UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) Commission file number: 001-35824 Professional Diversity Network, Inc. (Exact name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 55 E. Monroe Street, Suite Chicago, Illinois (312) 614-0950 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes There were ——————————————————————☒ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Quarterly Period Ended September 30, 2017 quarterly period ended March 31, 2021(OR)or[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Transition Periodtransition period from ________ to________.——————————————————————80-0900177 80-0900177801 W. Adams600, 2120 6060760603 (Address of Principal Executive Offices) (Zip(Zip Code) Telephone: (312) 614-0950(Registrant’s Telephone Number, Including Area Code)N/A(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)Title of each class Name of each exchange on which registered Common Stock, $0.01 par value per share The Nasdaq Stock Market LLC ☒[X] No ☐☒[X] No ☐“large-accelerated“large accelerated filer,” “accelerated filer,”filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐[ ] Accelerated filer ☐[ ]Non-accelerated filer ☐[ ] Smaller reporting company ☒[X]Emerging growth company [ ] Emerging growth company ☒financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐[ ] No ☒3,931,83813,465,022 shares outstanding of the registrant’s common stock as of November 6, 2017.
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:
● | our beliefs regarding our ability to capture and capitalize on market trends; | |
● | our expectations on the future growth and financial health of the online diversity recruitment industry and the industry participants, and the drivers of such growth; | |
● | our expectations regarding continued membership growth; | |
● | our beliefs regarding the increased value derived from the synergies among our segments; and | |
● | our beliefs regarding our liquidity requirements, the availability of cash and capital resources to fund our business in the future and intended use of liquidity. |
These 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; | |
● | our ability to maintain our stock exchange listing in order to provide liquidity for our shares as a prerequisite for raising additional equity: | |
● | 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. |
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 I, Item 1A, “Risk Factors” of our 2020 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 views as of the date of this Quarterly Report, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date of this Quarterly Report.
2 |
PROFESSIONAL DIVERSITY NETWORK, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
TABLE OF CONTENTS
PAGE | |||
PART I | |||
ITEM 1. FINANCIAL STATEMENTS | |||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||
ITEM 4 CONTROLS AND PROCEDURES | 32 | ||
PART II | |||
ITEM 1 LEGAL PROCEEDINGS | |||
ITEM 1A RISK FACTORS | 35 | ||
ITEM | 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | ||
ITEM | 3 DEFAULTS UPON SENIOR SECURITIES | ||
ITEM | 4 MINE SAFETY | ||
ITEM | 5 OTHER INFORMATION | ||
ITEM 6 EXHIBITS |
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 |
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 2,342,343 | $ | 2,117,569 | ||||
Accounts receivable, net | 1,066,101 | 1,005,482 | ||||||
Incremental direct costs | 42,848 | 36,212 | ||||||
Prepaid expense and other current assets | 353,273 | 355,260 | ||||||
Current assets from discontinued operations | 6,882 | 6,898 | ||||||
Total current assets | 3,811,447 | 3,521,421 | ||||||
Property and equipment, net | 12,240 | 10,382 | ||||||
Capitalized technology, net | 19,582 | 25,867 | ||||||
Goodwill | 339,451 | 339,451 | ||||||
Intangible assets, net | 357,126 | 376,178 | ||||||
Right-of-use assets | 472,526 | 487,677 | ||||||
Merchant reserve | 760,849 | 760,849 | ||||||
Security deposits | 66,340 | 66,340 | ||||||
Long-term assets from discontinued operations | 198,186 | 3,085,178 | ||||||
Total assets | $ | 6,037,747 | $ | 8,673,343 | ||||
Current Liabilities: | ||||||||
Accounts payable | $ | 431,778 | $ | 728,379 | ||||
Accrued expenses | 1,500,009 | 1,626,164 | ||||||
Deferred revenue | 2,114,991 | 1,901,129 | ||||||
Lease liability, current portion | 61,887 | 46,526 | ||||||
Current liabilities from discontinued operations | 387,186 | 375,276 | ||||||
Total current liabilities | 4,495,851 | 4,677,474 | ||||||
Lease liability, non-current portion | 456,333 | 463,998 | ||||||
Deferred tax liability | 121,335 | 186,039 | ||||||
Total liabilities | 5,073,519 | 5,327,511 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common stock, $0.01 par value; 45,000,000 shares authorized, 13,466,070 shares and 12,820,891 shares issued as of March 31, 2021 and December 31, 2020, and 13,465,022 and 12,819,843 shares outstanding as of March 31, 2021 and December 31, 2020. | 134,650 | 128,198 | ||||||
Additional paid in capital | 94,659,832 | 95,985,080 | ||||||
Accumulated other comprehensive income | 387 | 292,506 | ||||||
Accumulated deficit | (93,793,524 | ) | (93,022,835 | ) | ||||
Treasury stock, at cost; 1,048 shares at March 31, 2021 and December 31, 2020 | (37,117 | ) | (37,117 | ) | ||||
Total stockholders’ equity | 964,228 | 3,345,832 | ||||||
Total liabilities and stockholders’ equity | $ | 6,037,747 | $ | 8,673,343 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3 |
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, | ||||||||
2021 | 2020 | |||||||
Revenues: | ||||||||
Membership fees and related services | $ | 263,205 | $ | 383,831 | ||||
Recruitment services | 1,175,080 | 566,687 | ||||||
Products sales and other | 1,431 | 1,431 | ||||||
Consumer advertising and marketing solutions | 45,136 | 30,348 | ||||||
Total revenues | 1,484,852 | 982,297 | ||||||
Costs and expenses: | ||||||||
Cost of revenues | 261,154 | 173,477 | ||||||
Sales and marketing | 699,715 | 524,969 | ||||||
General and administrative | 1,317,853 | 1,660,854 | ||||||
Depreciation and amortization | 29,607 | 52,001 | ||||||
Total costs and expenses | 2,308,329 | 2,411,301 | ||||||
Loss from continuing operations | (823,477 | ) | (1,429,004 | ) | ||||
Other income (expense) | ||||||||
Interest expense | - | - | ||||||
Interest and other income | 885 | 664 | ||||||
Other income (expense), net | 885 | 664 | ||||||
Loss before income tax benefit | (822,592 | ) | (1,428,340 | ) | ||||
Income tax benefit | (66,977 | ) | (5,909 | ) | ||||
Loss from continuing operations | (755,615 | ) | (1,422,431 | ) | ||||
Income (loss) from discontinued operations | (15,074 | ) | (69,665 | ) | ||||
Net loss | $ | (770,689 | ) | $ | (1,492,096 | ) | ||
Other comprehensive loss: | ||||||||
Net loss | $ | (770,689 | ) | $ | (1,492,096 | ) | ||
Foreign currency translation adjustment | (292,119 | ) | 39,873 | |||||
Comprehensive loss: | $ | (1,062,808 | ) | $ | (1,452,223 | ) | ||
Basic and diluted loss per share: | ||||||||
Continuing operations | $ | (0.06 | ) | $ | (0.16 | ) | ||
Discontinued operations | $ | (0.00 | ) | $ | (0.01 | ) | ||
Net loss | $ | (0.06 | ) | $ | (0.17 | ) | ||
Weighted average outstanding shares used in computing net loss per common share: | ||||||||
Basic and diluted | 13,263,402 | 8,969,475 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4 |
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 STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
Common Stock | Additional Paid in | Accumulated | Treasury Stock | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Income (Loss) | Equity | |||||||||||||||||||||||||
Balance at January 1, 2021 | 12,819,843 | $ | 128,198 | $ | 95,985,080 | $ | (93,022,835 | ) | 1,048 | $ | (37,117 | ) | $ | 292,506 | $ | 3,345,832 | ||||||||||||||||
Sale of common stock | 500,000 | 5,000 | 995,000 | - | - | - | - | 1,000,000 | ||||||||||||||||||||||||
Issuance of common stock | 150,000 | 1,500 | 165,000 | - | - | - | - | 166,500 | ||||||||||||||||||||||||
Cancellation of common stock | (4,821 | ) | (48 | ) | 48 | - | ||||||||||||||||||||||||||
Share-based compensation | - | - | 106,428 | - | - | - | - | 106,428 | ||||||||||||||||||||||||
Adjustment from discontinued operations | (2,591,724 | ) | (2,591,724 | ) | ||||||||||||||||||||||||||||
Translation adjustments | - | - | - | - | - | - | (292,119 | ) | (292,119 | ) | ||||||||||||||||||||||
Net loss | - | - | - | (770,689 | ) | - | - | - | (770,689 | ) | ||||||||||||||||||||||
Balance at March 31, 2021 | 13,465,022 | $ | 134,650 | $ | 94,659,832 | $ | (93,793,524 | ) | 1,048 | $ | (37,117 | ) | $ | 387 | $ | 964,228 |
Common Stock | Additional Paid in | Accumulated | Treasury Stock | Accumulated Other Comprehensive | Total 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 |
The accompanying notes are an integral part of these unauditedconsolidated financial statements.
