall general and administrative expenses, partially offset by a decrease of $2,199,000 in overall sales and marketing expenses.

~~During the three and nine months ended September 30, 2017,~~March 31, 2020, we incurred a net loss of ~~$1,528,000 and $14,026,000,~~ ~~respectively,~~ ~~attributable~~$1,422,000 from continuing operations, an increase of $618,000 or 76.9%, compared to ~~the NAPW Network segment, compared to~~a net loss of ~~$604,000 and $1,616,000 for the three and nine months ended September 30, 2016, respectively. The increase in net loss for~~$804,000 during the three months ended ~~September 30, 2017 was primarily driven by a decrease of $1,578,000 in~~ March 31, 2019.

NAPW segment revenues from membership fees, related services and product sales period-over-period, partially offset by a decrease of $734,000 in sales and marketing expenses. The $12,410,000 increase in net loss for the nine months ended September 30, 2017 was primarily driven by a decrease of $6,036,000 in NAPW segment revenues from membership fees, related services and product sales period-over-period, along with NAPW segment goodwill impairment charge of $9,920,000, and partially offset by a decrease of $2,479,000 in sales and marketing expenses.

Network Net Loss.During the three months ended ~~September 30, 2017,~~March 31, 2020, we incurred a net loss of ~~$218,000, attributable to the PDN Network segment,~~$68,000, compared to a net loss ~~of $513,000 for~~$100,000 during the three months ended ~~September 30, 2016, a decrease of $295,000, or 57.5%.~~March 31, 2019. The decrease in net loss ~~is mainly~~was primarily attributable to a ~~result of $216,000 interest expense, and a loss of $401,000 as a result of change~~$412,000 in ~~fair value of warrant liability, both recorded during three months ended September 30, 2016,~~lower revenues in the current period, which was partially offset by a ~~$246,000~~$165,000 decrease in ~~revenues.~~ intangible amortization, $95,000 decrease in sales and marketing personnel costs, a $56,000 decrease in digital advertising and marketing expenses and a $50,000 decrease in general and administrative personnel costs.

PDN Network Net Loss.During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, we incurred a net loss of ~~$1,865,000,~~$148,000 compared to the net loss of ~~$1,083,000 for~~$161,000 incurred during the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019. This decrease in net loss was primarily attributable to lower revenues in the current year, partially offset by lower personnel costs.

Corporate Overhead.During the three months ended March 31, 2020, we incurred a net loss of $1,206,000, an increase of ~~$782,000, or 72.2%.~~$663,000, compared to a net loss of $543,000 incurred during the three months ended March 31, 2019. The increase in net loss was primarily ~~attributable to $616,000~~a result of a litigation settlement reserve of $450,000 recorded in the first quarter of 2020, $251,000 increase in ~~non recurring~~ legal ~~expense, $513,000 increase in stock based compensation, along with a $306,000 decrease in revenues,~~and accounting fees, which was partially offset by a ~~$216,000 interest expense, and $401,000 change~~reduction of $133,000 in ~~fair value of warrant liability, both recorded during three months ended September 30, 2016.~~personnel costs.

~~During the three and nine months ended September 30, 2017, we incurred a net loss of $419,000 and $1,358,000,~~ ~~respectively,~~ attributable to the Noble Voice segment, compared to $156,000 and $820,000 for the three and nine months ended September 30, 2016, respectively. The increase in net loss was primarily attributable to by higher corporate overhead allocation.

Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, respectively,~~2019:

	March 31,			December 31,
	2020			2019
	(in thousands)
Cash and cash equivalents	$	1,555		$	634
Working capital (deficiency)	$	(1,741	)	$	(2,114	)

As of March 31, 2020, we had cash and ~~is intended~~cash equivalents of $1,555,000 compared to ~~supplement the more detailed discussion that follows:~~

September 30, December 31,
2017 2016
(in thousands)
Cash and cash equivalents $ 2,822 $ 6,069
Working capital (deficiency) $ (1,475 ) $ 1,000

cash and cash equivalents of $634,000 at December 31, 2019. Our principal sources of liquidity are our cash and cash equivalents, including ~~the~~ net proceeds from the ~~recent~~ issuances of ~~Common Stock to CFL.~~common stock. As of ~~September 30, 2017 and~~March 31, 2020, we had a working capital deficiency of approximately $1,741,000, compared to a working capital deficiency of approximately $2,114,000 as of December 31, ~~2016, we~~2019. We had ~~working capital (deficiency)~~an accumulated deficit of approximately ~~$(1,475,000) and $1,000,000.~~$90,163,000 at March 31, 2020. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, we generated a net loss ~~of approximately $17,665,000 (including a non-cash impairment charge of $9,920,000), used cash in~~from continuing operations of approximately ~~$6,454,000, which includes $1,450,000 paid~~$1,422,000 and used cash from continuing operations of approximately $574,000.