5 |
Professional Diversity Network, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Loss from continuing operations | $ | (755,615 | ) | $ | (1,422,431 | ) | ||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities - continuing operations: | ||||||||
Depreciation and amortization | 29,606 | 52,001 | ||||||
Deferred tax benefit | (64,704 | ) | (5,909 | ) | ||||
Amortization of right-of-use asset | 22,847 | 39,102 | ||||||
Accretion of lease liability | - | 1,469 | ||||||
Stock-based compensation expense | 106,428 | 18,680 | ||||||
Write-off of property and equipment | - | - | ||||||
Litigation settlement reserve | - | 450,000 | ||||||
Issuance of common stock related to settlement | 166,500 | - | ||||||
Payment of lease obligations | - | (45,642 | ) | |||||
Changes in operating assets and liabilities, net of effects of discontinued operations: | ||||||||
Accounts receivable | (60,619 | ) | 433,396 | |||||
Prepaid expenses and other current assets | 1,987 | (66,419 | ) | |||||
Incremental direct costs | (6,636 | ) | 7,139 | |||||
Accounts payable | (296,600 | ) | 187,576 | |||||
Accrued expenses | (126,154 | ) | (73,004 | ) | ||||
Deferred revenue | 213,862 | (149,836 | ) | |||||
Net cash used in operating activities - continuing operations | (769,098 | ) | (573,878 | ) | ||||
Net cash provided by operating activities - discontinued operations | 35,364 | 15,573 | ||||||
Net cash used in operating activities | (733,734 | ) | (558,305 | ) | ||||
Cash flows from investing activities: | ||||||||
Costs incurred to develop technology | (3,470 | ) | (3,700 | ) | ||||
Purchases of property and equipment | (2,658 | ) | (834 | ) | ||||
Net cash used in investing activities - continuing operations | (6,128 | ) | (4,534 | ) | ||||
Net cash used in investing activities - discontinued operations | - | (171 | ) | |||||
Net cash provided used in investing activities | (6,128 | ) | (4,705 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from the sale of common stock | 1,000,000 | 1,500,000 | ||||||
Net cash provided by financing activities - continuing operations | 1,000,000 | 1,500,000 | ||||||
Net cash provided by financing activities | 1,000,000 | 1,500,000 | ||||||
Effect of exchange rate fluctuations on cash and cash equivalents | (35,364 | ) | (15,402 | ) | ||||
Net increase (decrease) in cash and cash equivalents | �� | 224,774 | 936,990 | |||||
Cash, cash equivalents, beginning of period | 2,117,569 | 633,615 | ||||||
Cash and cash equivalents, end of period | 2,342,343 | 1,555,203 | ||||||
Supplemental disclosures of other cash flow information: | ||||||||
Non-cash stock issuance | $ | 166,500 | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - |
The accompanying notes are an integral part of these consolidated financial statements.
6 |
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. 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:
In March 2020, our Board of Directors decided to suspend all China operations generated 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.
2. Liquidity, Financial ConditionGoing Concern and Management’s Plans
At September 30, 2017,March 31, 2021, the Company’s principal sources of liquidity were its cash and cash equivalents and the net proceeds from the closingssale of common stock during the CFL Transaction (as defined in Note 7).
The Company had an accumulated deficit of approximately $65,123,000($93,793,524) at September 30, 2017.March 31, 2021. During the ninethree months ended September 30, 2017,March 31, 2021, the Company generated a net loss from continuing operations of approximately $17,665,000 (including a goodwill impairment charge of $9,920,000),($755,615) 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.$935,598. At September 30, 2017,March 31, 2021, the Company had a cash balance of approximately $2,822,000.$2,324,343. Total revenues were approximately $4,422,000$1,485,000 and $6,360,000$982,000 for the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and approximately $15,321,000 and $20,554,000 for the nine months ended September 30, 2017 and 2016,2020, respectively. The Company had a working capital deficiency from continuing operations of approximately ($1,475,000)684,000) and $1,000,000($1,156,000) at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.
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Management believes that its available funds cash on hand and cash generatedflow from operations willmay not be sufficient to meet itsour working capital requirements at leastfor 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 theour business plans and actions proposed by management will be successful, that the Companywe 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 fundsimprove liquidity through the issuance of our common stock may not be successful or they may not be available on acceptable terms, if at all.
On February 1, 2021, the Company entered into a private placement with Ms. Yiran Gu, in which the Company sold 500,000 shares of its common stock at a price per share of $2.00 for gross proceeds of $1,000,000.
3. Summary of Significant Accounting Policies
BasisPrinciples 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 presentationthe accounts of the financial position, operating resultsCompany, its wholly-owned subsidiaries and cash flows for the periods presented.
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.
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.
5
Cash 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, 2021 and December 31, 2020, the allowance for doubtful accounts was approximately $191,000 and $157,000, respectively.
8 |
Incremental Direct Costs - Incremental direct costs incurred in connection with enrolling members in the NAPW Network consist of 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 approximately $34,000 and $29,000 during the three months ended March 31, 2021 and 2020.
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 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. Depreciation expense during the three months ended March 31, 2021 and 2020 was approximately $10,000 and $26,000, respectively, and is recorded in depreciation and amortization expense in the accompanying consolidated statements of operations.
Lease Obligations - The Company leases office space and equipment under various operating lease agreements, including an office for its corporate 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.
On September 23, 2020, the Company entered into a new office lease agreement for its corporate headquarters. The office lease is for 4,902 square feet of office space and the lease term is for 84 months, commencing on October 1, 2020. Additionally, the office lease required a security deposit of $66,340 and the lease agreement provided for a rent abatement of twelve months beginning in October 2020.
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 the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Accounting for acquisitions requires the Company to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
9 |
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.
When conducting its annual goodwill impairment assessment, the Company initially performedperforms a qualitative evaluation of whether it is more likely than not that goodwill wasis impaired. If it wasis determined by a qualitative evaluation that it wasis more likely than not that goodwill wasis impaired, the Company then applied a two-step impairment test. The two-step impairment test first comparedcompares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceededexceeds its carrying value, goodwill wasis not impaired and the Company wasis 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.
Treasury Stock – Treasury stock is recorded at cost as a resultreduction 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 consolidatedbalance sheets.
Discontinued Operations
China Operations
The Company previously disclosed in its Form 10-K for the year ending December 31, 2019 (the “2019 10-K”) and subsequently that the assets of PDN China were frozen by Chinese local authorities in November 2019 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 was affiliated. A subsequent investigation led by a special committee of the Board concluded that it did not find any evidence that the Company or PDN China has engaged in the criminal activity of illegal fund-raising as alleged against Gatewang. The Company subsequently discontinued all of its operations in China.
The Company also previously disclosed in the 2019 Form 10-K that although the seizure of PDN China’s assets had been lifted in March 2020, PDN China’s bank account (the “PDN China Account”) with a balance of RMB 20,080,467 (approximately $3.1 million) continued to be frozen by the Chinese local authorities pending the outcome of the Gatewang Case. The Company had classified this entire cash balance as a long-term asset (the “Frozen Cash Asset”) of discontinued operations in its financial statements.
On April 22, 2021, the Company learned that RMB 18,841,064.15 (approximately $2.9 million) had been seized from the PDN China Account by Longxu District Court of Wuzhou City in Guangxi Province to satisfy a judgment in favor of the plaintiffs in the Gatewang Case. On April 26, 2021, the Company concluded that the seizure of such cash assets is a material reduction of Company assets and filed a Form 8-K to report that reduction. The cash value at time of seizure is approximately $2.9 million. The Company has reflected the seizure of these cash funds in its Consolidated Balance Sheets as of March 31, 2021.
The seizure of these cash funds reduces the Company’s shareholders’ equity by an equal amount, which results in its stockholders’ equity being less than the $2.5 million required by The Nasdaq Stock Market LLC (“Nasdaq”) under its Listing Rule 5550(b)(1) for continued listing of the Company’s common shares on the Nasdaq Capital Market. The Company plans to explore alternatives for increasing its stockholders’ equity in order to meet NASDAQ’s listing requirements, including the possibility of issuing additional equity.
The Company has asserted its claim to these funds as the genuine owner to the Chinese officials and asked for their return. The Company plans to pursue all possible legal alternatives to have these funds returned to the Company but such return is uncertain at this time.
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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, 2021, loss from discontinued operations was approximately $15,000 compared to a loss from discontinued operations of approximately $70,000 for the three months ended March 31, 2020.
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. Current assets from discontinued operations were approximately $7,000, as of March 31, 2021 and December 31, 2020, respectively, and long-term assets from discontinued operations were approximately $198,000 at March 31, 2021, compared to approximately $3,085,000 as of December 31, 2020. As of March 31, 2021, current liabilities from discontinued operations were approximately $387,000, compared to approximately $375,000 as of December 31, 2020.
Operating Results of Discontinued Operations
The following table represents the components of gross operating results from discontinued operations, which are included in the statements of operations and comprehensive loss for the ninethree months ended September 30, 2017.
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues | $ | - | $ | - | ||||
Cost of Sales | 2,315 | 7,356 | ||||||
Depreciation and amortization | - | - | ||||||
Sales and marketing | - | 1,695 | ||||||
General and administrative | 9,470 | 60,614 | ||||||
Non-operating income (expense) | 3,289 | - | ||||||
Loss from discontinued operations before income tax | (15,074 | ) | (69,665 | ) | ||||
Income tax expense (benefit) | - | - | ||||||
Net loss from discontinued operations | $ | (15,074 | ) | $ | (69,665 | ) |
6
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.
11 |
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, 2021. 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, 2017 through 2020.
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, 2021.
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, 2017March 31, 2021 and 20162020 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 |
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Warrants to purchase common stock | 125,000 | 125,000 | ||||||
Stock options | 66,126 | 39,126 | ||||||
Unvested restricted stock | 206,775 | - | ||||||
Total dilutive securities | 397,901 | 164,126 |
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,”Revenue from Contracts with Customers,” which was subsequently modified in August 2015 by ASU No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date.” As a result, the ASU No. 2014-09 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 2016,2019, the FASB issued additional ASUs that clarifyASU 2019-12, Income Taxes (Topic 740): Simplifying the implementationAccounting for Income Taxes (ASU 2019-12) which simplifies the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations, and interim calculations, and adds 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 onto reduce the revenue recognition criteria and other technical corrections (ASU 2016-20). Thecomplexity of applying Topic 740. This ASU was effective for the Company will adopt the standard on January 1, 2018, using the full retrospective transition method, which may result in2021. The adoption of ASU 2019-12 did not have a cumulative-effect adjustment for deferred revenuematerial impact 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 itsCompany’s consolidated financial statements and disclosures.
In February 2016,March 2020, the FASB issued new leaseASU 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 guidance ASU No. 2016-02, “Leases” (“ASU 2016-02”). Under the new guidance, at the commencement date, lessees willprinciples to certain contract modification and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to 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.discontinued. 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 aftereffective upon issuance and generally can be applied through 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.31, 2022. The Company is currently evaluating the potential impact of the new guidancethis ASU on its condensed consolidated financial statements.
12 |
4. Revenue Recognition
The Company recognizes revenue under the core principle of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 606 (“ASC 606”) – Revenues From Contracts with Customers, to depict the transfer of control to its customers in an amount reflecting the consideration to which it expects to be entitled. In order to achieve that core principle, the Company has applied the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.
The Company’s 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 its 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. The Company’s 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 began offering a monthly membership for which we collect fees on a monthly basis and we recognize revenue in the same month as the fees are collected. Revenue from related membership services 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.
The Company may have contracts where there is an extended timing difference between payment and the time when control of the goods or services is transferred to the customer. The Company has adopted the practical expedient and does not adjust for the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Nature of Goods and Services
The following is a description of principal activities from which the Company generates its revenue:
Membership Fees and Related Services
Membership fees of longer than one month are collected up-front and member benefits become available immediately; however those benefits must remain available over the 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 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.
The Company also offers monthly memberships for which it collects fees on a monthly basis and recognizes 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 these services are recognized as revenue at the time the on-line profile is complete and press release is distributed.
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. Direct sales to customers are most typically a twelve-month contract for services and as such the revenue for each contract is recognized ratably over its twelve-month term. Event revenue is recognized in the period that the event takes place and e-commerce sales are for sixty to ninety day job postings and the revenue from those sales are recognized when the service is provided. The Company’s 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, Kappa Alpha Psi, Phi Beta Sigma and many 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; and |
● | Diversity executive staffing services. |
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.
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. Consumer advertising and marketing solutions revenue is recognized as jobs are posted to their hosted sites.
Disaggregation of revenue
Revenue is disaggregated by product line and timing of transfer of products and services and is in line with our reportable segments as described in Note 12 - Segment Reporting.
Contract Balances
The Company’s rights to consideration for work completed, but not billed at the reporting date, is classified as a receivable, as it has an unconditional right to payment or only conditional for the passage of time. The Company has no recorded contract assets as of March 31, 2021.
Consideration received in advance from customers is recorded as a contract liability, if a contract exists under ASC 606, until services are delivered or obligations are met and revenue is earned. Contract liability represents the excess of amounts invoiced over amounts recognized as revenues. Contract liabilities to be recognized in the succeeding twelve-month period are classified as current contract liabilities and the remaining amounts, if any, are classified as non-current contract liabilities. Contract liabilities of approximately $2,115,000 are included in current deferred revenues, on the Consolidated Balance Sheets as of March 31, 2021. For the period ended March 31, 2021, we recognized revenue associated with contract liabilities of approximately $756,000 that were included in the contract liabilities balance at the beginning of the period.