While we have aggressively reduced operating and overhead expenses, and while we continue to ~~LinkedIn related~~focus on our overall profitability, we have continued to ~~litigation that was settled in 2016,~~generate negative cash flows from operations, and we expect ~~that we will continue~~ to ~~generate operating~~incur net losses for the foreseeable ~~future.~~

future, especially considering the negative impact COVID-19 will have on our liquidity and financial position. 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, raise capital, and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if we unable to continue as a going concern.

We are closely monitoring operating costs and capital ~~requirements~~requirements. Our Management also made efforts in 2019 and ~~have developed~~2018 to contain and reduce cost, including terminating non-performing employees and eliminating certain positions, replacing and negotiating with certain vendors, implementing a new approval process overseeing travel and other expenses, and significantly reducing the cash compensation for independent board directors. If we are still not successful in sufficiently reducing our costs, we may then need to dispose of our other assets or discontinue business lines.

On March 22, 2020, we entered into an ~~operating plan for 2017. We have had cost reductions~~agreement with Malven Group Limited, a company established under the laws of the British Virgin Islands (“Malven”), in connection with the ~~areas~~purchase by Malven of ~~staffing levels and operating budgets.~~

~~On November 7, 2016, we consummated the issuance and sale of 1,777,417~~1,939,237 shares of ~~Common Stock to CFL,~~our common stock at a price of ~~$9.60~~$0.7735 per ~~share. We received total~~share for gross proceeds of ~~approximately $17.1 million~~$1,500,000. The closing of the transaction took place on March 31, 2020.

Due to COVID-19 and the financial impact and business interruption that this pandemic will have, we applied for the Paycheck Protection Program (“PPP”) under the Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. On May 5, 2020, we received total proceeds of $651,077 from the ~~Share Issuance, or $14.1 million after giving effect~~SBA. In accordance with the loan forgiveness requirements under the SBA CARES Act, we intend to use 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~~PPP loan primarily for payroll costs, rent and utilities and we anticipate that the ~~payment of transaction-related expenses at~~PPP loan will be forgiven by the ~~closing.~~

~~On January 18, 2017, we sold 312,500 shares of Common Stock to CFL at a price of $9.60 per share, for total gross proceeds of $3,000,000, or $2,821,000 after giving effect to~~SBA upon meeting the ~~payment of transaction-related expenses.~~

loan requirements under the PPP.

We currently anticipate that our available funds and cash ~~generated~~flow from operations ~~will~~ may not be sufficient to meet our working capital requirements ~~through November of 2018. Since the Company expects that it will continue to generate operating losses~~ for the ~~mid-term,~~twelve months subsequent to the ~~Company may~~issuance of our financial statements. In order to fund our operations, we will need to increase revenues or raise capital by the issuance of stock. However, 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 ~~need to further decrease expenses in order~~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 move money between China and the USA 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 strictly. We need to get approval from Chinese government to move money from China to the U.S. which might take extra time.

We collect ~~NAPW Network~~ 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~~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 year~~one-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. Cash and cash equivalents and ~~short term~~short-term investments consist primarily of cash on deposit with banks and investments in money market funds, corporate and municipal debt and U.S. government and U.S. government agency securities.

Nine Months Ended
September 30,
2017 2016
(in thousands)
Cash provided by (used in):
Operating activities $ (6,454 ) $ (2,489 )
Investing activities (294 ) 694
Financing activities 3,502 239
Effect of exchange rate fluctuations on cash and cash equivalents (1 ) -
Net decrease in cash and cash equivalents $ (3,247 ) $ (1,556 )

	Three Months Ended March 31,
	2020			2019
Cash provided by (used in) continued operations	(in thousands)
Operating activities	$	(574	)	$	(828	)
Investing activities		(5	)		-
Financing activities		1,500			373
Effect of exchange rate fluctuations on cash and cash equivalents		(15	)		21
Cash provided by (used in) discontinued operations
Operating activities		16			365
Investing activities		-			(4	)
Net increase (decrease) in cash and cash equivalents	$	922		$	(73	)

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

~~For the nine months ended September 30, 2017, net~~

Net cash used in operating activities from continuing operations during the three months ended March 31, 2002 was ~~$6,454,000.~~$574,000. We had a net loss of ~~$17,665,000,~~$1,422,000 during the three months ended March 31, 2020, which included a ~~deferred income tax benefit~~non-cash litigation settlement reserve of ~~$1,160,000, which was offset by~~ ~~non-cash~~ ~~NAPW goodwill impairment charge~~$450,000, depreciation of ~~$9,920,000, depreciation~~amortization expense of $52,000 and amortization of ~~$2,444,000 and stock-based compensation expense~~right-of-use assets of ~~$731,000.~~$39,000, which was partially offset by payments of lease obligations of $46,000. Changes in operating assets and liabilities used $~~879,000~~$339,000 of cash during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, consisting primarily of increases in accounts receivable, accounts payable, deferred revenue and accrued expenses, partially offset by decreases in deferred revenue and accrued expenses.