14 |
Transaction price allocated to the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvementsremaining performance obligations
The Company applies the optional exemptions and does not disclose: a) information about remaining performance obligations that have an original expected duration of one year or less or b) transaction price allocated to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 was issued asunsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with the FASB’s simplification initiativeseries guidance.
The typical duration of all event related and affects all entitiesother contracts is one year or less and, as a result, the Company applies the optional exemptions and does not disclose information about remaining performance obligations that issue share-based payment awardshave an original expected duration of one year or less.
The Company has also elected to their employees.not disclose transaction price allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service for event related promises for those contracts that contain percentage of the sales. The amendments infees are variable for this update cover such areas as the recognitiontype 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 classificationcontract, 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.
The adoption of ASU 2017-09 is not expected to have an impact on the Company’s financial position or results of operations.
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 |
March 31, 2021 | December 31, 2020 | |||||||
Capitalized cost: | ||||||||
Balance, beginning of period | $ | 2,169,245 | $ | 2,169,245 | ||||
Additional capitalized cost | 3,470 | - | ||||||
Balance, end of period | 2,172,715 | 2,169,245 | ||||||
Accumulated amortization: | ||||||||
Balance, beginning of period | $ | 2,143,378 | $ | 2,130,037 | ||||
Provision for amortization | 9,755 | 13,341 | ||||||
Balance, end of period | 2,153,132 | 2,143,378 | ||||||
Capitalized Technology, net | 19,582 | 25,867 |
For the three months ended September 30, 2017March 31, 2021 and 2016,2020, amortization expense was approximately $10,000 and $13,000, 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.
15 |
6. Intangible Assets
Intangible assets, net iswas as follows:
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 |
Useful Lives | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
March 31, 2021 | (Years) | Amount | Amortization | Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | 10 | $ | 2,130,956 | $ | (1,864,230 | ) | $ | 266,726 | ||||||||
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 | ) | 266,726 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade name | 90,400 | |||||||||||||||
Intangible assets, net | $ | 357,126 |
Useful Lives | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
December 31, 2020 | (Years) | Amount | Amortization | Amount | ||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Sales Process | 10 | $ | 2,130,956 | $ | (1,845,178 | ) | $ | 285,778 | ||||||||
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 | (11,822,831 | ) | 285,778 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trade name | 90,400 | |||||||||||||||
Intangible assets, net | $ | 376,178 |
As of March 31, 2021, 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 |
Year ended December 31, | ||||
Remaining of 2021 | $ | 57,156 | ||
2022 | 76,207 | |||
2023 | 76,207 | |||
2024 | 57,156 | |||
$ | 266,726 |
For the three months ended September 30, 2017March 31, 2021 and 2016,2020, amortization expense was approximately $19,000, 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 and comprehensive loss.
10
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.
As of March 31, 2021, right of use assets and current lease obligations were approximately $473,000 and $62,000, respectively.
16 |
Other - 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.
The amount of back pay and other potential liabilities ordered by NLRB is $146,000.Legal Proceedings
In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened assertion of a claimto assert claims against the Company. The letter allegesCompany 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 indelayed White Winston’s ability to sell shares in the Company during a period when the Company’s stock price was generally falling. On October 28, 2020, the Company and White Winston reached a settlement agreement, in which the Company made a cash payment of $250,000 on October 29, 2020 and a second cash payment of $350,000 was paid on February 16, 2021. In addition, the Company issued 150,000 shares of the Company’s common stock in January 2021 and recorded a non-cash stock issuance of $166,500. The total amount of the settlement was $766,500.
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 has obtained a judgment against NAPW in the amount of $746,142.41. As a result of the judgement order, the Company recorded a $780,000 litigation settlement reserve in the second quarter of 2020, which reflected the judgement order in addition to imputed interest costs and legal fees. NAPW is currently negotiating a settlement with the Landlord.
The Company deniesand 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 the Fair Labor Standards Act and certain provisions of the New York Labor Law. The Company disputes that it or its subsidiary violated the applicable laws or that either entity has any liability for any such claim.
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”), pursuantCFL, 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”), 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, 312,500a number of shares of the Company’s common stock. On January 18, 2017, the Company consummated the Second Share Issuance. As a resultstock, par value $0.01 per share (the “Common Stock”), such that CFL will hold shares of Common Stock equal to approximately 51% 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,Common Stock, determined on a fully diluted basis.
At the closing of the Second Share Issuance, and as contemplated by the Purchase Agreement,CFL Transaction, the Company entered into an amendment, dated as of January 18, 2017 (the “Amendment”), to thea 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.Shareholders relating to board representation rights, transfer restrictions, standstill provisions, voting, registration rights and other matters following the closing of the Share Issuance and Sale.
As of March 31, 2021, CFL beneficially holds shares of Common Stock equal to approximately 25.5% of the outstanding shares of Common Stock of the Company.
17 |
9. Stockholders’ Equity
Preferred Stock – The Amendment increasedCompany has no preferred stock issued. The Company’s amended and restated certificate of incorporation and amended and restated bylaws include provisions that allow the cap onCompany’s Board of Directors to issue, without further action by the amountstockholders, up to 1,000,000 shares of undesignated preferred stock.
Common Stock – The Company has one class 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 fromoutstanding with a total number of shares authorized of 45,000,000. As of March 31, 2021, the Company or pursuant to a tender or exchange offer for anyhad 13,465,022 shares of common stock from 51%outstanding.
In January 2021, the Company issued 150,000 shares of the then outstandingCompany’s common stock to White Winston as a result of a settlement agreement and recorded a non-cash stock issuance of $166,500. (see note 7. Commitments and Contingencies).
On February 1, 2021, the Company entered into a private placement with Ms. Yiran Gu, in which the Company sold 500,000 shares of its common stock at a price per share of $2.00 for gross proceeds of $1,000,000.
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 outstandingauthorized 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 thatnumber 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 allterm of the restrictions contained inawards, 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 conditionsU.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 forcelife of options using the simplified method, and effect and were ratified and affirmed byforfeitures are estimated on the parties indate of grant based on certain historical data. The Company utilizes the Amendment.
Forfeitures are required to an employment contract withbe estimated at the Company dated September 30, 2016. As the Company previously reportedtime 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.subsequent periods if actual forfeitures differ from those estimates.
18 |
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.
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Number of | Exercise | Life | Intrinsic | |||||||||||||
Options | Price | (in Years) | Value | |||||||||||||
Outstanding - January 1, 2021 | 66,126 | $ | 5.24 | 8.3 | $ | - | ||||||||||
Granted | - | - | - | |||||||||||||
Exercised | - | - | - | |||||||||||||
Forfeited | - | - | - | |||||||||||||
Outstanding - March 31, 2021 | 66,126 | $ | 5.24 | 8.1 | $ | - | ||||||||||
Exercisable at March 31, 2021 | 26,126 | $ | 8.18 | 6.8 | $ | - |
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 | $ | - |
Total unrecognized pre-tax stock-based compensation expense related to unvested stock options at March 31, 2021 was approximately $0.
Warrants
As of March 31, 2021 and December 31, 2020, 125,000 warrants were outstanding and exercisable with an exercise price of $20.00 per share. The aggregate intrinsic value was $0 and the warrants are scheduled to expire on December 30, 20172021.