Net cash used in operating activities from continuing operations for the three months ended March 31, 2019 was $828,000. We had a net loss of $804,000 during the three months ended March 31, 2019, which included depreciation and amortization expense of $217,000 and amortization of right-of-use assets of $38,000, which was partially by a deferred tax benefit of $69,000 and payments of lease obligations of $44,000. Changes in operating assets and liabilities used $179,000 of cash during the three months ended March 31, 2019, consisting primarily of decreases in deferred revenue, ~~and~~ accounts payable, ~~partially offset by increases in accrued~~prepaid expenses and ~~decreases in accounts receivable and prepayments.~~

Net cash used in operating activities for the nine months ended September 30, 2016 was $2,489,000. We had a net loss of $3,519,000 during the nine months ended September 30, 2016, a deferred tax benefit of $1,218,000 and a gain on lease cancellation of $424,000, which were partially offset by non-cash depreciation and amortization of $2,498,000, an increase in the fair value of warrant liabilities of $401,000, stock-based compensation expense of $218,000 and deferred financing cost amortization of $157,000. Changes in operating assets and liabilities used $601,000 of cash during the nine months ended September 30, 2016, consisting primarily of decreases in deferred revenue and increased prepaidaccrued expenses, partially offset by increases in ~~accrued expenses.~~

accounts receivable.

Net Cash ~~(Used in) Provided by~~Used in Investing Activities

Net cash used in investing activities ~~for~~from continuing operations during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was ~~$294,000, consisting~~$4,500, which consisted of ~~$123,000 invested to develop~~investments in developed technology ~~$154,000 in purchases of property~~ and computer equipment ~~partially offset by $18,000 of returned security deposits.~~

Net cash provided by investing activities for the nine months ended September 30, 2016 was $694,000, consisting of $500,000 of proceeds from the maturities of short-term investments and $194,000 of returned security deposits.

purchases.

Net Cash Provided by Financing Activities

Net cash provided by financing activities from continuing operations during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was ~~$3,502,000, consisting of the $3,000,000 in gross~~$1,500,000 and which reflected proceeds from the ~~January 18, 2017 issuance, $646,000 refund~~sale of ~~merchant reserve, partially offset by~~common stock. On March 22, 2020, we entered into an agreement with Malven Group Limited, a company established under the ~~$144,000 payment~~laws of ~~offering costs to third-party professionals.~~the British Virgin Islands, in connection with the purchase of 1,939,237 shares of our common stock at a price of $0.7735 per share for gross proceeds of $1,500,000. The closing of the transaction took place on March 30, 2020.

Net cash provided by financing activities from continuing operations during the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 was ~~$239,000,~~$373,000, consisting of ~~$1,943,000~~$373,000 in gross proceeds from the sale of ~~proceeds drawn on~~203,963 shares of our ~~Master Credit Facility, partially offset by $488,000~~common stock at a purchase price ranging from $1.42 to $3.85 per share, representing 120% of ~~costs related to securing that facility, payment of $1,049,000 of costs related~~the closing price the trading day immediately prior to the ~~CFL Transaction and $166,000 due~~date of subscription to citizens of the ~~increase in the merchant reserve for NAPW Network.~~

People’s Republic of China.

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

~~Pursuant to the provisions of the Jumpstart Our Business Startups Act (the “JOBS Act~~”), 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.

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.

~~There have been no material changes to the Company’s critical~~

While our significant accounting policies ~~and estimates as compared to the critical accounting policies and estimates~~are more fully described in Note 3 to our consolidated financial statements included at the ~~2016~~end of this Annual Report, ~~which~~ we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our ~~business and the understanding of our~~reported financial results ~~of operations~~ and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.

~~Special Note Regarding Forward-Looking Statements~~

~~This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A~~

Accounts Receivable

Our policy is to reserve for uncollectible accounts based on our best estimate of the ~~Securities Act~~amount of ~~1933, as amended,~~probable credit losses in 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 ~~Section 21E~~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.

Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 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.

When conducting its annual goodwill impairment assessment, the Company initially performs a 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 ~~Securities Exchange Act~~Company’s reporting unit to its carrying or book value. If the fair value of ~~1934,~~the reporting unit exceeds its carrying 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 Company will measure any goodwill impairment losses as ~~amended. These~~the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Capitalized Technology Costs

We account for capitalized technology costs in accordance with ASC 350-40, Internal-Use Software (“ASC 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.