Restricted Stock
As of March 31, 2021 and 2016 was 7.9% and 32.9%, respectively, resulting in2020, the following is a $213,000 and $624,000 income tax benefit, respectively. The effective income tax rate forsummary of restricted stock activity:
Number of | ||||
Shares | ||||
Outstanding - January 1, 2021 | 206,775 | |||
Granted | - | |||
Forfeited | - | |||
Vested | - | |||
Outstanding - March 31, 2021 | 206,775 |
Number of | ||||
Shares | ||||
Outstanding - January 1, 2020 | 27,319 | |||
Granted | - | |||
Forfeited | - | |||
Vested | (27,319 | ) | ||
Outstanding - March 31, 2020 | - |
Additionally, 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 rateCompany had no non-cash pre-tax stock-based compensation expense recorded for the three months ended September 30, 2017, comparedMarch 31, 2021 and March 31, 2020, respectively, 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, 2021 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 toMarch 31, 2021 and 2020, the change in the valuation allowance. The difference in the effectiveCompany recorded a benefit for income tax rate forof approximately $67,000 and $5,900, respectively. The increase in income tax benefit during the nine months ended September 30, 2017, comparedcurrent period was primarily due to the nine months ended September 30, 2016, is mainly attributable to the impairment charge recognized on NAPW’s goodwillan increases in discrete tax items associated with litigation settlement reserves and the change in the valuation allowance. stock-based compensation expense.
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 DecemberMarch 31, 2016.
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 | $ | - |
12. Segment Information
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.
The following tables present key financial information related of the Company’s reportable segments related to financial position as of March 31, 2021 and December 31, 2020 and results of operations for the three and nine months ended September 30, 2017March 31, 2021 and 2016:
Three Months Ended March 31, 2021 | ||||||||||||||||
PDN | NAPW | Corporate | ||||||||||||||
Network | Network | Overhead | Consolidated | |||||||||||||
Membership fees and related services | $ | - | $ | 263,205 | $ | - | $ | 263,205 | ||||||||
Recruitment services | 1,175,080 | - | - | 1,175,080 | ||||||||||||
Products sales and other | - | 1,431 | - | 1,431 | ||||||||||||
Consumer advertising and marketing solutions | 45,137 | - | - | 45,137 | ||||||||||||
Total revenues | 1,220,217 | 264,636 | - | 1,484,853 | ||||||||||||
Income (loss) from continuing operations | 312,823 | (246,419 | ) | (889,880 | ) | (823,476 | ) | |||||||||
Depreciation and amortization | 1,178 | 28,429 | - | 29,607 | ||||||||||||
Income tax benefit | (46,357 | ) | (20,620 | ) | - | (66,977 | ) | |||||||||
Net loss from continuing operations | 360,065 | (225,799 | ) | (889,880 | ) | (755,614 | ) |
As of March 31, 2021 | ||||||||||||||||
Goodwill | $ | 339,451 | $ | - | $ | - | $ | 339,451 | ||||||||
Intangibles assets, net | 90,400 | 266,726 | - | 357,126 | ||||||||||||
Assets from continuing operations | 4,643,168 | 1,189,511 | - | 5,832,679 |
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 December 31, 2020 | ||||||||||||||||
Goodwill | $ | 339,451 | $ | - | $ | - | $ | 339,451 | ||||||||
Intangibles assets, net | 90,400 | 285,778 | - | 376,178 | ||||||||||||
Assets from continuing operations | 4,455,262 | 1,126,005 | - | 5,581,267 |
13. Subsequent Events
On or about March 24, 2021, IPDN entered into a stock purchase agreement to purchase a significant equity stake in RemoteMore (USA) Inc. (“RemoteMore”). According to an arrangement between the parties, IPDN made a deposit of $60,000 to RemoteMore to facilitate the closing of the transaction. RemoteMore may use the deposit towards closing costs. If the transaction is closed as planned, this deposit will be treated as a part of the purchase price. If the transaction for whatever reasons is not closed, RemoteMore shall refund this deposit to IPDN.
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 |
20 |
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 | ) |
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 |
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This MD&A should be read in conjunction with ourthe 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 2020 Form 10-K.
Forward-looking statements in Part Ithis 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. Ourperformance and may involve risks and uncertainties that could cause actual results will likelyto differ materially from those contained inprojected. 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 2020 Form 10-K for additional information regarding forward-looking statements used in this Quarterly Report.
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 fourtwo 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 Voiceorganization. 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 focusfocused on providing tools, products and services in China which willto 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 Gaygay 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; and (iii) we help employers address their workforce diversity needs by connecting them with the right candidates; and (iv) we leveragecandidates.
On March 4, 2020, our U.S. expertise andBoard 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 connectionsoperations, but to deliver these values to China, the world’s fastest-growing market.
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Impact of COVID-19
The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic may have an adverse effect on our business and financial performance. The extent of the impact of the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted. In response to mandates and recommendations from federal, state and local authorities, as well as decisions we heldhave made to protect the health and safety of our employees with respect to the COVID-19 pandemic, we temporarily closed our offices and had our employees work remotely. We may face more closure requirements and other operation restrictions for prolonged periods of time due to, among other factors, evolving and stringent public health directives, quarantine policies, social distancing measures, or other governmental restrictions, which could have a selective marketing eventfurther material impact on our sales and profits. The COVID-19 pandemic could also adversely affect our liquidity and ability to introduce IAW,access the PDN China women’s networking business.
The extent of the Women’s Forum Global Meeting,impact of COVID-19 on our business and financial results will also depend on future developments, including the duration and spread of the pandemic, the implementation or recurrence of shelter in Paris, France. Alsoplace or similar orders 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.
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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.comwww.iawomen.com and “virtual” eChapternetworking events which occur in a webcast setting as well as through in-person networking at approximately 190100 local chapters nationwide, additional career and networking events such as HERizonInsights and the National Networking Summit Series, Power Networking EventsLeadership Lab 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 promotionalaccess to networking events and publicity toolsmember programming. Upgrades to an Innovator membership include the Initiator benefits as well as free access (including guest)enhanced education and mentorship. The most comprehensive level, the Influencer, provides all the aforementioned benefits plus admission to exclusive “live” events and expanded opportunities for marketing and promotion, including the National Networking Summitscreation and free continuing education programs and (ii) thedistribution of a press release, package, which provides members with the opportunity to work withis prepared by professional writers to publish personalized press releases and thereby secure valuable online presence.sent over major newswires. Additionally, all memberships offer discounts through the IAW Perks program and preferred partners. 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.
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.
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Product Sales. We offer to new purchasers of our NAPW Network memberships the opportunity to purchase up to twoa commemorative wall plaquesplaque at the time of membership purchase. Product sales represented approximately 0.8% and 1.4%, respectively, of revenue attributableThey 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.
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.
18
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.
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.
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 | % |
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 Lossnet loss from continuing operations to Adjusted EBITDA for the three months ended March 31, 2021 and 2020, the most directly comparable GAAP measure reported in our consolidated financial statements:
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Loss from Continuing Operations | $ | (756 | ) | $ | (1,422 | ) | ||
Stock-based compensation | 106 | 19 | ||||||
Litigation settlement reserve | - | 450 | ||||||
Depreciation and amortization | 30 | 52 | ||||||
Interest and other income | 1 | 1 | ||||||
Income tax benefit | (67 | ) | (6 | ) | ||||
Adjusted EBITDA | $ | (686 | ) | $ | (906 | ) |
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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 | ) |
Results of Operations
Revenues
Total Revenues
The following tables set forth our revenuesrevenue 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 | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Membership fees and related services | $ | 263 | $ | 384 | $ | (121 | ) | (31.5 | )% | |||||||
Recruitment services | 1,175 | 567 | 608 | 107.2 | % | |||||||||||
Products sales and other | 1 | 1 | - | - | % | |||||||||||
Consumer advertising and marketing solutions | 45 | 30 | 15 | 50.0 | % | |||||||||||
Total revenues | $ | 1,484 | $ | 982 | $ | 502 | 51.1 | % |
Total revenues decreased $1,939,000, or 30.5% for the three months ended September 30, 2017, comparedMarch 31, 2021 increased approximately $502,000, or 51%, to approximately $1,484,000 from approximately $982,000 during the same period in the prior yearyear. The increase was predominately attributable to an approximate $608,000 increase in recruitment services revenues in the current period, and $5,234,000, or 25.5%, for the nine months ended September 30, 2017, compared to the same prior year period, due primarily topartially offset by an approximate $121,000 decrease in membership fees and products salesrelated services revenues, as compared to the management focuses on cost reduction efforts, including the reductionsame period in the salesforce.
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 | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 1,220 | $ | 597 | $ | 623 | 104.3 | % | ||||||||
NAPW Network | 264 | 385 | (121 | ) | (31.4 | )% | ||||||||||
Total revenues | $ | 1,484 | $ | 982 | $ | 502 | 51.1 | % |
During the three months ended September 30, 2017,March 31, 2021, our PDN Network generated approximately $1,220,000 in revenues compared to approximately $597,000 in revenues during the three months ended March 31, 2020, an increase of approximately $623,000 or 104%. The increase in revenues was predominately driven by improvements in our e-commerce platform and new sales collaborations, higher new client acquisitions and a significant increase in diversity recruitment initiatives by our clients
During the three months ended March 31, 2021, our NAPW Network generated $2,223,000 in revenue from membership fees and related services and product sales,revenues were approximately $264,000, compared to $3,801,000 forrevenues of approximately $385,000 during the same period in the prior year, a decrease of $1,578,000,approximately $121,000 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%31%. The decrease in revenues was mainly attributableprimarily due a continued decrease in legacy membership retention rates and the continued effects of COVID-19 as new membership enrollment slowly returns. We believe that the membership services that we provide to reductionsour customers turned into a discretionary spending item during 2020 and the first three months of 2021 and the services that we provide were postponed as a result of the NAPW sales staff while the Company re-tooled its lead-generationfinancial 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 methodseconomic impact 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 Company 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.COVID-19.
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During the three months ended September 30, 2017, our PDN Network generated $759,000 in revenue, compared to $1,005,000 for the same period in the prior year, a decrease 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 during Q4 and beyond.
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 | )% |
Three Months Ended March 31, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of revenues | $ | 261 | $ | 173 | $ | 88 | 50.9 | % | ||||||||
Sales and marketing | 700 | 525 | 175 | 33.3 | % | |||||||||||
General and administrative | 1,318 | 1,661 | (343 | ) | (20.7 | )% | ||||||||||
Depreciation and amortization | 29 | 52 | (23 | ) | (42.3 | )% | ||||||||||
Total pre-tax cost and expenses: | $ | 2,308 | $ | 2,411 | $ | (103 | ) | (4.2 | )% |
22
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 | % |
Sales and marketing expense: Sales and marketing expense during the three months ended March 31, 2021 was approximately $700,000, an increase of approximately $175,000, or 33%, from $525,000 during the same period in the prior year. The increase is mainly attributable to primarily as a result of approximately $188,000 of sales and marketing costs driving increased revenues.
General and administrative expense: General and administrative expenses decreased by approximately $343,000, or 20%, to approximately $1,318,000 during the three months ended March 31, 2021, as compared to $745,000 forthe same period in the prior year. The decrease was a result of a litigation settlement reserve of $450,000 recorded in the first quarter of 2020 where there was no comparable event in the current period and a decrease in legal fees of approximately $160,000 as compared to the same period in the prior year. The decrease was offset by an increase in professional services of approximately $110,000 and stock-based compensation costs of approximately $88,000, as compared to the same period in the prior year.
Depreciation and amortization expense: Depreciation and amortization expense during the three months ended March 31, 2021 was approximately $29,000, compared to approximately $51,000 during the same period in the prior year, a decrease of $87,000,approximately $23,000, or 11.7%, mainly42%. The decrease was primarily attributable to a decreaseassets and intangible assets reaching the end of $85,000 intheir useful lives.
Costs and Expenses by Segment
The following table sets forth each operating segment’s costs and expenses for the PDN segmentperiods presented. The period-to-period comparison is not necessarily indicative of future results.
Three Months Ended March 31, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 907 | $ | 747 | $ | 160 | 21.4 | % | ||||||||
NAPW Network | 511 | 453 | 58 | 12.8 | % | |||||||||||
Corporate Overhead | 890 | 1,211 | (321 | ) | (26.5 | )% | ||||||||||
Total pre-tax costs and expenses: | $ | 2,308 | $ | 2,411 | $ | (103 | ) | (4.2 | )% |
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For the three months ended March 31, 2021, pre-tax costs and a decrease of $44,000 in the Noble Voice segment due to decline in revenue, partially offset by an increase of $70,000expenses 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,Corporate Overhead decreased by approximately $321,000, or 27%, as 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 segmentprimarily as a result of improved efficienciesa litigation settlement reserve of $450,000 recorded in spending,the first quarter of 2020 where there was no comparable event in the current period and a decrease in legal fees of $221,000approximately $160,000 as compared to the same period in the Noble Voice segment as a result of improved efficiencies in lead data sourcing and spending, partiallyprior year. The decrease was offset by an increase in professional services of $338,000 relatedapproximately $110,000 and stock-based compensation costs of approximately $88,000, as compared to our China Operations that was launchedthe same period in March 2017.
For the three months ended September 30, 2017 were $2,276,000,March 31, 2021, pre-tax costs and expenses related to our PDN Network increased by approximately $160,000, or 21%, as compared to $3,064,000 for the same period in the prior year, in our PDN Network segment primarily as a decreaseresult of $788,000, or 25.7%. Salesapproximately $188,000 of sales and marketing during the nine months ended September 30, 2017 were $8,115,000,costs driving increased revenues, partially offset by a reduction of general and administrative costs of approximately $44,000, as compared to $10,314,000 for the same 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 primarily due to reduction in the NAPW segment sales force from 64 sales representatives as of September 30, 2016 to 51 as of September 30, 2017.
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 generalMarch 31, 2021, pre-tax costs and administrative expenseexpenses 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, Network remained fairly consistent.
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 directorsIncome Tax Benefit. 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, | Change | Change | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
Income tax benefit | $ | (67 | ) | $ | (6 | ) | $ | 61 | 1016.7 | % |
During the three months ended September 30, 2017 was $807,000, compared to $820,000March 31, 2021 and 2020, we recorded a benefit 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.
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 | )% |
Net 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 | ||||||||||||||
2021 | 2020 | (Dollars) | (Percent) | |||||||||||||
(in thousands) | ||||||||||||||||
PDN Network | $ | 360 | $ | (148 | ) | $ | 508 | 342.3 | % | |||||||
NAPW Network | (226 | ) | (68 | ) | (158 | ) | (233.4 | )% | ||||||||
Corporate Overhead | (890 | ) | (1,206 | ) | 316 | 26.2 | % | |||||||||
Consolidated net loss from continuing operations | $ | (756 | ) | $ | (1,422 | ) | $ | 666 | 46.8 | % |
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Discontinued Operations
In March 2020, our Board decided to suspend all China operations generated by the former CEO, Michael Wang. The increaseresults of operations for China operations are presented in netthe statements of operation and comprehensive loss as loss from discontinued operations.