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 ~~concern expectations, beliefs, projections, plans~~the identifiable assets acquired, the liabilities assumed, and ~~strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this Quarterly Report contains forward-looking statements regarding:~~

~~our beliefs regarding our ability to create enhanced value for our members and customers;~~

~~our beliefs regarding the relation between the number of members or registered users and our revenues;~~

~~our expectations regarding future changes in our salesforce;~~

~~our expectations regarding the changes in revenues in 2017, 2018 and 2019;~~

~~our expectations regarding future increases in sales and marketing costs and general and administrative expenses; 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 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 couldany non-controlling interest in the ~~future affect our actual results~~acquiree; b) recognizes and ~~could cause actual results~~measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to ~~differ significantly~~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 ~~those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause~~goodwill, the ~~assumptions underlying forward-looking statements~~assets acquired 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 partners or to successfully integrate such businesses;~~

~~our history of operating losses;~~

~~we may not be able to reverse the significant decline in our revenues;~~

~~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 protection for our intellectual property;~~

~~any future litigation regarding our business, including intellectual property claims;~~

~~general and economic business conditions; and~~

~~legal and regulatory developments.~~

The foregoing list of important factors may not include all such factors. You should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for additional factors, risks and uncertainties that may cause actual results to differ materially from those projected by the Company. Please refer to Part II, Item 1A, “~~Risk Factors” of this Quarterly Report and to Part I, Item 1A, “Risk Factors~~” of our 2016 Annual Report for additional information regarding factors that could affect our results of operations, financial condition and cash flow. 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 viewsliabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of ~~this Quarterly Report,~~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, and product sales. 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.

Consumer marketing and consumer advertising revenue is recognized either based upon a fixed fee for revenue 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.

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. Starting January 2, 2018, we also offer a monthly membership for which we collect fees on a monthly basis and we ~~undertake no obligation~~recognize revenue in the same month as the fees are collected. Revenue from related membership services are derived from fees for development and set-up of a member’s personal on-line profile and/or press release announcements. Fees related to ~~update any forward-looking statement~~these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.

Recent Accounting Pronouncements

See Note 3 to ~~reflect the impact~~our financial statements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of ~~circumstances or events that arise after the date of this Quarterly Report.~~

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Not applicable.~~

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

~~Disclosure Controls~~disclosure controls and ~~Procedures~~

procedures

As of ~~September 30, 2017,~~March 31, 2020, our management conducted an evaluation, under the supervision and with the participation of our Interim Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures; as is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the ~~“ Exchange~~“Exchange Act”). We recognize that there are material weaknesses related to our internal controls. Therefore, our Interim Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, as of the end of the period covered by this Quarterly Report. This includes ensuring that information required to be disclosed was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Furthermore, to provide reasonable assurance that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in ~~Internal Control~~internal control over ~~Financial Reporting~~

financial reporting

During the ~~third~~first quarter of ~~2017,~~2020, we continued to undertake certain initiatives to improve and remediate material weaknesses related to our internal control over financial reporting that were identified for the year ended December 31, ~~2016. We~~2019. Specifically, we continued ~~making necessary changes~~to implement more effective financial reporting process and ~~implementing new policies to enhance the overall~~ internal control ~~structure, including requiring pre-approval for travel~~procedures that included monthly and ~~certain purchases~~quarterly closing check-lists and ~~ensuring employees are cross trained for certain key tasks.~~monthly review of the financial reports by the Company’s Finance Department. We also continued improving GAAP training of internal staff and to utilize third-party consultants to assist in the review and preparation of complex accounting transaction and financial statement reports. There have been no other changes in our internal control over financial reporting during the ~~third~~first quarter of ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Our management has concluded that, as of March 31, 2020, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements. Specifically, we noted the following:

	●	Relevant operating information is not adequately used to develop accounting and financial information and serve as a basis for reliable financial reporting. This same operating information is also used as the basis for accounting estimates. Specifically, financial and nonfinancial indicators of going concern and impairment of assets were not completely assessed by management.

	●	Employees lack full technical competence and training necessary for the nature and complexity of the entity’s activities. Specifically, Company personnel could not perform purchase accounting or fair value measurements with Company’s acquisitions.

	●	Supporting analysis is not prepared for each non-routine event or transaction that requires management’s judgement and/or estimate. Specifically, no analysis is prepared to document compliance with relevant GAAP and entity’s accounting policies.

	●	Accounting procedures relevant to foreign subsidiaries are not sufficiently formal that management can determine whether the control objective is met, documentation supporting the procedures is in place, and personnel routinely know the procedures that need to be performed. Specifically, data from foreign subsidiaries underlying financial statements is not captured completely, accurately, and timely, in accordance with the entity’s policy and procedures.

28Limitations on effectiveness of controls and procedures

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 weaknesses. However, because many of the controls in the Company’s system of internal controls 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 weaknesses have been remediated.

~~PART II~~

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~33

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 amount of back pay and other potential liabilities ordered by NLRB is $146,000.~~PART II

ITEM 1 – LEGAL PROCEEDINGS

~~ITEM 1A.~~

~~RISK FACTORS~~

~~The information presented below updates,~~all claims.

NAPW is a defendant in a Nassau County (NY) Supreme Court case, whereby TL Franklin Avenue Plaza LLC has sued NAPW Case index No. LT-000421/2018, with respect to NAPW’s former Garden City NY Premises. NAPW had surrendered the Premises to the Landlord, and ~~should be read in conjunction with,~~ the ~~risk factors and information disclosed in our 2016 Annual Report.~~

~~The proceeds from~~Landlord is suing NAPW for the ~~January 2017 Share Issuance may not be sufficient to implement our productivity improvement initiatives.~~

We received net proceeds of approximately $2,856,000 from the January 18, 2017 Share Issuance, partially offset by approximately $144,000 in third-party professional fees. We expect to use the net proceeds for general corporate and working capital purposes including to implement the productivity improvement initiatives that we have identified as key to our ability to deliver profitable growth over the long term. We cannot be certain that the proceeds from the Share Issuance will be sufficient to implement all or anybalance of the ~~initiatives or that these initiatives will improve our short~~rent due under the Lease Term. The case is currently being litigated, and ~~long-term business performance or prospects. In the event that~~ we ~~cannot implement these initiatives or that these initiatives~~ are ~~not successful, we could again face liquidity and going concern issues, which could result in your losing your entire investment~~currently in the ~~Company.~~

fact damages phase of the litigation.

The Company is ~~controlled~~a party to a proceeding captioned Gerbie, et al. v. Professional Diversity Network, Inc. (U.S. Dist. Ct., N.D. Ill.), a putative class action alleging violations of the Telephone Consumer Protection Act. A settlement has been reached and case has been dismissed by ~~CFL,~~the court. The Company believes that its practices and ~~CFL’s interests may differ from the interests of our other stockholders.~~

CFL beneficially owns 54.64% of our outstanding shares of Common Stock on a fully diluted basis. Five out of nine members of our Board of Directors are nominated by CFL. CFL may not exercise its rights as our controlling stockholder in a manner consistentprocedures were compliant with the ~~interests~~Telephone Consumer Protection Act and admitted no fault.

The Company and its wholly-owned subsidiary, NAPW, Inc., are parties to a proceeding captioned Deborah Bayne, et al. vs. NAPW, Inc. and Professional Diversity Network, Inc., No. 18-cv-3591 (E.D.N.Y.), filed on June 20, 2018 and alleging violations of ~~our other stockholders. By virtue~~the Fair Labor Standards Act and certain provisions of the New York Labor Law. The Company disputes that it or its ~~ownership of a majority of our Common Stock~~subsidiary violated the applicable laws or that either entity has any liability and ~~the power~~intends to ~~designate the majority of our Board of Directors, CFL~~vigorously defend against these claims. The matter is in ~~a position to influence~~ the ~~Company’s actions for its own benefit.~~

~~Public sales~~final stages of ~~a substantial number~~discovery and we have completed depositions of ~~shares of our Common Stock by CFL could cause our stock price to fall.~~

~~CFL beneficially owns 54.64% of our outstanding shares of Common Stock~~relevant witnesses. The potential financial impact on ~~a fully diluted basis. Pursuant to the Stockholders’ Agreement, dated November 7, 2016, by and among~~ the Company ~~CFL and CFL shareholders, CFL, CFL shareholders and their respective affiliates (collectively,~~is still uncertain at this point. During the “ ~~CFL Group~~ ”)first quarter of 2020, the Company recorded a $450,000 litigation settlement reserve in the event of an unfavorable outcome in this proceeding.

We are also generally subject to ~~a one-year lock-up with respect to all shares of Common Stock owned by members of the CFL Group, subject to certain exceptions. However, after the one-year period, it may generally sell its shares~~legal proceedings and litigation arising in the public markets, subject to applicable securities laws. Furthermore, we have granted CFL and the CFL shareholders certain registration rights that provide them the ability to register for resale, fromordinary course of business.

General Legal Matters

From time to time, ~~and~~the Company is involved in accordance with the terms of the registration rights agreement, all shares of Common Stock owned by members of the CFL Group, subject to certain exceptions. Sales of a substantial number of shares of our Common Stocklegal matters arising in the ~~public market~~ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or ~~the perception that these sales might occur,~~ could ~~depress the market price of our Common Stock and could~~be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.

ITEM 1A – RISK FACTORS

Smaller reporting companies are not required to provide the ~~trading price of our Common Stock.~~information required by this item.