The following table presents results from discontinued operations 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 servicesMarch 31, 2021 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.
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues | $ | - | $ | - | ||||
Cost of Sales | 2,315 | 7,356 | ||||||
Depreciation and amortization | - | - | ||||||
Sales and marketing | - | 1,695 | ||||||
General and administrative | 9,470 | 60,614 | ||||||
Non-operating income (expense) | 3,289 | - | ||||||
Loss from discontinued operations before income tax | (15,074 | ) | (69,665 | ) | ||||
Income tax expense (benefit) | - | - | ||||||
Net loss from discontinued operations | $ | (15,074 | ) | $ | (69,665 | ) |
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.
The following table summarizes our liquidity and capital resources as of September 30, 2017March 31, 2021 and December 31, 2016, respectively, and is intended 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 |
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 2,342 | $ | 2,118 | ||||
Working capital (deficiency) | $ | (684 | ) | $ | (1,156 | ) |
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, 2017March 31, 2021, we had cash and cash equivalents of approximately $2,342,000 compared to cash and cash equivalents of $2,118,000 at December 31, 2016, we2020. We had working capital (deficiency)an accumulated deficit of approximately $(1,475,000) and $1,000,000.$93,793,000 at March 31, 2021. During the ninethree months ended September 30, 2017,March 31, 2021, we generated a net loss of approximately $17,665,000 (including a non-cash impairment charge of $9,920,000), used cash infrom continuing operations of approximately $6,454,000, which includes $1,450,000 paid$756,000 and used cash from continuing operations of approximately $936,000.
As of March 31, 2020, we had a working capital deficiency of approximately $1,741,000. We had an accumulated deficit of approximately $90,163,000 at March 31, 2020. During the three months ended March 31, 2020, we generated a net loss from continuing operations of approximately $1,422,000 and used cash from continuing operations of approximately $574,000.
We continue to LinkedIn relatedfocus on our overall profitability by reducing operating and overhead expenses, 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 operatingincur 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.
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We are closely monitoring operating costs and capital requirementsrequirements. Our Management continues to contain and have developed an operating planreduce costs, 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 2017. We have had cost reductionsindependent 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 February 1, 2021, the areas of staffing levels and operating budgets.
On or about March 24, 2021, we entered into a stock purchase agreement to purchase a significant equity stake in RemoteMore (USA) Inc. (“RemoteMore”). According to an arrangement between the Share Issuance, or $14.1 million after giving effectparties, we made a deposit of $60,000 to RemoteMore to facilitate the paymentclosing of the transaction. RemoteMore may use the deposit towards closing costs. If the transaction is closed as planned, this deposit will be treated as a part of the purchase price. If the transaction for 312,500 shares of Common Stock tendered andwhatever reasons is not withdrawn in the Tender Offer. We received approximately $9.0 million in net proceeds from the Share Issuance, after repayment of outstanding indebtedness and the payment of transaction-related expenses at the closing.
We currently anticipate that our available funds
and cashWe 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 monthtwelve-month period. Starting January 2, 2018, we began offering a monthly membership for IAW USA for which we collect a fee on a monthly basis. Our PDN Network also sells recruitment services to employers, generally on a one yearone-year contract basis. This revenue is also deferred and recognized over the life of the contract. Our payment terms for PDN Network and Noble Voice customers range from 30 to 60 days. We consider the difference between the payment terms and payment receipts a result of transit time for invoice and payment processing and to date have not experienced any liquidity issues as a result of the payments extending past the specified terms. Cash and cash equivalents and short termshort-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.
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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 | 2020 | |||||||
Cash provided by (used in) continued operations | (in thousands) | |||||||
Operating activities | $ | (769 | ) | $ | (574 | ) | ||
Investing activities | (6 | ) | (5 | ) | ||||
Financing activities | 1,000 | 1,500 | ||||||
Effect of exchange rate fluctuations on cash and cash equivalents | (35 | ) | (15 | ) | ||||
Cash provided by (used in) discontinued operations | ||||||||
Operating activities | 35 | 16 | ||||||
Investing activities | - | - | ||||||
Net increase (decrease) in cash and cash equivalents | $ | 225 | $ | 922 |
Cash and Cash Equivalents
The Company considers cash and cash equivalents to include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.
Net Cash Used in Operating Activities
Net cash used in operating activities from continuing operations during the three months ended March 31, 2021 was $6,454,000.approximately $769,000. We had a net loss of $17,665,000,approximately $756,000 during the three months ended March 31, 2021, which included a stock based compensation expense of approximately $106,000, depreciation of amortization expense of $30,000 and amortization of right-of-use assets of $23,000, which was partially offset by deferred income tax benefit of $1,160,000, which was offset by approximately $65,000. We also recorded a non-cash NAPW goodwill impairment charge stock issuance of $9,920,000, depreciation and amortization$166,500 related to the settlement of $2,444,000 and stock-based compensation expense of $731,000.litigation. Changes in operating assets and liabilities used $879,000approximately $274,000 of cash during the ninethree months ended September 30, 2017,March 31, 2021, consisting primarily of increases in accounts receivable, accounts payable, deferred revenue and accrued expenses, partially offset by decreases in deferred revenue and accounts payable, partially offset by increases in accrued expenses and decreases in accounts receivable and prepayments.
Net cash used in operating activities forfrom continuing operations during the ninethree months ended September 30, 2016March 31, 2020 was $2,489,000.$574,000. We had a net loss of $3,519,000$1,422,000 during the ninethree months ended September 30, 2016,March 31, 2020, which included a deferred tax benefitnon-cash litigation settlement reserve of $1,218,000$450,000, depreciation of amortization expense of $52,000 and a gain on lease cancellationamortization of $424,000,right-of-use assets of $39,000, which werewas partially offset by non-cash depreciation and amortizationpayments of $2,498,000, an increase in the fair valuelease obligations of warrant liabilities of $401,000, stock-based compensation expense of $218,000 and deferred financing cost amortization of $157,000.$46,000. Changes in operating assets and liabilities used $601,000$339,000 of cash during the ninethree months ended September 30, 2016,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 increased prepaid expenses partially offset by increases in accrued expenses.
Net Cash (Used in) Provided byUsed in Investing Activities
Net cash used in investing activities forfrom continuing operations during the ninethree months ended September 30, 2017March 31, 2021 was $294,000, consistingapproximately $6,000, which consisted of $123,000 invested to developinvestments in developed technology $154,000 in purchases of property and computer equipment partially offset by $18,000 of returned security deposits.
26
Net cash provided by financing activities from continuing operations during the ninethree months ended September 30, 2017March 31, 2021 was $3,502,000, consisting of the $3,000,000 in grossapproximately $1,000,000 and which reflected proceeds from the January 18, 2017 issuance, $646,000 refundsale of merchant reserve, partially offset by the $144,000 payment of offering costs to third-party professionals.
Net cash provided by financing activities from continuing operations during the ninethree months ended SeptemberMarch 31, 2020 was $1,500,000 and which reflected proceeds from the sale of common stock. On March 22, 2020, we 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 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, 2016 was $239,000, consisting of $1,943,000 of proceeds drawn on our Master Credit Facility, partially offset by $488,000 of costs related to securing that facility, payment of $1,049,000 of costs related to the CFL Transaction and $166,000 due to the increase in the merchant reserve for NAPW Network.2020.