~~Because we have~~

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

On March 31, 2020 the Company closed a ~~majority stockholder, our public float is more limited which could impact your ability to sell your shares and could result in increased volatility in our stock price.~~

~~CFL beneficially owns 54.64%~~private placement with Malven Group Limited, a company established under the laws of the ~~outstanding~~British Virgin Islands, in connection with the purchase of 1,939,237 shares of our Common Stock. As a result, the trading volume of our Common Stock could be more limited than if our shares were more-widely held. In addition, because we are a relatively small company, the range of investors willing to invest in our shares may be relatively limited. As a result of these factors, it may be more difficult for you to sell your shares of Common Stockcommon stock at a ~~time and~~ price ~~that you deem appropriate, and could increase the volatility~~ of ~~our stock price.~~

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~We did not sell any equity securities in transactions that were not registered under the Securities Act~~$0.7735 per share for gross proceeds of ~~1933 during the three months ended September 30, 2017.~~

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

$1,500,000. The Company’s Form 8-K filed on March 27, 2020 is incorporated herein by reference.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURE~~

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

~~ITEM 5.~~

~~OTHER INFORMATION~~

ITEM 5. OTHER INFORMATION

None.

~~ITEM 6.~~

~~EXHIBITS~~

ITEM 6. EXHIBITS

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.		INS XBRL Instance Document
101.		SCH XBRL Taxonomy Extension Schema Document
101.		CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.		DEF XBRL Taxonomy Extension Definition Linkbase Document
101.		LAB XBRL Taxonomy Extension Labels Linkbase Document
101.		PRE XBRL Taxonomy Extension Presentation Linkbase Document

30SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly ~~authorized.~~

authorized, on May 20, 2020.

		PROFESSIONAL DIVERSITY NETWORK, INC.



Date: ~~November 13, 2017~~ May 20, 2020	By:	/s/ Xin (Adam) He
	~~/s/ Jiangping (Gary) Xiao~~Name:	Xin (Adam) He
	Title:	Interim Chief Executive Officer and Chief Financial Officer
		~~Name:~~	~~Jiangping (Gary) Xiao~~
		~~Title:~~	~~Chief Financial Officer~~ (On behalf of the Registrant and as principal financial
		officer and principal accounting officer)

EXHIBIT INDEX

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or Rule 15d- 14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.		INS XBRL Instance Document
101.		SCH XBRL Taxonomy Extension Schema Document
101.		CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.		DEF XBRL Taxonomy Extension Definition Linkbase Document
101.		LAB XBRL Taxonomy Extension Labels Linkbase Document
101.		PRE XBRL Taxonomy Extension Presentation Linkbase Document

Title of each class		Name of each exchange on which registered
Common Stock, $0.01 par value per share		The Nasdaq Stock Market LLC

Large accelerated filer ☐	[ ]	Accelerated filer ☐[ ]
Non-accelerated filer ☐	[ ]	Smaller reporting company ☒[X]
Emerging growth company [ ]

	September 30,			December 31,
	2017			2016
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	2,821,729		$	6,068,973
Accounts receivable, net		1,799,013			2,170,529
Incremental direct costs		241,235			423,023
Prepaid expenses and other current assets		490,581			957,140
Total current assets		5,352,558			9,619,665

Property and equipment, net		291,774			277,534
Capitalized technology, net		141,573			173,368
Goodwill		10,280,885			20,201,190
Intangible assets, net		7,035,139			9,183,439
Merchant reserve		780,849			1,426,927
Security deposits		239,059			220,754
Other assets		-			35,000
Total assets	$	24,121,837		$	41,137,877

Current Liabilities:
Accounts payable	$	1,232,510		$	2,172,332
Accrued expenses		1,172,435			962,172
Deferred revenue		4,422,715			5,485,599
Total current liabilities		6,827,660			8,620,103

Deferred tax liability		2,492,837			3,653,274
Deferred rent		60,959			55,718
Other liabilities		78,481			33,159
Total liabilities		9,459,937			12,362,254

Commitments and contingencies

Stockholders' Equity
Common stock, $0.01 par value; 45,000,000 shares authorized; 3,936,399 shares and 3,623,899 shares issued as of September 30, 2017 and December 31, 2016, respectively; and 3,931,838 shares and 3,619,338 shares outstanding as of September 30, 2017 and December 31, 2016, respectively		39,329			36,204
Additional paid in capital		79,783,969			76,234,772
Accumulated other comprehensive loss		(1,435	)		-
Accumulated deficit		(65,122,846	)		(47,458,236	)
Treasury stock, at cost; 1,048 shares at September 30, 2017 and December 31, 2016		(37,117	)		(37,117	)
Total stockholders' equity		14,661,900			28,775,623

Total liabilities and stockholders' equity	$	24,121,837		$	41,137,877

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Revenues:
Membership fees and related services	$	2,204,909		$	3,748,334		$	7,465,202		$	13,047,652
Lead generation		1,370,465			1,554,370			4,699,399			4,489,919
Recruitment services		694,454			954,887			1,977,101			2,295,556
Product sales and other		18,285			52,857			91,226			544,440
Education and training		68,890			-			898,584			-
Consumer advertising and marketing solutions		65,188			49,719			189,217			176,771
Total revenues		4,422,191			6,360,167			15,320,729			20,554,338

Costs and expenses:
Cost of revenues		658,297			745,159			2,193,224			2,433,550
Sales and marketing		2,275,585			3,064,454			8,114,908			10,314,145
General and administrative		3,236,848			3,010,862			11,322,513			8,928,493
Litigation settlement		155,216			-			155,216			500,000
Goodwill impairment charge		-			-			9,920,305			-
Depreciation and amortization		806,898			819,894			2,443,511			2,498,136
Total costs and expenses		7,132,844			7,640,369			34,149,677			24,674,324

Loss from operations		(2,710,653	)		(1,280,202	)		(18,828,948	)		(4,119,986	)

Other (expense) income
Interest expense		-			(215,781	)		(12,399	)		(216,948	)
Interest and other income		4,117			150			9,218			801
Other finance income		5,318			-			7,082			-
Other (expense) income, net		9,435			(215,631	)		3,901			(216,147	)

Change in fair value of warrant liability		-			(401,000	)		-			(401,000	)

Loss before income tax benefit		(2,701,218	)		(1,896,833	)		(18,825,047	)		(4,737,133	)
Income tax benefit		(213,133	)		(623,699	)		(1,160,437	)		(1,218,092	)
Net loss		(2,488,085	)		(1,273,134	)		(17,664,610	)		(3,519,041	)

Other comprehensive loss:
Foreign currency translation adjustment		(3,056	)		-			(1,435	)		-
Comprehensive loss	$	(2,491,141	)	$	(1,273,134	)	$	(17,666,045	)	$	(3,519,041	)

Net loss per common share, basic and diluted	$	(0.63	)	$	(0.70	)	$	(4.52	)	$	(1.94	)

Weighted average shares used in computing net loss per common share:
Basic and diluted		3,932,886			1,809,676			3,912,282			1,809,676

	As of September 30,
	2017		2016
Warrants to purchase common stock		170,314		514,064
Stock options		284,897		72,886
Restricted stock units		15,544		-
Unvested restricted stock		2,778		5,556
Total dilutive securities		473,533		592,506

	September 30, 2017		December 31, 2016
Capitalized cost:
Balance, beginning of period	$	1,888,791	$	1,888,791
Additional capitalized cost		122,597		-
Balance, end of period	$	2,011,388	$	1,888,791


Accumulated amortization:
Balance, beginning of period	$	1,715,423	$	1,432,268
Provision for amortization		154,392		283,155
Balance, end of period	$	1,869,815	$	1,715,423
Capitalized Technology, net	$	141,573	$	173,368

September 30, 2017	Useful Lives (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Long-lived intangible assets:
Sales Process		10	$	3,970,000	$	(1,196,514	)	$	2,773,486
Paid Member Relationships		5		890,000		(536,472	)		353,528
Member Lists		5		8,957,000		(5,399,081	)		3,557,919
Developed Technology		3		978,000		(959,666	)		18,334
Trade Name/Trademarks		4		480,000		(359,861	)		120,139
Customer Relationships		5		280,000		(158,667	)		121,333
			$	15,555,000	$	(8,610,261	)		6,944,739
Indefinite-lived intangible assets:
Trade Name									90,400

Intangible assets, net								$	7,035,139

December 31, 2016	Useful Lives (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Long-lived intangible assets:
Sales Process		10	$	3,970,000	$	(898,764	)	$	3,071,236
Paid Member Relationships		5		890,000		(402,972	)		487,028
Member Lists		5		8,957,000		(4,055,531	)		4,901,469
Developed Technology		3		978,000		(718,166	)		259,834
Trade Name/Trademarks		4		480,000		(269,861	)		210,139
Customer Relationships		5		280,000		(116,667	)		163,333
			$	15,555,000	$	(6,461,961	)		9,093,039
Indefinite-lived intangible assets:
Trade Name									90,400

Intangible assets, net								$	9,183,439

Years ending December 31,
2017 (three months)	$	653,933
2018		2,563,872
2019		1,846,697
2020		397,000
2021		397,000
2022		397,000
Thereafter		689,237
	$	6,944,739

	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - December 31, 2016		69,950		$	12.07			9.0	$	156,975
Granted		240,000			10.72
Exercised		-			-
Forfeited/Canceled/Expired		(25,053	)		(13.93	)
Outstanding – September 30, 2017		284,897		$	10.77			9.3	$	-

Exercisable – September 30, 2017		124,897		$	10.83			9.2	$	-

	Three Months Ended September 30, 2017
	United States
	PDN Network			NAPW Network			Noble Voice			China Operations			Consolidated