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Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet activities as defined in Regulation S-K Item 303(a)(4).
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements.
We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
While our significant accounting policies and estimates as compared to the critical accounting policies and estimatesare more fully described in Note 3 to our consolidated financial statements included at the 2016end 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 ourreported financial results of operations and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.
Accounts Receivable
Our policy is to reserve for uncollectible accounts based on our best estimate of the Securities Actamount 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 21Eother factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the Securities Exchange Actallowance after all means of 1934, as amended. These statements concern expectations, beliefs, projections, planscollection have been exhausted and strategies, anticipatedthe 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 trendscircumstances 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 similar expressions concerning mattersbetween annual tests if an event occurs or circumstances change that arewould more likely than not historical facts. Specifically, this Quarterly Report contains forward-looking statements regarding:
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 Company’s reporting unit to its carrying or book value. If the fair value of 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 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 the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Accounting for acquisitions requires the Company to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of comprehensive loss.
Revenue Recognition
Our principal sources of revenue are recruitment revenue, consumer marketing and consumer advertising revenue, membership subscription fees, 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 began offering a monthly membership for which we collect fees on a monthly basis and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and couldwe recognize revenue in the future affectsame 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 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 our actual resultsfinancial statements.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
Evaluation of disclosure controls 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:
As of September 30, 2017,March 31, 2021, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Interim 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 Chief Executive Officer and Interim 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.
Management’s Report on Internal Control over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (principal executive officer) and Interim Chief Financial Officer (principal financial officer), is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. We have designed our internal controls to provide reasonable assurance that our financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP), and include those policies and procedures that:
● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets; | |
● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and | |
● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Our management conducted an evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2020. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in its 2013 Internal Control — Integrated Framework.
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Based on this evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that our internal controls over financial reporting were not effective as of the end of the period covered in our 2020 Annual Report on Form 10-K. Management undertook several remediation actions, including hiring experienced accounting personnel, improvements in the segregation of duties within our accounting and financial reporting functions, GAAP training of internal staff and engaging an outside consultant to assist the Company on complex GAAP matters. Although these measures greatly helped to improve our internal controls, they did not fully remediate deficiencies in controls. Despite this, our management has concluded that the financial statements included in this report fairly present in all material respects our financial position and results of operations.
The Company’s 2020 Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting as it was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in the 2020 Annual Report on Form 10-K.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a control deficiency or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our management had concluded that, as of December 31, 2020, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements. Specifically, we noted the following.
● | Management has not implemented policies and procedures to recognize revenue equal to the amount allocated from revenue sharing arrangements with partners. Specifically, invoices of such arrangements are not agreed to approved price list before recording and related write-offs and credit memos for payments to be received are not reviewed or approved by management; | |
● | The Company does not have accounting policies and procedures to specify the correct treatment for estimating the allowance for doubtful accounts and bad debt expense of recruitment services. Specifically, a supporting analysis is not prepared for estimating the allowance for doubtful accounts and bad debt expense. Delinquent accounts receivable are not reviewed; and | |
● | Accounting procedures 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 policies and procedure |
Plan for Remediation of Material Weakness
During the third quarter of 2017,fiscal 2021, we continued to undertake certainour initiatives to improve and remediate material weaknesses related to our internal control over financial reporting that were identified for the yearperiod ended December 31, 2016. We continued making necessary changes and implementing new policies to enhance the overall internal control structure, including requiring pre-approval for travel and certain purchases and ensuring employees are cross trained for certain key tasks. There have been no other changes in our internal control over financial reporting during the third quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
● | We continue to look to expand our corporate accounting staff and add qualified personnel with knowledge of U.S. GAAP; | |
● | Continued updating of accounting policies and procedures; and | |
● | We continue to improve the financial reporting processes which included monthly and quarterly closing check-lists and monthly review of the financial reports by the Company’s Finance Department leadership. |
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.weakness. 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 haveweakness has been remediated.
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Limitations on the Effectiveness of Controls
The Company has previously disclosedeffectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that itcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and its wholly-owned subsidiary, NAPW, Inc., are partiesupgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to litigation captioned Gauri Ramnath, et al. v. Professional Diversity Network, Inc., et al., No. BC604153 (Los Angeles Superior Ct.), a putative class action filedprovide us with effective internal control over financial reporting.
Changes in January 2016 alleging violations of various California Labor Code (wage & hour) sections. Internal Control over Financial Reporting
During the first quarter of 2016,2021, 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 Company executed a settlement agreement, subjectyear ended December 31, 2020. Specifically, we continued to later Court approval, in which the Company agreed in principle to pay $500,000 for a global settlementimplement more effective financial reporting process and internal control procedures that included monthly and quarterly closing check-lists, updating of accounting policies and procedures, and monthly review of the class action. Duringfinancial reports by the Company’s Finance Department. We also continued improving GAAP training of internal staff and to utilize third-party consultants, when necessary, 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 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 payments2021 that have materially affected, or are reasonably likely 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.materially affect, our internal controls over financial reporting.
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The amount of back pay and other potential liabilities ordered by NLRB is $146,000.PART II
In a letter dated October 12, 2017, White Winston Select Asset Funds (“White Winston”) threatened assertion of a claimto assert claims against the Company. The letter allegesCompany 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 allegedour conduct that caused a delay indelayed White Winston’s ability to sell our shares in the Companyof Common Stock during a period when the Company’sour stock price was generally falling. The Company denies liability for any such claim.
NAPW is 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, the “ CFL Group ”) are subject todefendant in a one-year lock-upNassau County (NY) Supreme Court case, whereby TL Franklin Avenue Plaza LLC has sued NAPW Case index No. LT-000421/2018, with respect to all sharesNAPW’s former Garden City NY Premises. NAPW had surrendered the Premises to the Landlord, and the Landlord has obtained a judgment against NAPW in the amount of Common Stock owned by members$746,142.41. As a result of the CFL Group, subject to certain exceptions. However, after the one-year period, it may generally sell its sharesjudgement order, we recorded a $780,000 litigation settlement reserve in the public markets, subjectsecond quarter of 2020, which reflected the judgement order in addition to imputed interest costs and legal fees. NAPW is currently negotiating a settlement with the Landlord.
We and our 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 the Fair Labor Standards Act and certain provisions of the New York Labor Law. We dispute that it or its subsidiary violated the applicable securities laws. Furthermore,laws or that either entity has any liability and intends to vigorously defend against these claims. The matter is in the final stages of discovery and we have granted CFL andcompleted depositions of relevant witnesses. During the CFL shareholders certain registration rights that provide themfirst quarter of 2020, we recorded a $450,000 litigation settlement reserve in the abilityevent of an unfavorable outcome in this proceeding. In November 2020, both parties entered into mediation proceedings but a settlement was not reached. This matter is scheduled to register for resale, fromgo to trial in 2021.
General Legal Matters
From time to time, andthe 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 marketordinary 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 couldbe, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.
Smaller reporting companies are not required to provide the trading price of our Common Stock.information required by this item.
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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On February 1, 2021, the Company entered into a majority stockholder, our public float is more limitedprivate placement with Ms. Yiran Gu, in which could impact your ability to sell your shares and could result in increased volatility in our stock price.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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 |
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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.
PROFESSIONAL DIVERSITY NETWORK, INC. | ||||
Date: | By: | /s/ Xin (Adam) He | ||
Xin (Adam) He | ||||
Title: | Chief Executive Officer and Acting Chief Financial Officer | |||
(On behalf of the Registrant and as principal financial | ||||
officer and principal accounting officer) |
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31
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 |
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