Membership fees and related services	$	-		$	2,204,909		$	-		$	-		$	2,204,909
Lead generation		-			-			1,370,465			-			1,370,465
Recruitment services		694,454			-			-			-			694,454
Products sales and other		-			18,285			-			-			18,285
Education and training		-			-			-			68,890			68,890
Consumer advertising and marketing solutions		65,188			-			-			-			65,188
Total revenues		759,642			2,223,194			1,370,465			68,890			4,422,191
Loss from operations		(249,017	)		(1,651,322	)		(448,310	)		(362,004	)		(2,710,653	)
Depreciation and amortization		13,213			740,489			49,754			3,442			806,898
Income tax expense (benefit)		(17,311	)		(123,091	)		(29,688	)		(43,043	)		(213,133	)
Net loss		(217,589	)		(1,528,231	)		(418,622	)		(323,643	)		(2,488,085	)
Capital expenditures		93,676			-			(5,575	)		12,356			100,457

	Nine Months Ended September 30, 2017
	United States
	PDN Network			NAPW Network			Noble Voice			China Operations			Consolidated

Membership fees and related services	$	-		$	7,465,202		$	-		$	-		$	7,465,202
Lead generation		-			-			4,699,399			-			4,699,399
Recruitment services		1,977,101			-			-			-			1,977,101
Products sales and other		-			91,226			-			-			91,226
Education and training		-			-			-			898,584			898,584
Consumer advertising and marketing solutions		189,217			-			-			-			189,217
Total revenues		2,166,318			7,556,428			4,699,399			898,584			15,320,729
Loss from operations		(2,001,870	)		(14,969,177	)		(1,449,279	)		(408,622	)		(18,828,948	)
Depreciation and amortization		67,099			2,220,806			149,499			6,107			2,443,511
Income tax expense (benefit)		(125,444	)		(943,633	)		(91,360	)		-			(1,160,437	)
Net loss		(1,864,520	)		(14,025,544	)		(1,357,919	)		(416,627	)		(17,664,610	)
Capital expenditures		100,823			10,646			(5,234	)		48,060			154,295

	Three Months Ended September 30, 2016
	PDN Network			NAPW Network			Noble Voice			Consolidated

Membership fees and related services	$	-		$	3,748,334		$	-		$	3,748,334
Lead generation		-			-			1,554,370			1,554,370
Recruitment services		954,887			-			-			954,887
Products sales and other		-			52,857			-			52,857
Consumer advertising and marketing solutions		49,719			-			-			49,719
Total revenues		1,004,606			3,801,191			1,554,370			6,360,167
Loss from operations		(118,948	)		(894,361	)		(266,893	)		(1,280,202	)
Depreciation and amortization		33,471			738,473			47,950			819,894
Income tax expense (benefit)		(222,808	)		(289,767	)		(111,124	)		(623,699	)
Net loss		(512,771	)		(604,594	)		(155,769	)		(1,273,134	)

	Nine Months Ended September 30, 2016
	PDN Network			NAPW Network			Noble Voice			Consolidated

Membership fees and related services	$	-		$	13,047,652		$	-		$	13,047,652
Lead generation		-			-			4,489,919			4,489,919
Recruitment services		2,295,556			-			-			2,295,556
Products sales and other		-			544,440			-			544,440
Consumer advertising and marketing solutions		176,771			-			-			176,771
Total revenues		2,472,327			13,592,092			4,489,919			20,554,338
Loss from operations		(839,840	)		(2,173,251	)		(1,106,895	)		(4,119,986	)
Depreciation and amortization		130,121			2,207,703			160,312			2,498,136
Income benefit		(373,717	)		(557,439	)		(286,936	)		(1,218,092	)
Net loss		(1,083,270	)		(1,615,812	)		(819,959	)		(3,519,041	)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Percentage of revenue by product:
Membership fees and related services		49.9	%		58.9	%		48.7	%		63.5	%
Lead generation		31.0	%		24.5	%		30.7	%		21.8	%
Recruitment services		15.7	%		15.0	%		12.9	%		11.2	%
Products sales and other		0.4	%		0.8	%		0.6	%		2.6	%
Education and training		1.5	%		0.0	%		5.9	%		0.0	%
Consumer advertising and consumer marketing solutions		1.5	%		0.8	%		1.2	%		0.9	%

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
	(in thousands)
Net loss	$	(2,488	)	$	(1,273	)	$	(17,665	)	$	(3,519	)
Stock-based compensation expense		146			118			731			218
Goodwill impairment charge		-			-			9,920			-
Litigation Settlement		155			-			155			500
Gain on lease cancellation		-			-			-			(424	)
Depreciation and amortization		807			820			2,444			2,498
Change in fair value of Warrant Liability		-			401			-			401
Interest Expense		-			216			12			217
Interest and other income		(4	)		-			(9	)		(1	)
Income tax benefit		(213	)		(624	)		(1,160	)		(1,218	)
Adjusted EBITDA	$	(1,597	)	$	(342	)	$	(5,572	)	$	(1,328	)